~~ '2q,~:rd - sandiganbayan - supreme court

REPUBLIC OF THE PHILIPPINESSANDIGANBAY AN

QUEZON CITY

PEOPLE OF THE PHILIPPINES,Plaintiff,

Criminal Case No. SB-II-CRM-0256For: Violation of Section 3(e),Republic Act No. 3019

TITO S. SARION,Accused.

Criminal Case No. SB-II-CRM-0257For: Malversation of Public Funds

CABOTAJE-TANG, P.J.,ChairpersonFERNANDEZ,SJ,~,andFERNANDEZ, B, J.*

Promulgated:. ~~ '2q,~:rd

1{-------------------------------------------------------------------------------1{ ~

For approving the disbursement and the disbursementvoucher in the amount of P1,000,000.00 in favor of MarkbiltConstruction as partial payment for contract price escalationdespite the absence of a) a Certificate of Availability ofFunds; b) the Government Procurement Policy Board's(GPPB)approval and c) the National Economic DevelopmentAuthority's (NEDA)determination as to the propriety of theprice escalation, accused Sarion was charged for Violation ofSection 3(e) of Republic Act No. 30191 and for Malversationof Public Funds under Article 217 of the Revised Penal Code.

The Infor3019 reads:

ation for Violation of Section 3(e), R.A. No.

~* In view of the appointment of Justice Samuel R. Martires to the Supreme Court, Justice

Bernelito R. Fernandez, as the regular member of the Third Division, participated in theDecision.

1 Anti-Graft and Corrupt Practices Act

DecisionPeople vs. SarionCriminal Cases No. SB-II-CRM-0256-0257x----------------------------------------------------x

That on 24 April 2008 or sometime prior orsubsequent thereto, in Daet, a first class municipality inthe Province of Camarines Norte, Philippines, and withinthe jurisdiction of this Honorable Court, the accused, TitoS. Sarion, a public officer, being the Mayor of theMunicipality of Daet, committing the crime in thedischarge of his official functions, through manifestpartiality, evident bad faith, or gross inexcusablenegligence, did then and there willfully, unlawfully, andcriminally cause undue injury to the government in thegross amount of One Million Pesos, Philippine Currency(PhP1,000,000.00), by then and there approving thedisbursement in the absence of certificate of availability offunds, of public funds in said gross amount in favor ofMarkbilt Construction, the contractor for the constructionof Daet Public Market (Phase II), as partial payment for itsclaim for price escalation which it is not entitled to soreceive but which it received nevertheless per its OfficialReceipt No. 1156 dated 24 April 2008 through theapproval of the disbursement voucher by the accused evenwithout the approval from the Government ProcurementPolicy Board (GPPB)and the determination by the NationalEconomic Development Authority (NEDA) as to thepropriety of the claim for price escalation in violation of theGPPB Guidelines for Contract Price Escalation, to theprejudice of the Municipality of Daet in said amount.

The Information for the offense of Malversation of PublicFunds under Article 217 of the Revised Penal Code reads:

That on 24 April 2008, or sometime prior orsubsequent thereto, in Daet, a first class municipality inthe Province of Camarines Norte, Philippines, and withinthe jurisdiction of this Honorable Court, the accused, TitoS. Sarion, a public officer, being the Mayor of theMunicipality of Daet, while in the performance of hisofficial functions, committing the offense in relation to hisoffice, and taking advantage of his official position, and ingrave abuse thereof, having control of public funds in thegross amount of One Million Pesos, Philippine Currency(PhP1,000,000.00), which was placed under hisadministration by reason of the duties of his office, and isaccountable for said amount of public funds pursuant toSection 340 of the Local Government Code, did then andthere willfully, unlawfully and feloniously consent, orthrough abandonment or negligence, permit MarkbiltConstruction, the contractor for construction of DaetPublic Market (Phase II), to take such amount of publicfunds which it is not entitled to receive but which itreceived nevertheless per its Official Receipt No. 1156dated 24 April 2008, by then and there allowing thedisbursement through his approval of the disbursement

;\>2 Information dated May 12, 2011; Record, Vol. I, pp. 1-2; underscoring emphasis supplie


voucher even in the absence of certificate of availability offunds in said gross amount in favor of MarkbiltConstruction as partial payment for its claim for the priceescalation even without the approval from the GovernmentProcurement Policy Board (GPPB) and the determinationby the National Economic Development Authority (NEDA)as to the propriety of the claim for price escalation inviolation of the GPPB Guidelines for Contract PriceEscalation.

When conditionally arraigned on September 2, 2011,accused Sarion, with the assistance of his counsel Atty.Raymundo R. Aquino, entered a plea of "Not Guilty" to thecrimes charged.4 After the Court resolved the Motion forJudicial Determination of Probable Cause filed by accusedSarion,5 preliminary conference was held.6

During the pre-trial, the parties stipulated:

1. The jurisdiction of the Honorable Court over theoffenses charged.

2. The jurisdiction of the Honorable Court over theperson of the accused.

3. The identity of the accused as the same personcharged in the information in Crim. Cases No. SB-11-0256-0257 for violation of Sec. 3(e) of R.A. No.3019 and for Malversation of Public Funds.

4. The PhP1,000,000.00 was duly received by MarkbiltConstruction as per its Official Receipt No. 1156dated April 24, 2008.7

The parties also stipul ted on the existence of thefollowingcommon exhibits:

3 Information dated March 12, 2011; Record, Vol. II, pp. 3-4, underscoring and emphasissupplied.

4 Certificate of Arraignment dated September 2, 2011; Record, Vol. I, p. 184; Order datedSeptember 2,2011; Record, Vol. I, p. 188

5 Resolution dated November 3, 2011; Record Vol. I, pp. 212-2196 Minutes dated April 24, 2012, May 8, 17 and 30,2012; Record, Vol. I, pp. 351, 179,214

and 2187 Pre-Trial Order dated June 6,2012, p. 2; Record, Vol. II, p. 19

DecisionPeople vs. SarionCriminal Cases No. SB-11-CRM-0256-0257x----------------------------------------------------x

Exhibits DocumentAand series; and, Contract Agreement dated December 26, 2003 between

1 and series the Municipal Government of Daet, Camarines Sur (sic)and Markbilt ConstructionNotice to Commence Work issued by the Municipality of

B and series; and, Daet, Office of the Pre-Qualifications Bids and Awards2 and series Committee dated January 5, 2004 for the Construction

of the Daet Public Market (Phase II)

C and series; and, Excerpts from the Minutes of the 2nd Special Session of

9 and series the Honorable Sangguniang Bayan of Daet, CamarinesNorte, Held at the Session Hall on the 6th day of March,2008 at 10:00 a.m.

G and14 Disbursement Voucher No. 08041239, dated April 2008,in the amount of PhP1,000,000.00

I and15Official Receipt No. 1156, dated April 24, 2008, issuedby Markbilt ConstructionAudit Observation Memorandum (AOM)dated October

D and 16 6, 2008, with Reference No. 2008-001, issued by theCommission on Audit

J and 19 Notice of Suspension dated July 10, 2009, withreference no. 2009-001-101-(2008), issued by the COA

Land 20 Notice of Disallowance dated March 17, 2010 of theCOAObligation Request, with Reference No. 100-08-03-402,

M and 24 for the amount of Php1,000,000.00, and with MarkbiltConstruction as payee8

The prosecution presented the following witnesses: 1)Zenaida M. Baluca,9 2) Jesus R. Reblora, Jr.,l0 3) LourdesG. Cribe,l1 4) Elmer H. Dorado,12 5) Bonifacio Navarez, Jr.,13and, 6) Dennis Santiago. 14

a. She is the private complainant. She identified herComplaint, marked as Exhibit K, and its annexesmarked as Exhibits A to D. She also identified accusedSarion.1s

b. She lost her store in the public market. She and about200 people grouped themselves to recover their stores.But their request was not granted. 16

c. They were asked to transfer to the Daet Public Marketduring the term of Mayor Panotes. She sells pork, fruitsand vegetables for a living since the year 2007, but shedoes not pay any income taxA (l

8 pp. 2-4;Record, Vol. II,pp. 19-219 TSN dated August 16,201210 TSN dated September 3,201211 TSN dated October 2,201212 TSN dated October 2,201213 TSN dated October 2,2012,p. 2614 TSN dated October 2,2012,p. 63;Order dated October 2,2012;Record, Vol. II,p. 7615 Exhibit K;TSN dated August 16,2012,pp. 6-816 TSN dated August 16,2012,pp. 19-2017 TSN dated August 16,2012,p. 16-17

DecisionPeople vs. SarionCriminal Cases No. SB-ll-CRM-0256-0257x------------------------------------------------~---x

d. In response to her verbal requests, she was furnished bythe following agencies with a copy of the correspondingdocuments: 18

Commission on AuditMunici ality of DaetSangguniang BayanSecretaCa itol COA

Contract 0 A reement dated December 29,2003Notice to Commence WorkResolution No. 063

e. They went to the Commission on Audit Office at theKapitolyo four times. The first person they approachedwas Mrs. Pususan. She does not know the names ofthe other persons whom they approached. She does notknow the name of the person who handed them a copyof the Audit Observation Memorandum.2o

f. She is not a signatory to the foregoing documents butsaid documents were the bases of her complaint againstaccused Sarion. She relied solely on the documentsgiven by COA.21

g. The contract (for the Daet Public Market) was enteredinto when accused Sarion was the Mayor. AccusedSarion was also the one who signed the Notice toCommence Work.22

h. Based on her understanding, the Contract provided foradjustment of contract prices. But she does not know ifMarkbilt incurred escalation cost in the construction ofthe public market. 23

1. Based on the Contract, the construction of the publicmarket should have been completed in January 2005, or365 days from its commencement in January 2004.24

J. The construction of the public market was completed inMay 2006 during the term of Mayor Panotes, who wonthe mayoral race on May 10, 2004 and served until2007. She does not have any personal knowledge as towhen the public market was actually completed.25

k. She does not know why Markbilt was not held liable forliquidated damages despite completing the projectbeyond the stipulated period of one (1) year. She is alsonot aware whether there was a Change Or er in relationto the construction of the public market. 26

18 TSN dated August 16, 2012, pp. 9-11 & 19 and September 3,2012, p. 1119 Exhibit A, B, C and D, respectively20 TSN dated September 3,2012, pp. 11-1221 TSN dated August 16,2012, pp. 14,20-21 and TSN dated September 3,2012, p. 1722 TSN dated September 3,2012, p. 1423 TSN dated August 16,2012, pp. 40-4124 TSN dated September 3,2012, p. 825 TSN dated September 3,2012, pp. 6, 13, 15 and 1626 TSN dated September 3,2012, p. 9


1. The Sangguniang Bayan of the Municipality of Daetpassed Appropriation Ordinance No. 1. Said Ordinanceis also Resolution No. 063. Section 2 of the Resolutiondirected the Municipal Treasurer, Municipal Accountantand Municipal Officer to pay the amount therein stated.The Resolution does not mention the name of accusedSarion.27

m. She read the Audit Observation Memorandum. However,she did not fully understand it.28

n. They approached Atty. Zeneta, a popular lawyer in theirplace, who prepared her complaint. She does notremember the first name ofAtty. Zeneta.29

o. They decided to file a case with the Office of theOmbudsman in order to find out if the Audit ObservationMemorandum is legal.30

p. She did not file a complaint against the other persons,i.e., members of the Sangguniang Bayan, accountant andtreasurer, mentioned in the Audit ObservationMemorandum because accused Sarion is the ExecutiveOfficer, as such, all documents from and transactionsrelating to the Sangguniang Bayan pass through him forsignature.31

q. At the time of the filing of the complaint, she had noproof that it was accused Sarion who approved theappropriation of PhPl,OOO,OOO.OOfor payment toMarkbilt referred to in Resolution No. 063.32

2. Jesus R. Reblora, Jr., State Auditor III of COA,33testified:

a. During the last quarter of 2005, he was assigned asAudit Team Leader in connection with the constructionof the Daet Public Market. He prepared an AuditObservation Memorandum solely to tackle the priceescalation issue.34

b. It was his first time to encounter a transaction whichinvolves pri~.~e~eef alation. Hence, he was skeptical as toits propriety~, (7

27 TSNdated August 16,2012, pp. 21-2328 TSNdated August 16,2012, pp. 24-25 and 3329 TSNdated September 3,2012, p. 1030 TSNdated August 16,2012, pp. 24-25 and 3331 TSNdated August 16, 2012, pp. 27-2832 TSNdated August 16, 2012, pp. 28-2933 TSNdated September 3,2012, p. 1834 TSNdated September 3,2012, p. 1935 TSNdated September 3,2012, p. 21

DecisionPeople vs. SarionCriminal Cases No. SB-II-CRM-0256-0257

1. The basic requirements for the payment of priceescalation;36 and,

11. The appropriation made for price escalation, whichwas not incorporated in the main contract.37

d. Markbilt and the local government of Daet entered into acontract in relation to the construction of the publicmarket. 38

e. The award of the project was regular, however, theapproval of the supplemental budget for payment of priceescalation is irregular since there was already a projectbefore an appropriation therefor was made.39 The priceescalation was paid after the construction of the publicmarket. The price escalation was paid pursuant to asupplemental budget embodied in Resolution No. 01dated March 6, 2008.40 The Sangguniang Bayan ofDaet did not appropriate PhP5,500,000.00 as demandedby Markbilt, but only PhP4,400,000.00.41 SupplementalBudget No. 1 does not provide for the payment of priceescalation. The payment therefor appears to have nochargeability. If a payment has no charge ability, it isillegal; any disbursement without the budget orappropriation is illegal.42

f. The Contract Agreement for the construction of the DaetPublic Market (Phase II) provided for an appropriation inthe amount of PhP71,499,875.29 for said project. Theproject was already completed, and said amount, alreadypaid.43

g. He did not find an appropriation for the price escalation.It appears that there was an inverted approach in thedisposition of public funds. The law requires anappropriation first before entering into a contract.44

h. The claim for price adjustment was made sometime in2008.45 Markbilt submitted five (5) demand letters to theLGUof Daet regarding the price escalation rate, claimingthe amount of more than PhP5,000,000.00. Theseletters, except for the last/fifth, were issued prior to theenactment of the supplemental budget for the paymentof the price escalation. ~ r;

Ii36 TSNdated September 3,2012, p. 2137 TSNdated September 3,2012, p. 3038 TSNdated September 4,2012, pp. 19-2039 TSNdated September 3,2012, pp. 26-2940 TSNdated September 3,2012, p. 2341 TSNdated September 4,2012, p. 2942 TSNdated October 2,2012, pp. 13-1443 TSNdated September 3,2012, pp. 29-3044 TSNdated September 3,2012, pp. 22-2445 TSNdated September 3,2012, p. 3146 TSNdated September 4,2012, pp. 8-12, and 28 and October 2,2012, p. 17


1. Under Section 61, R.A. No. 9184, the LGUof Daet shouldhave endorsed Markbilt's letter-request to the NationalEconomic Development Authority for consideration andfor the latter's submission to the Chief Executive of theGPPB, before paying the price escalation. Suchendorsement is absent in the present case.47

J. There was no approval (of the request for pnceescalation) by the NEDA and the GPPB. There waslikewise no marginal note of approval by the Mayor ofsaid request. 48

k. The disbursement voucher was approved by accusedSarion.49 He is familiar with accused Sarion's signaturebecause of his (Reblora)regular work at the COA.5o

1. A check in the amount of PhP937,500.00,51 paid to theorder of Markbilt or Romeo Torate, serves as proof of thepayment made by the LGU of Daet to Markbilt. Saidcheck was approved by accused Sarion and was signedby the Municipal Treasurer.52

m. There is a discrepancy between the amount stated in thecheck (PhP937,500.00) and the disbursement voucher(PhP1,000,000.00) perhaps because the amountindicated in the check represents the net amount fromwhich withholding tax had been deducted. 53

n. The receipt issued by Markbilt shows that the check wasreceived by the payee.54 The payment was madepursuant to an obligation request regarding the priceescalation. 55

o. The obligation request was not signed by Sarion.56 Thedisbursement voucher was signed by accused Sariononly after the Municipal Accountant and the MunicipalTreasurer signed the same and certified the existence ofcertain documents and the availability of funds. Thedisbursement voucher, in turn, was prepared only afterthe preparation of the obligation request.57

p. The disbursement voucher and the obligation requestwere prepared only fter the passage of AppropriationOrdinance No. 01.58

47 TSN dated October 2,2012, pp. 17-1848 TSN dated September 3,2012, p. 3549 Exhibit G50 TSN dated September 3,2012, p. 3651 Exhibit H52 TSN dated September 3,2012, pp. 40-4153 TSN dated September 3,2012, pp. 41-4254 Exhibit I; TSN dated September 3,2012, p. 4955 Exhibit M; TSN dated September 3,2012, p. 5056 TSN dated September 4,2012, p. 2757 Exhibits G and M; TSN dated September 4,2012, pp. 29-3058 Exhibit C; TSN dated September 4,2012, p. 30


q. The payment of the price escalation is irregular becausethe same was pre-mature; it was made without theauthorization or approval from the GPPB or the NEDA.Considering that payment on the price escalation wasmade even in the absence of GPPB and NEDA's approval,said transaction is irregular. 59

r. During the investigation, he found that there was noGPPB approval of the claim for price escalation. Hence,he prepared the Notice of Suspension which was signedby him and his immediate supervisor, Susie Lauriano.6o

s. The Notice of Suspension is issued when an auditor islooking for some documentary requirements on thetransaction.

t. As stated in the Notice of Suspension, Section 61 of theIRR of R.A. No. 9184 requires prior approval by theGPPB for payment of price escalation.61

u. The Audit Observation Memorandum merely askscomments from the municipal officers mentionedtherein i.e., accountant, treasurer and budget officer.The Memorandum contains his personal auditobservations. The same may be challenged by themunicipal officers or by his superiors.62

v. The Municipal Treasurer, Municipal Accountant and theMunicipal Budget Officer are the ones in charge ofimplementing Appropriation Ordinance No. 01. Theseare the same officers mentioned m his AuditObservation Memorandum.63

w. The COA directed the LGU of Daet to submit the GPPBapproval. Based on the Notice of Disallowance, the LGUhad 90 days from notice to comply with the COA's order.Since the LGU of Daet failed to submit the GPPBapproval, COA issued a Notice of Disallowance. TheNotice of Disallowance was issued by the currentauditor, Lourdes Cribe.64

x. The approval of the GPPB (prior to the payment of priceescalation) is required under R.A. No. 9184. Section 65,R.A. No. 9184, is a penal provision with respect toviolation of or non-compliance with the provisions of RA9184. But he would not know if the penal provisionwould apply if the violation is the absence of the NEDArequirement. 65 He is not aware that Rule 61 of the IRRof R.A. No. 9184 does not carry a penal provision fo

59 TSN dated September 3, 2012, p. 37, 45 and 51; TSN dated September 4, 2012, pp. 7-8;and TSN dated October 2, 2012, pp. 8-9

60 Exhibit J, TSN dated September 3,2012, pp. 42-4561 TSN dated October 2,2012, p. 962 TSN dated September 4,2012, pp. 16-1763 TSN dated September 4,2012, p. 1564 TSN dated September 3,2012, pp. 45-48 and October 2,2012, pp. 14-1565 TSN dated October 2,2012, pp. 11-12 and 20-21


non-compliance with the requirement of GPPBapproval. 66

y. He confirms that aside from accused Sarion, the followingpersons were named in the Notice of Disallowance:

i. Vice Mayor Serafin Raymundo;ii. SB Members, namely:

(1) Bienvenido Dumapias,(2) Domingo Tinati, Jr.,(3) Felix C. Abaya,(4) Marvin Bandenarya,(5) Corazon Yuson-Marcelo,(6) Ely Abacilla,(7) Nestor F. Dalida,(8) Joan Kristine Abernilla,(9) Maria Cristina Serrano and

(10) Glenn Mark Velasco;iii. Municipal Accountant Carolyn Robles,iv. Municipal Treasurer Marlene Aberya,v. Municipal Budget Officer Amelia Laborte; and,vi. Representatives of Markbilt, namely:

(1) Romeo B. Coralde, and,(2) Mr. Aseron.67

z. Per the Notice of Disallowance, the alleged irregularity,i.e., lack of GPPBapproval or failure to submit requireddocuments, pertained to the representatives ofMarkbilt.68

aa. He is aware that accused Sarion has a pending appealwith the COA regarding the Notice of Disallowance.69

The present case was filed while said appeal ispending.70 He is not aware if there is already a Noticeof Finality regarding the Notice of Disallowance.71

bb. The Audit Observation Memorandum, Notice ofSuspension and Notice of Disallowance were all issuedon the basis of a COA Circular issued prior to COACircular dated September 15, 2009.72 The earlier COACircular has the same contents as the latter.73However, Section 7.2.1 of the new circular did notappear in the old circular.74

3. The testimony of Bonifacio Navarez, Jr.,Department Manager of Land Bank, Daet Br ch,75 wasdispensed with after the parties stipulated that:

66 TSNdated September 4,2012, pp. 21-2267 TSNdated September 4,2012, pp. 30-3168 TSNdated September 4,2012, pp. 32-3369 TSNdated September 4,2012, p. 34 and October 2,2012, p. 2270 TSNdated October 2,2012, p. 2471 TSNdated September 4,2012, pp. 37-3872 Exhibit N73 TSNdated September 3,2012, pp. 50-5174 TSNdated September 4,2012, pp. 35-3775 TSNdated October 2,2012, p. 26


a. The Municipality of Daet, Camarines Norte maintainsAccount No. 412-1032-70, with Land Bank, DaetBranch;

b. The Municipality of Daet issued Check No. 27388 datedApril 24, 2008, in the amount of PhP937,500.00 drawnagainst said account, and payable to Markbilt.76

4. Before the prosecutor proceeded to the directexamination of Lourdes G. Cribe, State Auditor V of theCOA,77the parties agreed to stipulate that:

a State Auditor Cribe was one of the COA officials whoapproved the Notice of Disallowance.

b. One of the grounds for the issuance of a Notice ofDisallowance is non-compliance with Section 61, RA. No.9184, as stated in Paragraph 6 of the Notice ofDisallowance.

c. Said non-compliance with Section 61, RA. No. 9184pertains to Romeo B. Itturalde or BillyAceron,78

a. She is the Supervising Auditor of State Auditor III JesusReblora;79

b. When COAdoubts the legality, regularity or propriety of atransaction, they issue a Notice of Suspension. If theconcerned persons fail to comply, or are not able toexplain or justify the assailed transaction, the COAissuesa Notice of Disallowance.8o

c. They issued a Notice of Disallowance in this case becausethere appears to be a violation of law; there was non-compliance with the regulation under the law.81 Theydisallowed the transaction because the persons chargeddid not comply with Section 61, RA. No. 9184. Paymentfor the price escalation should not have been madewithout compliance with said provision.82

d. Section 61, RA. No. 9184 requires the Head of the Agencyconcerned to recommend for NEDA's evaluation theextraordinary circumstances, and to submit the same tothe GPPB for its approval.83 Hence, the Notice ofDisallowance was issued to Sarion, "attention" to ~~~;...JMunicipal Accountant and the other persons suppos~~ (J

76 TSN dated October 2, 2012, pp. 26-28; Order dated October 2,2012, Record, Vol. II, p. 76 A1J77 TSN dated October 2,2012, pp. 29-3078 TSN dated October 2,2012, pp. 30-3279 TSN dated October 2,2012, pp. 29-3080 TSN dated October 2,2012, p. 3381 TSN dated October 2,2012, p. 3482 TSN dated October 2, 2012, pp. 37-3883 TSN dated October 2,2012, p. 35


liable. All of the abovementioned individuals received acopy of the Notice of Disallowance. The Notice ofDisallowance enumerates the participation of the personstherein name. 84

e. Said LGU stated in their request for extension that theyfiled a request for the NEDA'sapproval (of the payment ofprice escalation). She did not encounter anyrecommendation or endorsements by the LGU of Daet tothe NEDA.85

f. The Audit Observation Memorandum, the Notice ofSuspension, the Notice of Disallowance were all issuedsubsequent to the payment made by the LGU of Daet onApril 24, 2008. The LGUof Daet paid the price escalationsometime in 2008, while the Audit ObservationMemorandum was prepared around October 6, 2008.The Notice of Suspension was issued by Auditor Reblorasometime in July 10, 2009. She issued the Notice ofDisallowance on March 17,2010.86

g. The line, "failure to submit the required documents incompliance with Section of 61 of R.A.No. 9184," does notappear in the line pertaining to Sarion.87

h. To settle the audit disallowance means to refund anyamount disallowed by the auditors, any obligation to thegovernment through payment or through other modes ofextinguishment of obligation, as approved by the generalcounsel.88

1. She is not aware whether Sarion appealed the Notice ofDisallowance issued him. At the time of her testimony,there is no Notice of Finality of Decision with respect tothe Notice of Disallowance that they issued. No order ofexecution was issued as well.89

J. Without such Notice of Finality of Decision from the COA-Central Office, no government official shall be held liablefor any transaction that COA claims to be irregularbecause the government officials are given a chance to filetheir appeal; the central officewill evaluate their appeal. 90

5. Elmer H. Dorado, Division Chief of the SocialInfrastructure Division of NEDA,91testified:

a. ignated by their Office to appear before the

~84 TSN dated October 2,2012, p. 36 ~85 TSN dated October 2, 2012, p. 3586 TSN dated October 2,2012, pp. 39-4087 TSN dated October 2,2012, p. 4388 TSN dated October 2,2012, p. 4489 TSN dated October 2,2012, pp. 44-4590 TSN dated October 2,2012, pp. 45-4791 TSN dated October 2,2012, p. 5192 TSN dated October 2,2012, pp. 54-55


b. The document dated July 30, 2012, signed by JocelynP. Reyes, Director for Legal Staff, pertains to therequest of Prosecutor Harry Caldino (i) for acertification on: (1) whether NEDAfurnished the OSPwith a certification on whether the LGUof Daet appliedfor exemption or approval for the payment of priceescalation to Markbilt (Romeo Itturalde), and, (2)whether the certification would constituteextraordinary circumstance under Section 61, R.A.No. 9184;93 and, (ii) for NEDA to designate a dulyauthorized representative to testify before theSandiganbayan.

c. The Certification dated July 25, 2012 signed by theDirector for NEDAInfrastructure Staff officially camefrom their office.94 He confirms that the Certificationdated July 18, 2012 (marked as Exhibit W) issued byNEDA Regional Office No 5, Legaspi City, was issuedby said Office.95

d. GPPB Resolution No. 07-2004,96 or the Guidelines forContract Price Escalation was attached to the letterdated August 17, 201297 signed by Jocelyn P. Reyes,Director of Legal Staff and addressed to ProsecutorCaldino.98

6. The testimony of Dennis Santiago, of the GPPB,was dispensed with after the parties stipulated on theexistence of the certification issued by the GPPB statingthat the Municipality of Daet did not ask for an exemptionfor the payment of the escalation amount. 99

The Court admitted the following exhibits of theprosecution: 100

ExhibitA to A-4

BC to C-2

DocumentContract A reement dated 29 December 2003Notice to Commence Work dated January 5, 2004Resolution No. 063 dated 6 March 2008 with SupplementalAppropriation Ordinance No. 01Audit Observation Memorandum dated October 6, 2008,issued b the Office of COALetter dated November 26, 2009 addressed to Ms. LourdesG. Cribe, State Auditor V, Supervising Auditor, COA, fromJesus Reblora, Jr., Audit Team Leader.Letter dated March 17, 2012, addressed to M. MaryAntonette Yalao, Director, PARB, Office of the Om udsmanfrom Ms. Lourdes G. Cribe, State Auditor V, COA

93 Exhibits T and T-194 Exhibit U95 TSN dated October 2,2012, pp. 56-5896 Exhibit V to V-997 Exhibit X98 TSN dated October 2,2012, pp. 59-6199 TSN dated October 2,2012, p. 63; Order dated October 2,2012; Record, Vol. II, p. 76100 Resolution dated December 7,2012; Record, Vol. II, p. 235


F-1 2nd Indorsement dated 15 March 2010 for Ms. Lourdes G.Cribe, from Jesus R. Reblora, Jr.

F-2 Subpoena Duces Tecum dated 22 February 2010, from theOffice of the Ombudsman addressed to Lourdes G. Cribe

F-3 Letter dated November 10, 2009 addressed to State Auditor,Jesus R Reblora from Tito S. Sarion

G Disbursement Voucher No. 08041239 in the amount ofPhP1,000,000.00 in favor of Markbilt

H Landbank Check No. 272388 dated April 24, 2008

I Official Receipt (O.R) No. 1156 issued by Markbilt datedApril 24, 2008

J Notice of Suspension No. 2009-001-101-(2008) dated July10,2009 issued by the COA,to the LGUof Daet

K to K-2 Complaint of Ms. Zenaida Baluca dated 24 November 2008

L to L-1 Notice of Disallowance (NO) NO No. 2010-001-101-(2008)dated March 17,2010

M Obligation Request No. 001-08-03-402N to N-26 COA,Memo Circular No. 2009-006

o to 0-14 COA Regional Office Decision No. 2012-L-003 datedFebruary 17, 2012, Re: Appeal from NO No. 2010,001-101(2008) dated March 17, 2010, 1n the amount ofPhP1,000,000.00

P to P-2 Excerpt from the IRR of RA. 9184 Rule XIX-Contract Pricesand Warranties-Section 61.1-61.3

T to T-1 NEDA's letter dated 30 July 2012U Certification dated July 25, 2012 issued by NEDA, Central

OfficeV to V-2 Government Procurement Policy Board (GPPB) Resolution

No. 07-2004V-3 to V-lO GPPB Guidelines for Contract Price Escalation

V-5-a Review and Approval Process for Request for PriceEscalation

V-9-a Authority to Approve Contract Price EscalationW to W-2 GPPB's letters dated 13 August 2012 and 4 September 2012W-3 Certification dated 18 July 2012 issued by NEDARegion 5

X Letter dated 17 August 2012 from NEDA

In a Resolution dated January 28, 2014,101 this Courtdenied the Demurrer to Evidence 102 filed, with leave ofcourt,103 by accused Sarion.

Accused Sarion presented the following witnesses: 1)Elmer C. Nagera,104 2) Amelia P. Laborte,105 3) CarolineMasie Robles,106 4) Alicia B. Lorenzo,107 and, 5) accused Tito

S. Sarion'~i r:~

101 p. 18;Record,Vol.II, p. 462102 DatedApri117,2013;Record,Vol.II, pp. 343-362103 Resolutiondated March 15,2013; Record,Vol.II, p. 340104 TSNdated September9,2014105 TSNdated September9,2014106 TSNdate September10,2014107 TSNdated October20,2014108 TSNdated July 7,2015 and TSNdated November5,2015

DecisionPeople vs. SarionCriminal Cases No. SB-ll-CRM-0256-0257x----------------------------------------------------x

1. Elmer C. Nagera, Municipal Administrator of theMunicipality of Daet, 109 testified:

b. He is familiar with the Public Market of Daet because heused to purchase commodities there. He also tookphotographs of the Public Market. 111

c. Accused Sarion, as Mayor of the Municipal Governmentof Daet, signed the Contract Agreement dated December29, 2003 for the construction of the Daet PublicMarket. 112

d. Mayor Panotes became mayor m 2004. The PublicMarket project was completed m 2005 during theincumbency ofMayor Panotes.113

e. He came across Markbilt when he assumed office asMunicipal Administrator, as Markbilt sent several lettersaddressed to Mayor Panotes and accused Sarion,demanding payment for the escalation price, relative tothe construction of the Public Market of Daet.114

f. Markbilt's claim for payment of price escalation was"revived"upon accused Sarion's re-election in 2007.115

g. One of the demand-letters, marked as Exhibit 5, wasaddressed to accused Sarion. He was instructed byaccused Sarion to find a source of funds for thepayment of the claim. 116

h. He determined that there was an existing appropriationordinance, passed by the Sangguniang Bayan of Daet, topay Markbilt's demand. The ordinance was alsoapproved by the Sangguniang Panlalawigan of theProvince of Camarines Norte.117

1. The Appropriation Ordinance allocated PhP4,400,000.00for Special Account (Market). It did not expressly providefor the payment of price escalation. During thedeliberations by the Sangguniang Bayan of the subjectordinance, it was mentioned that a portion of saidamount will be paid to Markbilt for price escalation.118The appropriation ordinance was passed in 2008. Hehad no participation in the passage of the ordinance andwas not in the position to ask for legal opinion regardi~ (J

109 TSNdated September 9,2014, p. 4110 TSNdated September 9,2014, p. 6 At1)111 TSNdated September 9,2014, p. 16112 TSNdated September 9,2014, p. 24113 TSNdated September 9,2014, pp. 22, 24-25114 Exhibits 3,4,5,6, and 7; TSNdated September 9,2014, pp. 7-12, 30 and 38-39115 TSNdated September 9,2014, p. 26116 TSNdated September 9,2014, pp. 21-22117 Exhibits C and 11; TSNdated September 9,2014, pp. 12-13 and 17-18118 TSNdated September 9,2014, pp. 32-33


the same. He only found out about the ordinance whenhe had read the same. 119

J. His office prepared an Obligation Request120 to pay forthe demand of Markbilt.121 He signed the ObligationRequest and forwarded the same to the Office ofMunicipal Budget OfficerAmelia P. Laborte.122

k. Only partial payment was made (to Markbilt). The fundallotted by the Sangguniang Bayan was not enough tocover the amount being asked by Markbilt.123

1. Only PhPl,OOO,OOO.OOwas allotted for the demand ofMarkbilt. The remaining amount was spent for theconstruction of the wet section at the ground floor of thePublic Market, undertaken by a different contractor. Hedoes not have any proof or a copy of the contract for theconstruction of the Wet Section at the ground floor of thepublic market. 124

m. The funds for the payment of PhPl,OOO,OOO.OOfor theescalation price was taken from the general fund. Theappropriation ordinance was under the general fundfrom the special account. 125

n. He did not inquire why Mayor Panotes did not act on thedemand for payment for the price escalation. He does notknow of any action taken by Mayor Panotes on thedemand-letters marked as Exhibit 3 and 4. He assumesthat there was no source of fund appropriated by theSangguniang Bayan.126

o. Before a resolution can be passed, the source of fundmust be identified. The Sangguniang Bayan cannot makeany appropriation without a source of fund. The sourceof income shall be the basis for passing the appropriationordinance. After the passage of the appropriationordinance, the availability of funds will be processed. 127

p. He is not aware that a GPPB approval is necessary priorto payment of price escalation, nor that the priceescalation is to be determined by NEDA.128

2. Amelia P. Laborte, Municipal Budget Officer ofthe Municipality of Daet, Camarines Norte,'29 teStifie~ (7119 TSNdated September 9,2014, pp. 33-35120 Exhibit M121 TSNdated September 9,2014, p. 15122 TSNdated September 9,2014, pp. 14-15 and 36123 TSNdated September 9,2014, pp. 30 and 38-39124 TSNdated September 9,2014, pp. 40-42125 TSNdated September 9,2014, pp. 35-36126 TSNdated September 9,2014, pp. 20-21, 23, 36-37127 TSNdated September 9,2014, pp. 27-29128 TSNdated September 9,2014, pp. 31 and 36129 TSNdated September 9,2014, p. 43

DecisionPeople vs. SarionCriminal Cases No. SB-ll-CRM-0256-0257

a. She has been the Municipal Budget Officer smce April2006. Her major functions include:

1. Preparation of the annual and supplementalbudget;

11. Release of Barangay budget and supplementalbudgets; and,

111. Certification of the existence of availableappropriation 130

b. After receiving the Obligation Request, she verified thatthere was an existing appropriation intended for thepayment of Markbilt, as embodied in an appropriationordinance. She certified the Obligation Request ofMarkbilt.131

c. The Municipal Treasurer (Arlyn O. Aberia), MunicipalAccountant (Caroline Maisie J. Robles) and theMunicipal Budget Officer who signed the appropriationordinance were still occupying their respective positionsafter the passage of the Appropriation Ordinance. 132

d. The appropriation for Markbilt's demand can be foundunder the Special Account Construction of Marketamounting to PhP4,400,000.00, of AppropriationOrdinance No. 1.133

e. The total demand of Markbilt was PhP5,200,000.000.Out of the PhP4,400,000.00 appropriation in themunicipal ordinance, only PhPl,OOO,OOO.OOwas paid toMarkbilt. The PhPl,OOO,OOO.OOpaid to Markbilt aspayment for the price escalation came from theappropriation which was passed sometime in March2008.134 The remaining amount was appropriated forother priority projects of the Municipality. 135

f. The item "price escalation," together with the "repair andconstruction of market," is included under the accounttitle, construction of market. There are no annexes (tothe ordinance) which would show the breakdown of thePhP4,400,000.00 appropriation. But it was stated in thebudget deliberation. 136 .

g. She had no direct participation in the preparation of theappropriation ordinance, but they prepared thesupplemental budget. The supplemental budget comesfrom the Internal Revenue Allotment. Under sai

130 TSN dated September 9, 2014, p. 45131 TSN dated September 9,2014, p. 46132 TSN dated September 9,2014, p. 48133 TSN dated September 9,2014, p. 49134 TSN dated September 9,2014, pp. 53-54135 TSN dated September 9,2014, pp. 49-54136 TSN dated September 9,2014, pp. 51-52


supplemental budget, there was a specification withrespect to the payment of the price escalation. 137

h. She does not know the requirements for the payment of aprice escalation. Her only participation in the process is"to appropriate"; her only part is as to the "existence ofthe available appropriation."138

1. She just followed the appropriation ordinance withoutdetermining whether the construction of the PublicMarket was completed. But she was aware that thepayment was for the price escalation. 139

J. There was an appropriation ordinance as well as acertificate of availability of fund. 140

k. This is the first time that she signed an obligationrequest for the payment of price escalation. She doesnot know the requirements therefor in relation to NEDAand the GPPB.141

1. Before signing an obligation request, she would first verifyif there is an appropriation ordinance or an availableappropriation therefor. There must also be a certificate ofavailability of fund. 142

3. Caroline Masie Robles, Municipal Accountant ofthe Local Government of Daet, Camarines Norte,143testified:

a. She is a Certified Public Accountant. She had been theMunicipal Accountant since February 2005. As aMunicipal Accountant, she handles the accounting andcollection transactions of the LGU.144

b. She signed the Disbursement Voucher on the claim ofMarkbilt. The Disbursement Voucher attached to theObligation Request originated from the requesting office,the Office of the Mayor. In particular, the requestingofficer was the Municipal Administrator of the Office ofthe Mayor.145

c. Before signing the Disbursement Voucher, she madesure that the allotment obligation is obligated for thepurpose stated in the obligation request; that thesupporting documents are valid, proper, legal andcomplete; and that there iS~6:;rgal opinion attached tothe supporting documents.l~ \ /7

137 TSNdated September 9,2014, pp. 52-53 ( .138 TSNdated September 9,2014, p. 53139 TSNdated September 9,2014, pp. 54-55 ,,~140 TSNdated September 9,2014, p. 57 ~ '-.)141 TSNdated September 9,2014, p. 58142 TSNdated September 9,2014, pp. 56-57143 TSNdated September 10,2014, p. 5144 TSNdated September 10, 2014, pp. 6 and 39145 Exhibit 14, TSNdated September 10, 2014, pp. 6-7, 13-14, and 28146 TSNdated September 10, 2014, p. 7


d. The supporting documents for payment of the priceescalation include the demand letter, obligation request,appropriation ordinance and computation of thedemand. 147

e. Based on Section 61, R.A. No. 9184, she considered theamount stated in the Contract Agreement as the fIxedprice for the construction of the project. She might haveread the Contract Agreement. She does not knowwhether there is price escalation provision in theagreement. During the time of the construction of theproject and when the agreement was entered into,sometime in 2003, there was no appropriation for priceescalation. 148

f. She is familiar with R.A. No. 9184, which requires anapproval from NEDAand GPBB before payment of priceescalation. However, she is not sure if said law isapplicable to the subject transaction. 149

g. When she asked the COAauditor on the propriety of theprice escalation, the latter advised her to seek the legalopinion of the municipal legal offIcer.150

h. She requested for a legal opinion on Markbilt's claimsince she is not familiar with the applicable laws --whether to apply R.A. No. 9184 or P.D. No. 1594. Shedoubted the propriety of the payment of price escalation.This is the fIrst time that she encountered payment forprice escalation. This is also her fIrst time to seek legalopinion as regards the payment of price escalation. 151

1. On the basis of the· legal opinion issued by MunicipalLegal Officer Edmundo R. Deveza stating that there is noreason to refuse payment, she deemed it proper toapprove the payment for price escalation in favor ofMarkbilt. She relied heavily on the legal opinion, whichwas submitted together with the Disbursement Voucher.The legal opinion states that P.D. No. 1594 should beapplied to the present transaction. Hence, based on thesaid law, the supporting documents are complete even inthe absence of the NEDAand GPPB approval, which arenot required under P.D. No. 1594.152

J. She relied on the documents submitted to her as well asthe legal advice/opinion in making the payment for priceescalation to Markbilt. She did not consult anindependent body as to the correctness of thecomputation of Markbilt's claim. She inquired, throughverbal communication, with the municipal engineer asregards the computation of the price increase. The leg

147 TSN dated September 10, 2014, pp. 11-12148 TSN dated September 10, 2014, pp. 21-24149 TSN dated September 10,2014, pp. 15, 18150 TSN dated September 10, 2014, p. 40151 TSN dated September 10, 2014, pp. 12, 14, and 26-27152 TSN dated September 10,2014, pp. 12, 15,27-29,37-39


opinion rendered by the Municipal Legal officer statedthat said officer inquired with the Municipal Engineer.153

k. The funds which she certified as "available" was takenfrom the additional Internal Revenue Allotment. 154

1. The supplemental budget (Appropriation Ordinance No.1)was enacted on March 6, 2008. The same was one of thesupporting documents attached to the DisbursementVoucher. This was taken from the funds for Fiscal Year2008.155

m. Before affixing her signature on the DisbursementVoucher, she must first verify whether there is anobligation request, and legal opinion which support thevalidity, propriety and legality of the claim. 156

n. If she has doubts on the le'galityof a claim, she seeks alegal opinion. From 2005, she has asked a legal opinionfrom the legal officer once, and more or less, five times,from other agencies, i.e., Department of Budget andManagement, Department of Interior and LocalGovernment and the CivilService Commission. 157

o. Markbilt requested for the payment of price escalationbecause there was supposedly an increase in the pricesof commodities or hardware materials in 2004.According to the project engineer, the prices are inaccordance with the IRRof P.D. 1594.158

p. The supporting documents required to be attached to theDisbursement Voucher consist of the claim or demand-letter from Markbilt, appropriation ordinance, contract,and computation on the basis of their claim of priceescalation. There was neither an approval by the GPPBnor NEDAon the price escalation.159

4. Alicia B. Lorenzo, Statistician III, PhilippineStatistics Authority, 160 testified:

a. She has been a Statistician since 2003. As a statistician,she is responsible for the regeneration of the two generalwholesale price index in the construction materials.'A t

153 Exhibit 12; TSN dated September 10, 2014, pp. 31-32, 35 and 37154 TSN dated September 10, 2014, p. 22155 TSN dated September 10, 2014, p. 23156 TSN dated September 10,2014, p. 24157 TSN dated September 10, 2014, p. 25158 TSN dated September 10, 2014, pp. 29-30159 TSN dated September 10,2014, pp. 38-39160 TSN dated October 20,2014, p. 4161 TSN dated October 20,2014, p. 6


b. Price escalation is the increase in price of certaincommodities of construction materials. The increase inthe amount of projects of engineers is based on theincrease in the index of the construction materials. 162

c. The 2000 verSIOn of the Construction MaterialsWholesale Price Index-National Capital Region wasreleased after the 2011 Presidential election.163 Theyobtained the old version.164

d. Price escalation does not necessarily occur. It dependson the demand of the construction materials in thecountry. Based on experience, price escalation ofconstruction materials usually occur yearly or quarterly.During summertime, there is a fast increase' in theaverage price of construction materials. 165

e. In the years 2002-2006, there was a remarkableescalation in the price index of construction materials.

f. The average construction materials for all items is 106.9in 2002. It rose to 162.6 in 2006. The price escalationin the construction materials in the NCR also applies toother cities or municipalities. 166Each page of Exhibit 25(Construction Materials Wholesale Price Index in theNational Capital Region) corresponds to the priceescalation from 2002 to 2006 in the NCR.167 In 2003,the price of gravel and sand increased by 4%.

g. Price escalation is based on the request of theconstructing firm or the engineer. The PSA's duty is tocollect wholesale price of selected construction materialssent to them. 168

5. Accused Tito Sarte Sarion, Municipal Mayor,Daet, Camarines Norte, 169 testified:

a. He was first elected as Mayor of Daet in 2001 and heldofficeuntil 2004. He was again elected in 2007,2010 and2013. He also held the position of Youth Representative(1986), Co ncilor (1988 to 1992), and Vice Mayor (1998 to2001),170

('___ to162 TSN dated October 20,2014, p. 7163 Exhibit 25164 TSN dated October 20,2014, pp. 10-11165 TSN dated October 20,2014, p. 12166 TSN dated October 20, 2014, pp. 12-14, 17167 TSN dated October 20,2014, p. 15168 TSN dated October 20,2014, p. 13169 TSN dated July 7,2015170 TSN dated July 7,2015, p. 4 and TSN dated November 5,2015, p. 13


b. He is familiar with Markbilt because the latterconstructed the Daet Public Market.171

c. He, as municipal mayor of Daet and Markbilt, representedby Architect Romeo Itturalde, entered into a contract forthe construction of the Daet Public Market during hisincumbency as Mayor of Daet. The contract price in theamount of PhP71,499.875.29 is considered a fIxed price.Paragraph 4 of the Contract provided that theimplementing rules and guidelines set by the governmentshall be applied to the Contract of Agreement. This is thefIrst time that the LGUof Daet entered into a contract withMarkbilt. Aside from said project, there was no otherproject that Markbilt undertook during his terms asMayor.172

d. Demand-letters marked as Exhibits 3 and 4 wereaddressed to Hon. Elmer E. Panotes, then Mayor of Daet.The demand-letters marked as Exhibits 5 and 6 wereaddressed to him. The demand-letter marked as Exhibit7 was addressed to Municipal Administrator ElmerNagera.173

e. He endorsed Markbilt's demand (for payment of priceescalation) to the Municipal Accountant. In turn, theMunicipal Accountant may consult the Sanggunianregarding the availability of appropriation and the legalityof possible payment. 174

f. Nagera referred the demand letter marked as Exhibit 7 tohim. Markbilt was demanding more thanPhP5,000,000.00 for the payment of price escalation.They referred the matter to the Sangguniang Bayan whichhas the function to act upon matters endorsed to it. TheSangguniang Bayan appropriated PhPl,OOO,OOO.OO forinitial payment of price escalation. 175

g. He was not involved in the determination of the amount ofPhPl,OOO,OOO.OO paid to Markbilt, in relation to itsdemand in the amount of PhP5,000,000.00. It was theSangguniang Bayan which assigned the amount to be paidto Markbilt.176

h. On the basis of the Ordinance, a DisbursementVoucher177 was prepared. The signature of MunicipalAccountant Caroline Messy Robles, certifying that thedocuments are complete and of Municipal TreasurerArlene O. Aberia certifying that funds available appear onthe Disbursement vouCherl~ (7~

171 TSN dated July 7,2015, p. 5 and TSN dated November 5,2015, p. 14172 TSN dated November 5,2015, pp. 14-16173 TSN dated July 7,2015, pp. 5-6174 TSN dated November 5,2015, p. 21175 TSN dated July 7,2015, p. 6176 TSN dated July 7,2015, p. 7177 Exhibit 14178 TSN dated July 7,2015, pp. 7-8


1. He signed the Disbursement Voucher, approving the samefor payment, because the Municipal Accountant hadcertified the completeness of the document and theMunicipal Treasurer and the Budget Officer had certifiedthe availability of funds therefor. Hence, there wasalready an appropriation. He relied on the capability ofsaid individuals. 179

J. He signed the check as well as the disbursement voucherfor the payment of the price escalation in the amount ofPhPl,OOO,OOO.OOin favor of Markbilt since all thedocuments, i.e., legal opinion, were already attached andcertified by the different chief of offices.180

k. He is not very familiar with all the details of the ContractAgreement; he relied on the Municipal Accountant who isreally the one in charge of certifying that all thedocuments are attached to the voucher. 181

1. When he signed the Disbursement Voucher, he was notaware of the requirement of approval by the GPPB and theneed for Clearance from the NEDA before payment forprice escalation may be made. He never encountered theneed for GPPB approval and NEDA clearance beforepayment of price escalation. Although it was the firsttime that he encountered price escalation, he did notinquire with the concerned agencies, i.e., GPPB, NEDA,COA, Municipal/Provincial Accountant regarding thesame, as he relied on the chief of offices who are really incharge of processing such transactions. He relied on hissubordinates. 182 He did not consult the MunicipalEngineer whether there was a study as to Markbilt's claimfor payment of price escalation. There were so many othertransactions in the Municipality. In his fair judgment, thedocuments and the voucher were in order, so he signedthe same. It is the chiefs of the offices who normally meetand discuss such matters. 183

m. He never encountered the need for GPPB approval andNEDA clearance before payment of price escalation. Thefirst time he encountered said requirement was whenCOA sent the Notice of Disallowance and AuditObservation Memorandum; and, after the payment forprice escalation had already been made. 184

n. The Municipal Accountant was the one who sought thelegal opinion of the Municipal Legal Officer. The latterissued a legal opinion stating that the LGU (of Daet) maypay the claim of Markbilt.1BS He is not aware if the Le~ (7

179 TSN dated July 7,2015, p. 9 ~180 TSN dated July 7,2015, p. 4 and TSN dated November 5,2015, p. 22181 TSN dated November 5,2015, p. 22182 TSN dated November 5,2015, pp. 24-25183 TSN dated November 5, 2015, p. 26184 TSN dated July 7,2015, pp. 14-15 and November 5,2015, p. 22185 TSN dated November 5,2015, p. 20


Officer mentioned anything about the requirement on theGPPB approval and NEDAClearance in his opinion. 186

o. The payee must claim the check from the MunicipalTreasurer at the LGU. He did not receive anything fromthe payment of PhPl,OOO,OOO.OOto Markbilt. Neither washe promised anything; or expecting anything in relation tothe payment of PhPl,OOO,OOO.OOto said company. 187

p. After paying Markbilt, the Municipality of Daet received aNotice of Disallowance from COA. The Notice ofDisallowance was issued by the team leader assigned tothe Municipality of Daet.188

q. He asked his personnel to discuss the Notice ofDisallowance. Thereafter, they filed an appeal before theRegional Officeof COA.189

r. He wrote the letter dated November 10, 2009,190addressedto Mr. Jesus Rebora, State Auditor III, Audit Team Leader,after the issuance of the Suspension Order. 191

s. He does not have any idea as to what happened with thedemand-letter addressed to former Mayor Panotes (Exhibit3). The letter addressed to former Mayor Panotes wasattached to the demand-letter addressed to him (accusedSarion) when he was already the Mayor of Daet. He doesnot know whether former Mayor Panotes acted upon saidletter. 192

t. Upon inquiring with the Accounting Department, he foundthat no payment was made on the demand-letter (Exhibit4) addressed to Mayor Panotes.193

u. His basis for saying that there is an appropriation for thepayment of price escalation is Resolution No. 063, theSupplemental Budget. 194

v. The appropriation for the payment of price escalation isprovided under the title, "Construction of Public Market,"amounting to PhP4,400,OOO.00.195

w. Resolution No. 063 does not state that said amount is tobe paid for the already completed public market. There isno specific mention that the amount of PhP4.4 Million isappropriated for the payment of price escalation toMarkbilt. But, he believes that the same is in the detail:Jof the deliberation of the Sangguniang Bayan. There is ~ ~ /}

186 TSN dated July 7,2015, pp. 14-15 I I187 TSN dated July 7,2015, pp. 9-10 ~188 TSN dated July 7,2015, p. 10 ~'189 TSN dated July 7,2015, p. 10190 Exhibit F-3/Exhibit 26191 TSN dated November 5, 2015, p. 31192 TSN dated November 5,2015, pp. 17-18193 TSN dated November 5,2015, pp. 18-19194 Exhibit 9, TSN dated November 5,2015, p. 27; Exhibit 9195 TSN dated November 5,2015, pp. 27-28


general term used by budget officers In appropriatingfunds. 196

x. The signatures of Municipal Budget Officer Amelia P.Laborte and Municipal Administrator Elmer C. Nageraappear on Supplemental Budget No. 1.197 He did not signsaid document because it was already signed by theMunicipal Administrator. 198

y. He may approve or disapprove an appropriation passed bythe Sangguniang Bayan.199

The Court admitted the following exhibits for theaccused: 200

Exhibit Document1 Contract Agreement dated December 29,2003

2 Notice to Commence Work dated January 5,2004Markbilt's demand letter dated December 4, 2005

3 addressed to Daet Municipal Mayor Elmer E. PanotesMarkbilt's undated demand letter and received on Nov.

4 13, 2006 by the Municipality of Daet, addressed to DaetMunicipal Mayor Elmer E. PanotesMarkbilt's demand letter dated January 21, 2008

5 addressed to Daet Municipal Mayor Tito S. Sarion6 Markbilt's demand letter dated February 7, 2008

Markbilt 's demand letter dated April 14, 2008 addressed7 to Daet Municipal Administrator Elmer Nagera

Construction Materials Wholesale Price Index In the8 National Capital Region (NCR) issued by National

Statistics Office Industry and Trade StatisticsDepartmentResolution No. 063 of the Sangguniang Sayan of theMunicipality of Daet, entitled, Resolution Approving theSupplemental Budget No. 01 for CY 2008 for theMunicipality of Daet Appropriating the Amount of P6,822,088.00 for Various Municipal Projects/ Expenditures Underthe General Fund Proper and for Special Account (Market)- Construction of Public Market Amounting toP4,400,000.00 with a Total Amount of P11,222,088.00,

and9

Appropriation Ordinance No. 01 of the SangguniangSayan of the Municipality of Daet, entitled, An OrdinanceApproving the Supplemental Budget No. 01 for CY 2008for the Municipality of Daet Appropriating the Amount ofP6,822,088.00 for Various Municipal Project/sExpenditures under the General Fund Proper and forSpecial Account (Market) - Construction of Public MarketAmounting to Four Million P4,400,000.00 with a TotalAmount of P11,222,088.00.

10 Photographs of the Daet Municipal Market Phase n"vTSN dated November 5, 2015, .28-29 ~I

197 Exhibit 21-Q198 TSN dated November 5,2015, pp. 34-35 i1199 TSN dated November 5, 2015, p. 29200 Resolution dated January 4,2016; Record, Vol. III, p. 338


Province of Carnarines Norte SangguniangPanlalawigan's Resolution No. 229-2008, entitled, AResolution Declaring Supplemental Budget No. 1 for FY2008 Embodying Appropriation Ordinance No. 01-08

11 Amounting to P11,222,088.00 and P4,400,000.00 for theGeneral Fund and Special Account Respectively, of theMunicipality of Daet this Province, as Operative Subject toCondition

12 Legal Opinion of the Municipal Legal Officer of theMunicipality of Daet

13 Landbank Statements of Account14 Disbursement Voucher No. 080412315 Markbilt's Official Receipt No. 115616 Audit Observation Memorandum dated October 6, 2008

of the Commission on Audit (COA) on the subject"Claim/Payment for Price Escalation"

17 Accused's letter-appeal dated March 6, 2009 submittedto the Commission on Audit

19 Notice of Suspension dated July 10, 2009 issued by COA20 Notice of Disallowance (ND) No. 2010-001-101-(2008)

dated March 17,201021 Accused's Appeal Memorandum filed before the COA

from the Notice of Disallowance21-Q to Supplemental Budget No. 1- Fiscal Year 200821-Q-422 to Accused's Motion Adopting Appeal Memorandum filed22-1 with the COA by Municipal Budget Officer Amelia P.

Laborte, Municipal Budget Officer Arlyn O. Aberia, andMunicipal Treasurer Caroline Maisie J. Robles

23 Accused's Compliance with attached AppealMemorandum filed with the COA

24 Obligation Request, with Reference No. 100-08-03-40225 Construction Materials Wholesale Price Index in the

National Capital Region (NCR) (2000=100) issued by thePhilippine Statistics Authority Industry and TradeStatistics Department

26 Accused's letter dated November 10, 2009 addressed tothe COA

Thereafter, the prosecution201 and accused Sarion202filed their respective memoranda.

On December 29, 2003, the Municipal Government ofDaet, Camarines Norte (represented by its Mayor, accusedTito S. Sarion), and Mr. Billy Aceron, General Manager ofMarkbilt (represented by his attorney-in-fact, ArchitectRomeo B. Itturalde), entered into a Contract Agreement(contract) for the construction of the Daet Public Market(Phase II),at a total cost ofPhP71,499,875.29. The contra~ rlV" ~stipulated that the construction shall be completed withi~~ /}

201 Prosecution's Memorandum dated February 15, 2016; Record, Vol. III, pp. 342-359 ( I202 Memorandum dated May 5, 2016; Record, Vol. III, pp. 374-400


365 calendar days, in accordance with the provisions of theBid Documents.203 The contract contains a provision forthe adjustment of the contract price, viz:

4. The Implementing Rules and Guidelines regardingAdjustment of contract prices adopted and approvedby the Government will be applied in this contract.204

In the Notice to Commence dated January 5, 2004,

approved by accused Sarion, Markbilt was given notice thatwork on the project may commence on the 10th day from itsreceipt of said Notice.205

During the national and local elections held2004, Elmer E. Panotes was elected MayorMunicipality of Daet.206

on Mayof the

In a letter dated December 4, 2005 addressed to thenMayor Panotes (thru Engr. Arlene dela Cruz), Markbilt,through Engineer Carlito A. Torero, stated that it isattaching therein, for checking and proper evaluation, "themonthly computation of materials fluctuation based on PD1594. Constant K Factor and National Statistics Office PriceIndex. "207

The construction of the Daet Public Market wascompleted sometime in 2006.208

In an undated letter received by the Office of thenMayor Panotes on November 13, 2006,209 Markbilt, throughits General Manager Billy Aceron, invoking the IRR of PD1594, requested the processing and payment of its contractprice escalation for the Daet Public Market (Phase II)project.However,Mayor Panotes did not favorably act on Markbilt'sdemands for payment.210

In 2007, accus~~~~arion wasMunicipality ofDaet.2~\ (J

,,, Exh;b;t t to t-e and Exh;b;t A to A-3 1M204 Exhibit A-4 I ••P205 Exhibit B206 TSN dated July 7, 2015, pp. 4-5; Letter dated December 4,2005 addressed to Panotes as

Mayor of Daet, Exhibit 3; and, undated letter addressed to Panotes as Mayor, Exhibit 4207 Exhibit 3208 Complaint dated November 24, 2008, p. 2, Exhibit K; Letter dated March 6, 2009, Exhibit

17; and, TSN dated September 3,2012, pp. 6 and 16209 Exhibit 4210 Commission on Audit, Regional Office V, Decision No. 2012, L-003 dated February 17,

2012, p.2211 TSN dated July 7,2015, p. 4


In his letter dated January 21, 2008 (addressed toaccused Sarion), Engr. Torero followedup Markbilt's requestto be paid Php5,222, 903.75 for contract price escalation.212In another letter dated February 7, 2008, Engr. Torero againfollowed up on the payment of their claim and informedaccused Sarion that they will impose a 15% per annuminterest payment as just valuation for their claim.213

Accused Sarion asked Administrator Nagera to look forsources of funds. Thereafter, Supplemental Budget No.1,signed by Municipal Budget Officer Amelia P. Laborte andapproved by Municipal Administrator Nagera, by authority ofthe Mayor (accused Sarion), was submitted to theSangguniang Bayan.214

On March 6, 2008, the Sangguniang Bayan of theMunicipality of Daet passed Resolution No. 063,unanimously approving Supplemental Budget No. 01-2008,appropriating the total amount of PhPll,222,088.00,sourced from the municipality's additional Internal revenueAllotment. 215 Section 1 of the Resolution appropriated theabove amount as follows:

From: Additional Realized IncomePer LBP Form # I61-Additional IRATotal

PI I ,222,088.00PII,222,088.00

To: General Fund Properxxx xxx xxxTotal Amount for General Fund ProperSpecial Account (Market)

Construction of Market

Subsequently, Resolution No. 063 was approved byaccused Sarion.

In his letter dated April 14, 2008 (addressed toAdministrator Nagera), Engr. Torero reiterated Markbilt'sdemand for payment of,price escalation and provided thefollowing computation~ fJ

~212 Exhibit 5213 Exhibit 6214 Supplemental Budget, Exhibits 21-Q to 21-Q-4215 Exhibit C and Exhibit 9216 Exhibit 7

DecisionPeople vs. SarionCriminal Cases No. SB-11-CRM-0256-0257

Billin~ No. Period Escalated Amount1 February to April 2004 76,282.992 May to July 2004 2,041,842.153 August to September 2004 1,647,078.374 October 2004 to February 2005 1,457,700.24

Total: P5,222,903.75217

Municipal Administrator Nagera and accused Sarionreferred the matter to the Sangguniang Bayan of theMunicipality of Daet.218

Upon determination that there was an appropriationfor the purpose, Municipal Administrator Nagera preparedan undated Obligation Request No. 100-08-03-402 for thepartial payment for Price Escalation to Markbilt. He certifiedthat: a) The charges to appropriation/allotment arenecessary, lawful and under his direct supervision; and, b)The supporting documents are valid, proper and legal.Municipal Budget OfficerLaborte certified as to the existenceof available appropriation.219

The Office of the Municipal Administrator preparedDisbursement Voucher No. 08041239 for ObligationRequest No. 100-08-03-402, with Markbilt as payee, in theamount of PhP1,000,000.00, as partial payment for priceescalation, "per supporting documents attached". Unsureof the applicability of R.A.No. 9184, Municipal AccountantRobles referred the matter to the COAAuditor assigned tothe municipality. Said COAauditor instructed her to referthe matter to the municipal legal officer. Upon Robles'request for an opinion on the applicable law for the priceescalation, Municipal Legal Officer Edmundo R. Deveza IIissued an undated legal opinion which states:

This is in connection with the request seeking legalopinion of this office regarding the provision of the ContractAgreement for the Construction of the Daet Public Market(Phase II) specifically on Adjustment of Contract Prices(Item No.4, page 2 of the Contract), which provides:

xxx xxx xxx

Presidential Decree No. 1594 should be made toapply, and, for the proper implementation of its provisions,an Implementing Rules and Guidelines was approved. CI12 particularly refers to Contract Price Escalation and it isworthy to note the following rules thereUnd~ I?

'" Lettec dated April 14, 2008 add,",sed to Daet Municipal Administmtoc Etb Nagem,Exhibit 7

218 TSNdated July 7,2015, p. 6219 Exhibit Mand Exhibit 24; TSNdated September 9,2014, pp. 45-46


This Office received complete copies of all documentsrelative to the contract and copies of the demand letterstogether with all its attachments on April 18, 2008.

Per inquiries made with the Municipal EngineeringOffice, the said escalation prices were computed inaccordance with the prescribed formulas and procedure setforth in the Implementing Rules and Regulations.

The above-cited provisions having been compliedwith, there is no reason to refuse the payment of theobligation. 220

On April 21, 2008, Municipal Accountant CarolineMaisie Robles, relying on the opinion of Atty. Deveza,certified that: a) Allotment obligated for the purposeindicated; and, b) Supporting documents are complete. OnApril 24, 2008, Municipal Treasurer Arlyn O. Aberia certifiedthat funds are available; Accused Sarion, as municipalmayor, approved the same for payment. 221

On April 24, 2008, a representative of Markbilt signedthe Disbursement Voucher to acknowledge receipt ofpayment through Land Bank Check No. 0272388.222

Markbilt issued Official Receipt No. 1156, dated April 24,2008, as proof of receipt of PhP1,000,000.00(PhP937,500.00 net of withholding tax) as partial payment ofprice escalation for the Daet Market Project (Phase II).223

Check No. 0272388, dated April 24, 2008, withMarkbilt as payee in the amount of PhP937,500.00 andsigned by Arlyn O. Aberia (municipal treasurer) and accusedTito S. Sarion (municipal mayor) was duly paid by LandBankDaet Branch.224

On June 17, 2008, the Sangguniang Panlalawigan ofthe Province of Camarines Norte, in the exercise of its reviewpowers, approved Resolution No. 229-2008 declaring asoperative, subject to conditions, Suppleme tal Budget No.1for FY 2008 of the Municipality of Daet.225

220 Memorandum dated May 5,2016, pp. 11-12; Record, Vol. III, pp. 384-385221 Disbursement Voucher No. 08041239, Exhibit G; Markbilt Official Receipt No. 1156 dated

April 24, 2008, Exhibit I; and, LBPCheck No. 272388 (PhP937,500.00), Exhibit H.222 Exhibit G and Exhibit 14223 Exhibit I224 Exhibit H225 Resolution No. 229-2008 dated June 24, 2008; Exhibit 11


In response to the request of Prosecutor Harry Caldino,NEDA, Regional Office No. 5 issued a Certification datedJuly 18, 2012 that it "did not receive any request from Daet,Camarines Norte for exemption and/or approval for paymentof escalation price to Markbilt."226 NEDA-Central Officeissued a similar certification dated July 25, 2012.227

In response to the request of Prosecutor Harry Caldino,the GPPB through its Executive Director Dennis Santiago, ina letter dated August 13, 2012, certified that "it has notreceived any recommendation from the National EconomicDevelopment Authority (NEDA),relative to the Applicationfor Contract Price Escalation by the Local Government Unit(LGU)of Daet, Camarines Norte."228

For a more orderly discussion and to avoid repetition,the Court will discuss the offense of Malversation of PublicFunds, ahead of the crime of Violation of Section 3(e) of R.A.No. 3019.

Accused Sarion is charged for permitting Markbilt totake PhPl,OOO,OOO.OOin public funds, as partial paymentfor its claim for the price escalation which it is not entitled toreceive, by allowing the disbursement through his approvalof the disbursement voucher:

a. In the absence of certificate of availability of funds insaid gross amount in favor of Markbilt;

b. In violation of the GPPB Guidelines for Contract PriceEscalation, as the payment was done:

1. Without approval from the GovernmentProcurement PolicyBoard (GPPB);and,

11. Without the determination by the NationalEconomic Development Authority (NEDA)as tthe propriety of the claim for price escalation.

226 Exhibit W-3227 Exhibit U228 Exhibit Wand W-l


Article 217 of the Revised Penal Code defines andpenalizes Malversation of Public Funds as follows:

Article 217. Malversation of public funds orproperty; Presumption of malversation. - Any publicofficer who, by reason of the duties of his office, isaccountable for public funds or property, shall appropriatethe same or shall take or misappropriate or shall consent,through abandonment or negligence, shall permit anyother person to take such public funds, or property, whollyor partially, or shall otherwise be guilty of themisappropriation or malversation of such funds orproperty, shall suffer:

4. The penalty of reclusion temporal, in its mediumand maximum periods, if the amount involved is morethan twelve thousand pesos but is less than twenty-twothousand pesos. If the amount exceeds the latter, thepenalty shall be reclusion temporal in its maximum periodto reclusion perpetua.

In all cases, persons guilty of malversation shall alsosuffer the penalty of perpetual special disqualification anda fine equal to the amount of the funds malversed or equalto the total value of the property embezzled.

The failure of a public officer to have dulyforthcoming any public funds or property with which he ischargeable, upon demand by any duly authorized officer,shall be prima facie evidence that he has put such missingfunds or property to personal use.

2. He had the custody or control of funds or propertyby reason of the duties of his office;

3. Those funds or property were public funds orproperty for which he was accountable;

4. He appropriated, took, misappropriated orconsented or, through abandonment or negligence,permitted another person to take them.229

All the elements of Malversation of Public funds arepresen~

~


Accused is a public officer.

Accused Sarion was a public officer, being the Mayor ofthe Municipality of Daet, Camarines Norte, at the time of thecommission of the offense.23o

Accused had custody or control of funds or property byreason of the duties of his office.

Accused Sarion signed Disbursement Voucher No.08041239,231 approving the payment of the amount ofPhP1,000,000.00 as contract price escalation to Markbilt.

It is settled that municipal mayors have custody,control and responsibility over the funds of the municipality.In People vs. Pantaleon,232 the Supreme Court held:

As a required standard procedure, the signatures ofthe mayor and the treasurer are needed before anydisbursement of public funds can be made. No checkscan be prepared and no payment can be effected withouttheir signatures on a disbursement voucher and thecorresponding check. In other words, any disbursementand release of public funds require their approval. Theappellants, therefore, in their capacities as mayor andtreasurer, had control and responsibility over the funds ofthe Municipality of Castillejos.233

Clearly, accused Sarion, by reason of his position asthe municipal mayor of Daet, had control and responsibilityof public funds.

The subject funds or property were public funds or propertyfor which he was accountable.

The amount paid to Markbilt constitutes public funds.Said amount was charged against the additional InternalRevenue Allotment under Appropriation Ordinance No.01,234which allotted :~)400,000.00 for "Special Account(Market)- constructio~ ~ (?

'" "'eo Trial O'd" dated June 6. 2012;~. Vol. 1I. p. 19 and TSN dated July 7. 2015. p. 4231 Exhibit G232 581SCRA 140[2009]233 At p. 161. Underscoring supplied234 Exhibit C


Accused Sarion is accountable for the amount paid toMarkbilt for price escalation, which are in the nature ofpublic funds.

It IS already settled that municipal mayors areaccountable for the funds of the local government unit.Thus, in Pantaleon, the Supreme Court held:

Pantaleon, as municipal mayor, was alsoaccountable for the public funds by virtue of Section 340of the Local Government, which reads:

Section 340. Persons Accountable for LocalGovernment Funds. - Any officer· of the localgovernment unit whose duty permits or requires thepossession or custody of local government funds shallbe accountable and responsible for the safekeepingthereof in conformity with the provisions of this title.Other local officials, though not accountable by thenature of their duties, may likewise be similarly heldaccountable and responsible for local government fundsthrough their participation in the use or applicationthereof.

In addition, municipal mayors, pursuant to theLocal Government Code, are chief executives of theirrespective municipalities. Under Section 102 of theGovernment Auditing Code of the Philippines, he isresponsible for all government funds pertaining to themunicipality:

Section 102. Primary and secondaryresponsibility. - (1) The head of any agency of thegovernment is immediately and primarily responsiblefor all government funds and property pertaining tohis agency. 235

Accused appropriated, took, misappropriated or consentedor, through abandonment or negligence, permitted anotherperson to take them.

Accused Sarion allowed the disbursement ofPhP1,000,000.00 to Markbilt as partial payment for its claimof price escalation, by approving the disbursement voucher,even when the latter was not entitled to be compensated forprice escalation.

Absence of Certificate ofAvailabilityof Funds

The Information charges accused Sarion of disbursingPhP1,000,000.00 in favor of Markbilt without a certificate ofavailability of funds. Disbursement Voucher No. 0804123

~


shows that Municipal Treasurer Arlyn Aberia certified to theavailability of funds. Municipal Budget Officer Amelia P.Laborte certified, in the Obligation Request, to the existenceof available appropriation.236 However, the said certificationswere irregular. Appropriation Ordinance No.1 contained noappropriation for the payment of the amount ofPhP1,000,000.00 to Markbilt. Appropriation Ordinance No.01 shows that the appropriation was for the construction ofthe public market. There was no appropriation to pay forthe contract price escalation, an obligation supposedlyincurred in the already completed construction of the DaetPublic Market.

Accused Sarion and his witnesses point to thedeliberations of the Sangguniang Bayan. But the intent topay the contract price escalation allegedly manifested duringthe deliberations are not reflected in AppropriationOrdinance No. 1. Notably, no documentary evidence wasoffered to prove the alleged deliberations.

Accused Sarion cannot blindly rely on the erroneouscertification of his municipal budget officer that funds areavailable because he was the one who approved theSupplemental Budget Ordinance and it was clear that noappropriation for the contract price escalation was includedtherein. Nonetheless, the Court notes that the Informationalleges the absence of, not the infirmity in, the certificate ofavailability of funds. Hence, the court cannot find himculpable for said action.

Violation of Republic Act No. 9184;approval and NEDA determinationcircumstances to justify price escalation.

Absence of GPPBof extraordinary

The applicable law referred to in paragraph 4 of theContract is R.A. No. 9184,237 and not P.D. No. 1594, invokedby Markbilt.

The Contract Agreement was executed on December29, 2003, when R.A. No. 9184 and its IRR238 were alreadyeffective, on January 26, 2003 and October 8, 2003,respectively. Section 76, 'R.A. No. 9184, expressly repealed

iseveral procurement laws, rules and regulations, one of

~(l236 Exhibit M/Exhibit 24 l\A.237 Govemment Procurement Reform Act ~v ,U238 Memorandum Order No. 119, dated 18 September 2003; issued by former Presiaent

Gloria Macapagal~Arroyo


which is P.D. No.longer applicableexecuted.

1594.239 Hence, P.D. No. 1594 is nowhen the contract agreement was

Section 61, R.A. No. 9184 expressly prohibits priceescalation during the implementation of the contract exceptunder extraordinary circumstances and upon prior approvalof the GPPB and determination by the NEDAof the existenceof "extraordinary circumstances." Viz:

SEC. 61. Contract Prices. - For the given scope ofwork in the contract as awarded, all bid prices shall beconsidered as fIxed prices, and therefore not subject toprice escalation during contract implementation, exceptunder extraordinary circumstances and upon priorapproval of the GPPB.

For purposes of this Section, "extraordinarycircumstances" shall refer to events that may bedetermined by the National Economic andDevelopment Authority in accordance with the Civil Codeof the Philippines, and upon the recommendation of theprocuring entity concerned.24o

61.1. For the given scope of work in the contract asawarded, all bid prices shall be considered as fIxed prices,and therefore not subject to price escalation duringcontract implementation, except under extraordinarycircumstances and upon prior approval of the GPPB.xxx

61.2. Any request for price escalation underextraordinary circumstances shall be submitted by theconcerned entity to the National Economic andDevelopment Authority (NEDA)with the endorsement ofthe procuring entity. The burden of proving theoccurrence of extraordinary circumstances that will allowfor price escalation shall rest with the entity requestingfor such escalation. NEDA shall only respond to suchrequest after receiving the proof and the necessarydocumentatio~ ~

~

239 SEC. 76. Repealing Clause. - This law rep.eals ... and Presidential Decree No. 1594dated June 11J 1978, entitled 'Prescribing Policies, Guidelines. Rules and Regulationsfor Government Infrastructure Contracts ..." Any other law, presidential decree orissuance, executive order, letter of instruction, administrative order, proclamation,charter, rule or regulation and/or parts thereof contrary to or inconsistent with theprovisions of this Act is hereby repealed, modified or amended accordingly. (Emphasisand underscoring supplied)

240 Emphasis and underscoring supplied


61.3. For purposes of this Section, "extraordinarycircumstances" shall refer to events that may bedetermined by the NEDAin accordance with the CivilCodeof the Philippines, and upon the recommendation of theprocuring entity concerned.241

GPPB Resolution No. 07-2004, Guidelines for ContractPrice Escalation (effectiveOctober 19, 2004), prohibits thepayment of any contract price escalation until after theGPPBhas approved the claim:

6. AUTHORITY TO APPROVE CONTRACT PRICEESCALATION

The Head of the Procuring Entity shall not pay anycontract price escalation until after the GPPB hasapproved the claim.

The guidelines limits the "extraordinary circumstances"to: a) ordinary fortuitous events; b) extraordinary inflationand deflation events; and, c) extraordinary fortuitous events,VIZ:

4. FOR PURPOSES OF THESE GUIDELINES, THETERM "EXTRAORDINARY CIRCUMSTANCESSHALL REFER TO THE FOLLOWING ARTICLESOF THE CIVIL CODE OF THE PHILIPPINES:

4.1 Article 1174. As it pertains to ordinary fortuitousevents or those events which ordinarily happen orwhich could be reasonably foreseen but areinevitable, such as but not limited to the following:

a. Typhoons;b. Thunderstorms;c. Flooding of lowlyareas;d. Vehicular accidents

4.2 Article 1250,242as it pertains to extraordinaryinflation or deflation, as defined in Section 3.3243

hereof; C241 Emphasis and unders ring supplied Ar1\242 Article 1250. In case an extraordinary in ation or ~;flJlon of the currency stipulated

should supervene, the value of the currency at the time of the establishment of theobligation shall be the basis of payment, unless there is an agreement to the contrary.

243 Section 3.3 Extraordinary Inflation or Deflation. Refers to the increase or decrease of thepurchasing power of the Philippine Cl\rrency which is unusual or beyond he commonfluctuation in the value of said currency, in accordance with the two (2) standarddeviation rule computed under Section 5.2.b of these guidelines and such decrease orincrease could not have been reasonably foreseen or was manifestly beyond thecontemplation of the parties at the time of the establishment of the obligation.


4.3 Article 1680, as it enumerates extraordinaryfortuitous events or those events which do not usuallyhappen, such as, but not limited to the following:

a. Fire;b. War;c. Pestilence;d. Unusual flood;e. Locusts; and,f. Earthquake

Provided that the circumstances before, during andafter the event shall be taken into consideration

In Singson vs. Caltex (Philippines), Inc.,244 theSupreme Court stressed that extraordinary inflation is neverassumed, and that the party alleging it must lay down thebasis of Article 1250 of the CivilCode. It also held that theeffects of extraordinary inflation are not to be appliedwithout an officialdeclaration by competent authorities.

Clearly, R.A. No. 9184, its Implementing Rules andRegulations and the Guidelines require that, before paymentof contract price escalation may be made, there must first bean approval of the GPPB of the payment and thedetermination by NEDA of the existence of extraordinarycircumstances.

Here, there is no question that the approval of theGPPB was not obtained before payment for the contractprice escalation was approved by accused Sarion and madeby the Municipality of Daet. The parties stipulated that theGPPB issued the Certification that it has not received anyrecommendation from the NEDA,relative to the Applicationfor Contract Price Escalation by the Local Government Unit(LGU)of Daet, Camarines Norte.245

Further, accused Sarion's declaration that he endorsedMarkbilt's request for approval of price escalation under R.A.No. 9184 to the GPPB in a letter dated November 10, 2009confirms that there was no GPPB approval at the time of thedisbursement of the funds on April 24, 2008. The requestwas made more than one (1) year after the payment was /Jmade and only after COA issued its Notice of DiSalIOWan~1 ! '

244 342 seRA 91 [2000]245 Exhibits Wand W-1


There is likewise no question that NEDAhas not madea determination of an extraordinary circumstance in theconstruction of the Daet Public Market to justify a contractprice escalation. The NEDA-Central Office and NEDA-Region 5 issued separate certifications (dated July 25, 2012and July 18, 2012, respectively)246 that they did not receiveany request from the Local Government of Daet, CamarinesNorte for exemption and/or approval for the payment ofescalation price to Markbilt or Mr. Romeo Iturralde.

Without the NEDA determination and the GPPBapproval, Markbilt is not entitled to payment for ContractPrice Escalation.

Despite the absence of any basis to pay Markbilt,accused Sarion went ahead and approved the payment toMarkbilt of the amount of PhPl,OOO,OOO.OOunderDisbursement Voucher No. 08041239 and by signingLandBank Check No. 272388.247

Accused Sarion's claim that he was unaware of therequirements under Section 61 of RA No. 9184 does notexcuse him from compliance with said law.248 At the timehe approved the payment to Markbilt, R.A. No. 9184, its IRRand the GPPB Guidelines on Escalation has been effectivefor four (4) years. His reliance on the erroneous legalopinion of the Municipal Legal Officer, which states that theapplicable law is P.D. No. 1594 and "there is no reason torefuse the payment of the obligation [price escalation],"249may negate evident bad faith but this does not necessarilyexcuse him from liability.

In Vicencio vs. Villar,250the Supreme Court said thatthe opinion of the City Legal Officer serves to buttress thepublic official's good faith. It does not, however, exculpateone from his personal liability under P.D. No. 1445.

The evidence shows that accused Sarion was grosslynegligent in approving the disbursement of thePhPl,OOO, 00.00 contract price escalation in favor ofMarkbilt

-~-246 Exhibits U and W-3247 Exhibit H248 Article 3, Civil Code249 Memorandum dated May 5,2016,pp. 11-12;Record, Vol. III, pp. 384-385250 675SeRA 468[2012]


The exculpatory ruling in Arias vs. Sandiganbayan251

is not applicable here. It is the exception enunciated in saidcase which applies. In said case, the Supreme Court heldthat heads of offices, to a reasonable extent, rely on theirsubordinates, and are not expected to examine each andevery detail in the supporting documents before approving avoucher, unless there are added reasons for doing so.

We would be setting a bad precedent if a head ofoffice plagued by all too common problems-dishonest ornegligent subordinates, overwork, multiple assignments orpositions, or plain incompetence is suddenly swept into aconspiracy conviction simply because he did notpersonally examine every single detail, painstakingly traceevery step from inception, and investigate the motives ofevery person involved in a transaction before affixing, hissignature as the final approving authority.

We can, in retrospect, argue that Arias should haveprobed records, inspected documents, receivedprocedures, and questioned persons. It is doubtful if anyauditor for a fairly sized officecould personally do all thesethings in all vouchers presented for his signature. TheCourt would be asking for the impossible. All heads ofoffices have to rely to a reasonable extent on theirsubordinates and on the good faith of those who preparebids, purchase supplies, or enter into negotiations. If adepartment secretary entertains important visitors, theauditor is not ordinarily expected to call the restaurantabout the amount of the bill, question each guest whetherhe was present at the luncheon, inquire whether thecorrect amoun t of food was served and otherwisepersonally look into the reimbursement voucher'saccuracy, propriety, and sufficiency. There has to be someadded reason why he should examine each voucher insuch detail. Any executive head of even small governmentagencies or commissions can attest to the volume ofpapers that must be signed. There are hundreds ofdocuments, letters and supporting paper that routinelypass through his hands. The number in bigger offices ordepartments is even more appalling.

There should be other grounds than the meresignature or approval appearing on a voucher to sustain aconspiracy charge and conviction.252

Accused Sarion, as local chief executive, was notexpected to examine the minutiae of every documentattached to the disbursement vouchers before approving thesame. But he was not completely relieved of thfyi 17251 180 seRA 309 [1989] ~ U ( ~ ~252 supra at pp. 315-316 ~


responsibility of conducting, at the very least, a cursoryexamination of the attached supporting documents.Completely entrusting the checking of the supportingdocuments to his subordinates goes beyond what isconsidered relying on his subordinates "to a reasonableextent."

The presence of the legal opinion of the Municipal LegalOfficerand the contents thereof, instead of assuring accusedSarion of the propriety of the payment should haveprompted accused Sarion to require his subordinates tomake further study or inquiries. The legal opinion of Atty.Deveza consisted of generalities and legal conclusionswithout a clear explanation of the bases therefor. Noexplanation was made as to why P.D. No. 1594 is theapplicable law nor was any mention made of the presence ofother possible applicable laws that prompted the request forthe legal opinion.

The legal opinion also made no mention of therequirements under P.D. No. 1594 that were complied withfor his conclusion and opinion that there is no reason torefuse payment. No discussion was included on thecorrectness of the computation for the price escalation,except to say that the municipal engineer confirmed that the"escalation prices were computed in accordance with theprescribed formulas and procedures set forth in the IRR."Had he discussed with the municipal accountant thereasons that prompted her to seek a legal opinion, he wouldhave been apprised of the applicability of Section 61, R.A.No. 9184. He would have been put on alert that Markbiltand the Municipal Legal Officer relied on the wrong lawbecause P.D. No. 1594 has been repealed by R.A. No. 9184,and earlier by R.A. No. 7160 insofar as it governs locallyfunded projects.253

Notably, other than the computation attached to theApril 14, 2008 letter addressed to Administrator Nagera,showing the total claim for each period, there is nodocument showing how the amounts for the claim for priceescalation were arrived at, as required under the IRRof P.D.No. 1594.

Accused Sarion who admitted that it was his first timeto encounter a request for payment of price escalation didnot bother to determine if the requirements for payme::t~Jwere complied with and if Markbilt was entitled to payme~,\'

'" Section 534(cll. R.A. No. 7160 k'O \ (?


Instead, he just approved the disbursement voucher blindlyrelying on the signatures of his subordinates. Clearly, theomissions and actuations of accused Sarion evince grossinexcusable negligence in the performance of his duties.

In Zoleta vs. Sandiganbayan,254 the Supreme Courtfound accused Provincial Vice-Governor guilty ofmalversation when he approved the disbursement voucher,thereby attesting that the payee is entitled to payment. Viz:

Finally, Vice-Governor Constantino and Camanayappropriated, took, misappropriated or consented, orthrough abandonment or negligence, permitted anotherperson to take the public funds when they signedDisbursement Voucher No. 101-2002-01-822. The termvoucher, when used in connection with disbursement ofmoney, implies some instrument that shows on whataccount or by what authority a particular payment hasbeen made, or that services have been performed whichentitle the party to whom it is issued to payment.Corollarily, when an authorized person approves adisbursement voucher, he certifies to the correctness ofthe entries therein, among others: that the expensesincurred were necessary and lawful, the supportingdocuments are complete, and the availability of cashtherefor. He also attests that the person who performedthe services or delivered the supplies, materials, orequipment is entitled to payment.255

Here, by approvIng payment and by signingDisbursement Voucher No. 08041239256 and LBPCheck No.272388 when Markbilt was clearly not entitled to paymentfor price escalation, accused Sarion is guilty of Malversationof Public Funds under Article 217 of the Revised Penal Code.

Violation of Section 3~ of Republic Act No. 3019

Accused Sarion is charged for causing undue injury tothe government when it paid Markbilt PhP1,000,000.00, aspartial payment for its claim for price escalation, which it isnot entitled to so receive, by approving the disbursement:

b. In violation of the GPPB Guidelines for Contract PriceEscalation as the payment was made despite:

i. The absence of an approval from the Gov.ernmentProcurement PolicyBoard (GPPB);and.,..} (l

254 764 seRA 110 [2015] ~~~255 At p. 124. Emphasis and underscoring supplied.256 Exhibit G


11. The absence of a determination by the NationalEconomic Development Authority (NEDA)as to thepropriety of the claim for price escalation.

Section 3. Corrupt practices of public officers. Inaddition to acts or omissions of public officers alreadypenalized by existing law, the following shall constitutecorrupt practices of any public officer and are herebydeclared to be unlawful:

(e) Causing any undue injury to any party,including the Government, or giving any privateparty any unwarranted benefits, advantage orpreference in the discharge of his officialadministrative or judicial functions throughmanifest partiality, evident bad faith or grossinexcusable negligence. This provision shall applyto officers and employees of offices or governmentcorporations charged with the grant of licenses orpermits or other concessions.

2. The act was done in the discharge of the publicofficer's official, administrative or judicialfunctions;

3. The act was done through manifest partiality,evident bad faith, or gross inexcusablenegligence; and,

4. The public officer caused any undue injury toany party, including the Government, or gaveany unwarranted benefits, advantage orpreference.257

All the elements of v:~~:ti!n of Section3019 are present in this ca:t ~ (J'" Zapaola va. People, 757 SeRA 172,189 [20151 ft'1


The offender is a public officer.

Accused Sarion was a public officer at the time relevantto the instant case. Accused Sarion testified that he was theMayor of Daet, Camarines Norte, from 2007 to 2013.258

The act was done in the discharge of the public officer'sofficial, administrative or judicial functions.

As discussed above, the Supreme Court, in Pantaleon,said that no checks can be prepared and no payment can beeffected without the signatures of the municipal mayor andthe treasurer on a disbursement voucher and thecorresponding check. Any disbursement and release ofpublic funds require their approval. 259Citing Section 102 ofthe Government Auditing Code of the Philippines, 260 theSupreme Court explained that as local chief executive of themunicipality, the municipal mayor is responsible for allgovernment funds pertaining to the municipality.261

Notably, the Manual on the New Government AccountingSystem for Local Government Units specifically requires theapproval of disbursements by the local chief executivewhenever local funds are disbursed:

Sec. 39. Approval of Disbursements. - Approval ofdisbursements by the Local Chief Executive (LCE)himselfshall be required whenever local funds are disbursed,except for regularly recurring administrative expensessuch as: payrolls for regular or permanent employees,expenses for light, water, telephone and telegraph services,remittances to government creditor agencies such as GSIS,BIR, PHILHEALTH,LBP, DBP, NPO, PS of the DBM andothers, where the authority to approve may be delegated.Disbursement vouchers for expenditures appropriated forthe operation of the Sanggunian shall be approved by theprovincial Vice Governor, the city Vice Mayor or themunicipal ViceMayor, as the case may be.262

Disbursement Voucher No. 08041239263 and LBPCheck No. 272388,264 were both signed by acc~~eJarion inthe discharge of his function as Municipal May~ ~.

~(J258 TSN dated July 7,2015,p. 4259 Supra, at p. 161260 Section 102.Primary and secondary responsibility. - (1)The head of any agency of the

government is immediately and primarily responsible for all government funds andproperty pertaining to his agency.

261 Supra, at p. 162262 Chapter III,Vol. I263 Exhibit G264 Exhibit H


The act was done through manifest partiality, evident badfaith, or gross inexcusable negligence

In Albert vs. Sandiganbayan,265 the Supreme Courtexplained the three modes, i.e., manifest partiality, evidentbad faith and gross inexcusable negligence, through whichviolation of Section 3(e),R.A.No. 3019 may be committed:

The second element provides the different modes bywhich the crime may be committed, that is, through"manifest partiality," "evident bad faith," or "grossinexcusable negligence." In Uriarte v. People, this Courtexplained that Section 3(e) of RA3019 may be committedeither by dolo, as when the accused acted with evident badfaith or manifest partiality, or by culpa, as when theaccused committed gross inexcusable negligence. There is"manifest partiality" when there is a clear, notorious, orplain inclination or predilection to favor one side or personrather than another. "Evident bad faith" connotes notonly bad judgment but also palpably and patentlyfraudulent and dishonest purpose to do moral obliquity orconscious wrongdoing for some perverse motive or ill will."Evident bad faith" contemplates a state of mindaffirmatively operating with furtive design or with somemotive or self-interest or ill will or for ulterior purposes."Gross inexcusable negligence" refers to negligencecharacterized by the want of even the slightest care, actingor omitting to act in a situation where there is a duty toact, not inadvertently but willfully and intentionally, withconscious indifference to consequences insofar as otherpersons may be affected.266

Proof of any of the three modes is sufficient to sustaina conviction.267

As the Court has concluded above, Markbilt is notentitled to payment for contract price escalation, in view ofthe absence of a GPPB approval for the payment and theabsence of a NEDA determination of extraordinarycircumstances to justify contract price escalation.

Accused Sarion's approval of the payment for priceescalation to Markbilt, without the requisite approval of theGPPB and NEDA's determination of the existence ofextraordinary circumstances, does not necessarily imPl~)manifest partiality on the part of the accused. Records ~ 1\ (7----- ~265 580 SCRA279 [2009]266 At p. 290267 Sison vs. People, 614 SCRA670,679 [2010]


not show that accused Sarion favored Markbilt over anotherentity when he authorized the subject payment.

The evidence is not sufficient to support a conclusionthat accused Sarion was motivated by ill will or dishonestpurpose in paying Markbilt's demand for payment ofcontract price escalation. Accused Sarion appears to haverelied on the legal opinion issued by the municipal legalofficer which states: a) that P.D. No. 1594 is the applicablelaw in connection with Markbilt's claim for price escalation;b) The escalation prices were allegedly computed inaccordance with the IRRof P.D. No. 1594; and c) There wasno reason to refuse payment for price escalation.268 Asconcluded above, it appears that accused Sarion did not actin bad faith.

Gross Inexcusable Negligence

Accused acted with gross inexcusable negligence whenhe approved the payment for Markbilt's demand for contractprice escalation even in the absence of the requisite approvalof the GPPB and without NEDA's determination of theexistence of extraordinary circumstances.

In Jaca vs. People,269 the Supreme Court emphasizedthat gross inexcusable negligence takes place only whenbreach of duty by a public official is flagrant and devious.Neglect or disregard of duty must be willful and intentionalin order for a violation to exist, viz:

Gross inexcusable negligence is negligencecharacterized by the want of even slight care; acting oromitting to act in a situation where there is a duty to act,not inadvertently but willfully and intentionally, with aconscious indifference to consequences in so far as otherpersons may be affected. It is the omission of that carewhich even inattentive and thoughtless men never fail totake on their own property; in cases involving publicofficials, it takes place only when breach of duty is flagrantand devious.

Considering the countless scenarios that may fallunder the provisions of Section 3 of RA No. 3019,particularly paragraph e, and the avowed purpose of thelaw to repress certain acts of public officers constituti~ggraft or corrupt practices or leading thereto, the law /I

268 Exhibit 12 " ~ (269 689 SCRA 270 [2013] ~ ~


considers the gravity of the bad faith (or partiality) ornegligent act or omission as a mode to commit theviolation of Section 3(e) of RANo. 3019. In requiring thenegligence to be both gross and inexcusable, the lawdemands the neglect or disregard of duty to be willful andintentional in order for a violation to exist, although it mayfall short of the required degree of bad faith, which mustbe evident, or of partiality, which must be manifest.27o

As discussed above, accused Sarion acted with grossinexcusable negligence when he approved the payment ofthe price escalation in favor of Markbilt without confirmingthat it was lawfully entitled thereto.

Giving any private party unwarranted benefits, advantage orpreference

The word "unwarranted" means lacking adequate orofficial support; unjustified; unauthorized or withoutjustification or adequate reason. "Advantage"means a morefavorable or improved position or condition; benefit, profit orgain of any kind; benefit from some course of action."Preference" signifies priority or higher evaluation ordesirability; choice or estimation above another.271

In the instant case, accused Sarion's approval of thepayment of PhPl,OOO,OOO.OOto Markbilt when it was notentitled thereto, in view of the absence of an approval by theGPPBand the absence of a determination by the NEDAas tothe existence of extraordinary circumstances, clearly gaveunwarranted benefit in favor of Markbilt.

Causing any undue injury to any party, including theGovernment

By approving payment of PhPl,OOO,OOO.OOinmunicipal funds to Markbilt, when the Municipality of Daetis not liable therefor as there was no requisite approval bythe GPPB and no factual and/or legal justification thereforas determined by the NEDA,accused Sarion caused undueinjury to the Municipality of Daet in the' amount ofPhPl,OOO,OOO.OO.

In fine, the evidence established .that accused Sarion isguilty of Violation of Section 3(e), R.A. No. 301i (7

to270 At pp. 296-297271 Rivera vs. People, 743 SeRA 476,498 [2014J


Herein accused posted bail on August 26, 2011, whichrendered moot the issuance of a warrant for his arrest. 272

The Supreme Court, in Valle vs. Sandiganbayan,273held that the trial court properly appreciated voluntarysurrender as a mitigating circumstance since nothing in therecords show that therein accused had been arrested priorto his posting of a cash bail bond.274 Hence, accused Sarionis entitled to the mitigating circumstance of voluntarysurrender.

The penalty for Malversation of Public Funds underArticle 217 of the Revised Penal Code, as amended by R.A.No. 10951,275 where the amount involved is more thanPhP40,000.00 but does not exceed PhPl,200,000.00, isFrision Mayor in its minimum and medium periods.

With one mitigating circumstance in his favor, thepenalty imposable upon the accused is 6 years and 1 day to7 years and 4 months of Prision Mayor, minimum. Applyingthe indeterminate sentence law, accused Sarion can bemeted the penalty ranging anywhere from 2 years, 4 monthsand 1 day, of Frision Correccional medium, to 6 years ofPrision Correccional max:imum, as minimum, to 6 years and1 day to 7 years and 4 months of Frision Mayor minimum, asmaxlmum.

The penalty imposable for violation of Section 3(e), R.A.No. 3019 is imprisonment for 6 years and 1 month to 15years. Applying the indeterminate sentence law, accusedSarion can be meted the penalty of imprisonment rangingfrom 6 years and 1 month, as minimum, to 15 years, asmaxImum.

272 Order dated August 26,2011;Record, Vol. I, p. 170;Resolution dated November 3,2011,p. 8; Record, Vol. I, p. 219.

273 214SeRA 532[1992]274 At p. 536275 An Act Adjusting the Amount or the Value of Property and Damage on which a Penalty is

Based, and the Fines Imposed under the Revised Penal Code, Amending for the Purpose ActNo. 3815, otherwise known as the "Revised Penal Code", as Amended


1. Guilty beyond reasonable doubt of Violation ofSection 3(e) of Republic Act No. 3019, and he ISaccordingly sentenced to:

a. Suffer an indeterminate penalty of imprisonment of Six(6) years and One (1) month, as minimum, to Eight (8)years, as maximum, and,

b. Suffer the penalty of perpetual special disqualificationfrom holding public office; and,

2. Guilty beyond reasonable doubt of Malversation ofPublic Funds or Property under Article 217 of theRevised Penal Code, and he is accordinglysentenced to:

a) Suffer 'an indeterminate penalty of imprisonment ofTwo (2) years, Four (4) months and One (1) day ofprision correccional, as minimum, to Six (6) years andOne (1) day of prision mayor, as maximum;

b) Pay a fine in the amount of One Million Pesos(PhP1,OOO,OOO.OO);and,

c) Suffer the penalty of perpetual special disqualificationfrom holding public office.

Accused Sarion shall indemnify the Municipality ofDaet the amount of One Million Pesos (PhP1,000,000.00) asactual damages, plus interest at the rate of 6% per annumto be reckoned from the date of finality of the Decision untilits full satisfaction.

WE CONCUR:..


I attest that the conclusions in the above decision werereached in consultation before the case was assigned to thewriter of the opinion of the Court's Division.

Pursuant to Article VIII, Section 13, of the Constitution,and the Division Chairperson's Attestation, it is herebycertified that the conclusions in the above decision werereached in consultation before the case was assigned to thewriter of the opinion of the Court's Division.