Heirs of Nelson Cabrera Buenaflor vs. Field Investigation Office, Office of the Ombudsman

A government-owned corporation’s credit program that provides loan facilities to borrowers for the purchase of inputs from accredited suppliers, where the corporation does not itself acquire goods but merely pays suppliers on behalf of borrowers to ensure loan proceeds are used for the intended purpose, does not constitute “procurement” under Section 5(n) of Republic Act No. 9184 and consequently is not subject to its competitive bidding requirements. The absence of an unlawful act precludes a finding of administrative liability for Grave Misconduct.

Nelson Cabrera Buenaflor, as President and Chief Executive Officer of Quedan and Rural Credit Guarantee Corporation (QUEDANCOR), a government-owned and controlled corporation created under Republic Act No. 7393, issued Memorandum Circular No. 270 on March 18, 2004. This circular, called the Consolidated Guidelines on QUEDANCOR Swine Program (CG-QSP), established a credit program to support swine raisers by providing affordable credit for fattening and breeding activities. QUEDANCOR later accredited Metro Livestock Incorporated (MLI) as an Input Supplier. The Field Investigation Office (FIO) of the Office of the Ombudsman subsequently filed an administrative complaint alleging that the program’s implementation in Oriental Mindoro was tainted with irregularities, including the failure to conduct competitive bidding under R.A. No. 9184 when contracts in favor of MLI totaling P48,606,750.00 were awarded.

• The QUEDANCOR Swine Program (QSP): On March 18, 2004, Buenaflor, as President and CEO of QUEDANCOR, issued Memorandum Circular No. 270, the Consolidated Guidelines on QUEDANCOR Swine Program (CG-QSP). The program established a credit facility for swine raisers. Under its mechanics, a borrower applied for a loan; upon approval, QUEDANCOR issued a Purchase Order (PO). The borrower presented the PO to an accredited Input Supplier (IS), who delivered swine inputs such as hogs, gilts, medicines, feeds, and technical assistance. The borrower signed a Joint Acceptance and Delivery Receipt upon receipt of inputs. The IS then collected payment from QUEDANCOR, and the amount paid by QUEDANCOR became the borrower’s loan.
• Accreditation of MLI: On August 25, 2003, QUEDANCOR, through its Regional Office No. 4 and Calapan District Office, issued Certificate of Accreditation No. R-IV-IS-009 to Metro Livestock Incorporated (MLI), making MLI an accredited Input Supplier.
• Administrative Complaint: On June 23, 2009, the FIO filed a complaint charging Buenaflor and other QUEDANCOR officials with Serious Dishonesty and Conduct Prejudicial to the Best Interest of the Service. The FIO alleged that QUEDANCOR failed to comply with the competitive bidding requirements under Section 10 of R.A. No. 9184 when it awarded contracts totaling P48,606,750.00 to MLI. It further claimed that MLI did not meet accreditation and eligibility requirements, lacked financial and technical capability, and committed breaches such as late or non-delivery of feeds and medicines, poor-quality piglets, insufficient technical assistance, and difficulty in reimbursing borrowers for advances. The Commission on Audit (COA) corroborated these findings in an Audit Observation Memorandum dated February 29, 2008.
• Buenaflor’s Defense: Buenaflor argued that R.A. No. 9184 applies only to actual procurement of infrastructure projects, goods, and consulting services by government instrumentalities. He maintained that QUEDANCOR did not engage in any procurement and that the CG-QSP did not contemplate the procurement of goods. He prayed for dismissal of the charge.
• Ombudsman and CA Findings: The Ombudsman found Buenaflor guilty of Grave Misconduct, ruling that the QSP was a loan in kind rather than a loan in money, and therefore QUEDANCOR should have complied with R.A. No. 9184’s bidding requirements. The CA affirmed, holding that the QSP was a loan in kind and that Buenaflor could be found guilty of Grave Misconduct even though the complaint originally charged Serious Dishonesty and Conduct Prejudicial to the Best Interest of the Service, because the designation of the offense is not controlling when the allegations and evidence prove guilt.

• Non-Applicability of R.A. No. 9184: Petitioners argued that the CG-QSP was purely a credit facility, not a procurement of goods by QUEDANCOR. Borrowers used loan proceeds to acquire inputs from accredited suppliers, and QUEDANCOR’s direct payment to suppliers on the borrowers’ behalf did not convert the transaction into a government procurement. They relied on Office of the Government Corporate Counsel (OGCC) Opinion No. 21, Series of 2006, which confirmed that R.A. No. 9184 does not apply to the QSP, and on the Supreme Court’s ruling in People v. Sandiganbayan, G.R. No. 214068, which involved identical facts and held the program outside the Procurement Act.
• Entitlement to Benefits: As heirs of the late Buenaflor, petitioners asserted a common interest in the retirement benefits that were ordered forfeited, and urged the Court to resolve the case on the merits to determine their entitlement.

• Procurement in Disguise: The FIO contended that the QSP was essentially a scheme whereby QUEDANCOR acquired swine inputs for distribution to borrowers, making the transaction a procurement subject to R.A. No. 9184. The failure to conduct competitive bidding prejudiced the government and violated the law.
• Proper Administrative Charge: Respondent maintained that the substance of the allegations and the evidence sufficiently established Grave Misconduct, even if the original complaint denominated the offense as Serious Dishonesty and Conduct Prejudicial to the Best Interest of the Service.

• Effect of Respondent’s Death: Whether the death of Buenaflor during the pendency of the administrative appeal precludes the Court from resolving the case on its merits.
• Administrative Liability under R.A. No. 9184: Whether Buenaflor’s issuance of the CG-QSP, which established a loan program with direct payment to accredited input suppliers, constituted a violation of the Government Procurement Reform Act requiring competitive bidding, and whether such violation warranted a finding of Grave Misconduct.

• Effect of Respondent’s Death: Buenaflor’s death did not bar final resolution of the administrative case. The Court retained jurisdiction to determine guilt or innocence because the outcome directly affected the heirs’ entitlement to retirement gratuity and other accrued benefits that would be forfeited upon a finding of guilt. The jurisprudentially recognized exceptions to the rule that administrative cases do not survive the respondent’s death—subversion of due process, equitable and humanitarian reasons, or the uselessness of proceedings due to the imposable penalty—were not present.
• Administrative Liability under R.A. No. 9184: The CG-QSP did not involve procurement within the meaning of R.A. No. 9184. The program merely provided a credit mechanism where borrowers, not QUEDANCOR, acquired swine inputs from accredited suppliers using loan proceeds; QUEDANCOR’s role was limited to paying suppliers directly to ensure loan funds were used for the intended purpose. Applying the ruling in People v. Sandiganbayan, G.R. No. 214068, which involved the same CG-QSP, the Supreme Court held that QUEDANCOR did not engage in the acquisition of goods or services. OGCC Opinion No. 21, Series of 2006, confirmed this interpretation. Consequently, the competitive bidding requirements of R.A. No. 9184 did not apply, and the failure to conduct bidding was not a violation of law. Because the alleged unlawful act did not exist, there was no substantial evidence to support a finding of Grave Misconduct.

• Definition of Procurement under R.A. No. 9184, Section 5(n) — Procurement is the “acquisition of Goods, Consulting Services, and contracting for Infrastructure Projects” by a procuring entity, including the lease of goods and real estate. A government financial institution’s credit program that facilitates loans to borrowers, where the institution merely pays accredited suppliers on behalf of the borrowers and does not itself acquire goods, falls outside this definition. Therefore, competitive bidding under the Act is not required.
• Continuation of Administrative Case After Respondent’s Death — The death of a respondent in an administrative case does not automatically preclude the finding of administrative liability. The case may be resolved on the merits when doing so would benefit the heirs—particularly to determine entitlement to retirement gratuity and accrued benefits that would otherwise be forfeited upon a finding of guilt. The exceptions to this rule are when due process would be subverted, when equitable and humanitarian reasons exist, or when the penalty imposable would render the proceedings useless.

• “QUEDANCOR merely provides credit facilities by which [borrowers] may avail of loans in connection with their swine businesses. … It is clear that the only aim of x x x Buenaflor for the issuance of the CG-QSP is to provide a swine program for the [borrowers] and to set a general policy and procedure on how the beneficiaries will go about it. … QUEDANCOR, by lending money to [borrowers], cannot be said to have engaged in the procurement or acquisition of goods or services from input suppliers.” — This passage, adopted from People v. Sandiganbayan, defines the nature of the QSP as a credit facility rather than a procurement, forming the central ratio for dismissing the administrative charge.
• “Public bidding was precluded in the CG-QSP not to purposely skirt the requirements of RA 9184, but because there were reasons to rely on that the purchase of swine inputs was not within the ambit of the Procurement Act.” — The excerpt underscores that the program’s design did not intentionally circumvent the law but rested on a correct legal premise that no procurement occurred.
• “The Court retains its jurisdiction either to pronounce the respondent official innocent of the charges or declare him guilty thereof because a contrary rule would be fraught with injustices and pregnant with dreadful and dangerous implications.” — This statement justifies the resolution of administrative cases on the merits despite the respondent’s death.

• People v. Sandiganbayan, First Division, G.R. No. 214068, July 22, 2019 (Minute Resolution) — Controlling precedent involving the identical CG-QSP; the Court followed its holding that the program was outside the scope of R.A. No. 9184 and that no public bidding violation occurred.
• Office of the Ombudsman v. Pacuribot, G.R. No. 193336, September 26, 2018, citing Hermosa v. Paraiso, 159 Phil. 417 (1975) — Cited for the doctrine that an administrative case may continue after the respondent’s death to determine the heirs’ entitlement to retirement benefits.
• Civil Service Commission v. Juen, 793 Phil. 344, 353 (2016) — Enumerated the exceptions to the rule that an administrative case does not survive the respondent’s death: when due process would be subverted, on equitable and humanitarian grounds, or when the penalty imposable renders proceedings useless.

• Section 5(n), Republic Act No. 9184 (Government Procurement Reform Act) — Defines procurement as the acquisition of goods, consulting services, and contracting for infrastructure projects by a procuring entity. The Court interpreted this provision to exclude QUEDANCOR’s credit program, as the corporation did not acquire goods but merely facilitated loans.
• Section 10, Republic Act No. 9184 — Requires competitive bidding for government procurement. The provision was held inapplicable because no procurement occurred.

Chief Justice Peralta (Chairperson), Associate Justice Caguioa, Associate Justice Reyes, Jr. (ponente), Associate Justice Lazaro-Javier, and Associate Justice Lopez concurred.