G.R. No.

130191                  April 27, 1998

Facts
            In 1990, the the Davao City Local Automation Project was launched by the City
government of Davao. The Computerization Program Committee recommended the acquisition
of Goldstar computers manufactured by Goldstar Information and Communication, Ltd., South
Korea and exclusively distributed in the Philippines by Systems Plus, Inc. (SPI). After obtaining
prior clearance from COA Auditor Kintanar, the Committee proceeded to negotiate with SPI.
            Sometime in February 1991, a complaint was filed before the Regional Trial Court of
Davao City, by Dean Pilar Braga, Hospicio Conanan, Jr., and Korsung Dabaw Foundation, Inc.
against the petitioners, the City Council, various City Officials and SPI for the judicial declaration
of nullity of the aforestated resolutions and ordinances and the computer contract executed
pursuant thereto. On February 22, 1991, Goldstar, through its agent, Mr. S.Y. Lee sent a
proposal to petitioner Duterte for the cancellation of the computerization contract. On May 6,
1991, petitioner Duterte, in behalf of Davao City, and SPI mutually rescinded the contract and
the downpayment was duly refunded.
            On August 1, 1991, the Anti-Graft League - Davao City, through one Miguel C. Enriquez,
filed an unverified complaint with the Ombudsman – Mindanao against petitioners, the City
Treasurer, City Auditor, the whole city government of Davao and SPI. The League alleged that
the respondents, in entering into the computerization contract, violated R.A. 3019 (Anti-Graft
and Corrupt Practices Act), P.D. No. 1445 (Government Auditing Code of the Philippines), COA
circulars and regulations, the Revised Penal Code and other pertinent laws.
            Petitioners allege that the Honorable Sandiganbayan committed grave abuse of
discretion amounting to lack or excess of jurisdiction in denying petitioners’ Motion to Quash
and Motion for Reconsideration considering that petitioners were effectively deprived of their
Right to a Preliminary Investigation pursuant to Sec. 4, Rule II of Administrative Order NO. 07
(Rules of Procedure of the Office of the Ombudsman); and assuming that a Preliminary
Investigation was properly conducted, there was an inordinate delay in terminating the same
thereby depriving them of their Right to Due Provess and Speedy Disposition of the case.

Issues
1.         Whether or not the petitioners were deprived of their right to due process.
2.         Whether or not Mayor Duterte violated the R.A. No. 3019.

Ruling
1.         Yes.
.           The right to a preliminary investigation is not a mere formal right; it is a substantive right.
To deny the accused of such right would be to deprive him of due process.
            Preliminary investigation of the charges against petitioners has been conducted not in
the manner laid down in Administrative Order No. 07. In November 12, 1991 Order of Graft
Investigator Manriquez, petitioners were merely directed to submit a point-by-point comment
under oath on the allegations in Civil Case No. 20,550-91 and on SAR No. 91-05. The said
order was not accompanied by a single affidavit of any person charging petitioners of any
offense as required by law. They were just required to comment upon the allegations in Civil
Case No. 20,550-91 of the Regional Trial Court of Davao City which had earlier been dismissed
and on the COA Special Audit Report. Petitioners had no inkling that they were being subjected
to a preliminary investigation as in fact there was no indication in the order that a preliminary
investigation was being conducted. If Graft Investigator Manriquez had intended merely to adopt
the allegations of the plaintiffs in the civil case or the Special Audit Report (whose
recommendation for the cancellation of the contract in question had been complied with) as his
bases for criminal prosecution, then the procedure was plainly anomalous and highly irregular.
As a consequence, petitioners' constitutional right to due process was violated.
            Apparently, in the case at bar, the investigating officer considered the filing of petitioner's
comment as a substantial compliance with the requirements of a preliminary investigation.
Initially, Graft Investigator Manriquez directed the members of the Special Audit Team on 9
October 1991 to submit their affidavits relative to SAR No. 91-05. However, on 12 November
1991, before the affidavits were submitted, Manriquez required petitioners to submit their
respective comments on the complaint in the civil case and on Special Audit Report (SAR) 91-
05. Even when the required affidavits were filed by the audit team on 4 December 1991,
petitioners were still not furnished copies thereof. The Ombudsman contends that failure to
provide petitioners the complaint-affidavits is immaterial since petitioners were well aware of the
existence of the civil complaint and SAR No. 91-05. We find the Ombudsman's reasoning
flawed. The civil complaint and the COA Special Audit Report are not equivalent to the
complaint-affidavits required by the rules. Moreover, long before petitioners were directed to file
their comments, the civil complaint (Civil Case No. 20,550-91) was rendered moot and
academic and, accordingly, dismissed following the mutual cancellation of the computerization
contract. In SAR No. 91-05, on the other hand, petitioners were merely advised to rescind the
subject contract — which was accomplished even before the audit report came out. In light of
these circumstances, the Court cannot blame petitioners for being unaware of the proceedings
conducted against them.
2.         There is no basis in law or in fact to charge petitioners for violation of Sec. 3(g) of R.A.
No. 3019. To establish probable cause against the offender for violation of Sec. 3(g), the
following elements must be present: (1) the offender is a public officer; (2) he entered into a
contract or transaction in behalf of the government; and (3) the contract or transaction is grossly
and manifestly disadvantageous to the government. The second element of the crime — that
the accused public officers entered into a contract in behalf of the government — is absent. The
computerization contract was rescinded on May 6, 1991 before SAR No. 91-05 came out on
May 31, 1991 and before the Anti-Graft League filed its complaint with the Ombudsman
on  August 1, 1991. Hence, at that time the Anti-Graft League instituted their complaint and the
Ombudsman issued its Order on November 12, 1991, there was no longer any contract to
speak of. The contract, after May 6, 1991 became in contemplation of law, non-existent, as if no
contract was ever executed.