Prudent Man Rule — Judge Investments by What Was Known at the Time

CIRIACO VS. MARQUEZ

G.R. Nos. 171746–48 and 171770–72, and G.R. No. 185290 | March 29, 2023 | 939 Phil. 1
Supreme Court, First Division, Zalameda, J.

Facts

In 1999, the Social Security System (SSS) used its Investment Reserve Fund to buy 25,855,382 shares of Philippine Commercial International Bank (PCIB) at ₱290.075 per share in a negotiated block purchase. Ciriaco and other SSS officers and members alleged that the shares were worth ₱245 each and that SSS had overpaid by about ₱1.165 billion. The respondent officials maintained that the difference was a justified premium for acquiring a large block of shares

The Ombudsman found Horacio Templo, Edgar Solilapsi, and Lilia Marquez liable for conduct prejudicial to the best interest of the service and suspended them for six months without pay. It questioned the speed of the transaction and Marquez’s role in preparing the final investment memorandum. The Court of Appeals reversed. In a separate proceeding, it dismissed Marissu Bugante’s appeal as untimely.

Issues and rulings

1. Did Ciriaco and the other complainants have standing to appeal? No. Private complainants in administrative disciplinary proceedings generally act as witnesses for the government. An exception may apply when a complainant has a direct, personal, and substantial interest. Their general interest as SSS officers and members in seeing the law enforced was insufficient.

2. Did Bugante’s appeal survive her death? No. The appeal concerned administrative discipline and implicated no property right of Bugante’s heirs that could support substitution. The Court closed and terminated G.R. No. 185290. 

3. Was Rule 65 the proper remedy for the Ombudsman? No. The Ombudsman could have sought review of the Court of Appeals’ decision under Rule 45 and invoked a recognized exception to the general bar on factual review. Rule 65 certiorari cannot substitute for a lost appeal.

4. Were Templo, Solilapsi, and Marquez administratively liable? No. Months of investment studies preceded the purchase, and a firm bid deadline justified acting promptly. The size of the block, comparative valuations, and the two board seats SSS obtained supported the premium. Marquez helped prepare the memorandum using information supplied by Solilapsi and his staff, and Solilapsi approved it. A later decline in share value did not establish misconduct.

Doctrine:

Under the prudent man rule in Section 26 of the SSS Law then in force, courts assess an investment decision against the care, skill, and diligence that a knowledgeable person in a comparable role would exercise under the circumstances prevailing when the decision was made. A disappointing return, by itself, does not establish administrative liability where the officials exercised the required diligence.

(Doctrine — Prudent man rule. Under Section 26 of the SSS Law then in force, SSS officials must invest reserve funds with the skill, care, prudence, and diligence that a knowledgeable investment professional in a comparable position would exercise under the circumstances existing when the decision was made. A later loss or failure to earn projected profits does not by itself establish administrative liability if the officials exercised the required diligence.)

The Court applied that rule to the PCIB purchase. Months of prior studies supported the investment, the bid deadline justified prompt action, and the size of the share block and the two board seats SSS obtained helped justify the premium.

Disposition

The Supreme Court denied G.R. Nos. 171746–48 and 171770–72 and affirmed the exoneration of Templo, Solilapsi, and Marquez. It held that they were entitled to the salaries and other emoluments withheld during their six-month suspensions. It closed and terminated G.R. No. 185290 and declared the dismissal of the complaint against the other respondents covered by that petition final.