THE Supreme Court (SC) has ordered the Regional Trial Court (RTC) in Manila to proceed with the trial of the criminal case against tycoon Jose C. Go for allegedly guaranteeing loans to others and borrowing at least P2.75 billion deposits of his wholly owned bank, the now defunct Orient Commercial Banking Corp., without the written approval of the majority of the bank’s board of directors.

In a 13-page decision penned by Associate Justice Arturo Brion, the Court’s Second Division denied the petition for review filed by Go seeking the nullification of the Court of Appeals’ (CA) decision issued on October 26, 2006, which overturned the order of Branch 26 of the RTC in Manila granting the businessman’s motion to quash the information filed against him.

Go, who also owns the Ever Gotesco shopping malls in Manila, Caloocan and Quezon cities and in Cainta, Rizal, argued that the CA erred in reversing the trial court’s dismissal of the case, which found the complaint against him not only vague but also did not constitute an offense.

The lower court agreed with Go’s contention that the information for violation of Section 83 of Republic Act (RA) 337, or the General Banking Act, filed against him by the Bangko Sentral ng Pilipinas (BSP) penalized only directors and officers of banking institutions who acted either as borrower or as  guarantor, but not as both.

Go pointed out that the second paragraph of Section 83 allowed banks to extend credit accommodations to their directors, officers and stockholders, provided it is “limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank.”

He maintained that extending credit accommodations to bank officers and stockholders is not prohibited, unless the amount exceeds the legal limit.

Since the information failed to state that the amount he purportedly borrowed or guaranteed or both was beyond the limit set by law, Go insisted that his acts did not constitute a violation of the banking laws.

Go protested the prosecution’s “shotgun approach” that he claimed violated his constitutional right to be informed of the nature and cause of the accusations against him.

The SC, however, is not convinced with Go’s contentions, saying that Section 83 of RA 337 generally prohibits a bank director or officer from becoming an obligor of the bank without securing the necessary written approval of the majority of the bank’s directors.

“To make a distinction between the act of borrowing and guarantying is therefore unnecessary because in either situation, the director or officer concerned becomes an obligor of the bank against whom the obligation is juridically demandable,” the Court explained.

Even assuming that the information filed against Go do not constitute an offense, the  Court stressed that it was erroneous for the RTC in Manila to immediately dismiss the case without giving the prosecution a chance to amend the  complaint.

Section 4 of Rule 117 of the Rules of Criminal Procedure, according to the Court, requires that the prosecution should be given a chance to correct the defect and the court can order the dismissal if the prosecution fails to do so.

“The RTC’s failure to provide the prosecution this opportunity constitutes an arbitrary exercise of power that was correctly addressed by the CA through the certiorari petition. This defect in the RTC’s action on the case, while not central to the issue before us, strengthens our conclusion that this criminal case should be resolved through full-blown trial on the merits.”

Concurring with the ruling were Associate Justices Leonardo Quisumbing, Antonio Carpio, Conchita Carpio-Morales and Roberto Abad.

The complaint filed on August 20, 1999, before the sala of Judge Oscar Barrientors of Branch 26 of the RTC in Manila accused Go, then the director and the president and chief executive officer of Orient Bank, of “unlawfully borrowing the deposits of the said bank or become a guarantor for loans from said bank to others or both and using the borrowed funds in facilitating and granting credit lines to the New Zealand Accounts loans in the total amount of P2.75 billion…without the written approval of majority of the board of directors.”

Orient Bank was ordered closed by the BSP on October 14, 1998, and placed under receivership by the Philippine Deposit Insurance Corp. It was the first bank to collapse at the height of the Asian financial crisis.