MANILA, Philippines -- Bad business judgment does not always give rise to criminal liability, the Supreme Court said after it denied an appeal by the Presidential Commission on Good Government concerning a bad loan that cost the government millions of pesos.

In a 23-page decision the high court's second division said that the Development Bank of the Philippines (DBP) should not be faulted for approving the loan of Midland Cement Corp. that years later resulted in an P855.551 million loss to the government.

The high court, through Associate Justice Dante Tinga, said that the mandate of the government-owned DBP was to provide credit facilities to private enterprises in starting up their businesses expecting it to succeed and the benefit to redound to national growth.

"This function inherently bears risks since not all enterprises actually become successful and quite a number of them ultimately flame out. In the same way that there is no guarantee that every business will end up profitable, there is no certainty that DBP will not sustain losses resulting from its loan transactions with a particular company. It would be foolhardy to impute criminal liability against the DBP officers because of the damage sustained from such unsuccessful loan transactions," the high court said.

The high tribunal said that “distressing” as the ultimate loss to the government might be as a result of DBP's loan transactions with Midland Cement, “bad business judgment on the part of the DBP officers does not necessarily translate to criminal liability."

The case stemmed from a P110-million foreign guarantee loan granted by DBP to Midland in 1968. And then, between 1971 and 1982, several other loan agreements between Midland Cement and DBP had been approved.

In 1981, the DBP became the majority owner of Midland, with 92.89 percent of the shares in the corporation.

After 17 years, the presidential ad hoc fact finding committee on behest loan under PCGG recommended to the Office of the Ombudsman an investigation into the deal to determine possible violations of the law.

The committee told the Ombudsman that Midland Cement had no sufficient capital to be entitled to several loans.

The committee said Midland Cement's unpaid balance amounted to P1.027, 376-billion with a property valued at P329.470 million. With its properties sold at P171.825 million, the government incurred a loss of P855.551-million.

But then Ombudsman Aniano Desierto said the loan could not be considered behest because the proceeds had been used to construct the cement plant.

The Ombudsman also considered the fact that DBP became the majority owner of Midland. It also said that Midland offered as collateral all its assets, mining claims, lease contracts, which were sufficient collateral.

"What cannot be denied is that DBP, as the new owner of Midland Cement indirectly assumed responsibility for the outstanding obligations of the company. It could thus not allow Midland Cement to simply flounder without causing prejudice to its own interests," the high court said.