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Thursday, August 23, 2018
528TH PERSUASIVE APPEAL_23AUGUST18_TO THE SCP JUSTICIDES : EVERYBODY HAS TO COOPERATE INCLUDING YOU.
CIVIL SERVICE COMMISSION NATIONAL CAPITAL REGION DIRECTORS_REFERENCE
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Wednesday, August 22, 2018
SYNDICATED ESTAFA CASE _REFERENCE
SECOND DIVISION
x ----------------------------------------------------------------------------------------x
D E C I S I O N
PEREZ, J.:
THE FACTS
In 1999, Radio Marine Network (Smartnet) Inc. (RMSI) claiming to do business under the name Smartnet Philippines[1] and/or Smartnet Philippines, Inc. (SPI),[2] applied for an Omnibus Credit Line for various credit facilities with Asia United Bank (AUB). To induce AUB to extend the Omnibus Credit Line, RMSI, through its directors and officers, presented its Articles of Incorporation with its 400-peso million capitalization and its congressional telecom franchise. RMSI was represented by the following officers and directors occupying the following positions:
Gilbert Guy - Exec. V-Pres./Director
Philip Leung - Managing Director
Katherine Guy - Treasurer
Rafael Galvez - Executive Officer
Eugenio Galvez, Jr. - Chief Financial Officer/Comptroller
Satisfied with the credit worthiness of RMSI, AUB granted it a
Believing that SPI is the same as Smartnet Philippines - the division of RMSI - AUB granted to it, among others, Irrevocable Letter of Credit No. 990361 in the total sum of $29,300.00 in favor of Rohde & Schwarz Support Centre Asia Ptd. Ltd., which is the subject of these consolidated petitions. To cover the liability of this Irrevocable Letter of Credit, Gilbert Guy executed Promissory Note No. 010445 in behalf of SPI in favor of AUB. This promissory note was renewed twice, once, in the name of SPI (Promissory Note No. 011686), and last, in the name of Smartnet Philippines under Promissory Note No. 136131, bolstering AUBs belief that RMSIs directors and officers consistently treated this letter of credit, among others, as obligations of RMSI.
When RMSIs obligations remained unpaid, AUB sent letters demanding payments. RMSI denied liability contending that the transaction was incurred solely by SPI, a corporation which belongs to the Guy Group of Companies, but which has a separate and distinct personality from RMSI. RMSI further claimed that while Smartnet Philippines is an RMSI division, SPI, is a subsidiary of RMSI, and hence, is a separate entity.
Aggrieved, AUB filed a case of syndicated estafa under Article 315 (2) (a) of the Revised Penal Code in relation to Section 1 of Presidential Decree (PD) No. 1689 against the interlocking directors of RMSI and SPI, namely, Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr., before the Office of the City Prosecutor of Pasig City.
AUB alleged that the directors of RMSI deceived it into believing that SPI was a division of RMSI, only to insist on its separate juridical personality later on to escape from its liabilities with AUB. AUB contended that had it not been for the fraudulent scheme employed by Gilbert Guy, et al., AUB would not have parted with its money, which, including the controversy subject of this petition, amounted to hundreds of millions of pesos.
In a Resolution dated 3 April 2006,[7] the Prosecutor found probable cause to indict Gilbert G. Guy, et al. for estafa but dismissed the charge of violation of PD No. 1689 against the same for insufficiency of evidence, thus:
WHEREFORE, it is recommended that respondents be charged for ESTAFA under Article 315, par. 2(a) of the Revised Penal Code, and the attached information be filed with the Regional Trial Court in Pasig City, with a recommended bail of
It is further recommended that the charge of violation of P.D. 1689 against the said respondents be dismissed for insufficiency of evidence.[8]
Accordingly, an Information dated 3 April 2006[9] was filed against Gilbert Guy, et al. with the Regional Trial Court of Pasig City.
Both parties, i.e., the AUB and Gilbert Guy, et al., filed their respective Petitions for Review with the Department of Justice (DOJ) assailing the 3 April 2006 Resolution of the Office of the City Prosecutor of Pasig City.
In a Resolution dated 15 August 2006,[10] the DOJ reversed the City Prosecutors Resolution and ordered the dismissal of the estafa charges against Gilbert Guy, et al. for insufficiency of evidence.
The AUBs Motion for Reconsideration was denied, constraining it to assail the DOJ Resolution before the Court of Appeals (CA).
The CA partially granted AUBs petition in a Decision dated 27 June 2008, thus:
WHEREFORE, the instant petition is GRANTED, finding probable cause against private respondents for the crime of ESTAFA under Article 315, par 2 (a) of the Revised Penal Code. The assailed Resolution dated August 15, 2006 of the Department of Justice is REVERSED AND SET ASIDE, subject to our ruling that the private respondents are not liable under P.D. 1689. The April 3, 2006 Resolution of Assistant City Prosecutor Paudac is hereby REINSTATED.[11]
Aggrieved, Gilbert Guy, Philip Leung and Eugenio H. Galvez Jr. (in G.R. No. 188030) and separately, Rafael Galvez and Katherine Guy (in G.R. No. 187919) filed the present petitions before this Court assailing the CA Decision which reinstated the City Prosecutors Resolution indicting them of the crime of estafa. The AUB also filed its own petition before us, docketed as G.R. No. 187979, assailing the Court of Appeals Decision for dismissing the charge in relation to Section 1 of PD No. 1689.
Hence, these consolidated petitions.
Gilbert Guy, et al. argue that this case is but a case for collection of sum of money, and, hence, civil in nature and that no fraud or deceit was present at the onset of the transaction which gave rise to this controversy, an element indispensable for estafa to prosper.[12]
AUB, on the other, insists that this controversy is within the scope of PD No. 1689, otherwise known as syndicated estafa. It contends that Guy, et al., induced AUB to grant SPIs letter of credit to AUBs damage and prejudice by misleading AUB into believing that SPI is one and the same entity as Smartnet Philippines which AUB granted an Omnibus Credit Transaction. After receiving and profiting from the proceeds of the aforesaid letter of credit, Gilbert Guy, et al. denied and avoided liability therefrom by declaring that the obligation should have been booked under SPI as RMSI never contracted, nor authorized the same. It is on this premise that AUB accuses Gilbert Guy, et al. to have committed the crime of estafa under Article 315 (2) (a) of the Revised Penal Code in relation to PD No. 1689.
At issue, therefore, is whether or not there is probable cause to prosecute Gilbert Guy, et al. for the crime of syndicated estafa on the basis of fraudulent acts or fraudulent means employed to deceive AUB into releasing the proceeds of Irrevocable Letter of Credit No. 990361 in favor of SPI.
Our Ruling
This controversy could have been just a simple case for collection of sum of money had it not been for the sophisticated fraudulent scheme which Gilbert Guy, et al. employed in inducing AUB to part with its money.
Records show that on 17 February 1995, Radio Marine Network, Inc. (Radio Marine) amended its corporate name to what it stands today Radio Marine Network (Smartnet), Inc. This was a month after organizing its subsidiary corporation the Smartnet Philippines, Inc. with a capital of only
It was, however, only on 26 March 1998, when the Securities and Exchange Commission approved the amended corporate name, and only in October 1999 did RMSI register Smartnet Philippines as its business name with the Department of Trade and Industry.[14]
It is in this milieu that RMSI transacted business with AUB under the name Smartnet Philippines and/or SPI.
Article 315 (2) (a) of the Revised Penal Code provides:
Art. 315. Swindling (estafa) any person who shall defraud another by any of the means mentioned herein below x x x :
x x x x
2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneous with the commission of the fraud:
(a) By using a fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions; or by means of other similar deceits. x x x.
The elements of estafa by means of deceit are the following:
a. That there must be a false pretense, fraudulent act or fraudulent means;
b. That such false pretense, fraudulent act or fraudulent means must be made or executed prior to or simultaneously with the commission of the fraud;
c. That the offended party must have relied on the false pretense, fraudulent act, or fraudulent means, that is, he was induced to part with his money or property because of the false pretense, fraudulent act, or fraudulent means;
d. That as a result thereof, the offended party suffered damage.[15]
First, Gilbert Guy, Philip Leung, Katherine Guy, Rafael Galvez and Eugene Galvez, Jr., interlocking directors of RMSI and SPI, represented to AUB in their transactions that Smartnet Philippines and SPI were one and the same entity. While Eugene Galvez, Jr. was not a director of SPI, he actively dealt with AUB in his capacity as RMSIs Chief Financial Officer/Comptroller by falsely representing that SPI and RMSI were the same entity. Gilbert Guy, Philip Leung, Katherine Guy, Rafael Galvez, and Eugene Galvez, Jr. used the business names Smartnet Philippines, RMSI, and SPI interchangeably and without any distinction. They successfully did this by using the confusing similarity of RMSIs business name, i.e., Smartnet Philippines its division, and, Smartnet Philippines, Inc. the subsidiary corporation. Further, they were able to hide the identity of SPI, by having almost the same directors as that of RMSI. In order to let it appear that SPI is the same as that of Smartnet Philippines, they submitted in their application documents of RMSI, including its Amended Articles of Incorporation,[16] third-party real estate mortgage of Goodland Company[17] in favor of Smartnet Philippines, and audited annual financial statement of SGV & Co.[18] Gilbert Guy, et al. also used RMSI letterhead in their official communications with the bank and the contents of these official communications[19]conclusively pointed to RMSI as the one which transacted with the bank.
These circumstances are all indicia of deceit. Deceit is the false representation of a matter of fact whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed which deceives or is intended to deceive another so that he shall act upon it to his legal injury.[20]
Second, the intent to deceive AUB was manifest from the start. Gilbert Guy et al. laid down first all the necessary materials they need for this deception before defrauding the bank by first establishing Smartnet Philippines as a division of Radio Marine under which Radio Marine Network Inc. operated its business.[21] Then it organized a subsidiary corporation, the SPI, with a capital of only
Undoubtedly, deceit here was conceived in relation to Gilbert Guy, et al.s transaction with AUB. There was a plan, documented in corporations papers, that led to the defraudation of the bank. The circumstances of the directors and officers acts in inserting in Radio Marine the name of Smartnet; the creation of its division Smartnet Philippines; and its registration as business name as Smartnet Philippines with the Department of Trade and Industry, together with the incorporation of its subsidiary, the SPI, are indicia of a pre-conceived scheme to create this elaborate fraud, victimizing a banking institution, which perhaps, is the first of a kind in Philippine business.
We emphasize that fraud in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal duty or equitable duty, trust, or confidence justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another.[24] It is a generic term embracing all multifarious means which human ingenuity can device and which are resorted to by one individual to secure an advantage over another by false suggestions or by suppression of truth and includes all surprise, trick, cunning, dissembling and any unfair way by which another is cheated.[25]
As early as 1903, in U.S. v. Mendezona,[26] we held that an accused may be convicted for estafa if the deceit of false pretense is committed prior to or simultaneous with fraud and is the efficient cause or primary consideration which induced the offended party to part with his money or property.
Third, AUB would not have granted the Irrevocable Letter of Credit No. 990361, among others, had it known that SPI which had only
It is also noted that the subject transaction, one of the several series of transactions between complainant AUB and SPI, is not a loan transaction. It is a letter of credit transaction intended to facilitate the importation of goods by SPI. The allegation as to the lack of capitalization of SPI is therefore immaterial and irrelevant since it is a letter of credit transaction. The seller gets paid only if it delivers the documents of title over the goods to the bank which issued the letter of credit, while the buyer/importer acquires title to the goods once it reimburses the issuing bank. The transaction secures the obligation of the buyer/importer to the issuing bank. [28]
It is true that ordinarily, in a letter of credit transaction, the bank merely substitutes its own promise to pay for the promise to pay of one of its customers, who in turn promises to pay the bank the amount of funds mentioned in the letters of credit plus credit or commitments fees mutually agreed upon. Once the issuing bank shall have paid the beneficiary after the latters compliance with the terms of the letter of credit, the issuing bank is entitled to reimbursement for the amount it paid under the letter of credit.[29]
In the present case, however, no reimbursement was made outright, precisely because the letter of credit was secured by a promissory note executed by SPI. The bank would have not agreed to this transaction had it not been deceived by Gilbert Guy, et al. into believing the RMSI and SPI were one and the same entity. Guy and his cohorts acts in (1) securing the letter of credit guaranteed by a promissory note in behalf of SPI; and, (2) their act of representing SPI as RMSIs Division, were indicia of fraudulent acts because they fully well know, even before transacting with the bank, that: (a) SPI was a separate entity from Smartnet Philippines, the RMSIs Division, which has the Omnibus Credit Line; and (b) despite this knowledge, they misrepresented to the bank that SPI is RMSIs division. Had it not for this false representation, AUB would have not granted SPIs letter of credit to be secured with a promissory note because SPI as a corporation has no credit line with AUB and SPI by its own, has no credit standing.
Fourth, it is not in dispute that the bank suffered damage, which, including this controversy, amounted to hundreds of millions of pesos.
It is worth emphasizing that under Section 1, Rule 112 of the Revised Rules on Criminal Procedure, the function of a preliminary investigation is to determine whether there is a sufficient ground to engender a well-grounded belief that a crime x x x has been committed and that the respondent is probably guilty thereof and should be held for trial.[30]
A finding of probable cause needs only to rest on evidence showing that more likely than not, the accused committed the crime.[31] Preliminary investigation is not the occasion for the full and exhaustive display of the parties' evidence.[32] It is for the presentation of such evidence only as may engender a well-founded belief that an offense has been committed and that the accused is probably guilty thereof.[33] The validity and merits of a party's accusation or defense, as well as admissibility of testimonies and evidence, are better ventilated during the trial proper.[34]
We, therefore, sustain the findings of the CA and the City Prosecutors Resolution finding that probable cause exists against Gilbert Guy, et al. for the crime of estafa under Article 315 (2)(a) of the Revised Penal Code and that Gilbert Guy, et al. are probably guilty thereof and should be held for trial. AUBs voluminous documents submitted to this Court overcome this difficulty and established that there is sufficient ground to engender a well-grounded belief that a crime has been committed and that the respondents are probably guilty thereof and should be held for trial.
Lest it be misunderstood, we reiterate that this Courts finding of probable cause is grounded on fraud committed through deceit which surrounded Gilbert Guy, et al. transaction with AUB, thus, violating Article 315 (2) (a) of the Revised Penal Code; it is neither their act of borrowing money and not paying them, nor their denial thereof, but their very act of deceiving AUB in order for the latter to part with its money. As early as the Penal Code of Spain, which was enforced in the Philippines as early as 1887 until it was replaced by the Revised Penal Code in 1932, the act of fraud through false pretenses or similar deceit was already being punished. Article 335 of the Penal Code of Spain punished a person who defrauded another by falsely pretending to possess any power, influence, qualification, property, credit, agency or business, or by means of similar deceit.[35]
Anent the issue as to whether or not Gilbert Guy, et al. should be charged for syndicated estafa in relation to Section 1 of PD No. 1689, which states that:
SEC 1. Any person or persons who shall commit estafa or other forms of swindling as defined in Article 315 and 316 of the Revised Penal Code, as amended, shall be punished by life imprisonment to death if the swindling (estafa) is committed by a syndicate consisting of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme, and the defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperatives, samahang nayon(s), or farmers associations, or of funds solicited by corporations/ associations from the general public.
We hold that the afore-quoted law applies to the case at bar, for the following reasons:
Under Section 1 of PD No. 1689, the elements of syndicated estafa are: (a) estafa or other forms of swindling as defined in Artilce 315 and 316 of the Revised Penal Code is committed; (b) the estafa or swindling is committed by a syndicate of five or more persons; and (c) defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperatives, samahang nayon[s], or farmers associations or of funds solicited by corporations/associations from the general public.[36]
First, as defined under Section 1 of PD No. 1689, a syndicate consists of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme. Five (5) accused, namely, Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr. were, (a) all involved in the formation of the entities used to defraud AUB; and (b) they were the officers and directors, both of RMSI and SPI, whose conformities paved the way for AUB to grant the letter of credit subject of this case, in AUBs honest belief that SPI, as Gilbert Guy, et al. represented, was a mere division of RMSI. As already discussed, although Eugenio Galvez, Jr. was not a director of SPI, he, together with Gilbert Guy and Philip Leung, actively participated in the scheme through their signed correspondences with the bank and their attendance in the meetings with executives of AUB.[37] Rafael Galvez and Katherine Guy, on the other hand, were the directors of RMSI and SPI who caused and authorized Gilbert Guy and Philip Leung to transact with AUB.[38]
Second, while these corporations were established presumably in accordance with law, it cannot be denied that Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr. used these corporations to carry out the illegal and unlawful act of misrepresenting SPI as a mere division of RMSI, and, despite knowing SPIs separate juridical personality, applied for a letter of credit secured by SPIs promissory note, knowing fully that SPI has no credit line with AUB. The circumstances of the creation of these entities and their dealings with the bank reveal this criminal intent to defraud and to deceive AUB.
Third, the fact that the defraudation of AUB resulted to misappropriation of the money which it solicited from the general public in the form of deposits was substantially established.[39] Section 3.1 of the General Banking Law defines banks as entities engaged in the lending of funds obtained in the form of deposits. The Old General Banking Act (R.A. No. 337) gave a fuller picture of the basic banking function of obtaining funds from the public by way of deposits and the lending of these funds as follows:
Sec 2. Only entities duly authorized by the Monetary Board of the Central Bank may engage in the lending of funds obtained from the public through the receipt of deposits of any kind, and all entities regularly conducting such operations shall be considered as banking institutions, xxxx.
Gilbert Guy et al. want this Court to believe that AUB, being a commercial bank, is beyond the coverage of PD No. 1689. We hold, however, that a bank is a corporation whose fund comes from the general public. P.D. No. 1689 does not distinguish the nature of the corporation. It requires, rather, that the funds of such corporation should come from the general public. This is bolstered by the third whereas clause of the quoted law which states that the same also applies to other corporations/associations operating on funds solicited from the general public. This is precisely the very same scheme that PD No. 1689 contemplates that this species of estafa be checked or at least be minimized by imposing capital punishment involving funds solicited by corporations/associations from the general public because this erodes the confidence of the public in the banking and cooperative system, contravenes public interest and constitutes economic sabotage that threatens the stability of the nation.[40]
Hence, for the stated reasons, we applied the law in People v. Balasa,[41] a non-stock/non-profit corporation the Panata Foundation of the Philippines, Inc. We held that PD No. 1689 also applies to other corporations/associations operating on funds solicited from the general public.
In People v. Romero,[42] we also applied the law to a stock corporation engaged in marketing, the Surigao San Andres Industrial Development Corporation. Likewise, in People v. Menil,[43] we applied the law to another marketing firm known as ABM Appliance and Upholstery.
In these cited cases, the accused used the legitimacy of their entities to perpetrate their unlawful and illegal acts. We see no reason not to apply this law to a banking institution, a corporation imbued with public interest, when a clear reading of the PD 1689 reveals that it is within its coverage.
WHEREFORE, the Decision of the Court of Appeals dated 27 June 2008 in CA-G.R. SP No. 97160 is hereby AFFIRMED with MODIFICATION that Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy and Eugenio H. Galvez, Jr. be charged forSYNDICATED ESTAFA under Article 315 (2) (a) of the Revised Penal Code in relation to Section 1 of Presidential Decree No. 1689.
SO ORDERED.
JOSE PORTUGAL PEREZ
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ARTURO D. BRION MARIA LOURDES P. A. SERENO Associate Justice Associate Justice
BIENVENIDO L. REYES
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice
[2] In Civil Case No. 68366, RMSI filed a complaint, claiming that it was doing business under the name Smartnet Philippines and Smartnet Philippines, Inc. Id. at 486.
[3] Goodland Co., Inc. v Asia United Bank, G.R. Nos. 195546 and 195561, 14 March 2012.
[5] Id. at 472.
[6] Id.
[7] Rollo in G.R. No. 187919, pp. 137-148.
[9] Filed before the Regional Trial Court of Pasig City, entitled People of the Philippines v. Gilbert Guy et al., Branch 57, docketed as Criminal Case No. 133010-PSG. Id. at 53
[11] Penned by Associate Justice Vicente Veloso, with Associate Justices Rebecca de Guia-Salvador and Apolinario D. Bruselas, Jr., concurring. Rollo in G.R. No. 187919, pp. 8-41.
[17] Id. at 114.
[18] Id. at 494-502.
[19] Id. at. 481, 492-493, 502, 505, 507-512.
[21] Rollo in G.R. No. 188030, p. 381.
[22] Id. at 89-100.
[23] Id. at 101.
[24] Id. at 382.
[25] Id. citing Alleje v. Court of Appeals, G.R. No. 107152, 25 January 1995, 240 SCRA 495, 500 citing further Blacks Law Dictionary., 4th Edition., p. 788 (1951).
[26] 2 Phil. 353 (1903).
[27] Rollo in G.R. No. 188030, p. 22.
[28] Resolution of the Department of Justice. Rollo in G.R. No. 188030, p. 201.
[29] Prudential Bank v. IAC, 216 SCRA 257 (1992).
[31] Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Hon. Desierto, 375 Phil. 697 (1999).
[32] Id.
[33] Id.
[34] Id.
[37] Rollo in G.R. No. 188030, pp. 149-160.
[38] Id. at 115.
[39] Section 95. Definition of Deposit Substitutes. The term deposit substitutes is defined as an alternative form of obtaining funds from the public, other than deposits, xxx.
[40] Preamble of PD No 1689:
WHEREAS, there is an upsurge in the commission of swindling and other forms of frauds in rural banks, cooperatives, "samahang nayon (s)", and farmers' associations or corporations/associations operating on funds solicited from the general public; WHEREAS, such defraudation or misappropriation of funds contributed by stockholders or members of such rural banks, cooperatives, "samahang nayon(s)", or farmers' associations, or of funds solicited by corporations/associations from the general public, erodes the confidence of the public in the banking and cooperative system, contravenes the public interest, and constitutes economic sabotage that threatens the stability of the nation;
WHEREAS, it is imperative that the resurgence of said crimes be checked, or at least minimized, by imposing capital punishment on certain forms of swindling and other frauds involving rural banks, cooperatives, "samahang nayon(s)", farmers' associations or corporations/associations operating on funds solicited from the general public;
[41] Supra note 20.
[42] 365 Phil. 531 (1999).
[43] G.R. Nos. 11504-66, 12 September 2000, 340 SCRA 125.
Syndicated estafa - G.R. No. 187919
G.R. No. 187919
"x x x.
Anent the issue as to whether or not Gilbert Guy, et al. should be charged for syndicated estafa in relation to Section 1 of PD No. 1689, which states that:
SEC 1. Any person or persons who shall commit estafa or other forms of swindling as defined in Article 315 and 316 of the Revised Penal Code, as amended, shall be punished by life imprisonment to death if the swindling (estafa) is committed by a syndicate consisting of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme, and the defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperatives, “samahang nayon(s)”, or farmers associations, or of funds solicited by corporations/ associations from the general public.
We hold that the afore-quoted law applies to the case at bar, for the following reasons:
Under Section 1 of PD No. 1689, the elements of syndicated estafa are: (a) estafa or other forms of swindling as defined in Artilce 315 and 316 of the Revised Penal Code is committed; (b) the estafa or swindling is committed by a syndicate of five or more persons; and (c) defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperatives, “samahang nayon[s],” or farmers associations or of funds solicited by corporations/associations from the general public.[36]
First, as defined under Section 1 of PD No. 1689, a syndicate “consists of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme.” Five (5) accused, namely, Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr. were, (a) all involved in the formation of the entities used to defraud AUB; and (b) they were the officers and directors, both of RMSI and SPI, whose conformities paved the way for AUB to grant the letter of credit subject of this case, in AUB’s honest belief that SPI, as Gilbert Guy, et al.represented, was a mere division of RMSI. As already discussed, although Eugenio Galvez, Jr. was not a director of SPI, he, together with Gilbert Guy and Philip Leung, actively participated in the scheme through their signed correspondences with the bank and their attendance in the meetings with executives of AUB.[37] Rafael Galvez and Katherine Guy, on the other hand, were the directors of RMSI and SPI who caused and authorized Gilbert Guy and Philip Leung to transact with AUB.[38]
Second, while these corporations were established presumably in accordance with law, it cannot be denied that Gilbert G. Guy, Rafael H. Galvez, Philip Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr. used these corporations to carry out the illegal and unlawful act of misrepresenting SPI as a mere division of RMSI, and, despite knowing SPI’s separate juridical personality, applied for a letter of credit secured by SPI’s promissory note, knowing fully that SPI has no credit line with AUB. The circumstances of the creation of these entities and their dealings with the bank reveal this criminal intent to defraud and to deceive AUB.
Third, the fact that the defraudation of AUB resulted to misappropriation of the money which it solicited from the general public in the form of deposits was substantially established.[39] Section 3.1 of the General Banking Law defines banks as “entities engaged in the lending of funds obtained in the form of deposits.” The Old General Banking Act (R.A. No. 337) gave a fuller picture of the basic banking function of obtaining funds from the public by way of deposits and the lending of these funds as follows:
Sec 2. Only entities duly authorized by the Monetary Board of the Central Bank may engage in the lending of funds obtained from the public through the receipt of deposits of any kind, and all entities regularly conducting such operations shall be considered as banking institutions, xxxx.
Gilbert Guy et al. want this Court to believe that AUB, being a commercial bank, is beyond the coverage of PD No. 1689. We hold, however, that a bank is a corporation whose fund comes from the general public. P.D. No. 1689 does not distinguish the nature of the corporation. It requires, rather, that the funds of such corporation should come from the general public. This is bolstered by the third “whereas clause” of the quoted law which states that the same also applies to other “corporations/associations operating on funds solicited from the general public.” This is precisely the very same scheme that PD No. 1689 contemplates that this species of estafa “be checked or at least be minimized by imposing capital punishment involving funds solicited by corporations/associations from the general public” because “this erodes the confidence of the public in the banking and cooperative system, contravenes public interest and constitutes economic sabotage that threatens the stability of the nation.”[40]
Hence, for the stated reasons, we applied the law in People v. Balasa,[41] a non-stock/non-profit corporation – the Panata Foundation of the Philippines, Inc. We held that PD No. 1689 also applies to other corporations/associations operating on funds solicited from the general public.
In People v. Romero,[42] we also applied the law to a stock corporation engaged in marketing, the Surigao San Andres Industrial Development Corporation. Likewise, inPeople v. Menil,[43] we applied the law to another marketing firm known as ABM Appliance and Upholstery.
In these cited cases, the accused used the legitimacy of their entities to perpetrate their unlawful and illegal acts. We see no reason not to apply this law to a banking institution, a corporation imbued with public interest, when a clear reading of the PD 1689 reveals that it is within its coverage.
x x x."
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