title 10 part 2

Begun and held in Metro Manila, on Monday, the twenty-third day of July, two thousand twelve.

[REPUBLIC ACT NO. 10515]

AN ACT PROHIBITING AND PENALIZING UNAUTHORIZED INTERCEPTION, RECEPTION OR USE OF ANY SIGNAL OR SERVICE OVER A CABLE TELEVISION SYSTEM OR CABLE INTERNET SYSTEM AND/OR NETWORK, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. – This Act shall be known as the “Anti-Cable Television and Cable Internet Tapping Act of 2013″.

SEC. 2. Declaration of Policy. – The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. Pursuant thereto, this Act aims to protect the Cable Television and Cable Internet Industries from cable pilferage.

SEC. 3. Definition of Terms. – As used in this Act:

(a) Cable Television (CATV) Service refers to the transmission or delivery of video and audio signals and programming for a fee, through fiber optics, coaxial cable and other technological means.

(b) Cable Internet Service refers to the transmission or delivery of electronic signals for a fee, to provide and facilitate access to the worldwide web, for a fee, through a CATV transmission or delivery system/network.

(c) Cable Television (CATV) System/Network refers to a facility engaged in the transmission or delivery of video and audio signals and programming for a fee, through fiber optics, coaxial cable and other technological means.

(d) Cable Internet System/Network refers to a facility engaged in the transmission or delivery of electronic signals for a fee, to provide and facilitate access to the worldwide web, for a fee, through a CATV transmission or delivery system/network.

(e) Cable Television (CATV) Service Provider refers to any person, natural or juridical, public or private, which was granted a Certificate of Authority or Provisional Authority as provided under existing laws, rules and regulations, to install, operate and maintain a CATV System/Network and is actually providing Cable Television (CATV) Service to its subscribers.

(f) Cable Internet Service Provider refers to any person, natural or juridical, public or private, which was issued a registration certificate as provided under existing laws, rules and regulations, to provide and facilitate access to the worldwide web, for a fee, through a CATV transmission or delivery system/network and is actually providing Cable Internet Service to its subscribers.

SEC. 4. Prohibited Acts. – It is hereby declared unlawful for any person, whether natural or juridical, public or private, to:

(a) intercept or receive, or assist in intercepting or receiving, any signal offered over a cable television system or a cable internet system by tapping, making or causing to be made, any connection to an existing CATV System/Network or Cable Internet System/Network without the authority of the concerned CATV Service Provider or Cable Internet Service Provider;

(b) record, reproduce, distribute, import or sell, any intercepted or received CATV System/Network signals for commercial purposes without the authority of the concerned CATV Service Provider or Cable Internet Service Provider;

(c) use or receive any direct or indirect benefit, from any CATV System/Network or Cable Internet System/Network with knowledge that it is a result of any of acts enumerated in paragraphs (a) or (b) above; or

(d) wantonly, maliciously and willfully damage, destroy or remove CATV and/or Cable Internet facilities and accessories of authorized CATV and/or Cable Internet Service Providers.

SEC. 5. Penalties. – Any person who commits any of the unlawful acts enumerated in the next preceding section shall be punished with imprisonment of not less than two (2) years but not more than five (5) years or a fine of not less than Fifty thousand pesos (P50,000.00) nor more than One hundred thousand pesos (P100,000.00) or both, at the discretion of the court. If the offender is a corporation or association, the president, manager, managing partner or any officer of the corporation or partnership who directly participated in the violation of this Act shall be held liable.

SEC. 6. Information Dissemination. – Within sixty (60) days after the effectivity of this Act, the National Telecommunications Commission shall undertake an information dissemination campaign to inform the public of the existence of this Act.

SEC. 7. Rules and Regulations. – The National Telecommunications Commission, in consultation with CATV and Cable Internet Service Providers and other affected parties, shall, within sixty (60) days after the conduct of public hearings which must commence within thirty (30) working days upon the effectivity of this Act,

issue the implementing rules and regulations to ensure the efficient and effective implementation of the provisions of this Act.

SEC. 8. Separability Clause. – If, for any reason, any section or provision of this Act is held invalid or unconstitutional, the remainder of the law or the provisions not otherwise affected shall remain valid and subsisting.

SEC. 9. Repealing Clause. – All laws, presidential decrees or issuances, executive orders, letters of instruction, administrative orders, rules or regulations contrary to, or inconsistent with the provisions of this Act are hereby repealed, modified or amended accordingly.

SEC. 10. Effectivity Clause. – This Act shall take effect fifteen (15) days after its complete publication in at least two (2) newspapers of general circulation.

PRESIDENTIAL DECREE No. 1612

ANTI-FENCING LAW OF 1979

WHEREAS, reports from law enforcement agencies reveal that there is rampant robbery and thievery of government and private properties;

WHEREAS, such robbery and thievery have become profitable on the part of the lawless elements because of the existence of ready buyers, commonly known as fence, of stolen properties;lawphil.net

WHEREAS, under existing law, a fence can be prosecuted only as an accessory after the fact and punished lightly;

WHEREAS, is imperative to impose heavy penalties on persons who profit by the effects of the crimes of robbery and theft.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines by virtue of the powers vested in me by the Constitution, do hereby order and decree as part of the law of the land the following:

Section 1. Title. This decree shall be known as the Anti-Fencing Law.

Section 2. Definition of Terms. The following terms shall mean as follows:

(a) "Fencing" is the act of any person who, with intent to gain for himself or for another, shall buy, receive, possess, keep, acquire, conceal, sell or dispose of, or shall buy and sell, or in any other manner deal in any article, item, object or

anything of value which he knows, or should be known to him, to have been derived from the proceeds of the crime of robbery or theft.

(b) "Fence" includes any person, firm, association corporation or partnership or other organization who/which commits the act of fencing.

Section 3. Penalties. Any person guilty of fencing shall be punished as hereunder indicated:

(a) The penalty of prision mayor, if the value of the property involved is more than 12,000 pesos but not exceeding 22,000 pesos; if the value of such property exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years. In such cases, the penalty shall be termed reclusion temporal and the accessory penalty pertaining thereto provided in the Revised Penal Code shall also be imposed.

(b) The penalty of prision correccional in its medium and maximum periods, if the value of the property robbed or stolen is more than 6,000 pesos but not exceeding 12,000 pesos.

(c) The penalty of prision correccional in its minimum and medium periods, if the value of the property involved is more than 200 pesos but not exceeding 6,000 pesos.

(d) The penalty of arresto mayor in its medium period to prision correccional in its minimum period, if the value of the property involved is over 50 pesos but not exceeding 200 pesos.

(e) The penalty of arresto mayor in its medium period if such value is over five (5) pesos but not exceeding 50 pesos.

(f) The penalty of arresto mayor in its minimum period if such value does not exceed 5 pesos.

Section 4. Liability of Officials of Juridical Persons. If the fence is a partnership, firm, corporation or association, the president or the manager or any officer thereof who knows or should have known the commission of the offense shall be liable.

Section 5. Presumption of Fencing. Mere possession of any good, article, item, object, or anything of value which has been the subject of robbery or thievery shall be prima facie evidence of fencing.

Section 6. Clearance/Permit to Sell/Used Second Hand Articles. For purposes of this Act, all stores,

establishments or entities dealing in the buy and sell of any good, article item, object of anything of value obtained from an unlicensed dealer or supplier thereof, shall before offering the same for sale to the public, secure the necessary clearance or permit from the station commander of the Integrated National Police in the town or city where such store, establishment or entity is located. The Chief of Constabulary/Director General, Integrated National Police shall promulgate such rules and regulations to carry out the provisions of this section. Any person who fails to secure the clearance or permit required by this section or who violates any of the provisions of the rules and regulations promulgated thereunder shall upon conviction be punished as a fence. lawphi1.net

Section 7. Repealing Clause. All laws or parts thereof, which are inconsistent with the provisions of this Decree are hereby repealed or modified accordingly.

Section 8. Effectivity. This Decree shall take effect upon approval.

Done in the City of Manila, this 2nd day of March, in the year of Our Lord, nineteen hundred and seventy-nine.

RULES AND REGULATIONS TO CARRY OUT THE PROVISIONS OF SECTION 6 OF PRESIDENTIAL DECREE NO. 1612, KNOWN AS THE ANTI-FENCING LAW.

Pursuant to Section 6 of Presidential Decree No. 1612, known as the Anti-Fencing Law, the following rules and regulations are hereby promulgated to govern the issuance of clearances/permits to sell used secondhand articles obtained from an unlicensed dealer or supplier thereof:

I. Definition of Terms

1. "Used secondhand article" shall refer to any goods, article, item, object or anything of value obtained from an unlicensed dealer or supplier, regardless of whether the same has actually or in fact been used.

2. "Unlicensed dealer/supplier" shall refer to any persons, partnership, firm, corporation, association or any other entity or establishment not licensed by the government to engage in the business of dealing in or of supplying the articles defined in the preceding paragraph.

3. "Store", "establishment" or "entity" shall be construed to include any individual dealing in the buying and selling used secondhand articles, as defined in paragraph hereof.

4. "Buy and Sell" refer to the transaction whereby one purchases used secondhand

articles for the purpose of resale to third persons.

5. "Station Commander" shall refer to the Station Commander of the Integrated National Police within the territorial limits of the town or city district where the store, establishment or entity dealing in the buying and selling of used secondhand articles is located.

II. Duty to Procure Clearance or Permit

1. No person shall sell or offer to sell to the public any used secondhand article as defined herein without first securing a clearance or permit for the purpose from the proper Station Commander of the Integrated National Police.

2. If the person seeking the clearance or permit is a partnership, firm, corporation, or association or group of individuals, the clearance or permit shall be obtained by or in the name of the president, manager or other responsible officer-in-charge thereof.

3. If a store, firm, corporation, partnership, association or other establishment or entity has a branch or subsidiary and the used secondhand article is acquired by such branch or subsidiary for sale to the public, the said branch or subsidiary shall secure the required clearance or permit.

4. Any goods, article, item, or object or anything of value acquired from any source for which no receipt or equivalent document evidencing the legality of its acquisition could be presented by the present possessor or holder thereof, or the covering receipt, or equivalent document, of which is fake, falsified or irregularly obtained, shall be presumed as having been acquired from an unlicensed dealer or supplier and the possessor or holder thereof must secure the required clearance or permit before the same can be sold or offered for sale to the public.

III. Procedure for Procurement of Clearances or Permits

1. The Station Commanders concerned shall require the owner of a store or the president, manager or responsible officer-in-charge of a firm, establishment or other entity located within their respective jurisdictions and in possession of or having in stock used secondhand articles as defined herein, to submit an initial affidavit within thirty (30) days from receipt of notice for the purpose thereof and subsequent affidavits once every fifteen (15) days within five (5) days after the period covered, which shall contain:

(a) A complete inventory of such articles acquired daily from whatever source and the names and addresses of the persons from whom such articles were acquired.

(b) A full list of articles to be sold or offered for sale as well as the place where the date when the sale or offer for sale shall commence.

(c) The place where the articles are presently deposited or kept in stock.

The Station Commander may, at his discretion when the circumstances of each case warrant, require that the affidavit submitted be accompanied by other documents showing proof of legitimacy of the acquisition of the articles.

2. A party required to secure a clearance or permit under these rules and regulations shall file an application therefor with the Station Commander concerned. The application shall state:

(a) The name, address and other pertinent circumstances of the persons, in case of an individual or, in the case of a firm, corporation, association, partnership or other entity, the name, address and other pertinent circumstances of the president, manager or officer-in-charge.

(b) The article to be sold or offered for sale to the public and the name and address of the unlicensed dealer or supplier from whom such article was acquired.

In support of the application, there shall be attached to it the corresponding receipt or other equivalent document to show proof of the legitimacy of acquisition of the article.

3. The Station Commander shall examine the documents attached to the application and may require the presentation of other additional documents, if necessary, to show satisfactory proof of the legitimacy of acquisition of the article, subject to the following conditions:

(a) If the legitimacy of acquisition of any article from an unlicensed source cannot be satisfactorily established by the documents presented, the Station Commander shall, upon approval of the INP Superintendent in the district and at the expense of the party seeking the

clearance/permit, cause the publication of a notice in a newspaper of general circulation for two (2) successive days enumerating therein the articles acquired from an unlicensed dealer or supplier, the names and addresses of the persons from whom they were acquired and shall state that such articles are to be sold or offered for sale to the public at the address of the store, establishment or other entity seeking the clearance/permit. In places where no newspapers are in general circulation, the party seeking the clearance or permit shall, instead, post a notice daily for one week on the bulletin board of the municipal building of the town where the store, firm, establishment or entity concerned is located or, in the case of an individual, where the articles in his possession are to be sold or offered for sale.

(b) If after 15 days, upon expiration of the period of publication or of the notice referred to in the preceding paragraph, no claim is made with respect to any of the articles enumerated in the notice, the Station Commander shall issue the clearance or permit sought.

(c) If, before expiration of the same period for publication of the notice or its posting, it shall appear that any of the articles in question is stolen property, the Station Commander shall hold the article in restraint as evidence in any appropriate case to be filed. Articles held in restraint shall be kept and disposed of as the circumstances of each case permit, taking into account all considerations of right and justice in the case. In any case where any article is held in restraint, it shall be the duty of the Station Commander concerned to advise/notify the Commission on Audit of the case and comply with such procedure as may be proper under applicable existing laws, rules and regulations.

4. The Station Commander concerned shall, within seventy-two (72) hours from receipt of the application, act thereon by either issuing the clearance/permit requested or denying the same. Denial of an application shall be in writing and shall state in brief the reason/s therefor.

5. The application, clearance/permit or the denial thereof, including such other documents as may be pertinent in the implementation of

Section 6 of P.D. No. 1612 shall be in the forms prescribed in Annexes "A", "B", "C", "D", and "E" hereof, which are made integral parts of these rules and regulations.

6. For the issuance of clearances/permit required under Section 6 of P.D. No. 1612, no fee shall be charged.

IV. Appeals

Any party aggrieved by the action taken by the Station Commander may elevate the decision taken in the case to the proper INP District Superintendent and, if he is still dissatisfied therewith may take the same on appeal to the INP Director. The decision of the INP Director may also be appealed to the INP Director-General whose decision may likewise be appealed to the Minister of National Defense. The decision of the Minister of National Defense on the case shall be final. The appeal against the decision taken by a Commander lower than the INP Director-General should be filed to the next higher Commander within ten (10) days from receipt of notice of the decision. The decision of the INP Director-General should be appealed within fifteen (15) days from receipt of notice of the decision.

V. Penalties

1. Any person who fails to secure the clearance or permit required by Section 6 of P.D. 1612 or who violates any of the provisions of these rules and regulations shall upon conviction be punished as a fence.

2. The INP Director-General shall recommend to the proper authority the cancellation of the business license of the erring individual, store, establishment or the entity concerned.

3. Articles obtained from unlicensed sources for sale or offered for sale without prior compliance with the provisions of Section 6 of P.D. No. 1612 and with these rules and regulations shall be held in restraint until satisfactory evidence or legitimacy of acquisition has been established.

4. Articles for which no satisfactory evidence of legitimacy of acquisition is established and which are found to be stolen property shall likewise be held under restraint and shall, furthermore, be subject to confiscation as evidence in the appropriate case to be filed. If, upon termination of the case, the same is not claimed by their legitimate owners, the article/s shall be forfeited in favor of the government and made subject to disposition as the circumstances warrant in accordance with applicable existing laws, rules and regulations.

The Commission on Audit shall, in all cases, be notified.

5. Any personnel of the Integrated National Police found violating the provisions of Section 6 of P.D. No. 1612 or any of its implementing rules and regulations or who, in any manner whatsoever, connives with or through his negligence or inaction makes possible the commission of such violations by any party required to comply with the law and its implementing rules and regulations, shall be prosecuted criminally without prejudice to the imposition of administrative penalties.

VI. Visitorial Power

It shall be the duty of the owner of the store or of the president, manager or responsible officer-in-charge of any firm, establishment or other entity or of an individual having in his premises articles to be sold or offered for sale to the public to allow the Station Commander or his authorized representative to exercise visitorial powers. For this purpose, however, the power to conduct visitations shall be exercise only during office or business hours and upon authority in writing from and by the INP Superintendent in the district and for the sole purpose of determining whether articles are kept in possession or stock contrary to the intents of Section 6 of P.D. No. 1612 and of these rules and regulations.

VII. Other Duties Imposed Upon Station Commanders and INP District Superintendent and Directors Following Action on Applications for Clearances or Permits

1. At the end of each month, it shall be the duty of the Station Commander concerned to:

(a) Make and maintain a file in his office of all clearances/permit issued by him.

(b) Submit a full report to the INP District Superintendent on the number of applications for clearances or permits processed by his office, indicating therein the number of clearances/permits issued and the number of applications denied. The report shall state the reasons for denial of an application and the corresponding follow-up actions taken and shall be accompanied by an inventory of the articles to be sold or offered for sale in his jurisdiction.

2. The INP District Superintendent shall, on the basis of the reports submitted by the Station Commander, in turn submit quarterly reports to the appropriate INP Director containing a consolidation of the information stated in the

reports of Station Commanders in his jurisdiction.

3. Reports from INP District Superintendent shall serve as basis for a consolidated report to be submitted semi-annually by INP Directors to the Director-General, Integrated National Police.

4. In all cases, reports emanating from the different levels of the Integrated National Police shall be accompanied with full and accurate inventories of the articles acquired from unlicensed dealers or suppliers and proposed to be sold or offered for sale in the jurisdictions covered by the report.

These implementing rules and regulations, having been published in a newspaper of national circulation, shall take effect on June 15, 1979.

FOR THE CHIEF OF CONSTABULARY DIRECTOR-GENERAL, INP:

G.R. No. L-66136 September 28, 1984

ELPIDIO EMPELIS, MAMERTO CARBUNGCO, SALVADOR CARBUNGCO and EMILIO CARBUNGCO,petitioners, vs.HON. INTERMEDIATE APPELLATE COURT and THE PEOPLE OF THE PHILIPPINES, respondents.

Roselito R. Apoya for petitioners,

The Solicitor General for respondents.

RELOVA, J.:

The then Municipal Circuit Court of Dimasalang-Palanan-Uson, Masbate convicted herein petitioners of qualified theft of fifty coconuts valued at P50.00 and sentenced each of them to an indeterminate penalty of from four (4) to eight (8) years and one (1) day, to restore to the owner of the stolen coconuts, Guillermo Catarining the sum of P50.00 and to pay the costs.

From the foregoing judgment they went to the Intermediate Appellate Court claiming that the court a quo erred: (1) in convicting all accused when there was no sufficient evidence to prove that they did gather and steal the coconut fruits of the coconut plantation of Guillermo Catarining at Tambangan, Dapdap, Uson, Masbate, Philippines; (2) in giving too much probative value to the evidence for the prosecution and in discrediting that for the defense; and (3) in not acquitting

all the accused of the crime charged on the ground of reasonable doubt. (pp. 8-9, Rollo)

Respondent appellate court affirmed in toto the penalty imposed upon petitioners by the trial court. Hence, instant petition which seeks to reduce the penalty imposed upon petitioners by the trial court, which was affirmed in toto by respondent Intermediate Appellate Court. (p. 1, Rollo)

The facts as found by respondent Intermediate Appellate Court are as follows:

Prior to June 10, 1979, Guillermo Catarining owner of a coconut plantation in Sitio Tambangan, Dapdap, Uson, Masbate, was frequently losing coconuts in his plantation due to thievery. Thus, on the early morning of June 10, 1979, while he stayed in his plantation to keep watch, he saw four (4) persons within the premises of his plantation gathering and tying some coconuts. He then went home, fetched his neighbors Anastacio Andales and Teodomero Garay and took along a flashlight. Upon reaching the coconut plantation with his companions, Catarining beamed his flashlight on the four persons who, turned out to be the herein appellants. Elpidio Empelis and Emilio Carbungco were seen carrying coconuts on a piece of wood on their shoulders while Salvad and Mamerto Carbungco were espied carrying coconuts with their bare hands. As the four persons noticed the presence of Catarining and the latter's companions, they dropped the coconuts they were carrying and fled leaving behind about 50 pieces of coconuts valued at P50.00 and two poles, one made of bamboo and the other of wood. (Exhs. A & A-1) Catarining invited the barangay tanod to witness the counting of the coconuts abandoned by the four men. Upon the advice of said tanod, Catarining reported the incident to the barangay captain who accompanied him and his companions to the police station at Uson, Masbate where Catarining filed his complaint. (pp. 47-48, Rollo)

The only issue raised with earnestness by petitioners is that the crime committed, if at all is simple and not qualified theft as found by respondent court.

Article 310 of the Revised Penal Code states that the crime of theft shall "be punished by the penalties next higher by two degrees than those respectively expressed in the next preceding article ... if the property

stolen ... consists of coconuts taken from the premises of a plantation, ... ." Thus, the stealing of coconuts when they are still in the tree or deposited on the ground within the premises is qualified theft. When the coconuts are stolen in any other place, it is simple theft. Stated differently, if the coconuts were taken in front of a house along the highway outside the coconut plantation, it would be simple theft only.

In the case of People vs. Isnain, 85 Phil. 648, this Court held that "[i]n the matter of theft of coconuts, the purpose of the heavier penalty is to encourage and protect the development of the coconut industry as one of the sources of our national economy. Unlike rice and sugar cane farms where the range of vision is unobstructed, coconut groves can not be efficiently watched because of the nature of the growth of coconut trees; and without a special measure to protect this kind of property, of will be as it has been in the past the favorite resort of thieves."

In the case at bar, petitioners were seen arriving away fifty coconuts while they were still in the premises of the plantation. They would therefore come within the definition of qualified theft because the property stolen consists of coconuts taken from the premises of a plantation.

However, the crime committed is only frustrated qualified theft because petitioners were not able to perform all the acts of execution which should have produced the felon as a consequence. They were not able to carry the coconuts away from the plantation due to the timely arrival of the owner.

WHEREFORE, the judgment of conviction is hereby AFFIRMED but modified in the sense that the crime committed is only frustrated qualified theft and petitioners Elpidio Empelis, Mamerto Carbungco, Salvador Carbungco and Emilio Carbungco are each sentenced to suffer the indeterminate penalty of two (2) months and one (1) day ofarresto mayor, as minimum, to two (2) years and four (4) months and one (1) day, of prision correccional, as maximum, and to pay the costs

SO ORDERED.

[G. R. No. 148233.  June 8, 2004]

PEOPLE OF THE PHILIPPINES, appellee, vs. LUISITO D. BUSTINERA, appellant.

D E C I S I O N

CARPIO MORALES, J.:

From the decision[1] of the Regional Trial Court, Branch 217, Quezon City finding appellant Luisito D. Bustinera guilty beyond reasonable doubt of qualified theft[2] for the unlawful taking of a Daewoo Racer GTE Taxi and sentencing him to suffer the penalty of reclusion perpetua, he comes to this Court on appeal.

In an information[3] dated June 17, 1997, appellant was indicted as follows:

The undersigned accuses LUISITO D. BUSTINERA of the crime of Qualified Theft, committed as follows:

That on or about the 25th day of December up to the 9th day of January, 1997, in Quezon City, Philippines, the said accused being then employed as one [of] the taxi Drivers of Elias S. Cipriano, an Operator of several taxi cabs with business address at corner 44 Commonwealth Avenue, iliman (sic), this City, and as such has free access to the taxi he being driven, did then and there willfully, unlawfully and feloniously with intent to gain, with grave abuse of confidence reposed upon him by his employer and without the knowledge and consent of the owner thereof, take, steal and carry away a Daewoo Racer GTE Taxi with Plate No. PWH-266 worthP303,000.00, Philippine Currency, belonging to Elias S. Cipriano, to the damage and prejudice of the said offended party in the amount of P303,000.00.

CONTRARY TO LAW.

Upon arraignment[4] on March 27, 2000, appellant, assisted by counsel de oficio, entered a plea of not guilty.  Thereafter, trial on the merits ensued.

From the evidence for the prosecution, the following version is established.

Sometime in 1996, Edwin Cipriano (Cipriano), who manages ESC Transport, the taxicab business of his father, hired appellant as a taxi driver and assigned him to drive a Daewoo Racer with plate number PWH-266.  It was agreed that appellant would drive the taxi from 6:00 a.m. to 11:00 p.m, after which he would return it to ESC Transport’s garage and remit the boundary fee in the amount of P780.00 per day.[5]

On December 25, 1996, appellant admittedly reported for work and drove the taxi, but he did not return it on the same day as he was supposed to.

Q:  Now, Mr. Witness, on December 25, 1996, did you report for work?

A:  Yes, sir.

Q:  Now, since you reported for work, what are your duties and responsibilities as taxi driver of the taxi company?

A:  That we have to bring back the taxi at night with the boundary .

Q:  How much is your boundary?

A:  P780.00, sir.

Q:  On December 25, 1996, did you bring out any taxi?

A:  Yes, sir.

Q:  Now, when ever (sic) you bring out a taxi, what procedure [do] you follow with that company?

A:  That we have to bring back the taxi to the company and before we leave we also sign something, sir.

Q:  What is that something you mentioned?

A:  On the record book and on the daily trip ticket, sir.

Q:  You said that you have to return your taxi at the end of the day, what is then the procedure reflect (sic) by your company when you return a taxi?

A:  To remit the boundary and to sign the record book and daily trip ticket.

Q:   So, when you return the taxi, you sign the record book?

A:  Yes, sir.

Q:  You mentioned that on December 25, 1996, you brought out a taxi?

A:  Yes, sir.

Q:  What kind of taxi?

A:  Daewoo taxi, sir.

Q:  Now did you return the taxi on December 25, 1996?

A:    I was not able to bring back the taxi because I was short of my boundary, sir.[6]

The following day, December 26, 1996, Cipriano went to appellant’s house to ascertain why the taxi was not returned.[7]  Arriving at appellant’s house, he did not find the taxi there, appellant’s wife telling him that her husband had not yet arrived.[8] Leaving nothing to chance, Cipriano went to the Commonwealth Avenue police station and reported that his taxi was missing.[9]

On January 9, 1997, appellant’s wife went to the garage of ESC Transport and revealed that the taxi had been abandoned in Regalado Street, Lagro, Quezon City.[10] Cipriano lost no time in repairing to Regalado Street where he recovered the taxi.[11]

Upon the other hand, while appellant does not deny that he did not return the taxi on December 25, 1996 as he was short of the boundary fee, he claims that he did not abandon the taxi but actually returned it on January 5, 1997;[12]  and that on December 27, 1996, he gave the

amount of P2,000.00[13] to his wife whom he instructed to remit the same to Cipriano as payment of the boundary fee[14] and to tell the latter that he could not return the taxi as he still had a balance thereof.[15]

Appellant, however, admits that his wife informed him that when she went to the garage to remit the boundary fee on the very same day (December 27, 1996),[16] Cipriano was already demanding the return of the taxi.[17]

Appellant maintains though that he returned the taxi on January 5, 1997 and signed the record book, [18] which was company procedure, to show that he indeed returned it and gave his employer P2,500.00[19] as partial payment for the boundary fee covering the period from December 25, 1996 to January 5, 1997.

Continuing, appellant claims that as he still had a balance in the boundary fee, he left his driver’s license with Cipriano;[20] that as he could not drive, which was the only work he had ever known, without his driver’s license, and with the obligation to pay the balance of the boundary fee still lingering, his wife started working on February 18, 1997 as a stay-in maid for Cipriano, with a monthly salary of P1,300.00,[21] until March 26, 1997 when Cipriano told her that she had worked off the balance of his obligation;[22] and that with his obligation extinguished, his driver’s license was returned to him.[23]

Brushing aside appellant’s claim that he returned the taxi on January 5, 1997 and that he had in fact paid the total amount of P4,500.00, the trial court found him guilty beyond reasonable doubt of qualified theft by Decision of May 17, 2001, the dispositive portion of which is quoted verbatim:

WHEREFORE, judgment is hereby rendered finding accused guilty beyond reasonable doubt as charged, and he is accordingly sentenced to suffer the penalty of Reclusion Perpetua and to pay the costs.

In the service of his sentence, accused is ordered credited with four-fifths (4/5) of the preventive imprisonment undergone by him there being no showing that he agreed in writing to abide by the same disciplinary rules imposed upon convicted prisoners.

SO ORDERED.[24]  (Emphasis and italics in the original)

Hence, the present appeal anchored on the following assigned errors:

I.

THE COURT A QUO GRAVELY ERRED IN CONCLUDING WITHOUT CONCRETE BASIS THAT THE ACCUSED-APPELLANT HAS INTENT TO GAIN WHEN HE FAILED TO RETURN THE TAXI TO ITS GARAGE.

II.

THE COURT A QUO GRAVELY ERRED IN FINDING ACCUSED-APPELLANT GUILTY BEYOND REASONABLE DOUBT OF THE CRIME OF QUALIFIED THEFT.[25]

It is settled that an appeal in a criminal proceeding throws the whole case open for review, and it becomes the duty of the appellate court to correct such errors as may be found in the judgment even if they have not been specifically assigned.[26]

Appellant was convicted of qualified theft under Article 310 of the Revised Penal Code, as amended for the unlawful taking of a motor vehicle.  However, Article 310 has been modified, with respect to certain vehicles,[27] by Republic Act No. 6539, as amended, otherwise known as "AN ACT PREVENTING AND PENALIZING CARNAPPING.”

When statutes are in pari materia[28] or when they relate to the same person or thing, or to the same class of persons or things, or cover the same specific or particular subject matter,[29] or have the same purpose or object,[30] the rule dictates that they should be construed together – interpretare et concordare leges legibus, est optimus interpretandi modus.[31] Every statute must be so construed and harmonized with other statutes as to form a uniform system of jurisprudence,[32] as this Court explained in City of Naga v. Agna,[33] viz:

. . . When statutes are in pari materia, the rule of statutory construction dictates that they should be construed together. This is because enactments of the same legislature on the same subject matter are supposed to form part of one uniform system; that later statutes are supplementary or complimentary to the earlier enactments and in the passage of its acts the legislature is supposed to have in mind the existing legislation on the same subject and to have enacted its new act with reference thereto. Having thus in mind the previous statutes relating to the same subject matter, whenever the legislature enacts a new law, it is deemed to have enacted the new provision in accordance with the legislative policy embodied in those prior statutes unless there is an express repeal of the old and they all should be construed together.  In construing them the old statutes relating to the same subject matter should be compared with the new provisions and if possible by reasonable construction, both should be so construed that effect may be given to every provision of each. However, when the new provision and the old relating to the same subject cannot be reconciled the former shall prevail as it is the latter expression of the legislative will . . . [34]  (Emphasis and underscoring supplied; citations omitted)

The elements of the crime of theft as provided for in Article 308 of the Revised Penal Code are:  (1) that there be taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be

accomplished without the use of violence against or intimidation of persons or force upon things.[35]

Theft is qualified when any of the following circumstances is present:  (1) the theft is committed by a domestic servant; (2) the theft is committed with grave abuse of confidence; (3) the property stolen is either a motor vehicle, mail matter or large cattle; (4) the property stolen consists of coconuts taken from the premises of a plantation; (5) the property stolen is fish taken from a fishpond or fishery; and (6) the property was taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity, vehicular accident or civil disturbance.[36]

On the other hand, Section 2 of Republic Act No. 6539, as amended defines “carnapping” as “the taking, with intent to gain, of a motor vehicle belonging to another without the latter's consent, or by means of violence against or intimidation of persons, or by using force upon things.” The elements of carnapping are thus: (1) the taking of a motor vehicle which belongs to another; (2) the taking is without the consent of the owner or by means of violence against or intimidation of persons or by using force upon things; and (3) the taking is done with intent to gain.[37]

Carnapping is essentially the robbery or theft of a motorized vehicle,[38] the concept of unlawful taking in theft, robbery and carnapping being the same.[39]

In the 2000 case of People v. Tan [40]  where the accused took a Mitsubishi Gallant and in the later case of People v. Lobitania [41]  which involved the taking of a Yamaha motorized tricycle, this Court held that the unlawful taking of motor vehicles is now covered by the anti-carnapping law and not by the provisions on qualified theft or robbery.

There is no arguing that the anti-carnapping law is a special law, different from the crime of robbery and theft included in the Revised Penal Code.  It particularly addresses the taking, with intent to gain, of a motor vehicle belonging to another without the latter's consent, or by means of violence against or intimidation of persons, or by using force upon things. But a careful comparison of this special law with the crimes of robbery and theft readily reveals their common features and characteristics, to wit: unlawful taking, intent to gain, and that personal property belonging to another is taken without the latter's consent.  However, the anti-carnapping law particularly deals with the theft and robbery of motor vehicles.  Hence a motor vehicle is said to have been carnapped when it has been taken, with intent to gain, without the owner's consent, whether the taking was done with or without the use of force upon things.  Without the anti-carnapping law, such unlawful taking of a motor vehicle would fall within the purview of either theft or robbery which was certainly the case before the enactment of said statute.[42] (Emphasis and underscoring supplied; citations omitted.)

It is to be noted, however, that while the anti-carnapping law penalizes the unlawful taking of motor vehicles, it excepts from its coverage certain vehicles such as roadrollers, trolleys, street-sweepers, sprinklers, lawn mowers, amphibian trucks and cranes if not used on public highways, vehicles which run only on rails and tracks, and tractors, trailers and tractor engines of all kinds and used exclusively for agricultural purposes.  By implication, the theft or robbery of the foregoing vehicles would be covered by Article 310 of the Revised Penal Code, as amended and the provisions on robbery, respectively.[43]

From the foregoing, since appellant is being accused of the unlawful taking of a Daewoo sedan, it is the anti-carnapping law and not the provisions of qualified theft which would apply as the said motor vehicle does not fall within the exceptions mentioned in the anti-carnapping law.

The designation in the information of the offense committed by appellant as one for qualified theft notwithstanding, appellant may still be convicted of the crime of carnapping.  For while it is necessary that the statutory designation be stated in the information, a mistake in the caption of an indictment in designating the correct name of the offense is not a fatal defect as it is not the designation that is controlling but the facts alleged in the information which determines the real nature of the crime.[44]

In the case at bar, the information alleges that appellant, with intent to gain, took the taxi owned by Cipriano without the latter’s consent.[45] Thus, the indictment alleges every element of the crime of carnapping,[46] and the prosecution proved the same.

Appellant’s appeal is thus bereft of merit.

That appellant brought out the taxi on December 25, 1996 and did not return it on the same day as he was supposed to is admitted.[47]

Unlawful taking, or apoderamiento, is the taking of the motor vehicle without the consent of the owner, or by means of violence against or intimidation of persons, or by using force upon things; it is deemed complete from the moment the offender gains possession of the thing, even if he has no opportunity to dispose of the same.[48]

While the nature of appellant’s possession of the taxi was initially lawful as he was hired as a taxi driver and was entrusted possession thereof, his act of not returning it to its owner, which is contrary to company practice and against the owner’s consent transformed the character of the possession into an unlawful one.[49] Appellant himself admits that he was aware that his possession of the taxi was no longer with Cipriano’s consent as the latter was already demanding its return.

Q:  Also you said that during your direct testimony that when you gave your wife the P2,500.00, you also told her to go to the company to ask the company for permission for you to use the taxi since

you were then still short of the boundary.  Alright, after telling that to your wife and after seeing your wife between December 27, 1996 and January 5, 1997, did you ask your wife what was the answer of the company to that request of yours?

A:  He did not allow me, sir, and he even [got] angry with me.

Q:  So, when did you learn that the company was not agreeable to your making use of the taxicab without first returning it to the company?

A:  Before the new year, sir.

Q:  When you said new year, you were referring to January 1, 1997?

A:  Either December 29 or December 30, 1996, sir.

Q:  So, are you telling us that even if you knew already that the company was not agreeable to your making use of the taxicab continually (sic) without returning the same to the company, you still went ahead and make (sic) use of it and returned it only on January 5, 1997.

A:  Yes, sir.[50]  (Emphasis and underscoring supplied)

Appellant assails the trial court’s conclusion that there was intent to gain with the mere taking of the taxi without the owner’s consent.  He maintains that his reason for failing to return the taxi was his inability to remit the boundary fee, his earnings that day not having permitted it; and that there was no intent to gain since the taking of the taxi was not permanent in character, he having returned it.

Appellant’s position does not persuade.

Intent to gain or animus lucrandi is an internal act, presumed from the unlawful taking of the motor vehicle.[51] Actual gain is irrelevant as the important consideration is the intent to gain.[52] The term “gain” is not merely limited to pecuniary benefit but also includes the benefit which in any other sense may be derived or expected from the act which is performed.[53] Thus, the mere use of the thing which was taken without the owner’s consent constitutes gain.[54]

In Villacorta v. Insurance Commission[55]  which was reiterated in Association of Baptists for World Evangelism, Inc. v. Fieldmen’s Insurance Co, Inc.,[56] Justice Claudio Teehankee (later Chief Justice), interpreting the theft clause of an insurance policy, explained that, when one takes the motor vehicle of another without the latter’s consent even if the motor vehicle is later returned, there is theft, there being

intent to gain as the use of the thing unlawfully taken constitutes gain:

Assuming, despite the totally inadequate evidence, that the taking was   “temporary” and for a “joy ride”, the Court sustains as the better view[57] that which holds that when a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C. Aquino cites in his work Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it “hurt de uso . ”[58]  (Emphasis and underscoring supplied; citation omitted)

Besides, the trial court did not believe appellant’s claim that he in fact returned the taxi on January 5, 1997.

The Court can not (sic) believe accused’s assertion that he returned the subject vehicle on January 5, 1997 to the garage and that he had in fact paid the amount of P4,500.00 in partial payment of his unremitted “boundary” for ten (10) days.  He could not even be certain of the exact amount he allegedly paid the taxicab owner.  On direct-examination, he claimed that he paid Edwin Cipriano on December 27, 1996 the amount of P2,000.00 and it was his wife who handed said amount to Cipriano, yet on cross-examination, he claimed that he gave P2,500.00 to his wife on that date for payment to the taxicab owner.[59]

The rule is well-entrenched that findings of fact of the trial court are accorded the highest degree of respect and will not be disturbed on appeal absent any clear showing that the trial court had overlooked, misunderstood or misapplied some facts or circumstances of weight and significance which, if considered, would alter the result of the case. [60] The reason for the rule being that trial courts have the distinct advantage of having heard the witnesses themselves and observed their deportment and manner of testifying or their conduct and behavior during the trial.[61]

Other than his bare and self-serving allegations, appellant has not shown any scintilla of evidence that he indeed returned the taxi on      January 5, 1997.

Q:  You said that you returned the taxi on January 5, 1997, correct?

A:  Yes, sir.

Q:  Now, Mr. Witness, did you sign any record when you returned the taxi?

A:  Yes, sir.

Q:  Do you have any copy of that record?

A:  They were the one (sic) in-charge of the record book and I even voluntarily left my driver’s license with them, sir.

Q:  You said that you did not return the taxi because you were short of (sic) boundary, did you turn over any money to your employer when you returned the taxi?

A:    I gave them [an] additional P2,500.00, sir.

Q:  At the time when you returned the taxi, how much was your short indebtedness (sic) or short boundary (sic)?

A:    I was short for ten (10) days, and I was able to pay P4,500.00.

Q:  Do you have any receipt to show receipt of payment for this P4,500.00?

A:  They were the ones having the record of my payment, and our agreement was that I have to pay the balance in installment.[62] (Emphasis supplied)

While appellant maintains that he signed on January 5, 1997 the record book indicating that he returned the taxi on the said date and paid Cipriano the amount of P4,500.00 as partial payment for the boundary fee, appellant did not produce the documentary evidence alluded to, to substantiate his claim.  That such alleged record book is in the possession of Cipriano did not prevent him from producing it as appellant has the right to have compulsory process issued to secure the production of evidence on his behalf.[63]

The trial court having convicted appellant of qualified theft instead of carnapping, it erred in the imposition of the penalty. While the information alleges that the crime was attended with grave abuse of confidence, the same cannot be appreciated as the suppletory effect of the Revised Penal Code to special laws, as provided in Article 10 of said Code, cannot be invoked when there is a legal impossibility of application, either by express provision or by necessary implication.[64]

Moreover, when the penalties under the special law are different from and are without reference or relation to those under the Revised Penal Code, there can be no suppletory effect of the rules, for the application of penalties under the said Code or by other relevant statutory provisions are based on or applicable only to said rules for felonies under the Code.[65]

Thus, in People v. Panida[66] which involved the crime of carnapping and the penalty imposed was the indeterminate sentence of 14 years and 8 months, as minimum, to 17 years and 4 months, as maximum, this Court did not apply the provisions of the Revised Penal Code suppletorily as the anti-carnapping law provides for its own penalties which are distinct and without reference to the said Code.

The charge being simple carnapping, the imposable penalty is imprisonment for not less than 14 years and 8 months and not more than 17 years and 4 months.  There can be no suppletory effect of the rules for the application of penalties under the Revised Penal Code or by other relevant statutory provisions based on, or applicable only to, the rules for felonies under the Code. While it is true that the penalty of 14 years and 8 months to 17 years and 4 months is virtually equivalent to the duration of the medium period of   reclusion temporal , such technical term under the Revised Penal Code is not given to that penalty for carnapping. Besides, the other penalties for carnapping attended by the qualifying circumstances stated in the law do not correspond to those in the Code.    The rules on penalties in the Code, therefore, cannot suppletorily apply to Republic Act No. 6539 and special laws of the same formulation. For this reason, we hold that the proper penalty to be imposed on each of accused-appellants is an indeterminate sentence of 14 years and 8 months, as minimum, to 17 years and 4 months, as maximum.[67] (Emphasis and underscoring supplied; citations omitted)

Appellant being then culpable for carnapping under the first clause of Section 14 of Republic Act No. 6539, as amended, the imposable penalty is imprisonment for not less than 14 years and 8 months, not more than 17 years and 4 months,[68] for, as discussed above, the provisions of the Revised Penal Code cannot be applied suppletorily and, therefore, the alleged aggravating circumstance of grave abuse of confidence cannot be appreciated.

Applying Section 1 of Act No. 4103,[69] as amended, otherwise known as the Indeterminate Sentence Law, if the offense is punishable by a special law, the court shall sentence the accused to an indeterminate sentence, the maximum term of which shall not exceed the maximum fixed by said law and the minimum term shall not be less than the minimum prescribed by the same – the penalty imposed being a range.[70]

WHEREFORE, the judgment of the Regional Trial Court of Quezon City, Branch 217, in Crim Case No. Q-97-71956, finding appellant Luisito D. Bustinera guilty beyond reasonable doubt of qualified theft, is REVERSED and SET ASIDE, and another judgment entered in its place, finding him guilty beyond reasonable doubt of the crime of carnapping under Republic Act No. 6539, as amended and sentencing him to an indeterminate penalty of Fourteen (14) Years and Eight (8) Months, as minimum, to Seventeen (17) Years and Four (4) Months, as maximum.

SO ORDERED.

FIRST DIVISION[G.R. No. 91041 :  December 10, 1990.]

192 SCRA 277JOSE A. SADDUL, JR., Petitioner, vs. THE HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, Respondents. 

D E C I S I O N 

GRIÑO-AQUINO, J.:Before the Court is the Second Motion for Reconsideration filed by the petitioner, Jose A. Saddul, Jr., praying that we set aside our resolution of April 16, 1990 denying his petition for review of the decision promulgated on September 1, 1989 by the Court of Appeals in CA-G.R. CR No. 06234, entitled: "The People of the Philippines, Plaintiff-Appellee vs.  Jose A. Saddul, Jr., Accused-Appellant" which affirmed on appeal the judgment of the Regional Trial Court of Manila, finding him guilty of estafa under Article 315, par. 1(b) of the Revised Penal Code. After deliberating on the motion for reconsideration and the respondents' comments, the Court resolved to grant the motion and set aside its resolution of April 16, 1990.

In 1973, the petitioner became a vice-president and director of Amalgamated Motors (Phils.) Inc. (AMPI for brevity) (p. 5, tsn, February 15, 1988). AMPI was then a wholly-owned subsidiary of British Leyland (p. 31, tsn, November 9, 1989). It was the sole distributor in the Philippines of British and Japanese heavy equipment, trucks, farm implements, spare parts, and other automotive products and machines manufactured by Leyland International, Land Rover Ltd. (LAND ROVER for brevity), Avelyn Barfourd, Mitsubishi, and Furokawa (p. 7, tsn, February 15, 1988; p. 6, tsn, November 9, 1987).

Since 1980, Felimon R. Cuevas had been a dealer of AMPI for government sales. In 1981, he bought into the company and became its majority stockholder and president (p. 5, tsn, February 15, 1988). Upon Cuevas' ascendancy in the corporation, Saddul was made a director as well as Executive Vice-President and General Manager. As such, he was in charge of the operations of the company and was "delegated" to make sales of some units and spare parts (p. 7, tsn, November 9, 1989). As distributor not only of British but also Japanese automotive products, AMPI carried an inventory of some P15 to P20 million worth of spare parts of the companies it represented in the Philippines (p. 37, tsn, November 9, 1987).

In 1985, LAND ROVER supplied P1.5 million worth of spare parts to the Armed Forces of the Philippines (AFP) through AMPI, but the merchandise were returned to AMPI because they were not the correct items needed by the AFP (p. 27, tsn, February 15, 1988). The parts were kept by AMPI pending disposal instructions from LAND ROVER.

On March 4, 1985, Erwin Lyndsay, LAND ROVER's area manager for Southeast Asia, sent the following letter to

Saddul, Executive Vice-President and General Manager of AMPI, regarding the spare parts rejected by the AFP:

"Dear Joe:

"Further to my letter dated 27 February 1985, we have now given consideration to the matter of disposal of the Land Rover parts wrongly supplied to A.F.P. and currently held by Ampi on our behalf, pending disposal instructions from us.

"As agreed in principle during our meeting, we now authorize you to undertake the disposal of the parts at the best possible prices available from your local market.

"We would expect you to detail to us all sales of part number, quantity sold and price obtained.

"We agree that a sum amounting to 20% of the sale value be retained by Amalgamated Motors as a handling charge and that the balance is placed into a separate client account which will be available to LRPE or any other party authorized by LRPE.

"I trust that these arrangements meet with your approval and will satisfactorily solve the problem of the AFP parts disposal.

"If you have any problems with the above arrangements or need any further authorizations at this stage, please do not hesitate to contact me.

"Yours sincerely,

"(SGD)

"ERWIN LYNDSAY

Area Manager-

South East Asia"

(Emphasis ours: Exh. I or F. pp. 126, 141 RTC Record.)

Saddul sold some of the spare parts (worth P143,085.00) to Rover Motor Parts (a different entity from LAND ROVER) whose president was Jose P. Garcia. The sales were evidenced by AMPI Sales Invoices (Exhs. A, A-1, to A-8) and summarized in the Statement of Accounts dated June 9, 1986 (Exh. B) sent by AMPI to Rover Motor Parts. Payments were made by the buyer to Saddul. AMPI's 20% handling commission on the sale amounted to P28,617.

Pursuant to LAND ROVER's directive that sale value of these spare parts be "placed into a separate client account which will be available to LRPE or any other party authorized by LRPE" (Exh. 1 or F), Saddul did not deposit the proceeds of the sales in AMPI's account but held them in trust for LAND ROVER. Saddul testified thus:

"ATTY. ROBLES:

"Q Is there any reason why you have not remitted to Amalgamated Motors Philippines this 20% handling charge?

"A The reason is this transaction covered a lot of spare parts and the P143,085.00 was only a part of the entire shipment so that there is still an amount due to Land Rover Ltd. I was requested by Land Rover Ltd. to hold on to the 20% until a proper account of the other side could be made and proceeds of items which I do not know, only they would know, how much is owing Amalgamated Motors Philippines, Inc." (p. 10, tsn, February 15, 1988.)

"Atty. CALIMA:

"Q So, in other words, the instructions were given to you before you sold to Rover Motor Parts?

"A Generally, the instruction was to sell it for Land Rover and which I did, sir. Subsequently, when sales proceeds were received, I asked them what will I do with the money and they said, keep the money until I can give you the necessary authority to open account for Land Rover.

"Q My question to you is when did you receive the instruction from Land Rover? After the sale or before the sale was effected to Rover Motor Parts?

"A Instructions for what?

"Q To withhold the proceeds and not to remit the proceeds?

"A The instruction to hold, it is after the sale, sir." (p. 23-24, tsn, February 15, 1988.)

"ATTY. CALIMA:

"Q And inspite (sic) of the fact that Amalgamated Motors Philippines, Inc. can retain 20% handling charge you were still instructed not to remit the 20% to Amalgamated Motors?

x  x  x

"J. SADDUL JR.:

"A Yes, sir, I was told pending full accounting of the entire volume of the transaction. As soon as the entire transaction is worked out through the accounting process then we will know whether Land Rover will owe Mr. Cuevas or Mr. Cuevas will owe Land Rover.

"Q But again Mr. Witness, you will agree to this portion referring to the handling charge, it is not qualified by proper accounting?

"A No, it is not, sir. In the letter, it is not." (p. 28, tsn, February 15, 1988.)

Saddul was "terminated" by AMPI in the early part of 1986 for cause or causes that Cuevas did not disclose, but, according to Edgar Guilatco, a prosecution witness,

Saddul "left the company" (pp. 6-7, tsn, January 6, 1988). He thereupon formed his own outfit which he named "Multipart Motors International, Inc." What appears in the record is that on May 30, 1986, Lyndsay wrote a letter to Saddul enclosing "a note which effectively authorizes you to act as our distributor" (Exh. 5).: nad

This appointment, although not yet official, must have leaked to, and deeply wounded AMPI's President Felimon Cuevas. It was presumably the reason why in a letter of the same date, May 30, 1986, through counsel Atty. Benjamin G. Calima, AMPI demanded from Saddul an accounting of the spare parts supposedly worth P575,053.50 sold by him to Rover Motor Parts "during the time when you were still connected with the company" (Exh. E).

On November 10, 1986, Lyndsay wrote a letter to Cuevas requesting for a statement on AMPI's inventory of British Leyland spare parts, indicating:

"1. Opening stock by part number.

"2. Sales made by part number and price obtained.

"3. Net proceeds credited to client account.

"4. Present stock holding by part number." (p. 127; Exh. G, RTC Record.)

Cuevas replied by telex that some of those spare parts had been sold by Saddul who did not turn over the proceeds to AMPI, and that he (Cuevas) filed a criminal case against Saddul "to recover the money so I can remit immediately" (Exh. H).

On March 26, 1987, Lyndsay sent a reply-telex requesting information as to "which items have been sold and at what price and which items remain in stock" and sought "a reconciliation of this stock" (Exh. I).

On June 3, 1987, based on Cuevas' complaint, an information for estafa in the amount of P143,085.00 (I.S. No. 86-20607) was filed against Saddul in the Regional Trial Court of Manila:

"That in or about and during the period comprised between February 12, 1985 and September 10, 1985, inclusive, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully and feloniously defraud AMALGAMATED MOTORS (PHILS.), INC., a corporation duly organized and existing under the laws of the Republic of the Philippines with business address at Leyland House, 21st corner Railroad Sts., Port Area, this City, in the following manner, to wit: the said accused, being then the Executive Vice-President and General Manager of said Amalgamated Motors (Phils.), Inc., having been authorized by Land Rover Parts & Equipment Ltd., England, to undertake disposal of rejected spare parts and engines at the best possible prices available in the local market, which rejected spare parts and engines were then held by Amalgamated Motors (Phils.), Inc. in behalf of the Land Rover Parts & Equipment Ltd. pending disposal and instructions from the latter

company, actually disposed and offered the said parts and engines for sale to a certain Jose P. Garcia and obtained from the latter the sum of P143,085.00 as purchase price of the same, and the said accused, once in possession of the said sum of P143,085.00, far from complying with his obligation to turn over the proceeds of the sale to said Amalgamated Motors Phils., Inc., failed and refused, and still fails and refuses to do so notwithstanding demands made upon him, and instead, with intent to defraud, he wilfully, unlawfully and feloniously misappropriated, misapplied and converted the same to his own personal use and benefit, to the damage and prejudice of said AMALGAMATED MOTORS (PHILS.) INC. in the aforesaid total amount of P143,085.00, Philippine currency." (Emphasis supplied; p. 1, RTC Record).: rd

On August 6, 1987, Lyndsay wrote Cuevas requesting that all British Leyland parts in the possession of AMPI be delivered to Saddul's Multipart Motors Philippines, Inc. "who is our new parts distributor for the Philippines." He further advised Cuevas that "in view of the change in distributorship to Multipart Motors, we will not hold you (AMPI) liable" for the proceeds (P143,085.00) of the spare parts sold by Saddul to Rover Motor Parts. The letter reads as follows:

"6 August 1987

"Amalgamated Motors (Phils.) Inc.

Railroad Street Corner 21st Street

Port Area

Manila

Philippines

Attention Col. Felimon R. Cuevas

Dear Sirs,

"We have been advised that Security Bank and Trust Co. have obtained a Writ of Attachment over your properties and assets. We further understand that the parts supplied in error to Philippine Armed Forces and returned to Amalgamated Motors for safe keeping have been included under the Attachment. We therefore request that you inform the bank and the Court that these parts do not form part of your properties and assets and should in consequence, be released from the Attachment.

"We should also be pleased if you would transfer these parts to:

"Multipart Motors Philippines Inc. who is our new parts distributor for the Philippines.

"We would take this opportunity to raise the matter of the parts and major units which were already disposed of before the granting of the Writ of Attachment.

"We have been advised by Mr. Jose A. Saddul that he is holding proceeds of sale, amounting to Pesos 143,084.00, of some of the subject parts

in line with instructions contained in our letter dated 4 March 1985. We believe that you are aware of this arrangement. Please note that in view of the change in distributorship to Multipart Motors, we will not hold you liable for this amount, but will accept accounts from Mr. Saddul covering the parts he has sold. As agreed, we will provide Amalgamated Motors with a handling charge amounting to 20% of the proceeds and sale of these parts.: nad

"With regard to the balance of parts held by you, we shall be grateful if you will provide to us an account detailing sales made. Upon receipt we will settle your handling charges at 20% of sales as agreed.

"We look forward to hearing from you.

"Yours sincerely,

(SGD)

ERWIN LYNDSAY

Regional Manager

Export Sales" (Italics supplied; Exh. 2, pp. 142-143, RTC Record)

Despite the advice from Land Rover, AMPI prosecuted the criminal case against Saddul. On August 29, 1988, the trial court rendered a decision finding him guilty of estafa with unfaithfulness or abuse of confidence (Art. 315, subpar. 1-b, Rev. Penal Code). The dispositive part of the decision reads as follows:

"WHEREFORE, the Court finds the accused Jose A. Saddul, Jr. guilty beyond reasonable doubt of the crime of estafa, defined and penalized under Article 315, par. 1(b) of the Revised Penal Code, involving the amount of P28,617.00 and in the absence of any modifying circumstance, hereby sentences him to suffer an indeterminate penalty ranging from six (6) months and one (1) day of  prision correccional, as minimum, to eight (8) years of  prision mayor, as maximum, to indemnify the offended party, Amalgamated Motors (Phils.), Inc., in the amount of P28,617.00 without subsidiary imprisonment in case of insolvency, and to pay the costs." (p. 26, Rollo.)

Saddul appealed to the Court of Appeals (CA-G.R. CR No. 06234.) On September 1, 1989, the Court of Appeals affirmed the trial court's decision. Hence, this petition for review.

The Court has carefully considered the petition for review on Certiorari and its annexes, as well as the comments of the public respondent, including the original records which the Court caused to be elevated for examination. We find merit in the petition for review.

One of the ways of committing the crime of estafa with unfaithfulness or abuse of confidence is:

"(b) By misappropriating or converting to the prejudice of another, money, goods, or any other personal property received by the offender in

trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property." (Art. 315, par. 1 subpar. b, Rev. Penal Code.).chanrobles virtual law library

The appropriation or conversion of money or property received, to the prejudice of the owner thereof, is the essence of estafa through misappropriation (Ramirez, 9 Phil. 67). The words "convert" and "misappropriate" connote an act of using or disposing of another's property as if it were one's own, or of devoting it to a purpose or use different from that agreed upon. To misappropriate to one's own use includes, not only conversion to one's personal advantage, but also every attempt to dispose of the property of another without right. (Webber vs.  Court of Appeals, 57 OG 2937; People vs.  Panes, 37 Phil. 118.)

Conversion is an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, resulting in the alteration of their condition or the exclusion of the owner's rights. It takes place when a person actually appropriates the property of another to his own benefit, use, and enjoyment (Trinidad vs.  Court of Appeals, 53 OG 731 citing Bouvier's Law Dictionary).

The elements of the crime of embezzlement or estafa with abuse of confidence are:

(a) that personal property is received in trust, on commission, for administration or under any other circumstance involving the duty to make delivery of or to return the same, even though the obligation is guaranteed by a bond;

(b) that there is conversion or diversion of such property by the person who has so received it or a denial on his part that he received it;

(c) that such conversion, diversion or denial is to the injury of another, and

(d) that there be demand for the return of the property, (p. 247, Vol. III, 1988 Ed., Revised Penal Code by R.C. Aquino)

The first element of the crime does not exist in this case because Saddul did not receive the Leyland Automotive spare parts from Cuevas or AMPI in trust, on commission, for administration, or under a duty to make delivery of, or return the same. Saddul received the Leyland spare parts from the AFP in trust for LAND ROVER which authorized him to sell them ("we now authorize you to undertake the disposal of the parts at the best possible prices available from your local market" - Exh. 1 or F, p. 126, RTC Record).

Since Saddul did not convert or divert the property (he sold them in accordance with the authority given to him by Land Rover) nor did he deny that he received them, the second element of the crime was also not present.

Saddul's failure to deliver the proceeds of the sale of the spare parts to AMPI or Cuevas did not constitute a conversion or diversion to the injury of the latter who, not being the owner of the property, incurred no loss and suffered no injury on account of Saddul's retention of the said proceeds while awaiting Land Rover's instructions regarding the special account where he should deposit them. Saddul simply complied with the directive in Land Rover's letter of March 4, 1985 that the proceeds be "placed into a separate client account which will be available to LRPE or any other party authorized by LRPE" (Exh. 1 or F). Implicit in this directive was an injunction not to deliver the proceeds to AMPI. The third element of the crime charged is absent.:-cralaw

The fourth and final element of demand for the return of the property is also lacking. AMPI or Cuevas made no demand for the return of the spare parts sold by Saddul because Cuevas knew that those spare parts were to be sold for the account of Land Rover.

While it is true that under Lyndsay's letter of March 4, 1985 (Exh. 1 or F) AMPI was entitled to a handling commission of 20% of the sale value of the spare parts (equivalent to P28,617.00) which Saddul failed to deliver to AMPI, Saddul explained that he subsequently received instructions from Land Rover to hold the 20% commission until AMPI shall have given an accounting of the remaining Leyland spare parts (worth P1.2 million) still held by AMPI. (pp. 10, 23-28, tsn, February 15, 1988.)

That testimony of Saddul was not controverted by the complainant. On the contrary, it was confirmed by Lyndsay's letter dated August 6, 1987 to AMPI or Cuevas (Exh. 2) asking for an accounting of "balance of the parts held by you . . . upon receipt (of which) ** we will settle your handling charges at 20% of sales as agreed."

By obeying the instructions of Land Rover to withhold payment of AMPI's 20% handling charge (P28,617.00) Saddul did not become liable for embezzlement to AMPI for he did not receive that sum from AMPI. It was part of the price he received from Rover Motor Parts, the buyer of the spare parts.

"Where the accused did not receive the money from the complainant for safekeeping or on commission or for administration and in trust, he is not criminally liable for failure to return the money." (Jose Barredo vs.  Court of Appeals, 54 OG 1037).

AMPI's recourse, in order to recover its 20% handling charge, is to file a civil action to collect that amount from its erstwhile principal, Land Rover, not this criminal action for estafa against Saddul.: nad

WHEREFORE, the petitioner's motion for reconsideration of the resolution dated April 16, 1990 is granted. The decision dated September 1, 1989, of the Court of Appeals in CA-G.R. No. 06234 is hereby

reversed and set aside. The petitioner is acquitted of the crime charged, with costs de oficio.

SO ORDERED.

PRESIDENTIAL DECREE No. 115 January 29, 1973

PROVIDING FOR THE REGULATION OF TRUST RECEIPTS TRANSACTIONS

WHEREAS, the utilization of trust receipts, as a convenient business device to assist importers and merchants solve their financing problems, had gained popular acceptance in international and domestic business practices, particularly in commercial banking transactions;

WHEREAS, there is no specific law in the Philippines that governs trust receipt transactions, especially the rights and obligations of the parties involved therein and the enforcement of the said rights in case of default or violation of the terms of the trust receipt agreement;

WHEREAS, the recommendations contained in the report on the financial system which have been accepted, with certain modifications by the monetary authorities included, among others, the enactment of a law regulating the trust receipt transactions;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated September 22, 1972, as amended, and in order to effect the desired changes and reforms in the social, economic, and political structure of our society, do hereby order and decree and make as part of the law of the land the following:

Section 1. Short Title. This Decree shall be known as the Trust Receipts Law.

Section 2. Declaration of Policy. It is hereby declared to be the policy of the state (a) to encourage and promote the use of trust receipts as an additional and convenient aid to commerce and trade; (b) to provide for the regulation of trust receipts transactions in order to assure the protection of the rights and enforcement of obligations of the parties involved therein; and (c) to declare the misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released under trust receipts as a criminal offense punishable under Article Three hundred and fifteen of the Revised Penal Code.

Section 3. Definition of terms. As used in this Decree, unless the context otherwise requires, the term

(a) "Document" shall mean written or printed evidence of title to goods.

(b) "Entrustee" shall refer to the person having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose or purposes specified in the trust receipt agreement.

(c) "Entruster" shall refer to the person holding title over the goods, documents, or instruments subject of a trust receipt transaction, and any successor in interest of such person.

(d) "Goods" shall include chattels and personal property other than: money, things in action, or things so affixed to land as to become a part thereof.

(e) "Instrument" means any negotiable instrument as defined in the Negotiable Instrument Law; any certificate of stock, or bond or debenture for the payment of money issued by a public or private corporation, or any certificate of deposit, participation certificate or receipt, any credit or investment instrument of a sort marketed in the ordinary course of business or finance, whereby the entrustee, after the issuance of the trust receipt, appears by virtue of possession and the face of the instrument to be the owner. "Instrument" shall not include a document as defined in this Decree.

(f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge, legal or equitable.

(g) "Purchaser" means any person taking by purchase.

(h) "Security Interest" means a property interest in goods, documents or instruments to secure performance of some obligations of the entrustee or of some third persons to the entruster and includes title, whether or not expressed to be absolute, whenever such title is in substance taken or retained for security only.

(i) "Person" means, as the case may be, an individual, trustee, receiver, or other fiduciary, partnership, corporation, business trust or other association, and two more persons having a joint or common interest.

(j) "Trust Receipt" shall refer to the written or printed document signed by the entrustee in favor of the entruster containing terms and conditions substantially complying with the provisions of this Decree. No further formality of

execution or authentication shall be necessary to the validity of a trust receipt.

(k) "Value" means any consideration sufficient to support a simple contract.

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree as entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster of a signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any of the following:

1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with the purpose of ultimate sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied fully with his obligation under the trust receipt; or (c) to load, unload, ship or tranship or otherwise deal with them in a manner preliminary or necessary to their sale; or

2. In the case of instruments,

a) to sell or procure their sale or exchange; or

b) to deliver them to a principal; or

c) to effect the consummation of some transactions involving delivery to a depository or register; or

d) to effect their presentation, collection or renewal

The sale of goods, documents or instruments by a person in the business of selling goods, documents or instruments for profit who, at the outset of the transaction, has, as against the

buyer, general property rights in such goods, documents or instruments, or who sells the same to the buyer on credit, retaining title or other interest as security for the payment of the purchase price, does not constitute a trust receipt transaction and is outside the purview and coverage of this Decree.

Section 5. Form of trust receipts; contents. A trust receipt need not be in any particular form, but every such receipt must substantially contain (a) a description of the goods, documents or instruments subject of the trust receipt; (2) the total invoice value of the goods and the amount of the draft to be paid by the entrustee; (3) an undertaking or a commitment of the entrustee (a) to hold in trust for the entruster the goods, documents or instruments therein described; (b) to dispose of them in the manner provided for in the trust receipt; and (c) to turn over the proceeds of the sale of the goods, documents or instruments to the entruster to the extent of the amount owing to the entruster or as appears in the trust receipt or to return the goods, documents or instruments in the event of their non-sale within the period specified therein.

The trust receipt may contain other terms and conditions agreed upon by the parties in addition to those hereinabove enumerated provided that such terms and conditions shall not be contrary to the provisions of this Decree, any existing laws, public policy or morals, public order or good customs.

Section 6. Currency in which a trust receipt may be denominated. A trust receipt may be denominated in the Philippine currency or any foreign currency acceptable and eligible as part of international reserves of the Philippines, the provisions of existing law, executive orders, rules and regulations to the contrary notwithstanding: Provided, however, That in the case of trust receipts denominated in foreign currency, payment shall be made in its equivalent in Philippine currency computed at the prevailing exchange rate on the date the proceeds of sale of the goods, documents or instruments held in trust by the entrustee are turned over to the entruster or on such other date as may be stipulated in the trust receipt or other agreements executed between the entruster and the entrustee.

Section 7. Rights of the entruster. The entruster shall be entitled to the proceeds from the sale of the goods, documents or instruments released under a trust receipt to the entrustee to the extent of the amount owing to the entruster or as appears in the trust receipt, or to the return of the goods, documents or instruments in case of non-sale, and to the enforcement of all other rights conferred on him in the trust receipt provided such are not contrary to the provisions of this Decree.

The entruster may cancel the trust and take possession of the goods, documents or instruments subject of the trust or of the proceeds realized therefrom at any time

upon default or failure of the entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the entruster and the entrustee, and the entruster in possession of the goods, documents or instruments may, on or after default, give notice to the entrustee of the intention to sell, and may, not less than five days after serving or sending of such notice, sell the goods, documents or instruments at public or private sale, and the entruster may, at a public sale, become a purchaser. The proceeds of any such sale, whether public or private, shall be applied (a) to the payment of the expenses thereof; (b) to the payment of the expenses of re-taking, keeping and storing the goods, documents or instruments; (c) to the satisfaction of the entrustee's indebtedness to the entruster. The entrustee shall receive any surplus but shall be liable to the entruster for any deficiency. Notice of sale shall be deemed sufficiently given if in writing, and either personally served on the entrustee or sent by post-paid ordinary mail to the entrustee's last known business address.

Section 8. Entruster not responsible on sale by entrustee. The entruster holding a security interest shall not, merely by virtue of such interest or having given the entrustee liberty of sale or other disposition of the goods, documents or instruments under the terms of the trust receipt transaction be responsible as principal or as vendor under any sale or contract to sell made by the entrustee.

Section 9. Obligations of the entrustee. The entrustee shall (1) hold the goods, documents or instruments in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipt; (2) receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to the entruster or as appears on the trust receipt; (3) insure the goods for their total value against loss from fire, theft, pilferage or other casualties; (4) keep said goods or proceeds thereof whether in money or whatever form, separate and capable of identification as property of the entruster; (5) return the goods, documents or instruments in the event of non-sale or upon demand of the entruster; and (6) observe all other terms and conditions of the trust receipt not contrary to the provisions of this Decree.

Section 10. Liability of entrustee for loss. The risk of loss shall be borne by the entrustee. Loss of goods, documents or instruments which are the subject of a trust receipt, pending their disposition, irrespective of whether or not it was due to the fault or negligence of the entrustee, shall not extinguish his obligation to the entruster for the value thereof.

Section 11. Rights of purchaser for value and in good faith. Any purchaser of goods from an entrustee with right to sell, or of documents or instruments through their customary form of transfer, who buys the goods, documents, or instruments for value and in good faith

from the entrustee, acquires said goods, documents or instruments free from the entruster's security interest.

Section 12. Validity of entruster's security interest as against creditors. The entruster's security interest in goods, documents, or instruments pursuant to the written terms of a trust receipt shall be valid as against all creditors of the entrustee for the duration of the trust receipt agreement.

Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article Three hundred and fifteen, paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense.

Section 14. Cases not covered by this Decree. Cases not provided for in this Decree shall be governed by the applicable provisions of existing laws.

Section 15. Separability clause. If any provision or section of this Decree or the application thereof to any person or circumstance is held invalid, the other provisions or sections hereof and the application of such provisions or sections to other persons or circumstances shall not be affected thereby.

Section 16. Repealing clause. All Acts inconsistent with this Decree are hereby repealed.

Section 17. This Decree shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the year of Our Lord, nineteen hundred and seventy-three.

SECOND DIVISION[G.R. No. 82495 :  December 10, 1990.]192 SCRA 246ALLIED BANKING CORPORATION, Petitioner, vs. HON. SECRETARY SEDFREY ORDOÑEZ (Public Respondent) and ALFREDO CHING (Private Respondent), Respondents.

D E C I S I O N PADILLA, J.: 

In this special civil action for Certiorari, the interpretation by the Department of Justice of the penal provision of PD 115, the Trust Receipts Law, is assailed by petitioner.

The relevant facts are as follows:

On 23 January 1981, Philippine Blooming Mills (PBM, for short) thru its duly authorized officer, private respondent Alfredo Ching, applied for the issuance of commercial letters of credit with petitioner's Makati branch to finance the purchase of 500 M/T Magtar Branch Dolomites and one (1) Lot High Fired Refractory Sliding Nozzle Bricks.

Petitioner issued an irrevocable letter of credit in favor of Nikko Industry Co., Ltd. (Nikko) by virtue of which the latter drew four (4) drafts which were accepted by PBM and duly honored and paid by the petitioner bank.:- nad

To secure payment of the amount covered by the drafts, and in consideration of the transfer by petitioner of the possession of the goods to PBM, the latter as entrustee, thru private respondent, executed four (4) Trust Receipt Agreements with maturity dates on 19 May, 3 and 24 June 1981 acknowledging petitioner's ownership of the goods and its (PBM'S) obligation to turn over the proceeds of the sale of the goods, if sold, or to return the same, if unsold within the stated period.

Out of the said obligation resulted an overdue amount of P1,475,274.09. Despite repeated demands, PBM failed and refused to either turn over the proceeds of the sale of the goods or to return the same.

On 7 September 1984, petitioner filed a criminal complaint against private respondent for violation of PD 115 before the office of the Provincial Fiscal of Rizal. After preliminary investigation wherein private respondent failed to appear or submit a counter-affidavit and even refused to receive the subpoena, the Fiscal found a prima facie case for violation of PD 115 on four (4) counts and filed the corresponding information in court.

Private respondent appealed the Fiscal's resolution to the Department of Justice on three (3) grounds:

1. Lack of proper preliminary investigation;

2. The Provincial Fiscal of Rizal did not have jurisdiction over the case, as respondent's obligation was purely civil;

3. There had been a novation of the obligation by the substitution of the person of the Rehabilitation Receivers in place of both PBM and private respondent Ching.

Then Secretary of Justice (now Senator) Neptali A. Gonzales, in a 24 September 1986 letter/resolution, 1 held:

"Your contention that respondent's obligation was purely a civil one, is without any merit. The four (4) Trust Receipt Agreements entered into by respondent and complainant appear regular in form and in substance. Their agreement regarding interest, not being contrary to law, public policy or morals, public order or good custom, is a valid stipulation which does not change the character of the said Trust Receipt Agreements. Further, as precisely pointed out by complainant, raw materials for manufacture of goods to be ultimately sold are proper objects of a trust receipt. Thus, respondent's failure to remit to the complainant proceeds of the sale of the finished products if sold or the finished products themselves if not sold, at the maturity dates of the trust receipts, constitutes a violation of P.D. 115." 2

A motion for reconsideration alleged that, as PBM was under rehabilitation receivership, no criminal liability can be imputed to herein respondent Ching. On 17 March 1987, Undersecretary Silvestre H. Bello III denied said motion. The pertinent portion of the denial resolution states::-cralaw

"It cannot be denied that the offense was consummated long before the appointment of rehabilitation receivers. The filing of a criminal case against respondent Ching is not only for the purpose of effectuating a collection of a debt but primarily for the purpose of punishing an offender for a crime committed not only against the complaining witness but also against the state. The crime of estafa for violation of the Trust Receipts Law is a special offense or mala prohibita. It is a fundamental rule in criminal law that when the crime is punished by a special law, the act alone, irrespective of its motives, constitutes the offense. In the instant case the failure of the entrustee to pay complainant the remaining balance of the value of the goods covered by the trust receipt when the same became due constitutes the offense penalized under Section 13 of P.D. No. 115; and on the basis of this failure alone, the prosecution has sufficient evidence to establish a prima facie case (Res. No. 671, s. 1981; Allied Banking Corporation vs.  Reinhard Sagemuller, et al., Provincial Fiscal of Rizal, September 18, 1981).

"Likewise untenable is your contention that 'rehabilitation proceedings must stay the attempt to enforce a liability in view of Section 4 of P.D. No. 1758.' Section 4 of P.D. No. 1758, provides, among others: '. . . Provided, further, that upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly.

"You will note that the term 'all actions for claims' refer only to actions for money claims but not to criminal liability of offenders." 3

Another motion for reconsideration was filed by respondent on 9 April 1987 to which an opposition was filed by the petitioner. Private respondent also filed a supplemental request for reconsideration dated 28 December 1987 with two (2) additional grounds, namely:

". . . 3) there is no evidence on record to show that respondent was in particeps criminis in the act complained of; and 4) there could be no violation of the trust receipt agreements because the articles imported by the corporation and subject of the trust receipts were fungible or consummable goods and do not form part of the steel product itself. These goods were not procured to be sold in whatever state or condition they were in or were supposed to be after the manufacturing process." 4

Because of private respondent's clarification that the goods subject of the trust receipt agreements were dolomites which were specifically used for patching purposes over the surface of furnaces and nozzle bricks which are insulating materials in the lower portion of the ladle which do not form part of the steel product itself, Justice Secretary Sedfrey Ordoñez, on 11 January 1988, "rectified" his predecessor's supposed reversible error, and held::-cralaw

". . . it is clear that what the law contemplates or covers are goods which have, for their ultimate destination, the sale thereof or if unsold, their surrender to the entruster, this whether the goods are in their original form or in their manufactured/processed state. Since the goods covered by the trust receipts and subject matter of these proceedings are to be utilized in the operation of the equipment and machineries of the corporation, they could not have been contemplated as being covered by PD 115. It is axiomatic that penal statutes are strictly construed against the state and liberally in favor of the accused (People vs.  Purisima, 86 SCRA 542, People vs.  Terrado, 125 SCRA 648). This means that penal statutes cannot be enlarged or extended by intendment, implication, or any equitable consideration (People vs.  Garcia, 85 Phil. 651). Thus, not all transactions covered by trust receipts may be considered as trust receipt transactions defined and penalized under PD 115.

x  x  x

Apparently, the trust receipt agreements were executed as security for the payment of the drafts. As such, the main transaction was that of a loan. . . . In essence, therefore, the relationship between the Bank and the corporation, consequently, the respondent herein likewise included, is that of debtor and creditor.

x  x  x

WHEREFORE, premises considered, our resolution dated September 24, 1986, recorded 119 Resolution No. 456, series of 1986, and that dated March 17, 1987, the latter being necessarily dependent upon and incidental to the former, are hereby abrogated and abandoned. You are hereby directed to move for the withdrawal of the informations and the dismissal of the criminal cases filed in court . . ." 5

This time, petitioner Allied Bank filed a motion for reconsideration of the Ordoñez resolution, which was resolved by the Department of Justice on 17 February 1988, enunciating that PD 115 covers goods or

components of goods which are ultimately destined for sale. It concluded that:

". . . The goods subject of the instant case were shown to have been used and/or consumed in the operation of the equipment and machineries of the corporation, and are therefore outside the ambit of the provisions of PD 115 albeit covered by Trust Receipt agreements . . . Finally, it is noted that under the Sia vs.  People (121 SCRA 655 (1983), and Vintola vs.  Insular Bank of Asia and America (150 SCRA 578 (1987) rulings, the trend in the Supreme Court appears to be to the effect that trust receipts under PD 115 are treated as security documents for basically loan transactions, so much so that criminal liability is virtually obliterated and limiting liability of the accused to the civil aspect only.

WHEREFORE, your motion for reconsideration is hereby DENIED." 6

From the Department of Justice, petitioner is now before this Court praying for writs ofCertiorari and prohibition to annul the 11 January and 17 February 1988 DOJ rulings, mainly on two (2) grounds:

1. public respondent is without power or authority to declare that a violation of PD 115 is not criminally punishable, thereby rendering a portion of said law inoperative or ineffectual.: nad

2. public respondent acted with grave abuse of discretion in holding that the goods covered by the trust receipts are outside the contemplation of PD 115.

Private and public respondents both filed their comments on the petition to which a consolidated reply was filed. After the submission of the parties' respective memoranda, the case was calendared for deliberation.

Does the penal provision of PD 115 (Trust Receipts Law) apply when the goods covered by a Trust Receipt do not form part of the finished products which are ultimately sold but are instead, utilized/used up in the operation of the equipment and machineries of the entrustee-manufacturer?

The answer must be in the affirmative, Section 4 of said PD 115 says in part:

"Sec. 4. What constitutes a trust receipt transaction. — A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a person referred to in this Decree as the entrustee, and another person referred to in this Decree as the entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster of a signed document called a 'trust receipt' wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or

instruments themselves, if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, . . ."

Respondent Ching contends that PBM is not in the business of selling Magtar Branch Dolomites or High Fired Refractory Sliding Nozzle Bricks, it is a manufacturer of steel and steel products. But PBM, as entrustee under the trust receipts has, under Sec. 9 of PD 115, the following obligations, inter alia: (a) receive the proceeds of sale, in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to him or as appears on the trust receipt; (b) keep said goods or proceeds thereof whether in money or whatever form, separate and capable of identification as property of the entruster; (c) return the goods, documents or instruments in the event of non-sale, or upon demand of the entruster; and (d) observe all other terms and conditions of the trust receipt not contrary to the provisions of said Decree. 7

The trust receipts, there is an obligation to repay the entruster. 8 Their terms are to be interpreted in accordance with the general rules on contracts, the law being alert in all cases to prevent fraud on the part of either party to the transaction. 9 The entrustee binds himself to sell or otherwise dispose of the entrusted goods with the obligation to turn over to the entruster the proceeds if sold, or return the goods if unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt. A violation of this undertaking constitutes estafa under Sec. 13, PD 115.

And even assuming the absence of a clear provision in the trust receipt agreement, Lee v. Rodil  10 and Sia v. CA  11 have held: Acts involving the violation of trust receipt agreements occurring after 29 January 1973 (when PD 115 was issued) would render the accused criminally liable for estafa under par. 1(b), Art. 315 of the Revised Penal Code, pursuant to the explicit provision in Sec. 13 of PD 115.  12 The act punishable is malum prohibitum. Respondent Secretary's prognostication of the Supreme Court's supposed inclination to treat trust receipts as mere security documents for loan transactions, thereby obliterating criminal liability, appears to be a misjudgment.  13

In an attempt to escape criminal liability, private respondent claims PD 115 covers goods which are ultimately destined for sale and not goods for use in manufacture. But the wording of Sec. 13 covers failure to turn over the proceeds of the sale of entrusted goods, or to return said goods if unsold or disposed of in accordance with the terms of the trust receipts. Private respondent claims that at the time of PBM's application for the issuance of the LC's, it was not represented to the petitioner that the items were intended for sale,  14 hence, there was no deceit resulting in a violation of the trust receipts which would constitute a criminal liability. Again, we cannot uphold this contention. The non-payment of the amount covered by a trust receipt is an act violative of the entrustee's obligation to pay. There is no reason why the law should not apply to all

transactions covered by trust receipts, except those expressly excluded.  15

The Court takes judicial notice of customary banking and business practices where trust receipts are used for importation of heavy equipment, machineries and supplies used in manufacturing operations. We are perplexed by the statements in the assailed DOJ resolution that the goods subject of the instant case are outside the ambit of the provisions of PD 115 albeit covered by Trust Receipt Agreements (17 February 1988 resolution) and that not all transactions covered by trust receipts may be considered as trust receipt transactions defined and penalized under PD 115 (11 January 1988 resolution). A construction should be avoided when it affords an opportunity to defeat compliance with the terms of a statute.: nad

"A construction of a statute which creates an inconsistency should be avoided when a reasonable interpretation can be adopted which will not do violence to the plain words of the act and will carry out the intention of Congress.

In the construction of statutes, the courts start with the assumption that the legislature intended to enact an effective law, and the legislature is not to be presumed to have done a vain thing in the enactment of a statute. Hence, it is a general principle, embodied in the maxim, 'ut res magis valeat quam pereat,' that the courts should, if reasonably possible to do so without violence to the spirit and language of an act, so interpret the statute to give it efficient operation and effect as a whole. An interpretation should, if possible, be avoided, under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or nugatory."  16

The penal provision of PD 115 encompasses any act violative of an obligation covered by the trust receipt; it is not limited to transactions in goods which are to be sold (retailed), reshipped, stored or processed as a component of a product ultimately sold.

To uphold the Justice Department's ruling would contravene not only the letter but the spirit of PD 115.

"An examination of P.D. 115 shows the growing importance of trust receipts in Philippine business, the need to provide for the rights and obligations of parties to a trust receipt transaction, the study of the problems involved and the action by monetary authorities, and the necessity of regulating the enforcement of rights arising from default or violations of trust receipt agreements. The legislative intent to meet a pressing need is clearly expressed . . ."  17

WHEREFORE, the petition is granted. The temporary restraining order issued on 13 April 1988 restraining the enforcement of the questioned DOJ resolutions dated 11 January 1988 and 17 February 1988 directing the provincial fiscal to move for the dismissal of the criminal case filed before the RTC of Makati, Branch 143 and the withdrawal of IS-No. 84-3140, is made permanent. Let

this case be remanded to said RTC for disposition in accordance with this decision.

SO ORDERED.

G.R. No. 80544 July 5, 1989

ROSEMARIE M. LEE, petitioner, vs.HON. JOSEFINA CRUZ RODIL, Judge of Regional Trial Court, Branch X, Manila and PEOPLE OF THE PHILIPPINES, respondents.

Manuel B. Imbong for petitioner.

GUTIERREZ, JR., J.:

In this petition we are asked to reconsider the liability for estafa of an entrustee in a trust receipt agreement who disposes of the goods covered by it but fails to deliver the proceeds of the sale to the bank.

Petitioner Rosemarie M. Lee was charged with estafa in an information which alleged:

That on or about July 26,1982 in the City of Manila, Philippines, the said accused, did then and there wilfully, unlawfully and feloniously defraud the Philippine Bank of Communications, a banking institution duly organized and existing under the laws of the Republic of the Philippines, in the following manner, to wit: the said accused, being then the duly authorized representative of C.S. Lee Enterprises, Inc., after opening letter of credit with the said bank under L/C No. 63251 dated July 26, 1982, for the amount of P 154,711.97, coveting the purchase price of a certain merchandise consisting of 23 ctns. Lab. Culture Media in favor of said bank, received from the latter the necessary document and thereafter the said merchandise and forthwith, executed trust receipt for, the aforesaid merchandise dated July 26, 1982, by virtue of which, the said accused obligated herself to hold said merchandise in trust with liberty to sell the same in cash for the account of the said bank and to account for the proceeds of the sale thereof, if sold or of returning the said merchandise to said bank in case of failure to sell the same, on or before October 24, 1982, but the said accused, once in possession of the

said merchandise, far from complying with her aforesaid obligation and despite the lapse of a long period of time and repeated demands made upon her to that effect, did then and there willfully, unlawfully and feloniously, with intent to defraud, misappropriate, misapply and convert the said merchandise or the value thereof, to her own personal use and benefit, to the damage and prejudice of the said Philippine Bank of Communications in the amount of P154,711.97, Philippine currency. (Rollo, p. 19)

The accused moved to quash this information on the ground that the facts charged do not constitute an offense. She alleges that the violation of a trust receipt agreement does not constitute estafa notwithstanding an express provision in the "Trust Receipts Law" (P.D. 115) characterizing such violation as estafa. She attacks P. D. 115 for being unconstitutional.

The trial court, in its order dated August 21, 1987 denied the motion to quash the information and upheld the constitutionality of P.D. No. 115.

The subsequent Motion for Reconsideration was also denied for lack of merit in an order dated October 12, 1987.

Hence, this petition.

The issue posed in this case is whether or not the violation of a trust receipt agreement constitutes the crime of estafa.

We answer in the affirmative in the light of a specific provision in P.D. No. 115.

Sec. 13 of P.D. No. 115 provides:

... Penalty clause. — The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article Three Hundred and Fifteen, Paragraph One (b) of Act Numbered Three Thousand Eight Hundred and Fifteen, as amended, otherwise known as the Revised Penal Code. If the violation or offense is committed by a

corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense without prejudice to the civil liabilities arising from the criminal offense. (Italics supplied).

The petitioner cites the cases of People v. Cuevo, (104 SCRA 312 [1981]) and Sia v. People, (121 SCRA 655 [1983]) to support her stand that the violation of a trust receipt does not constitute estafa.

The petitioner's citation of People v. Cuevo, supra does not strengthen her case at all. Of the eleven (11) members of the Court, a majority of six (6) were clearly of the view that the violation of a trust receipt constitutes estafa. The Chief Justice concurred with them on the issue of absence of double jeopardy. Two Justices inhibited themselves. Only two (2) out of the eleven members strongly adhered to the view now presented by the petitioner. However, for want of one vote needed to reverse the dismissal order of the lower court, the view of the dissenting Justices prevailed as the result in that case. Excerpts from the majority opinion show as follows:

... (I)t is a well-entrenched rule in our jurisprudence that the conversion by the importer of the goods covered by a trust receipt constitutes estafa through misappropriation under article 315(l) (b) of the Revised Penal Code. (People vs. Yu Chai Ho, 53 Phil. 874 and Samo vs. People, 115 Phil, 346. As to civil cases, see National Bank vs. Viuda e Hijos de Angel Jose, 63 Phil. 814; Philippine National Bank vs. Catipon, 98 Phil. 286 and Philippine National Bank vs. Arrozal, 103 Phil. 213). xxx

xxx xxx xxx

As noted by Justice Street in People vs. Yu Chai Ho, supra, the conversion by the trustee in a trust receipt of the proceeds of the sale falls 'most literally and directly under' the provisions of article 315(l) (b).

Thus, it was held that where, notwithstanding repeated oral and written demands by the bank, the petitioner had failed either to turn over to the said bank the proceeds of the sale of the goods, or to return said goods if they were not sold, the petitioner is guilty of estafa under article 315 (1) (b) (Samo vs. People, 115 Phil. 346).

In this connection, it is relevant to state that Presidential Decree No. 115, the Trust Receipts Law, regulating trust receipt transactions, was issued on January 29,1973.

xxx xxx xxx

The enactment of the said penal provision is confirmatory of existing jurisprudence and should not be construed as meaning that, heretofore, the misappropriation of the proceeds of a sale made under a trust receipt was not punishable under article 315. That penal provision removed any doubt as to the criminal liability of the holder of a trust receipt who misappropriated the proceeds of the sale.

It was the lower court in the Cuevo case which ruled that violation of a trust receipt gives rise to a civil action only. This was not the ruling in the Supreme Court's decision.

It was made quite clear in the majority opinion that the lower court erred in holding that the accused did not commit estafa under article 315 (1) (b). (104 SCRA 312, 316).

The petitioner quotes the dissenting opinion of Justice De Castro in this case that:

The parties, therefore, are deemed to have consciously entered into a purely commercial transaction that could give rise only to civil liability, never to subject the 'entrustee' to criminal prosecution. Unlike, for instance, when several pieces of jewelry are received by a person from the owner for sale on commission, and the former misappropriates for his personal use and benefit, either the jewelries or the proceeds of the sale, instead of returning them to the owner as is his obligation, the bank is not in the same concept as the jewelry owner with full power of disposition of the goods, which the bank does not have, for the bank has previously extended a loan which the L/C represents to the importer, and by that loan, the importer should be the real owner of the goods. If under the trust receipt, the bank is made to appear as the owner, it was but an artificial expedient, more of a legal fiction than fact, for it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with the purpose of the trust receipt by giving a stronger security for

the loan obtained by the importer. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof, a feature totally absent in the case of the transaction between the jewel-owner and his agent.

Equally emphatic is the dissent of then Senior Associate Justice Claudio Teehankee that:

I concur with the dissent of Mr. Justice De Castro insofar as it upholds the more liberal interpretation to the trust receipt transaction which would give rise only to civil liability on the part of the offender. The very definition of trust receipt as given in the main opinion (at pp. 4-5), '(A) trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased' (53 Am. Jr. 961, cited in Samo v. People, 115 Phil. 346, 349),' sustains the lower court's rationale in dismissing the information that the contract covered by a trust receipt is merely a secured loan. The goods imported by the small importer and retail dealer through the bank's financing remain of their own property and risk and the old capitalist orientation of putting them in jail for estafa for non-payment of the secured loan (granted after they had been fully investigated by the bank as good credit risks) through the fiction of the trust receipt device should no longer be permitted in this day and age.

It should, however, be noted that even as Justice de Castro filed a dissent, he also made the following observations:

The question is whether the violation of the terms of a trust receipt would constitute estafa. There is no more doubt that under P.D. 115, the violation is defined as estafa, but before the promulgation of said decree, I have entertained grave doubts to such extent that I would acquit a person accused of the crime allegedly committed before said decree, the promulgation of which serves to confirm my doubts. For if there had been no such doubt, especially as some decisions had already been

rendered by this Court holding that estafa is committed where there is a violation of a trust receipt,there would have been no need for P.D. 115. (Emphasis supplied)

The dissenting opinions later became the Court's ruling on the matter when the Sia decision penned by Justice De Castro was promulgated.

In the Sia case, supra, it was held that:

Consequently, if only from the fact that the trust receipt transaction is susceptible to two reasonable interpretation(s), one as giving rise only to civil liability for the violation of the condition thereof, and the other, as generating also criminal liability, the former should be adopted as more favorable to the supposed offender. ...

A closer look at the two decisions cited by the petitioner shows attendant facts that are different from those in the instant case.

As noted by the Solicitor General, in the Cuevo and Sia cases, both violations of the trust receipt agreements happened in the 1960's, way before the promulgation of P.D. 115 in 1973. (Rollo, p. 55) In the present case, the accused was charged in 1985 for an act committed in 1982.

While the Cuevo and Sia cases were decided when P.D. 115 had already been promulgated, the decree was not applied in either of the cases because the questioned acts were committed before its effectivity.

Thus, the view held by the Court in the Sia case that violation of a trust receipt only gives rise to civil liability did not take into consideration P.D. 115, as it ruled:

We consider the view that the trust receipt arrangement gives rise only to civil liability as the more feasible, before the promulgation of P.D. 115. (121 SCRA 655, 664) (Emphasis supplied).

Acts involving the violation of trust receipt agreements occurring after 29 January 1973 would make the accused criminally liable for estafa under paragraph 1 (b), Article 315 of the Revised Penal Code, pursuant to the explicit provision in Sec. 13 of P.D. 115. (Sia v. Court of Appeals, G.R. No. 40324, October 5, 1988).

The petitioner questions the constitutionality of Sec. 13 of P.D. 115. She contends that it is violative of the constitutional right that "No person shall be imprisoned for debt or non-payment of a poll tax".

The petitioner has failed to make out a strong case that P.D. 115 conflicts with the constitutional prohibition against imprisonment for non-payment of debt. A convincing showing is needed to overcome the presumption of the validity of an existing statute.

The criminal liability springs from the violation of the trust receipt.

We bear in mind the nature of a trust receipt agreement. This Court pronounced in the Vintola cases, 150 SCRA 578 (1987); G.R. No. 78671, March 25,1988 that:

... A letter of credit-trust receipt arrangement is endorsed with its own distinctive features and characteristics. Under that set-up, a bank extends a loan covered by the letter of credit, with the trust receipt as a security for the loan. In other words, the transaction involves a loan feature represented by the letter of credit, and a security feature which is in the covering trust receipt. (Emphasis supplied)

Therefore, the loan feature is separate and distinct from the trust receipt. The violation of a trust receipt committed by disposing of the goods covered thereby and failing to deliver the proceeds of such sale has been squarely made to fall under Art. 315 (1) (b) of the Revised Penal Code, which provides:

... Swindling (estafa).-Any person who shall defraud another by any of the means mentioned herein below shall be punished by:

xxx xxx xxx

a. With unfaithfulness or abuse of confidence, namely:

xxx xxx xxx

b. By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property.

The fact that the bank does not become the factual owner of the goods does not make the law unconstitutional (See the Vintola cases, supra) The language of the above- mentioned penal provision has

been clarified by P.D. 115. The person who is prejudiced through the misappropriation or conversion of the goods need not be the owner, thereof; if such had been the intention of the authors of the Code, the phrase "to the prejudice of another" would have read "to the prejudice of the owner." (People v. Yu Chai Ho, 53 Phil. 874, 877-878).

Moreover, we agree with the Solicitor General who expressed the policy behind the law:

Verily, P.D. 115 is a declaration by the legislative authority that, as a matter of public policy, the failure of a person to turn over the proceeds of the sale of goods covered by a trust receipt or to return said goods if not sold is a public nuisance to be abated by the imposition of penal sanctions. As held in Lozano vs. Martinez, (146 SCRA 323,338):

... certainly it is within the authority of the lawmaking body to prescribe certain acts deemed pernicious and inimical to public welfare. Acts mala in se are not the only acts that the law can punish. An act may not be considered by society as inherently wrong, hence, not malum in se but because of the harm that it inflicts on the community, it can be outlawed and criminally punished as malum prohibitum. The State can do this in the exercise of its police power.

In fine, P.D. 115 is a valid exercise of police power and is not repugnant to the constitutional provision on non-imprisonment for non-payment of debt.

The undersigned ponente concurred in the Sia decision in 1983 because the allegedly criminal act was committed before the pointedly deliberate expression of legislative intent was manifested in a statute. There were then doubts as to the susceptibility of a trust receipt transaction to two different interpretations, one which limits the effects of a violation to civil liability and the other to include criminal responsibility. Certain factual considerations in the Sia case strengthened the arguments for acquittal of the accused. There have been two legislatures since then — the Batasang Pambansa and the present Congress of the Philippines — but no

repeal of P.D. 115 has been made. To declare this law unconstitutional is an entirely different proposition from merely choosing one of two reasonable alternatives.

An examination of P.D. 115 shows the growing importance of trust receipts in Philippine business, the need to provide for the rights and obligations of parties to a trust receipt transaction, the study of the problems involved and the action by monetary authorities, and the necessity of regulating the enforcement of rights arising from default or violations of trust receipt agreements. The legislative intent to meet a pressing need is clearly expressed. We see no unconstitutionality in the means deliberately employed to enforce the integrity of trust receipts.

WHEREFORE, the trial court's orders are AFFIRMED and the case is remanded to the trial court for further proceedings.

SO ORDERED.

[G.R. No. 137348.  June 21, 2004]

PEOPLE OF THE PHILIPPINES, appellee, vs. WILLIAM ONG y LI and CHING DE MING @ ROBERT TIU, appellants.

D E C I S I O N

PUNO, J.:

“… the allowance of the privilege to withhold evidence that is demonstrably relevant in a criminal trial would cut deeply into the guarantee of due process of law and gravely impair the basic function of the courts.” [1]

Chief Justice Warren E. Burger

The case at bar involves the clash of two classic values - - - the need for the State to stop crimes and preserve the peace against the right of an individual to confront material witnesses to establish his innocence.  In balancing the two values, we shall scrutinize and set the parameters that ought to guide prosecution when to disclose the identity of confidential informers.

On July 27, 1998 accused William Ong y Li and Ching De Ming @ Robert Tiu were charged with violation of Section 15, Article III, in relation to Section 2, Article I, of Republic Act No. 6425, otherwise known as The

Dangerous Drugs Act of 1972, as amended.  The Information[2] reads:

That on or about the 24th day of July, 1998 in Quezon City, Philippines, the said accused, conspiring together, confederating with and mutually helping each other not having been authorized by law to sell, dispense, deliver, transport or distribute any regulated drug, did then and there willfully and unlawfully sell or offer for sale 980.50 grams of Methyl Amphetamine Hydrochloride, which is a regulated drug.

CONTRARY TO LAW.

Upon arraignment, the two (2) accused, who are Chinese nationals, pled not guilty.  The records do not show whether they had sufficient knowledge of the English language.  Their trial proceeded.  In the course of the trial, the two (2) accused were given the services of a Chinese interpreter.

The prosecution, through the testimony of SPO1 Rodolfo S. Gonzales, sought to establish that on July 23, 1998 at around 5:00 P.M., a confidential informant (CI) of the Special Operations Division (SOD), PNP Narcotics Group, reported to Chief Inspector Albert Ignatius D. Ferro about the alleged illicit drug activities of a certain William Ong and an unidentified Chinese male partner.  After an evaluation of the confidential information, Chief Inspector Ferro decided to conduct a buy-bust operation.  He constituted a team of eight (8) with Police Inspector Medel N. Poñe as team leader, SPO1 Gonzales as poseur-buyer and the rest as back-up support.

According to SPO1 Gonzales, the CI called up the alleged pusher, placed an order for one (1) kilo of shabu and agreed to a P600,000.00 consideration.  The CI likewise agreed to meet with his contact on July 24, 1998 at 6th Street corner Gilmore Avenue, New Manila, Quezon City, between 4:00 and 5:00 A.M.  The boodle money was prepared consisting of six (6) bundles of cut bond paper with a marked P1,000.00 peso bill on top of each bundle.

On July 24, 2004 at 3:00 A.M., the CI received a call from the drug dealer changing the meeting time between 2:00 and 3:00 P.M. on the same day.  The team, together with the CI, proceeded to the meeting place and arrived there at around 1:30 P.M.  The CI rode with SPO1 Gonzales.  They parked their car along 6th Street corner Gilmore Avenue.  The rest of the team posted themselves at their back and their right side.

A little while, accused Ong approached their car.  The CI introduced him to SPO1 Gonzales who told accused Ong in broken Tagalog to get in the car.  When Ong inquired about the money in payment of the shabu, SPO1 Gonzales showed him the slightly opened plastic bag containing the boodle money. SPO1 Gonzales then demanded to see the shabu.  Accused Ong excused himself, went out of the car, walked a few steps and then

waved his right hand to somebody.  While accused Ong was walking back to the car, SPO1 Gonzales and the CI saw a green Toyota Corolla coming.  The Corolla parked in front of their car and a Chinese-looking male, later identified as accused Ching De Ming @ Robert Tiu alighted, approached accused Ong and handed to him a gift-wrapped package.  SPO1 Gonzales opened it and inside was one (1) sealed plastic bag with a white crystalline substance.  After its inspection, accused Ong demanded for its payment.  SPO1 Gonzales gave to accused Ong the boodle money placed in a “W. Brown” plastic bag.  Thereafter, SPO1 Gonzales signaled his back-up team by turning on the hazard lights of the car.  SPO1 Gonzales himself arrested accused Ong while the CI and the back-up agents arrested accused De Ming.

The officers brought the two (2) accused to their office where the corresponding booking sheets and arrest report were prepared.  The plastic bag containing the white crystalline substance was referred to the PNP Crime Laboratory for examination.  The two (2) accused were subjected to a physical and mental examination as required.  They were found to be free from any external signs of trauma.

Police Inspector Grace M. Eustaquio, Forensic Chemist, PNP Crime Laboratory, testified that the specimen she examined had a net weight of 980.50 grams and manifested “positive results for methyl amphetamine hydrochloride”[3] or what is commonly known as shabu, a regulated drug.  Her testimony was supported by her Physical Sciences Report.[4]

Appellants denied the story of the prosecution.  Accused William Ong, a Chinese citizen from the People’s Republic of China, claimed that he came to the Philippines in 1997 to look for a job.  Upon the recommendation of a friend, he was able to work in a pancit canton factory in Quezon City.  In June 1998, he stopped working at the factory and hunted for another job.  Two (2) weeks prior to his arrest, accused Ong was introduced by his friend Kian Ling to Ong Sin for a possible job as technician in a bihon factory owned by Ong Sin. 

On July 22, 1998, Ong Sin called up and set a meeting with accused Ong at the Tayuman branch of Jollibee the next day.  While waiting at Jollibee, accused Ong received a call from Ong Sin that he could not personally meet him.  Instead, his two (2) co-workers would meet accused Ong as instructed.  Subsequently, two (2) men answering to Ong Sin’s description approached accused Ong.  He joined them inside a yellow car.  When they reached a certain place, the driver reached for his cellular phone and called up someone.  After a brief conversation, the driver handed the phone to him.  Ong Sin was on the line and informed him that the driver would accompany him to the bihon factory.  The driver got out of the car and accused Ong followed him.  After walking two (2) blocks, the driver picked up something from the place.  They returned to the car.  Suddenly, the companion of the driver poked a gun at him.  He was arrested, blindfolded and brought to

an undisclosed place.  Several hours later, he was taken to the police station.  There he met the other accused Ching De Ming for the first time.  He maintained innocence to the crime charged.

On his part, accused Ching De Ming testified that he is a legitimate businessman engaged in the RTW business.  He claimed that he gets his products from Baclaran and sells them to customers in the cities of Naga and Daet in Bicol.

On July 23, 1998 at around 4:30 and 5:00 P.M., while waiting inside his car for his girlfriend and her mother who just went in a townhouse at 8th Street, New Manila, Quezon City, he was approached by persons unknown to him.  They asked him what he was doing there.  One of them went to the car parked at his back, ordered somebody inside to get out and take a good look at him.  The person pointed at him saying “maybe he is the one.”  He was then dragged out of his car and brought to the other car.  They took his clutch bag.  They blindfolded and brought him to a place.  After a few hours, at Camp Crame, Quezon City, they removed his blindfold.  He denied knowing accused Ong and the charge of conspiring with him to deliver shabu in New Manila,Quezon City.

Avelina Cardoz, the mother of his girlfriend, and a divine healer, corroborated his story.  She testified that she requested accused De Ming to drive her to a townhouse at 8th Street, New Manila, to cure a patient.  She declared that the officers of the People’s Journal publication could attest to her profession.  She asked accused De Ming to wait for her and her daughter inside his car.  When they returned to the car, accused De Ming was nowhere to be found.  They saw him next at the Quezon City Jail.

On November 18, 1998 the trial court convicted appellants as charged and imposed on them the penalty of death.  It likewise ordered each of them to pay a fine of P1 million pesos.[5]

The case is with us on automatic review.  Appellants insist on their innocence.  They claim that their guilt was not proven beyond reasonable doubt.

We agree.

I

Rule 116, Section 1 (a) of the Revised Rules of Criminal Procedure, as amended, provides:

SECTION 1. Arraignment and plea; how made.-

(a) The accused must be arraigned before the court where the complaint or information was filed or assigned for trial. The arraignment shall be made in open court by the judge or clerk by furnishing the accused with a copy of the complaint or information, reading the same in the language or dialect known to him, and asking him whether he pleads guilty or not guilty. The prosecution may call at the trial witnesses other than those named in

the complaint or information. (Underscoring and emphasis supplied.)

The arraignment of appellants violates the above rule.  Appellants are Chinese nationals.  Their Certificate of Arraignment[6] states that they were informed of the accusations against them.  It does not, however, indicate whether the Information was read in the language or dialect known to them.  It merely states:

This 4th day of Aug., 1998, the undersigns (sic) states:

That, in open court, and in the presence of Trial Prosecutor Ruben Catubay, the following accused William Ong and Ching De Ming AKA Robert Tiu was/were called and, having been informed of the nature of the accusation filed against him/her/them, furnishing him/her/them a copy of the complaint or information with the list of witnesses, the said accused in answer to the question of the Court, pleaded Not Guilty to the crime as charged.

TO WHICH I CERTIFY.

Sgd. Mary Ruth Milo-Ferrer

Branch Clerk of Court

Sgd. William OngACCUSED WILLIAM ONG

Sgd. Ching de MingACCUSED CHING DE MING @ ROBERT TIU

Neither does the August 4, 1998 Order of Judge Diosdado M. Peralta of RTC-Br. 95, Quezon City, disclose compliance with the rule on arraignment.  It merely stated in part that “[w]hen both accused William Ong y Li and Ching De Ming @ Robert Tiu were arraigned, assisted by counsel de parte, both accused entered a plea of not guilty.”[7]

From the records, it is clear that appellants only knew the Chinese language.  Thus, the services of a Chinese interpreter were used in investigating appellants.  SPO1 Rodolfo S. Gonzales revealed in his testimony, viz:[8]

Q:   Now, is it not a fact that you had the difficulty of investigating the two accused because of communication problem from your informant?

A:    We did not encounter such problem when we investigated them sir.  We also asked question and we have another Chinese who was arrested who can speak Tagalog and we used that Chinese man to translate for us and for them if the

questions are difficult to understand, sir.

Q:   Now that Chinese interpreter that is also an accused?

A:    Yes sir.[9]

After arraignment and in the course of the trial, the lower court had to  secure the services of a certain Richard Ng Lee as Chinese interpreter.  This appears in the Order of August 28, 1998 of Judge Peralta, viz:

Considering that the counsel of the two (2) accused has still a lot of questions to ask on cross-examination x x x x From hereon, Mr. Richard Ng Lee, a businessman and a part time interpreter, is hereby designated by the Court as interpreter in this case considering that there is no official interpreter of the Court who is knowledgeable in the Chinese language or any Chinese dialect whatsoever.  The appointment of Mr. Richard Ng Lee is without the objection of counsel of the accused and the public prosecutor and considering that the court is convinced that he indeed possesses the qualifications of an interpreter of a Chinese language or any other Chinese dialect known and spoken by the two (2) accused.[10] (Emphasis supplied.)

What leaps from the records of the case is the inability of appellants to fully or sufficiently comprehend any other language than Chinese and any of its dialect.  Despite this inability, however, the appellants were arraigned on an Information written in the English language.

We again emphasize that the requirement that the information should be read in a language or dialect known to the accused is mandatory.  It must be strictly complied with as it is intended to protect the constitutional right of the accused to be informed of the nature and cause of the accusation against him.  The constitutional protection is part of due process.  Failure to observe the rules necessarily nullifies the arraignment.[11]

II

More important than the invalid arraignment of the appellants, we find that the prosecution evidence failed to prove that appellants willfully and unlawfully sold or offered to sell shabu.

Appellants’ conviction is based on the lone testimony of SPO1 Gonzales.  He was the designated poseur-buyer in the team formed for the buy-bust operation.  But a careful reading of his testimony will reveal that he was not privy to the sale transaction that transpired between the CI and appellant William Ong, the alleged pusher.  It is beyond contention that a contract of sale is perfected upon a meeting of the minds of the parties on the object and its price.[12] Not all elements of the sale were established by the testimony of SPO1 Gonzales, viz:

PROSECUTOR to SPO1 GONZALES

Q:   After you have prepared the boodle money and you had made the proper marking which you presented before this Honorable Court, what happen?

A:    Out CI make a couple of call and he contacted William Ong thru a broken tagalog conversation.

Q:   When your CI contacted with William Ong in broken tagalog?

A:    I have a conversation with William Ong in broken tagalog   the deal of one kilo gram of shabu was initially closed.

Q:   When you say “closed”, what do you mean by that?

A:    They agreed to the sale of the shabu.

ATTY. TRINIDAD (counsel of accused) to the COURT

       We object to the line of questioning, Your Honor that would be hearsay.

COURT:

       I think what you were asking is what happened he said it was the CI who talked.

PROSECUTOR to SPO1 GONZALES

Q:   So after that, do you know what happen?

A:    The CI informed us that the price of that shabu which we’re supposed to buy from them amounts to 600,000.00 pesos, ma’am.

Q:  Where did you come to know about this information that the amount is already 600,000.00 pesos?

ATTY. TRINIDAD to the COURT

       Already answered, Your Honor.

COURT:

       In other words what he say is that, there was a telephone conversation but he has no personal knowledge. Your question then was what happened.

PROSECUTOR to SPO1 GONZALES

Q:   After the CI informed you that the price of the shabu is 600,000.00 pesos?

A:    We prepared this boodle money and the 6,000 by our Chief SOD.

COURT to SPO1 GONZALES

Q:   After the informant told you that there was an agreement to sell 600,000.00 pesos

and that you have already prepared the boodle money as you have stated, what happened after that?

A:    The CI told us that the transaction is 600,000.00 pesos and venue is at 6th Street, corner Gilmore Avenue, New Manila, Quezon City, between 4 o’clock to 5 o’clock in the morning of July 24, 1998, ma’am.

Q:   So when the CI informed you that they will meet at 6th Street, New Manila, Quezon City, what transpired next?

A:    On or about 3 o’clock in the morning William Ong made a call to our CI informing him that the sale of the delivery of shabu was reset to another time.[13]

x x x x

PROSECUTOR to SPO1 GONZALES

Q:   And when you were informed that there was a resetting of this deal?

COURT to SPO1 GONZALES

Q:   How did you come to know that there was a resetting because he has no participation in the conversation and it was the CI according to him and the alleged poseur-buyer.

A:    The CI told our Chief Deputy.

ATTY. TRINIDAD to the COURT

       That would be hearsay, Your Honor, and that would be a double hearsay.

COURT

       Put on record that the counsel manifested that his answer is again hearsay and that a double hearsay evidence.

PROSECUTOR to SPO1 GONZALES

Q:   And what did the CI do?

A:    The CI informed us that the time will be at about 2 to 3 o’clock in the afternoon of that same day and the place.[14]

It is abundantly clear that it was the CI who made the initial contact, albeit only through the telephone, with the pusher.  The CI was likewise the one who closed the deal with appellant Ong as to the quantity of shabu to be purchased and its price.  He also set the venue and time of the meeting when the sale would take place.  The Joint Affidavit of Arrest[15] executed by SPO1 Gonzales, PO2 Elmer N. Sarampote and PO1 Noli Jingo G. Rivel fortifies these facts, viz:

x x x x

That after couple of calls made by our CI, suspect WILLIAM ONG was finally contacted on or about 9:30 in the evening of July 23, 1998 and through a broken Tagalog conversation, a drug deal/sale was initially closed in the agreed amount of six hundred thousand pesos (P600,000.00) and the agreed venue is at the corner of 6th Street and Gilmore Avenue, New Manila, Quezon City between 4:00 and 5:00 o’clock in the morning of July 24, 1998 through “Kaliwaan or Abutan” (Cash upon Delivery);

That said information was relayed to our Deputy Chief, who upon learning said report, immediately grouped and briefed the team for the said operation;

x x x x

That on or about 3:00 o’clock in the morning of July 24, 1998, WILLIAM ONG made a call to our CI informing him (CI) to reset the time of the drug deal/sale of one (1) kilogram of SHABU and it was scheduled again between 2:00 to 3:00 o’clock in the afternoon of same date and same place;

It is therefore understandable that in his account of his meeting with appellant William Ong, SPO1 Gonzales made no reference to any further discussion of the price and the quantity of the shabu.  When they met, they just proceeded with the exchange of money and shabu, viz:

PROSECUTOR to SPO1 GONZALES

Q:   And when you were there stationed at the venue at 6th Street, New Manila, Quezon City, what happened?

A:    I and the CI parked our car at 6th Street corner Gilmore Avenue and then we saw William Ong emerged from Gilmore Avenue and approached me and our CI, ma’am.[16]

x x x x

Q:   And when he approached you what did you do if any?

A:    Our CI introduced me to William Ong as an interested buyer of one kilo gram of shabu and afterwards I asked William Ong in broken tagalog to get inside the car.[17]

x x x x

Q:   And while inside the car, what happened next?

A:    While inside the car William Ong asked me about the payment of the stuff and I got the paper bag and slightly opened.  So that I get the plastic bag and show to William Ong the boodle money.

Q:   When you showed the boodle money to William Ong what did he do if there was any?

A:    He looked at it, ma’am.

Q:   And when he looked at it what happened next?

A:    I told him that I should look at the stuff before I give the money.

Q:   What stuff are you referring to?

A:    The shabu, ma’am.

Q:   And what did you do after expecting the boodle money or the bag where the boodle money was placed, if there was any?

A:    He excused himself and alighted from our car and told me to wait for his companion.

Q:   And where you able to wait for that male companion he is referring to?

A:    He walked a distance and waved at his companion as if somebody will come to him.

Q:   How did he do that?

A:    (put on record that the witness when answering the question he stood up and then used his right hand in waving as if he is calling for somebody)

Q:   When William Ong waved his right hand to his companion what happened?

A:    William Ong walked towards to me and suddenly a green Toyota appeared and parked in front of our car.

Q:   When a green Toyota corolla was parked in front of the car, what happened next?

A:    Chinese looking male person alighted from the car and he went to William Ong and handed to William Ong something that was gift wrapped.[18]

x x x x

Q:   When that thing was handed to William Ong which identified in Court and which was marked, what did William Ong do?

A:    William Ong took it from Ching De Ming, ma’am.

Q:   When this Exhibit was given to by William Ong what did you do in return?

A:    I opened that something which was gift wrapped and I saw one sealed plastic bag containing white crystalline substance suspected to be a shabu.[19]

x x x x

Q:   When you saw this Exhibit C-2 crystalline substance which was opened according to you.  What did you do?

A:    The companion of William Ong demanded to me the money and I gave to him the boodle money.

Q:   When you gave the boodle money to him, what did he do if any these person who secured the money?

A:    He took the money inside the bag.[20]

Since only the CI had personal knowledge of the offer to purchase shabu, the acceptance of the offer and the consideration for the offer, we hold that SPO1 Gonzales is, in effect, not the “poseur-buyer” but merely the deliveryman.  His testimony therefore on material points of the sale of shabu is hearsay and standing alone cannot be the basis of the conviction of the appellants.[21]

III

We further hold that the prosecution failed to establish its claim of entrapment.

A buy-bust operation is a form of entrapment, which in recent years has been accepted as a valid means of arresting violators of the Dangerous Drugs Law.[22] It is commonly employed by police officers as an effective way of apprehending law offenders in the act of committing a crime.[23] In a buy-bust operation, the idea to commit a crime originates from the offender, without anybody inducing or prodding him to commit the offense.[24] Its opposite is instigation or inducement, wherein the police or its agent lures the accused into committing the offense in order to prosecute him.[25] Instigation is deemed contrary to public policy and considered an absolutory cause.[26]

To determine whether there was a valid entrapment or whether proper procedures were undertaken in effecting the buy-bust operation, it is incumbent upon the courts to make sure that the details of the operation are clearly and adequately laid out through relevant, material and competent evidence.  For, the courts could not merely rely on but must apply with studied restraint the presumption of regularity in the performance of official duty by law enforcement agents.  This presumption should not by itself prevail over the presumption of innocence and the constitutionally protected rights of the individual.[27] It is the duty of courts to preserve the purity of their own temple from the prostitution of the criminal law through lawless enforcement.[28] Courts should not allow themselves to be used as instruments of abuse and injustice lest innocent persons are made to suffer the unusually severe penalties for drug offenses.[29]

In People v. Doria,[30] we stressed the “objective” test in buy-bust operations.  We ruled that in such operations, the prosecution must present a complete picture detailing the transaction, which “must start from

the initial contact between the poseur-buyer and the pusher, the offer to purchase, the promise or payment of the consideration until the consummation of the sale by the delivery of the illegal drug subject of the sale. [31] We emphasized that the manner by which the initial contact was made, the offer to purchase the drug, the payment of the 'buy-bust' money, and the delivery of the illegal drug must be the subject of strict scrutiny by courts to insure that law-abiding citizens are not unlawfully induced to commit an offense.”[32]

In the case at bar, the prosecution evidence about the buy-bust operation is incomplete.  The confidential informant who had sole knowledge of how the alleged illegal sale of shabustarted and how it was perfected was not presented as a witness.  His testimony was given instead by SPO1 Gonzales who had no personal knowledge of the same.  On this score, SPO1 Gonzales’ testimony is hearsay and possesses no probative value unless it can be shown that the same falls within the exception to the hearsay rule. [33] To impart probative value to these hearsay statements and convict the appellant solely on this basis would be to render nugatory his constitutional right to confront the witness against him, in this case the informant, and to examine him for his truthfulness.[34] As the prosecution failed to prove all the material details of the buy-bust operation, its claim that there was a valid entrapment of the appellants must fail.

IV

The Court is sharply aware of the compelling considerations why confidential informants are usually not presented by the prosecution.  One is the need to hide their identity and preserve their invaluable service to the police.[35] Another is the necessity to protect them from being objects or targets of revenge by the criminals they implicate once they become known.  All these considerations, however, have to be balanced with the right of an accused to a fair trial.

The ruling of the U.S. Supreme Court in Roviaro v. U.S.[36] on informer’s privilege is instructive.  In said case, the principal issue on certiorari is whether the United States District Court committed reversible error when it allowed the Government not to disclose the identity of an undercover employee who had played a material part in bringing about the possession of certain drugs by the accused, had been present with the accused at the occurrence of the alleged crime, and might be a material witness to whether the accused knowingly transported the drugs as charged.[37] The Court, through Mr. Justice Burton, granted certiorari in order to pass upon the propriety of disclosure of the informer’s identity.

Mr. Justice Burton explained that what is usually referred to as the informer’s privilege is in reality the Government’s privilege to withhold from disclosure the identity of persons who furnish information of violations of law to officers charged with enforcement of that law.[38] The purpose of the privilege is the furtherance and protection of the public interest in effective law

enforcement. The privilege recognizes the obligation of citizens to communicate their knowledge of the commission of crimes to law-enforcement officials and, by preserving their anonymity, encourages them to perform that obligation.

It was held that the scope of the privilege is limited by its underlying purpose.  Thus, where the disclosure of the contents of the communication will not tend to reveal the identity of an informer, the contents are not privileged.[39] Likewise, once the identity of the informer has been disclosed to those who would have cause to resent the communication, the privilege is no longer applicable.[40]

A further limitation on the applicability of the privilege, which arises from the fundamental requirements of fairness was emphasized.  Where the disclosure of an informer’s identity, or the contents of his communication, is relevant and helpful to the defense of an accused, or is essential to a fair determination of a cause, the privilege must give way.[41] In these situations, the trial court may require disclosure and dismiss the action if the Government withholds the information.[42]

In sum, there is no fixed rule with respect to disclosure of the identity of an informer.  The problem has to be resolved on a case to case basis and calls for balancing the state interest in protecting people from crimes against the individual’s right to prepare his defense.  The balance must be adjusted by giving due weight to the following factors, among others: (1) the crime charged, (2) the possible defenses, (3) the possible significance of the informer’s testimony, and (4) other relevant factors.[43]

In the case at bar, the crime charged against the appellants is capital in character and can result in the imposition of the death penalty.  They have foisted the defense of instigation which is in sharp contrast to the claim of entrapment by the prosecution.  The prosecution has to prove all the material elements of the alleged sale of shabu and the resulting buy-bust operation. Where the testimony of the informer is indispensable, it should be disclosed.  The liberty and the life of a person enjoy high importance in our scale of values.  It cannot be diminished except by a value of higher significance.

V

Moreover, the mishandling and transfer of custody of the alleged confiscated methyl amphetamine hydrochloride or shabu further shattered the case of the prosecution.  There is no crime of illegal sale of regulated drug when there is a nagging doubt on whether the substance confiscated was the same specimen examined and established to be regulated drug.

After the arrest of the appellants, the records show that the substance allegedly taken from them was submitted to the PNP Crime Laboratory for examination upon request of the Chief of the SOD Narcotics

Group, Quezon City.[44] Police Inspector Grace M. Eustaquio, Forensic Chemist, PNP Crime Laboratory, testified that the qualitative examination she conducted manifested “positive results for methyl amphetamine hydrochloride” with net weight of 980.50 grams. [45] This is not in dispute.  The issue is whether the substance examined was the same as that allegedly confiscated from appellants.

The Joint Affidavit of Arrest[46] merely states that the evidence confiscated was submitted to the “PNP Crime Laboratory Group for qualitative examination.”  SPO1 Gonzales testified on direct examination that:

Q:   When you arrested them according to you, what other steps did you take if any?

A:    We brought them to our office and we requested the crime laboratory Camp Crame to test the suspected shabu that we recovered from both of them.[47]

On cross-examination, the defense only got this statement from SPO1 Gonzales regarding the evidence allegedly confiscated:

Q:   And you immediately brought him to your office at Camp Aguinaldo?

A:    After we gathered the evidences we turned them over to our office, sir.[48]

Clearly, there was no reference to the person who submitted it to the PNP Crime Laboratory for examination.  It is the Memorandum-Request for Laboratory Examination[49] which indicates that a certain SPO4 Castro submitted the specimen for examination.  However, the rest of the records of the case failed to show the role of SPO4 Castro in the buy-bust operation, if any.  In theJoint Affidavit of Arrest, the only participants in the operation were enumerated as SPO1 Gonzales as the poseur-buyer, Police Inspector Medel M. Poñe as the team leader with PO2 Elmer N. Sarampote and PO1 Noli Jingo G. Rivel as back-up support.[50] Other members of the team who acted as perimeter security were not identified.  In fact, when SPO1 Gonzales was asked during the trial as to their identities, he was only able to name another member of the team:

Q:   When you say “team,” who compose the team?

A:    I and more or less eight (8) person, ma’am.  

Q:   Can you name the member of the team?

A:    Our team led by Inspector Medel Poñe, I myself, PO2 Elmer Sarampote, PO1 Noli Jingo G. Rivel, SPO3 Ronaldo Sayson, and I can not remember the others, ma’am.[51]

These are questions which cannot be met with a lockjaw.  Since SPO4 Castro appears not to be a part of

the buy-bust team, how and when did he[52] get hold of the specimen examined by Police Inspector Eustaquio?  Who entrusted the substance to him and requested him to submit it for examination?  For how long was he in possession of the evidence before he turned it over to the PNP Crime Laboratory?  Who else had access to the specimen from the time it was allegedly taken from appellants when arrested?  These questions should be answered satisfactorily to determine whether the integrity of the evidence was compromised in any way.  Otherwise, the prosecution cannot maintain that it was able to prove the guilt of the appellants beyond reasonable doubt.

VI

Finally, the denials and proffered explanations of appellants assume significance in light of the insufficiency of evidence of the prosecution.

Appellant Ong testified that he was arrested on July 23, 1998 when he was scheduled to meet with a certain Ong Sin for a possible job as technician in a bihon factory.  On his part, appellant De Ming claimed that when he was arrested on July 23, 1998, he was in the area waiting for his girlfriend and her mother who just went inside a townhouse at 8th Street, New Manila, Quezon City.  His girlfriend’s mother, Avelina Cardoz, confirmed his explanation.  The prosecution tells a different story, the uncorroborated story of SPO1 Gonzales that their team entrapped the appellants in a buy-bust operation on July 24, 1998.  Our minds rest uneasy on the lone testimony of SPO1 Gonzales.

WHEREFORE, the Decision of the court a quo is REVERSED and SET ASIDE.  Appellants WILLIAM ONG y LI and CHING DE MING @ ROBERT TIU, are ACQUITTED of the crime of violation of Section 15, Article III, in relation to Section 2, Article I of R.A. No. 6425, otherwise known as The Dangerous Drugs Act of 1972, as amended, and are ordered immediately released from custody unless held for some other lawful cause.

The Director of Prisons is DIRECTED to implement this decision immediately and to inform this Court within five (5) days from receipt of this decision of the date the appellants are actually released from confinement.  Costs de officio.

SO ORDERED.

BATAS PAMBANSA BLG. 22

AN ACT PENALIZING THE MAKING OR DRAWING

AND ISSUANCE OF A CHECK WITHOUT

SUFFICIENT FUNDS OR CREDIT AND FOR OTHER

PURPOSES.

Section 1. Checks without sufficient funds. - Any person

who makes or draws and issues any check to apply on

account or for value, knowing at the time of issue that he

does not have sufficient funds in or credit with the

drawee bank for the payment of such check in full upon

its presentment, which check is subsequently

dishonored by the drawee bank for insufficiency of funds

or credit or would have been dishonored for the same

reason had not the drawer, without any valid reason,

ordered the bank to stop payment, shall be punished by

imprisonment of not less than thirty days but not more

than one (1) year or by a fine of not less than but not

more than double the amount of the check which fine

shall in no case exceed Two Hundred Thousand Pesos,

or both such fine and imprisonment at the discretion of

the court. chan robles virtual law library 

The same penalty shall be imposed upon any person

who, having sufficient funds in or credit with the drawee

bank when he makes or draws and issues a check, shall

fail to keep sufficient funds or to maintain a credit to

cover the full amount of the check if presented within a

period of ninety (90) days from the date appearing

thereon, for which reason it is dishonored by the drawee

bank. 

Where the check is drawn by a corporation, company or

entity, the person or persons who actually signed the

check in behalf of such drawer shall be liable under this

Act. 

Sec. 2. Evidence of knowledge of insufficient funds. -

The making, drawing and issuance of a check payment

of which is refused by the drawee because of insufficient

funds in or credit with such bank, when presented within

ninety (90) days from the date of the check, shall be

prima facie evidence of knowledge of such insufficiency

of funds or credit unless such maker or drawer pays the

holder thereof the amount due thereon, or makes

arrangements for payment in full by the drawee of such

check within (5) banking days after receiving notice that

such check has not been paid by the drawee.

Sec. 3. Duty of drawee; rules of evidence. - It shall be

the duty of the drawee of any check, when refusing to

pay the same to the holder thereof upon presentment, to

cause to be written, printed, or stamped in plain

language thereon, or attached thereto, the reason for

drawee's dishonor or refusal to pay the same: Provided,

That where there are no sufficient funds in or credit with

such drawee bank, such fact shall always be explicitly

stated in the notice of dishonor or refusal.  In all

prosecutions under this Act, the introduction in evidence

of any unpaid and dishonored check, having the

drawee's refusal to pay stamped or written thereon or

attached thereto, with the reason therefor as aforesaid,

shall be prima facie evidence of the making or issuance

of said check, and the due presentment to the drawee

for payment and the dishonor thereof, and that the same

was properly dishonored for the reason written, stamped

or attached by the drawee on such dishonored check. 

Notwithstanding receipt of an order to stop payment, the

drawee shall state in the notice that there were no

sufficient funds in or credit with such bank for the

payment in full of such check, if such be the fact. 

Sec. 4. Credit construed. - The word "credit" as used

herein shall be construed to mean an arrangement or

understanding with the bank for the payment of such

check. 

Sec. 5. Liability under the Revised Penal Code. -

Prosecution under this Act shall be without prejudice to

any liability for violation of any provision of theRevised

Penal Code. 

Sec. 6. Separability clause. - If any separable provision

of this Act be declared unconstitutional, the remaining

provisions shall continue to be in force.

Sec. 7. Effectivity. - This Act shall take effect fifteen days

after publication in the Official Gazette. 

Approved: April 3, 1979.

G.R. Nos. 59568-76 January 11, 1990

PETER NIERRAS, petitioner, vs.HON. AUXENCIO C. DACUYCUY and HON. ANTONIO S. LOPEZ, in their capacity as Presiding Judge, Branch IV, Court of First Instance of Leyte, Palo, Leyte, and City Fiscal of Tacloban City, Leyte, respectively, respondents.

Victor C. Veloso for petitioner.

PARAS, J.:

Before Us is a petition for certiorari with preliminary injunction for the annulment of the resolution dated September 17, 1981 of the respondent Judge Auxencio C. Dacuycuy in nine (9) criminal cases, entitled "People of the Philippines v. Peter Nierras" docketed as Criminal Cases Nos. 4379, 4380, 4381, 4382, 4383, 4384, 4385, 4386 and 4387, for estafa under Article 315 (2-d) of the Revised Penal Code which denied petitioner's motion to quash. Said motion to quash was filed by petitioner on the ground of double jeopardy as these offenses were already included in Criminal Cases Nos. 3790, 3791, 3792, 3793, 4085, 4122, 4123, 4124, and 4125, entitled "People of the Philippines v. Peter Nierras," for violation of the Bouncing Checks Law or Batas Pambansa Blg. 22, pending before the lower court. In both sets of criminal cases, petitioner entered a plea of not guilty upon arraignment before the lower court. However, immediately after his plea of not guilty in these estafa cases, petitioner moved in open court to be allowed to withdraw his plea of not guilty upon his filing of a motion to quash, which was denied by respondent Judge ruling as follows:

The motion to quash should be and is hereby denied. Accused Peter Nierras allegedly issued the checks in favor of complainant Pilipinas Shell Petroleum Corporation in payment of oil products which the latter delivered to him

simultaneously with the issuance of the checks.

xxx xxx xxx

. . . The crime of estafa committed by means of bouncing checks is not committed by mere issuance of a check. Under Art. 315, par. 2 (d) of the Revised Penal Code, as amended by Republic Act 4885, the following are the elements of estafa: (1) the postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack of or insufficiency of funds to cover the check; and (3) damage to the payee thereof (People v. Sabio, 86 SCRA 568). Under Batas Pambansa Bilang 22 (1979) the mere issuance of a check without sufficient funds issued in payment of a simultaneous obligation and the check was dishonored upon presentation for that estafa is committed under the Revised Penal Code. At the same time, the drawer will also be liable under Batas Pambansa Bilang 22 for offense of issuing a check without sufficient funds (pp. 1-2, Resolution On Motion To Quash dated September 17, 1981; Annex "MM", Petition). (p. 100, Rollo)

The issue now submitted for Our consideration is whether the filing of the nine (9) other informations for estafa against petitioner under the Revised Penal Code after he had earlier been charged with violation of Batas Pambansa Blg. 22 for issuing the same bouncing checks will put him in jeopardy of being convicted twice for the same offenses. In other words, can petitioner be held liable for the nine criminal cases for violation of Batas Pambansa Blg. 22, and separately also be held liable for the crime of estafa under Article 315 (2-d) of the Revised Penal Code for the issuance of the same bouncing checks?

It appears that petitioner, a customer of Pilipinas Shell Petroleum Corporation, purchased oil products from it. Simultaneous with the delivery of the products, he issued nine (9) checks in payment thereof. Upon presentation to the Philippine National Bank at Naval, Leyte, said checks were dishonored for the reason that his account was already closed. Thereafter, Pilipinas Shell Petroleum Corporation repeatedly demanded of petitioner either to deposit funds for his checks or pay for the oil products he had purchased but he failed and refused to do either.

Petitioner argues that he would be placed in double jeopardy as all the elements of estafa under Article 315 (2-d) of the Revised Penal Code are also present in that crime punishable under Batas Pambansa Bilang 22

namely (1) "the postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack or insufficiency of funds to cover the check and (3) damage to the payee thereof."

Petitioner's contentions are devoid of merit.

Petitioner is charged with two (2) distinct and separate offenses, first under Section 1 of Batas Pambansa Bilang 22 approved on April 3, 1979 which provides that:

Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed TWO HUNDRED THOUSAND PESOS or both such fine and imprisonment at the discretion of the court.

and, second, under Article 315, (2-d) of the Revised Penal Code which states as follows:

Art. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned herein below . . .

xxx xxx xxx

2. By means of any of the following false pretenses or fraudulent acts, executed prior to or simultaneously with the commission of the fraud;

xxx xxx xxx

(d) By postdating a check or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check.

What petitioner failed to mention in his argument is the fact that deceit and damage are essential elements in Article 315 (2-d) Revised Penal Code, but are not required in Batas Pambansa Bilang 22. Under

the latter law, mere issuance of a check that is dishonored gives rise to the presumption of knowledge on the part of the drawer that he issued the same without sufficient funds and hence punishable (People v. Veridiano, 132 SCRA 523) which is not so under the Penal Code. Other differences between the two also include the following: (1) a drawer of a dishonored check may be convicted under Batas Pambansa Bilang 22 even if he had issued the same for a pre-existing obligation, while under Article 315 (2-d) of the Revised Penal Code such circumstance negates criminal liability; (2) specific and different penalties are imposed in each of the two offenses; (3) estafa is essentially a crime against property, while violation of Batas Pambansa Bilang 22 is principally a crime against public interest as it does injury to the entire banking system; (4) violations of Article 315 of the Revised Penal Code are mala in se, while those of Batas Pambansa Bilang 22 are mala prohibita.

These differences are better understood by presenting the pertinent discussions on the passage of Batas Pambansa Bilang 22 between the author of the bill, former Solicitor General and Member of the Batasang Pambansa, the Honorable Estelito P. Mendoza, presented in the memorandum for the government as follows:

MR. MENDOZA. If there is evidence demonstrating that the act committed does not only violate this proposed Act but also the Revised Penal Code, there will be further prosecution under the Revised Penal Code. That is why it is proposed in this Act that there be a single uniform penalty for all violations in this Act. However the court is given the discretion whether to impose imprisonment or fine or both or also in whatever severity the court may consider appropriate under the circumstances.

xxx xxx xxx

MR. VELOSO, F. The other way around, it is not so. So precisely, if I file a case for estafa against a particular person for issuance of a

bouncing check, then necessarily I can also be prosecuted under this proposed bill. On the other hand, if a person is prosecuted under the proposed bill, it does not necessarily follow that he can be prosecuted for estafa.

MR. MENDOZA. This is simply because that in a certain set of circumstances, the offense under this Act is the only offense committed while under a different set of circumstances, not only the offense described in this Act is committed but also estafa. So that, for example, if a check with sufficient funds is issued in payment of a pre-existing obligation and the position of the Government should turn out to be correct that there is no estafa, then the drawer of the check would only be liable under this Act but not under the Revised Penal Code. But if he issues a check in payment, or contemporaneously with incurring, of an obligation, then he will be liable not only for estafa but also for violation for this Act. There is a difference between the two cases. In that situation where the check was issued in payment of a pre-existing obligation, the issuance of the check does not cause damage to the payee and so it is but appropriate that he should not be held for estafa but only for violating this Act. But if he issued a check to induce another, to part with a valuable consideration and the check bounces, then he

does inflict an injury to the payee of the check apart from violating this law. In that case, it should be but fair that he be subject to prosecution not only for estafa but also for violating this law.

MR. VELOSO, F. Yes, I agree with the Solicitor General on that point but my worry is with respect to situations where there is prosecution first to estafa.

MR. MENDOZA. Well, if there is estafa . . .

MR. VELOSO, F. Estafa committed by the issuance of a bouncing check, in which case it will be mandatory on the part of the prosecuting official to also file a case for violation of this offense under the proposed bill.

MR. MENDOZA. Yes, that is correct. In such a situation because if the offender did not only cause injury on account of the issuance of the check but did issue a bouncing check penalized under this Act, then he will be liable for prosecution under both laws. I would admit that perhaps in such situation, the penalty may be somewhat severe. As a matter of fact, in other jurisdictions, the issuance of bouncing checks is penalized with substantially lower penalty. However, because of the situation in the Philippines, the situation being now relatively grave that practically everybody is

complaining about bouncing checks, may be it is necessary at least initially, at this point in time for us to impose a rather severe penalty and even allow liability not only under this Act but also for estafa. Then perhaps, after the necessary discipline has been inculcated in our people and that the incidence of the offense has been reduced, we may then decide to amend the law and reduce the penalty. But at this time, shall we say the evil is of such magnitude that only a dramatic and expeditious effort to prosecute persons who issue bouncing checks may be necessary to curb quickly this evil. (explanations given by Solicitor General ESTELITO P. MENDOZA at the Batasan Pambansa during his sponsorship speech of BP 22 which he authored, pages 1037-1038, Record of the Batasan, Plenary Session No. 70, Dec. 4, 1978). (Emphasis supplied). (pp. 115-117,Rollo or pp. 9-11, Memorandum for respondents).

Furthermore, Section 5 of Batas Pambansa Bilang 22 provides that:

Prosecution under this Act shall be without prejudice to any liability for violation of any provision of the Revised Penal Code.

While the filing of the two sets of Information under the provisions of Batas Pambansa Bilang 22 and under the provisions of the Revised Penal Code, as amended, on estafa, may refer to identical acts committed by petitioner, the prosecution thereof cannot be limited to one offense, because a single criminal act may give rise to a multiplicity of offenses and where there is variance or differences between the elements of an offense in one law and another law as in the case at bar there will be no

double jeopardy because what the rule on double jeopardy prohibits refers to identity of elements in the two (2) offenses. Otherwise stated prosecution for the same act is not prohibited. What is forbidden is prosecution for the same offense. Hence, the mere filing of the two (2) sets of information does not itself give rise to double jeopardy (People v. Miraflores, 115 SCRA 570).

In the instant petition, certiorari is not the proper remedy. We have held in Acharon v. Purisima, et al. (13 SCRA 309) that "when a motion to quash a criminal case is denied, remedy is not certiorari but to go to court without prejudice to reiterating special defenses invoked in the motion, and if after trial on the merits, an adverse decision is rendered, to appeal therefrom in the manner authorized by law," invoking the rule laid down in People v.Magdaluyo (1 SCRA 990). If the petitioner cannot appeal at this state of the proceeding, it is because there is still a necessity for the trial on the merits wherein the parties may present proofs in support of their contentions and not because the remedy of appeal is unavailing.

WHEREFORE, premises considered, the petition for certiorari is hereby DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 119178.  June 20, 1997]

LINA LIM LAO, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N

PANGANIBAN, J.:

May an employee who, as part of her regular duties, signs blank corporate checks -- with the name of the payee and the amount drawn to be filled later by another signatory -- and, therefore, does so without actual knowledge of whether such checks are funded,  be held criminally liable for violation of Batas Pambansa Bilang 22 (B.P. 22), when checks so signed are dishonored due to insufficiency of funds?  Does a notice of dishonor sent to the main office of the corporation constitute a valid notice to the said employee who holds office in a separate branch and who had no actual knowledge thereof?  In other words, is constructive knowledge of the corporation, but not of the signatory-employee, sufficient?

These are the questions raised in the petition filed on March 21, 1995 assailing the Decision[1] of Respondent Court of Appeals[2] promulgated on December 9, 1994 in CA-G.R. CR No. 14240 dismissing the appeal of petitioner and affirming the decision dated September 26, 1990 in Criminal Case Nos. 84-26967 to 84-26969 of the Regional Trial Court of Manila, Branch 33. The dispositive portion of the said RTC decision affirmed by the respondent appellate court reads:[3]

“WHEREFORE, after a careful consideration of the evidence presented by the prosecution and that of the defense, the Court renders judgment as follows:

In Criminal Case No. 84-26969 where no evidence was presented by the prosecution notwithstanding the fact that there was an agreement that the cases be tried jointly and also the fact that the accused Lina Lim Lao was already arraigned, for failure of the prosecution to adduce evidence against the accused, the Court hereby declares her innocent of the crime charged and she is hereby acquitted with cost de oficio.

For Criminal Case No. 84-26967, the Court finds the accused Lina Lim Lao guilty beyond reasonable doubt of the crime charged and is hereby sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay a fine of P150,000.00 without subsidiary imprisonment in case of insolvency.

For Criminal Case No. 84-26968, the Court finds the accused Lina Lim Lao guilty beyond reasonable doubt of the crime charged and is hereby sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay a fine of P150,000.00 without subsidiary imprisonment in case of of (sic) insolvency.

For the two cases the accused is ordered to pay the cost of suit.

The cash bond put up by the accused for her provisional liberty in Criminal Case No. 84-26969 where she is declared acquitted is hereby ordered cancelled (sic).

With reference to the accused Teodulo Asprec who has remained at large, in order that the cases as against him may not remain pending in the docket for an indefinite period, let the same be archived without prejudice to its subsequent prosecution as soon as said accused is finally apprehended.

Let a warrant issue for the arrest of the accused Teodulo Asprec which warrant need not be returned to this Court until the accused is finally arrested.

SO ORDERED.”

The Facts

Version of the Prosecution

The facts are not disputed.  We thus lift them from the assailed Decision, as follows:

“Appellant (and now Petitioner Lina Lim Lao) was a junior officer of Premiere Investment House (Premiere) in its Binondo Branch.  As such officer, she was authorized to sign checks for and in behalf of the corporation (TSN, August 16, 1990, p. 6).  In the course of the business, she met complainant Father Artelijo Pelijo, the provincial treasurer of the Society of the Divine Word through Mrs. Rosemarie Lachenal, a trader for Premiere. Father Palijo was authorized to invest donations to the society and had been investing the society’s money with Premiere (TSN, June 23, 1987, pp. 5, 9-10).  Father Palijo had invested a total of P514,484.04, as evidenced by the Confirmation of Sale No. 82-6994 (Exh ‘A’) dated July 8, 1993.  Father Palijo was also issued Traders Royal Bank (TRB) checks  in payment of interest, as follows:

Check                                                             Date                                                         Amount

299961                 Oct. 7, 1993  (sic)                   P150,000.00  (Exh. ‘B’)

299962                 Oct. 7, 1983                            P150,000.00  (Exh. ‘C’)

323835                 Oct. 7, 1983                            P 26,010.73

All the checks were issued in favor of Artelijo A. Palijo and signed by appellant (herein petitioner) and Teodulo Asprec, who was the head of operations.  Further evidence of the transaction was the acknowledgment of postdated checks dated July 8, 1983 (Exh . ‘D’) and the cash disbursement voucher (Exh. ‘F’, TSN, supra, at pp. 11-16).

When Father Palijo presented the checks for encashment, the same were dishonored for the reason ‘Drawn Against Insufficient Funds’ (DAIF).  Father Palijo immediately made demands on premiere to pay him the necessary amounts.  He first went to the Binondo Branch but was referred to the Cubao Main Branch where he was able to talk with the President, Mr. Cariño.  For his efforts, he was paid P5,000.00.  Since no other payments followed, Father Palijo wrote Premiere a formal letter of demand.  Subsequently, Premiere was placed under receivership” (TSN, supra, at pp. 16-19).[4]

Thereafter, on January 24, 1984, Private Complainant Palijo filed an affidavit-complaint against Petitioner Lina Lim Lao and Teodulo Asprec for violation of B.P. 22.  After preliminary investigation,[5] three Informations charging Lao and Asprec with the offense

defined in the first paragraph of Section 1, B.P. 22 were filed by Assistant Fiscal Felix S. Caballes before the trial court on May 11, 1984,[6] worded as follows:

1.  In Criminal Case No. 84-26967:

“That on or about October 7, 1983 in the City of Manila, Philippines, the said accused did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo to apply on account or for value a Traders Royal Bank Check No. 299962 for P150,000.00 payable to Fr. Artelijo A. Palijo dated October 7, 1983 well knowing that at the time of issue he/she did not have sufficient funds in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check, when presented within ninety (90) days from the date thereof, was dishonored by the drawee bank for the reason:  ‘Insufficient Funds’; that despite notice of such dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said check or to make arrangement for full payment of the same within five (5) banking days from receipt of said notice.

CONTRARY TO LAW.”

2.  In Criminal Case No. 84-26968:

“That on or about October 7, 1983 in the City of Manila, Philippines, the said accused did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo to apply on account or for value a Traders Royal Bank Check No. 299961 for P150,000.00 payable to Fr. Artelijo A. Palijo dated October 7, ‘83 well knowing that at the time of issue he/she did not have sufficient funds in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check, when presented within ninety (90) days from the date thereof, was dishonored by the drawee bank for the reason:  ‘Insuficient Funds’; that despite notice of such dishonor, said accused failed to pay said Artelijo A. Palijo the amount of the said check or to make arrangement for full payment of the same within five (5) banking days from receipt of said notice.

CONTRARY TO LAW.”

3.  And finally in Criminal Case No. 84-26969:

“That on or about July 8, 1983 in the City of Manila, Philippines, the said accused did then and there wilfully and unlawfully draw and issue to Artelijo A. Palijo to apply on account  for value a Traders Royal Bank Check No. 323835 for P26,010.03 payable to Fr. Artelijo A. Palijo dated October 7, 1983 well knowing that at the time of issue he/she did not have sufficient funds in or credit with the drawee bank for full payment of the said check upon its presentment as in fact the said check, when presented within ninety (90) days from the date thereof, was dishonored by the drawee bank for the reason:  ‘Insufficient Funds’; that despite notice of such dishonor, said accused failed to pay said Artelijo A.

Palijo the amount of the said check or to make arrangement for full payment of the same within five (5) banking days from receipt of said notice.

CONTRARY TO LAW.”

Upon being arraigned, petitioner assisted by counsel pleaded “not guilty.”  Asprec was not arrested; he has remained at large since the trial, and even now on appeal.

After due trial, the Regional Trial Court convicted Petitioner Lina Lim Lao in Criminal Case Nos. 84-26967 and 84-26968 but acquitted her in Criminal Case No. 84-26969.[7] On appeal, the Court of Appeals affirmed the decision of the trial court.

Version of the Defense

Petitioner aptly summarized her version of the facts of the case thus:

“Petitioner Lina Lim Lao was, in 1983, an employee of Premiere Financing Corporation (hereinafter referred to as the ‘Corporation’), a corporation engaged in investment management, with principal business office at Miami, Cubao, Quezon City.  She was a junior officer at the corporation who was, however, assigned not at its main branch but at the corporation’s extension office in (Binondo) Manila.  (Ocampo, T.S.N., 16 August 1990, p. 14)

In the regular course of her duties as a junior officer, she was required to co-sign checks drawn against the account of the corporation.  The other co-signor was her head of office, Mr. Teodulo Asprec.  Since part of her duties required her to be mostly in the field and out of the office, it was normal procedure for her to sign the checks in blank, that is, without the names of the payees, the amounts and the dates of maturity.  It was likewise Mr. Asprec, as head of office, who alone decided to whom the checks were to be ultimately issued and delivered.  (Lao, T.S.N., 28 September 1989, pp. 9-11, 17, 19.)

In signing the checks as part of her duties as junior officer of the corporation, petitioner had no knowledge of the actual funds available in the corporate account.  (Lao, T.S.N., 28 September 1989, p. 21)  The power, duty and responsibility of monitoring and assessing the balances against the checks issued, and funding the checks thus issued, devolved on the corporation’s Treasury Department in its main office in Cubao, Quezon City, headed then by the Treasurer, Ms. Veronilyn Ocampo.  (Ocampo, T.S.N., 19 July 1990, p. 4; Lao, T.S.N., 28 September 1989, pp. 21-23)  All bank statements regarding the corporate checking account were likewise sent to the main branch in Cubao, Quezon City, and not in Binondo, Manila, where

petitioner was holding office.  (Ocampo, T.S.N., 19 July 1990, p. 24; Marqueses, T.S.N., 22 November 1988, p. 8)

The foregoing circumstances attended the issuance of the checks subject of the instant prosecution.

The checks were issued to guarantee payment of investments placed by private complainant Palijo with Premiere Financing Corporation.  In his transactions with the corporation, private complainant dealt exclusively with one Rosemarie Lachenal, a trader connected with the corporation, and he never knew nor in any way dealt with petitioner Lina Lim Lao at any time before or during the issuance of the delivery of the checks.  (Palijo, T.S.N., 23 June 1987, pp. 28-29, 32-34; Lao, T.S.N., 15 May 1990, p. 6; Ocampo, T.S.N., p. 5)  Petitioner Lina Lim Lao was not in any way involved in the transaction which led to the issuance of the checks.

When the checks were co-signed by petitioner, they were signed in advance and in blank, delivered to the Head of Operations, Mr. Teodulo Asprec, who subsequently filled in the names of the payee, the amounts and the corresponding dates of maturity.  After Mr. Asprec signed the checks, they were delivered to private complainant Palijo.  (Lao, T.S.N., 28 September 1989, pp. 8-11, 17, 19; note also that the trial court in its decision fully accepted the testimony of petitioner [Decision of the Regional Trial Court, p. 12], and that the Court of Appeals affirmed said decision in toto)

Petitioner Lina Lim Lao was not in any way involved in the completion, and the subsequent delivery of the check to private complainant Palijo.

At the time petitioner signed the checks, she had no knowledge of the sufficiency or insufficiency of the funds of the corporate account. (Lao, T.S.N., 28 September 1989, p. 21)  It was not within her powers, duties or responsibilities to monitor and assess the balances against the issuance; much less was it within her (duties and responsibilities) to make sure that the checks were funded.  Premiere Financing Corporation had a Treasury Department headed by a Treasurer, Ms. Veronilyn Ocampo, which alone had access to information as to account balances and which alone was responsible for funding the issued checks.  (Ocampo, T.S.N., 19 July 1990, p. 4; Lao, T.S.N., 28 September 1990, p. 23)  All statements of account were sent to the Treasury Department located at the main office in Cubao, Quezon City.  Petitioner was holding office at the extension in Binondo Manila.  (Lao, T.S.N., 28 September 1989, p. 24-25)  Petitioner Lina Lim Lao did not have knowledge of the insufficiency of the funds in the corporate account against which the checks were drawn.

When the checks were subsequently dishonored, private complainant sent a notice of said dishonor to Premier

Financing Corporation at its head office in Cubao, Quezon City.  (Please refer to Exh. ‘E’; Palijo, T.S.N., 23 June 1987, p. 51)  Private complainant did not send notice of dishonor to petitioner.  (Palijo, T.S.N., 24 July 1987, p. 10)  He did not follow up his investment with petitioner.  (Id.)  Private complainant never contacted, never informed, and never talked with, petitioner after the checks had bounced.  (Id., at p. 29)  Petitioner never had notice of the dishonor of the checks subject of the instant prosecution.

The Treasurer of Premiere Financing Corporation, Ms. Veronilyn Ocampo testified that it was the head office in Cubao, Quezon City, which received notice of dishonor of the bounced checks.  (Ocampo, T.S.N., 19 July 1990, pp. 7-8)  The dishonor of the check came in the wake of the assassination of the late Sen. Benigno Aquino, as a consequence of which event a majority of the corporation’s clients pre-terminated their investments.  A period of extreme illiquidity and financial distress followed, which ultimately led to the corporation’s being placed under receivership by the Securities and Exchange Commission.  (Ocampo, T.S.N., 16 August 1990, p. 8, 19; Lao, T.S.N., 28 September 1989, pp. 25-26; Please refer also to Exhibit ‘1’, the order of receivership issued by the Securities and Exchange Commission)  Despite the Treasury Department’s and (Ms. Ocampo’s) knowledge of the dishonor of the checks, however, the main office in Cubao, Quezon City never informed petitioner Lina Lim Lao or anybody in the Binondo office for that matter.  (Ocampo, T.S.N., 16 August 1990, pp. 9-10)  In her testimony, she justified her omission by saying that the checks were actually the responsibility of the main office (Ocampo, T.S.N., 19 July 1990, p. 6) and that, at that time of panic withdrawals and massive pre-termination of clients’ investments, it was futile to inform the Binondo office since the main office was strapped for cash and in deep financial distress.  (Id., at pp. 7-9)  Moreover, the confusion which came in the wake of the Aquino assassination and the consequent panic withdrawals caused them to lose direct communication with the Binondo office.  (Ocampo, T.S.N., 16 August 1990, p. 9-10)

As a result of the financial crisis and distress, the Securities and Exchange Commission placed Premier Financing Corporation under receivership, appointing a rehabilitation receiver for the purpose of settling claims against the corporation.  (Exh. ‘1’)  As he himself admits, private complainant filed a claim for the payment of the bounced check before and even after the corporation had been placed under receivership.  (Palijo, T.S.N., 24 July 1987, p. 10-17)  A check was prepared by the receiver in favor of the private complainant but the same was not claimed by him.  (Lao, T.S.N., 15 May 1990, p. 18)

Private complainant then filed the instant criminal action.  On 26 September 1990, the Regional Trial Court of Manila, Branch 33, rendered a decision convicting

petitioner, and sentencing the latter to suffer the aggregate penalty of two (2) years and to pay a fine in the total amount of P300,000.00.  On appeal, the Court of Appeals affirmed said decision.  Hence, this petition for review.”[8]

The Issue

In the main, petitioner contends that the public respondent committed a reversible error in concluding that lack of actual knowledge of insufficiency of funds was not a defense in a prosecution for violation of B.P. 22.  Additionally, the petitioner argues that the notice of dishonor sent to the main office of the corporation, and not to petitioner herself who holds office in that corporation’s branch office, does not constitute the notice mandated in Section 2 of BP 22; thus, there can be no  prima facie presumption that she had knowledge of the insufficiency of funds.

The Court’s Ruling

The petition is meritorious.

Strict Interpretation of Penal Statutes

It is well-settled in this jurisdiction that penal statutes are strictly construed against the state and liberally for the accused,  so much so that the scope of a penal statute cannot be extended by good intention, implication, or even equity consideration.  Thus, for Petitioner Lina Lim Lao’s acts to be penalized under the Bouncing Checks Law or B.P. 22, “they must come clearly within both the spirit and the letter of the statute.”[9]

The salient portions of B.P. 22 read:

“SECTION 1.  Checks without sufficient funds. -- Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two hundred thousand pesos, or both such fine and imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a credit or to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon, for which reason it is dishonored by the drawee bank.

Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.

SECTION 2.  Evidence of knowledge of insufficient funds. -- The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee.”

This Court listed the elements of the offense penalized under B.P. 22, as follows:  “(1)  the making, drawing and issuance of any check to apply to account or for value;  (2)  the knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.”[10]

Justice Luis B. Reyes, an eminent authority in criminal law, also enumerated the elements of the offense defined in the first paragraph of Section 1 of B.P. 22, thus:

“1. That a person makes or draws and issues any check.

2.  That the check is made or drawn and issued to apply on account or for value.

3.  That the person who makes or draws and issues the check knows at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in fullupon its presentment.

4.  That the check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.”[11]

Crux of the Petition

Petitioner raised as defense before the Court of Appeals her lack of actual knowledge of the insufficiency of funds at the time of the issuance of the checks, and lack of personal notice of dishonor to her.  The respondent appellate court, however, affirmed the RTC decision, reasoning that “the maker’s knowledge of the insufficiency of funds is legally presumed from the dishonor of his checks for insufficiency of funds.  (People vs. Laggui, 171 SCRA 305; Nieras vs. Hon. Auxencio C. Dacuycuy, 181 SCRA 1)”[12] The Court of Appeals also stated that “her alleged lack of knowledge or intent to issue a bum check would not exculpate her from any responsibility under B.P. Blg. 22, since the act of making and issuing a worthless check is a  malum prohibitum.”[13] In the words of the Solicitor General, “(s)uch alleged lack of knowledge is not material for petitioner’s liability under B.P.Blg. 22.”[14]

Lack of Actual Knowledge of Insufficiency of Funds

Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense.[15] There is a prima facie presumption of the existence of this element from the fact of drawing, issuing or making a check, the payment of which was subsequently refused for insufficiency of funds.  It is important to stress, however, that this is not a conclusive presumption that forecloses or precludes the presentation of evidence to the contrary.

In the present case, the fact alone that petitioner was a signatory to the checks that were subsequently dishonored merely engenders the prima facie presumption that she knew of the insufficiency of funds, but it does not render her automatically guilty under B.P. 22.  The prosecution has a duty to prove all the elements of the crime, including the acts that give rise to the prima facie presumption; petitioner, on the other hand, has a right to rebut the prima facie presumption.[16] Therefore, if such knowledge of insufficiency of funds is proven to be actually absent or non-existent,  the accused should not be held liable for the offense defined under the first paragraph of Section 1 of B.P. 22.  Although the offense charged is a malum prohibitum, the prosecution is not thereby excused from its responsibility of proving beyond reasonable doubt all the elements of the offense, one of which is knowledge of the insufficiency of funds.

After a thorough review of the case at bar, the Court finds that Petitioner Lina Lim Lao did not have actual knowledge of the insufficiency of funds in the corporate accounts at the time she affixed her signature to the checks involved in this case, at the time the same were issued, and even at the time the checks were subsequently dishonored by the drawee bank.

The scope of petitioner’s duties and responsibilities did not encompass the funding of the corporation’s checks; her duties were limited to the marketing department of the Binondo branch.[17]Under the organizational structure of Premiere Financing Corporation,  funding of checks was the sole responsibility of the Treasury Department.  Veronilyn Ocampo, former Treasurer of Premiere,  testified thus:

“Q   Will you please tell us whose (sic) responsible for the funding of checks in Premiere?

A     The one in charge is the Treasury Division up to the Treasury Disbursement and then they give it directly to Jose Cabacan, President of Premiere.”[18]

Furthermore, the Regional Trial Court itself found that, since  Petitioner Lina Lim Lao was often out in the field taking charge of the marketing department of the Binondo branch, she signed the checks in blank as to name of the payee and the amount to be drawn, and without knowledge of the transaction for which they were issued.[19] As a matter of company practice, her signature was required in addition to that of  Teodulo Asprec, who alone placed the name of the payee and the amount to be drawn thereon.  This is clear from her testimony:

“q    x x x  Will you please or will you be able to tell us the condition of this check when you signed this or when you first saw this check?

Witness

a     I signed the check in blank.  There were no payee.  No amount, no date, sir.

q     Why did you sign this check in blank when there was no payee, no amount and no date?

a     It is in order to facilitate the transaction, sir.

x x x                                                                      x x x                                                                             x x x

COURT

(to witness)

q     Is that your practice?

Witness

a     Procedure, Your Honor.

COURT

That is quiet (sic) unusual.  That is why I am asking that last question if that is a practice of your office.

a     As a co-signer, I sign first, sir.

q     So the check cannot be encashed without your signature, co-signature?

a     Yes, sir.

Atty. Gonzales

(to witness)

q     Now, you said that you sign first, after you sign, who signs the check?

a     Mr. Teodoro Asprec, sir.

q     Is this Teodoro Asprec the same Teodoro Asprec, one of the accused in all these cases?

a     Yes, sir.

q     Now, in the distribution or issuance of checks which according to you, as a co-signee, you sign.  Who determines to whom to issue or to whom to pay the check after Teodoro Asprec signs the check?

Witness

a     He is the one.

Atty. Gonzales

q     Mr. Asprec is the one in-charge in  .  .  .  are you telling the Honorable Court that it was Teodoro Asprec who determines to whom to issue the check?  Does he do that all the time?

Court

q     Does he all the time?

(to witness)

a     Yes, Your Honor.

q     So the check can be negotiated?  So, the check can be good only upon his signing?  Without his signing or signature the check cannot be good?

a     Yes, Your Honor.

Atty. Gonzales

(to witness)

q     You made reference to a transaction which according to you, you signed this check in order to facilitate the transaction  .  .  .  I withdraw that question.  I will reform.

COURT

(for clarification to witness)

Witness may answer.

q     Only to facilitate your business transaction, so you signed the other checks?

Witness

a     Yes, Your Honor.

q     So that when ever there is a transaction all is needed  .  .  .  all that is needed is for the other co-signee to sign?

a     Yes, Your Honor.

COURT

(To counsel)

Proceed.

Atty. Gonzales

(to witness)

q     Why is it necessary for you to sign?

a     Because most of the time I am out in the field in the afternoon, so, in order to facilitate the transaction I sign so if I am not around they can issue the check.”[20]

Petitioner did not have any knowledge either of the identity of the payee or the transaction which gave rise to the issuance of the checks.  It was her co-signatory, Teodulo Asprec, who alone filled in the blanks, completed  and issued the checks.  That Petitioner Lina Lim Lao did not have any knowledge or connection with the checks’ payee, Artelijo Palijo, is clearly evident even from the latter’s testimony, viz.:

“ATTY. GONZALES:

Q    When  did you come to know the accused Lina Lim Lao?

A     I cannot remember the exact date because in their office Binondo, --

COURT:  (before witness could finish)

Q    More or less?

A     It must have been late 1983.

ATTY. GONZALES:

Q    And that must or that was after the transactions involving alleged checks marked in evidence as Exhibits B and C?

A     After the transactions.

Q    And that was also before the transaction involving that confirmation of sale marked in evidence as Exhibit A?

A     It was also.

Q    And so you came to know the accused Lina Lim Lao when all those transactions were already consummated?

A     Yes, sir.

Q    And there has never been any occasion where you transacted with accused Lina Lim Lao, is that correct?

A     None, sir, there was no occasion.

Q    And your coming to know Lina Lim Lao the accused in these cases was by chance when you happened to drop by in the office at Binondo of the Premier Finance Corporation, is that what you mean?

A     Yes, sir.

Q    You indicated to the Court that you were introduced to the accused Lina Lim Lao, is that correct?

A     I was introduced.

x x x                                                                      x x x                                                                             x x x

Q    After that plain introduction there was nothing which transpired between you and the accused Lina Lim Lao?

A     There was none.”[21]

Since Petitioner Lina Lim Lao signed the checks without knowledge of the insufficiency of funds, knowledge she was not expected or obliged to possess under the organizational structure of the corporation, she may not be held liable under B.P. 22.  For in the final analysis, penal statutes such as B.P. 22 “must be construed with such strictness as to carefully safeguard the rights of the defendant  x x x.”[22] The element of knowledge of insufficiency of funds having been proven to be absent, petitioner is therefore entitled to an acquittal.

This position finds support in Dingle vs. Intermediate Appellate Court[23] where we stressed that knowledge of insufficiency of funds at the time of the issuance of the check was an essential requisite for the offense penalized under B.P. 22.  In that case, the spouses Paz and Nestor Dingle owned a family business known as “PMD Enterprises.”  Nestor transacted the sale of 400 tons of silica sand to the buyer Ernesto Ang who paid for the same.  Nestor failed to deliver.  Thus, he issued to Ernesto two checks, signed by him and his wife as authorized signatories for PMD Enterprises, to represent the value of the undelivered silica sand.  These checks were dishonored for having been “drawn against insufficient funds.”  Nestor thereafter issued to Ernesto another check, signed by him and his wife Paz, which was likewise subsequently dishonored.  No payment was ever made; hence, the spouses were charged with a violation of B.P. 22 before the trial court which found them both guilty.  Paz appealed the judgment to the then Intermediate Appellate Court which modified the same by reducing the penalty of imprisonment to thirty days.  Not satisfied, Paz filed an appeal to this Court “insisting on her

innocence” and “contending that she did not incur any criminal liability under B.P. 22 because she had no knowledge of the dishonor of the checks issued by her husband and, for that matter, even the transaction of her husband with Ang.”  The Court ruled in Dingle as follows:

“The Solicitor General in his Memorandum recommended that petitioner be acquitted of the instant charge because from the testimony of the sole prosecution witness Ernesto Ang, it was established that he dealt exclusively with Nestor Dingle.  Nowhere in his testimony is the name of Paz Dingle ever mentioned in connection with the transaction and with the issuance of the check.  In fact, Ang categorically stated that it was Nestor Dingle who received his two (2) letters of demand.  This lends credence to the testimony of Paz Dingle that she signed the questioned checks in blank together with her husband without any knowledge of its issuance, much less of the transaction and the fact of dishonor.

In the case of Florentino Lozano vs. Hon. Martinez, promulgated December 18, 1986, it was held that an essential element of the offense is knowledge on the part of the maker or drawer of the check of the insufficiency of his funds.

WHEREFORE, on reasonable doubt, the assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is hereby SET ASIDE and a new one is hereby rendered ACQUITTING petitioner on reasonable doubt."[24]

In rejecting the defense of herein petitioner and ruling that knowledge of the insufficiency of funds is legally presumed from the dishonor of the checks for insufficiency of funds,   Respondent Court of Appeals cited People vs. Laggui[25] and Nierras vs. Dacuycuy.[26] These, however, are inapplicable here.  The accused in both cases issued personal -- not corporate -- checks and did not aver lack of knowledge of insufficiency of funds or absence of personal notice of the check’s dishonor.  Furthermore,  in People vs. Laggui[27] the Court ruled mainly on the adequacy of an information which alleged lack of knowledge of insufficiency of funds at the time the check was issued and not at the time of its presentment.  On the other hand, the Court in Nierras vs. Dacuycuy[28] held mainly that an accused may be charged under B.P. 22 and Article 315 of the Revised Penal Code for the same act of issuing a bouncing check.

The statement in the two cases -- that  mere issuance of a dishonored check gives rise to the presumption of knowledge on the part of the drawer that he issued the same without funds -- does not support the CA Decision.  As observed earlier,  there is here only a prima facie presumption which does not preclude the presentation of contrary evidence.  On the contrary, People vs. Laggui clearly spells out as an element of the offense the fact that the drawer must have knowledge of the insufficiency of  funds in, or of

credit with, the drawee bank for the payment of the same in full on presentment;  hence, it even supports the petitioner’s position.

Lack of Adequate Notice of Dishonor

There is another equally cogent reason for the acquittal of the accused.  There can be no prima facie evidence of knowledge of insufficiency of funds in the instant case because no notice of dishonor was actually sent to or received by the petitioner.

The notice of dishonor may be sent by the offended party or the drawee bank.  The trial court itself found absent a personal notice of dishonor to Petitioner Lina Lim Lao by the drawee bank based on the unrebutted testimony of Ocampo “(t)hat the checks bounced when presented with the drawee bank but she did not inform anymore the Binondo branch and Lina Lim Lao as there was no need to inform them as the corporation was in distress.”[29] The Court of Appeals affirmed this factual finding.  Pursuant to prevailing jurisprudence, this finding is binding on this Court.[30]

Indeed, this factual matter is borne by the records.  The records show that the notice of dishonor was addressed to Premiere Financing Corporation and sent to its main office in Cubao, Quezon City.  Furthermore,  the same had not been transmitted to Premiere’s Binondo Office where petitioner had been holding office.

Likewise no notice of dishonor from the offended party was actually sent to or received by Petitioner Lao.  Her testimony on this point is as follows:

“Atty. Gonzales

q     Will you please tell us if Father Artelejo Palejo (sic) ever notified you of the bouncing of the check or the two (2) checks marked as Exhibit ‘B’ or ‘C’ for the prosecution?

Witness

a     No, sir.

q     What do you mean no, sir?

a     I was never given a notice.  I was never given notice from Father Palejo (sic).

COURT

(to witness)

q     Notice of what?

a     Of the bouncing check, Your Honor.”[31]

Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that she knew about the insufficiency of funds cannot apply.  Section 2 of B.P. 22 clearly

provides that this presumption arises not from the mere fact of drawing, making and issuing a bum check;  there must also be a showing that, within five banking days from receipt of the notice of dishonor,  such maker or drawer failed to pay the holder of the check the amount due thereon or  to make arrangement for its payment in full by the drawee of such check.

It has been observed that the State, under this statute, actually offers the violator “a compromise by allowing him to perform some act which operates to preempt the criminal action, and if he opts to perform it the action is abated.”  This was also compared “to certain laws[32] allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed firearms to the Government, without incurring any criminal liability.”[33] In this light, the full payment of the amount appearing in the check within five banking days from notice of dishonor is a “complete defense.”[34] The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution.  Accordingly, procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner.  Petitioner has a right to demand -- and the basic postulates of fairness require -- that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under B.P. 22.

In this light, the postulate of Respondent Court of Appeals that “(d)emand on the Corporation constitutes demand on appellant (herein petitioner),”[35] is erroneous.  Premiere has no obligation to forward the notice addressed to it to the employee concerned, especially because the corporation itself incurs no criminal liability under B.P. 22 for the issuance of a bouncing check. Responsibility under B.P. 22 is personal to the accused; hence, personal knowledge of the notice of dishonor is necessary.  Consequently, constructive notice to the corporation is not enough to satisfy due process.  Moreover, it is petitioner, as an officer of the corporation, who is the latter’s agent for purposes of receiving notices and other documents, and not the other way around.  It is but axiomatic that notice to the corporation, which has a personality distinct and separate from the petitioner, does not constitute notice to the latter.

Epilogue

In granting this appeal, the Court is not unaware of B.P. 22’s intent to inculcate public respect for and trust in checks which, although not legal tender, are deemed convenient substitutes for currency.  B.P. 22 was intended by the legislature to enhance commercial and financial transactions in the Philippines by penalizing makers and issuers of worthless checks.  The public interest behind B.P. 22 is thus clearly palpable from its intended purpose.[36]

At the same time, this Court deeply cherishes and is in fact bound by duty to protect our people’s constitutional rights to due process and to be presumed innocent until the contrary is proven.[37] These rights must be read into any interpretation and application of B.P. 22.  Verily, the public policy to uphold civil liberties embodied in the Bill of Rights necessarily outweighs the public policy to build confidence in the issuance of checks.  The first is a basic human right while the second is only proprietary in nature.[38] Important to remember also is B.P. 22’s requirements that the check issuer must know “at the time of issue that he does not have sufficient funds in or credit with the drawee bank” and that he must receive “notice that such check has not been paid by the drawee.”  Hence, B.P. 22 must not be applied in a manner which contravenes an accused’s constitutional and statutory rights.

There is also a social justice dimension in this case.  Lina Lim Lao is only a minor employee who had nothing to do with the issuance, funding and delivery of checks.  Why she was required by her employer to countersign checks escapes us.  Her signature is completely unnecessary for it serves no fathomable purpose at all in protecting the employer from unauthorized disbursements.  Because of the pendency of this case, Lina Lim Lao stood in jeopardy -- for over a decade -- of losing her liberty and suffering the wrenching pain and loneliness of imprisonment, not to mention the stigma of prosecution on her career and family life as a young mother, as well as the expenses, effort and aches in defending her innocence.  Upon the other hand, the senior official -- Teodulo Asprec -- who appears responsible for the issuance, funding and delivery of the worthless checks has escaped criminal prosecution simply because he could not be located by the authorities.  The case against him has been archived while the awesome prosecutory might of the government and the knuckled ire of the private complainant were all focused on poor petitioner.  Thus, this Court exhorts the prosecutors and the police authorities concerned to exert their best to arrest and prosecute Asprec so that justice in its pristine essence can be achieved in all fairness to the complainant, Fr. Artelijo Palijo, and the People of the Philippines.  By this Decision,  the Court enjoins the Secretary of Justice and the Secretary of Interior and Local Government to see that essential justice is done and the real culprit(s) duly-prosecuted and punished.

WHEREFORE, the questioned Decision of the Court of Appeals affirming that of the Regional Trial Court, is hereby REVERSED and SET ASIDE.  Petitioner Lina Lim Lao is ACQUITTED. The Clerk of Court is hereby ORDERED to furnish the Secretary of Justice and the Secretary of Interior and Local Government with copies of this Decision.  No costs.

SO ORDERED.

[G.R. Nos. 104238-58.  June 3, 2004]

PEOPLE OF THE PHILIPPINES, appellee, vs. CORA ABELLA OJEDA, appellant.

D E C I S I O N

CORONA, J.:

For review is the decision[1] dated June 21, 1991 of the Regional Trial Court of Manila, Branch 38, the dispositive portion of which read:

WHEREFORE, the Court finds accused Cora Abella Ojeda guilty beyond reasonable doubt of the crime of Estafa as defined and penalized under paragraph 2(d) of Article 315 of the Revised Penal Code, as amended by Rep. Act 4885, in Criminal Case No. 88-66228 and hereby sentences her to suffer a penalty of reclusion perpetua, with the accessories provided by law and with credit for preventive imprisonment undergone, if any, in accordance with Article 29 of the Revised Penal Code as amended, and to pay complainant Ruby Chua the amount of Two Hundred Twenty Eight Thousand Three Hundred Six (P228,306.00) Pesos with interests thereon from the time of demand until fully paid.

Likewise, the Court also finds the said accused guilty for Violation of Batas Pambansa Blg. 22 in Criminal Cases Nos. 88-66230, 88-66232, 88-66235 to 88-66240, 88-66242, 88-66243, 88- 66245 to 88-66248 (14) counts and hereby sentences her to suffer a penalty of one year of imprisonment for each count. On the other hand, the other charges docketed as Criminal Cases Nos. 88- 66229, 88-66231, 88-66233, 88-66234, 88-66241 and 88-66244 are hereby dismissed for insufficiency of evidence.

Costs against accused in all instances.[2]

Appellant Cora Abella Ojeda was charged in 21 separate Informations for estafa in Criminal Case No. 88-66228 and for violation of Batas Pambansa (BP) 22 in Criminal Case Nos. 88-66229 to 88-66248.

The Information charging Ojeda with estafa read:

That on or about the first week of November, 1983, in the City of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously defraud RUBY CHUA in the following manner, to wit: the said accused, well knowing that she did not have sufficient funds in the bank and without informing the said Ruby Chua of such fact drew, made out and issued to the latter the following post-dated Rizal Commercial Banking Corporation checks, to wit:

Check No.                             Date                            Amount

1. 033550                              Nov. 5, 1983                P17,100.002. 041782                              Nov. 5, 1983                5,392.343. 042935                              Nov. 6, 1983                1,840.194. 041799                              Nov. 9, 1983                11,953.385. 033530                              Nov. 10, 1983              19,437.346. 041714                              Nov. 10, 1983              26, 890.007. 042942                              Nov. 10, 1983              1,941.598. 041783                              Nov. 12, 1983              5,392.349. 041800                              Nov. 14, 1983              11,953.3910. 041788                            Nov. 15, 1983              3,081.9011. 033529                            Nov. 15, 1983              19,437.3412. 041784                            Nov. 18, 1983              5,392.3413. 042901                            Nov. 18, 1983              11,953.3814. 042902                            Nov. 23, 1983              11,953.3815. 041785                            Nov. 25, 1983              5,392.3416. 042903                            Nov. 29, 1983              11,953.3817. 033532                            Nov. 29, 1983              13,603.2218. 041786                            Nov. 30, 1983              5,392.3419. 042905                            Dec. 8, 1983               11,953.3920. 043004                            Dec. 10, 1983             2,386.2521. 042907                            Dec. 15, 1983             11,953.3822. 042906                            Dec. 18, 1983             11,953.39

      P228,306.60

in payment of various fabrics and textile materials all in the total amount of P228,306.60 which the said accused ordered or purchased from the said RUBY CHUA on the same day; that upon presentation of the said checks to the bank for payment, the same were dishonored and payment thereof refused for the reason ‘Account Closed’, and said accused, notwithstanding due notice to her by the said Ruby Chua of such dishonor of the said checks, failed and refused and still fails and refuses to deposit the necessary amount to cover the amount of the checks to the damage and prejudice of the said

RUBY CHUA in the aforesaid amount of P228,306.60, Philippine currency.

Contrary to law.

The Informations charging Ojeda for violation of BP 22 were similarly worded except for the amounts of the checks, the check numbers and the dates of the checks:

That on or about the first week of November 1983, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully and feloniously make or draw and issue to RUBY CHUA to apply on account or for value Rizal Commercial Banking Corp. Check No. 041784 dated November 18, 1983 payable to Ruby Chua in the amount of P5,392.34, said accused well knowing that at the time of issue he/she/they did not have sufficient funds in or credit with the drawee bank or payment of such check in full upon its presentment, which check, when presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for insufficiency of funds, and despite receipt of notice of such dishonor, said accused failed to pay said complainant the amount of said check or to make arrangement for full payment of the same within five (5) banking days after receiving said notice.

Contrary to law.

The pertinent facts of the case follow.

Appellant Cora Abella Ojeda used to buy fabrics (telas) from complainant Ruby Chua. For the three years approximately she transacted business with Chua, appellant used postdated checks to pay for the fabrics she bought. On November 5, 1983, appellant purchased from Chua various fabrics and textile materials worth P228,306 for which she issued 22 postdated checks bearing different dates and amounts.

Chua later presented to the bank for payment check no. 033550 dated November 5, 1983 in the amount of P17,100[3] but it was dishonored due to “Account Closed.”[4] On April 10, 1984, Chua deposited the rest of the checks but all were dishonored for the same reason.[5] Demands were allegedly made on the appellant to make good the dishonored checks, to no avail.

Estafa and BP 22 charges were thereafter filed against appellant. The criminal cases were consolidated and appellant, on arraignment, pleaded not guilty to each of the charges.

On the whole, appellant’s defense was grounded on good faith or absence of deceit, lack of notice of dishonor and full payment of the total amount of the checks.

With the exception of six checks[6] which did not bear her signature, appellant admitted that she issued the postdated checks which were the subject of the criminal cases against her. She, however, alleged that

she told Chua not to deposit the postdated checks on maturity as they were not yet sufficiently funded. Appellant also claimed that she made partial payments to Chua in the form of finished garments worth P50,000. This was not rebutted by the prosecution.

The trial court convicted appellant of the crime of estafa as defined and penalized under paragraph 2(d) of Article 315 of the Revised Penal Code (RPC), and sentenced her to reclusion perpetua. The trial court also convicted appellant of violation of BP 22 for issuing bouncing checks.  However, the court a quo held her guilty of only 14 counts out of the 22 bouncing checks issued. The court reasoned:

xxx This is due to the fact that of the 22 checks, two of them are not covered by the indictment. This refers to Check No. 042935 dated November 6, 1983 in the amount of P1,840.19 (Exhibit D) and Check No. 042942 dated November 10, 1983 in the amount of P1,941.59 (Exhibit F). And of the total number of checks, six of them were not signed by the accused but by the latter’s husband (Exhibits C,H,J,M,R and O). The accused should not be liable for the issuance of the 6 checks in the absence of any showing of conspiracy.[7]

Appellant appealed to this Court, seeking acquittal.  Her counsel, however, failed to file the appellant’s brief within the prescribed period. Her appeal was thus dismissed in a resolution of this Court dated October 14, 1992.[8]

In her motion for reconsideration, appellant asked this Court to reverse its order of dismissal in the interest of substantial justice and equity.[9] We initially found no compelling reason to grant her motion and resolved to deny with finality appellant’s MR in a resolution dated February 3, 1993.[10] Appellant thereafter filed a “Second and Urgent Motion for Reconsideration,” attaching thereto an “Affidavit of Desistance” of complainant Ruby Chua which stated in part:

xxx    xxx       xxx.

2. that the defendant Mrs. Cora Ojeda has already fully paid her monetary obligation to me in the amount of P228,306.00 which is the subject of the aforementioned cases;

xxx    xxx       xxx.

5. That as the private complainant, I am now appealing to the sense of compassion and humanity of the good justices of the Supreme Court to reconsider the appeal of Mrs. Cora Ojeda and I solemnly pray that the criminal liability be extinguished with her civil liability.[11]

In a resolution dated March 17, 1993,[12] this Court denied the second MR for having been filed without leave of court. In the same resolution, this Court ordered the entry of judgment in due course.

Appellant thereafter filed another motion dated April 21, 1993, praying that she be recommended to then President Fidel V. Ramos for executive clemency. In support of such motion, she once more attached the affidavit of desistance[13] of complainant Ruby Chua which categorically declared that “the defendant, Ms. Cora Ojeda, (had) already fully paid her monetary obligations to (Chua) in the amount of P228,306 which (was) the subject of the aforementioned cases.”[14]

In view of such special circumstances, this Court issued a resolution dated June 9, 1993[15] recalling its resolutions dated October 14, 1992, February 3, 1993 and March 17, 1993 for humanitarian reasons and in the interest of justice, and in order that this Court may resolve appellant’s appeal on the merits.[16]

Hence, the instant appeal with the following assignments of error:

I.

THE LOWER COURT ERRED IN FINDING THAT DECEIT WAS EMPLOYED BY ACCUSED APPELLANT WHEN SHE ISSUED THE CHECKS TO THE PRIVATE COMPLAINANT.

II.

THE LOWER COURT ERRED IN NOT FINDING THAT THE ISSUANCE BY THE ACCUSED-APPELLANT OF THE CHECKS TO THE PRIVATE COMPLAINANT WAS MERELY A MODE OF PAYMENT WHICH ARRANGEMENT HAD BEEN THEIR PRACTICE FOR THREE (3) YEARS.

III.

THE LOWER COURT ERRED IN NOT FINDING THAT GOOD FAITH IS A VALID DEFENSE AGAINST ESTAFA BY POSTDATING A CHECK

IV.

THE LOWER COURT ERRED IN CONVICTING THE ACCUSED OF FOURTEEN (14) COUNTS OF B.P. 22 WHEN THERE WAS NO PROOF OF NOTICE OF DISHONOR TO THE ACCUSED.

V.

THE LOWER COURT ERRED IN NOT FINDING THAT SINCE 13 OF THE 14 CHECKS WERE DEPOSITED ONLY AFTER THE LAPSE OF THE 90 DAY PERIOD, HENCE, THE PRIMA FACIE PRESUMPTION OF KNOWLEDGE DOES NOT APPLY.[17]

Appellant firmly denies any criminal liability for estafa.  She argues there was no deceit employed when she issued the checks because she never assured Chua that the checks were funded. Chua allegedly knew all

along that the checks were merely intended to guarantee future payment by appellant.

Appellant further claims good faith in all her transactions with Chua for three years.  She explained that her failure to fund the checks was brought about by the collapse of the country’s economy in the wake of the Aquino assassination in 1983.  The capital flight and financial chaos at that time caused her own business to shut down when her customers also failed to pay her. Despite the closure of her business, appellant maintains that she did her best to continue paying Chua what she owed and, when she could no longer pay in cash, she instead paid in kind in the form of finished goods.  But these were not enough to cover her debts.  Nevertheless, she spared no effort in complying with her financial obligations to Chua until she was gradually able to pay all her debts, a fact fully admitted as true by complainant in her affidavit.

From the foregoing, appellant contends that the element of deceit thru abuse of confidence or false pretenses was not present. Thus, her guilt was not established with satisfactory proof. Appellant asserts that good faith on her part was a valid defense to rebut the prima facie presumption of deceit when she issued the checks that subsequently bounced.

Furthermore, out of the 14 checks cited in the decision of the trial court, only one check was deposited within 90 days from due date. This was check no. 033550 dated November 5, 1983. The rest of the checks were deposited only on April 10, 1984 or more than 90 days from the date of the last check.[18]

Appellant also denies she received any notice of dishonor of the checks, contrary to the findings of the trial court.  She was not even aware that cases had already been filed against her for violation of BP 22.  Since there was allegedly no proof of notice[19] of the dishonor of the checks, appellant claims that she cannot be convicted of violation of BP 22.

On the other hand, the Solicitor General contends that appellant was criminally liable for issuing worthless checks. Complainant Chua accepted the postdated checks as payment because of appellant’s good credit standing.  She was confident that appellant’s checks were good checks.  Thus, no assurances from appellant that the checks were sufficiently funded were needed for Chua to part with her goods. And when the checks later bounced, appellant betrayed the confidence reposed in her by Chua.

The Solicitor General also argues that there was a simultaneous exchange of textile materials and checks between complainant and appellant.  Complainant Chua would not have parted with her telas had she known that appellant’s checks would not clear.  Appellant obtained something in exchange for her worthless checks.  When she issued them, she knew she had no funds to back up those checks because her account had already been closed.  Yet, she did not inform Chua that the checks could not be cashed upon maturity. She thus deceived

Chua into parting with her goods and the deceit employed constituted estafa.

We grant the appeal.

DECEIT AND DAMAGE ASELEMENTS OF ESTAFA

Under paragraph 2 (d) of Article 315 of the RPC, as amended by RA 4885,[20] the elements of estafa are: (1) a check is postdated or issued in payment of an obligation contracted at the time it is issued; (2) lack or insufficiency of funds to cover the check; (3) damage to the payee thereof.  Deceit and damage are essential elements of the offense and must be established by satisfactory proof to warrant conviction.[21] Thus, the drawer of the dishonored check is given three days from receipt of the notice of dishonor to cover the amount of the check. Otherwise a prima facie presumption of deceit arises.

The prosecution failed to prove deceit in this case.  The prima facie presumption of deceit was successfully rebutted by appellant’s evidence of good faith, a defense in estafa by postdating a check.[22] Good faith may be demonstrated, for instance, by a debtor’s offer to arrange a payment scheme with his creditor.  In this case, the debtor not only made arrangements for payment; as complainant herself categorically stated, the debtor-appellant fully paid the entire amount of the dishonored checks.

It must be noted that our Revised Penal Code was enacted to penalize unlawful acts accompanied by evil intent denominated as crimes mala in se. The principal consideration is the existence of malicious intent. There is a concurrence of freedom, intelligence and intent which together make up the “criminal mind” behind the “criminal act.” Thus, to constitute a crime, the act must, generally and in most cases, be accompanied by a criminal intent.  Actus non facit reum, nisi mens sit rea. No crime is committed if the mind of the person performing the act complained of is innocent. As we held in Tabuena vs .   Sandiganbayan :[23]

The rule was reiterated in People v. Pacana, although this case involved falsification of public documents and estafa:

“Ordinarily, evil intent must unite with an unlawful act for there to be a crime.  Actus non facit reum, nisi mens sit rea.  There can be no crime when the criminal mind is wanting.”

American jurisprudence echoes the same principle. It adheres to the view that criminal intent in embezzlement is not based on technical mistakes as to the legal effect of a transaction honestly entered into, and there can be no embezzlement if the mind of the person doing the act is innocent or if there is no wrongful purpose.

The accused may thus prove that he acted in good faith and that he had no intention to convert the money or goods for his personal benefit.[24] We are convinced that appellant was able to prove the absence of criminal intent in her transactions with Chua.  Had her intention been tainted with malice and deceit, appellant would not have exerted extraordinary effort to pay the complainant, given her own business and financial reverses.

LACK OF NOTICE OF DISHONOR

We also note that the prosecution presented virtually no evidence to show that the indispensable notice of dishonor was sent to and received by appellant.  Excerpts from the following testimony of complainant are significant:

ATTY. ANGELES:

Q    Now, Mrs. Witness, when these checks from Exhibits ‘A’ to ‘V’ have bounced, what steps, did you do?

A     I consulted my lawyer and she wrote a Demand Letter.

COURT:

Q    What is the name of that lawyer?

A     Atty. Virginia Nabora.

ATTY. ANGELES:

Q    Now, you mentioned a Demand Letter sent by Atty. Virginia Nabor, I am showing to you this Demand Letter dated March 16, 1988, will you kindly examine the same if this is the same Demand Letter you mentioned a while ago?

A     Yes, sir.

Q    Now, on this second page of this Demand Letter there is a signature above the printed name Virginia Guevarra Nabor, do you know the signature, Mrs. Witness?

A     Yes, that is the signature of my lawyer.

ATTY. ANGELES:

May we request that this Demand Letter dated March 16, 1988 consisting of two (2) pages, Your Honor, be marked as Exhibit ‘W’ and that the signature on the second page of this letter of Virginia Guevarra Nabor be encircled and be marked as Exhibit ‘W-1’ and that the attached Registry Receipt, Your Honor, be marked as Exhibit ‘W-2’.

COURT:

Mark them.

ATTY. ANGELES:

Q    Now, Mrs. Witness, why do you know that this is the signature of Virginia Guevarra Nabor?

A     After preparing that I saw her sign the letter.

Q    Now, after sending this Demand Letter, do you know If the accused herein made payments or replaced the checks that were issued to you?

COURT:

Q    Of course, you assumed that the accused received that letter, that is his basis on the premise that the accused received that letter?

ATTY. ANGELES:

A     Yes, Your Honor.

COURT:

Q    What proof is there to show that accused received the letter because your question is premises (sic) on the assumption that the accused received the letter?

ATTY. ANGELES:

Q    Now, do you know Mrs. Witness if the accused received the letter?

A     There is a registry receipt.

COURT:

Q    Now, later on after sending that letter, did you have communication with the accused?

A     I kept on calling her but I was not able to get in touch with her.

Q    But do you know if that letter of your lawyer was received by the accused?

A     I was not informed by my lawyer but I presumed that the same was already received by the accused.

ATTY. ANGELES:

Q    Now, aside from sending this Demand Letter, do you know what your lawyer did?

A     We filed a case with the Fiscal’s.[25]

Aside from the above testimony, no other reference to the demand letter was made by the prosecution.  The prosecution claimed that the demand letter was sent by registered mail.  To prove this, it presented a copy of the demand letter as well as the registry return receipt bearing a signature which was, however, not even authenticated or identified.  A registry receipt alone is insufficient as proof of mailing.[26] “Receipts for registered

letters and return receipts do not prove themselves; they must be properly authenticated in order to serve as proof of receipt of the letters.”[27]

It is clear from the foregoing that complainant merely presumed that appellant received the demand letter prepared and sent by her lawyer.  She was not certain if appellant indeed received the notice of dishonor of the checks. All she knew was that a demand letter was sent by her lawyer to the appellant. In fact, right after complainant made that presumption, her lawyer filed the criminal cases against appellant at the Fiscal’s office[28] without any confirmation that the demand letter supposedly sent through registered mail was actually received by appellant.

With the evident lack of notice of dishonor of the checks, appellant cannot be held guilty of violation of BP 22. The lack of such notice violated appellant’s right to procedural due process.  “It is a general rule that when service of notice is an issue, the person alleging that the notice was served must prove the fact of service.”[29] The burden of proving receipt of notice rests upon the party asserting it and the quantum of proof required for conviction in this criminal case is proof beyond reasonable doubt.

When, during the trial, appellant denied having received the demand letter, it became incumbent upon the prosecution to prove that the demand letter was indeed sent through registered mail and that the same was received by appellant. But it did not.  Obviously, it relied merely on the weakness of the evidence of the defense.

This Court therefore cannot, with moral certainty, convict appellant of violation of BP 22.  The evident failure of the prosecution to establish that she was given the requisite notice of dishonor justifies her acquittal.[30]

As held in Lao vs. Court of Appeals:[31]  

“It has been observed that the State, under this statute, actually offers the violator ‘a compromise by allowing him to perform some act which operates to preempt the criminal action, and if he opts to perform it the action is abated.’  This was also compared ‘to certain laws allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed firearms to the Government, without incurring any criminal liability.’ In this light, the full payment of the amount appearing in the check within five banking days from notice of dishonor is a ‘complete defense.’ The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution. Accordingly, procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner. Petitioner has a right to demand – and the basic postulates of fairness require -- that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under B.P. 22.

Stated otherwise, responsibility under BP 22 was personal to appellant; hence, personal knowledge of the

notice of dishonor was necessary.  Consequently, while there may have been constructive notice to appellant regarding the insufficiency of her funds in the bank, it was not enough to satisfy the requirements of procedural due process.

Finally, it is worth mentioning that notice of dishonor is required under both par. 2(d) Art. 315 of the RPC and Sec. 2 of BP 22. While the RPC prescribes that the drawer of the check must deposit the amount needed to cover his check within three days from receipt of notice of dishonor, BP 22, on the other hand, requires the maker or drawer to pay the amount of the check withinfive days from receipt of notice of dishonor. Under both laws, notice of dishonor is necessary for prosecution (for estafa and violation of BP 22). Without proof of notice of dishonor, knowledge of insufficiency of funds cannot be presumed and no crime (whether estafa or violation of BP 22) can be deemed to exist.

WHEREFORE, the decision of the trial court is hereby REVERSED and SET ASIDE. Appellant Cora Abella Ojeda is ACQUITTED in Criminal Case No. 88-66228 for estafa and in Criminal Case Nos. 88-66230, 88-66232, 88-66235 to 88-66240, 88-66242, 88-66243, 88-66245 to 88-66248 for violation of BP 22.

SO ORDERED.

[G.R. No. 131714.  November 16, 1998]

EDUARDO R. VACA and FERNANDO NIETO, petitioners, vs. COURT OF APPEALS and the PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N

MENDOZA, J.:

Petitioners seek a review of the decision, dated October 25, 1996,[1] and the resolution, dated December 2, 1997,[2] of the Court of Appeals, affirming their conviction by the Regional Trial Court of Quezon City (Branch 100) for violation of B.P. Blg. 22, otherwise known as the “Bouncing Checks Law.”

The facts are as follows:

Petitioner Eduardo R. Vaca is the president and owner of Ervine International, Inc. (Ervine), which is engaged in the manufacture and sale of refrigeration equipment, while his son-in-law, petitioner Fernando  Nieto, is the firm’s purchasing manager. On March 10, 1988, petitioners issued a  check for P10,000.00 to the General Agency for Reconnaissance, Detection, and Security, Inc. (GARDS) in partial payment of the security services rendered by

GARDS to Ervine. The check was drawn on the China Banking Corporation (CBC). When deposited in the Philippine Commercial International Bank (PCIBank) branch at Shaw Boulevard, Mandaluyong, the check was dishonored for  insufficiency of funds.

On March 29, 1988, GARDS wrote Ervine a letter in which it demanded payment in cash of the amount of the check  within seven days from notice. The letter was received by Ervine on the same day, but petitioners did not pay within the time given.

On April 13, 1988, petitioners issued a check for P19,860.16 to GARDS. The check was drawn on the Associated Bank. The voucher accompanying it stated that the check was to replace the dishonored check, theP9,860.16 balance being partial payment for Ervine’s outstanding account. The check and the voucher were received by a GARDS messenger, Nolan C. Pena, on April 15, 1988, but GARDS did not return the dishonored check.

On April 14, 1988, GARDS Operations Manager Jovito C. Cabusara filed a criminal complaint against petitioners for violation of B.P. Blg. 22. After preliminary investigation, an information was filed in the Regional Trial Court of Quezon City (Branch 97).  However, the case was dismissed by the court on May 11, 1989, upon motion of the prosecution, on the ground that Ervine had already paid the amount of the check. 

On September 18, 1989, GARDS, through its Acting Operations Manager Eduardo B. Alindaya, filed another complaint for violation of B.P. Blg. 22 against petitioners. This resulted in the filing of an information against petitioners in the Regional Trial Court of Quezon City (Branch 100). After trial, petitioners were found guilty of the charge and each was sentenced  to suffer one (1) year imprisonment and to pay a fine ofP10,000.00 and the costs.

On appeal, the Court of Appeals affirmed the decision. It subsequently denied petitioners’ motion for reconsideration. Hence, this petition. Petitioners contend:

A. Respondent Court gravely erred in not holding that the prosecution failed to prove petitioners’ guilt beyond reasonable doubt.

B. Respondent Court gravely erred in basing conviction on the alleged weakness of the evidence of the defense rather than on the strength of the evidence of the prosecution.

C. Respondent Court erred in not acquitting petitioners on grounds of “mistake of fact” and “lack of knowledge.”

Petitioners pray that the case against them be dismissed or, in the alternative, that the decision of the trial court be modified by sentencing each to an increased fine but without imprisonment.

By  supplemental petition, dated January 29, 1998, petitioners submitted an affidavit of desistance executed

by GARDS president Dominador R. Santiago which  states that the case arose from a mere “accounting difference”  between petitioners and GARDS, that the latter had not really suffered any damage as a result of the issuance of the check in question and, that GARDS was no longer interested in prosecuting the case.

On May 28, 1998, petitioners filed another supplemental petition, this time invoking the recent decision in Lao v. Court of Appeals,[3] in which this Court reversed a conviction for violation of B.P. Blg. 22 upon a showing that the accused had no knowledge of the insufficiency of funds.

The Solicitor General opposes the appeal.  He contends that the facts of Lao v. Court of Appeals are different from those of the case at bar and that the affidavit of desistance of Dominador Santiago is of no moment, such affidavit having been made only after petitioners’ conviction.

After due review of the decision in this case, we find that petitioners’ conviction for violation of B.P. Blg. 22 is well founded.

First. The elements of the offense penalized under B.P. Blg. 22 are: (1) making, drawing, and issuance of any check to apply to account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of the check for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. [4] The maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds.[5] Thus, §2 of B.P. Blg. 22 expressly provides:

SECTION 2. Evidence of knowledge of insufficient funds. - The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee.

In this case, after being notified on March 29, 1988 of the dishonor of their previous check, petitioners gave GARDS a check for P19,860.16. They claim that this check had been intended by them to replace the bad check they had previously issued to the GARDS. Based on the testimony of a GARDS accountant, however, the Court of Appeals found that the check was actually  payment for two bills, one for the period of January 16 to January 31, 1988 in the amount

of P9,930.08 and another one for the period of  March 16 to  March 31, 1988  in   the  same  amount. But  even  if  such check was intended to replace  the  bad  one, its issuance  on April 13, 1988 ¾ 15  days after petitioners had been notified  on  March 29, 1988  of  the dishonor  of  their previous check ¾ cannot negate the presumption that petitioners knew of the insufficiency of funds to cover the amount of their previous check. Sec. 2 of B.P. Blg. 22 requires that such check be given within five (5) days from the notice of dishonor to them.

Petitioners contend that, in accordance with the ruling in Lao v. Court of Appeals,[6] they should be acquitted because the preparation of checks is the responsibility of the company accountant and all they do is sign the checks.  They  claim that they rely on the word of the accountant that there are sufficient funds in the bank to pay for the checks.

In the Lao case, the accused, as the Court found, had merely been made by her employer, Premiere Investment House, to countersign checks in blank. The accused was a mere employee who did not have anything to do with the issuance of checks for the company. She did not know to whom the checks would be paid as the names of payees were written only later by the head of operations. Moreover, no notice of dishonor was given to her as required by B.P. Blg. 22, §2. It could thus rightly be concluded that the accused issued checks to apply to account not knowing that at the time of issuance funds were insufficient to pay for the checks.

Petitioners in this case cannot pretend ignorance of the insufficiency of funds. While it may be true that it was the company’s accountant who actually prepared the rubber check, the fact remains that petitioners  are the owners and officers of the company. Sec. 1  of B.P. Blg. 22 provides that  “Where the check is drawn by a corporation, company, or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.”

In fact, petitioner Nieto testified that after the check in question was dishonored, he instructed their company accountant to prepare a replacement check.[7] This belies petitioners’ claim that they had no hand in the preparation of checks[8] and shows that petitioners were in control of the finances of the company.

Second. The affidavit of desistance of the GARDS president deserves no more than passing mention. The claim that this case was simply the result of a misunderstanding between GARDS and petitioners and that the former did not really suffer any damage from the dishonor of the check is flimsy. After prosecuting the case below with tenacity, complainants going so far as to file another complaint after their first one had been dismissed, it is trifling with this Court for complainants to now assert that the filing of their case was simply a mistake.  It is for reasons such as this that affidavits of desistance, like retractions, are generally disfavored.[9] The affidavit in this case, which was made after

petitioners’ conviction, is nothing but a last-minute attempt to save them from punishment.  Even if the payee suffered no damage as a result of the issuance of the bouncing check, the damage to the integrity of the banking system cannot be denied.  Damage to the payee is not an element of the crime punished in B.P. Blg. 22.

Third. Petitioners pray that, in the alternative, the penalty be modified by deleting the sentence of imprisonment and, in lieu thereof, a fine in an increased amount be imposed on them. In support of their plea, they allege that they do not have any record of prior conviction; that Eduardo Vaca is of advanced age (late 60s);  and, that they come from good families.  Petitioners claim that “with their family background and social standing there is no reason why they will refuse to pay a due and demandable debt of only P10,000.00.  It is precisely because of their founded belief that the subject obligation has been paid that they refused to be intimidated by a criminal charge.”

The Court of Appeals dismissed these allegations as irrelevant to the question of petitioners’ guilt. We think so ourselves. However, we believe that they can be considered in determining the appropriate penalty to impose on petitioners.

B.P. Blg. 22, §1, par. 1 provides a penalty of “imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than, but not more than double, the amount of the check which fine shall in no case exceed two hundred thousand pesos, or both such fine and imprisonment at the discretion of the Court.” Petitioners are first-time offenders. They are Filipino entrepreneurs who presumably contribute to the national economy. Apparently, they brought this appeal, believing in all good faith, although mistakenly, that they had not committed a violation of B.P. Blg. 22. Otherwise, they could simply have accepted the judgment of the trial court and applied for probation to evade a prison term.  It would best serve the ends of criminal justice if in fixing the penalty within the range of discretion allowed by §1, par. 1, the same philosophy underlying the Indeterminate Sentence Law is observed, namely, that of redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness with due regard to the  protection of the social order.[10] In this case we believe that a fine in an amount equal to double the amount of the check involved is an appropriate penalty to impose on each of the petitioners.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that the sentence of imprisonment is deleted and petitioners are each ordered to pay a fine of P20,000.00 equivalent to double the amount of the check.

 SO ORDERED.

G.R. No. 95694.  October 9, 1997]

VICENTE VILLLAFLOR, substituted by his heirs, petitioner, vs. COURT OF APPEALS and NASIPIT LUMBER CO., INC., respondents.

D E C I S I O N

PANGANIBAN ,J.:

In this rather factually complicated case, the Court reiterates the binding force and effect of findings of specialized administrative agencies as well as those of trial courts when affirmed by the Court of Appeals; rejects petitioner’s theory of simulation of contracts; and passes upon the qualifications of private respondent corporation to acquire disposable public agricultural lands prior to the effectivity of the 1973 Constitution.

The Case

Before us is a petition for review on certiorari seeking the reversal of the Decision[1] of the Court of Appeals, dated September 27, 1990, in C.A. G.R. CV No. 09062, affirming the dismissal by the trial court of Petitioner Vicente Villaflor’s complaint against Private Respondent Nasipit Lumber Co., Inc.  The disposition of both the trial and the appellate courts are quoted in the statement of facts below.

The Facts

The facts of this case, as narrated in detail by Respondent Court of Appeals, are as follows:[2]

“The evidence, testimonial and documentary, presented during the trial show that on January 16, 1940, Cirilo Piencenaves, in a Deed of Absolute Sale (exh. A), sold to [petitioner], a parcel of agricultural land containing an area of 50 hectares,[3] more or less, and particularly described and bounded as follows:

‘A certain parcel of agricultural land planted to abaca with visible concrete monuments marking the boundaries and bounded on the NORTH by Public Land now Private Deeds on the East by Serafin Villaflor, on the SOUTH by Public Land; and on the West by land claimed by H. Patete, containing an area of 60 hectares more or less, now under Tax Dec. 29451 in the (sic) of said Vicente Villaflor, the whole parcel of which this particular parcel is only a part, is assessed at P22,550.00 under the above said Tax Dec. Number.’

This deed states:

‘That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but no formal document was then executed, and since then until the present time, the said Vicente Villaflor has been in possession and occupation of (the same); (and)

That the above described property was before the sale, of my exclusive property having inherited from my long dead parents and my ownership to it and that of my [sic] lasted for more than fifty (50) years, possessing and occupying same peacefully, publicly and continuously without interruption for that length of time.’

Also on January 16, 1940, Claudio Otero, in a Deed of Absolute Sale (exh. C) sold to Villaflor a parcel of agricultural land, containing an area of 24 hectares, more or less, and particularly described and bounded as follows:

‘A certain land planted to corn with visible concrete measurements marking the boundaries and bounded on the North by Public Land and Tungao Creek; on the East by Agusan River; on the South by Serafin Villaflor and Cirilo Piencenaves; and on the West by land of Fermin Bacobo containing an area of 24 hectares more or less, under Tax Declaration No. 29451 in the name already of Vicente Villaflor, the whole parcel of which this particular land is only a part, is assessed at P22,550.00 under the above said Tax Declaration No. 29451.’

This deed states:

‘That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but no sound document was then executed, however since then and until the present time, the said Vicente Villaflor has been in open and continuous possession and occupation of said land; (and)

That the above described land was before the sale, my own exclusive property, being inherited from my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying the same, peacefully, openly and continuously without interruption for that length of time.’

Likewise on January 16, 1940, Hermogenes Patete, in a Deed of Absolute Sale (exh. D), sold to Villaflor, a parcel of agricultural land, containing an area of 20 hectares, more or less, and particularly described and bounded as follows:

‘A certain parcel of agricultural land planted to abaca and corn with visible concrete monuments marking the boundaries and bounded on the North by Public Land area-private Road; on the East by land claimed by Cirilo Piencenaves; on the South by Public Land containing an

area of 20 hectares more or less, now under Tax Declaration No. 29451 in the name of Vicente Villaflor the whole parcel of which this particular parcel, is assessed at P22,550.00 for purposes of taxation under the above said Tax Declaration No. 29451.’

This deed states:

‘xxx (O)n June 22, 1937 but the formal document was then executed, and since then until the present time, the said VICENTE VILLAFLOR has been in continuous and open possession and occupation of the same; (and)

That  the above described property was before the sale, my own and exclusive property, being inherited from my deceased parents and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing  and occupying same, peacefully, openly and continuously without interruption for that length of time.’

On February 15, 1940, Fermin Bocobo, in a Deed of Absolute Sale (exh. B), sold to Villaflor, a parcel of agricultural land, containing an area of 18 hectares, more or less, and particularly described and bounded as follows:

‘A certain parcel of agricultural land planted with abaca with visible part marking the corners and bounded on the North by the corners and bounded on the North by Public Land; on the East by Cirilo Piencenaves; on the South by Hermogenes Patete and West by Public Land,  containing an area of 18 hectares more or less now under Tax Declaration No. 29451 in the name of Vicente Villaflor.  The whole parcel of which this particular parcel is only a part is assessed as P22,550.00 for purposes of taxation under the above said Tax Declaration Number (Deed of Absolute Sale executed by Fermin Bocobo date Feb. 15, 1940).  This document was annotated in Registry of Deeds on February 16, 1940).’

This deed states:

‘That the above described property was before the sale of my own exclusive property, being inherited from my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying the same peacefully, openly and continuously without interruption for that length of time.’

On November 8, 1946, Villaflor, in a Lease Agreement (exh. Q),[4] leased to Nasipit Lumber Co., Inc. a parcel of land, containing an area of two (2) hectares, together with all the improvements existing thereon, for a period of five (5) years from June 1, 1946 at a rental of P200.00 per annum ‘to cover the annual rental of house and building sites for thirty three (33) houses or buildings.’  This agreement also provides:[5]

‘3.           During the term of this lease, the Lessee is authorized and empowered to build and construct additional houses in addition to the 33 houses or buildings mentioned in the next preceding paragraph, provided however, that for every additional house or building constructed the Lessee shall pay unto the Lessor an amount of fifty centavos (¢50) per month for every house or building.  The Lessee is empowered and authorized by the Lessor to sublot (sic) the premises hereby leased or assign the same or any portion of the land hereby  leased to any person, firm and corporation; (and)

4.            The Lessee is hereby authorized to make any construction and/or improvement on the premises hereby leased as he may deem necessary and proper thereon, provided however, that any and all such improvements shall become the property of the Lessor upon the termination of this lease without obligation on the part of the latter to reimburse the Lessee for expenses incurred in the construction of the same.’

Villaflor claimed having discovered that after the execution of the lease agreement, that Nasipit Lumber ‘in bad faith x x x surreptitiously grabbed and occupied a big portion of plaintiff’s property x x x’;  that after a confrontation with the corporate’s (sic) field manager, the latter, in a letter dated December 3, 1973 (exh. R),[6] stated recalling having ‘made some sort of agreement for the occupancy (of the property at Acacia, San Mateo), but I no longer recall the details and I had forgotten whether or not we did occupy your land.  But if, as you say, we did occupy it, then (he is ) sure that the company is obligated to pay the rental.’

On July 7, 1948, in an ‘Agreement to Sell’ (exh. 2), Villaflor conveyed to Nasipit Lumber, two (2) parcels of land xxx described as follows:[7]

‘PARCEL ONE

Bounded on the North by Public Land and Tungao Creek; on the East by Agusan River and Serafin Villaflor; on the South by Public Land, on the West by Public Land.  Improvements thereon consist of abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber Company.  Divided into Lot Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852.  Boundaries of this parcel of land are marked by concrete monuments of the Bureau of Lands.  Containing an area of 112,000 hectares.  Assessed at P17,160.00 according to Tax Declaration No. V-315 dated April 14, 1946.

PARCEL TWO

Bounded on the North by Pagudasan Creek; on the East by Agusan River; on the South by Tungao Creek; on the West by Public Land.  Containing an area of 48,000 hectares more or less.  Divided into Lot Nos. 5411,

5410, 5409, and 5399.  Improvements 100 coconut trees, productive, and 300 cacao trees.  Boundaries of said land are marked by concrete monuments of the Bureau pf (sic) Lands.  Assessed value  -- P6,290.00 according to Tax No. 317, April 14, 1946.’

This Agreement to Sell provides:

‘3.           That beginning today, the Party of the Second Part shall continue to occupy the property not anymore in concept of lessee but as prospective owners, it being the sense of the parties hereto that the Party of the Second Part shall not in any manner be under any obligation to make any compensation to the Party of the First Part, for the use, and occupation of the property herein before described in such concept of prospective owner, and it likewise being the sense of the parties hereto to terminate as they do hereby terminate, effective on the date of this present instrument, the Contract of Lease, otherwise known as Doc. No. 420, Page No. 36, Book No. II, Series of 1946 of Notary Public Gabriel R. Banaag, of the Province of Agusan.

4.            That the Party of the Second Part has bound as it does hereby bind itself, its executors and administrators, to pay unto the party of the First Part the sum of Five Thousand Pesos (P5,000.00), Philippine Currency, upon presentation by the latter to the former of satisfactory evidence that:

(a)   The Bureau of Lands will not have any objection to the obtainment by the Party of the First Part of a Certificate of Torrens Title in his favor, either thru ordinary land registration proceedings or thru administrative means procedure.

(b)   That there is no other private claimant to the properties hereinbefore described.

5.            That the Party of the First Part has bound as he does hereby bind to undertake immediately after the execution of these presents to secure and obtain, or cause to be secured and obtained, a Certificate of Torrens Title in his favor over the properties described on Page (One) hereof, and after obtainment of such Certificate of Torrens Title, the said Party of the First Part shall execute a (D)eed of Absolute Sale unto and in favor of the Party of the Second Part, its executors, administrators and assigns, it being the sense of the parties that the Party of the Second Part upon delivery to it of such deed of absolute sale, shall pay unto the Party of the First Part in cash, the sum of Twelve Thousand (P12,000.00) Pesos in Philippine Currency, provided, however, that the Party of the First Part, shall be reimbursed by the Party of the Second Part with one half of the expenses incurred by the Party of the First Part for survey and attorney’s fees; and other incidental expenses not exceeding P300.00.’

On December 2, 1948, Villaflor filed Sales Application No. V-807[8] (exh. 1) with the Bureau of Lands, Manila,

‘to purchase under the provisions of Chapter V, XI or IX of Commonwealth Act. No. 141 (The Public Lands Act), as amended, the tract of public lands x x x and described as follows:  ‘North by Public Land; East by Agusan River and Serafin Villaflor; South by Public Land and West by public land (Lot Nos. 5379, 5489, 5412, 5490, 5491, 5492, 5849, 5850, 5851, 5413, 5488, 5489, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 x x x  containing an area of 140 hectares xxx.’  Paragraph 6 of the Application, states: ‘I understand that this application conveys no right to occupy the land prior to its approval, and I recognized (sic) that the land covered by the same is of public domain and any and all rights I may have with respect thereto by virtue of continuous occupation and cultivation are hereby relinquished to the Government.’[9] (exh. 1-D)

On December 7, 1948, Villaflor and Nasipit Lumber executed an ‘Agreement’ (exh 3).[10] This contract provides:

‘1.           That the First Party is the possessor since 1930 of two (2) parcels of land situated in sitio Tungao, Barrio of San Mateo, Municipality of Butuan, Province of Agusan;

2.            That the first parcel of land abovementioned and described in Plan PLS-97 filed in the office of the Bureau of Lands is made up of Lots Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5849, 5850, 5851, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 and the second parcel of land is made of Lots Nos. 5399, 5409, 5410 and 5411;

3.            That on July 7, 1948, a contract of Agreement to Sell was executed between the contracting parties herein, covering the said two parcels of land, copy of said Agreement to Sell is hereto attached marked as Annex “A” and made an integral part of this document.  The parties hereto agree that the said Agreement to Sell be maintained in full force and effect with all its terms and conditions of this present agreement and in no way be considered as modified.

4.            That paragraph 4 of the Contract of Agreement to Sell, marked as annex, “A” stipulates as follows:

‘Par. 4.        That the Party of the Second Part has bound as it does hereby bind itself, its executors and administrators, to pay unto the Party of the First Part of the sum of FIVE THOUSAND PESOS (P5,000.00) Philippine Currency, upon presentation by the latter to the former of satisfactory evidence that:

a)    The Bureau of Lands will have any objection to the obtainment by Party of the First Part of a favor, either thru ordinary land registration proceedings or thru administrative means and procedure.

b)    That there is no other private claimant to the properties hereinabove described.’

That the First Party has on December 2, 1948, submitted to the Bureau of Lands, a Sales Application for the twenty-two (22) lots comprising the two abovementioned parcels of land, the said Sales Application was registered in the said Bureau under No. V-807;

6.            That in reply to the request made by the First Party to the Bureau of Lands, in connection with the Sales Application No. V-807, the latter informed the former that action on his request will be expedited, as per letter of the Chief, Public Land Division, dated December 2, 1948, copy of which is hereto attached marked as annex ‘B’ and made an integral part of this agreement:

7.            That for and in consideration of the premises above stated and the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS  that the Second Party shall pay to the First Party, by these presents, the First Party hereby sells, transfers and conveys unto the Second Party, its successors and assigns, his right, interest and participation under an(d) by virtue of the Sales Application No. V-807, which he has or may have in the lots mentioned in said Sales Application No. V-807;

8.            That the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS, shall be paid by the Second Party to the First Party, as follows:

a)    The amount of SEVEN THOUSAND (P7,000.00) PESOS, has already been paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948;

b)    The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present agreement; and

c)    The balance of TWELVE THOUSAND (P12,000.00) PESOS, shall be paid upon the execution by the First Party of the Absolute Deed of Sale of the two parcels of land in question in favor of the Second Party, and upon delivery to the Second Party of the Certificate of Ownership of the said two parcels of land.

9.            It is specially understood that the mortgage constituted by the First Party in favor of the Second Party, as stated in the said contract of Agreement to Sell dated July 7, 1948, shall cover not only the amount of SEVEN THOUSAND (P7,000.00) PESOS as specified in said document, but shall also cover the amount of FIVE THOUSAND (P5,000.00) PESOS to be paid as stipulated in paragraph 8, sub-paragraph (b) of this present agreement, if the First Party should fail to comply with the obligations as provided for in paragraphs 2, 4, and 5 of the Agreement to Sell;

10.          It is further agreed that the First Party obligates himself to sign, execute and deliver to and in favor of the Second Party, its successors and assigns, at anytime upon demand by the Second Party such other instruments as may be necessary in order to give full effect to this present agreement;’

In the Report dated December 31, 1949 by the public land inspector, District Land Office, Bureau of Lands, in Butuan, the report contains an Indorsement of the aforesaid District Land Officer recommending rejection of the Sales Application of Villaflor for having leased the property to another even before he had acquired transmissible rights thereto.

In a letter of Villaflor dated January 23, 1950, addressed to the Bureau of Lands, he informed the Bureau Director that he was already occupying the property when the Bureau’s Agusan River Valley Subdivision Project was inaugurated, that the property was formerly claimed as private properties (sic), and that therefore, the property was segregated or excluded from disposition because of the claim of private ownership.  In a letter of Nasipit Lumber dated February 22, 1950 (exh. X)[11] addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and occupant of the land; that since June 1946, Villaflor leased two (2) hectares inside the land to the company; that it has no other interest on the land; and that the Sales Application of Villaflor should be given favorable consideration.

xxx                                                                        xxx                                                                                    xxx

On July 24, 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in full.

xxx                                                                        xxx                                                                                    xxx

On August 16, 1950, Villaflor executed a document, denominated as a ‘Deed of Relinquishment of Rights’ (exh. N),[12] pertinent portion of which reads:

‘5. That in view of my present business in Manila, and my change in residence from Butuan, Agusan to the City of Manila, I cannot, therefore, develope (sic) or cultivate the land applied for as projected before;

6. That the Nasipit Lumber Company, Inc., a corporation duly organized xxx is very much interested in acquiring the land covered by the aforecited application xxx;

7. That I believe the said company is qualified to acquire public land, and has the means to develop (sic) the above-mentioned land;

xxx                                                                        xxx                                                                                    xxx

WHEREFORE, and in consideration of the amount of FIVE THOUSAND PESOS (P5,000.00) to be reimbursed to me by the aforementioned Nasipit Lumber Company, Inc., after its receipt of the order of award, the said amount representing part of the purchase price of the land aforesaid, the value of the improvements I introduced thereon, and the expenses incurred in the publication of the Notice of Sale, I, the applicant, Vicente J. Villaflor, hereby voluntarily renounce and relinquish whatever rights to, and interests I have in the land covered by my above-mentioned application in favor of the Nasipit Lumber Company, Inc.’

Also on August 16, 1950, Nasipit Lumber filed a Sales Application over the two (2) parcels of land, covering an area of 140 hectares, more or less.  This application was also numbered V-807 (exh. Y).

On August 17, 1950 the Director of Lands issued an ‘Order of Award’[13] in favor of Nasipit Lumber Company, Inc., pertinent portion of  which reads:

‘4. That at the auction sale of the land held on July 24, 1950 the highest bid received was that of Nasipit Lumber Company, Inc. which offered P41.00 per hectare or P5,740.00 for the whole tract, which bid was equaled by applicant Vicente J. Villaflor, who deposited the amount of P574.00 under Official Receipt No. B-1373826 dated July 24, 1950 which is equivalent to 10% of the bid.  Subsequently, the said xxx Villaflor paid the amount of P5,160.00 in full payment of the purchase price of the above-mentioned land and for some reasons stated in an instrument of relinquishment dated August 16, 1950, he (Vicente J. Villaflor) relinquished his rights to and interest in the said land in favor of the Nasipit Lumber Company, Inc. who filed the corresponding application therefore.

In view of the foregoing, and it appearing that the proceedings had xxx were in accordance with law and in [sic] existing regulations, the land covered thereby is hereby awarded to Nasipit Lumber Company, Inc. at P41.00 per hectare or P5,740.00 for the whole tract.

This application should be entered in the record of this Office as Sales Entry No. V-407.’

It is Villaflor’s claim that he only learned of the Order of Award on January 16, 1974, or after his arrival to the Philippines, coming from Indonesia, where he stayed for more than ten (10) years; that he went to Butuan City in the latter part of 1973 upon the call of his brother Serafin

Villaflor, who was then sick and learned that Nasipit Lumber (had) failed and refused to pay the agreed rentals, although his brother was able to collect during the early years; and that Serafin died three days after his (Vicente’s) arrival, and so no accounting of the rentals could be made; that on November 27, 1973, Villaflor wrote a letter to Mr. G.E.C. Mears of Nasipit Lumber, reminding him of their verbal agreement in 1955 xxx that Mr. Mears in a Reply dated December 3, 1973, appears to have referred the matter to Mr. Noriega, the corporate general manager, but the new set of corporate officers refused to recognize (Villaflor’s) claim, for Mr. Florencio Tamesis, the general manager of Nasipit Lumber, in a letter dated February 19, 1974, denied Villaflor’s itemized claim dated January 5, 1974 (exh. V) to be without valid and legal basis.  In that 5th  January, 1974 letter, Villaflor claimed the total amount of P427,000.00 x x x.

In a formal protest dated January 31, 1974[14] which Villaflor filed with the Bureau of Lands, he protested the Sales Application of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as provided in the Deed of Relinquishment of Rights dated August 16, 1950.

xxx                                                                        xxx                                                                                    xxx

x x x (T)hat in a Decision dated August 8, 1977 (exh. 8), the Director of Lands found that the payment of the amount of P5,000.00 in the Deed xxx and the consideration in the Agreement to Sell were duly proven, and ordered the dismissal of Villaflor’s protest and gave due course to the Sales Application of Nasipit Lumber.  Pertinent portion of the Decision penned by Director of Lands, Ramon Casanova, in the Matter of SP No. V-807 (C-V-407) xxx reads:

‘xxx                                                                       xxx                                                                                    xxx

During the proceedings, Villaflor presented another claim entirely different from his previous claim -- this time, for recovery of rentals in arrears arising from a supposed contract of lease by Villaflor as lessor in favor of Nasipit as lessee, and indemnity for damages supposedly caused improvements on his other property xxx in the staggering amount of Seventeen Million (P17,000,000.00) Pesos.  Earlier, he had also demanded from NASIPIT xxx (P427,000.00) xxx also as indemnity for damages to improvements supposedly caused by NASIPIT on his other real property as well as for reimbursement of realty taxes allegedly paid by him thereon.

xxx                                                                        xxx                                                                                    xxx

It would seem that xxx Villaflor has sought to inject so many collaterals, if not extraneous claims, into this case.  It is the considered opinion of this Office that any claim not within the sphere or scope of its adjudicatory authority as an administrative as well as quasi-judicial body or any issue which seeks to delve into the merits of incidents clearly outside of the administrative competence of this Office to decide may not be entertained.

There is no merit in the contention of Villaflor that owing to Nasipit’s failure to pay the amount of xxx (P5,000.00) xxx (assuming that Nasipit had failed) the deed of relinquishment became null and void for lack of consideration. xxxx.

xxx                                                                        xxx                                                                                    xxx

x x x The records clearly show, however, that since the execution of the deed of relinquishment xxx Villaflor has always considered and recognized NASIPIT as having the juridical personality to acquire public lands for agricultural purposes.  xxxx.

xxx                                                                        xxx                                                                                    xxx

Even this Office had not failed to recognize the juridical personality of NASIPIT to apply for the purchase of public lands xxx when it awarded to it the land so relinquished by Villaflor (Order of Award dated August 17, 1950) and accepted its application therefor.  At any rate, the question whether an applicant is qualified to apply for the acquisition of public lands is a matter between the applicant and this Office to decide and which a third party like Villaflor has no personality to question beyond merely calling the attention of this Office thereto.

xxx                                                                        xxx                                                                                    xxx

Villaflor offered no evidence to support his claim of non-payment beyond his own self-serving assertions and expressions that he had not been paid said amount.  As protestant in this case, he has the affirmative of the issue. He is obliged to prove his allegations, otherwise his action will fail.  For, it is a well settled principle (‘) that if plaintiff upon whom rests the burden of proving his cause of action fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exceptions or special defenses (Belen vs. Belen, 13 Phil. 202; Mendoza vs. Fulgencio, 8 Phil. 243).

xxx                                                                        xxx                                                                                    xxx

Consequently, Villaflor’s claim that he had not been paid must perforce fail.

On the other hand, there are strong and compelling reasons to presume that Villaflor had already been paid the amount of Five Thousand (P5,000.00) Pesos.

First, xxx What is surprising, however, is not so much his claims consisting of gigantic amounts as his having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand (P5,000.00) Pesos  during the investigation proceedings when he had all the time and opportunity to do so.  xxx The fact that he did not adduce or even attempt to adduce evidence in support thereof shows either that he had no evidence to offer xxx that NASIPIT had already paid him in fact.  What is worse is that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand (P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause of action to recover payment had accrued.  The fact that he only made a command (sic) for payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is immediately nugatory of his claim for non-payment.

But Villaflor maintains that he had no knowledge or notice that the order of award had already been issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all those twenty-four (24) years.  This of course taxes credulity. xxx.

Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was issued to NASIPIT on August 17, 1950.  The said deed of relinquishment was prepared and notarized in Manila with Villaflor and NASIPIT signing the instrument also in Manila on August 16, 1950 (p.77, (sic)).  The following day or barely a day after that, or on August 17, 1950, the order of award was issued by this Office to NASIPIT also in Manila.  Now, considering that Villaflor is presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of the order of award as the payment of the Five Thousand (P5,000.00) Pesos (consideration) would depend on the issuance of said order to award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was issued to NASIPIT on August 17, 1950, or barely a day which (sic) he executed the deed of relinquishment on August 16, 1950, in Manila?  xxx.

Third, on the other hand, NASIPIT has in his possession a sort of “order” upon itself -- (the deed of relinquishment wherein he (sic) obligated itself to reimburse or pay

Villaflor the xxx consideration of the relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the moment the order of award is issued to it.  It is reasonable to presume that NASIPIT has paid the Five Thousand (P5,000.00) Pesos to Villaflor.

‘A person in possession of an order on himself for the payment of money, or the delivery of anything, has paid the money or delivered the thing accordingly.  (Section 5(k) B-131-Revised Rules of Court.’

It should be noted that NASIPIT did not produce direct evidence as proof of its payment of the Five Thousand (P5,000.00) Pesos to Villaflor.  Nasipit’s explanation on this point is found satisfactory.

‘x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to cope up with all the records necessary to show that the consideration for the deed of relinquishment had been fully paid.  To expect NASIPIT to keep intact all records pertinent to the transaction for the whole quarter of a century would be to require what even the law does not.  Indeed, even the applicable law itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be preserved for only a maximum of five years.

NASIPIT may well have added that at any rate while ‘there are transactions where the proper evidence is impossible or extremely difficult to produce after the lapse of time xxx the law creates presumptions of regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in an action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491).

Anent Villaflor’s claim that the 140-hectare land relinquished and awarded to NASIPIT is his private property, little (need) be said.  xxxx The tracks of land referred to therein are not identical to the lands awarded to NASIPIT.  Even in the assumption that the lands mentioned in the deeds of transfer are the same as the 140-hectare area awarded to NASIPIT, their purchase by Villaflor (or) the latter’s occupation of the same did not change the character of the land from that of public land to a private property.  The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended).  The records show that Villaflor had applied for the purchase of the lands in question with this Office (Sales Application No. V-807) on December 2, 1948. xxxx There is a condition in the sales application signed by Villaflor to the effect that he recognizes that the land covered by the same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government (paragraph 6, Sales Application No. V-807 xxx) of which Villaflor is very much

aware.  It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He participated in the public auction where he was declared the successful bidder.  He had fully paid the purchase prive (sic) thereof (sic).   It would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership thereof is to be believed.  The most that can be said is that his possession was merely that of a sales applicant to when it had not been awarded because he relinquished his interest therein in favor of NASIPIT who (sic) filed a sales application therefor.

xxx                                                                        xxx                                                                                    xxx

x x x During the investigation proceedings, Villaflor presented as his Exhibit ‘(sic)’ (which NASIPIT adopted as its own exhibit and had it marked in evidence as Exhibit ‘1’) a duly notarized ‘agreement to Sell’ dated July 7, 1948, by virtue of which Villaflor undertook to sell to Nasipit the tracts of land mentioned therein, for a consideration of Twenty-Four Thousand (P24,000.00) Pesos.  Said tracts of land have been verified to be identical to the parcels of land formerly applied for by Villaflor and which the latter had relinquished in favor of NASIPIT under a deed of relinquishment executed by him on August 16, 1950.  In another document executed on December 7, 1948 xxx Villaflor as ‘FIRST PARTY’ and NASIPIT as ‘SECOND PARTY’ confirmed the ‘Agreement to Sell’ of July 7, 1948, which was maintained ‘in full force and effect with all its terms and conditions x x x’ (Exh. ‘38-A’); and that ‘for and in consideration of xxx TWENTY FOUR THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party xxx the First Party hereby sells, transfers and conveys unto the Second Party xxx his right interest and participation under and by virtue of the Sales Application No. V-807’ and, in its paragraph 8, it made stipulations as to when part of the said consideration xxx was paid and when the balance was to be paid, to wit:

‘a) the amount of SEVEN THOUSAND xxx PESOS has already been     paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on July 17, 1948;

b) the amount of FIVE THOUSAND xxx PESOS shall be paid upon the signing of this present agreement; and

c) the amount of TWELVE THOUSAND xxx PESOS, shall be paid upon the execution by the First Party of the Absolute Sale of the Two parcels of land in question in favor of the Second Party of the Certificate of Ownership of the said two parcels of land.’ (Exh. 38-B). (Emphasis ours)

It is thus clear from this subsequent document marked Exhibit ’38 ANALCO’ that of the consideration of the

‘Agreement to Sell’ dated July7, 1948, involving the 140-hectare area relinquished by Villaflor in favor of NASIPIT, in the amount of Twenty-Four Thousand (P24,000.00) Pesos:

(1)          the amount of Seven Thousand (P7,000.00) Pesos was already paid upon the execution of the ‘Agreement to Sell’ on July 7, 1948, receipt of which incidentally was admitted by Villaflor in the document of December 7, 1948;

(2)          the amount of Five Thousand (P5,000.00) Pesos was paid when said document was signed by Vicente J. Villaflor as the First Party and Nasipit thru its President, as the Second Party, on December 7, 1948; and

(3)          the balance of Twelve Thousand (P12,000.00) Pesos to be paid upon the execution by the First Party of the Absolute Deed of Sale of the two parcels of land in favor of the Second Party, and upon delivery to the Second Party of the Certificate of Ownership of the said two parcels of land.

Villaflor contends that NASIPIT could not have paid Villaflor the balance of Twelve Thousand (P12,000.00) Pesos x x x consideration in the Agreement to Sell will only be paid to applicant-assignor (referring to Villaflor) upon obtaining a Torrens Title in his favor over the 140-hectare of land applied for and upon execution by him of a Deed of Absolute Sale in favor of Nasipit Lumber Company, Inc. x x x.  Inasmuch as applicant-assignor was not able to obtain a Torrens Title over the land in question he could not execute an absolute Deed of (sic) Nasipit Lumber Co., Inc.  Hence, the Agreement to Sell was not carried out and no Twelve Thousand (P12,000.00) Pesos was overpaid either to the applicant-assignor, much less to Howard J. Nell Company.  (See MEMORANDUM FOR THE APPLICANT-ASSIGNOR, dated January 5, 1977).  xxx.

xxx Villaflor did not adduce evidence in support of his claim that he had not been paid the xxx (P12,000.00) xxx consideration of the Agreement to Sell dated July 7, 1948 (Exh. ‘38 NALCO’) beyond his mere uncorroborated assertions.  On the other hand, there is strong evidence to show that said Twelve Thousand (P12,000.00) Pesos had been paid by (private respondent) to Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. ‘41 NALCO’) for the credit of the latter.

Atty. Gabriel Banaag, resident counsel of NASIPIT who is in a position to know the facts, testified for NASIPIT.  He described that it was he who notarized the ‘Agreement to Sell‘ (Exh. ‘F’); that he knew about the execution of the document of December 7, 1948 (Exh. ‘38’) confirming the said ‘Agreement to Sell’ having been previously consulted thereon by Jose Fernandez, who signed said document on behalf of NASIPIT xxx  that subsequently, in January 1949, Villaflor executed a

Deed of Assignment of credit in favor of Edward J. Nell Company (Exh. ‘41 NALCO’) whereby Villaflor ceded to the latter his receivable for NASIPIT  corresponding to the remaining balance in the amount of Twelve Thousand xxx Pesos  of the total consideration xxx stipulated in both the ‘Agreement to Sell’ (Exh. ‘F’) and the document dated December 7, 1948 (Exh. ‘39’); xxx.  He further testified that the said assignment of credit was communicated to (private respondent) under cover letter dated January 24, 1949 (Exh. ‘41-A’) and not long thereafter, by virtue of the said assignment of credit, (private respondent) paid the balance of Twelve Thousand xxx due to Villaflor to Edward J. Nell Company xxx. Atty. Banaag’s aforesaid testimony stand unrebutted; hence, must be given full weight and credit. xxx Villaflor and his counsel were present when Atty. Banaag’s foregoing testimony was given.  Yet, Villaflor did not demur, nor did he rebut the same, despite having been accorded full opportunity to do so.

xxx                                                                        xxx                                                                                    xxx

Having found that both the Five Thousand  xxx consideration of the deed of Relinquishment xxx and that the remaining balance of xxx (P12,000.00) to complete the Twenty-Four Thousand (P24,000.00) Pesos consideration of both the Agreement to Sell dated July 7, 1948, and the document, dated December 7, 1948, executed by the former in favor of the latter, have been paid Villaflor the issue on prescription and laches becomes academic and needs no further discussion.

But more than all the questions thus far raised and resolved is the question whether a sales patent can be issued to NASIPIT for the 140-hectare area awarded to it in the light of Section 11, Article XIV of the new Constitution which provides in its pertinent portion to wit:

‘x x x No private corporation or association may hold alienable land of the public domain except by lease not to exceed one thousand hectares in area xxx.’

The Secretary of Justice had previous occasion to rule on this point in his opinion No. 140, s. 1974.  Said the Honorable Justice Secretary:

‘On the second question, (referring to the questions when may a public land be considered to have been acquired by purchase before the effectivity of the new Constitution posed by the Director of Lands in his query on the effect on pending applications for the issuance of sales patent in the light of Section 11, Art. XIV of the New Constitution aforecited), you refer to this Office’s Opinion No. 64 series of 1973 in which I stated:

On the other hand, with respect to sales applications ready for issuance of sales patent, it is my opinion that where the applicant had, before the Constitution took effect, fully complied with all this obligations under the

Public Land Act in order to entitle him to a Sales patent, there would be no legal or equitable justification for refusing to issue or release the sales patent.’

With respect to the point as to when the Sales applicant has complied with all the terms and conditions which would entitle him to a sales patent, the herein above Secretary of Justice went on:

‘That as to when the applicant has complied with all the terms and conditions which would  entitle him to a patent is a questioned (sic) fact which your office would be in the best position to determine.  However, relating this to the procedure for the processing of applications mentioned above, I think that as the  applicant has fulfilled the construction/cultivation requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract of land and (sic) the area (sic) in the provision in question of the new constitution would not apply.’

From the decision of the Director of Lands, Villaflor filed a Motion for Reconsideration which was considered as an Appeal M.N.R. Case 4341, to the Ministry of Natural Resources.

On June 6, 1979, the Minister of Natural Resources rendered a Decision (exh. 9),[15] dismissing the appeal and affirming the decision of the Director of Lands, pertinent portions of which reads:

‘After a careful study of the records and the arguments of the parties, we believe that the appeal is not well taken.

Firstly, the area in dispute is not the private property of appellant.

The evidence adduced by appellant to establish his claim of ownership over the subject area consists of deeds of absolute sale executed in his favor on January 16, and February 15, 1940, by four (4) different persons, namely, Cirilo Piencenaves, Fermin Balobo, Claudio Otero and Hermogenes Patete.

However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that said parcels are not identical to, and do not tally with, the area in controversy.

‘It is a basic assumption of our policy that lands of whatever classification belong to the state.  Unless alienated in accordance with law, it retains its rights over the same as dominus, (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152).

For, it is well-settled that no public land can be acquired by private persons without any grant, express or implied from the government.  It is indispensable then that there be showing of title from the state or any other mode of

acquisition recognized by law.’  (Lee Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379.)

It is well-settled that all lands remain part of the public domain unless severed therefrom by state grant or unless alienated in accordance with law.

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to establish that the contested area is of private ownership.  Hence, the property must be held to be public domain.

‘There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors either by composition title from the Spanish Government or by possessory information title or by any other means for the acquisition of public lands, the property must be held to be public domain.’  (Lee  Hong Hok, et al., vs. David , et al., L-30389 December 27, 1972, 48 SCRA 378-379 citing Heirs of Datu Pendatun vs. Director of Lands; see also Director of Lands vs. Reyes, L-27594, November 28, 1975, 68 SCRA 177).

Be that as it may, appellant, by filing a sales application over the controverted land, acknowledged unequivocably [sic] that the same is not his private property.

‘As such sales applicant, appellant manifestly acknowledged that he does not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the application was submitted, xxx All of its acts prior thereof, including its real estate tax declarations, characterized its possessions of the land as that of a ‘sales applicant’ and consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner.’ (Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 20, 21).

Secondly, appellant’s alleged failure to pay the consideration stipulated in the deed of relinquishment neither converts said deed into one without a cause or consideration nor ipso facto rescinds the same.  Appellant, though, has the right to demand payment with legal interest for the delay or to demand rescission.

xxx                                                                        xxx                                                                                    xxx

However, appellant’s cause of action, either for specific performance or rescission of contract, with damages, lies within the jurisdiction of civil courts, not with administrative bodies.

xxx                                                                        xxx                                                                                    xxx

Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by the new constitutional provision that no private corporation may hold alienable land of the public domain except by lease.

xxx                                                                        xxx                                                                                    xxx

Implementing the aforesaid Opinion No. 64 of the Secretary of Justice, the then Secretary of Agriculture and Natural Resources issued a memorandum, dated February 18, 1974, which pertinently reads as follows:

‘In the implementation of the foregoing opinion, sales application of private individuals covering areas in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be given due course and issued patents, to wit:

1.    Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to January 17, 1973;

a.    the land covered thereby was awarded;

b.    cultivation requirements of law were complied with as shown by investigation reports submitted prior to January 17, 1973;

c.    land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and

d.    purchase price was fully paid.’

From the records, it is evident that the aforestated requisites have been complied with by appellee long before January 17, 1973, the effectivity of the New Constitution.  To restate, the disputed area was awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the cultivation requirements were complied with as per investigation report dated December 31, 1949, and the land was surveyed under Pls-97.’”

On July 6, 1978, petitioner filed a complaint [16] in the trial court  for “Declaration of Nullity of Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the contract), and Damages” at about the same time that he appealed the decision of the Minister of Natural Resources to the Office of the President.

On January 28, 1983, petitioner died.  The trial court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner.  After trial in due course, the then Court of First Instance of Agusan del Norte and Butuan City, Branch III,[17] dismissed the complaint on the grounds that: (1) petitioner admitted the due execution and genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action were barred by extinctive prescription and/or laches.  It ruled that there was prescription and/or laches because the alleged verbal lease ended in 1966, but the action was filed only on January 6, 1978.  The six-year period within which to file an action on an oral contract per Article 1145 (1) of the Civil Code expired in 1972.  The decretal portion[18] of the trial court’s decision reads:

“WHEREFORE, the foregoing premises duly considered, judgment is hereby rendered in favor of the defendant and against the plaintiff.  Consequently, this case is hereby ordered DISMISSED. The defendant is hereby declared the lawful actual physical possessor-occupant and having a better right of possession over the two (2) parcels of land in litigation described in par. 1.2 of the complaint as Parcel I and Parcel II, containing a total area of One Hundred Sixty (160) hectares, and was then the subject of the Sales Application No. V-807 of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A, Record), and now of the Sales Application No. 807, Entry No. V-407 of the defendant Nasipit Lumber Company (Exhibit Y, pp. 357-358, Record).  The Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to 3-B, and the Deed of Relinquishment of Rights, Exhibits N to N-1, over the two parcels of land in litigation are hereby declared binding between the plaintiff and the defendant, their successors and assigns.

Double the costs against the plaintiff.”

The heirs of petitioner appealed to Respondent Court of Appeals[19] which, however, rendered judgment against petitioner via the assailed Decision dated September 27, 1990 finding petitioner’s prayers -- (1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction of private respondent from the property and (3) for the declaration of  petitioner’s heirs as owners – to be without basis.  The decretal portion[20] of the assailed 49-page, single-spaced Decision curtly reads:

“WHEREFORE, the Decision appealed from, is hereby AFFIRMED, with costs against plaintiff-appellants.”

Not satisfied, petitioner’s heirs filed the instant 57-page petition for review dated December 7, 1990.  In a Resolution dated June 23, 1991, the Court denied this petition “for being late.”  On reconsideration -- upon plea of counsel that petitioners were “poor” and that a full decision on the merits should be rendered -- the Court reinstated the petition and required comment from

private respondent.  Eventually, the petition was granted due course and the parties thus filed their respective memoranda.

The Issues

Petitioner, through his heirs, attributes the following errors to the Court of Appeals:

“I.  Are the findings of the Court of Appeals conclusive and binding upon the Supreme Court?

II.  Are the findings of the Court of Appeals fortified by the similar findings made by the Director of Lands and the Minister of Natural Resources (as well as by the Office of the President)?

III.  Was there ‘forum shopping?’

IV.  Are the findings of facts of the Court of Appeals and the trial court supported by the evidence and the law?

V.  Are the findings of the Court of Appeals supported by the very terms of the contracts which were under consideration by the said court?

VI.  Did the Court of Appeals, in construing the subject contracts, consider the contemporaneous and subsequent act of the parties pursuant to article 1371 of the Civil Code?

VII.  Did the Court of Appeals consider the fact and the unrefuted claim of Villaflor that he never knew of the award in favor of Nasipit?

VIII.  Did the Court of Appeals correctly apply the rules on evidence in its findings that Villaflor was paid the P5,000.00 consideration because Villaflor did not adduce any proof that he was not paid?

IX.  Is the Court of Appeals‘ conclusion that the contract is not simulated or fictitious simply because it is genuine and duly executed by the parties, supported by logic or the law?

X.  May the prestations in a contract agreeing to transfer certain rights constitute estoppel when this very contract is the subject of an action for annulment on the ground that it is fictitious?

XI.  Is the Court of Appeals‘ conclusion that the lease agreement between Villaflor is verbal and therefore, unenforceable supported by the evidence and the law?”

After a review of the various submissions of the parties, particularly those of petitioner, this Court

believes and holds that the issues can be condensed into three as follows:

(1)     Did the Court of Appeals err in adopting or relying on the factual findings of the Bureau of Lands, especially those affirmed by the Minister (now Secretary) of Natural Resources and the trial court?

(2)     Did the Court of Appeals err in upholding the validity of the contracts to sell and the deed of relinquishment?  Otherwise stated, did the Court of Appeals err in finding the deed of relinquishment of rights and the contracts to sell valid, and not simulated or fictitious?

(3)     Is the private respondent qualified to acquire title over the disputed property?

The Court’s Ruling

The petition is bereft of merit.  It basically questions the sufficiency of the evidence relied upon by the Court of Appeals, alleging that public respondent’s factual findings were based on speculations, surmises and conjectures.  Petitioner insists that a review of those findings is in order because they were allegedly (1) rooted, not on specific evidence, but on conclusions and inferences of the Director of Lands which were, in turn, based on misapprehension of the applicable law on simulated contracts; (2) arrived at whimsically -- totally ignoring the substantial and admitted fact that petitioner was not notified of the award in favor of private respondent; and (3) grounded on errors and misapprehensions, particularly those relating to the identity of the disputed area.

First Issue:  Primary Jurisdiction of the Director of Lands and Finality of Factual Findings of the Court of Appeals

Underlying the rulings of the trial and appellate courts is the doctrine of primary jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact.[21]

In recent years, it has been the jurisprudential trend to apply this doctrine to cases involving matters that demand the special competence of administrative agencies even if the question involved is also judicial in character.  It applies “where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of

issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.”[22]

In cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot arrogate unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence.[23] In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of the Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian dispute over the payment of back rentals under a leasehold contract.[24] In Concerned Officials of the Metropolitan Waterworks and Sewerage System vs. Vasquez,[25] the Court recognized that the MWSS was in the best position to evaluate and to decide which bid for a waterworks project was compatible with its development plan.

The rationale underlying the doctrine of primary jurisdiction finds application in this case, since the questions on the identity of the land in dispute and the factual qualification of private respondent as an awardee of a sales application require a technical determination by the Bureau of Lands as the administrative agency with the expertise to determine such matters.  Because these issues preclude  prior judicial determination, it behooves the courts to stand aside even when they apparently have statutory power to proceed, in recognition of the primary jurisdiction of the administrative agency.[26]

“One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular courts”[27]

Petitioner initiated his action with a protest before the Bureau of Lands and followed it through in the Ministry of Natural Resources and thereafter in the Office of the President.  Consistent with the doctrine of primary jurisdiction, the trial and the appellate courts had reason to rely on the findings of these specialized administrative bodies.

The primary jurisdiction of the director of lands and the minister of natural resources over the issues regarding the identity of the disputed land and the qualification of an awardee of a sales patent is established by Sections 3 and 4 of Commonwealth Act No. 141, also known as the Public Land Act:

“Section 3. The Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be the executive officer charged with carrying out the provisions of this Act through the Director of Lands, who shall act under his immediate control.”

“Section 4. Subject to said control, the Director of Lands shall have direct executive control of the survey, classification, lease, sale or any other form of concession or disposition and management of the lands of the public domain, and his decision as to questions of fact shall be conclusive when approved by the Secretary of Agriculture and Commerce.”

Thus, the Director of Lands, in his decision, said:[28]

“x x x It is merely whether or not Villaflor has been paid the Five Thousand (P5,000.00) Pesos stipulated consideration of the deed of relinquishment made by him without touching on the nature of the deed of relinquishment.  The administration and disposition of public lands is primarily vested in the Director of Lands and ultimately with the Secretary of Agriculture and Natural Resources (now Secretary of Natural Resources), and to this end--

‘Our Supreme Court has recognized that the Director of Lands is a quasi-judicial officer who passes on issues of mixed facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440).  Sections 3 and 4 of the Public Land Law thus mean that the Secretary of Agriculture and Natural Resources shall be the final arbiter on questions of fact in public land conflicts (Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442).‘

The ruling of this Office in its order dated September 10, 1975, is worth reiterating, thus:

‘x x x it is our opinion that in the exercise of his power of executive control, administrative disposition and allegation of public land, the Director of Lands should entertain the protest of Villaflor and conduct formal investigation xxx to determine the following points: (a) whether or not the Nasipit Lumber Company, Inc. paid or reimbursed to Villaflor the consideration of the rights in the amount of P5,000.00 and what evidence the company has to prove payment, the relinquishment of rights being part of the administrative process in the disposition of the land in question xxx.

xxxx Besides, the authority of the Director of Lands to pass upon and determine questions considered inherent in or essential to the efficient exercise of his powers like the incident at issue, i.e. , whether Villaflor had been paid or not, is conceded by law.‘”

Reliance by the trial and the appellate courts on the factual findings of the Director of Lands and the Minister of Natural Resources is not misplaced.  By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not finality,[29] by the courts.[30] The findings of fact of an administrative agency must be respected as long as they are supported by substantial evidence, even if such evidence might not be

overwhelming or even preponderant.  It is not the task of an appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect of sufficiency of evidence.[31]

However, the rule that factual findings of an administrative agency are accorded respect and even finality by courts admits of exceptions.  This is true also in assessing factual findings of lower courts. [32] It is incumbent on the petitioner to show that the resolution of the factual issues by the administrative agency and/or by the trial court falls under any of the exceptions.  Otherwise, this Court will not disturb such findings.[33]

We mention and quote extensively from the rulings of the Bureau of Lands and the Minister of Natural Resources because the points, questions and issues raised by petitioner before the trial court, the appellate court and now before this Court are basically the same as those brought up before the aforesaid specialized administrative agencies.  As held by the Court of Appeals:[34]

“We find that the contentious points raised by appellant in this action, are substantially the same matters he raised in BL Claim No. 873 (N).  In both actions, he claimed private ownership over the land in question, assailed the validity and effectiveness of the Deed of Relinquishment of Rights he executed in August 16, 1950, that he had not been paid the P5,000.00 consideration, the value of the improvements he introduced on the land and other expenses incurred by him.”

In this instance, both the principle of primary jurisdiction of administrative agencies and the doctrine of finality of factual findings of the trial courts, particularly when affirmed by the Court of Appeals as in this case, militate against petitioner’s cause.  Indeed, petitioner has not given us sufficient reason to deviate from them.

Land in Dispute Is Public Land

Petitioner argues that even if the technical description in the deeds of sale and those in the sales application were not identical, the area in dispute remains his private property.  He alleges that the deeds did not contain any technical description, as they were executed prior to the survey conducted by the Bureau of Lands; thus, the properties sold were merely described by reference to natural boundaries.  His private ownership thereof was also allegedly attested to by private respondent’s former field manager in the latter’s February 22, 1950 letter, which contained an admission that the land leased by private respondent was covered by the sales application.

This contention is specious.  The lack of technical description did not prove that the finding of the Director of Lands lacked substantial evidence.  Here, the issue is not so much whether the subject land is identical with the property purchased by petitioner.  The issue, rather, is whether the land covered by the sales application is private or public land.  In his sales application, petitioner expressly admitted that said property was public land.   This  is formidable  evidence as it amounts  to an admission against interest.

In the exercise of his primary jurisdiction over the issue, Director of Lands Casanova ruled that the land was public:[35]

“x x x Even (o)n the assumption that the lands mentioned in the deeds of transfer are the same as the 140-hectare area awarded to Nasipit, their purchase by Villaflor (or) the latter’s occupation of the same did not change the character of the land from that of public land to a private property.  The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended).  The records show that Villaflor had applied for the purchase of lands in question with this Office (Sales Application No. V-807) on December 2, 1948.  xxx There is a condition in the sales application xxx to the effect that he recognizes that the land covered by the same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government (paragraph 6, Sales Application No. V-807 of Vicente J. Villaflor, p. 21, carpeta) of which Villaflor is very much aware.  It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land.  He participated in the public auction where he was declared the successful bidder.  He had fully paid the purchase prive (sic) thereor (sic).  It would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership thereof is to be believed. xxx.”

This finding was affirmed by the Minister of Natural Resources:[36]

“Firstly, the area in dispute is not the private property of appellant (herein petitioner).

The evidence adduced by (petitioner) to establish his claim of ownership over the subject area consists of deeds of absolute sale executed in his favor xxx.

However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that said parcels are not identical to, and do not tally with, the area in controversy.

‘It is a basic assumption of our policy that lands of whatever classification belong to the state.  Unless alienated in accordance with law, it retains its rights over

the same as dominus. (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152).

For it is well-settled that no public land can be acquired by private persons without any grant, express or implied from the government.  It is indispensable then that there be showing of title from the state or any other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379).’

xxx                                                                        xxx                                                                                    xxx                                                                                    xxx

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to establish that the contested area is of private ownership.  Hence, the property must be held to be public domain.

‘There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors either by composition title from the Spanish Government or by possessory information title or by any other means for the acquisition of public lands, the property must be held to be public domain.’

Be that as it may, [petitioner], by filing a sales application over the controverted land, acknowledged unequivocably [sic] that the same is not his private property.

‘As such sales applicant manifestly acknowledged that he does not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the application was submitted, xxx All of its acts prior thereof, including its real estate tax declarations, characterized its possessions of the land as that of a ‘sales applicant’.  And consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner.’(Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 15).”

Clearly, this issue falls under the primary jurisdiction of the Director of Lands because its resolution requires “survey, classification, xxx disposition and management of the lands of the public domain.”  It follows that his rulings deserve great respect.  As petitioner failed to show that this factual finding of the Director of Lands was unsupported by substantial evidence, it assumes finality. Thus, both the trial and the appellate courts correctly relied on such finding.[37] We can do no less.

Second Issue:  No Simulation of Contracts Proven

Petitioner insists that contrary to Article 1371 [38] of the Civil Code, Respondent Court erroneously ignored the contemporaneous and subsequent acts of the parties; hence, it failed to ascertain their true intentions.  However, the rule on the interpretation of contracts that was alluded to by petitioner is used in affirming, not negating, their validity. Thus, Article 1373,[39] which is a conjunct of Article 1371, provides that, if the instrument is susceptible of two or more interpretations, the interpretation which will make it valid and effectual should be adopted.  In this light, it is not difficult to understand that the legal basis urged by petitioner does not support his allegation that the contracts to sell and the deed of relinquishment are simulated and fictitious.  Properly understood, such rules on interpretation even negate petitioner’s thesis.

But let us indulge the petitioner awhile and determine whether the cited contemporaneous  and  subsequent  acts of  the  parties support his allegation of simulation.  Petitioner asserts that the relinquishment of rights and the agreements to sell were simulated because, first, the language and terms of said contracts negated private respondent’s  acquisition of ownership of the land in issue; and second, contemporaneous and subsequent communications between him and private respondent allegedly showed that the latter admitted that petitioner owned and occupied the two parcels; i.e., that private respondent was not applying for said parcels but was interested only in the two hectares it had leased, and that private respondent supported petitioner’s application for a patent.

Petitioner explains that the Agreement to Sell dated December 7, 1948 did not and could not transfer ownership because paragraph 8 (c) thereof stipulates that the “balance of twelve thousand pesos (P12,000.00) shall be paid upon the execution by the First Party [petitioner] of the Absolute Deed of Sale of the two parcels of land in question in favor of the Second Party, and upon delivery to the Second Party [private respondent] of the Certificate of Ownership of the said two parcels of land.”  The mortgage provisions in paragraphs 6 and 7 of the agreement state that the P7,000.00 and P5,000.00 were “earnest money or a loan with antichresis by the free occupancy and use given to Nasipit of the 140 hectares of land not anymore as a lessee.”  If the agreement to sell transferred ownership to Nasipit, then why was it necessary to require petitioner, in a second agreement, to mortgage his property in the event of nonfulfillment of the prestations in the first agreement?

True, the agreement to sell did not absolutely transfer ownership of the land to private respondent.  This fact, however, does not show that the agreement was simulated.  Petitioner’s delivery of the Certificate of Ownership and execution of the deed of absolute sale were suspensive conditions, which gave rise to a corresponding obligation on the part of the private respondent, i.e., the payment of the last installment of the consideration mentioned in the

December 7, 1948 Agreement.  Such conditions did not affect the perfection of the contract or prove simulation.  Neither did the mortgage.

Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is different from that which was really executed.[40] Such an intention is not apparent in the agreements.  The intent to sell, on the other hand, is as clear as daylight.

Petitioner alleges further that the deed of relinquishment of right did not give full effect to the two agreements to sell, because the preliminary clauses of the deed allegedly served only to give private respondent an interest in the property as a future owner thereof and to enable respondent to follow up petitioner’s sales application.

We disagree.  Such an intention is not indicated in the deed.  On the contrary, a real and factual sale is evident in paragraph 6 thereof, which states: “That the Nasipit Lumber Co., Inc., xxx is very much interested in acquiring the land covered by the aforecited application to be used for purposes of mechanized farming” and the penultimate paragraph stating: “xxx VICENTE J. VILLAFLOR, hereby voluntarily renounce and relinquish whatever rights to, and interests I have in the land covered by my above-mentioned application in favor of the Nasipit Lumber Co., Inc.”

We also hold that no simulation is shown either in the letter, dated December 3, 1973, of the former field manager of private respondent, George Mear.  A pertinent portion of the letter reads:

“(a)s regards your property at Acacia, San Mateo, I recall that we made some sort of agreement for the occupancy, but I no longer recall the details and I had forgotten whether or not we actually did occupy your land.  But if, as you say, we did occupy it, then I am sure that the Company is obligated to pay a rental.”

The letter did not contain any express admission that private respondent was still leasing the land from petitioner as of that date.  According to Mear, he could no longer recall the details of his agreement with petitioner.  This cannot be read as evidence of the simulation of either the deed of relinquishment or the agreements to sell.  It is evidence merely of an honest lack of recollection.

Petitioner also alleges that he  continued to pay realty taxes on the land even after the execution of said contracts.  This is immaterial because payment of realty taxes does not necessarily prove ownership, much less simulation of said contracts.[41]

Nonpayment of the ConsiderationDid Not Prove Simulation

Petitioner insists that nonpayment of the consideration in the contracts proves their simulation.  We disagree.  Nonpayment, at most, gives him only the right to sue for collection.  Generally, in a contract of sale, payment of the price is a resolutory condition and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code.[42] However, failure to pay is not even a breach, but merely an event which prevents the vendor’s obligation to convey title from acquiring binding force.[43]

Petitioner also argues that Respondent Court violated evidentiary rules in upholding the ruling of the Director of Lands that petitioner did not present evidence to show private respondent’s failure to pay him.  We disagree.  Prior to the amendment of the rules on evidence on March 14, 1989, Section 1, Rule 131, states that each party must prove his or her own affirmative allegations.[44] Thus, the burden of proof in any cause rested upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue and remains there until the termination of the action.[45] Although nonpayment is a negative fact which need not be proved, the party seeking payment is still required to prove the existence of the debt and the fact that it is already due.[46]

Petitioner showed the existence of the obligation with the presentation of the contracts, but did not present any evidence that he demanded payment from private respondent.  The demand letters dated January 2 and 5, 1974 (Exhs. “J” and “U”), adduced in evidence by petitioner, were for the payment of back rentals, damages to improvements and reimbursement of acquisition costs and realty taxes, not payment arising from the contract to sell.

Thus, we cannot fault Respondent Court for adopting the finding of the Director of Lands that petitioner “offered no evidence to support his claim of nonpayment beyond his own self-serving assertions,” as he did not even demand “payment, orally or in writing, of the five thousand (P5,000.00) pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause of action to recover payment had accrued.”  Nonpayment of the consideration in the contracts to sell or the deed of relinquishment was raised for the first time in the protest filed with the Bureau of Lands on January 31, 1974.  But this protest letter was not the demand letter required by law.

Petitioner alleges that the assignment of credit and the letter of the former field manager of private respondent are contemporaneous and subsequent acts revealing the nonpayment of the consideration.  He maintains that the P12,000.00 credit assigned pertains to the P5,000.00 and P7,000.00 initial payments in the December 7, 1948 Agreement, because the balance ofP12,000.00 was not yet “due and accruing.”  This is consistent, he argues, with the representation that private respondent was not interested in filing a sales application over the land in issue and that  Nasipit was

instead supporting petitioner’s application thereto in  Mear’s letter to the Director of Lands dated February 22, 1950 (Exh. “X”).[47]

This argument is too strained to be acceptable.  The assignment of credit did not establish the nondelivery of these initial payments of the total consideration.  First, the assignment of credit happened on January 19, 1949, or a month after the signing of the December 7, 1948 Agreement and almost six months after the July 7, 1948 Agreement to Sell.  Second, it does not overcome the recitation in the Agreement of December 7, 1948:  “xxx a) The amount of SEVEN THOUSAND (P7,000.00) PESOS has already been paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948; b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present agreement; xxx.”

Aside from these facts, the Director of Lands found evidence of greater weight showing that payment was actually made:[48]

“x x x (T)here is strong evidence to show that said xxx (P12,000.00) had been paid by NASIPIT to Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. “41 NALCO”) for the credit of the latter.

Atty. Gabriel Banaag, resident counsel of NASIPIT xxx declared that it was he who notarized the ‘Agreement to Sell’ (Exh. “F”); xxxx that subsequently, in January 1949, Villaflor executed a Deed of Assignment of credit in favor of Edward J. Nell Company (Exh. “41 NALCO”) whereby Villaflor ceded to the latter his receivable for NASIPIT corresponding to the remaining balance in the amount of xxx (P12,000.00) xxx of the total consideration xxxx; He further testified that the said assignment xxx was communicated to NASIPIT under cover letter dated January 24, 1949 (Exh. “41-A”) and not long thereafter, by virtue of the said assignment of credit, NASIPIT paid the balance xxx to Edward J. Nell Company (p. 58, bid).  Atty. Banaag’s aforesaid testimony stand unrebutted; hence, must be given full weight and credit.

xxx                                                                        xxx                                                                                    xxx.”

The Director of Lands also found that there had been payment of the consideration in the relinquishment of rights:[49]

“On the other hand, there are strong and compelling reasons to presume that Villaflor had already been paid the amount of Five Thousand (P5,000.00) Pesos.

First, x x x What is surprising, however, is not so much his claims consisting of gigantic amounts as his having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand (P5,000.00) Pesos during

the investigation proceedings when he had all the time and opportunity to do so.  xxxx The fact that he did not adduce or even attempt to adduce evidence in support thereof shows either that he had no evidence to offer of that NASIPIT had already paid him in fact.  What is worse is that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand (P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause of action to recover payment had accrued.  The fact that he only made a command for payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is immediately nugatory of his claim for non-payment.

But Villaflor maintains that he had no knowledge or notice that the order of award had already been issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all those twenty-four (24) years.  This of course taxes credulity.xxxx

‘ x x x It is more in keeping with the ordinary course of things that he should have acquired information as to what was transpiring in his affairs in Manila x x x.‘

Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was issued to NASIPIT on August 17, 1950.  The said deed of relinquishment was prepared and notarized in Manila with Villaflor and NASIPIT signing the instrument also in Manila.  Now, considering that Villaflor is presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of the order of award as the (consideration) would depend on the issuance of said order to award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was issued to NASIPIT on August 17, 1950, or barely a day which he executed the deed of relinquishment on August 16, 1950, in Manila?  xxxx.

Third, on the other hand, NASIPIT has in his possession a sort of “order” upon itself -- (the deed of relinquishment wherein he(sic) obligated itself to reimburse or pay Villaflor the xxx consideration of the relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the moment the order of award is issued to it.  It is reasonable to presume that NASIPIT has paid the (consideration) to Villaflor.

xxx                                                                        xxx                                                                                    xxx

x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to cope up with all the records necessary to show that the consideration for the deed of relinquishment had been fully paid.  To expect NASIPIT to keep intact all records pertinent to the transaction for the whole quarter of a

century would be to require what even the law does not.  Indeed, even the applicable law itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be preserved for only a maximum of five years.

NASIPIT may well have added that at any rate while there are transactions where the proper evidence is impossible or extremely difficult to produce after the lapse of time xxx the law creates presumptions of regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in an action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491).”

The Court also notes that Mear’s letter of February 22, 1950 was sent six months prior to the execution of the deed of relinquishment of right.  At the time of its writing, private respondent had not perfected its ownership of the land to be able to qualify as a sales applicant.  Besides, although he was a party to the July 7, 1948 Agreement to Sell, Mear was not a signatory to the Deed of Relinquishment or to the December 7, 1948 Agreement to Sell.  Thus, he cannot be expected to know the existence of and the amendments to the later contracts.  These circumstances explain the mistaken representations, not misrepresentations, in said letter.

Lack of Notice of the Award

Petitioner insists that private respondent suppressed evidence, pointing to his not having been notified of the Order of Award dated August 17, 1950.[50] At the bottom of page 2 of the order, petitioner was not listed as one of the parties who were to be furnished a copy by Director of Lands Jose P. Dans.  Petitioner also posits that Public Land Inspector Sulpicio A. Taeza irregularly received the copies for both private respondent and the city treasurer of Butuan City.  The lack of notice for petitioner can be easily explained.  Plainly,  petitioner was not entitled to said notice of award from the Director of Lands, because by then, he had already relinquished his rights to the disputed land in favor of private respondent.  In the heading of the order, he was referred to as sales applicant-assignor.  In paragraph number 4, the order stated that, on August 16, 1950, he relinquished his rights to the land subject of the award to private respondent.  From such date, the sales application was considered to be a matter between the Bureau of Lands and private respondent only.  Considering these facts, the failure to give petitioner a copy of the notice of the award cannot be considered as suppression of evidence.[51] Furthermore, this order was in fact available to petitioner and had been referred to by him since January 31, 1974 when he filed his protest with the Bureau of Lands.[52]

Third Issue:  Private Respondent Qualified for an   Award of Public Land

Petitioner asserts that private respondent was legally disqualified from acquiring the parcels of land in question because it was not authorized by its charter to acquire disposable public agricultural lands under Sections 121, 122 and 123 of the Public Land Act, prior to its amendment by P.D. No. 763.  We disagree.  The requirements for a sales application under the Public Land Act are: (1) the possession of the qualifications required by said Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121, 122, and 123).  However, the transfer of ownership via the two agreements dated July 7 and December 7, 1948 and the relinquishment of rights, being private contracts, were binding only between petitioner and private respondent.  The Public Land Act finds no relevance because the disputed land was covered by said Act only after the issuance of the order of award in favor of private respondent.  Thus, the possession of any disqualification by private respondent under said Act is immaterial to the private contracts between the parties thereto.  (We are not, however, suggesting a departure from the rule that laws are deemed written in contracts.)  Consideration of said provisions of the Act will further show their inapplicability to these contracts.  Section 121 of the Act pertains to acquisitions of public land by a corporation from a grantee, but petitioner never became a grantee of the disputed land.  On the other hand, private respondent itself was the direct grantee.  Sections 122 and 123 disqualify corporations, which are not authorized by their charter, from acquiring public land;  the records do not show that private respondent was not so authorized under its charter.

Also,  the determination by the Director of Lands and the Minister of Natural Resources of the qualification of private respondent to become an awardee or grantee under the Act is persuasive on Respondent Court.  In Espinosa vs. Makalintal,[53] the Court ruled that, by law, the powers of the Secretary of Agriculture and Natural Resources regarding the disposition of public lands -- including the approval, rejection, and reinstatement of applications – are of executive and administrative nature.  (Such powers, however, do not include the judicial power to decide controversies arising from disagreements in civil or contractual relations between the litigants.)  Consequently, the determination of whether private respondent is qualified to become an awardee of public land under C.A. 141 by sales application is included therein.

All told, the only disqualification that can be imputed to private respondent is the prohibition in the 1973 Constitution against the holding of alienable lands of the public domain by corporations.[54] However, this Court earlier settled the matter, ruling that said constitutional prohibition had no retroactive effect and could not prevail over a vested right to the land.  In Ayog vs. Cusi, Jr.,[55] this Court declared:

“We hold that the said constitutional prohibition has no retroactive application to the sales application of Biñan Development Co., Inc. because it had already acquired a vested right to the land applied for at the time the 1973 Constitution took effect.

That vested right has to be respected.  It could not be abrogated by the new Constitution.  Section 2, Article XIII of the 1935 Constitution allows private corporations to purchase public agricultural lands not exceeding one thousand and twenty-four hectares.  Petitioner’s prohibition action is barred by the doctrine of vested rights in constitutional law.

‘A right is vested when the right to enjoyment has become the property of some particular person or persons as a present interest.’ (16 C.J.S. 1173).  It is ‘the privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights of property conferred by existing law’ (12 C.J. 955, Note 46, No. 6) or ‘some right or interest in property which has become fixed and established and is no longer open to doubt or controversy’ (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil. 498, 502).

The due process clause prohibits the annihilation of vested rights.  ‘A state may not impair vested rights by legislative enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or by a change in the constitution of the State, except in a legitimate exercise of the police power’ (16 C.J.S. 1177-78).

It has been observed that, generally, the term ‘vested right’ expresses the concept of present fixed interest, which in right reason and natural justice should be protected against arbitrary State action, or an innately just an imperative right which an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2nd587).

Secretary of Justice Abad Santos in his 1973 opinion ruled that where the applicant, before the Constitution took effect, had fully complied with all his obligations under the Public Land Act in order to entitle him to a sales patent, there would seem to be no legal or equitable justification for refusing to issue or release the sales patent (p. 254, Rollo).

In Opinion No. 140, series of 1974, he held that as soon as the applicant had fulfilled the construction or cultivation requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract of land and to him the area limitation in the new Constitution would not apply.

In Opinion No. 185, series of 1976, Secretary Abad Santos held that where the cultivation requirements were fulfilled before the new Constitution took effect but the

full payment of the price was completed after January 17, 1973, the applicant was, nevertheless, entitled to a sales patent (p. 256, Rollo).

Such a contemporaneous construction of the constitutional prohibition by a high executive official carries great weight and should be accorded much respect.  It is a correct interpretation of section 11 of Article XIV.

In the instant case, it is incontestable that prior to the effectivity of the 1973 Constitution the right of the corporation to purchase the land in question had become fixed and established and was no longer open to doubt or controversy.

Its compliance with the requirements of the Public Land Law for the issuance of a patent had the effect of segregating the said land from the public domain.  The corporation’s right to obtain a patent for that land is protected by law.  It cannot be deprived of that right without due process (Director of Lands vs. CA, 123 Phil. 919).”

The Minister of Natural Resources ruled, and we agree, that private respondent was similarly qualified to become an awardee of the disputed land because its rights to it vested prior to the effectivity of the 1973 Constitution:[56]

“Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by the new constitutional provision that no private corporation may hold alienable land of the public domain except by lease.

It may be recalled that the Secretary of Justice in his Opinion No. 64, series of 1973, had declared, to wit:

‘On the other hand, with respect to sales application ready for issuance of sales patent, it is my opinion that where the applicant had, before, the constitution took effect, fully complied with all his obligations under the Public Land act in order to entitle him to sales patent, there would seem to be not legal or equitable justification for refusing to issue or release the sales patent.’

Implementing the aforesaid Opinion No. 64 xxx, the then Secretary of Agriculture and Natural Resources issued a memorandum, dated February 18, 1974, which pertinently reads as follows:

‘In the implementation of the foregoing opinion, sales application of private individuals covering areas in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be given due course and issued patents, to wit:

Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to January 17, 1973,

a.    the land covered thereby was awarded;

b.    cultivation requirements of law were complied with as shown by investigation reports submitted prior to January 17, 1973;

c.    land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and

d.    purchase price was fully paid.‘

From the records, it is evident that the aforestated requisites have been complied with by appellee long before January 17, 1973, the effectivity of the New Constitution.  To restate, the disputed area was awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the cultivation requirements were complied with as per investigation report dated December 31, 1949, and the land was surveyed under Pls-97.”

The same finding was earlier made by the Director of  Lands:[57]

“It is further contended by Villaflor that Nasipit has no juridical personality to apply for the purchase of public lands for agricultural purposes.  The records clearly show, however, that since the execution of the deed of relinquishment of August 16, 1950, in favor of Nasipit, Villaflor has always considered and recognized Nasipit as having the juridical personality to acquire public lands for agricultural purposes.  In the deed of relinquishment xxx, it is stated:

‘6. That the Nasipit Lumber Co., Inc., a corporation duly organized in accordance with the laws of the Philippines, x x x.’

Even this Office had not failed to recognize the juridical personality of Nasipit to apply for the purchase of public lands xxx when it awarded to it the land so relinquished by Villaflor (Order of Award dated August 17, 1950) and accepted its application therefor.  At any rate, the question whether an applicant is qualified to apply for the acquisition of public lands is a matter between the applicant and this Office to decide and which a third party like Villaflor has no personality to question beyond merely calling the attention of this Office thereto.”

Needless to say, we also agree that the November 8, 1946 Lease Agreement between petitioner and private respondent had been terminated by the agreements to sell and the relinquishment of rights.  By the time the verbal leases were allegedly made in 1951 and 1955,[58] the disputed land had already been acquired and

awarded to private respondent.  In any event, petitioner’s cause of action on these alleged lease agreements prescribed long before he filed Civil Case No. 2072-III, as correctly found by the trial and appellate courts.[59] Thus, it is no longer important, in this case, to pass upon the issue of whether or not amendments to a lease contract can be proven by parol evidence.  The same holds true as regards the issue of forum-shopping.

All in all, petitioner has not provided us sufficient reason to disturb the cogent findings of the Director of Lands, the Minister of Natural Resources, the trial court and the Court of Appeals.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

G.R. No. 89043-65 July 16, 1990

JOSE R. VELOSO, petitioner, vs.SANDIGANBAYAN (Second Division) and the PEOPLE OF THE PHILIPPINES, respondents.

Amado A. Caballero for petitioner.

CORTES, J.:

This is a petition to review the decision of the Second Division of the Sandiganbayan in Crim Cases Nos. 2073-2095 and 33233345 insofar as it finds petitioner Jose R. Veloso guilty as co-principal in the complex crimes of Estafa thru Falsification of Public Documents, as defined and penalized under Article 318 1 and 171, paragraph 4, 2in relation to Article 48, 3 of the Revised Penal Code.

The nature of the cases filed before the Sandiganbayan was as follows:

For defrauding the Government in the amount of Nine Hundred Eighty- Two Thousand Two Hundred Seven Pesos and Sixty Centavos (P982,207.60) through the illegal and unauthorized issuance of fake Letters of Advice of Allotments and Cash Disbursement Ceilings and the tampering and falsifications of General Vouchers and supporting documents, the following officials and employees of the Ministry of Public Highways Central Office, Regional Office No. VII and the Siquijor Highway Engineering District, together with contractors Clodualdo Gomilla, Juliana de los Angeles and Manuel Mascardo, were charged with forty-six (46) counts of Estafa thru Falsification of Public Documents:

(1) Rolando Mangubat, Angelina Escano, Chief Regional Accountant and Regional Finance Officer, respectively, of the 7th Highway Regional Office in Cebu City;

Wilfredo Monte, Zosimo S. Dinsay, Cresencia L. Tan, Isaac T. Mananquil, Trinidad T. Manloloyo, Aurelio M. de la Pena Eugenio S. Machan, Ediltrudes Kilat Jose R. Veloso, Regino Junawan Arsenio Pakilit Juan Sumagang, Francisco Ganhinhin and Urbano Arcamo, the Civil Engineer, Senior Civil Engineer, Accountant I, Highway District Engineer II, Assistant Highway District Engineer, Administrative Officer, Property Custodian, Auditing Aide Auditor, Auditing Examiner, Senior Civil Engineer, Crewman and Auditing Aide respectively, of the Siquijor Highway Engineering District (SHED) in Crim. Cases Nos. 20732095, and

(2) Manuel de Veyra, Regional Director, Basilisa Galwan Budget Officer, Matilde Jabalde, Supervising Accounting Clerk, Josefina Luna, Accountant II, Jose Sayson, Budget Examiner, of the Department of Public Works and Highways, Region VII, Cebu City; Leonila del Rosario, Chief, Finance and Management Service, Engracia Escobar, Chief Accountant, Abelardo Cardona, Asst. Chief Accountant and Leonardo Tordecilla, Supervising Accountant, of the Department of Public Works and Highways, Central Office, Manila, in Crim. Cases Nos. 3323-3345 [Decision, pp. 7-8; Rollo, pp. 37-38.]

Petitioner, together with accused Mangubat, Mananquil, Monte, Machan Tan, Ganhinhin, Manloloyo, de la Peña Dinsay, Kilat Jumawan, Pakilit Arcamo, Sumagang and Gomilla were found guilty as co-principals and sentenced in each of twenty-three (23) cases (Crim. Cases Nos. 2073-2095) to suffer imprisonment of from four (4) years, two (2) months and one (1) day of prision correccional, as minimum, to ten (10) years of prision mayor, as maximum, to pay a fine of One Thousand Five Hundred Pesos (P1,500.00) in each case and to indemnify the government in amounts varying from case to case.

Those found guilty filed separate motions for reconsideration but these were denied by the Sandiganbayan. Thus, this petition by Jose R. Veloso.

Petitioner does not dispute the finding that there were anomalies in the Siquijor Highway Engineering District (SHED) Neither does he dispute the existence of a conspiracy between the suppliers and certain government officials and employees. What he vehemently denies is the Sandiganbayan's finding that he was a conspirator.

Thus, for purposes of this petition we will no longer inquire into whether or not the offenses charged were in fact committed, but shall limit ourselves to the issue of whether or not petitioner's participation in the criminal conspiracy has been established beyond reasonable doubt.

The Sandiganbayan found that petitioner's liability, as District Auditor, emanated from his irregular and improper processing, pre-audit and approval of all the

general vouchers and checks in question, based on irregular or fake supporting papers. The graft court found that he also signed and passed in audit the vouchers and checks knowing that these were illegally funded and improperly charged to "Fund 81-400" (the prior year's obligations), and engaged in "splitting," so that he would be the one to pass the vouchers in audit when such should have been forwarded to the Commission on Audit (COA) Regional Auditor for action or review, [Decision, p. 83; Rollo, p. 113.]

The Sandiganbayan described the details of the "splitting" resorted to as follows:

Fifthly, based on the foregoing, the Court finds that the accused district officials resorted to "splitting" of RSEs, POs (Purchase Orders) and GVs in order to avoid review or approval by higher authorities. Under COA Circular No. 76-41, dated July 30, 1976, in relation to COA Circular No. 16-16A, dated February 10, 1976, of which the Court takes judicial notice, it is provided that "Resident Auditors of bureaus, offices and agencies of the National Government in Metropolitan Manila, as well as other Auditors 3 for District/City Highway, Public Works/School, State Colleges and Universities, Military Areas and Zones outside Metropolitan Manila, are authorized to countersign checks and warrants in amounts not exceeding P50,000.00 in each case" (Emphasis supplied). Consequently, all GVs in amounts exceeding P50,000.00 must have to be processed, pre-audited and approved by the Regional Auditor of the COA, instead of (SHED) resident auditor Jose Veloso, one of the accused herein.

Thus, in the very wording of COA Circular No. 76-41, "to avoid action, review or approval by higher authorities", the district officials herein resorted to the splitting of the RSEs, POs and the GVs involved in the fake LAA dated October 6, 1977 in the amount of P200,000.00. Said LAA evolved into three (3) separate transactions involving the amounts of P48,480.00, P48,480.00 and P48,189.60 as evidenced by three GVs dated December 21, December 21 and December 23, 1977, respectively. Otherwise, if such transactions were to be reviewed and pre-audited by the Regional (COA) Auditor, who might be averse to joining the conspiracy, then the GVs and supporting papers may be found to be the result of (1) inexistent programs of work, (2) illegal funding, (3) irregular or non-existent bidding, (4) fictitious deliveries and inspection, and other anomalies. Consequently, the Court considers such "splitting" as an integral and/or essential element or link in the conspiracy to defraud the Government inasmuch as such practices was (sic) consciously and deliberately resorted to in order to hide the massive and stupefying misappropriations being undertaken by the accused herein. [Decision, pp. 75-76; Rollo, pp. 105-106; underscoring in the original.

But petitioner vigorously argues his innocence, alleging his non- participation in the conspiracy and his good faith in attaching his signature to the documents involved. He

contends that it has not been shown that he falsified any of the documents which the Sandiganbayan found to be falsifications.

Thus, while he admits that he signed the general vouchers, he claims that his act of doing so was merely ministerial considering that all the supporting papers and documents were submitted and attached to the vouchers. He continues that he could not question the veracity of the prepared Letters of Advice of Allotments (LAA) and Sub-Advices of Cash Disbursement Ceiling (SACDC) since these documents, with the program of work accompanying them and other inspection reports, gave him the go-signal to pass them in audit.

Thus, he claims that the vouchers would have been cleared even without his signature as they were supported by the required documents and certifications.

This argument cannot be given much weight. It has already been rejected by the Sandiganbayan in this wise:

xxx xxx xxx

None of the accused regional and district officials can claim good faith or reliance on the regularity of the documents processed and signed by them or on the presumption that their subordinates and/or superiors have acted regularly, since by the very nature of their duties, they should have known or realized by mere scrutiny of the documents or by the exercise of ordinary diligence that there were irregularities or anomalies reflected on their very faces. This is simplified by several circumstances patent on said documents, to wit, the irregular funding of the LAAs the improper charging to prior year's obligations; the unauthorized and/or improper action by officials on the supporting documents; the lack or incompleteness of supporting documents, and the splitting of payments. Neither can the accused-contractors claim good faith likewise and reliance on the actuations of their co-accused public officials since they knew fully well that their participation in the transactions under question were only make believe or a farce and that their names, business standing and signatures were only utilized, with their whole-hearted cooperation, in seeking the consummation of their plans to defraud the government.

xxx xxx xxx

[Decision, pp. 85-86; Rollo, pp. 115-116; emphasis supplied]

Clearly, given his acts and omissions in auditing the documents, which related not only to one but to several transactions, petitioner's participation in the conspiracy to defraud the Government has been established beyond reasonable doubt. It is well-settled that there need not be direct evidence of the existence and details of the conspiracy [People v. Romualdez, 57 Phil. 148 (1932); People v. Cadag, G.R. No. L-13830, May 31, 1961, 2 SCRA 388.] Like the guilt of the individual offender, the existence of a conspiracy and a conspirator's participation may be established through circumstantial evidence [Ibid.]

Petitioner, as resident auditor of the SHED was tasked with ensuring the regularity of all transactions that are subject to his review. In these cases, he had before him, for his signature, vouchers that were patently irregular, supported by similarly irregularly issued documents, which he should not have passed in audit. Instead of refusing to affix his signature and reporting the irregularities to his superiors, as he was duty bound to do, he turned a blind eye and signed the documents, completing the process that led to the consummation of the crime.

He can not rely on the excuse that his subordinates have already initialed the documents for his signature because his function, as their superior, is to check on their work and to ensure that they do it correctly. Otherwise, if his signature was a superfluity, petitioner would be serving no useful purpose in occupying his position of resident auditor.

The number of transactions in which petitioner is involved and the magnitude of the amount involved also prevent a reasonable mind from accepting the proposition that petitioner was merely careless or negligent in the performance of his functions He passed in audit twenty-four (24) general vouchers which resulted in the issuance of twenty-three (23) checks amounting to Nine Hundred Eighty-Two Thousand Two Hundred Seven Pesos and Sixty Centavos (P982,207.60).i•t•c-aüsl Moreover, the irregularities were not of the kind that could have gone unnoticed by the trained eyes of an auditor.

Finally, it may be that petitioner has already been administratively penalized for his malfeasance, as in fact he was suspended for one (1) year without pay [Annex "A" of the Reply; Rollo, pp. 189- 200], but such will not bar his conviction under the general penal laws. Administrative liability is separate and distinct from penal liability.

In sum, no reversible error was committed by the Sandiganbayan in adjudging petitioner guilty beyond reasonable doubt of the crime charged.

WHEREFORE, the petition is hereby DENIED, and the decision of the Sandiganbayan, insofar as it relates to petitioner, is AFFIRMED.

SO ORDERED.

PRESIDENTIAL DECREE No. 1689 April 6, 1980

INCREASING THE PENALTY FOR CERTAIN FORMS OF SWINDLING OR ESTAFA

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;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order as follows:

Section 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 money contributed by stockholders, or members of rural banks, cooperative, "samahang nayon(s)", or farmers association, or of funds solicited by corporations/associations from the general public.

When not committed by a syndicate as above defined, the penalty imposable shall be reclusion temporal to reclusion perpetua if the amount of the fraud exceeds 100,000 pesos.

Section 2. This decree shall take effect immediately.

DONE in the City of Manila, this 6th day of April, in the year of Our Lord, nineteen hundred and eighty.