G.R. No. 106357 September 3, 1998
Higit namang nakakaawa kapag ang naloloko ay
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
PRISCILLA BALASA, NORMITA VISAYA, GUILLERMO FRANCISCO, NORMA
FRANCISCO and ANALINA FRANCISCO, accused, NORMA FRANCISCO,
GUILLERMO FRANCISCO and ANALINA FRANCISCO, accused-appellants.
G.R. No. 108601-02 September 3, 1998
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
PRISCILLA BALASA, NORMITA VISAYA, GUILLERMO FRANCISCO, NORMA
FRANCISCO and ANALINA FRANCISCO, accused, NORMA FRANCISCO,
GUILLERMO FRANCISCO and ANALINA FRANCISCO, accused-appellants.
ROMERO, J.:
Avarice, mother of crimes, greedy for more the more she
possesses, eversearching open-mouthed for gold. 1
Greed has always been one of man's failings. The hope of greater gain has
lured many a man to throw caution, and his common sense, to the wind. This
human foible, known to many, has been exploited throughout the ages by con
men, charlatans and cheats to bilk the gullible public of their hard-earned
money. History has thus seen the unraveling of various disingenuous
stratagems which are at bottom nothing but seams. The case at hand once
again proves that "a sucker is born every minute."
Totoong walang pagkaubos sa ating daigdig ang mga taong nanlilinlang. Hindi
magkakagayon naman kung walang nagpapalinlang. Dahil sa kanilang
malaking hangarin na magkamal ng kimpal kimpal na kayamanan,
pinapasukan nila ang mga kaduda-dudang alok ng mga mapagsamantala na
kung sila ay mamuhunan ng kaunting salapi, ito ay tutubo ng malaki sa ilang
araw lamang. Kaya't napakaraming mga tao ang nagagantso. Hindi
masasabing mga hangal o dili kaya'y mga maralita na walang gaanong pinag-
aralan ang mga nabibiktima. Kahit ang mga maykaya at matataas sa ating
lipunan ay napaglalaruan din. Milyun-milyong salapi ang nahuhuthot sa kanila,
hindi ng mga masakim na magnanakaw, kundi ng kanila na ring mga
kasamahan sa tinatawag na "alta sociedad." Mismong mga kaibigan at
kapanatag ng loob ang naguudyok sa kanilang sumali sa mga pakana na
magpapayaman sa kanila.
iyong nangungutang lamang at nagbabakasakali na ang ilang daan nila ay
magiging libo.
Itong kapasiyahang ito ng Mataas na Hukuman ay nagbababalang muli.
Magpakaingat-ingat ang lahat. Ang naghahangad ng kagitna, isang salop ang
nawawala.
Iyon namang nanlilinlang. Walang gawaing masama na hindi nabubunyag rin.
Totoong mahigpit ang ating batas na pumaparusa sa mga ganyang hindi na
natututo, lalo't higit kung ang mga salarin ay mga sindikato.
Tunghayan natin kung papaano naganap ang gawang panloloko sa mga taga
Palawan ng mga dayo lamang.
On July 6, 1989, the Panata Foundation of the Philippines, Inc., a non-stock,
non-profit corporation with principal address at San Miguel, Puerto Princesa,
Palawan, was registered with the securities and Exchange Commission, under
S.E.C. Reg. No. 165565. Its ten incoporators were Priscilla Balasa, Normita
Visaya, Analina Francisco, Lolita Gelilang, Cynthia Ang, Norma Francisco,
Purabel Espidol, Melinda Mercado, Rodolfo Ang, Jr. and Teresa G. Carandang.
Five incorporators, namely, Priscilla Balasa, Normita Visaya, Analina Francisco,
Lolita Gelilang and Cynthia Ang were named first trustees.
In addition, the management of the foundation was entrusted to Priscilla
Balasa, as president and general manager; Normita Visaya as corporate
secretary and head comptroller; Norma Francisco as cashier; Guillermo
Francisco as the disbursing officer; and Analina Francisco as treasurer. The
latter also doubled as a typist of the Foundation.
On the other hand, the employees of the foundation were the tellers
Rosemarie Balasa, Sylvia Magnaye, Judith Ponciano, Jessica Buaya, Rosario
Arciaga, Paul Francisco, Enriquita Gabayan and Anita Macmac. The
comptrollers, Ruth Jalover, Amarino Agayo, and Avelina Yan were under the
supervision of Normita Visaya. Nelia Daco, one of the clerks assigned outside,
was the one in direct contact with the depositors.
The Foundation's purposes, as stated in its by-laws, were as follows:
1. Uplift members' economic condition by
way of financial or consultative basis (sic);
 2. To encourage members in a self-help
program;
3. To grant educational assistance;
4. To implement the program on the Anti-
Drug campaign;
5. To acquire facilities either by or through
purchase, lease, bequest of donations,
equipments (sic), machineries (sic) and
supplies for purposes of carrying out its
business operation or hold such real or
personal properties as may be convenient and
proper in order to achieve the purpose of this
corporation;
6. To cooperate with other organizations,
institutions with similar activities for purposes
of carrying out its business; and
7. To organize seminars or conferences
specially in the rural areas and other selected
cities. 2
After obtaining its SEC registration, the foundation immediately swung into
operation. It sent out brochures soliciting deposits from the public, assuring
would-be depositors that their money would either be doubled after 21 days
or trebled after 30 days. Priscilla Balasa also went around convincing people
to make deposits with the foundation at their office at the Diaz Apartment,
Puerto Princesa.
The modus operandi for investing with the foundation was as follows:
When a person would deposit an amount, the amount would be taken by a
clerk to be given to the teller. The teller would then fill up a printed form
called a "slot." These "slots" were part of a booklet, with one booklet
containing one hundred "slots." A "slot," which resembled a check, contained
the following data:
PANATA FOUNDATION Control No. 33
(Logo) OF THE PHILIPPINES INC. Date 12-5-87 / Dec. 26, 1987
PFOPI Puerto Princesa, Palawan Amount P 500.00
Sec. Reg. No. 165565
M CHESTER MONREAL
Address RPC
Share FIVE
Amount in words FIVE HUNDRED PESOS Only
(Sgd.)
(Sgd.) PRICILLA BALASA
————————— —————————
Signature of Member President / Manager
No. 30333 3
The control number indicated the number of the "slot" in a booklet, while the
space after "date" would contain the date when the slot was acquired, as well
as the date of its maturity. The amount deposited determined the number of
shares, one share being equivalent to one hundred pesos. The depositor had
the discretion when to affix his signature on the space provided therefor.
Some would sign their slot only after payment on maturity, while others
would sign as soon as they were given the slot. However, without the control
number and the stamp of the teller, duly signed or initialed, no depositor
could claim the proceeds of his deposit upon maturity. 4
After the slot had been filled up by the teller, he would give it to the clerk
assigned outside. The clerk would then give the slot to the depositor. Hence,
while it was the teller who prepared and issued the slot, he had no direct
contact with the depositor. The slots handed to a depositor were signed
beforehand by the president of the foundation.
Every afternoon, the comptrollers would take the list of depositors made by
the tellers with the amounts deposited by each, and have these typed. Norma
Francisco would then receive from the tellers the amounts deposited by the
public. It was also her job to pay the salaries of the foundation's employees.
For his part, Guillermo Francisco would release money whenever a deposit
would mature as indicated in the slots.
According to the foundations rules, an investor could deposit up to P5,000.00
only, getting a slot corresponding thereto. Anyone who deposited more than
that amount would, however, be given a slot but the slot had to be in he
name of another person or several other persons, depending upon the
amount invested. 5 According to Sylvia Magnaye, a foundation teller, all
deposits maturing in August 1989 were to be tripled. For such deposits, the
slots issued were colored yellow to signify that the depositor would have his
deposit tripled. Deposits that would mature subsequent to August were only
given double the amount deposited. 6 However, there were times when it was
the depositor who would choose that his deposit be tripled, in which case, the
deposit would mature later 7.
The amounts received by the foundation were deposited in banks. Thus, a
foundation teller would, from time to time, go to PNB, PCI Bank, DBP and the
Rural Bank of Coron to deposit the collections in a joint account in the names
of Priscilla Balasa and Norma Francisco.
Initially, the operation started with a few depositors, with most depositors
investing small amounts to see whether the foundation would make good on
its promise. When the foundation paid double or triple the amounts of their
investment at maturity, most not only reinvested their earnings but even
added to their initial investments. As word got around that deposits could be
doubled within 21 days, or tripled if the period lasted for more than 30 days,
more depositors were attracted. Blinded by the prospect of gaining
substantial profits for nothing more than a minuscule investment, these
investors, like previous ones, were lured to reinvest their earnings, if not to
invest more.
Most would invest more than P5,000.00, the investment limit set by the
foundation. Priscilla Balasa would, however, encourage depositors to invest
more than P5,000.00, provided that the excess was deposited under the name
of others. She assured the depositors that this was safe because as long as the
depositor was holding the slots, he was the "owner" of the amount deposited.
Most investors then deposited amounts in the names of their relatives.
At the outset, the foundation's operations proceeded smoothly, as satisfied
investors collected their investments upon maturity. On November 29, 1989,
however, the foundation did not open. Depositors whose investments were to
mature on said date demanded payments but none was forthcoming. On
December 2, 1989, Priscilla Balasa announced that since the foundation's
money had been invested in the stock market, it would resume operations on
December 4, 1989. On that date, the foundation remained closed. Depositors
began to demand reimbursement of their deposits, but the foundation was
unable to deliver.
Consequently, sixty-four informations, all charging the offense of estafa, as
defined in Presidential Decree No. 1689, were filed against Priscilla Balasa,
Normita Visaya, Norma Francisco, Guillermo Francisco, Analina Francisco and
eight other persons, mostly incorporators and employees of the Panata
Foundation, before the Regional Trial Court of Palawan. Fourteen cases,
including Criminal Case Nos. 8429 and 8751, were raffled off to Branch 52.
Two more cases, Criminal Case Nos. 8704 and 8749, were similarly assigned to
it. Of the sixteen casts assigned to Branch 52, eight were, with the consent of
the accused, provisionally dismissed for lack of evidence.
In Criminal Case No. 8429, the information charging the accused with the
crime of estafa "as amended by PD 1689" was filed on December 12, 1989.
The accused in this case were: Priscilla Balasa, Almarino Agayo, Norma
Francisco, Normita Visaya, Paul Francisco, Nelia Daco, Ruth
Jalover, 8 Guillermo Francisco, Candido Tolentino, Jr., Rosemarie
Balasa, 9 Ricardo del Rosario, Emelita Gabayan, Rosario Arciaga, Jessica Buaya,
Avelina Yan, Anita Macmac, Gina Gabaldon, Ronaldo Belo, Fernando Cadauan,
Lolita Gelilang, Cynthia Ang, Judith Ponciano, Sylvia Magnaye, 10 Analina
Francisco and Sulpicio Nabayan. As Amended on February 16, 1990, the
information in this case reads as follows:
That sometime on (sic) December, 1989, the above-named
accused being the Manager and employees of the PANATA
Foundation of the Philippines, Inc., with office at No. 20 Diaz
Apartment, Manalo Extension, Puerto Princesa City,
Philippines, and within the jurisdiction of this Honorable
Court, the said accused conspiring and confederating with one
another and operating as a syndicate, did then and there
wilfully, unlawfully and feloniously defraud one Estrella San
Gabriel y Lacao by means of false representation and
fraudulent means which they made to said Estrella San
Gabriel to the effect that as an investor/subscriber to the
 PANATA Foundation, Inc. which is a non-stock corporation
allegedly registered with the SEC under Registration No.
165565 and by means of other similar deceit induce the said
Estrella San Gabriel to give and deliver to the said accused the
amount of P5,500.00 as her investment in said foundation,
and by manifestation and misrepresentation by the said
accused that the said invested amount will be doubled or
tripled within a certain period of days said accused knowing
fully well that their manifestation and representations were
false and fraudulent as they are made only for the purpose of
obtaining as in fact they obtained the amount with intent to
defraud misapply, misappropriate and convert the said
amount for their own personal use and benefit, to the
damage and prejudice of said Estrella San Gabriel in the
amount of P5,500.00, Philippine Currency.
CONTRARY TO LAW and penalized under Presidential Decree
No. 1689.
Likewise, in Criminal Case No. 8704, the information, filed on May 23, 1990,
charged Priscilla Balasa, Norma Francisco, Guillermo Francisco, Normita
Visaya, Analina Francisco, Lolita Gelilang, Cynthia Ang, Rodolfo Ang, Jr.,
Purable Espidol, Melinda Mercado, Almarino Agayo, Candido Tolentino, Jr.,
Ricardo del Rosario, Fernando Caduan, Paul Francisco and Teresita Carandang
with the crime of estafa "as amended by Presidential Decree No. 1689" as
follows:
That sometime in July, 1989 to December 1989, the above-
named accused being then the Manager incorporators,
members of the board of trustees, officers and employees of
the PANATA FOUNDATION OF THE PHIL., INC. with Office No.
20 Diaz Apartment, Manalo Extension, Puerto Princess City,
Philippines and within the jurisdiction of this Honorable Court,
the said accused conspiring, confederating together and
mutually helping one another, and operating as a syndicate,
did then and there wilfully, unlawfully and feloniously
defraud, the complainant Conchita Bigornia, by means of false
pretenses/representation and fraudulent means which they
made to said Conchita Bigornia to the effect that as
depositor/subscriber to the PANATA FOUNDATION OF THE
PHIL., INC., which is a non-stock corporation allegedly
registered with the SEC under Registration No. 165565 and by
means of other similar deceit induce the said Conchita
Bigornia, to give and deliver to the said accused the amount
of TWENTY FOUR THOUSAND ONE HUNDRED (P24,100.00)
PESOS, Philippine Currency, as his/her deposit/subscription in
said Foundation, and by manifestation and misrepresentation
by the said accused that the said deposited/subscription
amount will be doubled or tripled within a certain period of
days said accused knowing fully well that this manifestation
were (sic) false and fraudulent as they are made only for the
purpose of obtaining as in fact they obtained the amount of
TWENTY FOUR THOUSAND ONE HUNDRED PESOS
(P24,100.00) from the said (Conchita Bigornia) and the said
accused once in possession of the said amount with intent to
defraud, misapply, misappropriate and convert the said
amount for their own personal use and benefit, to the
damage and prejudice of the said Conchita Bigornia in the
amount aforestated.
CONTRARY TO LAW and penalized under P.D. No. 1689.
Similar informations were filed against the same persons in Criminal Cases
Nos. 8749 and 8751. The complainant in Criminal Case No. 8749, complainant
Shiela San Juan, was allegedly defrauded of P25,800.00 while in Criminal Case
No. 8751, the amount of P6,800.00 was allegedly defrauded from Benjamin
Yangco.
In like manner, similarly worded informations in Criminal Case Nos. 8734 and
8428, raffled off to Branch 50, alleged that Elisia Mensias was defrauded in
the amount of P4,500.00 and Alfonso and Prescilla Lacao defrauded in the
amount of P58,850.00, respectively.
After the filing of the informations, warrants for the arrest of the defendants
in the corresponding criminal cases were issued. However, only Priscilla
Balasa, Normita Visaya, Guillermo Francisco, Norma Francisco and Analina
Francisco were arrested, the rest of the defendants having gone into hiding.
On arraignment, the arrested defendants all pleaded not guilty to the crimes
charged but before the presentation of prosecution evidence, Priscilla Balasa
and Normita Visaya escaped from police custody. With their escape, only the
spouses Guillermo and Norma Francisco were called to present evidence on
behalf of the defense. Analina Francisco, being a deaf-mute, was not called to
the witness stand due to the lack of a competent interpreter. The spouses, in
denying criminal liability, presented the following facts:
Priscilla Balasa, Normita Visaya, and Analina Francisco, full-blooded sisters,
are the common children of appellant spouses Guillermo and Norma
Francisco. Before the Panata Foundation started operations in July 1989,
Priscilla had been living with her parents in San Mateo, Isabela. Analina, on
the other hand, was living with their elder sister, Normita, in Manila. Priscilla,
however, left for Palawan in June 1989.
Sometime thereafter, Guillermo Francisco received a letter from Priscilla
asking him to come to Palawan to provide her company, the latter's husband
having left for abroad as a seaman. Consequently, Francisco came to Palawan
sometime in August 1989 to live with Priscilla at the Diaz Apartment in Puerto
Princesa. Norma Francisco also came to Palawan in August, purportedly to
visit Priscilla's daughter, whom she missed. Analina likewise came to Palawan
from Manila in August.
Guillermo denies participation in the commission of the crime charged. In his
testimony, he limits his participation in the foundation's activities to paying
the holders of matured slots. It was the comptroller, Ruth Jalover, who would
give him the record on which to base the remittances he would make. 11 The
money he disbursed was not always in his possession, as it would have to
come from the bank. It was Sylvia Magnaye who would withdraw the money
from the bank while it was Nelia Daco who would directly receive money from
the people. Thus, not even once did he participate in the process of receiving
money. His daughters Priscilla Balasa and Normita Visaya performed other
jobs in the operation of the foundation while his other daughter, Analina
Francisco, only typed documents. He knew that the foundation helped people
who received money from it. 12 Although the primary purpose of the
foundation was to help the needy, Guillermo testified having knowledge of
only one recipient thereof, the church of Aborlan.
In her testimony, Norma Francisco also denied complicity in the crime
charged, claiming that she only did household chores in Puerto Princesa. She
alleged that sometimes, she would "help the tellers." However, because Ruth
Jalover was educated and she was not, the former would sometimes become
the "acting manager of her daughter." Sylvia Magnaye, her daughter's sister-
in-law and a permanent employee of the foundation, was one of the tellers
who would deposit and withdraw from the bank. The eight tellers of the
foundation all applied for their jobs with Priscilla but it was Normita who
interviewed them. However, Normita was only a clerk in the foundation while
Analina would type whatever work Ruth Jalover would give her. While Norma
had no official position in the foundation, her husband, Guillermo, was the
paymaster. During her stay in Puerto Princesa, she knew of no other business
that her daughter Priscilla was engaged in except the foundation and
a  paluwagan, which she ran together with a certain Manny Diaz. Norma knew
that the foundation was a charitable institution that had helped a lot of
people. She did not help Ruth Jalover in the same way that she helped Sylvia
Magnaye with her job as teller, but she had nothing to do with the keeping of
records. She knew that money came from the tellers, who got the money
from Nelia Daco, the one receiving money from prospective investors. 13
On March 31, 1992, Branch 50 of the Regional Trial Court of Palawan issued a
joint decision in Criminal Case Nos. 8734 and 8428 finding the accused guilty
of the crime charged and of having acted in conspiracy in committing the
same. Finding no aggravating or mitigating circumstances in the commission
of the crime, the trial court decreed thus:
WHEREFORE AND IN VIEW OF THE FOREGOING
CONSIDERATIONS, judgment is hereby rendered finding all
the accused in the 2 above-entitled cases guilty as principals
of the crime of estafa as the same is defined and penalized
under the Revised Penal Code.
a. In Criminal Case No. 8428 accused Priscilla
Balasa, Normita Visaya, Analina Francisco,
Guillermo Francisco and Norma Francisco are
hereby sentenced to suffer the penalty
of reclusion perpetua as well as to pay the
costs. The accused are jointly and severally
ordered to pay the offended party Alfonso
Lacao the sum of Fifty Eight Thousand Eight
Hundred Fifty (P58,850.00) Pesos and to pay
the further sum of Thirty Thousand Pesos
(P30,000.00) as and for moral damages;
b. In Criminal Case No. 8734, accused Normita
Visaya, Analina Francisco, Norma Francisco
and Guillermo Francisco are hereby
sentenced to suffer the penalty of reclusion
perpetua as well as to pay the costs. They are
furthermore ordered jointly and severally to
indemnify the offended party Elisea Mensias
 the sum of Four Thousand Five Hundred
(P4,500.00) Pesos as well as to pay the
additional sum of Fifteen Thousand
(P15,000.00) Pesos as and for moral damages.
The cases against the accused Almarino Agayo, Paul Francisco,
Candido Tolentino, Jr., Ricardo del Rosario, Jessica Buaya,
Fernando Cadauan, Lolita Gelilang Cynthia Ang, Rodolfo Ang
Jr., Purable Espidol, Melinda Mercado, and Teresit Carandang
who remained at large up to the present time are hereby
ordered archived to be reinstated in the docket of this Court
as soon they shall have been arrested or surrendered
voluntarily to the jurisdiction of this Court.
SO ORDERED.
On the other hand, Branch 52 rendered separate decisions in the cases
assigned to it. Thus, on October 14, 1991, the trial court in Criminal Case No.
8429 rendered a decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby
rendered finding co-accused PRISCILLA BALASA, NORMITA
VISAYA, GULLLERMO FRANCISCO, and NORMA FRANCISCO
guilty beyond reasonable doubt as co-principals of the crime
of estafa committed by a syndicate in violation of Section 1 of
Presidential Decree No. 1689, and each of the aforenamed
accused is sentenced to reclusion perpetua; to pay to Estrella
Lacao San Gabriel, jointly and severally, by way of restitution,
the sum of P5,500.00.00, with interest thereon of 12% per
annum from December, 1989, until fully paid; and to pay the
costs.
On grounds of reasonable doubt engendered by lack of
sufficiently clear and convincing evidence as against her, co-
accused Analina Francisco is acquitted of the offense charged.
SO ORDERED.
Although Branch 52 rendered separate decisions in the cases assigned to it, all
had essentially the same disposition — imposing the penalty of reclusion
perpetua  upon each of the convicted accused — only the name of the
offended party and the amount to be restituted varied. Thus, in Criminal Case
No.
8704, 14 the trial court ordered the accused to pay Conchita Bigornia by way of
restitution, the amount of P24,200.00 with interest thereon of 12% per
annum from December 1989. In Criminal Case No. 8749, 15 the same convicted
accused were ordered to restitute Shiela San Juan the amount of P25,800.00
plus 12% per annum from December 1989. In Criminal Case No. 8751, 16 the
convicted accused were ordered to restitute Benjamin Yangco the amount of
P6,800.00 with 12% interest per annum from December 1989.
Guillermo and Norma Francisco filed notices of appeal in Criminal Case Nos.
8429, 8704, 8749 and 8751. Their appeal was docketed as G.R. No. 106357.
Likewise, the joint decision in Criminal Case Nos. 8734 and 8428 was appealed
to this Court by Guillermo Francisco, Norma Francisco, Analina Francisco, and
Normita Visaya, docketed herein as G.R. Nos. 108601-02. Noting Normita
Visaya's escape from police custody after arraignment, the Court, on August
15, 1994, and pursuant to Section 8, Rule 124 of the Revised Rules of Court,
ordered the dismissal of her appeal on the ground of abandonment. The Court
also considered Priscilla Balasa's conviction to be final and executory, in light
of her escape from police custody. It also ordered the issuance of a warrant
for the arrest of Normita Visaya and an alias  warrant of arrest against Priscilla
Balasa.
On October 16, 1993, appellants' counsel, Atty. Agustin Rocamora, filed an
appellants' brief in G.R. No. 106357. Thereafter, appellants appointed the
Maramba and Mamauag Law Office as new counsel in substitution of Atty.
Rocamora. On November 2, 1994, new counsel filed a motion to consolidate
G.R. No. 106357 and G.R. Nos. 108601-02. On December 7, 1994, the Court
granted the motion and ordered the consolidation of the two cases. On the
same day, counsel for appellants submitted a consolidated appellants' brief.
In G.R. No. 106357, counsel for appellants raise the following errors:
1. The trial court erred in convicting the appellants
despite the total absence of evidence against them;
2. The trial court erred in ruling that conspiracy
existed on the basis of the relationship of the
appellants to the principal accused; and
3. The trial court erred in convicting appellants
despite their prior conviction for the same offense in
Criminal Case No. 8429.
On the other hand, the brief filed by appellants in the consolidated cases
mainly argues that they cannot be convicted of the defined in Presidential
Decree No. 1689 because the informations filed against them alleged
prejudice against the complaining witnesses, not against the national,
provincial, or city economy nor was evidence presented therefor.
Appellants' conviction must, however, be sustained, the issues raised being
devoid of merit. The number and diversity of issues raised by appellants impel
us to discuss the points raised seriatim.
For the first assignment of error, we hold that the elements of the crime
defined and penalized by P.D. No. 1689 have been proven beyond reasonable
doubt in these appealed cases. The informations filed against appellants
alleged that by means of false representation or false pretenses and through
fraudulent means, complainants were defrauded of various amounts of
money by the accused. Article 315, paragraph 2 (a) of the Revised Penal Code
provides that swindling or estafa by false pretenses or fraudulent acts
executed prior to or simultaneously with the commission of the fraud is
committed by "using fictitious name, or falsely pretending to possess power,
influence, qualifications, property, credit, agency, business or imaginary
transactions, or by other similar deceits." The elements of estafa under this
penal provision are: (1) the accused defrauded another by means of deceit
and (2) damage or prejudice capable of pecuniary estimation is caused to the
offended party or third party. 17 It is indisputable that the foundation failed to
return the investments of the complaining witnesses, hence it is undeniable
that the complainants suffered damage in the amount of their unrecouped
investments. What needs elucidation is whether or not the element of
defraudation by means of deceit has been established beyond reasonable
doubt.
Fraud, in its general sense, is deemed to comprise anything calculated to
deceive, including all acts, omissions, and concealment involving a breach of
legal or equitable duty, trust, or confidence justly reposed, resulting in
damage to another, or by which an undue and unconscientious advantage is
taken of another. 18 It is a generic term embracing all multifarious means
which human ingenuity can device, and which are resorted to by one
individual to secure an advantage over another by false suggestions or by
suppression of truth and includes all surprise, trick, cunning, dissembling and
any unfair way by which another is cheated. 19 On the other hand, deceit is the
false representation of a matter of fact whether by words or conduct, by false
or misleading allegations, or by concealment of that which should have been
disclosed which deceives or is intended to deceive another so that he shall act
upon it to his legal injury. 20
In pursuit of their agenda, appellants established a foundation which, by its
articles of incorporation, was established, allegedly to "uplift members'
economic condition by way of financial or consultative basis." Organized as a
non-stock, non-profit charitable institution, its funds were to be obtained
through membership dues and such other assessments as may be agreed
upon by its board of directors. 21 Furthermore, the modus operandi 22 of the
foundation, duly signed by Priscilla Balasa, provided that:
Funding
Any funding requirements to finance the operation of the
association shall be done through the collection of
membership fees, dues, donations, bequests and other
assessments. The amount of which shall be subject to the
approval of the general membership of the association.
Likewise, all funds in-flows would be used exclusively to carry
out the purposes for which the FOUNDATION is established
and would not inure to the benefit of any single member of
the FOUNDATION.
The operations personnel shall come from volunteers among
its members and should the need arise, hiring of additional
personnel be resorted to.
In contravention of these by-laws and modus operandi, the people behind the
foundation enticed people to "deposit or invest" funds in the foundation
under a "double or treble your deposit" scheme. These investment activities
were clearly ultra vires acts or acts beyond the foundation's authority.
Evidently, SEC registration was obtained only for the purpose of giving a
semblance of legitimacy to the foundation; that the foundation's business was
sanctioned by the government; and that it was allowed by law to accept
deposits. This pretension was carried out even on the slots it issued, the
foundations' S.E.C. registry number being indicated thereon.
In carrying out the charade, the manager went to the extent of delivering a
speech and personally encouraging people to deposit or invest in the
foundation. Alfonso Lacao, a complainant and prosecution witness, testified:
Q: Have you heard of this so called Panata
Foundation?
A: Yes, ma'm I heard it from my friends who
are talking about this Panata Foundation they
even informed me that the manager of this
Panata Foundation is calling for a meeting for
all depositors and prospective depositors on
Saturday afternoon.
Q: With that information did you get
interested in the proposed meeting being
called by this Panata Foundation?
A: I was curious and came Saturday I went to
the office of the Panata Foundation to attend
the meeting.
Q: And at that time where was this office
located?
A: At Diaz Apartment, Manalo Extension,
Puerto Princesa City.
Q: Did you attend that meeting?
A: Yes ma'am.
Q: Whom did you see sponsoring that
meeting on that particular day?
A: Upon arrival I saw a woman delivering her
message to the depositors and to the
prospective depositors. I asked a friend of me
(sic) who is that woman and he informed me
that she is the manager of the Panata
Foundation Priscilla Balasa.
x x x           x x x          x x x
Q: What was Priscilla Balasa doing if any in
that particular meeting?
A: In her message she was convincing all the
people there to make their deposit to the
Panata Foundation because according to her
they were sent here to help the people of
Puerto Princesa City and the people of
Palawan.
Q: Aside from that what did Priscilla Balasa
tell those people who attended the meeting?
A: She was assuring the people that they must
not be afraid to deposit their money because
they will not be fooling around with them.
x x x           x x x          x x x
Q: And did Priscilla Balasa tell those persons
attending the meeting what would happen
with the money they will deposit with the
Panata Foundation?
A: She was telling the people that you could
deposit the money and it will be doubled
within 21 days. I was further informed that
the maximum amount to be deposited is
P5,000,00.
Q: You stated a while ago that the amount
deposited will be doubled after 21 days?
A: Yes ma'am.
Q: Aside from that what else if any did
Priscilla Balasa tell the public who attended
that meeting?
A: She was telling the public to make ease
with their deposit because they were sent
 here to help the people of Puerto Princesa
City and Palawan.
Q: Did she tell the public as to where the
money would be coming from?
A: Right that moment she was not able to tell
the public. 23
On cross-examination, Mr. Lacao testified:
Q: But did it not occur to your mind
considering your past experience to
investigate or cause the investigation of this
Panata Foundation considering your
connection as to whether they are in a
position to make double your money
investment specially so they are not engage
(sic) in business, so to speak?
A: Once I overheard the manager say when
she was there telling the people around the
depositors that their money is being invested
in a world bank. 24
Priscilla Balasa, thus, promised the credulous public quick financial gains on
their investments. The foundation even printed brochures proclaiming the
merits of the foundation's investment scheme. 25 Likewise, to bolster the
illusion that indeed, the foundation was legitimate, the claim was made that
deposits would be invested abroad in a world bank, with said transactions
allegedly enabling the foundation to double or treble depositors' investments.
The evidence, however, proves the contrary. Sylvia Magnaye, one of the
tellers, testified:
Q: Other than to issue slots, do you know
what other phase of operation in running the
Panata Foundation during the time that you
were employed?
A: No sir, I can only observe that issuing of
slots.
Q: Madam Witness, aside from issuing slots,
there is only the activity of the foundation
that you are well aware of?
A: Sometimes they also sent me to deposit.
Q: The deposit of the amount collected in the
bank, is that correct?
A: I do not know but they just send me to
deposit amounts.
Q: But you do not know in what other
business activity other than the matter of
collecting money and issuance of slots you do
not know if the Panata Foundation is involved
in any business activity?
A: Yes, sir.
Q: You do not know whether the foundation
receives money regularly from any other
source?
A: I do not know sir. 26
On cross-examination, she testified:
Q: You mentioned Madam Witness, that on
several occasions you were asked to deposit
certain amounts in the bank, do you
remember having told the Court that?
A: Right, sir.
Q: Do you remember how many banks these
deposited amounts were if you remember?
A: I deposited at PNB, PCIBank, and DBP and
Rural Bank of Coron.
 Q: Do you remember in whose names you
deposited these amounts you deposited?
A: In the name of the joint account of Priscilla
Balasa and Norma Francisco. 27
The testimonial evidence presented by the prosecution proves that appellants
employed fraud and deceit upon gullible people to convince them to invest in
the foundation. It has been held that where one states that the future profits
or income of an enterprise shall be a certain sum, but he actually knows that
there will be none, or that they will be substantially less than he represents,
the statement constitutes actionable fraud where the hearer believes him and
relies on the statement to his injury. 28 That there was no profit forthcoming
can be clearly deduced from the fact that the foundation was not engaged nor
authorized to engage in any lucrative business to finance its operation. It was
not shown that it was the recipient of donations or bequest with which to
finance its "double or triple your money" scheme, nor did it have any
operating capital to speak of when it started operations.
Parenthetically, what appellants offered the public was a "Ponzi scheme," an
investment program that offers impossibly high returns and pays these
returns to early investors out of the capital contributed by later
investors. 29 Named after Charles Ponzi who promoted the scheme in the
1920s, the original scheme involved the issuance of bonds which offered 50%
interest in 45 days or a 100% profit if held for 90 days. Basically, Ponzi used
the money he received from later investors to pay extravagant rates of return
to early investors, thereby inducing more investors to place their money with
him in the false hope of realizing this same extravagant rate of return
themselves. This was the very same scheme practiced by the Panata
Foundation.
However, the Ponzi scheme works only as long as there is an ever-increasing
number of new investors joining the scheme. To pay off the 50% bonds Ponzi
had to come up with a one-and-a-half times increase with each round. To pay
100% profit he had to double the number of investors at each stage, and this
is the reason why a Ponzi scheme is a scheme and not an investment strategy.
The progression it depends upon is unsustainable. The pattern of increase in
the number of participants in the system explains how it is able to succeed in
the short run and, at the same time, why it must fail in the long run. This game
is difficult to sustain over a long period of time because to continue paying the
promised profits to early investors, the operator needs an ever larger pool of
later investors. 30 The idea behind this type of swindle is that the "con-man"
collects his money from his second or third round of investors and then
absconds before anyone else shows up to collect. Necessarily, these schemes
only last weeks, or months at most. 31
Note should also be taken of the fact that appellants used "slots" in their
operation. These slots are actually securities, 32 the issuance of which needs
the approval of the Securities and Exchange Commission. Knowing fully well
that the S.E.C. would not approve the issuance of securities by a non-stock,
non-profit organization, the operators of the Ponzi scheme, nevertheless,
applied for registration as a foundation, an entity not allowed to engage in
securities.
Finally, if the foundation were indeed legitimate, the incorporators, outside of
the members of the Francisco family, would not have escaped from the
clutches of the law. If the foundation and its investment scheme were legal,
then it behooved them to come out and testify for their own exoneration. The
wicked flee when no man pursueth: but the righteous are bold as a lion. 33
In their defense, appellants would shift the blame on the investors. Invoking
the legal principle of caveat emptor, they maintain that it was the investors'
own greed that did them in, implying that the depositors should have known
that no sensible business could afford to pay such extravagant returns. Having
investigated the foundation and its activities, the investors should fault
themselves, not the appellants, for investing in the foundation despite the
patent impossibility of its claims.
The contention is untenable. The fact that the buyer makes an independent
investigation or inspection has been held not to preclude him from relying on
the representation made by the seller where the seller has superior
knowledge and the falsity of such representation would not be apparent from
such examination or inspection, and, a fortiori, where the efforts of a buyer to
learn the true profits or income of a business or property are thwarted by
some device of the seller, such efforts have been held not to preclude a
recovery. 34 It has often been held that the buyer of a business or property is
entitled to rely on the seller's statements concerning its profits, income or
rents. The rule — that where a speaker has knowingly and deliberately made
a statement concerning a fact the falsity of which is not apparent to the
hearer, and has thus accomplished a fraudulent result, he cannot defend
against the fraud by proving that the victim was negligent in failing to discover
the falsity of the statement — is said to be peculiarly applicable where the
owner of the property or a business intentionally makes a false statement
concerning its rents, profits or income. The doctrine of caveat emptor has Q: What was her job in the Panata
been held not to apply to such a case. 35 Foundation?

The second assignment of error is likewise devoid of merit. Appellants deny A: She was the one who received the money
the existence of a conspiracy in the perpetration of the fraudulent scheme, from our tellers every afternoon. 38
charging that mere relationship does not prove conspiracy. Guillermo
Francisco further maintains that he was not even an incorporator of the Sylvia Magnaye, on the other hand, testified:
foundation.
Q: Madam Witness, do you know a person by
The evidence adduced by the prosecution confirms the existence of a the name of Norma Francisco?
conspiracy among the appellants in committing the crime charged. The fact
that Guillermo Francisco was not an incorporator of the foundation does not A: Yes sir.
make him any less liable for the crime charged. By his own admission, he
participated in the foundation's activities by serving as its paymaster. Because Q: How did you come to know her Madam
he is father and husband to three of the organizers of the foundation, it is not Witness?
farfetched to presume that he was aware of its operations. By his active
cooperation, he showed a community of design with the incorporators of the A: She is our former cashier sir.
foundation, thereby making him a co-conspirator and equally liable for the
crime charged. His voluntary and indispensable cooperation was a Q: In the Panata Foundation?
concatenation of the criminal acts performed by his co-accused. 36 In this
regard, appellant Guillermo Francisco is not being implicated as a co- A: Yes sir. 39
conspirator solely because he is the father of the principal proponent of the
Ponzi scheme. He is held liable as a conspirator because of his indispensable On cross-examination, she further testified:
act of being the paymaster of the foundation.
Q: Now, I would like to direct your attention
Likewise, Norma Francisco's bare denial cannot exempt her from complicity. also to the other accused, Norma Francisco.
Denials of an accused cannot be accorded greater evidentiary weight than the You stated that she is your cashier, do you
positive declarations of credible witnesses who testify on affirmative remember having done that?
matters. 37 Moreover, her efforts to show that she was a mere housewife who
simply helped in her daughter's "business" is refuted by the prosecution A: Yes sir.
witnesses. Ruth Jalover testified:
Q: When you say she is the cashier, do you
Q: Madam Witness, do you know a person by mean to say that she is the one who pays out
the name of Norma Francisco? money or amounts to the employees Madam
Witness?
A: Yes sir.
A: Yes sir. 40
Q: And how did you come to Know her
Madam Witness? Aside from being the cashier, Norma Francisco was also an incorporator of the
foundation. Likewise, the money invested in the foundation was deposited in
A: She is my co-employee at the Panata joint bank accounts in Priscilla Balasa's name and hers. Norma Francisco's
Foundation sir.
activities would thus show a community of design with the other accused
making her a co-conspirator and equally liable for the crime charged. Her
voluntary and indispensable cooperation concurred with the criminal acts
performed by her co-accused.
As for Analina Francisco, however, the evidence adduced as to her complicity
in the nefarious scheme is far from conclusive. While she was an incorporator
and treasurer of the foundation, there is no denying the fact that she is a
deaf-mute. As such, she is incapable of communicating and conveying her
thoughts to the complaining witnesses and other depositors. This casts
serious doubt on whether she could be deemed to have similarly conspired
and confederated with the other accused. As Branch 52 pointed out, on
paper she might have been in the thick of the foundation's operation — being
an incorporator and treasurer. We are not, however, convinced that she was
actually involved in the sinister scheme. In fact, she was given the manual task
of typing papers, despite her being the treasurer of the foundation. Her
disability might have been the principal reason for giving her that job — she
was literally deaf and mute to the nefarious activities going on in the
foundation that she did not pose a danger to it. Furthermore, it is well settled
that where the acts of an accused are capable of two interpretations, that
which is in consonance with innocence should prevail.
With respect to the third assignment of error, appellants cannot raise the
defense of double jeopardy for which the following requisites must concur: (1)
a first jeopardy must have attached prior to the second; (2) the first jeopardy
must have been validly terminated; (3) the second jeopardy must be for the
same offense, or the second offense includes or is necessarily included in the
offense charged in the first information, or is an attempt to commit the same
or a frustration thereof. 41 In the instant case, the offense charged in Criminal
Case No. 8429 is different from the offense charged in the other cases. While
these cases arose out of the same scheme, the fraudulent acts charged were
committed against different persons, hence they do not constitute the same
offense.
Lastly, appellants assert that they cannot be convicted under P.D. No. 1689.
They contend that the following requisites must concur for conviction under
P.D. No. 1689: (1) that estafa is committed under Articles 315 or 316 of the
Revised Penal Code; (2) by a syndication of five or more persons; (3) against a)
stockholders or members of rural banks, cooperatives, or samahang nayon; b)
corporations or associations the funds of which are solicited from the general
public; and (4) such defraudation erodes the confidence of the public in the
banking and cooperative systems, contravenes public interest, and (5)
constitutes economic sabotage that threatens the stability of the nation. 42
In support of their argument, appellants point out that there could not have
been economic sabotage under the facts of the case because the total amount
of P125,400.00 allegedly embezzled "by the other accused (not herein
appellants)," did not weaken or threaten national economic stability. To
emphasize that point, appellants enumerate the revenue collections of
Palawan and Puerto Princesa City, "for dearth of a better reference," from
1987 to 1992 showing that the revenue collections for 1989 alone amounted
to P75,002,499,19. Appellants assert that as compared to such revenue
collection in 1989, the amount allegedly embezzled was negligible. As such,
the crime committed in this case was not of the same genre as the "Agrix" and
"Dewey Dee" scams that "spurred the birth of P.D. No. 1689. 43
Appellants, in a desperate attempt to avoid conviction, grasp at straws. The
law upon which appellants have been charged and convicted reads as follows:
PRESIDENTIAL DECREE NO. 1689
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:
Sec. 1. Any person or persons who shall commit estafa or
other forms of swindling as defined in Article 315 and 316 of
the Revised penal Code, as amended, shall be punished by life
imprisonment to death if the swindling (estafa) is committed
by a syndicate consisting of five or more persons formed with
the intention of carrying out the unlawful or illegal act,
transaction, enterprise or scheme, and the defraudation
results in the misappropriation of moneys contributed by
stockholders, or members of rural banks, cooperatives,
"samahang nayon(s)", or farmers associations, or of funds
solicited by corporations/associations from the general public.
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.
Sec. 2. This decree shall take effect immediately.
DONE in Manila, Philippines, this 6th day of April, in the year
of Our Lord, nineteen hundred and eighty.
Under this law, the elements of the crime are: (a) estafa or other forms of
swindling as defined in Articles 315 and 316 of the Revised Penal Code is
committed; (b) the estafa or swindling is committed by a syndicate, and (c)
defraudation results in the misappropriation of moneys contributed by
stockholders, or members of rural banks, cooperatives, "samahang nayon(s),"
or farmers associations, or of funds solicited by corporations/associations
from the general public. These are the only elements of the crime under
Section 1 of the decree. The two other "ingredients" added by appellants to
constitute the crime of economic sabotage under P.D. No. 1689 have been
taken from the "whereas" clause or preamble of the law. A preamble is not
exactly an essential part of an act as it is an introductory or preparatory clause
that explains the reasons for the enactment, usually introduced by the word
"whereas." 44 In People v.
Purisima, 45 we explained that the preamble serves as the key to the intent
and spirit of the decree. It enumerates the facts or events justifying the
promulgation of the decree. It enumerate the fact or events justifying the
promulgation of the decree and the sanctions for the acts prohibited therein.
As such, although it is an aid in interpretation, the preamble of an act or
decree is not the law subject thereof. Appellants' novel theory must,
therefore, be given short shrift by this Court.
Assuming arguendo that the preamble was part of the statute, appellants'
contention that they should not be held criminally liable because it was not
proven that their acts constituted economic sabotage threatening the stability
of the nation remains too flimsy for extensive discussion. As the preamble of
P.D. No. 1689 shows, the act prohibited therein need not necessarily threaten
the stability of the nation. It is sufficient that it "contravenes public interest."
Public interest was affected by the solicitation of deposits under a promise of
substantial profits, as it was people coming from the lower income brackets
who were victimized by the illegal scheme.
Similarly, the fact that the entity involved was not a rural bank,
cooperative, samahang nayon or farmers' association does not take the case
out of the coverage of P.D. No. 1689. Its third "whereas clause" states that it
also applies to other "corporations/associations operating on funds solicited
from the general public." The foundation fits into these category as it
"operated on funds solicited from the general public." To construe the law
otherwise would sanction the proliferation of minor-league schemers who
operate in the countryside. To allow these crimes to go unabated could spell
disaster for people from the lower income bracket, the primary target of
swindlers.
Again, P.D. No. 1689 penalizes offenders with life imprisonment to death
regardless of the amount involved, provided that a syndicate committed the
crime. A syndicate is defined in the same law as "consisting of five or more
persons formed with the intention of carrying out the unlawful or illegal act,
transaction, enterprise or scheme." If the offenders are not members of a
syndicate, they shall nevertheless be held liable for the acts prohibited by the
law but they shall be penalized by reclusion temporal to reclusion perpetua if
the amount of the fraud is more than one hundred thousand pesos
(P100,000.00).
In the instant case, a syndicate perpetrated the Ponzi scheme. The evidence
shows that at least five persons — Priscilla Balasa, Normita Visaya, Norma
Francisco, Guillermo Francisco, and the other incorporators of the foundation
— collaborated, confederated and mutually helped one another in directing
the foundation's activities.
In its decision in Criminal Case Nos. 8428 and 8734, Branch 50 found that the
"accused numbering 5 who composed the Francisco Family together with
others acted and operated as a syndicate as defined under P.D. No. 1689 and
should be held liable therefor." 46 However, it imposed the penalty
of reclusion perpetua, the penalty imposable under the second paragraph of
Section 1 of P.D. No. 1689 — where the offenders are not members of a
syndicate and the amount involved is more than P100,000.00. The existence
of a syndicate having been proved, the crime falls under the first paragraph of
Section 1 of P.D. No. 1689, with an imposable penalty of life imprisonment to
death. Hence, the imposition of reclusion perpetua is incorrect. Given the
absence of aggravating or mitigating circumstances, the lesser penalty, or life
imprisonment, should have been meted out. 47
Decree No. 1689 and ordered to restitute to complainants the amounts they
have been defrauded, subject to the MODIFICATION that appellants
GUILLERMO and NORMA FRANCISCO shall each suffer the penalty of life
imprisonment for each violation of the same law under the corresponding
criminal cases. Appellant ANALINA FRANCISCO is hereby ACQUITTED of the
crimes charged under Criminal Case Nos. 8428 and 8734 on ground of
reasonable doubt and her immediate release from custody is ordered unless
she is being held on other legal grounds.
Let a copy of this Decision be furnished the Department of Justice and the
Philippine National Police in order that the arrest of Priscilla Balasa, Normita
Visaya and the others who have so far eluded the law shall be effected with
dispatch.
SO ORDERED.

Branch 52, likewise, ruled that the accused committed the offense of estafa by
a syndicate under P.D. No. 1689. Therefore appellants, due to the absence of
mitigating or aggravating circumstances, should have been punished with life
imprisonment. However, in the dispositive portion of its decision in the four
cases assigned to it, Branch 52 imposed the penalty of reclusion
perpetua instead.

The Court finds this an opportune time to restate that the penalties of life
imprisonment and reclusion perpetua are not the same. Thus:

While "life imprisonment" may appear to be the English

translation of reclusion perperua, in reality, it goes deeper
than that. First, "life imprisonment" is invariably imposed for
serious offenses penalized by special laws, while reclusion
perpetua is prescribed under The Revised Penal Code. Second,
"life imprisonment," unlike reclusion perpetua, does not carry
with it any accessory penalty. Third, "life imprisonment" does
not appear to have any definite extent or duration,
while reclusion perpetua entails imprisonment for at least
thirty (30) years after which the convict becomes eligible for
pardon, although the maximum period thereof shall in no
case exceed forty (40) years. 48

WHEREFORE, premises considered, the decisions appealed from are hereby

AFFIRMED in so far as appellants GUILLERMO and NORMA FRANCISCO are
convicted for violation of the first paragraph of Section 1 of Presidential
G.R. Nos. 115054-66. September 12, 2000.*

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. VICENTE MENIL, JR.,

accused-appellant.

APPEAL from a decision of the Regional Trial Court of Surigao City, Br. 30.

The facts are stated in the opinion of the Court.

     The Solicitor General for plaintiff-appellee.

     Public Attorney’s Office for accused-appellant.

GONZAGA-REYES, J

The facts of the case are as follows:

Vicente Menil, Jr. and his wife, Adrian B. Menil, were the proprietors of a
business operating under the name ABM Appliance and Upholstery with
offices at the Denso Building, Capitol Road, Surigao City. On July 15, 1989,
they, through ushers and sales executives, began soliciting investments from
the general public in Surigao City and its neighboring towns. They assured
would-be investors that their money would be multiplied ten-fold after fifteen
(15) calendar days. In other words, if a person invested P100.00, they claimed
that after fifteen (15) calendar days the investor would get the amount of
P1,000.00 in return. Each investor may invest a maximum amount of P1000.00
for which they were reportedly assured a return of P10,000.00. With respect
to their ushers and sales executives, they were given a 10% commission from
the total amounts they remitted to the business.
The people who invested in the business were issued coupons which merely
indicated the date of entry, the due date of the investment, the amount given,
the amount to be received, the name and address of the investor and the
name of the sales executive. Sales executives appointed by accused-appellant
were given these coupons which they, in turn, gave to the people they
solicited from as proof of their investment. The sales executives likewise
wrote down on a piece of yellow pad paper the details of the investments
they received during a particular day. These sales executives were required to
remit the investments they collected daily at the offices of ABM Appliance and
Upholstery by presenting the money and the yellow pad containing the names
of the investors. A representative of ABM Appliance and Upholstery then
received the money and signed the yellow pad paper. The sales executives
were then immediately given their 10% commission from the amount
remitted. When the investments matured, a lump sum representing the total
return of the investments were given to the sales executives who were given
the task of distributing them to the investors they dealt with.
Initially, the operation started with a few investors who invested small
amounts. On the day of the start of the operations, for example, less than
P200.00 were invested at their offices. Gradually, the amounts invested and
the number of depositors increased. On June 30, 1989 alone, the business was
able to attract more than 200 investors and the total amount of investments
they received was more than P40,000.00. Because of the small amounts
initially involved, accused-appellant and his wife were able to pay the returns
on the investments as they fell due.
Sometime during the first week of August, 1989, accused-appellant and his
wife, apparently to clothe their operations with legitimacy, caused the
incorporation of their business, under the name ABM Development Center,
Inc. with the Securities and Exchange Commission. As registered under S.E.C.
Reg. No. 167274,2 the ABM Development Center, Inc. was a non-stock
corporation with twelve (12) incorporators and trustees, including accused-
appellant Vicente Menil, Jr. and his wife, Adriana B. Menil. Adriana B. Menil
was likewise appointed as the treasurer of the non-stock corporation. The
corporation had a total capitalization of P12,000.00 and its purposes, as
stated in its Articles of Incorporation, 3 are as follows:
"1. To assist in the total development of community members
morally, physically, educationally and economically and socially
towards their present and future progress;
2. To operate, coordinate and/or organize community development
centers;
3. To make or coordinate in the making of studies and researches;
4. To solicit, receive, channel and/or distribute donations, economic
aids, grants, investments in money or in kind;
5. To help train community members in newly acquired knowledge,
modern trends and techniques;
6. To promote brotherhood, fellowship and unity among ourselves;
and
7. To negotiate, represent, and deal with government and other
agencies for the benefit and in behalf of the members as well as for
the community."
On August 15, 1989, accused-appellant and his wife held a meeting with the
sales executives and ushers of the ABM Development Center, Inc. at the
Provincial Convention Center. At this meeting, accused-appellant informed
the sales executives that the business of ABM Development Center, Inc. was
proceeding normally and that investments were coming in. He advised the
sales executives however that beginning that date, all investments accepted
by the business would only have returns of 1:7 which investors will receive
after fifteen (15) working days, excluding weekends and holidays. As such, if a
person gave P100.00, his investment will mature only after fifteen (15)
working days and he will receive only P700.00. This change of policy was
contained in a Memorandum dated August 24, 1989. 4
After this August 15, 1989 meeting, the sales executives continued accepting
investments from the general public and the offices of accused-appellant kept
on accepting the remittances of the sales executives. By this time, daily
investments amounting to millions of pesos were pouring into the offices of
ABM Development Center, Inc. and payments of the returns became delayed.
Allegedly due to the delay in the counting of the money for release to
investors, the payments which were set for release on August 28, 1989 were
completely paid only on September 18, 1989.
On September 19, 1989, the ABM Development Center, Inc. stopped releasing
payments. The sales investors went to the offices of ABM Development
Center, Inc. to inquire about the release of payments but there was no one
around to address their complaints. The whereabouts of accused-appellant
and his wife was also unknown.
On October 10, 1989, accused-appellant and his wife made an announcement
over the radio that payments were forthcoming and that the investors should
have no cause for alarm. They also repeated their announcement on
television. Despite these assurances and despite repeated demands made by
the investors, accused-appellant released no further payments and neither
did he refund any investment remitted to him. Accused-appellant and his wife
went into hiding in Davao City but eventually they were arrested by police
authorities led by a certain Colonel Panchito.
Consequently, a case for large scale swindling was filed by the City Prosecutor
of Surigao City against the accused-appellant and his wife. Additionally,
twenty cases for estafa were filed against accused-appellant and his wife by
the Provincial Prosecutor’s Office. Of these twenty (20) cases, seven (7) were
provisionally dismissed on October 21, 1991 for failure to prosecute.
In Criminal Case No. 2948, the information 5 charging accused-appellant and
his wife with the crime of large scale swindling was filed on December 14,
1989. The information in this case reads as follows:
"That in or about the month of August, 1989, and/or sometime prior or
subsequent thereto, in the city of Surigao, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping one another, did then and there
willfully, unlawfully and feloniously defraud thousands of investors using as
instruments innocent and defrauded sales executives and/or ushers, in the
following manner, to wit: the above-named accused, pretending to possess
credit, property and a secret formula in their pyramiding business scheme,
enticed the general public to invest with ABM Development Center,
Incorporated, thru false manifestations and representations that the amount
they would invest would earn seven hundred percent (700%) after fifteen (15)
working days from date of investment, by which enticing offer, the general
public was persuaded to invest large sums of money thru the innocent sales
executives and/or ushers, amounting to more than ONE HUNDRED
THOUSAND PESOS (₱100,000.00), Philippine Currency, which were duly
remitted to and received by the accused, doing business under the name and
style ABM Development Center, Incorporated, which was the front of their
illegal transactions, but the accused once in the possession of the amounts
invested and far from complying with their aforesaid obligation, with deceit
aforethought, misapplied, misappropriated, converted and absconded the
amounts received as investments to their own personal use and benefit and
despite repeated demands made for the payment of the benefits of the
investments and/or the return of the amounts invested, said accused failed
and refused, and still fail and refuse to do so, to the damage and prejudice of
the investors in such sums as may be proven and such other damages as may
be allowed by law.
Contrary to Article 315 of the Revised Penal Code, in relation to paragraph 2
of Presidential Decree No. 1689."
In Criminal Case No. 2956, accused appellant and his wife were charged with
violation of Article 315 of the Revised Penal Code. The information in this case
reads as follows:
"That from July 26, 1989 to September 13, 1989, at Placer, Surigao del Norte,
Philippines, xxx, the above-named accused xxx with deliberate criminal intent
to defraud the general public by pretending to have a huge amount as sinking
fund but later on was found out to be a pyramiding scam, accused Vicente
Menil, Jr., being the Manager, and his wife accused Adriana B. Menil, being
the Treasurer of their association known as ABM Development Center, Inc.,
xxx operating on funds solicited from the general public in the form of
investments with the enticing return of 10 times then later reduced to 7 times
the investment after due date and having successfully solicited thru their sales
executive, Zohar Mondaya, the total amount of ₱610,046.00, did then and
there xxx misappropriate xxx the said amount xxx remitted to them subject to
the condition that xxx after the lapse of 15 working days from remittance, said
investment would be returned in seven folds to the investors, but xxx
repeated demands made xxx said accused failed and refused to pay or give as
agreed upon by them xxx to the damage and prejudice of the investors in the
said amount ₱610,046.00 xxx resulting to more financial difficulties of the
general public and therefore constitutes economic sabotage that threatens
the stability of the nation.
Contrary to Art. 315 of the Revised Penal Code." 6
Similarly worded informations were filed against the accused-appellant and
his wife in Criminal Case Nos. 3000, 3001, 3013, 3020, 3021, 3022, 3026, 3028,
3052, 3053, 3054, and 3058. These informations likewise charged accused-
appellant and his wife with violations of Article 315 of the Revised Penal Code
and differed only in the amount allegedly swindled, the names of the
complainants and the sales executives, and the time and place where the
alleged swindling occurred.
Accused-appellant and his wife, upon being arraigned on April 4, 1990,
pleaded not guilty to all the charges leveled against them. 7
In the case for large scale swindling and in the thirteen (13) cases for estafa, a
pre-trial was conducted. The pre-trial order 8 in Criminal Case No. 2948, for
large scale swindling, shows the following stipulations:
1. That the accused Vicente Menil, Jr. and Adriana Menil are the
General Manager and Treasurer, respectively of the ABM Appliances
and Upholstery with Assurances and Privileges which later on changed
to ABM Development Center;
2. That the ABM Development Center was operating business in
Surigao City, particularly at the Capitol Road; that it was duly
registered with the Securities and Exchange Commission and was duly
issued a Mayor’s Permit to operate the same;
3. That the ABM Appliances and Upholstery with Assurances and
Privileges, and later ABM Development Center were merged into one,
under one sanitary permit to operate as one entity;
4. That on August 24, 1989, Vicente Menil, Jr., the General Manager,
issued a Memorandum to all investors thereof regarding the decrease
of the proceeds of the investment from one thousand percent to
700% so that the P10.00 investment will get only the proceeds of
P70.00; and,
5. That what remain to be proved in the trial on the merits will be
limited only to the names of the sales executives/investors and
amounts of investment.
For the thirteen estafa cases, the following facts were stipulated:
1. That the accused operated the ABM Appliance and Upholstery with
Assurance Privileges and ABM Development Center, Inc., the latter
being duly registered with the Securities and Exchange Commission;
2. That accused Vicente Menil, as General Manager, and Adriana
Menil, as Treasurer, operating through the sales executives who
solicited/received investments from the general public and remitted
to the corporation;
3. That the listed sales executives and the amounts claimed remitted
and received are qualifiedly admitted; and
4. That the operation of ABM stopped on September 18, 1989. 9
Thereafter, trial on the merits in the fourteen (14) cases commenced.
During the trial of the case, accused Adrian B. Menil, the wife of accused-
appellant, died of tuberculosis on November 5, 1992 and accordingly, the trial
court dismissed the cases as against her in an Order dated November 12,
1992.10
In all the fourteen (14) cases before the trial court, the documentary evidence
for the prosecution was similar, consisting mainly of the investment records
containing a listing of remittances made by the sales executives/ushers of
ABM Appliance and Upholstery and ABM Development Center, Inc. Likewise,
the testimonial evidence for the prosecution consisted mainly of the
testimonies of the sales executives/ushers of ABM Appliance and Upholstery
and ABM Development Center, Inc., who testified on the mode of operations,
the respective amounts which they solicited from the public, and the places
where they solicited11
In Criminal Case No. 2948, for violation of P.D. 1689, due to the large number
of witnesses listed in the complaint and information (91 in all), the
prosecution and defense agreed to limit the number of witnesses to only four
(4) sales executives.
These witnesses, namely Felicitas Gotostos, Gloria Apale, Wlfredo Lisandra
and Nena Cagna-an, uniformly declared that they were sales executives and
investors appointed by accused-appellant Vicente Menil, Jr. to solicit
investments from people in Surigao City. Witness Felicitas Gatostos claimed 3022 Rebecca Mosca Brgy. Poblacion, P275,280.00
that she remitted a total of P257,180.00. Gloria Apale turned over Mainit,
investments totalling P1,397,619.00 while Nena Cagna-an claimed to have Surigao del Norte
remitted a total of P94,120.00. Finally, witness Wilfredo Lisondra allegedly
turned over investments totaling P1,124,358.00. These amounts were listed 3026 Patora Decalit Brgy. Sta. Cruz, 222,120.00
on sheets of paper which were marked and acknowledged received by Placer,
representatives of the ABM office. These four investments were included in a Surigao del Norte
Summary of Total Investments presented by the prosecution containing the 3028 Francisca Tado Tubod, Surigao del P399,650.00
names of 1,124 sales executives and/or investors who all in all remitted a total Norte
amount of P45,494,936.00.
3052 Porferia Etac Brgy. Bad-as, Placer, 172,910.00
For the thirteen (13) estafa cases, the prosecution presented the thirteen Surigao del Norte
complainants who were sales executives and/or investors of ABM assigned to
3053 Leodegaria Brgy. Marga, Tubod, 148,278.00
the different barangays and municipalities in Surigao del Norte where ABM
Paquero Surigao del Norte
collected investments. They all testified on the modus operandi employed by
accused-appellant in conducting his "investment business" and they identified 3054 Felomina Calamba Tubod, Surigao del P320,000.00
documents which showed the names of the investors they solicited from and Norte
the amounts which they remitted to ABM and which remained unpaid.
3058 Merlina Silva Brgy. Bad-as, Placer, 500,129.00
Following is a summary of the amounts that these witnesses claim as having
been duly received by ABM for investment purposes and which remained
unpaid to date: Accused Vicente Menil, Jr. put up a common defense in all the cases filed
against him.
CRIMINAL CASE WITNESS PLACE AMOUNT
NO. He testified that his investment business started on June 15, 1989 in Surigao
City.12 He insists that his investment business was legitimate as his corporation
2956 Zohar Mandaya Placer, Surigao del P610,046.00 was registered with the Securities and Exchange Commission. He pointed out
Norte that under paragraphs 3 and 4 of the Articles of Incorporation of ABM
Development Center, Inc., he was authorized to solicit and receive
3000 Cedronio Bacuag, Surigao del 136,670.00
investments in money and in kind. He also presented a Mayor’s Permit which
Cagampang Norte
he claimed authorized him to run the business. 13
3001 Joseph Lacsamana Brgy. del Rosario, P203,850.00
Tubod, In answer to a question as to how his business operates, the accused-
Surigao del Norte appellant described it as a "rolling system" which paid off dividends in the
ratio of one is to ten initially and then one is to seven beginning August 15,
3013 Domingo T. Tejada Brgy. Anislagan, P 29,070.00
1989.14 He claimed to have paid off these investments as they matured
Placer,
beginning June 30, 1989 and that he was able to pay off all investments
Surigao del Norte
received by his office which matured on August 28, 1989 and earlier. 15 He
3020 Rosiefe M. Laid Brgy. Sta Cruz, Placer, P114,620.00 stated however, that because of the large amounts involved, he was able to
Surigao del Norte pay off the investments maturing on August 28, 1989 only on September 18,
1989 as the counting of the money alone took two or three days to finish. 16
3021 Gamaliela Brgy. Roxas, Mainit, 447,960.00
Mordeno Surigao del Norte
He alleged that he stopped giving payments after September 18, 1989 due to
circumstances beyond his control. He claimed that on September 19, 1989, he
and his wife were fetched by a certain Lt. Arab and were brought to the PC
Headquarters where a certain Col. Macatangcop questioned them as to the
delay in the payment of investments. He was then mauled by a certain Lt.
Arab and two sons of Col. Macatangcop when he refused to issue to them a
check for P500,000.00. He was released by Col. Macatangcop only after he
issued a check for P250,000.00 and after he promised that he will not submit
himself to a medical examination.17
After his experience with Col. Macatangcop, he proceeded back to his office to
rest and to plan his next course of action. He then went to the Provincial
Hospital in order to have his injuries checked. He was able to secure a medical
certificate attesting to the injuries that he sustained. 18 While at the hospital,
he heard rumors that he was being hunted by the military and so he
transferred to the Miranda Clinic. Thereafter, he went to Toril, Davao City
where he was arrested by a certain Col. Panchito. 19
He stated that while in Davao City, a certain Sgt. Patino ransacked his
belongings and took away his attache case containing P50,000.00 in cash,
several pieces of jewelry, watches, a camera, and an undisclosed amount in
British pounds and American dollars. All in all, he claimed that he lost a total
of half a million pesos.20 He further stated that he left around P3,000,000.00
inside a steel cabinet in his office which had been taken into the custody of
the city sheriff. When he checked the contents with the sheriff’s office, he
stated that the steel cabinet had been forcibly opened and the money was
now missing.21
He further alleged that he had money in the Surigao City Banks amounting to
half a million pesos but he gradually withdrew this amount to pay off his
obligations. At this point, he could no longer pay off all his financial obligations
as he had no more money and because he was detained at the Surigao City
jail.22
On August 16, 1993, the trial court rendered a joint decision 23 finding accused-
appellant guilty of one count of large scale swindling and thirteen (13) counts
of estafa. The dispositive portion of the joint decision provides, as follows:
"WHEREFORE, this Court hereby finds accused Vicente Menil, Jr. GUILTY
beyond reasonable doubt of Estafa, defined and penalized in Article 315, first
paragraph and Sections 1(b) and 2(a) of the Revised Penal Code, in all the
above-entitled thirteen (13) provincial cases and one (1) city case, and,
accordingly, hereby sentences him, the following penalties:
Crim. Case No. 2948:
The qualified penalty provided for in second paragraph of Section 1,
Presidential Decree No. 1689, for Large Scale Swindling, and metes out an
imprisonment of reclusion perpetua; and to indemnify all the listed investors
in Exhibits "PP-1" to "PP-2", in the total sum of P45,494,936.00, Exhibit "PP";
to suffer the accessory penalties provided for by law; and, to pay the costs.
Crim. Case No. 2956:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-5" to "A-
188", in the amount of P624,726.00; to suffer the accessory penalties
provided for by law; and, to pay the costs.
Crim. Case No. 3000:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A" to "A-
27", the sum of P136,670.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3001:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
83", the sum of P203,850.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3013:
An indeterminate penalty of Two (2) years, Four (4) Months of prision
correccional , as the minimum, to Eight (8) years of prision mayor, as the
maximum; to indemnify the investors listed in Exhibits "A-1" to "A-8" the sum
of P29,070.00; to suffer the accessory penalties provided for by law; and, to
pay the costs.
Crim. Case No. 3020:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
126" the sum of P114,620.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3021:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
126" the sum of P447,960.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3022:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
64" the sum of P275,280.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3026:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
28" the sum of P222,120.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3028:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
74" the sum of P399,650.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3052:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
26" the sum of P172,910.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3053:
An indeterminate penalty of Two (2) Years and Four (4) Months of prision
correccional, as the minimum, to Eight (8) years of prision mayor; to
indemnify the investors listed in Exhibits "A-1" to "A-17" the sum of
P36,970.00; to suffer the accessory penalties provided for by law; and, to pay
the costs.
Crim. Case No. 3054:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
198" the sum of P920,883.00; to suffer the accessory penalties provided for by
law; and, to pay the costs.
Crim. Case No. 3058:
An indeterminate penalty of Eight (8) years of prision mayor to Twenty Years
of reclusion temporal; to indemnify the investors listed in Exhibits "A-1" to "A-
150" the sum of P500,129.00; to suffer the accessory penalties provided for by
law; and, to pay the costs;
Without subsidiary imprisonment, in case of insolvency.
Pursuant to Article 70, the penalty of reclusion perpetua shall be served first
and, thereafter, the simultaneous service of the penalties imposed in the
thirteen (13) provincial cases. Provided, however, that the maximum period
shall in no case exceed Forty (40) Years, after applying the three-fold rule
length of time, corresponding to the most severe of the penalties imposed,
which is reclusion perpetua, computed at Thirty (30) years.
The accused’s preventive detention shall be credited in his favor, pursuant to
law.
SO ORDERED."24
Hence, this appeal where accused-appellant raises the following assignment
of errors25 :
I.
THE COURT A QUO ERRED IN NOT DECLARING AS PURELY CIVIL THE LIABILITY
OF ACCUSED-APPELLANT TO THE PRIVATE COMPLAINANTS/ INVESTORS.
II.
THE COURT A QUO MANIFESTLY ERRED IN CONVICTING ACCUSED-APPELLANT
FOR LARGE SCALE SWINDLING UNDER P.D. 1869 IN CRIM. CASE NO. 2948 AND
ESTAFA IN CRIM. CASE NOS. 2956-3058, RESPECTIVELY, DESPITE THE FACT
THAT HIS GUILT WAS NOT PROVED BEYOND REASONABLE DOUBT.
We affirm the conviction of accused-appellant.
In convicting accused-appellant of the crimes of Large Scale Swindling
punishable under P.D. 1689 in Criminal Case No. 2948 and estafa in the
thirteen other criminal cases filed against accused-appellant, the trial court
made reference to Article 315, par. 2 (a) of the Revised Penal Code. Under this
provision, swindling or estafa by false pretenses or fraudulent acts executed
prior to or simultaneously with the commission of the fraud is committed by
"using fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business, or imaginary transactions, or
by other similar deceits." The elements of estafa under this penal provision
are: (1) the accused defrauded another by means of deceit and (2) damage or
prejudice capable of pecuniary estimation is caused to the offended party or
third party.26
In the case at bench, it is not disputed that the accused-appellant failed to pay
the expected returns of the investments and/or solicitations of the private
complainants. Accused-appellant himself admits that he was not able to pay
the returns on the investments due August 29, 1989 onwards. Neither did he
return the amount of their investments. Thus:
"Q: Okay. All right, you know this Crim. Case No. 3053, one Leodegarda
Paquero claims that she had invested the amount of P36,970.00 duly
acknowledged as to have been received by the ABM. Can you tell, Mr. Menil,
what happened to this investment made by the said Leodegarda Paquero?
Court:
What municipality is that?
Pros. Calang:
Tubod, Barangay Marga, your Honor please.
Atty. Canoy:
I would like to request counsel to pinpoint your honor please, the amount?
Pros. Calang:
On pages 31-45 inclusive, on record.
Q: What happened to her investment of P36,970.00?
A: It was included in the damage when the business was closed.
Q: Meaning to say, not paid?
A: Not paid, sir.
Q: Even the total amount of investment was not returned?
A: Yes, it was not returned, sir.
Q: In Crim. Case No. 3000, one Cedronio Cagampang claims that he had
invested to the ABM Development Center, Inc. as usher as well as investor in
the amount of P136,670.00 turned over and received by the ABM
Development Center, Incorporated. Kindly tell this Honorable Court what
happened to this investment?
A: This one which was not yet due or arrived to its due date, so this was not
paid.
Atty. Canoy:
Your honor, please, I think there is no need to present the same because it is
admitted, your Honor, that all monies invested and which became due after
August 28 were not received.
Court:
Yes, that is why there is that manifestation. So we will save time the same is
true with the other cases where it was shown that the money were invested
and due after August 28."27
What needs to be determined therefore is whether or not the element of Q: Your first due date was June 30, 1989, you said, the returns is estimated to
defraudation by means of deceit has been established by the prosecution be more than one thousand pesos?
beyond reasonable doubt.
A: Yes, sir.
Fraud, in its general sense, is deemed to comprise anything calculated to
deceive, including all acts, omissions, and concealment involving a breach of Q: Where do you get this one thousand pesos for the investment due on June
legal or equitable duty, trust, or confidence justly reposed, resulting in 30, 1989 is it not that you get it from the investment of the previous days?
damage to another, or by which an undue and unconscientious advantage is
taken of another.28 It is a generic term embracing all multifarious means which A: That is the amount that I’m going to use. But I also have my own funds.
human ingenuity can devise, and which are resorted to by one individual to
secure an advantage over another by false suggestions or by suppression of Q: How much was your funds as of June 30, 1989?
truth and includes all surprise, trick, cunning, dissembling and any unfair way
by which another is cheated.29 On the other hand, deceit is the false A: Two Hundred Fifty Thousand (P250,000.00) Pesos.
representation of a matter of fact, whether by words or conduct, by false or
misleading allegations, or by concealment of that which should have been Q: The investments that were due on July 1, 1989, the money that you are to
disclosed which deceives or is intended to deceive another so that he shall act pay for these returns were taken from the previous days, correct?
upon it to his legal injury.30
A: Yes, sir.
With these legal doctrines in mind, we hold that the testimonial and
documentary evidence presented by the prosecution, as well as the Q: The same is true with the investments due on July 2, you get all the money
admissions made by accused-appellant, sufficiently prove that accused- to pay from the investments made in the previous days, correct?
appellant employed fraud and deceit upon gullible people to induce them to
invest in his "business." The inducement consisted of accused-appellant’s A: Yes, sir.
assurance that money invested in his "business" would have returns of
1000%, later reduced to 700%, after 15 days. Lured by the false promise of Q: And the same thing is followed on the days after?
quick financial gains on their investments, the unsuspecting people of Surigao
del Norte readily turned over their hard-earned money to the coffers of ABM. A: Yes, sir.

It has been held that where one states that the future profits or income of an Q: Your last due date was August 28?
enterprise shall be a certain sum, but he actually knows that there will be
none, or that they will be substantially less than he represents, the statements A: Yes, sir.
constitute an actionable fraud where the hearer believes him and relies on
the statement to his injury.31 In the case at bench, it is abundantly clear that
Q: Again the returns for these date were taken from the previous days, from
ultimately, the profits which accused-appellant promised to his investors
the investments of the people from the previous dates?
would not be realized. Accused-appellant admitted during his testimony that
the money he used to pay off maturing investments were taken from the
A: Yes, sir.
remittances received by ABM Development Center, Inc. Thus:
xxx
Q: As far as you can recall as of June 30, 1989, how much investments were
already made or received by your office?
Q: On August 29, were there still investments?
A: More than forty thousand pesos.
A: There was still investment on that date, sir, but as far as I know there were
so many releases on that day. I paid up to September 18. But on September
19, there was already an incident that happened.
Q: The returns you made of investments on September 18, when was that
investment made?
A: From the previous investments.
Q: My question is: Those amounts you paid on September 18, when was …
were those amounts invested, do you agree that it was also fifteen days
before?
A: Every due date we completely paid it. Every due date, we paid completely
before going to the next day. Due date, for example, it was delayed because it
was delayed in counting money. For example, the one hundred thousand
pesos, it takes time in counting that one hundred thousand pesos.
Q: Are we to understand from you, Mr. Witness, that the returns of the
investments due on August 28 were already paid on August 28?
A: Yes, sir.
Q: And the money that you used in paying these returns were also taken from
the previous days, from the investments of the people?
A: Yes, sir.32
In other words, accused-appellant merely paid the returns of maturing
investments from the remittances of succeeding investors. What accused-
appellant actually offered to the public was a "Ponzi Scheme," an
unsustainable investment program that offers extravagantly high returns and
pays these returns to early investors out of the capital contributed by later
investors. In People vs. Balasa33 , we had occasion to describe the workings of
the "Ponzi Scheme" as follows:
"Named after Charles Ponzi who promoted the scheme in the 1920’s, the
original scheme involved the issuance of bonds which offered 50% interest in
45 days or a 100% profit if held for 90 days. Basically, Ponzi used the money
he received from later investors to pay extravagant rates of return to early
investors, thereby inducing more investors to place their money with him in
the false hope of realizing this same extravagant rate of return themselves.
This was the very scheme practiced by the Panata Foundation.
However, the Ponzi scheme works only as long as there is an ever-increasing
number of new investors joining the scheme. To pay off the 50% bonds Ponzi
had to come up with one-and-a-half times increase with each round. To pay
100% profit, he had to double the number of investors at each stage, and this
is the reason why a Ponzi scheme is a scheme and not an investment strategy.
The progression it depends upon is unsustainable. The pattern of increase in
the number of participants in the system explains how it is able to succeed in
the short run and, at the same time, why it must fail in the long run. This game
is difficult to sustain over a long period of time because to continue paying the
promised profits to early investors, the operator needs an ever larger pool of
later investors. The idea behind this type of swindle is that the ‘conman’
collects his money from his second or third round of investors and then
absconds before anyone else shows up to collect. Necessarily, these schemes
only last weeks, or months at most."
That there was no profit forthcoming can likewise be deduced from the fact
that accused-appellant was not engaged nor authorized to engage in any
lucrative business to finance its operation. On this point, accused-appellant
points out that under the Articles of Incorporation of ABM Development
Center, Inc., he was authorized to "make or coordinate in the making of
studies and researches" and "to solicit, receive, channel and/or distribute
donations, economic aids, grants, investments in money or in kind." Likewise,
he presented a Mayor’s Permit that he claimed authorized him to engage in
the investment business.
There is no merit in these contentions of accused-appellant. As proven by the
prosecution, the incorporation of the ABM Development Center, Inc. on
August 21, 1989 was undertaken by accused-appellant only to give a
semblance of legitimacy to its illegal operations. Accused-appellant started
receiving investments from the public as early as July 15, 1989 and yet it was
only after he was warned by a representative of the Department of Trade and
Industry that his operation was illegal that he went about with the business of
incorporating his moneymaking scheme.34 Moreover, as borne out by the
Articles of Incorporation, the ABM Development Center, Inc. was incorporated
as a non-stock corporation. As a non-stock corporation, ABM Development
Center, Inc. may only be formed or organized for charitable, religious,
educational, professional, cultural, fraternal, literary, scientific, social, civic, or
other similar purposes.35 It may not engage in undertakings, such as the
investment business, where profit is the main or underlying purpose.
Although the non-stock corporation may obtain profits as an incident to its
operation, such profits are not to be distributed among its members but must
be used for the furtherance of its purposes. 36 In the same vein, the Mayor’s
Permit issued to accused-appellant shows that he was only permitted to "act
as dealer of appliances and upholstery." The permit did not give accused-
appellant authority to engage in the investment business.
Finally, the fact that accused-appellant could not present any specific business
plan or cite any donations or bequests which he received to finance his
money-making scheme clearly shows that the investment scheme which he
foisted on the unsuspecting public was fraudulent. It must be noted that
according to the Articles of Incorporation of ABM Development Center, Inc.,
its paid-up capital was only P11,000.00 and yet it was able to transact
business in terms of millions of pesos. It must likewise be stressed that
accused-appellant refused to answer when asked about the specifics of his
business and about how he would be able to fulfill his obligation of paying the
promised exorbitant rates of return.
In his defense, accused-appellant points to the fact that several investors
were paid the corresponding returns on their investments. This fact, accused-
appellant argues, negates any perceived false pretense or deceit on his part
and as such, his liability, if any should only be civil in nature.
There is no merit in this argument. As previously explained, the payment of
returns to early investors is an integral part of the illegal Ponzi scheme foisted
by accused-appellant on the unsuspecting public. The fact that early investors
were paid the returns on their investments induced more people to
participate in the illegal scheme with the hope of realizing the same
extravagant rate of return. In fact, after word of these payments spread like
wildfire, the amount of investments received by accused-appellant ballooned
from thousands of pesos to several millions of pesos.
The prosecution having proved the two elements of damage and deceit in all
the cases filed against accused-appellant, the trial court thus committed no
error in finding accused-appellant guilty of one count of large scale swindling
and thirteen (13) counts of estafa. The Court notes, however, that the
penalties imposed by the trial court are erroneous.
In Criminal Case No. 2948, accused-appellant was charged with violation of
P.D. 1689 and sentenced to imprisonment of reclusion perpetua. Section 1 of
the said law provides, as follows:
"Sec.1. Any person or persons who shall commit estafa or other forms of
swindling as defined in Articles 315 and 316 of the Revised Penal Code, as
amended, shall be punished by life imprisonment to death if the swindling
(estafa) is committed by a syndicate consisting of five or more persons formed
with the intention of carrying out the unlawful or illegal act, transaction,
enterprise or scheme, and the defraudation results in the misappropriation of
moneys contributed by stockholders, or members of rural banks,
cooperatives, "samahang nayons," or farmers’ associations, 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."
P.D. No. 1689 thus penalizes offenders with life imprisonment to death
regardless of the amount involved, provided that a syndicate committed the
crime. A syndicate is defined in the same law as "consisting of five or more
persons formed with the intention of carrying out the unlawful or illegal act,
transaction, enterprise or scheme." If the offenders are not members of a
syndicate, they shall nevertheless be held liable for the acts prohibited by the
law but they shall be penalized by reclusion temporal  to reclusion perpetua if
the amount of the fraud is more than one hundred thousand pesos.
In the instant case, there was no showing by the prosecution that a syndicate
perpetrated the Ponzi scheme. While the prosecution proved that a non-stock
corporation with eleven (11) incorporators, including accused-appellant and
his wife, was involved in the illegal scheme, there was no showing that these
incorporators collaborated, confederated, and mutually helped one another
in directing the corporation’s activities. In fact, the evidence for the
prosecution shows that it was only accused-appellant and his wife who had
knowledge of and who perpetrated the illegal scheme.
As such, the trial court was correct in convicting accused-appellant under the
second paragraph of Section 1 of P.D. 1689 considering that the amount
swindled by accused-appellant totals P45,494,936.00. The trial court erred,
however, in imposing the penalty of reclusion perpetua. Given the absence of
mitigating or aggravating circumstances, the lesser penalty imposed under the
said paragraph, reclusion temporal, should have been imposed in its medium
period. Applying the Indeterminate Sentence Law, accused-appellant, in
Criminal Case No. 2948, should have been sentenced to an indeterminate
penalty of ten (10) years of prision mayor medium, as minimum, to twenty
(20) years of reclusion temporal medium, as maximum.
The trial court likewise erred in its application of the provisions of Article 315
of the Revised Penal Code and of the Indeterminate Sentence Law in the
imposition of the proper penalties for the thirteen (13) estafa cases.
The penalty for estafa depends on the amount defrauded. Article 315 of the
Revised Penal Code provides that "the penalty of prision correccional in its
maximum period to prision mayor in its minimum period (or imprisonment
ranging from 4 years, 2 months, and 1 day to 8 years), if the amount of the
fraud is over P12,000.00 but does not exceed P22,000.00, and if such amount
exceeds the latter sum, the penalty provided in this paragraph shall be
imposed in its maximum period (6 years, 8 months and 21 days to 8 years),
adding one year for each additional P10,000.00 pesos; but the total penalty
which may be imposed shall not exceed twenty years. In such case, and in
connection with the accessory penalties which may be imposed and for the
purpose of the other provisions of this Code, the penalty shall be
termed prision mayor or reclusion temporal, as the case may be.37
Under the Indeterminate Sentence Law, the maximum term of the penalty
shall be "that which, in view of the attending circumstances, could be properly
imposed" under the Revised Penal Code, and the minimum shall be "within
the range of the penalty next lower to that prescribed" for the offense. 38 The
penalty next lower should be based on the penalty prescribed by the Code for
the offense, without first considering any modifying circumstance attendant
to the commission of the crime. The modifying circumstances are considered
only in the imposition of the maximum term of the indeterminate sentence. 39
In computing the penalty for estafa, the fact that the amounts involved
exceed P22,000.00 should not be considered in the initial determination of
the indeterminate penalty; instead the matter should be taken as analogous
to modifying circumstances in the imposition of the maximum term of the full
indeterminate sentence. This interpretation of the law is in accord with the
rule that penal laws should be construed in favor of the accused. Since the
penalty prescribed by law for estafa is prision correccional maximum
to prision mayor minimum, the penalty next lower would then be prision
correccional in its minimum to medium periods. Thus, the minimum term of
the indeterminate sentence should be anywhere within six (6) months and
one (1) day to four (4) years and two (2) months while the maximum term of
the indeterminate sentence should at least be six (6) years and one (1) day
because the amounts involved exceeded P22,000.00, plus one (1) year for
each additional P10,000.00.40 The maximum penalty should not exceed twenty
years.
Accordingly, with respect to the cases of estafa filed against accused-
appellant, the applicable periods of imprisonment should, respectively, be as
follows:
In Criminal Case No. 2956, where the amount swindled is P624,726.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3000, where the amount involved is P136,670.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
nineteen (19) years of reclusion temporal as maximum.
In Criminal Case No. 3001, where the amount involved is P203,850.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3013, where the amount involved is P29,070.00, accused-
appellant is hereby sentenced to an indeterminate penalty of four (4) years
and two (2) months of prision correccional medium, as minimum to eight (8)
years of prision mayor as maximum.
In Criminal Case No. 3020, where the amount involved is P114,620.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
seventeen (17) years of reclusion temporal as maximum.
In Criminal Case No. 3021, where the amount involved is P447,960.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3022, where the amount involved is P275,280.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3026, where the amount involved is P222,120.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3028, where the amount involved is P399,650.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3052, where the amount involved is P172,910.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3053, where the amount involved is P36,970.00, accused-
appellant is hereby sentenced to an indeterminate penalty of four (4) years
and two (2) months of prision correccional medium, as minimum, to nine (9)
years of prision mayor as maximum.
In Criminal Case No. 3054, where the amount involved is P920,883.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3058, where the amount involved is P500,129.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
The amounts ordered reimbursed to the respective complainants and
investors listed in the documentary exhibits of the prosecution are hereby
affirmed.
WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED, subject to the following modifications:
In Criminal Case No. 2948, where the total amount of the fraud is
P45,494,936.00, accused-appellant is hereby sentenced to an indeterminate
penalty of ten (10) years of prision mayor medium, as minimum to twenty (20)
years of reclusion temporal medium, as maximum.
In Criminal Case No. 2956, where the amount swindled is P624,726.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3000, where the amount involved is P136,670.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
nineteen (19) years of reclusion temporal as maximum.
In Criminal Case No. 3001, where the amount involved is P203,850.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3013, where the amount involved is P29,070.00, accused-
appellant is hereby sentenced to an indeterminate penalty of four (4) years
and two (2) months of prision correccional medium, as minimum to eight (8)
years of prision mayor as maximum.
In Criminal Case No. 3020, where the amount involved is P114,620.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
seventeen (17) years of reclusion temporal as maximum.
In Criminal Case No. 3021, where the amount involved is P447,960.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3022, where the amount involved is P275,280.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3026, where the amount involved is P222,120.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.
In Criminal Case No. 3028, where the amount involved is P399,650.00,
accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.

In Criminal Case No. 3052, where the amount involved is P172,910.00,

accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.

In Criminal Case No. 3053, where the amount involved is P36,970.00, accused-
appellant is hereby sentenced to an indeterminate penalty of four (4) years
and two (2) months of prision correccional medium, as minimum, to nine (9)
years of prision mayor as maximum.

In Criminal Case No. 3054, where the amount involved is P920,883.00,

accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.

In Criminal Case No. 3058, where the amount involved is P500,129.00,

accused-appellant is hereby sentenced to an indeterminate penalty of four (4)
years and two (2) months of prision correccional medium, as minimum, to
twenty (20) years of reclusion temporal as maximum.

The amounts ordered reimbursed to the respective complainants and

investors listed in the documentary exhibits of the prosecution are hereby
affirmed.

SO ORDERED.

G.R. No. 195542
SECURITIES AND EXCHANGE COMMISSION, Petitioner,
vs.
OUDINE SANTOS, Respondent.
DECISION
PEREZ, J.:
Before us is another cautionary tale of an investment arrangement which, at
the outset, appeared good, unraveling unhappily as a deal too-good-to-be-
true.
This petition for review on certiorari under Rule 45 of the Rules of Court
assails the Decision1 of the Court of Appeals in CA-G.R. SP No. 112781
affirming the Resolutions2 of the Secretary of Justice in I.S. No. 2007-1054
which, among others, dismissed the criminal complaint for violation of Section
28 of Republic Act No. 8799, the Securities Regulation Code, filed by petitioner
Securities and Exchange Commission (SEC) against respondent Oudine Santos
(Santos).
Sometime in 2007, yet another investment scam was exposed with the
disappearance of its primary perpetrator, Michael H.K. Liew (Liew), a self-
styled financial guru and Chairman of the Board of Directors of Performance
Investment Products Corporation (PIPC-BVI), a foreign corporation registered
in the British Virgin Islands.
To do business in the Philippines, PIPC-BVI incorporated herein as Philippine
International Planning Center Corporation (PIPC Corporation).
Because the head of PIPC Corporation had gone missing and with it the
monies and investment of a significant number of investors, the SEC was
flooded with complaints from thirty-one (31) individuals against PIPC
Corporation, its directors, officers, employees, agents and brokers for alleged
violation of certain provisions of the Securities Regulation Code, including
Section 28 thereof. Santos was charged in the complaints in her capacity as
investment consultant of PIPC Corporation, who supposedly induced private
complainants Luisa Mercedes P. Lorenzo (Lorenzo) and Ricky Albino P. Sy (Sy),
to invest their monies in PIPC Corporation.
The common recital in the 31 complaints is that:
x x x [D]ue to the inducements and solicitations of the PIPC corporation’s
directors, officers and employees/agents/brokers, the former were enticed to
invest their hard-earned money, the minimum amount of which must be
US$40,000.00, with PIPC-BVI, with a promise of higher income potential of an
interest of 12 to 18 percentum (%) per annum at relatively low-risk investment
program. The private complainants also claimed that they were made to
believe that PIPC Corporation refers to Performance Investment Product
Corporation, the Philippine office or branch of PIPC-BVI, which is an entity
engaged in foreign currency trading, and not Philippine International Planning
Center Corporation.3
Soon thereafter, the SEC, through its Compliance and Endorsement Division,
filed a complaint-affidavit for violation of Sections 8, 4 265 and 286 of the
Securities Regulation Code before the Department of Justice which was
docketed as I.S. No. 2007-1054. Among the respondents in the complaint-
affidavit were the principal officers of PIPC: Liew, Chairman and President;
Cristina Gonzalez-Tuason, Director and General Manager; Ma. Cristina
Bautista-Jurado, Director; and herein respondent Santos.
Private complainants, Lorenzo and Sy, in their affidavits annexed to SEC’s
complaint-affidavit, respectively narrated Santos’ participation in how they
came to invest their monies in PIPC Corporation:
1. Lorenzo’s affidavit
xxxx
2. I heard about PIPC Corporation from my friend Derrick Santos
during an informal gathering sometime in March 2006. He said that
the investments in PIPC Corporation generated a return of 18-20%
p.a. every two (2) months. He then gave me the number of his
sister, Oudine Santos who worked for PIPC Philippines to discuss the
investment further.
3. I then met with Oudine Santos sometime during the first week of
April 2006 at PIPC Philippines’ lounge x x x. Oudine Santos conducted
for my personal benefit a presentation of the characteristics of their
investment product called "Performance Managed Portfolio" (PMP).
The main points of her presentation are indicated in a summary she
gave me, x x x:
xxxx
4. I asked Oudine Santos who were the traders, she said their names
were "confidential."
5. Oudine Santos also emphasized in that same meeting that I should
keep this transaction to myself because they were not allowed to
conduct foreign currency trading. However, she assured me that I
should not worry because they have a lot of "big people" backing
them up. She also mentioned that they were applying for a seat in the
"stock exchange."
6. I ultimately agreed to put in FORTY THOUSAND US DOLLARS
(US$40,000.00) in their investment product.
7. Oudine Santos then gave me instructions on how to place my
money in PMP and made me sign a Partnership Agreement. x x x.
xxxx
8. Soon thereafter, pursuant to the instructions Oudine Santos gave
me, I remitted US$40,000.00 to ABN-AMRO Hong Kong.
9. Afterwards, I received a letter dated 17 April 2006, signed by
Michael H.K. Liew, welcoming my investment.
xxxx
10. Sometime on May 2006, I added another US$ 60,000.00 to my
then subsisting account #181372, thus totaling US$100,000.00. This
amount, pursuant to the instructions of Oudine Santos, was remitted
to Standard Chartered Bank.
xxxx
14. Then sometime on May 2007, I planned to pull out my remaining
US$100,000.00 investment in PIPC Philippines. On 22 May 2007, I met
with Oudine Santos at the 15th Floor of Citibank Tower in Makati City.
I told her I wanted to terminate all my investments.
15. Oudine Santos instead said that PIPC Philippines has a new
product I might be interested in. x x x She explained that this product
had the following characteristics:
xxxx
16. Oudine Santos reiterated these claims in an email she sent me on
22 May 2007. x x x.
17. Enticed by these assurances and promises of large earnings, I put
in FOUR HUNDRED THOUSAND US DOLLARS (US$400,000.00) in PMP
(RZB), which became account # R149432.
18. Pursuant to the instructions Oudine Santos gave me, I remitted
the amount of US$ 400,000.00 to RZB Austria, Singapore Branch.
xxxx
22. I tried calling Oudine Santos and was finally able to reach her at
around 7 in the morning. She confirmed what Leah Caringal told me. I
told her then that I want full recovery of my investment in accordance
with their 100% principal guarantee. To this day[,] I have not received
my principal investment.7
5. Sy’s affidavit
2. I have been a depositor of the Bank of the Philippine Islands (BPI)
Pasong Tamo branch for the past 15 years. Sometime in the last
quarter of 2006, I was at BPI Pasong Tamo to accomplish certain
routine transactions. Being a client of long standing, the bank
manager[,] as a matter of courtesy, allowed me to wait in her cubicle.
It was there that the bank manager introduced me to another bank
client, Ms. Oudine Santos. After exchanging pleasantries, and in the
course of a brief conversation, Ms. Santos told me that she is a
resident of Damariñas Village and was working as an investment
consultant for a certain company, Performance Investment Products
Corporation [PIPC]. She told me that she wanted to invite me to her
office at the Citibank Tower in Makati so that she could explain the
investment products that they are offering. I gave her my contact
number and finished my transaction with the bank for that day;
3. Ms. Santos texted me to confirm our meeting. A few days later, I
met her at the business lounge of [PIPC] located at the 15th Floor of
Citibank Tower, Makati. During the meeting, Ms. Santos enticed me to
invest in their Performance Managed Portfolio which she explained
was a risk controlled investment program designed for individuals like
me who are looking for higher investment returns than bank deposits
while still having the advantage of security and liquidity. She told me
that they were engaged in foreign currency trading abroad and that
they only employ professional and experienced foreign exchange
traders who specialize in trading the Japanese Yen, Euro, British
Pound, Swiss Francs and Australian Dollar. I then told her that I did
not have any experience in foreign currency trading and was quite
conservative in handling my money;
4. Ms. Santos quickly allayed my fears by emphasizing that the capital
for any investment with [PIPC] is secure. She then trumpeted [PIPC’s]
track record in the Philippines, having successfully solicited
investments from many wealthy and well-known individuals since
2001;
5. Ms. Santos convinced me to invest in Performance Management
Portfolio I x x x [which] features full protection for the principal
investment and a 60%-40% sharing of the profit between the client
and [PIPC] respectively;
6. In November of 2006, I decided to invest USD 40,000 specifically in
Performance Management Portfolio I x x x. After signing the
Partnership Agreement, x x x, I was instructed by Ms. Santos to
deposit the amount by telegraphic transfer to [PIPC’s] account in ABN
AMRO Bank Hong Kong. I did as instructed;
xxxx
8. Sometime January to March of 2007, [Santos] was convincing me to
make an additional investment under a second product, Performance
Management Portfolio II [PMP II] which provides a more limited
guarantee for the principal investment of USD 100,000 and a 80%-
20% sharing of the profit between the client and [PIPC] respectively.
In both schemes, the client’s participation will be limited to choosing
two currencies which will in turn be traded by professional traders
abroad. Profit earned from the transaction will then be remitted to
the client’s account every 8 weeks;
xxxx
10. After I made my USD 40,000 PMP I investment, Ms. Santos invited
me to meet Mr. Michael Liew in the business lounge some time during
the first quarter of this year. My impression was that he was quite
unassuming considering that he was the head of an international
investment firm. x x x.8
On the whole, Lorenzo and Sy charge Santos in her capacity as investment
consultant of PIPC Corporation who actively engaged in the solicitation and
recruitment of investors. Private complainants maintain that Santos, apart
from being PIPC Corporation’s employee, acted as PIPC Corporation’s agent
and made representations regarding its investment products and that of the
supposed global corporation PIPC-BVI. Facilitating Lorenzo’s and Sy’s
investment with PIPC Corporation, Santos represented to the two that
investing with PIPC Corporation, an affiliate of PIPC-BVI, would be safe and
full-proof.
In SEC’s complaint-affidavit, it charged the following:
xxxx
12. This case stems from the act of fraud and chicanery masterfully
orchestrated and executed by the officers and agents of PIPC Corp.
 against their unsuspecting investors. The deception is founded on the xxxx
basic fact that neither PIPC Corp. nor its officers, employees and
agents are registered brokers/dealers, making their numerous 23. Luisa Oudine RZB Austria, June R149432 US$500,000 Not
transactions of buying and selling securities to the public a blatant Mercedes P. Santos Singapore Branch 2007 provid
violation of the provisions of the SRC, specifically Sections 8 and 28 Lorenzo
thereof. Their illegal offer/sale of securities in the form of the xxxx
"Performance Management Partnership Agreement" to the public
was perpetrated for about nine (9) years and would have continued 32. Ricky Oudine ABN-AMRO Bank 9 0800287 US$40,000 BPI
were it not for the alleged, and most probably, contrived and Albino P. Sy Santos Hongkong October 769 Pasong
deliberate withdrawal of the entire funds of the corporation by 2006 Tamo B
Michael H.K. Liew. The [scam] was masked by a supposed offshore
foreign currency trading scheme promising that the principal or 23. A careful perusal of the complaint-affidavits revealed that for
capital infused will be guaranteed or fully protected. Coupled with this every completed investment transaction, a company brochure,
[full] guarantee for the principal is the prospect of profits at an annual depending on the type of investment portfolio chosen, was provided
rate of 12 to 18%. [One of] the other enticements provided by the to each investor containing the following information on Performance
subject company were free use of its business either for personal or BVI and its investment product called Performance Managed Portfolio
business purposes, free subscription of imported magazines, [trips] or PMP, the points of which are as follows:
abroad, and insurance coverage, just to name a few. Fully convinced
and enamored [by the] thought of earning higher rates of interest a.8 calendar week maturity period[,]
along with the promise of a guaranteed [capital] the investors placed
and entrusted their money to PIPC Corp., only to find out later [that b.principal investment (minimum of USD 40,000) is
they] had been deceived and taken for a ride. protected[,]

xxxx c.investments maintained in strict confidentiality[,]

17. Sometime in 2006, an investigation was undertaken by the d.features: security, liquidity, short term commitment,
[Compliance and Enforcement Division of the SEC] on the [account] of
PIPC Corp. Per its Articles of Incorporation, PIPC Corp. was authorized e.tax-exemption status for offshore investments.
to engage [in the] dissemination of information on the current flow of
foreign exchange (forex) as x x x precious metals such as gold, silver,
24.The investment flow is described as follows:
and oil, and items traded in stock and securities/commodities
exchanges around the world. To be more specific, PIPC Corp. [was]
a.Investors’ funds will be placed into a fixed deposit account
authorized to act only as a research arm of their foreign clients.
with a PIPC designated bank and shall not be exposed for
trading purposes. The PIPC designated bank shall then extend
xxxx
a margin line request for trading based on the deposit;
22. x x x.
b.PIPC shall open a separate account which will contain an
amount of not more than 30% of its own funds to serve as a
ame of Broker/Agen Banl/Location to Date Account Amount of Bank/ profit and loss account;
vestors t which funds were Number Investment Location
transferred xxx
 c.Trading will commence with PIPC designated bank closely
monitoring the performance to ensure that if losses are
incurred trading will cease immediately should the 20% stop
limit be hit;
d.Profits will be credited into the Profit and Loss account with
PIPC designated bank account. Losses will be debited from the
same account up to the controlled 20% limit;
e.Notice of withdrawals must be submitted two weeks prior
to schedule of maturity otherwise investment is automatically
rolled over to the next batch;
f.At maturity, profits accumulated in the settlement account
shall be distributed and deposited into each investor’s dollar
bank account within fourteen (14) banking days;
g.The funds of various investors are pooled, batched and
deposited with PIPC designated bank account acting as
custodian bank, to form a massive asset base. This account is
separate and distinct from the Profit and Loss Account. The
line from this pooled fund is then entrusted to full time
professional and experienced foreign traders who each
specialize in the following currencies: Japanes Yen, Euro,
British Pound, Swiss Francs and Australian Dollar. Profits
generated from trading these major currencies is credited into
the Profit and Loss Account, which at the end of the eight
calendar week lock-in period, will be distributed among the
investors. Investors are informed of their account status thru
trading statements issued by PIPC every time there is a trade
made in their respective accounts.
xxxx
25. Furthermore, it was relayed by the officers and agents to
complainants-investors that PIPC Corp. is the Philippine office of the
Performance Group of Companies affiliates situated in different parts
of the world, particularly China, Indonesia, Hong Kong, Japan, Korea,
Singapore, and the British Virgin Islands (BVI), even reaching
Switzerland. With such basic depiction of the legitimacy and stability
of PIPC Corp., complainants-investors deduced that it was clothed
with the authority to solicit, offer [and] sell securities. As regards the
officers and agents of [PIPC Corp.], they secured proper individual
licenses with the SEC as brokers/dealers of securities to enable to
solicit, offer and/or sell the same.
26. Official SEC documents would show that while PIPC Corp. is indeed
registered with the SEC, it having engaged in the solicitation and sale
of securities was contrary to the purpose for which it was established
which is only to act as a financial research. Corollarily, PIPC Corp.’s
officers, agents, and brokers were not licensed to solicit, offer and sell
securities to the public, a glaring violation of Sections 8 and 28 of the
SRC.10
In refutation, Santos denied intentionally defrauding complainants
Lorenzo and Sy:
12.I cannot understand how I can be charged of forming, or even of
being a part of, a syndicate "formed with the intention of carrying an
unlawful or illegal act, transaction, enterprise or scheme." If this
charge has reference to PIPC Corp. then I certainly cannot be held
liable therefore. As I mentioned above, I joined PIPC Corp. only
in April 2005 and, by that time, the company was already in existence
for over four years. I had no participation whatsoever in its creation or
formation, as I was not even connected with PIPC Corp. at the time of
its incorporation. In fact, I have never been a stockholder, director,
general manager or officer of PIPC Corp. Further, PIPC Corp. was duly
registered with the Securities and Exchange Commission and was
organized for a legitimate purpose, and certainly not for the purpose
of perpetrating a fraud against the public.
13.That I was an employee and, later on, an independent information
provider of PIPC Corp. is of little consequence. My duties as such were
limited to providing information about the corporate clients of PIPC
Corp. that had been expressly requested by interested individuals. I
performed my assigned job without any criminal intent or malice. In
this regard, I have been advised that offenses penalized under the RPC
are intentional felonies for which criminal liability attaches only when
it is shown that the malefactors acted with criminal intent or malice.
There can be no crime when the criminal mind is wanting. In this case,
I performed my task of providing requested information about the
clients of PIPC Corp. without any intent to violate the law. Thus, there
can be no criminal liability.
[14]. I have also been advised that under the law, the directors and
officers of a corporation who act for and in behalf of the corporation,
who keep within the lawful scope of their authority, and act in good
faith, do not become liable, whether civilly or otherwise, for the
consequences of their acts, as these acts are properly attributed to
the corporation alone. The same principle should apply to individual,
like myself, who was only acting within the bounds of her assigned
tasks and had absolutely no decision-making power in the
management and supervision of the company.
[15]. Neither can I be liable of forming a syndicate with respect to
PIPC- BVI. To reiterate, at no time was I ever a stockholder, director,
employee, officer or agent of PIPC-BVI. Said company is simply one of
many companies serviced by PIPC Corp. I had no participation
whatsoever in its creation and/or in the direction of its day-to-day
affairs.
xxxx
19. Further, I have been advised by counsel that conspiracy must be
established by positive and conclusive evidence. It cannot be based on
mere conjecture but must be established as a fact. In this case, no
proof of conspiracy was presented against me. In fact, it appears that I
have been dragged in to this allegation based on the hearsay
statement of Felicia Tirona that I was one of the in-house "account
executives" or "work force" of PIPC-BVI and PIPC Corp. There was no
allegation whatsoever of any illegal act done by me to warrant the
institution of criminal charges against me. If at all, only Michael Liew
should be held criminally liable, as he was clearly the one who
absconded with the money of the investors of PIPC-BVI. Mr. Liew has
since disappeared and efforts to locate him have apparently proved to
be futile to date.
xxxx
23.In the first place, I did not receive any money or property from any
of the complainants. As clearly shown by the documents submitted to
this Honorable Office, particularly, the Portfolio Management
Partnership Agreement, Security Agreement, Declaration of Trust,
bank statements and acknowledgement receipts, complainants
delivered their money to PIPC-BVI, not to PIPC Corp. Complainants
deposited their investment in PIPC-BVI’s bank account, and PIPC-BVI
would subsequently issue an acknowledgement receipt. No part of
the said money was ever delivered to PIPC Corp. or to me.
24.Indeed, complainant’s own evidence show that the Portfolio
Management Partnership Agreement, Security Agreement and
Declaration of Trust were executed between PIPC-BVI and the
individual complainants. Further, paragraph 2 of the Declaration of
Trust explicitly stated that PIPC-BVI "hold the said amount of money
UPON TRUST for the Beneficiary Owner." The complainants cannot,
therefore, hold PIPC Corp., or any of its officers or employees, with
misappropriating their money or property when they were fully aware
that they delivered their money to, and transacted solely with, PIPC-
BVI, and not PIPC Corp.
25.It also bears stressing that of the twenty-one (21) complainants in
this case, only complainant Ricky Albino Sy alleged that he had
actually dealt with me. Complainant Sy himself never alleged that he
delivered or entrusted any money or property to me. On the contrary,
complainant Sy admitted that he deposited his investment of U.S.
$40,000.00 by bank transfer to PIPC-BVI’s account in the ABN Amro
Bank. That the money was delivered to PIPC-BVI, and not to me, is
shown by the fact that the receipt was issued by PIPC-BVI. I never
signed or issued any acknowledgement receipt, as I never received
any such money. Neither did I ever gain physical or juridical
possession of the said money.11 (Emphasis and underscoring
supplied).
Santos’ defense consisted in: (1) denying participation in the conspiracy and
fraud perpetrated against the investor-complainants of PIPC Corporation,
specifically Sy and Lorenzo; (2) claiming that she was initially and merely an
employee of, and subsequently an independent information provider for, PIPC
Corporation; (3) PIPC Corporation being a separate entity from PIPC-BVI of
which Santos has never been a part of in any capacity; (4) her not having
received any money from Sy and Lorenzo, the two having, in actuality, directly
invested their money in PIPC-BVI; (5) Santos having dealt only with Sy and the
latter, in fact, deposited money directly into PIPC-BVI’s account; and (6) on
the whole, PIPC-BVI as the other party in the investment contracts signed by
Sy and Lorenzo, thus the only corporation liable to Sy and Lorenzo and the
other complainants.
On 18 April 2008, the DOJ, in I.S. No. 2007-1054, issued a Resolution signed by
a panel of three (3) prosecutors, with recommendation for approval of the
Assistant Chief State Prosecutor, and ultimately approved by Chief State
Prosecutor Jovencito R. Zuño, indicting: (a) Liew and Gonzalez-Tuason for
violation of Sections 8 and 26 of the Securities Regulation Code; and (b) herein
respondent Santos, along with Cristina Gonzalez-Tuason and 12 others for
violation of Section 28 of the Securities Regulation Code. The same Resolution
likewise dismissed the complaint against 8 of the respondents therein for
insufficiency of evidence. In the 18 April 2008 Resolution, the DOJ discussed at
length the liability of PIPC Corporation and its officers, employees, agents and
all those acting on PIPC Corporation’s behalf, to wit:
Firstly, complainant SEC filed the instant case for alleged violation by
respondents [therein, including herein respondent, Santos,] of Section 8 of
the SRC.
Sec. 8. Requirement of Registration of Securities. – 8.1. Securities shall not be
sold or offered for sale or distribution within the Philippines, without a
registration statement duly filed with and approved by the Commission. Prior
to such sale, information on the securities, in such form and with such
substance as the Commission may prescribe, shall be made available to each
prospective purchaser.
Based on the above provision of the law, complainant SEC is now accusing all
respondents [therein, including Santos,] for violating the same when they
allegedly sold and/or offered for sale unregistered securities.
However, Section 8.5 thereof provides that "The Commission may audit the
financial statements, assets and other information  of a firm applying for
registration of its securities  whenever it deems the same necessary to insure
full disclosure or to protect the interest of the investors and the public in
general."
The above-quoted provision is loud and clear and needs no further
interpretation. It is the firm through its authorized officers that is required to
register its securities with the SEC and not the individual persons allegedly
selling and/or offering for sale said unregistered securities. To do otherwise
would open the floodgates to numerous complaints against innocent
individuals who have no hand in the control, decision-making and operations
of said investment company.
Clearly, it is only the PIPC Corp. and respondents Michael H. Liew and Cristina
Gonzalez-Tuason being the President and the General Manager respectively,
of PIPC Corp. who violated Section 8 of the SRC.
xxxx
Respondents Liew and Tuason are directors and officers of PIPC Corp. who
exercise power of control and supervision in the management of said
corporation. Surely they cannot claim having no knowledge of the operations
of PIPC Corp. vis-à-vis its scope of authority since they are the ones who
actually created and manage the same. They are well aware that PIPC Corp. is
a mere financial research facility and has nothing to do with selling or offering
for sale securities to the general public. But despite knowledge, they continue
to recruit and deceive the general public by making it appear that PIPC Corp.
is a legitimate investment company.
Moreover, they cannot evade liability by hiding behind the veil of a corporate
fiction. x x x.
xxxx
In the case at bar, the investors were made to believe that PIPC Corp. and
PIPC-BVI is one and the same corporation. There is nothing on record that
would show that private complainants were informed that PIPC Corp. and
PIPC-BVI are two entities distinct and separate from one another. In fact,
when they invested their money, they dealt with PIPC Corp. and the people
acting on its behalf but when they signed documents they were provided with
ones bearing the name of PIPC-BVI. Clearly, this obvious and intentional
confusion of names of the two entities is designed to defraud and later to
avoid liabilities from their victims. Therefore, the defense of a corporate
fiction is unavailing in the instant case.
xxxx
Buying and selling of securities is an indispensable element that makes one a
broker or dealer. So if one is not engaged in the business of buying and selling
of securities, naturally he or she cannot be considered as a broker or dealer.
However, a person may be considered as an agent of another, juridical or
natural person, if it can be inferred that he or she acts as an agent of his or
her principal as above-defined. One can also be an investor and agent at the
same time.
An examination of the records and the evidence submitted by the parties, we
have observed that all respondents are investors of PIPC-BVI, same with the
private complainants, they also lost thousands of dollars. We also noted the
fact that most of the private complainants and alleged brokers or agents are
long time friends if not blood related individuals. Notably also is the fact that
most of them are highly educated businessmen/businesswomen who are
financially well-off. Hence, they are regarded to be wiser and more prudent
and expected to exercise due diligence of a good father of a family in
managing their finances as compared to those who are less fortunate in life.
However, we still need to delve deeper into the facts and the [evidence] on
record to determine the degree of respondents’ participations and if on the
basis of their actions, it can be inferred that they acted as employees-agents
or investor-agents of PIPC Corp. or PIPC- BVI then are liable under Section 28
of the SRC otherwise, they cannot be [blamed] for being mere employees or
investors thereof.
xxxx
Oudine Santos. Investment Consultant of PIPC Corp. who allegedly invited,
convinced and assured private complainants Luisa Mercedes P. Lorenzo and
Ricky Albino P. Sy to invest in PIPC Corp. To prove their allegations,
respondents attached email exchanges with respondent Santos regarding the
details in investing with PIPC-BVI. Respondent Santos failed to submit
counter-affidavit despite subpoena.
xxxx
After painstakingly going over the record and the supporting documents
attached thereto and after carefully evaluating the respective claims and
defenses raised by all the parties, the undersigned panel of prosecutors has a
reason to believe that Section 28 of the SRC has been violated and that the
following respondents are probably guilty thereof and should, therefore, be
held for trial:
1.Cristina Gonzalez-Tuason
2.x x x.
xxxx
13.Oudine Santos
The above-named respondents, aside from being officers, employees or
investors, clearly acted as agents of PIPC Corp. who made representations
regarding PIPC Corp. and PIPC-BVI investment products. They assured their
clients that investing with PIPC-BVI will be 100% guaranteed. In addition, they
also facilitated their clients’ investments with PIPC-BVI and some, if not all,
even received money investors as evidenced by the acknowledgement
receipts they signed and on behalf of PIPC-BVI. The documentary evidence
submitted by witnesses and their categorical and positive assertion of facts
which, taken together corroborate one another, prevails over the defense of
denial raised by the above-named respondents which are mostly self-serving
in nature.
A formal or written contract of agency between two or more persons is not
necessary for one to become an agent of the other for as long as it can be
inferred from their actions that there exists a principal- agent relationship
between them on the one hand and the PIPC Corp. or PIPC-BVI on the other
hand, then, it is implied that a contract of agency is created.
As to their contention that they are not officers or employees of PIPC Corp.,
the Supreme Court ruled that one may be an agent of a domestic corporation
although he or she is not an officer thereto. x x x. The basis of agency is
representation; the question of whether an agency has been created is
ordinarily a question which may be established in the same way as any other
fact, either by direct or substantial evidence; though that fact or extent of
authority of the agents may not, as a general rule, be established from the
declarations of the agents alone, if one professes to act as agent for another,
he or she is estopped to deny her agency both as against the asserted
principal and third persons interested in the transaction in which he or she is
engaged.
Further, they cannot raise the defense of good faith for the simple reason that
the SRC is a special law where criminal intent is not an essential element.
Mere violation of which is punishable except in some provisions thereof
where fraud is a condition sine qua non such as Section 26 of the said law.
xxxx
WHEREFORE, the foregoing considered, it is respectfully recommended that
this resolution be APPROVED and that:
1.An information for violation of Section 8 of the SRC be filed
against respondent PIPC Corp., MICHAEL H. LIEW and
CRISTINA GONZALEZ-TUASON;
 2.An information for violation of Section 26 thereof be also
filed against respondents MICHAEL H. LIEW and CRISTINA
GONZALEZ- TUASON; and
3.An information for violation of Section 28 thereof be filed
against respondents CRISTINA GONZALEZ-TUASON, MA.
CRISTINA BAUTISTA-JURADO, BARBARA GARCIA, ANTHONY
KIERULF, EUGENE GO, MICHAEL MELCHOR NUBLA, MA.
PAMELA MORRIS, LUIS ‘JIMBO’ ARAGON, RENATO
SARMIENTO, JR., VICTOR JOSE VERGEL DE DIOS, NICOLINE
AMORANTO MENDOZA, JOSE ‘JAY’ TENGCO III, [respondent]
OUDINE SANTOS AND HERLEY JESUITAS; and
4.The complaint against MAYENNE CARMONA, YEYE SAN
PEDRO-CHOA, MIA LEGARDA, NICOLE ORTEGA, DAVID CHUA-
UNSU, STANLEY CHUA-UNSU, DEBORAH V. YABUT, CHRISTINE
YU and JONATHAN OCAMPO be dismissed for insufficiency of
evidence.12 (Emphasis supplied).
In sum, the DOJ panel based its finding of probable cause on the collective
acts of the majority of the respondents therein, including herein respondent
Santos, which consisted in their acting as employees-agent and/or investor-
agents of PIPC Corporation and/or PIPC-BVI. Specifically alluding to Santos as
Investment Consultant of PIPC Corporation, the DOJ found probable cause to
indict her for violation of Section 28 of the Securities Regulation Code for
engaging in the business of selling or offering for sale securities, on behalf of
PIPC Corporation and/or PIPC-BVI (which were found to be an issuer13 of
securities without the necessary registration from the SEC) without Santos
being registered as a broker, dealer, salesman or an associated person.
On separate motions for reconsideration of the respondents therein, including
herein respondent Santos, the DOJ panel issued a Resolution dated 2
September 2008 modifying its previous ruling and excluding respondent
Victor Jose Vergel de Dios from prosecution for violation of Section 28 of the
Securities Regulation Code, thus:
After an assiduous re-evaluation of the facts and the evidence submitted by
the parties in support of their respective positions, the undersigned panel
finds x x x [that the] rest of the respondents mainly rehashed their earlier
arguments except for a few respondents who, in one way or another, failed to
participate in the preliminary investigation; hence raising their respective
defenses for the first time in their motions for reconsideration.
xxxx
With respect to respondents Luis "Jimbo" Aragon and Oudine Santos who also
claimed to have not received subpoenas, this panel, after thoroughly
evaluating their respective defenses, finds them to be similarly situated with
the other respondents who acted as agents for and in behalf of PIPC Corp.
and/or PIPC-BVI; hence, their inclusion in the information is affirmed.
xxxx
x x x As to the issue on whether or not PMPA is a security contract, we rule in
the affirmative, as supported by the herein below provisions of the SRC,
particularly:
Sec. 8. Requirement of Registration of Securities. – 8.1. Securities shall not be
sold or offered for sale or distribution within the Philippines, without
registration statement duly filed with and approved by the Commission. Prior
to such sale, information on the securities, in such form and with such
substance as the Commission may prescribe, shall be made available to each
prospective purchaser.
Securities have been defined as shares, participation or interest in a
corporation or in a commercial enterprise or profit making venture and
evidenced by a certificate, contract, instrument, whether written or electronic
in character. It includes among others, investment contracts, certificates of
interest or participation in a profit sharing agreement, certificates of deposit
for a future subscription.
Under the SRC’s Amended Implementing Rules and Regulations, specifically
Rule 3, par. 1 subpar. G, an investment contract has been defined as a
contract, transaction or scheme (collectively "contract"), whereby a person
invests his money in a common enterprise and is led to expect profits
primarily from the efforts of others. It is likewise provided in the said provision
that an investment contract is presumed to exist whenever a person seeks to
use the money or property of others on the promise of profits and a common
enterprise is deemed created when two
(2) or more investors "pool" their resources creating a common enterprise,
even if the promoter receives nothing more than a broker’s commission.
Undoubtedly, the PMPA is an investment contract falling within the purview
of the term securities as defined by law.
 xxxx
It bears to emphasize that the purpose of a preliminary investigation and/or
confrontation between the party-litigants is for them to lay down all their
cards on the table to properly inform and apprise the other of the charges
against him/her, to avoid suprises and to afford the adverse party all the
opportunity to defend himself/herself based on the evidence submitted
against him/her. Thus, failure on the part of the defaulting party to submit
evidence that was then available to him is deemed a waiver on his part to
submit it in the same proceedings against the same party for the same issue.
WHEREFORE, the foregoing premises considered, the undersigned panel of
prosecutors respectfully recommends that the assailed resolution
be modified by dismissing the complaint against Victor Jose Vergel De Dios
and that the Information filed with the appropriate court for violation of
Section 28 of the SRC be amended accordingly. 14
Respondent Santos filed a petition for review before the Office of the
Secretary of the DOJ assailing the Resolutions dated 18 April 2008 and 2
September 2008 and claiming that she was a mere clerical
employee/information provider who never solicited nor recruited investors, in
particular complainants Sy and Lorenzo, for PIPC Corporation or PIPC- BVI.
Santos also claimed dearth of evidence indicating she was a salesman/agent
or an associated person of a broker or dealer, as defined under the Securities
Regulation Code.
The SEC filed its Comment opposing Santos’ petition for review. Thereafter,
the Office of the Secretary of the DOJ, through its then Undersecretary
Ricardo R. Blancaflor, issued a Resolution dated 1 October 2009 which, as
previously adverted to, excluded respondent Santos from prosecution for
violation of Section 28 of the Securities Regulation Code. For a complete
picture, we quote in full the disquisition of the Secretary of the DOJ:
[Santos] argues that while Luisa Mercedes P. Lorenzo and Ricky Albino P. Sy
mentioned two (2) instances wherein she allegedly enticed them to invest,
their own pieces of evidence, particularly the Annex "E" series (several
"Details of Profit distribution & Renewal of Partnership Agreement" bearing
different dates addressed to Ricky Albino P. Sy with stamped signature for
PIPC-BVI), indicate that they invested and reinvested their money with PIPC-
BVI repeatedly and even earned profits from these transactions through direct
dealing with PIPC-BVI and without her participation. In addition, she maintains
that Luisa Mercedes P. Lorenzo and Ricky Albino P. Sy had several
opportunities to divest or withdraw their respective investments but opted
not to do so at their own volitions.
xxxx
The sole issue in this case is whether or not respondent Santos acted as agent
of PIPC Corp. or had enticed Luisa Mercedes P. Lorenzo or Ricky Albino P. Sy to
buy PIPC Corp. or PIPC-BVI’s investment products.
We resolve in the negative.
Section 28 of the Securities Regulation Code (SRC) reads:
SEC. [28]. Registration of Brokers, Dealers, Salesmen and Associated Persons. –
28.1. No person shall engage in the business of buying or selling securities in
the Philippines as a broker or dealer unless registered as such with the
Commission.
28.2. No registered broker or dealer shall employ any salesman or any
associated person, and no issuer shall employ any salesman, who is not
registered as such with the Commission.
Jurisprudence defines an "agent" as a "business representative, whose
function is to bring about, modify, affect, accept performance of, or terminate
contractual obligations between principal and third persons." x x x On the
other hand, the Implementing Rules of the SRC simply provides that an agent
or a "salesman" is a person employed as such or as an agent, by the dealer,
issuer or broker to buy and sell securities x x x.
A judicious examination of the records indicates the lack of evidence that
respondent Santos violated Section 28 of the SRC, or that she had acted as an
agent for PIPC Corp. or enticed Luisa Mercedes P. Lorenzo or Ricky Albino P.
Sy to buy PIPC Corp. or PIPC-BVI’s investment products.
The annex "D" ("Welcome to PMP" Letter dated [17 April 2006] addressed to
Luisa Mercedes P. Lorenzo signed by Michael Liew as president of PIPC-BVI),
Annex "E" (Fixed Deposit Advice Letter dated [26 June 2006] addressed to
Luisa Mercedes P. Lorenzo and stamped signature for PIPC-BVI), and Annex
"H" ("Welcome to PMP" Letter dated [30 May 2007] addressed to Luisa
Mercedes P. Lorenzo signed by Michael Liew as President of PIPC-BVI) of the
complaint-affidavit dated [11 September 2007] of Luisa Mercedes P. Lorenzo
show that she directly dealt with PIPC-BVI in placing her investment. The same
is true with regard to Annex "A" series (Portfolio Management Partnership
Agreement between Ricky Albino P. Sy and PIPC-BVI, Security Agreement
between Ricky Albino P. Sy and PIPC-BVI, and Declaration of Trust between
Ricky Albino P. Sy and PIPC-BVI), Annex "B" (Official Receipt dated 09
November 2006 issued by PIPC-BVI), Annex "C’ ("Welcome to PMP" Letter
dated [10 November 2006] addressed to Ricky Albino P. Sy and signed by
Michael [Liew] as President of PIPC-BVI), and Annex "D" (Fixed Deposit Advice
Letter dated [29 January 2007] addressed to Ricky Albino P. Sy with stamped
signature for PIPC-BVI) of the complaint-affidavit dated [26 September 2007]
of Ricky Albino P. Sy. These documents categorically show that the parties
therein, i.e., Luisa Mercedes P. Lorenzo or Ricky Albino P. Sy and PIPC-BVI,
transacted with each other directly without any participation from respondent
Santos.
These documents speak for themselves. Moreover, it bears stressing that
Luisa Mercedes P. Lorenzo and Ricky Albino P. Sy admit in their respective
affidavits that they directly deposited their investments by bank transfer to
PIPC-BVI’s offshore bank account.
Annex "B" (Printed background of the PMP of [PIPC]-BVI enumerating the
features of said product) and Annex "C" (Printed "Procedures in PMP Account
Opening" instructing the client what to do in placing his/her investment) of
the complaint-affidavit of Luisa Mercedes P. Lorenzo actually supports the
allegations of respondent Santos that there were printed forms/brochures for
distribution to persons requesting the same. These printed/prepared
handouts contain the assurances or guarantees of PIPC-BVI and the
instructions on where and how to deposit the investors’ money.
Likewise, Luisa Mercedes P. Lorenzo’s Annex "A" (2006 GIS of PIPC Corp.
listing the stockholders, board of directors an[d] officers thereof), Annex "F"
(Deposit Confirmation dated [14 June 2006] from Standard Chartered Bank)
and Annexes "I" to "L" (SEC Certifications stating that PIPC Corp., PIPC, PIPC-
BVI and Performance Investment Products Ltd., respectively, are not
registered issuer of securities nor licensed to offer or sell securities to the
public) are not evidence against respondent Santos. Her name is not even
mentioned in any of these documents. If at all, these documents are evidence
against PIPC Corp. and its officers named therein.
Further, it is important to note that in the "Request Form," one of the
documents being distributed by respondent Santos x x x, it is categorically
stated therein that said request "shall not be taken as an investment
solicitation x x x, but is mainly for the purpose of providing me with
information." Clearly, this document proves that respondent Santos did not or
was not involved in the solicitation of investments but merely shows that she
is an employee of PIPC Corp. In addition, the "Information Dissemination
Agreement" between her employer PIPC Corp. and PIPC- BVI readably and
understandably provides that she is prohibited from soliciting investments in
behalf of PIPC-BVI and her authority is limited only to providing interested
persons with the "necessary information regarding how to communicate
directly with PIPC." Parenthetically, the decision to sign the partnership
Agreement with PIPC-BVI to invest and repeatedly reinvest their monies with
PIPC-BVI were made by Luisa Mercedes P. Lorenzo and Ricky Albino P. Sy
themselves without any inducement or undue influence from respondent
Santos.
xxxx
WHEREFORE, the assailed resolution is hereby MODIFIED, the Chief State
Prosecutor is directed to EXCLUDE respondent Oudine Santos from the
Information for violation of Section 28 of the Securities and Regulation Code,
if any has been filed, and report the action taken thereon within ten (10) days
from receipt hereof.15
Expectedly, after the denial of the SEC’s motion for reconsideration before the
Secretary of the DOJ, the SEC filed a petition for certiorari before the Court of
Appeals seeking to annul the 1 October 2009 Resolution of the DOJ.
The Court of Appeals dismissed the SEC’s petition for certiorari and affirmed
the 1 October 2009 Resolution of the Secretary of the DOJ:
Prescinding from the foregoing, a person must first and foremost be engaged
in the business of buying and selling securities in the Philippines before he can
be considered as a broker, a dealer or salesman within the coverage of the
Securities Regulation Code. The record in this case however is bereft of any
showing that [Santos] was engaged in the business of buying and selling
securities in the Philippines, whether for herself or in behalf of another person
or entity. Apart from [SEC’s] sweeping allegation that [Santos] enticed Sy and
Lorenzo and solicited from them investments for PIPC-BVI without first being
registered as broker, dealer or salesman with SEC, no evidence had been
adduced that shows [Santos’] actual participation in the alleged offer and sale
of securities to the public, particularly to Sy and Lorenzo, within the
Philippines. There was likewise no exchange of funds between Sy and Lorenzo,
on one hand, and [Santos], on the other hand, as the price of certain
securities offered by PIPC-BVI. There was even no specific proof that [Santos]
misrepresented to Sy and Lorenzo that she was a licensed broker, dealer or
salesperson of securities, thereby inducing them to invest and deliver their
hard-earned money with PIPC-BVI. In fact, the Information Dissemination
Agreement between PIPC Corporation, [Santos’ employer], and PIPC-BVI
clearly provides that [Santos] was prohibited from soliciting investments in
behalf of PIPC-BVI and that her authority is limited only to providing
prospective client with the "necessary information on how to communicate
directly with PIPC." Thus, it is obvious that the final decision of investing and
reinvesting their money with PIPC-BVI was made solely by Sy and Lorenzo
themselves.
xxxx
WHEREFORE, in view of the foregoing premises, the petition filed in this case
is hereby DENIED and, consequently, DISMISSED. The assailed Resolutions
dated [1 October 2009] and [23 November 2009] of the Secretary of Justice in
I.S. No. 2007-1054 are hereby
AFFIRMED.16
Hence, this appeal by certiorari raising the sole error of Santos’ exclusion from
the Information for violation of Section 28 of the Securities Regulation Code.
Generally, at the preliminary investigation proper, the investigating
prosecutor, and ultimately, the Secretary of the DOJ, is afforded wide latitude
of discretion in the exercise of its power to determine probable cause to
warrant criminal prosecution. The determination of probable cause is an
executive function where the prosecutor determines merely that a crime has
been committed and that the accused has committed the same. 17 The rules do
not require that a prosecutor has moral certainty of the guilt of a person
simply for preliminary investigation purposes.
However, the authority of the prosecutor and the DOJ is not absolute; it
cannot be exercised arbitrarily or capriciously. Where the findings of the
investigating prosecutor or the Secretary of the DOJ as to the existence of
probable cause are equivalent to a gross misapprehension of facts, certiorari
will lie to correct these errors.18
While it is our policy not to interfere in the conduct of preliminary
investigations, we have, on more than one occasion, adhered to some
exceptions to the general rule:
1.when necessary to afford adequate protection to the constitutional
rights of the accused;
2.when necessary for the orderly administration of justice or to avoid
oppression or multiplicity of actions;
3.when there is a prejudicial question which is sub judice;
4.when the acts of the officer are without or in excess of authority;
5.where the prosecution is under an invalid law, ordinance or
regulation;
6.when double jeopardy is clearly apparent;
7.where the court has no jurisdiction over the offense;
8.where it is a case of persecution rather than prosecution;
9.where the charges are manifestly false and motivated by the lust for
vengeance;
10.when there is clearly no prima facie case against the accused and a
motion to quash on that ground has been denied. 19(Italics supplied).
In excluding Santos from the prosecution of the supposed violation of Section
28 of the Securities Regulation Code, the Secretary of the DOJ, as affirmed by
the appellate court, debunked the DOJ panel’s finding that Santos was prima
facie liable for either: (1) selling securities in the Philippines as a broker or
dealer, or (2) acting as a salesman, or an associated person of any broker or
dealer on behalf of PIPC Corporation and/or PIPC-BVI without being registered
as such with the SEC.
To get to that conclusion, the Secretary of the DOJ and the appellate court
ruled that no evidence was adduced showing Santos’ actual participation in
the final sale by PIPC Corporation and/or PIPC-BVI of unregistered securities
since the very affidavits of complainants Lorenzo and Sy proved that Santos
had never signed, neither was she mentioned in, any of the investment
documents between Lorenzo and Sy, on one hand, and PIPC Corporation
and/or PIPC-BVI, on the other hand.
The conclusions made by the Secretary of the DOJ and the appellate court are
a myopic view of the investment solicitations made by Santos on behalf of
PIPC Corporation and/or PIPC-BVI while she was not licensed as a broker or
dealer, or registered as a salesman, or an associated person of a broker or
dealer.
We sustain the DOJ panel’s findings which were not overruled by the
Secretary of the DOJ and the appellate court, that PIPC Corporation and/or
PIPC-BVI was: (1) an issuer of securities without the necessary registration or
license from the SEC, and (2) engaged in the business of buying and selling
securities. In connection therewith, we look to Section 3 of the Securities
Regulation Code for pertinent definitions of terms:
Sec. 3. Definition of Terms. – x x x.
xxxx
3.3."Broker" is a person engaged in the business of buying and selling
securities for the account of others.
3.4."Dealer" means [any] person who buys [and] sells securities for his/her
own account in the ordinary course of business.
3.5."Associated person of a broker or dealer" is an employee thereof whom,
directly exercises control of supervisory authority, but does not include a
salesman, or an agent or a person whose functions are solely clerical or
ministerial.
xxxx
3.13."Salesman" is a natural person, employed as such [or] as an agent, by a
dealer, issuer or broker to buy and sell securities.
To determine whether the DOJ Secretary’s Resolution was tainted with grave
abuse of discretion, we pass upon the elements for violation of Section 28 of
the Securities Regulation Code: (a) engaging in the business of buying or
selling securities in the Philippines as a broker or dealer; or (b) acting as a
salesman; or (c) acting as an associated person of any broker or dealer, unless
registered as such with the SEC.
Tying it all in, there is no quarrel that Santos was in the employ of PIPC
Corporation and/or PIPC-BVI, a corporation which sold or offered for sale
unregistered securities in the Philippines. To escape probable culpability,
Santos claims that she was a mere clerical employee of PIPC Corporation
and/or PIPC-BVI and was never an agent or salesman who actually solicited
the sale of or sold unregistered securities issued by PIPC Corporation and/or
PIPC-BVI.
Solicitation is the act of seeking or asking for business or information; it is not
a commitment to an agreement.20
Santos, by the very nature of her function as what she now unaffectedly calls
an information provider, brought about the sale of securities made by PIPC
Corporation and/or PIPC-BVI to certain individuals, specifically private
complainants Sy and Lorenzo by providing information on the investment
products of PIPC Corporation and/or PIPC- BVI with the end in view of PIPC
Corporation closing a sale.
While Santos was not a signatory to the contracts on Sy’s or Lorenzo’s
investments, Santos procured the sale of these unregistered securities to the
two (2) complainants by providing information on the investment products
being offered for sale by PIPC Corporation and/or PIPC-BVI and convincing
them to invest therein.
No matter Santos’ strenuous objections, it is apparent that she connected the
probable investors, Sy and Lorenzo, to PIPC Corporation and/or PIPC-BVI,
acting as an ostensible agent of the latter on the viability of PIPC Corporation
as an investment company. At each point of Sy’s and Lorenzo’s investment,
Santos’ participation thereon, even if not shown strictly on paper, was prima
facie established.
In all of the documents presented by Santos, she never alleged or pointed out
that she did not receive extra consideration for her simply providing
information to Sy and Lorenzo about PIPC Corporation and/or PIPC-BVI.
Santos only claims that the monies invested by Sy and Lorenzo did not pass
through her hands. In short, Santos did not present in evidence her salaries as
a supposed "mere clerical employee or information provider" of PIPC-BVI.
Such presentation would have foreclosed all questions on her status within
PIPC Corporation and/or PIPC-BVI at the lowest rung of the ladder who only
provided information and who did not use her discretion in any capacity.
We cannot overemphasize that the very information provided by Santos
locked the deal on unregistered securities with Sy and Lorenzo.
In fact, Sy alleged in his affidavit, which allegation was not refuted by Santos,
that he was introduced to Santos while he performed routine transactions at
his bank:
2.I have been a depositor of the Bank of the Philippine Islands (BPI)
Pasong Tamo branch for the past 15 years. Sometime in the last
quarter of 2006, I was at BPI Pasong Tamo to accomplish certain
routine transactions. Being a client of long standing, the bank
manager[,] as a matter of courtesy, allowed me to wait in her cubicle.
It was there that the bank manager introduced me to another bank
client, Ms. Oudine Santos. After exchanging pleasantries, and in the
course of a brief conversation, Ms. Santos told me that she is a
resident of Damariñas Village and was working as an investment
consultant for a certain company, Performance Investment Products
Corporation [PIPC]. She told me that she wanted to invite me to her
office at the Citibank Tower in Makati so that she could explain the
investment products that they are offering. I gave her my contact
number and finished my transaction with the bank for that day;
3.Ms. Santos texted me to confirm our meeting. A few days later, I
met her at the business lounge of [PIPC] located at the 15th Floor of
Citibank Tower, Makati.1âwphi1 During the meeting, Ms. Santos
enticed me to invest in their Performance Managed Portfolio which
she explained was a risk controlled investment program designed for
individuals like me who are looking for higher investment returns than
bank deposits while still having the advantage of security and
liquidity. She told me that they were engaged in foreign currency
trading abroad and that they only employ professional and
experienced foreign exchange traders who specialize in trading the
Japanese Yen, Euro, British Pound, Swiss Francs and Australian Dollar.
I then told her that I did not have any experience in foreign currency
trading and was quite conservative in handling my money; 21
Santos countered that:
28. I also categorically deny complainant Sy’s allegation that I
"enticed" him to enter into a Partnership Agreement with PIPC-BVI. In
the first place, I came to know complainant Sy only when he was
referred to me by a mutual acquaintance, Ms. Ana Liliosa Santos, who
was then the Manager of the Bank of the Philippine Islands, Pasong
Tamo Branch. Ms. Ana Santos set up a meeting between complainant
Sy and me because complainant Sy wanted to know more about PIPC-
BVI. As with the other individuals who expressed interest in PIPC
Corp.’s client companies, I then provided complainant Sy with
additional information about PIPC- BVI. The decision to enter into the
aforementioned Partnership Agreement with PIPC-BVI was made by
complainant Sy alone without any inducement or undue influence
from me, as in fact I only met him twice – the first one was on the
meeting set up by Ms. Ana Santos and the second one was to
introduce him to Michael Liew. Indeed, complainant Sy appears to be
a well-educated person with years of experience as a businessman. It
is reasonable to assume that before entering into the said Partnership
Agreement with PIPC-BVI, complainant Sy had fully understood the
nature of the agreement and that in entering thereto, he had been
motivated by a desire to earn a profit and had believed, as I myself
have been led to believe, that PIPC-BVI was a legitimate business
concern which offered a reasonable return on investment, Moreover,
complainant Sy could have withdrawn his initial investment of
US$40,000.00 on its date of maturity, i.e., 26 January 2007, as
indicated in the PIPC-BVI’s letter dated 10 November 2006, a copy of
which is attached to complainant Sy’s Sworn Statement. Complainant
Sy, however, obviously decided on his own volition to keep his
investment with PIPC-BVI presumably because he wanted to gain
more profit therefrom. Complainant Sy in fact admitted that he
received monetary returns from PIPC-BVI in the total amount of
US$2,439.12.22
What is palpable from the foregoing is that Sy and Lorenzo did not go directly
to Liew or any of PIPC Corporation’s and/or PIPC-BVI’s principal officers before
making their investment or renewing their prior investment. However,
undeniably, Santos actively recruited and referred possible investors to PIPC
Corporation and/or PIPC-BVI and acted as the go-between on behalf of PIPC
Corporation and/or PIPC-BVI.
The DOJ’s and Court of Appeals’ reasoning that Santos did not sign the
investment contracts of Sy and Lorenzo is specious. The contracts merely
document the act performed by Santos.
Individual complainants and the SEC have categorically alleged that Liew and
PIPC Corporation and/or PIPC-BVI is not a legitimate investment company but
a company which perpetrated a scam on 31 individuals where the president, a
foreign national, Liew, ran away with their money. Liew’s absconding with the
monies of 31 individuals and that PIPC Corporation and/or PIPC-BVI were not
licensed by the SEC to sell securities are uncontroverted facts.

The transaction initiated by Santos with Sy and Lorenzo, respectively, is an

investment contract or participation in a profit sharing agreement that falls
within the definition of the law. When the investor is relatively uninformed
and turns over his money to others, essentially depending upon their
representations and their honesty and skill in managing it, the transaction
generally is considered to be an investment contract. 23 The touchstone is the
presence of an investment in a common venture premised on a reasonable
expectation of profits to be derived from the entrepreneurial or managerial
efforts of others.24

At bottom, the exculpation of Santos cannot be preliminarily established

simply by asserting that she did not sign the investment contracts, as the facts
alleged in this case constitute fraud perpetrated on the public. Specially so
because the absence of Santos’ signature in the contract is, likewise,
indicative of a scheme to circumvent and evade liability should the pyramid
fall apart.

Lastly, we clarify that we are only dealing herein with the preliminary
investigation aspect of this case. We do not adjudge respondents’ guilt or the
lack thereof. Santos' defense of being a mere employee or simply an
information provider is best raised and threshed out during trial of the case.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in

CA-G.R. No. SP No. 112781 and the Resolutions of the Department of Justice
dated 1 October 2009 and 23 November 2009 are ANNULLED and SET ASIDE.
The Resolution of the Department of Justice dated 18 April 2008 and 2
September 2008 are REINSTATED. The Department of Justice is directed to
include respondent Oudine Santos in the Information for violation of Section
28 of the Securities and Regulation Code.

SO ORDERED.

G.R. Nos. 209655-60, January 14, 2015

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. PALMY TIBAYAN AND RICO

Z. PUERTO, Accused-Appellants.
DECISION
PERLAS-BERNABE, J.:
Assailed in this ordinary appeal1 filed by accused-appellants Palmy Tibayan
(Tibayan) and Rico Z. Puerto (Puerto) (accused-appellants) is the Decision2
dated June 28, 2013 of the Court of Appeals (CA) in CA-G.R. CR Nos. 33063,
33562, 33660, 33660, 33669, 33939, and 34398 which modified the Decisions
dated December 4, 2009,3 June 24, 2010,4 August 2, 2010,5August 5, 2010,6
January 21, 2011,7 and August 18, 20118 of the Regional Trial Court of Las
Piñas City, Branch 198 (RTC)and convicted accused-appellants of the crime of
Syndicated Estafa, defined and penalized under Item 2 (a), Paragraph 4,
Article 315 of the Revised Penal Code (RPC) in relation to Presidential Decree
No. (PD) 1689.9chanRoblesvirtualLawlibrary
The Facts
Tibayan Group Investment Company, Inc. (TGICI) is is an open-end investment
company registered with the Securities and Exchange Commission (SEC) on
September 21, 2001.10 Sometime in 2002, the SEC conducted an investigation
on TGICI and its subsidiaries.In the course thereof, it discovered that TGICI
was selling securities to the public without a registration statement in
violation of Republic Act No. 8799, otherwise known as “The Securities
Regulation Code,” and that TGICI submitted a fraudulent Treasurer’s Affidavit
before the SEC. Resultantly, on October 21, 2003, the SEC revoked TGICI’s
corporate registration for being fraudulently
procured.11chanRoblesvirtualLawlibrary
The foregoing led to the filing of multiple criminal cases12 for Syndicated
Estafa against the incorporators and directors of TGICI,13 namely, Jesus
Tibayan, Ezekiel D. Martinez, Liborio E. Elacio, Jimmy C. Catigan, Nelda B.
Baran, and herein accused-appellants.14 Consequently, warrants of arrest
were issued against all of them; however, only accused-appellants were
arrested, while the others remained at large.15chanRoblesvirtualLawlibrary
According to the prosecution, private complainants Hector H. Alvarez,
Milagros Alvarez, Clarita P. Gacayan, Irma T. Ador, Emelyn Gomez, Yolanda
Zimmer, Nonito Garlan, Judy C. Rillon, Leonida D. Jarina, Reynaldo A. Dacon,
Cristina Dela Peña, and Rodney E. Villareal16 (private complainants) were
enticed to invest in TGICI due to the offer of high interest rates, as well as the
assurance that they will recover their investments. After giving their money to
TGICI, private complainants received a Certificate of Share and post-dated
checks, representing the amount of the principal investment and the monthly
interest earnings, respectively.17 Upon encashment, the checks were
dishonored,as the account was already closed, prompting private
complainants to bring the bounced checks to the TGICI office to demand
payment. At the office, the TGICI employees took the said checks, gave private
complainants acknowledgement receipts, and reassured that their
investments, as well as the interests, would be paid. However, the TGICI office
closed down without private complainants having been paid and, thus, they
were constrained to file criminal complaints against the incorporators and
directors of TGICI.18chanRoblesvirtualLawlibrary
In their defense, accused-appellants denied having conspired with the other
TGICI incorporators to defraud private complainants. Particularly, Puerto
claimed that his signature in the Articles of Incorporation of TGICI was forged
and that since January 2002,he was no longer a director of TGICI. For her part,
Tibayan also claimed that her signature in the TGICI’s Articles of Incorporation
was a forgery, as she was neither an incorporator nor a director of
TGICI.19chanRoblesvirtualLawlibrary
The RTC Rulings
On various dates, the RTC issued six (6) separate decisions convicting Tibayan
of 13 counts and Puerto of 11 counts of Estafa under Item 2 (a), Paragraph 4,
Article 315 of the RPC in relation to PD 1689, to wit: (a) in a Joint Decision20
dated December 4, 2009, the RTC found accused-appellants guilty beyond
reasonable doubt of three (3) counts of Estafa, sentencing them to suffer the
penalty of imprisonment for a period of 20 years of reclusion temporal for
each count, and ordering them to pay the amounts of P1,500,000.00, to
Hector H. Alvarez, and P119,405.23 and P800,000.00 to Milagros Alvarez;21;
(b) in a Joint Decision22 dated June 24, 2010, the RTC acquitted Puerto of all
the charges, but found Tibayan guilty beyond reasonable doubt of two (2)
counts of Estafa, sentencing her to suffer the penalty of imprisonment for a
period of 20 years of reclusion temporal for each count, and ordering her to
pay the amounts of P1,300,000.00 and US$12,000.00 to Clarita P. Gacayan
and P500,000.00 to Irma T. Ador;23; (c) in a Joint Decision24 dated August 2,
2010, the accused-appellants were found guilty beyond reasonable doubt of
two (2) counts of Estafa, and were sentenced to suffer the penalty of
imprisonment for a period of 20 years of reclusion temporal for each count,
and ordered to pay the amounts of P1,000,000.00 to Yolanda Zimmer and
P556,376.00 to Nonito Garlan;25;(d) in a Joint Decision26 dated August 5,
2010, the RTC found the accused-appellants guilty beyond reasonable doubt
of one (1) count of Estafa, sentencing them to suffer the penalty of
imprisonment for a period of 20 years of reclusion temporal, and ordering
them to pay Emelyn Gomez the amount of P250,000.00;27; (e) in a Decision28
dated January 21, 2011, accused-appellants were found guilty beyond
reasonable doubt of one (1) count of Estafa each, and were sentenced to
suffer the penalty of imprisonment for a period of 20 years of reclusion
temporal, and ordered to pay Judy C. Rillon the amount of P118,000.00;29;
and (f) in a Joint Decision30 dated August 18, 2011, accused-appellants were
each convicted of four (4) counts of Estafa, and meted different penalties per
count, as follows: (i) for the first count, they were sentenced to suffer the
penalty of imprisonment for a period of four (4) years and two (2) months of
prision correcional medium, as minimum, to fifteen (15) years of reclusion
temporal medium, as maximum, and to pay Reynaldo A. Dacon the amount of
P100,000.00; to;(ii) for the second count, they were sentenced to suffer the
penalty of imprisonment for a period of ten (10) years of prision mayor
medium, as minimum, to twenty (20) years of reclusion temporal medium, as
maximum, and to pay Leonida D. Jarina the amount of P200,000.00; (iii) for
the third count, they were sentenced to suffer the penalty of imprisonment
for a period of ten (10) years of prision mayor medium, as minimum, to
twenty (20) years of reclusion temporal medium, as maximum, and to pay
Cristina Dela Peña the amount of P250,000.00; and (iv) for the last count, they
were sentenced to suffer the penalty of imprisonment for a period of four (4)
years and two (2) months of prision correcional medium, as minimum, to
fifteen (15) years of reclusion temporal medium, as maximum, and to pay
Rodney E. Villareal the amount of P100,000.00.31.
In the aforesaid decisions, the RTC did not lend credence to accused-
appellants’ denials in light of the positive testimonies of the private
complainants that they invested their money in TGICI because of the
assurances from accused-appellants and the other directors/incorporators of
TGICI that their investments would yield very profitable returns. In this
relation, the RTC found that accused-appellants conspired with the other
directors/incorporators of TGICI in misrepresenting the company as a
legitimate corporation duly registered to operate as a mutual fund, to the
detriment of the private complainants.32 However, the RTC convicted
accused-appellants of simple Estafa only, as the prosecution failed to allege in
the informations that accused-appellants and the other directors/
incorporators formed a syndicate with the intention of defrauding the public,
or it failed to adduce documentary evidence substantiating its claims that the
accused-appellants committed Syndicated
Estafa.33chanRoblesvirtualLawlibrary
Aggrieved, accused-appellants separately appealed the foregoing RTC
Decisions to the CA, docketed as CA-G.R. CR Nos. 33063, 33562, 336609,
336690, 33939, and 34398. Thereafter, the CA issued a Resolution34 dated
February 19, 2013 ordering the consolidation of accused-appellants’
appeals.cralawred
The CA Ruling
In a Decision35 dated June 28, 2013, the CA modified accused-appellants’
conviction to that of Syndicated Estafa, and accordingly, increased their
respective penalties to life imprisonment for each count.36 The CA also
increased the amount of actual damages awarded to private complainant
Clarita P. Gacayan from P1,300,000.00 to P1,530,625.90, apart from the
award of US$12,000.00.37chanRoblesvirtualLawlibrary
It held that TGICI and its subsidiaries were engaged in a Ponzi scheme which
relied on subsequent investors to pay its earlier investors – and is what PD
1689 precisely aims to punish. Inevitably, TGICI could no longer hoodwink new
investors that led to its collapse.38Thus, the CA concluded that as
incorporators/directors of TGICI, accused-appellants and their cohorts
conspired in making TGICI a vehicle for the perpetuation of fraud against the
unsuspecting public.. As such, they cannot hide behind the corporate veil and
must be personally and criminally liable for their acts.39 The CA then
concluded that since the TGICI incorporators/directors comprised more than
five (5) persons, accused-appellants’ criminal liability should be upgraded to
that of Syndicated Estafa, and their respective penalties increased
accordingly.40chanRoblesvirtualLawlibrary
Undaunted, accused-appellants filed the instant appeal.cralawred
The Issue Before the Court
The primordial issue for the Court’s resolution is whether or not accused-
appellants are guilty beyond reasonable doubt of the crime of Syndicated
Estafa defined and penalized under Item 2 (a), Paragraph 4, Article 315 of the
RPC in relation to PD 1689.cralawred
The Court’s Ruling
The Court sustains the convictions of accused-appellants.
Item 2 (a), Paragraph 4, Article 315 of the RPC
provides:chanroblesvirtuallawlibrary
Art. 315. Swindling (estafa). – Any person who shall defraud another by any
means mentioned herein below shall be punished by:
xxxx
By means of any of the following false pretenses or fraudulent acts executed
prior to or simultaneously with the commission of the fraud:
(a) By using a fictitious name, or falsely pretending to possess power,
influence, qualifications, property, credit, agency, business, or imaginary
transactions; or by means of other similar deceits.
xxxx
The elements of Estafa by means of deceit under this provision are the
following: (a) that there must be a false pretense or fraudulent representation
as to his power, influence, qualifications, property, credit, agency, business or
imaginary transactions; (b) that such false pretense or fraudulent
representation was made or executed prior to or simultaneously with the
commission of the fraud; (c) that the offended party relied on the false
pretense, fraudulent act, or fraudulent means and was induced to part with
his money or property; and (d) that, as a result thereof, the offended party
suffered damage.41chanRoblesvirtualLawlibrary
In relation thereto, Section 1 of PD 1689 defines Syndicated Estafa as
follows:chanroblesvirtuallawlibrary
Section 1. Any person or persons who shall commit estafa or other forms of
swindling as defined in Articles 315 and 316 of the Revised Penal Code, as
amended, shall be punished by life imprisonment to death if the swindling
(estafa) is committed by a syndicate consisting of five or more persons formed
with the intention of carrying out the unlawful or illegal act, transaction,
enterprise or scheme, and the defraudation results in the misappropriation of
moneys contributed by stockholders, or members of rural banks,
cooperatives, “samahang nayon(s),” or farmers’ associations, or funds
solicited by corporations/associations from the general public.
Thus, the elements of Syndicated Estafa are: (a) Estafa or other forms of
swindling, as defined in Articles 315 and 316 of the RPC,, is committed; (b) the
Estafa or swindling is committed by a syndicate of five (5) or more persons;
and (c) defraudation results in the misappropriation of moneys contributed by
stockholders, or members of rural banks, cooperative, “samahang nayon(s),”
or farmers’ associations, or of funds solicited by corporations/associations
from the general public.42chanRoblesvirtualLawlibrary
In this case, a judicious review of the records reveals TGICI’s modus operandi
of inducing the public to invest in it on the undertaking that their investment
would be returned with a very high monthly interest rate ranging from three
to five and a half percent (3%-5.5%).43 Under such lucrative promise, the
investing public are enticed to infuse funds into TGICI. However, as the
directors/incorporators of TGICI knew from the start that TGICI is operating
without any paid-up capital and has no clear trade by which it can pay the
assured profits to its investors,44 they cannot comply with their guarantee
and had to simply abscond with their investors’ money. Thus, the CA correctly
held that accused-appellants, along with the other accused who are still at
large, used TGICI to engage in a Ponzi scheme, resulting in the defraudation of
the TGICI investors.
To be sure, a Ponzi scheme is a type of investment fraud that involves the
payment of purported returns to existing investors from funds contributed by
new investors. Its organizers often solicit new investors by promising to invest
funds in opportunities claimed to generate high returns with little or no risk.
In many Ponzi schemes, the perpetrators focus on attracting new money to
make promised payments to earlier-stage investors to create the false
appearance that investors are profiting from a legitimate business.45 It is not
an investment strategy but a gullibility scheme, which works only as long as
there is an ever increasing number of new investors joining the scheme.46 It is
difficult to sustain the scheme over a long period of time because the
operator needs an ever larger pool of later investors to continue paying the
promised profits to early investors. The idea behind this type of swindle is that
the “con-man” collects his money from his second or third round of investors
and then absconds before anyone else shows up to collect. Necessarily, Ponzi
schemes only last weeks, or months at the
most.47chanRoblesvirtualLawlibrary
In this light, it is clearthat all the elements of Syndicated Estafa, committed
through a Ponzi scheme,are present in this case, considering that: (a) the
incorporators/directors of TGICI comprising more than five (5) people,
including herein accused-appellants,, made false pretenses and
representations to the investing public – in this case,the private complainants
– regarding a supposed lucrative investment opportunity with TGICI in order
to solicit money from them; (b) the said false pretenses and representations
were made prior to or simultaneous with the commission of fraud; (c) relying
on the same, private complainants invested their hard earned money into
TGICI; and (d) the incorporators/directors of TGICI ended up running away
with the private complainants’ investments, obviously to the latter’s
prejudice.
Corollary thereto, the CA correctly upgraded accused-appellants’ conviction
from simple Estafa to Syndicated Estafa. In a criminal case, an appeal throws
the whole case wide open for review. Issues whether raised or not by the
parties may be resolved by the appellate court.48 Hence, accused-appellants’
appeal conferred upon the appellate court full jurisdiction and rendered it
competent to examine the records, revise the judgment appealed from,
increase the penalty, and cite the proper provision of the penal
law.49chanRoblesvirtualLawlibrarychanrobleslaw
WHEREFORE, the appeal is DENIED. The Decision dated June 28, 2013 of the
Court of Appeals in CA-G.R. CR Nos. 33063, 33562, 33660, 33669, 33939, and
34398 is hereby AFFIRMED. Accordingly, accused-appellants Palmy Tibayan
and Rico Z. Puerto are found GUILTY beyond reasonable doubt of 13 and 11
counts, respectively, of Syndicated Estafa and are sentenced to suffer the
penalty of life imprisonment for each count. Accused-appellants are further
ordered to pay actual damages to each of the private complainants in the
following amounts: (a) P1,500,000.00 to Hector H. Alvarez; (b) P119,405.23
and P800,000.00 to Milagros Alvarez; (c) P1,530,625.90 and US$12,000.00 to
Clarita P. Gacayan; (d) P500,000.00 to Irma T. Ador; (e) P1,000,000.00 to
Yolanda Zimmer; (f) P556,376.00 to NonitoGarlan; (g) P250,000.00 to Emelyn
Gomez; (h) P118,000.00 to Judy C. Rillon; (i) P100,000.00 to Reynaldo A.
Dacon; (j) P200,000.00 to Leonida D. Jarina; (k) P250,000.00 to CristinaDela
Peña; and (l) P100,000.00 to Rodney E. Villareal.
SO ORDERED
G.R. No. 220458

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee

vs.
ROSARIO BALADJAY, Accused-Appellant

DECISION

VELASCO, JR., J.:

"... the only people who get rich from "get rich quick" books are those who
write them."

-Richard M. Nixon

Nature of the Case

Before this Court is an appeal from the November 13, 2014 Decision 1 of the
Court of Appeals (CA) in CA-G.R. CR HC No. 06308 finding the accused-
appellant, Rosario Baladjay (Baladjay), guilty beyond reasonable doubt of the
crime of Syndicated Estafa  defined and penalized under Article 315 (2) (a) of
the Revised Penal Code (RPC) in relation to Section 1 of Presidential Decree
No. (PD) 1689.2

The Facts

In an Information  dated August 6, 2003, accused-appellant Baladjay and her

co-accused were indicted with the crime of Syndicated Estafa.  The accusatory
portion of the Information  reads:

The undersigned Prosecutor accuses ROSARIO BALADJA Y, SATURNINO

BALADJAY, LITO NATIVIDAD, RANDY RUBIO, TESS VILLEGAS, OLIVE
MARASIGAN, LORNA PANGAN, CARMEN CHAN, STELLA ILAGAN and JOHN
MUNOZ of the crime of SYNDICATED ESTAFA under Article 315, par. 2(a) of
the Revised Penal Code in relation to [PD] 1689, committed as follows:

That on or about and sometime during the months covering the period from
May 2001 to October 2002, in the City of Makati, Philippines and within the
jurisdiction of this Honorable Court, the above-named accused, being officers,
employees, and/or agents of Multinational Telecom Investors Corporation
(Multitel), an association operating on funds solicited from the public,
conspiring or confederating with and mutually helping one another, and
confederating as a syndicate, did then and there, willfully, unlawfully and
feloniously defraud complainants JOSE SAMALA, HENRY CHUA CO, ROLANDO
T. CUSTODIO, KATHERINE T. HEBRON AND STELLA P. LEE by means of false
pretenses or fraudulent acts executed prior to or simultaneously with the
commission of fraud to the effect that they have the business, property and
power to solicit and accept investments and deposits from the general public
and capacity to pay the complainants guaranteed monthly interest on
investment from 5% to 6% and lucrative commissions, and by means of other
deceits of similar import, induced and succeeded in inducing the complainants
to invest, deposit, give and deliver as in fact the latter gave the accused the
total amount of [Php]7,810,000.00 as investment or deposit, accused knowing
fully well that said pretenses and representations are fraudulent scheme to
enable them to obtain said amount, and thereafter, having in their possession
said amount, with intent to gain and to defraud, misappropriated and
converted the same to their own personal benefits to the damage and
prejudice of said complainants in the aforementioned amount.
CONTRARY TO LAW.3
Upon motion of the public prosecutor, the charge against Carmen Chan was
dismissed for lack of probable cause; while the other accused, aside from
Baladjay, remained at large. On arraignment, Baladjay pleaded not guilty to
the offense charged. Thereafter, trial on the merits ensued.
The prosecution presented Rolando T. Custodio (Rolando), Estella Pozon Lee
(Estella), Henry M. Chua Co (Henry), and Yolanda Baladjay (Yolanda) to testify
against accused-appellant Baladjay.
When Rolando took to the stand, he narrated that sometime in February
2001, his neighbor told him about Multitel, a company which allegedly pays its
investors an interest income of at least five percent (5%) per month. Enticed
with the prospective returns, Rolando invested the amount of Phpl00,000.00
in Multitel and received monthly interest payments, as promised. 4
Thereafter, Rolando met Gladina Baligad (Gladina), a counselor of Multitel,
who explained to him that the company was engaged in the
telecommunications business. Convinced of Gladina's representations
regarding Multitel's legitimacy and her assurances as to its profitability,
Rolando increased his investment in the company to Php2,000,000.00.
Gladina then made a more attractive offer, promising an increased monthly
earning of eight to twelve percent (8%-12%) of the investments, luring
Rolando to invest a total of Php3,200,000.00 in Multitel. A receipt was issued
for every placement that Rolando made, together with checks personally
signed by Baladjay, representing his principal investment. 5
However, sometime in October 2002, when he had yet to receive his interest
income for the month, Rolando learned that Baladjay was under investigation.
Knowledge of this prompted him to call Gladina, who assured him that
Multitel would still be able to deliver on its promised returns. Nevertheless,
despite Gladina's assurance, Multitel defaulted. Rolando then conducted his
own investigation on the matter and found out that Multitel was not issued a
secondary license by the Securities and Exchange Commission (SEC) to deal in
securities and solicit investments from the general public. In fact, per an SEC
Advisory, the company and its conduits were not duly registered and had no
juridical personality and authority to engage in any activity, let alone
investment-taking.6
Rolando exerted all effort to recover his investments after his discovery. He
even attended the meetings conducted by Multitel, the last one of which was
held on November 5, 2002. During the final meeting, Baladjay's co-accused
Randy Rubio, Olive Marasigan, and Tess Villegas, all officers of Multitel, met
with the investors and repeatedly assured the latter that Multitel was a
legitimate company and that it was merely organizing its books so as to meet
the monthly withdrawals. Multitel, however, was unable to deliver on the
promised returns, prompting Rolando to file a criminal complaint. 7
In her account of the events, Estella claimed that she was advised by
Carmencita Chan (Carmencita), a Multitel counselor, to invest in the company
through the One Heart Multi-Purpose Cooperative (One Heart). 8 As
Carmencita explained to her, One Heart was an agent of Multitel, which could
receive investments in the latter's behalf. Carmencita also informed Estella in
one of their meetings at One Heart's office at the Enterprise Building in Makati
City that Multitel is a local subsidiary of a New Yorkbased telecommunications
company.9
Carmencita later introduced Estella and her husband to accused Manolito
Natividad (Manolito ), who confirmed the information about Multi tel. With
the promised yield of six percent (6%) monthly interest, Estella's total
investment with Multitel amounted to Php3,280,000.00 and US$7 ,520.00.
Estella initially received the promised interest yields. However, in October
2002, no interest income was deposited to Estella's account. This impelled
Estella to call Carmencita, who told her that she had to wait before she could
get her income for the month.10
Subsequently, Estella constantly called and followed up with Carmencita and
even Multitel's advertised hotline only to be repeatedly told that she would
be informed of the status of her investments. However, no information ever
reached her, and her investments were never returned by Multitel. 11
In his testimony, Henry claimed that he knew the accused Baladjay, Satumino
Baladjay, Randy Rubio, Lito Natividad, and Tess Villegas. According to him, he
was also persuaded by Gladina to invest in Multitel because of the promise of
a five percent (5%) monthly interest income. His total investments amounted
to Phpl,050,000.00, for which he received interest payment only once. 12 When
the guaranteed return never arrived, Henry called Gladina who relayed to him
that Baladjay was having difficulty with respect to the Multitel funds. Henry
then became suspicious, prompting him to consult with the SEC where he was
informed that Multitel is a scam, and that a Cease and Desist Order had
already been issued against it for soliciting funds from the public without a
valid license.13
Henry then confronted Gladina, only to be redirected to Baladjay's then
counsel. He then attempted to settle with Baladjay, but the latter can no
longer be contacted. And in his last-ditch effort to recover his investment, he
attended the investors meeting organized by Multitel counselors, including
Randy Rubio, Olive Marasigan, and Tess Villegas, among others. 14
Lastly, Yolanda testified that her and Baladjay' s husbands are
brothers.15 Baladjay offered her a job as a Multitel counselor, promising her
commissions equivalent to seven percent (7%) of the capital infused by the
investors that she would convince. Accepting the offer, Yolanda ushered in
clients to Baladjay's office at the Enterprise Building in Ayala, Makati City until
2001. Thereafter, Yolanda and the other Multitel counselors were assigned to
different groups or cooperatives, which Baladjay herself had established.
According to her, the investments were placed in the cooperatives, which, in
turn, placed them in Multitel. 16
By September 2002, Multitel started to have problems with the SEC.
Consequently, the investors demanded from Yolanda that she return their
money placements. However, she could not address their demands as she
could no longer contact Baladjay, who, by then, was already nowhere to be
found.17
For its part, the defense presented accused-appellant Baladjay as its sole
witness. Baladjay, in her testimony, denied knowing, meeting, or transacting
with the private complainants. She insisted on her innocence and decried the
allegations that she took the private complainants' money in the aggregate
amount of Php7,810,000.00.18
Baladjay added that while she is the President and Chairman of the Board of
Multitel International Holdings, Inc. (MIHI), it is a company totally distinct and
separate from Multinational Telecom Investors Corporation or Multitel. She
claimed that her company, which was registered with the SEC, was only
engaged in the selling of cell phones and did not solicit any investment from
the public. However, Baladjay admitted that she was also known as the
president of Multitel.19
The Ruling of the RTC
On December 3, 2012, the Regional Trial Court (RTC), Makati City, Branch 58,
rendered judgment in Criminal Case No. 03-3261 finding Baladjay guilty of
Syndicated Estafa,  disposing as follows:
WHEREFORE, premises considered, JUDGMENT is hereby rendered as follows:
1. Convicting the accused Rosario Baladjay of the crime of syndicated
estafa and is hereby ordered to suffer life imprisonment.
By way of civil liability
2. To pay Dr. Rolando T. Custodio the sum of Php3,200,000.00 as
actual damages and Php500,000.00 as moral damages;
3. To pay Estella Ponce Lee the sum of Php3,280,000.00 and US$
7,520.00 the rate to be computed from the time of its investment and
Php500,000.00 as moral damages;
4. To pay Henry M. Chua Co the sum of Phpl,050,000.00 and
Php500,000.00 as moral damages;
Considering that the Court has yet to acquire jurisdiction over the other
accused, let alias warrants of arrest be issued against them.
SO ORDERED.
An Amended Decision20 was later issued on April 26, 2013 to correct the
middle name of one of the private complainants, Estella Pozon Lee.
Baladjay interposed an appeal from the above-quoted R TC ruling, arguing
that the trial court gravely erred in convicting her when her guilt has not been
proven beyond reasonable doubt.21
The Ruling of the CA
In its November 13, 2014 Decision, the CA affirmed the guilty verdict meted
by the R TC, but with modification with respect to the amount of moral
damages awarded. The CA held that all the elements of Estafa  under Article
315 (2) (a) of the RPC are present in the instant case, and that the crime was
committed by Baladjay together with her counselors numbering more than
five (5), thus, qualifying the felony to Syndicated Estafa  in accordance with PD
1689. The dispositive portion of the CA Decision states:
ACCORDINGLY, the appeal is DENIED and the Decision dated December 3,
2012, AFFIRMED WITH MODIFICATION, reducing the award of moral damages
to Phpl00,000.00 for each of the private complainant.
SO ORDERED.22
Aggrieved, accused-appellant Baladjay elevated the case before Us, raising the
same arguments she had at the CA.
The Issue
The sole issue in this case is whether or not the appellate court gravely erred
in affirming the accused-appellant's conviction for Syndicated Estafa.
The Court's Ruling
We find no merit in the instant appeal.
All the elements of Syndicated Estafa
are present in the instant case
Accused-appellant and her eight (8) co-accused were charged with
Syndicated Estafa,  in relation to Article 315 (2)(a) of the RPC, viz:
Art. 315. Swindling (estafa).  - Any person who shall defraud another by any
means mentioned herein below shall be punished by:
xxxx
2. By means of any of the following false pretenses or fraudulent acts
executed prior to or simultaneously with the commission of the fraud:
(a) By using a fictitious name, or falsely pretending to possess power,
influence, qualifications, property, credit, agency, business, or imaginary
transactions; or by means of other similar deceits.
xxxx
Jurisprudence elucidates that the elements of Estafa  by means of deceit
under this provision are as follows: (a) that there must be a false pretense or
fraudulent representation as to the offender's power, influence,
qualifications, property, credit, agency, business or imaginary transactions; (b)
that such false pretense or fraudulent representation was made or executed
prior to or simultaneously with the commission of the fraud; (c) that the
offended party relied on the false pretense, fraudulent act, or fraudulent
means and was induced to part with his money or property; and (d) that, as a
result thereof, the offended party suffered damage. 23
In relation to the foregoing, Section 1 of PD 1689 qualifies the offense
of Estafa  if it is committed by a syndicate, viz:
Section 1. Any person or persons who shall commit estafa or other forms of
swindling as defined in Articles 315 and 316 of the Revised Penal Code, as
amended, shall be punished by life imprisonment to death if the swindling
(estafa) is committed by a syndicate consisting of five or more persons formed
with the intention of carrying out the unlawful or illegal act, transaction,
enterprise or scheme, and the defraudation results in the misappropriation of
moneys contributed by stockholders, or members of rural banks,
cooperatives, "samahang nayon(s),"  or farmers' associations, or funds
solicited by corporations/associations from the general public.
Synthesizing the two provisions of law, the elements of
Syndicated Estafa,  therefore, are as follows: (a) Estafa  or other forms of
swindling, as defined in Articles 315 and 316 of the RPC, is committed; (b)
the Estafa  or swindling is committed by a syndicate of five (5) or more
persons; and (c) the defraudation results in the misappropriation of moneys
contributed by stockholders, or members of rural banks,
cooperatives, "samahang nayon(s),"  or farmers' associations, or of funds
solicited by corporations/associations from the general public. 24
The special law is typically invoked by those who fall prey to the too-good- to-
be-true promises of a Ponzi scheme, wherein the purported investment
program offers impossibly high returns and pays these returns to early
investors out of the capital contributed by later investors. The history of such
a stratagem has been discussed in the landmark ruling of People v. Balasa
(Balasa):
x x x x Named after Charles Ponzi who promoted the scheme in the 1920s, the
original scheme involved the issuance of bonds which offered 50% interest in
45 days or a 100% profit if held for 90 days. Basically, Ponzi used the money
he received from later investors to pay extravagant rates of return to early
investors, thereby inducing more investors to place their money with him in
the false hope of realizing this same extravagant rate of return themselves. x x
xx
However, the Ponzi scheme works only as long as there is an ever-increasing
number of new investors joining the scheme. To pay off the 50% bonds Ponzi
had to come up with a one-and-a-half times increase with each round. To pay
100% profit he had to double the number of investors at each stage, and this
is the reason why a Ponzi scheme is a scheme and not an investment strategy.
The progression it depends upon is unsustainable. The pattern of increase in
the number of participants in the system explains how it is able to succeed in
the short run and, at the same time, why it must fail in the long run. This game
is difficult to sustain over a long period of time because to continue paying the
promised profits to early investors, the operator needs an ever larger pool of
later investors. The idea behind this type of swindle is that the "con-man"
collects his money from his second or third round of investors and then
absconds before anyone else shows up to collect. Necessarily, these schemes
only last weeks, or months at most.25
In Balasa,  Panata Foundation of the Philippines, Inc. sent out brochures
soliciting deposits from the public, assuring would-be depositors that their
money would either be doubled after 21 days or tripled after 30 days. Under
its alleged investment program, a depositor hands his investment to a clerk
who, in turn would give it to the teller. In exchange, the depositors would
receive filled-up printed forms called "slots," which bear resemblance to bank
checks and were already signed beforehand by the president of the
foundation. The amounts received by the foundation were deposited in
various banks under the names of its president and/or secretary. 26
The foundation started with a few depositors, most of whom only invested
small amounts to see whether the foundation would make good on its
promise. As word got around that the foundation was able to fulfill its
obligations, more depositors were attracted by the promised returns. Blinded
by the prospect of gaining substantial profits for nothing more than a
minuscule investment, these investors were lured to reinvest their earnings, if
not to invest more.27
The operations initially proceeded smoothly. However, on November 29,
1989, the foundation closed down. Depositors then began to demand for the
reimbursement of their deposits, but the foundation was unable to deliver.
Consequently, sixty-four informations, all charging the offense of
Syndicated Estafa  were filed against the officers and trustees of the
foundation.28 The cashier and the disbursing officer of the foundation were
eventually found guilty beyond reasonable doubt of the offense charged. They
were sentenced to suffer the penalty of life imprisonment, and were ordered
to restitute to complainants the amounts defrauded.
Parallelisms can be drawn between Balasa  and People v. Menil.29  In the said
case, the spouses Menil were the proprietors of a business operating under
the name ABM Appliance and Upholstery. Through ushers and sales
executives, they began soliciting investments from the general public in
Surigao City and its neighboring towns, assuring would-be investors that their
money would be multiplied tenfold after fifteen (15) calendar days. 30
Instead of the "slots" that were given to the investors in Balasa,  the spouses
Menil issued "coupons" as proofs of investment. And just as in Balasa,  the
initial amounts involved were small, and so the spouses Menil were able to
pay the returns on the investments as they fell due. However, the amounts
invested and the number of depositors gradually increased until it reached a
point wherein the daily investments amounting to millions of pesos were
pouring in and payments of the returns were delayed. 31 On September 19,
1989, the spouses stopped releasing payments altogether, prompting the
investors to charge them with large-scale swindling. 32
More recently, in People v. Tibayan,33  the Court has convicted two
incorporators of the Tibayan Group Investment Company, Inc. (TGICI) of
multiple counts of Syndicated Estafa  and sentencing them to suffer life
imprisonment for each count. As in the other fraudulent investment schemes,
the private complainants in that case were enticed to invest in TGICI due to
the offer of high interest rates, as well as the assurance that they will recover
their investments. After parting with their monies, the private complainants
received a Certificate of Share and post-dated checks, representing the
amount of the principal investment and the corresponding monthly interest
earnings. The checks, however, were dishonoured upon encashment, and the
TGICI office closed down without private complainants having been paid. The
investors were then constrained to file criminal complaints against the
incorporators and directors of TGICI.
The gravamen of the offenses charged in all the afore-mentioned cases is the
employment of fraud or deceit to the damage or prejudice of another. As
defined in Balasa:
Fraud, in its general sense, is deemed to comprise anything calculated to
deceive, including all acts, omissions, and concealment involving a breach of
legal or equitable duty, trust, or confidence justly reposed, resulting in
damage to another, or by which an undue and unconscientious advantage is
taken of another. It is a generic term embracing all multifarious means which
human ingenuity can device, and which are resorted to by one individual to
secure an advantage over another by false suggestions or by suppression of
truth and includes all surprise, trick, cunning, dissembling and any unfair way
by which another is cheated. On the other hand, deceit is the false
representation of a matter of fact whether by words or conduct, by false or
misleading allegations, or by concealment of that which should have been
disclosed which deceives or is intended to deceive another so that he shall act
upon it to his legal Injury.34
In the case at bar, it can be observed that Multitel engaged in a modus
operandi  that does not deviate far from those practiced in the above-cited
cases.1âwphi1 The similarity of the pattern is uncanny. Here, using Multitel as
their conduit, Baladjay and her more than five (5) counselors employed deceit
and falsely pretended to have the authority to solicit investments from the
general public when, in truth, they did not have such authority. The deception
continued when Baladjay's counselors actively solicited investments from the
public, promising very high interest returns starting at five percent (5%) per
month. Convinced of Baladjay's and her counselors' promise of lucrative
income, the private complainants were then enticed to invest in Multitel.
However, unknown to them, the promised high-yielding venture was
unsustainable, as Multitel was not really engaged in any legitimate business.
Eventually, Baladjay and her cohorts ran away with the private complainants'
money causing them damage and prejudice.
Clearly, all the elements of Syndicated Estafa  obtain in this case, considering
that: (a) more than five (5) persons are involved in Multitel's grand fraudulent
scheme, including Baladjay and her co-accused - who employed deceit, false
pretenses and representations to the private complainants regarding a
supposed lucrative investment opportunity with Multitel in order to solicit
money from them; (b) the said false pretenses and representations were
made prior to or simultaneous with the commission of fraud; (c) relying on the
false promises and misrepresentations thus employed, private complainants
invested their hard-earned money in Multitel; and (d) Baladjay and her co-
accused defrauded the private complainants, obviously to the latter's
prejudice.
Baladjay's connection with Multitel
has been clearly established
Baladjay contends, however, that the prosecution failed to prove her
connection with Multitel, which is supposedly an entity distinct from the
company she actually owns.
We are not convinced.
Multitel was sufficiently proven to be owned by and linked to Baladjay. The
positive and straightforward testimony of her own sister-in-law, Yolanda,
shows not only Baladjay's direct connection with Multitel, but also her active
participation in soliciting and convincing prospective investors to place their
investments in Multitel, viz:
ATTY. FERMO
Q: Why did you agree to become a counselor of Ms. Baladjay and recruit
investors, Ms. Witness?
A: Because I will earn something from the persons that I will be recruiting,
ma'am.
Q: You mentioned that you will earn, why, how much will you earn if you will
be able to recruit investors of Multitel?
A: She'll give me seven percent (7%) and then to the person they will be given
four percent (4%).
xxxx
Q: Were you able to recruit or persuade others to invest at Multitel, Madam
witness?
A: Yes, ma'am and the persons whom I recruited, I brought them to her
residence and she personally talked to them.
Q: When you brought these persons to her house, did they immediately
invest?
A: Yes, ma'am they invested immediately because she is very articulate.
Q: After these investors made their investment, when will you receive the
three percent (3%) commission?
A: Every month ma' am, I will receive the commission and the investors will
also receive their monthly interest.
Q: Do you know what are the proofs to show that people invested in Multitel,
Madam witness?
A: She issued us post dated checks for the principal and the monthly interest
was given in cash and we have to sign in the paper.
xxxx
Q: For how long have you been a counselor of Multitel, Madam witness?
A: I started with her ma'am and it was already at Multitel Office in Ayala.
Q: When was that?
A: In the year 2000 ma' am.
Q: Year 2000 when she had an office at Ayala?
A: Yes, ma' am.
Q: What building is that Madam witness?
A: At Enterprise Building Ma' am.
Q: For how long were you able to bring investors at her office at Enterprise
Building?
A: Until 2001, ma'am.
Q: So, why, what happened after 2001?
A: Because we already have our own group or cooperative.
Q: What do you mean, that you became part of the cooperative?
A: Because there were plenty of investors, ma' am and her office can no
longer accommodate us.
Q: So, who established this cooperative, Madam witness?
A: She established the cooperative Ma'am and we have our own chairman.
Q: How many cooperatives were established, if you know, madam witness?
A: 16 Cooperatives, ma'am but I can only remember three names Telecon,
Star Enterprise, One Heart.
Q: And what is the name of your cooperative?
A: Star Enterprise, ma'am.35
Further, Baladjay's claim that she has not transacted with the private
complainants, or has never known the supposed Multitel counselors to whom
the victims of Multitel's fraudulent scheme delivered their money, cannot
prevail over the evidence on record. Baladjay cannot feign innocence by
hiding behind her so-called "counselors" because not only did they positively
identify her, she also signed the checks issued in favor of the investors.
The RTC and the CA both found that the witnesses presented in the instant
case were credible, having given their respective testimonies in a
straightforward manner, corroborated by documentary evidence. Accordingly,
the totality of the testimonies of the witnesses, documentary evidence on
record, and findings of the SEC all point to Baladjay as the perpetrator of a
grand scheme to defraud investors of their investments in her company,
Multitel.36
Based on the foregoing, the CA correctly affirmed Baladjay' s guilt.
Notably, the crime of Estafa  under Article 315 (2)(a) of the RPC was
committed by accused-appellant together with her counselors, numbering
more than five (5), qualifying the crime to Syndicated Estafa  in accordance
with PD 1689. Thus, the imposition of the penalty of life imprisonment should
be upheld, as well as the order to pay the actual damages suffered by each of
the private complainants. In addition thereto, the Court imposes interest on
the monetary penalty at the rate of six percent (6%) per annum from the time
of the demand, which shall be deemed as made on the same day the
Information was filed against accused-appellant, until the amounts are fully
paid.37
2. To pay Dr. Rolando T. Custodio the sum of Php3,200,000.00 as
actual damages;
3. To pay Estella Pozon Lee the sum of Php3,280,000.00 and
US$7,520.00 the rate to be computed from the time of its investment;
4. To pay Henry M. Chua Co the sum of Phpl,050,000.00;
The afore-stated amounts shall be paid with legal interest at the rate
of six percent (6%) per annum from August 27, 2003 until fully paid.
By way of moral damages

As regards the award of moral damages, the CA was correct in reducing the 5. To pay Dr. Rolando T. Custodio, Estella Pozon Lee, and Henry M.
same to a fair, just and reasonable amount 38 of One Hundred Thousand Pesos Chua Co the amount of One Hundred Thousand Pesos (Phpl00,000.00)
(Phpl00,000.00) for each of the private complainants. The Court also imposes each, with interest at the rate of six percent (6%) per annum from the
an interest at the rate of six percent (6%) per annum on the moral damages finality of the Court's Decision until fully paid.
assessed from finality of this ruling until full payment. 39
Considering that the Court has yet to acquire jurisdiction over the other
IN VIEW OF THE FOREGOING, the Court ADOPTS the findings and conclusions accused, let alias warrants of arrest be issued against them.
of law in the Decision dated November 13, 2014 of the Court of Appeals in CA-
G.R. CR HC No. 06308 and AFFIRMS said Decision WITH MODIFICATION that SO ORDERED.
(1) accused-appellant is assessed and shall pay an interest at the rate of six
percent (6%) per annum on the amount of actual damages suffered by each of
the private complainants, reckoned from the filing of Information on August
27, 2003 until fully paid, and (2) an interest at the rate of six percent (6%) per
annum on the amount of moral damages awarded to each of the private
complainants from the finality of the Court's Decision until full payment.

As thus modified, the judgment of the Regional Trial Court of Makati City,
Branch 58, promulgated on December 3, 2012, as amended on April 26, 2013,
shall read as follows:

WHEREFORE, premises considered, JUDGMENT is hereby rendered as follows:

1. Convicting the accused Rosario Baladjay of the crime of

Syndicated Estafa  and ordering her to suffer the penalty of life
imprisonment.

By way of civil liability