PDIC v.
Manu GIDWANI Unperturbed, PDIC interposed a petition for
Facts:
Pursuant to several resolutions of the
Monetary Board (MB) of the BSP, a number of
the rural banks owned and controlled by the
Legacy Group of Companies (Legacy Banks, for
brevity) were ordered closed and thereafter
placed under the receivership of Philippine
Deposit Insurance Corporation (PDIC).
The spouses Gidwani, and eighty-six
(86) other individuals, represented themselves
to be owners of four hundred seventy-one
(471) deposit accounts with the Legacy Banks,
and filed claims with PDIC. The claims were
processed and granted, resulting in the
issuance of six hundred eighty-three (683)
Landbank checks in favor of the 86 individuals,
excluding the spouses Gidwani, in the
aggregate amount of over 98 million Pesos.
The individuals did not deposit the
crossed checks in their respective bank
accounts. Rather, the face value of all the
checks were credited to a single bank account
with Rizal Commercial Banking Corporation
(RCBC) owned by Manu Gidwani.
According to PDIC, it only discovered
the foregoing circumstance when the checks
were cleared and returned to it. This prompted
PDIC to conduct an investigation on the true
nature of the deposit placements of the 86
individuals. Based on available bank
documents, the spouses Gidwani and the 86
individuals maintained a total of 471 deposit
accounts (aggregating to over 118 million
Pesos) with the different Legacy Banks; and
142 of these accounts (amounting to over 20
million Pesos) were in the names of helpers
and rank-and-file employees of the Gidwani
spouses. Thus, according to PDIC, most of
them if not all, did not have the financial
capacity to deposit the amounts recorded
under their names, let alone make the deposits
in various Legacy Banks located nationwide.
PDIC also noted that advance interests on
several of the deposits were paid to the
Gidwani spouses even though they are not the
named owners of the accounts.
Pursuant to its mandate to safeguard
the deposit insurance fund against illegal
schemes and machinations, PDIC lodged a
criminal complaint against the Gidwani spouses
and the 86 other individuals, before the
Department of Justice (DOJ) Task Force on
Financial Fraud (DOJ Task Force) for:
1. Estafa through falsification under Art.
315(2)(a) in relation to Art. 172(1) and
171(4) of the Revised Penal Code; and
2. Money laundering as defined in Section
4(a) of AMLA.
On January 14, 2014, the DOJ Task Force
promulgated a Resolution dismissing the
Complaint. PDIC's motion for reconsideration
from the said Resolution was likewise denied.
review with the Office of the Secretary of
Justice (SOJ).
On September 11, 2015, then
Undersecretary of Justice Jose F. Justiniano
issued a Resolution (Justiniano Resolution)
denying PDIC's appeal.
On June 3, 2016, then SOJ Emmanuel
Caparas, however, overturned the Justianio
Resolution through his own ruling granting
PDIC's motion for reconsideration (Caparas
Resolution). In his Resolution, then SOJ
Caparas directed the Prosecutor General to file
the relevant Informations against the spouses
Gidwani and the 86 other individuals.
Manu Gidwani immediately elevated the
matter to the Court of Appeals, ascribing grave
abuse of discretion on the part of SOJ Caparas
in finding probable cause to charge him with
estafa and for violation of the AMLA.
The Court of Appeals reversed the decision
of SOJ Caparas. Te CA ruled that SOJ Caparas
gravely abused his discretion when he reversed
and set aside the earlier resolutions of the DOJ
Task Force and of Undersecretary Justiniano.
Accordingly, due to lack of probable cause, the
appellate court ordered the dismissal of the
criminal complaint against Gidwani, and the
cancellation of the corresponding
Information/s.
PDIC’s motion for reconsideration of the
CA’s decision having been denied, it elevated
the case to the Supreme Court.
Issue: Did the then SOJ Caparas gravely
abuse his discretion in finding probable cause
against Manu Gidwani, in connection with the
allegations in PDIC’s criminal complaint? NO.
HELD:
Jurisprudence elucidates that the elements
of estafa or swindling under paragraph 2(a) of
Article 315 of the RPC are the following:
1. That there must be a false pretense,
fraudulent act or fraudulent means;
2. That such false pretense, fraudulent
act or fraudulent means must be made
or executed prior to or simultaneously
with the commission of the fraud;
3. That the offended party must have
relied on the false pretense, fraudulent
act, or fraudulent means, that is, he
was induced to part with his money or
property because of the false pretense,
fraudulent act, or fraudulent means;
and
4. That as a result thereof, the offended
party suffered damage.
According to PDIC:
1. the crime charged (estafa or swindling
under paragraph 2(a) of Article 315 of
the RPC) was committed when the 86
other individuals fraudulently declared
that they are the bona fide owners of
471 deposits with the legacy banks;
 2. the purported depositors, in conspiracy
with Manu, falsified official documents
by making the untruthful statement of
ownership in their deposit insurance
claims;
3. it (PDIC) relied on the representations
of the claimants when it released to
them the deposit insurance proceeds
amounting to over 98 million Pesos, of
which over 97 million Pesos was
deposited to the RCBC account of Manu
Gidwani; and
4. the government suffered damage when
PDIC discovered upon investigation
that Manu was the sole beneficial
owner of the bank accounts.
The [Court] disagrees with the CA’s ruling
that "PDIC failed to prove that Gidwani is the
owner of all subject bank accounts or financed
the same" and, as such, Manu could not be
considered to have committed false pretenses
or misrepresentations against PDIC.
It must be recalled that the criminal case is
still in the stage of preliminary investigation.
Under Rule 112, Section 1 of the Rules of
Court, a preliminary investigation is "an inquiry
or proceeding to determine whether there is
sufficient ground to engender a well-founded
belief that a crime has been committed and the
respondent is probably guilty thereof, and
should be held for trial." The investigation is
advisedly called preliminary, because it is yet
to be followed by the trial proper in a court of
law. The occasion is not for the full and
exhaustive display of the parties since the
function of the investigating prosecutor is not
to determine the guilt or innocence of an
accused.
In this case, the PDIC reportedly
discovered that there was only one
beneficial owner of the 471 bank accounts
with the Legacy Banks (purportedly
owned by 86 other individuals) –
respondent Manu.
PDIC reportedly discovered that 142 of
these 471 accounts, with the total amount of
over 20 million Pesos, were in the names of
helpers and rank-and-file employees of the
Gidwani spouses who do not have the financial
capacity to deposit the amounts recorded
under their names. Moreover, the helpers and
rank-and-file employees who reside and are
employed in Bacolod City maintained bank
accounts in Legacy Banks located in different
parts of the country (outside of Bacolod City).
The fact these individuals stated/reported
Manu Gidwani's office or business address as
their own further arouses serious suspicion on
the true ownership of the funds deposited. It
gives the impression that they had been used
by Gidwani as dummies, and that their
purported ownership was a mere subterfuge in
order to increase the amount of Gidwani’s
protected deposit.
Under Republic Act No. 3591 (PDIC
Charter), as amended:
all deposits in a bank
maintained in the same right and
capacity for a depositor's benefit,
either in his name or in the name of
others, shall be added together for the
purpose of determining the insured
deposit amount due to a bona fide
depositor, which amount should not
exceed the maximum deposit
insurance coverage (MDIC) of
P250,000.00.
Thus, the entitlement to a deposit
insurance is based not on the number of bank
accounts held, but on the number of
beneficial owners. It is this government
policy and P250,000.00 threshold that Gidwani
purportedly circumvented by conspiring with
the 86 individuals. If not for the fact that the
683 Landbank crossed checks amounting to
over 97 million Pesos were deposited in the
RCBC account of Gidwani, PDIC would not have
gotten wind of this probable concealment of
true ownership over the subject bank
accounts.
Thus, that the Court herein finds probable
cause to charge respondent for estafa and
money laundering.
SEC v Laigo
GR No. 188639, September 2, 2015
Facts: SEC issued the corresponding New Rules
on the Registration and Sale of Pre-Need
Plans (New Rules) to govern the pre-need
industry prior to the enactment of R.A. No.
9829, otherwise known as the Pre-Need Code of
the Philippines (Pre-Need Code). It required
from the pre-need providers the creation of trust
funds as a requirement for registration.
As defined in Rule 1.9 of the New Rules, "'Trust
Fund' means a fund set up from planholders'
payments, separate and distinct from the paid-up
capital of a registered pre-need company,
established with a trustee under a trust
agreement approved by the SEC, to pay for the
benefits as provided in the pre-need plan."
Legacy (pre-need company) entered into a trust
agreement with the Land Bank of the
Philippines (LBP). Subsequently, Legacy
became a subject of a petition for involuntary
insolvency by private respondents in their
capacity as planholders.
It was declared insolvent by the RTC and it also
ordered Legacy to submit an inventory of its
assets and liabilities. SEC opposed the inclusion
of the trust fund in the inventory of corporate
assets on the ground that to do so would
contravene the New Rules which treated trust
funds as principally established for the exclusive
purpose of guaranteeing the delivery of benefits
due to the planholders.
Despite the opposition of the SEC, Judge Laigo
ordered the insolvency Assignee to take
possession of the trust fund. RTC stated that the
trust fund could be withdrawn by the Assignee
to be used for the expenses he would incur in the
discharge of his functions and to be distributed
among the creditors who had officially filed
their valid claims with the court.
Issue 1: Whether or not the trust fund of Legacy
form part of its corporate assets. – NO.
Ruling: The Trust Fund is for the sole benefit of
the planholders and it cannot be used to satisfy
the claims of other creditors of Legacy.
The Assignee argues that Legacy has retained a
beneficial interest in the trust fund despite the
execution of the trust agreement and that the
properties can be the subject of insolvency
proceedings.
Legacy is not a beneficiary. It must be stressed
that a person is considered as a beneficiary of a
trust if there is a manifest intention to give such
a person the beneficial interest over the trust
properties. Here, the terms of the trust
agreement plainly confer the status of
beneficiary to the planholders, not to Legacy.
The beneficial ownership is vested in the
planholders and the legal ownership in the
trustee, LBP; Legacy, as trustor, is left without
any iota of interest in the trust fund.
To rule that Legacy has retained a beneficial
interest in the trust fund is to perpetuate the
injustices being committed against the
planholders and violate not only the spirit of the
trust agreement but, more importantly, the
lawmaker's intent. If indeed Legacy had an
interest that could be reached by its creditors
even during insolvency, the planholders would
be prejudiced as they would be forced to share in
the assets that would be distributed pro rata to
all creditors, whether planholders or not.
Legacy merely agreed to facilitate the payment
of the benefits from the trust fund to the
intended beneficiaries, acting as a conduit or an
agent of the trustee in the enforcement of the
trust agreement.
Issue 2: Is Legacy a debtor of the planholders
relative to the trust fund? – NO.
Ruling: The Court cannot subscribe either to the
Assignee's position that Legacy is a debtor of the
planholders relative to the trust fund. In trust, it
is the trustee, and not the trustor, who owes
fiduciary duty to the beneficiary. The trustee,
LBP, is tasked with the fiduciary duty to act for
the benefit of the planholders as to matters
within the scope of the relation.
The trust fund should not revert to Legacy,
which has no beneficial interest over it. Not
being an asset of Legacy, the trust fund is
immune from its reach and cannot be included
by the RTC in the insolvency estate.
SEC v CAP
GR No. 202052, March 7, 2018
Facts: College Assurance Plan Philippines, Inc.
(CAP) sells preneed education plans. To
guarantee the payment of benefits under its
educational plans, CAP set up a Trust Fund
contributing therein a certain percentage of the
amount actually collected from each planholder.
The Trust Fund, with the aid of trustee banks, is
invested in assets and securities with yields
higher than the projected increase in tuition fees.
CAP incurred a trust fund deficiency of 3.179
billion. In compliance with the directive of SEC
to submit a funding scheme to correct the
deficiency, CAP, among others, proposed to
purchase MRT III Bonds and assign the same to
the Trust Fund.
CAP purchased MRT III bonds from SMART
and FEMI but was ordered by the SEC
Oversight Board to stop paying SMART/FEMI
due to its perceived inadequacy of CAP's funds.
Subsequently, CAP filed a Petition for
Rehabilitation. In the interim, CAP sold the
MRT III bonds and the buyers’ payment was
credited to CAP’s trust accounts with Philippine
Veterans Bank (PVB). However, CAP’s
payment to SMART and FEMI remained to be
executed. Because of this, the receiver moved
for the payment of the respondent's obligations
to Smart and FEMI.
The CA directed Philippine Veterans Bank and
the receiver to set aside US$6 million from the
proceeds of the sale of the MRT III Bonds
pending the determination of the suit.
The CA opined that payment to Smart and FEMI
constituted "benefits" that could be validly
withdrawn from the trust fund pursuant to Rule
16.4 of the New Rules on the Registration and
Sale of Pre-Need Plans under Section 16 of the
Securities and Regulation Code (New Rules) in
relation to Section 30 of Republic Act No. 9829
(Pre-Need Code of the Philippines)
Issue: Does the obligation to pay to SMART and
FEMI constitute
 “benefits” or
 “cost of services rendered or property
delivered” or
 “administrative expense”
that could be validly withdrawn from the trust
fund? – NO.
Ruling:
The obligation to pay Smart and FEMI did
not constitute the "benefits" or "cost of
services rendered" or "property delivered".
Section 16.4, Rule 6 of the New Rules made an
exclusive enumeration of the administrative
expenses that may be withdrawn from the trust
fund, as follows: trust fees, bank charges and
investment expenses in the operation of the trust
fund, taxes on trust funds, as well as reasonable
withdrawals for minor repairs and costs of
ordinary maintenance of trust fund assets.
Evidently, the purchase price of the bonds for
the capital infusion to the trust fund was not
included as an administrative expense that could
be validly taken from the trust fund.

In respect of pre-need companies, the trust fund

is set up from the planholders' payments to pay
for the cost of benefits and services, termination
values payable to the planholders and other costs
necessary to ensure the delivery of benefits or
services to the planholders as provided for in the
contracts.

The term "benefits" used in Section 16.4 is

defined as “the money or services which the Pre-
Need Company undertakes to deliver in the
future to the planholder or his
beneficiary.” Accordingly, benefits refer to the
payments made to the planholders as stipulated
in their pre-need plans. Worthy of emphasis
herein is that the trust fund is established "to
ensure the delivery of the guaranteed benefits
and services provided under a pre-need plan
contract."

Section 30 of R.A. No. 9829 expressly stipulates

that the trust fund is to be used at all times for
the sole benefit of the planholders, and cannot
ever be applied to satisfy the claims of the
creditors of the company.

The CA gravely erred in authorizing the

payment out of the trust fund of the obligations
due to Smart and FEMI. Even assuming that the
obligations were incurred by the respondent in
order to infuse sufficient money in the trust fund
to correct its deficiencies, such obligations
should be paid for by its assets, not by the trust
fund.

The financial reports submitted by respondent to

the SEC as well as its April 18, 2009
Certification only show that indeed the MRT III
bonds were infused to respondent's Trust Fund
free from any liens and encumbrances, and that
the purchase price thereof is and remains to be
respondent's loan obligation to Smart and FEMI,
or its corporate liability, and not of the Trust
Fund.

Payment to Smart and FEMI was not an

administrative expense to be withdrawn from
the trust fund.