G.R. No.

188030 April 25, 2012

RAFAEL H. GALVEZ, et al. vs CA

PEREZ, J.:

In 1999, Radio Marine Network (Smartnet) Inc. (RMSI) claiming to do business under the name Smartnet Philippinesand/or
Smartnet Philippines, Inc. (SPI),applied for an Omnibus Credit Line for various credit facilities with Asia United Bank (AUB). To
induce AUB to extend the Omnibus Credit Line, RMSI, through its directors and officers, presented its Articles of Incorporation
with its 400-peso million capitalization and its congressional telecom franchise. RMSI was represented by the following officers
and directors occupying the following positions. the credit line was increased s after a third-party real estate mortgage by
Goodland Company, Inc.an affiliate of Guy Group of Companies, in favor of Smartnet Philippines, was offered to the bank.
Simultaneous to the increase of the Omibus Credit Line, RMSI submitted a proof of authority to open the Omnibus Credit Line.
Attached to this authority was the Amended Articles of Incorporation of RMSI, doing business under the name of Smartnet
Philippines, and the Secretarys Certificate of SPI authorizing its directors, Gilbert Guy and Philip Leung to transact with AUB. On
the other hand, Gilbert Guy, et al. formed a subsidiary corporation. Believing that SPI is the same as Smartnet Philippines - the
division of RMSI - AUB granted to it, among others, Irrevocable Letter of Credit. To cover the liability of this Irrevocable Letter of
Credit, Gilbert Guy executed Promissory Note. in behalf of SPI in favor of AUB. This promissory note was renewed twice, once, in
the name of SPI and last, in the name of Smartnet Philippines.

When RMSIs obligations remained unpaid, AUB sent letters demanding payments. RMSI denied liability contending that the
transaction was incurred solely by SPI, a corporation which belongs to the Guy Group of Companies, but which has a separate and
distinct personality from RMSI. RMSI further claimed that while Smartnet Philippines is an RMSI division, SPI, is a subsidiary of
RMSI, and hence, is a separate entity.

Aggrieved, AUB filed a case of syndicated estafa under Article 315 (2) (a) of the Revised Penal Code. AUB alleged that the directors
of RMSI deceived it into believing that SPI was a division of RMSI, only to insist on its separate juridical personality later on to
escape from its liabilities with AUB. AUB contended that had it not been for the fraudulent scheme employed by Gilbert Guy, et
al., AUB would not have parted with its money.

ISSUE:

WON there is no fraud or deceit that is present at the onset of the transaction which gave rise to this controversy, an element
indispensable for estafa to prosper.

HELD:

First, as defined under Section 1 of PD No. 1689, a syndicate consists of five or more persons formed with the intention of carrying
out the unlawful or illegal act, transaction, enterprise or scheme. Five (5) accused, namely, Gilbert G. Guy, Rafael H. Galvez, Philip
Leung, Katherine L. Guy, and Eugenio H. Galvez, Jr. were, (a) all involved in the formation of the entities used to defraud AUB; and
(b) they were the officers and directors, both of RMSI and SPI, whose conformities paved the way for AUB to grant the letter of
credit subject of this case, in AUBs honest belief that SPI, as Gilbert Guy, et al. represented, was a mere division of RMSI. As
already discussed, although Eugenio Galvez, Jr. was not a director of SPI, he, together with Gilbert Guy and Philip Leung, actively
participated in the scheme through their signed correspondences with the bank and their attendance in the meetings with
executives of AUB.Rafael Galvez and Katherine Guy, on the other hand, were the directors of RMSI and SPI who caused and
authorized Gilbert Guy and Philip Leung to transact with AUB.

Second, while these corporations were established presumably in accordance with law, it cannot be denied that Gilbert G. Guy , et
al. used these corporations to carry out the illegal and unlawful act of misrepresenting SPI as a mere division of RMSI, and, despite
knowing SPIs separate juridical personality, applied for a letter of credit secured by SPIs promissory note, knowing fully that SPI
has no credit line with AUB. The circumstances of the creation of these entities and their dealings with the bank reveal this
criminal intent to defraud and to deceive AUB.

Third, the fact that the defraudation of AUB resulted to misappropriation of the money which it solicited from the general public
in the form of deposits was substantially established.

Gilbert Guy et al. want this Court to believe that AUB, being a commercial bank, is beyond the coverage of PD No. 1689. We hold,
however, that a bank is a corporation whose fund comes from the general public. P.D. No. 1689 does not distinguish the nature of
the corporation. It requires, rather, that the funds of such corporation should come from the general public. This is bolstered by
the third whereas clause of the quoted law which states that the same also applies to other corporations/associations operating
on funds solicited from the general public.