FIRST DIVISION

[G. R. No. 112985. April 21, 1999]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. MARTIN L. ROMERO and

ERNESTO C. RODRIGUEZ, accused-appellants.
DECISION
PARDO, J.:
The case before the Court is an appeal of accused Martin L. Romero and Ernesto
C. Rodriguez from the Joint Judgment [1] of the Regional Trial Court, Branch 2, Butuan
City, convicting each of them of estafa under Article 315, par. 2 (d) of the Revised Penal
Code, in relation to Presidential Decree No. 1689, for widescale swindling, and
sentencing each of them to suffer the penalty of life imprisonment and to jointly and
severally pay Ernesto A. Ruiz the amount of one hundred fifty thousand pesos
(P150,000.00), with interest at the rate of twelve percent (12%) per annum, starting
September 14, 1989, until fully paid, and to pay ten thousand pesos (P10,000.00), as
moral damages.
On October 25, 1989, Butuan City acting fiscal Ernesto M. Brocoy filed with the
Regional Trial Court, Butuan City, an Information against the two (2) accused for estafa,
[2]
as follows:
That on or about September 14, 1989, at Butuan City, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused being the General
Manager and Operation Manager which solicit funds from the general public for
investment, conspiring, confederating together and mutually helping one another, by
means of deceit and false pretense, did then and there willfully, unlawfully and
feloniously deliberately defraud one Ernesto A. Ruiz by convincing the latter to invest his
money in the amount of P150,000.00 with a promise return of 800% profit within 21
days and in the process caused the issuance of Butuan City Rural Rural [sic] Bank
Check No. 158181 postdated to October 5, 1989 in the amount of One Million Two
Hundred Thousand Pesos (P1,200,000.00) Philippine Currency, that upon presentation
of said check to the drawee bank for payment the same was dishonored and that
notwithstanding repeated demands made on said accused to pay and/or change the
check to cash, they consistently failed and refused and still fail and refuse to pay or
redeem the check, to the damage and prejudice of the complainant in the aforestated
amount of P1,200,000.00.[3]
On the same day, the city fiscal filed with the same court another information
against the two (2) accused for violation of Batas Pambansa Bilang 22, arising from the
issuance of the same check.[4]

On January 11, 1990, both accused were arraigned before the Regional Trial Court,
Branch 5,[5] Butuan City, where they pleaded not guilty to both informations.
The prosecution presented its evidence on January 10, 1991, with complainant,
Ernesto A. Ruiz, and Daphne Parrocho, the usher/collector of the corporation being
managed by accused, testifying for the prosecution.
On August 12, 1991, the defense presented its only witness, accused Martin L.
Romero.
On November 13, 1992, the parties submitted a joint stipulation of facts, signed only
by their respective counsels. Thereafter, the case was submitted for decision.
On March 30, 1993, the trial court promulgated a Joint Judgment dated March 25,
1993. The trial court acquitted the accused in Criminal Case No. 3806 [6] based on
reasonable doubt, but convicted them in Criminal Case No. 3808 [7] and accordingly
sentenced each of them, as follows:
IN VIEW OF THE FOREGOING, the Court hereby renders judgment, finding or
declaring (a) Accused Martin L. Romero and Ernesto C. Rodriguez innocent on reasonable doubt
in Criminal Case No. 3806, for violation of Batas Pambansa Bilang 22;
(b) Accused Martin L. Romero and Ernesto C .Rodriguez guilty beyond reasonable
doubt in Criminal Case No. 3808 for estafa under P.D. 1689 for wide scale [sic]
swindling and accordingly sentences them to suffer life imprisonment (Section 1 P.D.
1689) and ordered jointly and severally to return to Ernesto A. Ruiz the amount of One
Hundred Fifty Thousand Pesos (P150,000.00) with interest thereon at the rate of Twelve
percent (12%) per annum starting from September 14, 1989 until fully paid and to pay
the amount of Ten Thousand Pesos (P10,000.00) as moral damages.
In the service of their sentence, the accused pursuant to R.A. 6127, shall be credited for
the preventive imprisonment they have undergone (PP vs. Ortencio, 38 Phil 941; PP vs.
Gabriel, No. L-13756, October 30, 1959, cited in Gregorios Fundamentals of Criminal
Law Review, P. 178, Seventh Edition, 1985). [8]
On March 31, 1993, accused filed their notice of appeal, which the trial court gave
due course on April 5, 1993. On March 16, 1994, this Court ordered the accused to file
their appellants brief.
Accused-appellants filed their brief on October 30, 1995, while the Solicitor General
filed the appellees brief on March 8, 1996.
During the pendency of the appeal, on November 12, 1997, accused Ernesto
Rodriguez died.[9] As a consequence of his death before final judgment, his criminal and
civil liability ex delicto, were extinguished.[10]
Complainant Ernesto A. Ruiz was a radio commentator of Radio DXRB, Butuan
City. In August, 1989, he came to know the business of Surigao San Andres Industrial

Development Corporation (SAIDECOR), when he interviewed accused Martin Romero

and Ernesto Rodriguez regarding the corporations investment operations in Butuan City
and Agusan del Norte. Romero was the president and general manager of SAIDECOR,
while Rodriguez was the operations manager.
SAIDECOR started its operation on August 24, 1989 as a marketing business.
Later, it engaged in soliciting funds and investments from the public. The corporation
guaranteed an 800% return on investment within fifteen (15) or twenty one (21)
days. Investors were given coupons containing the capital and the return on the capital
collectible on the date agreed upon. It stopped operations in September, 1989.
On September 14, 1989, complainant Ernesto A. Ruiz went to SAIDECOR office in
Butuan City to make an investment, accompanied by his friend Jimmy Acebu, and
SAIDECOR collection agent Daphne Parrocho. After handing over the amount of one
hundred fifty thousand pesos (P150,000.00) to Ernesto Rodriguez, complainant
received a postdated Butuan City Rural Bank check instead of the usual redeemable
coupon. The check indicated P1,000,200.00 as the amount in words, but the amount in
figures was for P1,200,000.00, as the return on the investment. Complainant did not
notice the discrepancy.
When the check was presented to the bank for payment on October 5, 1989, it was
dishonored for insufficiency of funds, as evidenced by the check return slip issued by
the bank.[11] Both accused could not be located and demand for payment was made only
sometime in November 1989 during the preliminary investigation of this case. Accused
responded that they had no money.
Daphne Parrocho,[12] testified that on September 14, 1989, complainant, with his
friend Jimmy Acebu, approached her to invest the amount of P150,000.00 at
SAIDECOR.As she has reached her quota, and therefore, no longer authorized to
receive the amount, she accompanied them to the office of SAIDECOR at Ong Yiu
District, Butuan City.Accused Ernesto Rodriguez accepted the investment and issued
the check signed by him and Martin Romero.
For their defense, accused Martin Romero [13] testified that on September 14, 1989,
he issued a check in the amount of P1,200,000.00 corresponding to the total of the
P150,000.00 investment and the 800% return thereon. He claimed that the corporation
had a deposit of fourteen million pesos (P14,000,000.00) at the time of the issuance of
the check and four million pesos (P4,000,000.00) at the time SAIDECOR stopped
operations. Romero knew these things because he used to monitor the funds of the
corporation with the bank. He was not aware that the check he issued was dishonored
because he never had the occasion to meet the complainant again after the September
14, 1989 transaction. He only came to know about this when the case was already filed
in court sometime in the second or third week of January 1990. [14]
In this appeal, both accused did not deny that complainant made an investment with
SAIDECOR in the amount of P150,000.00. However, they denied that deceit was
employed in the transaction. They assigned as errors: (1) their conviction under P.D.
1689 due to the prosecutions failure to establish their guilt beyond reasonable doubt;

and (2) the trial courts failure to consider the joint stipulation of facts in their favor.
[15]
There is no merit in this appeal. We sustain accused-appellants conviction.
Under paragraph 2 (d) of Article 315, as amended by R.A. 4885, [16] the elements of
estafa are: (1) a check was postdated or issued in payment of an obligation contracted
at the time it was issued; (2) lack or insufficiency of funds to cover the check; (3)
damage to the payee thereof.[17] The prosecution has satisfactorily established all these
elements.
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 confidences 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]
Deceit is a specie of fraud. It is actual fraud, and consists in any false
representation or contrivance whereby one person overreaches and misleads another,
to his hurt.Deceit excludes the idea of mistake. [20] There is deceit when one is misled,
either by guide or trickery or by other means, to believe to be true what is really false.
[21]
In this case, there was deception when accused fraudulently represented to
complainant that his investment with the corporation would have an 800% return in 15
or 21 days.
Upon receipt of the money, accused-appellant Martin Romero issued a postdated
check. Although accused-appellant contends that sufficient funds were deposited in the
bank when the check was issued, he presented no officer of the bank to substantiate
the contention. The check was dishonored when presented for payment, and the check
return slip submitted in evidence indicated that it was dishonored due to insufficiency of
funds.
Even assuming for the sake of argument that the check was dishonored without any
fraudulent pretense or fraudulent act of the drawer, the latters failure to cover the
amount within three days after notice creates a rebuttable presumption of fraud. [22]
Admittedly (1) the check was dishonored for insufficiency of funds as evidenced by
the check return slip; (2) complainant notified accused of the dishonor; and (3) accused
failed to make good the check within three days. Presumption of deceit remained since
accused failed to prove otherwise. Complainant sustained damage in the amount of
P150,000.00.
Accused-appellant also contends that had the trial court admitted the Admission and
Stipulation of Facts of November 9, 1992, it would prove that SAIDECOR had sufficient
funds in the bank.
Accused-appellant relies on the fact that there was a discrepancy between the
amount in words and the amount in figures in the check that was dishonored. The
amount in words was P1,000,200.00, while the amount in figures was P1,200,000.00. It

is admitted that the corporation had in the bank P1,144,760.00 on September 28,1989,
and P1,124,307.14 on April 2, 1990. The check was presented for payment on October
5, 1989. The rule in the Negotiable Instruments Law is that when there is ambiguity in
the amount in words and the amount in figures, it would be the amount in words that
would prevail.[23]
However, this rule of interpretation finds no application in the case. The agreement
was perfectly clear that at the end of twenty one (21) days, the investment of
P150,000.00 would become P1,200,000.00. Even if the trial court admitted the
stipulation of facts, it would not be favorable to accused-appellant.
The factual narration in this case established a kind of Ponzi scheme. [24] This is an
investment swindle in which high profits are promised from fictitious sources and early
investors are paid off with funds raised from later ones. It is sometimes called a pyramid
scheme because a broader base of gullible investors must support the structure as time
passes.
In the recent case of People vs. Priscilla Balasa,[25] this Court held that a transaction
similar to the case at hand 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. It is difficult to sustain 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, these schemes only last weeks, or months at most,
just like what happened in this case.
The Court notes that one of the accused-appellants, Ernesto Rodriguez, died
pending appeal. Pursuant to the doctrine established in People vs. Bayotas,[26] the death
of the accused pending appeal of his conviction extinguishes his criminal liability as well
as the civil liability ex delicto. The criminal action is extinguished inasmuch as there is
no longer a defendant to stand as the accused, the civil action instituted therein for
recovery of civil liability ex delicto is ipso facto extinguished, grounded as it is on the
criminal case. Corollarily, the claim for civil liability survives notwithstanding the death of
the accused, if the same may also be predicated on a source of obligation other than
delict.[27]
Thus, the outcome of this appeal pertains only to the remaining accused-appellant,
Martin L. Romero. The trial court considered the swindling involved in this case as
having been committed by a syndicate[28] and sentenced the accused to life
imprisonment based on the provisions of Presidential Decree 1689, which increased the
penalty for certain forms of swindling or estafa. [29] However, the prosecution failed to
clearly establish that the corporation was a syndicate, as defined under the law. The
penalty of life imprisonment cannot be imposed. What would be applicable in the
present case is the second paragraph of Presidential Decree No. 1689, Section 1,
which provides that:

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.
Article 77 of the Revised Penal Code on complex penalties provides that whenever
the penalty prescribed does not have one of the forms specially provided for in this
Code, the periods shall be distributed, applying by analogy the prescribed rules, that is,
those in Articles 61 and 76. [30] Hence, where as in this case, the penalty provided by
Section 1 of Presidential Decree No. 1689 for estafa under Articles 315 and 316 of the
Code is reclusion temporal to reclusion perpetua, the minimum period thereof is twelve
(12) years and one (1) day to sixteen (16) years of reclusion temporal; the medium
period is sixteen (16) years and one (1) day to twenty (20) years of reclusion temporal;
and the maximum period is reclusion perpetua.
In the case at bar, no mitigating or aggravating circumstance has been alleged or
proved. Applying the rules in the Revised Penal Code for graduating penalties by
degrees[31] to determine the proper period, [32] the penalty for the offense of estafa under
Article 315, 2(d) as amended by P.D. 1689 involving the amount of P150,000.00 is the
medium of the period of the complex penalty in said Section 1, that is, sixteen (16)
years and one (1) day to twenty (20) years. This penalty, being that which is to be
actually imposed in accordance with the rules therefor and not merely imposable as a
general prescription under the law, shall be the maximum range of the indeterminate
sentence.[33]The minimum thereof shall be taken, as aforesaid, from any period of the
penalty next lower in degree, which is, prision mayor.
To enable the complainant to obtain means, diversion or amusements that will serve
to alleviate the moral sufferings undergone by him, by reason of the failure of the
accused to return his money, moral damages are imposed against accused-appellant
Martin L. Romero in the amount of twenty thousand pesos (P20,000.00). [34] To serve as
an example for the public good, exemplary damages are awarded against him in the
amount of fifteen thousand pesos (P15,000.00). [35]
WHEREFORE, the Court hereby AFFIRMS WITH MODIFICATION the appealed
judgment. The Court hereby sentences accused-appellant Martin Romero to suffer an
indeterminate penalty of ten (10) years and one (1) day of prision mayor, as minimum,
to sixteen (16) years and one (1) day of reclusion temporal, as maximum, to indemnify
Ernesto A. Ruiz in the amount of one hundred fifty thousand pesos (P150,000.00) with
interest thereon at six (6%) per centum per annum from September 14, 1989, until fully
paid, to pay twenty thousand pesos (P20,000.00) as moral damages and fifteen
thousand pesos (P15,000.00), as exemplary damages, and the costs.
SO ORDERED.
Davide, Jr., C.J.,Melo, and Kapunan , JJ., concur.
Ynares-Santiago, J. no part.

[1]

Joint Judgment, dated March 25, 1993, Rollo, pp.15-23.

[2]

Docketed as Criminal Case No. 3808.

[3]

Rollo, p. 7.

[4]

Docketed as Criminal Case No. 3806.

[5]

During the arraignment of the accused the presiding judge of Branch 5, Regional Trial
Court, Butuan City was Hon. Edelwina C. Pastoral.
[6]

Violation of Batas Pambansa Bilang 22.

[7]

Violation of Article 315, par. 2 (d) of the Revised Penal Code, in relation to
Presidential Decree 1689.
[8]

Joint Judgment, Rollo, pp. 92-93.

[9]

Rollo, p. 170.

[10]

People vs. Tugbang, 196 SCRA 341, 345 citing People vs. Satorre, 72 SCRA 439.

[11]

Original Records, Criminal Case. No. 3808, p. 41-42.

[12]

tsn, January 10, 1991.

[13]

tsn, August 12, 1991.

[14]

tsn, August 12, 1991, Rollo, p. 206.

[15]

Rollo, pp. 72-85.

[16]

Article 315. Swindling (estafa)- Any person who shall defraud another by any of the
means mentioned hereinbelow shall be punished by:
1. x x x
2. By means of any of the following false pretenses or fraudulent acts executed prior to
or simulatneously with the commission of the fraud:
(a) x x x
(d) by postdating a check, or issuing a check in payment of an obligation when the
offender had no funds in the bank, or his funds deposited therein were not sufficient to
cover the amount of the check. The failure of the drawer of the check to deposit
the amount necessary to cover his check within three (3) days from receipt of notice
from the bank and/or the payee or holder that said check has been dishonored for lack
or insufficiency of funds shall be primafacie evidence of deceit constituting false
pretense or fraudulent act. (As amended by RA 4885, B.P. 22 and P.D. 1689).
[17]

Jovita Sales vs. Court of Appeals, 164 SCRA 717, 721, citing the case of People vs.
Sabio, 86 SCRA 568.
[18]
[19]

37 Am Jur 2d 1, p. 19.

People vs. Priscilla Balasa, G.R. No. 106357; G.R. Nos. 108601-02, September 3,
1998.

[20]

37 Am Jur 2d 2, p. 20.

[21]

Quirico Abela vs. Cesario C. Golez, 131 SCRA 12.

[22]

Reyes, The Revised Penal Code, Book II, p. 697, citing the explanatory note of
Senate Bill No. 413; Article 315, par. 2(d), Revised Penal Code, as amended by
Republic Act 4885; Vallarta vs. Court of Appeals, 150 SCRA 336, 343.
[23]

Section 17, Act No. 2031.

[24]

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.; People vs. Priscilla Balasa,supra.
[25]

People vs. Priscilla Balasa, supra.

[26]

236 SCRA 239, 251.

[27]

People vs. Bayotas, supra.

[28]

A syndicate consists of five or more persons formed with the intention of carrying out
the unlawful or illegal act, transaction, enterprise or sheme, 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 publis.[Section 1, P.D. 1689].
[29]

There was a need to provide for higher penalty to prevent acts of defraudation or
misappropriation of funds solicited by corporations/associations from the general public
which 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. [Preamble, P.D. 1689]
[30]

People vs. Lian, 255 SCRA 532, on p.541.

[31]

Article 61, Revised Penal Code.

[32]

Article 64, Ibid.

[33]

People vs. Lian, supra, on p. 542.

[34]

Prudenciado vs. Alliance Transport System, Inc., 148 SCRA 440, 449.

[35]

Lopez vs. Pan American World Airways, 16 SCRA 431.

THIRD DIVISION

[G.R. No. 152532. August 16, 2005]

PEOPLE OF THE PHILIPPINES, petitioner, vs. SANDIGANBAYAN (Fourth Division)

and BIENVENIDO A. TAN JR., respondents.
DECISION
PANGANIBAN, J.:
A judgment of acquittal made by a competent court on a valid information after the
accused has entered a plea bars an appeal by the prosecution. Only a clear showing of
grave abuse of discretion or denial of due process to the State can justify a review
(through a petition for certiorari) of such decision by this Court. In acquitting private
respondent in the present case, the Sandiganbayan has not been shown to have acted
arbitrarily or whimsically. Equally important, the herein accused, Commissioner
Bienvenido A. Tan Jr., has not been proven to have exceeded his discretion in the
exercise of his functions. Taking into account the relevant facts and applicable laws in
this very perplexing subject of taxation, this Court cannot fault him for abating an
excessive and erroneous tax assessment. Quite the contrary, he has acted fairly and
sensibly under the circumstances.
The Case
Before us is a Petition for Certiorari[1] under Rule 65 of the Rules of Court, seeking
to nullify and set aside the January 23, 2002 Resolution [2] of the Sandiganbayan (SB) in
Criminal Case No. 20685. The dispositive part of the Resolution reads as follows:
WHEREFORE, premises considered, the Decision dated 02 March 2001 is hereby
RECONSIDERED and SET ASIDE, and the accused is hereby ACQUITTED of the
charge in the instant case.

The bailbond of the accused is hereby cancelled and the Hold Departure order
previously issued by the court is hereby lifted and set aside. [3]
The Facts
The facts are narrated by the SB in its original Decision dated March 2, 2001, as
follows:
Pursuant to Letter of Authority No. ATD-035-STO dated January 2, 1986 and
Memorandum of Authority dated March 3, 1986, an investigation was conducted by
[Bureau of Internal Revenue (BIR)] examiners on the ad valorem and specific tax
liabilities of [San Miguel Corp. (SMC)] covering the period from January 1, 1985 to
March 31, 1986. The result of the investigation showed that [SMC] has a deficiency on
specific and ad valorem taxes totaling P342,616,217.88 broken down as follows:
Specific Tax P 33,817,613.21
Ad Valorem Tax P308,798,604.67
On the basis of these findings, the BIR sent a letter dated July 13, 1987 to SMC
demanding the payment of its deficiency tax in the amount of P342,616,217.88.
Apparently, the letter was received by the SMC, as it protested the assessment in its
letter dated August 10, 1987 with the information: 1) that the alleged specific tax
deficiency was already paid when the BIR approved SMCs request that its excess ad
valorem payments be applied to its specific tax balance; 2) that the computation of the
ad valorem tax deficiency was erroneous since the BIR examiners disallowed the
deduction of the price differential (cost of freight from brewery to warehouse) and ad
valorem tax.
The protest was denied by the BIR thru a letter dated October [8], 1987 signed by
accused Commissioner Bienvenido Tan, Jr., but the original assessment
of P342,616,217.88 was reduced toP302,[0]51,048.93 due to the crediting of the
taxpayers excess ad valorem tax deposit of P21,805,409.10 with a reiteration of the
payment of the x x x assessed specific and ad valorem tax as reduced.
On October 27, 1987, herein accused referred the matter to Jaime M. Maza, Assistant
BIR Commissioner, Legal Service Division and thereafter different BIR officials also
reviewed the case of SMC and rendered varying legal opinions on the issue x x x
On the part of Alicia P. Clemeno, Chief, Legislative Ruling and Research Division, she
recommended the reduction of SMCs tax liability, first to P21,856,985.29, and later
to P22,000,000.00. Balbino E. Gatdula, Jr., Assistant Revenue Service Chief, Legal
Service, supported the demand for ad valorem tax deficiency from SMC. In a letter
dated August 31, 1988, SMC, thru a certain Avendano offered the amount
of P10,000,000.00 for the settlement of the assessment. This was concurred in by
Juanito Urbi, Chief, Prosecutor Division, BIR in a Memorandum dated December 20,

1988. Jaime Maza, Assistant Commissioner, Legal Service, BIR, also gave his
concurrence to the recommendation that the offer of SMC for P10,000,000.00 in
compromise settlement be accepted. The recommendation was approved by accused
Bienvenido Tan; and accordingly, in a letter dated December 20, 1988, SMC was
informed that its offer to compromise was accepted. [4]
Subsequently, the SB reversed its original March 2, 2001 Decision with its now
assailed January 23, 2002 Resolution. The antecedents leading to the Petition before
this Court are narrated by the SB in this manner:
In our Decision of March 2, 2001, herein accused Bienvenido A. Tan, former
Commissioner of the [BIR], was convicted for violation of Section 3(e) of Republic Act
[(RA)] No. 3019 as amended, otherwise known as the Anti-Graft and Corrupt Practices
Act, the dispositive portion of which states as follows:
WHEREFORE, premises considered, judgment is hereby rendered convicting the
accused for Violation of Section 3(e) of [(RA)] 3019 as amended, and appreciating in his
favor the presence of the mitigating circumstance of age, accused being over seventy
(70) years old, and in the absence of aggravating circumstances to offset the same,
applying the Indeterminate Sentence Law, he is hereby sentenced to suffer
imprisonment of six (6) years and one (1) month as minimum to fifteen (15) years as
maximum. He is further disqualified perpetually from holding public office.
As the Court finds the compromise agreement to have been entered into illegally, the
[BIR] is hereby ordered to collect from [SMC] the amount of P292,951,048.93
representing its tax liabilities covering the period from January 1, 1985 to March 31,
1986.
SO ORDERED.
In his Motion for Reconsideration filed on March 12, 2001, accused seeks to reconsider
aforesaid Decision and posits the following grounds: (1) the Court erred in holding that
the assessment contained in the letter of accused dated 08 October 1987 was final and
executory; (2) corollarily, the Court erred in holding that the referral of the 08 October
1987 assessment to the Assistant Commissioner for further study was uncalled for,
given that there was no request for a reconsideration of the 08 October 1987
assessment; (3) the Court erred in not holding that the specific tax assessment of
[P]33,817,613.21 had been paid through the application of SMCs excess ad valorem tax
deposits to its unpaid specific tax; (4) the Court erred in not holding that the abatement
of SMCs ad valorem tax was proper on the ground that there exists a reasonable doubt
as to the correctness of said assessment; [(5)] the Court erred in holding that accused
exercise of his authority under Section 204 of the [National Internal Revenue Code
(NIRC)] to abate the assessment of ad valorem tax was improper; and [(6)] the Court
erred in holding that there was a compromise of the SMC tax case which resulted in
undue injury to the government.

In its Comment, the prosecution asserts that (1) the assessment contained in the letter
of SMC dated October 8, 1987 was final and executory; (2) the referral of the 08
October 1987 assessment to the Assistant Commissioner for further study was uncalled
for given that there was no request for a reconsideration from SMC; (3) SMCs total tax
due and collectible as Specific Tax of [P]33,817,613.21 has not been settled; (4) the
Court correctly held that the abatement of SMCs ad valorem taxes is improper; and (5)
the Court is correct in ruling that there was a compromise of SMCs tax which resulted in
undue injury to the government.
Thereafter, the accused and the prosecution made a further exchange of pleadings
elaborating on their respective positions on the matter.
The Motion is impressed with merit. After a careful and exhaustive review of the
pleadings, the records and the evidence, we reconsider our Decision dated March 2,
2001 and hereby acquit the accused of the charge in the instant case. [5]
Ruling of the Sandiganbayan
In acquitting herein private respondent, the SB adduced several reasons.
First, the SB failed to give weight to the October 27, 1987 meeting between
Commissioner Tan and SMCs representatives -- a meeting which resulted in the referral
of the assessment to Tans subordinates for further review and study. The referral
showed that the disputed assessment had not yet become final and executory.
Second, notwithstanding the prosecutions observation that the BIR rejected SMCs
protest against the inclusion of the water component of beer, private respondent
unequivocally approved SMCs application of its excess ad valorem deposit to complete
the payment of its specific tax deficiency.
Third, the abatement of SMCs ad valorem taxes is proper. The tax base for
computing them should not include the ad valorem tax itself and the price differential.
Reliance upon Executive Order (EO) No. 273 is not misplaced, because that law simply
affirms general principles of taxation as well as BIRs long-standing practice and policy
not to impose a tax on a tax. Moreover, nothing precludes private respondent from
applying EO 273 on an assessment made prior to its effectivity, because that law was
merely intended to formalize such long-standing practice and policy.
Fourth, after inquiring into the discretionary prerogative of private respondent to
compromise, the SB found no reason to conclude that he had acted contrary to law or
been impelled by any motive other than honest good faith. The compromise he had
entered into regarding SMCs tax did not result in any injury to the government. No
genuine compromise is impeccable, since the parties to it must perforce give up
something in exchange for something else. No basis existed to hold him liable for
violation of Section 3(e) of RA 3019.
Hence, this Petition.[6]

The Issues
Petitioner raises the following issues for our consideration:
A.
The respondent court acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when, in upholding private respondents act in ruling upon SMCs Motion
for Reconsideration, it disregarded Section 228 (previously Section 246) of the NIRC.
B.
The respondent court acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when, in upholding private respondents act in accepting SMCs offer of
compromise ofP10,000,000.00 for its tax liability of P302,051,048.93, it disregarded
Sections 124 and 228 of the NIRC.
C.
The respondent court acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when it declared the validity of private respondents act of approving SMCs
application of the excess ad valorem to its specific tax deficiency despite its being
contrary to law.
D.
The respondent court acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when it acquitted private respondent for violation of Sec. 3(e) of RA 3019
despite the overwhelming evidence proving his guilt beyond reasonable doubt. [7]
We shall tackle the foregoing issues seriatim, with the exception of the third issue
that will be discussed ahead of the second.
The Courts Ruling
The Petition has no merit.
First Issue:
Viability of SMCs Motion for Reconsideration
Section 229 of the NIRC[8] provides thus:

Sec. 229. Protesting of assessment. -- When the Commissioner of Internal Revenue or

his duly authorized representative finds that proper taxes should be assessed, he shall
first notify the taxpayer of his findings. Within a period to be prescribed by implementing
regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails
to respond, the Commissioner shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for
reconsideration or reinvestigation in such form and manner as may be prescribed by
implementing regulation within thirty (30) days from receipt of the assessment;
otherwise, the assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation
adversely affected by the decision on the protest may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of the said decision; otherwise, the decision
shall become final, executory and demandable.[9]
Petitioner argues that on October 8, 1987, a final decision was rendered by private
respondent as to SMCs tax liability totaling P302,051,048.93 x x x. Since SMC did not
appeal to the CTA, this decision became final and could no longer be compromised by
private respondent. We disagree.
A careful reading of the quoted tax provision readily shows that the Motion for
Reconsideration filed by SMC was aptly ruled upon by private respondent. Despite the
use of the phrase finally decided, his October 8, 1987 letter to SMC did not constitute a
final assessment.
First, the phrase finally decided referred not to the total amount of
deficiency specific and ad valorem taxes, but to the reduction of such assessment. The
reduction was the result of SMCs protest, by way of two requests for reconsideration
dated June 9, 1987 and August 10, 1987. Contrary to petitioners assertion, the rules on
statutory construction did not apply; the October 8, 1987 letter was not even a
law. Grantia argumenti that the letter partook of the nature of a final assessment, its
finality was suspended by private respondents handwritten note on the bottom left of the
second page, extending the tender of payment for another 15 days from October 27,
1987, because of a referral of the assessment to the BIRs Legal Service.[10]
Second, SMC filed on November 2, 1987 a timely request for reinvestigation -technically not a motion for reconsideration. Under Section 229 of the NIRC, this
request was a proper administrative protest [11] done within 30 days from receipt of the
assessment and substantiated by facts and law.[12] The assessment was received by
SMC only on October 26, 1987. Its request for reinvestigation was in turn received by
the BIR on November 10, 1987, well within the 30-day period allowed by Section 229;
thus, the assessment had not yet become final.
Moreover, a day after SMCs receipt of the assessment, the SB found that a meeting
had indeed been held between private respondent and the representatives of SMC,
resulting in the suspension of the alleged finality of the assessment. The meeting
partook of the nature of an oral, in advance of the written, request for reinvestigation. In

both instances, the taxpayers request was not merely pro forma; it had the effect of
suspending -- not interrupting -- the 30-day period for appeal. [13]
We do not agree with petitioners contention that, contrary to the finding of the SB in
its March 2, 2001 Decision, no conference had been held on that date. A careful perusal
of the Decision would, however, reveal that the date of the supposed conference was
not indicated with certainty.[14] And even if it were, the conference was supposed to have
been held between SMCs representatives and BIR officials, other than private
respondent, on the computation (not the assessment) that was followed by SMC and
that bore the alleged approval by the BIR.
Third, after SMCs request for reinvestigation, no other issuance emanated from the
BIR that could be considered a decision. Therefore, no appeal to the Tax Court [15]could
have been made under Section 229 of the NIRC, since the protest filed with the BIR had
not been acted upon. Appealable to the Tax Court is a decision that refers not to
the assessment itself, but to one made on the protest against such assessment.[16] The
commissioner of internal revenues action in response to a taxpayers request for
reconsideration or reinvestigation of the assessment constitutes the decision, the
receipt of which will start the 30-day period for appeal. [17]
Section 229 does not prevent a taxpayer from exhausting administrative remedies
by filing a request for reconsideration, then a request for reinvestigation. [18] Furthermore,
under Section 7(1) of RA 1125 [19] as amended,[20] the Tax Court exercised exclusive
appellate jurisdiction to review not the assessments themselves, but the decisions
involving disputed ones arising under the NIRC.[21]
Fourth, quite obviously, no decision could as yet be made by the BIR, because the
protest filed by SMC had been referred by private respondent to several top BIR officials
for further review. In fact, various intra-office Memoranda were issued in 1988 involving
the chiefs of the (1) Legislative Ruling and Research and (2) Prosecution Divisions of
the BIR, as well as its assistant commissioners for legal service and excise tax. Had the
assessment already become final in 1987, there would then be no more reason to
reinvestigate and study the merits of SMCs protest in 1988.
Fifth, totally misplaced is petitioners reference to the 180-day period from the
submission of documents, within which time the BIR should act upon the protest,
followed by a 30-day period of appeal to the Tax Court. This provision did not exist in
either 1987 or 1988. It appeared only in a much later law, RA 8424, as Section 228 -again erroneously referred to by petitioner as the basis for the present controversy.
Consequently, there was no legal impediment either to the referral of the protest by
private respondent to his subordinates or to the action taken by them -- a process that
lasted for more than 180 days. Neither was there a need to make a 30-day appeal to
the Tax Court due to the BIRs inaction on the protest within the 180-day period.
The assessment was clearly not yet final, executory or demandable. While it is
pending with the commissioner of internal revenue, it cannot yet serve as the basis of
collection by distraint or levy or by judicial action. [22] No grave abuse of discretion can be
attributed to the SB for upholding private respondents act of reinvestigation upon SMCs
request.

Second Issue:
Application of the Ad Valorem Tax
to the Specific Tax Deficiency
In like manner, no grave abuse of discretion was committed when the SB upheld
private respondents approval of SMCs application of its excess ad valorem tax deposits
to its specific tax deficiency.
First, the approval given by private respondent was correct. Ad valorem
taxes[23] and specific taxes[24] are both excise taxes[25] on alcohol products.[26] The
payment by installment of a portion of the total specific tax deficiency of SMC, in
addition to the application of its excess and unused ad valorem tax deposits to the
remaining portion, fully covered the total net specific tax shortfall. BIR committed an
oversight in failing to credit the amount of deposits to the specific tax deficiency, as well
as an error in crediting the same amount to a subsequent ad valorem tax liability. A
confusion was thus created when it issued a later assessment for the same specific
tax deficiency, this time inclusive of increments. [27] Proper was the BIR officials
abatement or cancellation of the specific taxes of SMC, after the amount of its ad
valorem tax deposits had already been credited to it.
To state that the balances of accounts pertaining to different tax deposits could only
be applied to cover certain tax liabilities upon the approval of a request for tax credit is
to validate the proposition that the acceptance of payment by installment of a portion of
the specific tax deficiency was indeed tantamount to the approval of the request. No law
or regulation prevented such approval.
Private respondents letter states a condition: should the final computation
of specific and ad valorem taxes yield a different result, the difference plus penalties
would be paid in addition to them. Obviously, this condition referred solely to the
discrepancy, not to the application, and had nothing to do with the approval that was
given.
Second, such approval had the concurrence of top tax officials within the Bureau.
Not only was there a presumption of regularity in the performance of official functions;
[28]
also, their collective conclusion was controlling. Besides, the disclosure of the change
in beer formulation was timely and voluntary; no attribution of bad faith or fraud could be
made. A change in technology that would result in a change in the manner of computing
taxes was well within the realm of tax administration, [29] on which private respondent had
reasonable discretion to rule.
Third, the law and revenue regulations [30] allowed pre-payment schemes,[31] whereby
excise taxes on alcohol products could be paid in advance of the dates they were due.
Since the equivalent value of specific taxes by way of advance ad valorem tax deposits
had already been paid, the government lost nothing. It was a simple request properly
granted for applying the advance deposits made on one type of excise tax to another
type. Granting such request was well within private respondents authority to administer
tax laws and regulations.[32] Again, the assessment was not final, demandable or
executory at the time.

Fourth, in a letter to the Blue Ribbon Committee of the Senate, no less than the
succeeding commissioner of internal revenue declared that the abatement of
the specific taxdeficiency through the proposed application was proper. Even if the new
commissioner had admittedly been advised by private respondent, there remained the
unrebutted presumptions of good faith and regularity in the performance of official
functions.
Third Issue:
Acceptance of the P10 Million Alleged Compromise
The SB did not gravely abuse its discretion when it upheld private respondents
acceptance of SMCs compromise offer of P10 million.
In computing its ad valorem tax liabilities for the taxable period involved in the
present case, SMC deducted from its brewers gross selling price the specific tax, price
differential, and ad valorem tax. The BIR allowed the deduction of the specific tax, but
not the deduction of the price differential and ad valorem tax, thus increasing the tax
base and consequently the ad valorem tax liabilities of SMC for the said period.
Prior to and during the taxable period involved in the present case, several changes
were made in the NIRC of 1977, particularly its provisions pertaining to fermented liquor.
We must therefore trace the NIRCs pertinent history to be able to rule properly on the
validity of SMCs deduction of both the price differential and the ad valorem tax from the
brewers gross selling price.
Section 147(A) of the NIRC, as amended by PD 1959 [33] in 1984, provides for the
collection of a specific tax on each liter of the volume capacity of fermented liquor. In
addition to the provision on the specific tax, the first paragraph of its Section 147(B)
provides for the levying, assessment and collection of an ad valorem tax. The latter tax
is equivalent to a certain percentage of the brewers gross selling price, net of
the specific tax, of the product to be removed from the brewery or other place of
manufacture. Thead valorem tax shall be paid by the brewer at the same time as
the specific tax.
Added in 1984 were provisions of Section 186-A [34] governing the determination of
the gross selling price of cigarettes, as well as the administrative requirements and
penalties imposable. Such provisions shall apply to the determination of the gross
selling price of fermented liquor.[35] Basically, this means that the amount of tax due on
the fermented liquor shall be determined by the price at which it is sold either wholesale
in the factory of SMC or directly to the public through its sales agents. If the fermented
liquor is sold or allowed to be sold wholesale by SMC in another establishment which it
owns, the wholesale price in that establishment shall determine the tax applicable to the
fermented liquor sold there. When the price is less than the cost of manufacture plus all
expenses incurred, until the fermented liquor is finally sold by SMC, such cost plus
expenses shall be the basis for determining the amount of tax to be collected.

In 1986, PD 1994 amended the NIRC of 1977 by renumbering, among others,

Section 147 as Section 124.[36] In the new Section 124, the provisions on
the specific and ad valorem taxes imposed on fermented liquors remained substantially
the same, except for the tax rates.
On July 1, 1986, Section 4 of EO 22 amended said Section 124 by essentially
providing that an ad valorem tax equivalent to a certain percentage of the brewers
wholesale selling price -- this time excluding the ad valorem tax -- shall be levied,
assessed and collected on fermented liquors. It was only in 1988 that EO 273
renumbered Section 124 as Section 140, and thereby amended it further to exclude
also from such wholesale price the value-added tax already imposed at the time upon
the same articles.[37]
Price Differential Deduction
Section 110 of the NIRC of 1977, as amended in 1986 by PD 1994, explicitly
provides that the excise taxes on domestic products shall be paid by the manufacturer
or producer before the removal of those products from the place of production. [38] It does
not matter to what use the article[s] subject to tax is put; [39] the excise taxes are still due,
even though the articles are removed merely for storage in some other place and are
not actually sold or consumed.[40] The intent of the law is reiterated in several
implementing regulations.[41] This means, therefore, that the price that should be used
as the tax base for computing the ad valorem tax on fermented liquor is the price at the
brewery. After all, excise taxes are taxes on property,[42] not on the sale of the property.
Verily, the price differential cannot be ascertained at the time the fermented liquor is
removed from the brewery, because such ascertainment will involve amounts that
cannot be determined with certainty in advance, and that vary from one commercial
outlet to another. The price differential, according to SMC, represents the cost of
discounts, promotions, rebates, and transportation. To require the inclusion of the price
differential in, not its deduction from, the tax base for purposes of computing the ad
valorem taxwould certainly lead to the impossible situation of computing for such tax,
because the price differential itself cannot be determined unless the fermented liquor is
actually sold.
Hence, no ad valorem tax can ever be paid before the removal of the fermented
liquor from the place of production. This outcome cannot be countenanced, for it would
be contrary to what the law mandates -- payment before removal. It follows that the tax
base to be used should be net of the price differential. In other words, the gross selling
price should be that which is charged at the brewery prior to the removal of the
fermented liquor.
Ad Valorem Tax Deduction

The taxable period covered in this case is January 1, 1985 to March 31, 1986. Prior
to the amendment of the NIRC of 1977 by EO 22 on July 1, 1986, the ad valorem
taxwas not excluded from the brewers wholesale price. Does this mean that such tax
cannot be deducted? The answer is no.
A tax should not be imposed upon another tax. This is tax pyramiding, which has no
basis either in fact or in law.
Private respondent has shown by mathematical analysis that the inclusion of the ad
valorem tax in the tax base would only yield a circuitous manner of computation that will
never end in just one ad valorem tax figure properly chargeable against a taxpayer.
Quoted verbatim, his presentation is as follows:
If [SMC] wants to make P42.7269 on a case of beer and because of price differential
and specific taxes has to fix a price of P51.2722 ex brewery, what would the ad valorem
tax be?
The prosecutions method is to charge the 20% ad valorem on the selling price ex
brewery of P51.2722 and to tack that on the SMC price as follows:
P51.2722 - price ex brewery
x .20
P10.2544 - ad valorem tax
and 42.7269 - SMC price
P52.9813 - this should be the new selling price ex
brewery but SMC only charged P51.2722
Following the prosecutions theory, since there is a new selling price ex brewery,
i.e., P52.9813, the ad valorem tax should be adjusted to the new selling price or tax
base or 20% of P52.9813, resulting in:
P42.7269 - SMC price
10.5962 - new ad valorem tax P53.3231
P53.3231 - another new selling price ex brewery
Then following the prosecutions theory, the 20% ad valorem tax is again charged on the
new selling price ex brewery.
20% of P53.3231 the new tax base or
P10.6646 - the new ad valorem tax
Resulting in P42.7269 - SMC price
10.6646 - new ad valorem tax
P53.3915 - new selling price ex warehouse
Therefore, the ad valorem tax is not P10.2544 or P10.5962 but P10.6646 ad infinitum.

The obvious untenability of the above situation is a clear enough argument to prove that
ad valorem tax should be excluded from the tax base.
The correct method is that used by the BIR and that is:
P51.2722 - original price to public
[1.20]
= P42.726[8] - SMC warehouse price.[43]
Expectedly, though, petitioner is unable to negate the mathematics proffered by
private respondent.
Equally important, tax pyramiding has since 1922 been rejected by this Court, the
legislature, and our tax authorities. The intent behind the law is clearly to obviate a tax
imposed upon another tax. Ratio legis est anima legis. The reason for the law is its
spirit.
For instance, Regulations No. 27, [44] promulgated March 1, 1923, already excludes
the specific tax on cigars and cigarettes from the tax base upon which such tax is
computed.[45] This is reiterated in the more recent amendments to our tax law, among
which are EOs 22 and 273, [46] and their implementing rules. In fact, Commissioner of
Internal Revenue v. American Rubber Co. held that a taxpayer cannot be compelled to
pay a x x x tax on the tax itself.[47]
Having shown the appropriateness of deducting the ad valorem tax from the tax
base upon which it is computed, private respondent has shown prudence in exercising
his power under Section 204(2) [48] of the NIRC of 1977 to abate an unjust, excessively
assessed, and unreasonable tax; and to accept the offer of P10 million,[49] if only to
avoid protracted and costly litigation.
Abatement,
Not Compromise
Although referred to in the pleadings as a compromise, the matter at hand is
actually an abatement or a cancellation. Abatement is the diminution or decrease in the
amount of tax imposed;[50] it refers to the act of eliminating or nullifying; x x x of
lessening or moderating x x x. [51] To abate is to nullify or reduce in value or amount;
[52]
while to cancel is to obliterate, cross out, or invalidate; [53] and to strike out; x x x
delete; x x x erase; x x x make void or invalid; x x x annul; x x x destroy; x x x revoke or
recall.[54]
The BIR may therefore abate or cancel the whole or any unpaid portion of a tax
liability, inclusive of increments, if its assessment is excessive or erroneous; [55] or if the
administration costs involved do not justify the collection of the amount due. [56] No
mutual concessions need be made, [57] because an excessive or erroneous tax is not
compromised; it is abated or canceled. Only correct taxes should be paid. [58] Besides, as
we have discussed earlier, there was no finality in the assessment that could be settled.

Moreover, petitioner did not prove the alleged bad faith attributed to private
respondent, who simply relied upon his subordinates. Mere assertion will not suffice.
Even reference to the approval by the Evaluation Board was misleading, for such
approval was inexistent at the time and was merely a product of RA 8424 as amended.
[59]
Actual, not presumed, fraud should be the bench mark of liability.
Fourth Issue:
Violation of Section 3(e) of RA 3019
Clearly, the court a quo did not commit grave abuse of discretion in upholding
private respondent in his act of ruling upon the request of SMC for reinvestigation,
leading,first, to his approval of its application of the excess tax deposit to its tax
deficiency; and, second, to his acceptance of its offer to pay for its tax liability, which
was a little over the assessed amount, inclusive of increments. It necessarily follows
that his acquittal is proper and inevitable.
Basic is the rule that no person shall be twice put in jeopardy of punishment for the
same offense.[60] It is a constitutional guarantee repeated in Section 7 of Rule 117 of the
Rules of Court. A judgment of acquittal cannot be reopened, absent a grave abuse of
discretion or a denial of due process to the State. [61] In this light, pertinent is the
following excerpt, showing how a similar attempt was made by the prosecution to
overturn an acquittal through a Petition for Certiorari in this Court:
The rule against double jeopardy proscribes an appeal from a judgment of acquittal. If
said judgment is assailed in a petition for certiorari under Rule 65 of the Rules of Court,
x x x the petitioner must prove that the lower court, in acquitting the accused, committed
not merely reversible errors, but grave abuse of discretion amounting to lack or excess
of jurisdiction. A judgment rendered with grave abuse of discretion or without due
process is void, does not exist in legal contemplation and, thus, cannot be the source of
an acquittal. However, where the petition demonstrate[s] mere errors in judgment not
amounting to grave abuse of discretion or deprivation of due process, the writ
of certiorari cannot issue. A review of the alleged errors of judgment cannot be made
without trampling upon the right of the accused against double jeopardy.[62]
As aptly put by private respondent, error in the exercise of jurisdiction is not the
same as error in judgment. The latter is not reviewable by certiorari,[63] since evidence
has been duly considered and passed upon by the SB.
Epilogue
Former BIR Commissioner Bienvenido A. Tan Jr. was charged with having willfully,
unlawfully and criminally cause[d] undue injury to the government by effecting a
compromise of the tax liabilities of SMC amounting to P302,051,048.93 for
only P10,000,000, a compromise [that] is grossly disadvantageous to the government.

In no uncertain terms, the assailed Resolution of the Sandiganbayan acquitted him of

violating Section 3(e) of Republic Act No. 3019 (the Anti-Graft Law).
Under the Constitution, no person shall be twice put in jeopardy of punishment for
the same offense. To implement this constitutional mandate, the Rules of Court [64] bars
an appeal by the State from a judgment of acquittal, provided the following requisites
are present: (1) a valid complaint or information was filed; (2) before a competent court;
(3) the defendant pleaded to the charge; and (4) the accused was acquitted.
Petitioner alleges, however, that in acquitting the accused, the Sandiganbayan
acted in a capricious, whimsical, arbitrary or despotic manner equivalent to lack or
excess of jurisdiction.
Indeed, the double jeopardy principle will not protect the accused, if the prosecution
can show that the court gravely abused its discretion in rendering the judgment of
acquittal. The prosecutions burden is heavy: to show grave -- not just ordinary -- abuse
of discretion equivalent to lack or excess of jurisdiction.
This Court notes the tenacity of the Ombudsman and the Office the Special
Prosecutor in doggedly pursuing what they believe is the public weal. But after a careful
review of the assailed judgment and the relevant facts and laws, this Court cannot
ascribe capricious or whimsical conduct on the part of the Sandiganbayan. The SB
Resolution assessed the facts and applied the governing laws and jurisprudence. It
analyzed the arguments of both the prosecution and the defense. It then concluded that
the elements of the crime charged had not been sufficiently proven. Hence, it acquitted
the accused.
Because of the importance of this case and the need to assist the government in
collecting the correct amount of taxes, this Court even went further by inquiring whether
private respondent (not just the Sandiganbayan) acted within the confines of his duties
and prerogatives.
As can be seen from the foregoing discussions, Commissioner Bienvenido A. Tan
Jr. acted fairly, honestly and in good faith in discharging his functions. To compromise a
tax liability of more than P300 million for only P10 million may appear to be an arbitrary
action grossly disadvantageous to the government. The fact remains, however, that the
initial tax assessment of P300 million was correctly found by the SB to be overly
excessive and erroneous. Under the circumstances, the abatement of the excessive
and erroneous taxes was not only within the discretion of respondent; it was just and fair
to all concerned. After all, the purpose of tax assessment is to collect only what is legally
and justly due the government; not to overburden, much less harass, the taxpayers.
WHEREFORE, the Petition is DENIED, and the assailed Resolution AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

[1]

Rollo, pp. 2-52.

[2]

Fourth Division. Penned by Associate Justice Narciso S. Nario (chairman), with the
concurrence of Justices Nicodemo T. Ferrer and Raoul V. Victorino (members),
the latter with a Separate Concurring Opinion.

[3]

Sandiganbayan (SB) Resolution, p. 17; rollo, p. 70. Uppercase in the original.

[4]

SB Decision dated March 2, 2001, pp. 13-16; rollo, pp. 222-225. Words in [bracket]
supplied. Fourth Division. Penned by Justice Rodolfo G. Palattao (member), with
the concurrence of Justices Narciso S. Nario (chairman) and Nicodemo T. Ferrer
(member).

[5]

SB Resolution, pp. 1-4; rollo, pp. 54-57. Words in [bracket] supplied.

[6]

The Petition was deemed submitted for decision on August 29, 2003, upon receipt by
the Court of private respondents Memorandum, signed by Attys. Mario E.
Ongkiko, Demetrio C. Custodio Jr., and Barbara Anne C. Migallos. Petitioners
Memorandum -- signed by Special Prosecutor Dennis M. Villa-Ignacio, Deputy
Special Prosecutor Robert E. Kallos, Director (ASAB) Rodrigo V. Coquia, and
Special Prosecution Officer III Pilarita T. Lapitan -- was filed on August 11, 2003.

[7]

Petitioners Memorandum, pp. 19-20; rollo, pp. 384-385. Original in uppercase.

[8]

NIRC refers to the National Internal Revenue Code or Tax Code of 1986, the law
prevailing when the BIR sent in 1987 its assessment of SMCs deficiency in
specific and ad valorem taxes for the period January 1, 1985 to March 31, 1986.

[9]

229 was originally found in the NIRC of 1977, which was codified by and made an
integral part of Presidential Decree (PD) No. 1158, otherwise known as A Decree
to Consolidate and Codify all the Internal Revenue Laws of the Philippines.

When the NIRC of 1977 was amended by PD 1705 on August 1, 1980, 229 was
restated as 16(d). On January 16, 1981, PD 1773 further amended 16 by
eliminating paragraph (d) and inserting its contents between 319 and 320 as a
new 319-A. PD 1994 then renumbered 319-A as 270 on January 1, 1986; and on
January 1, 1988, 270 was again renumbered as 229 and rearranged to fall under
Chapter 3 of Title VIII of the NIRC by Executive Order (EO) No. 273, otherwise
known as Adopting a Value-Added Tax, Amending for this Purpose Certain
Provisions of the National Internal Revenue Code, and for other purposes.
At present, 229 has been amended as 228 by RA 8424, otherwise known as the Tax
Reform Act of 1997.
[10]

If the commissioner of internal revenue makes changes in an assessment, then the

previous action is deemed abandoned, and the modificatory action becomes the
final decision upon receipt of which a new 30-day period for appeal shall be
reckoned. See Paras, Taxation
Fundamentals (1966),
pp.
215nd
216. See also Vitug and Acosta, Tax Law and Jurisprudence (2 ed., 2000), p.
312; (citing Ker & Co., Ltd. v. CTA, 114 Phil. 1220 [unreported], 4 SCRA 160,
January 31, 1962).

Moreover, the commissioner should indicate to the taxpayer in clear language what
constitutes the final decision on a disputed assessment; otherwise, the period for
appeal cannot be deemed to have commenced to run. De Leon, The
Fundamentals of Taxation (12th ed., 1998), pp. 256-257.
[11]

De Leon, The Fundamentals of Taxation, supra, p. 249.

[12]

See Dayrit v. Cruz, 165 SCRA 571, 580, September 26, 1988; and Vitug and
Acosta, supra, p. 309.

[13]

See Dy Pac & Co., Inc. v. CTA, 79 SCRA 442, 447, October 18, 1977; Surigao
Electric Co., Inc. v. CTA, 57 SCRA 523, 527, June 28, 1974; and Vitug and
Acosta, supra, p. 312.

[14]

SB Decision, p. 23; rollo, p. 232.

[15]

This refers to the Court of Tax Appeals (CTA).

[16]

Commissioner of Internal Revenue v. Villa, 130 Phil. 3, 7, January 2, 1968; and St.
Stephens Association v. Collector of Internal Revenue, 104 Phil. 314, 317,
August 21, 1958.

[17]

See Commissioner of Internal Revenue v. Villa, supra.

[18]

De Leon, The Fundamentals of Taxation, supra, p. 249. See also Deoferio Jr. & Tan
Torres, Know Your CTRP: Comments on the Amendments to the National
Internal Revenue Code Under Republic Act No. 8424 (1998), p. 131.

[19]

This was the law that created the CTA.

[20]

One of the amendatory laws to RA 1125 is RA 3457, which took effect on January 1,
1962.

[21]

De Leon, supra, p. 281.

[22]

See Vitug and Acosta, supra, p. 310.

[23]

Ad valorem taxes refer to excise taxes that are based on the selling price or other
specific value of the article taxed. 2nd paragraph of 109 of the NIRC of 1977, as
amended and renumbered by PD 1994, and again amended by EO 22.

[24]

Specific taxes refer to excise taxes that are based on the weight, volume capacity, or
any other physical unit of measurement of the article taxed. 2 nd paragraph of 109
of the NIRC of 1977, as amended and renumbered by PD 1994, and again
amended by EO 22.

[25]

These are taxes on articles manufactured or produced in the Philippines for domestic
sale or consumption or for any other disposition. De Leon, The Law on Transfer
and Business Taxation (12th ed., 1998), p. 251.

[26]

Both taxes fall under the same title in the NIRC of 1977.

[27]

These increments pertain to the surcharges and interest on the amount of deficiency.

[28]

3(m) of Rule 131 of the Rules of Court.

[29]

Tax administration involves two functions: assessment and collection. De Leon, The
Fundamentals of Taxation, supra, p. 175.

[30]

See 5 and 6 of Revenue Regulations (RR) No. 15-84, and 3 of RRs 6-86 and 8-86.

[31]

De Leon, The Law on Transfer and Business Taxation, supra, p. 288.

[32]

Paras, supra, pp. 123-126. See also De Leon, The Fundamentals of Taxation, supra,
p. 179.

[33]

This law took effect on October 15, 1984, with respect to the first 10% ad valorem
tax imposed on fermented liquor, and on January 1, 1985, with respect to the
next 10% ad valorem tax.

[34]

This section was added under a new Chapter IV of Title IV of the NIRC of 1977 by 1
of EO 960, which had already taken effect on September 1, 1984. Subsequently,
the ad valorem tax on cigarettes was revised effective September 3, 1984, while
the specific tax rates were also revised effective October 1, 1984. EO 978
effected both revisions, the dates of effectivity of which are found in its 6.

[35]

2nd paragraph of 147(B) of the NIRC of 1977 as amended by PD 1959.

[36]

45 of PD 1994, which took effect on January 1, 1986.

[37]

11 of EO 273. See De Leon, The Law on Transfer and Business Taxation with
Illustrations, Problems, and Solutions (12th ed.), 1998, p. 278.

[38]

De Leon, The Law on Transfer and Business Taxation with Illustrations, Problems,
and Solutions, supra, p. 256.

[39]

Commissioner of Internal Revenue v. Abad, 132 Phil. 551, June 27, 1968, per
Castro, J. (later CJ).

[40]

De Leon, The Law on Transfer and Business Taxation with Illustrations, Problems,
and Solutions, supra, p. 257.

[41]

See 5 and 6 of RR 15-84, and 3 of RRs 6-86 and 8-86.

[42]

De Leon, The Fundamentals of Taxation, supra, pp. 13-14 & 141.

[43]

Respondents Memorandum, pp. 23-25; temporary rollo, pp. 23-25.

[44]

This refers to the Revised Regulations and Instructions Governing the Business of
Manufacturers of Cigars and Cigarettes and Chewing and Smoking Tobacco
issued by Alberto Barretto, Secretary of Finance, on August 10, 1922. XXI Official
Gazette 26, p. 460.

[45]

19(a) of Regulations No. 27, dated August 10, 1922.

[46]

Mr. Jose Ong, BIR Commissioner, also referred to these two laws before the Senate
Blue Ribbon Committee.

[47]

124 Phil. 1471, 1483, November 29, 1966, per Reyes, J. B. L., J.

[48]

This section became 295 when amended by PD 1773, and later 245 when amended
by PD 1994.

[49]

There was even a lower assessment at P8,001,977.97, as disclosed in a

Memorandum dated November 21, 1988, issued by Supervising Revenue
Enforcement Officer Jesus Q. Bundang; later confirmed and endorsed on
November 25, 1988 by Assistant Commissioner (on Excise Tax) Aquilino T. Larin.

[50]

Statsky, Hussey, Diamond, and Nakamura, Wests Legal Desk Reference (1991), p. 1.

[51]

Garner (ed. in chief), Blacks Law Dictionary (8th ed., 2004), p. 3.

[52]

Smith, Wests Tax Law Dictionary (1993), p. 1.

[53]

Statsky, Hussey, Diamond, and Nakamura, supra, p. 46.

[54]

Moreno, Philippine Law Dictionary (3rd ed., 1988), p. 129.

[55]

De Leon, The Fundamentals of Taxation, supra, pp. 192-193.

[56]

204(2) of the NIRC of 1977. See Vitug and Acosta, supra, pp. 292-293.

[57]

De Leon, The Fundamentals of Taxation, supra, p. 216.

[58]

Paras, supra, pp. 147-148.

[59]

Last paragraph of 204(A) of RA 8424.

[60]

21 or Article III of the 1987 Constitution.

[61]

See Regalado, Remedial Law Compendium, Vol. II (8th rev. ed., 2000), p. 422.

[62]

People v. CA, 368 Phil. 169, 172, June 21, 1999, per Panganiban, J.

[63]

Jopillo Jr. v. CA, 167 SCRA 247, 254, November 9, 1988.

[64]

1 of Rule 117 of the Rules of Court.

IRST DIVISION
POWER HOMES UNLIMITED G.R. No. 164182
CORPORATION,
Petitioner,
Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus - CORONA,
AZCUNA, and
LEONARDO-DE CASTRO, JJ.
SECURITIES AND EXCHANGE
COMMISSION AND NOEL Promulgated:
MANERO,
Respondents. February 26, 2008
x-------------------------------------------------x
DECISION
PUNO, C.J.:
This petition for review seeks the reversal and setting aside of the July 31, 2003
Decision[1] of the Court of Appeals that affirmed the January 26, 2001 Cease and Desist
Order (CDO)[2] of public respondent Securities and Exchange Commission (SEC)
enjoining petitioner Power Homes Unlimited Corporations (petitioner) officers, directors,
agents, representatives and any and all persons claiming and acting under their

authority, from further engaging in the sale, offer for sale or distribution of securities; and
its June 18, 2004 Resolution[3] which denied petitioners motion for reconsideration.
The facts: Petitioner is a domestic corporation duly registered with public
respondent SEC on October 13, 2000 under SEC Reg. No. A200016113. Its primary
purpose is:
To engage in the transaction of promoting, acquiring, managing,
leasing, obtaining options on, development, and improvement of real
estate properties for subdivision and allied purposes, and in the purchase,
sale and/or exchange of said subdivision and properties through network
marketing.[4]
On October 27, 2000, respondent Noel Manero requested public respondent SEC to
investigate petitioners business. He claimed that he attended a seminar conducted by
petitioner where the latter claimed to sell properties that were inexistent and without any
brokers license.
On November 21, 2000, one Romulo E. Munsayac, Jr. inquired from public
respondent SEC whether petitioners business involves legitimate network marketing.
On the bases of the letters of respondent Manero and Munsayac, public
respondent SEC held a conference on December 13, 2000 that was attended by
petitioners incorporators John Lim, Paul Nicolas and Leonito Nicolas. The attendees
were requested to submit copies of petitioners marketing scheme and list of its
members with addresses.
The following day or on December 14, 2000, petitioner submitted to public
respondent SEC copies of its marketing course module and letters of
accreditation/authority or confirmation from Crown Asia, Fil-Estate Network and Pioneer
29 Realty Corporation.
On January 26, 2001, public respondent SEC visited the business premises of
petitioner wherein it gathered documents such as certificates of accreditation to several
real estate companies, list of members with web sites, sample of member mail box,
webpages of two (2) members, and lists of Business Center Owners who are qualified
to acquire real estate properties and materials on computer tutorials.
On the same day, after finding petitioner to be engaged in the sale or offer for
sale or distribution of investment contracts, which are considered securities under Sec.

3.1 (b) of Republic Act (R.A.) No. 8799 (The Securities Regulation Code), [5] but failed to
register them in violation of Sec. 8.1 of the same Act, [6] public respondent SEC issued a
CDO that reads:
WHEREFORE, pursuant to the authority vested in the Commission,
POWER HOMES UNLIMITED, CORP., its officers, directors, agents,
representatives and any and all persons claiming and acting under their
authority, are hereby ordered to immediately CEASE AND DESIST from
further engaging in the sale, offer or distribution of the securities upon the
receipt of this order.
In accordance with the provisions of Section 64.3 of Republic Act
No. 8799, otherwise known as the Securities Regulation Code, the parties
subject of this Cease and Desist Order may file a request for the lifting
thereof within five (5) days from receipt.[7]
On February 5, 2001, petitioner moved for the lifting of the CDO, which public
respondent SEC denied for lack of merit on February 22, 2001.
Aggrieved, petitioner went to the Court of Appeals imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on public respondent SEC for
issuing the order. It also applied for a temporary restraining order, which the appellate
court granted.
On May 23, 2001, the Court of Appeals consolidated petitioners case with CA-G.R. [SP]
No. 62890 entitled Prosperity.Com, Incorporated v. Securities and Exchange
Commission (Compliance and Enforcement Department), Cristina T. De La Cruz,
et al.
On June 19, 2001, petitioner filed in the Court of Appeals a Motion for the
Issuance of a Writ of Preliminary Injunction. On July 6, 2001, the motion was
heard.On July 12, 2001, public respondent SEC filed its opposition. On July 13, 2001,
the appellate court granted petitioners motion, thus:
Considering that the Temporary Restraining Order will expire
tomorrow or on July 14, 2001, and it appearing that this Court cannot
resolve the petition immediately because of the issues involved which
require a further study on the matter, and considering further that with the
continuous implementation of the CDO by the SEC would eventually result
to the sudden demise of the petitioners business to their prejudice and an

irreparable damage that may possibly arise, we hereby resolve to grant

the preliminary injunction.
WHEREFORE, let a writ of preliminary injunction be issued in favor
of petitioner, after posting a bond in the amount of P500,000.00 to answer
whatever damages the respondents may suffer should petitioner be
adjudged not entitled to the injunctive relief herein granted. [8]
On August 8, 2001, public respondent SEC moved for reconsideration, which
was not resolved by the Court of Appeals.
On July 31, 2003, the Court of Appeals issued its Consolidated Decision. The
disposition pertinent to petitioner reads:[9]
WHEREFORE, x x x x the petition for certiorari and prohibition filed
by the other petitioner Powerhomes Unlimited Corporation is hereby
DENIED for lack of merit and the questioned Cease and Desist Order
issued by public respondent against it is accordingly AFFIRMED IN TOTO.
On June 18, 2004, the Court of Appeals denied petitioners motion for
reconsideration;[10] hence, this petition for review.
The issues for determination are: (1) whether public respondent SEC followed
due process in the issuance of the assailed CDO; and (2) whether petitioners business
constitutes an investment contract which should be registered with public respondent
SEC before its sale or offer for sale or distribution to the public.
On the first issue, Sec. 64 of R.A. No. 8799 provides:
Sec. 64. Cease and Desist Order. 64.1. The Commission, after proper
investigation or verification, motu proprio or upon verified complaint by any
aggrieved party, may issue a cease and desist order without the necessity
of a prior hearing if in its judgment the act or practice, unless restrained,
will operate as a fraud on investors or is otherwise likely to cause grave or
irreparable injury or prejudice to the investing public.
We hold that petitioner was not denied due process. The records reveal that
public respondent SEC properly examined petitioners business operations when it (1)
called into conference three of petitioners incorporators, (2) requested information from
the incorporators regarding the nature of petitioners business operations, (3) asked
them to submit documents pertinent thereto, and (4) visited petitioners business

premises and gathered information thereat. All these were done before the CDO was
issued by the public respondent SEC. Trite to state, a formal trial or hearing is not
necessary to comply with the requirements of due process. Its essence is simply the
opportunity to explain ones position. Public respondent SEC abundantly allowed
petitioner to prove its side.
The second issue is whether the business of petitioner involves an investment
contract that is considered security[11] and thus, must be registered prior to sale or offer
for sale or distribution to the public pursuant to Section 8.1 of R.A. No. 8799, viz:
Section 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.
Public respondent SEC found the petitioner as a marketing company that promotes and
facilitates sales of real properties and other related products of real estate developers
through effective leverage marketing. It also described the conduct of petitioners
business as follows:
The scheme of the [petitioner] corporation requires an investor to
become a Business Center Owner (BCO) who must fill-up and sign its
application form. The Terms and Conditions printed at the back of the
application form indicate that the BCO shall mean an independent
representative of Power Homes, who is enrolled in the companys referral
program and who will ultimately purchase real property from any
accredited real estate developers and as such he is entitled to a referral
bonus/commission. Paragraph 5 of the same indicates that there exists no
employer/employee relationship between the BCO and the Power Homes
Unlimited, Corp.
The BCO is required to pay US$234 as his enrollment fee. His
enrollment entitles him to recruit two investors who should pay US$234
each and out of which amount he shall receive US$92. In case the two
referrals/enrollees would recruit a minimum of four (4) persons each
recruiting two (2) persons who become his/her own down lines, the BCO
will receive a total amount of US$147.20 after deducting the amount of
US$36.80 as property fund from the gross amount of US$184. After
recruiting 128 persons in a period of eight (8) months for each Left and
Right business groups or a total of 256 enrollees whether directly referred

by the BCO or through his down lines, the BCO who receives a total
amount of US$11,412.80 after deducting the amount of US$363.20 as
property fund from the gross amount of US$11,776, has now an
accumulated amount of US$2,700 constituting as his Property Fund
placed in a Property Fund account with the Chinabank. This accumulated
amount of US$2,700 is used as partial/full down payment for the real
property chosen by the BCO from any of [petitioners] accredited real
estate developers.[12]
An investment contract is defined in the Amended Implementing Rules and
Regulations of R.A. No. 8799 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.[13]
It behooves us to trace the history of the concept of an investment contract under
R.A. No. 8799. Our definition of an investment contract traces its roots from the 1946
United States (US) case of SEC v. W.J. Howey Co.[14] In this case, the US Supreme
Court was confronted with the issue of whether the Howey transaction constituted an
investment contract under the Securities Acts definition of security.[15] The US Supreme
Court, recognizing that the term investment contract was not defined by the Act or
illumined by any legislative report, [16] held that Congress was using a term whose
meaning had been crystallized[17] under the states blue sky laws [18] in existence prior to
the adoption of the Securities Act.[19] Thus, it ruled that the use of the catch-all term
investment contract indicated a congressional intent to cover a wide range of
investment transactions.[20] It established a test to determine whether a transaction falls
within the scope of an investment contract. [21] Known as the Howey Test, it requires a
transaction, contract, or scheme whereby a person (1) makes an investment of money,
(2) in a common enterprise, (3) with the expectation of profits, (4) to be
derived solely from the efforts of others.[22] Although the proponents must establish all
four elements, the US Supreme Court stressed that the Howey Test embodies a
flexible rather than a static principle, one that is capable of adaptation to meet the
countless and variable schemes devised by those who seek the use of the money of
others on the promise of profits. [23] Needless to state, any investment contract covered
by the Howey Test must be registered under the Securities Act, regardless of whether
its issuer was engaged in fraudulent practices.
After Howey came the 1973 US case of SEC v. Glenn W. Turner Enterprises,
Inc. et al.[24] In this case, the 9th Circuit of the US Court of Appeals ruled that the

element that profits must come solely from the efforts of others should not be given a
strict interpretation. It held that a literal reading of the requirementsolely would lead to
unrealistic results. It reasoned out that its flexible reading is in accord with the statutory
policy of affording broad protection to the public. Our R.A. No. 8799 appears to follow
this flexible concept for it defines an investment contract as a contract, transaction or
scheme
(collectively
contract)
whereby
a
person invests his money in a common enterprise and is led to expect profits not
solely but primarily from the efforts of others. Thus, to be a security subject to
regulation by the SEC, an investment contract in our jurisdiction must be proved to
be: (1) an investment of money, (2) in a common enterprise, (3) with expectation of
profits, (4) primarily from efforts of others.
Prescinding from these premises, we affirm the ruling of the public respondent
SEC and the Court of Appeals that the petitioner was engaged in the sale or distribution
of an investment contract. Interestingly, the facts of SEC v. Turner[25] are similar to the
case at bar. In Turner, the SEC brought a suit to enjoin the violation of federal securities
laws by a company offering to sell to the public contracts characterized as selfimprovement courses. On appeal from a grant of preliminary injunction, the US Court of
Appeals of the 9th Circuit held that self-improvement contracts which primarily offered
the buyer the opportunity of earning commissions on the sale of contracts to others
were investment contracts and thus were securities within the meaning of the federal
securities laws. This is regardless of the fact that buyers, in addition to investing money
needed to purchase the contract, were obliged to contribute their own efforts in finding
prospects and bringing them to sales meetings. The appellate court held:
It is apparent from the record that what is sold is not of the usual
business motivation type of courses. Rather, the purchaser is really
buying the possibility of deriving money from the sale of the plans by
Dare to individuals whom the purchaser has brought to Dare. The
promotional aspects of the plan, such as seminars, films, and records, are
aimed at interesting others in the Plans. Their value for any other purpose
is, to put it mildly, minimal.
Once an individual has purchased a Plan, he turns his efforts
toward bringing others into the organization, for which he will
receive a part of what they pay. His task is to bring prospective
purchasers to Adventure Meetings.
The business scheme of petitioner in the case at bar is essentially similar. An investor
enrolls in petitioners program by paying US$234. This entitles him to recruit two (2)

investors who pay US$234 each and out of which amount he receives US$92. A
minimum recruitment of four (4) investors by these two (2) recruits, who then recruit at
least two (2) each, entitles the principal investor to US$184 and the pyramid goes on.
We reject petitioners claim that the payment of US$234 is for the seminars on
leverage marketing and not for any product. Clearly, the trainings or seminars are
merely designed to enhance petitioners business of teaching its investors the know-how
of its multi-level marketing business. An investor enrolls under the scheme of petitioner
to be entitled to recruit other investors and to receive commissions from the investments
of those directly recruited by him. Under the scheme, the accumulated amount received
by the investor comes primarily from the efforts of his recruits.
We therefore rule that the business operation or the scheme of petitioner
constitutes an investment contract that is a security under R.A. No. 8799. Thus, it must
be registered with public respondent SEC before its sale or offer for sale or distribution
to the public. As petitioner failed to register the same, its offering to the public was
rightfully enjoined by public respondent SEC. The CDO was proper even without a
finding of fraud. As an investment contract that is security under R.A. No. 8799, it must
be registered with public respondent SEC, otherwise the SEC cannot protect the
investing public from fraudulent securities. The strict regulation of securities is founded
on the premise that the capital markets depend on the investing publics level of
confidence in the system.
IN VIEW WHEREOF, the petition is DENIED. The July 31, 2003 Decision of the
Court of Appeals, affirming the January 26, 2001 Cease and Desist Order issued by
public respondent Securities and Exchange Commission against petitioner Power
Homes Unlimited Corporation, and its June 18, 2004 Resolution denying petitioners
Motion for Reconsideration are AFFIRMED. No costs.
SO ORDERED.

REYNATO S. PUNO
Chief Justice

WE CONCUR:

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

RENATO C. CORONA ADOLFO S. AZCUNA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in
the above decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

[1]

Penned by Associate Justice Eloy R. Bello, Jr., concurred in by then Presiding Justice
Cancio C. Garcia and Associate Justice Mariano C. Del Castillo; rollo, pp. 104-112.
[2]
CED Case No. 20-2486, signed by Order of the Commission Emilio B. Aquino,
Director, Compliance and Enforcement Department; rollo, pp. 42-52.
[3]
Ibid., id. at 134-135.

[4]

Id. at 107.
Sec. 3.1. Securities are shares, participation or interests 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:
xxxx
(b) Investment contracts, x x x x
[6]
Sec. 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.
[7]
Rollo, pp. 107-108.
[8]
Id. at 84.
[9]
See Note 1; the Court shall only discuss the petition of Power Homes Unlimited
Corporation as the other petitioner did not elevate its case before the Supreme
Court.
[10]
See Note 3.
[11]
See Note 4.
[12]
Rollo, pp. 33-34.
[13]
Rule 3, 1 (G), Definition of Terms Used in the Rules and Regulations.
[14]
328 U.S. 293, 66 S.Ct. 1100, 163 A.L.R. 1043, 90 L.Ed. 1244 (1946), where
investment contract was defined as a contract, transaction or scheme whereby a
person invests money in a common enterprise expecting profits to accrue solely
from the efforts of the promoter or third parties.
[15]
Id. at 297.
[16]
Id. at 298.
[17]
Id.
[18]
From 1911 to 1931, forty-seven of forty-eight states enacted statutes regulating the
sales of securities. One advocate of the laws purportedly asserted that securities
salesmen were so dishonest that they would attempt to sell building lots in the blue
sky. Thus, the statutes came to be known as the blue sky laws. (Paul G. Mahoney,
The Origins of the Blue Sky Laws: A Test of Competing Hypotheses, 46 J.L. & Econ.
229 [2003].)
[19]
See Note 14.
[20]
Id.
[21]
Id. at 298-299.
[22]
Id.
[23]
Id. at 299.
[24]
474 F.2d 476, Fed.Sec. L. Rep. P 93, 748.
[25]
Id.
[5]

HIRD DIVISION

[G.R. No. 106357. 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.

[G.R. Nos. 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.
DECISION
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 mans 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
scams. 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. Kayat napakaraming mga tao ang
nagagantso. Hindi masasabing mga hangal o dili kayay 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. Higit
namang nakakaawa kapag ang naloloko ay 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, lalot 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, nonprofit 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 incorporators 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,
Almarino 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 Foundations 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.)____________
Signature of Member PRISCILLA BALASA
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 foundations 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 the 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 foundations 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 foundations 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 cases 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
Sulpio 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 Princesa 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 latters 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 Priscillas 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 foundations 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 daughters 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 as 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, GUILLERMO 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 Visayas 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 Balasas 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 crime 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 raisedseriatim.
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 foundations authority. Evidently, SEC registration was obtained only for
the purpose of giving a semblance of legitimacy to the foundation; that the foundations
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, maam 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 maam.
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.

xxxxxxxxx
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.
xxxxxxxxx
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 maam.
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
foundations 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 sellers 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 been held not to apply to such a case.[35]
The second assignment of error is likewise devoid of merit. Appellants deny the
existence of a conspiracy in the perpetration of the fraudulent scheme, charging that
mere relationship does not prove conspiracy. Guillermo Francisco further maintains that
he was not even an incorporator of the foundation.
The evidence adduced by the prosecution confirms the existence of a conspiracy
among the appellants in committing the crime charged. The fact that Guillermo
Francisco was not an incorporator of the foundation does not make him any less liable
for the crime charged. By his own admission, he participated in the foundations
activities by serving as its paymaster. Because he is father and husband to three of the
organizers of the foundation, it is not 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 foundation, thereby making him a co-conspirator and equally liable
for the crime charged. His voluntary and indispensable cooperation was a
concatenation of the criminal acts performed by his co-accused. [36] In this regard,
appellant Guillermo Francisco is not being implicated as a co-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 act of being the paymaster of the
foundation.
Likewise, Norma Franciscos bare denial cannot exempt her from complicity. Denials
of an accused cannot be accorded greater evidentiary weight than the positive
declarations of credible witnesses who testify on affirmative matters. [37] Moreover, her
efforts to show that she was a mere housewife who simply helped in her daughters
business is refuted by the prosecution witnesses. Ruth Jalover testified:
Q: Madam Witness, do you know a person by the name of Norma Francisco?
A: Yes sir.
Q: And how did you come to know her Madam Witness?
A: She is my co-employee at the Panata Foundation sir.
Q: What was her job in the Panata Foundation?
A: She was the one who received the money from our tellers every afternoon. [38]
Sylvia Magnaye, on the other hand, testified:
Q: Madam Witness, do you know a person by the name of Norma Francisco?

A: Yes sir.
Q: How did you come to know her Madam Witness?
A: She is our former cashier sir.
Q: In the Panata Foundation?
A: Yes sir.[39]
On cross-examination, she further testified:
Q: Now, I would like to direct your attention also to the other accused, Norma
Francisco. You stated that she is your cashier, do you remember having done
that?
A: Yes sir.
Q: When you say she is the cashier, do you mean to say that she is the one who
pays out money or amounts to the employees Madam Witness?
A: Yes sir.[40]
Aside from being the cashier, Norma Francisco was also an incorporator of the
foundation. Likewise, the money invested in the foundation was deposited in joint bank
accounts in Priscilla Balasas name and hers. Norma Franciscos 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 foundations 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 6 th 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 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 foundations 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]
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 perpetua,
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 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.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

[1]

Claudian, De Consulatu Stilichonis. Bk. ii, l. 111.

[2]

Exh. J, Crim. Case No. 8428.

[3]

Exh. F (Crim. CaseNo. 8428)

[4]

Sylvia Magnaye, TSN, February 12, 1991, pp. 18-53.

[5]

Ibid., pp. 29-30.

[6]

Sylvia Magnaye, TSN, July 25, 1991, pp. 6 & 20-22.

[7]

Sylvia Magnaye, TSN, February 12, 1991, p. 50

[8]

Ruth Jalover, together with Rosemarie Balasa and Sylvia Magnaye turned state
witnesses and were consequently excluded from the informations.
[9]

Supra.

[10]

See Note 8.

[11]

TSN, September 13, 1991, p. 11.

[12]

Ibid., pp. 9-15.

[13]

TSN, September 13, 1991, pp. 2-9.

[14]

Promulgated on December 23, 1991.

[15]

Promulgated on February 19, 1992.

[16]

Promulgated on October 14, 1991.

[17]

De la Cruz vs. CA, 265 SCRA 299 (1996); People v. Bautista, 241 SCRA 216 (1995).

[18]

CIR vs. CA, 257 SCRA 200 (1996).

[19]

Alleje vs. CA, 240 SCRA 495 (1995), citing Blacks Law Dictionary, 4 th ed.

[20]

People v. Castillo, 76 Phil. 72 (1946).

[21]

Article VII of Panata Foundation Inc. By-laws provides as follows:

Section 1. Funds The funds of the association shall be derived from admission fees,
annual dues and special assessments of members, gifts, donations or benefits.
Section 2. Fees and Dues Every member of the association shall, in addition to the
membership fee pay dues and/or assessments that may be imposed by the association
from time to time.
Section 3. Disbursements Withdrawal from the funds of the association, whether by
check or any other instrument shall be signed by the Treasurer and countersigned by
the President. If necessary, the Board of Trustees may designate other signatories.
[22]

Exh. J-14. The modus operandi or a detailed explanation as to how the foundation
shall carry out its objectives, is a SEC requirement which must be submitted by nonstock corporations (See SEC Quarterly Bulletin No. 3, September 1982, p. 77).
[23]

TSN, April 11, 1991, pp. 3-6.

[24]

Ibid., p. 23.

[25]

Sylvia Magnaye, TSN, February 12, 1991, p. 27.

[26]

TSN, March 15, 1991, pp. 36-37.

[27]

Ibid., pp. 39-40.

[28]

37 Am. Jur. Fraud and Deceits 130.

[29]

http://risk.ifci.ch.

[30]

This ever increasing base of investors is the reason why a Ponzi scheme is
alternatively known as a pyramid scheme or pyramiding scheme. Technically speaking,
however, a pyramid scheme is different from a Ponzi scheme. A pyramid sales scheme
as defined in Section 53 of R.A. 7394, known as the Consumer Act of the Philippines,
involves:
x x x sales devices whereby a person, upon condition that he makes an investment, is
granted by the manufacturer or his representative a right to recruit for profit one or more
additional persons who will also be granted such right to recruit upon condition of
making similar investments: Provided, That, the profits of the person employing such a
plan are derived primarily from the recruitment of other persons into the plan rather than
from the sale of consumer products, services and credit; Provided, further, That the
limitation on the number of participants does not change the nature of the plan.

In the classic pyramid scheme 10 people say, make an investment and each in turn gets
10 additional people to invest, who in their turn must each get 10, and so on. The
money for the first 10 investors comes from the 10 they enroll, and the money for the
second group of 10 comes from the 10 investors that each of them enrolls, and so on.
This type of scheme involves a geometric increase in the number of investors. The
interesting thing about a geometric progression like this is that starting with only 10
investors, by the 10th round of such a scheme the number of participants would have to
be twice as large as the total population of the earth. Diagrammatically, such a scheme
looks like a pyramidhence its name.
[31]

http://199.173.224.3/history/Ponzi.html.

[32]

Sec. 2 (a) of The Revised Securities Act (B.P. Blg. 178) defines securities as
including bonds, debentures, notes, evidences of indebtedness, shares in a company,
preorganization certificates or subscriptions, investment contracts, certificates of interest
or participation in a profit sharing agreement, collateral trust certificates, equipment trust
certificates (including conditional sale contracts or similar interests or instruments
serving the same purpose), voting trust certificates, certificates of deposit for a security,
x x x.
[33]

Proverbs 28:1.

[34]

37 Am. Jur. Fraud and Deceits 234.

[35]

Ibid., 277.

[36]

Subayco v. Sandiganbayan, 260 SCRA 798 (1996).

[37]

People v. Pabalan, 262 SCRA 574 (1996).

[38]

TSN, March 13, 1991, pp. 6-7.

[39]

TSN, March 15, 1991, p. 11.

[40]

Ibid., p. 39.

[41]

Guerrero vs. CA, 257 SCRA 703 (1996).

[42]

Rollo, pp. 109-110.

[43]

Ibid., pp. 111-114.

[44]

Viray v. Amnesty Commission, 85 Phil. 354 (1950).

[45]

86 SCRA 542 (1978).

[46]

Decision, p. 10.

[47]

Art. 65, Revised Penal Code.

[48]

People vs. Ballabare 264 SCRA 350 (1996), citing People vs. Retuta, 234 SCRA 645
(1994).

THIRD DIVISION

[G.R. No. 115054-66. September 12, 2000]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

JR., accused-appellant.

vs. VICENTE

MENIL,

DECISION
GONZAGA-REYES, J.:
On appeal is the joint decision[1] dated 16 August 1993, of the Regional Trial Court
of Surigao City, Branch 30, in Criminal Case Nos. 2948, 2956, 3000, 3001, 3013, 3020,
3021, 3022, 3026, 3028, 3052, 3053, 3054, and 3058, convicting accused-appellant
Vicente Boy Menil, Jr. of one (1) count of large scale swindling and thirteen (13) counts
of estafa.
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 Prosecutors
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 (P100,000.00), 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 P610,046.00, 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 P610,046.00 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 pretrial 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 Mayors 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 solicited[11]
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 that she remitted a total of
P257,180.00. Gloria Apale turned over investments totalling P1,397,619.00 while Nena
Cagna-an claimed to have remitted a total of P94,120.00. Finally, witness Wilfredo
Lisondra allegedly turned over investments totaling P1,124,358.00. These amounts
were listed on sheets of paper which were marked and acknowledged received by
representatives of the ABM office. These four investments were included in a Summary
of Total Investments presented by the prosecution containing the names of 1,124 sales
executives and/or investors who all in all remitted a total amount of P45,494,936.00.
For the thirteen (13) estafa cases, the prosecution presented the thirteen
complainants who were sales executives and/or investors of ABM assigned to the
different barangays and municipalities in Surigao del Norte where ABM collected
investments. They all testified on the modus operandi employed by accused-appellant
in conducting his investment business and they identified documents which showed the
names of the investors they solicited from and the amounts which they remitted to ABM
and which remained unpaid. 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:
CRIMINAL CASE NO. WITNESS PLACE AMOUNT
2956 Zohar Mandaya Placer, Surigao del Norte P610,046.00
3000 Cedronio Cagampang Bacuag, Surigao del Norte 136,670.00
3001 Joseph Lacsamana Brgy. del Rosario, Tubod, P203,850.00
Surigao del Norte
3013 Domingo T. Tejada Brgy. Anislagan, Placer, P 29,070.00
Surigao del Norte

3020 Rosiefe M. Laid Brgy. Sta Cruz, Placer, P114,620.00

Surigao del Norte
3021 Gamaliela Mordeno Brgy. Roxas, Mainit, 447,960.00
Surigao del Norte
3022 Rebecca Mosca Brgy. Poblacion, Mainit, P275,280.00
Surigao del Norte
3026 Patora Decalit Brgy. Sta. Cruz, Placer, 222,120.00
Surigao del Norte
3028 Francisca Tado Tubod, Surigao del Norte P399,650.00
3052 Porferia Etac Brgy. Bad-as, Placer, 172,910.00
Surigao del Norte
3053 Leodegaria Paquero Brgy. Marga, Tubod, 148,278.00
Surigao del Norte
3054 Felomina Calamba Tubod, Surigao del Norte P320,000.00
3058 Merlina Silva Brgy. Bad-as, Placer, 500,129.00
Accused Vicente Menil, Jr. put up a common defense in all the cases filed against
him.
He testified that his investment business started on June 15, 1989 in Surigao City.
He insists that his investment business was legitimate as his corporation was
registered with the Securities and Exchange Commission. He pointed out that under
paragraphs 3 and 4 of the Articles of Incorporation of ABM Development Center, Inc., he
was authorized to solicit and receive investments in money and in kind. He also
presented a Mayors Permit which he claimed authorized him to run the business. [13]
[12]

In answer to a question as to how his business operates, the accused-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, 1989. [14] He claimed to have paid
off these investments as they matured beginning June 30, 1989 and that he was able to
pay off all investments received by his office which matured on August 28, 1989 and
earlier.[15] He stated however, that because of the large amounts involved, he was able

to 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]
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
sheriffs 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 accuseds 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
errors[25]:
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 ACCUSEDAPPELLANT 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

defraudation by means of deceit has been established by the prosecution 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.[28] It is a generic term
embracing all multifarious means which 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 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
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.
[30]

With these legal doctrines in mind, we hold that the testimonial and documentary
evidence presented by the prosecution, as well as the admissions made by accusedappellant, sufficiently prove that accused-appellant employed fraud and deceit upon
gullible people to induce them to invest in his business." The inducement consisted of
accused-appellants 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 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.
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 statements 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 ultimately, the profits which accusedappellant promised to his investors would not be realized. Accused-appellant admitted
during his testimony that the money he used to pay off maturing investments were taken
from the remittances received by ABM Development Center, Inc. Thus:
Q: As far as you can recall as of June 30, 1989, how much investments were already
made or received by your office?
A: More than forty thousand pesos.
Q: Your first due date was June 30, 1989, you said, the returns is estimated to be
more than one thousand pesos?
A: Yes, sir.
Q: Where do you get this one thousand pesos for the investment due on June 30,
1989 is it not that you get it from the investment of the previous days?
A: That is the amount that Im going to use. But I also have my own funds.
Q: How much was your funds as of June 30, 1989?

A: Two Hundred Fifty Thousand (P250,000.00) Pesos.

Q: The investments that were due on July 1, 1989, the money that you are to pay for
these returns were taken from the previous days, correct?
A: Yes, sir.
Q: The same is true with the investments due on July 2, you get all the money to pay
from the investments made in the previous days, correct?
A: Yes, sir.
Q: And the same thing is followed on the days after?
A: Yes, sir.
Q: Your last due date was August 28?
A: Yes, sir.
Q: Again the returns for these date were taken from the previous days, from the
investments of the people from the previous dates?
A: Yes, sir.
xxx
Q: On August 29, were there still investments?
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. Balasa[33], we had occasion to describe the
workings of the Ponzi Scheme as follows:
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 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 Mayors 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 Mayors 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 accusedappellant 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
corporations 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
toprision 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 toprision 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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
ofprision 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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, accusedappellant 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.
Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.

[1]

Penned by Judge Carlo H. Lozada.

[2]

Exhibit 2.

[3]

Exhibit 2-A.

[4]

Records, p. 69.

[5]

Rollo, p. 7.

[6]

Rollo, pp. 20-21.

[7]

Records, p. 116.

[8]

Records, p. 174.

[9]

Rollo, p. 26.

[10]

Records, p. 331.

[11]

Rollo, p. 27.

[12]

T.S.N., January 26, 1993, p.5.

[13]

Ibid, pp. 5-9.

[14]

Ibid, pp. 9-10.

[15]

Ibid, pp. 11-19.

[16]

Ibid, p. 19.

[17]

Ibid, pp. 20-23.

[18]

Ibid, p. 25.

[19]

Ibid, pp. 26-28.

[20]

Ibid, pp. 28-29.

[21]

Ibid, pp. 31-32.

[22]

Ibid, pp. 32-33.

[23]

Rollo, pp. 19-42.

[24]

Rollo, pp. 39-41.

[25]

Rollo, p. 98.

[26]

De la Cruz vs. CA, 265 SCRA 299; People vs. Bautista, 241 SCRA 216.

[27]

T.S.N., January 27, 1993, pp. 20-21.

[28]

CIR vs. CA, 257 SCRA 200.

[29]

Alleje vs. CA, 240 SCRA 495.

[30]

People vs. Castillo, 76 Phil. 72.

[31]

People vs. Balasa, 295 SCRA 49.

[32]

T.S.N., January 26, 1993, pp. 39-43.

[33]

295 SCRA 49.

[34]

T.S.N., December 19, 1991, pp. 8-15.

[35]

Corporation Code of the Philippines, Section 88.

[36]

Ibid, Section 87.

[37]

De la Cruz vs. Court of Appeals, 265 SCRA 299; People vs. Bautista, 241 SCRA 216.

[38]

See Section 1 of Act No. 4103, otherwise known as the Indeterminate Sentence Law,
as amended.
[39]

People vs. Gabres, 267 SCRA.

[40]

Ibid.