Cu Vs Small Business
Cu Vs Small Business
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AUSL Exclusive
FIRST DIVISION
August 7, 2017
ALLAN S. CU, Petitioner,
vs.
SMALL BUSINESS GUARANTEE AND FINANCE CORPORATION THROUGH MR.
HECTOR M. OLMEDILLO, Respondent
DECISION
CAGUIOA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
1
assailing the Decision of the Court of Appeals3 (CA) dated October 16, 2013 in CA-
2
G.R. SP No. 12157 and the Resolution dated February 6, 2014 denying the Motion
3 4
The undisputed facts are summarized by the CA in its Decision dated October 16,
2013, thus:
On August 31, 2007, an "Omnibus Credit Line Agreement" was executed, whereby
G7 Bank was initially granted credit line of Fifty Million Pesos (₱50,000,000.00) by SB
Corp. for re-lending to qualified MSMEs as sub-borrowers. Eventually, the credit line
was increased to Ninety Million Pesos (₱90,000,000.00), and in line with said
increase, the Board of Directors of G7 Bank authorized any two of its officers, namely
Fidel L. Cu, Allan S. Cu [Cu], Lucia C. Pascual and Norma B. Cueto, as signatories to
loan documents, including postdated checks.
Subsequently, various drawdowns were made from the line and each drawdown was
covered by a promissory note, amortization schedule and postdated check. Cu and
his co-signatory Lucia Pascual (now deceased) [Pascual] then issued more than a
hundred postdated checks as payment to the various drawdowns made on the credit
line, including the following checks subject of [the criminal cases filed against Cu and
Pascual], viz:
DATE AMOUNT
CHECK NUMBER October 13, 2008 3,881,513.25
865691 October 13, 2008 29,058.75
977005 October 17, 2008 37,800.00
977017 October 6, 2008 225,812.31
865558 October 7, 2008 169,391.25
865653
On July 31, 2008, Bangko Sentral ng Pilipinas (BSP) placed G7 Bank under
receivership by the Philippine Deposit Insurance Corporation (PDIC).
Thus, on August 1, 2008, x x x PDIC through its Deputy Receiver, took over the bank,
its premises, assets and records and accordingly, PDIC issued the following cease
and desist order, to wit:
"With the MB's closure of the Bank, all members of the Board of Directors and officers
of the Bank shall cease to have any further authority to act for and in behalf of the
Bank, PDIC, as receiver, shall immediately take charge of the assets, records, and
affairs of the Bank. As such, the Bank, its premises[,] assets, records shall be turned
over to the Deputy Receiver immediately upon receipt of the attached MB
Resolution."
Consequently, PDIC closed all of G7 Bank's deposit accounts with other banks,
including its checking account with the Land Bank of the Philippines (LBP) against
which the disputed checks were issued.
Upon maturity of the subject postdated checks in October 2008, SB Corp. deposited
the same to its account with the LBP Makati branch but all of them were dishonored
for reason of "Account Closed". Subsequently, SB Corp. sent demand letters to Cu
and Pascual demanding payment of the amounts represented in the dishonored
checks. Despite receipt of the demand letters, Cu and Pascual failed to make good
the dishonored checks, prompting SB Corp. to file a Complaint-Affidavit for Violation
of Batas Pambansa Blg. 22 (B.P. 22) before the Office of the City Prosecutor of
Makati.
After finding that probable cause exists to indict Cu and Pascual for Violation of B.P.
22, on five counts, the corresponding Informations were filed in court. Eventually, the
cases were raffled to Branch 65 of the [Metropolitan Trial Court,] Makati City
[(MeTC)].
Meantime, on October 15, 2009, PDIC filed a Petition for Assistance in the Liquidation
of G 7 Bank with the R TC Branch 21 of Naga City. SB Corp. then filed its Notice of
Appearance with Notice of Claims with the liquidation court on January 28, 2010. The
following day, the [Me TC] issued an Order setting the arraignment of the accused Cu
and Pascual on March 2, 2010.
SB Corporation countered that the only issue being determined in a prosecution for
BP 22 case is whether or not the accused issued the worthless checks, the defense
that they were precluded from fulfilling their obligation by reason of the receivership is
a mere afterthought and an evidentiary matter that can be ventilated during trial.
Thereafter, in an Order dated April 5, 2010, the MeTC dismissed the B.P. 22 cases
and ruled in this wise:
"It has been ruled in Abacus Real Estate Development Center, Inc. v. Manila Banking
Corporation (455 SCRA 97) that the appointment of a receiver operates to suspend
the authority of the bank and its directors and officers over its property and effects,
such authority being reposed in the receiver, and in this respect, the receivership is
equivalent to an injunction to restrain the bank officers from intermeddling with the
property of the bank in any way.
After G7 Bank was placed under receivership and with the designation of PDIC as
Receiver, the custody and control of its assets, funds and records are with the
receiver. At that time, the bank can no longer transfer or dispose of its assets. In
effect, the officers of the bank, the accused in particular, can no longer touch the
funds or property of the institution to fund the checks the maturity dates of which are
after the bank was placed under receivership. Because of the receivership, G7 Bank
cannot by itself keep sufficient funds in its account to cover the full amount of the
subject checks at their maturity dates. Clearly, placing the bank under receivership
prevented it from funding the checks subject of the cases. Thus, the herein cases for
Violation of Batas Pambansa Bilang 22 deserve dismissal. The other grounds cited by
the accused need not be discussed for being inconsequential.
SO ORDERED."
SB Corp. filed a Motion for Reconsideration from the Order of dismissal, but the same
was denied by the M[e]TC in an Order dated June 25, 2010. It then appealed to the
1âwphi1
[Regional Trial Court, Branch 61, Makati City (RTC)] arguing that a pending liquidation
proceedings (sic) does not extinguish the criminal and civil liabilities of the signatories
to the dishonored corporate checks.
On May 2, 2011, the [RTC] rendered [a] Decision affirming in toto the dismissal of the
cases for Violation of B.P. 22. The dispositive portion of the said Decision reads:
No costs.
SO ORDERED."
On June 21, 2011, SB Corp. filed a Motion for Reconsideration of the said Decision
which was denied by the [RTC]. Hence the x x x petition [for review under Rule 42]
was filed [with the Court of Appeals (CA)]. 5
In the decretal portion of its Decision, the CA: (1) granted the petition filed by SB
Corp., (2) vacated and set aside the May 2, 2011 Decision of the Regional Trial Court
(RTC) of Makati City, Branch 61, and (3) remanded the cases to the Me TC, Branch
65 of Makati City, for further proceedings.6
Cu's motion for reconsideration was denied by the CA in its Resolution dated
February 6, 2014. Hence, this Petition for Review on Certiorari under Rule 45 of the
Rules of Court.
In the Resolution of the Court dated December 1, 2016, Cu was required to furnish
7
the Office of the Solicitor General (OSG) with a copy of the petition and OSG was
required to file its comment on the petition. The OSG filed its Comment on July 10,
8
2017.
Issues
Whether the CA erred in not dismissing the SB Corp.' s petition because an appeal
from the dismissal of a criminal case may be undertaken only by the State through the
Solicitor General.
Whether the CA erred in reversing the May 2, 2011 Decision and September 5, 2011
Resolution of the RTC.
Regarding the first issue, Cu contends that the CA should have dismissed SB Corp.' s
petition because SB Corp., as the private offended party, could not, on its own, take
an appeal from the decision of the RTC of Makati City, as it is only the Solicitor
General who can represent the People of the Philippines on appeal, with respect to
the criminal aspect.
In its Comment,9 SB Corp. counters that Cu is barred from raising this issue now
because he did not raise it before the CA. SB Corp. also contends that in CA-G.R. CR
No. 34738, which involves the same parties and informations for violation of B.P. 22,
involving 35of103 checks Io that were filed against Cu and Pascual before Branch 64,
MeTC of Makati City, the Solicitor General filed a motion for reconsideration after SB
Corp.'s petition for review was dismissed by the CA for lack of authority to represent
the People of the Philippines. SB Corp. thus argues that since the Solicitor General
11
had adopted the arguments of SB Corp. in that case, then it would not act differently
in the instant cases. Finally, SB Corp. argues that the Revised Rules on Criminal
Procedure authorize any party to appeal from a judgment or final order, unless the
accused will be placed in double jeopardy and a party may file a petition for review
12
before the CA from a decision of the RTC rendered in the exercise of its appellate
jurisdiction.
13
The OSG, in its Comment, postulates that its participation is not always indispensable
in the appeal of the dismissal of a criminal case by the trial court and that there have
been times when the Court, in the interest of justice, gave due course to the appeal or
petition in a criminal case filed before· the Court or the CA by the private complainant
or the public prosecutor. 14 It is OSG's position that the CA did not err in giving due
course to the petition for review filed by SB Corp. before the CA. 15
In a criminal case in which the offended party is the State, the interest of the private
complainant or the offended party is limited to the civil liability arising therefrom.
Hence, if a criminal case is dismissed by the trial court or if there is an acquittal, a
reconsideration of the order of dismissal or acquittal may be undertaken, whenever
legally feasible, insofar as the criminal aspect thereof is concerned and may be made
only by the public prosecutor; or in the case of an appeal, by the State only, through
the OSG. The private complainant or offended party may not undertake such motion
for reconsideration or appeal on the criminal aspect of the case. However, the
offended party or private complainant may file a motion for reconsideration of such
dismissal or acquittal or appeal therefrom but only insofar as the civil aspect thereof is
concerned. In so doing, the private complainant or offended party need not secure the
conformity of the public prosecutor. If the court denies his motion for reconsideration,
the private complainant or offended party may appeal or file a petition
for certiorari or mandamus, if grave abuse amounting to excess or lack of jurisdiction
is shown and the aggrieved party has no right of appeal or x x x adequate remedy in
the ordinary course of law. 17
Following settled jurisprudence, the Court believes, and so holds, that being a mere
private complainant, SB Corp. lacked the authority to represent the State in the
appeal of the criminal cases before the CA as this authority is solely vested in the
OSG. The OSG is the law office of the Government whose specific powers and
functions include that of representing the Republic and/or the People before any
18
court in any action which affects the welfare of the People as the ends of justice may
require. Accordingly, if
19
there is a dismissal of a criminal case by the trial court, it is only the OSG that may
bring an appeal of the criminal aspect representing the People. 20
Clearly, SB Corp. did not file its petition for review with the CA merely to preserve its
interest in the civil aspect of the criminal cases but sought the reinstatement of the
criminal prosecution of Cu for violation of B.P. 22. Being an obvious attempt to
participate in, or otherwise prosecute, the criminal aspect of the cases without the
conformity of the OSG, its recourse must fail. 21
This Court has, however, taken exceptions and given due course to several actions
even when the respective interests of the Government were not properly represented
by the OSG, namely, when the challenged order affected the interest of the State or
22
the People, the case involved a novel issue, ·like the nature and scope of jurisdiction
23
of the Cooperative Development Authority, and the ends of justice would be defeated
24
if all those who came or were brought to court were not afforded a fair opportunity to
present their sides. 25
The Court is inclined to interpose the exception in the present petition for justice to
prevail and if only to write finis to the criminal cases from which the petition
26
originates.
Proceeding now to the second issue, the OSG posits that a review of SB Corp.'s
evidence to assess the propriety of the reinstatement or dismissal of the criminal
cases against Cu before the MeTC is not warranted in a petition for review
on certiorari before the Court because the determination of whether probable cause
exists is not lodged with the Court.
In this petition, the propriety of the dismissal by the MeTC of B.P. 22 cases filed
against Cu, which the RTC upheld, is in issue. Did the MeTC and RTC have legal
basis for the dismissal?
The Court finds that the MeTC and RTC acted correctly and did not gravely abuse
their discretion when they ordered the dismissal of the B.P. 22 cases against Cu.
In Gidwani v. People, wherein several checks that were issued by the President of
27
Considering that there was a lawful Order from the SEC, the contract is deemed
suspended. When a contract is suspended, it temporarily ceases to be operative; and
it again becomes operative when a condition [occurs-] or a situation arises -
warranting the termination of the suspension of the contract.
Moreover, it is a basic principle in criminal law that any ambiguity in the interpretation
or application of the law must be made in favor of the accused. Surely, our laws
1âwphi1
should not be interpreted in such a way that the interpretation would result in the
disobedience of a lawful order of an authority vested by law with the jurisdiction to
issue the order.
payment and the dishonor of the checks took place before the petition for suspension
of payments for rehabilitation purposes was filed with the SEC. There was already an
obligation to pay the amount covered by the checks since the criminal proceedings
were already underway when the SEC issued the Order suspending all actions for
claims against the debtor therein. The accused therein was not excused from
honoring his duly issued checks by the mere filing of the suspension of payments
proceeding before the SEC. 30
While the facts in present B.P. 22 cases against Cu are not on all fours with those in
Gidwani, the Court finds no reason why the ruling in Gidwani cannot be made to apply
to these cases. In Gidwani, the SEC order of suspension of payments preceded the
presentment for encashment of the subject checks therein. Here, the subject
postdated checks were deposited by SB Corp. in October 2008, and dishonored for
reason of "Account Closed," after the closure of G7 Bank and after the PDIC, through
its Deputy Receiver, had taken over G7 Bank, its premises, assets and records on
August 1, 2008 and had issued a cease and desist order against the members of the
Board of Directors and officers of G7 Bank and closed all its deposit accounts with
other banks, including its checking account with the LBP against which the five
disputed checks were issued.
Significantly, when PDIC filed on October 15, 2009 a Petition for Assistance in the
Liquidation of G7 Bank with the RTC Branch 21 of Naga City (the "liquidation court"),
SB Corp. thereafter filed in said liquidation court, on January 28, 2010, its Notice of
Appearance with Notice of Claims.
effect on interest payments: "The liability of a bank to pay interest on deposits and all
other obligations as of closure shall cease upon its closure by the Monetary Board
without prejudice to the first paragraph of Section 85 of Republic Act No. 7653 (the
New Central Bank Act)," and on final decisions against the closed bank: "The
execution and enforcement of a final decision of a court other than the liquidation
court against the assets of a closed bank shall be stayed. The prevailing party shall
file the final decision as a claim with the liquidation court and settled in accordance
with the Rules on Concurrence and Preference of Credits under the Civil Code or
other laws."32
The petition for assistance in the liquidation of a closed bank is a special proceeding
for the liquidation of a closed bank, and includes the declaration of the concomitant
rights of its creditors and the order of payment of their valid claims in the disposition of
assets. It is a proceeding in rem and the liquidation court has exclusive jurisdiction to
adjudicate disputed claims against the closed bank, assist in the enforcement of
individual liabilities of the stockholders, directors and officers, and decide on all other
issues as may be material to implement the distribution plan adopted by PDIC for
general application to all closed banks. The provisions of the Securities Regulation
Code or RA 8799, and Supreme Court Administrative Matter No. 00-8-10-SC or the
Rules of Procedure on Corporate Rehabilitation are not applicable to the petition for
assistance in the liquidation of closed banks. 33
In Gidwani, there was an SEC order of suspension of payments after a petition to that
effect was filed, which had the effect of suspending the collection of the loan
obligation of the debtor therein. In the present cases, the closure of G7 Bank by the
Monetary Board, the appointment of PDIC as receiver and its takeover of G7 Bank,
and the filing by PDIC of a petition for assistance in the liquidation of G7 Bank, had
the similar effect of suspending or staying the demandability of the loan obligation of
G7 Bank to SB Corp. with the concomitant cessation of the former's obligation to pay
interest to the latter upon G7 Bank's closure. Moreover, these events also affected G7
Bank's "liquidability" - subjecting the exact amount that SB Corp. is entitled to collect
34
from G7 Bank to the distribution plan adopted by PDIC and approved by the
liquidation court in accordance with the Rules on Concurrence and Preference of
Credits under the Civil Code.
SB Corp. knew at the time it deposited in October 2008 the subject postdated checks
that G7 Bank was already under receivership and PDIC had already taken over the
bank by virtue of the Monetary Board's closure thereof. SB Corp. acted in clear bad
faith because with G7 Bank's closure and PDIC taking over its assets and closing all
of its deposit and checking accounts, including that with LBP, there was no way that
Cu or any officer of the bank could fund the said checks. Stated otherwise, it was
legally impossible for Cu to fund those checks on the dates indicated therein, which
were all past G7 Bank's closure because all the bank accounts of G7 Bank were
closed by PDIC.
After the closure of G7 Bank, its obligations to SB Corp., including those which the
subject checks were
supposed to pay, are subject to the outcome of the bank's liquidation. The exact
consideration of the subject checks is, thus, contingent and any demand for the
payment of the obligation for which those checks were issued after closure and
pending liquidation of the bank is premature.
Furthermore, there was no way for Cu to pay SB Corp. the amount due on the subject
checks or make arrangements for its payment in full within five banking days from
after receiving notice that such checks had been dishonored pursuant to Section 2 of
B.P. 22 because as of that time, the exact amount due on the subject checks was not
known or uncertain.
Needless to add, the right of SB Corp. to pursue its civil or monetary claim against G7
Bank before the liquidation court exists and is undiminished.
Accordingly, the CA erred in reversing the May 2, 2011 Decision and the September
5, 2011 Order of the RTC, Branch 61 of Makati City .
WHEREFORE, in view of the foregoing, the Petition is hereby GRANTED. The Court
of Appeals Decision dated October 16, 2013 and Resolution dated February 6, 2014
in CA-G.R. SP No. 121573 are REVERSED and SET ASIDE. Criminal Case Nos.
361400 to 361404 are DISMISSED, without prejudice to the right of Small Business
Guarantee and Finance Corporation to pursue its claim against Golden 7 Bank (Rural
Bank of Nabua, Inc.) for the value of the five checks before the liquidation court.
SO ORDERED.
WE CONCUR:
CERTIFICATION
Pursuant to the 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 Court’s Division.
Footnotes
1
Rollo, pp. 3-28.
3
Eighth (8th) Division.
5
Id. at 33-38.
6
Id. at 44.
7
Id. at 119.
8
Id. at 136-163.
9
Id. at 83-94.
11
Rollo, pp. 84, 95-100.
14
Id. at 147.
15
Id. at 147, 149.
16
493 Phil. 85 (2005).
17
Id. at 108, citing Neplum, Inc. v. Orbeso, 433 Phil. 844 (2002).
Administrative Code, Book IV, Title III, Chapter 12, Section 35 (I)
provides:
Beronilla, id.
24
Cooperative Development Authority v. Dolefil Agrarian Reform
Beneficiaries Cooperative, Inc., 432 Phil. 290, 308 (2002), cited
in Antone v. Beronilla, id. at 162. The OSG was not even required to
file a comment on the petition.
Antone v. Beronilla, id., citing Tan v. People, 604 Phil. 68, 88 (2009).
25
Id.
26
Id. at 644-645.
28
34
In the context of capability of being liquidated. According
to Montemayor v. Millora, 670 Phil. 209, 218-219 (2011), a debt is
liquidated when its existence and amount are determined or when it is
expressed already in definite figures which do not require verification
or when the determination of the exact amount depends only on a
simple arithmetical operation.