Title
Barangan vs. Court of Appeals
Case
G.R. No. 123307
Decision Date
Nov 29, 1999
Officers of Biyaya Foundation held personally liable for defrauding investors through an illegal paluwagan scheme, despite acquittal on criminal charges.
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Case Digest (G.R. No. 123307)

Facts:

1. Formation of the Cooperative and Foundation:

  • In 1989, the San Mateo Small Town Multi-Purpose Cooperative (SMSTMC) was organized to uplift the economic condition of its members. Its officers included Federico Castillo (Chairman), Atty. Samuel Barangan (Vice-Chairman), and others as Board Members.
  • The cooperative was dissolved for engaging in a "paluwagan," a scheme where investments would treble in 15 days.
  • The officers then formed the Biyaya Foundation (BIYAYA), registered with the Securities and Exchange Commission (SEC), but continued the paluwagan scheme under this new entity.

2. Mechanics of the Paluwagan Scheme:

  • Investors were promised a 300% return on their investment after 15 days and an additional 200% after 21 days, with the return of the principal amount.
  • The scheme relied on a continuous influx of new investments to pay earlier investors, a classic pyramiding scam.

3. Criminal Complaints and Arrests:

  • On August 22, 1989, a criminal complaint for estafa was filed against BIYAYA's officers, including Samuel Barangan, for defrauding John Gatmen of P31,200.00.
  • On August 30, 1989, another complaint was filed by Leovino Jose, who invested P43,500.00 but was never paid.
  • A warrant of arrest was issued on September 6, 1989, leading to the apprehension of Barangan and others, while some officers remained at large.

4. Trial Court Proceedings:

  • The trial court acquitted Barangan and others of estafa due to lack of evidence but held them jointly and severally liable to pay Leovino Jose P43,500.00.
  • The court ruled that BIYAYA was engaged in an illegal activity, and its officers could not hide behind the corporate veil.

5. Appeal to the Court of Appeals:

  • The Court of Appeals affirmed the trial court's decision but absolved Efigenia Marquez from liability, as there was no proof she was an officer of BIYAYA.
  • The court upheld the liability of Barangan, Federico Sison Jr., and Rolando Remigio.

Issue:

  1. Whether there was sufficient evidence to prove that Leovino Jose invested money with BIYAYA.
  2. Whether the officers of BIYAYA, including Samuel Barangan, should be held jointly and severally liable for the civil liability arising from the illegal paluwagan scheme.
  3. Whether the corporate veil of BIYAYA should be pierced to hold its officers personally liable for the obligations of the foundation.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Conclusion:

The Supreme Court upheld the lower courts' decisions, emphasizing that the officers of BIYAYA could not escape civil liability for their involvement in the illegal paluwagan scheme. The corporate veil was pierced to hold them personally accountable for the foundation's obligations to Leovino Jose.


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