A.C. No. 12876 - Dillon vs. De Quiroz

Petitioners, Diong Bi Chu (alias “Patrick Chang”) and Chang Ka Hee (alias “Chang Ka Hee”), along with Lu Liong Corporation, were charged with estafa for violating Article 315, paragraph 2(a) of the Revised Penal Code.
Private respondents Jaime Navoa and Milagros de Leos alleged that through false pretenses and fraudulent acts, the petitioners induced them to mortgage a parcel of land registered in Jaime Navoa’s name, and misappropriated the proceeds amounting to P670,000.00.
During the criminal trial before Military Commission No. 3 (criminal case docket no. MC-3-57), evidence was presented, and petitioner Chang Ka Hee’s demurrer to evidence led to the dismissal of the charge against him on the ground of non-involvement in the transaction.
On August 3, 1977, Military Commission No. 3 rendered judgment acquitting petitioner Diong Bi Chu, reasoning that the transaction was conducted as a joint venture.

The judgment stated that both parties had contributed to a common fund.
It emphasized that no fraud or deceit was committed on the part of Diong Bi Chu since Industria Phils., Inc. had a valid contract with the PVTA for the exportation of foreign leaf tobacco.
The subsequent prohibition by the President on importing Virginia leaf tobacco, which adversely affected future shipments, was identified as an unforeseen attendant risk inherent in the joint venture.
Consequently, Diong Bi Chu was acquitted on the basis that acting in good faith without fault, he could not be held liable for the losses.

On March 31, 1978, private respondents commenced a civil action (Civil Case No. 29077) before the Court of First Instance of Rizal, Branch 21, to recover damages based on fraud and guaranty.
Petitioners argued that the civil case should be dismissed for two reasons:

The civil action was barred by the prior judgment in the criminal proceeding (the acquittal and dismissal rendered by Military Commission No. 3).
The respondents had failed to reserve their right to file a separate civil action during the criminal proceedings.

On May 30, 1978, the court denied the petitioners’ motion to dismiss the civil action.
Subsequent motions for reconsideration filed on July 10 and August 31, 1978 were likewise dismissed.

Petitioners filed a petition for certiorari before the Court of Appeals challenging the lower court’s rulings.
In its resolution dated October 16, 1978, the appellate court dismissed the petition.
The resolution held that the civil action for damages under Article 33 of the Civil Code is independent of the criminal case.
It further noted that the prior dismissal and acquittal in the criminal proceedings do not bar the filing or prosecution of the separate civil action.

Petitioners’ subsequent motion for reconsideration of the Court of Appeals’ decision (filed on December 29, 1978) was denied.
Petitioners then elevated the issue to the Supreme Court through a petition for review on certiorari, raising the sole issue regarding the bar effect of a criminal acquittal on a civil action for damages based on fraud.

Whether a civil action for damages based on fraud under Article 33 of the Civil Code is barred by a prior judgment of acquittal or dismissal in a criminal proceeding.

Is the outcome of the criminal case, specifically the acquittal of Diong Bi Chu and the dismissal of the charge against Chang Ka Hee, conclusive as to liability in a civil action for fraud?
Does the requirement (or lack thereof) of reserving the right to file a civil action during a criminal proceeding have any bearing on the validity or continuation of the independent civil action filed subsequently?