Facts:
On January 14, 1902, counsel for the bank (Spanish-Philippine Bank) filed a complaint in the Court of First Instance charging
Secundino Mendezona with
estafa. The complaint alleged that on January 5, 1900, Mendezona, acting as manager of the firm
Mendezona & Co., received from the bank the sum of
$300,000, offering as security, among other property, the building known as the procuration house of the Franciscan Friars; that on February 19, 1900, Mendezona obtained a further credit of
$300,000 as an extension of the first loan, offering the same property as security; and that after demand, Mendezona fraudulently delayed the execution of the corresponding
mortgage deed by invoking the claim that the notary, Mr. Barrera, had the title deeds. The complaint further alleged that on August 6, 1900, Mendezona sold the same procuration building for
$400,000 to named vendees, subject to the right of redemption, and that in the deed of sale he declared the property free from all
incumbrances and
gravamen, thereby causing damage to the bank in at least
$150,000. The Court of First Instance conducted a preliminary investigation. The record showed that on November 22, 1899, representatives of the Franciscan Friars and Mendezona entered into a verbal contract of sale over the city property on Isla de Romero Street known as the procuration building. The agreed consideration was
$190,000, which was to be left on deposit with
Mendezona & Co., drawing interest at
eight per cent per annum, while the purchaser was authorized to take immediate possession and make alterations. The verbal contract was apparently confirmed by letter, and Mendezona took possession toward the end of November 1899 and began alterations; on July 21, 1900, the corresponding deed of conveyance was drawn. The case record reflected that on January 1, 1900, the books of
Mendezona & Co. treated the procuration building as an asset valued at
$250,000, with a corresponding liability debit of
$190,000 in favor of the Franciscan Friars. The notary testified that the documents connected with the procuration building were delivered to him by the father provincial of the Franciscan Friars two or three months before July 21, 1900, and that the draft instrument stipulated that the consideration would remain with
Mendezona & Co. as a deposit. The complaint’s factual theory, as understood from the preliminary investigation, rested on two main allegations: first, that Mendezona delayed or evaded execution of the mortgage deed promised to secure the loans of
$600,000; and second, that he declared the property in his later sale to other friars to be free from charges or encumbrances, when it had allegedly been offered for mortgage to the bank. Although the complaint used the generic term
estafa, it did not initially specify the particular species of fraud or the exact Penal Code article; it was only later, in the printed briefs, that the complainant asked for the application of certain provisions of the Penal Code. The Supreme Court treated the lower court’s appealed order, arising from the negative result of the preliminary investigation, as one that affirmed the lack of sufficient showing that Mendezona had committed the acts charged as
estafa.
Issues:
Whether the record of the preliminary investigation established that
Secundino Mendezona committed the acts charged as
estafa—specifically, whether his alleged failure to execute a promised mortgage and his declaration in a subsequent sale that the property was unencumbered were proven to have been done with deceit and bad faith, and thus constituted punishable fraud under the Penal Code.
Ruling:
Ratio:
Doctrine: