G.R. No. 211222 - Cu vs. Small Business Guarantee and Fice Corp.

Case Summary (G.R. No. 211222)

Factual Background

SB Corp. extended a credit line to Golden 7 Bank (Rural Bank of Nabua, Inc.) under an Omnibus Credit Line Agreement initially in the amount of P50,000,000 and later increased to P90,000,000 for re-lending to MSMEs. Golden 7 Bank authorized any two of its officers, including Allan S. Cu, to sign loan documents and postdated checks. Cu and co-signatory Lucia C. Pascual issued more than one hundred postdated checks as payment for drawdowns, including five checks later presented by SB Corp. in October 2008 and dishonored for the reason "Account Closed." On July 31, 2008 the Bangko Sentral ng Pilipinas closed Golden 7 Bank and PDIC took over as receiver on August 1, 2008, issuing a cease and desist order and closing the bank's deposit accounts, including the checking account from which the subject checks were drawn.

Criminal Proceedings before the MeTC

After the dishonor and demand for payment went unheeded, SB Corp. filed Complaint-Affidavits for violation of Batas Pambansa Blg. 22 against Cu and Pascual before the Office of the City Prosecutor of Makati. Probable cause was found and informations were filed and raffled to Branch 65 of the Metropolitan Trial Court, Makati City. Prior to arraignment, the accused filed an omnibus motion contending, inter alia, that the bank's receivership precluded the funding of the checks and that the liquidation proceedings vested exclusive jurisdiction in the liquidation court. The MeTC granted the motion and dismissed Criminal Case Nos. 361400 to 361404 on April 5, 2010, reasoning that the receivership deprived bank officers of authority to fund accounts and thereby prevented the funding of the subject checks.

RTC Proceedings

SB Corp. appealed the MeTC dismissal to the Regional Trial Court, Branch 61, Makati City. The RTC affirmed the MeTC dismissal in a decision dated May 2, 2011 and denied SB Corp.'s motion for reconsideration. The RTC concluded that the MeTC correctly held that the receivership and PDIC takeover effectively prevented the funding of the checks and rendered the criminal prosecution untenable.

Court of Appeals Proceedings

SB Corp. filed a petition for review with the Court of Appeals. The CA granted SB Corp.'s petition, vacated and set aside the RTC decision of May 2, 2011, and remanded the cases to the MeTC, Branch 65, for further proceedings. Cu's motion for reconsideration before the CA was denied in a February 6, 2014 resolution. Cu then filed the present petition for review on certiorari under Rule 45 before the Supreme Court.

Issues Presented

The Supreme Court identified two principal issues: (1) whether the CA erred in entertaining and giving due course to SB Corp.'s petition because only the State, through the Office of the Solicitor General, may appeal the dismissal of a criminal case; and (2) whether the CA erred in reversing the RTC's May 2, 2011 Decision and September 5, 2011 Resolution that affirmed the MeTC dismissal of the B.P. 22 cases.

Parties' Contentions

Cu argued that SB Corp., as a private offended party, lacked authority to prosecute or appeal the criminal aspect of the cases and that only the OSG could represent the People on appeal. SB Corp. contended that Cu waived the objection by failing to raise it earlier and relied upon precedent and procedural rules permitting private parties to file appeals in certain contexts, asserting that it sought to vindicate both criminal and civil rights. The Office of the Solicitor General filed a comment asserting that its participation is not always indispensable and that courts have, in the interest of justice, given due course to appeals or petitions filed by private complainants in some instances.

Supreme Court Analysis Regarding SB Corp.'s Authority to Appeal

The Court reiterated the settled principle that the private complainant is limited as to the criminal aspect and that appeals or motions to reconsider the criminal aspect may be undertaken only by the public prosecutor or, on appeal, by the State through the Office of the Solicitor General, whose powers and functions include representing the Government in all criminal proceedings as provided in Executive Order No. 292. The Court acknowledged exceptions in prior jurisprudence where the Court gave due course to actions by private parties despite lack of OSG conformity, but observed that SB Corp. plainly sought reinstatement of criminal prosecution and thus lacked authority to represent the State on that criminal aspect. Nevertheless, invoking judicial exceptions and the interest of justice, the Court proceeded to address the merits rather than dismiss the petition summarily on procedural grounds.

Supreme Court Analysis on Merits — Effect of Receivership and Liquidation

The Court examined precedent, particularly Gidwani v. People and Rosario v. Co., to determine whether the receivership, PDIC takeover, and liquidation proceedings rendered the bank officers' obligation to fund the checks non-demandable and thus exempted the accused from criminal liability under B.P. 22. The Court found that the Monetary Board's closure of Golden 7 Bank, PDIC's designation as receiver, the takeover and the filing of a petition for assistance in liquidation had the legal effect of suspending the demandability of the bank's obligations and the bank's ability to pay interest, and of subjecting creditors' claims to the liquidation court's distribution plan under R.A. 3591, as amended by RA No. 10846. The Court analogized the situation to a suspensive condition as discussed in Gidwani, holding that at the time SB Corp. presented the postdated checks in October 2008 the underlying obligation was not yet due and demandable and the exact amount recoverable remained to be determined by the liquidation court.

Supreme Court Findings on SB Corp.'s Conduct and Legal Consequences

The Court concluded that it was legally impossible for Cu or any officer of Golden 7 Bank to fund the subject checks after the bank's closure because PDIC had closed the bank's accounts. The Court further found that SB C

Case Syllabus (G.R. No. 211222)

Parties and Procedural Posture

Allan S. Cu was the accused in five criminal informations for alleged violation of B.P. 22 arising from postdated checks issued on behalf of Golden 7 Bank (Rural Bank of Nabua, Inc.).
Small Business Guarantee and Finance Corporation (“SB Corp.”) was the private complainant and payee of the subject postdated checks.
Bangko Sentral ng Pilipinas, through the Monetary Board, closed Golden 7 Bank and designated Philippine Deposit Insurance Corporation (PDIC) as receiver which took custody of the bank’s assets and closed its deposit accounts.
The Metropolitan Trial Court, Makati City (MeTC) dismissed the B.P. 22 cases, the Regional Trial Court (RTC), Branch 61, Makati City affirmed the dismissal, the Court of Appeals reversed and remanded, and the Supreme Court reviewed the CA decision on petition for certiorari under Rule 45.

Key Facts

Golden 7 Bank obtained an Omnibus Credit Line Agreement from SB Corp. initially for P50,000,000 and later increased to P90,000,000 for on-lending to MSMEs.
Allan S. Cu and co-signatory Lucia C. Pascual executed more than one hundred postdated checks as payment for drawdowns under the credit line, including five checks later presented and dishonored.
PDIC, as Deputy Receiver, took over Golden 7 Bank on August 1, 2008 and issued a cease and desist order and closed the bank’s accounts, including the LBP account against which the subject checks were drawn.
SB Corp. deposited the subject checks in October 2008 and they were dishonored for reason of “Account Closed.”
SB Corp. sent demand letters to Cu and Pascual and thereafter filed criminal complaints for violation of B.P. 22 before the Office of the City Prosecutor of Makati.

Procedural History

The MeTC dismissed Criminal Case Nos. 361400 to 361404 for violation of B.P. 22 by Order dated April 5, 2010, and denied reconsideration on June 25, 2010.
The RTC, Branch 61, affirmed the MeTC dismissal in a Decision dated May 2, 2011 and denied reconsideration on September 5, 2011.
SB Corp. filed a petition for review with the Court of Appeals which granted relief on October 16, 2013 and denied Cu’s motion for reconsideration on February 6, 2014.
Allan S. Cu filed the present petition for review on certiorari under Rule 45 before the Supreme Court challenging the CA decision.

Issues Presented

Whether the Court of Appeals erred in entertaining SB Corp.’s petition given that only the Office of the Solicitor General may prosecute appeals on the criminal aspect on behalf of the State.
Whether the MeTC and the RTC gravely abused their discretion in dismissing the B.P. 22 prosecutions against Allan S. Cu in light of Golden 7 Bank’s closure and PDIC receivership.

Contentions

Allan S. Cu contended that SB Corp. lacked authority to appeal criminally because only the State through the OSG may undertake criminal appeals.
SB Corp. argued that Cu failed to raise the OSG-authority issue below and that private parties may appeal under the Revised Rules on Criminal Procedure and Rules of Court when appropriate.
The OSG submitted that its participation is not always indispensable and that the CA did not err in giving due course to the petition.

Statutory Framework

The obligation to represent t