Favis-Velasco vs. Gonzales

Factual Background

The petition arose from a Complaint-Affidavit filed by Ramona Favis-Velasco and Elvira L. Yulo accusing Jaye Marjorie R. Gonzales, her husband Bienvenido Ma. Gonzales III, and Raul Clemente of thirty-five counts of estafa by unfaithfulness and abuse of confidence under Article 315, paragraph 1(b) and thirty-five counts of estafa by false pretenses under Article 315, paragraph 2(a) of the Revised Penal Code. The petitioners alleged that respondent Jaye induced them to invest millions of pesos in securities and later misappropriated the funds. The complaint indicates that the petitioners first learned of respondent Jaye through a mutual friend, Marianne Onate, who introduced Jaye as her broker. Documentary records attached to the case showed checks issued by the petitioners payable to B.A. Securities, Inc. (BASI) or D.A. Market Securities, Inc. (DAMSI) and deposits made to the accounts of those entities rather than to any account in respondent Jaye’s name.

Proceedings Before the Department of Justice and the Filing of Informations

Assistant City Prosecutor Gilbert R. Alcala of the Office of the City Prosecutor of Makati City conducted the preliminary investigation and resolved on November 13, 2013 that there was no probable cause to charge the respondents, thereby dismissing the complaint. The petitioners filed a Petition for Review with the Secretary of Justice, who on July 15, 2015 modified the prosecutor’s resolution and directed the City Prosecutor of Makati to file Informations for estafa under Article 315, pars. 1(b) and 2(a) against respondent Jaye Marjorie R. Gonzales while maintaining dismissal as to the other respondents. Respondent Jaye filed a Motion for Reconsideration and subsequently moved to defer action. On January 11, 2016, four Informations dated January 6, 2016 were filed by the City Prosecutor and were consolidated and raffled to Branch 133 of the Regional Trial Court of Makati City, later re-raffled to Branch 60.

Petition before the Court of Appeals

Respondent Jaye Marjorie R. Gonzales filed a Petition for Certiorari and Prohibition with the Court of Appeals on March 15, 2016, seeking to set aside the DOJ Secretary’s Resolution directing the filing of Informations. The CA denied injunctive relief in a June 1, 2017 Resolution, required memoranda, and thereafter rendered a Decision dated November 23, 2017 granting the petition. The CA annulled the DOJ Secretary’s July 15, 2015 Resolution, reinstated the November 13, 2013 dismissal by Prosecutor Alcala, ordered dismissal of the criminal complaint filed by the petitioners, and declared the arrest warrants issued by the RTC null and void. The CA denied the petitioners’ Motion for Reconsideration on May 3, 2018.

Issues Presented to the Supreme Court

The petitioners sought review under Rule 45, Rules of Court and raised three principal grounds: that the CA erred in finding no probable cause for estafa under Article 315, paragraph 2(a); that the CA erred in finding no probable cause for estafa under Article 315, paragraph 1(b); and that the CA erred in ruling that there was grave abuse of discretion by the Secretary of Justice in finding probable cause to indict respondent Jaye Marjorie R. Gonzales.

The Parties' Contentions

The petitioners contended that the Complaint-Affidavit and supporting documents sufficiently alleged the elements of estafa under both paragraph 2(a) and paragraph 1(b) of Article 315, namely false pretenses and misappropriation, reliance, and resulting damage. The petitioners emphasized representations allegedly made by respondent Jaye that she was a licensed broker or part-owner of DAMSI and the loss of millions of pesos. Respondent Jaye Marjorie R. Gonzales maintained that the elements of the charged crimes were not present, asserting that there was no deceit prior to or simultaneous with the transactions, that she did not directly receive the petitioners’ money, that the petitioners were introduced to her by a third person and were predisposed to invest, and that the petitioners actually realized profits for several years, negating fraudulent intent.

Ruling of the Supreme Court

The Supreme Court denied the petition and affirmed the Decision dated November 23, 2017 and the Resolution dated May 3, 2018 of the Court of Appeals in CA-G.R. SP No. 144600. The Court held that there was no probable cause to indict respondent Jaye Marjorie R. Gonzales for estafa under Article 315, pars. 2(a) and 1(b), and agreed that the DOJ Secretary gravely abused her discretion in directing the filing of Informations.

Legal Basis and Reasoning

The Court articulated the governing standards for preliminary investigation and probable cause. It recalled that a preliminary investigation is an inquiry to determine whether there are grounds to engender a well-founded belief that a crime has been committed and that the respondent is probably guilty, citing Section 1, Rule 112 of the Rules of Court and precedents such as Labay v. Sandiganhayan and other authorities cited in the records. The Court noted that the determination of probable cause is primarily an executive function and that courts generally do not disturb prosecutors’ conclusions, consistent with separation of powers; nevertheless, courts will intervene upon a showing of grave abuse of discretion. The Court restated the definition of probable cause and the elements required to establish estafa under Article 315, paragraph 2(a)—a false pretense as to power, influence, qualifications, property, credit, agency, business or imaginary transactions; that the false pretense preceded or was simultaneous with the fraud; reliance by the offended party; and resulting damage—and under Article 315, paragraph 1(b)—receipt of money or property in trust or under an obligation to return, misappropriation or conversion to the prejudice of another, and demand for return. Applying these principles to the record, the Court found that the Complaint-Affidavit failed to sufficiently allege the elements of either paragraph. The petitioners’ own averments showed that they were introduced to respo