G.R. No. 94713 - Mansion Biscuit Corp. vs. Court of Appeals

Case Summary (G.R. No. 94713)

Factual Background

Sometime in 1981, Ty Teck Suan, as president of Edward Ty Brothers Corporation, ordered numerous cartons of nutri-wafer biscuits from Mansion Biscuit Corporation. Prior to delivery on November 12, 1981, he issued four postdated checks totaling P404,980.00 to Ang Cho Hong, president of Mansion. In December 1981, he issued four additional postdated checks of P100,000.00 each with Siy Gui as co-signer. Mansion delivered the goods between November 12, 1981 and January 7, 1982. When the first four checks were presented on their respective dates they were dishonored for insufficiency of funds. Demand was made for payment and replacement but the demands went unheeded. Subsequently, Ty Teck Suan delivered flour and advanced cash amounting to P162,500.00, which was applied in part to the first postdated check, resulting in its exclusion from the later information. Formal demands were sent in March and August 1982, and informations for violation of Batas Pambansa Blg. 22 were filed on February 16, 1983.

Criminal Informations

Two informations were filed: Criminal Case No. 5598-V-83 charged Ty Teck Suan with issuing three checks of P100,000.00 each dated in January 1982, alleged to have been dishonored, to the damage of Mansion Biscuit Corporation in the total amount of P300,000.00. Criminal Case No. 5599-V-83 charged Ty Teck Suan and Siy Gui with issuing four checks of P100,000.00 each drawn on Equitable Banking Corporation and dated March 20, 1982 through May 22, 1982, alleged to have been dishonored, in the total sum of P400,000.00. Both informations expressly alleged that the checks were issued “in payment of cartons of Nutri-Wafer biscuits purchased from the Mansion Biscuit Corporation…by the Edward Ty Brothers Corporation thru said accused Ty Teck Suan.”

Trial Court Proceedings

The accused pleaded not guilty. A writ of attachment was issued and some real properties were attached despite the filing of a P700,000.00 bond. After the prosecution rested, the accused filed a demurrer to evidence arguing that the checks were issued merely to guarantee the corporate obligation, that the Equitable Banking checks were replacements, and that the court lacked jurisdiction. On October 12, 1987 the trial court granted the demurrer to evidence and acquitted the accused. The court relied on existing jurisprudence that issuance of checks to guarantee payment prior to certain rulings was a valid defense and found that an essential element of Batas Pambansa Blg. 22 was missing because the checks were issued to guarantee fulfillment of an agreement. The trial court also found that Siy Gui’s liability was not established. The court set aside the attachment and ordered cancellation of bail bonds. On October 30, 1987 the trial court denied the prosecution’s motion for reconsideration and held that no civil liability could be enforced in the criminal cases in view of the acquittal and that any contractual liability should be pursued in a separate action.

Early Appellate Proceedings

Petitioner filed a special civil action of certiorari and injunction with the Court of Appeals (CA-G.R. SP No. 13264) to contest the setting aside of the attachment; the Court of Appeals, on February 22, 1988, annulled and set aside the portion of the trial court’s order that had set aside the writ of attachment. Petitioner separately appealed the trial court’s absolution from civil liability in CA-G.R. CV No. 16580. During the appeal Ty Teck Suan died on January 10, 1989; the Court of Appeals denied a motion to dismiss and allowed substitution of his heirs. On May 8, 1990 the Court of Appeals dismissed the appeal for lack of merit, holding that the civil liability for the unpaid biscuits was the contractual obligation of Edward Ty Brothers Corporation and not the personal obligation of Ty Teck Suan, and that a separate civil action should be instituted against the corporation.

Issues Presented to the Supreme Court

Petitioner sought review on the grounds that the Court of Appeals erred by: limiting the appeal to contractual liability; refusing to recognize a separate quasi-delict or tort committed by Ty Teck Suan; holding that contractual liability could not be enforced against Ty Teck Suan personally; failing to find that Ty Teck Suan had personally assumed liability; and disregarding the Court of Appeals’ earlier findings in CA-G.R. SP No. 13264. Petitioner asserted that two civil liabilities arose from the issuance of worthless checks: civil liability arising from crime under Article 100 of the Revised Penal Code, and civil liability arising from quasi-delict. Petitioner argued that the acquittal extinguished only the civil liability arising from crime while the civil liability based on quasi-delict remained enforceable.

Parties' Contentions

Petitioner maintained that the delivery of goods induced by worthless checks created both criminal and tortious civil liabilities against the individual accused and that the latter survived the acquittal. Private respondents countered that the obligation to pay was that of Edward Ty Brothers Corporation, the real party in interest, and that the corporation was not a party to the criminal cases; they contended that petitioner must pursue a separate civil action against the corporation.

Supreme Court's Ruling

The Supreme Court affirmed the Court of Appeals’ decision in toto. The Court held that the civil liability for non-payment of the nutri-wafer biscuits could not be enforced against the private respondents because the liability was contractual and belonged to Edward Ty Brothers Corporation, not to Ty Teck Suan personally. The Court grounded this conclusion on the informations’ language and petitioner’s own admissions that the purchase and sale were between the two corporations, represented by their respective presidents. The Court further agreed with the Court of Appeals that any claim in quasi-delict was improperly pleaded because the alleged fraud was incidental to the contractual relationship and occurred at the time of contract formation rather than constituting an independent tortious act that would give rise to a separate obligation against the individuals.

Legal Basis and Reasoning

The Court emphasized that the informations themselves described the checks as issued “in payment of cartons of Nutri-Wafer biscuits purchased … by the Edward Ty Brothers Corporation thru said accused Ty Teck Suan,” and that petitioner’s pleadings and testimony confirmed that the goods were ordered for and received by the corporation. The Court distinguished acts that give rise to contractual obligations from acts that constitute independent quasi-delicts, explaining

Case Syllabus (G.R. No. 94713)

Parties and Procedural Posture

Mansion Biscuit Corporation, represented by its president Ang Cho Hong, filed the civil claims attendant to criminal prosecutions and later appealed adverse rulings to the Court of Appeals and to the Supreme Court.
The accused in the underlying criminal informations were Ty Teck Suan and Siy Gui, and Ty Teck Suan was later substituted by his heirs following his death during the proceedings.
The criminal prosecutions for violation of Batas Pambansa Blg. 22 were docketed as Criminal Case Nos. 5598-V-83 and 5599-V-83 before the Regional Trial Court, Branch 172, Valenzuela, Metro Manila.
The trial court granted the accuseds' demurrer to evidence and acquitted them, and the complainant sought review of the adjudications of civil liability in the Court of Appeals and ultimately in this Court.
The Court of Appeals dismissed Mansion Biscuit Corporation's appeal for lack of merit, prompting the present petition for review to the Supreme Court.

Key Factual Allegations

Ty Teck Suan, as president of Edward Ty Brothers Corporation, ordered numerous cartons of nutri-wafer biscuits from Mansion Biscuit Corporation in 1981.
Before delivery on November 12, 1981, Ty Teck Suan issued four postdated checks totaling P404,980.00 which were delivered to Ang Cho Hong.
A second set of four postdated checks in the amount of P100,000.00 each was later issued with Siy Gui as co-signatory.
Deliveries of the biscuits occurred between November 12, 1981 and January 7, 1982, and the first four checks were dishonored for insufficiency of funds on presentment.
Subsequent deliveries of flour and cash advances amounting to P162,500.00 were credited and applied against the first check, leading to partial adjustment of accounts.
Demand letters were sent on March 1, 1982 and a final demand on August 3, 1982, and informations for violation of Batas Pambansa Blg. 22 were filed on February 16, 1983.

Charges and Trial Course

The informations charged that the accused issued checks "in payment of cartons of Nutri-Wafer biscuits purchased from the Mansion Biscuit Corporation" drawn against banks and dishonored for insufficiency of funds, in violation of Batas Pambansa Blg. 22.
Both accused pleaded not guilty and the prosecution rested before the accused filed a demurrer to evidence asserting, among other defenses, that the checks were issued to guarantee contractual obligations and that jurisdictional and replacement-check arguments barred conviction.
The trial court issued writs of attachment on some real properties and the accused posted bail bonds; the court later set aside the order of attachment upon acquittal.

Trial Court Ruling

The trial court, citing Supreme Court jurisprudence predating August 8, 1984, granted the demurrer to evidence and acquitted Ty Teck Suan and Siy Gui on the ground that the checks were issued as security to guarantee fulfillment of an agreement and therefore did not satisfy an essential element of violation of Batas Pambansa Blg. 22.
The trial court found that the defense that the checks were issued to guarantee payment was valid for checks issued prior to the Ministry of Justice ruling of August 8, 1984.
The trial court likewise found that the prosecution failed to establish the personal liability of Siy Gui and ordered cancellation of bail bonds and the setting aside of the order of attachment.
The trial court denied enforcement of any civil liability in the criminal cases on the ground that the acquittal precluded imposition of civil liability in those criminal proceedings.

Court of Appeals Ruling

The Court of Appeals, in the appeal in CA-G.R. CV No. 16580, dismissed Mansion Biscuit Corporation's appeal for lack of merit and held that the civil liabi