G.R. No. 209655-60 - People vs. Tibayan

Case Summary (G.R. No. 209655-60)

Petitioner and Respondent

Petitioner (appellee in the appeal context): People of the Philippines. Respondents (appellants in the Supreme Court appeal): Palmy Tibayan and Rico Z. Puerto, convicted below and appealing the upgrade of their conviction.

Key Dates

TGICI registered with the SEC: September 21, 2001.
SEC investigation and findings of unregistered securities sale and a fraudulent Treasurer’s Affidavit; SEC revoked TGICI’s registration: October 21, 2003.
Multiple RTC decisions convicting accused-appellants of estafa: December 4, 2009; June 24, 2010; August 2, 2010; August 5, 2010; January 21, 2011; August 18, 2011.
Court of Appeals Decision modifying convictions to Syndicated Estafa: June 28, 2013.
Supreme Court Decision affirming the CA: July 20, 2015 (decision date in the record).

Applicable Law

1987 Philippine Constitution (governing constitution applicable to decisions rendered in 1990 and later).
Revised Penal Code (RPC), Article 315 (estafa/swinding by means of false pretenses or fraudulent acts).
Presidential Decree No. 1689 (PD 1689) — increasing penalties for certain syndicate forms of estafa (defines “Syndicated Estafa”).
Republic Act No. 8799 (Securities Regulation Code) — TGICI’s unregistered sale of securities implicated violation.

Facts — TGICI’s Operations and the Complaints

TGICI was an open-end investment company registered with the SEC in 2001. The SEC later discovered that TGICI and subsidiaries sold securities to the public without required registration and submitted a fraudulent Treasurer’s Affidavit; the SEC revoked TGICI’s registration in October 2003. Private complainants invested in TGICI after being enticed by promises of high monthly interest returns (3%–5.5%) and assurances of recovery. Investors received Certificates of Share and post-dated checks (purportedly for principal and monthly interest). Upon encashment, checks bounced because the account was closed. When complainants sought payment at TGICI’s office, employees took the bounced checks, issued acknowledgements, and reassured complainants; the office later closed, and complainants filed criminal complaints.

Defenses Presented by the Accused

Accused-appellants denied conspiracy to defraud. Puerto claimed his signature on TGICI’s Articles of Incorporation was forged and that he was no longer a director as of January 2002. Tibayan likewise claimed forgery and that she was neither an incorporator nor a director.

RTC Rulings (Trial Court)

The RTC, Branch 198, issued six decisions cumulatively convicting Tibayan of 13 counts and Puerto of 11 counts of estafa under Item 2(a), Paragraph 4, Article 315 of the RPC in relation to PD 1689. Sentences varied by decision and count (ranging from prision correccional terms up to reclusion temporal of 20 years for several counts). The RTC found the complainants’ testimonies credible and concluded that the accused conspired with other incorporators/directors to misrepresent TGICI as a legitimate mutual fund. However, the RTC did not convict for Syndicated Estafa because the prosecution allegedly failed to allege or substantiate that the incorporators formed a syndicate of five or more persons with intent to defraud the public.

Court of Appeals Ruling

On appeal the Court of Appeals consolidated the appeals and, in a June 28, 2013 Decision, modified the convictions from simple estafa to Syndicated Estafa under PD 1689, increasing the penalties to life imprisonment for each count. The CA found TGICI to have operated a Ponzi scheme that relied on new investors’ funds to pay earlier investors, and concluded that the incorporators/directors — numbering more than five — conspired to use TGICI as a vehicle for perpetuating fraud, thereby justifying personal criminal liability notwithstanding the corporate form. The CA also increased certain monetary awards (notably Clarita P. Gacayan’s actual damages).

Issue before the Supreme Court

Whether accused-appellants are guilty beyond reasonable doubt of Syndicated Estafa as defined under Item 2(a), Paragraph 4, Article 315 of the RPC in relation to PD 1689.

Legal Elements of the Offense (as Applied)

Estafa (Article 315, Item 2(a) RPC) by false pretenses requires: (1) a false pretense or fraudulent representation regarding business, credit, property, etc.; (2) that such representation was made prior to or simultaneous with the fraud; (3) that the offended party relied on it and parted with money or property; and (4) resulting damage to the offended party.
Syndicated Estafa under Section 1, PD 1689 requires: (1) commission of estafa as defined in Articles 315/316; (2) commission by a syndicate of five (5) or more persons formed with intent to carry out the scheme; and (3) defraudation results in misappropriation of monies contributed by stockholders/members or funds solicited by corporations from the general public.

Court’s Analysis — Application to the Facts

The Supreme Court reviewed the record and agreed with the CA that TGICI’s modus operandi matched Ponzi schemes: solicitation by promising high returns, use of new investors’ funds to pay earlier investors, and the absence of legitimate capital or trade to generate promised profits. The Court found the required elements of estafa present (false representations about lucrative investment opportunities made prior or simultaneous to the fraud; reliance by complainants who invested; and resulting loss). It also found that the incorporators/directors numbered more than five and that the scheme led to misappropriation of funds solicited from the public. The Court accepted the CA’s determination that the corporate veil could not shield individual incorporators/directors from personal criminal liabi

Case Syllabus (G.R. No. 209655-60)

Case Citation and Case Origin

Reported at 750 Phil. 910; 111 OG No. 29, 4133 (July 20, 2015); First Division, G.R. Nos. 209655-60, January 14, 2015.
Decision penned by Justice Perlas-Bernabe, J., with Chief Justice Sereno and Justices Leonardo-De Castro, Bersamin, and Perez concurring.
Appeal from the Court of Appeals Decision dated June 28, 2013 in consolidated appeals CA-G.R. CR Nos. 33063, 33562, 33660, 33669, 33939, and 34398.
Case involves criminal charges prosecuted by the People of the Philippines against accused-appellants Palmy Tibayan and Rico Z. Puerto for violations of Article 315, Item 2(a), Paragraph 4 of the Revised Penal Code (Estafa by means of deceit) in relation to Presidential Decree No. 1689 (PD 1689) concerning Syndicated Estafa.

Parties

Plaintiff-Appellee: People of the Philippines.
Accused-Appellants: Palmy Tibayan and Rico Z. Puerto.
Private complainants (victims) named in the informations: Hector H. Alvarez; Milagros Alvarez; Clarita P. Gacayan; Irma T. Ador; Emelyn Gomez; Yolanda Zimmer; Nonito Garlan; Judy C. Rillon; Leonida D. Jarina; Reynaldo A. Dacon; Cristina Dela Pea; and Rodney E. Villareal.
Other incorporators and directors of Tibayan Group Investment Company, Inc. (TGICI) identified in the records and criminal informations: Jesus Tibayan, Ezekiel D. Martinez, Liborio E. Elacio, Jimmy C. Catigan, Nelda B. Baran, among others (some remaining at large).

Factual Background — TGICI and SEC Action

Tibayan Group Investment Company, Inc. (TGICI) was an open-end investment company registered with the Securities and Exchange Commission (SEC) on September 21, 2001.
Sometime in 2002 the SEC conducted an investigation of TGICI and its subsidiaries; it discovered TGICI was selling securities without a registration statement in violation of Republic Act No. 8799 (Securities Regulation Code) and that TGICI submitted a fraudulent Treasurer's Affidavit.
On October 21, 2003 the SEC revoked TGICI's corporate registration for being fraudulently procured.
The SEC findings and revocation precipitated multiple criminal prosecutions for Estafa (Syndicated Estafa alleged) against TGICI incorporators and directors.

TGICI’s Mode of Operation and Victimization

TGICI solicited investments by offering very high monthly interest rates ranging from 3% to 5.5%, and by assuring investors that they would recover their investments with profitable returns.
Private complainants were induced to invest and were issued Certificates of Share and post-dated checks purportedly representing principal and monthly interest.
Upon attempted encashment the checks were dishonored because the account had been closed.
Private complainants brought bounced checks to the TGICI office; TGICI employees took the checks, issued acknowledgement receipts, and reassured complainants that their investments and interest would be paid.
The TGICI office closed down without paying complainants, prompting the filing of criminal complaints.

Accused-Appellants’ Denials and Defenses

Both accused-appellants denied conspiring with other TGICI incorporators and directors to defraud private complainants.
Rico Z. Puerto asserted that his signature in TGICI's Articles of Incorporation was forged and that he had not been a director of TGICI since January 2002.
Palmy Tibayan likewise claimed that her signature in the Articles of Incorporation was forged and maintained she was neither an incorporator nor a director of TGICI.

Criminal Informations, Arrests, and Parties at Large

Multiple criminal informations for Syndicated Estafa were filed against the incorporators and directors of TGICI following the SEC revocation.
Warrants of arrest were issued against all named incorporators/directors; only accused-appellants were arrested while several co-accused remained at large.

Regional Trial Court (RTC) Proceedings — Decisions and Sentences

The RTC issued six separate decisions covering the criminal cases (docketed in grouped criminal case numbers), and found accused-appellants guilty beyond reasonable doubt of multiple counts of Estafa under Item 2(a), Paragraph 4, Article 315 RPC in relation to PD 1689, but convicted them only of simple Estafa for reasons explained below.
Summary of the six RTC decisions and the penalties/damages ordered:
- Joint Decision dated December 4, 2009 (Crim. Case Nos. 04-0391, 06-0042, 06-0045): accused-appellants found guilty of three (3) counts; each count meted the penalty of 20 years (reclusion temporal); ordered to pay P1,500,000.00 to Hector H. Alvarez and P119,405.23 and P800,000.00 to Milagros Alvarez.
- Joint Decision dated June 24, 2010 (Crim. Case Nos. 04-0619, 04-0622, 04-0627, 04-0635, 04-0636): Puerto acquitted of all charges; Tibayan found guilty of two (2) counts; each count meted penalty of 20 years (reclusion temporal); ordered to pay P1,300,000.00 and US$12,000.00 to Clarita P. Gacayan and P500,000.00 to Irma T. Ador.
- Joint Decision dated August 2, 2010 (Crim. Case Nos. 05-0710, 05-0779, 05-0784, 05-0803, 05-0809): both accused found guilty of two (2) counts; each count meted penalty of 20 years (reclusion temporal); ordered to pay P1,000,000.00 to Yolanda Zimmer and P556,376.00 to Nonito Garlan.
- Joint Decision dated August 5, 2010 (Crim. Case Nos. 04-0070, 04-0085, 04-0125, 04-0330, 04-0441, 04-0714): both accused found guilty of one (1) count; penalty 20 years (reclusion temporal); ordered to pay Emelyn Gomez P250,000.00.
- Decision dated January 21, 2011 (Crim. Case No. 04-1028): both accused found guilty of one (1) count each; penalty 20 years (reclusion temporal); ordered to pay Judy C. Rillon P118,000.00.
- Joint Decision dated August 18, 2011 (Crim. Case Nos. 04-0570, 04-0567, 04-0598, 04-0613): both accused convicted of four (4) counts with varying penalties per count an
  ...continue reading