Madrigal vs. Department of Justice

Probable cause for estafa under Article 315(1)(c) or 3(c) of the Revised Penal Code does not exist where the complainant, an experienced businesswoman, voluntarily signed a standard Comprehensive Surety Agreement and the bank did not conceal the loan documents; absent abuse of confidence or deceit and resulting damage, there is no estafa. A DOJ Undersecretary may validly reverse a prior resolution of a former Secretary of Justice when acting under delegated authority for the incumbent Secretary, absent proof of lack of authority or grave abuse of discretion.

Madrigal is president of Madrigal Transport, Inc. (MTI), while Palma was vice-president and Chua an account officer of Far East Bank and Trust Company (FEBTC). MTI sought financing from FEBTC for the acquisition of the feeder vessel M/V Alicia, and the bank required personal undertakings from Madrigal and Luis P. Lorenzo, Jr. as sureties for MTI’s loan. The case concerns whether the bank officers’ handling of the loan and surety documents gave rise to estafa and whether the DOJ Undersecretary could reverse a prior DOJ resolution.

Madrigal is the president of MTI, while Palma was the vice-president of FEBTC and Chua an account officer of the same bank. It is undisputed that sometime in 1997, MTI obtained and was granted a USD 10 million loan from FEBTC for the acquisition of the feeder vessel M/V Alicia, formerly M.V. Artemission. According to petitioner, as president of MTI, she applied for a USD 10.5 million loan from FEBTC to finance the acquisition pursuant to a Joint Venture Agreement between MTI and Lapanday Holdings Corporation. FEBTC sent her various documents, including a Loan Agreement, a Comprehensive Surety Agreement, a Notice of Borrowing, a Promissory Note, a Certificate of Non-Default, a Form of Opinion of Counsel to the Borrower, a Deed of Chattel Mortgage, and a Letter of Undertaking and Deed of Assignment; she signed the documents without the material entries and sent them back to FEBTC.

Thereafter, Palma advised petitioner that FEBTC could grant MTI only a USD 10 million loan because of a lower valuation of M/V Alicia. Petitioner reapplied for the reduced amount and signed a second set of loan documents, which included a Comprehensive Surety Agreement guaranteeing the USD 10 million loan, a Notice of Borrowing, a Promissory Note, a Certificate of Non-Default, and a Borrowing Certificate; she was also asked to sign a Deed of Assignment over Charter Hires and a Chattel Mortgage. Petitioner noticed that Palma was imposing additional obligations not originally contemplated, so she referred the matter to MTI lawyers, who wrote FEBTC and requested copies of the documents to be signed in relation to the USD 10 million loan. Palma insisted that petitioner was personally liable under the first Comprehensive Surety Agreement covering the USD 10.5 million loan despite the fact that all documents pertaining to that loan had been “abandoned and considered torn.” Petitioner alleged that, as a result of the fraudulent act of imputing to her a legally inexistent obligation, she was compelled to disburse from her personal funds the total amount of Php5,903,172.30, which was paid to FEBTC to protect her reputation.

Respondent Palma, for his part, averred that MTI had applied for a USD 11 million loan from FEBTC to finance the purchase of M/V Artemission, now M/V Alicia, for a joint venture with Lapanday and Macondray Company to be known as MLM Logistics International, Incorporated, which would operate a vessel for the carriage of goods of Del Monte Philippines, Incorporated. In connection with the loan application, MTI was required by FEBTC to infuse acceptable equity into the acquisition of the vessel. Palma maintained that FEBTC considered the immediate release of the loan proceeds, as accommodation to petitioner, provided that she, together with Luis P. Lorenzo, Jr., the president of Lapanday Holdings Corporation, would execute “personal undertakings” as sureties for MTI’s loan. To secure the immediate release of the proceeds, petitioner and Lorenzo agreed to this condition and executed a Comprehensive Surety Agreement as security for the release of the loan to MTI. Palma further stressed that FEBTC officers had several meetings with MTI officers to assist the latter in finding ways to repay MTI’s loan, and that the criminal complaint was merely a ploy resorted to by petitioner to question the due execution of the Comprehensive Surety Agreement and evade her personal liability for MTI’s loan. Respondent Chua corroborated Palma’s allegations.

On 12 February 1998, petitioner filed with the Office of the City Prosecutor of Manila a Complaint-Affidavit charging Palma with estafa under paragraphs 1(c), 2(a), 3(a), and 3(c) of Article 315 of the Revised Penal Code; Chua was later named as an additional respondent. The CA found it incredible that an experienced businesswoman would thoughtlessly affix her signature to a blank document and found devoid of merit petitioner’s assertion that she did not sign the Comprehensive Surety Agreement in her personal capacity and that the agreement referred to an “abandoned” loan application.

• Charge under Article 315(3)(c): Petitioner argued that the CA gravely erred in ignoring that the crime at issue is a violation of Article 315 paragraph 3(c), not paragraph 1(c), of the Revised Penal Code.
• Two Sets of Loan Documents: Petitioner argued that the CA brushed aside the existence of two sets of loan documents showing respondents’ ruse to deceive her, thereby ignoring evidence that abrogated her property rights.
• Concealment of Documents: Petitioner argued that the CA erred in ruling that respondents did not commit fraudulent acts when they concealed documents from her despite evidence to the contrary.
• Signature in Blank: Petitioner argued that the CA erred in ruling that respondents did not take advantage of her signature in blank despite evidence showing they did.
• Authority of DOJ Undersecretary: Petitioner argued that the CA failed to address whether respondent Undersecretary had the power and authority to reverse and set aside a resolution of the Secretary of Justice, nullifying case law that acts of the Secretary of Justice cannot be abrogated by his subordinate.

• Personal Surety and No Deceit: Respondent Palma maintained that MTI applied for a USD 11 million loan, that FEBTC required acceptable equity, and that the bank considered immediate release of the proceeds as accommodation to petitioner provided she and Luis P. Lorenzo, Jr. execute personal undertakings as sureties; petitioner agreed and executed the Comprehensive Surety Agreement. He stressed that the criminal complaint was merely a ploy to question the due execution of the CSA and evade personal liability, and respondent Chua corroborated his allegations.

• Probable Cause for Estafa: Whether probable cause exists to hold private respondents liable for estafa under paragraph 1(c) or 3(c) of Article 315 of the Revised Penal Code.
• Authority of the DOJ Undersecretary: Whether the Undersecretary of the DOJ had the authority to reverse a Resolution of its Secretary.

• Probable Cause for Estafa: No. The SC found no probable cause for estafa under Article 315(1)(c) or 3(c) because there was neither abuse of confidence nor deceit; petitioner signed a standard CSA, and her payment under it was legally made pursuant to a valid agreement.
• Authority of the DOJ Undersecretary: Yes. Undersecretary Gutierrez issued the assailed resolutions under delegated authority for two different Secretaries of Justice, and petitioner failed to overcome the presumption of regular performance of official duty or show grave abuse of discretion.

• Probable Cause for Estafa: The SC noted that the CA did not expressly rule on the DOJ finding of no probable cause under paragraph 3(c), perhaps because the Information was filed under paragraph 1(c), but it proceeded to find that the case does not constitute estafa in either form. Estafa in general requires (1) that the accused defrauded another by abuse of confidence or by means of deceit, and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third person. The first element covers estafa with abuse of confidence, estafa by false pretenses or fraudulent acts, and estafa through fraudulent means; the second and third ways involve deceit. The SC found neither abuse of confidence nor deceit. Petitioner claimed she was defrauded through the use of her signature in blank and the first set of documents supposedly abandoned, and that the second application for the USD 10 million loan should control because she signed the CSA there as president of MLM Logistics International. On abuse of confidence, the SC found no evidence: the CSA was a standard preprinted form whose plain reading showed that the signatory guarantees punctual payment of indebtedness; petitioner ought to have read its terms before signing. As an accountable signatory, she should have observed prudence and personally indicated whether she was signing as representative, surety, or witness; it was unlikely that FEBTC officers would make her personally liable without her knowledge and authority. She failed to overcome the presumption that the ordinary course of business was followed. The CA’s finding that it was incredible for an experienced businesswoman to sign a blank instrument involving millions of dollars was apt. Since the USD 10 million loan was approved and released before the second set of documents, it was more sensible that the bank approved the loan upon her personal guarantee and execution of the first CSA. Any intent to deceive through concealment was negated when the FEBTC officers willingly presented the loan documents upon request, and a communication letter showed that petitioner knew and acknowledged that she and Lorenzo had acted as sureties of MTI’s loan. The existence of two documents was irrelevant because the original intention was that petitioner and Lorenzo, in their personal capacities, are co-sureties of MTI’s loan. Under Article 2047 of the Civil Code, a surety undertakes to be bound solidarily with the principal debtor; it would be absurd to conclude that petitioner signed the CSA as president of MTI because the borrower cannot at the same time be a guarantor or surety for its own loan. The CSA was a continuing guarantee until full payment. There was only one loan transaction, and FEBTC did not intend to collect from both loan documents. On damage, even if petitioner paid Php5,903,172.30, the payment was legally made pursuant to a valid and existing agreement she voluntarily entered into, so it did not constitute damage or prejudice. The SC also found no evidence that would constitute a prima facie case for estafa; while probable cause needs only evidence showing that, more likely than not, a crime was committed and was committed by the accused, no such evidence existed to engender a well-founded belief that estafa was committed.
• Authority of the DOJ Undersecretary: Petitioner contended that Undersecretary Gutierrez did not have the power or authority to overturn a Resolution of her superior, Secretary Tuquero. The SC stressed that when Undersecretary Gutierrez issued the first assailed Resolution on 7 September 2001, Secretary Tuquero was no longer the DOJ Secretary. When she issued the Resolution on petitioner’s Motion for Reconsideration on 17 March 2003, she was acting “for the Secretary,” who was then Secretary Simeon A. Datumanong. The assailed Resolutions were issued by Undersecretary Gutierrez for two different Secretaries of Justice on two different occasions by virtue of a delegated authority. The SC quoted that absent any allegation and proof of any acquired vested right, the discretion exercised by a former alter-ego cannot tie the hands of successors in office, since cabinet secretaries are mere projections of the Chief Executive. The presumption that an official duty has been regularly performed applied in favor of Undersecretary Gutierrez; omnia praesumuntur rite et solemniter esse acta. It was petitioner’s burden to overcome this juris tantum presumption, and mere allegations would not suffice without proof that Undersecretary Gutierrez did not have the authority at the time she issued the assailed Resolution. The SC also held that courts are not empowered to substitute their judgment for that of the Secretary of Justice, save only when rendered with grave abuse of discretion amounting to lack or excess of jurisdiction; it found no abuse, much less grave abuse of discretion.

• Probable Cause in Criminal Prosecution — A finding of probable cause needs only to rest on evidence showing that, more likely than not, a crime has been committed and was committed by the accused. The SC found no such evidence of estafa and no grave abuse of discretion in the DOJ resolutions.
• Estafa by Abuse of Confidence or Deceit — Estafa requires (1) that the accused defrauded another by abuse of confidence or by means of deceit, and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third person. The first element covers estafa with abuse of confidence, estafa by false pretenses or fraudulent acts, and estafa through fraudulent means. The SC found neither abuse of confidence nor deceit in the handling of the CSA and loan documents, and the payment was under a valid agreement, so no damage.
• Surety under Article 2047 — A surety undertakes to be bound solidarily with the principal debtor to assure the fulfillment of the obligation. The SC used this to treat Madrigal’s CSA as a personal surety undertaking and to reject the claim that she signed it as MTI president, since the borrower cannot be its own surety.
• Delegated Authority of DOJ Undersecretary — A DOJ Undersecretary may act under delegated authority for the Secretary; the discretion of a former alter-ego cannot bind successors absent vested right, and official duty is presumed regularly performed. The SC upheld Undersecretary Gutierrez’s resolutions because she acted for two different Secretaries and petitioner showed no lack of authority.
• Grave Abuse of Discretion in Probable Cause Review — Courts are not empowered to substitute their judgment for that of the Secretary of Justice except when rendered with grave abuse of discretion amounting to lack or excess of jurisdiction. The SC found none.

• “The elements of estafa in general are: 1) That the accused defrauded another (a) by abuse of confidence, or (b) by means of deceit; and 2) That damage or prejudice capable of pecuniary estimation is caused to the offended party or third person.” — The SC set out the two elements of estafa before applying them to the loan and surety documents.
• “It would therefore be absurd to conclude that petitioner signed the CSA in her capacity as president of MTI considering that the principle behind surety ship will be negated.” — The SC rejected Madrigal’s claim that the second CSA was signed in a corporate capacity, reasoning that a borrower cannot be its own surety.
• “Absent any allegation and proof of any acquired vested right, the discretion exercised by a former alter-ego cannot tie the hands of their successors in office, since cabinet secretaries are mere projections of the Chief Executive himself.” — The SC used this to uphold the Undersecretary’s reversal of a prior Secretary’s resolution.
• “[c]ourts are not empowered to substitute their judgment for that of the Secretary of Justice, save only when it was rendered with grave abuse of discretion amounting to lack or excess of jurisdiction.” — The SC applied this to affirm the DOJ’s probable-cause determination absent grave abuse of discretion.

• Philippine Charter Insurance Corporation vs. Central Colleges of the Philippines and Dynamic Planners and Construction Corporation, G.R. Nos. 180631-33, February 22, 2012 — Cited and followed for the rule that a surety undertakes to be bound solidarily with the principal debtor.
• PCGG vs. Jacobi, G.R. No. 155996, June 27, 2012 — Cited and followed for the rule that the discretion of a former alter-ego cannot bind successors in office absent vested right.
• Farolan vs. Solmac Marketing Corporation, G.R. No. 83589, March 13, 1991, 195 SCRA 168, 178-179 — Cited and followed for the presumption of regular performance of official duty and the burden to overcome it.
• RCL Feeders PTE., Ltd. vs. Perez, 487 Phil. 211, 222-223 (2004) — Cited and followed for the rule that courts cannot substitute their judgment for the Secretary of Justice absent grave abuse of discretion and for the probable-cause standard.

• Article 315, paragraphs 1(c), 2(a), 3(a), and 3(c), Revised Penal Code — The complaint charged estafa under these paragraphs. The SC analyzed the general elements of estafa and specifically found no probable cause under paragraph 1(c) (taking undue advantage of the offended party’s signature in blank) and paragraph 3(c) (removing, concealing, or destroying documents).
• Article 2047, Civil Code — A surety undertakes to be bound solidarily with the principal debtor; the SC used this to treat the CSA as a personal surety undertaking and to reject the claim that Madrigal signed it as MTI president.
• Rule 65, Rules of Court — The CA petition was filed under Rule 65 on grave abuse of discretion; the SC affirmed that the DOJ did not commit grave abuse of discretion.
• Rule 45, Rules of Court — The SC case was a Petition for Review on Certiorari under Rule 45; the SC denied it and affirmed the CA.