Nanzan vs. People

A conviction for other deceits under Article 318 of the RPC may stand under the variance rule where the accused was charged with estafa under Article 315, paragraph 2(a), because Article 318 is necessarily included in that charge; the elements of Article 318 are satisfied when false representations as to the source of loan payment induced the complainant to release funds and the accused never remitted the proceeds.

Article 318 of the RPC is the catch-all provision for deceits not covered by Articles 315 to 317, while Article 315, paragraph 2(a), is the estafa provision under which Nanzan was originally charged. Oaña Credit Solutions, Inc. is the private complainant in the criminal case.

Nanzan and Rodella Alterado applied for a bridge financing loan with Oaña Credit Solutions, Inc. in the amount of PHP 2,565,325.00. Nanzan was the registered owner of a property covered by Transfer Certificate of Title No. 057-2013005908, which was mortgaged to Adoracion Belo. Nanzan and Rodella explained to Oaña Credit that they needed the loan to secure the release of the mortgage and to facilitate its sale to Rodella. They misrepresented that Rodella and her husband, Frederick Alterado, had a pre-approved loan with PS Bank in the amount of PHP 2,900,000.00. Rodella executed a document authorizing the credit investigator of Oaña Credit to verify this fact, and after inquiries, Vanessa Misa, a PS Bank supervisor, confirmed the existence of a pre-approved loan in favor of spouses Alterado.

The Loan Agreement was then executed with Nanzan as borrower, Oaña Credit as lender, and spouses Alterado as beneficiaries, with Rodella acting as Frederick’s attorney-in-fact. The loan agreement provided that the debt would be paid from the proceeds of the pre-approved loan with PS Bank. Rodella agreed that the loan proceeds would go directly to Nanzan, who would then turn over the same to Oaña Credit. Oaña Credit released the loan amount to Nanzan.

Eventually, the PS Bank loan proceeds were released to spouses Alterado, who conveyed the same to Nanzan. Nanzan then executed a Deed of Assignment of Loan Proceeds in favor of Oaña Credit. However, Oaña Credit never received the loan proceeds, prompting it to demand payment from Nanzan. In response, Nanzan wrote a PS Bank check to Oaña Credit, but the check was dishonored for “insufficient fund.” The final demand letter sent by Oaña Credit remained unheeded, which led to the filing of the Information docketed as Crim. Case No. 15-534, alleging that the offense was committed on June 27, 2013, or sometime prior or subsequent thereto.

Upon arraignment, Nanzan refused to enter a plea, so the RTC entered a plea of “not guilty” for her. Mediation efforts to settle the civil liability failed, and the case was re-raffled to Branch 62 where trial ensued. After the prosecution presented its evidence, Nanzan filed a demurrer to evidence, which the RTC denied in its January 23, 2018 Joint Order for lack of merit. Nanzan then moved for the inhibition of the presiding judge, and the case was re-raffled anew to Branch 138. When the case was set for the defense to present evidence, Nanzan, through counsel, manifested that she was waiving her right to present evidence because doing so would be inconsistent with her position that she was only civilly liable.

The RTC found that Nanzan made a fraudulent misrepresentation that the bridge financing loan would be paid from the PS Bank loan proceeds; that Oaña Credit relied on this representation; that the PS Bank loan proceeds were never turned over; and that Oaña Credit was prejudiced in the amount of PHP 2,565,325.00. The RTC also found that the real estate mortgage was never formally offered and was not on record, and that Nanzan waived her right to present evidence. The CA likewise found that the real estate mortgage was not substantiated because Nanzan did not present the instrument, and that its existence would not alter the fact that she employed deceit to secure the loan.

• Overlooked Facts: Petitioner argued that the CA sustained her conviction by ignoring and glossing over the existence of the real estate mortgage, and that facts of weight and substance were overlooked, misapprehended, or misapplied.
• Real Estate Mortgage as Defense: Petitioner argued that the real estate mortgage, if duly considered, would negate her criminal liability and show that she was only civilly liable.
• Proof of Real Estate Mortgage: Petitioner maintained that the presentation of the real estate mortgage itself was unnecessary because its contents were not in issue; substitutionary evidence could prove its existence, and the Loan Agreement itself referenced the mortgage in its provisions.

• Other Deceits under Article 318: Whether the CA erred in finding petitioner Nanzan guilty of other deceits under Article 318 of the RPC.

• Other Deceits under Article 318: No. The CA correctly found Nanzan guilty of other deceits under Article 318; Article 318 is necessarily included in the Article 315, paragraph 2(a) charge, and the elements of other deceits were proved.

• Other Deceits under Article 318: The SC reiterated that only questions of law may be entertained in a petition for review on certiorari under Rule 45, and that an examination of questions of fact is allowed only in exceptional circumstances; the determination of whether the elements of the crimes charged exist is a question of fact. Nanzan sought to overturn the lower courts’ findings on the ground that facts of weight and substance were overlooked, misapprehended, or misapplied, specifically that the CA ignored the existence of the real estate mortgage. The SC held that her thesis could not pass judicial muster. Under Rule 132, Section 34, no evidence not formally offered shall be considered, and the real estate mortgage was never offered as evidence and was not on record. Even assuming that a real estate mortgage existed as referenced in the Loan Agreement, its contents would still have to be examined because Nanzan claimed that Oaña Credit relied on the mortgage rather than her representations; but she offered no proof of its terms or whether it sufficiently covered the loan. The burden of evidence shifted to Nanzan once the prosecution established that Oaña Credit was induced by the promise of the PS Bank loan proceeds, and instead of rebutting this, she waived her right to present evidence. On the merits, the SC held that Article 318 is broad in application and is intended as a catch-all provision to cover all other kinds of deceit not falling under Articles 315, 316, and 317. To sustain a conviction under Article 318, the following elements must be proved: (a) the accused makes a false pretense, fraudulent act or pretense other than those in Articles 315, 316, and 317; (b) such false pretense, fraudulent act or pretense was made or executed prior to or simultaneously with the commission of the fraud; and (c) as a result, the offended party suffered damage or prejudice. It is likewise essential that such false statement or fraudulent representation constitutes the very cause or the only motive for the complainant to part with their property. All the elements obtained. Nanzan, in connivance with spouses Alterado, made overt misrepresentations to Oaña Credit that the payment of the bridge financing loan would be sourced from the proceeds of the pre-approved loan of spouses Alterado with PS Bank, and this payment scheme was integrated into the Loan Agreement. The falsity materialized when Nanzan received the PS Bank proceeds but never relayed them to Oaña Credit despite the Deed of Assignment of Loan Proceeds and due demand; worse, she issued a check that was dishonored for “insufficient fund,” which may be appreciated as further indicia that she never intended to pay. It was by virtue of these false pretenses made during the application process that Oaña Credit agreed to extend the loan and disburse the sum to Nanzan. These machinations resulted in damage and prejudice to Oaña Credit in the amount of PHP 2,565,325.00, and the prosecution proved that Nanzan’s misrepresentation was the very cause why Oaña Credit granted the loan. Nanzan’s claim that the real estate mortgage was a secondary motive was never proven as a fact, and there was nothing on record to bolster it. The CA committed no reversible error in sustaining the conviction and in imposing a straight penalty of two months and one day to four months of arresto mayor in its medium period, and a fine equal to the damages suffered by Oaña Credit in the amount of PHP 2,565,325.00, as Article 318 expressly provides for arresto mayor and a fine of not less than the amount of the damage caused and not more than twice such amount. The SC acknowledged that the result appeared harsh but held that when the language of the law is clear and explicit, there is no room for interpretation, only application; dura lex sed lex. The SC clarified that the fine is wholly separate and distinct from the civil indemnity awarded by the RTC, which appeared to have been omitted in the fallo of the CA Decision. A fine is a distinct penalty imposed by law, whether straight or alternative, while civil indemnity is monetary restitution or compensation to the victim for the damage or infraction done by the accused and covers only the civil aspect. A fine under the RPC is criminal in nature and may be classified as afflictive, correctional, or light, depending on the imposable amount; civil indemnity is civil in nature. A fine may be extinguished by an Executive pardon, but the same shall not exempt the accused from paying civil indemnities; civil indemnity may be extinguished in the same manner as obligations under the Civil Code or by the express waiver of the offended party, but the waiver shall not extinguish the criminal action. Nanzan remains liable to pay civil indemnity to Oaña Credit in the form of actual damages. Because the underlying obligation is a loan, compensatory interest may be awarded at the stipulated rate from the date of judicial or extrajudicial demand until full payment; however, when the stipulated rate of 3.75% per month is unconscionable, the SC may adjust it to the prevailing legal interest rate of 6% per annum. There was proof of extrajudicial demand on September 24, 2013, which shall serve as the reckoning point for the applicable interest. The SC withheld the imposition of interest on interest as a penalty because Oaña Credit did not appeal the civil aspect of the decisions of the courts a quo, and it is the private complainant who must preserve their interest in the civil aspect of a criminal case. The fine imposed by the CA, unlike the civil indemnity awarded by the RTC, shall not earn interest because a fine is not considered a civil liability from which an award of interest may spring. The consequence of failure to pay the fine is subsidiary imprisonment under Article 39 of the RPC. Finally, the SC found itself disturbed by the resulting imposition on Nanzan following a strict application of Article 318, which exacted from her the amount of PHP 2,565,325.00 twice over, but it was bound to apply the letter of the law lest it invade the exclusive sphere of the legislature in defining crimes and prescribing their corresponding penalties. Nevertheless, Article 5 of the RPC allows the SC to make a recommendation to the Executive for the exercise of clemency or a reduction of the penalty, and the SC formally recommended that Nanzan’s sentence be partially reduced or pardoned by the removal of the imposable fine in order that she be subjected to imprisonment only, as well as the payment of the civil indemnity to Oaña Credit.

• Only Questions of Law under Rule 45 — A petition for review on certiorari under Rule 45 may entertain only questions of law, and factual review is allowed only in exceptional circumstances; the determination of whether the elements of a crime exist is a question of fact. The SC noted this rule at the outset of its analysis.
• Variance Doctrine — Under Section 4, Rule 120 of the Revised Rules of Criminal Procedure, when the offense charged includes the offense proved, the accused may be convicted of the offense proved. The SC applied it because Article 318 is necessarily included in a charge under Article 315, paragraph 2(a), so Nanzan could be convicted of other deceits despite being charged with estafa.
• Other Deceits under Article 318 — Article 318 is a catch-all provision covering deceits not falling under Articles 315, 316, and 317. The elements are: (a) the accused makes a false pretense, fraudulent act, or pretense other than those in Articles 315, 316, and 317; (b) it is made prior to or simultaneously with the fraud; and (c) the offended party suffers damage or prejudice. The false statement must also be the very cause or the only motive for the complainant to part with property. The SC found all elements present.
• Formal Offer of Evidence — No evidence not formally offered shall be considered. The SC applied this to disregard the real estate mortgage because Nanzan never offered it as evidence and it was not on record.
• Burden of Evidence — The burden of proof never shifts from the prosecution in criminal cases, but the burden of evidence to rebut a fact in issue shifts to the accused once the prosecution establishes that fact. The SC applied this after the prosecution showed Oaña Credit was induced by the promise of PS Bank proceeds; Nanzan had to rebut this but waived evidence.
• Fine vs. Civil Indemnity — A fine is a criminal penalty, whether straight or alternative, while civil indemnity is civil restitution or compensation. A fine may be extinguished by executive pardon but not the civil indemnity; a fine does not earn interest, while civil indemnity may. The SC applied this to uphold the fine separately from actual damages.
• Unconscionable Stipulated Interest — Compensatory interest on a loan may be awarded at the stipulated rate from demand, but an unconscionable stipulated rate may be adjusted to the legal rate of 6% per annum. The SC applied this to the 3.75% per month stipulation.
• Subsidiary Imprisonment — Under Article 39 of the RPC, failure to pay a fine subjects the convict to subsidiary imprisonment at one day for each amount equivalent to the highest minimum wage rate, not exceeding one-third of the imposed arresto mayor, with no fraction of a day counted. The SC applied this in the dispositive portion.
• Judicial Recommendation for Clemency — Article 5 of the RPC allows the SC to recommend executive clemency or reduction of penalty. The SC recommended partial reduction or pardon by removing the fine, leaving imprisonment and civil indemnity.

• "[t]he court shall consider no evidence which has not been formally offered." — The SC used this rule to reject Nanzan’s reliance on the real estate mortgage, which was never formally offered and was not on record.
• "To sustain a conviction under Article 318, the following elements must be proved: (a) the accused makes a false pretense, fraudulent act or pretense other than those in Articles 315, 316, and 317; (b) such false pretense, fraudulent act or pretense was made or executed prior to or simultaneously with the commission of the fraud; and (c) as a result, the offended party suffered damage or prejudice." — This is the SC’s statement of the elements of other deceits, which it applied to Nanzan’s misrepresentation about the PS Bank loan proceeds.
• "It is likewise essential that such false statement or fraudulent representation constitutes the very cause or the only motive for the complainant to part with their property." — The SC used this causation requirement to reject Nanzan’s claim that the real estate mortgage, rather than her representation, induced Oaña Credit to grant the loan.
• "A fine is a distinct penalty imposed by law, whether straight or alternative; whereas civil indemnity is "awarded to the offended party as a kind of monetary restitution or compensation to the victim for the damage or infraction that was done to the latter by the accused, which in a sense only covers the civil aspect."" — The SC used this distinction to hold that the fine is separate from the civil indemnity and does not earn interest.

• Osorio vs. People, 834 Phil. 768 (2018) — Relied on for the rule that Article 318 is necessarily included in a charge under Article 315, paragraph 2(a), and for the elements of other deceits.
• Marcos vs. People, G.R. No. 252839, November 10, 2021 — Relied on for the requirement that the false statement or fraudulent representation be the very cause or the only motive for the complainant to part with property.
• Corpuz vs. People, 734 Phil. 353 — Relied on for the distinction between a fine as a criminal penalty and civil indemnity as civil restitution or compensation.
• Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc., G.R. No. 225433, September 20, 2022 — Relied on for the rules on compensatory interest on loans and the adjustment of unconscionable stipulated rates to the legal rate.
• People vs. Dapitan, G.R. No. 253975, September 27, 2021 — Relied on for the rule that a fine is not a civil liability from which interest may spring.
• Sioland Development Corp. vs. Fair Distribution Center Corp., G.R. No. 199539, August 9, 2023 — Relied on for the rule that the private complainant must preserve its interest in the civil aspect of a criminal case.
• Revilla vs. Sandiganbayan (First Division), 837 Phil. 17 (2018) — Relied on for the rule that when the language of the law is clear and explicit, there is no room for interpretation, only application.
• People vs. Estoista, 93 Phil. 647 (1953) — Relied on for the SC’s authority under Article 5 of the RPC to recommend executive clemency or reduction of penalty.

• Article 318, Revised Penal Code — Defines and penalizes other deceits; the SC applied it as the catch-all provision and as the basis for Nanzan’s conviction, with the penalty of arresto mayor and a fine of not less than the damage caused and not more than twice such amount.
• Article 315, paragraph 2(a), Revised Penal Code — The original charge of estafa; the SC held that Article 318 is necessarily included in this charge, allowing conviction under Article 318 under the variance rule.
• Section 4, Rule 120, Revised Rules of Criminal Procedure — The variance rule; the SC applied it because the offense proved, other deceits, is included in the offense charged, estafa under Article 315, paragraph 2(a).
• Rule 132, Section 34, Revised Rules on Evidence — No evidence not formally offered shall be considered; the SC applied it to exclude the real estate mortgage.
• Rule 131, Section 1, Revised Rules on Evidence — The burden of proof rule; the SC cited it in holding that the burden of evidence shifted to Nanzan to rebut the prosecution’s showing that Oaña Credit was induced by the promise of PS Bank proceeds.
• Article 39, Revised Penal Code — Subsidiary imprisonment for failure to pay a fine; the SC applied it in the dispositive portion.
• Article 38, Revised Penal Code — Order of preference for pecuniary liabilities; the SC applied it if Nanzan’s properties are insufficient to cover the fine and civil indemnity.
• Article 5, Revised Penal Code — Recommendation for clemency or reduction of penalty; the SC used it to recommend partial reduction or pardon by removing the fine.
• Articles 25 and 26, Revised Penal Code — Classification of penalties and fines; the SC cited them to explain that a fine is criminal in nature and may be afflictive, correctional, or light.
• Articles 100, 104, 36, 112, and 23, Revised Penal Code — Civil liability and extinction rules; the SC cited them to distinguish civil indemnity from a fine and to explain their separate extinction.