People vs. Arambulo

A pending intra-corporate case challenging the authority of the corporation’s directors and officers to act for it raises a prejudicial question in an estafa prosecution where the alleged offended party is the corporation and the validity of the demand for remittance depends on that authority; if the demander’s authority is defective, there is no valid demand and the estafa prosecution cannot prosper.

Anaped Estate Inc. was incorporated as part of the estate planning of the heirs of Spouses Pedro C. Reyes and Anastacia Reyes, or as a conduit to hold the estate properties for and in behalf of those heirs. Jose Buban served as its Vice-President and General Manager. The intra-corporate dispute concerns who may validly act for Anaped, a matter governed by Section 23 of the Corporation Code, which vests corporate powers in a board of directors elected by the stockholders.

Victoria R. Arambulo, Emerenciana R. Gungab, Reynaldo Reyes, Domingo Reyes, Rodrigo Reyes, and Oscar Reyes are the heirs of Spouses Pedro C. Reyes and Anastacia Reyes. For about twenty years, Victoria had been tasked with managing the real properties the Reyes siblings inherited from their parents and collecting rentals from them. Buban, as Vice-President and General Manager of Anaped, later filed a complaint for estafa against Victoria and her husband Miguel Arambulo, Jr. before the Office of the City Prosecutor of Caloocan City, alleging that Victoria failed to remit the rentals collected from the time ownership of the commercial apartments was transferred to Anaped.

On 24 April 2001, Assistant City Prosecutor Alvin A. Almora recommended the filing of an Information against respondents. On 1 June 2001, respondents were charged with estafa in an Information alleging that from December 1994 to June 1997 in Caloocan City, they conspired and mutually helped one another and, with unfaithfulness or abuse of confidence, after receiving rentals from IMF International Corporation in the total amount of ₱319,888.00 under the express obligation of turning over or remitting the same to Anaped Estate Incorporated, they misappropriated, misapplied, and converted the amount to their own personal use and benefit to the damage and prejudice of Anaped Estate, Inc.

On 14 April 2003, respondents filed a Motion to Suspend Proceedings on the ground of a prejudicial question in view of the pendency of two intra-corporate cases before the RTC of Quezon City and Makati City. SEC Case No. 05-97-5659 was a petition filed by Victoria’s brother Oscar for accounting of all corporate funds and assets of Anaped, annulment of sale, injunction, receivership, and damages. SEC Case No. 03-99-6259 was a petition filed by Victoria and her brothers Reynaldo and Domingo questioning the authority of their elder sibling Rodrigo Reyes and Emerenciana R. Gungab, as well as the Anaped Board of Directors and officers, including private complainant Buban, to act for and in behalf of the corporation. In their motion, respondents asserted that the resolution of the SEC cases in their favor, particularly the issues of whether the group of Rodrigo and Buban are the lawful representatives of the corporation and whether they are duly authorized to make a demand for remittance, would necessarily result in their acquittal in the criminal case.

On 28 August 2003, the RTC, through Presiding Judge Adoracion G. Angeles, granted the motion for suspension of the proceedings. The RTC reasoned that the issue in the SEC cases, who between the groups has the right to act for and in behalf of the corporation, had a direct link to the issue of the culpability of the accused for estafa. It stated that if the issues were resolved in respondents’ favor, they could not be held liable for misappropriation because they possessed the authority to collect rentals and hold the same on behalf of the firm, and they would be justified in not remitting the collections to the group of Jose Buban, who would then be deemed mere usurpers of authority.

Petitioner filed a Motion for Reconsideration. On 19 February 2004, the RTC set aside its 28 August 2003 Order and set the case for pre-trial, noting that respondents failed to file an opposition to the motion for reconsideration. Respondents filed an Omnibus Motion praying that they be allowed to file their Comment/Opposition to the motion for reconsideration and that the pre-trial be held in abeyance; they claimed that the Order to file comment/opposition was served on respondents themselves and not on their counsel. On 23 June 2004, the RTC denied respondents’ Omnibus Motion. It stressed that even if the order was served upon respondents and not upon their counsel, records showed that a copy of the motion for reconsideration was served by registered mail upon counsel, so counsel was well aware of its existence and could have taken the initiative to file his comment without waiting for any directive from the RTC.

Aggrieved, respondents filed a petition for certiorari before the CA asserting that the RTC committed grave abuse of discretion when it denied them the opportunity to file their comment; when it ruled that respondents’ counsel should have filed the comment as he was furnished a copy of the motion for reconsideration; and when it granted petitioner’s motion for reconsideration. The CA granted the petition and later denied petitioner’s motion for reconsideration, prompting petitioner to file this Petition for Review on Certiorari.

• Prejudicial Question: Petitioner argued that the CA erred in declaring that a prejudicial question existed, because any decision in the SEC cases on who are the lawful officers or directors of Anaped is not determinative of respondents’ liability to remit the rental collections to Anaped.
• Corporate Personality and Authority: Petitioner argued that a corporation has a personality distinct and separate from its individual stockholders; at the time the demand for remittance was made, Buban was an officer of Anaped and, until his authority was validly revoked, all his previous acts were valid and binding.
• Subsisting Duty to Remit: Petitioner argued that respondents’ duty to remit the collections still subsisted during the pendency of the SEC cases because the money remitted goes directly to the corporation and not to the person who demanded remittance.
• Defense, Not Suspension: Petitioner argued that the question of Buban’s authority to demand remittance may only be considered as a defense in the estafa case and not as a ground to suspend the proceedings.

• Prejudicial Question: Respondents asserted in their motion to suspend that the resolution of the SEC cases in their favor, particularly the issues of whether the group of Rodrigo and Buban are the lawful representatives of the corporation and whether they are duly authorized to make a demand for remittance, would necessarily result in their acquittal in the criminal case.
• Grave Abuse of Discretion: Respondents asserted in their certiorari petition that the RTC committed grave abuse of discretion when it denied them the opportunity to file their comment; when it ruled that respondents’ counsel should have filed the comment because he was furnished a copy of the motion for reconsideration; and when it granted petitioner’s motion for reconsideration.

• Prejudicial Question — SEC Case No. 03-99-6259: Whether the pendency of SEC Case No. 03-99-6259, which challenges the authority of Anaped’s directors and officers, including Buban, to act for the corporation, constitutes a prejudicial question that warrants suspension of the estafa proceedings.
• Prejudicial Question — SEC Case No. 05-97-5659: Whether the pendency of SEC Case No. 05-97-5659, an action for accounting, annulment of sale, injunction, receivership, and damages, constitutes a prejudicial question that warrants suspension of the estafa proceedings.

• Prejudicial Question — SEC Case No. 03-99-6259: Yes. The SEC case questions the authority of Anaped’s directors and officers, including Buban; if that authority is defective, there is no valid demand and the element of misappropriation may be absent, so the estafa case must be suspended.
• Prejudicial Question — SEC Case No. 05-97-5659: No. The accounting and annulment case does not determine guilt or innocence; even a ruling against respondents would not free them from criminal liability.

• Prejudicial Question — SEC Case No. 03-99-6259: The SC applied the definition of a prejudicial question and the elements under Section 7, Rule 111 of the 2000 Rules of Criminal Procedure: the previously instituted civil action must involve an issue similar or intimately related to the issue raised in the subsequent criminal action, and the resolution of that issue must determine whether the criminal action may proceed. The requisites are that the civil case involves facts intimately related to those upon which the criminal prosecution is based, that the resolution of the issue in the civil action necessarily determines the guilt or innocence of the accused, and that jurisdiction to try the question is lodged in another tribunal. The SC found that SEC Case No. 03-99-6259 met these requirements. The complaint there prayed for the nullification of the election of Anaped directors and officers, including Buban, and essentially raised the authority of those officers to act for and in behalf of the corporation. The estafa charge under Article 315, paragraph 1(b) of the Revised Penal Code required, among others, a demand by the offended party and misappropriation. Since the alleged offended party was the corporation, the validity of the demand rested upon the authority of the person making such demand on the company’s behalf. The SC relied on Omictin vs. Court of Appeals, where it was held that if the supposed authority of the person making the demand is defective, it is as if no demand was ever made, hence the prosecution for estafa cannot prosper. The SC also found that the resolution of the issue of misappropriation depended on SEC Case No. 03-99-6259: if the present Anaped directors and officers were not validly elected, Victoria may have every right to refuse remittance to Buban, and the essential element of misappropriation may be absent. The SC considered the CA’s finding that Victoria had been tasked for twenty years with the management and collection of rentals of the real properties the Reyes siblings inherited. Under Section 23 of the Corporation Code and Valle Verde Country Club, Inc. vs. Africa, corporate powers are exercised by a board of directors elected by the stockholders, and the legitimacy of decisions binding the corporation depends on a valid election. If respondents prevailed in SEC Case No. 03-99-6259, Buban could not demand remittance and Victoria would have no obligation to turn over the rentals to him; thus the result of that case would determine respondents’ innocence or guilt. The SC acknowledged that in a prosecution for estafa, demand is not necessary where there is evidence of misappropriation or conversion, and that “to misappropriate to one’s own use” includes every attempt to dispose of the property of another without right, but still the misappropriation issue in this case depended on the SEC case.
• Prejudicial Question — SEC Case No. 05-97-5659: Applying the prejudicial-question standard, the SC agreed with the CA that SEC Case No. 05-97-5659 did not present a prejudicial question. It was an action for accounting of all corporate funds and assets of Anaped, annulment of sale, injunction, receivership, and damages. Even if that case were decided against respondents, they would not be adjudged free from criminal liability, and it did not automatically follow that an accounting of corporate funds and properties and annulment of a fictitious sale of corporate assets would result in conviction in the estafa case.

• Prejudicial Question — A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal; it is based on a fact distinct and separate from the crime but so intimately connected with it that it determines the guilt or innocence of the accused. Section 7, Rule 111 of the 2000 Rules of Criminal Procedure requires that the previously instituted civil action involve an issue similar or intimately related to the issue raised in the subsequent criminal action, and that the resolution of such issue determine whether or not the criminal action may proceed. The requisites are: (1) the civil case involves facts intimately related to those upon which the criminal prosecution would be based; (2) in the resolution of the issue or issues raised in the civil action, the guilt or innocence of the accused would necessarily be determined; and (3) jurisdiction to try said question must be lodged in another tribunal. The SC applied this doctrine by holding that SEC Case No. 03-99-6259 qualified as a prejudicial question, while SEC Case No. 05-97-5659 did not.
• Demand by the Offended Party in Estafa — In estafa under Article 315, paragraph 1(b) of the Revised Penal Code, demand by the offended party is an element. When the alleged offended party is a corporation, the validity of the demand rests upon the authority of the person making such demand on the company’s behalf. If the supposed authority of the person making the demand is found to be defective, it is as if no demand was ever made, hence the prosecution for estafa cannot prosper. The SC applied this doctrine because Buban’s authority to demand remittance was precisely the issue in SEC Case No. 03-99-6259.
• Authority of Corporate Directors and Officers — Under Section 23 of the Corporation Code, corporate powers are exercised, business conducted, and property controlled and held by the board of directors or trustees elected from among the stockholders, who hold office for one year and until their successors are elected and qualified. The legitimacy of decisions binding the corporation depends on a valid election. The SC applied this doctrine by holding that if the Anaped directors and officers, including Buban, were not validly elected, Buban could not demand remittance and Victoria had no obligation to turn over the rentals to him.
• Misappropriation in Estafa — In a prosecution for estafa, demand is not necessary where there is evidence of misappropriation or conversion. The phrase “to misappropriate to one’s own use” includes not only conversion to one’s personal advantage, but also every attempt to dispose of the property of another without right. The SC applied this doctrine by recognizing the general rule but still holding that the resolution of the misappropriation issue in this case depended on SEC Case No. 03-99-6259.

• "A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal. It is a question based on a fact distinct and separate from the crime but so intimately connected with it that it determines the guilt or innocence of the accused, and for it to suspend the criminal action, it must appear not only that said case involves facts intimately related to those upon which the criminal prosecution would be based but also that in the resolution of the issue or issues raised in the civil case, the guilt or innocence of the accused would necessarily be determined." — This is the SC’s definition of a prejudicial question and the standard for suspending a criminal action.
• "If the supposed authority of the person making the demand is found to be defective, it is as if no demand was ever made, hence the prosecution for estafa cannot prosper." — The SC adopted Omictin’s rule that a defective authority by the corporate demander is equivalent to no demand at all.
• "In a prosecution for estafa, demand is not necessary where there is evidence of misappropriation or conversion." — The SC recognized the general rule that demand may be dispensed with when misappropriation or conversion is shown, but still found the misappropriation issue here dependent on the SEC case.
• "Verily, the result of SEC Case No. 03-99-6259 will determine the innocence or guilt of respondents in the criminal case for estafa." — The SC concluded that the SEC case on the authority of Anaped’s directors and officers would determine respondents’ guilt or innocence in the estafa case.

• Omictin vs. Court of Appeals, G.R. No. 148004, 541 Phil. 68, 79 (2007) — Controlling precedent for the rule that when the offended party is a corporation, the validity of the demand rests on the authority of the person making it; defective authority means no demand and no estafa.
• Valle Verde Country Club, Inc. vs. Africa, 614 Phil. 390, 400 (2009) — Relied on for the policy that corporate business and affairs must be governed by a board elected by stockholders, and that the shareholder vote legitimizes the exercise of power by directors or officers over properties they do not own.
• Pimentel vs. Pimentel, 645 Phil. 1, 6 (2010) — Cited for the definition of prejudicial question.
• Sabandal vs. Tongco, 419 Phil. 13, 17 (2001) — Cited for the requisites of a prejudicial question.
• Jandusay vs. People, G.R. No. 185129, June 17, 2013, 698 SCRA 619, 625 — Cited for the elements of estafa under Article 315, paragraph 1(b).
• Lee vs. People, 495 Phil. 239, 250 — Cited for the rule that demand is not necessary in estafa where there is evidence of misappropriation or conversion.
• Quinto vs. People, 365 Phil. 259, 270 (1999) — Cited for the meaning of “to misappropriate to one’s own use.”

• Section 7, Rule 111, 2000 Rules of Criminal Procedure — The elements of a prejudicial question are: (a) the previously instituted civil action involves an issue similar or intimately related to the issue raised in the subsequent criminal action, and (b) the resolution of such issue determines whether or not the criminal action may proceed. The SC applied this provision by holding that SEC Case No. 03-99-6259 met the elements while SEC Case No. 05-97-5659 did not.
• Article 315, paragraph 1(b), Revised Penal Code — Estafa with abuse of confidence has the following elements: (1) the money, goods, or other personal property is received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; (2) there is misappropriation or conversion of such money or property by the offender, or denial on his part of such receipt; (3) such misappropriation or conversion or denial is to the prejudice of another; and (4) there is demand by the offended party to the offender. The SC applied this provision by holding that the demand and misappropriation issues depended on SEC Case No. 03-99-6259.
• Section 23, Corporation Code — Corporate powers are exercised, all business conducted, and all property controlled and held by the board of directors or trustees elected from among the stockholders, who hold office for one year and until their successors are elected and qualified. The SC applied this provision by holding that the authority of Anaped’s board and officers, including Buban, was central to SEC Case No. 03-99-6259 and to the validity of the demand for remittance.