Reyes vs. Rossi

The rescission of a contract of sale does not constitute a prejudicial question warranting the suspension of criminal proceedings for violation of Batas Pambansa Blg. 22, because the offense is consummated upon the issuance and dishonor of a worthless check at a time when the contract is still valid and binding, and the subsequent extinguishment of the underlying obligation does not absolve the accused of criminal responsibility.

On October 31, 1997, petitioner Teodoro A. Reyes and Advanced Foundation Construction Systems Corporation, represented by its Executive Project Director, respondent Ettore Rossi, executed a deed of conditional sale for a Warman Dredging Pump worth ₱10,000,000.00. Reyes paid a ₱3,000,000.00 downpayment and agreed to pay the ₱7,000,000.00 balance through four post-dated checks. In January 1998, Reyes restructured the obligation, replacing the four original checks with nine post-dated checks totaling ₱7,125,000.00 to include monthly interest.

• The Conditional Sale and Restructuring: Petitioner Teodoro A. Reyes purchased a Warman Dredging Pump from Advanced Foundation Construction Systems Corporation, represented by respondent Ettore Rossi, for ₱10,000,000.00. After paying a ₱3,000,000.00 downpayment, Reyes issued four post-dated checks for the ₱7,000,000.00 balance. In January 1998, Reyes requested a restructuring of the obligation, prompting Advanced Foundation to return the original checks and accept nine new post-dated checks totaling ₱7,125,000.00, inclusive of interest.
• Dishonor of Checks: Rossi deposited five of the nine checks. Two checks were denied payment upon Reyes's instructions to stop payment, one was dishonored for insufficiency of funds, and two were returned stamped "Account Closed." The remaining three checks were not deposited, Rossi assuming they would be similarly dishonored.
• Civil Action for Rescission: On July 29, 1998, Reyes filed a complaint for rescission of contract and damages in the RTC of Quezon City. Reyes alleged that Advanced Foundation misrepresented the specifications of the pump's Caterpillar diesel engine and concealed several cracks through welding works, and that the seller failed to provide documentary proof of ownership despite demands.
• Criminal Charges: On September 8, 1998, Rossi charged Reyes with five counts of estafa and five counts of violation of Batas Pambansa Blg. 22 in the Makati City Prosecutor's Office, and one count of violation of BP 22 in the Quezon City Prosecutor's Office, all arising from the dishonored checks.

• Prejudicial Question: Petitioner argued that the civil action for rescission posed a prejudicial question because the extinguishment of the obligation to pay upon rescission would necessarily negate criminal liability under BP 22.
• Misapplication of Precedent: Petitioner maintained that the Court of Appeals erred in relying on Balgos, Jr. v. Sandiganbayan and Umali v. Intermediate Appellate Court due to factual dissimilarities with the present case.
• Grave Abuse of Discretion: Petitioner asserted that the Secretary of Justice committed no grave abuse of discretion in upholding the suspension of the criminal proceedings.
• Procedural Defect of CA Petition: Petitioner contended that Rossi's petition for certiorari in the Court of Appeals suffered fatal defects warranting immediate dismissal.

• No Prejudicial Question: Respondent countered that the rescission of contract did not pose a prejudicial question that would suspend the criminal proceedings, because the civil action's resolution would not determine the guilt or innocence of the accused under BP 22.
• Procedural Dismissal: Respondent argued that the petition for review should be dismissed outright due to fatal procedural defects.

• Prejudicial Question: Whether the civil action for rescission of the contract of sale raises a prejudicial question that requires the suspension of the criminal prosecution for violation of Batas Pambansa Blg. 22.

• Prejudicial Question: The rescission of contract does not constitute a prejudicial question. The elements of a prejudicial question under Section 7, Rule 111 of the Rules of Criminal Procedure require that the resolution of the civil issue determines whether or not the criminal action may proceed. The elements of BP 22—(1) the making, drawing, and issuance of any check to apply for account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment—are satisfied upon the issuance and dishonor of the check. Because a contract remains valid and subsisting until actually rescinded, the obligation to fund the checks existed at the time of dishonor. The subsequent rescission of the contract does not negate the commission of the offense, which was already consummated upon the dishonor of the worthless checks while the conditional sale was still fully binding.

• Prejudicial Question — A question 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. Two elements must concur: (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. Applied to hold that rescission of a contract does not satisfy the second element, because the resolution of the rescission does not determine the guilt or innocence of the accused under BP 22, the offense having been consummated prior to the rescission.

• "His obligation to fund the checks or to make arrangements for them with the drawee bank should not be tied up to the future event of extinguishment of the obligation under the contract of sale through rescission. Indeed, under Batas Pambansa Blg. 22, the mere issuance of a worthless check was already the offense in itself."
• "If, after trial on the merits in the civil action, Advanced Foundation would be found to have committed material breach as to warrant the rescission of the contract, such result would not necessarily mean that Reyes would be absolved of the criminal responsibility for issuing the dishonored checks because, as the aforementioned elements show, he already committed the violations upon the dishonor of the checks that he had issued at a time when the conditional sale was still fully binding upon the parties."

• Sabandal v. Tongco, G.R. No. 124498, October 5, 2001 — Followed. Cited for the requisites of a prejudicial question, specifically requiring that the resolution of the civil action must necessarily determine the guilt or innocence of the accused.
• Tan v. Mendez, Jr., G.R. No. 138669, June 6, 2002 — Followed. Cited for the elements of the offense of violation of Batas Pambansa Blg. 22.

• Section 7, Rule 111, 2000 Rules of Criminal Procedure — Sets forth the elements of a prejudicial question. Applied to determine that the rescission of contract did not satisfy the requisite that its resolution determines whether the criminal action may proceed.
• Article 1191, Civil Code — Recognizes the power to rescind obligations in reciprocal ones in case one obligor does not comply. Applied to demonstrate that rescission presupposes a valid contract until actually rescinded; thus, the obligation to pay subsisted at the time the checks were dishonored.
• Batas Pambansa Blg. 22 — The Bouncing Checks Law. Applied to establish that the mere issuance of a worthless check constitutes the offense, independent of the fate of the underlying obligation.

Sereno, C.J., Leonardo-De Castro, Villarama, Jr., Reyes (B.L.)