Soriano vs. People

A bank officer who indirectly secures a loan from his own bank using a dummy borrower, without complying with DOSRI requirements, violates Section 83 of RA 337 and may simultaneously be prosecuted for estafa through falsification of commercial documents, as the fraudulent loan documents do not negate the DOSRI violation and the officer holds the proceeds in a fiduciary capacity.

The case involves the enforcement of banking regulations designed to protect depositors and the banking system from overborrowing by bank insiders. Section 83 of RA 337 (the General Banking Act) prohibits directors, officers, stockholders, and related interests (DOSRI) from borrowing bank funds without written board approval, proper recording, and reporting to the Superintendent of Banks.

• BSP Office of Special Investigation (OSI) transmitted a letter with affidavits to the DOJ requesting preliminary investigation against Soriano
• State Prosecutor Fonacier conducted preliminary investigation and issued a Resolution finding probable cause
• Filed two Informations before the RTC of Malolos, Bulacan:
  • Criminal Case No. 237-M-2001: Estafa through falsification of commercial documents
  • Criminal Case No. 238-M-2001: Violation of Section 83 of RA 337 (DOSRI law)
  • Soriano filed a Motion to Quash both informations (denied by RTC in Orders dated August 8, 2001 and September 5, 2001)
  • Soriano filed a Petition for Certiorari with the CA (denied in Decision dated September 26, 2003 and Resolution dated February 5, 2004)
  • Soriano filed a Petition for Review on Certiorari with the SC

• Soriano was the President of Rural Bank of San Miguel (Bulacan), Inc. (RBSM)
• BSP OSI transmitted a letter to the DOJ Chief State Prosecutor attaching five affidavits alleging that Soriano ordered, facilitated, and received the proceeds of an P8 million loan ostensibly in the name of spouses Enrico and Amalia Carlos, who had never applied for nor received such loan
• The loan was never authorized by the RBSM Board of Directors and no report was transmitted to the BSP
• The Information for estafa alleged that Soriano, taking advantage of his position, falsified loan documents to make it appear Carlos applied for the loan, secured the P8 million proceeds, and converted them to personal use, causing damage to RBSM, its creditors, BSP, and PDIC
• The Information for DOSRI violation alleged that Soriano indirectly borrowed P8 million from RBSM using Carlos' name without written board approval, without entering the transaction in the bank's records, and without transmitting a copy to the supervising department, converting the amount to personal use

• The BSP letter to the DOJ was the "complaint" and was defective for failure to comply with Section 3(a), Rule 112 (not subscribed under oath, no address stated) and Section 18(c) and (d) of RA 7653 (no authority from BSP Governor or Monetary Board to file complaint)
• The offenses of DOSRI violation and estafa are inherently incompatible: DOSRI presupposes ownership of the loaned money (which cannot be converted), while estafa requires holding money in trust (which negates a loan relationship)
• A petition for certiorari under Rule 65 is the proper remedy against an order denying a motion to quash
• Entitled to a writ of injunction to prevent the trial from proceeding

• The BSP letter was merely a transmittal/cover letter; the attached affidavits constituted the complaint-affidavit and were duly subscribed and sworn to before a notary public
• The two offenses are separate and distinct; the test for a motion to quash is whether the facts alleged, if hypothetically admitted, constitute the elements of the offense charged
• Certiorari is not the proper remedy to assail the denial of a motion to quash; the proper procedure is to enter a plea, go to trial, and appeal an adverse decision

• Procedural Issues:

  • Whether the complaint complied with the mandatory requirements under Section 3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of RA 7653
  • Whether a petition for certiorari under Rule 65 is the proper remedy against an order denying a motion to quash
  • Whether petitioner is entitled to a writ of injunction

• Substantive Issues:

  • Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of RA 337) could also be the subject of estafa under Article 315(1)(b) of the Revised Penal Code

• Procedural: The BSP letter was a mere transmittal letter, not the complaint itself. The attached affidavits, which were subscribed and sworn to before a notary public, initiated the preliminary investigation and complied with Section 3(a), Rule 112. The BSP did not institute the complaint but merely transmitted the affidavits of complainants to the DOJ; thus, Section 18(c) and (d) of RA 7653 did not apply. As estafa is a public crime, it may be initiated by "any competent person" with personal knowledge of the acts committed.
• Procedural: Certiorari is not the proper remedy to assail the denial of a motion to quash. The proper procedure is for the accused to enter a plea, go to trial without prejudice to presenting the special defenses raised in the motion to quash, and if an adverse decision is rendered, to appeal therefrom.
• Procedural: No basis to issue an injunctive writ. The requisites—clear legal right, material invasion of right, and urgent necessity to prevent serious damage—were not established.
• Substantive: Yes. The theory that the two offenses are mutually exclusive is based on false premises. Soriano did not become the owner of the P8 million because the loan was fraudulent; he obtained it through falsification of documents to make it appear Carlos applied for it. As bank president, he held the money in trust or administration for the bank in a fiduciary capacity, making the proceeds capable of misappropriation or conversion. Section 83 of RA 337 broadly covers direct and indirect borrowing, including loans made using dummies. A contrary interpretation would allow DOSRIs to circumvent the law by using dummies.

• DOSRI Law (Section 83 of RA 337, as amended by PD 1795) — Prohibits directors/officers from borrowing bank deposits or funds, directly or indirectly, without written approval of the majority of directors (excluding the director concerned), entry in the records, and transmission of a copy to the Superintendent of Banks. Elements:
• The offender is a director or officer of a banking institution
• The offender, either directly or indirectly, for himself or as representative/agent of another, borrows bank funds/deposits, becomes a guarantor/indorser/surety for loans, or becomes an obligor for money borrowed from/loaned by the bank
• The offender performed such acts without the written approval of the majority of the directors of the bank, excluding the director concerned
• Indirect Borrowing — Covers loans to third parties where the DOSRI has a stake in the transaction, including situations where the DOSRI uses a dummy borrower to conceal his identity as the true beneficiary of the loan.
• Fiduciary Duty of Bank Officers — Bank directors and officers bear a fiduciary relationship to the corporation and its stockholders, and hold bank funds in trust or administration. They cannot use bank assets for personal benefit except as permitted by law.
• Test for Motion to Quash (Hypothetical Admission) — In considering a motion to quash on the ground that facts charged do not constitute an offense, the test is whether the facts alleged, if hypothetically admitted, would establish the essential elements of the offense charged. Facts constituting the defense must be proved during trial, not raised in a motion to quash.
• Complaint for Preliminary Investigation — A complaint may consist of sworn affidavits attached to a transmittal letter from a government agency. The transmittal letter itself need not comply with Section 3(a), Rule 112 if it merely summarizes attached affidavits and does not contain averments of personal knowledge of the offense.
• Public Crimes — Offenses that can be prosecuted de oficio may be initiated by "any competent person" with personal knowledge of the acts committed by the offender.

• "A bank officer violates the DOSRI law when he acquires bank funds for his personal benefit, even if such acquisition was facilitated by a fraudulent loan application."
• "Directors, officers, stockholders, and their related interests cannot be allowed to interpose the fraudulent nature of the loan as a defense to escape culpability for their circumvention of Section 83 of Republic Act (RA) No. 337."
• "The bank money... was money held in trust or administration by him for the bank, in his fiduciary capacity as the President of said bank."
• "Section 83... covers loans by a bank director or officer... made either: (1) directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of others."
• "A contrary interpretation will effectively allow a DOSRI to use dummies to circumvent the requirements of the law."

• Soriano v. Hon. Casanova (G.R. No. 163400, March 31, 2006) — Controlling precedent holding that BSP transmittal letters with attached sworn affidavits comply with Rule 112 requirements; the affidavits, not the letter, initiate preliminary investigation.
• Santos-Concio v. Department of Justice (G.R. No. 175057, January 29, 2008) — Adopted and elaborated upon the ruling in Soriano v. Casanova, affirming that affidavits attached to referral/transmittal letters are sufficient for preliminary investigation.
• Soriano v. People (G.R. Nos. 159517-18, June 30, 2009) — Involving the same petitioner and similar facts; held that informations for DOSRI violation and estafa through falsification were sufficient and not mutually exclusive.
• Go v. Bangko Sentral ng Pilipinas (G.R. No. 178429, October 23, 2009) — Enumerated the elements of DOSRI law violation and emphasized the broad coverage of the prohibition to protect depositors.
• People v. Concepcion (44 Phil. 126) — Historical authority defining indirect borrowing under the DOSRI law.

• Section 83 of RA 337 (General Banking Act), as amended by PD 1795 — Prohibits DOSRI borrowing without board approval and reportorial requirements; defines the offense charged in Criminal Case No. 238-M-2001.
• Article 315(1)(b) of the Revised Penal Code — Defines estafa with unfaithfulness or abuse of confidence; applied to the charge of converting loan proceeds held in fiduciary capacity.
• Article 172 of the Revised Penal Code — Falsification by private individuals; cited in relation to the estafa charge involving falsified loan documents.
• PD 1689 — Increases penalties for certain forms of estafa; cited in relation to the estafa charge.
• Section 3(a), Rule 112 of the Rules of Court — Requirements for complaint-affidavit; held substantially complied with by the attached sworn affidavits.
• Section 18(c) and (d) of RA 7653 (New Central Bank Act) — Provisions regarding authority to file complaints; held inapplicable because the BSP merely transmitted affidavits rather than instituted the complaint.