TOPIC: Who may conduct determination of existence of probable cause

The determination of probable cause for the filing of an information in court is an executive
function which pertains at the first instance to the public prosecutor and then to the Secretary of
Justice

Manila Electric Company, represented by Manolo C. Fernando vs. Vicente Atilano,

Nazaar Luis, Jocelyn Dela Dingco, Sharon See Vicente, and John Does
G.R. No. 166758, 27 June 2012

Facts:
On April 16, 2001, MERALCO filed a complaint for estafa, under Article 315,
paragraphs 1(a), 1(b) and 2(a) of the Revised Penal Code, against the officers of Corporate
Investments Philippines, Inc. (CIPI). MERALCO alleged that in 1993, MERALCO started
investing in commercial papers (CPs) through CIPI. As of May 2000, MERALCOs investment
with CIPI already amounted to P75,000,000.00. At various points in time, MERALCO delivered
funds to the respondents for investment in CPs and government securities (GS). Sometime in
May 2000, respondent Atilano, who was at that time the President of CIPI, conveyed to Manuel
Lopez, MERALCOs President, that CIPI was facing liquidity problems. Lopez agreed to extend
help to CIPI by placing investments through CIPI, on the condition that CIPI would secure these
investments with GS and CPs issued by the Lopez Group of Companies (Lopez Group). Pursuant
to this agreement, Fernando, who was at that time the Head of MERALCOs Treasury Operations
Group, and respondent Vicente, who was the Assistant Manager of CIPIs Funds Management
Group, allegedly entered into the following transactions:

1.) Investment: 20,000,000; Term 30 Days; Securities: GS and CP’s of Lopes Group
2.) Investment: 45,000,000; Term: 30 Days; Securities: CP’s of Rockwell and Benpres Corp.

MERALCO further alleged that it informed CIPI of its requirement to have the above-
listed securities delivered to it within twenty-four (24) hours after the transaction, which CIPI
failed to deliver despite repeated demands. Contrary to its specific instructions, MERALCO
alleged that CIPI diverted MERALCOs funds by placing the investments in CIPIs own
promissory notes (PNs) and in CPs of companies that are not members of the Lopez Group such
as the investment of MERALCOs funds amounting to P10,000,000.00 in Pilipino Telephone
Corporation CPs.

On June 8, 2000, following CIPIs alleged failure to deliver the subject securities within
the period agreed upon, Fernando instructed Manolo Carpio and another staff of MERALCO’s
Treasury Operations Group to proceed to CIPIs office and demand the proper documentation of
the subject transactions. Fernando followed his staff and met with respondent Luis who was at
that time the Vice-President and General Counsel of CIPI. According to Fernando, respondent
Atilano called him during the meeting to reiterate CIPIs liquidity problems, and to assure him
that it was only temporary. He said that respondent Atilano promised to correct the irregularities
committed by CIPI by making changes in MERALCOs investment portfolio. MERALCO said
that the proposed changes in its investment portfolio, as promised by respondent Atilano, are
reflected in the Minutes of the June 8, 2000 Meeting.
The Minutes were signed by respondent Luis and they indicated that the meeting was
attended by Fernando, Felix C. de Guzman, Manolo D. Carpio and Malou M. Manlugon, on
MERALCOs part, and by respondents Luis and Dela Dingco on CIPIs part. However,
notwithstanding the agreed deadline of June 9, 2000, CIPI allegedly failed to fulfill its
undertaking.

MERALCO’s Contention:
MERALCO argued that the respondents should be held liable for estafa under Article
315, paragraphs 1(a), 1(b) and 2(a) of the Revised Penal Code for falsely pretending that they
possess power, influence and qualifications to buy CPs of the Lopez Group and/or GS as agreed
upon. MERALCO averred that it entrusted the subject investments to CIPI because of CIPIs
commitment to comply with the condition that the investments would be secured by GS and/or
CPs issued by a Lopez Group company. MERALCO maintained that by substituting the required
securities with PNs of CIPI and CPs of non-Lopez Group companies, the respondents are guilty
of converting and misappropriating the subject funds to the prejudice of MERALCO.

Office of the Prosecutor:

Prosecutor Dennis R. Pastrana dismissed MERALCO’s complaint for insufficiency of
evidence. According to Pastrana, the transaction between MERALCO and CIPI was a money
market transaction partaking of a loan transaction whose nonpayment does not give rise to any
criminal liability for estafa through misappropriation or conversion. Prosecutor Pastrana ruled
that in a money market placement, the remedy of an unpaid investor (MERALCO) is to institute
a civil action for recovery against the middleman or dealer (CIPI) and not a criminal action, such
as the present recourse.

MERALCO moved to reconsider Prosecutor Pastrana’s resolution but the latter denied the
motion in a resolution dated May 8, 2002. On June 3, 2002, MERALCO filed a petition for
review before the Department of Justice (DOJ).

DOJ:
DOJ Secretary Ma. Merceditas N. Gutierrez dismissed the petition in accordance with
Section 12(c), in relation to Section 7, of Department Circular No. 70. The Secretary of Justice
ruled that after carefully examining the petition and its attachments, she found no error on the
part of the handling prosecutor that would warrant a reversal of the challenged resolution.
MERALCO filed a motion for reconsideration of said resolution but the same was denied in a
resolution dated March 26, 2004.

Thereupon, on May 31, 2004, MERALCO filed a petition for certiorari with the CA under Rule
65 of the Rules of Court to question the December 17, 2002 and March 26, 2004 resolutions of
the DOJ.

CA:
The CA dismissed MERALCO’s petition and affirmed the resolutions of the Secretary of
Justice. It noted that the DOJ Minute Resolution was not invalidated by the fact that it contained
no further discussion of the factual and legal issues because the reviewing authority expressed
full concurrence with the findings and conclusions made by the prosecutor.
  The CA further ruled that the relationship between MERALCO and CIPI is that of a
creditor and debtor and, therefore, the remedy available to MERALCO is to file a civil case for
recovery and not a criminal case for estafa (Sesbreno v. CA).

Issue:
1.) Whether the DOJ Resolution dated December 17, 2002 complied with the constitutional
requirement laid down in Section 14, Article VIII of the 1987 Constitution and the
requirement in Section 14, Chapter III, Book VII of the Administrative Code of 1987

2.) Whether or not this Court can disturb the determination of probable cause made by the
public prosecutor in the case.

Ruling:
1.) YES. The December 17, 2002 DOJ resolution complied with the requirement of the
Constitution and the Administrative Code of 1987

The December 17, 2002 DOJ resolution was issued in accordance with Section 12(c), in
relation to Section 7, of Department Circular No. 70, dated July 3, 2000, which
authorizes the Secretary of Justice to dismiss a petition outright if he finds it to be
patently without merit or manifestly intended for delay, or when the issues raised therein
are too insubstantial to require consideration.

MERALCO considers the December 17, 2002 DOJ resolution invalid because of the
absence of any statement of facts and law upon which it is based, as required under
Section 14, Article VIII of the Constitution and Section 14, Chapter III, Book VII of the
Administrative Code of 1987. MERALCO claims that the requirement to state the facts
and the law in a decision is a mandatory requirement and the DOJ is not exempt from
complying with the same.
 
In arguing as it did, MERALCO failed to note that Section 14, Article VIII of the
Constitution refers to courts, thereby excluding the DOJ Secretary and prosecutors who
are not members of the Judiciary.  In Odchigue-Bondoc v. Tan Tiong Bio, the court ruled
that Section 4, Article VIII of the Constitution does not x x x extend to resolutions issued
by the DOJ Secretary.  In explaining the inapplicability of Section 4, Article VIII of the
Constitution to DOJ resolutions, the Court said that the DOJ is not a quasi-judicial body
 and the action of the Secretary of Justice in  reviewing a prosecutors order or resolution
via appeal or petition for review cannot be considered a quasi-judicial proceeding.

In Spouses Balangauan v. Court of Appeals, Special Nineteenth Division, Cebu City, the

court pointed out that a preliminary investigation is not a quasi-judicial proceeding, and
the DOJ is not a quasi-judicial agency exercising a quasi-judicial function when it
reviews the findings of a public prosecutor regarding the presence of probable cause. A
quasi-judicial agency performs adjudicatory functions when its awards determine the
rights of parties, and its decisions have the same effect as a judgment of a court.  

2.) NO. The determination of probable cause for the filing of an information in court is an
executive function which pertains at the first instance to the public prosecutor and then to
the Secretary of Justice.

As a rule, in the absence of any grave abuse of discretion, courts are not empowered to
substitute their own judgment for that of the executive branch; the public prosecutor
alone determines the sufficiency of evidence that will establish probable cause in filing a
criminal information and courts will not interfere with his findings unless grave abuse of
discretion can be shown.

The court found no error in the public prosecutor’s determination that no probable cause
existed to justify the filing of a criminal complaint.The records show that MERALCO
failed to prove that the respondents indeed misappropriated or converted its investments.
As the handling prosecutor found, aside from the Minutes of the June 8, 2000
Meeting, MERALCO did not present any evidence that would prove that MERALCO
indeed gave specific instructions for CIPI to invest only in GS or CPs of the Lopez
Group.

WHEREFORE, the petition is DENIED. The decision dated September 29, 2004 and the
resolution dated January 18, 2005 of the Court of Appeals are AFFIRMED. No pronouncement
as to costs.

NOTES:

ART. 315. Swindling (Estafa)

1. With unfaithfulness or abuse of confidence, namely:  
(a) By altering the substance, quantity, or quality or anything of value which the offender
shall deliver by virtue of an obligation to do so, even though such obligation be based on
an immoral or illegal consideration.
(b) By misappropriating or converting, to the prejudice of another, money, goods, or any
other personal property 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, even though such obligation be totally or partially guaranteed by a bond;
or by denying having received such money, goods, or other property.
2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:  
(a) By using fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by means
of other similar deceits.

SEC. 14, Article 8 of the 1987 Constitution

No decision shall be rendered by any court without expressing therein clearly and distinctly the
facts and the law on which it is based. No petition for review or motion for reconsideration of a
decision of the court shall be refused due course or denied without stating the legal basis
therefor.

SEC. 14, Chapter 3, Book of the Administrative Code of 1987

Decision.—Every decision rendered by the agency in a contested case shall be in writing and
shall state clearly and distinctly the facts and the law on which it is based. The agency shall
decide each case within thirty (30) days following its submission. The parties shall be notified of
the decision personally or by registered mail addressed to their counsel of record, if any, or to
them.

SEC. 7 of Department Circular No. 70

Action on the petition. The Secretary of Justice may dismiss the petition outright if he finds the
same to be patently without merit or manifestly intended for delay, or when the issues raised
therein are too unsubstantial to require consideration. If an information has been filed in court
pursuant to the appealed resolution, the petition shall not be given due course if the accused had
already been arraigned. Any arraignment made after the filing of the petition shall not bar the
Secretary of Justice from exercising his power of review.