Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. Nos. 209655-60               January 14, 2015

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
PALMY TIBAYAN and RICO Z. PUERTO, Accused-Appellants.

DECISION

PERLAS-BERNABE, J.:

Assailed in this ordinary appeal1 filed by accused-appellants Palmy Tibayan

(Tibayan) and Rico Z. Puerto (Puerto) (accused-appellants) is the Decision2 dated
June 28, 2013 of the Court of Appeals (CA) in CA-G.R. CR Nos. 33063, 33562,
33660, 33669, 33939, and 34398 which modified the Decisions dated December 4,
2009,3 June 24, 2010,4 August 2, 2010,5 August 5, 2010,6 January 21, 2011,7 and
August 18, 20118 of the Regional Trial Court of Las Piñas City, Branch 198 (RTC)
and convicted accused appellants of the crime of Syndicated Estafa, defined and
penalized under Item 2 (a), Paragraph 4, Article 315 of the Revised Penal Code
(RPC) in relation to Presidential Decree No. (PD) 1689.9

The Facts

Tibayan Group Investment Company,Inc. (TGICI) is an open-end investment

company registered with the Securities and Exchange Commission (SEC) on
September 21, 2001.10 Sometime in 2002, the SEC conducted an investigation on
TGICI and its subsidiaries. In the course thereof, it discovered that TGICI was
selling securities to the public without a registration statement in violation of
Republic Act No. 8799, otherwise known as "The Securities Regulation Code," and
that TGICI submitted a fraudulent Treasurer’s Affidavit before the SEC.
Resultantly, on October 21, 2003, the SEC revoked TGICI’s corporate registration
for being fraudulently procured.11 The foregoing led to the filing of multiple
criminal cases12 for Syndicated Estafa against the incorporators and directors of
TGICI,13 namely, Jesus Tibayan, Ezekiel D. Martinez, Liborio E. Elacio, Jimmy
C. Catigan, Nelda B. Baran, and herein accused-appellants.14 Consequently,
warrants of arrest were issued against all of them; however, only accusedappellants
were arrested, while the others remained at large.15

According to the prosecution, private complainants Hector H. Alvarez, Milagros

Alvarez, Clarita P. Gacayan, Irma T. Ador, Emelyn Gomez, Yolanda Zimmer,
Nonito Garlan, Judy C. Rillon, Leonida D. Jarina, Reynaldo A. Dacon, Cristina
DelaPeña, and Rodney E. Villareal16 (private complainants) were enticed to invest
in TGICI due to the offer of high interest rates, as well as the assurance that they
will recover their investments. After giving their money to TGICI, private
complainants received a Certificate of Share and post-dated checks, representing
the amount of the principal investment and the monthly interest earnings,
respectively.17 Upon encashment, the checks were dishonored, as the account was
already closed, prompting private complainants to bring the bounced checks to the
TGICI office to demand payment. At the office, the TGICI employees took the said
checks, gave private complainants acknowledgement receipts, and reassured that
their investments, as well as the interests, would be paid. However, the TGICI
office closed down without private complainants having been paid and, thus, they
were constrained to file criminal complaints against the incorporators and directors
of TGICI.18

In their defense, accused-appellants denied having conspired with the other TGICI
incorporators to defraud private complainants. Particularly, Puerto claimed that his
signature in the Articles of Incorporation of TGICI was forged and that since
January 2002, he was no longer a director of TGICI. For her part, Tibayan also
claimed that her signature in the TGICI’s Articles of Incorporation was a forgery,as
she was neither an incorporator nor a director of TGICI.19

The RTC Rulings

On various dates, the RTC issued six (6) separate decisions convicting Tibayan of
13 counts and Puerto of 11 counts of Estafa under Item 2 (a), Paragraph 4, Article
315 of the RPC in relation to PD 1689, to wit: (a) in a Joint Decision20 dated
December 4, 2009, the RTC found accused-appellants guilty beyond reasonable
doubt of three (3) counts of Estafa, sentencing them to suffer the penalty of
imprisonment for a period of 20 years of reclusion temporalfor each count and
ordering them to pay the amounts of ₱1,500,000.00 to Hector H. Alvarez, and
119,405.23 and ₱800,000.00 to Milagros Alvarez;21 (b) in a Joint Decision22
dated June 24, 2010, the RTC acquitted Puerto of all the charges, but found
Tibayan guilty beyond reasonable doubt of two (2) counts of Estafa, sentencing her
to suffer the penalty of imprisonment for a period of 20 years of reclusion temporal
for each count, and ordering her to pay the amounts of ₱1,300,000.00 and
US$12,000.00 to Clarita P. Gacayan and ₱500,000.00 to Irma T. Ador;23 (c) in a
Joint Decision24 dated August 2, 2010, the accused-appellants were found guilty
beyond reasonable doubt of two (2) counts of Estafa, and were sentenced to suffer
the penalty of imprisonment for a period of 20 years of reclusion temporal for each
count, and ordered to pay the amounts of ₱1,000,000.00 to Yolanda Zimmer and
₱556,376.00 to Nonito Garlan;25 (d) in a Joint Decision26 dated August 5, 2010,
the RTC found the accused appellants guilty beyond reasonable doubt of one (1)
count of Estafa, sentencing them to suffer the penalty of imprisonment for a period
of 20 years of reclusion temporaland ordering them to pay Emelyn Gomez the
amount of ₱250,000.00;27 (e) in a Decision28 dated January 21, 2011, accused-
appellants were found guilty beyond reasonable doubt of one (1) count of Estafa
each, and were sentenced to suffer the penalty of imprisonment for a period of 20
years of reclusion temporal and ordered to pay Judy C. Rillon the amount of
₱118,000.00;29 and (f) in a Joint Decision30 dated August 18, 2011, accused-
appellants were each convicted of four (4) counts of Estafa, and meted different
penalties per count, as follows: (i) for the first count, they were sentenced to suffer
the penalty of imprisonment for a period of four (4) years and two (2) months of
prision correcional medium, as minimum, to fifteen (15) years of reclusion
temporal medium, as maximum, and to pay Reynaldo A. Dacon the amount of
₱100,000.00; (ii) for the second count, they were sentenced to suffer the penalty of
imprisonment for a period of ten (10) years of prision mayor medium, as
minimum, to twenty (20) years of reclusion temporal medium, as maximum, and to
pay Leonida D. Jarina the amount of ₱200,000.00; (iii) for the third count, they
were sentenced to suffer the penalty of imprisonment for a period of ten (10) years
of prision mayormedium, as minimum, to twenty (20) years of reclusion temporal
medium, as maximum, and to pay Cristina Dela Peña the amount of ₱250,000.00;
and (iv) for the last count, they were sentenced to suffer the penalty of
imprisonment for a period of four (4) years and two (2) months of prision
correcional medium, as minimum, to fifteen (15) years of reclusion
temporalmedium, as maximum, and to pay Rodney E. Villareal the amount of
₱100,000.00.31

In the aforesaid decisions, the RTC did not lend credence to accused appellants’
denials in light of the positive testimonies of the private complainants that they
invested their money in TGICI because of the assurances from accused-appellants
and the other directors/incorporators of TGICI that their investments would yield
very profitable returns. In this relation, the RTC found that accused-appellants
conspired with the other directors/incorporators of TGICI in misrepresenting the
company as a legitimate corporation duly registered to operate as a mutual fund to
the detriment of the private complainants.32 However, the RTC convicted accused-
appellants of simple Estafa only, as the prosecution failed to allege in the
informations that accused-appellants and the other directors/ incorporators formed
a syndicate with the intention of defrauding the public, or it failed to adduce
documentary evidence substantiating its claims that the accused-appellants
committed Syndicated Estafa.33

Aggrieved, accused-appellants separately appealed the foregoing RTC Decisions to

the CA, docketed as CA-G.R. CR Nos. 33063, 33562, 33660, 33669, 33939, and
34398. Thereafter, the CA issued a Resolution34 dated February 19, 2013 ordering
the consolidation of accused-appellants’ appeals.

The CA Ruling

In a Decision35 dated June 28, 2013, the CA modified accused appellants’

conviction to that of Syndicated Estafa, and accordingly, increased their respective
penalties to life imprisonment for each count.36 The CA also increased the amount
of actual damages awarded to private complainant Clarita P. Gacayan from
₱1,300,000.00 to ₱1,530,625.90, apart from the award of US$12,000.00.37

It held that TGICI and its subsidiaries were engaged in a Ponzi scheme which
relied on subsequent investors to pay its earlier investors – and is what PD 1689
precisely aims to punish. Inevitably, TGICI could no longer hoodwink new
investors that led to its collapse.38 Thus, the CA concluded that as
incorporators/directors of TGICI, accused-appellants and their cohorts conspired in
making TGICI a vehicle for the perpetuation of fraud against the unsuspecting
public. As such, they cannot hide behind the corporate veil and must be personally
and criminally liable for their acts.39 The CA then concluded that since the TGICI
incorporators/directors comprised more than five (5) persons, accused-appellants’
criminal liability should be upgraded to that of Syndicated Estafa, and their
respective penalties increased accordingly.40 Undaunted, accused-appellants filed
the instant appeal.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not accused-appellants
are guilty beyond reasonable doubt of the crime of Syndicated Estafa defined and
penalized under Item 2 (a), Paragraph 4,

Article 315 of the RPC in relation to PD 1689.

The Court’s Ruling

The Court sustains the convictions of accused-appellants.

Item 2 (a), Paragraph 4, Article 315 of the RPC provides:

Art. 315. Swindling (estafa).– Any person who shall defraud another by any means
mentioned hereinbelow shall be punished by:

xxxx

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.

xxxx

The elements of Estafa by means of deceit under this provision are the following:
(a) that there must be a false pretense or fraudulent representation as to his power,
influence, qualifications, property, credit, agency, business or imaginary
transactions; (b) that such false pretense or fraudulent representation was made or
executed prior to or simultaneously with the commission of the fraud; (c) that the
offended party relied on the false pretense, fraudulent act, or fraudulent means and
was induced to part with his money or property; and (d) that, as a result thereof, the
offended party suffered damage.41

In relation thereto, Section 1 of PD 1689 defines Syndicated Estafa as follows:

Section 1. Any person or persons who shall commit estafa or other forms of
swindling as defined in Articles 315 and 316 of the Revised Penal Code, as
amended, shall be punished by life imprisonment to death if the swindling (estafa)
is committed by a syndicate consisting of five or more persons formed with the
intention of carrying out the unlawful or illegal act, transaction, enterprise or
scheme, and the defraudation results in the misappropriation of moneys contributed
by stockholders, or members of rural banks, cooperatives, "samahang nayon(s)," or
farmers’ associations, or funds solicited by corporations/associations from the
general public.

Thus, the elements of Syndicated Estafa are: (a) Estafa or other forms of swindling,
as defined in Articles 315 and 316 of the RPC, is committed; (b) the Estafa or
swindling is committed by a syndicate of five (5) or more persons; and (c)
defraudation results in the misappropriation of moneys contributed by
stockholders, or members of rural banks, cooperative, "samahang nayon(s)," or
farmers’ associations, or of funds solicited by corporations/associations from the
general public.42

In this case, a judicious review of the records reveals TGICI’s modus operandiof
inducing the public to invest in it on the undertaking that their investment would be
returned with a very high monthly interest rate ranging from three to five and a half
percent (3%-5.5%).43 Under such lucrative promise, the investing public are
enticed to infuse funds into TGICI. However, as the directors/incorporators of
TGICI knew from the start that TGICI is operating withoutany paid-up capital and
has no clear trade by which it can pay the assured profits to its investors,44 they
cannot comply with their guarantee and had to simply abscond with their investors’
money. Thus, the CA correctly held that accused-appellants, along with the other
accused who are still at large, used TGICI to engage ina Ponzi scheme, resulting in
the defraudation of the TGICI investors.

To be sure, a Ponzi scheme is a typeof investment fraud that involves the payment
of purported returns to existing investors from funds contributed by new investors.
Its organizers often solicit new investors by promising to invest funds in
opportunities claimed to generate high returns with little or no risk. In many Ponzi
schemes, the perpetrators focus on attracting new money to make promised
payments to earlier-stage investors to create the false appearance that investors are
profiting from a legitimate business.45 It is not an investment strategy but a
gullibility scheme, which works only as long as there is an ever increasing number
of new investors joining the scheme.46 It is difficult to sustain the scheme over a
long period of time because the operator needs an ever larger pool of later investors
to continue paying the promised profits toearly investors. The idea behind this type
of swindle is that the "con-man" collects his money from his second or third round
of investors and then absconds before anyone else shows up to collect. Necessarily,
Ponzi schemes only last weeks, or months at the most.47

In this light, it is clear that all the elements of Syndicated Esta/a, committed
through a Ponzi scheme, are present in this case, considering that: (a) the
incorporators/directors of TGICI comprising more than five (5) people, including
herein accused-appellants, made false pretenses and representations to the
investing public - in this case, the private complainants - regarding a supposed
lucrative investment opportunity with TGICI in order to solicit money from them;
(b) the said false pretenses and representations were made prior to or simultaneous
with the commission of fraud; (c) relying on the same, private complainants
invested their hard earned money into TGICI; and (d) the incorporators/directors of
TGICI ended up running away with the private complainants' investments,
obviously to the latter's prejudice.

Corollary thereto, the CA correctly upgraded accused-appellants' conviction from

simple Estafa to Syndicated Estafa.1âwphi1 In a criminal case, an appeal throws
the whole case wide open for review. Issues whether raised or not by the parties
may be resolved by the appellate court.48 Hence, accused appellants' appeal
conferred upon the appellate court full jurisdiction and rendered it competent to
examine the records, revise the judgment appealed from, increase the penalty, and
cite the proper provision of the penal law.49

WHEREFORE, the appeal is DENIED. The Decision dated June 28, 2013 of the
Court of Appeals in CA-G.R. CR Nos. 33063, 33562, 33660, 33669, 33939, and
34398 is hereby AFFIRMED. Accordingly, accused appellants Palmy Tibayan and
Rico Z. Puerto are found GUILTY beyond reasonable doubt of 13 and 11 counts,
respectively, of Syndicated Esta/a and are sentenced to suffer the penalty of life
imprisonment for each count. Accused-appellants are further ordered to pay actual
damages to each of the private complainants in the following amounts: (a)
₱1,500,000.00 to Hector H. Alvarez; (b) ₱119,405.23 and ₱800,000.00 to Milagros
Alvarez; (c) ₱1,530,625.90 and US$12,000.00 to Clarita P. Gacayan; (d)
₱500,000.00 to Irma T. Ador; (e) ₱1,000,000.00 to Yolanda Zimmer; (f)
₱556,376.00 to Nonito Garlan; (g) ₱250,000.00 to Emelyn Gomez; (h)
₱118,000.00 to Judy C. Rillon; (i) ₱100,000.00 to Reynaldo A. Dacon; (j)
₱200,000.00 to Leonida D. Jarina; (k) ₱250,000.00 to Cristina Dela Pefia; and (l)
₱100,000.00 to Rodney E. Villareal.

SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE
LUCAS P. BERSAMIN
CASTRO
Associate Justice
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

C E R T I F I CAT I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Footnotes

1 See Notice of Appeal dated July 10, 2013; rollo, pp. 24-25.

2 Id. at 3-23. Penned by Associate Justice Mario V. Lopez with Associate

Justices Jose C. Reyes, Jr. and Socorro B. Inting, concurring.

3 See Joint Decision in Crim. Case Nos. 04-0391, 06-0042, and 06-0045
penned by Judge Erlinda Nicolas-Alvaro; CA rollo (CA-G.R. CR No.
33063), pp. 39-50.

4 See Joint Decision in Crim. Case Nos. 04-0619, 04-0622, 04-0627, 04-
0635, and 04-0636; CA rollo (CA-G.R. CR No. 33562), pp. 28-42.

5 See Joint Decision in Crim. Case Nos. 05-0710, 05-0779, 05-0784, 05-
0803, and 05-0809; CA rollo (CA-G.R. CR No. 33669), pp. 29-41. .

6 See Joint Decision in Crim. Case Nos. 04-0070, 04-0085, 04-0125, 04-
0330, 04-0441, and 04-0714; CA rollo (CA-G.R. CR No. 33660), pp. 20-32.
7 See Decision in Crim. Case No. 04-1028; CA rollo (CA-G.R. CR No.
33939), pp. 25-32.

8 See Joint Decision in Crim. Case Nos. 04-0570, 04-0567, 04-0598, and
04-0613; CA rollo (CA-G.R. CR No. 34398), pp. 41-53.

9 Entitled "INCREASING THE PENALTY FOR CERTAIN FORMS OF

SWINDLING OR ESTAFA" (April 6, 1980).

10 Rollo, pp. 4-5.

11 See id. at 5.

12 The criminal cases were ultimately decided insix (6) separate RTC
Decisions, as follows: (a) the 1st RTC Decision covered Crim. Case Nos. 04-
0391, 06-0042, and 06-0045; (b) the 2 nd RTC Decision covered Crim. Case
Nos. 04-0619, 04-0622, 04-0627, 04-0635, and 04-0636; (c) the 3 rd RTC
Decision covered Crim. Case Nos. 05-0710, 05-0779, 05-0784, 05-0803, and
05-0809; (d) the 4 th RTC Decision covered Crim. Case Nos. 04-0070, 04-
0085, 04-0125, 04-0330, 04-0441, 04-0714; (e) the 5 th RTC Decision
covered Crim. Case No. 04-1028; and (f) the 6 th RTC Decision covered
Crim. Case Nos. 04-0570, 04-0567, 04-0598, and 04-0613.

13 Rollo, p. 6.

14 Id. at 5.

15 Id. at 7.

16 Id. at 6.

17 Id. at 7.

18 Id.

19 Id. at 9-10.

20 CA rollo (CA-G.R. CR No. 33063), pp. 39-50.

21 Id at 50. "₱119,000.23" in some parts of the records.

22 CA rollo (CA-G.R. CR No. 33562), pp. 28-42.

23 Id. at 42.

24 CA rollo (CA-G.R. CR No. 33669), pp. 29-41.

25 Id. at 40.
26 CA rollo (CA-G.R. CR No. 33660), pp. 20-32.

27 Id. at 31.

28 CA rollo (CA-G.R. CR No. 33939), pp. 25-32.

29 Id. at 31.

30 CA rollo (CA-G.R. CR No. 34398), pp. 41-53.

31 Id. at 52.

32 See CA rollo (CA-G.R. CR No. 33063), pp. 48-49; CA rollo (CA-G.R.

CR No. 33562), pp. 39-41; CA rollo (CA-G.R. CR No. 33669), pp. 38-40;
CA rollo (CA-G.R. CR No. 33660), pp. 28-31; CA rollo (CA-G.R. CR No.
33939), pp. 30-31; and CA rollo (CA-G.R. CR No. 34398), pp. 49-51.

33 See CA rollo (CA-G.R. CR No. 33063), p. 50; CA rollo (CA-G.R. CR

No. 33562), p. 41; CA rollo (CA-G.R. CR No. 33669), pp. 38-39; CA rollo
(CA-G.R. CR No. 33660), pp. 28 and 31; CA rollo (CA-G.R. CR No.
33939), p. 31; and CA rollo (CA-G.R. CR No. 34398), p. 51.

34 CA rollo (CA-G.R. CR No. 33063), pp. 140-142.

35 Rollo, pp. 3-23.

36 Id. at 21-22.

37 Id. at 22.

38 Id. at 16-17.

39 Id. at 17-18.

40 Id. at 21-22.

41 People v. Chua, G.R. No. 187052, September 13, 2012, 680 SCRA 575,
592, citing Sy v. People, G.R. No. 183879, April 14, 2010, 618 SCRA 264,
271.

42 Galvez v. CA, G.R. No. 187919, 187979, and 188030, February 20, 2013,
691 SCRA 455, 467.

43 See rollo, p. 7.

44 "It has been held that where one states that the future profits or income of
an enterprise shall be a certain sum, but he actually knows that there will be
none, or that they will be substantially less than he represents, the statements
constitute an actionable fraud where the hearer believes him and relies on
the statement to his injury." (People v. Menil, Jr., 394 Phil 433, 453 [2000],
citing People v. Balasa, 356 Phil. 362, 387 [1998].)

45 United States Securities and Exchange Commission, Ponzi Schemes.

<www.sec.gov/answers/ponzi.htm>(visited December 19, 2014).

46 People v. Romero, 365 Phil 531, 542 (1999), citing People v. Balasa,
supra note 44, at 388-389.

47 People v. Menil, supra note 44, at 455, citing People v. Balasa, id.

48 Eusebio-Calderon v. People, 484 Phil 87, 98 (2004).

49 Id.