THE PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, VS. DICK ONG Y CHAN, LINO MORFE Y GUTIERREZ, RICARDO VILLARAN AND LUCILA TALABIS, ACCUSED, DICK ONG Y CHAN, ACCUSED-APPELLANT.

The accused, Dick Ong y Chan, Lino Morfe y Gutierrez, Ricardo Villaran
and Lucila Talabis, were
charged with the crime of estafa in Criminal Case No.
44080 before the Regional Trial Court of Manila, Branch 35.  The information filed in said case reads, as
follows (pp. 8-9, Rollo):

“That in (sic) or about and during the period comprised
between December 6, 1978 and January 31, 1979, both dates inclusive, in the
City of Manila, Philippines, the said accused, conspiring and confederating
together and helping one another, did then and there wilfully,
unlawfully and feloniously defraud the Home Savings Bank in the
following manner, to wit:  the said
accused Dick Ong y Chan, by means of false
manifestations and fraudulent representations which he made to the management
of the Home Savings Bank, Aurea Annex Branch, located
at 640 Rizal Avenue, Sta. Cruz, in said City,
to the effect that the following checks, to wit:

or all
in the total amount of P575,504.00, are good and covered with sufficient
funds in the banks, and by means of other similar deceits, with the conspiracy of
his co-accused Lino Morfe y
Gutierrez, Ricardo Villaran and Lucila
Talabis, in their capacities as officer-in?charge,
branch accountant and bank branch cashier, respectively, of said bank (Home
Savings Bank), induced and succeeded in inducing the management of the said
bank to accept said checks as deposits, all the said accused well knowing that
his (Dick Ong y Chan’s)
representations and manifestations are false and untrue and were made
solely for the purpose of defrauding the said bank, and, in accordance with
their conspiracy, his co-accused Lino Morfe y Gutierrez, Ricardo Villaran
and Lucila Talabis,
facilitated the opening of a savings
account in the name of accused Dick Ong y Chan and,
thereafter, approved said deposits; that on the strength of such deposits made
and the opening of an account, the said accused were able to withdraw the total
amount of P575,504.00, which once in their possession, with intent to defraud,
they thereafter wilfully, unlawfully and feloniously
misappropriated, misapplied and converted to their own personal use and
benefit, to the damage and prejudice of said Home Savings Bank in the said
amount of P575,504.00, Philippine Currency.

“Contrary to law.”

On October 15, 1979,
the prosecution moved for the dismissal of the case, insofar as accused Lino Morfe y Gutierrez is
concerned, on the ground that after a reinvestigation, it was found that the
evidence against him is not sufficient to sustain the allegations contained in
the information (p. 54, Records).  On October 31, 1979, the trial court
granted the motion (p. 60, Records).

Upon being arraigned, the remaining three (3) accused entered the
plea of not guilty to the crime charged. 
After trial on the merits, the trial court rendered its decision on January 11, 1990, the dispositive portion of which reads, as follows (p. 26, Rollo):

“WHEREFORE, judgment is rendered:  (1) pronouncing accused DICK ONG
y CHAN guilty beyond reasonable doubt, as
principal, of ESTAFA defined under No. 2 (d) of Article 315 of the Revised
Penal Code, as amended by Republic Act 4885, and penalized under the 1st
paragraph of the same Code as amended by Presidential Decree no. 818, and
sentencing said accused to RECLUSION PERPETUA; (2) ACQUITTING accused Lucila Talabis and Ricardo Villaran, their guilt of (sic) the felony charged against
them not having been established beyond reasonable doubt; (3) ordering accused
Dick Ong to pay the Home Savings Bank and Trust
Company the sum of P559,381.34 as partial reparation of the damage caused to
said Bank; (4) ordering forfeited in favor of the Home Savings Bank and Trust
Company the sum of P16,122.66 the positive balance remaining outstanding in
Savings Account No. 6-1981 of accused Dick Ong with,
and in the possession of, said Bank to complete the reparation of the damage
caused by Dick Ong to the Bank; (5) ordering accused
Dick Ong to pay one-third (1/3) of the costs; and (6)
ordering two-thirds (2/3) of the costs charged de oficio.

“SO ORDERED.”

On February 15, 1990, the accused-appellant filed a motion
for reconsideration.  On March 22, 1990, he filed a
supplemental memorandum in support of the motion for reconsideration.  On April
3, 1990, said motion was denied for lack of merit (pp. 575-576,
Records).  Hence, the present appeal by
Dick Ong y Chan.

The facts of this case were summarized by the trial court, as
follows (pp. 18-20, Rollo):

“Accused Dick Ong was one of the
depositors of the Home Savings Bank and Trust Company in its Aurea Annex Branch at Rizal Avenue, Sta. Cruz, Manila,
hereafter, to be referred to as the Bank. 
He opened his savings account on December
6, 1978, under the Bank’s Savings Account No. 6-1981, with an
initial deposit of P22.14 in cash and P10,000.00 in (a) check.

“On the same date, December
6, 1978, without his check undergoing the usual and reglamentary (sic) clearance, which normally takes about
five working days, Dick Ong was allowed to withdraw
from his savings account with the Bank the sum of P5,000.00.  The corresponding withdrawal slip was signed
and approved by Lino Morfe,
then the Branch Manager, and accused Lucila Talabis, the Branch Cashier.

“That initial transaction was followed by other similar
transactions where Dick Ong, upon depositing checks
in his savings account with the Bank, was allowed to withdraw against those uncleared checks and uncollected deposits.  The withdrawals were authorized and approved
by accused Ricardo Villaran and Lucila
Talabis, sometimes jointly, sometimes by aither (sic) of them alone, and at other times by one of
them together with another official of the Bank.  But all of those uncleared
checks deposited by Dick Ong prior to January 30, 1979 and against which he
was allowed to withdraw were subsequently honored and
paid by the drawee banks.  (TSN, Mar. 9, 1981, pp.
101-104; TSN, Mar. 18, 1981, pp. 144-146.)

“On January 30, 1979,
Dick Ong issued and deposited in his savings account
with the Bank the following checks:

“Afterwards but before these checks could be cleared and the
Bank could collect their amounts from the drawee
banks, Lucila Talabis
allowed and approved the withdrawal of Dick Ong
against the amounts of said checks.  (TSN, Mar. 18, 1981, pp. 47-48.)

“On the following day, January 31, 1979, Dick Ong also issued and deposited in his savings account with
the Bank the following checks:

“Subsequently, but before said seven checks were cleared and the
Bank had collected their amounts, Lucila Talabis and then officer in charge of the Bank Grace Silao allowed and approved the withdrawals of Dick Ong against the amounts of these seven checks.  (TSN, Ibid., pp. 47-48.)

“However, when the Bank presented those eleven checks issued
and deposited by Dick Ong on January 30,
1979 and January 31, 1979
and against which he made withdrawals against (sic) their amounts, to their
respective drawee banks for payment, they were all
dishonored for lack or insufficiency of funds. 
(TSN, Jan. 7, 1981, pp. 90-101; TSN, May 8, 1981, pp. 74-75.)”

The accused-appellant neither took the witness stand to testify
in his behalf, nor presented any witness to testify in his favor.  Instead, he offered the following documents
(p. 20, Rollo):

“1.  Exhibit 1 – Ong. –
The letter dated June 27, 1980 of the Central Bank Governor to all banks
authorized to accept demand deposits, enjoining strict compliance with Monetary
Board Resolution No. 2202 dated December 21, 1979, prohibiting, as a matter of
policy, drawing against uncollected deposits effective July 1, 1980.

“2.  Exhibit 2 – Ong. –
The Memorandum of the Central Bank Governor dated July 9, 1980, to all banks for their guidance, that
Monetary Board Resolution No. 2202 dated December 21, 1979, prohibiting, as a matter of policy,
drawing against uncollected deposits effective July 1, 1980, covers drawing against demand deposits as
well as withdrawals from savings deposits.

“3.  Exhibits 3 – Ong. –
and 3-a. – Clippings from the Bulletin Today issue on July 25,
1980 regarding on (sic) ban on DAUD (drawn against uncollected deposits)
effective July 1, 1980, and the one-day loan which replaced the DAUD
arrangement.

“4.  Exhibit 4 – Ong. –
The sworn statement of Lino Morfe
before the METROCOM taken on February
11, 1979.

“5.  Exhibit 5 – Ong. –
The letter dated July 6, 1979,
of Lino Morfe to the
Assistant Fiscal of Manila, transmitting his (Morfe’s)
affidavit.

“6.  Exhibits  5-a Ong to 5-a-3-Ong. – Affidavit of
Lino Morfe sworn on June 28, 1979.

“7.  Exhibit 5-b-Ong. – The Bank’s
Memorandum dated January 31, 1979, to all Branch Manager/Extension Office
O.I.C. (sic) requiring them to furnish the Head Office of the Bank every Monday
and Thursday with a list of all ‘drawn against’ and encashment’ accommodations
(sic) of P1,000.00 and above
granted by the Branch during the week.

“8.  Exhibit 6-Ong. – The sworn statement of
accused Dick Ong.

On the other hand, accused Lucila Talabis admitted that she approved the withdrawals of the
accused?appellant against his uncleared
checks.  However, she explained that her
approval thereof was in accordance with the instruction of then bank manager Lino Morfe; that this
accommodation given or extended to the accused-appellant had been going on even
before she started giving the same accommodation; that this was a common
practice in the bank; that she approved those withdrawals together with one
other bank official, namely, either the bank manager, the bank accountant, the
other bank cashier, or the bank assistant cashier; and that they reported those
withdrawals against, and the dishonor of,
the subject checks, always sending copies of their reports to the head
office.

Accused Ricardo Villaran testified on
his behalf that the accused-appellant was able to withdraw against his uncleared checks because of the accommodations extended to
him by bank officials Lino Morfe,
co-accused Lucila Talabis,
Grace Silao, Precy Salamat, and Cora Gascon; that
this practice of drawing against uncollected deposits was a common practice in
all branches of the Bank; that
on December 14, 1978, the accused-appellant withdrew the sum of P75,000.00
against his uncleared checks; that on December 21,
1978, the accused-appellant deposited several checks in the total amount of P197,000.00 and withdrew on the
same date the sum of P120,000.00; that on January 23, 1979, the
accused-appellant again deposited several checks in the aggregate sum of
P260,000.00 and withdrew, also on the same date, the amount of P28,000.00; and
that he (Villaran) approved these three withdrawals
of the accused-appellant against his uncollected deposits.

In this appeal, the accused-appellant assigns the following
errors committed by the trial court:

1)   it concluded that the withdrawals against the
amounts of the subject checks before clearance and collection of the
corresponding amounts thereof by the depository bank from the drawee banks is deceit or fraud constituting estafa under Article 315, paragraph 2(d) of the Revised Penal Code, in the total absence of evidence
showing criminal intent to defraud the depository bank; and not a case which is
civil in nature governed solely
by the Negotiable Instruments Law;

2)   it stated that he
issued and deposited the subject checks when he is not the issuer, maker, nor
drawer thereof but merely an indorser; hence, his
liability, if any, is that of a general indorser
under the Negotiable Instruments Law;

3)   it convicted him on mere presumption, without
any evidence that he had prior knowledge of the lack or insufficiency of funds
in the drawee banks to cover the amounts of the
subject checks; and

4)   it failed to
consider that a general indorser under the Negotiable
Instruments Law warrants payment of the value of the checks indorsed by him; no
damage could have been suffered by the depository bank because he had offered
payment thereof.

To support the aforementioned assignment   of errors, the accused-appellant alleges that based on the
testimonies of co-accused Lucila Talabis
and Ricardo Villaran, he did not employ any deceit or
fraud on the Bank because the practice of deposit and withdrawal against uncleared checks and uncollected deposits was tolerated by
it.  As soon as he learned of the
dishonor of the subject checks, he offered to pay the amounts thereof (see pp.
48-49, tsn of Felix Hocson,
May 8, 1981) and put up as
security his property.  The subject
checks were not in payment of an obligation but were deposited in his savings
account.  He was merely a general indorser of the subject checks and this being the case, his
obligations as such, if any, should be governed by Section 66 of the Negotiable
Instruments Law*/.  The subject checks were issued or drawn by
his customers and paid to him.  He could
not have had any knowledge as to the sufficiency of their funds in the drawee banks.

The Office of the Solicitor General disputes the allegations of
the accused-appellant.  According to it,
by reason of the accused-appellant’s antecedent acts of issuing and depositing
checks, and withdrawing the amounts thereof before clearing by the drawee banks, which checks were later honored and paid by
the drawee banks, he was able to gain the trust and
confidence of the Bank, such that the practice, albeit contrary to sound
banking policy, was tolerated by the Bank. 
After thus having gained the trust and confidence of the Bank, the
accused-appellant issued and deposited the subject checks, the amounts of which
he later withdrew, fully aware that he had no sufficient funds to cover the
amounts of said checks in the drawee banks.  Contrary to the accused-appellant’s
allegation, the trial court found that he issued and deposited the subject
checks in his savings account.  As drawer
of the subject checks, the accused-appellant had the obligation to maintain
funds in his current account in the drawee banks
sufficient to cover the amounts thereof or, in case of dishonor, to deposit
within three (3) days from receipt of notice of dishonor, the amounts necessary
to cover the checks.  The testimony of
Felix Hocson, Senior Vice President and Treasurer of
the Bank, apart from being hearsay, does not prove that the accused-appellant
made an offer to pay the amounts covered by the subject checks.  Even assuming arguendo
that the accused-appellant made an offer to pay the amounts covered by the
subject checks, said offer is not sufficient to rebut the prima facie
evidence of deceit.  There is no showing
that the accused-appellant deposited the amounts necessary to cover the subject
checks within three (3) days from
receipt of notice from the Bank and/or the payee or holder that said checks
have been dishonored.  The damage
suffered by the Bank consists in its inability to make use of the P575,504.00 it had delivered to the accused-appellant.

We are convinced that the accused-appellant is innocent of the
crime charged against him.

Article 315, paragraph 2(d) of the Revised Penal Code, as amended
by Republic Act No. 4885, provides:

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

x x x, provided
that in the four cases mentioned, the fraud be committed by any of the
following means:

x x x.

‘2. By means of any of the following
false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the
fraud:

x x x.

(d) By post-dating a check, or issuing a check in
payment of an obligation when the offender had no funds in the bank, or his
funds deposited therein were not sufficient to cover the amount of the
check.  The failure of the drawer of the
check to deposit the amount necessary to cover his check within three (3) days
from receipt of notice from the bank and/or the payee or holder that said check
has been dishonored for lack or insufficiency of funds shall be prima facie
evidence of deceit constituting false pretense or fraudulent act.”

The following are the elements of this
kind of estafa: 
(1) postdating or issuance of a check in payment of an obligation
contracted at the time the check was issued; (2) lack or insufficiency of funds
to cover the check; and (3) damage to the payee thereof (People v. Tugbang, et al., G.R. No. 76212, April, 26, 1991; Sales v.
Court of Appeals, et al., G.R. No. L-47817, August 29, 1988,
164 SCRA 717; People v. Sabio, Sr., etc., et al.,
G.R. No. L-45490, November 20, 1978, 86 SCRA 568).  Based thereon, the trial court concluded that
the guilt of the accused-appellant has “been duly established by the
required quantum of evidence adduced by the People against (him)” (p. 22, Rollo).  We
shall confine Our discussion only on the first element
because there is no argument that the second and third elements are present in
this case.  For an orderly discussion of
this element, We will divide it into two (2)
parts:  first, “postdating or
issuance of a check,” and second, “in payment of an obligation contracted
at the time the check was issued.”

Inasmuch as the first part of the first element of Article 315,
paragraph 2(d) of the Revised Penal Code is concerned with the act of
“postdating or issuance of a check,” the accused-appellant
raises the defense that he was neither the issuer nor drawer of the subject
checks, but only an indorser thereof.  Thus, his liability, if any, should be
governed by the provision of the Negotiable Instruments Law, particularly
Section 66 thereof, supra.  Also,
he could not have had any knowledge as to the sufficiency of the drawers’ funds
in their respective banks.  The Office of
the Solicitor General contends that the trial court found as a fact that the
accused-appellant issued the subject checks.

The contention of the Office of the Solicitor General is accurate
only in part.  In the trial court’s
disquisition on the liability of the accused-appellant, it, said (p. 22, Rollo):

“There is no question that on January 30, 1979, accused Dick Ong issued or used and indorsed,
and deposited in his Savings Account No. 6-1981 with the Bank the four checks x
x x.

“There is likewise no dispute that on the following date,
January 31, 1979, Dick Ong issued or used
and indorsed, and deposited in his savings account with the Bank
seven checks x x x.” (underscoring supplied)

On this subject matter, Fernando Esguerra, Internal Auditor of the Bank and a witness for
the prosecution, testified that (pp. 101-103, tsn,
January 7, 1981):

“Court –

Q:   You
mentioned these checks, Mr. Witness.  Did
you or anybody for that matter ever verify the actual depositors of these
checks whether it is Mr. Dick Ong himself?

A:    Yes,
Your Honor.  Our
Vice-President for Bank Operations verified said checks and found out that one
of or rather, two of those checks are in
the account of Mr. Dick Onq
but the other checks are not in his account.

Court –

Q:   In
other words, there are checks where the depositor himself was also Mr. Dick Ong?

A:    Could I go over the checks, Your Honor.

Q:   Is
it indicated there?

A:    Yes,
Your Honor, it is.

Q:   All
right, go over the checks.

A:    There
is one check, Your Honor.  It is a China
Banking Corporation Check in the amount of P69,850.00
(Witness referring to Exhibit ‘Z’).

Q:   Now,
why do you say that the current checking account or current account was opened
by Mr. Dick Ong himself?

A:    Because
he is the drawer of the check, Your Honor.” (underscoring supplied)

Thus,   the
fact established by the prosecution and adopted by the trial court is that the
subject checks were either issued or indorsed by
the accused-appellant.

In the case of People v. Isleta, et al., 61 Phil. 332, which was recently reiterated
in the case of Zagado v. Court Of Appeals, G.R. No.
76612, September 29, 1989, 178 SCRA 146, We declared the accused?appellant,
who only negotiated the check drawn by another, guilty of estafa.  This case of People v. Isleta,
et al. was relied upon by the trial court in its order dated April 3, 1990,
which denied the accused-appellant’s motion for reconsideration based on the
same defense.  The trial court erred in
doing so.  It must have overlooked the ratio
decidendi of the aforementioned case.  We held the accused-appellant therein guilty
of estafa because he “had guilty knowledge of
the fact that (the drawer) had no funds in the bank when he negotiated the
(subject) check” (at p. 334).  In
the present case, the prosecution failed to prove that the accused-appellant
had such knowledge with respect to the subject checks that he indorsed.  In applying Our
decisions, it is not enough that courts take into account only the facts and
the dispositive portions thereof.  It is imperative that the rationale of these
decisions be read and comprehended thoroughly.

It goes without saying that with respect to the subject checks
wherein the accused-appellant was the issuer/drawer, the first part of the
first element of Article 315, paragraph 2(d) of the Revised Penal Code is
applicable.  However, this statement will
lose its significance in Our next discussion.

Regarding the second part of the first element of Article 315,
paragraph 2(d) of the Revised Penal Code, the accused-appellant alleges that
when he deposited the subject checks in his savings account, it was clearly not
in payment of an obligation to the Bank. 
The Office of the Solicitor General misses this point of the
accused-appellant.

This single argument of the accuse-appellant spells tilting the
scale to his advantage.  In several
cases, We were categorical that bank deposits are in
the nature of irregular deposits.  They
are really loans because they earn interest. 
All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans.  Current and savings deposits are loans to a
bank because it can use the same (Serrano v. Central Bank of the Philippines,
et al., G.R. No. L-30511, February 14, 1980, 96 SCRA 96; Gullas v. Philippine National Bank, 62 Phil. 519; Central
Bank of the Philippines v. Morfe, etc., et al., G.R.
No. L-38427, March 12, 1975, 63 SCRA 114; Guingona, Jr., et al. v.  The City Fiscal of Manila,
et al., G.R. No. 60033, April 4, 1984, 128 SCRA 577).

The elements of estafa in general
are:  (1) that the accused defrauded
another (a) by abuse of confidence, or (b) by means of deceit; and (2) that
damage or prejudice capable of pecuniary estimation is caused to the offended
party or third person.  Aside from the
elements that We have discussed earlier, in the crime of estafa
by postdating or issuing a bad check, deceit and damage are essential elements
of the offense and have to be established, with satisfactory proof to warrant
conviction (U.S. v. Rivera, 23 Phil. 383; People, et al. v. Grospe, etc., et al., G.R. No.
74053-54, January 20, 1988, 157 SCRA 154; Buaya v.
Polo, etc., et al., G.R. No. 75079, January 26, 1989, 169 SCRA 471).

In this connection, the Office of the Solicitor General advances
the view that by reason of the accused-appellant’s antecedent acts of issuing
and depositing checks, and withdrawing the amounts thereof before clearing by
the drawee banks, which checks were later honored and
paid by the drawee banks, he was able to gain the
trust and confidence of the Bank, such that the practice, albeit contrary to
sound banking policy, was
tolerated by the Bank.  After thus having
gained the trust and confidence of the Bank, he issued and deposited the
subject checks, the amounts of which he later withdrew, fully aware that he had
no sufficient funds to cover the amounts of said checks in the drawee banks.

This view is not supported by the facts of this case.  Rather, the evidence for the prosecution
proved that the Bank on its own accorded him a drawn against uncollected
deposit (DAUD) privilege without need of any pretensions on his part (pp. 7-8, supra).  Moreover, this privilege was not only for the
subject checks, but for other past transactions.  Fernando Esguerra
and Felix Hocson even testified that in some
instances prior to July 1, 1980, especially where the depositor is an important
client, the Bank relaxed its rule and internal policy against uncleared checks and uncollected deposits, and allowed such
depositor to withdraw against his uncleared checks
and uncollected deposits.  Admittedly,
the accused-appellant was one of the important depositors of the Bank (pp.
24-25, Rollo). 
Granting, in gratia argumenti, that he had in fact acted fraudulently,
he could not have done so without the active cooperation of the Bank’s
employees.  Therefore, since Lucila Talabis and Ricardo Villaran were declared innocent of the crimes charged
against them, the same should be said for the accused-appellant (see People v. Jalandoni, G.R. No. 57555, May 30, 1983, 122 SCRA
588).  True it is that the Bank suffered
damage in the amount of P575,504.00 but the accused?appellant’s
liability thereon is only civil.

One additional statement made by the trial court in its decision
requires correction.  It said that
“[t]he circumstances that the drawer of a check had insufficient or no
funds in the drawee bank to cover the amount of his
check at the time of its issuance
and he did not inform the payee or holder of such fact, are sufficient to make
him liable for estafa” (p. 23, Rollo).  This
statement is no longer controlling.  We
have clarified in the case of People v. Sabio, Sr.,
etc., et al., supra, that Republic Act No. 4885 has eliminated the
requirement under the old provision for the drawer to inform the payee that he
had no funds the bank or the funds deposited by him were not sufficient to
cover the amount of the check.

We, therefore, find that the guilt of the accused-appellant for the crime of estafa
under Article 315, paragraph 2(d) of the Revised Penal Code has not been proven
beyond reasonable doubt.  However, We
find him civilly liable to the Bank in the amount of P575,504.00,
less the balance remaining in his
savings account with it (p. 26, Rollo), with
legal interest from the date of the filing of this case until full payment.

ACCORDINGLY, the decision and order appealed from are
hereby SET ASIDE.  The accused-appellant
is ACQUITTED of the crime charged against him but ordered to pay the
aforementioned amount.  No costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Cruz,
Feliciano, and Griño-Aquino,
JJ., concur.

*
SECTION 66. Liability of general indorser.  —
Every indorser who indorses without qualification,
warrants to all subsequent holders in due course:

(a) The  matters and things mentioned in subdivisions (a), (b), and (c) of
the next preceding section; and

(b) That the instrument is, at the
time of his indorsement, valid and subsisting;

And, in addition, he engages that, on
due presentment, it shall be accepted or paid, or both, as the case may be,
according to its tenor, and that if it be dishonored and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to the
holder, or to any subsequent indorser who may be
compelled to pay it.