ORIEL MAGNO, PETITIONER, VS. HONORABLE COURT OF APPEALS AND PEOPLE OF THE PHILIP­PINES, RESPONDENTS.

This is an appeal by certiorari under Rule 45 of the Revised
Rules of Court, from the decision* of the
respondent Court of Appeals which affirmed in toto the decision
of the Regional Trial Court of Quezon City, Branch 104 finding the accused
petitioner, guilty of violations of Batas Pambansa Blg. 22, in Criminal Cases
Q-35693 to 35696 before they were elevated on appeal to the respondent
appellate Court under CA-G.R. CR No. 04889.

The antecedent facts and circumstances of the four (4) counts of
the offense charged, have been clearly illustrated, in the Comment of the
Office of the Solicitor General as official counsel for the public respondent,
thus:

Petitioner was in the process of putting up a car repair shop
sometime in April 1983, but he did not have complete equipment that could make
his venture workable. He also had
another problem, and that while he was going into this entrepreneurship, he
lacked funds with which to purchase the necessary equipment to make such
business operational. Thus, petitioner,
representing Ultra Sources International Corporation, approached Corazon Teng,
(private complainant) Vice President of Mancor Industries (hereinafter referred
to as Mancor) for his needed car repair service equipment of which Mancor was a
distributor. (Rollo, pp. 40-41)

Having been approached by petitioner on his predicament, who
fully bared that he had no sufficient funds to buy the equipment needed, the
former (Corazon Teng) referred Magno to LS Finance and Management Corporation
(LS Finance for brevity) advising its Vice-President, Joey Gomez, that Mancor
was willing and able to supply the pieces of equipment needed if LS Finance
could accommodate petitioner and provide him credit facilities. (Ibid., p. 41)

The arrangement went through on condition that petitioner has to
put up a warranty deposit equivalent to thirty per centum (30%) of the total
value of the pieces of equipment to be purchased, amounting to P29,790.00. Since petitioner could not come up with such
amount, he requested Joey Gomez on a personal
level to look for a third party who could lend him the equivalent amount of the
warranty deposit, however, unknown to petitioner, it was Corazon Teng who
advanced the deposit in question, on condition that the same would be paid as a short term loan at 3% interest. (Ibid., p. 41)

The specific provision in the Leasing Agreement, reads:

“1.1. WARRANTY DEPOSIT – Before or upon delivery
of each item of Equipment, the Lessee shall deposit with the Lessor such sum or
sums specified in Schedule A to serve as security for the faithful performance
of its obligations.

“This deposit shall be refunded to the Lessee upon the
satisfactory completion of the entire period of Lease, subject to the
conditions of clause 1.12 of this Article.” (Ibid., p. 17)

As part of the arrangement, petitioner and LS Finance entered into
a leasing agreement whereby LS Finance would lease the garage equipments and
petitioner would pay the corresponding rent with the option to buy the
same. After the documentation was
completed, the equipment were delivered to petitioner who in turn issued a
postdated check and gave it to Joey Gomez who, unknown to the petitioner,
delivered the same to Corazon Teng. When the check matured, petitioner requested through Joey Gomez not to
deposit the check as he (Magno) was no longer banking with Pacific Bank.

To replace the first check issued, petitioner issued another set
of six (6) postdated checks. Two (2)
checks dated July 29, 1983 were deposited and cleared while the four (4)
others, which were the subject of
the four counts of the aforestated charges subject of the petition, were held
momentarily by Corazon Teng, on the request of Magno as they were not covered
with sufficient funds. These checks
were a) Piso Bank Check Nos. 006858, dated August 15, 1983, 006859 dated August
28, 1983 and 006860 dated September 15, 1983, all in the amount of P5,038.43
and No. 006861 dated September 28, 1983, in the amount of P10,076.87. (Ibid., pp. 42 & 43)

Subsequently, petitioner could not pay LS Finance the monthly
rentals, thus it pulled out the garage equipments. It was then on this occasion that petitioner became aware that
Corazon Teng was the one who advanced the warranty deposit. Petitioner with his wife went to see Corazon
Teng and promised to pay the latter but the payment never came and when the
four (4) checks were deposited they were returned for the reason “account
closed.” (Ibid., p. 43)

After joint trial before the Regional Trial Court of Quezon City,
Branch 104, the accused-petitioner was convicted for violations of BP Blg. 22
on the four (4) cases, as follows:

“x x x finding the accused-appellant guilty beyond reasonable
doubt of the offense of violations of B.P. Blg. 22 and sentencing the accused
to imprisonment for one year in each Criminal Case Nos. Q-35693, Q-35695 and
Q-35696 and to pay to complainant the respective amounts reflected in subject
checks.” (Ibid., pp. 25, 27)

Reviewing the above and the affirmation of the above-stated
decision of the court a quo, this Court is intrigued about the outcome of the checks
subject of the cases which were intended by the parties, the petitioner on the
one hand and the private complainant on the other, to cover the “warranty
deposit” equivalent to the 30% requirement of the financing company. Corazon Teng is one of the officers of
Mancor, the supplier of the equipment subject of the Leasing Agreement subject
of the high financing scheme undertaken by the petitioner as lessee of the
repair service equipment, which was arranged at the instance of Mrs. Teng from
the very beginning of the transaction.

By the nature of the “warranty deposit” amounting to
P29,790.00 corresponding to 30% of the “purchase/lease” value of the
equipments subject of the transaction, it is obvious that the “cash
out” made by Mrs. Teng was not used by petitioner who was just paying rentals
for the equipment. It would have been
different if petitioner opted to purchase the pieces of equipment on or about
the termination of the lease-purchase agreement in which case he had to pay the
additional amount of the warranty deposit which should have formed part of the
purchase price. As the transaction did
not ripen into a purchase, but remained a
lease with rentals being paid for
the loaned equipment, which were pulled out by the Lessor (Mancor) when the petitioner failed to continue paying possibly due to economic
constraints or business failure, then it is lawful and just that the warranty
deposit should not be charged against the petitioner.

To charge the petitioner for the refund of a “warranty deposit” which
he did not withdraw as it was not his own account, it having remained with LS
Finance, is to even make him pay an unjust “debt”, to say the least,
since petitioner did not receive the amount in question. All the while, said amount was in the
safekeeping of the financing company, which is managed, supervised and operated
by the corporation officials and employees of LS Finance. Petitioner did not even know that the checks
he issued were turned over by Joey Gomez to Mrs. Teng, whose operation was kept from his knowledge on her
instruction. This fact alone evoke
suspicion that the transaction is irregular and immoral per se,
hence, she specifically requested Gomez not to divulge the source of the
“warranty deposit”.

It is intriguing to realize that Mrs. Teng did not want the
petitioner to know that it was she who “accommodated” petitioner’s
request for Joey Gomez, to source out the needed funds for the “warranty
deposit”. Thus it unfolds the kind
of transaction that is shrouded with mystery, gimmickry and doubtful
legality. It is in simple language, a scheme whereby Mrs. Teng as the
supplier of the equipment in the name of her corporation, Mancor, would be able
to “sell or lease” its goods as in this case, and at the same time,
privately financing those who desperately need petty accommodations as this
one. This modus operandi
has in so many instances victimized unsuspecting businessmen, who likewise need
protection from the law, by availing of the deceptively called “warranty
deposit” not realizing that they also fall prey to leasing equipment under
the guise of a lease-purchase
agreement when it is a scheme designed to skim off business clients.

This maneuvering has serious implications especially with respect
to the threat of the penal sanction of the law in issue, as in this case. And, with a willing court system to apply
the full harshness of the special law in question, using the “mala prohibita”
doctrine, the noble objective of the law is tainted with materialism and
opportunism in the highest degree.

This angle is bolstered by the fact that since the petitioner or
lessee referred to above in the lease agreement knew that the amount of
P29,790.00 subject of the cases, were mere accommodation-arrangements with
somebody thru Joey Gomez, petitioner did not even attempt to secure the refund
of said amount from LS Finance, notwithstanding the agreement provision to the
contrary. To argue that after the
termination of the lease agreement, the warranty deposit should be refundable
in full to Mrs. Teng by petitioner when he did not cash out the “warranty
deposit” for his official or personal use, is to stretch the nicety of the
alleged law (B.P. No. 22) violated.

For all intents and purposes, the law was devised to safeguard
the interest of the banking system and the legitimate public checking account
user. It did not intend to shelter or
favor nor encourage users of the system to enrich themselves through
manipulations and circumvention of the noble purpose and objective of the law. Least should it be used also as a means of
jeopardizing honest-to-goodness transactions with some color of
“get-rich” scheme to the prejudice of well-meaning businessmen who
are the pillars of society.

Under the utilitarian theory, the “protective theory”
in criminal law, “affirms that the primary function of punishment is the
protective (sic) of society against actual and potential
wrongdoers.” It is not clear whether petitioner could be considered
as having actually committed the wrong sought to be punished in the offense
charged, but on the other hand, it can be safely said that the actuations of
Mrs. Carolina Teng amount to that of potential wrongdoers whose operations
should also be clipped at some point in time in order that the unwary public
will not be falling prey to such a vicious transaction. (Aquino, The Revised Penal Code, 1987
Edition, Vol. I, p. 11)

Corollary to the above view, is the application of the theory
that “criminal law is founded upon that moral disapprobation x x x of
actions which are immoral, i.e., which are detrimental (or dangerous) to those
conditions upon which depend the existence and progress of human society. This disapprobation is inevitable to the
extent that morality is generally founded and built upon a certain concurrence
in the moral opinions of all. x x x
That which we call punishment is only an external means of emphasizing moral
disapprobation: the method of
punishment is in reality the amount of punishment.” (Ibid., p. 11, citing
People v. Roldan Zaballero, CA 54 O.G. 6904. Note also Justice Pablo’s view in People v. Piosca and Peremne, 86 Phil.
31).

Thus, it behooves upon a court of law that in applying the
punishment imposed upon the accused, the objective of retribution of a wronged society, should be
directed against the “actual and potential wrongdoers.” In the instant
case, there is no doubt that petitioner’s four (4) checks were used to
collateralize an accommodation, and not to cover the receipt of an actual
“account or credit for value” as this was absent, and therefore
petitioner should not be punished for mere issuance of the checks in
question. Following the aforecited
theory, in petitioner’s stead the “potential wrongdoer”, whose
operation could be a menace to society, should not be glorified by convicting
the petitioner.

While in case of doubt, the case should have been resolved in
favor of the accused, however, by the open admission of the appellate court
below, even when the ultimate
beneficiary of the “warranty deposit” is of doubtful certainty, the
accused was convicted, as shown below:

“Nor
do We see any merit in appellant’s claim that the obligation of the accused to
complainant had been extinguished by the termination of the leasing agreement
— by the terms of which the warranty deposit advanced by complainant was
refundable to the accused as lessee — and that as the lessor L.S. Finance
neither made any liquidation of said amount nor returned the same to the
accused, it may be assumed that the amount
was already returned to the complainant. For these allegations, even
if true, do not change the fact,
admitted by appellant and established by
the evidence, that the four checks were
originally issued on account or for value. And as We have already observed, in order
that there may be a conviction under the first paragraph of Section 2 of BP
Blg. 22 — with respect to the element of said offense that the check should
have been made and issued on account or for value — it is sufficient, all the
other elements of the offense being present, that the check must have been
drawn and issued in payment of an obligation.

“Moreover,
even granting, arguendo, that the extinguishments, after the issuance of
the checks, of the obligation in consideration of which the checks were issued,
would have resulted in placing the case at bar beyond the purview of the prohibition
in Section 1 of BP Big. 22, there is no satisfactory proof that there was such
an extinguishment in the present case. Appellee
aptly points out that appellant had not
adduced any direct evidence to prove that
the amount advanced by the
complainant to cover the warranty deposit
must already have been returned to her.”
(Rollo, p. 30)

It is indubitable that the respondent Court of Appeals even
disregarded the cardinal rule that the accused is presumed innocent until
proven guilty beyond reasonable doubt. On the contrary, the same court even expected the petitioner-appellant
to adduce evidence to show that he was not guilty of the crime charged. But how can he produce documents showing
that the warranty deposit has already been taken back by Mrs. Teng when she is an officer of Mancor
which has interest in the transaction, besides being personally interested in
the profit of her side-line. Thus, even
if she may have gotten back the value of the accommodation, she would still
pursue collecting from the petitioner since she had in her possession the
checks that “bounced”.

That the court a quo merely relied on the law,
without looking into the real nature of the warranty deposit is evident from
the following pronouncement:

“And the trial court concluded that there is no question that
the accused violated BP Blg. 22, which is a special statutory law, violations
of which are mala prohibita. The court relied on the rule that in cases of mala prohibita,
the only inquiry is whether or not the law had been violated, proof of criminal
intent not being necessary for the conviction of the accused, the acts being
prohibited for reasons of public policy and the defenses of good faith and
absence of criminal intent being unavailing in prosecutions for said offenses.”
(Ibid., p. 26)

The crux of the matter rests upon the reason for the drawing of
the postdated checks by the petitioner, i.e., whether they were drawn or issued
“to apply on account or for value”, as required under Section 1 of BP
Blg. 22. When viewed against the
following definitions of the catch-terms “warranty” and
“deposit”, for which the postdated checks were issued or drawn, all
the more, the alleged crime could not have been committed by petitioner:

“a)     Warranty – A promise that a proposition of
fact is true. A promise that certain
facts are truly as they are represented to be and that they will remain so; x x
x.” (Black’s Law Dictionary, Fifth Edition, (1979) p. 1423)

A cross-reference to the following term shows:

“Fitness for Particular Purpose: – Where the seller at the time of contracting has reason to know
any particular purpose for which the goods are required and that the buyer is
relying on the seller’s skill or judgment to select or furnish suitable goods, there is, unless excluded or modified,
an implied warranty that the goods shall be fit for such purpose.” (Ibid.,
p. 573)

“b)     Deposit: – Money lodged with a person
as an earnest or security for the performance of some contract, to be forfeited
if the depositor fails in his undertaking. It may be deemed to be part payment and to that extent may constitute
the purchaser the actual owner of the estate.

“To commit to custody, or to lay down; to place; to put. To lodge for safe­-keeping or as a pledge to
intrust to the care of another.

“The act of placing money in the custody of a bank or banker,
for safety or convenience, to be withdrawn at the will of the depositor or
under rules and regulations agreed on. Also, the money so deposited, or the credit which the depositor receives
for it. Deposit, according to its
commonly accepted and generally understood among bankers and by the public,
includes not only deposits payable on demand and for which certificates,
whether interest-bearing or not, may be issued, payable on demand, or on
certain notice, or at a fixed future time.” (Ibid., pp. 394-395)

Furthermore, the element of “knowing at the time of issue
that he does not have sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would
have been dishonored for the same reason x x x” is inversely applied in
this case. From the very beginning,
petitioner never hid the fact that he did not have the funds with which to put
up the warranty deposit and as a matter of fact, he openly intimated this to
the vital conduit of the transaction, Joey
Gomez, to whom petitioner was introduced by Mrs. Teng. It would have been different if this
predicament was not communicated to all the parties he dealt with regarding the
lease agreement the financing of which was covered by L.S. Finance Management.

WHEREFORE, the appealed decision is REVERSED and the
accused-petitioner is hereby ACQUITTED of the crime charged.

SO ORDERED.

Padilla, J., concur.

Narvasa, C.J., (Chairman), in the result.

Regalado, J., pro hac vice.

Nocon, J., on leave.

* Penned by Associate Justice
Lorna S. Lombos-De La Fuente and concurred in by Associate Justices Jesus M.
Elbinias and Luis L. Victor.