PAULINO CHANG, PETITIONER, VS. THE INTERMEDIATE APPELLATE COURT (FIRST CRIM. CASES DIVISION) AND THE PEOPLE OF THE PHILIPPINES, RESPONDENTS.

Chang versus Intermediate Appellate Court

The Case

This is the case of Chang versus the Intermediate Appellate Court, a criminal case for Estafa under Article 315 of the Revised Penal Code, arising from a failed investment scheme. Paulino Chang was convicted of defrauding Kiat Reaport of 68,000 pesos by false pretenses and by issuing an unfunded postdated check. The case matters because it draws the line between a civil investment liability and a criminal Estafa, and because it shows how the issuance of a bouncing check can itself be the deceit that consummates the fraud.

Procedural History

Chang was charged in two separate Informations before the former Court of First Instance of Manila: one for violation of the Bouncing Checks Law, and one for Estafa. After a joint trial, the Regional Trial Court of Manila, Branch 32, convicted him in both cases. In the Estafa case, the trial court sentenced him to imprisonment of two years, four months and one day as minimum, to sixteen years and one day as maximum, and to indemnify the offended party in the amount of 88,350 pesos, plus costs.

On appeal, the Intermediate Appellate Court affirmed the conviction but modified the penalties. It reduced the maximum ceiling of imprisonment in the Estafa case from sixteen years to twelve years, and reduced the indemnity from 88,350 pesos to 68,000 pesos. Chang then filed a Petition for Review before the Supreme Court. The Court denied the Petition for lack of merit. Chang's first Motion for Reconsideration was denied with finality. He then filed a second Motion for Reconsideration, which is the matter resolved in this decision.

Facts

In August 1979, Paulino Chang was introduced to Kiat Reaport as a very rich businessman. Flaunting a Mercedes Benz 450 and a bodyguard, Chang told Reaport that he was importing hand tractors from the People's Republic of China and selling them to the government. He claimed to know high-ranking officials, among them the First Lady. He invited Reaport to invest 200,000 pesos in the importation business, with a guaranteed profit of thirty percent in three months. Reaport was at first reluctant because he did not have that kind of money, but Chang told him that a lesser amount would do.

By the end of June 1980, Reaport agreed to invest 68,000 pesos. On July 2, 1980, inside the coffee shop of the Mabini Mansion, Reaport handed Chang the 68,000 pesos in cash. In return, Chang gave him a postdated check for 88,350 pesos, drawn on his account with the Bank of the Philippine Islands, payable to cash and postdated October 2, 1980. That amount represented the investment plus the thirty percent profit. Chang assured Reaport that the check was fully funded.

Reaport did not deposit the check on its date upon Chang's request. He deposited it on October 29, 1980, and after three days the check was returned unpaid, stamped payment stopped. Reaport informed Chang of the dishonor and demanded cash, but Chang refused because he had no money. A demand letter from Reaport's lawyer followed. Chang replied that the check had in fact been issued to another person in payment of gambling debts. The bank records showed that on the date of the check, Chang's balance was only 73 pesos and 95 centavos. Chang's defense was that he did not know Reaport and had no dealings with him, and that the check was a gambling check.

Issues

• Whether or not Chang is guilty of Estafa under Article 315 of the Revised Penal Code, considering his claim that the transaction was a mere investment and his liability, if any, would only be civil.
• Whether or not the issuance of an unfunded postdated check may be considered as the deceit that consummates the Estafa, even if the Information did not expressly charge Estafa through the issuance of a postdated check.
• Whether or not the defense that the check was a gambling check, and therefore void from the beginning, can overcome the finding of fraud.

Applicable Provisions

Section 1 of the Bouncing Checks Law, Batas Pambansa Blg. 22, provides:

SECTION 1. Checks without sufficient funds. - Any person who makes or draws and issues any check to apply on account or for value, 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 had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but more than one (1) year or by fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or both such fine and imprisonment at the discretion of the Court.

This provision is the basis for Chang's separate conviction for violation of the Bouncing Checks Law, which the Court affirmed because the check bounced for insufficiency of funds.

Article 315 of the Revised Penal Code, which defines Estafa, is the provision applied to the fraud charge. The Court quotes the Information alleging that Chang, by means of false manifestations and fraudulent representations, induced Reaport to invest 68,000 pesos, and simultaneously gave him a postdated check with the assurance that it was fully funded, knowing that it was not. The Court holds that these allegations sufficiently charge Estafa through false pretenses and through the issuance of an unfunded check.

Ruling

On the first issue, the Court held that Chang is guilty of Estafa. It acknowledged that if the amount were invested as capital in a business, the accused would not be liable for Estafa, as his liability would be civil. However, the Court found that Chang employed deceit to induce Reaport to deliver the sum for investment. He misrepresented that he was moneyed and had influence and connections in high places, and simultaneously with the delivery of the sum, he resorted to the deceitful practice of issuing an unfunded check for 88,350 pesos, ostensibly with a profitable return on investment, to perpetrate the fraud. The Court stressed that Chang never had the money in the bank and never made good the dishonored check despite notice.

On the second issue, the Court rejected Chang's argument that he was not charged with Estafa through the issuance of a postdated check. The Information sufficiently alleged that Chang had issued a postdated check covering the whole amount of his investment plus the thirty percent profit, which he simultaneously gave and delivered to Reaport, with the assurance that the check was fully funded, well knowing that it was not fully funded, for which reason it was dishonored when presented for payment. The Court also noted that Chang presented no evidence to overcome the proof of false pretenses, and no evidence that he had invested Reaport's money as he had represented. His denial of knowing Reaport indicated that everything he made Reaport believe was false and fabricated.

On the third issue, the Court held that the defense that the check was a gambling check lacks credence. Chang issued the check in payment of an obligation to return the money he got from Reaport, including a thirty percent profit. It was not by way of guaranteeing Reaport's investment; it was the inducement to convince Reaport of a sure return of his money plus the profit promised. The Court found the gambling debt theory characterized with circumstances doubly hard to believe, and treated the matter as one of credibility, which the trial court and the appellate court are better fitted to pass upon.

The Court concluded that the conjunto of the facts narrated by the complainant established fraud, deceit and damage, the essential elements of the crime of Estafa. The fraud was confirmed by Chang's defense that there was never a deal between him and Reaport, and the claim that he had given the cash check to a gambling creditor.

Doctrine

A Bar candidate should retain these rules. First, if money is invested as capital in a business, the investor's liability is civil, not criminal. Second, the issuance of an unfunded postdated check, simultaneous with the delivery of money, may constitute the deceit that consummates Estafa under Article 315 of the Revised Penal Code, even if the Information does not expressly charge Estafa through the issuance of a postdated check, provided the Information alleges the facts constituting the fraud. Third, the elements of Estafa are fraud, deceit and damage, and the prosecution must prove them. Fourth, the defense that the check was a gambling check is a question of credibility, and the trial court's findings on credibility are accorded great weight. Fifth, the Bouncing Checks Law, Batas Pambansa Blg. 22, punishes the issuance of a check without sufficient funds, and a conviction under it may stand separately from a conviction for Estafa.

Disposition

The Court denied Chang's second Motion for Reconsideration, and the denial is final. Chang's conviction for Estafa, as modified by the appellate court, stands.

Remember This

The single line worth memorizing is that the issuance of an unfunded postdated check, simultaneous with the delivery of money, can be the deceit that consummates Estafa, and the liability is criminal, not merely civil. Examiners like to use this case to test the distinction between a civil investment liability and a criminal Estafa, and to test whether the issuance of a bouncing check can be the fraud itself.