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G.R. No. 195064, January 15, 2014 - NARI K. GIDWANI, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

G.R. No. 195064, January 15, 2014 - NARI K. GIDWANI, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.



G.R. No. 195064, January 15, 2014




Before us is a Petition1 under Rule 45 of the Rules of Court, assailing the Decision2 and the subsequent Resolution3  of the Court of Appeals (CA) in CA-G.R. CR No. 32642 dated 17 September 2010 and 6 January 2011, respectively.

The facts are as follows:chanroblesvirtuallawlibrary

Petitioner is the president of G.G. Sportswear Manufacturing Corporation (GSMC), which is engaged in the export of ready-to-wear clothes. GSMC secured the embroidery services of El Grande Industrial Corporation (El Grande) and issued on various dates from June 1997 to December 1997 a total of 10 Banco de Oro (BDO) checks as payment for the latter’s services worth an aggregate total of P1,626,707.62.

Upon presentment, these checks were dishonored by the drawee bank for having been drawn against a closed account.

Thus, El Grande, through counsel, sent three demand letters regarding 8 of the 10 issued checks: 4chanrobleslaw

Date of letter
BDO Check No.
Date of Check
24 September 1997
4 September 1997
P 130,000.00
24 September 1997
12 June 1997
24 July 1997
7 August 1997
7 August 1997
28 August 1997
8 October
25 September 1997
2 October 1997

On 15 October 1997,5 petitioner wrote to El Grande’s counsel acknowledging receipt of the 8 October demand letter6 and informing the latter that, on 29 August 1997, GSMC had filed a Petition with the Securities and Exchange Commission (SEC). It was a Petition for the Declaration of a State of Suspension of Payments, for the Approval of a Rehabilitation Plan and Appointment of a Management Committee.7 Acting on the Petition, the SEC issued an Order8 on 3 September 1997 ordering the suspension of all actions, claims, and proceedings against GSMC until further order from the SEC Hearing Panel. Petitioner attached this SEC Order to the 15 October 1997 letter. In short, GSMC did not pay El Grande.

Despite its receipt on 16 October 1997 of GSMC’s letter and explanation, El Grande still presented to the drawee bank for payment BDO Check Nos. 0000063652 and 0000063653 dated November and December 1997, respectively.

Thereafter, sometime in November 1997, El Grande filed a Complaint with the Office of the City Prosecutor of Manila charging petitioner with eight counts of violation of Batas Pambansa Blg. 22 (B.P. 22) for the checks covering June to October 1997. El Grande likewise filed a similar Complaint in December 1997, covering the checks issued in November and December 1997.

Corresponding Informations for the Complaints were subsequently filed on 1 October 2001.

For his part, petitioner raised the following defenses: (1) the SEC Order of Suspension of Payment legally prevented him from honoring the checks; (2) there was no consideration for the issuance of the checks, because the embroidery services of El Grande were of poor quality and, hence, were rejected; and (3) he did not receive a notice of dishonor of the checks.

On 24 March 2008, after trial on the merits, the Metropolitan Trial Court (MTC) of Manila found petitioner guilty beyond reasonable doubt of ten counts of violation of B.P. 22.  It ordered him to pay the face value of the checks amounting to P1,626,707.60 with interest at the legal rate per annum from the filing of the case and to pay a fine of P200,000 with subsidiary imprisonment in case of insolvency.9 The MTC held that the Petition for voluntary insolvency or a SEC Order for the suspension of payment of all claims are not defenses under the law regarding violations of B.P. 22, since an order suspending payments involves only the obligations of the corporation and does not affect criminal proceedings.

On appeal, the Regional Trial Court (RTC) affirmed the findings of the MTC and likewise denied the Motion for Reconsideration of petitioner.10chanrobleslaw

Thereafter, petitioner filed with the CA a Petition for Review under Rule 42.

In its Decision dated 17 September 2010, the CA found that the prosecution was able to establish that petitioner had received only the 8 October 1997 Notice of Dishonor and not the others. The CA further held that the prosecution failed to establish that the account was closed prior to or at the time the checks were issued, thus proving knowledge of the insufficiency of funds.

Thus, the CA partly granted the appeal and acquitted petitioner of eight counts of violation of B.P. 22, while sustaining his conviction for the two remaining counts and ordering him to pay the total civil liability due to El Grande. The dispositive portion of the Decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED and the assailed RTC Decision dated January 29, 2009 and its Order dated June 5, 2009 are AFFIRMED with modifications: (a) sustaining accused-appellant’s conviction in Criminal Case Nos. 301888 and 301889; (b) acquitting him in Criminal Case Nos. 371112-13, 301883-87 and 301890; and (c) ordering him to pay private complainant, El Grande Industrial Corporation, the aggregate amount of P1,626,707.62 representing the value of the ten (10) BDO checks with interest at 12% per annum reckoned from the date of the filing of the Information until finality of this Decision, and thereafter, the total amount due, inclusive of interest, shall be subject to 12% annual interest until fully paid.

The rest of the Decision stands.


Petitioner filed his Motion for Partial Reconsideration on 11 October 2010,12 raising the following as his defenses: (1) there was no clear evidence showing that he acknowledged the Notice of Dishonor of the two remaining checks; (2) the suspension Order of the SEC was a valid reason for stopping the payment of the checks; and, (3) as a corporate officer, he could only be held civilly liable.

On 6 January 2011, the CA denied the motion through its assailed Resolution.13chanrobleslaw

Hence, this Petition.

Petitioner raises these two issues in the present Petition:chanRoblesvirtualLawlibrary


We find the appeal to be meritorious.

The elements of a violation of B.P. 22 are the following:15chanrobleslaw

1) making, drawing and issuing any check to apply on account or for value;

2) knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and

3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of the check for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.
In convicting petitioner of two counts of violation of B.P. 22, the CA applied Tiong v. Co,16 in which we said:chanRoblesvirtualLawlibrary

The purpose of suspending the proceedings under P.D. No. 902-A is to prevent a creditor from obtaining an advantage or preference over another and to protect and preserve the rights of party litigants as well as the interest of the investing public or creditors. It is intended to give enough breathing space for the management committee or rehabilitation receiver to make the business viable again, without having to divert attention and resources to litigations in various fora. The suspension would enable the management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the “rescue” of the debtor company. To allow such other action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation.

Whereas, the gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a worthless check; that is, a check that is dishonored upon its presentation for payment. It is designed to prevent damage to trade, commerce, and banking caused by worthless checks. In Lozano v. Martinez, this Court declared that it is not the nonpayment of an obligation which the law punishes. The law is not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making and circulation of worthless checks. Because of its deleterious effects on the public interest, the practice is proscribed by the law. The law punishes the act not as an offense against property, but an offense against public order. The prime purpose of the criminal action is to punish the offender in order to deter him and others from committing the same or similar offense, to isolate him from society, to reform and rehabilitate him or, in general, to maintain social order. Hence, the criminal prosecution is designed to promote the public welfare by punishing offenders and deterring others.

Consequently, the filing of the case for violation of B.P. Blg. 22 is not a “claim” that can be enjoined within the purview of P.D. No. 902-A. True, although conviction of the accused for the alleged crime could result in the restitution, reparation or indemnification of the private offended party for the damage or injury he sustained by reason of the felonious act of the accused, nevertheless, prosecution for violation of B.P. Blg. 22 is a criminal action. (Emphasis supplied.)

The CA furthermore cited Tiong in this wise: 17chanrobleslaw

Hence, accused-appellant cannot be deemed excused from honoring his duly issued checks by the mere filing of the petition for suspension of payments before the SEC. Otherwise, an absurdity will result such that “one who has engaged in criminal conduct could escape punishment by the mere filing of a petition for rehabilitation by the corporation of which he is an officer.” (Emphasis supplied.)

However, what the CA failed to consider was that the facts of Tiong were not on all fours with those of the present case and must be put in the proper context.  In Tiong, the presentment for payment and the dishonor of the checks took place before the Petition for Suspension of Payments for Rehabilitation Purposes was filed with the SEC. There was already an obligation to pay the amount covered by the checks. The criminal action for the violations of B.P. 22 was filed for failure to meet this obligation. The criminal proceedings were already underway when the SEC issued an Omnibus Order creating a Management Committee and consequently suspending all actions for claims against the debtor therein. Thus, in Tiong, this Court took pains to differentiate the criminal action, the civil liability and the administrative proceedings involved.

In contrast, it is clear that prior to the presentment for payment and the subsequent demand letters to petitioner, there was already a lawful Order from the SEC suspending all payments of claims. It was incumbent on him to follow that SEC Order.  He was able to sufficiently establish that the accounts were closed pursuant to the Order, without which a different set of circumstances might have dictated his liability for those checks.

Considering that there was a lawful Order from the SEC, the contract is deemed suspended. When a contract is suspended, it temporarily ceases to be operative; and it again becomes operative when a condition occurs - or a situation arises - warranting the termination of the suspension of the contract.18chanrobleslaw

In other words, the SEC Order also created a suspensive condition. When a contract is subject to a suspensive condition, its birth takes place or its effectivity commences only if and when the event that constitutes the condition happens or is fulfilled.19 Thus, at the time private respondent presented the September and October 1997 checks for encashment, it had no right to do so, as there was yet no obligation due from petitioner.

Moreover, it is a basic principle in criminal law that any ambiguity in the interpretation or application of the law must be made in favor of the accused. Surely, our laws should not be interpreted in such a way that the interpretation would result in the disobedience of a lawful order of an authority vested by law with the jurisdiction to issue the order.

Consequently, because there was a suspension of GSMC’s obligations, petitioner may not be held liable for the civil obligations of the corporation covered by the bank checks at the time this case arose. However, it must be emphasized that her non-liability should not prejudice the right of El Grande to pursue its claim through remedies available to it, subject to the SEC proceedings regarding the application for corporate rehabilitation.

WHEREFORE, in view of the foregoing, the Petition is hereby GRANTED. The Decision dated 17 September 2010 and the Resolution dated 6 January 2011 of the Court of Appeals in CA-G.R. CR No. 32642 are REVERSED and SET ASIDE. Criminal Case Nos. 301888 and 301889 are DISMISSED, without prejudice to the right of El Grande Industrial Corporation to file the proper civil action against G.G. Sportswear Manufacturing Corporation for the value of the ten (10) checks.

SO ORDERED.cralawlawlibrary

Leonardo-Decastro, Bersamin, Villarama, Jr., and Mendoza,* JJ. concur.


* Designated as additional member per Raffle dated 8 November 2011 in lieu of Associate Justice Bienvenido L. Reyes, who took no part due to prior action in the Court of Appeals.

1Rollo, pp. 8-27.

2 Id. at 28-36; Penned by Associate Justice Estela M. Perlas-Bernabe (now a member of this Court), with Associate Justices Bienvenido L. Reyes (now also a member of this Court) and CA Associate Justice Elihu A. Ybañez concurring.

3 Id. at 37.

4 Id. at 51-53.

5 Id. at 56.

6 Id. at 55.

7 Id. at 105-112.

8 Id. at 46-49.

9 Id. at 176-186.

10 Id. at 66-73.

11Rollo, pp. 28-36.

12 Id. at 77-89.

13 Id. at 37.

14 Id. at 15.

15Josef v. People, 512 Phil. 65, 69 (2005).

16 G.R. No. 133608, 26 August 2008, 563 SCRA 239, 249-251.

17Rollo, p. 33.

18Nielson & Company, Inc. v. Lepanto Consolidated Mining Company, 135 Phil. 532 (1968).

19 360 Phil. 891 (1998).
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