G.R. No. 187919 , 187979, 188030; February 20, 2013
RAFAEL H. GALVEZ, KATHERINE L. GUY, GILBERT G. GUY, PHILIP LEUNG, EUGENIO H. GALVEZ, JR., Petitioners, vs. ASIA UNITED BANK, Respondent.

FACTS

Radio Marine Network Inc. (RMSI), through its interlocking directors and officers (the petitioners), applied for and was granted a substantial Omnibus Credit Line by Asia United Bank (AUB). RMSI presented itself as doing business under the name “Smartnet Philippines” and submitted documents showing a large capitalization and a telecom franchise. Unknown to AUB, the petitioners had also incorporated a separate subsidiary corporation named Smartnet Philippines, Inc. (SPI) with a minimal paid-up capital. The bank, believing SPI was merely the division of RMSI, extended credit facilities, including an Irrevocable Letter of Credit, to SPI based on the financial strength of RMSI.
When the obligations became due and remained unpaid, AUB demanded payment. RMSI and the petitioners denied liability, asserting that SPI was a separate juridical entity distinct from RMSI and that the obligation was solely SPI’s. AUB filed a criminal complaint for Syndicated Estafa, alleging the petitioners employed a fraudulent scheme by misrepresenting SPI as a division of RMSI to obtain credit, only to later hide behind corporate separateness to avoid payment.

ISSUE

Whether there is probable cause to indict the petitioners for estafa.

RULING

Yes, but for Simple Estafa under Article 315(2)(a) of the Revised Penal Code, not Syndicated Estafa. The Supreme Court, upon motion for reconsideration, modified its earlier ruling. The element of deceit was sufficiently established for probable cause. The petitioners, as directors of both RMSI and SPI, induced AUB to part with its money by creating the false impression that SPI was not a separate corporation but a division of the well-capitalized RMSI. They used RMSI’s financial documents to secure credit for the thinly capitalized SPI, and even executed renewal promissory notes under the name “Smartnet Philippines,” blurring the distinction between the two entities. This constituted a fraudulent scheme or false pretense.
However, the charge for Syndicated Estafa under P.D. No. 1689 was dismissed. The Court ruled that the law requires the solicitation of funds from the general public, which was not present in this case. The transaction was a private loan obtained from a single banking institution. Thus, while the alleged deceit warranted a criminal prosecution for estafa, it did not meet the elevated elements of the syndicated variety. The case was remanded for prosecution for Simple Estafa.