Soriano vs. People

An indirect borrowing by a bank director or officer—one made by a third party in which the DOSRI holds a stake—is within the prohibition of Section 83 of the General Banking Act, and the absence of the required written approval of the majority of the board of directors completes the crime. Falsification of a commercial document is a necessary means to commit estafa when the falsified document is thereafter utilized to defraud, and the complex crime is consummated even if the falsification precedes the actual defraudation.

Petitioner Hilario P. Soriano served as president of the Rural Bank of San Miguel (Bulacan), Inc. (RBSM). During a general examination conducted by the Department of Rural Bank Supervision and Examination Section of the Bangko Sentral ng Pilipinas (BSP), RBSM was found to have granted loans without proper documentation and to have extended excessive unsecured credit. Investigation revealed that on June 27, 1997, RBSM released an unsecured loan of P15,000,000.00 in the name of Virgilio J. Malang, a depositor. The loan had no collateral, lacked approval from the Credit Committee or the Board of Directors, and was supported only by an incomplete loan application signed in blank. Malang denied knowledge of the loan. Two Informations were subsequently filed against petitioner: one for violation of the DOSRI law (Criminal Case No. 1719-M-2000) and another for estafa through falsification of commercial documents (Criminal Case No. 1720-M-2000).

• The Fictitious Loan: Petitioner, as president of RBSM, caused the release of a P15,000,000.00 unsecured loan in the name of Virgilio J. Malang on June 27, 1997. The loan application was signed by Malang in blank and lacked the requisite details. The loan was processed without approval from the Credit Committee or the Board of Directors, without collateral, and without a complete loan application. The net proceeds of P14,775,000.00 were released through Manager’s Check No. 016514 payable to Malang. RBSM’s letter to BSP, signed by petitioner, falsely represented that the loan had been approved under Board Resolution No. 64A-1997 and was secured by real estate mortgages, but no such board resolution or annotation of mortgages existed.

• Malang’s Denial: Virgilio Malang, a businessman and depositor of RBSM, testified that petitioner had earlier encouraged him to apply for a loan and gave him documents to sign. Malang, however, withdrew the application because his wife objected and their lawyer advised that the collateral would be insufficient. He was unaware that the loan had been approved and proceeds credited to an account in his name, as he maintained no current account with RBSM. Two personal checks totaling P14,775,000.00 were issued from that account payable to Malang and deposited into another account under his name at Merchants Rural Bank of Talavera, Inc. (MRBTI), all without his knowledge.

• The Circuitous Scheme to Divert Proceeds: Upon instruction of petitioner, RBSM General Manager Rosalinda Ilagan deposited the two checks into Malang’s MRBTI account. MRBTI President Andres Santillana testified that petitioner directed him to accept the checks, deposit them, and later allow Ilagan to withdraw the funds once cleared. The amount was withdrawn through 30 MRBTI checks drawn against MRBTI’s Land Bank account and made payable to Malang. These checks were negotiated at Land Bank-Gapan Branch to secure two Land Bank cashier’s checks—Check No. 000000992 for P12,409,791.99 payable to Norma Rayo and Check No. 000000993 for P2,365,000.00 payable to Teresa Villacorta.

• Application of Proceeds to Petitioner’s Prior Irregular Loans: The Land Bank checks were deposited in RBSM and applied to earlier irregular obligations of petitioner and other individuals. Official receipts showed that Check No. 000000992 was applied to loans of Norma Rayo and Hilario Soriano, while Check No. 000000993 was applied to loans of Hilario P. Soriano, among others. The General Examination Report of RBSM had previously identified significant irregular loans under petitioner’s name, providing motive for the scheme.

• Defense’s Position: The defense failed to file a formal offer of evidence. Petitioner contended that the prosecution’s evidence referred to a separate irregular loan of P34,000,000.00, not the Malang loan, and that the non-presentation of Norma Rayo was a fatal omission. He also argued that his bank account was never examined to trace proceeds directly to him, that Malang actually signed the loan application, and that as president he was not involved in frontline loan processing.

• Identity of the Loan: Petitioner maintained that the prosecution’s General Examination Report pertained to an irregular loan of P34,000,000.00 under his and Rayo’s names, not the P15 million Malang loan; thus, the evidence was misdirected and insufficient to prove the indirect borrowing charged.

• Failure to Present Key Witness: Petitioner argued that the prosecution’s failure to present Norma Rayo as a witness was fatal because it left unverified the connection between the proceeds and his personal obligations.

• Tracing of Proceeds: Petitioner contended that the prosecution never examined his personal bank account to demonstrate that the loan proceeds “went straight to his coffers,” thereby failing to prove that the money inured to his benefit.

• Actual Signing by Malang: Petitioner pointed out that Malang himself signed the loan application, which should negate the allegation of falsification based on causing it to appear that Malang participated when he did not.

• Role in Loan Processing: Petitioner stressed that as RBSM president, he was not engaged in frontline services and could not have personally processed the loan.

• Sufficiency of Evidence: Respondent countered that the prosecution presented nine witnesses whose testimonies were categorical, corroborative, and consistent with voluminous documentary evidence, establishing beyond reasonable doubt that petitioner orchestrated the entire scheme.

• Relevance of General Examination Report: The Report was not the sole evidence but was used to prove petitioner’s pre-existing irregular loans and his motive for obtaining the Malang loan to pay those obligations.

• Immateriality of Rayo’s Non-Presentation: The testimony of other witnesses and documentary exhibits sufficiently detailed the scheme, including the roles of Rayo and Villacorta, without Rayo’s presence being indispensable.

• Circumstantial Tracing of Proceeds: The indirect and circuitous routing of funds did not undercut proof; rather, it demonstrated petitioner’s deliberate effort to avoid detection. The application of the Land Bank checks to his prior loans established benefit.

• Falsification Despite Malang’s Signature: Malang signed documents in blank under petitioner’s prodding and later withdrew the application; the subsequent processing and completion of the loan without Malang’s knowledge or consent constituted causing it to appear that he participated in an act when he did not.

• Violation of the DOSRI Law: Whether petitioner’s guilt for violation of Section 83 of R.A. No. 337, as amended, was proved beyond reasonable doubt.

• Estafa Through Falsification of Commercial Documents: Whether petitioner’s guilt for the complex crime of estafa through falsification of commercial documents was proved beyond reasonable doubt.

• Violation of the DOSRI Law: The prosecution established the three elements of the offense. Petitioner was concededly a director and officer of RBSM. The subject loan had no written approval from the majority of the board of directors. The second element—indirect borrowing—was proved by evidence that petitioner orchestrated the release of a fictitious loan under Malang’s name, caused its proceeds to be funneled through MRBTI and Land Bank, and ultimately used the money to settle his prior irregular obligations with RBSM. The General Examination Report was not the sole proof but was legitimately used to establish motive. The non-presentation of Norma Rayo was not fatal because the web of testimonial and documentary evidence amply traced the destination of the funds. The fact that proceeds did not go directly to petitioner’s personal account was inconsequential; a circuitous scheme does not erase criminal liability, and indirect borrowing includes loans made by a third party in which the DOSRI has a stake.

• Estafa Through Falsification of Commercial Documents: All elements of falsification under Article 171(2) in relation to Article 172 of the RPC were present. Petitioner, a private individual, caused it to appear that Malang participated in the loan transaction when Malang had withdrawn his application and had no knowledge of the processed loan. The falsified instruments—loan application, promissory note, checks, disclosure statement—are commercial documents because they facilitate trade or credit transactions. The falsification was a necessary means to commit estafa: the falsified documents were used to defraud RBSM into releasing P14,775,000.00, which petitioner then misappropriated for his own benefit. The scheme satisfied the elements of estafa by means of deceit, resulting in damage to the bank. Malang’s act of signing in blank did not exculpate petitioner, as the subsequent unauthorized processing and completion of the loan constituted the prohibited act of causing it to appear that Malang participated when he did not. Petitioner’s lack of frontline duties was irrelevant given the direct instructions he gave to the working participants.

• Elements of Violation of Section 83, R.A. No. 337 (DOSRI Law) — (1) The offender is a director or officer of a banking institution; (2) the offender, directly or indirectly, for himself or as representative or agent of another, borrows deposits or funds of the bank, becomes a guarantor, indorser, or surety for loans from the bank to others, or in any manner becomes an obligor for money borrowed from the bank; (3) the act is performed without the written approval of the majority of the directors, excluding the director concerned. Applied here, all elements were satisfied by petitioner’s orchestration of the Malang loan and the absence of board approval.

• Indirect Borrowing under the DOSRI Law — An indirect borrowing includes a loan made by a third party in which the director or officer has a stake, even if the DOSRI is not a named party. The prohibition is intended to protect depositors from overborrowing by bank insiders and covers a broad range of modes of becoming an obligor.

• Complex Crime of Estafa through Falsification of Commercial Documents — Falsification of a public, official, or commercial document may be a necessary means to commit estafa when the falsified document is subsequently used to defraud. The falsification is already consummated before the document is utilized, and the damage results from the estafa, not the falsification itself. The two offenses are thus complexed under Article 48 of the RPC, with the penalty for the more serious offense (estafa) imposed in its maximum period.

• Commercial Documents Defined — Documents or instruments used by merchants or businessmen to promote or facilitate trade or credit transactions, such as loan applications, promissory notes, disclosure statements, and checks.

• Factual Findings of Trial Courts — Factual findings of trial courts, including assessments of witness credibility, are accorded great weight and respect, especially when affirmed by the Court of Appeals. The Supreme Court will not disturb them absent any of the recognized exceptions.

• Incremental Penalty under R.A. No. 10951 — When the amount of fraud exceeds P4,400,000.00, one year is added for each additional P2,000,000.00, with any fraction of a year disregarded, up to a maximum of 20 years. The rate of legal interest on civil indemnity is 6% per annum from finality of judgment until full payment, pursuant to BSP Circular No. 799.

• “The prohibition under the DOSRI law is broad enough to cover various modes of borrowing… A direct borrowing is obviously one that is made in the name of the DOSRI himself or where the DOSRI is a named party, while an indirect borrowing includes one that is made by a third party, but the DOSRI has a stake in the transaction.” — This passage defines the scope of indirect borrowing and was central to rejecting petitioner’s argument that the loan was in Malang’s name.

• “The falsification of a public, official, or commercial document may be a means of committing estafa, because before the falsified document is actually utilized to defraud another, the crime of falsification has already been consummated, damage or intent to cause damage not being an element of the crime of falsification of public, official or commercial document.” — The Court reiterated the doctrinal basis for complexing falsification and estafa.

• “Commercial documents are, in general, documents or instruments which are used by merchants or businessmen to promote or facilitate trade or credit transactions.” — This definition supported the classification of the loan documents as commercial documents.

• “It would be absurd for a high-ranking bank officer to orchestrate the processing and acquisition of a fictitious loan and to deposit the proceeds thereof straight to his personal bank account only to leave paper trails and put himself at the risk of easy apprehension.” — The Court addressed the argument that funds never went directly to petitioner’s account.

• Go v. Bangko Sentral ng Pilipinas, 619 Phil. 306 (2009) — Enumerated the elements of a violation of Section 83 of the General Banking Act; applied as the controlling framework for the DOSRI charge.

• Soriano v. People, 625 Phil. 33 (2010) — A related case involving the same petitioner, which elaborated the distinction between direct and indirect borrowing under the DOSRI law; extensively quoted and relied upon.

• Tanenggee v. People, 712 Phil. 310 (2013) — Defined the complex crime of estafa through falsification of commercial documents and the nature of commercial documents; used as the primary authority for the second charge.

• Domingo v. People, 618 Phil. 499 (2009) — Cited within Tanenggee as precedent for the rule that falsification is already consummated before the document is used to defraud.

• Hernan v. Sandiganbayan, G.R. No. 217874, December 5, 2017 — Held that R.A. No. 10951, which adjusted penalties for estafa based on amount, applies retroactively; relied upon in modifying the penalty.

• People v. Ocden, 665 Phil. 268 (2011) — Prescribed the method for computing incremental penalties for estafa; used to confirm the CA’s computation of the maximum term.

• Pucay v. People, 536 Phil. 1117 (2006) — Enumerated the exceptions to the rule that factual findings of trial courts are binding; cited to underline that none applied.

• Desmoparan v. People, G.R. No. 233598, March 27, 2019 — Provided the basis, together with BSP Circular No. 799, for reducing the interest rate on the civil indemnity to 6% per annum from finality.

• Section 83, Republic Act No. 337, as amended by Presidential Decree No. 1795 (General Banking Act) — Prohibits directors or officers of banking institutions from directly or indirectly borrowing bank funds or becoming obligors without written approval of the majority of the board; prescribed penalty of imprisonment of not less than one year nor more than ten years and a fine of not less than P1,000 nor more than P10,000. Applied to petitioner’s indirect borrowing through the fictitious Malang loan.

• Article 171(2), Revised Penal Code — Enumeration of acts of falsification, specifically paragraph 2: “Causing it to appear that persons have participated in any act or proceeding when they did not in fact so participate.” Petitioner’s use of Malang’s blank-signed documents after withdrawal of the application fell under this subsection.

• Article 172, Revised Penal Code — Falsification by private individuals; petitioner, a private individual, was convicted under this article in relation to Article 171.

• Article 48, Revised Penal Code (Complex Crimes) — Applied to complex the falsification of commercial documents with estafa, the falsification being a necessary means to commit the estafa.

• Article 315, Revised Penal Code (Estafa) — Constituted the felony of estafa through deceit, as petitioner employed false pretenses to obtain the loan proceeds for his own benefit.

• Republic Act No. 10951 — Adjusted the amounts and penalties for estafa; the amended thresholds were applied retroactively to compute the indeterminate sentence, reducing the maximum term.

• Indeterminate Sentence Law (Act No. 4103) — Applied in fixing the minimum and maximum terms of the penalty for the complex crime.

Peralta, C.J. (Chairperson), Caguioa (Working Chairperson), and Lazaro-Javier, JJ., concurred. Lopez, J., was on official leave.