TEODORO A. REYES, Petitioner, vs. ETTORE ROSSI, Respondent.

G.R. No. 159823 February 18, 2013

Doctrine:
The rescission of a contract of sale is not a prejudicial question that will
warrant the suspension of the criminal proceedings commenced to prosecute
the buyer for violations of the Bouncing Checks Law (Batas Pambansa Blg.22)
arising from the dishonor of the checks the buyer issued in connection with the
sale.

Facts:
1. On October 31, 1997, petitioner Teodoro A. Reyes (Reyes) and Advanced
Foundation Construction Systems Corporation (Advanced Foundation),
represented by its Executive Project Director, respondent Ettore Rossi (Rossi),
executed a deed of conditional sale involving the purchase by Reyes of
equipment consisting of a Warman Dredging Pump HY 300A
worth P10,000,000.00.
> The parties agreed therein that Reyes would pay the sum of P3,000,000.00
as downpayment, and the balance of P7,000,000.00 through four post-
dated checks.
> Reyes complied.

2. However, in January 1998, he requested the restructuring of his
obligation under the deed of conditional sale by replacing the four post-
dated checks with nine post-dated checks that would include interest at
the rate of P25,000.00/month accruing on the unpaid portion of the
obligation on April 30, 1998, June 30, 1998, July 31, 1998, September 30,
1998 and October 31, 1998.
> Advanced Foundation assented to Reyes request, and returned the four
checks. In turn, Reyes issued and delivered the following nine postdated
checks in the aggregate sum of P7,125,000.00 drawn against the United
Coconut Planters Bank.
Check No. Date Amount
72807 April 30, 1998 P 25,000.00
79125 May 1, 1998 1,000,000.00
72802 May 30, 1998 2,000,000.00
72808 June 30, 1998 25,000.00
72809 July 31, 1998 25,000.00
72801 August 31, 1998 2,000,000.00
72810 September 30, 1998 25,000.00
72811 October 31, 1998 25,000.00
72903 November 30, 1998 2,000,000.00
3. Rossi deposited three of the post-dated checks (i.e., No. 72807, No.
79125 and No. 72808) on their maturity dates in Advanced Foundations bank
account at the PCI Bank in Makati.
> Two of these checks were denied payment ostensibly upon Reyes
instructions to stop their payment, while the third (i.e., No. 72802) was
dishonored for insufficiency of funds.

4. Rossi likewise deposited two more checks (i.e., No. 72809 and No.
72801) in Advanced Foundations account at the PCI Bank in Makati, but the
checks were returned with the notation Account Closed stamped on
them.
> He did not anymore deposit the three remaining checks on the assumption
that they would be similarly dishonored.

5. In the meanwhile, on July 29, 1998, Reyes commenced an action for
rescission of contract and damages in the RTC of QC. His complaint
sought judgment declaring the deed of conditional sale "rescinded and of no
further force and effect," and ordering Advanced Foundation to return
the P3,000,000.00 downpayment with legal interest from June 4, 1998 until
fully paid; and to pay to him attorneys fees, and various kinds and amounts of
damages.

6. On September 8, 1998, Rossi charged Reyes with five counts
of estafa and five counts of violation of Batas Pambansa Blg. 22 in the
Office of the City Prosecutor of Makati for the dishonor of Checks No. 72807,
No. 72808, No. 72801, No. 72809 and No. 79125.
> And another criminal charge for violation of Batas Pambansa Blg. 22
was lodged against Reyes in the Office of the City Prosecutor of Quezon
City for the dishonor of Check No. 72802.

7. On September 29, 1998, Reyes submitted his counter-affidavit in the Office
of the City Prosecutor of Makati, claiming that the checks had not been
issued for any valuable consideration; that he had discovered from the start
of using the dredging pump involved in the conditional sale that the Caterpillar
diesel engine powering the pump had been rated at only 560 horsepower
instead of the 1200 horsepower Advanced Foundation had represented to
him; that welding works on the pump had neatly concealed several cracks;
that on May 6, 1998 he had written to Advanced Foundation complaining about
the misrepresentations on the specifications of the pump and demanding
documentary proof of Advanced Foundations ownership of the pump;
that he had caused the order to stop the payment of three checks (i.e., No.
72806, No. 72807 and No. 79125); that Advanced Foundation had replied to
his letter on May 8, 1998 by saying that the pump had been sold to him on
an as is, where is basis; that he had then sent another letter to Advanced
Foundation on May 18, 1998 to reiterate his complaints and the request
for proper documentation of ownership; that he had subsequently
discovered other hidden defects, prompting him to write another letter;
and that instead of attending to his complaints and request, Advanced
Foundations lawyers had threatened him with legal action.
> Reyes also assailed the jurisdiction of the Office of the City Prosecutor
of Makati over the criminal charges against him on the ground that he had
issued the checks in Quezon City; as well as argued that the Office of the
City Prosecutor of Makati should suspend the proceedings because of the
pendency in the RTC of the civil action for rescission of contract that
posed a prejudicial question as to the criminal proceedings.

7. On November 20, 1998, the Assistant City Prosecutor handling the
preliminary investigation recommended the dismissal of the charges
of estafa and the suspension of the proceedings relating to the violation
of Batas Pambansa Blg. 22 based on a prejudicial question, and for it to
remain suspended until the prejudicial question has been resolved.
> On January 5, 1999, the City Prosecutor of Makati approved the
recommendation of the handling Assistant City Prosecutor.

8. Rossi appealed the resolution of the City Prosecutor to the Department of
Justice, but the Secretary of Justice, by resolution of July 24, 2001, denied
Rossis petition for review.

9. After the denial of his motion for reconsideration on April 29, 2002, Rossi
challenged the resolutions of the Secretary of Justice by petition
for certiorari in the CA.
> Rossi insisted that the Secretary of Justice had committed grave abuse of
discretion amounting to lack or excess of jurisdiction in upholding the
suspension of the criminal proceedings by the City Prosecutor of Makati on
account of the existence of a prejudicial question, and in sustaining the
dismissal of the complaints for estafa.
CA: On May 30, 2003, the CA promulgated its assailed decision, to wit:
WHEREFORE, the foregoing considered, the assailed resolution is
hereby MODIFIED and the instant petition isGRANTED in so far as the issue of
the existence of prejudicial question is concerned. Accordingly, the order
suspending the preliminary investigation in I.S. No. 98-40024-29
is REVERSED and SET ASIDE, and the dismissal of the complaint for estafa
is AFFIRMED. SO ORDERED.

10. Hence, this appeal by Reyes.

Issue:
Whether or not the civil action for rescission of the contract of sale raised a
prejudicial question that required the suspension of the criminal prosecution for
violation of Batas Pambansa Blg. 22.


Held:

Reyes asserts that the CA erred in ruling that there was no prejudicial question
that warranted the suspension of the criminal proceedings against him; that the
petition suffered fatal defects that merited its immediate dismissal; that the CA
was wrong in relying on the pronouncements in Balgos, Jr. v.
Sandiganbayan
12
and Umali v. Intermediate Appellate Court
13
because the
factual backgrounds thereat were not similar to that obtaining here; and that
the Secretary of Justice did not commit any grave abuse of discretion
amounting to lack or excess of jurisdiction.

In his comment,
14
Rossi counters that the petition for review should be
outrightly dismissed because of its fatal defect; that the CA did not err in ruling
that the action for rescission of contract did not pose a prejudicial question that
would suspend the criminal proceedings.

Reyes submitted a reply,
15
declaring that the defect in the affidavit of service
attached to his petition for review had been due to oversight; that he had
substantially complied with the rules; that there existed a prejudicial question
that could affect the extent of his liability in light of Supreme Court
Administrative Circular No. 12-2000; and that the CA erred in finding that the
Secretary of Justice committed grave abuse of discretion.


The petition for review is without merit.

A prejudicial question generally comes into play in a situation
where a civil action and a criminal action are both pending, and there
exists in the former an issue that must first be determined before the
latter may proceed, because howsoever the issue raised in the civil
action is resolved would be determinative juris et de jure of the guilt or
innocence of the accused in the criminal case. The rationale for the
suspension on the ground of a prejudicial question is to avoid conflicting
decisions.

Two elements that must concur in order for a civil case to be
considered a prejudicial question are expressly stated in Section 7, Rule 111 of
the 2000 Rules of Criminal Procedure, to wit:
Section 7. Elements of prejudicial question. The elements of a prejudicial
question are: (a) the previously instituted civil action involves an issue similar
or intimately related to the issue raised in the subsequent criminal action, and
(b) the resolution of such issue determines whether or not the criminal action
may proceed.

In Sabandal v. Tongco, the concept of prejudicial question is explained
in this wise:
For a civil action to be considered prejudicial to a criminal case as to
cause the suspension of the criminal proceedings until the final
resolution of the civil, the following requisites must be present: (1) the
civil case involves facts intimately related to those upon which the
criminal prosecution would be based; (2) in the resolution of the issue or
issues raised in the civil action, the guilt or innocence of the accused
would necessarily be determined; and (3) jurisdiction to try said question
must be lodged in another tribunal.

If both civil and criminal cases have similar issues or the issue in
one is intimately related to the issues raised in the other, then a
prejudicial question would likely exist, provided the other element or
characteristic is satisfied. It must appear not only that the civil case
involves the same facts upon which the criminal prosecution would be
based, but also that the resolution of the issues raised in the civil action
would be necessarily determinative of the guilt or innocence of the
accused. If the resolution of the issue in the civil action will not determine
the criminal responsibility of the accused in the criminal action based on
the same facts, or there is no necessity "that the civil case be determined
first before taking up the criminal case," therefore, the civil case does not
involve a prejudicial question. Neither is there a prejudicial question if the
civil and the criminal action can, according to law, proceed independently
of each other.

Contending that the rescission of the contract of sale constitutes a
prejudicial question, Reyes posits that the resolution of the civil action will be
determinative of whether or not he was criminally liable for the violations of
Batas Pambansa Blg. 22. He states that if the contract would be rescinded, his
obligation to pay under the conditional deed of sale would be extinguished, and
such outcome would necessarily result in the dismissal of the criminal
proceedings for the violations of Batas Pambansa Blg. 22.

The action for the rescission of the deed of sale on the ground that
Advanced Foundation did not comply with its obligation actually seeks one of
the alternative remedies available to a contracting party under Article 1191 of
theCivil Code, to wit:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfilment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfilment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period. This is understood to be without
prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law.

Article 1191 of the Civil Code recognizes an implied or tacit resolutory
condition in reciprocal obligations. The condition is imposed by law, and
applies even if there is no corresponding agreement thereon between the
parties. The explanation for this is that in reciprocal obligations a party incurs in
delay once the other party has performed his part of the contract; hence, the
party who has performed or is ready and willing to perform may rescind the
obligation if the other does not perform, or is not ready and willing to perform.

It is true that the rescission of a contract results in the extinguishment
of the obligatory relation as if it was never created, the extinguishment having a
retroactive effect. The rescission is equivalent to invalidating and unmaking the
juridical tie, leaving things in their status before the celebration of the
contract. However, until the contract is rescinded, the juridical tie and the
concomitant obligations subsist.

To properly appreciate if there is a prejudicial question to warrant
the suspension of the criminal actions, reference is made to the elements
of the crimes charged. The violation of Batas Pambansa Blg. 22 requires
the concurrence of the following elements, namely: (1) the making,
drawing, and issuance of any check to apply for account or for value; (2)
the 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) the
subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit or dishonor for the same reason had not the drawer,
without any valid cause, ordered the bank to stop payment.
21
The issue in
the criminal actions upon the violations of Batas Pambansa Blg. 22 is,
therefore, whether or not Reyes issued the dishonoured checks knowing
them to be without funds upon presentment. On the other hand, the issue
in the civil action for rescission is whether or not the breach in the
fulfilment of Advanced Foundations obligation warranted the rescission
of the conditional sale. If, after trial on the merits in the civil action,
Advanced Foundation would be found to have committed material breach
as to warrant the rescission of the contract, such result would not
necessarily mean that Reyes would be absolved of the criminal
responsibility for issuing the dishonored checks because, as the
aforementioned elements show, he already committed the violations
upon the dishonor of the checks that he had issued at a time when the
conditional sale was still fully binding upon the parties. His obligation to
fund the checks or to make arrangements for them with the drawee bank
should not be tied up to the future event of extinguishment of the
obligation under the contract of sale through rescission. Indeed,
under Batas Pambansa Blg. 22, the mere issuance of a worthless check
was already the offense in itself. Under such circumstances, the criminal
proceedings for the violation of Batas Pambansa Blg. 22 could proceed
despite the pendency of the civil action for rescission of the conditional
sale.

Accordingly, we agree with the holding of the CA that the civil
action for the rescission of contract was not determinative of the guilt or
innocence of Reyes. We consider the exposition by the CA of its reasons
to be appropriate enough, to wit:
x x x x
We find merit in the petition.
A careful perusal of the complaint for rescission of contract and
damages reveals that the causes of action advanced by respondent Reyes are
the alleged misrepresentation committed by the petitioner and AFCSC and
their alleged failure to comply with his demand for proofs of ownership. On one
hand, he posits that his consent to the contract was vitiated by the fraudulent
act of the company in misrepresenting the condition and quality of the dredging
pump. Alternatively, he claims that the company committed a breach of
contract which is a ground for the rescission thereof. Either way, he in effect
admits the validity and the binding effect of the deed pending any adjudication
which nullifies the same.
Indeed, under the Jaw on contracts, vitiated consent does not make a
contract unenforceable but merely voidable, the remedy of which would be to
annul the contract since voidable contracts produce legal effects until they are
annulled. On the other hand, rescission of contracts in case of breach pursuant
to Article 1191 of the Civil Code of the Philippines also presupposes a valid
contract unless rescinded or annulled.
As defined, a prejudicial question is one that arises in a case, the
resolution of which is a logical antecedent of the issue involved therein, and the
cognizance of which pertains to another tribunal. The prejudicial question must
be determinative of the case before the court but the jurisdiction to try and
resolve the question must be lodged in another court or tribunal.
It is a question based on a fact distinct and separate from the crime but
so intimately connected with it that it determines the guilt or innocence of the
accused, and for it to suspend the criminal action, it must appear not only that
said case involves facts intimately related to those upon which the criminal
prosecution would be based but also that in the resolution of the issue or
issues raised in the civil case, the guilt or innocence of the accused would
necessarily be determined. It comes into play generally in a situation where a
civil action and a criminal action are both pending and there exists in the former
an issue which must be preemptively resolved before the criminal action may
proceed, because howsoever the issue raised in the civil action is resolved
would be determinative juris et de jure of the guilt or innocence of the accused
in the criminal case.
In this light, it is clear that the pendency of the civil case does not bar
the continuation of the proceedings in the preliminary investigation on the
ground that it poses a prejudicial question. Considering that the contracts are
deemed to be valid until rescinded, the consideration and obligatory effect
thereof are also deemed to have been validly made, thus demandable.
Consequently, there was no failure of consideration at the time when the
subject checks were dishonored. (Emphasis supplied)
x x x x

WHEREFORE, the Court DENIES the petition for review; AFFIRMS
the decision the Court of Appeals promulgated on May 30, 2003; and
DIRECTS the petitioner to pay the costs of suit.
SO ORDERED.