GR 123307; (November, 1999) (Digest)
G.R. No. 123307 November 29, 1999
SAMUEL BARANGAN, petitioner, vs. COURT OF APPEALS and LEOVINO JOSE, respondents.
FACTS
Private respondent Leovino Jose invested P43,500.00 in the Biyaya Foundation, which promised a 300% return in fifteen days. The Foundation was a reorganized entity of the previously dissolved San Mateo Small Town Multi-Purpose Cooperative, which had been engaged in an illegal paluwagan or pyramiding scheme. Petitioner Samuel Barangan was the Vice-Chairman of the Foundation’s Board of Directors. The scheme collapsed, and Jose’s investment was lost. A criminal complaint for estafa was filed against Barangan and other officers. The trial court acquitted Barangan and three others of the criminal charge due to lack of evidence proving they personally induced Jose to invest. However, the court held them jointly and severally liable to repay Jose P43,500.00. The Court of Appeals affirmed this decision.
ISSUE
Whether petitioner Samuel Barangan, despite his acquittal from the criminal charge of estafa, can be held civilly liable for the return of the investment made by private respondent Leovino Jose.
RULING
Yes. The Supreme Court affirmed the rulings of the lower courts. The acquittal was based on the prosecution’s failure to prove criminal intent or personal acts of inducement by the petitioner beyond reasonable doubt. This does not extinguish the civil liability arising from the investment contract. The civil liability is based on a different standard of proof—preponderance of evidence—and stems from the petitioner’s role as a corporate officer. The Court found that the Biyaya Foundation was a fraudulent scheme, a mere continuation of the earlier illegal paluwagan. As an officer and director, Barangan participated in the operations of this scheme. The Court rejected the defense that the Foundation, as a separate juridical entity, was solely liable. The corporate veil was pierced because the Foundation was organized as a subterfuge to perpetuate fraud. Therefore, its officers who participated in the scheme could be held personally liable for the financial losses incurred by investors. The civil obligation to return the money received under a void or inexistent contract is governed by the Civil Code under the principle of solutio indebiti. Consequently, Barangan, along with his co-accused (with one exception), was correctly ordered to pay Jose jointly and severally.