Dear PAO,
I was invited to invest in a company that promised a 5 percent return on investment every month. Unfortunately, after several months, no payout was made and the company representatives no longer spoke to us. We discovered that the corporation was not engaged in any form of business and just invited people to invest. Can we file a criminal case for Estafa?
Mily

Dear Mily,
Please be informed of the Supreme Court’s ruling in the case of People of the Philippines vs. Felix Aquino, et al., GR 234818, Nov. 5, 2018, Associate Justice Estela Perlas-Bernabe, where the Supreme Court stated the distinction between legitimate and fraudulent investment schemes, to wit:

“Lest it be misunderstood, not all proposals to invest in certain business ventures are tainted with fraud. To be sure, an actionable fraud arises when the accused has knowledge that the venture proposed would not reasonably yield the promised results, and yet, despite such knowledge, deliberately continues with the misrepresentation. Business investments ordinarily carry risks; but for as long as the incipient representations related thereto are legitimate and made in good faith, the fact that the business eventually fails to succeed or skews from its intended targets does not mean that there is fraud. As case law instructs, ‘the gravamen of the (crime of Estafa) is the employment of fraud or deceit to the damage or prejudice of another. When fraud pertains to the means of committing a crime or the classes of crimes under Chapter Three, Title Four, Book Two and Chapter Three, Title Seven, Book Two of the RPC, criminal liability may arise; otherwise, if fraud merely causes loss or injury to another, without being an element of a crime, then it may only be classified as civil fraud from which an action for damages may arise.'” (Emphasis and Underscoring Ours)
In the same case, the Supreme Court enumerated the elements of this type of Estafa, viz.:

“Article 315 (2) (a) of the RPC reads:
“Art. 315. Swindling (estafa). — Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by: xxx

“2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:
“(a) By using a fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions; or by means of other similar deceits. xxx

“The elements of Estafa as contemplated in this provision are the following: (a) that there must be a false pretense or fraudulent representation as to his power, influence, qualifications, property, credit, agency, business or imaginary transactions; (b) that such false pretense or fraudulent representation was made or executed prior to or simultaneously with the commission of the fraud; (c) that the offended party relied on the false pretense, fraudulent act, or fraudulent means and was induced to part with his money or property; and (d) that, as a result thereof, the offended party suffered damage.” (Emphasis and Underscoring Ours)

From the above-quoted portion of the Supreme Court decision, it is clear that Estafa or Swindling is committed when the false pretense or fraudulent representation was done prior to or simultaneous to the commission of the fraud and that it was the very reason why the person induced parted with his money. In this case, you parted with your money with the impression that it will earn 5 percent interest. That was the very reason you were induced to invest and part with your money. However, the promise to return 5 percent interest was a false pretense or fraudulent representation because the corporation was not engaged in any form of business which could be the source of returning your investment. Thus, this clearly falls within the category of Estafa as defined and penalized by Art. 315 par. (2) (a) of the Revised Penal Code.

We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]