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Prudential Bank v.

IAC, 216 SCRA 257 (1992)


FACTS:
Philippine Rayon Mills, Inc. entered into a contract with Nissho Co., Ltd. of Japan for the importation of textile machineries under a fiveyear deferred payment plan.
Rayon applied for a commercial letter of credit with the Prudential Bank and Trust Company in favor of Nissho. By virtue of said application,
the Prudential Bank opened Utter of Credit
Against this letter of credit, drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through its correspondent
in Japan, the Bank of Tokyo, Ltd.
As indicated on their faces, two of these drafts were accepted by the Rayon through its president, Anacleto R. Chi, while the others were
not.
Upon the arrival of the machineries, the Prudential Bank indorsed the shipping documents to Rayon which accepted delivery of the same.
To enable Rayon to take delivery of the machineries, it executed, by prior arrangement with the Prudential Bank, a trust receipt which was
signed by Anacleto R. Chi in his capacity as President
.
At the back of the trust receipt is a printed form to be accomplished by two sureties who, by the very terms and conditions thereof, were to
be jointly and severally liable to the Prudential Bank should the Rayon fail to pay the total amount or any portion of the drafts issued by
Nissho and paid for by Prudential Bank.
The defendant-appellant was able to take delivery of the textile machineries and installed the same at its factory site at 69 Obudan Street,
Quezon City.
Subsequently, Rayon ceased business operation. All the textile machineries in its factory were sold to AIC Development Corporation.
The obligation of Rayon arising from the letter of credit and the trust receipt remained unpaid and unliquidated.
Repeated formal demands for the payment of the said trust receipt yielded no result.
TC: Ordered Philippine Rayon to pay, however disregarded the latter drafts as those drafts were not accepted by Rayon.
Prudential Bank: Trial Court erred in interpreting sight drafts as requiring acceptance by Rayon before it could be held liable thereon.
CA: Sustained the Trial Court. The last drafts which had not been presented and accepted by Rayon, prudential Bank was not justified in
unilaterally paying the amounts therein.
ISSUE: Whether or not sight drafts require prior acceptance before Rayon can be held liable thereon.
HELD:
Letters of Credit; Presentment for acceptance not required for sight drafts.-- A letter of credit is defined as an engagement by a bank or
other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the
conditions specified in the credit.11 Through a letter of credit, the bank merely substitutes its own promise to pay for the promise to pay of
one of its customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment
fees mutually agreed upon. In the instant case then, the drawee was necessarily the herein petitioner. It was to the latter that the drafts
were presented for payment. In fact, there was no need for acceptance as the issued drafts are sight drafts. Presentment for acceptance is
necessary only in the cases expressly provided for in Section 143 of the Negotiable Instruments Law (NIL).13 The said section reads:
"SEC. 143. When presentment for acceptance must be made.-Presentment for acceptance must be made:
(a) Where the bill is payable after sight, or in any other ease, where presentment for acceptance is necessary in order to fix the maturity of
the instrument; or
(b)Where the bill expressly stipulates that it shall be presented for acceptance;
(c) Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee.
In no other case is presentment for acceptance necessary in order to render any party to the bill liable."
Obviously then, sight drafts do not require presentment for acceptance.
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Presentment is not a condition sine qua non for reimbursement.


Bank of America, NT & SA v. Court of Appeals, 228 SCRA 357 (1993)
FACTS
Bank of America, NT & SA, Manila, received by registered mail art Irrevocable Letter of Credit purportedly issued by Bank of Ayudhya,
Sarnyaek Branch, for the account of General Chemicals, Ltd., of Thailand in the amount to cover the sale of Plastic ropes and "agricultural
files," with the Bank of America as advising bank and Inter-Resin Industrial Corporation as beneficiary.
Upon receipt of the letter-advice with the letter of credit, Inter-Resin sent its lawyer to Bank of America to have the letter of credit confirmed.
The bank did not. The bank employee in charge of letters of credit, however, explained to that there was no need for confirmation because
the letter of credit would not have been transmitted if it were not genuine.
Inter-Resin sought to make a partial availment under the letter of credit by submitting to Bank of America invoices, covering the shipment
of 24,000 bales of polyethylene rope to General Chemicals valued at US$1,320,600.00, the corresponding packing list, export declaration
and bill of lading. Finally, after being satisfied that Inter-Resin's documents conformed with the conditions expressed in the letter of credit,
Bank of America issued in favor of Inter-Resin a Cashier's Check the peso equivalent of the draft.
Bank of America wrote Bank of Ayudhya advising the latter of the availment under the letter of credit and sought the corresponding
reimbursement therefor.
Meanwhile, Inter-Resin, presented to Bank of America the documents for the second availment under the same letter of credit.
Immediately upon receipt of a telex from Bank of Ayudhya declaring the letter of credit fraudulent, Bank of America stopped the processing
of Inter-Resin's documents and sent a telex to its branch office in Bangkok, Thailand, requesting assistance in determining the authenticity
of the letter of credit.
Bank of America sued Inter-Resin for the recovery of the peso equivalent of the draft on the partial availment of the now disowned letter of
credit.
TC: Ruled for Inter-Resin, holding that (c) Bank of America cannot recover from Inter-Resin because the drawer of the letter of credit is the
Bank of Ayudhya and not Inter-Resin, that Bank of America made assurances that enticed Inter-Resin and the merchandise to Thailand;
CA: Sustained the Trial Court.
ISSUE: Whether or not the Bank of America acted merely as an advising bank or a confirming bank, corollarily, Bank of America can
recover from Inter-Resin.
HELD:
It cannot seriously be disputed, looking at this case, that Bank of America has, in fact, only been an advising, not confirming, bank, and this
much is clearly evident, among other things, by the provisions of the letter of credit itself, the petitioner bank's letter of advice, its request
for payment of advising fee, and the admission of Inter-Resin that it has paid the same. That Bank of America has asked Inter-Resin to
submit documents required by the letter of credit and eventually has paid the proceeds thereof, did not obviously make it a confirming bank.
The fact, too, that the draft required by the letter of credit is to be drawn under the account of General Chemicals (buyer) only means that
the same had to be presented to Bank of Ayudhya (issuing, bank) for payment. It may be significant to recall that the letter of credit is an
engagement of the issuing bank, not the advising bank, to pay the draft.
No less important is that Bank of America's letter of 11 March 1981 has expressly stated that "[t]he enclosure is solely an advise of credit
opened by the abovementioned correspondent and conveys no engagement by us." This written reservation by Bank of America in limiting
its obligation only to being an advising bank is in consonance with the provisions of U.C.P.
As an advising or notifying bank, Bank of Amenca did not incur any obligation more than just notifying Inter-Resin of the letter of credit
issued in its favor, let alone to confirm the letter of credit. The bare statement of the bank employee, aforementioned, in responding to the
inquiry made by Atty. Tanay, Inter-Resin's representative, on the authenticity of the letter of credit certainly did not have the effect of
novating the letter of credit and Bank of America's letter of advise, nor can it justify the conclusion that the bank must now assume total
liability on the letter of credit. Indeed, Inter-Resin itself cannot claim to have been all that free from fault. As the seller, the issuance of the
letter of credit should have obviously been a great concern to it. It would have, in fact, been strange if it did not, prior to the letter of credit,
enter into a contract, or negotiated at the very least, with General Chemicals. In the ordinary course, of business, the perfection of contract
precedes the issuance of a letter of credit.
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT
OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
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Facts:
On March 2, 1979, Charles Lee, as President of MICO wrote private respondent Philippine Bank of Communications (PBCom) requesting
for a grant of a discounting loan/credit line in the sum of Three Million Pesos (P3,000,000.00) for the purpose of carrying out MICOs line of
business as well as to maintain its volume of business.
On the same day, Charles Lee requested for another discounting loan/credit line of Three Million Pesos (P3,000,000.00) from PBCom for
the purpose of opening letters of credit and trust receipts.
As per agreement, the proceeds of all the loan availments were credited to MICOs current checking account with PBCom. To induce the
PBCom to increase the credit line of MICO, petitioners executed another surety agreement in favor of PBCom on July 28, 1980, whereby
they jointly and severally guaranteed the prompt payment on due dates or at maturity of overdrafts, promissory notes, discounts, drafts,
letters of credit, bills of exchange, trust receipts and all other obligations of any kind and nature for which MICO may be held accountable
by PBCom
Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand for payment. Private respondent PBCom
extrajudicially foreclosed MICOs real estate mortgage upon repeated demands & emerged as the highest bidder. For the unpaid balance,
PBCom then demanded the settlement of the aforesaid obligations from herein petitioners-sureties who, however, refused to acknowledge
their obligations to PBCom under the surety agreements. Hence, PBCom filed a complaint with prayer for writ of preliminary attachment
before the Regional Trial Court of Manila.
Petitioners (MICO and herein petitioners-sureties) denied all the allegations of the complaint filed by respondent PBCom, and alleged that:
a) MICO was not granted the alleged loans and neither did it receive the proceeds of the aforesaid loans; b) Chua Siok Suy was never
granted any valid Board Resolution to sign for and in behalf of MICO; c) PBCom acted in bad faith in granting the alleged loans and in
releasing the proceeds thereof; d) petitioners were never advised of the alleged grant of loans and the subsequent releases therefor, if
any; e) since no loan was ever released to or received by MICO, the corresponding real estate mortgage and the surety agreements
signed concededly by the petitioners-sureties are null and void.
Issue: WON the proceeds of the loans or the goods under the trust receipts were ever delivered to and received by MICO.
Held: It is clear that letters of credit, being usually bank to bank transactions, involve more than just one bank. Consequently, there is
nothing unusual in the fact that the drafts presented in evidence by respondent bank were not made payable to PBCom.
A trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient
funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through
utilization, as collateral of the merchandise imported or purchased.
A trust receipt, therefor, is a document of security pursuant to which a bank acquires a security interest in the goods under trust receipt.
Under a letter of credit-trust receipt arrangement, a bank extends a loan covered by a letter of credit, with the trust receipt as a security for
the loan. The transaction involves a loan feature represented by a letter of credit, and a security feature which is in the covering trust
receipt which secures an indebtedness.
Bank of the Philippine Islands v. De Reny Fabric Industries, Inc., 35 SCRA 253 (1970)
FACTS:
-On four (4) diffierent occasions in 1961, the De Reny Fabric Industries, Inc., a Philippine corporation, applied to the Bank for four (4)
irrevocable commercial letters of credit to cover the purchase by the corporation of goods described in the covering L/C applications as
"dyestuffs of various colors" from its American supplier, the J.B. Distributing Company.
-All the applications of the corporation were approved, and the corresponding Commercial L/C Agreements were executed pursuant to
banking procedures.
-Pursuant to banking regulations then in force, the corporation delivered to the Bank peso marginal deposits as each letter of credit was
opened.
-By virtue of the foregoing transactions, the Bank issued irrevocable commercial letters of credit addressed to its correspondent banks in
the United States, with uniform instructions for them to notify the beneficiary thereof, the JB. Distributing Company, that they have been
authorized to negotiate the latter's sight drafts up to the amounts mentioned therein, respectively, if accompanied, upon presentation, by a
full set of negotiable clean "on board" ocean bills of lading, covering the merchandise appearing in the L/Cs, that is, dyestuffs of various
colors, Consequently, the J.B. Distributing Company drew upon, presented to and negotiated with these banks, its sight drafts covering the
amounts of the merchandise ostensibly being exported by it, together with clean bills of lading, and collected the full value of the drafts up
to the amounts appearing in the L/ Cs as above indicated.
-These correspondent banks then debited the account of the Bank of the Philippine Islands with them up to the full value of th drafts
presented by the J.B. Distributing Company, thereafter, endorsed and forwarded all documents to the Bank of the Philippine Islands.
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-In the meantime, as each shipment (covered by the above-mentioned letters of credit) arrived in the Philippines, the De Reny Fabric
Industries, Inc. made partial payments to the Bank amounting, in the aggregate, to P90,000.
-Further payments were, however, subsequently discontinued by the corporation when it became established, as a result of a chemical test
conducted by the National Science Development Board, that the goods that arrived in Manila were colored chalks instead of dyestuffs.
-The corporation also refused to take possession of these goods, and for this reason, the Bank caused them to be deposited with a bonded
warehouse paying therefor the amount of P12,609.64 up to the filing of its complaint with the court below on December 10, 1962.
LOWER COURT: Ordered the corporation and its co-defendants (the herein appellants) to pay BPI the amount of the LC agreement.
DEFENSE OF DE RENY:
It was the duty of the foreign correspondent banks of the Bank of the Philippine Islands to take the necessary precautions to insure that the
goods shipped under the covering L/Cs conformed with the item appearing therein, and, that the foreign banks having failed to perform this
duty, no claim for recoupment against the defendants-appellants, arising from the losses incurred for the non-delivery or defective delivery
of the articles ordered, could accrue.
HELD:
Under the terms of their Commercial Letter of Credit Agreements with the Bank, the appellants agreed that the Bank shall not be
responsible for the "existence, chancier, quality, quantity, conditions, packing, value, or delivery of the property purporting to be
represented by documents, for any difference in character, quality, quantity, condition, or value of the property front that expressed in
documents," or for "partial or incomplete shipment, or failure or omission to ship my or all of the property referred to in the Credit," as well
as "for any deviation from instructions, delay, default or fraud by the shipper or inyone else in connection with the property or the shipping
thereof," and "for any breach of contract between the shippers or vendors and ourselves, [purchasers] or any of us."
Having agreed to these terms, the appellants have, therefore, no recourse but to comply with their covenant to the rules of evidence."
The Code of Commerce, in its Article 2, likewise provides that "Acts of commerce, whether those who execute them be merchants or not,
and whether specified in this Code or not, should be governed by the provisions contained in it, in their absence, b) the usages of
commerce generally observed in each place, and in the absence of both rules, by those of the civil law" "Those acts contained in this Code
and all Others of analogous character, shall be deemed acts of commerce." It must be noted that certain principles governing the issuance,
acceptance and payment of letters of credit arc specifically provided for in the Code of Commerce.
But even without the stipulation recited above, the appellants cannot shift the burden of loss to the Bank on account of the violation by their
vendor of its prestation.
Banks, in providing financing in international business transactions such as those entered into by the appellants, do not deal with the
property to be exported or shipped to the importer, but deal only with documents. The Bank introduced in evidence a provision contained in
the "Uniform Customs and Practices for Commercial Documentary Credits Fixed for the Thirteenth Congress of International Chamber of
Commerce," to which the Philippines is a signatory nation. Article 10 thereof provides:
"Its documentary credit operations, all parties concerned deal in documents and not in goods. payment, negotiation or acceptance against
documents in accordance with the terms and conditions of a credit by a Bank authorized to do so binds the party giving the authorization to
take up the documents and reimbursed the Bank making the payment, negotiation or acceptance."
The existence of a custom in international banking and financing circles negating any duty on the part of a bank to verify whether what has
been described in letters of credits or drafts or shipping documents actually tallies with what was loaded aboard ship, having been
positively proven as a fact, the appellants me bound by this established usage. They were, after all, the ones who tapped the facilities
afforded by the Bank in order to engage in international business.
Feati Bank & Trust Company vs. Court of Appeals, 196 SCRA 576 (1991)
FACTS:
-Bernardo E. Villaluz agreed to sell to the then defendant Axel Christiansen 2,000 cubic meters of lauan logs at $27.00 per cubic meter
FOB.
-After inspecting the logs, Christiansen issued purchase order.

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-On the arrangements made and upon the instructions of the consignee, Hanmi Trade Development, Ltd., de Santa Ana, California, the
Security Pacific National Bank of Los Angeles, California issued Irrevocable Letter of Credit available at sight in favor of Villaluz for the sum
of $54,000.00, the total purchase price of the lauan logs.
-The letter of credit was mailed to the Feati Bank and Trust Company (now Citytrust) with the instruction to the latter that it "forward the
enclosed letter of credit to the beneficiary. The letter of credit further provided that the draft to be drawn is on Security Pacific National
Bank and that it be accompanied by the documents specified therein. Also incorporated by reference is the Uniform Customs and Practice
for Documentary Credits).
-The logs were thereafter loaded on the vessel "Zenlin Glory" which was chartered by Christiansen. Before its loading, the logs were
inspected by custom inspectors, all of whom certified to the good condition and exportsbility of the logs, and the loading was completed.
-However, Christiansen refused to issue the certification as required in paragraph 4 of the letter of credit, despite several requests made by
the private respondent.Because of the absence of the certification by Christiansen, the Feati Bank and Trust Company refused to advance
the payment on the letter of credit.
-Meanwhile, the logs arrived at Inchon, Korea and were received by the consignee, Hanmi Trade Development Company, to whom
Christiansen sold the logs and obtained profit. Hanmi Trade Development Company, on the other hand sold the logs to Taisung Lumber
Company at Inchon, Korea.
-Since the demands by the private respondent for Christiansen to execute the certification proved futile, Villaluz, instituted an action for
mandamus and specific performance against Christiansen and the Feati Bank and Trust Company (now Citytrust).The petitioner was
impleaded as defendant before the lower court only to afford complete relief should the court a quo order Christiansen to execute the
required certifica tion.
-While the case was still pending trial, Christiansen left the Philippines without informing the Court and his counsel. Hence, Villaluz, filed an
amended complaint make the petitioner solidarily liable with Christiansen.
ISSUE: Whether or not a correspondent bank is to be held liable under the letter of credit despite non-compliance by the beneficiary with
the terms thereon.
HELD:
Commercial transactions involving letter of credits are governed by the rule on strict compliance-- It is a settled rule in commercial
transactions involving letters of credit that the documents tendered must strictly conform to the terms of the letter of credit. The tender of
documents by the beneficiary (seller) must include all documents required by the letter. A correspondent bank which departs from what
has been stipulated under the letter of credit, as when it accepts a faulty tender, acts on its own risks and it may not thereafter be able to
recover from the buyer or the issuing bank, as the case may be, the money thus paid to the beneficiary. Thus the rule of strict compliance.
In the United States, commercial transactions involving letters of credit are governed by the rule of strict compliance. In the Philippines, the
same holds true. The-same rule must also be followed.
Although in some American decisions, banks are granted a little discretion to accept a faulty tender as when the other documents may be
considered immaterial or superfluous, this theory could lead to dangerous precedents. Since a bank deals only with documents, it is not in
a position to determine whether or not the documents required by the letter of credit Are material or superfluous. The mere fact that the
document was specified therein readily means that the document is of vital importance to the buyer.
Transfield Philippines, Inc. v. Luzon Hydro Corp., 443 SCRA 307 (2004)
FACTS:
-Transfield and Luzon Hydro Corporation entered into a Turnkey contract whereby Transfield, as turnkey contractor, undertook to construct,
on a turnkey basis, a seventy Megawatt Hydro-Electric power station at the Bakun River in the provinces of Benguet and Ilocos Sur.
-Transfield was given the sole responsibility for the design, construction, commissioning, testing and completion of the project.
-The turnkey contract entitled Transfield to claim extensions of time for reasons enumerated in the turnkey contract, among which are
variations, force majeure and delays caused by LHC itself.
-To secure performance of Transfields obligation on or before target completion date, Transfield opened in favor of LHC two stand-by
letters of credit.

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-In the course of construction of the project, Transfield sought various extension of time to complete the project. The extensions were
requested allegedly due to several factors which prevented the completion of the project on the target date, such as force majeure
occasioned by typhoon Zeb, barricades and demonstration. LHC denied the requests.
-Arbitration proceeding were initiated.
-Asserting that LHC had no right to call on the securities until the resolution of disputes before the arbitration tribunals, Transfield warned
the banks that any transfer, release or disposition of the securities in favor of LHC would constrain it to hold them liable for damages.
-Despite warning, however, the banks informed Transfield that they would pay on the securities if and when LHC calls on them.
-Subsequently, LHC declared Transfield in default and demanded payment for the delay until actual completion of the project pursuant to
the turnkey contract.
-Also, LHC served notice that it would call on the securities for payment of liquidated damages for the delay.
-Hence, Transfield filed a complaint for injunction against LHC and the banks.
ISSUES:
1. Whether or not it is only the issuing bank that may invoke the independence principle on letters of credit.
2. Whether or not there is necessity of resolving first any dispute by the parties before the beneficiary is entitled to call on the letter of credit.
3. Whether or not injunction is the proper remedy to restrain wrongful draws on the securities.
4. Whether the banks were justified in releasing the amounts due under the securities.
HELD:
- Letters of credit are also used in non-sale settings where they serve to reduce the risk of non-performance. Letters of credit in non-sale
settings are known as standby letters of credit. There are three significant differences between commercial and standby credits. First,
commercial credits involve the payment of money under a contract of sale. Such credits become payable upon the presentation by the
seller-beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement. In the standby type, the
credit is payable upon certification of a party's nonperformance of the agreement. The documents that accompany the beneficiary's draft
tend to show that the applicant has not performed. The beneficiary of a commercial credit must demonstrate by documents that he has
performed his contract. The beneficiary of the standby credit must certify that his obligor has not performed the contract.
- As beneficiary of the letter of credit, LHC is entitled to invoke the principle.
- The so-called independence principle assures the seller or the beneficiary of prompt payment independent of any breach of the main
contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not. Under this principle,
banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or
for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or
responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any
documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers
of the goods, or any other person whomsoever.
The independent nature of the letter of credit may be:
(a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying
agreement like for instance a typical standby; or
(b) independence may be only as to the justification aspect like in a commercial letter of credit or repayment standby, which is identical
with the same obligations under the underlying agreement. In both cases the payment may be enjoined if in the light of the purpose of the
credit the payment of the credit would constitute fraudulent abuse of the credit.
-The fraud exception principle is an exception to the independence principle. The untruthfulness of a certificate accompanying a demand
for payment under a standby letter of credit may qualify as fraud sufficient to support an injunction against payment. The remedy for
fraudulent abuse is an injunction. However, injunction should not be granted unless:
(a) there is a clear proof of fraud;
(b) the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud in the main agreement; and
(3) irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously damaged.
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-Where the applicant entered into a Turnkey contract whereby it undertook to construct, on a turnkey basis, a seventy (70) megawatt hydro
electric power station, the performance of which is secured by a standby letter of credit, the resort to arbitration by the applicant/ contractor
to arbitration to determine if the latter is guilty of delay does not preclude the beneficiary to draw on the letter of credit upon the issuance of
certificate of default because whether or not the issuance of certification of default amounted to fraud was not raised in the lower court and
the parties did not stipulate that all dispute regarding delay should first be settled through arbitration before the beneficiary would be
allowed to call upon the letter of credit. If drawing upon the letter of credit was wrongful due to the non-existent of the fact of default, the
right of the applicant to seek indemnification for damages it suffered would not normally be foreclosed pursuant to general principle of law.
MWSS v. Hon. Daway, 432 SCRA 559 (2004)
FACTS:
- MWSS granted Maynilad a 20- year period to manage, operate, repair, decommission and refurbish the existing MWSS water delivery
and sewerage services in the west zone service area, for which Maynilad undertook to pay the corresponding concession fees on the date
agreed upon in the said agreement which consisted of the payments of MWSS foreign loans.
- To secure the concessionaires performance of its obligation under the Concession Agreement, Maynilad was required to put up a bond,
bank guarantee or other security acceptable to MWSS.
- In compliance with this requirement, Maynilad arranged for a 3 year facility with a number of foreign banks, led by Citicorp International
Limited for the issuance of an irrevocable Standby Letter of Credit for the full and prompt performance of Maynilads obligations under
MWSS.
- As a result, of the depreciation of the Philippine Peso against US dollar, Maynilad incurred losses and issued a force majeure notice and
unilaterally suspend payment of the concession fees.
- In an effort to salvage the concession agreement, the parties entered into a Memorandum of Agreement wherein Maynilad was allowed
to recover foreign exchange losses under a formula agreed upon between them.
- Maynilad filed again another force majeure notice and since MWSS could not agree with the terms of the notice, the same was referred to
the Appeals Panel for arbitration.
- New term was agreed upon.
- Prior to that Maynilad had filed a petition for rehabilitation.
- RTC issued an order staying the enforcement of the claims and stopping payment of liabilities, because it is under rehabilitation. It
effectively stopped the commencing process of payment by the bank to MWSS.
- When MWSS demanded payment and commenced drawing on the irrevocable standby letter of credit, another order was issued by the
RTC declaring such act of MWSS as violative of stay order earlier issued.
- Aggrieved, MWSS filed this petition for review by way of certiorari under rule 65.
ISSUE: Whether or not Court has the authority to issue order enjoining MWSS from proceeding against the Stand-by Letter of Credit.
HELD:
-Letters of credit are in effect absolute undertakings to pay the money advanced or the amount for which credit is given on the faith of the
instrument; they are primary obligations and not accessory contracts and while they are security arrangements, they are not converted into
contracts of guaranty.Letters of credit were developed for the purpose of insuring to a seller payment of a definite amount upon the
presentation of documents and is thus a commitment by the issuer that the party in whose favor it is issued and who can collect upon it will
have his credit against the applicant of the letter, duly paid in the amount specified in the letter. They are in effect absolute undertakings
to pay the money advanced or the amount for which credit is given on the faith of the instrument. They are primary obligations and not
accessory contracts and while they are security arrangements, they are not converted thereby into contracts of guaranty. What
distinguishes letters of credit from other accessory contracts is the engagement of the issuing bank to pay the seller once draft and other
required shipping documents are presented to it. They are definite undertakings to pay at sight once the documents stipulated therein are
presented.

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-The obligation of the banks issuing letters of credit are solidary with that of the person or entity requesting for its issuance, the same being
a direct, primary, absolute and definite undertaking to pay the beneficiary upon the presentation of the set of documents required therein.
- Being a solidary obligation, the letter of credit is excluded from the jurisdiction of the rehabilitation and therefore in enjoining MWSS from
proceeding against the Standby Letters of Credit to which it had a clear right under the law and the terms of said Standby Letter of credit,
Hon. Daway acted in excess of his jurisdiction

Rosario Textile Mills Corp. v. Home Bankers Savings and Trust Company, 462 SCRA 88 (2005)
FACTS:
- Rosario Textile Mills Corporation (RTMC) applied from Home Bankers Savings & Trust Co. for an Omnibus Credit Line for P10 million.The bank approved RTMCs credit line but for only P8 million. The bank notified RTMC of the grant of the said loan thru a letter which
contains terms and conditions conformed by RTMC thru Edilberto V. Yujuico. Yujuico signed a Surety Agreement in favor of the bank, in
which he bound himself jointly and severally with RTMC for the payment of all RTMCs indebtedness to the bank.-RTMC availed of the
credit line by making numerous drawdowns, each drawdown being covered by a separate promissory note and trust receipt. RTMC,
represented by Yujuico, executed in favor of the bank atotal of eleven (11) promissory notes.-Despite the lapse of the respective due dates
under the promissory notes and notwithstanding the banks demand letters, RTMC failed to pay its loans. Hence, the bank filed a complaint
for sum of money against RTMC and Yujuico.
CONTENTION OF RTMC AND YUJUICO:
They claimed that although the grant of the credit line and the execution of the suretyship agreement are admitted, the bank gave
assurance that the suretyship agreement was merely a formality under which Yujuico will not be personally liable; that the importation of
raw materials under the credit line was with a grant of option to them to turn-over to the bank the imported raw materials should these fail
to meet their manufacturing requirements.-RTMC offered to make such turn-over since the imported materials did not conform to the
required specifications. However, the bank refused to accept the same, until the materials were destroyed by a fire which gutted down
RTMCs premises. For failure of the parties to amicably settle the case, trial on the merits proceeded.
TC: In favor of the bank and ordered RTMC and Yujuico to pay.-RMTC appealed contending that under the trust receipt contracts between
the parties, they merely held the goods described therein in trust for Home Bankers Savings and Trust Company (the bank) which owns
the same. Since the ownership of the goods remains with the bank, then it should bear the loss. With the destruction of the goods by fire,
petitioners should have been relieved of any obligation to pay.
CA: Affirmed the trial courts judgment, holding that the bank is merely the holder of the security for its advancepayments to petitioners;
and that the goods they purchased, through the credit line extended by the bank, belong tothem and hold said goods at their own risk.
ISSUE: Whether or not RMTC and Yujuico are not relieved of their obligation to pay their loan after they tried to tender the goods to the
bank which the bank refused to accept the same, and which goods were subsequently lost in fire.
HELD:
-Petitioners theorize that when petitioner RTMC imported the raw materials needed for its manufacture, using the credit line, it was merely
acting on behalf of the bank, the true owner of the goods by virtue of the trust receipts. Hence, under the doctrine of res perit domino, the
bank took the risk of the loss of said raw materials. RTMCs role in the transaction was that of end user of the raw materials and when it did
not accept those materials as they did not meet the manufacturing requirements, RTMC made a valid and effective tender of the goods to
the bank. Since the bank refused to accept the raw materials, RTMC stored them in its warehouse. When the warehouse and its contents
were gutted by fire, petitioners obligation to the bank was accordingly extinguished.
-Petitioners stance, however, conveniently ignores the true nature of its transaction with the bank. We recall that RTMC filed with the bank
an application for a credit line in the amount of P10 million, but only P8 million was approved. RTMC then made withdrawals from this
credit line and issued several promissory notes in favor of the bank. In banking and commerce, a credit line is that amount of money or
merchandise which a banker, merchant, or supplier agrees to supply to a person on credit and generally agreed to in advance. It is the
fixed limit of credit granted by a bank, retailer, or credit card issuer to a customer, to the full extent of which the latter may avail himself of
his dealings with the former but which he must not exceed and is usually intended to cover a series of transactions in which case, when the
customers line of credit is nearly exhausted, he is expected to reduce his indebtedness by payments before making any further drawings.It is thus clear that the principal transaction between petitioner RTMC and the bank is a contract of loan. RTMC used the proceeds of this
loan to purchase raw materials from a supplier abroad. In order to secure the payment of the loan, RTMC delivered the raw materials to
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the bank as collateral. Trust receipts were executed by the parties to evidence this security arrangement. Simply stated, the trust receipts
were mere securities.
Bank of Commerce v. Serrano, 451 SCRA 484 (2005)
FACTS:
- Via Moda International, through Serrano, obtained an export packing loan from, Bank of Commerce (BOC) secured by a Deed of
Assignment over Irrevocable Transferable Letter of Credit. Serrano executed in favor of BOC Promissory Note. Via Moda then opened a
deposit account for the proceeds of the said loan.
-BOC issued to Via Moda, Irrevocable Letter of Credit for the purchase and importation of fabric and textile products from Tiger Ear Fabric
Co. Ltd. of Taiwan. To secure the release of the goods covered, Serrano, in representation of Via Moda, executed Trust Receipt .
-Under the terms of the trust receipt, Via Moda agreed to hold the goods in trust for BOC as the latters property and to sell the same for
the latters account. In case of sale, the proceeds are to be remitted to the bank as soon as it is received, but not later than the maturity
date. Said proceeds are to be applied to the relative acceptances, with interest and penalty or in the alternative, to return the goods in case
of non-sale.
-The goods covered by the trust receipt were shipped by Via Moda to its consignee in New Jersey, USA, who sent an Export Letter of
Credit issued by the Bank of New York, in favor of BOC. The Regional Operations Officer of BOC signed the export declarations to show
consent to the shipment. The proceeds of the entrusted goods sold were not credited to the trust receipt but, were applied by the bank to
the principal, penalties and interest of the export packing loan. The excess was applied to the trust receipt, leaving a balance.
- BOC sent a demand letter to Via Moda to pay the said amount plus interest and penalty charges, or to return the goods covered by Trust
Receipt within 5 days from receipt.
-The demand was not heeded.
-Serrano was charged with the crime of estafa under Article 315 (b) of the Revised Penal Code in relation to Presidential Decree No. 115.
TC: Serrano guilty and ordered to pay civil liability to BOC.
CA: Reversed the decision of TC.
ISSUE: Whether or not Serrano is jointly and severally liable with Via Moda under the guarantee of the Letter of Credit secured by the
Trust Receipt.
HELD:
- A letter of credit is a separate document from a trust receipt. While the trust receipt may have been executed as a security on the letter of
credit, still the two documents involve different undertakings and obligations. A letter of credit is an engagement by a bank or other person
made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions
specified in the credit. Through a letter of credit, the bank merely substitutes its own promise to pay for the promise to pay of one of its
customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees
mutually agreed upon. By contrast, a trust receipt transaction is one where the entruster, who holds an absolute title or security interests
over certain goods, documents or instruments, released the same to the entrustee, who executes a trust receipt binding himself to hold the
goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents and instruments with
the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster, or as appears in the trust
receipt, or return the goods, documents or instruments themselves if they are unsold, or not otherwise disposed of, in accordance with the
terms and conditions specified in the trust receipt.
- Serrano cannot be held civilly liable under the trust receipt since she was not made personally liable nor was she a guarantor therein. The
parties stipulated during the pre-trial that respondent Serrano executed the trust receipt in representation of Via Moda, Inc., which has a
separate personality from Serrano, and petitioner BOC failed to show sufficient reason to justify the piercing of the veil of corporate fiction.
It thus ruled that this was not Serranos personal obligation but that of Via Moda and there was no basis of finding her solidarily liable with
Via Moda.
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Landl & Company v. Metropolitan Bank, 435 SCRA 639 (2004)


FACTS:
-Landl and Company is engaged in the business of selling imported welding rods and alloys.
-It opened a commercial letter of credit with MBTC for the purchase of various welding rods and electrons from PERMA ALLOYS Inc., New
York, USA. Landl put up a marginal deposit of P50, 000.00 from the proceeds of a separate clean loan.
-As an additional security, and as a condition for the approval of the application, MBTC required Percival Llaban and Manuel Lucente to
execute a continuing surety agreement. Lucente also executed a Deed of assignment in favor of MBTC to cover the amount of the
corporations obligation to the bank. Upon compliance with these requisites, MBTC opened an irrevocable Letter of Credit for Landl.
-Trust Receipt was executed to secure indebtedness of Landl.
-Upon Maturity, Landl defaulted payment of its obligation or to return the goods to MBTC.-The goods were sold at public auction to MBTC
as the highest bidder.-However, the proceeds of the auction sale were insufficient to completely satisfy the outstanding obligation of Landl
notwithstanding the application of the time deposit account of its director Lucente.
-Accordingly, MBTC demanded that Landl pay the remaining balance of their obligation.
-Landl failed to do so.-MBTC filed a complaint for sum of money against Landl and its directors for the amount of the deficiency.
TC and CA: Ordered Landl to pay the bank.
ISSUE: Whether or not in a trust receipt transaction, an entruster which had taken actual and juridical possession of the goods covered by
trust receipt may subsequently avail of the right to demand from the entrustee the deficiency of the amount covered by the trust receipt.
HELD
- A trust receipt agreement is merely a collateral agreement, the purpose of which is to serve as security for a loan.-In the event of default
or failure of the entrustee to comply with the terms of the trust receipt agreement, the entruster may cancel the trust and take possession of
the goods subject of the trust receipt and while in possession cause the sale of the goods after at least five (5) day notice to the entrustee,
in a private or public sale. The entruster may at public sale become a purchaser. If the proceeds of the sale were insufficient to satisfy
entirely entrustees indebtedness, the entruster is well within its rights to file an action to collect the deficiency.
- The initial repossession by the bank of the goods subject of the trust receipt did not result in the full satisfaction of the petitioners loan
obligation. Petitioners are apparently laboring under the mistaken impression that the full turn-over of the goods suffices to divest them of
their obligation to repay the principal amount of their loan obligation. The entrustees possession of the subject machinery and equipment
being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be
considered payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on said securities, sold the
same and applied the proceeds thereof to TCCs loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes
the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. Neither can
said repossession amount to dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a
debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor
to the creditor as an accepted equivalent of the performance of the obligation.
A trust receipt is inextricably linked with the primary agreement between the parties. Time and again, we have emphasized that a trust
receipt agreement is merely a collateral agreement, the purpose of which is to serve as security for a loan. Thus, in Abad v. Court of
Appeals, we ruled: A letter of credit-trust receipt arrangement is endowed with its own distinctive features and characteristics. Under that
set-up, a bank extends a loan covered by the letter of credit, with the trust receipt as security for the loan. In other words, the transaction
involves a loan feature represented by the letter of credit, and a security feature which is in the covering trust receipt. x x x. A trust receipt,
therefore, is a security agreement, pursuant to which a bank acquires a security interest in the goods. It secures an indebtedness and
there can be no such thing as security interest that secures no obligation. The Trust Receipts Law was enacted to safeguard commercial
transactions and to offer an additional layer of security to the lending bank. Trust receipts are indispensable contracts in international and
domestic business transactions. The prevalent use of trust receipts, the danger of their misuse and/or misappropriation of the goods or
proceeds realized from the sale of goods, documents or instruments held in trust for entruster banks, and the need for regulation of trust
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receipt transactions to safeguard the rights and enforce the obligations of the parties involved are the main thrusts of the Trust Receipts
Law.
METROPOLITAN BANK & TRUST COMPANY vs. HON. SECRETARY OF JUSTICE RAUL M. GONZALES, OLIVER T. YAO and
DIANA T. YAO, G.R. No. 180165, April 7, 2009
FACTS
In this case, the investigating prosecutor indicted the private respondents for the crime of estafa charged by the bank. They subsequently
appealed their indictment to the Secretary of Justice, who ruled that there was no probable cause to prosecute private respondents. He
declared that the legitimate transactional relationship between the parties being merely a contract of loan, violations of the terms
thereunder were not covered by Presidential Decree No. 115.
Acting on the directive of the Secretary of Justice, the City Prosecutor moved for the withdrawal of the Informations. The Regional Trial
Court (RTC) granted the same. The bank elevated the matter to the Court of Appeals (CA), which dismissed its petition after finding that
the Secretary of Justice committed no grave abuse of discretion in ruling against the existence of probable cause to prosecute private
respondents.
The CA recognized the authority of the Secretary of Justice to control and supervise the prosecutors, which included the power to reverse
or modify their decisions without committing grave abuse of discretion. Unfazed by the turn of events, petitioner went up to the Supreme
Court, urging it to reverse the Court of Appeals and to direct the filing of the proper criminal Informations against private respondents.
The Supreme Court found the petition to be meritorious. It concluded that there was probable cause to warrant the prosecution of private
respondents for estafa. It stressed that probable cause did not require an inquiry into whether there is sufficient evidence to procure a
conviction.
The Court held that the offense punished under Presidential Decree No. 115 is in the nature of malum prohibitum. A mere failure to deliver
the proceeds of the sale or the goods, if not sold, constituted a criminal offense that caused prejudice not only to another, but more to the
public interest.
The Court rejected the allegation of private respondents that they did not give much significance to the documents that they had signed.
According to the Court, considering the enormous value of the transaction involved, it was highly improbable to mistake trust receipt
documents for a contract of loan when the heading thereon printed in bold and legible letters reads: Trust Receipts. Although it said that it
was not prejudging the case on the merits, the Court stated that by merely glancing at the documents submitted by petitioner entitled
Trust Receipts and the arguments advanced by private respondents, it was convinced that there was probable cause to file the case and to
hold them for trial.

In the present case, the abuse of discretion is patent in the act of the Secretary of Justice holding that the contractual relationship forged
by the parties was a simple loan, for in so doing, the Secretary of Justice assumed the function of the trial judge of calibrating the evidence
on record, done only after a full-blown trial on the merits. The fact of existence or non-existence of a trust receipt transaction is evidentiary
in nature, the veracity of which can best be passed upon after trial on the merits, for it is virtually impossible to ascertain the real nature of
the transaction involved based solely on the self-serving allegations contained in the opposing parties pleadings. Clearly, the Secretary of
Justice is not in a competent position to pass judgment on substantive matters. The bases of a partys accusation and defenses are better
ventilated at the trial proper than at the preliminary investigation.
We need not overemphasize that in a preliminary investigation, the public prosecutor merely determines whether there is probable cause
or sufficient ground to engender a well-founded belief that a crime has been committed, and that the respondent is probably guilty thereof
and should be held for trial. It does not call for the application of rules and standards of proof that a judgment of conviction requires after
trial on the merits. The complainant need not present at this stage proof beyond reasonable doubt. A preliminary investigation does not
require a full and exhaustive presentation of the parties evidence. Precisely, there is a trial to allow the reception of evidence for both
parties to substantiate their respective claims.
Having said the foregoing, this Court now proceeds to determine whether probable cause exists for holding private respondents liable for
estafa in relation to Presidential Decree No. 115.
Trust receipt transactions are governed by the provisions of Presidential Decree No. 115 which defines such a transaction as follows:
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Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a
person referred to in this Decree as the entruster, and another person referred to in this Decree as the entrustee, whereby the entruster, who owns or
holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee
upon the latters execution and delivery to the entruster of a signed document called a trust receipt wherein the entrustee binds himself to hold the
designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the
obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the
goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the
trust receipt, or for other purposes substantially equivalent to any one of the following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with the purpose of ultimate
sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale, the
entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied fully with his obligation under the
trust receipt; or (c) to load, unload, ship or transship or otherwise deal with them in a manner preliminary or necessary to their sale; or
2. In the case of instruments, a) to sell or procure their sale or exchange; or b) to deliver them to a principal; or c) to effect the consummation of some
transactions involving delivery to a depository or register; or d) to effect their presentation, collection or renewal.
The sale of goods, documents or instruments by a person in the business of selling goods, documents or instruments for profit who, at the outset of the
transaction, has, as against the buyer, general property rights in such goods, documents or instruments, or who sells the same to the buyer on credit,
retaining title or other interest as security for the payment of the purchase price, does not constitute a trust receipt transaction and is outside the purview
and coverage of this Decree.

An entrustee is one having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor
in interest of such person for the purpose of payment specified in the trust receipt agreement. The entrustee is obliged to (1) hold the
goods, documents or instruments in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of
the trust receipt; (2) receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owed
to the entruster or as appears on the trust receipt; (3) insure the goods for their total value against loss from fire, theft, pilferage or other
casualties; (4) keep said goods or the proceeds therefrom whether in money or whatever form, separate and capable of identification as
property of the entruster; (5) return the goods, documents or instruments in the event of non-sale or upon demand of the entruster; and (6)
observe all other terms and conditions of the trust receipt not contrary to the provisions of the decree.

The entruster shall be entitled to the proceeds from the sale of the goods, documents or instruments released under a trust receipt to the
entrustee to the extent of the amount owed to the entruster or as appears in the trust receipt; or to the return of the goods, documents or
instruments in case of non-sale; and to the enforcement of all other rights conferred on him in the trust receipt, provided these are not
contrary to the provisions of the document. A violation of any of these undertakings constitutes estafa defined under Article 315(1)(b) of the
Revised Renal Code, as provided by Section 13 of Presidential Decree No. 115 viz:
Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust
receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were
not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article
Three hundred and fifteen, paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised
Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this
Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the
civil liabilities arising from the criminal offense.

Apropos thereto, Article 315(1)(b) of the Revised Renal Code punishes estafa committed as follows:
ARTICLE 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud is over 12,000 pesos but
does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum
period, adding one year for each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years. In such case, and in
connection with the accessory penalties which may be imposed and for the purpose of the other provisions of this Code, the penalty shall be termed
prision mayor to reclusion temporal, as the case may be.
2nd. The penalty of prision correccional in its minimum and medium periods, if the amount of the fraud is over 6,000 pesos but does not exceed 12,000
pesos;
3rd. The penalty of arresto mayor in its maximum period to prision correccional in its minimum period, if such amount is over 200 pesos but does not
exceed 6,000 pesos; and
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4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200 pesos, provided that in the four cases mentioned, the
fraud be committed by any of the following means; x x x.

As found in the Complaint-Affidavit of petitioner, private respondents were charged with failing to account for or turn over to petitioner the
merchandise or goods covered by the trust receipts or the proceeds of the sale thereof in payment of their obligations thereunder. The
following pieces of evidence adduced from the affidavits and documents submitted before the City Prosecutor are sufficient to establish the
existence of probable cause, to wit:
First, the trust receipts bearing the genuine signatures of private respondents; second, the demand letter of petitioner addressed to
respondents; and third, the initial admission by private respondents of the receipt of the imported goods from petitioner.
Prescinding from the foregoing, we conclude that there is ample evidence on record to warrant a finding that there is a probable cause to
warrant the prosecution of private respondents for estafa. It must be once again stressed that probable cause does not require an inquiry
into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of
constitutes the offense charged.
That private respondents did not sell the goods under the trust receipt but allowed it to be used by their sister company is of no moment.
The offense punished under Presidential Decree No. 115 is in the nature of malum prohibitum. A mere failure to deliver the proceeds of the
sale or the goods, if not sold, constitutes a criminal offense that causes prejudice not only to another, but more to the public interest. Even
more incredible is the contention of private respondents that they did not give much significance to the documents they signed, considering
the enormous value of the transaction involved. Thus, it is highly improbable to mistake trust receipt documents for a contract of loan when
the heading thereon printed in bold and legible letters reads: Trust Receipts. We are not prejudging this case on the merits. However, by
merely glancing at the documents submitted by petitioner entitled Trust Receipts and the arguments advanced by private respondents,
we are convinced that there is probable cause to file the case and to hold them for trial.
All told, the evidentiary measure for the propriety of filing criminal charges has been reduced and liberalized to a mere probable cause. As
implied by the words themselves, probable cause is concerned with probability, not absolute or moral certainty.

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