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G.R. No.

117913

February 1, 2002

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.
x-----------------------x

centavos (P5,451,663.90) representing defendants-appellees


unpaid obligations arising from ordinary loans granted by the
plaintiff plus legal interest until fully paid.
b) Ordering defendants-appellees jointly and severally to pay
PBCom the sum of Four hundred sixty-one thousand six hundred
pesos and sixty-six centavos (P46 1,600.66) representing
defendants-appellees unpaid obligations arising from their
letters of credit and trust receipt transactions with plaintiff
PBCom plus legal interest until fully paid.

G.R. NO. 117914


MICO METALS CORPORATION, petitioner,
vs.
COURT OF APPEALS and PHILIPPINE BANK OF
COMMUNICATIONS, respondents.

c) Ordering defendants-appellees jointly and severally to pay


PBCom the sum of P50,000.00 as attorneys fees.
No pronouncement as to costs.
The facts of the case are as follows:

DECISION
DE LEON, JR., J:
Before us is the joint and consolidated petition for review of the
Decision1 dated June 15, 1994 of the Court of Appeals in CA-G.R. CV
No. 27480 entitled, "Philippine Bank of Communications vs. Mico
Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio,
Alfonso Yap, Richard Velasco and Alfonso Co," which reversed the
decision of the Regional Trial Court (RTC) of Manila, Branch 55
dismissing the complaint for a sum of money filed by private
respondent Philippine Bank of Communications against herein
petitioners, Mico Metals Corporation (MICO, for brevity), Charles
Lee, Chua Siok Suy,2 Mariano Sio, Alfonso Yap, Richard Velasco and
Alfonso Co.3 The dispositive portion of the said Decision of the
Court of Appeals, reads:
WHEREFORE, the decision of the Regional Trial Court is hereby
reversed and in lieu thereof, a new one is entered:
a) Ordering the defendants-appellees jointly and severally to
pay plaintiff PBCom the sum of Five million four hundred fiftyone thousand six hundred sixty-three pesos and ninety

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.
In connection with the requests for discounting loan/credit lines,
PBCom was furnished by MICO the following resolution which was
adopted unanimously by MICOs Board of Directors:
RESOLVED, that the President, Mr. Charles Lee, and the VicePresident and General Manager, Mr. Mariano A. Sio, singly or jointly,
be and they are duly authorized and empowered for and in behalf
of this Corporation to apply for, negotiate and secure the approval
of commercial loans and other banking facilities and
accommodations, such as, but not limited to discount loans, letters
of credit, trust receipts, lines for marginal deposits on foreign and

domestic letters of credit, negotiate out-of-town checks, etc. from


the Philippine Bank of Communications, 216 Juan Luna, Manila in
such sums as they shall deem advantageous, the principal of all of
which shall not exceed the total amount of TEN MILLION PESOS
(P10,000,000.00), Philippine Currency, plus any interests that may
be agreed upon with said Bank in such loans and other credit lines
of the same kind and such further terms and conditions as may,
upon granting of said loans and other banking facilities, be
imposed by the Bank; and to make, execute, sign and deliver any
contracts of mortgage, pledge or sale of one, some or all of the
properties of the Company, or any other agreements or documents
of whatever nature or kind, including the signing, indorsing,
cashing, negotiation and execution of promissory notes, checks,
money orders or other negotiable instruments, which may be
necessary and proper in connection with said loans and other
banking facilities, or with their amendments, renewals and
extensions of payment of the whole or any part thereof.4
On March 26, 1979, MICO availed of the first loan of One Million
Pesos (P1,000,000.00) from PBCom. Upon maturity of the loan,
MICO caused the same to be renewed, the last renewal of which
was made on May 21, 1982 under Promissory Note BNA No. 26218. 5
Another loan of One Million Pesos (P1,000,000.00) was availed of by
MICO from PBCom which was likewise later on renewed, the last
renewal of which was made on May 21, 1982 under Promissory
Note BNA No. 26219.6 To complete MICOs availment of Three
Million Pesos (P3,000,000.00) discounting loan/credit line with
PBCom, MICO availed of another loan from PBCom in the sum of
One Million Pesos (P1,000,000.00) on May 24, 1979. As in previous
loans, this was rolled over or renewed, the last renewal of which
was made on May 25, 1982 under Promissory Note BNA No. 26253. 7
As security for the loans, MICO through its Vice-President and
General Manager, Mariano Sio, executed on May 16, 1979 a Deed
of Real Estate Mortgage over its properties situated in Pasig, Metro
Manila covered by Transfer Certificates of Title (TCT) Nos. 11248
and 11250.

On March 26, 1979 Charles Lee, Chua Siok Suy, Mariano Sio,
Alfonso Yap and Richard Velasco, in their personal capacities
executed a Surety Agreement 8 in favor of PBCom whereby the
petitioners 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 other obligations of every kind and nature, for which MICO may
be held accountable by PBCom. It was provided, however, that the
liability of the sureties shall not at any one time exceed the
principal amount of Three Million Pesos (P3,000,000.00) plus
interest, costs, losses, charges and expenses including attorneys
fees incurred by PBCom in connection therewith.
On July 14, 1980, petitioner Charles Lee, in his capacity as
president of MICO, wrote PBCom and applied for an additional loan
in the sum of Four Million Pesos (P4,000,000.00). The loan was
intended for the expansion and modernization of the companys
machineries. Upon approval of the said application for loan, MICO
availed of the additional loan of Four Million Pesos (P4,000,000.00)
as evidenced by Promissory Note TA No. 094.9
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, Charles Lee, Chua
Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co
(hereinafter referred to as petitioners-sureties), executed another
surety agreement10 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. It was provided, however, that their
liability shall not at any one time exceed the sum of Seven Million
Five Hundred Thousand Pesos (P7,500,000.00) including interest,
costs, charges, expenses and attorneys fees incurred by MICO in
connection therewith.
On July 29, 1980, MICO furnished PBCom with a notarized
certification issued by its corporate secretary, Atty. P.B. Barrera,
that Chua Siok Suy was duly authorized by the Board of Directors to

negotiate on behalf of MICO for loans and other credit availments


from PBCom. Indicated in the certification was the following
resolution unanimously approved by the Board of Directors:
RESOLVED, AS IT IS HEREBY RESOLVED, That Mr. Chua Siok Suy be,
as he is hereby authorized and empowered, on behalf of MICO
METALS CORPORATION from time to time, to borrow money and
obtain other credit facilities, with or without security, from the
PHILIPPINE BANK OF COMMUNICATIONS in such amount(s) and
under such terms and conditions as he may determine, with full
power and authority to execute, sign and deliver such contracts,
instruments and papers in connection therewith, including real
estate and chattel mortgages, pledges and assignments over the
properties of the Corporation; and to renew and/or extend and/or
roll-over and/or reavail of the credit facilities granted thereunder,
either for lesser or for greater amount(s), the intention being that
such credit facilities and all securities of whatever kind given as
collaterals therefor shall be a continuing security.
RESOLVED FURTHER, That said bank is hereby authorized,
empowered and directed to rely on the authority given hereunder,
the same to continue in full force and effect until written notice of
its revocation shall be received by said Bank.11
On July 2, 1981, MICO filed with PBCom an application for a
domestic letter of credit in the sum of Three Hundred Forty-Eight
Thousand Pesos (P348,000.00).12 The corresponding irrevocable
letter of credit was approved and opened under LC No. L-16060. 13
Thereafter, the domestic letter of credit was negotiated and
accepted by MICO as evidenced by the corresponding bank draft
issued for the purpose.14 After the supplier of the merchandise was
paid, a trust receipt upon MICOs own initiative, was executed in
favor of PBCom.15
On September 14, 1981, MICO applied for another domestic letter
of credit with PBCom in the sum of Two Hundred Ninety Thousand
Pesos (P290,000.00).16 The corresponding irrevocable letter of
credit was issued on September 22, 1981 under LC No. L-16334. 17
After the beneficiary of the said letter of credit was paid by PBCom

for the price of the merchandise, the goods were delivered to MICO
which executed a corresponding trust receipt18 in favor of PBCom.
On November 10, 1981, MICO applied for authority to open a
foreign letter of credit in favor of Ta Jih Enterprises Co., Ltd., 19 and
thus, the corresponding letter of credit 20 was then issued by PBCom
with a cable sent to the beneficiary, Ta Jih Enterprises Co., Ltd.
advising that said beneficiary may draw funds from the account of
PBCom in its correspondent banks New York Office. 21 PBCom also
informed its corresponding bank in Taiwan, the Irving Trust
Company, of the approved letter of credit. The correspondent bank
acknowledged PBComs advice through a confirmation letter 22 and
by debiting from PBComs account with the said correspondent
bank the sum of Eleven Thousand Nine Hundred Sixty US Dollars
($11 ,960.00).23 As in past transactions, MICO executed in favor of
PBCom a corresponding trust receipt.24
On January 4, 1982, MICO applied, for authority to open a foreign
letter of credit in the sum of One Thousand Nine Hundred US
Dollars ($1,900.00), with PBCom.25 Upon approval, the
corresponding letter of credit denominated as LC No. 62293 26 was
issued whereupon PBCom advised its correspondent bank and
MICO27 of the same. Negotiation and proper acceptance of the
letter of credit were then made by MICO. Again, a corresponding
trust receipt28 was executed by MICO in favor of PBCom.
In all the transactions involving foreign letters of credit, PBCom
turned over to MICO the necessary documents such as the bills of
lading and commercial invoices to enable the latter to withdraw the
goods from the port of Manila.
On May 21, 1982 MICO obtained from PBCom another loan in the
sum of Three Hundred Seventy-Seven Thousand Pesos
(P377,000.00) covered by Promissory Note BA No. 7458.29
Upon maturity of all credit availments obtained by MICO from
PBCom, the latter made a demand for payment. 30 For failure of
petitioner MICO to pay the obligations incurred despite repeated
demands, private respondent PBCom extrajudicially foreclosed
MICOs real estate mortgage and sold the said mortgaged

properties in a public auction sale held on November 23, 1982.


Private respondent PBCom which emerged as the highest bidder in
the auction sale, applied the proceeds of the purchase price at
public auction of Three Million Pesos (P3,000,000.00) to the
expenses of the foreclosure, interest and charges and part of the
principal of the loans, leaving an unpaid balance of Five Million Four
Hundred Forty-One Thousand Six Hundred Sixty-Three Pesos and
Ninety Centavos (P5,441,663.90) exclusive of penalty and interest
charges. Aside from the unpaid balance of Five Million Four Hundred
Forty-One Thousand Six Hundred Sixty-Three Pesos and Ninety
Centavos (P5,441,663.90), MICO likewise had another standing
obligation in the sum of Four Hundred Sixty-One Thousand Six
Hundred Pesos and Six Centavos (P461,600.06) representing its
trust receipts liabilities to private respondent. 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, which was raffled to
Branch 55, alleging that MICO was no longer in operation and had
no properties to answer for its obligations. PBCom further alleged
that petitioner Charles Lee has disposed or concealed his properties
with intent to defraud his creditors. Except for MICO and Charles
Lee, the sheriff of the RTC failed to serve the summons on herein
petitioners-sureties since they were all reportedly abroad at the
time. An alias summons was later issued but the sheriff was not
able to serve the same to petitioners Alfonso Co and Chua Siok Suy
who was already sickly at the time and reportedly in Taiwan where
he later died.
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.
The trial court gave credence to the testimonies of herein
petitioners and dismissed the complaint filed by PBCom. The trial
court likewise declared the real estate mortgage and its foreclosure
null and void. In ruling for herein petitioners, the trial court said
that PBCom failed to adequately prove that the proceeds of the
loans were ever delivered to MICO. The trial court pointed out,
among others, that while PBCom claimed that the proceeds of the
Four Million Pesos (P4,000,000.00) loan covered by promissory note
TA 094 were deposited to the current account of petitioner MICO,
PBCom failed to produce the ledger account showing such deposit.
The trial court added that while PBCom may have loaned to MICO
the other sums of Three Hundred Forty-Eight Thousand Pesos
(P348,000.00) and Two Hundred Ninety Thousand Pesos
(P290,000.00), no proof has been adduced as to the existence of
the goods covered and paid by the said amounts. Hence, inasmuch
as no consideration ever passed from PBCom to MICO, all the
documents involved therein, such as the promissory notes, real
estate mortgage including the surety agreements were all void or
nonexistent for lack of cause or consideration. The trial court said
that the lack of proof as regards the existence of the merchandise
covered by the letters of credit bolstered the claim of herein
petitioners that no purchases of the goods were really made and
that the letters of credit transactions were simply resorted to by the
PBCom and Chua Siok Suy to accommodate the latter in his
financial requirements.
The Court of Appeals reversed the ruling of the trial court, saying
that the latter committed an erroneous application and
appreciation of the rules governing the burden of proof. Citing
Section 24 of the Negotiable Instruments Law which provides that
"Every negotiable instrument is deemed prima facie to have
been issued for valuable consideration and every person
whose signature appears thereon to have become a party
thereto for value", the Court of Appeals said that while the
subject promissory notes and letters of credit issued by the PBCom
made no mention of delivery of cash, it is presumed that said
negotiable instruments were issued for valuable consideration. The

Court of Appeals also cited the case of Gatmaitan vs. Court of


Appeals31 which holds that "there is a presumption that an
instrument sets out the true agreement of the parties
thereto
and
that
it
was
executed
for
valuable
consideration". The appellate court noted and found that a
notarized Certification was issued by MICOs corporate secretary,
P.B. Barrera, that Chua Siok Suy, was duly authorized by the Board
of Directors of MICO to borrow money and obtain credit facilities
from PBCom.
Petitioners filed a motion for reconsideration of the challenged
decision of the Court of Appeals but this was denied in a Resolution
dated November 7, 1994 issued by its Former Second Division.
Petitioners-sureties then filed a petition for review on certiorari with
this Court, docketed as G.R. No. 117913, assailing the decision of
the Court of Appeals. MICO likewise filed a separate petition for
review on certiorari, docketed as G.R. No. 117914, with this Court
assailing the same decision rendered by the Court of Appeals. Upon
motion filed by petitioners, the two (2) petitions were consolidated
on January 11, 1995.32
Petitioners contend that there was no proof that the proceeds of
the loans or the goods under the trust receipts were ever delivered
to and received by MICO. But the record shows otherwise.
Petitioners-sureties further contend that assuming that there was
delivery by PBCom of the proceeds of the loans and the goods, the
contracts were executed by an unauthorized person, more
specifically Chua Siok Suy who acted fraudulently and in collusion
with PBCom to defraud MICO.
The pertinent issues raised in the consolidated cases at bar are: a)
whether or not the proceeds of the loans and letters of credit
transactions were ever delivered to MICO, and b) whether or not
the individual petitioners, as sureties, may be held liable under the
two (2) Surety Agreements executed on March 26, 1979 and July
28, 1980.
In civil cases, the party having the burden of proof must establish
his case by preponderance of evidence.33 Preponderance of
evidence means evidence which is more convincing to the court as

worthy of belief than that which is offered in opposition thereto.


Petitioners contend that the alleged promissory notes, trust
receipts and surety agreements attached to the complaint filed by
PBCom did not ripen into valid and binding contracts inasmuch as
there is no evidence of the delivery of money or loan proceeds to
MICO or to any of the petitioners-sureties. Petitioners claim that
under normal banking practice, borrowers are required to
accomplish promissory notes in blank even before the grant of the
loans applied for and such documents become valid written
contracts only when the loans are actually released to the borrower.
We are not convinced.
During the trial of an action, the party who has the burden of proof
upon an issue may be aided in establishing his claim or defense by
the operation of a presumption, or, expressed differently, by the
probative value which the law attaches to a specific state of facts.
A presumption may operate against his adversary who has not
introduced proof to rebut the presumption. The effect of a legal
presumption upon a burden of proof is to create the necessity of
presenting evidence to meet the legal presumption or the prima
facie case created thereby, and which if no proof to the contrary is
presented and offered, will prevail. The burden of proof remains
where it is, but by the presumption the one who has that burden is
relieved for the time being from introducing evidence in support of
his averment, because the presumption stands in the place of
evidence unless rebutted.
Under Section 3, Rule 131 of the Rules of Court the following
presumptions, among others, are satisfactory if uncontradicted: a)
That there was a sufficient consideration for a contract and b) That
a negotiable instrument was given or indorsed for sufficient
consideration. As observed by the Court of Appeals, a similar
presumption is found in Section 24 of the Negotiable Instruments
Law which provides that every negotiable instrument is deemed
prima facie to have been issued for valuable consideration and
every person whose signature appears thereon to have become a
party for value. Negotiable instruments which are meant to be
substitutes for money, must conform to the following requisites to
be considered as such a) it must be in writing; b) it must be signed

by the maker or drawer; c) it must contain an unconditional


promise or order to pay a sum certain in money; d) it must be
payable on demand or at a fixed or determinable future time; e) it
must be payable to order or bearer; and f) where it is a bill of
exchange, the drawee must be named or otherwise indicated with
reasonable certainty. Negotiable instruments include promissory
notes, bills of exchange and checks. Letters of credit and trust
receipts are, however, not negotiable instruments. But drafts issued
in connection with letters of credit are negotiable instruments.

8) Letter dated July 2, 1981 from Perez Battery Center


addressed to private respondent PBCom showing that
proceeds of the irrevocable letter of credit No. L- 16060 was
received by Mr. Moises Rosete, representative of Perez
Battery Center.

Private respondent PBCom presented the following documentary


evidence to prove petitioners credit availments and liabilities:

10) Irrevocable letter of credit No. L-16334 dated September


22, 1981 issued in favor of Perez Battery Center for account
of MICO Metals Corp.

1) Promissory Note No. BNA 26218 dated May 21, 1982 in


the sum of P1,000,000.00 executed by MICO in favor of
PBCom.
2) Promissory Note No. BNA 26219 dated May 21, 1982 in
the sum of P1,000,000.00 executed by MICO in favor of
PBCom.
3) Promissory Note No. BNA 26253 dated May 25, 1982 in
the sum of P1,000,000.00 executed by MICO in favor of
PBCom.
4) Promissory Note No. BNA 7458 dated May 21, 1982 in
the sum of P377,000.00 executed by MICO in favor of
PBCom.
5) Promissory Note No. TA 094 dated July 29, 1980 in the
sum of P4,000.000.00 executed by MICO in favor of PBCom.
6) Irrevocable letter of credit No. L-16060 dated July 2,1981
issued in favor of Perez Battery Center for account of Mico
Metals Corp.
7) Draft dated July 2, 1981 in the sum of P348,000.00 issued
by Perez Battery Center, beneficiary of irrevocable Letter of
Credit No. No. L-16060 and accepted by MICO Metals
corporation.

9) Trust receipt dated July 2, 1981 executed by MICO in


favor of PBCom covering the merchandise purchased under
Letter of Credit No. 16060.

11) Draft dated September 22, 1981 in the sum of


P290,000.00 issued by Perez Battery Center and accepted
by MICO.
12) Letter dated September 17, 1981 from Perez Battery
addressed to PBCom showing that the proceeds of credit no.
L-16344 was received by Mr. Moises Rosete, a
representative of Perez Battery Center.
13) Trust Receipt dated September 22, 1981 executed by
MICO in favor of PBCom covering the merchandise under
Letter of Credit No. L-16334.
14) Irrevocable Letter of Credit no. 61873 dated November
10, 1981 for US$11,960.00 issued by PBCom in favor of TA
JIH Enterprises Co. Ltd., through its correspondent bank,
Irving Trust Company of Taipei, Taiwan.
15) Trust Receipt dated December 15, 9181 executed by
MICO in favor of PBCom showing that possession of the
merchandise covered by Irrevocable Letter of Credit no.
61873 was released by PBCom to MICO.
16) Letters dated March 2, 1979 from MICO signed by its
president, Charles Lee, showing that MICO sought credit line

from PBCom in the form of loans, letters of credit and trust


receipt in the sum of P7,500,000.00.
17) Letter dated July 14, 1980 from MICO signed by its
president, Charles Lee, showing that MICO requested for
additional financial assistance in the sum of P4,000,000.00.
18) Board resolution dated March 6, 1979 of MICO
authorizing Charles Lee and Mariano Sio singly or jointly to
act and sign for and in behalf of MICO relative to the
obtention of credit facilities from PBCom.
19) Duly notarized Deed of Mortgage dated May 16, 1979
executed by MICO in favor of PBCom over MICO s real
properties covered by TCT Nos. 11248 and 11250 located in
Pasig.
20) Duly notarized Surety Agreement dated March 26, 1979
executed by herein petitioners Charles Lee, Mariano Sio,
Alfonso Yap, Richard Velasco and Chua Siok Suy in favor of
PBCom.
21) Duly notarized Surety Agreement dated July 28, 1980
executed by herein petitioners Charles Lee, Mariano Sio,
Alfonso Yap, Richard Velasco and Chua Siok Suy in favor of
PBCom.
22) Duly notarized certification dated July 28, 1980 issued
by MICO s corporate secretary, Mr. P.B. Barrera, attesting to
the adoption of a board resolution authorizing Chua Siok
Suy to sign, for and in behalf of MICO, all the necessary
documents including contracts, loan instruments and
mortgages relative to the obtention of various credit
facilities from PBCom.
The above-cited documents presented have not merely created a
prima facie case but have actually proved the solidary obligation of
MICO and the petitioners, as sureties of MICO, in favor of
respondent PBCom. While the presumption found under the
Negotiable Instruments Law may not necessarily be applicable to

trust receipts and letters of credit, the presumption that the drafts
drawn in connection with the letters of credit have sufficient
consideration. Under Section 3(r), Rule 131 of the Rules of Court
there is also a presumption that sufficient consideration was given
in a contract. Hence, petitioners should have presented credible
evidence to rebut that presumption as well as the evidence
presented by private respondent PBCom. The letters of credit show
that the pertinent materials/merchandise have been received by
MICO. The drafts signed by the beneficiary/suppliers in connection
with the corresponding letters of credit proved that said suppliers
were paid by PBCom for the account of MICO. On the other hand,
aside from their bare denials petitioners did not present sufficient
and competent evidence to rebut the evidence of private
respondent PBCom. Petitioner MICO did not proffer a single piece of
evidence, apart from its bare denials, to support its allegation that
the loan transactions, real estate mortgage, letters of credit and
trust receipts were issued allegedly without any consideration.
Petitioners-sureties, for their part, presented the By-Laws34 of Mico
Metals Corporation (MICO) to prove that only the president of MICO
is authorized to borrow money, arrange letters of credit, execute
trust receipts, and promissory notes and consequently, that the
loan transactions, letters of credit, promissory notes and trust
receipts, most of which were executed by Chua Siok Suy in
representation of MICO were not allegedly authorized and hence,
are not binding upon MICO. A perusal of the By-Laws of MICO,
however, shows that the power to borrow money for the company
and issue mortgages, bonds, deeds of trust and negotiable
instruments or securities, secured by mortgages or pledges of
property belonging to the company is not confined solely to the
president of the corporation. The Board of Directors of MICO can
also borrow money, arrange letters of credit, execute trust receipts
and promissory notes on behalf of the corporation. 35 Significantly,
this power of the Board of Directors according to the by-laws of
MICO, may be delegated to any of its standing committee, officer or
agent.36 Hence, PBCom had every right to rely on the Certification
issued by MICO's corporate secretary, P.B. Barrera, that Chua Siok
Suy was duly authorized by its Board of Directors to borrow money
and obtain credit facilities in behalf of MICO from PBCom.

Petitioners-sureties also presented a letter of their counsel dated


October 9, 1982, addressed to private respondent PBCom
purportedly to show that PBCom knew that Chua Siok Suy allegedly
used the credit and good names of the petitioner-sureties for his
benefit, and that petitioner-sureties were made to sign blank
documents and were furnished copies of the same. The letter,
however, is in fact merely a reply of petitioners-sureties counsel to
PBComs demand for payment of MICOs obligations, and appears
to be an inconsequential piece of self-serving evidence.

COURT:

In addition to the foregoing, MICO and petitioners-sureties cited the


decision of the trial court which stated that there was no proof that
the proceeds of the loans were ever delivered to MICO. Although
the private respondents witness, Mr. Gardiola, testified that the
proceeds of the loans were deposited in MICOs current account
with PBCom, his testimony was allegedly not supported by any
bank record, note or memorandum. A careful scrutiny of the record
including the transcript of stenographic notes reveals, however,
that although private respondent PBCom was willing to produce the
corresponding account ledger showing that the proceeds of the
loans were credited to MICOs current account with PBCom, MICO in
fact vigorously objected to the presentation of said document. That
point is shown in the testimony of PBComs witness, Gardiola, thus:

A: Yes, Your Honor.

Q: Now, all of these promissory note Exhibits "I" and "J" which as
you have said previously (sic) availed originally by defendant Mico
Metals Corp. sometime in 1979, my question now is, do you know
what happened to the proceeds of the original availment?
A: Well, it was credited to the current account of Mico Metals Corp.
Q: Why did it was credited to the proceeds to the account of Mico
Metals Corp? (sic)
A: Well, that is our understanding.
ATTY. DURAN:
Your honor, may we be given a chance to object, the best evidence
is the so-called current account...

Can you produce the ledger account?


A: Yes, Your Honor, I will bring.
COURT:
The ledger or record of the current account of Mico Metals Corp.

ATTY. ACEJAS:
Your Honor, these are a confidential record, and they might not be
disclosed without the consent of the person concerned. (sic)
ATTY. SANTOS:
Well, you are the one who is asking that.
ATTY. DURAN:
Your Honor, Im precisely want to show for the ... (sic)
COURT:
But the amount covered by the current account of defendant Mico
Metals Corp. is the subject matter of this case.
xxx

xxx

xxx

Q: Are those availments were release? (sic)


A: Yes, Your Honor, to the defendant corporation.
Q: By what means?
A: By the credit to their current account.

ATTY. ACEJAS:
We object to that, your Honor, because the disclose is the secrecy
of the bank deposit. (sic)
xxx

xxx

xxx

Q: Before the recess Mr. Gardiola, you stated that the proceeds of
the three (3) promissory notes were credited to the accounts of
Mico Metals Corporation, now do you know what kind of current
account was that which you are referring to?
ATTY. ACEJAS:
Objection your Honor, that is the disclose of the deposit of
defendant Mico Metals Corporation and it cannot disclosed without
the authority of the depositor. (sic)37
That proceeds of the loans which were originally availed of in 1979
were delivered to MICO is bolstered by the fact that more than a
year later, specifically on July 14, 1980, MICO through its president,
petitioner-surety Charles Lee, requested for an additional loan of
Four Million Pesos (P4,000,000.00) from PBCom. The fact that MICO
was requesting for an additional loan implied that it has already
availed of earlier loans from PBCom.
Petitioners allege that PBCom presented no evidence that it
remitted payments to cover the domestic and foreign letters of
credit. Petitioners placed much reliance on the erroneous decision
of the trial court which stated that private respondent PBCom
allegedly failed to prove that it actually made payments under the
letters of credit since the bank drafts presented as evidence show
that they were made in favor of the Bank of Taiwan and First
Commercial Bank.
Petitioners allegations are untenable.
Modern letters of credit are usually not made between natural
persons. They involve bank to bank transactions. Historically, the
letter of credit was developed to facilitate the sale of goods

between, distant and unfamiliar buyers and sellers. It was an


arrangement under which a bank, whose credit was acceptable to
the seller, would at the instance of the buyer agree to pay drafts
drawn on it by the seller, provided that certain documents are
presented such as bills of lading accompanied the corresponding
drafts. Expansion in the use of letters of credit was a natural
development in commercial banking.38 Parties to a commercial
letter of credit include (a) the buyer or the importer, (b) the seller,
also referred to as beneficiary, (c) the opening bank which is
usually the buyers bank which actually issues the letter of credit,
(d) the notifying bank which is the correspondent bank of the
opening bank through which it advises the beneficiary of the letter
of credit, (e) negotiating bank which is usually any bank in the city
of the beneficiary. The services of the notifying bank must always
be utilized if the letter of credit is to be advised to the beneficiary
through cable, (f) the paying bank which buys or discounts the
drafts contemplated by the letter of credit, if such draft is to be
drawn on the opening bank or on another designated bank not in
the city of the beneficiary. As a rule, whenever the facilities of the
opening bank are used, the beneficiary is supposed to present his
drafts to the notifying bank for negotiation and (g) the confirming
bank which, upon the request of the beneficiary, confirms the letter
of credit issued by the opening bank.
From the foregoing, 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. As explained by respondent bank, a draft was drawn on
the Bank of Taiwan by Ta Jih Enterprises Co., Ltd. of Taiwan, supplier
of the goods covered by the foreign letter of credit. Having paid the
supplier, the Bank of Taiwan then presented the bank draft for
reimbursement by PBComs correspondent bank in Taiwan, the
Irving Trust Company which explains the reason why on its face,
the draft was made payable to the Bank of Taiwan. Irving Trust
Company accepted and endorsed the draft to PBCom. The draft was
later transmitted to PBCom to support the latters claim for
payment from MICO. MICO accepted the draft upon presentment
and negotiated it to PBCom.

Petitioners further aver that MICO never requested that legal


possession of the merchandise be transferred to PBCom by way of
trust receipts. Petitioners insist that assuming that MICO
transferred possession of the merchandise to PBCom by way of
trust receipts, the same would be illegal since PBCom, being a
banking institution, is not authorized by law to engage in the
business of importing and selling goods.
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.39 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.
Petitioners averments with regard to the second issue are no less
incredulous.1wphi1 Petitioners contend that the letters of credit,
surety agreements and loan transactions did not ripen into valid
and binding contracts since no part of the proceeds of the loan
transactions were delivered to MICO or to any of the petitionerssureties. Petitioners-sureties allege that Chua Siok Suy was the
beneficiary of the proceeds of the loans and that the latter made
them sign the surety agreements in blank. Thus, they maintain that
they should not be held accountable for any liability that might
arise therefrom.
It has not escaped our notice that it was petitioner-surety Charles
Lee, as president of MICO Metals Corporation, who first requested
for a discounting loan of Three Million Pesos (P3,000,000.00) from
PBCom as evidenced by his letter dated March 2, 1979. 40 On the
same day, Charles Lee, as President of MICO, requested for a Letter
of Credit and Trust Receipt line in the sum of Three Million Pesos
(P3,000,000.00).41 Still, on the same day, Charles Lee again as

President of MICO, wrote another letter to PBCOM requesting for a


financing line in the sum of One Million Five Hundred Thousand
Pesos (P1,500,000.00) to be used exclusively as marginal deposit
for the opening of MICOs foreign and local letters of credit with
PBCom.42 More than a year later, it was also Charles Lee, again in
his capacity as president of MICO, who asked for an additional loan
in the sum of Four Million Pesos (P4,000,000.00). The claim
therefore of petitioners that it was Chua Siok Suy, in connivance
with the respondent PBCom, who applied for and obtained the loan
transactions and letters of credit strains credulity considering that
even the Deed of the Real Estate Mortgage in favor of PBCom was
executed by petitioner-surety Mariano Sio in his capacity as general
manager of MICO43 to secure the loan accommodations obtained by
MICO from PBCom.
Petitioners-sureties allege that they were made to sign the surety
agreements in blank by Chua Siok Suy. Petitioner Alfonso Yap, the
corporate treasurer, for his part testified that he signed booklets of
checks, surety agreements and promissory notes in blank; that he
signed the documents in blank despite his misgivings since Chua
Siok Suy assured him that the transaction can easily be taken cared
of since Chua Siok Suy personally knew the Chairman of the Board
of PBCom; that he was not receiving salary as treasurer of Mico
Metals and since Chua Siok Suy had a direct hand in the
management of Malayan Sales Corporation, of which Yap is an
employee, he (Yap) signed the documents in blank as consideration
for his continued employment in Malayan Sales Corporation.
Petitioner Antonio Co testified that he worked as office manager for
MICO from 1978-1982. As office manager, he was the one in charge
of transacting business like purchasing, selling and paying the
salary of the employees. He was also in charge of the handling of
documents pertaining to surety agreements, trust receipts and
promissory notes;44 that when he first joined MICO Metals
Corporation, he was able to read the by-laws of the corporation and
he came to know that only the chairman and the president can
borrow money in behalf of the corporation; that Chua Siok Suy once
called him up and told him to secure an invoice so that a credit line
can be opened in the bank with a local letter of credit; that when
the invoice was secured, he (Co) brought it together with the
application for a credit line to Chua Siok Suy, and that he

questioned the authority of Chua Siok Suy pointing out that he (Co)
is not empowered to sign the document inasmuch as only the
latter, as president, was authorized to do so. However, Chua Siok
Suy allegedly just said that he had already talked with the
Chairman of the Board of PBCom; and that Chua Siok Suy
reportedly said that he needed the money to finance a project that
he had with the Taipei government. Co also testified that he knew
of the application for domestic letter of credit in the sum of Three
Hundred Forty-Eight Thousand Pesos (P348,000.00); and that a
certain Moises Rosete was authorized to claim the check covering
the Three Hundred Forty-Eight Thousand Pesos (P348,000.00) from
PBCom; and that after claiming the check Rosete brought it to Perez
Battery Center for indorsement after which the same was deposited
to the personal account of Chua Siok Suy.45

authority given by the Board of Directors to Chua Siok Suy to


negotiate for loans in behalf of MICO.
There was no need for PBCom to personally inform the petitionerssureties individually about the terms of the loans, letters of credit
and other loan documents. The petitioners-sureties themselves
happen to comprise the Board of Directors of MICO, which gave full
authority to Chua Siok Suy to negotiate for loans in behalf of MICO.
Notice to MICOs authorized representative, Chua Siok Suy, was
notice to MICO. The Certification issued by PBComs corporate
secretary, Atty. P.B. Barrera, indicated that Chua Siok Suy had full
authority to negotiate and sign the necessary documents, in behalf
of MICO for loans from PBCom. Respondent PBCom therefore had
the right to rely on the said notarized Certification of MICOs
Corporate Secretary.

We consider as incredible and unacceptable the claim of


petitioners-sureties that the Board of Directors of MICO was so
careless about the business affairs of MICO as well as about their
own personal reputation and money that they simply relied on the
say so of Chua Siok Suy on matters involving millions of pesos.
Under Section 3 (d), Rule 131 of the Rules of Court, it is presumed
that a person takes ordinary care of his concerns. Hence, the
natural presumption is that one does not sign a document without
first informing himself of its contents and consequences. Said
presumption acquires greater force in the case at bar where not
only one but several documents were executed at different times
and at different places by the petitioner sureties and Chua Siok Suy
as president of MICO.

Anent petitioners-sureties contention that they obtained no


consideration whatsoever on the surety agreements, we need only
point out that the consideration for the sureties is the very
consideration for the principal obligor, MICO, in the contracts of
loan. In the case of Willex Plastic Industries Corporation vs. Court of
Appeals,46 we ruled that the consideration necessary to support a
surety obligation need not pass directly to the surety, a
consideration moving to the principal alone being sufficient. For a
guarantor or surety is bound by the same consideration that makes
the contract effective between the parties thereto. It is not
necessary that a guarantor or surety should receive any part or
benefit, if such there be, accruing to his principal.

MICO and herein petitioners-sureties insist that Chua Siok Suy was
not duly authorized to negotiate for loans in behalf of MICO from
PBCom. Petitioners allegation, however, is belied by the July 28,
1980 Certification issued by the corporate secretary of PBCom, Atty.
P.B. Barrera, that MICO's Board of Directors gave Chua Siok Suy full
authority to negotiate for loans in behalf of MICO with PBCom. In
fact, the Certification even provided that Chua Siok Suys authority
continues until and unless PBCom is notified in writing of the
withdrawal thereof by the said Board. Notably, petitioners failed to
contest the genuineness of the said Certification which is notarized
and to show any written proof of any alleged withdrawal of the said

Petitioners placed too much reliance on the rule in evidence that


the burden of proof does not shift whereas the burden of going
forward with the evidence does pass from party to party. It is true
that said rule is not changed by the fact that the party having the
burden of proof has introduced evidence which established prima
facie his assertion because such evidence does not shift the burden
of proof; it merely puts the adversary to the necessity of producing
evidence to meet the prima facie case. Where the defendant
merely denies, either generally or otherwise, the allegations of the
plaintiffs pleadings, the burden of proof continues to rest on the
plaintiff throughout the trial and does not shift to the defendant

until the plaintiffs evidence has been presented and duly offered.
The defendant has then no burden except to produce evidence
sufficient to create a state of equipoise between his proof and that
of the plaintiff to defeat the latter, whereas the plaintiff has the
burden, as in the beginning, of establishing his case by a
preponderance of evidence.47 But where the defendant has failed to
present and marshall evidence sufficient to create a state of
equipoise between his proof and that of plaintiff, the prima facie
case presented by the plaintiff will prevail.
In the case at bar, respondent PBCom, as plaintiff in the trial court,
has in fact presented sufficient documentary and testimonial
evidence that proved by preponderance of evidence its subject
collection case against the defendants who are the petitioners
herein. In view of all the foregoing, the Court of Appeals committed
no reversible error in its appealed Decision.
WHEREFORE, the assailed Decision of the Court of Appeals in CAG.R. CV No. 27480 entitled, "Philippine Bank of Communications vs.
Mico Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio,
Alfonso Yap, Richard Velasco and Alfonso Co," is AFFIRMED in toto.
Costs against the petitioners.
SO ORDERED.

G.R. No. 161865. March 10, 2005


LAND BANK OF THE PHILIPPINES, Petitioners,
vs.
MONETS EXPORT AND MANUFACTURING CORPORATION,
SPOUSES VICENTE V. TAGLE, SR. and MA. CONSUELO G.
TAGLE, Respondents.
DECISION

YNARES-SANTIAGO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the October 9, 2003 Decision 1 of the Court of
Appeals2 in CA-G.R. CV No. 57436, and its January 20, 2004
Resolution3 denying petitioners motion for reconsideration.
The factual antecedents are as follows:
On June 25, 1981, petitioner, Land Bank of the Philippines (Land
Bank), and Monets Export and Manufacturing Corporation (Monet)
executed an Export Packing Credit Line Agreement 4 under which
Monet was given a credit line in the amount of P250,000.00,
secured by the proceeds of its export letters of credit, 5 the
continuing guaranty of the spouses Vicente V. Tagle, Sr. and Ma.
Consuelo G. Tagle,6 and the third party mortgage executed by
Pepita C. Mendigoria.7
The credit line agreement was renewed and amended several
times8 until it was increased to P5,000,000.00. 9 Owing to the
continued failure and refusal of Monet, notwithstanding repeated
demands, to pay its indebtedness to Land Bank, which have
ballooned to P11,464,246.1910 by August 31, 1992, a complaint11
for collection of sum of money with prayer for preliminary
attachment was filed by Land Bank with the Regional Trial Court of
Manila, docketed as Civil Case No. 93-64350.12
In their joint Answer with Compulsory Counterclaim, 13 Monet and
the Tagle spouses alleged that Land Bank failed and refused to
collect the receivables on their export letter of credit against
Wishbone Trading Company of Hong Kong in the sum of
US$33,434.00, while it made unauthorized payments on their
import letter of credit to Beautilike (H.K.) Ltd. in the amount of
US$38,768.40, which seriously damaged the business interests of
Monet.
On July 15, 1997, the trial court rendered decision, 14 the dispositive
portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered
as follows:
1. Recognizing the obligation of the defendants as stated in the
"Schedule of Amortization from the Loans and Discount Department

of LAND BANK" (Exh. "39"), as well as the interest mentioned


therein, but deleting the penalty thereof as no penalty should be
charged and sentencing defendants jointly and severally to pay the
amounts stated therein as verified;
2. Granting the counterclaim interposed by the defendants in the
amount of US$30,000.00 payable in Philippine Pesos at the official
exchange rate when payment is to be made, to compensate for the
defendants lost income opportunities occasioned by defendants
transaction with Wishbone Trading Corporation and with Beautilike,
the same to be deducted from the confirmed and computed
obligation mentioned in No. 1 hereof; and

1. Whether or not the respondent Court seriously erred in upholding


the findings and conclusion of the trial court limiting the liability of
private respondents based on [the] Summary of Availment and
Schedule of Amortization and granting the latter opportunity losses
anchored on the theory that petitioner disrupted the cas[h] flow of
respondent MONETs which led to its decline;
2. Whether or not the respondent Court palpably erred in not
clearly establishing petitioners right to collect payment from
private respondents loan validly obtained in the sum of
P11,464,246.19 Million which has become long overdue and
demandable.20

3. Denying the claim for attorneys fees for lack of merit. 15

The petition is partly impressed with merit.

From the foregoing decision, Land Bank filed an appeal 16 with the
Court of Appeals.

As regards the Beautilike account, the trial court and the Court of
Appeals erred in holding that Land Bank failed to protect Monets
interest when it paid the suppliers despite discrepancies in the
shipment vis--vis the order specifications of Monet.

On October 9, 2003, the Court of Appeals promulgated the decision


subject of the present petition for review. In affirming the trial
court, the Court of Appeals found that, indeed, Land Bank was
responsible for the mismanagement of the Wishbone and Beautilike
accounts of Monet. It held that because of the non-collection and
unauthorized payment made by Land Bank on behalf of Monet, and
considering that the latter could no longer draw from its credit line
with Land Bank, it suffered from lack of financial resources
sufficient to buy the needed materials to fill up the standing orders
from its customers.
The Court of Appeals disposed of Land Banks appeal in this wise:
WHEREFORE, premises considered, and finding no reversible error
in the assailed Decision of the Regional Trial Court of Manila, Branch
49, in Civil Case No. 93-64350 dated July 15, 1997, said Decision is
hereby AFFIRMED and UPHELD and the appeal is DISMISSED for
lack of merit.
SO ORDERED.17
Land Banks Motion for Reconsideration 18 was denied by the Court
of Appeals on January 20, 2004, 19 hence, this petition raising the
following issues:

Our ruling in Bank of America, NT & SA v. Court of Appeals,21 is


pertinent:
A letter of credit is a financial device developed by merchants as a
convenient and relatively safe mode of dealing with sales of goods
to satisfy the seemingly irreconcilable interests of a seller, who
refuses to part with his goods before he is paid, and a buyer, who
wants to have control of the goods before paying. To break the
impasse, the buyer may be required to contract a bank to issue a
letter of credit in favor of the seller so that, by virtue of the letter of
credit, the issuing bank can authorize the seller to draw drafts and
engage to pay them upon their presentment simultaneously with
the tender of documents required by the letter of credit. The buyer
and the seller agree on what documents are to be presented for
payment, but ordinarily they are documents of title evidencing or
attesting to the shipment of the goods to the buyer.
Once the credit is established, the seller ships the goods to the
buyer and in the process secures the required shipping documents
or documents of title. To get paid, the seller executes a draft and
presents it together with the required documents to the issuing
bank. The issuing bank redeems the draft and pays cash to the
seller if it finds that the documents submitted by the seller conform
with what the letter of credit requires. The bank then obtains
possession of the documents upon paying the seller. The

transaction is completed when the buyer reimburses the issuing


bank and acquires the documents entitling him to the goods. Under
this arrangement, the seller gets paid only if he delivers the
documents of title over the goods, while the buyer acquires the
said documents and control over the goods only after reimbursing
the bank.
What characterizes letters of credit, as distinguished from
other accessory contracts, is the engagement of the issuing
bank to pay the seller once the draft and the required
shipping documents are presented to it. In turn, this
arrangement assures the seller of prompt payment,
independent of any breach of the main sales contract. By
this
so-called
"independence
principle,"
the
bank
determines compliance with the letter of credit only by
examining the shipping documents presented; it is
precluded from determining whether the main contract is
actually accomplished or not. (Emphasis supplied)
Moreover, Article 3 of the Uniform Customs and Practice (UCP) for
Documentary Credits provides that credits, by their nature, are
separate transactions from the sales or other contract(s) on which
they may be based and banks are in no way concerned with or
bound by such contract(s), even if any reference whatsoever to
such contract(s) is included in the credit. Consequently, the
undertaking of a bank to pay, accept and pay draft(s) or negotiate
and/or fulfill any other obligation under the credit is not subject to
claims or defenses by the applicant resulting from his relationships
with the issuing bank or the beneficiary.
In particular, Article 15 of the UCP states:
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,
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. (Emphasis supplied)

Transfield Philippines, Inc.


Corporation, et al.,22 we held that
In

v.

Luzon

Hydro

the engagement of the


issuing bank is to pay the seller or beneficiary of the credit once the
draft and the required documents are presented to it. 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.
For, if the letter of credit is drawable only after the settlement of
any dispute on the main contract entered into by the applicant of
the said letter of credit and the beneficiary, then there would be no
practical and beneficial use for letters of credit in commercial
transactions.
Accordingly, we find merit in the contention of Land Bank that, as
the issuing bank in the Beautilike transaction involving an import
letter of credit, it only deals in documents and it is not involved in
the contract between the parties. The relationship between the
beneficiary and the issuer of a letter of credit is not strictly
contractual, because both privity and a meeting of the minds are
lacking. Thus, upon receipt by Land Bank of the documents of title
which conform with what the letter of credit requires, it is duty
bound to pay the seller, as it did in this case.
Thus, no fault or acts of mismanagement can be attributed to Land
Bank relative to Monets import letter of credit. Its actions find solid
footing on the legal principles and jurisprudence earlier discussed.
Consequently, it was error for the trial court and for the Court of
Appeals to grant opportunity losses to the respondents on this
account.
On the matter, however, of the Wishbone transaction where it is
alleged by respondents that petitioner failed in its duty to protect
its (Monets) interest in collecting the amount due to it from its
customers, we find that the trial court and the Court of Appeals
committed no reversible error in holding Land Bank liable for
opportunity losses. The trial court summarized the transaction in
this manner:
The shipment to Wishbone Trading Company was for US16,119.00
on October 16, 1986. Documents were submitted without
requesting for purchase of export bills. This was sent by plaintiff
(Land Bank) via telex to Hongkong Bank requesting advice to pay

as there were discrepancies. On advice of Hongkong Bank plaintiff


paid the first shipment. At this point defendants (Monet and the
Tagle spouses) were reluctant to release the two subsequent
documents to the buyer until payment of the first shipment is
made. When LANDBANK paid the defendants, believing that
everything was in order, defendants released the documents for
the two subsequent shipments, thinking that the LANDBANKs
international department had taken the necessary measures for
them to be paid. Wishbone then came up with new additional
discrepancies not listed in the cable sent by LANDBANK.
Defendants argue that if LANDBANK had acted prudently on this as
it used to do, Mantruste Hongkong could not have denied payment
upon the first instructions of the buyer based on the cable of
LANDBANKs international department. Defendants therefore asked
LANDBANK to share with them the burden of compelling the shrewd
buyers to effect the payment of the export bills. Furthermore,
referring to the telex of Mantruste Hongkong the original
documents to Wishbone were sent per requirement under the term
of the Letter of Credit, but the goods were consigned to the order of
Wells Fargo Bank. Defendants believed that Wells Fargo Bank
should be responsible to the shipper. Thus the defendants
requested for assistance to telex Wells Fargo Bank to inquire about
the whereabouts of the merchandise shipped to them as consignee.
As early as November 30, 1986, Mantruste Hongkong sent a telex
addressed to the bank instructing it to pay MONET the sum of
US$16,119.00 for the first shipment despite discrepancies which
were minor and properly corrected. The evidence indicates that in
the Wishbone case the foreign buyer was actually putting one over
the defendants, which LANDBANK could have properly prevented
had it been more aggressive as is expected of a bank.
Exhibits "27" and "27-A" clearly show that the terms and conditions
of the Letter of Credit were substantially complied with by MONET.
And the evidence shows that Wells Fargo Bank was included to
receive the bills of lading, notifying only Style Up of California, and
yet LANDBANK did not consider this for purposes of collection.
These were testified to by defendant Consuelo Tagle who explained
what happened, including payments of account, which LANDBANK
failed to rebut. LANDBANK did not pursue collection on this despite
the fact that the goods were acceptable merchandise.23
A careful review of the records reveal that the trial court correctly
considered Land Bank as the attorney-in-fact of Monet with regard
to its export transactions with Wishbone Trading Company. It was

stipulated in the Deed of Assignment24 executed between Monet


and Land Bank on June 26, 1981:
That the ASSIGNOR/s (Monet) by these presents, does/do hereby
appoint/s the ASSIGNEE (Land Bank) their/his/her true and lawful
attorney-in-fact and in their/his/her place and stead, to demand,
collect and receive the proceeds of the export letters of credit at a
loan value of 80% to be applied to the payment of the credit
accommodation herein secured. (Underscoring supplied)
Clearly, petitioners refusal to own its responsibility in the handling
of the Wishbone account fails against the aforequoted provision.
As the attorney-in-fact of Monet in transactions involving its export
letters of credit, such as the Wishbone account, Land Bank should
have exercised the requisite degree of diligence in collecting the
amount due to the former. The records of this case are bereft of
evidence showing that Land Bank exercised the prudence
mandated by its contractual obligations to Monet.
The failure of Land Bank to judiciously safeguard the interest of
Monet is not without any repercussions vis--vis the viability of
Monet as a business enterprise. As correctly observed by the Court
of Appeals:
In fine, because of the non-collection defendants-appellees
suffered from a lack of financial resources sufficient to buy new
materials. And since they also could no longer draw on their
existing credit line with Landbank, they could not purchase
materials to fill up the orders of their customers. Because of this
the business reputation of Monets suffered which hastened its
decline.25
The right of the respondents to be awarded opportunity losses
having been established, we now go to the determination of the
proper amount to be awarded to them under the circumstances
obtaining in this case. The lower court awarded to herein
respondents opportunity losses in the amount of US$30,000.00
based on its findings of two (2) acts of mismanagement committed
by Land Bank. The Court of Appeals affirmed the amount of the
award in the assailed decision. In view of our findings that Land
Bank is not guilty of mismanagement in its handling of Monets
import letter of credit relative to the Beautilike transaction, we hold
that a reduction of the amount of the grant is in order. It is not
possible for us to totally do away with the award of opportunity

losses having affirmed the findings of the trial court and the Court
of Appeals that Land Bank, as the attorney-in-fact of Monet in its
transaction with Wishbone Trading Company, committed acts of
mismanagement. On account of the foregoing reasons, we reduce
the amount of opportunity losses granted to Monet to
US$15,000.00 payable in Philippine pesos at the official exchange
rate when payment is to be made.
Anent the second issue, we find that the trial court erred in limiting
the obligation of the respondents to Land Bank to what was stated
in the "Schedule of Amortization from the Loans and Discounts
Department of LANDBANK", or Exhibit "39",26 for the respondents.
Prefatorily, we restate the time honored principle that in a petition
for review under Rule 45, only questions of law may be raised. It is
not our function to analyze or weigh all over again evidence already
considered in the proceedings below, our jurisdiction is limited to
reviewing only errors of law that may have been committed by the
lower court.27 The resolution of factual issues is the function of
lower courts, whose findings on these matters are received with
respect. A question of law which we may pass upon must not
involve an examination of the probative value of the evidence
presented by the litigants.28
The above rule, however, admits of certain exceptions. The findings
of fact of the Court of Appeals are generally conclusive but may be
reviewed when: (1) the factual findings of the Court of Appeals and
the trial court are contradictory; (2) the findings are grounded
entirely on speculation, surmises or conjectures; (3) the inference
made by the Court of Appeals from its findings of fact is manifestly
mistaken, absurd or impossible; (4) there is grave abuse of
discretion in the appreciation of facts; (5) the appellate court, in
making its findings, goes beyond the issues of the case and such
findings are contrary to the admissions of both appellant and
appellee; (6) the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) the Court of Appeals fails to notice
certain relevant facts which, if properly considered, will justify a
different conclusion; and (8) the findings of fact of the Court of
Appeals are contrary to those of the trial court or are mere
conclusions without citation of specific evidence, or where the facts
set forth by the petitioner are not disputed by respondent, or where
the findings of fact of the Court of Appeals are premised on the
absence of evidence but are contradicted by the evidence on
record.29

Our review of the records of this case reveal that the reversible
error committed by the lower court, and that of the Court of
Appeals, partook of the form of over reliance and sole reliance on
the figures contained in Exhibit "39", to the exclusion of other
pieces of documentary evidence annexed by Land Bank to its
complaint.
There is no doubt that the respondents indeed owed Land Bank a
sum of money. This much was clearly established by the series of
letters30 written by the officers of Monet to Land Bank
acknowledging the corporations indebtedness, albeit without
specifying any amount, and asking for understanding and more
time within which they can settle their obligations. We note,
however, that the respondents have been consistent and persistent
in their stand that they do not harbor any intention of evading the
payment of the amount they actually owed to the petitioner,
provided that there be a reconciliation of the payments made by
the respondents on their loan obligations.31
Indeed, Exhibit "39" or the Summary of Availment and Schedule of
Amortization, which was made by the trial court as the basis in
determining the amount of indebtedness of the respondents to the
petitioner, is a document issued by the Loans and Discounts
Department of Land Bank itself. Nevertheless, we note that the
amount covered by the said summary pertains only to the
indebtedness of Monet to Land Bank amounting to P2,500,000.00,
as covered by Promissory Note No. P-981. The amount reflected in
Exhibit "39" is so small when compared to the P11,464,246.19
which Land Bank sought to collect from the respondents in its
complaint before the trial court. The records of this case show that
respondents, in the course of their credit transactions with Land
Bank, executed not only one, but several promissory notes in
varying amounts in favor of the bank.
On the other hand, Land Bank submitted a Consolidated Statement
of Account dated August 31, 1992 32 in support of its claim as to the
amount owed to it. The said document illustrated how, based on
the computations made by Land Bank, the indebtedness of Monet
ballooned to P11,464,246.19. Land Bank also submitted a Summary
of Availments and Payments from 1981 to 1989 33 which detailed
the series of availments and payments made by Monet.
Notwithstanding the above facts, and considering that Monets
Exhibit "39" was prepared before its due date of April 29, 1991,
while Land Banks Consolidated Statement of Account was

prepared much later on August 31, 1992, the trial court chose to
overlook them and conveniently held that the correct basis of
Monets indebtedness to Land Bank are the figures contained in
Exhibit "39". Nonetheless, no explanation was proferred why it used
Exhibit "39" as basis in determining the actual indebtedness of
Monet. We note that instead of dealing squarely with the issue of
resolving the total amount of indebtedness due to Land Bank, the
trial court and the Court of Appeals chose to expound on Land
Banks alleged acts of mismanagement.
In "discussing" this issue, all the trial court said was:
LANDBANK claims that as of August 31, 1992, the defendants owe
them the sum of P11,464,246.19 payable with interest at the rate
of 10% per annum. But this is disputed by the defendants as shown
in their Summary of Availment and Schedule of Amortization (Exh.
"39").34
While both the petitioner and the respondents submitted their
respective pieces of documentary evidence in support of their
contentions as to the amount of indebtedness due to petitioner, the
trial court failed to calibrate and harmonize them.
Unfortunately, despite the pieces of evidence submitted by the
parties, our review of the same is inconclusive in determining the
total amount due to the petitioner. The petitioner had failed to
establish the effect of Monets Exhibit "39" to its own Consolidated
Statement of Account as of August 31, 1992, nor did the
respondents categorically refute the said statement of account vis-vis its Exhibit "39". The interest of justice will best be served if
this case be remanded to the court of origin for the purpose of
determining the amount due to petitioner. The dearth in the records
of sufficient evidence with which we can utilize in making a
categorical ruling on the amount of indebtedness due to the
petitioner constrains us to remand this case to the trial court with
instructions to receive additional evidence as needed in order to
fully thresh out the issue and establish the rights and obligations of
the parties. From the amount ultimately determined by the trial
court as the outstanding obligation of the respondents to the
petitioner, will be deducted the award of opportunity losses granted
to the respondents in the amount of US$ 15,000.00 payable in
Philippine pesos at the official exchange rate when payment is to
be made.

WHEREFORE, the instant petition is GRANTED. The October 9,


2003 decision and the January 20, 2004 resolution of the Court of
Appeals in CA-G.R. CV No. 57436, are MODIFIED insofar as the
award of the counterclaim to the respondents is concerned.
Accordingly, there being no basis to award opportunity costs to the
respondents, Monets Export and Manufacturing Corporation and
the spouses, Vicente V. Tagle, Sr. and Ma. Consuelo G. Tagle,
relative to the Beautilike account, but finding good cause to sustain
the award of opportunity costs to the respondents on account of
the failure of the petitioner to diligently perform its duties as the
attorney-in-fact of the respondents in the Wishbone Trading
Company account, the amount of opportunity costs granted to the
respondents, is REDUCED to US$15,000.00 payable in Philippine
pesos at the official exchange rate when payment is to be made.
Insofar as the amount of indebtedness of the respondents to the
petitioner is concerned, the October 9, 2003 decision and the
January 20, 2004 resolution of the Court of Appeals in CA-G.R. CV
No. 57436, are SET ASIDE. The case is hereby remanded to its court
of origin, the Regional Trial Court of Manila, Branch 49, for the
reception of additional evidence as may be needed to determine
the actual amount of indebtedness of the respondents to the
petitioner. The trial court is INSTRUCTED to deduct the award of
opportunity losses granted to the respondents, in the amount of
US$15,000.00 payable in Philippine pesos at the official exchange
rate when payment is to be made, from the amount ultimately
determined as the actual amount of indebtedness of the
respondents to the petitioner. No pronouncement as to costs.
SO ORDERED.

Held: NO. The execution of the MOA constitutes a novation which "places
petitioner Bank in estoppel to insist on the original trust relation and
constitutes a bar to the filing of any criminal information for violation of the
trust receipts law."
It has the effect of a compromise agreement, novated BMCs existing
obligations under the trust receipt agreement. The novation converted the
parties relationship into one of an ordinary creditor and debtor. Moreover,
the execution of the MOA precludes any criminal liability on their part which
may arise in case they violate any provision thereof.

[G.R. No. 133176. August 8, 2002]


PILIPINAS BANK, petitioner, vs. ALFREDO T. ONG and LEONCIA LIM,
respondents.
Facts:
On April 1991, Baliwag Mahogany Corporation (BMC), through its president,
respondent Alfredo T. Ong, applied for a domestic commercial letter of credit
with petitioner Pilipinas Bank (hereinafter referred to as the bank) to finance
the purchase of about 100,000 board feet of "Air Dried, Dark Red Lauan"
sawn lumber.
The bank approved the application and issued Letter of Credit No. 91/725HO in the amount of P3,500,000.00. To secure payment of the amount,
BMC, through respondent Ong, executed two (2) trust receipts[3] providing
inter alia that it shall turn over the proceeds of the goods to the bank, if sold,
or return the goods, if unsold, upon maturity on July 28, 1991 and August 4,
1991.
On due dates, BMC failed to comply with the trust receipt agreement. On
November 22, 1991, it filed with the Securities and Exchange Commission
(SEC) a Petition for Rehabilitation and for a Declaration in a State of
Suspension of Payments under Section 6 (c) of P.D. No. 902-A,[4] as
amended, docketed as SEC Case No. 4109. On November 27, 1992, the
SEC rendered a Decision[7] approving the Rehabilitation Plan of BMC as
contained in the MOA and declaring it in a state of suspension of payments.
However, BMC and respondent Ong defaulted in the payment of their
obligations under the rescheduled payment scheme provided in the MOA.
Issue: WON respondents Ong and Leoncia Lim (as president and treasurer
of BMC, respectively) violated the Trust Receipts Law (PD No. 115).

The execution of the MOA extinguished respondents obligation under the


trust receipts. Respondents liability, if any, would only be civil in nature
since the trust receipts were transformed into mere loan documents after the
execution of the MOA. This is reinforced by the fact that the mortgage
contracts executed by the BMC survive despite its non-compliance with the
conditions set forth in the MOA.
_____________________________________________________________
____________________
[G.R. NO. 117913. February 1, 2002]
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.
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 and Trust Company merchandise, i.e., 1,000 bags of


grind yellow corn and 1,000 bags of palay specified in a
trust receipt covered by Letter of Credit No. 5643, executed
by him in favor of said bank, of the total value of
P24,000.00, to be sold by him, under the express obligation
on the part of the said accused to account for the said
merchandise, or to deliver and turn over to the Prudential
Bank and Trust Company the proceeds of the sale thereof;

G.R. No. L-27607 May 7, 1981


THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee
vs.
BEN CUEVO, defendant-appellant.
AQUINO, J.:
This case presents for reexamination the liability for estafa of the
holder of a trust receipt who disposed of the goods covered thereby
and, in violation of its terms, failed to deliver to the bank the
proceeds of the sale as payment of the debt secured by the trust
receipt.
We say reexamination because it is a well-entrenched rule in our
jurisprudence that the conversion by the importer of the goods
covered by a trust receipt constitutes estafa through
misappropriation under article 315(l) (b) of the Revised Penal Code,
(People vs. Yu Chai Ho 53 Phil. 874 and Samo vs. People. 115 Phil.
346. As to civil cases, see National Bank vs. Viuda e Hijos de Angel
Jose, 63 Phil. 814; Philippine National Bank vs. Catipon, 98 Phil. 286
and Philippine National Bank vs. Arrozal 103 Phil. 213).
In this case, an information dated July 27, 1966 was filed in the
Court of First Instance of Manila, charging Ben Cuevo with estafa
committed as follows (Criminal Case No. 83309): 1wph1.t
That on or about the 16th day of February, 1964 in the City
of Manila, Philippines, the said accused did then and there
willfully, unlawfully and feloniously defraud the Prudential
Bank and Trust Company in the following manner, to wit: the
said accused having received in trust from the Prudential

But said accused once in possession of said merchandise,


far from complying with the aforesaid obligation,
notwithstanding repeated demands made upon him, with
intent to defraud, willfully, unlawfully and feloniously
misappropriated, misapplied and converted the said
merchandise or the value, thereof in the sum of P24,000.00
to his own personal use and benefit, to the damage and
prejudice of the Prudential Bank and Trust Company in the
aforesaid of P24,000.00, Philippine Currency. (p. 2, Rollo.)
Upon arraignment, the accused pleaded not guilty (p. 11, Record).
Later, or on December 13, 1966, before the trial had started, Cuevo
filed a motion to dismiss on the ground that the facts alleged in the
information do not constitute an offense.
Judge Ruperto Kapunan, Jr., in his order of January 3, 1967, granted
the motion and dismissed the case but "without prejudice to
whatever civil action the complaining bank may take to recover the
amount of P24,000" which it had advanced to cover the price of the
merchandise delivered to the accused (p. 7, Rollo). From that order
of dismissal, the prosecution appealed to this Court.
The appeal is meritorious. Judge Kapunan, Jr. erred in holding that
the accused did not commit estafa under article 315(l) (b), which
reads: 1wph1.t
(b) By misappropriating or converting, to the prejudice of
another, money, goods, or any other personal property
received by the offender in trust or on commission, or for
administration, or under any other obligation involving the
duty to make delivery of or to return the same, even though
such obligation be totally or partially guaranteed by a bond;
or by denying having received such money, goods, or other
property.

Judge Kapunan, Jr., in sustaining the motion to dismiss, relied on


the Spanish version of paragraph (b) of article 315 wherein the
expression used is "recibido en deposito". In his opinion, that
phrase is not accurately translated as "in trust" and, as he
explained, it does not allegedly cover the conversion or
misappropriation of the goods covered by a trust receipt. The
Spanish version reads: 1wph1.t

In case of sale I/We further agree to hand the proceeds, as


soon as received, to the International Banking Corporation
to apply against the relative acceptances (as described
above) and for the payment of any other indebtedness of
mine/ours to the International Banking Corporation. (People
vs. Yu Chai Ho 53 Phil. 874, 876.)

(b) Apropiandose o distrayendo, en perjuicio de otro dinero,


efectos o cualquiera otra cosa mueble, que hubiere recibido
en deposito, commission o administracion o por otro titulo
que produzca obligacion de entregarla o devolveria, aungue
dicha obligacion estuviese afianzada total or parcialmente, o
negando haberla recibido.

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" (53 Am. Jur. 961, cited in Samo vs. People, 115 Phil.
346, 349).

The lower court ratiocinated that the contract covered by a trust


receipt is merely a secured loan (U.S. vs. Tan Tok, 15 Phil. 538)
where the borrower is allowed to dispose of the collateral, whereas,
in a deposit the depositary is not empowered to dispose of the
property deposited. Hence, the lower court concluded that the
violation of the provisions of the trust receipt gives rise to a civil
action and not to a criminal prosecution for estafa.

In the instant case, it is alleged in the indictment that the accused,


by means of a trust receipt, received from the Prudential Bank and
Trust Company 1,000 bags of corn and 1,000 bags of palay to be
sold by him with the express obligation to deliver the proceeds of
the sale to the bank or, if not sold, to account for the merchandise
and that, instead of complying with either obligation, he
misappropriated the merchandise or the value thereof (p. 2, Rollo).

The lower court also ventured the opinion that the other phrase in
paragraph (b), por otro titulo que produzca obligacion de entregarla
o devolverla" ("under any other obligation involving the duty to
make delivery of or to return the same") is not applicable because
that phrase allegedly refers to the very "money, goods, or any
other personal property received by the offender" as a deposit, and
not to the proceeds of the sale of the goods covered by the trust
receipt.

We hold that even if the accused did not receive the merchandise
for deposit, he is, nevertheless, covered by article 315(l) (b)
because after receiving the price of the sale, he did not deliver the
money to the bank or, if he did not sell the merchandise, he did not
return it to the bank.

The lower court observed further that the framers of the Spanish
Penal Code could not have contemplated the inclusion of the trust
receipt in article 315(l) (b) because that transaction did not exist in
the nineteenth century. The usual form of a trust receipt is as
follows: 1wph1.t
I/We hereby agree to hold said goods in trust for the said
corporation (meaning the bank as trustor), and as its
property with liberty to sell the same for its account, but
without authority to make any other disposition whatever of
the said goods or any part thereof (or of proceeds thereof)
either by way of conditional sale, pledge or otherwise.

Those two situations are within the purview of article 315(l) (b). The
first situation is covered by the provision which refers to money
received under the obligation involving the duty to deliver it
(entregarla) to the owner of the merchandise sold.
The other contingency is covered by the provision which refers to
merchandise received under the obligation to "return" it
(devolvelra) to the owner.
The fact that in the first case the money was received from the
purchaser of the merchandise and not from the bank does not
remove it from the operation of article 315(l) (b).
As noted by Justice Street in People vs. Yu Chai Ho, supra, the
conversion by the trustee in a trust receipt of the proceeds of the

sale falls "most literally and directly under" the provisions of article
315(l) (b).
Thus, it was held that where, notwithstanding repeated oral and
written demands by the bank, the petitioner had failed either to
turn over to the said bank the proceeds of the sale of the goods, or
to return said goods if they were not sold, the petitioner is guilty of
estafa under article 315(l) (b) (Samo vs. People, 115 Phil. 346).
In this connection, it is relevant to state that Presidential Decree
No. 115, the Trust Receipts Law, regulating trust receipts
transactions, was issued on January 29, 1973.

No person shall be twice put in jeopardy of punishment for the


same offense" (Sec. 22, Art. IV of the Constitution). The maxim is
non bis in Idem (not twice for the same). The ban against double
jeopardy is similar to the rule on res judicata in civil cases.
Jeopardy attaches when an accused was charged with an offense
(a) upon a valid complaint or information sufficient in form and
substance to sustain a conviction (b) in a court of competent
jurisdiction and (c) after the accused had been arraigned and
entered his plea, he was convicted or acquitted, or the case against
him was "dismissed or otherwise terminated without his express
consent".

One objective of that law is "to declare the misuse and/or


misappropriation of goods or proceeds realized from the sale of
goods, documents or instruments released under trust receipts as a
criminal offense punishable under" article 315.

In such a case, his conviction or acquittal (autrefois convict or


autrefois acquit) is a "bar to another prosecution for the offense
charged, or for any attempt to commit the same or frustration
thereof, or for any offense charged in the former complaint or
information " (Sec. 9, Rule 117, Rules of Court).

Section 13 of the decree provides that "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 315 of the Revised Penal Code.

The accused invokes the ruling that "where a trial court has
jurisdiction but mistakenly dismisses the complaint or information
on the ground of lack of it, the order of dismissal is, after the
prosecution has presented its evidence, unappealable because an
appeal by the government therefrom would place the accused in
second jeopardy for the same offense" (People vs. Duran, Jr., 107
Phil. 979).

The enactment of the said penal provision is confirmatory of


existing jurisprudence and should not be construed as meaning
that, heretofore, the misappropriation of the proceeds of a sale
made under a trust receipt was not punishable under article 315.
That penal provision removed any doubt as to the criminal liability
of the holder of a trust receipt who misappropriated the proceeds of
the sale.
The other issue raised in the last part of accused Cuevo's brief is
whether the lower court's erroneous dismissal of the information
against him amounts to an acquittal which placed him in jeopardy
and whether the return of the case to the lower court for trial would
place him in double jeopardy.

That ruling has no application to this case because in the Duran


case (as in People vs. Caderao 69 Phil. 327, also cited by the
accused herein) the dismissal was made after the prosecution had
presented its evidence. The accused filed a demurrer to the
evidence but the trial court dismissed the case, not on the ground
of insufficiency of evidence, but on the ground of lack of
jurisdiction. In the instant case, the prosecution has not
commenced the presentation of its evidence. The dismissal was
with the consent of the accused because he filed a motion to
dismiss.
In Esguerra vs. De la Costa, 66 Phil. 134, another case cited by the
accused, the erroneous dismissal on the ground of lack of
jurisdiction was made by the lower court motu proprio. Hence, the
dismissal without the consent of the accused amounted to an
acquittal which placed him in jeopardy.

Moreover, in the Duran case, it was expressly indicated that the


erroneous dismissal on the ground of lack of jurisdiction does not
place the accused in jeopardy if the dismissal was made with the
consent of the accused, as held in People vs. Salico, 84 Phil. 722.
As already stated, in the instant case the dismissal was with the
consent of accused Cuevo. The dismissal did not place him in
jeopardy.
The Chief Justice and six Justices voted to reverse the order of
dismissal. Justices Teehankee and De Castro dissented. As only
seven Justices voted to reverse the order of dismissal, the same
has to be affirmed.
WHEREFORE, the order of dismissal is affirmed. Costs de oficio.
SO ORDERED.