CASE 1: Rosemarie M. Lee vs. Hon.

Rodil (RTC Manila judge) and People of the Philippines

G.R. No. 80544; 5 July 1989

FACTS:
1. Lee was the representative of CS Lee Enterprises Inc which opened a letter of credit worth Php
154,711.97 with Philippine Bank of Communications for the purchase of merchandise.
2. 1982: Culture Media received the necessary document and then executed a trust receipt for the
said merchandise: Lee obligated herself to hold the merchandise in trust to sell the same in
cash for the account of the bank; To account for the proceeds if sold; To return the merchandise
to the bank in case of failure to sell the same;
3. Despite repeated demands, she failed to comply with her obligation and instead appropriated
the merchandise for her own personal use.
4. 1985: Lee was charged for estafa. She moved to quash the information on the ff grounds:
o The violation of a trust agreement does not constitute estafa despite an express
provision in the Trust Receipts Law characterizing it as estafa.
o PD 115 is violative of the right that no person shall be imprisoned for non-payment of
debt.
5. RTC denied the motion to quash and upheld the constitutionality of the law.
6. MR denied. Hence, the present petition.

ISSUE: Does the violation of a trust receipt agreement constitute estafa? YES

RATIO:

• PD 115, S3 expressly provides: 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…
• On the case of People v. Cuevo (1981):
o It was the lower court that dismissed the information and ruled that a violation gives rise to a
civil action only.
o Out of the 11 members of the SC, a majority of 6 justices +CJ were of the view that the
violation constitutes estafa, 2 voted otherwise, another 2 inhibited themselves. The view of the
dissenting justices prevailed as a result of the want of 1 vote to reverse the order of the lower
court. (SC affirmed the LC decision despite the majority view)
o SC Majority view: The conversion by the trustee in a trust receipt of the proceeds of the sale
falls most literally and directly under the provision of estafa thru misappropriation under Art
315 (1)(b) of the RPC. The enactment of the Trust Receipts Law confirmed the said criminal
liability.
o Dissent of J. Teehankee:
▪ A contract covered by a trust receipt is a secured loan. The goods imported by the
dealer, through the bank’s financing, remain of their own property and risk.
▪ The view of putting them in jail for estafa for non-payment of the secured loan through a
trust receipt should not be permitted in this day and age.
o Dissent of De Castro:
▪ The bank cannot be considered as the true owner of the goods which has full power of
disposition over the same. Otherwise, it would disregard the loan feature (L/C).
▪ The trust receipt is supposed to give a stronger security for the loan obtained by the
importer.
▪ There would have been no need for PD 115 had there been no such doubt if the
violation constitutes estafa.
• On the case of Sia v. People (1983):
o De Castro penned the said case.
 o If the trust receipt transaction is susceptible to two reasonable interpretations, one giving rise
only to civil liability and the other also generating criminal liability, the first should be adopted
as more favorable to the offender.
• Lee used the Cuevo and Sia case to support her stand. However, the violations in both cases
occurred in the 1960’s. PD115 was not applied because the questioned acts were committed before
its effectivity/promulgation in 1973.
• Violations of trust receipt agreements occurring after 29 Jan 1973 would thus make the
accused criminally liable for estafa pursuant to PD115.
• On the constitutionality of PD115: A convincing showing is needed to overcome the presumption of
the validity of a statute.
• On the nature of a trust receipt agreement:
o An LC-TR arrangement involves a loan feature represented by a letter of credit and a
security feature which is the trust receipt. Each feature is separate and distinct.
o The person prejudiced by the misappropriation or conversion of goods need not be
the owner thereof. The authors simply used the phrase “to the prejudice of another”
The failure of a person to turn over the proceeds or goods not sold covered by a trust receipt is a public
nuisance. The act is not inherently wrong but because of the harm it inflicts on the community, it may be
punished as malum prohibitum.