G.R. No.

L-39922-25 August 21, 1987 drafts were accepted by the accused

also on the same dates of the
TRINIDAD RAMOS, petitioner,  respective applications (Exhibits E,
vs. E-1, A-3, A-6, F-4 F-5, F- 7 and G-
THE HONORABLE COURT OF APPEALS and 8). After such acceptance, the
PEOPLE OF THE PHILIPPINES, respondents. corresponding trust receipts were
signed by the accused also on the
Neptali A. Gonzales & Associates for petitioner- same dates of the respective
appellant. applications (Exhibits E-2, A-8, F-8
and G-9 ).

The four trust receipts signed by the

NARVASA, J.: accused uniformly contain the
following stipulation:
In the appeal at bar, Trinidad Ramos seeks
reversal of the judgment of the Court of The undersigned
Appeals, 1 affirming with modification, her hereby acknowledges
conviction of four felonies of estafa handed down to have received in
by the Court of First Instance of Manila. 2 Her trust from the ...
conviction is made to rest upon the following (PNCB) the
findings of the Trial Court, subsequently adopted in merchandise covered
their entirety by the Court of Appeals, vis: by the above-
mentioned documents
(T)he accused filed with the ... and agrees to hold
(Philippine National Cooperative said merchandise in
Bank) four applications for letters of storage as the
credit, the first on September 14, property of said bank,
1964 and the last three all on August with the liberty to sell
24, 1965, and in the respective the same for cash
amounts of P10,000.00, P22,300.00, and for its account
P24,000.00 and P24,600.00 * * provided the
(Exhibits C, A, F and G). After the proceeds thereof are
applications were processed and turned over in their
approved, domestic letters of credit entirety to the said
were opened on the same dates of bank to be applied
the applications and in the amounts against any
applied for (Exhibits C-2, A-2, F-2 acceptance(s) and
and G-2, respectively). Among the any other
papers filed for the issuance of the indebtedness of the
domestic letters of credit were undersigned to the
commercial invoices of the different said bank.
suppliers of the merchandise sought
to be purchase (Exhs. C-1, a-1, f-1 The records of the PNCB which had
and G-1), also bearing the same been presented in evidence show
dates of the applications for letters of that the drafts drawn by the bank
credit with which they were against the accused and accepted
respectively attached. The different by the latter were supposed to be
suppliers then drew sight drafts due in 90 days from the dates
against the applicant payable to the thereof. No payments were made
order of the PNCB, also bearing the excepting a partial payment of
same dates as the respective P3,900.00, inclusive of interests,
applications and for the same made on May 20, 1965, as
amounts (Exhibits D, A-3, F-4 and evidenced by the receipt Exhibit 1,
G-5Z). The PNCB then drew its own for the account under the letter of
drafts against the accused as the credit No. 006; and another partial
buyer of the merchadise and which payment of P2,000.00 made on May
 28, 1965 on the same letter of'
credit, evidenced by the receipt
Exhibit J. These partial payments
were evidently in pursuance of
written demands for payment
addressed by the PNCB to the
accused on October 5, 1965
(Exhibits K-2 and K-3). A last formal
demand was addressed to the
accused in a letter of counsel for the
PNCB dated January 26,1967
(Exhibits H, H-1 and H- 2). 3
The sentence eventually passed on her by the
Appellate Court is as follows:
WHEREFORE, in Criminal Case No.
88095, with the only modification
that subsidiary imprisonment in case
of insolvency should be eliminated in
view of the provisions of Republic
Act 5465, which law may be applied
retroactively as it favors the person
guilty of the offense (Article 22,
Revised Penal Code), the decision
appealed from is hereby affirmed in
all respects.
In Criminal Case No. 88096 while
the minimum penalty of
imprisonment is within the range
allowed by law, the maximum is
below the aforesaid range. The
amount of the fraud exceeds
P22,000.00, hence, the principal
penalty should be imposed in its
maximum period (par. 1, Penalty
Provision of Article 315, Revised
Penal Code) and the appellant
Trinidad Ramos is hereby sentenced
to suffer an indeterminate penalty
ranging from one (1) year, eight (8)
months and Twenty-One (21) days
of prision correccionalas minimum,
to six (6) years, eight (8) months and
Twenty-One (21) days of prision
mayor, as maximum, with the
accessory penalties provided by law,
to indemnify the Philippine National
Cooperative Bank in the sum of
P22,328.00 without subsidiary
imprisonment in case of insolvency,
and to pay the costs.
In Criminal Case No. 88097, with the
only modification that the penalty to
suffer subsidiary imprisonment in
case of insolvency should be
eliminated, the decision appealed
from is hereby affirmed in toto.
In Criminal Case No. 88098, with the
elimination of the penalty to suffer
subsidiary imprisonment in case of
insolvency. the decision appealed
from is affirmed in all respects. 4
Trinidad Ramos pleads for acquittal on the
proposition that the factual predicate on which her
conviction is laid is chiefly comprised of
speculations, conjectures and presumptions without
substantial and actual support in the
evidence. 5 She asserts that it behooved the
prosecution, which had charged her
with estafa under Article 315, par. 1 (b) of the
Revised Penal Code, to prove the essential
elements thereof, numbering four, to wit: (1) that
the accused received the thing subject of the
offense; (2) that the thing received is personal
property susceptible of appropriation; (3) that the
thing was received for safe-keeping, or on
commission, or for administration, or under any
other obligation involving the duty to make delivery
of or return the same; and (4) that there was
misappropriation or conversion by the accused of
the thing received to the prejudice of another. 6 But,
she contends, in her case (1) that there is no
adequate proof of her receipt of the goods subject
of the trust receipts in question or of her having
paid anything on account thereof or in connection
therewith; (2) that complainant Bank had suffered
no damage whatever, since it had made no
payment at all on account of the commercial
invoices for which the trust receipts were issued;
and (3) that under the laws at the time, transactions
involving trust receipts could only give rise to purely
civil liability. 7
Examined against the evidence of record, the
assailed factual findings as to the receipt of the
merchandise and the damage sustained by the
Bank cannot stand. The proofs are indeed
inadequate on these propositions of fact. It is
difficult to accept the prosecution's theory that it has
furnished sufficient proof of delivery by the
introduction in evidence of the commercial invoices
attached to the applications for the letters of credit
and of the trust receipts. The invoices are actually
nothing more than lists of the items sought to be
purchased and their prices; and it can scarcely be
believed that goods worth no mean sum actually
transferred hands without the unpaid vendor
requiring the vendee to acknowledge this fact in
some way, even by a simple signature on these
documents alone if not in fact by the execution of
some appropriate document, such as a delivery
receipt.
The trust receipts do not fare any better as proofs
of the delivery to Ramos of the goods. Except for
the invoices, an documents relating to each trust
receipt agreement, including the trust receipts
themselves, appear to be standard Bank forms
accomplished by the Bank personnel, and were all
signed by Ramos in one sitting, no doubt with a
view to facilitating the pending transactions
between the parties. If, as she claims, Ramos was
made to believe that bank usage or regulations
require the signing of the papers in this way, i.e., on
a single occasion, there was neither reason nor
opportunity for her to question the statement
therein of receipt of the goods since it was evidently
assumed that delivery to her of the goods would
shortly come to pass.
At any rate, Ramos has categorically and
consistently denied ever having received the goods
either from the Bank or the suppliers. And this was
because, according to her, the suppliers simply
refused to part with the goods as no payment had
been made therefor by the Bank. 8 Now, the issue
could quite easily have been resolved by the
production of the delivery receipts or the testimony
of the employees who made the supposed
deliveries. And the prosecution could not have
been unaware of such evidence, its ready
accessibility, and its importance, specially after the
appellant had disclaimed receipt of the goods in
question. Yet the existence of that evidence is
placed in serious doubt by the fact that the
prosecution made no effort to bring it before the
Court, although it could have done so routinely and
without any difficulty whatever. Certainly, this
omission cannot be taken against the accused, who
is presumed innocent until the contrary is proved
beyond reasonable doubt. 9 It is after all the duty of
the prosecution to establish the existence of all the
elements of the crime charged. 10
The State however insists that Ramos' receipt of
the goods is proven by the fact that she made
marginal fee deposits on all the letters of credit, and
also tendered partial payments for the merchandise
subject of the first trust receipt. But evidence of
these supposed deposits and payments is no less
flimsy too. The only document presented in proof of
the deposit of marginal fees was Ramos' Statement
of Account 11 as of May 19, 1967, prepared by the
complainant Bank. But no receipt for the claimed
deposits was ever produced. On the other hand,
the prosecution offered two official receipts in
evidence 12 ostensibly showing that Ramos
remitted partial payments to the Bank for the goods
allegedly received under the first trust receipt
transaction. Yet these payments — supposedly
made on May 20 and May 28, 1965 — are not even
reflected in the 1967. Statement of Account which
credited Ramos only with the payment of marginal
fee deposits. Furthermore, although both PNCB
receipts indicate that checks were given in
payment, the encashed checks were never
exhibited, nor any reason advanced for their non-
production.
The omission to present obvious and available
primary items of proof is also perceived in the
attempted substantiation of the claim that the Bank
paid the suppliers for the goods, and thereby
suffered damage. Under its standard procedures,
the Bank effects payment on a negotiated letter of
credit by the issuance of a check, the cancelled
check being the invariable proof that negotiation
has been consummated. 13 Again, not one such
check issued by the Bank to the suppliers was ever
submitted, or any receipt signed by any supplier, or
any of the Bank's books, ledgers, or journals
reflecting any of the disbursements, in settlement of
Ramos' accounts with her suppliers.
This rather sorry state of the evidence against the
accused, who is to be presumed innocent until the
contrary is proved beyond reasonable doubt,
compels a reversal of her convictions in all four
cases.
Having found the record to contain insufficient
evidence of the essential elements of the crime
charged, this Court finds it unnecessary to resolve
the other issue raised by the accused.
WHEREFORE, the judgments of the Trial Court
and of the Court of Appeals convicting the accused,
Trinidad Ramos, of the crime with which she is
charged are hereby REVERSED, and she is
acquitted on reasonable doubt, with costs de oficio.
SO ORDERED.
Teehankee, C.J., Cruz, Paras, * and Gancayco,
JJ., concur.
 FIRST DIVISION
[G.R. No. L-58476. September 2, 1983.]
FERNANDO ONG, Petitioner, v. THE COURT OF
APPEALS and JUDGE P.
PURISIMA, Respondents.
Alberto R. de Joya for Petitioner.
The Solicitor General for Respondents.
SYLLABUS
1. REMEDIAL LAW; CRIMINAL PROCEDURE;
COMPROMISE AGREEMENT MADE AFTER
FILING OF INFORMATION NOT SUFFICIENT TO
DIVEST PROSECUTION OF POWER TO EXACT
CRIMINAL LIABILITY. — The Court, speaking
through J.B.L. Reyes in People v. Nery, 10 SCRA
244, said that "the Novation theory may perhaps
apply prior to the filing of the criminal information in
court by the state prosecutors because up to that
time the original trust relation may be converted by
the parties into an ordinary creditor-debtor situation,
thereby placing the complainant in estoppel to insist
on the original trust but after the justice authorities
have taken cognizance of the crime and instituted
action in court, the offended party may no longer
divest the prosecution of its power to exact the
criminal liability, as distinguished from the civil
since the crime being an offense against the state,
only the latter can renounce it" (People v. Gervacio,
54 Off. Gaz. 2898; People v. Velasco, 42 Phil. 76;
U.S. v. Montañez, 8 Phil. 620). As regards the role
of novation in a criminal case, the Court further
stated that "novation is not one of the means
recognized by the Penal Code whereby criminal
liability can be extinguished; hence, the role of
novation may only be to either prevent the rise of
criminal liability or to cast doubt on the true nature
of the original basic transaction, whether or not it
was such that its breach would not give rise to
penal responsibility, as when money loaned is
made to appear as a deposit, or other similar
disguise is resorted to (cf. Abeto v. People, 90 Phil.
381; U.S. v. Villareal, 27 Phil. 481)."cralaw
virtua1aw library
2. ID.; ID.; INFORMATION FOR ESTAFA; MOTION
TO DISMISS; DENIAL, NOT A GRAVE ABUSE OF
DISCRETION. — The respondent Court of Appeals
did not abuse its discretion amounting to lack of
jurisdiction in denying petitioner’s motion to dismiss
the criminal case of estafa on the basis of a
compromise agreement made after the filing of the
information, which petitioner claimed novated the
contract embodied in the trust receipts on which the
information was based and converted the
transaction from a criminal violation to civil
obligation.
TEEHANKEE, J., dissenting:chanrob1es virtual
1aw library
1. REMEDIAL LAW; CRIMINAL PROCEDURE;
TRUST RECEIPT TRANSACTION GIVES RISE
TO CIVIL LIABILITY WHEN A COMPROMISE
AGREEMENT FOR DISCHARGE HAS BEEN
MADE AFTER THE FILING OF INFORMATION. —
The trust receipt transaction, more so when there
has been a compromise agreement after the filing
of the information for the discharge of petitioner-
accused’s liability under the importation covered by
the trust receipt, gives rise only to civil liability on
the part of the said petitioner-accused. In People v.
Cuevo, G.R. No. L-27607, May 7, 1981, the dissent
of Justice Teehankee stated that the old capitalist
orientation of putting importers in jail for supposed
estafa or swindling for non-payment of the price of
the imported goods released to them under trust
receipts (a purely commercial transaction), under
the fiction of the trust receipt device, should no
longer be permitted in this day and age.
DECISION
RELOVA, J.:
Records show that on January 17, 1979, an
information for estafa (Criminal Case No. 43423),
was filed by the Assistant Fiscal before the then
Court of First Instance of Manila alleging that herein
petitioner "obtained and received from the Tramat
Mercantile, Inc., . . . several units of machineries for
a total value of P133,550.00, in trust, for the
purpose of displaying and selling the machineries
for cash, under the express obligation on the part of
said accused (herein petitioner) of turning over to
said Tramat Mercantile, Inc., the proceeds from the
sale thereof, if sold, or of returning to the latter the
said goods, if not sold, within ninety (90) days, or
immediately upon demand . . . (p. 7, Rollo)
Petitioner allegedly failed to turn over the proceeds
of the sale or to return the goods under the
aforementioned covenant.
On April 2, 1979, a few months after the case of
estafa was filed against petitioner, Tramat
Mercantile, Inc., filed a complaint against him in
Civil Case No. 122842 for sum of money with the
then Court of First Instance of Manila. The parties
entered into a compromise agreement to settle the
claim in said civil case, on the basis of which the
trial court rendered judgment, dated March 27,
1980, approving the same.
On June 1, 1980, herein petitioner moved for the
dismissal of the criminal charge of estafa (Criminal
Case No. 43423) against him on the ground of
novation because of the compromise agreement
entered into between him and the
complainant.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
On July 17, 1980, the trial court denied the motion
to dismiss the estafa case for lack of merit.
Thereafter, petitioner filed a petition
for certiorari with the then Court of Appeals which
dismissed the petition on the grounds, among
others, that "novation does not extinguish the
criminal liability if the crime of estafa had been
completed. (2 REYES 670, 1975 ed., citing People
v. Clemente, CA, 65 O.G. 6892). In the instant case
the crime of estafa had been consummated long
before the compromise settlement was agreed
upon. In fact, the criminal case had already been
filed in the court. Therefore, the subsequent
agreement did not affect the criminal culpability of
the petitioner." (p. 16, Rollo) Hence, the filing of the
instant petition for certiorari, mandamus, prohibition
and for a writ of preliminary injunction, with prayer
that "the Decision of the respondent Court of
Appeals be reversed and set aside; and that
respondent judge of First Instance be prohibited
permanently from further proceeding in said
criminal case and to command him to dismiss said
case after due hearing of this petition . . ." (p. 11,
Rollo)
It is the position of herein petitioner that the
compromise agreement in the civil case novated
the contract embodied in the trust receipts on which
the information in Criminal Case No. 43423 was
based, "inasmuch as there was a change of object
or principal conditions, under Article 1291 of the
Civil Code. There being a novation, it is respectfully
submitted that even if the novation took place after
the filing of the Information in the criminal case, the
transaction had nonetheless been converted from a
criminal violation to civil obligation, which would
therefore necessitate the consequent dismissal of
the criminal case." (p. 8, Rollo).
We are not persuaded. The Court, speaking
through Justice J.B.L. Reyes, in People v. Nery, 10
SCRA 244, said that:jgc:chanrobles.com.ph
"The novation theory may perhaps apply to the
filing of the criminal information in court by the state
prosecutors because up to that time the original
trust relation may be converted by the parties into
an ordinary creditor-debtor situation, thereby
placing the complainant in estoppel to insist on the
original trust. But after the justice authorities have
taken cognizance of the crime and instituted action
in court, the offended party may no longer divest
the prosecution of its power to exact the criminal
liability, as distinguished from the civil. The crime
being an offense against the state, only the latter
can renounce it (People v. Gervacio, 54 Off. Gaz.
2898; People v. Velasco, 42 Phil. 76; U.S v.
Montañes, 8 Phil. 620).
"It may be observed in this regard that novation is
not one of the means recognized by the Penal
Code whereby criminal liability can be extinguished;
hence, the role of novation may only be to either
prevent the rise of criminal liability or to cast doubt
on the true nature of the original basic transaction,
whether or not it was such that its breach would not
give rise to penal responsibility, as when money
loaned is made to appear as a deposit, or other
similar disguise is resorted to (cf. Abeto v. People,
90 Phil. 681; U.S. v. Villareal, 27 Phil. 481)."cralaw
virtua1aw library
Thus, it is clear that the respondent Court of
Appeals did not abuse its discretion amounting to
lack of jurisdiction in denying petitioner’s motion to
dismiss the criminal case of estafa on the basis of a
compromise agreement made after the filing of the
information.
ACCORDINGLY, the petition is DISMISSED for
lack of merit.
SO ORDERED.
Melencio-Herrera, Plana, Vasquez and Gutierrez,
Jr., JJ., concur.
Separate Opinions
TEEHANKEE, J., dissenting:chanrob1es virtual
1aw library
I dissent from the majority opinion on the ground
that the trust receipt transaction, more so when
there has been a compromise agreement after the
filing of the information for the discharge of
petitioner-accused’s liability under the importation
covered by the trust receipt, gives rise only to civil
liability on the part of the said petitioner-accused.
As previously stated by me in my dissent in People
v. Cuevo, G.R. No. L-27607, May 7, 1981 (which is
herein reproduced by reference for brevity’s sake),
the old capitalist orientation of putting importers in
jail for supposed estafa or swindling for non-
payment of the price of the imported goods
released to them under trust receipts (a purely
commercial transaction), under the fiction of the
trust receipt device, should no longer be permitted
in this day and age.
G.R. No. 133176               August 8, 2002
PILIPINAS BANK, petitioner,  Decision7 approving the Rehabilitation Plan of BMC
vs.
ALFREDO T. ONG and LEONCIA
LIM, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Petition for review on certiorari1 of the
Resolutions2 dated January 9, 1998 and March 25,
1998 of the Court of Appeals in CA-G.R. SP No.
42005, "Pilipinas Bank vs. The Honorable
Secretary of Justice, the City Prosecutor of Makati
City, Alfredo T. Ong and Leoncia Lim," reversing its
Decision dated August 29, 1997.
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. 91/725-HO in the amount of
P3,500,000.00. To secure payment of the amount,
BMC, through respondent Ong, executed two (2)
trust receipts3 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. After
BMC informed its creditors (including the bank) of
the filing of the petition, a Creditors' Meeting was
held to:
(a) inform all creditor banks of the present status of
BMC to avert any action which would affect the
company's operations, and (b) reach an accord on
a common course of action to restore the company
to sound financial footing.
On January 8, 1992, the SEC issued an
order5 creating a Management Committee wherein
the bank is represented. The Committee shall,
among others, undertake the management of BMC,
take custody and control of all its existing assets
and liabilities, study, review and evaluate its
operation and/or the feasibility of its being
restructured.
On October 13, 1992, BMC and a consortium of 14
of its creditor banks entered into a Memorandum of
Agreement6(MOA) rescheduling the payment of
BMC’s existing debts.
On November 27, 1992, the SEC rendered a
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. Thus, on April 1994, the bank filed with the
Makati City Prosecutor’s Office a
complaint8 charging respondents Ong and Leoncia
Lim (as president and treasurer of BMC,
respectively) with violation of the Trust Receipts
Law (PD No. 115), docketed as I.S. No. 94-3324.
The bank alleged that both respondents failed to
pay their obligations under the trust receipts despite
demand.9
On July 7, 1994, 3rd Assistant Prosecutor Edgardo
E. Bautista issued a Resolution10 recommending the
dismissal of the complaint. On July 11, 1994, the
Resolution was approved by Provincial Prosecutor
of Rizal Herminio T. Ubana, Sr.11 The bank filed a
motion for reconsideration but was denied.
Upon appeal by the bank, the Department of
Justice (DOJ) rendered judgment12 denying the
same for lack of merit. Its motion for
reconsideration was likewise denied.13
On July 5, 1996, the bank filed with this Court a
petition for certiorari and mandamus seeking to
annul the resolution of the DOJ. In a Resolution
dated August 21, 1996, this Court referred the
petition to the Court of Appeals for proper
determination and disposition.14
On August 29, 1997, the Court of Appeals rendered
judgment, the dispositive portion of which reads:
"WHEREFORE, in view of all the foregoing, the
assailed resolutions of the public respondents are
hereby SET ASIDE and in lieu thereof a new one
rendered directing the public respondents to file the
appropriate criminal charges for violation of P.D.
No. 115, otherwise known as The Trust Receipts
Law, against private respondents."15
However, upon respondents’ motion for
reconsideration, the Court of Appeals reversed
itself, holding that the execution of the MOA
constitutes 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."16
The bank filed a motion for reconsideration but was
denied.17 Hence this petition.
Petitioner bank contends that the MOA did not
novate, much less extinguish, the existing
obligations of BMC under the trust receipt
agreement. The bank, through the execution of the
MOA, merely assisted BMC to settle its obligations
by rescheduling the same. Hence, when BMC
defaulted in its payment, all its rights, including the
right to charge respondents for violation of the Trust
Receipts Law, were revived.
Respondents Ong and Lim maintain that the MOA,
which has the effect of a compromise agreement,
novated BMC’s 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.
The only issue for our determination is whether
respondents can be held liable for violation of the
Trust Receipts Law.
Section 4 of PD No. 115 (The Trust Receipts Law)
defines a trust receipt as any transaction by and
between a person referred to as the entruster, and
another person referred to as the entrustee,
whereby the entruster who owns or holds absolute
title or security interest over certain specified
goods, documents or instruments, releases the
same to the possession of the entrustee upon the
latter's execution and delivery to the entruster of a
signed document called a "trust receipt" wherein
the entrustee binds himself to hold the designated
goods, documents or instruments with the
obligation to turn over to the entruster the proceeds
thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt, or the
goods, documents or instruments themselves if
they are unsold or not otherwise disposed of, in
accordance with the terms and conditions specified
in the trust receipt.18
Failure of the entrustee to turn over the proceeds of
the sale of the goods covered by a trust receipt to
the entruster or to return the goods, if they were not
disposed of, shall constitute the crime of estafa
under Article 315, par. 1(b) of the Revised Penal
Code.19 If the violation or offense is committed by a
corporation, the penalty shall be imposed upon the
directors, officers, employees or other officials or
persons therein responsible for the offense, without
prejudice to the civil liabilities arising from the
criminal offense.20 It is on this premise that
petitioner bank charged respondents with violation
of the Trust Receipts Law.1âwphi1
Mere failure to deliver the proceeds of the sale or
the goods, if not sold, constitutes violation of PD
No. 115.21However, what is being punished by the
law is the dishonesty and abuse of confidence in
the handling of money or goods to the prejudice of
another regardless of whether the latter is the
owner. 22
In this case, no dishonesty nor abuse of confidence
can be attributed to respondents. Record shows
that BMC failed to comply with its obligations upon
maturity of the trust receipts due to serious liquidity
problems, prompting it to file a Petition for
Rehabilitation and Declaration in a State of
Suspension of Payments. It bears emphasis that
when petitioner bank made a demand upon BMC
on February 11, 1994 to comply with its obligations
under the trust receipts, the latter was already
under the control of the Management Committee
created by the SEC in its Order dated January 8,
1992.23 The Management Committee took custody
of all BMC’s assets and liabilities, including the
red lauan lumber subject of the trust receipts, and
authorized their use in the ordinary course of
business operations. Clearly, it was the
Management Committee which could settle BMC’s
obligations. Moreover, it has not escaped this
Court’s observation that respondent Ong paid
P21,000,000.00 in compliance with the equity
infusion required by the MOA. The mala
prohibita nature of the offense notwithstanding,
respondents’ intent to misuse or misappropriate the
goods or their proceeds has not been established
by the records.24
Did the MOA novate the trust agreement between
the parties?
In Quinto vs. People,25 this Court held that there are
two ways which could indicate the presence of
novation, thereby producing the effect of
extinguishing an obligation by another which
substitutes the same. The first is when novation
has been stated and declared in unequivocal terms.
The second is when the old and the new
obligations are incompatible on every point. The
test of incompatibility is whether or not the two
obligations can stand together. If they cannot, they
are incompatible and the latter obligation novates
the first. Corollarily, changes that breed
incompatibility must be essential in nature and not
merely accidental. The incompatibility must take
place in any of the essential elements of the
obligation, such as its object, cause or principal
conditions, otherwise, the change is merely
modificatory in nature and insufficient to extinguish
the original obligation.
Contrary to petitioner's contention, the MOA did not
only reschedule BMC’s debts, but more importantly,
it provided principal conditions which
are incompatible with the trust agreement. The
undisputed points of incompatibility between the
two agreements are:
Points of incompatibility Trust Receipt MOA
1) Nature of contract Trust Receipt Loan26
2) Juridical relationship Trustor-Trustee Lender-
Borrower
3) Status of obligation Matured Payable within 7 January 9, 1998 and March 25, 1998 in CA-G.R.
years27 SP No. 42005 are hereby AFFIRMED.
4) Governing law Criminal Civil & Commercial28 SO ORDERED.
5) Security offered Trust Receipts Real Puno, (Chairman), Panganiban, and Carpio, JJ.,
estate/chattel mortgages29 concur.
6) Interest rate per annum (Unspecified) 14%30
7) Default charges 24% 14%31
8) No. of parties 3 16
Hence, applying the pronouncement in Quinto, we
can safely conclude that the MOA novated and
effectively extinguished BMC's obligations under
the trust receipt agreement.
Petitioner bank's argument that BMC's non-
compliance with the MOA revived respondents’
original liabilities under the trust receipt agreement
is completely misplaced. Section 8.4 of the MOA on
termination reads:
"8.4 Termination. Any provision of this Agreement
to the contrary notwithstanding, if the conditions for
rescheduling specified in Section 7 shall not be
complied with on such later date as the Qualified
Majority Lenders in their sole and absolute
discretion may agree in writing, then
(i) the obligation of the Lenders to reschedule the
Existing Credits as contemplated hereby shall
automatically terminate on such date:
(ii) the Existing Agreements shall continue in full
force and effect on the remaining loan balances as
if this Agreement had not been entered into;
(iii) all the rights of the lenders against the borrower
and Spouses Ong prior to the agreement shall
revest to the lenders."
Indeed, what is automatically terminated in case
BMC failed to comply with the conditions under the
MOA is not the MOA itself but merely the obligation
of the lender (the bank) to reschedule the existing
credits. Moreover, it is erroneous to assume that
the revesting of "all the rights of lenders against the
borrower" means that petitioner can charge
respondents for violation of the Trust Receipts Law
under the original trust receipt agreement. As
explained earlier, 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.
All told, we find no reversible error committed by
the Court of Appeals in rendering the assailed
Resolutions.
WHEREFORE, the petition is DENIED. The
assailed Resolutions of the Court of Appeals dated
G.R. No. 73271 May 29, 1987
SPOUSES TIRSO I. VINTOLA and LORETO DY
VINTOLA, defendants-appellants,  Finally, it should be mentioned that under the trust
vs.
INSULAR BANK OF ASIA AND
AMERICA, plaintiff-appellee.
MELENCIO-HERRERA, J.:
This case was appealed to the Intermediate
Appellate Court which, however, certified the same
to this Court, the issue involved being purely legal.
The facts are not disputed.
On August 20, 1975 the spouses Tirso and Loreta
Vintola (the VINTOLAS, for short), doing business
under the name and style "Dax Kin International,"
engaged in the manufacture of raw sea shells into
finished products, applied for and were granted a
domestic letter of credit by the Insular Bank of Asia
and America (IBAA), Cebu City. 1 in the amount of
P40,000.00. The Letter of Credit authorized the
bank to negotiate for their account drafts drawn by
their supplier, one Stalin Tan, on Dax Kin
International for the purchase of puka and olive
seashells. In consideration thereof, the VINTOLAS,
jointly and severally, agreed to pay the bank "at
maturity, in Philippine currency, the equivalent, of
the aforementioned amount or such portion thereof
as may be drawn or paid, upon the faith of the said
credit together with the usual charges."
On the same day, August 20, 1975, having
received from Stalin Tan the puka and olive shells
worth P40,000.00, the VINTOLAS executed a Trust
Receipt agreement with IBAA, Cebu City. Under
that Agreement, the VINTOLAS agreed to hold the
goods in trust for IBAA as the "latter's property with
liberty to sell the same for its account, " and "in
case of sale" to turn over the proceeds as soon as
received to (IBAA) the due date indicated in the
document was October 19, 1975.
Having defaulted on their obligation, IBAA
demanded payment from the VINTOLAS in a letter
dated January 1, 1976. The VINTOLAS, who were
unable to dispose of the shells, responded by
offering to return the goods. IBAA refused to accept
the merchandise, and due to the continued refusal
of the VINTOLAS to make good their undertaking,
IBAA charged them with Estafa for having
misappropriated, misapplied and converted for their
own personal use and benefit the aforesaid goods.
During the trial of the criminal case the VINTOLAS
turned over the seashells to the custody of the Trial
Court.
On April 12, 1982, the then Court of First Instance
of Cebu, Branch VII, acquitted the VINTOLAS of
the crime charged, after finding that the element of
misappropriation or conversion was inexistent.
Concluded the Court:
receipt, in the event of default and/or non-fulfillment
on the part of the accused of their undertaking, the
bank is entitled to take possession of the goods or
to recover its equivalent value together with the
usual charges. In either case, the remedy of the
Bank is civil and not criminal in nature. ... 2
Shortly thereafter, IBAA commenced the present
civil action to recover the value of the goods before
the Regional Trial Court of Cebu, Branch XVI.
Holding that the complaint was barred by the
judgment of acquittal in the criminal case, said
Court dismissed the complaint. However, on IBAA's
motion, the Court granted reconsideration and:
1. Order(ed)defendants jointly and severally to pay
the plaintiff the sum of Seventy Two Thousand Nine
Hundred Eighty Two and 27/100 (P72,982.27),
Philippine Currency, plus interest of 14% per
annum and service charge of one (1%) per cent per
annum computed from judicial demand and until
the obligation is fully paid;
2. Ordered defendants jointly and severally to pay
attorney's fees to the plaintiff in the sum of Four
Thousand (P4,000.00) pesos, Philippine Currency,
plus costs of the suit. 3
The VINTOLAS rest their present appeal on the
principal allegation that their acquittal in the Estafa
case bars IBAA's filing of the civil action because
IBAA had not reserved in the criminal case its right
to enforce separately their civil liability. They
maintain that by intervening actively in the
prosecution of the criminal case through a private
prosecutor, IBAA had chosen to file the civil action
impliedly with the criminal action, pursuant to
Section 1, Rule 111 of the 1985 Rules on Criminal
Procedure, reading:
Section 1. Institution of criminal and civil action.
— When a criminal action is instituted, the civil
action for the recovery of civil liability arising from
the offense charged is impliedly instituted with the
criminal action, unless the offended party expressly
waives the civil action or reserves his right to
institute it separately. ...
and that since the judgment in the criminal case
had made a declaration that the facts from which
the civil action might arise did not exist, the filing of
the civil action arising from the offense is now
barred, as provided by Section 3-b of Rule 111 of
the same Rules providing:
(b) Extinction of the penal action does not carry
with it extinction of the civil, unless the extinction
proceeds from a declaration in a final judgment that
the fact from which the civil might arise did not
exist. In other cases, the person entitled to the civil
action may institute it in the jurisdiction in the
manner provided by law against the person who
may be liable for restitution of the thing and
reparation or indemnity for the damage suffered.
Further, the VINTOLAS take the position that their
obligation to IBAA has been extinguished inasmuch
as, through no fault of their own, they were unable
to dispose of the seashells, and that they have
relinguished possession thereof to the IBAA, as
owner of the goods, by depositing them with the
Court.
The foregoing submission overlooks the nature and
mercantile usage of the transaction involved. A
letter of credit-trust receipt arrangement is endowed
with its own distinctive features and characteristics.
Under that set-up, a bank extends a loan covered
by the Letter of Credit, with the trust receipt as a
security for the loan. In other words, the transaction
involves a loan feature represented by the letter of
credit, and a security feature which is in the
covering trust receipt.
Thus, Section 4 of P.D. No. 115 defines a trust
receipt transaction as:
... any transaction by and between a person
referred to in this Decree as the entruster, and
another person referred to in this Decree as the
entrustee, whereby the entruster, who owns or
holds absolute title or security interests over certain
specified goods, documents or instruments,
releases the same to the possession of the
entrustee upon the latter's execution and delivery to
the entruster of a signed document called a "trust
receipt" wherein the entrustee binds himself to hold
the designated goods, documents or instruments in
trust for the entruster and to sell or otherwise
dispose of the goods, documents or instrument
thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the
goods, documents or instruments themselves if
they are unsold or not otherwise disposed of, in
accordance with the terms and conditions specified
in the trust receipt, or for other purposes
substantially equivalent to any one of the following:
1. In the case of goods or documents, (a) to sell the
goods or procure their sale, ...
A trust receipt, therefore, is a security agreement,
pursuant to which a bank acquires a "security
interest" in the goods. "It secures an indebtedness
and there can be no such thing as security interest
that secures no obligation." 4As defined in our laws:
(h) "Security Interest"means a property interest in
goods, documents or instruments to secure
performance of some obligations of the entrustee or
of some third persons to the entruster and includes
title, whether or not expressed to be absolute,
whenever such title is in substance taken or
retained for security only. 5
As elucidated in Samo vs. People6 "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."
Contrary to the allegation of the VINTOLAS, IBAA
did not become the real owner of the goods. It was
merely the holder of a security title for the advances
it had made to the VINTOLAS The goods the
VINTOLAS had purchased through IBAA financing
remain their own property and they hold it at their
own risk. The trust receipt arrangement did not
convert the IBAA into an investor; the latter
remained a lender and creditor.
... for the bank has previously extended a loan
which the L/C represents to the importer, and by
that loan, the importer should be the real owner of
the goods. If under the trust receipt, the bank is
made to appear as the owner, it was but an artificial
expedient, more of a legal fiction than fact, for if it
were so, it could dispose of the goods in any
manner it wants, which it cannot do, just to give
consistency with the purpose of the trust receipt of
giving a stronger security for the loan obtained by
the importer. To consider the bank as the true
owner from the inception of the transaction would
be to disregard the loan feature thereof. ... 7
Since the IBAA is not the factual owner of the
goods, the VINTOLAS cannot justifiably claim that
because they have surrendered the goods to IBAA
and subsequently deposited them in the custody of
the court, they are absolutely relieved of their
obligation to pay their loan because of their inability
to dispose of the goods. The fact that they were
unable to sell the seashells in question does not
affect IBAA's right to recover the advances it had
made under the Letter of Credit. In so arguing, the
VINTOLAS conveniently close their eyes to their
application for a Letter of Credit wherein they
expressly obligated themselves in these terms:
IN CONSIDERATION THEREOF, I/we promise and
agree to pay you at maturity in Philippine Currency
the equivalent of the above amount or such portion
thereof as may be drawn or paid upon the faith of
said credit together with the usual charges. ...
(Exhibit "A")
They further agreed that their marginal deposit of
P8,000.00, later increased to P11,000.00
be applied, without further proceedings or
formalities to pay or reduce our obligation under
this letter of credit or its corresponding Trust
Receipt. (Emphasis supplied) 8
The foregoing premises considered, it follows that
the acquittal of the VINTOLAS in the Estafa case is
no bar to the institution of a civil action for
collection. It is inaccurate for the VINTOLAS to
claim that the judgment in the estafa case had
declared that the facts from which the civil action
might arise, did not exist, for, it will be recalled that
the decision of acquittal expressly declared that
"the remedy of the Bank is civil and not criminal in
nature." This amounts to a reservation of the civil
action in IBAA's favor, for the Court would not have
dwelt on a civil liability that it had intended to
extinguish by the same decision. 9 The VINTOLAS
are liable ex contractu for breach of the Letter of
Credit — Trust Receipt, whether they did or they
did not "misappropriate, misapply or convert" the
merchandise as charged in the criminal
case. 10 Their civil liability does not arise ex
delicto, the action for the recovery of which would
have been deemed instituted with the criminal-
action (unless waived or reserved) and where
acquittal based on a judicial declaration that the
criminal acts charged do not exist would have
extinguished the civil action. 11 Rather, the civil suit
instituted by IBAA is based ex contractu and as
such is distinct and independent from any criminal
proceedings and may proceed regardless of the
result of the latter. Under the situational
circumstances of the parties, they are governed by
Article 31 of the Civil Code, explicitly providing:
Art. 31. When the civil action is based on an
obligation not arising from the act or omission
complained of as a felony, such civil action may
proceed independently of the criminal proceedings
and regardless of the result of the latter.
WHEREFORE, finding no reversible error in the
judgment appealed from, the same is hereby
AFFIRMED. No costs.
SO ORDERED.
Yap (Chairman), Narvasa, Cruz, Gancayco, and
Sarmiento, JJ., concur.
Feliciano, J., is on leave.
G.R. No. 137232               June 29, 2005 For failure of the parties to amicably settle the case,
ROSARIO TEXTILE MILLS CORPORATION and trial on the merits proceeded. After the trial, the
EDILBERTO YUJUICO, petitioners,  Court a quorendered a decision in favor of the
vs. bank, the decretal part of which reads:
HOME BANKERS SAVINGS AND TRUST ‘WHEREFORE, PREMISES CONSIDERED,
COMPANY, respondent. judgment is hereby rendered in favor of plaintiff and
DECISION against defendants who are ordered to pay jointly
SANDOVAL-GUTIERREZ, J.: and severally in favor of plaintiff, inclusive of
For our resolution is the petition for review stipulated 30% per annum interest and penalty of
on certiorari assailing the Decision1 of the Court of 3% per month until fully paid, under the following
Appeals dated March 31, 1998 in CA-G.R. CV No. promissory notes:
48708 and its Resolution dated January 12, 1999. 90-1116 6-20-90 ₱737,088.25 9-18-90
The facts of the case as found by the Court of
Appeals are: (maturity)
"Sometime in 1989, Rosario Textile Mills
Corporation (RTMC) applied from Home Bankers 90-1320 7-13-90 ₱650,000.00 10-11-90
Savings & Trust Co. for an Omnibus Credit Line for
₱10 million. The bank approved RTMC’s credit line 90-1334 7-17-90 ₱422,500.00 10-15-90
but for only ₱8 million. The bank notified RTMC of
90-1335 7-17-90 ₱422,500.00 10-15-90
the grant of the said loan thru a letter dated March
2, 1989 which contains terms and conditions 90-1347 7-18-90 ₱795,000.00 10-16-90
conformed by RTMC thru Edilberto V. Yujuico. On
March 3, 1989, Yujuico signed a Surety Agreement 90-1373 7-20-90 ₱715,900.00 10-18-90
in favor of the bank, in which he bound himself
jointly and severally with RTMC for the payment of 90-1397 7-27-90 ₱773,500.00 10-20-90
all RTMC’s indebtedness to the bank from 1989 to
1990. RTMC availed of the credit line by making 90-1429 7-26-90 ₱425,750.00 10-24-90
numerous drawdowns, each drawdown being
90-1540 8-7-90 ₱720,984.00 11-5-90
covered by a separate promissory note and trust
receipt. RTMC, represented by Yujuico, executed in 90-1569 8-9-90 ₱209,433.75 11-8-90
favor of the bank a total of eleven (11) promissory
notes. 90-0922 5-28-90 ₱747,780.00 8-26-90
Despite the lapse of the respective due dates under
The counterclaims of defendants are hereby
the promissory notes and notwithstanding the
DISMISSED.
bank’s demand letters, RTMC failed to pay its
SO ORDERED." (OR, p. 323; Rollo, p. 73)."2
loans. Hence, on January 22, 1993, the bank filed a
Dissatisfied, RTMC and Yujuico, herein petitioners,
complaint for sum of money against RTMC and
appealed to the Court of Appeals, contending that
Yujuico before the Regional Trial Court, Br. 16,
under the trust receipt contracts between the
Manila.
parties, they merely held the goods described
In their answer (OR, pp. 44-47), RTMC and Yujuico
therein in trust for respondent Home Bankers
contend that they should be absolved from liability.
Savings and Trust Company (the bank) which
They claimed that although the grant of the credit
owns the same. Since the ownership of the goods
line and the execution of the suretyship agreement
remains with the bank, then it should bear the loss.
are admitted, the bank gave assurance that the
With the destruction of the goods by fire, petitioners
suretyship agreement was merely a formality under
should have been relieved of any obligation to pay.
which Yujuico will not be personally liable. They
The Court of Appeals, however, affirmed the trial
argue that the importation of raw materials under
court’s judgment, holding that the bank is merely
the credit line was with a grant of option to them to
the holder of the security for its advance payments
turn-over to the bank the imported raw materials
to petitioners; and that the goods they purchased,
should these fail to meet their manufacturing
through the credit line extended by the bank,
requirements. RTMC offered to make such turn-
belong to them and hold said goods at their own
over since the imported materials did not conform
risk.
to the required specifications. However, the bank
Petitioners then filed a motion for reconsideration
refused to accept the same, until the materials were
but this was denied by the Appellate Court in its
destroyed by a fire which gutted down RTMC’s
Resolution dated January 12, 1999.
premises.
Hence, this petition for review
on certiorari ascribing to the Court of Appeals the
following errors:
"I
THE HONORABLE COURT OF APPEALS ERRED
IN NOT HOLDING THAT THE ACTS OF THE
PETITIONERS-DEFENDANTS WERE
TANTAMOUNT TO A VALID AND EFFECTIVE
TENDER OF THE GOODS TO THE
RESPONDENT-PLAINTIFF.
II
THE HONORABLE COURT OF APPEALS ERRED
IN NOT APPLYING THE DOCTRINE OF ‘RES
PERIT DOMINO’ IN THE CASE AT BAR
CONSIDERING THE VALID AND EFFECTIVE
TENDER OF THE DEFECTIVE RAW MATERIALS
BY THE PETITIONERS-DEFENDANTS TO THE
RESPONDENT-PLAINTIFF AND THE EXPRESS
STIPULATION IN THEIR CONTRACT THAT
OWNERSHIP OF THE GOODS REMAINS WITH
THE RESPONDENT-PLAINTIFF.
III
THE HONORABLE COURT OF APPEALS
VIOLATED ARTICLE 1370 OF THE CIVIL CODE
AND THE LONG-STANDING JURISPRUDENCE
THAT ‘INTENTION OF THE PARTIES IS
PRIMORDIAL’ IN ITS FAILURE TO UPHOLD THE
INTENTION OF THE PARTIES THAT THE
SURETY AGREEMENT WAS A MERE
FORMALITY AND DID NOT INTEND TO HOLD
PETITIONER YUJUICO LIABLE UNDER THE
SAME SURETY AGREEMENT.
IV
ASSUMING ARGUENDO THAT THE
SURETYSHIP AGREEMENT WAS VALID AND
EFFECTIVE, THE HONORABLE COURT OF
APPEALS VIOLATED THE BASIC LEGAL
PRECEPT THAT A SURETY IS NOT LIABLE
UNLESS THE DEBTOR IS HIMSELF LIABLE.
V contract of loan. RTMC used the proceeds of this
THE HONORABLE COURT OF APPEALS
VIOLATED THE PURPOSE OF TRUST RECEIPT
LAW IN HOLDING THE PETITIONERS LIABLE TO
THE RESPONDENT."
The above assigned errors boil down to the
following issues: (1) whether the Court of Appeals
erred in holding that petitioners are not relieved of
their obligation to pay their loan after they tried to
tender the goods to the bank which refused to
accept the same, and which goods were
subsequently lost in a fire; (2) whether the Court of
Appeals erred when it ruled that petitioners are
solidarily liable for the payment of their obligations
to the bank; and (3) whether the Court of Appeals
violated the Trust Receipts Law.
On the first issue, petitioners theorize that when
petitioner RTMC imported the raw materials
needed for its manufacture, using the credit line, it
was merely acting on behalf of the bank, the true
owner of the goods by virtue of the trust receipts.
Hence, under the doctrine of res perit domino, the
bank took the risk of the loss of said raw materials.
RTMC’s role in the transaction was that of end user
of the raw materials and when it did not accept
those materials as they did not meet the
manufacturing requirements, RTMC made a valid
and effective tender of the goods to the bank. Since
the bank refused to accept the raw materials,
RTMC stored them in its warehouse. When the
warehouse and its contents were gutted by fire,
petitioners’ obligation to the bank was accordingly
extinguished.
Petitioners’ stance, however, conveniently ignores
the true nature of its transaction with the bank. We
recall that RTMC filed with the bank an application
for a credit line in the amount of ₱10 million, but
only ₱8 million was approved. RTMC then made
withdrawals from this credit line and issued several
promissory notes in favor of the bank. In banking
and commerce, a credit line is "that amount of
money or merchandise which a banker, merchant,
or supplier agrees to supply to a person on credit
and generally agreed to in advance."3 It is the fixed
limit of credit granted by a bank, retailer, or credit
card issuer to a customer, to the full extent of which
the latter may avail himself of his dealings with the
former but which he must not exceed and is usually
intended to cover a series of transactions in which
case, when the customer’s line of credit is nearly
exhausted, he is expected to reduce his
indebtedness by payments before making any
further drawings.4
It is thus clear that the principal transaction
between petitioner RTMC and the bank is a
loan to purchase raw materials from a supplier
abroad. In order to secure the payment of the loan,
RTMC delivered the raw materials to the bank as
collateral. Trust receipts were executed by the
parties to evidence this security arrangement.
Simply stated, the trust receipts were mere
securities.
In Samo vs. People,5 we described a trust receipt
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."6
In Vintola vs. Insular Bank of Asia and
America,7 we elucidated further that "a trust receipt,
therefore, is a security agreement, pursuant to
which a bank acquires a ‘security interest’ in the
goods. It secures an indebtedness and there can
be no such thing as security interest that
secures no obligation."8 Section 3 (h) of the Trust
Receipts Law (P.D. No. 115) defines a "security
interest" as follows:
"(h) Security Interest means a property interest in
goods, documents, or instruments to secure
performance of some obligation of the entrustee or
of some third persons to the entruster and includes
title, whether or not expressed to be absolute,
whenever such title is in substance taken or
retained for security only."
Petitioners’ insistence that the ownership of the raw
materials remained with the bank is untenable.
In Sia vs. People,9 Abad vs. Court of
Appeals,10 and PNB vs. Pineda,11 we held that:
"If under the trust receipt, the bank is made to
appear as the owner, it was but an artificial
expedient, more of legal fiction than fact, for if it
were really so, it could dispose of the goods in any
manner it wants, which it cannot do, just to give
consistency with purpose of the trust receipt of
giving a stronger security for the loan obtained by
the importer. To consider the bank as the true
owner from the inception of the transaction
would be to disregard the loan feature
thereof..."12
Thus, petitioners cannot be relieved of their
obligation to pay their loan in favor of the bank.
Anent the second issue, petitioner Yujuico
contends that the suretyship agreement he signed
does not bind him, the same being a mere
formality.
We reject petitioner Yujuico’s contentions for two
reasons.
First, there is no record to support his allegation
that the surety agreement is a "mere formality;" and
Second, as correctly held by the Court of Appeals,
the Suretyship Agreement signed by petitioner
Yujuico binds him. The terms clearly show that he
agreed to pay the bank jointly and severally with
RTMC. The parole evidence rule under Section 9,
Rule 130 of the Revised Rules of Court is in point,
thus:
"SEC. 9. Evidence of written agreements. – When
the terms of an agreement have been reduced in
writing, it is considered as containing all the terms
agreed upon and there can be, between the parties
and their successors in interest, no evidence of
such terms other than the contents of the written
agreement.
However, a party may present evidence to modify,
explain, or add to the terms of the written
agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake, or imperfection
in the written agreement;
(b) The failure of the written agreement to express
the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the
parties or their successors in interest after the
execution of the written agreement.
x x x."
Under this Rule, the terms of a contract are
rendered conclusive upon the parties and
evidence aliunde is not admissible to vary or
contradict a complete and enforceable agreement
embodied in a document.13 We have carefully
examined the Suretyship Agreement signed by
Yujuico and found no ambiguity therein. Documents
must be taken as explaining all the terms of the
agreement between the parties when there appears
to be no ambiguity in the language of said
documents nor any failure to express the true intent
and agreement of the parties.14
As to the third and final issue – At the risk of being
repetitious, we stress that the contract between the
parties is a loan. What respondent bank sought to
collect as creditor was the loan it granted to
petitioners. Petitioners’ recourse is to sue their
supplier, if indeed the materials were defective.
WHEREFORE, the petition is DENIED. The
assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 48708 are
AFFIRMED IN TOTO. Costs against petitioners.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales,
and Garcia, JJ., concur.
FIRST DIVISION
G.R. No. 119858. April 29, 2003
EDWARD C. ONG, Petitioner, v. THE COURT OF
APPEALS AND THE PEOPLE OF THE
PHILIPPINES, respondents.
DECISION
CARPIO, J.:
The Case
Petitioner Edward C. Ong (petitioner) filed this
petition for review on certiorari1 to nullify the
Decision2 dated 27 October 1994 of the Court of
Appeals in CA-G.R. C.R. No. 14031, and its
Resolution3 dated 18 April 1995, denying
petitioners motion for reconsideration. The assailed
Decision affirmed in toto petitioners conviction4 by
the Regional Trial Court of Manila, Branch 35,5 on
two counts of estafa for violation of the Trust
Receipts Law,6 as follows:
WHEREFORE, judgment is rendered: (1)
pronouncing accused EDWARD C. ONG guilty
beyond reasonable doubt on two counts, as
principal on both counts, of ESTAFA defined under
No. 1 (b) of Article 315 of the Revised Penal Code
in relation to Section 13 of Presidential Decree No.
115, and penalized under the 1st paragraph of the
same Article 315, and sentenced said accused in
each count to TEN (10) YEARS of prision mayor,
as minimum, to TWENTY (20) YEARS of reclusion
temporal, as maximum;
(2) ACQUITTING accused BENITO ONG of the
crime charged against him, his guilt thereof not
having been established by the People beyond
reasonable doubt;
(3) Ordering accused Edward C. Ong to pay private
complainant Solid Bank Corporation the aggregate
sum of P2,976,576.37 as reparation for the
damages said accused caused to the private
complainant, plus the interest thereon at the legal
rate and the penalty of 1% per month, both interest
and penalty computed from July 15, 1991, until the
principal obligation is fully paid;
(4) Ordering Benito Ong to pay, jointly and
severally with Edward C. Ong, the private
complainant the legal interest and the penalty of
1% per month due and accruing on the unpaid
amount of P1,449,395.71, still owing to the private
offended under the trust receipt Exhibit C,
computed from July 15, 1991, until the said unpaid
obligation is fully paid;
(5) Ordering accused Edward C. Ong to pay the
costs of these two actions.
SO ORDERED.7
The Charge
Assistant City Prosecutor Dina P. Teves of the City
of Manila charged petitioner and Benito Ong with
two counts of estafa under separate Informations
dated 11 October 1991.
In Criminal Case No. 92-101989, the Information
indicts petitioner and Benito Ong of the crime
of estafa committed as follows:
That on or about July 23, 1990, in the City of
Manila, Philippines, the said accused, representing
ARMAGRI International Corporation, conspiring
and confederating together did then and there
willfully, unlawfully and feloniously defraud the
SOLIDBANK Corporation represented by its
Accountant, DEMETRIO LAZARO, a corporation
duly organized and existing under the laws of the
Philippines located at Juan Luna Street, Binondo,
this City, in the following manner, to wit: the said
accused received in trust from said SOLIDBANK
Corporation the following, to wit:
10,000 bags of urea
valued at P2,050,000.00 specified in a Trust
Receipt Agreement and covered by a Letter of
Credit No. DOM GD 90-009 in favor of the Fertiphil
Corporation; under the express obligation on the
part of the said accused to account for said goods
to Solidbank Corporation and/or remit the proceeds
of the sale thereof within the period specified in the
Agreement or return the goods, if unsold
immediately or upon demand; but said accused,
once in possession of said goods, far from
complying with the aforesaid obligation failed and
refused and still fails and refuses to do so despite
repeated demands made upon him to that effect
and with intent to defraud, willfully, unlawfully and
feloniously misapplied, misappropriated and
converted the same or the value thereof to his own
personal use and benefit, to the damage and
prejudice of the said Solidbank Corporation in the
aforesaid amount of P2,050,000.00 Philippine
Currency.
Contrary to law.
In Criminal Case No. 92-101990, the Information
likewise charges petitioner of the crime
of estafa committed as follows:
That on or about July 6, 1990, in the City of Manila,
Philippines, the said accused, representing
ARMAGRI International Corporation, did then and
there willfully, unlawfully and feloniously defraud
the SOLIDBANK Corporation represented by its
Accountant, DEMETRIO LAZARO, a corporation
duly organized and existing under the laws of the
Philippines located at Juan Luna Street, Binondo,
this City, in the following manner, to wit: the said
accused received in trust from said SOLIDBANK
Corporation the following goods, to wit:
125 pcs. Rear diff. assy RNZO 49
50 pcs. Front & Rear diff assy. Isuzu Elof
85 units 1-Beam assy. Isuzu Spz
all valued at P2,532,500.00 specified in a Trust
Receipt Agreement and covered by a Domestic
Letter of Credit No. DOM GD 90-006 in favor of the
Metropole Industrial Sales with address at P.O. Box
AC 219, Quezon City; under the express obligation
on the part of the said accused to account for said
goods to Solidbank Corporation and/or remit the
proceeds of the sale thereof within the period
specified in the Agreement or return the goods, if
unsold immediately or upon demand; but said
accused, once in possession of said goods, far
from complying with the aforesaid obligation failed
and refused and still fails and refuses to do so
despite repeated demands made upon him to that
effect and with intent to defraud, willfully, unlawfully
and feloniously misapplied, misappropriated and
converted the same or the value thereof to his own
personal use and benefit, to the damage and
prejudice of the said Solidbank Corporation in the
aforesaid amount of P2,532,500.00 Philippine
Currency.
Contrary to law.
Arraignment and Plea
With the assistance of counsel, petitioner and
Benito Ong both pleaded not guilty when arraigned.
Thereafter, trial ensued.
Version of the Prosecution
The prosecutions evidence disclosed that on 22
June 1990, Petitioner, representing ARMAGRI
International Corporation8 (ARMAGRI), applied for
a letter of credit for P2,532,500.00 with
SOLIDBANK Corporation (Bank) to finance the
purchase of differential assemblies from Metropole
Industrial Sales. On 6 July 1990, Petitioner,
representing ARMAGRI, executed a trust
receipt9 acknowledging receipt from the Bank of the
goods valued at P2,532,500.00.
On 12 July 1990, petitioner and Benito Ong,
representing ARMAGRI, applied for another letter
of credit for P2,050,000.00 to finance the purchase
of merchandise from Fertiphil Corporation. The
Bank approved the application, opened the letter of
credit and paid to Fertiphil Corporation the amount
of P2,050,000.00. On 23 July 1990, Petitioner,
signing for ARMAGRI, executed another trust
receipt10 in favor of the Bank acknowledging receipt
of the merchandise.
Both trust receipts contained the same stipulations.
Under the trust receipts, ARMAGRI undertook to
account for the goods held in trust for the Bank, or
if the goods are sold, to turn over the proceeds to
the Bank. ARMAGRI also undertook the obligation
to keep the proceeds in the form of money, bills or
receivables as the separate property of the Bank or
to return the goods upon demand by the Bank, if
not sold. In addition, petitioner executed the
following additional undertaking stamped on the
dorsal portion of both trust receipts:
I/We jointly and severally agreed to any increase or
decrease in the interest rate which may occur after
July 1, 1981, when the Central Bank floated the
interest rates, and to pay additionally the penalty of
1% per month until the amount/s or installment/s
due and unpaid under the trust receipt on the
reverse side hereof is/are fully
paid.11cräläwvirtualibräry
Petitioner signed alone the foregoing additional
undertaking in the Trust Receipt for P2,253,500.00,
while both petitioner and Benito Ong signed the
additional undertaking in the Trust Receipt
for P2,050,000.00.
When the trust receipts became due and
demandable, ARMAGRI failed to pay or deliver the
goods to the Bank despite several demand
letters.12 Consequently, as of 31 May 1991, the
unpaid account under the first trust receipt
amounted to P1,527,180.66,13 while the unpaid
account under the second trust receipt amounted
to P1,449,395.71.14
Version of the Defense
After the prosecution rested its case, petitioner and
Benito Ong, through counsel, manifested in open
court that they were waiving their right to present
evidence. The trial court then considered the case
submitted for decision.15
The Ruling of the Court of Appeals
Petitioner appealed his conviction to the Court of
Appeals. On 27 October 1994, the Court of Appeals
affirmed the trial courts decision in toto. Petitioner
filed a motion for reconsideration but the same was
denied by the Court of Appeals in the Resolution
dated 18 April 1995.
The Court of Appeals held that although petitioner
is neither a director nor an officer of ARMAGRI, he
certainly comes within the term employees or other
x x x persons therein responsible for the offense in
Section 13 of the Trust Receipts Law. The Court of
Appeals explained as follows:
It is not disputed that appellant transacted with the
Solid Bank on behalf of ARMAGRI. This is because
the Corporation cannot by itself transact business
or sign documents it being an artificial person. It
has to accomplish these through its agents. A
corporation has a personality distinct and separate
from those acting on its behalf. In the fulfillment of
its purpose, the corporation by necessity has to
employ persons to act on its behalf.
Being a mere artificial person, the law (Section 13,
P.D. 115) recognizes the impossibility of imposing
the penalty of imprisonment on the corporation
itself. For this reason, it is the officers or employees
or other persons whom the law holds
responsible.16cräläwvirtualibräry
The Court of Appeals ruled that what made
petitioner liable was his failure to account to the
entruster Bank what he undertook to perform under
the trust receipts. The Court of Appeals held that
ARMAGRI, which petitioner represented, could not
itself negotiate the execution of the trust receipts,
go to the Bank to receive, return or account for the
entrusted goods. Based on the representations of
petitioner, the Bank accepted the trust receipts and,
consequently, expected petitioner to return or
account for the goods
entrusted.17cräläwvirtualibräry
The Court of Appeals also ruled that the
prosecution need not prove that petitioner is
occupying a position in ARMAGRI in the nature of
an officer or similar position to hold him the
person(s) therein responsible for the offense. The
Court of Appeals held that petitioners admission
that his participation was merely incidental still
makes him fall within the purview of the law as one
of the corporations employees or other officials or
persons therein responsible for the offense.
Incidental or not, petitioner was then acting on
behalf of ARMAGRI, carrying out the corporations
decision when he signed the trust receipts.
The Court of Appeals further ruled that the
prosecution need not prove that petitioner
personally received and misappropriated the goods
subject of the trust receipts. Evidence of
misappropriation is not required under the Trust
Receipts Law. To establish the crime of estafa, it is
sufficient to show failure by the entrustee to turn
over the goods or the proceeds of the sale of the
goods covered by a trust receipt. Moreover, the
bank is not obliged to determine if the goods came
into the actual possession of the entrustee. Trust
receipts are issued to facilitate the purchase of
merchandise. To obligate the bank to examine the
fact of actual possession by the entrustee of the
goods subject of every trust receipt will greatly
impede commercial transactions.
Hence, this petition.
The Issues
Petitioner seeks to reverse his conviction by
contending that the Court of Appeals erred:
1. IN RULING THAT, BY THE MERE
CIRCUMSTANCE THAT PETITIONER ACTED AS
AGENT AND SIGNED FOR THE ENTRUSTEE
CORPORATION, PETITIONER WAS
NECESSARILY THE ONE RESPONSIBLE FOR
THE OFFENSE; AND
2. IN CONVICTING PETITIONER UNDER
SPECIFICATIONS NOT ALLEGED IN THE
INFORMATION.
The Ruling of the Court
The Court sustains the conviction of petitioner.
First Assigned Error: Petitioner comes within
the purview of Section 13 of the Trust Receipts
Law.
Petitioner contends that the Court of Appeals erred
in finding him liable for the default of ARMAGRI,
arguing that in signing the trust receipts, he merely
acted as an agent of ARMAGRI. Petitioner asserts
that nowhere in the trust receipts did he assume
personal responsibility for the undertakings of
ARMAGRI which was the entrustee.
Petitioners arguments fail to persuade us.
The pivotal issue for resolution is whether petitioner
comes within the purview of Section 13 of the Trust
Receipts Law which provides:
x x x. If the violation is committed by a corporation,
partnership, association or other juridical entities,
the penalty provided for in this Decree shall be
imposed upon the directors, officers, employees or
other officials or persons therein responsible for the
offense, without prejudice to the civil liabilities
arising from the offense. (Emphasis supplied)
We hold that petitioner is a person responsible for
violation of the Trust Receipts Law.
The relevant penal provision of the Trust Receipts
Law reads:
SEC. 13. Penalty Clause. The failure of the
entrustee to turn over the proceeds of the sale of
the goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to
the entruster or as appears in the trust receipt or to
return said goods, documents or instruments if they
were not sold or disposed of in accordance with the
terms of the trust receipt shall constitute the crime
of estafa, punishable under the provisions of Article
Three Hundred and Fifteen, Paragraph One (b), of
Act Numbered Three Thousand Eight Hundred and
Fifteen, as amended, otherwise known as the
Revised Penal Code. If the violation or offense
is committed by a corporation, partnership,
association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon
the directors, officers, employees or other officials
or persons therein responsible for the offense,
without prejudice to the civil liabilities arising from
the criminal offense. (Emphasis supplied)
The Trust Receipts Law is violated whenever the
entrustee fails to: (1) turn over the proceeds of the
sale of the goods, or (2) return the goods covered
by the trust receipts if the goods are not sold.18 The
mere failure to account or return gives rise to the
crime which is malum prohibitum.19 There is no
requirement to prove intent to
defraud.20cräläwvirtualibräry
The Trust Receipts Law recognizes the
impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the
entrustee is a corporation, the law makes the
officers or employees or other persons responsible
for the offense liable to suffer the penalty of
imprisonment. The reason is obvious: corporations,
partnerships, associations and other juridical
entities cannot be put to jail. Hence, the criminal
liability falls on the human agent responsible for the
violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster
while ARMAGRI was the entrustee. Being the
entrustee, ARMAGRI was the one responsible to
account for the goods or its proceeds in case of
sale. However, the criminal liability for violation of
the Trust Receipts Law falls on the human agent
responsible for the violation. Petitioner, who admits
being the agent of ARMAGRI, is the person
responsible for the offense for two reasons. First,
petitioner is the signatory to the trust receipts, the
loan applications and the letters of credit. Second,
despite being the signatory to the trust receipts and
the other documents, petitioner did not explain or
show why he is not responsible for the failure to
turn over the proceeds of the sale or account for
the goods covered by the trust receipts.
The Bank released the goods to ARMAGRI upon
execution of the trust receipts and as part of the
loan transactions of ARMAGRI. The Bank had a
right to demand from ARMAGRI payment or at
least a return of the goods. ARMAGRI failed to pay
or return the goods despite repeated demands by
the Bank.
It is a well-settled doctrine long before the
enactment of the Trust Receipts Law, that the
failure to account, upon demand, for funds or
property held in trust is evidence of conversion or
misappropriation.21 Under the law, mere failure by
the entrustee to account for the goods received in
trust constitutes estafa. The Trust Receipts Law
punishes dishonesty and abuse of confidence in
the handling of money or goods to the prejudice of
public order.22 The mere failure to deliver the
proceeds of the sale or the goods if not sold
constitutes a criminal offense that causes prejudice
not only to the creditor, but also to the public
interest.23 Evidently, the Bank suffered prejudice for
neither money nor the goods were turned over to
the Bank.
The Trust Receipts Law expressly makes the
corporations officers or employees or other persons
therein responsible for the offense liable to suffer
the penalty of imprisonment. In the instant case,
petitioner signed the two trust receipts on behalf of
ARMAGRI24 as the latter could only act through its
agents. When petitioner signed the trust receipts,
he acknowledged receipt of the goods covered by
the trust receipts. In addition, petitioner was fully
aware of the terms and conditions stated in the
trust receipts, including the obligation to turn over
the proceeds of the sale or return the goods to the
Bank, to wit:
Received, upon the TRUST hereinafter mentioned
from SOLIDBANK CORPORATION (hereafter
referred to as the BANK), the following goods and
merchandise, the property of said BANK specified
in the bill of lading as follows: x x x and in
consideration thereof, I/we hereby agree to hold
said goods in Trust for the said BANK and as its
property with liberty to sell the same for its account
but without authority to make any other disposition
whatsoever of the said goods or any part thereof
(or the proceeds thereof) either by way of
conditional sale, pledge, or otherwise.
In case of sale I/we agree to hand the proceeds
as soon as received to the BANKto apply against
the relative acceptance (as described above) and
for the payment of any other indebtedness of
mine/ours to SOLIDBANK CORPORATION.
x x x.
I/we agree to keep said goods, manufactured
products, or proceeds thereof, whether in the form
of money or bills, receivables, or accounts,
separate and capable of identification as the
property of the BANK.
I/we further agree to return the goods,
documents, or instruments in the event of their
non-sale, upon demand or within _______ days,
at the option of the BANK.
x x x. (Emphasis supplied)25cräläwvirtualibräry
True, petitioner acted on behalf of ARMAGRI.
However, it is a well-settled rule that the law of
agency governing civil cases has no application in
criminal cases. When a person participates in the
commission of a crime, he cannot escape
punishment on the ground that he simply acted as
an agent of another party.26 In the instant case, the
Bank accepted the trust receipts signed by
petitioner based on petitioners representations. It is
the fact of being the signatory to the two trust
receipts, and thus a direct participant to the
crime, which makes petitioner a person
responsible for the offense.
Petitioner could have raised the defense that he
had nothing to do with the failure to account for the
proceeds or to return the goods. Petitioner could
have shown that he had severed his relationship
with ARMAGRI prior to the loss of the proceeds or
the disappearance of the goods. Petitioner,
however, waived his right to present any evidence,
and thus failed to show that he is not responsible
for the violation of the Trust Receipts Law.
There is no dispute that on 6 July 1990 and on 23
July 1990, petitioner signed the two trust
receipts27 on behalf of ARMAGRI. Petitioner, acting
on behalf of ARMAGRI, expressly acknowledged
receipt of the goods in trust for the Bank.
ARMAGRI failed to comply with its undertakings
under the trust receipts. On the other hand,
petitioner failed to explain and communicate to the
Bank what happened to the goods despite repeated
demands from the Bank. As of 13 May 1991, the
unpaid account under the first and second trust
receipts amounted to P1,527,180.60
and P1,449,395.71, respectively.28
Second Assigned Error: Petitioners conviction
under
the allegations in the two Informations for Estafa.
Petitioner argues that he cannot be convicted on a
new set of facts not alleged in the Informations.
Petitioner claims that the trial courts decision found
that it was ARMAGRI that transacted with the Bank,
acting through petitioner as its agent. Petitioner
asserts that this contradicts the specific allegation
in the Informations that it was petitioner who was
constituted as the entrustee and was thus obligated
to account for the goods or its proceeds if sold.
Petitioner maintains that this absolves him from
criminal liability.
We find no merit in petitioners arguments.
Contrary to petitioners assertions, the Informations
explicitly allege that petitioner, representing
ARMAGRI, defrauded the Bank by failing to remit
the proceeds of the sale or to return the goods
despite demands by the Bank, to the latters
prejudice. As an essential element of estafa with
abuse of confidence, it is sufficient that the
Informations specifically allege that the entrustee
received the goods. The Informations expressly
state that ARMAGRI, represented by petitioner,
received the goods in trust for the Bank under the
express obligation to remit the proceeds of the sale
or to return the goods upon demand by the Bank.
There is no need to allege in the Informations in
what capacity petitioner participated to hold him
responsible for the offense. Under the Trust
Receipts Law, it is sufficient to allege and establish
the failure of ARMAGRI, whom petitioner
represented, to remit the proceeds or to return the
goods to the Bank.
When petitioner signed the trust receipts, he
claimed he was representing ARMAGRI. The
corporation obviously acts only through its human
agents and it is the conduct of such agents which
the law must deter.29 The existence of the corporate
entity does not shield from prosecution the agent
who knowingly and intentionally commits a crime at
the instance of a corporation.30
Penalty for the crime of Estafa.
The penalty for the crime of estafa is prescribed in
Article 315 of the Revised Penal Code, as follows:
1st. The penalty of prision correccional in its
maximum period to prision mayor in its minimum
period, if the amount of the fraud is over 12,000
pesos but does not exceed 22,000 pesos; and if
such amount exceeds the latter sum, the penalty
provided in this paragraph shall be imposed in its
maximum period, adding one year for each
additional 10,000 pesos; but the total penalty which
may be imposed should not exceed twenty years. x
x x.
In the instant case, the amount of the fraud in
Criminal Case No. 92-101989 is P1,527,180.66. In
Criminal Case No. 92-101990, the amount of the
fraud is P1,449,395.71. Since the amounts of the
fraud in each estafa exceeds P22,000.00, the
penalty of prision correccional maximum to prision
mayor minimum should be imposed in its maximum
period as prescribed in Article 315 of the Revised
Penal Code. The maximum indeterminate sentence
should be taken from this maximum period which
has a duration of 6 years, 8 months and 21 days to
8 years. One year is then added for each
additional P10,000.00, but the total penalty should
not exceed 20 years. Thus, the maximum penalty
for each count of estafa in this case should be 20
years.
Under the Indeterminate Sentence Law, the
minimum indeterminate sentence can be anywhere
within the range of the penalty next lower in degree
to the penalty prescribed by the Code for the
offense. The minimum range of the penalty is
determined without first considering any modifying
circumstance attendant to the commission of the
crime and without reference to the periods into
which it may be subdivided.31 The modifying
circumstances are considered only in the imposition
of the maximum term of the indeterminate
sentence.32 Since the penalty prescribed in Article
315 is prision correccional maximum to prision
mayor minimum, the penalty next lower in degree
would be prision correccional minimum to medium.
Thus, the minimum term of the indeterminate
penalty should be anywhere within 6 months and 1
day to 4 years and 2 months.33cräläwvirtualibräry
Accordingly, the Court finds a need to modify in
part the penalties imposed by the trial court. The
minimum penalty for each count of estafa should be
reduced to four (4) years and two (2) months
of prision correccional.
As for the civil liability arising from the criminal
offense, the question is whether as the signatory for
ARMAGRI, petitioner is personally liable pursuant petitioner received the demand letter,37 until the
to the provision of Section 13 of the Trust Receipts debt is fully paid.
Law. WHEREFORE, the assailed Decision is AFFIRMED
In Prudential Bank v. Intermediate Appellate with MODIFICATION. In Criminal Case No. 92-
Court,34 the Court discussed the imposition of civil 101989 and in Criminal Case No. 92-101990, for
liability for violation of the Trust Receipts Law in this each count of estafa, petitioner EDWARD C. ONG
wise: is sentenced to an indeterminate penalty of
It is clear that if the violation or offense is imprisonment from four (4) years and two (2)
committed by a corporation, partnership, months of prision correccional as MINIMUM, to
association or other juridical entities, the penalty twenty (20) years of reclusion temporal as
shall be imposed upon the directors, officers, MAXIMUM. Petitioner is ordered to pay
employees or other officials or persons responsible SOLIDBANK CORPORATION the stipulated
for the offense. The penalty referred to penalty of 1% per month on the outstanding
is imprisonment, the duration of which would balance of the two trust receipts to be computed
depend on the amount of the fraud as provided for from 15 July 1991 until the debt is fully paid.
in Article 315 of the Revised Penal Code. The SO ORDERED.
reason for this is obvious: corporation, partnership, Davide, Jr., C.J., (Chairman), Vitug, Ynares-
association or other juridical entities cannot be put Santiago, and Azcuna, JJ., concur.
in jail. However, it is these entities which are
made liable for the civil liabilities arising from
the criminal offense. This is the import of the
clause without prejudice to the civil liabilities arising
from the criminal offense. (Emphasis supplied)
In Prudential Bank, the Court ruled that the person
signing the trust receipt for the corporation is not
solidarily liable with the entrustee-corporation for
the civil liability arising from the criminal offense. He
may, however, be personally liable if he bound
himself to pay the debt of the corporation under a
separate contract of surety or guaranty.
In the instant case, petitioner did not sign in his
personal capacity the solidary guarantee
clause35 found on the dorsal portion of the trust
receipts. Petitioner placed his signature after the
typewritten words ARMCO INDUSTRIAL
CORPORATION found at the end of the solidary
guarantee clause. Evidently, petitioner did not
undertake to guaranty personally the payment of
the principal and interest of ARMAGRIs debt under
the two trust receipts.
In contrast, petitioner signed the stamped additional
undertaking without any indication he was signing
for ARMAGRI. Petitioner merely placed his
signature after the additional undertaking. Clearly,
what petitioner signed in his personal capacity was
the stamped additional undertaking to pay a
monthly penalty of 1% of the total obligation in case
of ARMAGRIs default.
In the additional undertaking, petitioner bound
himself to pay jointly and severally a monthly
penalty of 1% in case of ARMAGRIs
default.36 Thus, petitioner is liable to the Bank for
the stipulated monthly penalty of 1% on the
outstanding amount of each trust receipt. The
penalty shall be computed from 15 July 1991, when
G. R. No. 164317             February 6, 2006
80 81 for CCM
ALFREDO CHING, Petitioner, 
vs. 18 11- 02- P370,33 200 pcs.
THE SECRETARY OF JUSTICE, ASST. CITY 08 21- 19- 2.52 ingot
PROSECUTOR ECILYN BURGOS-VILLAVERT, 80 81 moulds
JUDGE EDGARDO SUDIAM of the Regional
Trial Court, Manila, Branch 52; RIZAL 20 01- 04- P469,66 High Fired
COMMERCIAL BANKING CORP. and THE 42 30- 30- 9.29 Refractory
PEOPLE OF THE PHILIPPINES, Respondents. 81 81 Nozzle
DECISION Bricks
CALLEJO, SR., J.:
Before the Court is a petition for review on certiorari 18 11- 02- P2,001,7 Synthetic
of the Decision1 of the Court of Appeals (CA) in CA- 01 21- 19- 15.17 Graphite
G.R. SP No. 57169 dismissing the petition for 80 81 Electrode
certiorari, prohibition and mandamus filed by [with]
petitioner Alfredo Ching, and its Resolution2 dated tapered
June 28, 2004 denying the motion for pitch filed
reconsideration thereof. nipples
Petitioner was the Senior Vice-President of
Philippine Blooming Mills, Inc. (PBMI). Sometime in 18 12- 03- P197,84 3,000 pcs.
September to October 1980, PBMI, through 57 09- 09- 3.61 (15 bundles
petitioner, applied with the Rizal Commercial 80 81 calorized
Banking Corporation (respondent bank) for the lance pipes
issuance of commercial letters of credit to finance [)]
its importation of assorted goods.3
Respondent bank approved the application, and 18 12- 03- P67,652. Spare parts
irrevocable letters of credit were issued in favor of 95 17- 17- 04 for
petitioner. The goods were purchased and 80 81 Spectrophot
delivered in trust to PBMI. Petitioner signed 13 trust ometer
receipts4 as surety, acknowledging delivery of the
following goods: 19 12- 03- P91,497. 50 pcs.
11 22- 20- 85 Ingot
T/ Date Matu Principal Description
80 81 moulds
R Gran rity of Goods
No ted Date 20 01- 04- P91,456. 50 pcs.
s. 41 30- 30- 97 Ingot
81 81 moulds
18 12- 03- P1,596,4 79.9425
45 05- 05- 70.05 M/T "SDK" 20 02- 05- P66,162. 8 pcs.
80 81 Brand 99 10- 11- 26 Kubota
Synthetic 81 81 Rolls for
Graphite rolling mills
Electrode
21 02- 05- P210,74 Spare parts
18 12- 03- P198,15 3,000 pcs. 00 10- 12- 8.00 for
53 08- 06- 0.67 (15 bundles) 81 81 Lacolaborat
80 81 Calorized ory
Lance Pipes Equipment5
18 11- 02- P707,87 One Lot Under the receipts, petitioner agreed to hold the
24 28- 26- 9.71 High Fired goods in trust for the said bank, with authority to
80 81 Refractory sell but not by way of conditional sale, pledge or
Tundish otherwise; and in case such goods were sold, to
Bricks turn over the proceeds thereof as soon as received,
to apply against the relative acceptances and
17 11- 02- P835,52 5 cases payment of other indebtedness to respondent bank.
98 21- 19- 6.25 spare parts In case the goods remained unsold within the
specified period, the goods were to be returned to
respondent bank without any need of demand.
Thus, said "goods, manufactured products or
proceeds thereof, whether in the form of money or
bills, receivables, or accounts separate and
capable of identification" were respondent bank’s
property.
When the trust receipts matured, petitioner failed to
return the goods to respondent bank, or to return
their value amounting to ₱6,940,280.66 despite
demands. Thus, the bank filed a criminal complaint
for estafa6 against petitioner in the Office of the City
Prosecutor of Manila.
After the requisite preliminary investigation, the City
Prosecutor found probable cause estafa under
Article 315, paragraph 1(b) of the Revised Penal
Code, in relation to Presidential Decree (P.D.) No.
115, otherwise known as the Trust Receipts Law.
Thirteen (13) Informations were filed against the
petitioner before the Regional Trial Court (RTC) of
Manila. The cases were docketed as Criminal
Cases No. 86-42169 to 86-42181, raffled to Branch
31 of said court.
Petitioner appealed the resolution of the City
Prosecutor to the then Minister of Justice. The
appeal was dismissed in a Resolution7 dated March
17, 1987, and petitioner moved for its
reconsideration. On December 23, 1987, the
Minister of Justice granted the motion, thus
reversing the previous resolution finding probable
cause against petitioner.8 The City Prosecutor was
ordered to move for the withdrawal of the
Informations.
This time, respondent bank filed a motion for
reconsideration, which, however, was denied on
February 24, 1988.9The RTC, for its part, granted
the Motion to Quash the Informations filed by
petitioner on the ground that the material
allegations therein did not amount to estafa.10
In the meantime, the Court rendered judgment in
Allied Banking Corporation v. Ordoñez,11 holding
that the penal provision of P.D. No. 115
encompasses any act violative of an obligation
covered by the trust receipt; it is not limited to
transactions involving goods which are to be sold
(retailed), reshipped, stored or processed as a
component of a product ultimately sold. The Court
also ruled that "the non-payment of the amount
covered by a trust receipt is an act violative of the
obligation of the entrustee to pay."12
On February 27, 1995, respondent bank re-filed the
criminal complaint for estafa against petitioner
before the Office of the City Prosecutor of Manila.
The case was docketed as I.S. No. 95B-07614.
Preliminary investigation ensued. On December 8,
1995, the City Prosecutor ruled that there was no
probable cause to charge petitioner with violating
P.D. No. 115, as petitioner’s liability was only civil,
not criminal, having signed the trust receipts as
surety.13 Respondent bank appealed the resolution
to the Department of Justice (DOJ) via petition for
review, alleging that the City Prosecutor erred in
ruling:
1. That there is no evidence to show that
respondent participated in the misappropriation of
the goods subject of the trust receipts;
2. That the respondent is a mere surety of the trust
receipts; and
3. That the liability of the respondent is only civil in
nature.14
On July 13, 1999, the Secretary of Justice issued
Resolution No. 25015 granting the petition and
reversing the assailed resolution of the City
Prosecutor. According to the Justice Secretary, the
petitioner, as Senior Vice-President of PBMI,
executed the 13 trust receipts and as such, was the
one responsible for the offense. Thus, the
execution of said receipts is enough to indict the
petitioner as the official responsible for violation of
P.D. No. 115. The Justice Secretary also declared
that petitioner could not contend that P.D. No. 115
covers only goods ultimately destined for sale, as
this issue had already been settled in Allied
Banking Corporation v. Ordoñez,16 where the Court
ruled that P.D. No. 115 is "not limited to
transactions in goods which are to be sold
(retailed), reshipped, stored or processed as a
component of a product ultimately sold but covers
failure to turn over the proceeds of the sale of
entrusted goods, or to return said goods if unsold or
not otherwise disposed of in accordance with the
terms of the trust receipts."
The Justice Secretary further stated that the
respondent bound himself under the terms of the
trust receipts not only as a corporate official of
PBMI but also as its surety; hence, he could be
proceeded against in two (2) ways: first, as surety
as determined by the Supreme Court in its decision
in Rizal Commercial Banking Corporation v. Court
of Appeals;17 and second, as the corporate official
responsible for the offense under P.D. No. 115, via
criminal prosecution. Moreover, P.D. No. 115
explicitly allows the prosecution of corporate
officers "without prejudice to the civil liabilities
arising from the criminal offense." Thus, according
to the Justice Secretary, following Rizal
Commercial Banking Corporation, the civil liability
imposed is clearly separate and distinct from the
criminal liability of the accused under P.D. No. 115.
Conformably with the Resolution of the Secretary of
Justice, the City Prosecutor filed 13 Informations
against petitioner for violation of P.D. No. 115
before the RTC of Manila. The cases were
docketed as Criminal Cases No. 99-178596 to 99-
178608 and consolidated for trial before Branch 52
of said court. Petitioner filed a motion for
reconsideration, which the Secretary of Justice
denied in a Resolution18 dated January 17, 2000.
Petitioner then filed a petition for certiorari,
prohibition and mandamus with the CA, assailing
the resolutions of the Secretary of Justice on the
following grounds:
1. THE RESPONDENTS ARE ACTING WITH AN
UNEVEN HAND AND IN FACT, ARE ACTING
OPPRESSIVELY AGAINST ALFREDO CHING
WHEN THEY ALLOWED HIS PROSECUTION
DESPITE THE FACT THAT NO EVIDENCE HAD
BEEN PRESENTED TO PROVE HIS
PARTICIPATION IN THE ALLEGED
TRANSACTIONS.
2. THE RESPONDENT SECRETARY OF JUSTICE
COMMITTED AN ACT IN GRAVE ABUSE OF
DISCRETION AND IN EXCESS OF HIS
JURISDICTION WHEN THEY CONTINUED
PROSECUTION OF THE PETITIONER DESPITE
THE LENGTH OF TIME INCURRED IN THE
TERMINATION OF THE PRELIMINARY
INVESTIGATION THAT SHOULD JUSTIFY THE
DISMISSAL OF THE INSTANT CASE.
3. THE RESPONDENT SECRETARY OF JUSTICE
AND ASSISTANT CITY PROSECUTOR ACTED IN
GRAVE ABUSE OF DISCRETION AMOUNTING
TO AN EXCESS OF JURISDICTION WHEN THEY
CONTINUED THE PROSECUTION OF THE
PETITIONER DESPITE LACK OF SUFFICIENT
BASIS.19
In his petition, petitioner incorporated a certification
stating that "as far as this Petition is concerned, no
action or proceeding in the Supreme Court, the
Court of Appeals or different divisions thereof, or
any tribunal or agency. It is finally certified that if
the affiant should learn that a similar action or
proceeding has been filed or is pending before the
Supreme Court, the Court of Appeals, or different
divisions thereof, of any other tribunal or agency, it
hereby undertakes to notify this Honorable Court
within five (5) days from such notice."20
In its Comment on the petition, the Office of the
Solicitor General alleged that -
A.
THE HONORABLE SECRETARY OF JUSTICE
CORRECTLY RULED THAT PETITIONER
ALFREDO CHING IS THE OFFICER
RESPONSIBLE FOR THE OFFENSE CHARGED
AND THAT THE ACTS OF PETITIONER FALL
WITHIN THE AMBIT OF VIOLATION OF P.D. [No.]
115 IN RELATION TO ARTICLE 315, PAR. 1(B)
OF THE REVISED PENAL CODE.
B.
THERE IS NO MERIT IN PETITIONER’S
CONTENTION THAT EXCESSIVE DELAY HAS
MARRED THE CONDUCT OF THE PRELIMINARY
INVESTIGATION OF THE CASE, JUSTIFYING ITS
DISMISSAL.
C.
THE PRESENT SPECIAL CIVIL ACTION FOR
CERTIORARI, PROHIBITION AND MANDAMUS
IS NOT THE PROPER MODE OF REVIEW FROM
THE RESOLUTION OF THE DEPARTMENT OF
JUSTICE. THE PRESENT PETITION MUST
THEREFORE BE DISMISSED.21
On April 22, 2004, the CA rendered judgment
dismissing the petition for lack of merit, and on
procedural grounds. On the procedural issue, it
ruled that (a) the certification of non-forum
shopping executed by petitioner and incorporated
in the petition was defective for failure to comply
with the first two of the three-fold undertakings
prescribed in Rule 7, Section 5 of the Revised
Rules of Civil Procedure; and (b) the petition for
certiorari, prohibition and mandamus was not the
proper remedy of the petitioner.
On the merits of the petition, the CA ruled that the
assailed resolutions of the Secretary of Justice
were correctly issued for the following reasons: (a)
petitioner, being the Senior Vice-President of PBMI
and the signatory to the trust receipts, is criminally
liable for violation of P.D. No. 115; (b) the issue
raised by the petitioner, on whether he violated
P.D. No. 115 by his actuations, had already been
resolved and laid to rest in Allied Bank Corporation
v. Ordoñez;22 and (c) petitioner was estopped from
raising the
City Prosecutor’s delay in the final disposition of the
preliminary investigation because he failed to do so
in the DOJ.
Thus, petitioner filed the instant petition, alleging
that:
I
THE COURT OF APPEALS ERRED WHEN IT
DISMISSED THE PETITION ON THE GROUND
THAT THE CERTIFICATION OF NON-FORUM
SHOPPING INCORPORATED THEREIN WAS
DEFECTIVE.
II
THE COURT OF APPEALS ERRED WHEN IT
RULED THAT NO GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WAS COMMITTED
BY THE SECRETARY OF JUSTICE IN COMING
OUT WITH THE ASSAILED RESOLUTIONS.23
The Court will delve into and resolve the issues
seriatim.
The petitioner avers that the CA erred in dismissing
his petition on a mere technicality. He claims that
the rules of procedure should be used to promote,
not frustrate, substantial justice. He insists that the
Rules of Court should be construed liberally
especially when, as in this case, his substantial
rights are adversely affected; hence, the deficiency
in his certification of non-forum shopping should not
result in the dismissal of his petition.
The Office of the Solicitor General (OSG) takes the
opposite view, and asserts that indubitably, the
certificate of non-forum shopping incorporated in
the petition before the CA is defective because it
failed to disclose essential facts about pending
actions concerning similar issues and parties. It
asserts that petitioner’s failure to comply with the
Rules of Court is fatal to his petition. The OSG cited
Section 2, Rule 42, as well as the ruling of this
Court in Melo v. Court of Appeals.24
We agree with the ruling of the CA that the
certification of non-forum shopping petitioner
incorporated in his petition before the appellate
court is defective. The certification reads:
It is further certified that as far as this Petition is
concerned, no action or proceeding in the Supreme
Court, the Court of Appeals or different divisions
thereof, or any tribunal or agency.
It is finally certified that if the affiant should learn
that a similar action or proceeding has been filed or
is pending before the Supreme Court, the Court of
Appeals, or different divisions thereof, of any other
tribunal or agency, it hereby undertakes to notify
this Honorable Court within five (5) days from such
notice.25
Under Section 1, second paragraph of Rule 65 of
the Revised Rules of Court, the petition should be
accompanied by a sworn certification of non-forum
shopping, as provided in the third paragraph of
Section 3, Rule 46 of said Rules. The latter
provision reads in part:
SEC. 3. Contents and filing of petition; effect of
non-compliance with requirements. — The petition
shall contain the full names and actual addresses
of all the petitioners and respondents, a concise
statement of the matters involved, the factual
background of the case and the grounds relied
upon for the relief prayed for.
xxx
The petitioner shall also submit together with the
petition a sworn certification that he has not
theretofore commenced any other action involving
the same issues in the Supreme Court, the Court of
Appeals or different divisions thereof, or any other
tribunal or agency; if there is such other action or
proceeding, he must state the status of the same;
and if he should thereafter learn that a similar
action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals, or
different divisions thereof, or any other tribunal or
agency, he undertakes to promptly inform the
aforesaid courts and other tribunal or agency
thereof within five (5) days therefrom. xxx
Compliance with the certification against forum
shopping is separate from and independent of the
avoidance of forum shopping itself. The
requirement is mandatory. The failure of the
petitioner to comply with the foregoing requirement
shall be sufficient ground for the dismissal of the
petition without prejudice, unless otherwise
provided.26
Indubitably, the first paragraph of petitioner’s
certification is incomplete and unintelligible.
Petitioner failed to certify that he "had not
heretofore commenced any other action involving
the same issues in the Supreme Court, the Court of
Appeals or the different divisions thereof or any
other tribunal or agency" as required by paragraph
4, Section 3, Rule 46 of the Revised Rules of Court.
We agree with petitioner’s contention that the
certification is designed to promote and facilitate
the orderly administration of justice, and therefore,
should not be interpreted with absolute literalness.
In his works on the Revised Rules of Civil
Procedure, former Supreme Court Justice Florenz
Regalado states that, with respect to the contents
of the certification which the pleader may prepare,
the rule of substantial compliance may be availed
of.27However, there must be a special circumstance
or compelling reason which makes the strict
application of the requirement clearly unjustified.
The instant petition has not alleged any such
extraneous circumstance. Moreover, as worded,
the certification cannot even be regarded as
substantial compliance with the procedural
requirement. Thus, the CA was not informed
whether, aside from the petition before it, petitioner
had commenced any other action involving the
same issues in other tribunals.
On the merits of the petition, the CA ruled that the
petitioner failed to establish that the Secretary of
Justice committed grave abuse of discretion in
finding probable cause against the petitioner for
violation of estafa under Article 315, paragraph 1(b)
of the Revised Penal Code, in relation to P.D. No.
115. Thus, the appellate court ratiocinated:
Be that as it may, even on the merits, the
arguments advanced in support of the petition are
not persuasive enough to justify the desired
conclusion that respondent Secretary of Justice
gravely abused its discretion in coming out with his
assailed Resolutions. Petitioner posits that, except
for his being the Senior Vice-President of the PBMI,
there is no iota of evidence that he was a participes
crimines in violating the trust receipts sued upon;
and that his liability, if at all, is purely civil because
he signed the said trust receipts merely as a xxx
surety and not as the entrustee. These assertions
are, however, too dull that they cannot even just
dent the findings of the respondent Secretary, viz:
"x x x it is apropos to quote section 13 of PD 115
which states in part, viz:
‘xxx If the violation or offense is committed by a
corporation, partnership, association or other
judicial entities, the penalty provided for in this
Decree shall be imposed upon the directors,
officers, employees or other officials or persons
therein responsible for the offense, without
prejudice to the civil liabilities arising from the
criminal offense.’
"There is no dispute that it was the respondent,
who as senior vice-president of PBM, executed the
thirteen (13) trust receipts. As such, the law points
to him as the official responsible for the offense.
Since a corporation cannot be proceeded against
criminally because it cannot commit crime in which
personal violence or malicious intent is required,
criminal action is limited to the corporate agents
guilty of an act amounting to a crime and never
against the corporation itself (West Coast Life Ins.
Co. vs. Hurd, 27 Phil. 401; Times, [I]nc. v. Reyes,
39 SCRA 303). Thus, the execution by respondent
of said receipts is enough to indict him as the
official responsible for violation of PD 115.
"Parenthetically, respondent is estopped to still
contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like
those imported by PBM, for use in manufacture.
This issue has already been settled in the Allied
Banking Corporation case, supra, where he was
also a party, when the Supreme Court ruled that
PD 115 is ‘not limited to transactions in goods
which are to be sold (retailed), reshipped, stored or
processed as a component or a product ultimately
sold’ but ‘covers failure to turn over the proceeds of
the sale of entrusted goods, or to return said goods
if unsold or disposed of in accordance with the
terms of the trust receipts.’
"In regard to the other assigned errors, we note that
the respondent bound himself under the terms of
the trust receipts not only as a corporate official of
PBM but also as its surety. It is evident that these
are two (2) capacities which do not exclude the
other. Logically, he can be proceeded against in
two (2) ways: first, as surety as determined by the
Supreme Court in its decision in RCBC vs. Court of
Appeals, 178 SCRA 739; and, secondly, as the
corporate official responsible for the offense under
PD 115, the present case is an appropriate remedy
under our penal law.
"Moreover, PD 115 explicitly allows the prosecution
of corporate officers ‘without prejudice to the civil
liabilities arising from the criminal offense’ thus, the
civil liability imposed on respondent in RCBC vs.
Court of Appeals case is clearly separate and
distinct from his criminal liability under PD 115.’"28
Petitioner asserts that the appellate court’s ruling is
erroneous because (a) the transaction between
PBMI and respondent bank is not a trust receipt
transaction; (b) he entered into the transaction and
was sued in his capacity as PBMI Senior Vice-
President; (c) he never received the goods as an
entrustee for PBMI, hence, could not have
committed any dishonesty or abused the
confidence of respondent bank; and (d) PBMI
acquired the goods and used the same in operating
its machineries and equipment and not for resale.
The OSG, for its part, submits a contrary view, to
wit:
34. Petitioner further claims that he is not a person
responsible for the offense allegedly because
"[b]eing charged as the Senior Vice-President of
Philippine Blooming Mills (PBM), petitioner cannot
be held criminally liable as the transactions sued
upon were clearly entered into in his capacity as an
officer of the corporation" and that [h]e never
received the goods as an entrustee for PBM as he
never had or took possession of the goods nor did
he commit dishonesty nor "abuse of confidence in
transacting with RCBC." Such argument is bereft of
merit.
35. Petitioner’s being a Senior Vice-President of the
Philippine Blooming Mills does not exculpate him
from any liability. Petitioner’s responsibility as the
corporate official of PBM who received the goods in
trust is premised on Section 13 of P.D. No. 115,
which provides:
Section 13. Penalty Clause. The failure of an
entrustee to turn over the proceeds of the sale of
the goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to
the entruster or as appears in the trust receipt or to
return said goods, documents or instruments if they
were not sold or disposed of in accordance with the
terms of the trust receipt shall constitute the crime
of estafa, punishable under the provisions of Article
Three hundred and fifteen, paragraph one (b) of Act
Numbered Three thousand eight hundred and
fifteen, as amended, otherwise known as the
Revised Penal Code. If the violation or offense is
committed by a corporation, partnership,
association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon
the directors, officers, employees or other officials
or persons therein responsible for the offense,
without prejudice to the civil liabilities arising from
the criminal offense. (Emphasis supplied)
36. Petitioner having participated in the
negotiations for the trust receipts and having
received the goods for PBM, it was inevitable that
the petitioner is the proper corporate officer to be
proceeded against by virtue of the PBM’s violation
of P.D. No. 115.29
The ruling of the CA is correct.
In Mendoza-Arce v. Office of the Ombudsman
(Visayas),30 this Court held that the acts of a quasi-
judicial officer may be assailed by the aggrieved
party via a petition for certiorari and enjoined (a)
when necessary to afford adequate protection to
the constitutional rights of the accused; (b) when
necessary for the orderly administration of justice;
(c) when the acts of the officer are without or in
excess of authority; (d) where the charges are
manifestly false and motivated by the lust for
vengeance; and (e) when there is clearly no prima
facie case against the accused.31 The Court also
declared that, if the officer conducting a preliminary
investigation (in that case, the Office of the
Ombudsman) acts without or in excess of his
authority and resolves to file an Information despite
the absence of probable cause, such act may be
nullified by a writ of certiorari.32
Indeed, under Section 4, Rule 112 of the 2000
Rules of Criminal Procedure,33 the Information shall
be prepared by the Investigating Prosecutor against
the respondent only if he or she finds probable
cause to hold such respondent for trial. The
Investigating Prosecutor acts without or in excess
of his authority under the Rule if the Information is
filed against the respondent despite absence of
evidence showing probable cause therefor.34 If the
Secretary of Justice reverses the Resolution of the
Investigating Prosecutor who found no probable
cause to hold the respondent for trial, and orders
such prosecutor to file the Information despite the
absence of probable cause, the Secretary of
Justice acts contrary to law, without authority
and/or in excess of authority. Such resolution may
likewise be nullified in a petition for certiorari under
Rule 65 of the Revised Rules of Civil Procedure.35
A preliminary investigation, designed to secure the
respondent against hasty, malicious and
oppressive prosecution, is an inquiry to determine
whether (a) a crime has been committed; and (b)
whether there is probable cause to believe that the
accused is guilty thereof. It is a means of
discovering the person or persons who may be
reasonably charged with a crime. Probable cause
need not be based on clear and convincing
evidence of guilt, as the investigating officer acts
upon probable cause of reasonable belief. Probable
cause implies probability of guilt and requires more
than bare suspicion but less than evidence which
would justify a conviction. A finding of probable
cause needs only to rest on evidence showing that
more likely than not, a crime has been committed
by the suspect.36
However, while probable cause should be
determined in a summary manner, there is a need
to examine the evidence with care to prevent
material damage to a potential accused’s
constitutional right to liberty and the guarantees of
freedom and fair play37 and to protect the State
from the burden of unnecessary expenses in
prosecuting alleged offenses and holding trials
arising from false, fraudulent or groundless
charges.38
In this case, petitioner failed to establish that the
Secretary of Justice committed grave abuse of
discretion in issuing the assailed resolutions.
Indeed, he acted in accord with law and the
evidence.
Section 4 of P.D. No. 115 defines a trust receipt
transaction, thus:
Section 4. What constitutes a trust receipt
transaction. A trust receipt transaction, within the
meaning of this Decree, is any transaction by and
between a person referred to in this Decree as the
entruster, and another person referred to in this
Decree as entrustee, whereby the entruster, who
owns or holds absolute title or security interests
over certain specified goods, documents or
instruments, releases the same to the possession
of the entrustee upon the latter’s execution and
delivery to the entruster of a signed document
called a "trust receipt" wherein the entrustee binds
himself to hold the designated goods, documents or
instruments in trust for the entruster and to sell or
otherwise dispose of the goods, documents or
instruments with the obligation to turn over to the
entruster the proceeds thereof to the extent of the
amount owing to the entruster or as appears in the
trust receipt or the goods, documents or
instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the
terms and conditions specified in the trust receipt,
or for other purposes substantially equivalent to any
of the following:
1. In case of goods or documents, (a) to sell the
goods or procure their sale; or (b) to manufacture
or process the goods with the purpose of ultimate
sale; Provided, That, in the case of goods delivered
under trust receipt for the purpose of manufacturing
or processing before its ultimate sale, the entruster
shall retain its title over the goods whether in its
original or processed form until the entrustee has
complied fully with his obligation under the trust
receipt; or (c) to load, unload, ship or otherwise
deal with them in a manner preliminary or
necessary to their sale; or
2. In the case of instruments a) to sell or procure
their sale or exchange; or b) to deliver them to a
principal; or c) to effect the consummation of some
transactions involving delivery to a depository or
register; or d) to effect their presentation, collection
or renewal.
The sale of goods, documents or instruments by a
person in the business of selling goods, documents
or instruments for profit who, at the outset of the
transaction, has, as against the buyer, general
property rights in such goods, documents or
instruments, or who sells the same to the buyer on
credit, retaining title or other interest as security for
the payment of the purchase price, does not
constitute a trust receipt transaction and is outside
the purview and coverage of this Decree.
An entrustee is one having or taking possession of
goods, documents or instruments under a trust
receipt transaction, and any successor in interest of
such person for the purpose of payment specified
in the trust receipt agreement.39 The entrustee is
obliged to: (1) hold the goods, documents or
instruments in trust for the entruster and shall
dispose of them strictly in accordance with the
terms and conditions of the trust receipt; (2) receive
the proceeds in trust for the entruster and turn over
the same to the entruster to the extent of the
amount owing to the entruster or as appears on the
trust receipt; (3) insure the goods for their total
value against loss from fire, theft, pilferage or other
casualties; (4) keep said goods or proceeds thereof
whether in money or whatever form, separate and
capable of identification as property of the
entruster; (5) return the goods, documents or
instruments in the event of non-sale or upon
demand of the entruster; and (6) observe all other
terms and conditions of the trust receipt not
contrary to the provisions of the decree.40
The entruster shall be entitled to the proceeds from
the sale of the goods, documents or instruments
released under a trust receipt to the entrustee to
the extent of the amount owing to the entruster or
as appears in the trust receipt, or to the return of
the goods, documents or instruments in case of
non-sale, and to the enforcement of all other rights
conferred on him in the trust receipt; provided, such
are not contrary to the provisions of the document.41
In the case at bar, the transaction between
petitioner and respondent bank falls under the trust
receipt transactions envisaged in P.D. No. 115.
Respondent bank imported the goods and
entrusted the same to PBMI under the trust receipts
signed by petitioner, as entrustee, with the bank as
entruster. The agreement was as follows:
And in consideration thereof, I/we hereby agree to
hold said goods in trust for the said BANK as its
property with liberty to sell the same within
____days from the date of the execution of this
Trust Receipt and for the Bank’s account, but
without authority to make any other disposition
whatsoever of the said goods or any part thereof
(or the proceeds) either by way of conditional sale,
pledge or otherwise.
I/we agree to keep the said goods insured to their
full value against loss from fire, theft, pilferage or
other casualties as directed by the BANK, the sum
insured to be payable in case of loss to the BANK,
with the understanding that the BANK is, not to be
chargeable with the storage premium or insurance
or any other expenses incurred on said goods.
In case of sale, I/we further agree to turn over the
proceeds thereof as soon as received to the BANK,
to apply against the relative acceptances (as
described above) and for the payment of any other
indebtedness of mine/ours to the BANK. In case of
non-sale within the period specified herein, I/we
agree to return the goods under this Trust Receipt
to the BANK without any need of demand.
I/we agree to keep the said goods, manufactured
products or proceeds thereof, whether in the form
of money or bills, receivables, or accounts separate
and capable of identification as property of the
BANK.42
It must be stressed that P.D. No. 115 is a
declaration by legislative authority that, as a matter
of public policy, the failure of person to turn over
the proceeds of the sale of the goods covered by a
trust receipt or to return said goods, if not sold, is a
public nuisance to be abated by the imposition of
penal sanctions.43
The Court likewise rules that the issue of whether
P.D. No. 115 encompasses transactions involving
goods procured as a component of a product
ultimately sold has been resolved in the affirmative
in Allied Banking Corporation v. Ordoñez.44 The law
applies to goods used by the entrustee in the
operation of its machineries and equipment. The
non-payment of the amount covered by the trust
receipts or the non-return of the goods covered by
the receipts, if not sold or otherwise not disposed
of, violate the entrustee’s obligation to pay the
amount or to return the goods to the entruster.
In Colinares v. Court of Appeals,45 the Court
declared that there are two possible situations in a
trust receipt transaction. The first 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 second
is covered by the provision which refers to
merchandise received under the obligation to return
it (devolvera) to the owner.46 Thus, failure of the
entrustee to turn over the proceeds of the sale of
the goods covered by the trust receipts to the
entruster or to return said goods if they were not
disposed of in accordance with the terms of the
trust receipt is a crime under P.D. No. 115, without
need of proving intent to defraud. The law punishes
dishonesty and abuse of confidence in the handling
of money or goods to the prejudice of the entruster,
regardless of whether the latter is the owner or not.
A mere failure to deliver the proceeds of the sale of
the goods, if not sold, constitutes a criminal offense
that causes prejudice, not only to another, but more
to the public interest.47
The Court rules that although petitioner signed the
trust receipts merely as Senior Vice-President of
PBMI and had no physical possession of the
goods, he cannot avoid prosecution for violation of
P.D. No. 115.
The penalty clause of the law, Section 13 of P.D.
No. 115 reads:
Section 13. Penalty Clause. The failure of an
entrustee to turn over the proceeds of the sale of
the goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to
the entruster or as appears in the trust receipt or to
return said goods, documents or instruments if they
were not sold or disposed of in accordance with the
terms of the trust receipt shall constitute the crime
of estafa, punishable under the provisions of Article
Three hundred and fifteen, paragraph one (b) of Act
Numbered Three thousand eight hundred and
fifteen, as amended, otherwise known as the
Revised Penal Code.1âwphi1 If the violation or
offense is committed by a corporation, partnership,
association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon
the directors, officers, employees or other officials
or persons therein responsible for the offense,
without prejudice to the civil liabilities arising from
the criminal offense.
The crime defined in P.D. No. 115 is malum
prohibitum but is classified as estafa under
paragraph 1(b), Article 315 of the Revised Penal
Code, or estafa with abuse of confidence. It may be
committed by a corporation or other juridical entity
or by natural persons. However, the penalty for the
crime is imprisonment for the periods provided in
said Article 315, which reads:
ARTICLE 315. Swindling (estafa). – Any person
who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its
maximum period to prision mayor in its minimum
period, if the amount of the fraud is over 12,000
pesos but does not exceed 22,000 pesos; and if
such amount exceeds the latter sum, the penalty
provided in this paragraph shall be imposed in its
maximum period, adding one year for each
additional 10,000 pesos; but the total penalty which
may be imposed shall not exceed twenty years. In
such cases, and in connection with the accessory
penalties which may be imposed and for the
purpose of the other provisions of this Code, the
penalty shall be termed prision mayor or reclusion
temporal, as the case may be;
2nd. The penalty of prision correccional in its
minimum and medium periods, if the amount of the
fraud is over 6,000 pesos but does not exceed
12,000 pesos;
3rd. The penalty of arresto mayor in its maximum
period to prision correccional in its minimum period,
if such amount is over 200 pesos but does not
exceed 6,000 pesos; and
4th. By arresto mayor in its medium and maximum
periods, if such amount does not exceed 200
pesos, provided that in the four cases mentioned,
the fraud be committed by any of the following
means; xxx
Though the entrustee is a corporation,
nevertheless, the law specifically makes the
officers, employees or other officers or persons
responsible for the offense, without prejudice to the
civil liabilities of such corporation and/or board of
directors, officers, or other officials or employees
responsible for the offense. The rationale is that
such officers or employees are vested with the
authority and responsibility to devise means
necessary to ensure compliance with the law and, if
they fail to do so, are held criminally accountable;
thus, they have a responsible share in the
violations of the law.48
If the crime is committed by a corporation or other
juridical entity, the directors, officers, employees or
other officers thereof responsible for the offense
shall be charged and penalized for the crime,
precisely because of the nature of the crime and
the penalty therefor. A corporation cannot be
arrested and imprisoned; hence, cannot be
penalized for a crime punishable by
imprisonment.49 However, a corporation may be
charged and prosecuted for a crime if the
imposable penalty is fine. Even if the statute
prescribes both fine and imprisonment as penalty, a
corporation may be prosecuted and, if found guilty,
may be fined.50
A crime is the doing of that which the penal code
forbids to be done, or omitting to do what it
commands. A necessary part of the definition of
every crime is the designation of the author of the
crime upon whom the penalty is to be inflicted. conclusions in the above decision were reached in
When a criminal statute designates an act of a consultation before the case was assigned to the
corporation or a crime and prescribes punishment writer of the opinion of the Court’s Division.
therefor, it creates a criminal offense which, ARTEMIO V. PANGANIBAN 
otherwise, would not exist and such can be Chief Justice
committed only by the corporation. But when a
penal statute does not expressly apply to
corporations, it does not create an offense for
which a corporation may be punished. On the other
hand, if the State, by statute, defines a crime that
may be committed by a corporation but prescribes
the penalty therefor to be suffered by the officers,
directors, or employees of such corporation or other
persons responsible for the offense, only such
individuals will suffer such penalty.51Corporate
officers or employees, through whose act, default
or omission the corporation commits a crime, are
themselves individually guilty of the crime.52
The principle applies whether or not the crime
requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves
commit the crime and to those, who, by virtue of
their managerial positions or other similar relation
to the corporation, could be deemed responsible for
its commission, if by virtue of their relationship to
the corporation, they had the power to prevent the
act.53 Moreover, all parties active in promoting a
crime, whether agents or not, are
principals.54 Whether such officers or employees
are benefited by their delictual acts is not a
touchstone of their criminal liability. Benefit is not
an operative fact.
In this case, petitioner signed the trust receipts in
question. He cannot, thus, hide behind the cloak of
the separate corporate personality of PBMI. In the
words of Chief Justice Earl Warren, a corporate
officer cannot protect himself behind a corporation
where he is the actual, present and efficient actor.55
IN LIGHT OF ALL THE FOREGOING, the petition
is DENIED for lack of merit. Costs against the
petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR. 
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO MA. ALICIA
YNARES-SANTIAGO AUSTRIA-MARTINEZ
Associate Justice Asscociate Justice
MINITA V. CHICO-NAZARIO 
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution, it is hereby certified that the
IRST DIVISION
 
JOSE C. TUPAZ IV and G.R. No. 145578
PETRONILA C. TUPAZ,
Petitioners,
Present:
Davide, Jr., C.J.,
Chairman ,
- versus - ' Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
 
THE COURT OF APPEALS and
BANK OF THE P HIL IPPINE ' Promulgated:
ISLANDS,
Respondents. November 18, 2005
 
x------------------------------------
-------------x
 
 
DECISION
 
CARPIO, J.:
 
 
The Case
 
 
This is a petition for review [1] of the Decision [2] of
the Court of Appeals dated 7 September 2000 and
its Resolution dated 18 October 2000. The 7
September 2000 Decision affirmed the ruling of the
Regional Trial Court, Makati, Branch 144 in a case
for estafa under Section 13, Presidential Decree
No. 115. The Court of Appeals' Resolution of 18
October 2000 denied petitioners' motion for
reconsideration.
 
The Facts
 
 
Petitioners Jose C. Tupaz IV and Petronila C.
Tupaz (petitioners') were Vice-President for
Operations and Vice-President/Treasurer,
respectively, of El Oro Engraver Corporation (El
Oro Corporation'). El Oro Corporation had a
contract with the Philippine Army to supply the
latter with 'survival bolos.
 
To finance the purchase of the raw materials for the
survival bolos, petitioners, on behalf of El Oro
Corporation, applied with respondent Bank of the
Philippine Islands (respondent bank') for two
commercial letters of credit. The letters of credit
were in favor of El Oro Corporation's suppliers,
Tanchaoco Manufacturing
Incorporated [3] (Tanchaoco Incorporated') and
Maresco Rubber and Retreading
Corporation [4] (Maresco Corporation').
Respondent bank granted petitioners' application
and issued Letter of Credit No. 2-00896-3
for P564,871.05 to Tanchaoco Incorporated and
Letter of Credit No. 2-00914-5 for P294,000 to
Maresco Corporation.
 
Simultaneous with the issuance of the letters of
credit, petitioners signed trust receipts in favor of
respondent bank. On 30 September 1981,
petitioner Jose C. Tupaz IV (petitioner Jose Tupaz')
signed, in his personal capacity, a trust receipt
corresponding to Letter of Credit No. 2-00896-3
(for P564,871.05). Petitioner Jose Tupaz bound
himself to sell the goods covered by the letter of
credit and to remit the proceeds to respondent
bank, if sold, or to return the goods, if not sold, on
or before 29 December 1981.
 
On 9 October 1981, petitioners signed, in their
capacities as officers of El Oro Corporation, a trust
receipt corresponding to Letter of Credit No. 2-
00914-5 (for P294,000). Petitioners bound
themselves to sell the goods covered by that letter
of credit and to remit the proceeds to respondent
bank, if sold, or to return the goods, if not sold, on
or before 8 December 1981.
 
After Tanchaoco Incorporated and Maresco
Corporation delivered the raw materials to El Oro
Corporation, respondent bank paid the
former P564,871.05 and P294,000, respectively.
 
Petitioners did not comply with their undertaking
under the trust receipts. Respondent bank made
several demands for payments but El Oro
Corporation made partial payments only. On 27
June 1983 and 28 June 1983, respondent bank's
counsel [5] and its representative [6] respectively
sent final demand letters to El Oro Corporation. El
Oro Corporation replied that it could not fully pay its
debt because the Armed Forces of the Philippines
had delayed paying for the survival bolos.
 
Respondent bank charged petitioners with estafa
under Section 13, Presidential Decree No. 115
(Section 13') [7] or Trust Receipts Law (PD 115').
After preliminary investigation, the then Makati
Fiscal's Office found probable cause to indict
petitioners. The Makati Fiscal's Office filed the
corresponding Informations (docketed as Criminal
Case Nos. 8848 and 8849) with the Regional Trial
Court, Makati, on 17 January 1984 and the cases
were raffled to Branch 144 (trial court') on 20
January 1984. Petitioners pleaded not guilty to the
charges and trial ensued. During the trial,
respondent bank presented evidence on the civil
aspect of the cases.
The Ruling of the Trial Court
On 16 July 1992, the trial court rendered judgment
acquitting petitioners of estafa on reasonable
doubt. However, the trial court found petitioners
solidarily liable with El Oro Corporation for the
balance of El Oro Corporation's principal debt
under the trust receipts. The dispositive portion of
the trial court's Decision provides:
WHEREFORE, judgment is hereby rendered
ACQUITTING both accused Jose C. Tupaz, IV and
Petronila Tupaz based upon reasonable doubt.
 
However, El Oro Engraver Corporation, Jose C.
Tupaz, IV and Petronila Tupaz, are hereby ordered,
jointly and solidarily, to pay the Bank of the
Philippine Islands the outstanding principal
obligation of P624,129.19 (as of January 23, 1992)
with the stipulated interest at the rate of 18% per
annum; plus 10% of the total amount due as
attorney's fees; P5,000.00 as expenses of litigation;
and costs of the suit. [8]
 
In holding petitioners civilly liable with El Oro
Corporation, the trial court held:
 
[S]ince the civil action for the recovery of the civil
liability is deemed impliedly instituted with the
criminal action, as in fact the prosecution thereof
was actively handled by the private prosecutor, the
Court believes that the El Oro Engraver
Corporation and both accused Jose C. Tupaz and
Petronila Tupaz, jointly and solidarily should be
held civilly liable to the Bank of the Philippine
Islands. The mere fact that they were unable to
collect in full from the AFP and/or the Department
of National Defense the proceeds of the sale of the
delivered survival bolos manufactured from the raw
materials covered by the trust receipt agreements
is no valid defense to the civil claim of the said
complainant and surely could not wipe out their civil
obligation. After all, they are free to institute an
action to collect the same. [9]
Petitioners appealed to the Court of Appeals.
Petitioners contended that: (1) their acquittal
'operates to extinguish [their] civil liability and (2) at
any rate, they are not personally liable for El Oro
Corporation's debts.
 
The Ruling of the Court of Appeals
In its Decision of 7 September 2000, the Court of
Appeals affirmed the trial court's ruling. The
appellate court held:
 
It is clear from [Section 13, PD 115] that civil liability
arising from the violation of the trust receipt
agreement is distinct from the criminal liability
imposed therein. In the case of Vintola vs. Insular
Bank of Asia and America, our Supreme Court held
that acquittal in the estafa case (P.D. 115) is no bar
to the institution of a civil action for collection. This
is because in such cases, the civil liability of the
accused does not arise ex delicto but rather
based ex contractu and as such is distinct and
independent from any criminal proceedings and
may proceed regardless of the result of the latter.
Thus, an independent civil action to enforce the civil
liability may be filed against the corporation aside
from the criminal action against the responsible
officers or employees.
xxx
[W]e hereby hold that the acquittal of the accused-
appellants from the criminal charge of estafa did
not operate to extinguish their civil liability under the
letter of credit-trust receipt arrangement with
plaintiff-appellee, with which they dealt both in their
personal capacity and as officers of El Oro
Engraver Corporation, the letter of credit applicant
and principal debtor.
Appellants argued that they cannot be held
solidarily liable with their corporation, El Oro
Engraver Corporation, alleging that they executed
the subject documents including the trust receipt
agreements only in their capacity as such corporate
officers. They said that these instruments are
mere pro-forma and that they executed these
instruments on the strength of a board resolution of
said corporation authorizing them to apply for the
opening of a letter of credit in favor of their
suppliers as well as to execute the other
documents necessary to accomplish the same.
Such contention, however, is contradicted by the
evidence on record. The trust receipt agreement
indicated in clear and unmistakable terms that the
accused signed the same as surety for the
corporation and that they bound themselves directly
and immediately liable in the event of default with
respect to the obligation under the letters of credit
which were made part of the said agreement,
without need of demand. Even in the application for
the letter of credit, it is likewise clear that the
undertaking of the accused is that of a surety as
indicated [in] the following words: 'In consideration
of your establishing the commercial letter of credit
herein applied for substantially in accordance with
the foregoing, the undersigned Applicant and
Surety hereby agree, jointly and severally, to each
and all stipulations, provisions and conditions on
the reverse side hereof.
 
xxx
 
Having contractually agreed to hold themselves
solidarily liable with El Oro Engraver Corporation
under the subject trust receipt agreements with
appellee Bank of the Philippine Islands, herein
accused-appellants may not, therefore, invoke the
separate legal personality of the said corporation to
evade their civil liability under the letter of credit-
trust receipt arrangement with said appellee,
notwithstanding their acquittal in the criminal cases
filed against them. The trial court thus did not err in
holding the appellants solidarily liable with El Oro
Engraver Corporation for the outstanding principal
obligation of P624,129.19 (as of January 23, 1992)
with the stipulated interest at the rate of 18% per
annum, plus 10% of the total amount due as
attorney's fees, P5,000.00 as expenses of litigation
and costs of suit. [10]
 
Hence, this petition. Petitioners contend that:
1.            A JUDGMENT OF ACQUITTAL
OPERATE[S] TO EXTINGUISH THE CIVIL
LIABILITY OF PETITIONERS[;]
 
2.            GRANTING WITHOUT ADMITTING
THAT THE QUESTIONED OBLIGATION WAS
INCURRED BY THE CORPORATION, THE SAME
IS NOT YET DUE AND PAYABLE;
 
3.            GRANTING THAT THE QUESTIONED
OBLIGATION WAS ALREADY DUE AND
PAYABLE, xxx PETITIONERS ARE NOT
PERSONALLY LIABLE TO xxx RESPONDENT
BANK, SINCE THEY SIGNED THE LETTER[S] OF
CREDIT AS 'SURETY AS OFFICERS OF EL ORO,
AND THEREFORE, AN EXCLUSIVE LIABILITY OF
EL ORO; [AND]
 
 
 
4.            IN THE ALTERNATIVE, THE
QUESTIONED TRANSACTIONS ARE
SIMULATED AND VOID. [11]
 
 
 
The Issues
 
 
The petition raises these issues:
 
(1)   Whether petitioners bound themselves
personally liable for El Oro Corporation's debts
under the trust receipts;
(2)   If so '
(a)        whether petitioners' liability is solidary with
El Oro Corporation; and
(b)       whether petitioners' acquittal of estafa under
Section 13, PD 115 extinguished their civil liability.
 
 
The Ruling of the Court
 
 
The petition is partly meritorious. We affirm the
Court of Appeals' ruling with the modification that
petitioner Jose Tupaz is liable as guarantor of El
Oro Corporation's debt under the trust receipt dated
30 September 1981.
 
 
On Petitioners' Undertaking Under
the Trust Receipts
 
A corporation, being a juridical entity, may act only
through its directors, officers, and employees.
Debts incurred by these individuals, acting as such
corporate agents, are not theirs but the direct
liability of the corporation they represent. [12] As an
exception, directors or officers are personally liable
for the corporation's debts only if they so
contractually agree or stipulate. [13]
 
Here, the dorsal side of the trust receipts contains
the following stipulation:
 
To the Bank of the Philippine Islands
 
In consideration of your releasing to under the
terms of this Trust Receipt the goods described
herein, I/We, jointly and severally, agree and
promise to pay to you, on demand, whatever sum
or sums of money which you may call upon me/us
to pay to you, arising out of, pertaining to, and/or in
any way connected with, this Trust Receipt, in the
event of default and/or non-fulfillment in any
respect of this undertaking on the part of the said .
I/we further agree that my/our liability in this
guarantee shall be DIRECT AND IMMEDIATE,
without any need whatsoever on your part to take
any steps or exhaust any legal remedies that you
may have against the said . before making demand
upon me/us. [14] (Capitalization in the original)
 
 
 
In the trust receipt dated 9 October 1981,
petitioners signed below this clause as officers of El
Oro Corporation. Thus, under petitioner Petronila
Tupaz's signature are the words Vice-
PresTreasurer and under petitioner Jose Tupaz's
signature are the words Vice-PresOperations. By
so signing that trust receipt, petitioners did not bind
themselves personally liable for El Oro
Corporation's obligation. In Ong v. Court of
Appeals , [15] a corporate representative signed a
solidary guarantee clause in two trust receipts in his
capacity as corporate representative. There, the
Court held that the corporate representative did not
undertake to guarantee personally the payment of
the corporation's debts, thus:
 
[P]etitioner did not sign in his personal capacity the
solidary guarantee clause found on the dorsal
portion of the trust receipts. Petitioner placed his
signature after the typewritten words 'ARMCO
INDUSTRIAL CORPORATION found at the end of
the solidary guarantee clause. Evidently, petitioner
did not undertake to guaranty personally the
payment of the principal and interest of ARMAGRI's
debt under the two trust receipts.
 
 
Hence, for the trust receipt dated 9 October 1981,
we sustain petitioners' claim that they are not
personally liable for El Oro Corporation's obligation.
For the trust receipt dated 30 September 1981, the
dorsal portion of which petitioner Jose Tupaz
signed alone, we find that he did so in his personal
capacity. Petitioner Jose Tupaz did not indicate that
he was signing as El Oro Corporation's Vice-
President for Operations. Hence, petitioner Jose
Tupaz bound himself personally liable for El Oro
Corporation's debts. Not being a party to the trust
receipt dated 30 September 1981, petitioner
Petronila Tupaz is not liable under such trust
receipt.
 
 
The Nature of Petitioner Jose Tupaz's Liability
Under the Trust Receipt Dated 30 September
1981
 
 
As stated, the dorsal side of the trust receipt dated
30 September 1981 provides:
 
To the Bank of the Philippine Islands
 
In consideration of your releasing to under the
terms of this Trust Receipt the goods described
herein, I/We, jointly and severally, agree and
promise to pay to you, on demand, whatever sum
or sums of money which you may call upon me/us
to pay to you, arising out of, pertaining to, and/or in
any way connected with, this Trust Receipt, in the
event of default and/or non-fulfillment in any
respect of this undertaking on the part of the said .
I/we further agree that my/our liability in
this guarantee shall be DIRECT AND
IMMEDIATE, without any need whatsoever on your
part to take any steps or exhaust any legal
remedies that you may have against the said '.
Before making demand upon me/us. (Underlining
supplied; capitalization in the original)
 
The lower courts interpreted this to mean that
petitioner Jose Tupaz bound himself solidarily liable
with El Oro Corporation for the latter's debt under
that trust receipt.
 
This is error.
In Prudential Bank v. Intermediate Appellate
Court , [16] the Court interpreted a substantially
identical clause [17] in a trust receipt signed by a
corporate officer who bound himself personally
liable for the corporation's obligation. The petitioner
in that case contended that the stipulation 'we
jointly and severally agree and undertake rendered
the corporate officer solidarily liable with the
corporation. We dismissed this claim and held the
corporate officer liable as guarantor only. The Court
further ruled that had there been more than one
signatories to the trust receipt, the solidary liability
would exist between the guarantors. We held:
 
Petitioner [Prudential Bank] insists that by virtue of
the clear wording of the xxx clause 'x x x we jointly
and severally agree and undertake x x x, and the
concluding sentence on exhaustion, [respondent]
Chi's liability therein is solidary.
 
xxx
 
Our xxx reading of the questioned solidary guaranty
clause yields no other conclusion than that the
obligation of Chi is only that of a guarantor. This is
further bolstered by the last sentence which speaks
of waiver of exhaustion, which, nevertheless, is
ineffective in this case because the space therein
for the party whose property may not be exhausted
was not filled up. Under Article 2058 of the Civil
Code, the defense of exhaustion (excussion) may
be raised by a guarantor before he may be held
liable for the obligation. Petitioner likewise admits
that the questioned provision is a solidary
guaranty clause, thereby clearly distinguishing it
from a contract of surety. It, however, described the
guaranty as solidary between the guarantors; this
would have been correct if two (2) guarantors had
signed it. The clause 'we jointly and severally agree
and undertake refers to the undertaking of the two
(2) parties who are to sign it or to the liability
existing between themselves. It does not refer to
the undertaking between either one or both of them
on the one hand and the petitioner on the other with
respect to the liability described under the trust
receipt. xxx
 
Furthermore, any doubt as to the import or true
intent of the solidary guaranty clause should be
resolved against the petitioner. The trust receipt,
together with the questioned solidary guaranty
clause, is on a form drafted and prepared solely by
the petitioner; Chi's participation therein is limited to
the affixing of his signature thereon. It is, therefore,
a contract of adhesion; as such, it must be strictly
construed against the party responsible for its
preparation. [18] (Underlining supplied; italicization
in the original)
 
 
 
However, respondent bank's suit against petitioner
Jose Tupaz stands despite the Court's finding that
he is liable as guarantor only. First, excussion is not
a pre-requisite to secure judgment against a
guarantor. The guarantor can still demand
deferment of the execution of the judgment against
him until after the assets of the principal debtor
shall have been exhausted. [19] Second, the
benefit of excussion may be waived. [20] Under the
trust receipt dated 30 September 1981, petitioner
Jose Tupaz waived excussion when he agreed that
his 'liability in [the] guaranty shall be DIRECT AND
IMMEDIATE, without any need whatsoever on xxx
[the] part [of respondent bank] to take any steps or
exhaust any legal remedies xxx. The clear import of
this stipulation is that petitioner Jose Tupaz waived
the benefit of excussion under his guarantee.
 
As guarantor, petitioner Jose Tupaz is liable for El
Oro Corporation's principal debt and other
accessory liabilities (as stipulated in the trust
receipt and as provided by law) under the trust
receipt dated 30 September 1981. That trust receipt
(and the trust receipt dated 9 October 1981)
provided for payment of attorney's fees equivalent
to 10% of the total amount due and an 'interest at
the rate of 7% per annum, or at such other rate as
the bank may fix, from the date due until paid
xxx. [21] In the applications for the letters of credit,
the parties stipulated that drafts drawn under the
letters of credit are subject to interest at the rate of
18% per annum. [22]
 
The lower courts correctly applied the 18% interest
rate per annum considering that the face value of
each of the trust receipts is based on the drafts
drawn under the letters of credit. Based on the
guidelines laid down in
Eastern Shipping Lines, Inc. v. Court of
Appeals , [23] the accrued stipulated interest earns
12% interest per annum from the time of the filing
of the Informations in the Makati Regional Trial
Court on 17 January 1984. Further, the total
amount due as of the date of the finality of this
Decision will earn interest at 18% per annum until
fully paid since this was the stipulated rate in the
applications for the letters of credit. [24]
 
The accounting of El Oro Corporation's debts as of
23 January 1992, which the trial court used, is no
longer useful as it does not specify the amounts
owing under each of the trust receipts. Hence, in
the execution of this Decision, the trial court shall
compute El Oro Corporation's total liability under
each of the trust receipts dated 30 September 1981
and 9 October 1981 based on the following
formula: [25]
 
TOTAL AMOUNT DUE = [principal + interest +
interest on interest] ' partial payments made [26]
Interest = principal x 18 % per annum x no. of years
from due date [27] until finality of judgment
 
Interest on interest = interest computed as of the
filing of the complaint (17 January 1984) x 12% x
no. of years until finality of judgment
 
Attorney's fees is 10% of the total amount
computed as of finality of judgment
Total amount due as of the date of finality of
judgment will earn an interest of 18% per annum
until fully paid.
 
 
In so delegating this task, we reiterate what we said
in Rizal Commercial Banking Corporation v.
Alfa RTW Manufacturing Corporation [28] where
we also ordered the trial court to compute the
amount of obligation due based on a formula
substantially similar to that indicated above:
 
The total amount due xxx [under] the xxx contract[]
xxx may be easily determined by the trial court
through a simple mathematical computation based
on the formula specified above. Mathematics is an
exact science, the application of which needs no
further proof from the parties.
 
 
Petitioner Jose Tupaz's Acquittal did not
Extinguish his Civil Liability
 
The rule is that where the civil action is impliedly
instituted with the criminal action, the civil liability is
not extinguished by acquittal '
 
[w]here the acquittal is based on reasonable doubt
xxx as only preponderance of evidence is required
in civil cases; where the court expressly declares
that the liability of the accused is not criminal but
only civil in nature xxx as, for instance, in the
felonies of estafa, theft, and malicious mischief
committed by certain relatives who thereby incur
only civil liability (See Art. 332, Revised Penal
Code); and, where the civil liability does not arise
from or is not based upon the criminal act of which
the accused was acquitted xxx.[29] (Emphasis
supplied)
 
Here, respondent bank chose not to file a separate
civil action [30] to recover payment under the trust
receipts. Instead, respondent bank sought to
recover payment in Criminal Case Nos. 8848 and
8849. Although the trial court acquitted petitioner
Jose Tupaz, his acquittal did not extinguish his civil
liability. As the Court of Appeals correctly held, his
liability arose not from the criminal act of which he
was acquitted (ex delito) but from the trust receipt
contract (ex contractu) of 30 September 1981.
Petitioner Jose Tupaz signed the trust receipt of 30
September 1981 in his personal capacity.
On the other Matters Petitioners Raise
Petitioners raise for the first time in this appeal the
contention that El Oro Corporation's debts under
the trust receipts are not yet due and demandable.
Alternatively, petitioners assail the trust receipts as
simulated. These assertions have no merit. Under
the terms of the trust receipts dated 30 September
1981 and 9 October 1981, El Oro Corporation's
debts fell due on 29 December 1981 and 8
December 1981, respectively.
 
Neither is there merit to petitioners' claim that the
trust receipts were simulated. During the trial,
petitioners did not deny applying for the letters of
credit and subsequently executing the trust receipts
to secure payment of the drafts drawn under the
letters of credit.
 
WHEREFORE, we GRANT the petition in part.
We AFFIRM the Decision of the Court of Appeals
dated 7 September 2000 and its Resolution dated
18 October 2000 with the
following MODIFICATIONS:
1)     El Oro Engraver Corporation is principally
liable for the total amount due under the trust
receipts dated 30 September 1981 and 9 October
1981, as computed by the Regional Trial Court,
Makati, Branch 144, upon finality of this Decision,
based on the formula provided above;
2)     Petitioner Jose C. Tupaz IV is liable for El Oro
Engraver Corporation's total debt under the trust
receipt dated 30 September 1981 as thus
computed by the Regional Trial Court, Makati,
Branch 144; and
 
3)     Petitioners Jose C. Tupaz IV and Petronila C.
Tupaz are not liable under the trust receipt dated 9
October 1981.
 
SO ORDERED .
ANTONIO T. CARPIO
Associate Justice
 
 
 
WE CONCUR :
 
 
 
 
HILARIO G. DAVIDE, JR.
Chief Justice
Chairman
 
 
 LEONARDO A. QUISU MBI NG CONSUELO
YNARES-SANTIAGO
Associate Justice ' Associate Justice
 
 
 
 
ADOLFO S. AZC UNA
Associate Justice
 
 
 
 
 
 
 
 
CERTIFICATION
 
 
Pursuant to Section 13, Article VIII of the
Constitution, it is hereby certified that the
conclusions in the above Decision were reached in
consultation before the case was assigned to the
writer of the opinion of the Court's Division.
 
 
HILARIO G. DAVIDE, JR.
Chief Justice
HIRD DIVISION
G.R. No. 237553, July 10, 2019
BDO UNIBANK, INC., PETITIONER, v. ANTONIO
CHOA, RESPONDENT.
DECISION
LEONEN, J.:
When a demurrer is granted in a criminal case, the
private complainant can file a Rule 65 petition on
the civil aspect of the case, as long as he or she
can show that the trial court committed grave abuse
of discretion in granting the demurrer.
This Court resolves a Petition for Review on
Certiorari1 under Rule 45 of the 1997 Rules of Civil
Procedure, assailing the October 24, 2017
Decision2 and February 13, 2018 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 140059.4 The
Court of Appeals affirmed the November 26,
20145 and February 12, 20156 Orders of the
Regional Trial Court, which granted Antonio Choa
(Choa)'s Demurrer to Evidence.
On February 28, 2008, an Information7 was filed
before the Regional Trial Court of Pasig City
against Choa, then president and general manager
of Camden Industries, Inc. (Camden). He was
charged with violating Presidential Decree No. 115,
or the Trust Receipts Law, to the prejudice of BDO
Unibank, Inc. (BDO), the private complainant. The
Information read:
That, on or about and during the period beginning
March 12, 1999 until May 20, 1999, in the then
Municipality of San Juan, now City of San Juan, a
place within the jurisdiction of this Honorable Court,
the above named accused, being then the
President and General Manager of Camden
Industries, Inc., execute several Trust Receipt
Agreements with Nos. 0006, 0007, 0008, 0009,
0024, 0025, 0046 and 0047 in favor of Equitable
PCI Bank (now Banco De Oro-EPCI, Inc.), herein
represented by its Senior Manager Danilo M. De
Dios, in consideration of the receipt by the said
accused of . . . for which there is now due the sum
of Php 7,875,904.96 under the terms of which the
accused agreed to sell the same with express
obligation to remit to the complainant bank
proceeds of the sale and/or turn over the same if
not sold or disposed of in accordance with the said
Trust Receipt Agreements on demand, but the
accused once in possession of the said good, far
from complying with his obligation and with
unfaithfulness and abuse of confidence, did then
and there willfully, unlawfully and feloniously,
misappropriate, misapply and convert to his own
personal use and benefit the said goods and/or the
proceeds of the sale thereof, and despite repeated
demands, failed and refused to account for and/or
remit the proceeds of the sale thereof, to the
damage and prejudice of the said complainant bank
in the aforementioned amount of Php7,875,904.96.
CONTRARY TO LAW.8
Trial ensued. The prosecution presented Gerard K.
Santiago (Santiago) and Froilan Carada (Carada)
as its witnesses.9 The witnesses testified, among
others, that per Civil Case No. 70098,
entitled "CAMDEN Industries, Inc. v. Equitable PCI
Bank" (Pasig civil case), which had been elevated
to the Court of Appeals, BDO supposedly owed
Camden the judgment award of P90 million.10 They
testified:
a. The subject trust receipts are for the account of
CAMDEN Industries[;]
b. The complainant bank did not sue CAMDEN for
the liability. The only one they sued was
CAMDEN's President, the accused;
c. CAMDEN sued the bank and was awarded
P90M plus. The bank was ordered to pay CAMDEN
the same amount. The case is now on appeal to
the Court of Appeals;
d. Upon the other hand, the money claim of the
bank against CAMDEN and/or for the accused is
P20M plus;
e. On clarificatory question by the court, the
prosecution witness Gerard Santiago [a]dmitted
that currently the bank is a judgment debtor of
CAMDEN in the amount of P90M plus while the
bank's claim against CAMDEN/accused is P20M
plus[.]11
On August 20, 2014, the prosecution filed its
Formal Offer of Documentary Evidence,12 which the
trial court admitted in its September 12, 2014
Order.13 In the same Order, the trial court gave
Choa 10 days to comment on the prosecution's
evidence.14
On September 25, 2014, Choa filed his Comment.15
Later, on October 13, 2014, Choa filed a Motion for
Leave (To file Demurrer to Evidence),16attached to
which was his Demurrer to Evidence.17 In both
pleadings, Choa argued:
It would thus appear that CAMDEN, represented by
the accused, and the bank,
assuming arguendo without admitting the bank's
theory of the case, are mutually creditors and
debtors of each other (Art. 1278, Civil
Code). Consequently, their obligations are
extinguished proportionately by operation of law.
Since the P20M plus being claimed by the bank is
more than offset by the P90M plus judgment
against the bank, there is no basis for the claim of
violation of the Trust Receipts Law. At the very
least, it would be impossible under such premises
to build the case beyond reasonable
doubt.18 (Emphasis in the original)
In its October 20, 2014 Order,19 the trial court
directed the prosecution to comment on Choa's
pleading, and Choa's counsel to reply on the
comment if needed.20
On October 30, 2014, the prosecution filed its
Opposition.21 Arguing that the Motion for Leave
should be expunged from the records, it claimed
that the pleading was pro-forma for being filed
beyond the five (5)-day reglementary period under
Rule 119, Section 23 of the Rules of Court.22
Even if the Motion was timely filed, the prosecution
asserted that it should still be denied for lack of
basis, maintaining that Choa's civil liabilities could
not have been offset by the judgment award
granted to Camden in the Pasig civil case. It points
out that since Choa's civil liabilities stemmed from
his criminal violations of the Trust Receipts
Law,23 they could not be the subject of
compensation.24
The prosecution added that the decision of the trial
court, which had awarded Camden P90 million,
was reversed and set aside by the Court of
Appeals.25
On November 26, 2014, the trial court issued an
Order26 granting Choa's Demurrer to Evidence.
Based on the records and the witnesses'
testimonies, it found that the prosecution failed to
establish Choa's guilt.27
The trial court found that: (1) the amounts BDO and
Camden owed each other—BDO's P90 million
judgment debt to Camden, and Camden's P20
million judgment debt to BDO—may be legally
compensated; (2) BDO failed to prove that Choa
was liable for P7,875,904.96, and that this amount
formed part of the P20 million trust receipt; and (3)
BDO failed to prove Choa's criminal intent in not
paying or turning over the goods.28
From these findings, the trial court declared that
"the case is subject to compensatory action, which
is civil in nature."29
The dispositive portion of the Regional Trial Court
Order read:
WHEREFORE, premises considered, accused
Antonio Choa's Demurrer to Evidence is
hereby GRANTED.
SO ORDERED.30 (Emphasis in the original)
The prosecution filed a Motion for
Reconsideration,31 which the trial court denied in its
February 12, 2015 Order.32
Thus, BDO filed before the Court of Appeals a
Petition for Certiorari,33 assailing the trial court's
November 26, 2014 and February 12, 2015 Orders.
It argued that the trial court judge committed grave
abuse of discretion in:
1. granting Choa's Demurrer to Evidence
despite being filed out of time;
2. granting the Demurrer to Evidence without
first resolving the Motion for Leave and
giving BDO due process;
3. ruling that Choa's civil liabilities may be
legally compensated with the judgment
award in the Pasig civil case despite it being
irrelevant to this case, and despite the
award having been reversed by the Court of
Appeals;
4. granting the Demurrer to Evidence despite
the prosecution having established a prima
facie case for Choa's violation of the Trust
Receipts Law; and
5. ruling that the prosecution failed to present
enough proof of Camden's outstanding
obligations to BDO despite evidence to the
contrary.34
Affirming the trial court's Orders, the Court of
Appeals issued its October 24, 2017
Decision35denying BDO's Petition. It found that
Choa filed his Motion for Leave within the
prescriptive period since the prosecution could not
"yet be deemed to have rested its case."36 It
explained that the trial court only "physically
'admitted'"37 in its September 12, 2014 Order the
prosecution's Formal Offer of Documentary
Evidence, but had yet to rule on its admissibility.
This was shown, the Court of Appeals explained,
when Choa was also directed to submit his
Comment.38
The Court of Appeals added that BDO was not
denied due process. It pointed out that the bank's
filing of its Opposition and subsequent Motion for
Reconsideration showed that it had been given an
opportunity to be heard.39 The Court of Appeals
noted that when the opportunity to be heard is
accorded, "there is no denial of procedural due
process."40
Finally, the Court of Appeals held that BDO failed to
show how the trial court had committed grave
abuse of discretion in issuing the September 12,
2014 Order.41 Even if the trial court erred in granting
Choa's Demurrer to Evidence, the Court of Appeals
stated that this error was not "capricious and
whimsical as to constitute grave abuse of
discretion."42
The dispositive portion of the Court of Appeals
Decision read:
WHEREFORE, the instant petition is
hereby DENIED. ACCORDINGLY, the assailed
Orders dated November 26, 2014 and February 12,
2015 of the Regional Trial Court of Pasig City
(assigned in San Juan City), Branch 264, in
Criminal Case No. 137326, are hereby AFFIRMED.
SO ORDERED.43 (Emphasis in the original)
BDO moved for reconsideration,44 but the Court of
Appeals denied the Motion in its February 13, 2018
Resolution.45
Hence, BDO filed this Petition for Review on
Certiorari,46 assailing the October 24, 2017
Decision and February 13, 2018 Resolution of the
Court of Appeals.47
On November 5, 2018, Choa filed his
Comment.48 In turn, BDO filed its Reply49 on
February 1, 2019.
Petitioner insists that the Motion for Leave was not
timely filed. It avers that under Rule 119, Section 23
of the Rules of Court, respondent should have filed
his Motion for Leave within five (5) days from
September 12, 2014, when the prosecution
supposedly rested its case after its documentary
evidence had been admitted by the trial court
judge.50 It claims that if, according to the Court of
Appeals, the prosecution did not rest its case at the
time of the filing of the Motion for Leave, then the
trial court's judgment granting the Demurrer to
Evidence was premature, and therefore, void.51
Moreover, petitioner contends that the trial court
should have first ruled on respondent's Motion for
Leave,52 as this would have helped "in determining
whether he is merely stalling the
proceedings."53 Nonetheless, even if the trial court
judge was allowed to resolve respondent's
Demurrer to Evidence without first ruling on the
Motion, petitioner claims that the prosecution
should have been given 10 days from notice of the
ruling on the Motion so it could file its Opposition to
the Demurrer to Evidence.54 What happened,
petitioner claims, was that the prosecution was
deprived of an opportunity to be heard on both
pleadings.55
Petitioner maintains that it was deprived of an
opportunity to present extensive evidence on the
overpayment in the Pasig civil case as it believed
that the trial court would not use the Pasig civil
case judgment in resolving the Demurrer to
Evidence. It points out that the trial court has
consistently stated in three (3) Orders—July 21,
2008, April 14, 2009, and November 8, 2010—that
the Pasig civil case was irrelevant to this case. It
says it did not know that the trial court would use
the Pasig civil case judgment in ruling that the
judgment debts may be offset.56
Finally, petitioner avers that the Court of Appeals
should have decided on the merits of the Demurrer
to Evidence after the trial court judge had
committed grave abuse of discretion in:
1. allowing respondent to comment on the
Formal Offer of Documentary Evidence
despite it having already been admitted;
2. granting the Motion for Leave despite being
filed belatedly;
3. denying petitioner due process by granting
the Motion and Demurrer to Evidence
without giving the prosecution a chance to
refute the pleadings;
4. ruling—contrary to the Civil Code—that
there could be legal compensation between
the judgment debt in Camden's favor and
respondent's civil liability arising from a
criminal case;
5. ignoring the Court of Appeals Decision that
reversed the trial court Decision awarding
the judgment debt in Camden's favor;
6. ruling that respondent's obligation to
petitioner was a mere loan, despite his
liability for violating the Trust Receipts Law;
 7. ignoring that respondent's violation of the
Trust Receipts Law was malum
prohibitum; and
8. ruling that the prosecution failed to present
proof of Camden's outstanding obligations
to petitioner.57
In his Comment,58 respondent counters that this
Petition should have been "denied outright for lack
of authority."59 It maintains that petitioner was also
appealing the criminal aspect of the case, which
was exclusively within the Office of the Solicitor
General's authority. Without the conformity or
authority of the Office of the Solicitor General,
petitioner had no standing to appeal the criminal
aspect of the case.60
Respondent also insists that his Motion for Leave
was not belatedly filed. Contrary to petitioner's
claim, the period of his Motion's filing did not start
on September 12, 2014, when the trial court
admitted the prosecution's exhibits. Respondent
asserts that since the trial court directed him to
comment on the evidence in the same Order, the
trial court did not yet rule on the evidence's
admissibility. If the trial court indeed made a ruling
on September 12, 2014, respondent asserts that
petitioner should have moved for reconsideration or
clarification of the Order, or it could have raised the
alleged prematurity of the Motion for Leave earlier
in its Opposition—but it did not do either.61
Respondent argues that petitioner was not deprived
of its opportunity to be heard on both the Motion for
Leave and the Demurrer to Evidence. He
emphasizes that petitioner was duly represented at
the hearing on the Motion for Leave, and that it filed
its Opposition to both pleadings. He further argues
that petitioner should have moved for
reconsideration or clarification of the trial court's
November 4, 2014 Order if it believed that the
Motion, not the Demurrer, was the only subject for
resolution.62
Respondent avers that petitioner's other arguments
involved an appreciation of evidence, which is not
proper in a petition for certiorari filed before the
Court of Appeals.63 He reiterated that a Rule 65
petition "cannot be granted to correct mere errors in
appreciation of facts or interpretation of law."64
Maintaining that his guilt of the accusation in the
Information has not been proven,''65respondent
argues that the prosecution failed to prove that he
"was directly and personally responsible for the
alleged violation of the Trust Receipts Law[.]"66 He
emphasizes that the prosecution witnesses had no
personal knowledge of the trust receipt
transactions, and that their testimonies were merely
based on available records.67
Moreover, respondent claims that the elements of
the offense are absent in his case:
There is no proof that Respondent received the
goods subject of the trust receipts (first element).
There is no proof that he personally
misappropriated such goods or the proceeds of
their sale (second element). There is no proof that
Respondent performed such act of
misappropriation or conversion with abuse of
confidence (third element). There is even no proof
of demand upon him (fourth element).68
Lastly, respondent points out that petitioner did not
present any evidence on the alleged reversal of the
Pasig civil case. He submits that petitioner did not
submit a certified copy of the Court of Appeals
Decision despite purportedly obtaining it before
filing the Formal Offer of Documentary Evidence.69
In its Reply,70 petitioner maintains that it has
personality in filing this case, citing as its
bases Rural Bank of Mabitac, Laguna, Inc. v.
Canicon71 and David v. Marquez.72 It refutes
respondent's claim that its Petition should be
dismissed for being filed without the Office of the
Solicitor General's authority.73
Petitioner insists that the trial court judge committed
grave abuse of discretion in issuing the assailed
Orders. As such, respondent was not validly
acquitted and, consequently, there is no double
jeopardy. Petitioner reiterates that it was able to
sufficiently show the trial court judge's arbitrariness
and abuse of authority in the way he handled the
case.74
Moreover, petitioner again submits that
respondent's Motion for Leave was belatedly filed.75
Petitioner reiterates that it was deprived of due
process. It insists that the trial court failed to give it
an opportunity to present evidence in relation to the
Pasig civil case, and on both the Motion for Leave
and Demurrer to Evidence.76
On the Pasig civil case, petitioner asserts that it
was not possible then to include the Court of
Appeals Decision in its Formal Offer of
Documentary Evidence since it received the copy
after it had concluded its presentation of evidence.
Nonetheless, it claims that it manifested the
Decision and attached its copy to its Opposition
before the trial court. Thus, it was able to inform the
trial court judge of the Decision.77
Petitioner argues that even if it did not include the
Court of Appeals Decision in the case records, the
Pasig civil case will still be irrelevant to the criminal
case since "the trial court Judge [has] already ruled
that the Pasig Civil Case will not determine the guilt
or innocence of respondent[.]"78
The issues for this Court's resolution are:
First, whether or not petitioner BDO Unibank, Inc.
has the legal personality to file a Petition for
Certiorari before the Court of Appeals; and
Second, whether or not the Court of Appeals erred
in ruling that the trial court judge did not commit
grave abuse of discretion when he issued the Order
granting respondent Antonio Choa's Demurrer to
Evidence.
I acquittal, an appeal therefrom on the criminal
The State has the "inherent prerogative in
prosecuting criminal cases and in seeing to it that
justice is served."79 Subsumed under this right is
the authority to appeal an accused's acquittal.
In Bautista v. Cuneta-Pangilinan,80 this Court
elaborated:
The authority to represent the State in appeals of
criminal cases before the Supreme Court and the
CA is solely vested in the Office of the Solicitor
General (OSG). Section 35 (1), Chapter 12, Title III,
Book IV of the 1987 Administrative Code explicitly
provides that the OSG shall represent the
Government of the Philippines, its agencies and
instrumentalities and its officials and agents in any
litigation, proceeding, investigation or matter
requiring the services of lawyers. It shall have
specific powers and functions to represent the
Government and its officers in the Supreme Court
and the CA, and all other courts or tribunals in all
civil actions and special proceedings in which the
Government or any officer thereof in his official
capacity is a party. The OSG is the law office of the
Government.
To be sure, in criminal cases, the acquittal of the
accused or the dismissal of the case against him
can only be appealed by the Solicitor General,
acting on behalf of the State. The private
complainant or the offended party may question
such acquittal or dismissal only insofar as the civil
liability of the accused is concerned. In a catena of
cases, this view has been time and again espoused
and maintained by the Court. In Rodriguez v.
Gadiane, it was categorically stated that if the
criminal case is dismissed by the trial court or if
there is an acquittal, the appeal on the criminal
aspect of the case must be instituted by the
Solicitor General in behalf of the State. The
capability of the private complainant to question
such dismissal or acquittal is limited only to the civil
aspect of the case. . .
Worthy of note is the case
of People v. Santiago, wherein the Court had the
occasion to bring this issue to rest. The Court
elucidated:
It is well-settled that in criminal cases where the
offended party is the State, the interest of the
private complainant or the private offended party is
limited to the civil liability. Thus, in the prosecution
of the offense, the complainant's role is limited to
that of a witness for the prosecution. If a criminal
case is dismissed by the trial court or if there is an
aspect may be undertaken only by the State
through the Solicitor General. Only the Solicitor
General may represent the People of the
Philippines on appeal. The private offended party or
complainant may not take such appeal. However,
the said offended party or complainant may appeal
the civil aspect despite the acquittal of the accused.
In a special civil action for certiorari filed under
Section 1, Rule 65 of the Rules of Court wherein it
is alleged that the trial court committed a grave
abuse of discretion amounting to lack of jurisdiction
or on other jurisdictional grounds, the rules state
that the petition may be filed by the person
aggrieved. In such case, the aggrieved parties are
the State and the private offended party or
complainant. The complainant has an interest in
the civil aspect of the case so he may file such
special civil action questioning the decision or
action of the respondent court on jurisdictional
grounds. In so doing, complainant should not bring
the action in the name of the People of the
Philippines. The action may be prosecuted in name
of said complainant.
Thus, the Court has definitively ruled that in a
criminal case in which the offended party is the
State, the interest of the private complainant or the
private offended party is limited to the civil liability
arising therefrom. If a criminal case is dismissed by
the trial court or if there is an acquittal, an appeal of
the criminal aspect may be undertaken, whenever
legally feasible, only by the State through the
solicitor general. As a rule, only the Solicitor
General may represent the People of the
Philippines on appeal. The private offended party or
complainant may not undertake such
appeal.81(Emphasis supplied, citations omitted)
Here, although petitioner discussed respondent's
criminal liability in its Petition for Certiorari, the
totality of its arguments concerns the civil aspect of
the case. It reinforced its position in its concluding
paragraph:
All told, public respondent Judge clearly committed
grave abuse of discretion amounting to lack and/or
excess of jurisdiction in holding that the prosecution
was not able to prove private respondent Choa's
liability in the total amount of P7,875,904.96 as
stated in the Information as well as CAMDEN's total
outstanding obligation to petitioner BDO as of 31
March 2011 in the amount of P23,806,788.11.82
Thus, petitioner has the legal personality to file a
special civil action questioning the Regional Trial
Court Orders insofar as the civil aspect of the case
is concerned.
II
This Court will first resolve the procedural issue of
whether the trial court erred in not dismissing
outright respondent's Motion for Leave and
Demurrer to Evidence for being filed out of time.
Demurrer to evidence in criminal cases is governed
by Rule 119, Section 23 of the Revised Rules of
Criminal Procedure:
RULE 119
Trial
SECTION 23. Demurrer to Evidence. — After the
prosecution rests its case, the court may dismiss
the action on the ground of insufficiency of
evidence (1) on its own initiative after giving the
prosecution the opportunity to be heard or (2) upon
demurrer to evidence filed by the accused with or
without leave of court.
If the court denies the demurrer to evidence filed
with leave of court, the accused may adduce
evidence in his defense. When the demurrer to
evidence is filed without leave of court, the accused
waives the right to present evidence and submits
the case for judgment on the basis of the evidence
for the prosecution.
The motion for leave of court to file demurrer to
evidence shall specifically state its grounds and
shall be filed within a non-extendible period of five
(5) days after the prosecution rests its case. The
prosecution may oppose the motion within a non-
extendible period of five (5) days from its receipt.
If leave of court is granted, the accused shall file
the demurrer to evidence within a non-extendible
period often (10) days from notice. The prosecution
may oppose the demurrer to evidence within a
similar period from its receipt.
The order denying the motion for leave of court to
file demurrer to evidence or the demurrer itself shall
not be reviewable by appeal or by certiorari before
judgment.
In Valencia v. Sandiganbayan,83 this Court clarified:
A demurrer to evidence tests the sufficiency or
insufficiency of the prosecution's evidence. As
such, a demurrer to evidence or a motion for leave
to file the same must be filed after the prosecution
rests its case. But before an evidence may be
admitted, the rules require that the same be
formally offered, otherwise, it cannot be considered
by the court. A prior formal offer of evidence
concludes the case for the prosecution and
determines the timeliness of the filing of a demurrer
to evidence.84
A review of the case records reveals that when the
prosecution filed its Formal Offer of Documentary
Evidence85 on August 20, 2014, it included a
reservation in its Prayer, which states:
PRAYER
WHEREFORE, it is respectfully prayed that plaintiff
People of the Philippines' Exhibits "A" to "P-I",
inclusive of their submarkings, be admitted in
evidence for the purposes for (sic) which they have
been offered. With the admission of the foregoing
exhibits and the testimonies of Messrs. Gerard
Santiago and Froilan Carada, for the purposes for
(sic) which they are offered, plaintiff People of the
Philippines hereby rests its case.
In the event that the Honorable Court will deny the
admission of any of the foregoing exhibits offered,
it is respectfully prayed that the Honorable Court
grant plaintiff People of the Philippines an
opportunity to present additional evidence.
Other reliefs just and equitable are likewise prayed
for.86 (Emphasis supplied)
The prayer itself indicates that the prosecution
would rest its case depending on whether the trial
court admitted its evidence. If the trial court did not
admit its evidence, the prosecution would present
additional evidence; otherwise, it would rest its
case. Due to this reservation, the five (5)-day
period for the filing of a Motion for Leave had not
yet started when petitioner filed its Formal Offer of
Documentary Evidence.
The prosecution is deemed to have rested its case
on September 12, 2014, when the trial court
admitted its documentary evidence. In Cabador v.
People,87 this Court held that "only after [the court
ruled on the prosecution's formal offer of
documentary evidence] could the prosecution be
deemed to have rested its case."88
However, the counting of the five (5)-day period did
not commence on August 20, 2014, when the
prosecution filed its Formal Offer of Documentary
Evidence; or on September 12, 2014, when the trial
court admitted the evidence. Instead, it started
upon respondent's receipt of the September 12,
2014 Order, for only then was he notified that the
prosecution had rested its case.
Nonetheless, respondent filed his Motion for Leave
and Demurrer to Evidence on October 13, 2014. To
recall, the September 12, 2014 Order had also
directed respondent to submit his
comment/opposition, which he then submitted on
September 25, 2014. Even if there is no record of
when respondent received a copy of the Order, it
can be surmised that he received it before
September 25, 2014. It follows that the Motion for
Leave and the Demurrer to Evidence were filed
beyond the five (5)-day period under Rule 119,
Section 23 of the Rules of Court. The trial court,
then, should have denied these pleadings outright.
III
Nevertheless, even if the Motion for Leave and the
Demurrer to Evidence were filed on time, the trial
court judge still committed grave abuse of
discretion in granting the Demurrer to Evidence.
Presidential Decree No. 115, or the Trust Receipts
Law, defines a trust receipt transaction:
SECTION 4. What constitutes a trust receipt
transaction. — A trust receipt transaction, within
the meaning of this Decree, is any transaction by
and between a person referred to in this Decree as
the entruster, and another person referred to in this
Decree as the entrustee, whereby the entruster,
who owns or holds absolute title or security
interests over certain specified goods, documents
or instruments, releases the same to the
possession of the entrustee upon the latter's
execution and delivery to the entruster of a signed
document called a "trust receipt" wherein the
entrustee binds himself to hold the designated
goods, documents or instruments in trust for the
entruster and to sell or otherwise dispose of the
goods, documents or instruments with the
obligation to turn over to the entruster the proceeds
thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the
goods, documents or instruments themselves if
they are unsold or not otherwise disposed of, in
accordance with the terms and conditions specified
in the trust receipt, or for other purposes
substantially equivalent to any of the following:
1. In the case of goods or documents, (a) to
sell the goods or procure their sale; or (b) to
manufacture or process the goods with the
purpose of ultimate sale: Provided, That, in
the case of goods delivered under trust
receipt for the purpose of manufacturing or
processing before its ultimate sale, the
entruster shall retain its title over the goods
whether in its original or processed form
until the entrustee has complied fully with
his obligation under the trust receipt; or (c)
to load, unload, ship or transship or
otherwise deal with them in a manner
preliminary or necessary to their sale; or
2. In the case of instruments, (a) to sell or
procure their sale or exchange; or (b) to
deliver them to a principal; or (c) to effect
the consummation of some transactions
involving delivery to a depository or register;
or (d) to effect their presentation, collection
or renewal.
The sale of goods, documents or instruments by a
person in the business of selling goods, documents
or instruments for profit who, at the outset of the
transaction, has, as against the buyer, general
property rights in such goods, documents or
instruments, or who sells the same to the buyer on
credit, retaining title or other interest as security for
the payment of the purchase price, does not
constitute a trust receipt transaction and is outside
the purview and coverage of this Decree.
Simply put, "a trust receipt transaction imposes
upon the entrustee the obligation to deliver to the
entruster the price of the sale, or if the merchandise
is not sold, to return the same to the
entruster."89Gonzalez v. Hongkong & Shanghai
Banking Corporation90 explained:
There are thus two obligations in a trust receipt
transaction: the first, refers to money received
under the obligation involving the duty to turn it
over (entregarla) to the owner of the merchandise
sold, while the second refers to merchandise
received under the obligation to "return"
it (devolvera) to the owner. A violation of any of
these undertakings constitutes estafa defined under
Art. 315 (1) (b) of the Revised Penal Code, as
provided by Sec. 13 of Presidential Decree
115[.]91 (Citations omitted)
In granting respondent's Demurrer to Evidence, the
trial court consequently acquitted him of violation of
the Trust Receipts Law. The Decision was based
on grounds that: (1) petitioner owed Camden,
which was represented by respondent, P90 million,
while Camden owed petitioner P20 million, and
both amounts can be legally compensated; (2)
petitioner failed to provide evidence that
respondent was liable for P7,875,904.96 as alleged
in the Information, or that this amount formed part
of the P20 million trust receipt; and (3) petitioner
failed to provide evidence of respondent's criminal
intent in not paying or turning over the goods.
On the first ground, the trial court held:
In the instant case, what is evidently proved is that
the complainant and CAMDEN, represented by the
accused have earlier litigated on the issue of trust
receipt. Accordingly, complainant BDO was
decided on that case a judgment debtor in favor of
the (sic) CAMDEN. It was testified that BDO is
obligated to the accused Antonio Choa by as much
as P90M more or less. On the other hand,
CAMDEN, represented by the accused Antonio
Choa, is claimed to have failed to pay and/or turn
over the goods amounting to P20M.
....
What is clear from the record is that the accused is
obligated to pay the private complainant BDO for
the purchase of the goods.
Under this (sic) circumstances, the transaction is a
mere loan extended to the accused who in turn is to
pay the loan by way of remittance of the proceeds
of the sale. If the goods are unsold or
surrender (sic) the collateral[,] no criminal liability
arises. Hence, accused should not be held liable for
violation of Presidential Decree No. 115 [p]roviding
for the Regulation of the Trust Receipts
Transactions.
....
... The mass of trust receipts subject of this case in
the amount of P20M interspersed with the claim of
P90M accused have against the complainant.
Hence, the case is subject to compensatory action,
which is civil in nature.92
However, the judgment in the Pasig civil case is
irrelevant here. Again, the issue here is whether
Camden violated the Trust Receipt Agreements
when it failed to deliver the proceeds of the sale of
the goods to petitioner, or to return the goods
should the merchandise remain unsold. Moreover,
the Pasig civil case, which held petitioner as a
judgment debtor of Camden, has yet to attain
finality.93 As such, it cannot be the basis of a
judgment.
On the second ground, the trial court held:
However, a review of the information filed by 4th
Assistant City Prosecutor, Ma. Dinna Paulino,
reveals that the amount at issue is
P7,875,904.96....
....
There is nothing on record that the information of
the prosecution even mentioned the specific
amount of P7,875,904.96. All that testified is the
P20M liability of the accused without specific proof
of obligation how the accused was able to
accumulate the P20M.
To the mind of the court, there is not even a
probable cause sufficient to indict the accused for
his minimal liability of P7,875,904.96. So far, the
prosecution was able to advance an imaginary
liability of P20M. There is even no proof posited
that the P7,875,904.96 mentioned in the
information, forms part of that P20M trust receipt.94
Contrary to the trial court's ruling, the prosecution
was able to show how it computed the amount of
P7,875,904.96. In its Formal Offer of Documentary
Evidence, the prosecution offered the following
Trust Receipt Agreements and their corresponding
amounts, which respondent received as Camden's
representative:
Trust Receipt Agreement No. P711,385.00
006, dated March 12, 1999
Trust Receipt Agreement No. P662,660.00
007, dated March 12, 1999
Trust Receipt Agreement No. P883,035.00
008, dated May 7, 1999
Trust Receipt Agreement No. P1,532,113.20
009, dated May 17, 1999
Trust Receipt Agreement No. P1,037,458.40
024, dated May 17, 1999
Trust Receipt Agreement No. P1,148,201.76
025, dated May 17, 1999
Trust Receipt Agreement No. P644,810.00
046, dated May 20, 1999
Trust Receipt Agreement No. P1,256,241.6095
047, dated May 20, 1999
These amounts total P7,875,904.96. The trial court,
then, cannot rule that the prosecution was not able
to provide evidence. In addition, whether this
amount formed part of the alleged P20 million trust
receipt obligation of respondent is irrelevant. That is
not the issue in this case, which deals with the
violation of the Trust Receipts Law.
On the third ground, the trial court held:
Finally, records show that the prosecution failed to
elicit strong evidence that the accused has criminal
intent not to pay or turn over the goods to the
private complainant.96
Criminal intent is irrelevant in prosecuting the
violation of the Trust Receipts Law. In Gonzalez:
That petitioner Gonzalez neither had the intent to
defraud respondent HSBC nor personally
misused/misappropriated the goods subject of the
trust receipts is of no moment. The offense
punished under Presidential Decree No. 115 is in
the nature of malum prohibitum. A mere failure to
deliver the proceeds of the sale or the goods if not
sold, constitutes a criminal offense that causes
prejudice not only to another, but more to the public
interest. This is a matter of public policy as
declared by the legislative authority. Moreover, this
Court already held previously that failure of the
entrustee to turn over the proceeds of the sale of
the goods, covered by the trust receipt, to the
entruster or to return said goods if they were not
disposed of in accordance with the terms of the
trust receipt shall be punishable as estafa under
Art. 315(1)(b) of the Revised Penal Code without
need of proving intent to defraud.97(Emphasis
supplied, citations omitted)
Thus, in granting the Demurrer to Evidence, the
trial court judge committed grave abuse of
discretion. Its Orders, therefore, should be
reversed.
IV
As a consequence, this Court will now resolve the
merits of the case based on petitioner's evidence.
This is in line with the ruling in Siayngco v.
Costibolo:98
The rationale behind the rule and doctrine is simple
and logical. The defendant is permitted, without
waiving his right to offer evidence in the event that
his motion is not granted, to move for a dismissal
(i.e. demur to the plaintiff's evidence) on the ground
that upon the facts as thus established and the
applicable law, the plaintiff has shown no right to
relief. If the trial court denies the dismissal motion,
i.e., finds that plaintiff's evidence is sufficient for an
award of judgment in the absence of contrary
evidence, the case still remains before the trial
court which should then proceed to hear and
receive the defendant's evidence so that all the
facts and evidence of the contending parties may
be properly placed before it for adjudication as well
as before the appellate courts, in case of appeal.
Nothing is lost. This doctrine is but in line with the
established procedural precepts in the conduct of
trials that the trial court liberally receive all
preferred (sic) evidence at the trial to enable it to
render its decision with all possibly relevant proofs
in the record, thus assuring that the appellate
courts upon appeal have all the material before
them necessary to make a correct judgment, and
avoiding the need of remanding the case for retrial
or reception of improperly excluded evidence, with
the possibility thereafter of still another appeal, with
all the concomitant delays. The rule, however,
imposes the condition by the same token that if his
demurrer is granted by the trial court, and the order
of dismissal is reversed on appeal, the movant
loses his right to present evidence in his behalf and
he shall have been deemed to have elected to
stand on the insufficiency of plaintiff's case and
evidence. In such event, the appellate court which
reverses the order of dismissal shall proceed to
render judgment on the merits on the basis of
plaintiff's evidence.99 (Emphasis supplied)
In the more recent case of Duque v. Spouses Yu:100
In short, defendants who present a demurrer to the
plaintiffs' evidence retain the right to present their
own evidence, if the trial court disagrees with them;
if it agrees with them, but on appeal, the appellate
court disagrees and reverses the dismissal order,
the defendants lose the right to present their own
evidence. The appellate court shall, in addition,
resolve the case and render judgment on the
merits, inasmuch as a demurrer aims to discourage
prolonged litigations.101 (Emphasis supplied, citation
omitted)
default of the company.103 In Tupaz IV v. Court of
Appeals:104
A corporation, being a juridical entity, may act only
through its directors, officers, and employees.
Debts incurred by these individuals, acting as such
corporate agents, are not theirs but the direct
liability of the corporation they represent. As an
exception, directors or officers are personally liable
for the corporation's debts only if they so
contractually agree or stipulate.105 (Citations
omitted)
Without any evidence that respondent personally
bound himself to the debts of the company he
represented, this Court cannot hold him civilly liable
under the Trust Receipt Agreements.
WHEREFORE, the Petition is DENIED.

SO ORDERED.
Based on the prosecution's evidence, this Court
cannot grant petitioner's Complaint. Peralta, (Chairperson), A. Reyes, Jr.,
Hernando, and Inting, JJ., concur.
The prosecution's evidence consists of copies of:
(1) Trust Receipt Agreement Nos. 006, 007, 008,
009, 024, 025, 04(5, and 047 between Equitable
PCI Bank, Inc.—petitioner's predecessor-in-interest
—and Camden, with respondent signing as its
representative; (2) a copy of the Demand Letter
dated May 22, 2003 addressed to Camden and
respondent; (3) Camden's Statement of Account as
of March 31, 2011; (4) the Certificate of Filing of the
Articles and Plan of Merger dated May 25, 2007
between petitioner and Equitable PCI Bank, Inc.;
(5) the Plan of Merger dated December 28, 2006
between petitioner and Equitable PCI Bank, Inc.;
(6) Santiago's Judicial Affidavit; and (7) Carada's
Judicial Affidavit.102

Although these pieces of evidence show that

respondent signed the Trust Receipt Agreements,
they do not show that he signed them in his
personal capacity. On the bottom right corner of the
agreements are two (2) lines: one for the "NAME
OF CORPORATION," and the other for
"AUTHORIZED SIGNATURE." In all agreements,
"Camden Inds." was handwritten as the name of
the corporation, while respondent's signature
appeared as the authorized signature. Clearly,
respondent affixed his signature only as Camden's
representative.

Moreover, there was no guaranty clause or a

similar clause on the page that he signed that
would have made him personally liable in case of
G.R. No. 73271 May 29, 1987
SPOUSES TIRSO I. VINTOLA and LORETO DY
VINTOLA, defendants-appellants,  Finally, it should be mentioned that under the trust
vs.
INSULAR BANK OF ASIA AND
AMERICA, plaintiff-appellee.
MELENCIO-HERRERA, J.:
This case was appealed to the Intermediate
Appellate Court which, however, certified the same
to this Court, the issue involved being purely legal.
The facts are not disputed.
On August 20, 1975 the spouses Tirso and Loreta
Vintola (the VINTOLAS, for short), doing business
under the name and style "Dax Kin International,"
engaged in the manufacture of raw sea shells into
finished products, applied for and were granted a
domestic letter of credit by the Insular Bank of Asia
and America (IBAA), Cebu City. 1 in the amount of
P40,000.00. The Letter of Credit authorized the
bank to negotiate for their account drafts drawn by
their supplier, one Stalin Tan, on Dax Kin
International for the purchase of puka and olive
seashells. In consideration thereof, the VINTOLAS,
jointly and severally, agreed to pay the bank "at
maturity, in Philippine currency, the equivalent, of
the aforementioned amount or such portion thereof
as may be drawn or paid, upon the faith of the said
credit together with the usual charges."
On the same day, August 20, 1975, having
received from Stalin Tan the puka and olive shells
worth P40,000.00, the VINTOLAS executed a Trust
Receipt agreement with IBAA, Cebu City. Under
that Agreement, the VINTOLAS agreed to hold the
goods in trust for IBAA as the "latter's property with
liberty to sell the same for its account, " and "in
case of sale" to turn over the proceeds as soon as
received to (IBAA) the due date indicated in the
document was October 19, 1975.
Having defaulted on their obligation, IBAA
demanded payment from the VINTOLAS in a letter
dated January 1, 1976. The VINTOLAS, who were
unable to dispose of the shells, responded by
offering to return the goods. IBAA refused to accept
the merchandise, and due to the continued refusal
of the VINTOLAS to make good their undertaking,
IBAA charged them with Estafa for having
misappropriated, misapplied and converted for their
own personal use and benefit the aforesaid goods.
During the trial of the criminal case the VINTOLAS
turned over the seashells to the custody of the Trial
Court.
On April 12, 1982, the then Court of First Instance
of Cebu, Branch VII, acquitted the VINTOLAS of
the crime charged, after finding that the element of
misappropriation or conversion was inexistent.
Concluded the Court:
receipt, in the event of default and/or non-fulfillment
on the part of the accused of their undertaking, the
bank is entitled to take possession of the goods or
to recover its equivalent value together with the
usual charges. In either case, the remedy of the
Bank is civil and not criminal in nature. ... 2
Shortly thereafter, IBAA commenced the present
civil action to recover the value of the goods before
the Regional Trial Court of Cebu, Branch XVI.
Holding that the complaint was barred by the
judgment of acquittal in the criminal case, said
Court dismissed the complaint. However, on IBAA's
motion, the Court granted reconsideration and:
1. Order(ed)defendants jointly and severally to pay
the plaintiff the sum of Seventy Two Thousand Nine
Hundred Eighty Two and 27/100 (P72,982.27),
Philippine Currency, plus interest of 14% per
annum and service charge of one (1%) per cent per
annum computed from judicial demand and until
the obligation is fully paid;
2. Ordered defendants jointly and severally to pay
attorney's fees to the plaintiff in the sum of Four
Thousand (P4,000.00) pesos, Philippine Currency,
plus costs of the suit. 3
The VINTOLAS rest their present appeal on the
principal allegation that their acquittal in the Estafa
case bars IBAA's filing of the civil action because
IBAA had not reserved in the criminal case its right
to enforce separately their civil liability. They
maintain that by intervening actively in the
prosecution of the criminal case through a private
prosecutor, IBAA had chosen to file the civil action
impliedly with the criminal action, pursuant to
Section 1, Rule 111 of the 1985 Rules on Criminal
Procedure, reading:
Section 1. Institution of criminal and civil action.
— When a criminal action is instituted, the civil
action for the recovery of civil liability arising from
the offense charged is impliedly instituted with the
criminal action, unless the offended party expressly
waives the civil action or reserves his right to
institute it separately. ...
and that since the judgment in the criminal case
had made a declaration that the facts from which
the civil action might arise did not exist, the filing of
the civil action arising from the offense is now
barred, as provided by Section 3-b of Rule 111 of
the same Rules providing:
(b) Extinction of the penal action does not carry
with it extinction of the civil, unless the extinction
proceeds from a declaration in a final judgment that
the fact from which the civil might arise did not
exist. In other cases, the person entitled to the civil
action may institute it in the jurisdiction in the
manner provided by law against the person who
may be liable for restitution of the thing and
reparation or indemnity for the damage suffered.
Further, the VINTOLAS take the position that their
obligation to IBAA has been extinguished inasmuch
as, through no fault of their own, they were unable
to dispose of the seashells, and that they have
relinguished possession thereof to the IBAA, as
owner of the goods, by depositing them with the
Court.
The foregoing submission overlooks the nature and
mercantile usage of the transaction involved. A
letter of credit-trust receipt arrangement is endowed
with its own distinctive features and characteristics.
Under that set-up, a bank extends a loan covered
by the Letter of Credit, with the trust receipt as a
security for the loan. In other words, the transaction
involves a loan feature represented by the letter of
credit, and a security feature which is in the
covering trust receipt.
Thus, Section 4 of P.D. No. 115 defines a trust
receipt transaction as:
... any transaction by and between a person
referred to in this Decree as the entruster, and
another person referred to in this Decree as the
entrustee, whereby the entruster, who owns or
holds absolute title or security interests over certain
specified goods, documents or instruments,
releases the same to the possession of the
entrustee upon the latter's execution and delivery to
the entruster of a signed document called a "trust
receipt" wherein the entrustee binds himself to hold
the designated goods, documents or instruments in
trust for the entruster and to sell or otherwise
dispose of the goods, documents or instrument
thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the
goods, documents or instruments themselves if
they are unsold or not otherwise disposed of, in
accordance with the terms and conditions specified
in the trust receipt, or for other purposes
substantially equivalent to any one of the following:
1. In the case of goods or documents, (a) to sell the
goods or procure their sale, ...
A trust receipt, therefore, is a security agreement,
pursuant to which a bank acquires a "security
interest" in the goods. "It secures an indebtedness
and there can be no such thing as security interest
that secures no obligation." 4As defined in our laws:
(h) "Security Interest"means a property interest in
goods, documents or instruments to secure
performance of some obligations of the entrustee or
of some third persons to the entruster and includes
title, whether or not expressed to be absolute,
whenever such title is in substance taken or
retained for security only. 5
As elucidated in Samo vs. People6 "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."
Contrary to the allegation of the VINTOLAS, IBAA
did not become the real owner of the goods. It was
merely the holder of a security title for the advances
it had made to the VINTOLAS The goods the
VINTOLAS had purchased through IBAA financing
remain their own property and they hold it at their
own risk. The trust receipt arrangement did not
convert the IBAA into an investor; the latter
remained a lender and creditor.
... for the bank has previously extended a loan
which the L/C represents to the importer, and by
that loan, the importer should be the real owner of
the goods. If under the trust receipt, the bank is
made to appear as the owner, it was but an artificial
expedient, more of a legal fiction than fact, for if it
were so, it could dispose of the goods in any
manner it wants, which it cannot do, just to give
consistency with the purpose of the trust receipt of
giving a stronger security for the loan obtained by
the importer. To consider the bank as the true
owner from the inception of the transaction would
be to disregard the loan feature thereof. ... 7
Since the IBAA is not the factual owner of the
goods, the VINTOLAS cannot justifiably claim that
because they have surrendered the goods to IBAA
and subsequently deposited them in the custody of
the court, they are absolutely relieved of their
obligation to pay their loan because of their inability
to dispose of the goods. The fact that they were
unable to sell the seashells in question does not
affect IBAA's right to recover the advances it had
made under the Letter of Credit. In so arguing, the
VINTOLAS conveniently close their eyes to their
application for a Letter of Credit wherein they
expressly obligated themselves in these terms:
IN CONSIDERATION THEREOF, I/we promise and
agree to pay you at maturity in Philippine Currency
the equivalent of the above amount or such portion
thereof as may be drawn or paid upon the faith of
said credit together with the usual charges. ...
(Exhibit "A")
They further agreed that their marginal deposit of
P8,000.00, later increased to P11,000.00
be applied, without further proceedings or
formalities to pay or reduce our obligation under
this letter of credit or its corresponding Trust
Receipt. (Emphasis supplied) 8
The foregoing premises considered, it follows that
the acquittal of the VINTOLAS in the Estafa case is
no bar to the institution of a civil action for
collection. It is inaccurate for the VINTOLAS to
claim that the judgment in the estafa case had
declared that the facts from which the civil action
might arise, did not exist, for, it will be recalled that
the decision of acquittal expressly declared that
"the remedy of the Bank is civil and not criminal in
nature." This amounts to a reservation of the civil
action in IBAA's favor, for the Court would not have
dwelt on a civil liability that it had intended to
extinguish by the same decision. 9 The VINTOLAS
are liable ex contractu for breach of the Letter of
Credit — Trust Receipt, whether they did or they
did not "misappropriate, misapply or convert" the
merchandise as charged in the criminal
case. 10 Their civil liability does not arise ex
delicto, the action for the recovery of which would
have been deemed instituted with the criminal-
action (unless waived or reserved) and where
acquittal based on a judicial declaration that the
criminal acts charged do not exist would have
extinguished the civil action. 11 Rather, the civil suit
instituted by IBAA is based ex contractu and as
such is distinct and independent from any criminal
proceedings and may proceed regardless of the
result of the latter. Under the situational
circumstances of the parties, they are governed by
Article 31 of the Civil Code, explicitly providing:
Art. 31. When the civil action is based on an
obligation not arising from the act or omission
complained of as a felony, such civil action may
proceed independently of the criminal proceedings
and regardless of the result of the latter.
WHEREFORE, finding no reversible error in the
judgment appealed from, the same is hereby
AFFIRMED. No costs.
SO ORDERED.
Yap (Chairman), Narvasa, Cruz, Gancayco, and
Sarmiento, JJ., concur.
Feliciano, J., is on leave.
SECOND DIVISION
G.R. No. 122502. December 27, 2002
LORENZO M. SARMIENTO, JR. and GREGORIO
LIMPIN, JR., Petitioners, v. COURT OF APPEALS
and ASSOCIATED BANKING
CORP., respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Filed with this court is the petition for review under
Rule 45 of the Rules of Court assailing the July 31,
1995 Decision1 of the Court of Appeals in CA-G.R.
CV No. 31568 which affirmed the Decision of the
Regional Trial Court of Davao City dated August 1,
1990 in Civil Case No. 19,272-88; and the October
25, 1995 Resolution2 denying petitioners Motion for
Reconsideration.
The dispositive portion of the trial courts decision
reads as follows:
WHEREFORE, in view of all the foregoing,
judgment is hereby rendered ordering defendants
Lorenzo Sarmiento, Jr. and Gregorio Limpin, Jr. to
pay jointly and severally, the plaintiff bank the
principal sum of P495,000.00 plus interest thereon
at the legal rate from December 6, 1978 until the
full amount is paid; the sum of P49,500.00 as the
agreed attorneys fees and the costs of suit.
Defendant Sarmientos counterclaim is
DISMISSED.
SO ORDERED.3cräläwvirtualibräry
The facts of the case as found by the trial court and
affirmed by the Court of Appeals are as follows:
On September 6, 1978, defendant Gregorio Limpin,
Jr. and Antonio Apostol, doing business under the
name and style of Davao Libra Industrial Sales,
filed an application for an Irrevocable Domestic
Letter of Credit with the plaintiff Bank for the
amount of P495,000.00 in favor of LS Parts
Hardware and Machine Shop (herein after referred
to as LS Parts) for the purchase of assorted scrap
irons. Said application was signed by defendant
Limpin and Apostol (Exh. A). The aforesaid
application was approved, and plaintiff Bank issued
Domestic Letter of Credit No. DLC No. DVO-78-006
in favor of LS Parts for P495,000.00 (Exh. B).
Thereafter, a Trust Receipt dated September 6,
1978, was executed by defendant Limpin and
Antonio Apostol (Exh. C). In said Trust Receipt, the
following stipulation, signed by defendant Lorenzo
Sarmiento, Jr. appears: -
In consideration of the Associated Banking
Corporation releasing to Gregorio Limpin and
Antonio Apostol goods mentioned in the trust
receipt, we hereby jointly and severally undertake
and agree to pay, on demand, to the Associated
Bank Corporation all sums and amount of money
which said Associated Banking Corporation may
call upon us to pay arising out of, pertaining to,
and/or any manner connected with the trust receipt,
WE FURTHER AGREE that our liability in this
undertaking shall be direct and immediate and not
contingent upon the pursuit by the Associated
Banking Corporation of whatever remedies it may
have against the aforesaid Gregorio Limpin and
Antonio Apostol.
SGD. T/LORENZO SARMIENTO, JR.
Surety/Guarantor (Exh. C-1)
Among others, the Trust Receipt (Exh. C) provided
that:
The defendants acknowledged to have received in
trust from the plaintiff Bank the merchandise
covered by the documents and agreed to hold said
merchandise in storage as the property of the
Bank, with liberty to sell the same for cash for its
accounts provided the proceeds thereof are turned
over in their entirety to the bank to be applied
against acceptance and any other indebtedness of
the defendants to the bank. (Exh. C-2)
That the defendants shall immediately give notice
to said Bank of any average damage, non-
shipment, shortage, non-delivery or other
happening not in the usual and ordinary course of
business (Exh. C-3).
That the due date of the Trust Receipt is December
5, 1978, (Exh. C-4).
The defendants failed to comply with their
undertaking under the Trust Receipt. Hence as
early as March, 1980, demands were made for
them to comply with their undertaking (Exhs. Q, R
to R-2, S, T, D to D-1; F to F-2). However,
defendants failed to pay their account. Legal action
against the defendants was deferred due to the
proposed settlement of the account (Exh U).
However, no settlement was reached. Hence the
bank, thru counsel, sent a final letter of demand on
May 26, 1986 (Exh. E). On June 11, 1986, a
complaint for Violation of the Trust Receipt Law
was filed against the defendants before the City
Fiscals Office (Exh. L-3). Thereafter, the
corresponding Information was filed against the
defendants. Defendant Lorenzo Sarmiento, Jr. was,
however, dropped from the Information while
defendant Gregorio Limpin, Jr. was convicted (Exh.
P to P-9).
The defendants claim that they cannot be held
liable as the 825 tons of assorted scrap iron,
subject of the trust receipt agreement, were lost
when the vessel transporting them sunk, and that
said scrap iron were delivered to Davao Libra
Industrial Sales, a business concern over which
they had no interest whatsoever.
They tried to show that the scrap irons were loaded
on board Barge L-1853, owned and operated by
Luzon Stevedoring, for shipment to Toledo Atlas
Pier in Cebu (Exh. 1; that the said Barge capsized
on October 4, 1978 while on its way to Toledo City,
and a notice of Marine Protest was made by Capt.
Jose C. Barrientos (Exh. 2); that Benigno Azarcon
executed an affidavit attesting to the fact that Barge
L-1853, capsized on October 4, 1978 and all its
cargoes were washed away (Exh. 3); that Charlie
Torregoza, a security guard of L.S. Sarmiento and
Company, Inc., who was one of those assigned to
escort Barge L-1853, prepared an Incident Report,
showing that said Barge capsized on October 4,
1978 and that cargoes were washed away (Exhs. 4
and 4-A).4cräläwvirtualibräry
After trial, the lower court rendered judgment in
favor of herein private respondent Associated
Banking Corporation.
On appeal by herein petitioners Sarmiento, Jr. and
Limpin, Jr., the Court of Appeals affirmed the
judgment of the trial court, and, denied the Motion
for Reconsideration of herein petitioner.
Hence, herein petition assigning the following
errors:
1. THE RESPONDENT COURT OF APPEALS IN
ITS AFOREQUOTED RULING HAD DEPARTED
FROM THE APPLICABLE BASIC PRINCIPLE AND
PROCEDURE TO THE INSTANT CIVIL CASE
EMBODYING THE OFFENDED PARTYS
(ASSOCIATED BANK) CLAIM FOR THE CIVIL
LIABILITY OF P495,000.00, NOT HAVING BEEN
EXPRESSLY RESERVED BY IT, HAS BEEN NOT
ONLY IMPLIEDLY, BUT IN FACT EXPRESSLY
INSTITUTED ALREADY IN CRIMINAL CASE NO.
14,126, THE INFORMATION FOR WHICH HAD
BEEN FILED AHEAD AND THE PROCEEDINGS
CONDUCTED PRIOR TO THE PRESENT CIVIL
CASE BEFORE THE SAME REGIONAL TRIAL
COURT OF DAVAO CITY IS PROCEDURALLY
BARRED.
2. THE RESPONDENT COURT OF APPEALS
HAD DISREGARDED BY JUDICIAL FIAT THAT
THE RTC OF DAVAO CITY IN CRIMINAL CASE
No. 14,126 HAD IN FACT ALREADY ADJUDGED
CIVIL LIABILITY OF THE SAME CLAIM AS
HEREIN IN FAVOR OF COMPLAINANT
ASSOCIATED BANK AS AGAINST PETITIONER
GREGORIO LIMPIN, JR.
3. THE RESPONDENT COURT OF APPEALS
HAD IGNORED THE CLEAR ADMITTED FACT OF
RECORD THAT FORMAL APPEARANCE OF
COMPLAINANT BANKS COUNSEL HAD BEEN
ENTERED IN CRIMINAL CASE NO.
14,126.5cräläwvirtualibräry
With respect to the second assigned error, we find
no cogent reason to disturb the finding of the RTC
of Davao City (Branch 12) in its Order dated
December 16, 19886 that the decision promulgated
by the RTC of Davao City (Branch 15) in Criminal
Case No. 14,126 did not contain an award of civil
liability as it appears in the dispositive portion of the
latter courts Decision dated July 14,
1988.7cräläwvirtualibräry
Being interrelated, we shall discuss jointly the first
and third assigned errors.
At the outset, it should be stated that in the
Amended Information, dated April 1, 1987, filed in
Criminal Case No. 14,126, Lorenzo Sarmiento, Jr.
was dropped as an accused.8Hence, with respect
to Sarmiento Jr., Criminal Case No. 14,126 cannot,
in any way, bar the filing by private respondent of
the present civil action against him.
With respect to Limpin, Jr., petitioners claim that
private respondents right to institute separately the
civil action for the recovery of civil liability is already
barred on the ground that the same was not
expressly reserved in the criminal action earlier
filed against said respondent.
Pertinent to this issue is the then prevailing Rule
111 of the 1985 Rules on Criminal Procedure.
Section 1 thereof provides:
Section 1. Institution of criminal and civil actions.
When a criminal action is instituted, the civil action
for the recovery of civil liability is impliedly instituted
with the criminal action, unless the offended party
waives the civil action, reserves his right to institute
it separately, or institutes the civil action prior to the
criminal action.
Such civil action includes recovery of indemnity
under the Revised Penal Code, and damages
under Articles 32, 33, 34 and 2176 of the Civil Code
of the Philippines arising from the same act or
omission of the accused.
A waiver of any of the civil actions extinguishes the
others. The institution of, or the reservation of the
right to file, any of said civil actions separately
waives the others.
The reservation of the right to institute the separate
civil actions shall be made before the prosecution
starts to present its evidence and under
circumstances affording the offended party a
reasonable opportunity to make such reservation.
x x x.
Under the Revised Rules of Criminal Procedure,
effective December 1, 2000,9 the same Section of
the same Rule provides:
Section 1. Institution of criminal and civil actions. --
(a) When a criminal action is instituted, the civil
action for the recovery of civil liability arising from
the offense charged shall be deemed instituted with
the criminal action unless the offended party waives
the civil action, reserves the right to institute it
separately or institutes the civil action prior to the
criminal action.
The reservation of the right to institute separately
the civil action shall be made before the
prosecution starts presenting its evidence and
under circumstances affording the offended party a
reasonable opportunity to make such reservation.
x x x.
While a reading of the aforequoted provisions
shows that the offended party is required to make a
reservation of his right to institute a separate civil
action, jurisprudence instructs that such reservation
may not necessarily be express but may be
implied10 which may be inferred not only from the
acts of the offended party but also from acts other
than those of the latter.
Demonstrative of the principle of implied
reservation of a separate civil action are the cases
of Vintola vs. Insular Bank of Asia and America,
[11] Bernaldes, Sr. vs. Bohol Land Transp.,
Inc.12 and Jarantilla vs. Court of Appeals.[13]
In the Vintola case, Insular Bank of Asia and
America (IBAA, for brevity) charged spouses Tirso
and Loreta Vintola with Estafa. The spouses were
acquitted on the ground that the element of
misappropriation or conversion was inexistent.
Subsequently, IBAA filed a civil case to recover the
value of the goods allegedly misappropriated or
converted. The lower court initially dismissed the
complaint holding that Vintolas acquittal in the
criminal case barred the complaint, but on motion
for reconsideration filed by IBAA the lower court
ruled in favor of the latter. On appeal, the Vintolas
contended that the civil action is already barred by
the judgment in the criminal case because IBAA did
not reserve in the criminal case its right to enforce
separately the Vintolas civil liability. They claim that
by actively intervening in the prosecution of the
criminal case through a private prosecutor, IBAA
had chosen to file the civil action impliedly with the
criminal action, pursuant to Section 1, Rule 111 of
the 1985 Rules on Criminal Procedure. In ruling
that the Estafa case is not a bar to the institution of
a civil action for collection, this Court held that:
[i]t is inaccurate for the VINTOLAS to claim that the
judgment in the estafa case had declared that the
facts from which the civil action might arise, did not
exist, for it will be recalled that the decision of
acquittal expressly declared that the remedy of the
Bank is civil and not criminal in nature. This
amounts to a reservation of the civil action in IBAAs
favor for the Court would not have dwelt on a civil
liability that it had intended to extinguish by the
same decision.
In the Bernaldes case, plaintiffs spouses Nicasio
Bernaldes, Sr. and Perpetua Besas together with
their minor son, Jovito, filed a complaint for
damages against defendant Bohol Land
Transportation Co. for the death of Jovitos brother
Nicasio, Jr. and for serious physical injuries
obtained by Jovito when the bus in which they were
riding, fell off a deep precipice. Defendant bus
company moved to dismiss the complaint on the
ground that in the criminal case earlier filed against
its bus driver, plaintiffs intervened through their
counsel but did not reserve therein their right to file
a separate action for damages. The lower court
sustained defendants motion to dismiss. On
appeal, this Court held that the dismissal was
improper and ruled thus:
True, appellants, through private prosecutors, were
allowed to intervene whether properly or improperly
we do not decide here in the criminal action against
appellees driver, but if that amounted inferentially to
submitting in said case their claim for civil
indemnity, the claim could have been only against
the driver but not against appellee who was not a
party therein. As a matter of fact, however, inspite
of appellees statements to the contrary in its brief,
there is no showing in the record before Us that
appellants made of record their claim for damages
against the driver or his employer; much less does
it appear that they had attempted to prove such
damages. The failure of the court to make any
pronouncement in its decision concerning the
civil liability of the driver and/or of his employer
must therefore be due to the fact that the
criminal action did not involve at all any claim
for civil indemnity.[14] (Emphasis supplied)
Later, in Jarantilla, this Court ruled that the failure
of the trial court to make any pronouncement,
favorable or unfavorable, as to the civil liability of
the accused amounts to a reservation of the right to
have the civil liability litigated and determined in a
separate action, for nowhere in the Rules of Court
is it provided that if the court fails to determine the
civil liability, it becomes no longer
enforceable.15cräläwvirtualibräry
Nothing in the records at hand shows that private
respondent ever attempted to enforce its right to
recover civil liability during the prosecution of the
criminal action against petitioners.
Petitioners correctly raised in their third assigned
error that private respondents counsel made a
formal entry of appearance in Criminal Case No.
14,126.16 However, it is undisputed that in the early
proceedings of the criminal action, private
respondents counsel moved to withdraw his
appearance. The trial court, in its Order dated
September 4, 1987, granted such motion. 17 This
Court has previously held that the appearance of
the offended party in the criminal case through a
private prosecutor may not per se be considered
either as an implied election to have his claim for
damages determined in said proceedings or a
waiver of his right to have it determined
separately.18 He must actually or actively intervene
in the criminal proceedings as to leave no doubt
with respect to his intention to press a claim for
damages in the same action.19 In the present case,
it can be said with reasonable certainty that by
withdrawal of appearance of its counsel in the early
stage of the criminal proceedings, the private
respondent, indeed, had no intention of submitting
its claim for civil liability against petitioners in the
criminal action filed against the latter.
Furthermore, private respondents right to file a
separate complaint for a sum of money is governed
by the provisions of Article 31 of the Civil Code, to
wit:
Article 31. When the civil action is based on an
obligation not arising from the act or omission
complained of as a felony, such civil action may
proceed independently of the criminal proceedings
and regardless of the result of the latter.
In the present case, private respondents complaint
against petitioners was based on the failure of the
latter to comply with their obligation as spelled out
in the Trust Receipt executed by them.20 This
breach of obligation is separate and distinct from
any criminal liability for misuse and/or
misappropriation of goods or proceeds realized
from the sale of goods, documents or instruments
released under trust receipts, punishable under
Section 13 of the Trust Receipts Law (P.D. 115) in
relation to Article 315(1), (b) of the Revised Penal
Code. Being based on an obligation ex
contractu and not ex delicto, the civil action may
proceed independently of the criminal proceedings
instituted against petitioners regardless of the result
of the latter.21cräläwvirtualibräry
WHEREFORE, the petition is denied and the
assailed Decision and Resolution of the Court of
Appeals are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing,
and Callejo, Sr., JJ., concur.
G.R. No. L-46658             May 13, 1991
PHILIPPINE NATIONAL BANK, petitioner,  machinery and equipment for failure of TCC to
vs.
HON. GREGORIO G. PINEDA, in his capacity as
Presiding Judge of the Court of First Instance
of Rizal, Branch XXI and TAYABAS CEMENT
COMPANY, INC., respondents.
The Chief Legal Counsel for petitioner.
Ortille Law Office for private respondent.
FERNAN, C.J.:
In this petition for certiorari, petitioner Philippine
National Bank (PNB) seeks to annul and set aside
the orders dated March 4, 1977 and May 31, 1977
rendered in Civil Case No. 244221 of the Court of
First Instance of Rizal, Branch XXI, respectively
granting private respondent Tayabas Cement
Company, Inc.'s application for a writ of preliminary
injunction to enjoin the foreclosure sale of certain
properties in Quezon City and Negros Occidental
and denying petitioner's motion for reconsideration
thereof.
In 1963, Ignacio Arroyo, married to Lourdes Tuason
Arroyo (the Arroyo Spouses), obtained a loan of
P580,000.00 from petitioner bank to purchase 60%
of the subscribed capital stock, and thereby acquire
the controlling interest of private respondent
Tayabas Cement Company, Inc. (TCC).2 As
security for said loan, the spouses Arroyo executed
a real estate mortgage over a parcel of land
covered by Transfer Certificate of Title No. 55323
of the Register of Deeds of Quezon City known as
the La Vista property.
Thereafter, TCC filed with petitioner bank an
application and agreement for the establishment of
an eight (8) year deferred letter of credit (L/C) for
$7,000,000.00 in favor of Toyo Menka Kaisha, Ltd.
of Tokyo, Japan, to cover the importation of a
cement plant machinery and equipment.
Upon approval of said application and opening of
an L/C by PNB in favor of Toyo Menka Kaisha, Ltd.
for the account of TCC, the Arroyo spouses
executed the following documents to secure this
loan accommodation: Surety Agreement dated
August 5, 19643 and Covenant dated August 6,
1964.4
The imported cement plant machinery and
equipment arrived from Japan and were released to
TCC under a trust receipt agreement.
Subsequently, Toyo Menka Kaisha, Ltd. made the
corresponding drawings against the L/C as
scheduled. TCC, however, failed to remit and/or
pay the corresponding amount covered by the
drawings. Thus, on May 19, 1968, pursuant to the
trust receipt agreement, PNB notified TCC of its
intention to repossess, as it later did, the imported
settle its obligations under the L/C.5
In the meantime, the personal accounts of the
spouses Arroyo, which included another loan of
P160,000.00 secured by a real estate mortgage
over parcels of agricultural land known as Hacienda
Bacon located in Isabela, Negros Occidental, had
likewise become due. The spouses Arroyo having
failed to satisfy their obligations with PNB, the latter
decided to foreclose the real estate mortgages
executed by the spouses Arroyo in its favor.
On July 18, 1975, PNB filed with the City Sheriff of
Quezon City a petition for extra-judicial foreclosure
under Act 3138, as amended by Act 4118 and
under Presidential Decree No. 385 of the real
estate mortgage over the properties known as the
La Vista property covered by TCT No. 55323.6 PNB
likewise filed a similar petition with the City Sheriff
of Bacolod, Negros Occidental with respect to the
mortgaged properties located at Isabela, Negros
Occidental and covered by OCT No. RT 1615.
The foreclosure sale of the La Vista property was
scheduled on August 11, 1975. At the auction sale,
PNB was the highest bidder with a bid price of
P1,000,001.00. However, when said property was
about to be awarded to PNB, the representative of
the mortgagor-spouses objected and demanded
from the PNB the difference between the bid price
of P1,000,001.00 and the indebtedness of
P499,060.25 of the Arroyo spouses on their
personal account. It was the contention of the
spouses Arroyo's representative that the
foreclosure proceedings referred only to the
personal account of the mortgagor spouses without
reference to the account of TCC.
To remedy the situation, PNB filed a supplemental
petition on August 13, 1975 requesting the Sheriff's
Office to proceed with the sale of the subject real
properties to satisfy not only the amount of
P499,060.25 owed by the spouses Arroyos on their
personal account but also the amount of
P35,019,901.49 exclusive of interest, commission
charges and other expenses owed by said spouses
as sureties of TCC.7 Said petition was opposed by
the spouses Arroyo and the other bidder, Jose L.
Araneta.
On September 12, 1975, Acting Clerk of Court and
Ex-Officio Sheriff Diana L. Dungca issued a
resolution finding that the questions raised by the
parties required the reception and evaluation of
evidence, hence, proper for adjudication by the
courts of law. Since said questions were prejudicial
to the holding of the foreclosure sale, she ruled that
her "Office, therefore, cannot properly proceed with
the foreclosure sale unless and until there be a
court ruling on the aforementioned issues."8
Thus, in May, 1976, PNB filed with the Court of
First Instance of Quezon City, Branch V a petition
for mandamus9against said Diana Dungca in her
capacity as City Sheriff of Quezon City to compel
her to proceed with the foreclosure sale of the
mortgaged properties covered by TCT No. 55323 in
order to satisfy both the personal obligation of the
spouses Arroyo as well as their liabilities as
sureties of TCC.10
On September 6, 1976, the petition was granted
and Dungca was directed to proceed with the
foreclosure sale of the mortgaged properties
covered by TCT No. 55323 pursuant to Act No.
3135 and to issue the corresponding Sheriff's
Certificate of Sale.11
Before the decision could attain finality, TCC filed
on September 14, 1976 before the Court of First
Instance of Rizal, Pasig, Branch XXI a
complaint12 against PNB, Dungca, and the
Provincial Sheriff of Negros Occidental and Ex-
Officio Sheriff of Bacolod City seeking, inter alia,
the issuance of a writ of preliminary injunction to
restrain the foreclosure of the mortgages over the
La Vista property and Hacienda Bacon as well as a
declaration that its obligation with PNB had been
fully paid by reason of the latter's repossession of
the imported machinery and equipment.13
On October 5, 1976, the CFI, thru respondent
Judge Gregorio Pineda, issued a restraining
order14 and on March 4, 1977, granted a writ of
preliminary injunction.15 PNB's motion for
reconsideration was denied, hence this petition.
Petitioner PNB advances four grounds for the
setting aside of the writ of preliminary injunction,
namely: a) that it contravenes P.D. No. 385 which
prohibits the issuance of a restraining order against
a government financial institution in any action
taken by such institution in compliance with the
mandatory foreclosure provided in Section 1
thereof; b) that the writ countermands a final
decision of a co-equal and coordinate court; c) that
the writ seeks to prohibit the performance of acts
beyond the court's territorial jurisdiction; and, d)
private respondent TCC has not shown any clear
legal right or necessity to the relief of preliminary
injunction.
Private respondent TCC counters with the
argument that P.D. No. 385 does not apply to the
case at bar, firstly because no foreclosure
proceedings have been instituted against it by PNB
and secondly, because its account under the L/C
has been fully satisfied with the repossession of the
imported machinery and equipment by PNB.
The resolution of the instant controversy lies
primarily on the question of whether or not TCC's
liability has been extinguished by the repossession
of PNB of the imported cement plant machinery
and equipment.
We rule for the petitioner PNB. It must be
remembered that PNB took possession of the
imported cement plant machinery and equipment
pursuant to the trust receipt agreement executed by
and between PNB and TCC giving the former the
unqualified right to the possession and disposal of
all property shipped under the Letter of Credit until
such time as all the liabilities and obligations under
said letter had been discharged.16 In the case
of Vintola vs. Insular Bank of Asia and
America17 wherein the same argument was
advanced by the Vintolas as entrustees of imported
seashells under a trust receipt transaction, we said:
Further, the VINTOLAS take the position that their
obligation to IBAA has been extinguished inasmuch
as, through no fault of their own, they were unable
to dispose of the seashells, and that they have
relinquished possession thereof to the IBAA, as
owner of the goods, by depositing them with the
Court.
The foregoing submission overlooks the nature and
mercantile usage of the transaction involved. A
letter of credit-trust receipt arrangement is endowed
with its own distinctive features and characteristics.
Under that set-up, a bank extends a loan covered
by the Letter of Credit, with the trust receipt as a
security for the loan. In other words, the transaction
involves a loan feature represented by the letter of
credit, and a security feature which is in the
covering trust receipt.
x x x           x x x          x x x
A trust receipt, therefore, is a security agreement,
pursuant to which a bank acquires a "security
interest" in the goods.1âwphi1 It secures an
indebtedness and there can be no such thing as
security interest that secures no obligation. As
defined in our laws:
(h) "Security interest" means a property interest in
goods, documents or instruments to secure
performance of some obligations of the entrustee or
of some third persons to the entruster and includes
title, whether or not expressed to be absolute,
whenever such title is in substance taken or
retained for security only.
x x x           x x x          x x x
Contrary to the allegation of the VINTOLAS, IBAA
did not become the real owner of the goods. It was
merely the holder of a security title for the advances
it had made to the VINTOLAS. The goods the
VINTOLAS had purchased through IBAA financing
remain their own property and they hold it at their
own risk. The trust receipt arrangement did not
convert the IBAA into an investor; the latter
remained a lender and creditor.
x x x           x x x          x x x
Since the IBAA is not the factual owner of the
goods, the VINTOLAS cannot justifiably claim that
because they have surrendered the goods to IBAA
and subsequently deposited them in the custody of
the court, they are absolutely relieved of their
obligation to pay their loan because of their inability
to dispose of the goods. The fact that they were
unable to sell the seashells in question does not
affect IBAA's right to recover the advances it had
made under the Letter of Credit.
PNB's possession of the subject machinery and
equipment being precisely as a form of security for
the advances given to TCC under the Letter of
Credit, said possession by itself cannot be
considered payment of the loan secured thereby.
Payment would legally result only after PNB had
foreclosed on said securities, sold the same and
applied the proceeds thereof to TCC's loan
obligation. Mere possession does not amount to
foreclosure for foreclosure denotes the procedure
adopted by the mortgagee to terminate the rights of
the mortgagor on the property and includes the sale
itself.18
Neither can said repossession amount to dacion en
pago. Dation in payment takes place when property
is alienated to the creditor in satisfaction of a debt
in money and the same is governed by
sales.19 Dation in payment is the delivery and
transmission of ownership of a thing by the debtor
to the creditor as an accepted equivalent of the
performance of the obligation.20 As aforesaid, the
repossession of the machinery and equipment in
question was merely to secure the payment of
TCC's loan obligation and not for the purpose of
transferring ownership thereof to PNB in
satisfaction of said loan. Thus, no dacion en
pago was ever accomplished.
Proceeding from this finding, PNB has the right to
foreclose the mortgages executed by the spouses
Arroyo as sureties of TCC. A surety is considered
in law as being the same party as the debtor in
relation to whatever is adjudged touching the
obligation of the latter, and their liabilities are
interwoven as to be inseparable.21 As sureties, the
Arroyo spouses are primarily liable as original
promissors and are bound immediately to pay the
creditor the amount outstanding.22
Under Presidential Decree No. 385 which took
effect on January 31, 1974, government financial
institutions like herein petitioner PNB are required
to foreclose on the collaterals and/or securities for
any loan, credit or accommodation whenever the
arrearages on such account amount to at least
twenty percent (20%) of the total outstanding
obligations, including interests and charges, as
appearing in the books of account of the financial
institution concerned.23 It is further provided therein
that "no restraining order, temporary or permanent
injunction shall be issued by the court against any
government financial institution in any action taken
by such institution in compliance with the
mandatory foreclosure provided in Section 1
hereof, whether such restraining order, temporary
or permanent injunction is sought by the
borrower(s) or any third party or parties . . ."24
It is not disputed that the foreclosure proceedings
instituted by PNB against the Arroyo spouses were
in compliance with the mandate of P.D. 385. This
being the case, the respondent judge acted in
excess of his jurisdiction in issuing the injunction
specifically proscribed under said decree.
Another reason for striking down the writ of
preliminary injunction complained of is that it
interfered with the order of a co-equal and
coordinate court. Since Branch V of the CFI of Rizal
had already acquired jurisdiction over the question
of foreclosure of mortgage over the La Vista
property and rendered judgment in relation thereto,
then it retained jurisdiction to the exclusion of all
other coordinate courts over its judgment, including
all incidents relative to the control and conduct of its
ministerial officers, namely the sheriff thereof.25 The
foreclosure sale having been ordered by Branch V
of the CFI of Rizal, TCC should not have filed
injunction proceedings with Branch XXI of the same
CFI, but instead should have first sought relief by
proper motion and application from the former court
which had exclusive jurisdiction over the
foreclosure proceeding.26
This doctrine of non-interference is premised on the
principle that a judgment of a court of competent
jurisdiction may not be opened, modified or vacated
by any court of concurrent jurisdiction.27
Furthermore, we find the issuance of the
preliminary injunction directed against the
Provincial Sheriff of Negros Occidental and ex-
officio Sheriff of Bacolod City a jurisdictional faux
pas as the Courts of First Instance, now Regional
Trial Courts, can only enforce their writs of
injunction within their respective designated
territories.28
WHEREFORE, the instant petition is hereby
granted. The assailed orders are hereby set aside.
Costs against private respondent.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ.,
concur.
FIRST DIVISION
G. R. No. 135462 - December 7, 2001
SOUTH CITY HOMES, INC., FORTUNE MOTORS
(PHILS.), PALAWAN LUMBER
MANUFACTURING CORPORATION,Petitioners,  Corporation to BA Finance Corporation (Folder of
vs.
BA FINANCE CORPORATION, Respondent.
PARDO, J.:
The Case
The case is a petition to set aside the decision1 of
the Court of Appeals, the dispositive portion of
which reads:
"WHEREFORE, premises considered, the
appealed Decision (as amended by that Order of
July 22, 1992) of the lower court in Civil Case No.
21944 is hereby AFFIRMED with the
MODIFICATION that defendant-appellee South
City Homes, Inc. is hereby ordered to pay, jointly
and severally, with Fortune Motors Corporation,
Palawan Lumber Manufacturing Corporation and
Joseph L. G. Chua, the outstanding amounts due
under the six (6) drafts and trust receipts, with
interest thereon at the legal rate from the date of
filing of this case until said amounts shall have
been fully paid, as follows:
Date of Draft Amount Balance Due
July 26, 1983 P244,269.00 P198,659.52
July 27, 1983 967,765.50 324,767.41
July 28, 1983 1,138,941.00 1,138,941.00
August 2, 1983 244,269.00 244,269.00
August 5, 1983 275,079.00 275,079.60
August 8, 1983 475,046.10 475,046.10
and the attorney's fees and costs of suit.
"SO ORDERED."2
The Facts
The facts, as found by the Court of Appeals, are as
follows:
"The present controversy relates to the rights of an
assignee (financing company) of drafts and trust
receipts backed up by sureties, in the event of
default by the debtor (car dealer) to whom the
assignor creditor (car manufacturer) sold and
delivered motor vehicles for resale. A consistent
ruling on these cases is hereby reiterated: that a
surety may secure obligations incurred subsequent
to the execution of the surety contract.
"Prior to the transactions covered by the subject
drafts and trust receipts, defendant-appellant
Fortune Motors Corporation (Phils.) has been
availing of the credit facilities of plaintiff-appellant
BA Finance Corporation. On January 17, 1983,
Joseph L. G. Chua, President of Fortune Motors
Corporation, executed in favor of plaintiff-appellant
a Continuing Suretyship Agreement, in which he
"jointly and severally unconditionally" guaranteed
the "full, faithful and prompt payment and discharge
of any and all indebtedness" of Fortune Motors
Exhibits, pp. 21-22).
"On February 3, 1983, Palawan Lumber
Manufacturing Corporation represented by Joseph
L.G. Chua, George D. Tan, Edgar C. Rodrigueza
and Joselito C. Baltazar, executed in favor of
plaintiff-appellant a Continuing Suretyship
Agreement in which, said corporation "jointly and
severally unconditionally" guaranteed the "full,
faithful and prompt payment and discharge of any
and all indebtedness of Fortune Motors Corporation
to BA Finance Corporation (Folder of Exhibits, pp.
19-20). On the same date, South City Homes, Inc.
represented by Edgar C. Rodrigueza and Aurelio F.
Tablante, likewise executed a Continuing
Suretyship Agreement in which said corporation
"jointly and severally unconditionally" guaranteed
the "full, faithful and prompt payment and discharge
of any and all indebtedness" of Fortune Motors
Corporation to BA Finance Corporation (Folder of
Exhibits, pp. 17-18).
"Subsequently, Canlubang Automotive Resources
Corporation (CARCO) drew six (6) Drafts in its own
favor, payable thirty (30) days after sight, charged
to the account of Fortune Motors Corporation, as
follows:
Date of Draft Amount
July 26, 1983 P244,269.00
July 27, 1983 967,765.50
July 28, 1983 1,138,941.00
August 2, 1983 244,269.00
August 5, 1983 275,079.00
August 8, 1983 475,046.10
"(Folder of Exhibits, pp. 1, 4, 7, 8, 11 and 14).
"Fortune Motors Corporation thereafter executed
trust receipts covering the motor vehicles delivered
to it by CARCO under which it agreed to remit to
the Entruster (CARCO) the proceeds of any sale
and immediately surrender the remaining unsold
vehicles (Folder of Exhibits, pp. 2, 5, 7-A, 9, 12 and
15). The drafts and trust receipts were assigned to
plaintiff-appellant, under Deeds of Assignment
executed by CARCO (Folder of Exhibits, pp. 3, 6,
7-B, 10, 13 and 16).
"Upon failure of the defendant-appellant Fortune
Motors Corporation to pay the amounts due under
the drafts and to remit the proceeds of motor
vehicles sold or to return those remaining unsold in
accordance with the terms of the trust receipt
agreements, BA Finance Corporation sent demand
letter to Edgar C. Rodrigueza, South City Homes,
Inc., Aurelio Tablante, Palawan Lumber
Manufacturing Corporation, Joseph L. G. Chua,
George D. Tan and Joselito C. Baltazar (Folder of
Exhibits, pp. 29-37). Since the defendants-
appellants failed to settle their outstanding account
with plaintiff-appellant, the latter filed on December
22, 1983 a complaint for a sum of money with
prayer for preliminary attachment, with the Regional
Trial Court of Manila, Branch 1, which was
docketed as Civil Case No. 83-21944 (Record, pp.
1-12). Plaintiff-appellant filed a surety bond in the
amount of P3,391,546.56 and accordingly, Judge
Rosalio C. Segundo ordered the issuance of a writ
of preliminary attachment on January 3, 1984
(Record, pp. 37-47). Defendants Fortune Motors
Corporation, South City Homes, Inc., Edgar C.
Rodrigueza, Aurelio F. Tablante, Palawan Lumber
Manufacturing Corporation, Joseph L. G. Chua,
George D. Tan and Joselito C. Baltazar filed a
Motion to Discharge Attachment, which was
opposed by plaintiff-appellant (Record, pp. 49-56).
In an Order dated January 11, 1984, Judge
Segundo dissolved the writ of attachment except as
against defendant Fortune Motors Corporation and
set the said incident for hearing (Record, p. 57). On
January 19, 1984, the defendants filed a Motion to
Dismiss. Therein, they alleged that conventional
subrogation effected a novation without the consent
of the debtor (Fortune Motors Corporation) and
thereby extinguished the latter's liability; that
pursuant to the trust receipt transaction, it was
premature under P. D. No. 115 to immediately file a
complaint for a sum of money as the remedy of the
entruster is an action for specific performance; that
the suretyship agreements are null and void for
having been entered into without an existing
principal obligation; and that being such sureties
does not make them solidary debtors (Record, pp.
58-64).
"After due hearing, the court denied the motion to
discharge attachment with respect to defendant
Fortune Motors Corporation as well as the motion
to dismiss by the defendants (Record, pp. 68 and
87). In their Answer, defendants stressed that their
obligations to the creditor (CARCO) was
extinguished by the assignment of the drafts and
trust receipts to plaintiff-appellant without their
knowledge and consent, and pursuant to legal
provision on conventional subrogation a novation
was effected, thereby extinguishing the liability of
the sureties; that plaintiff-appellant failed to
immediately demand the return of the goods under
the trust receipt agreements or exercise the
courses of action by the entruster as provided for
under P. D. No. 115; and that at the time the
suretyship agreements were entered into, there
were no principal obligations, thus rendering them
null and void. A counterclaim for the award of
actual, moral and exemplary damages was prayed
for by defendants (Record, pp. 91-110).
"During the pre-trial, efforts to reach a compromise
was not successful, and in view of the retirement of
Judge Rosalio C. Segundo of RTC Manila, Branch
1, the case was-re-raffled off to Branch XXXIII,
presided over by Judge Felix V. Barbers (Record,
pp. 155-160).
"Fortune Motors Corporation filed a motion to lift the
writ of attachment covering three (3) vehicles
described in the Third-Party Claim filed with the
Office of Deputy Sheriff Jorge C. Victorino (RTC,
Branch 1) by Fortune Equipment, Inc. which was
opposed by plaintiff-appellant (Record, pp. 173-
181). On June 15, 1984, Deputy Sheriff Jorge C.
Victorino issued a "Notice of Levy Upon Personal
Properties Pursuant to Order of Attachment" which
was duly served on defendant Fortune Motors
Corporation (Record, pp. 191-199). In an Order
dated April 28, 1986, the court a quo denied the
motion to lift the writ of attachment on three (3)
vehicles described in the Third-Party Claim filed by
Fortune Equipment Inc. (Record, p. 207). On
motion of their respective counsel, the trial court
granted the parties time to sit down and appraise
the machineries and spare parts owned by
defendant Fortune Motors Corporation which are
now in the possession of plaintiff corporation by
virtue of the attachment. A series of conferences
was allowed by the court, as means toward
possible compromise agreement. In an Order dated
June 2, 1987, the case was returned to Branch I,
now presided over by Judge Rebecca G. Salvador
(Record, p. 237). The pre-trial period was
terminated and the case was set for trial on the
merits (Record, p. 259).
"Acting on the motion to sell levied properties filed
by defendant George D. Tan, the trial court ordered
the public sale of the attached properties (Record,
p. 406). The court likewise allowed the complaint-
in-intervention filed by Fortune Equipment Inc. and
South Fortune Motors Corporation who claimed
ownership of four (4) vehicles earlier seized and
attached (Record, p. 471-475). Plaintiff corporation
admitted the allegations contained in the complaint-
in-intervention only with respect to one truck so
attached but denied the rest of intervenors'
allegations (Record, pp. 479-482). Thereafter, the
parties submitted their respective pre-trial briefs on
the complaint-in-intervention, and after the
submission of evidence thereon, the case was
submitted for decision (Record, pp. 573-577).
"On November 25, 1991, the lower court rendered
its judgment, the dispositive portion of which reads
as follows:
"WHEREFORE, judgment is hereby rendered:
"1. Ordering defendants Fortune Motors, Palawan
Lumber Manufacturing Corporation and Joseph
Chua, jointly and severally to pay the plaintiff on the
July 27, 1983 Draft, the sum of P324,767.41 with
the interest thereon at the legal rate from the date
of filing of this case, December 21, 1983 until the
amount shall have been fully paid;
"2. Ordering defendants Fortune Motors, Palawan
Manufacturing Corporation and Joseph Chua jointly
and severally to pay to the plaintiff on the July 26,
1983 Draft, the sum of P198,659.52 with interest
thereon at the legal rate from the date of filing of
this case, until the amount shall have been fully
paid;
"3. Ordering defendant Fortune Motors, Palawan
Manufacturing Corporation and Joseph Chua jointly
and severally to pay to the plaintiff on the July 28,
1983 Draft the sum of P1,138,941.00 with interest
thereon at the legal rate from the date of filing of
this case, until the amount shall have been fully
paid;
"4. Ordering defendants Fortune Motors, Palawan
Lumber Manufacturing Corporation and Joseph
Chua jointly and severally to pay to the plaintiff on
the August 2, 1983 Draft, the sum of P244,269.00
with interest thereon at the legal rate from the date
of filing of this case, until the amount shall have
been fully paid;
"5. Ordering defendants Fortune Motors, Palawan
Lumber Manufacturing Corporation and Joseph
Chua jointly and severally to pay to the plaintiff on
the August 5, 1983 Draft the sum of P275,079.60
with interest thereon at the legal rate from the date
of the filing of this case, until the amount shall have
been fully paid;
"6. Ordering defendants Fortune Motors, Palawan
Lumber Manufacturing Corporation and Joseph
Chua jointly and severally to pay to the plaintiff on
the August 8, 1983 Draft the sum of P475,046.10
with interest thereon at legal rate from the date of
the filing of this case, until the amount shall been
fully paid;
"7. Ordering defendant Fortune Motors, Palawan
Lumber Manufacturing Corporation and Joseph
Chua jointly and severally to pay the sum of
P300,000.00 as attorney's fees and the costs of this
suit;
"8. Dismissing plaintiff's complaint against South
City Homes, Aurelio Tablante, Joselito Baltazar,
George Tan and Edgar Rodrigueza and the latter's
counterclaim for lack of basis;
"9. Ordering Deputy Sheriff Jorge Victorino to return
to Intervenor Fortune Equipment the Mitsubishi
Truck Canter with Motor No. 310913 and Chassis
No. 513234;
"10. Dismissing the complaint-in-intervention in so
far as the three other vehicles mentioned in the
complaint-in-intervention are concerned for lack of
cause of action;
"11. Dismissing the complaint-in-intervention
against Fortune Motor for lack of basis; and
"12. Ordering the parties-in-intervention to bear
their respective damages, attorneys fees and the
costs of the suit.
"Upon execution, the sheriff may cause the
judgment to be satisfied out of the properties
attached with the exception of one (1) unit
Mitsubishi Truck Canter with Motor No. 310913 and
Chassis No. 513234, if they be sufficient for that
purpose. The officer shall make a return in writing
to the court of his proceedings. Whenever the
judgment shall have been paid, the officer, upon
reasonable demand must return to the judgment
debtor the attached properties remaining in his
hand, and any of the proceeds of the properties not
applied to the judgment.
"SO ORDERED.
"On two (2) separate motions for reconsideration,
one filed by plaintiffs-intervenors dated December
18, 1991 and the other by plaintiff dated December
26, 1991, the trial court issued an Order dated July
22, 1992 amending its Decision dated November
25, 1991. Specifically, said Order amended
paragraphs 9 and 10 thereof and deleted the last
paragraph of the said Decision.
"Paragraphs 9 and 10 now read:
"9. Ordering Deputy Sheriff Jorge C. Victorino to
return to Intervenor Fortune Equipment, Inc. the
Mitsubishi Truck Canter with Motor No. 310913 and
Chassis No. 513234; Mitsubishi Truck Canter with
Motor No. 4D30-313012 and Chassis No. 513696,
and Fuso Truck with Motor No. 006769 and
Chassis No. 20756, and to Intervenor South
Fortune Motors Corporation the Cimaron Jeepney
with Plate No. NET-849;
"10. Ordering the plaintiff, in the event the motor
vehicles could no longer be returned to pay the
estimated value thereof i.e., P750,000.00 for the
three trucks, and P5,000.00 for the Cimaron
Jeepney, to the plaintiffs-intervenors.
"x x x" (Records, pp. 664-665)
"Plaintiffs BA Finance Corporation, defendants
Fortune Motors Corp. (Phils.) and Palawan Lumber
Manufacturing Corporation, and intervenors
Fortune Equipment and South Fortune Motors,
interposed the present appeal and filed their
respective Briefs."3
On September 8, 1998, the Court of Appeals
promulgated a decision, the dispositive portion of
which is quoted in the opening paragraph of this
decision.
Hence, this appeal.4
The Issues
The issues presented are: (1) whether the
suretyship agreement is valid; (2) whether there
was a novation of the obligation so as to extinguish
the liability of the sureties; and (3) whether
respondent BAFC has a valid cause of action for a
sum of money following the drafts and trust receipts
transactions.5
The Court's Ruling
On the first issue, petitioners assert that the
suretyship agreement they signed is void because
there was no principal obligation at the time of
signing as the principal obligation was signed six
(6) months later. The Civil Code, however, allows a
suretyship agreement to secure future loans even if
the amount is not yet known.
Article 2053 of the Civil Code provides that:
"Art. 2053. A guaranty may also be given as
security for future debts, the amount of which is not
yet known. x x x"
In Fortune Motors (Phils.) Corporation v. Court of
Appeals,6 we held:
"To fund their acquisition of new vehicles (which
are later retailed or resold to the general public),
car dealers normally enter into wholesale
automotive financing schemes whereby vehicles
are delivered by the manufacturer or assembler on
the strength of trust receipts or drafts executed by
the car dealers, which are backed up by sureties.
These trust receipts or drafts are then assigned
and/or discounted by the manufacturer to/with
financing companies, which assume payment of the
vehicles but with the corresponding right to collect
such payment from the car dealers and/or the
sureties. In this manner, car dealers are able to
secure delivery of their stock-in-trade without
having to pay cash therefor; manufacturers get paid
without any receivables/collection problems; and
financing companies earn their margins with the
assurance of payment not only from the dealers but
also from the sureties. When the vehicles are
eventually resold, the car dealers are supposed to
pay the financing companies and the business
goes merrily on. However, in the event the car
dealer defaults in paying the financing company,
may the surety escape liability on the legal ground
that the obligations were incurred subsequent to
the execution of the surety contract?
"x x x Of course, a surety is not bound under any
particular principal obligation until that principal
obligation is born. But there is no theoretical or
doctrinal difficulty inherent in saying that the
suretyship agreement itself is valid and binding
even before the principal obligation intended to be
secured thereby is born, any more than there would
be in saying that obligations which are subject to a
condition precedent are valid and binding before
the occurrence of the condition precedent.
"Comprehensive or continuing surety agreements
are in fact quite commonplace in present day
financial and commercial practice. A bank or
financing company which anticipates entering into a
series of credit transactions with a particular
company, commonly requires the projected
principal debtor to execute a continuing surety
agreement along with its sureties. By executing
such an agreement, the principal places itself in a
position to enter into the projected series of
transactions with its creditor; with such suretyship
agreement, there would be no need to execute a
separate surety contract or bond for each financing
or credit accommodation extended to the principal
debtor."
Petitioners next posit (second issue) that a
novation, as a result of the assignment of the drafts
and trust receipts by the creditor (CARCO) in favor
of respondent BAFC without the consent of the
principal debtor (Fortune Motors), extinguished
their liabilities.
An assignment of credit is an agreement by virtue
of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en
pago, exchange or donation, and without the
consent of the debtor, transfers his credit and
accessory rights to another, known as the
assignee, who acquires the power to enforce it to
the same extent as the assignor could enforce it
against the debtor.7 As a consequence, the third
party steps into the shoes of the original creditor as
subrogee of the latter. Petitioners' obligations were
not extinguished. Thus:
"x x x Moreover, in assignment, the debtor's
consent is not essential for the validity of the
assignment (Art. 1624 in relation to Art. 1475, Civil
Code), his knowledge thereof affecting only the
validity of the payment he might make (Article
1626, Civil Code).
"Article 1626 also shows that payment of an
obligation which is already existing does not
depend on the consent of the debtor. It, in effect,
mandates that such payment of the existing
obligation shall already be made to the new creditor
from the time the debtor acquires knowledge of the
assignment of the obligation.
"The law is clear that the debtor had the obligation
to pay and should have paid from the date of notice
whether or not he consented.
"We have ruled in Sison & Sison vs. Yap Tico and
Avanceña, 37 Phil. 587 [1918] that definitely,
consent is not necessary in order that assignment
may fully produce legal effects. Hence, the duty to
pay does not depend on the consent of the debtor.
Otherwise, all creditors would be prevented from
assigning their credits because of the possibility of
the debtor's refusal to give consent.
"What the law requires in an assignment of credit is
not the consent of the debtor but merely notice to
him. A creditor may, therefore, validly assign his
credit and its accessories without the debtor's
consent (National Investment and Development Co.
v. De Los Angeles, 40 SCRA 489 [1971]. The
purpose of the notice is only to inform that debtor
from the date of the assignment, payment should
be made to the assignee and not to the original
creditor."8
Petitioners finally posit (third issue) that as an
entruster, respondent BAFC must first demand the
return of the unsold vehicles from Fortune Motors
Corporation, pursuant to the terms of the trust
receipts. Having failed to do so, petitioners had no
cause of action whatsoever against Fortune Motors
Corporation and the action for collection of sum of
money was, therefore, premature. A trust receipt is
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.9 In the event of default by
the entrustee on his obligations under the trust
receipt agreement, it is not absolutely necessary
that the entruster cancel the trust and take
possession of the goods to be able to enforce his
rights thereunder. We ruled:
"x x x Significantly, the law uses the word "may" in
granting to the entruster the right to cancel the trust
and take possession of the goods. Consequently,
petitioner has the discretion to avail of such right or
seek any alternative action, such as a third party
claim or a separate civil action which it deems best
to protect its right, at any time upon default or
failure of the entrustee to comply with any of the
terms and conditions of the trust agreement."10
The Judgment
G.R. No. 159622             July 30, 2004
LANDL & COMPANY (PHIL.) INC., PERCIVAL G.
LLABAN and MANUEL P. LUCENTE, petitioners,  execution of a Trust Receipt in an amount
vs.
METROPOLITAN BANK & TRUST
COMPANY, respondent.
DECISION
YNARES-SANTIAGO, J.:
At issue in this petition for review on certiorari is
whether or not, in a trust receipt transaction, an
entruster which had taken actual and juridical
possession of the goods covered by the trust
receipt may subsequently avail of the right to
demand from the entrustee the deficiency of the
amount covered by the trust receipt.
As correctly appreciated by the Court of Appeals,
the undisputed facts of this case are as follows:
Respondent Metropolitan Bank and Trust Company
(Metrobank) filed a complaint for sum of money
against Landl and Company (Phil.) Inc. (Landl) and
its directors, Percival G. Llaban and Manuel P.
Lucente before the Regional Trial Court of Cebu
City, Branch 19, docketed as Civil Case No. CEB-
4895.
Respondent alleged that petitioner corporation is
engaged in the business of selling imported welding
rods and alloys. On June 17, 1983, it opened
Commercial Letter of Credit No. 4998 with
respondent bank, in the amount of US$19,606.77,
which was equivalent to P218,733.92 in Philippine
currency at the time the transaction was
consummated. The letter of credit was opened to
purchase various welding rods and electrodes from
Perma Alloys, Inc., New York, U.S.A., as evidenced
by a Pro-Forma Invoice dated March 10, 1983.
Petitioner corporation put up a marginal deposit of
P50,414.00 from the proceeds of a separate clean
loan.
As an additional security, and as a condition for the
approval of petitioner corporation's application for
the opening of the commercial letter of credit,
respondent bank required petitioners Percival G.
Llaban and Manuel P. Lucente to execute a
Continuing Suretyship Agreement to the extent of
P400,000.00, excluding interest, in favor of
respondent bank. Petitioner Lucente also executed
a Deed of Assignment in the amount of P35,000.00
in favor of respondent bank to cover the amount of
petitioner corporation's obligation to the bank. Upon
compliance with these requisites, respondent bank
opened an irrevocable letter of credit for the
petitioner corporation.
To secure the indebtedness of petitioner
corporation, respondent bank required the
equivalent to the letter of credit, on the condition
that petitioner corporation would hold the goods in
trust for respondent bank, with the right to sell the
goods and the obligation to turn over to respondent
bank the proceeds of the sale, if any. If the goods
remained unsold, petitioner corporation had the
further obligation to return them to respondent bank
on or before November 23, 1983.
Upon arrival of the goods in the Philippines,
petitioner corporation took possession and custody
thereof.
On November 23, 1983, the maturity date of the
trust receipt, petitioner corporation defaulted in the
payment of its obligation to respondent bank and
failed to turn over the goods to the latter. On July
24, 1984, respondent bank demanded that
petitioners, as entrustees, turn over the goods
subject of the trust receipt. On September 24,
1984, petitioners turned over the subject goods to
the respondent bank.
On July 31, 1985, in the presence of
representatives of the petitioners and respondent
bank, the goods were sold at public auction. The
goods were sold for P30,000.00 to respondent
bank as the highest bidder.
The proceeds of the auction sale were insufficient
to completely satisfy petitioners' outstanding
obligation to respondent bank, notwithstanding the
application of the time deposit account of petitioner
Lucente. Accordingly, respondent bank demanded
that petitioners pay the remaining balance of their
obligation. After petitioners failed to do so,
respondent bank instituted the instant case to
collect the said deficiency.
On March 31, 1997, after trial on the merits, the trial
court rendered a decision, the dispositive portion of
which reads:
WHEREFORE, foregoing premises considered,
Judgment is hereby rendered in favor of the plaintiff
and against the defendant by (1) ordering the
defendant to pay jointly and severally to the plaintiff
the sum of P292,172.23 representing the
defendant's obligation, as of April 17, 1986; (2) to
pay the interest at the rate of 19% per annum to be
reckoned from April 18, 1986 until [the] obligation is
fully paid; (3) to pay service charge at the rate of
2% per annum starting April 18, 1986; (4) to pay
the sum equivalent to 10% per annum of the total
amount due collectible by way of Attorney's Fees;
(5) to pay Litigation Expenses of P3,000.00 and to
pay the cost of the suit; and (6) to pay penalty
charge of 12% per annum.
SO ORDERED.1
Petitioners appealed to the Court of Appeals,
raising the issues of: (1) whether or not respondent
bank has the right to recover any deficiency after it
has retained possession of and subsequently
effected a public auction sale of the goods covered
by the trust receipt; (2) whether or not respondent
bank is entitled to the amount of P3,000.00 as and
for litigation expenses and costs of the suit; and (3)
whether or not respondent bank is entitled to the
award of attorney's fees.
On February 13, 2003, the Court of Appeals
rendered a decision affirming in toto the decision of
the trial court.2
Hence, this petition for review on the following
assignment of errors:
I.
THE HONORABLE COURT OF APPEALS
GROSSLY ERRED IN AFFIRMING THE TRIAL
COURT'S RULING THAT RESPONDENT HAD
THE RIGHT TO CLAIM THE DEFICIENCY FROM
PETITIONERS NOTWITHSTANDING THE FACT
THAT THE GOODS COVERED BY THE TRUST
RECEIPT WERE FULLY TURNED OVER TO
RESPONDENT.
II.
THE HONORABLE COURT OF APPEALS
GROSSLY ERRED IN AFFIRMING THE TRIAL
COURT'S PATENTLY ERRONEOUS AWARD OF
PRINCIPAL OBLIGATION, INTEREST,
ATTORNEY'S FEES, AND PENALTY AGAINST
THE PETITIONERS.3
The instant petition is partly meritorious.
The resolution of the first assigned error hinges on
the proper interpretation of Section 7 of Presidential
Decree No. 115, or the Trust Receipts Law, which
reads:
Sec. 7. Rights of the entruster. - The entruster shall
be entitled to the proceeds from the sale of the
goods, documents or instruments released under a
trust receipt to the entrustee to the extent of the
amount owing to the entruster or as appears in the
trust receipt, or to the return of the goods,
documents or instruments in case of non-sale, and
to the enforcement of all other rights conferred on
him in the trust receipt provided such are not
contrary to the provisions of this Decree.
The entruster may cancel the trust and take
possession of the goods, documents or instruments
subject of the trust or of the proceeds realized
therefrom at any time upon default or failure of the
entrustee to comply with any of the terms and
conditions of the trust receipt or any other
agreement between the entruster and the
entrustee, and the entruster in possession of the
goods, documents or instruments may, on or after
default, give notice to the entrustee of the intention
to sell, and may, not less than five days after
serving or sending of such notice, sell the goods,
documents or instruments at public or private sale,
and the entruster may, at a public sale, become a
purchaser. The proceeds of any such sale, whether
public or private, shall be applied (a) to the
payment of the expenses thereof; (b) to the
payment of the expenses of re-taking, keeping and
storing the goods, documents or instruments; (c) to
the satisfaction of the entrustee's indebtedness to
the entruster. The entrustee shall receive any
surplus but shall be liable to the entruster for any
deficiency. Notice of sale shall be deemed
sufficiently given if in writing, and either personally
served on the entrustee or sent by post-paid
ordinary mail to the entrustee's last known business
address.
There is no question that petitioners failed to pay
their outstanding obligation to respondent bank.
They contend, however, that when the entrustee
fails to settle his principal loan, the entruster may
choose between two separate and alternative
remedies: (1) the return of the goods covered by
the trust receipt, in which case, the entruster now
acquires the ownership of the goods which the
entrustee failed to sell; or (2) cancel the trust and
take possession of the goods, for the purpose of
selling the same at a private sale or at public
auction. Petitioners assert that, under this second
remedy, the entruster does not acquire ownership
of the goods, in which case he is entitled to the
deficiency. Petitioners argue that these two
remedies are so distinct that the availment of one
necessarily bars the availment of the other. Thus,
when respondent bank availed of the remedy of
demanding the return of the goods, the actual
return of all the unsold goods completely
extinguished petitioners' liability.4
Petitioners' argument is bereft of merit.
A trust receipt is inextricably linked with the primary
agreement between the parties. Time and again,
we have emphasized that a trust receipt agreement
is merely a collateral agreement, the purpose of
which is to serve as security for a loan. Thus,
in Abad v. Court of Appeals,5 we ruled:
A letter of credit-trust receipt arrangement is
endowed with its own distinctive features and
characteristics. Under that set-up, a bank extends a
loan covered by the letter of credit, with the trust
receipt as security for the loan. In other words, the
transaction involves a loan feature represented by
the letter of credit, and a security feature which is in
the covering trust receipt. x x x.
A trust receipt, therefore, is a security agreement,
pursuant to which a bank acquires a "security
interest" in the goods. It secures an indebtedness
and there can be no such thing as security interest
that secures no obligation.6
The Trust Receipts Law was enacted to safeguard
commercial transactions and to offer an additional
layer of security to the lending bank. Trust receipts
are indispensable contracts in international and
domestic business transactions. The prevalent use
of trust receipts, the danger of their misuse and/or
misappropriation of the goods or proceeds realized
from the sale of goods, documents or instruments
held in trust for entruster banks, and the need for
regulation of trust receipt transactions to safeguard
the rights and enforce the obligations of the parties
involved are the main thrusts of the Trust Receipts
Law.7
The second paragraph of Section 7 provides a
statutory remedy available to an entruster in the
event of default or failure of the entrustee to comply
with any of the terms and conditions of the trust
receipt or any other agreement between the
entruster and the entrustee. More specifically, the
entruster "may cancel the trust and take possession
of the goods, documents or instruments subject of
the trust or of the proceeds realized therefrom at
any time". The law further provides that "the
entruster in possession of the goods, documents or
instruments may, on or after default, give notice to
the entrustee of the intention to sell, and may, not
less than five days after serving or sending of such
notice, sell the goods, documents or instruments at
public or private sale, and the entruster may, at a
public sale, become a purchaser. The proceeds of
any such sale, whether public or private, shall be
applied (a) to the payment of the expenses thereof;
(b) to the payment of the expenses of re-taking,
keeping and storing the goods, documents or
instruments; (c) to the satisfaction of the entrustee's
indebtedness to the entruster. The entrustee shall
receive any surplus but shall be liable to the
entruster for any deficiency."
The trust receipt between respondent bank and
petitioner corporation contains the following
relevant clauses:
The BANK/ENTRUSTER may, at any time, and
only at its option, cancel this trust and take
possession of the goods/documents/instruments
subject hereof or of the proceeds realized
therefrom wherever they may then be found, upon
default or failure of the ENTRUSTEE to comply with
any of the terms and conditions of this Trust
Receipt or of any other agreement between the
BANK/ENTRUSTER and the ENTRUSTEE; and
the BANK/ENTRUSTER having taken repossession
of the goods/documents/instruments object hereof
may, on or after default, give at least five (5) days'
previous notice to the ENTRUSTEE of its intention
to sell the goods/documents/instruments at public
or private sale, at which public sale, it may become
a purchaser; Provided, that the proceeds of any
such sale, whether public or private, shall be
applied: (a) to the payment of the expenses thereof;
(b) to the payment of the expenses of retaking,
keeping and storing the
goods/documents/instruments; (c) to the
satisfaction of all of the ENTRUSTEE's
indebtedness to the BANK/ENTRUSTER; and
Provided, further, that the ENTRUSTEE shall
receive any surplus thereof but shall, in any case,
be liable to the BANK/ENTRUSTER for any
deficiency. x x x
No act or omission on the part of the
BANK/ENTRUSTER shall be deemed and
considered a waiver of any of its rights hereunder
or under any related letters of credit, drafts or other
documents unless such waiver is expressly made
in writing over the signature of the
BANK/ENTRUSTER.8
The afore-cited stipulations in the trust receipt are a
near-exact reproduction of the second paragraph of
Section 7 of the Trust Receipts Law. The right of
repossession and subsequent sale at public auction
which were availed of by respondent bank were
rights available upon default, and which were
conferred by statute and reinforced by the contract
between the parties.
The initial repossession by the bank of the goods
subject of the trust receipt did not result in the full
satisfaction of the petitioners' loan obligation.
Petitioners are apparently laboring under the
mistaken impression that the full turn-over of the
goods suffices to divest them of their obligation to
repay the principal amount of their loan obligation.
This is definitely not the case. In Philippine National
Bank v. Hon. Gregorio G. Pineda and Tayabas
Cement Company, Inc.,9 we had occasion to rule:
PNB's possession of the subject machinery and
equipment being precisely as a form of security for
the advances given to TCC under the Letter of
Credit, said possession by itself cannot be
considered payment of the loan secured thereby.
Payment would legally result only after PNB had
foreclosed on said securities, sold the same and
applied the proceeds thereof to TCC's loan
obligation. Mere possession does not amount to
foreclosure for foreclosure denotes the procedure
adopted by the mortgagee to terminate the rights of
the mortgagor on the property and includes the sale
itself.
Neither can said repossession amount to dacion en
pago. Dation in payment takes place when property
is alienated to the creditor in satisfaction of a debt
in money and the same is governed by sales.
Dation in payment is the delivery and transmission
of ownership of a thing by the debtor to the creditor
as an accepted equivalent of the performance of
the obligation. As aforesaid, the repossession of
the machinery and equipment in question was
merely to secure the payment of TCC's loan
obligation and not for the purpose of transferring
ownership thereof to PNB in satisfaction of said
loan. Thus, no dacion en pago was ever
accomplished. (Citations omitted, underscoring
supplied)10
Indeed, in the 1987 case of Vintola v. Insular Bank
of Asia and America,11 we struck down the position
of the petitioner-spouses that their obligation to the
entruster bank had been extinguished when they
relinquished possession of the goods in question.
Thus:
A trust receipt… is a security agreement, pursuant
to which a bank acquires a "security interest" in the
goods. It secures an indebtedness and there can
be no such thing as security interest that secures
no obligation. As defined in our laws:
(h) Security Interest means a property interest in
goods, documents or instruments to secure
performance of some obligations of the entrustee or
of some third persons to the entruster and includes
title, whether or not expressed to be absolute,
whenever such title is in substance taken or
retained for security only.
xxx      xxx      xxx
Contrary to the allegations of the VINTOLAS, IBAA
did not become the real owner of the goods. It was
merely the holder of a security title for the advances
it had made to the VINTOLAS. The goods the
VINTOLAS had purchased through IBAA financing
remain their own property and they hold it at their
own risk. The trust receipt arrangement did not
convert the IBAA into an investor; the latter
remained a lender and creditor.
"x x x for the bank has previously extended a loan
which the L/C represents to the importer, and by
that loan, the importer should be the real owner of
the goods. If under the trust receipt, the bank is
made to appear as the owner, it was but an artificial
expedient, more of a legal fiction than fact, for if it
were so, it could dispose of the goods in any
manner it wants, which it cannot do, just to give
consistency with the purpose of the trust receipt of
giving a stronger security for the loan obtained by
the importer. To consider the bank as the true
owner from the inception of the transaction would
be to disregard the loan feature thereof. x x x"
Since the IBAA is not the factual owner of the
goods, the VINTOLAS cannot justifiably claim that
because they have surrendered the goods to IBAA
and subsequently deposited them in the custody of
the court, they are absolutely relieved of their
obligation to pay their loan because of their inability
to dispose of the goods. The fact that they were
unable to sell the seashells in question does not
affect IBAA's right to recover the advances it had
made under the Letter of Credit. (Citations
omitted.)12
Respondent bank's repossession of the properties
and subsequent sale of the goods were completely
in accordance with its statutory and contractual
rights upon default of petitioner corporation.
The second paragraph of Section 7 expressly
provides that the entrustee shall be liable to the
entruster for any deficiency after the proceeds of
the sale have been applied to the payment of the
expenses of the sale, the payment of the expenses
of re-taking, keeping and storing the goods,
documents or instruments, and the satisfaction of
the entrustee's indebtedness to the entruster.
In the case at bar, the proceeds of the auction sale
were insufficient to satisfy entirely petitioner
corporation's indebtedness to the respondent bank.
Respondent bank was thus well within its rights to
institute the instant case to collect the deficiency.
We find, however, that there has been an error in
the computation of the total amount of petitioners'
indebtedness to respondent bank.
Although respondent bank contends that the error
of computation is a question of fact which is beyond
the power of this Court to review,13 the total amount
of petitioners' indebtedness in this case is not a
question of fact. Rather, it is a question of law, i.e.,
the application of legal principles for the
computation of the amount owed to respondent
bank, and is thus a matter properly brought for our
determination.
The first issue involves the amount of indebtedness
prior to the imposition of interest and penalty
charges. The initial amount of the trust receipt of
P218,733.92, was reduced to P192,265.92 as of
June 14, 1984, as per respondent's Statement of
Past Due Trust Receipt dated December 1,
1993.14 This amount presumably includes the
application of P35,000.00, the amount of petitioner
Lucente's Deed of Assignment, which amount was
applied by respondent bank to petitioners'
obligation. No showing was made, however, that
the P30,000.00 proceeds of the auction sale on
July 31, 1985 was ever applied to the loan. Neither
was the amount of P50,414.00, representing the
marginal deposit made by petitioner corporation,
deducted from the loan. Although respondent bank
contends that the marginal deposit should not be
deducted from the principal obligation, this is
completely contrary to prevailing jurisprudence
allowing the deduction of the marginal deposit,
thus:
The marginal deposit requirement is a Central Bank
measure to cut off excess currency liquidity which
would create inflationary pressure. It is a collateral
security given by the debtor, and is supposed to be
returned to him upon his compliance with his
secured obligation. Consequently, the bank pays
no interest on the marginal deposit, unlike an
ordinary bank deposit which earns interest in the
bank. As a matter of fact, the marginal deposit
requirement for letters of credit has been
discontinued, except in those cases where the
applicant for a letter of credit is not known to the
bank or does not maintain a good credit standing
therein.
It is only fair then that the importer's marginal
deposit (if one was made, as in this case), should
be set off against his debt, for while the importer
earns no interest on his marginal deposit, the bank,
apart from being able to use said deposit for its own
purposes, also earns interest on the money it
loaned to the importer. It would be onerous to
compute interest and other charges on the face
value of the letter of credit which the bank issued,
without first crediting or setting off the marginal
deposit which the importer paid to the bank.
Compensation is proper and should take place by
operation of law because the requisites in Article
1279 of the Civil Code are present and should
extinguish both debts to the concurrent amount
(Art. 1290, Civil Code). Although Abad is only a
surety, he may set up compensation as regards
what the creditor owes the principal debtor,
TOMCO (Art. 1280, Civil Code).15
The net amount of the obligation, represented by
respondent bank to be P292,172.23 as of April 17,
1986, would thus be P211,758.23.
To this principal amount must be imposed the
following charges: (1) 19% interest per annum, in
keeping with the terms of the trust receipt;16 and (2)
12% penalty per annum, collected based on the
outstanding principal obligation plus unpaid
interest, again in keeping with the wording of the
trust receipt.17 It appearing that petitioners have
paid the interest and penalty charges until April 17,
1986, the reckoning date for the computation of the
foregoing charges must be April 18, 1986.
A perusal of the records reveals that the trial court
and the Court of Appeals erred in imposing service
charges upon the petitioners. No such stipulation is
found in the trust receipt. Moreover, the trial court
and the Court of Appeals erred in computing
attorney's fees equivalent to 10% per annum, rather
than 10% of the total amount due. There is no basis
for compounding the interest annually, as the trial
court and Court of Appeals have done. This amount
would be unconscionable.
Finally, Lucente and Llaban's contention that they
are not solidarily liable with petitioner corporation is
untenable. As co-signatories of the Continuing
Suretyship Agreement, they bound
themselves, inter alia, to pay the principal sum in
the amount of not more than P400,000.00; interest
due on the principal obligation; attorney's fees; and
expenses that may be incurred in collecting the
credit. The amount owed to respondent bank is the
amount of the principal, interest, attorney's fees,
and expenses in collecting the principal amount.
The Continuing Suretyship Agreement expressly
states the nature of the liability of Lucente and
Llaban:
The liability of the SURETY shall be solidary, direct
and immediate and not contingent upon the bank's
pursuit of whatever remedies the BANK have [sic]
against the Borrower or the securities or liens the
BANK may possess and the SURETY will at any
time, whether due or not due, pay to the BANK with
or withour demand upon the Borrower, any of the
instruments of indebtedness or other obligation
hereby guaranteed by the SURETY.18
Solidary liability is one of the primary characteristics
of a surety contract,19 and the Continuing
Suretyship Agreement expressly stipulates the
solidary nature of Lucente and Llaban's liability. All
three petitioners thus share the solidary obligation
in favor of respondent bank, which is given the
right, under the Civil Code, to proceed against any
one of the solidary debtors or some or all of them
simultaneously.20
WHEREFORE, premises considered, the instant
petition is PARTIALLY GRANTED. The decision of
the Court of Appeals in CA-G.R. CV No. 58193
dated February 13, 2003 is AFFIRMED with
MODIFICATIONS. Accordingly, petitioners are
ordered to pay respondent bank the following: (1)
P211,758.23 representing petitioners' net obligation
as of April 17, 1986; (2) interest at the rate of
19% per annum and penalty at the rate of 12% per
annum reckoned from April 18, 1986; (3) attorney's
fees equivalent to 10% of the total amount due and
collectible; and (4) litigation expenses in the
amount of P3,000.00. The service charge at the
rate of 2% per annum beginning April 18, 1986 is
deleted. Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio,
and Azcuna, JJ., concur.
N BANC
[G.R. Nos. L-17481 and L-17537 to 17559.
August 15, 1961.]
LIBERATA ANTONIO ESTRADA, CANUTO
CENIZAN, NAZARIO DE LA CRUZ, GENARO
ALVARO, ET AL., Petitioners, v. COURT OF
AGRARIAN RELATIONS and FAUSTINO F.
GALVAN, Respondents. 
Ortiz & Valencia Law Office, for Petitioners.  motion filed by the petitioners in which they alleged
Nora G. Nostratis for Respondents.
SYLLABUS
1. WAREHOUSE RECEIPTS; RIGHT OF
MANAGER OF BONDED WAREHOUSE NOT TO
RELEASE DEPOSITED PALAY. — The manager
of a bonded warehouse has the right to refuse to
release deposited palay for failure to surrender the
original of the warehouse receipts, since said
receipts may have been negotiated for value in
favor of innocent third parties.  respondent Faustino Galvan to surrender the
2. ID.; ID.; COURT ACTION TO FACILITATE
DELIVERY OF PALAY TO ENTITLED PARTIES.
— Where the court ordered the manager of the
bonded warehouse to deliver the deposited palay to
certain specified parties, and the person ordered to
present the original warehouse receipts failed to do
so because they were allegedly lost in a fire, the
court may order said manager to release the palay
to the proper parties upon their issuing a receipt
therefor, without necessity of producing and
surrendering the original receipts.
RESOLUTION
NATIVIDAD, J.:
These cases are now before this Court on the
petition filed by the petitioners under date of June
10, 1961, asking that the manager of the Moncada
Bonded Warehouse and respondent Faustino F.
Galvan be declared in contempt of court and
punished accordingly.  in Ylaya Street, Manila, were being desperately
It appears that, upon motion, this Court, on January
6, 1961, issued a resolution of the following
tenor:jgc:chanrobles.com.ph
"In cases L-17481 and L-17537 to 17559 (Liberata
Antonio Estrada, Et. Al. v. Court of Agrarian
Relations and Faustino Galvan), considering the
motion, and opposition thereto, that the owner or
manager of the Moncada Bonded Warehouse be
ordered to release and give to petitioners-
appellants the remaining deposits — 10% of the net
produce of the first crop minus P300 and 15% of
the net produce of the second crop minus P200,
the COURT RESOLVED to grant the motion,
without prejudice to subsequent accounting."cralaw
virtua1aw library
that on April 12, 1961, this Court, passing upon a
that the manager of the Moncada Bonded
Warehouse had refused to comply with the above
resolution unless "the original of the receipts of
palay deposits be presented and surrendered to
him," issued another resolution which
provides:jgc:chanrobles.com.ph
"In cases L-17537 to 17559 (Liberata Antonio
Estrada, Et. Al. v. Court of Agrarian Relations, Et.
Al.) , considering the petitioner’s motion dated
March 18, 1961, and the respondent’s opposition
thereto, THE COURT RESOLVED to order
original of the receipts of the palay deposits to the
manager or owner of the Moncada Bonded
Warehouse, Moncada, Tarlac."cralaw virtua1aw
library
that the manager of the Moncada Bonded
Warehouse and respondent Faustino F. Galvan
were duly served with notice of the above
resolutions, and that notwithstanding such service
of notice and in spite of repeated demands, the
manager of the Moncada Bonded Warehouse and
respondent Faustino F. Galvan refused and still
refuse to comply with the above orders of this
Court, the former, for the reason that petitioners
could not surrender to him the original of the
warehouse receipts issued for the palay in
question, and the latter, because, as he alleged in
his answer to the motion for contempt, he could not
locate any more said receipts "as they were
scattered, misplaced, destroyed or lost when the
contents of the Office of said respondent- appellee,
Faustino F. Galvan, in the Galvan-Cabrera Building
evacuated therefrom during the fire which burned
the Divisoria market and said Galvan-Cabrera
Building in Ylaya Street, Manila, in the latter part of
May, 1961."cralaw virtua1aw library
The excuses respectively offered by the manager
of the Moncada Bonded Warehouse and
respondent Faustino F. Galvan are not without
some merits. The former unquestionably had the
right to protect the interests of the bonded
warehouse of which he was manager, as the
warehouse receipts issued for the palay in question
might have been negotiated for value in favor of
innocent third parties; and the latter, or Faustino F.
Galvan, might have in fact lost said warehouse
receipts in the manner above stated, for his
allegation to that effect in his answer to petitioners’
motion for contempt until now has not been
contradicted. Such incidents, however, do not
constitute a valid excuse to evade compliance with
the order of this Court that the palay in question be
delivered to the petitioners, and, considering that
the petitioners, according to the manifestation filed
by their counsel under date of August 3, 1961, are
in dire need of said palay for their subsistence, our
order must be carried out in the meantime that
these cases have not been finally decided, in order
to ameliorate the precarious situation in which said
petitioners find themselves. 

WHEREFORE, it is hereby ordered that the

manager or the owner of the Moncada Bonded
Warehouse in Moncada, Tarlac, and respondent
Faustino F. Galvan release and deliver to the
petitioners the portion still remaining to be delivered
to them of their shares in the palay involved in
these cases, i.e.,

"(a) 10% of the net produce of the first crop minus

P300.00; and

"(b) 15% of the net produce of the second crop

minus P200.00."cralaw virtua1aw library

which was ordered deposited in said warehouse by

the trial court, upon the issuance by said
petitioners, or their duly authorized representatives,
of the corresponding receipts, without the necessity
of producing and surrendering the original of the
warehouse receipts issued therefor. It is so
ordered. 

Padilla, Labrador, Reyes, J.B.L., Barrera, Paredes,

Dizon and De Leon, JJ., concur. 

Bengzon, C.J., took no part. 

Concepcion, J., took no part.

G.R. No. L-25748 March 10, 1975
CONSOLIDATED TERMINALS, INC., plaintiff-
appellant,  averred that it returned the cotton to Paramount
vs.
ARTEX DEVELOPMENT CO., INC., defendant-
appellee.
Pelaez, Jalandoni and Jamir for plaintiff-appellant.
Norberto J. Quisumbing and Humberto V.
Quisumbing for defendant-appellee.
AQUINO, J.:ñé+.£ªwph!1
Consolidated Terminals, Inc. (CTI) appealed from
the order of Judge Jesus Y. Perez of the Court of
First Instance of Manila, dismissing its amended
complaint for damages against Artex Development
Co., Inc. (Artex for short). The dismissal was
predicated on lack of cause of action.
The following ultimate facts, which were
hypothetically admitted in the motion to dismiss,
were alleged in the amended complaint:
CTI was the operator of a customs bonded
warehouse located at Port Area, Manila. It received
on deposit one hundred ninety-three (193) bales of
high density compressed raw cotton valued at
P99,609.76. It was understood that CTI would keep
the cotton in behalf of Luzon Brokerage
Corporation until the consignee thereof, Paramount
Textile Mills, Inc., had opened the corresponding
letter of credit in favor of shipper, Adolph Hanslik
Cotton of Corpus Christi, Texas.
Allegedly by virtue of a forged permit to deliver
imported goods, purportedly issued by the Bureau
of Customs, Artex was able to obtain delivery of the
bales of cotton on November 5 and 6, 1964 after
paying CTI P15,000 as storage and handling
charges. At the time the merchandise was released
to Artex, the letter of credit had not yet been
opened and the customs duties and taxes due on
the shipment had not been paid. (That delivery
permit, Annex A of the complaint, was not included
by CTI in its record on appeal).
CTI, in its original complaint, sought to recover
possession of the cotton by means of a writ of
replevin. The writ could not be executed. CTI then
filed an amended complaint by transforming its
original complaint into an action for the recovery
from Artex of P99,609.76 as compensatory
damages, P10,000 as nominal and exemplary
damages and P20,000 as attorney's fees.
It should be clarified that CTI in its affidavit for
manual delivery of personal property (Annex B of
its complaint not included in its record on appeal)
and in paragraph 7 of its original complaint alleged
that Artex acquired the cotton from Paramount
Textile Mills, Inc., the consignee. Artex alleged in its
motion to dismiss that it was not shown in the
delivery permit that Artex was the entity that
presented that document to the CTI. Artex further
Textile Mills, Inc. when the contract of sale between
them was rescinded because the cotton did not
conform to the stipulated specifications as to quality
(14-15, Record on Appeal). No copy of the
rescissory agreement was attached to Artex's
motion to dismiss.
In sustaining Artex's motion to dismiss, which CTI
did not oppose in writing, Judge Perez said:têñ.
£îhqwâ£
Since the plaintiff (CTI) is only a warehouseman
and according to the amended complaint, plaintiff
was already paid the warehousing and handling
charges of the 193 bales of high density
compressed raw cotton mentioned in the complaint,
the plaintiff can no longer recover for its services as
warehouseman.
The fact that the delivery of the goods was obtained
by the defendant without opening the
corresponding letter of credit cannot be the basis of
a cause of action of the plaintiff because such
failure of the defendant to open the letter of credit
gives rise to a cause of action in favor of the
shipper of the goods and not in favor of the plaintiff.
With respect to the allegation of the amended
complaint that the goods were taken by the
defendant without paying the customs duties and
other revenues (sic) assessed thereon, this does
not give rise to a cause of action in favor of the
plaintiff for the party aggrieved is the government.
Likewise, the alleged presentation of a forged
permit to deliver imported goods by the defendant
did not give rise to a cause of action in favor of the
plaintiff but in favor of the Bureau of Customs and
of the consignee. (18-19, Record on Appeal).
Judge Perez was guided more by logic and
common sense than by any specific rule of law or
jurisprudence.
CTI in this appeal contends that, as
warehouseman, it was entitled to the possession
(should be repossession) of the bales of cotton;
that Artex acted wrongfully in depriving CTI of the
possession of the merchandise because Artex
presented a falsified delivery permit, and that Artex
should pay damages to CTI.
The only statutory rule cited by CTI is section 10 of
the Warehouse Receipts Law which provides that
"where a warehouseman delivers the goods to one
who is not in fact lawfully entitled to the possession
of them, the warehouseman shall be liable as for
conversion to all having a right of property or
possession in the goods ...".
We hold that CTI's appeal has not merit. Its
amended complaint does not clearly show that, as
warehouseman, it has a cause of action for
damages against Artex. The real parties interested
in the bales of cotton were Luzon Brokerage
Corporation as depositor, Paramount Textile Mills,
Inc. as consignee, Adolph Hanslik Cotton as
shipper and the Commissioners of Customs and
Internal Revenue with respect to the duties and
taxes. These parties have not sued CTI for
damages or for recovery of the bales of cotton or
the corresponding taxes and duties.
The case might have been different if it was alleged
in the amended complaint that the depositor,
consignee and shipper had required CTI to pay
damages, or that the Commissioners of Customs
and Internal Revenue had held CTI liable for the
duties and taxes. In such a case, CTI might
logically and sensibly go after Artex for having
wrongfully obtained custody of the merchandise.
But that eventuality has not arisen in this case. So,
CTI's basic action to recover the value of the
merchandise seems to be untenable. It was not the
owner of the cotton. How could it be entitled to
claim the value of the shipment?
In other words, on the basis of the allegations of the
amended complaint, the lower court could not
render a valid judgment in accordance with the
prayer thereof. It could not render such valid
judgment because the amended complaint did not
unequivocally allege what right of CTI was violated
by Artex, or, to use the familiar language of
adjective law, what delict or wrong was committed
by Artex against CTI which would justify the latter in
recovering the value of bales of cotton even if it
was not the owner thereof. (See Ma-ao Sugar
Central Co., Inc. vs. Barrios, 79 Phil. 666; 1
Moran's Comments on the Rules of Court, 1970
Ed., pp. 259, 495).
WHEREFORE, the order of dismissal is affirmed
with costs against the plaintiff-appellant.
SO ORDERED.
Makalintal, C.J., Barredo, Antonio and Fernandez,
JJ., concur.1äwphï1.ñët
Fernando, J., took no part.