Spec Com (Trust Receipts Cases)

7/29/2019 Spec Com (Trust Receipts Cases)

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

THE PEOPLE OF THE PHILIPPINES, plaintiff-appelleevs.BEN CUEVO, defendant-appellant.

AQUINO, J.:1wph1.t

This case presents for reexamination the liability for estafa of the holder of a trust receipt who disposed

of the goods covered thereby and, in violation of its terms, failed to deliver to the bank the proceeds of

the sale as payment of the debt secured by the trust receipt.

We say reexamination because it is a well-entrenched rule in our jurisprudence that the conversion by

the importer of the goods covered by a trust receipt constitutes estafa through misappropriation under

article 315(l) (b) of the Revised Penal Code, (People vs. Yu Chai Ho 53 Phil. 874 and Samo vs. People. 115

Phil. 346. As to civil cases, see National Bank vs. Viuda e Hijos de Angel Jose, 63 Phil. 814; Philippine

National Bank vs. Catipon, 98 Phil. 286 and Philippine National Bank vs. Arrozal 103 Phil. 213).

In this case, an information dated July 27, 1966 was filed in the Court of First Instance of Manila, charging

Ben Cuevo with estafa committed as follows (Criminal Case No. 83309): 1wph1.t

That on or about the 16th day of February, 1964 in the City of Manila, Philippines, the said accused did

then and there willfully, unlawfully and feloniously defraud the Prudential Bank and Trust Company in

the following manner, to wit: the said accused having received in trust from the Prudential Bank and

Trust Company merchandise, i.e., 1,000 bags of grind yellow corn and 1,000 bags of palay specified in atrust receipt covered by Letter of Credit No. 5643, executed by him in favor of said bank, of the total

value of P24,000.00, to be sold by him, under the express obligation on the part of the said accused to

account for the said merchandise, or to deliver and turn over to the Prudential Bank and Trust Company

the proceeds of the sale thereof;

But said accused once in possession of said merchandise, far from complying with the aforesaid

obligation, notwithstanding repeated demands made upon him, with intent to defraud, willfully,

unlawfully and feloniously misappropriated, misapplied and converted the said merchandise or the

value, thereof in the sum of P24,000.00 to his own personal use and benefit, to the damage and

prejudice of the Prudential Bank and Trust Company in the aforesaid of P24,000.00, Philippine Currency.

(p. 2, Rollo.)

Upon arraignment, the accused pleaded not guilty (p. 11, Record). Later, or on December 13, 1966,

before the trial had started, Cuevo filed a motion to dismiss on the ground that the facts alleged in the

information do not constitute an offense.

Judge Ruperto Kapunan, Jr., in his order of January 3, 1967, granted the motion and dismissed the case

but "without prejudice to whatever civil action the complaining bank may take to recover the amount of

P24,000" which it had advanced to cover the price of the merchandise delivered to the accused (p. 7,

Rollo). From that order of dismissal, the prosecution appealed to this Court.

The appeal is meritorious. Judge Kapunan, Jr. erred in holding that the accused did not commit estafa

under article 315(l) (b), which reads: 1wph1.t

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other

personal property received by the offender in trust or on commission, or for administration, or under

any other obligation involving the duty to make delivery of or to return the same, even though such

obligation be totally or partially guaranteed by a bond; or by denying having received such money,

goods, or other property.

Judge Kapunan, Jr., in sustaining the motion to dismiss, relied on the Spanish version of paragraph (b) of

article 315 wherein the expression used is "recibido en deposito". In his opinion, that phrase is not

accurately translated as "in trust" and, as he explained, it does not allegedly cover the conversion or

misappropriation of the goods covered by a trust receipt. The Spanish version reads: 1wph1.t

(b) Apropiandose o distrayendo, en perjuicio de otro dinero, efectos o cualquiera otra cosa

mueble, que hubiere recibido en deposito, commission o administracion o por otro titulo que produzca

obligacion de entregarla o devolveria, aungue dicha obligacion estuviese afianzada total or parcialmente,

o negando haberla recibido.

The lower court ratiocinated that the contract covered by a trust receipt is merely a secured loan (U.S.vs. Tan Tok, 15 Phil. 538) where the borrower is allowed to dispose of the collateral, whereas, in a

deposit the depositary is not empowered to dispose of the property deposited. Hence, the lower court

concluded that the violation of the provisions of the trust receipt gives rise to a civil action and not to a

criminal prosecution for estafa.

The lower court also ventured the opinion that the other phrase in paragraph (b), por otro titulo que

produzca obligacion de entregarla o devolverla" ("under any other obligation involving the duty to make

delivery of or to return the same") is not applicable because that phrase allegedly refers to the very

"money, goods, or any other personal property received by the offender" as a deposit, and not to the

proceeds of the sale of the goods covered by the trust receipt.

The lower court observed further that the framers of the Spanish Penal Code could not have

contemplated the inclusion of the trust receipt in article 315(l) (b) because that transaction did not exist

in the nineteenth century. The usual form of a trust receipt is as follows: 1wph1.t

I/We hereby agree to hold said goods in trust for the said corporation (meaning the bank as trustor), and

as its property with liberty to sell the same for its account, but without authority to make any other

disposition whatever of the said goods or any part thereof (or of proceeds thereof) either by way of

conditional sale, pledge or otherwise.

In case of sale I/We further agree to hand the proceeds, as soon as received, to the International Banking

Corporation to apply against the relative acceptances (as described above) and for the payment of any

other indebtedness of mine/ours to the International Banking Corporation. (People vs. Yu Chai Ho 53

Phil. 874, 876.)

A trust receipt is considered as a security transaction intended to aid in financing importers and retail

dealers who do not have sufficient funds or resources to finance the importation or purchase of

merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the

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

In the instant case, it is alleged in the indictment that the accused, by means of a trust receipt, received

from the Prudential Bank and Trust Company 1,000 bags of corn and 1,000 bags of palay to be sold by

him with the express obligation to deliver the proceeds of the sale to the bank or, if not sold, to account

for the merchandise and that, instead of complying with either obligation, he misappropriated the

merchandise or the value thereof (p. 2, Rollo).

We hold that even if the accused did not receive the merchandise for deposit, he is, nevertheless,

covered by article 315(l) (b) because after receiving the price of the sale, he did not deliver the money to

the bank or, if he did not sell the merchandise, he did not return it to the bank.

Those two situations are within the purview of article 315(l) (b). The first situation is covered by the

provision which refers to money received under the obligation involving the duty to deliver it

(entregarla) to the owner of the merchandise sold.


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The other contingency is covered by the provision which refers to merchandise received under the

obligation to "return" it (devolvelra) to the owner.

The fact that in the first case the money was received from the purchaser of the merchandise and not

from the bank does not remove it from the operation of article 315(l) (b).

As noted by Justice Street in People vs. Yu Chai Ho, supra, the conversion by the trustee in a trust receipt

of the proceeds of the sale falls "most literally and directly under" the provisions of article 315(l) (b).

Thus, it was held that where, notwithstanding repeated oral and written demands by the bank, the

petitioner had failed either to turn over to the said bank the proceeds of the sale of the goods, or toreturn said goods if they were not sold, the petitioner is guilty of estafa under article 315(l) (b) (Samo vs.

People, 115 Phil. 346).

In this connection, it is relevant to state that Presidential Decree No. 115, the Trust Receipts Law,

regulating trust receipts transactions, was issued on January 29, 1973.

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

realized from the sale of goods, documents or instruments released under trust receipts as a criminal

offense punishable under" article 315.

Section 13 of the decree provides that "the failure of an entrustee to turn over the proceeds of the sale

of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to

the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they

were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crimeof estafa, punishable under the provisions" of article 315 of the Revised Penal Code.

The enactment of the said penal provision is confirmatory of existing jurisprudence and should not be

construed as meaning that, heretofore, the misappropriation of the proceeds of a sale made under a

trust receipt was not punishable under article 315. That penal provision removed any doubt as to the

criminal liability of the holder of a trust receipt who misappropriated the proceeds of the sale.

The other issue raised in the last part of accused Cuevo's brief is whether the lower court's erroneous

dismissal of the information against him amounts to an acquittal which placed him in jeopardy and

whether the return of the case to the lower court for trial would place him in double jeopardy.

No person shall be twice put in jeopardy of punishment for the same offense" (Sec. 22, Art. IV of the

Constitution). The maxim is non bis in Idem (not twice for the same). The ban against double jeopardy is

similar to the rule on res judicata in civil cases.

Jeopardy attaches when an accused was charged with an offense (a) upon a valid complaint or

information sufficient in form and substance to sustain a conviction (b) in a court of competent

jurisdiction and (c) after the accused had been arraigned and entered his plea, he was convicted or

acquitted, or the case against him was "dismissed or otherwise terminated without his express consent".

In such a case, his conviction or acquittal (autrefois convict or autrefois acquit) is a "bar to another

prosecution for the offense charged, or for any attempt to commit the same or frustration thereof, or for

any offense charged in the former complaint or information " (Sec. 9, Rule 117, Rules of Court).

The accused invokes the ruling that "where a trial court has jurisdiction but mistakenly dismisses the

complaint or information on the ground of lack of it, the order of dismissal is, after the prosecution has

presented its evidence, unappealable because an appeal by the government therefrom would place the

accused in second jeopardy for the same offense" (People vs. Duran, Jr., 107 Phil. 979).

That ruling has no application to this case because in the Duran case (as in People vs. Caderao 69 Phil.

327, also cited by the accused herein) the dismissal was made after the prosecution had presented its

evidence. The accused filed a demurrer to the evidence but the trial court dismissed the case, not on the

ground of insufficiency of evidence, but on the ground of lack of jurisdiction. In the instant case, the

prosecution has not commenced the presentation of its evidence. The dismissal was with the consent of

the accused because he filed a motion to dismiss.

In Esguerra vs. De la Costa, 66 Phil. 134, another case cited by the accused, the erroneous dismissal on

the ground of lack of jurisdiction was made by the lower court motu proprio. Hence, the dismissal

without the consent of the accused amounted to an acquittal which placed him in jeopardy.

Moreover, in the Duran case, it was expressly indicated that the erroneous dismissal on the ground of

lack of jurisdiction does not place the accused in jeopardy if the dismissal was made with the consent of

the accused, as held in People vs. Salico, 84 Phil. 722. As already stated, in the instant case the dismissal

was with the consent of accused Cuevo. The dismissal did not place him in jeopardy.

The Chief Justice and six Justices voted to reverse the order of dismissal. Justices Teehankee and De

Castro dissented. As only seven Justices voted to reverse the order of dismissal, the same has to be

affirmed.

WHEREFORE, the order of dismissal is affirmed. Costs de oficio.

SO ORDERED.

SPOUSES TIRSO VINTOLA AND LORETA DY VS INSULAR BANK OF ASIA ANDAMERICA, (1987)150 SCRA 578

FACTS:

Petitioner spouses Vintola owns and manages manufacturing of raw seashells into finished products,

under their business name, Dax kin International. They applied for domestic letter of credit by

respondent Insular Bank of Asia and America which was granted. Then, executed a Trust Receipt

Agreement with Insular bank stipulating that the Vintolas shall hold the goods in trust for IBAA. Having

defaulted in its payment, the Vintolas offered to return the goods to IBAA, but the latter refused. Due to

their continued refusal, IBAA charged them with estafa. The Court acquitted the Vintolas.

ISSUE: Whether or not IBAA became the real owners of the goods held in trust by the Vintolas.

RULING: No. Insular bank of Asia and America did not become the holder or real owner of the goods. The

Vintolas retained ownership of the goods. The Court held that the trust receipt arrangement did not

convert the IBAA into an investor; it remained a lender and creditor. Under the law, a trust receipt is a

document wherein the entrustee binds himself to hold the designated goods, documents or instruments

in trust for the entruster to sell or otherwise dispose of the goods, to the amount owing to the entruster.

ALLIED BANKING CORPORATION VS SECRETARY SEDFREY ORDOEZ AND ALFREDOCHING192 SCRA 246 (1990)

FACTS: Respondent Alfredo Ching duly authorized officer of Philippine Blooming Mills(PBM) applied for

the issuance of commercial letters of credit with petitioner Allied banking Corporation. The latter issued

an irrevocable letter of credit infavor of Nikko Industry wherein it drew four (4) drafts which were

accepted by Blooming Mills and duly honored and paid by Allied Bank. In order to secure the payment of

the loan, Blooming Mills as entrustee, executed four (4) Trust Receipt Agreements acknowledging Allied

banks ownership of the goods and Blooming Mills obligation to turn over the proceeds of the sale of the

goods if sold or to return the same within the stated period. Blooming Mills failed to pay itsobligation,

thereby prompting petitioner bank to file a criminal complaint for violation of Presidential Decree 115.


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ISSUE: Whether or not the penal provision of Presidential decree 115 apply when the goods covered by a

Trust Receipt do not form part of the finished products which are ultimately sold but are instead, utilized

in the operation of the equipment of entrustee-manufacturer?

RULING: Yes. In trust receipts, there is an obligation to repay the entruster. The entrustee binds himself

to sell or otherwise dispose of the entrusted goods with the obligation to turn over to the entruster the

proceeds if sold, or return the goods if unsold or not otherwise disposed of according to the terms and

conditions of the trust receipt. Petition granted.

DAMIAN ROBLES, petitioner,

vs.THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.

FACTS: Petitioner, Damian Robles, was charged with the crime of estafa. Petitioner, received in trust

from Roberto Ng y Shiang an office equipment amounting to P14,895.00 for selling the same. Under the

express obligation of turning over the proceeds of the sale, if sold, or of returning the said office

equipment if not sold. Despite repeated demands, he refuses to remit the proceeds of the sale or return

the office equipment. The trial court convicted petitioner for the crime charged. Petitioner appealed the

decision to the Court of Appeals. CA affirmed the decision of the trial court but modified the penalty.

ISSUE: Whether or not petitioner is guilty of estafa?

RULINGS: We note that under Section 13 of the Trust Receipts Law, the violation by an entrustee of his

obligations under a trust receipt document, more specifically his failure to turn over the proceeds of the

sale of the goods covered by the trust receipt, or to return said goods as they were not sold or disposedof, would constitute the crime of estafa under Article315 (1) (b), Revised Penal Code. It is also pertinent

to point out that quite apart from and even in the absence of the provisions of Section 13 of the Trust

Receipt Law, the failure of Damian Robles to comply with his fiduciary obligation under the delivery trust

receipts here involved, constituted the offense of estafa punishable under Article 315 (1) (b) of the

Revised Penal Code. In other words, the elements of the offense of estafa set out in Article 315 (1) (b)

are present in the instant case. Those elements are: (1) "unfaithfulness or abuse of confidence;" (2)

"misappropriating . . .money or goods . . .; (3) received by the offender in trust or on commission . . . or

under any other obligation involving the duty to make delivery of or to return the same . . .;" and (4) "to

the prejudice of another." The delivery trust receipts, in the case at bar, admittedly signed by petitioner

Damian Robles imposed on him the duty to return the article or the proceeds thereof to Paramount

within two (2) days from the specified dates of the trust receipts.

The failure to account, upon demand, for funds or property held in trust is evidence of misappropriation

which, not having been explained away or rebutted by petitioner Damian Robles, warranted his

conviction for estafa under the Revised Penal Code. This was settled doctrine long before the

promulgation of the Trust Receipts Law. We note in this connection that the delivery trust receipts here

involved in fact constituted trust receipts within the meaning of Presidential Decree No. 115, known as

the "Trust Receipts Law," which took effect on 29 January 1973. Section 4 thereof defines a "trust

receipt" and a "trust receipt transaction" for purposes of the decree in the following terms:

Sec. 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

assigned 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 turnover 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.

PEOPLE OF THE PHILIPPINES, (public petitioner) and ALLIED BANKINGCORPORATION (privatepetitioner),vs.HON. JUDGE DAVID G. NITAFAN (public respondent) and BETTY SIA ANG (privaterespondent).

FACTS: Petitioner Allied banking Corporation (ABC) charged private respondent, Betty Sia Ang, for estafa

for willfully, unlawfully and feloniously defraud ABC. Private respondent received a trust from ABC

amounting to P398, 000.00 covered by a domestic letter of credit, under the express obligation to sellthe same and account for the proceeds of the sale, if sold, or to return the merchandise, if not sold.

Upon demand, private respondent paid onlyP283, 115.78. Betty Sia Ang filed a motion to quash the

information on the grounds that the facts charged do not constitute an offense. Respondent judge

granted the motion to quash.

ISSUE : Whether or not an entrustee in a trust receipt agreement who fails to deliver the proceeds of the

sale or to return the goods if not sold to the entruster-bank is liable for the crime of estafa?

RULINGS : The factual circumstances in the present case show that the alleged violation was committed

sometime in 1980 or during the effectivity of P.D. 115. The failure, therefore, to account for the

P114,884.22 balance is what makes the accused-respondent criminally liable for estafa. A trust receipt

arrangement does not involve a simple loan transaction between a creditor and debtor-importer. Apart

from a loan feature, the trust receipt arrangement has a security feature that is covered by the trust

receipt itself. (Vintola v. Insular Bank of Asia and America,151 SCRA 578 [1987]) That second feature iswhat provides the much needed financial assistance to our traders in the importation or purchase of

goods or merchandise through the use of those goods or merchandise as collateral for the

advancements made by a bank.(Samo v. People, supra). The title of the bank to the security is the one

sought to be protected and not the loan which is a separate and distinct agreement. The Trust Receipts

Law punishes 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 or not.

The law does not seek to enforce payment of the loan. Thus, there can be no violation of a right against

imprisonment for non-payment of a debt. 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 P.D. 115. As

correctly observed by the Solicitor General, P.D. 115, like Batas Pambansa Blg. 22, punishes the act "not

as an offense against property, but as an offense against public order. . . ." The misuse of trust receipts

therefore should be deterred to prevent any possible havoc in trade circles and the banking community

(citing Lozano v.Martinez, 146 SCRA 323 [1986]; Rollo, p. 57) It is in the context of upholding public

interest that the law now specifically designates a breach of a trust receipt agreement to be an act that

"shall" make one liable for estafa.

MELVIN COLINARES and LORDINO VELOSO, petitioners, vs.HONORABLE COURTOF APPEALS, and THE PEOPLE OF THE PHILIPPINES, respondents.

FACTS : Petitioners applied for a commercial letter of credit with the Philippine Banking Corporation

(PBC) in favor of CM builders for the purchased of various construction supplies. PBC approved the letter

of credit to cover the full invoice value of the goods and subsequently signed a prom-forma trust

receip0t as security. PBC wrote a demand letter to petitioner demanding the amount be paid within

seven days but instance of complying they confessed that they cant pay and request ed a grace period to

settle the account. Petitioners proposed to modify the payment of the loan. Petitioners were charged

with estafa. During trial, petitioner Veloso insisted that the transaction was a clean loan. He andpetitioner Colinares signed the documents without reading the fine print, and learning that the trust


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receipt was merely a formality. The trial court render a decision convicting the petitioner estafa. The trial

court considered the transaction between PBC and Petitioners as a trust receipt transaction under

Section 4, P.D. No. 115. Petitioners appealed from the judgment to the Court of Appeals and the CA

modified the judgment of the trial court by increasing the penalty.

ISSUE: Whether or not the petitioner were properly charged, tried and convicted for violation of PD 115

in relation to article 315 of the RPC?

RULINGS: A thorough examination of the facts obtaining in the case at bar reveals that the transaction

intended by the parties was a simple loan, not a trust receipt agreement. The Trust Receipts Law does

not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse of confidence inthe handling of money or goods to the prejudice of another regardless of whether the latter is the

owner. Here, it is crystal clear that on the part of Petitioners there was neither dishonesty nor abuse of

confidence in the handling of money to the prejudice of PBC. Petitioners continually endeavored to meet

their obligations, as shown by several receipts issued by PBC acknowledging payment of the loan. 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. 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 Article 315(1) of the Revised Penal Code, without need of proving intent to defraud. Petitioners

received the merchandise from CM Builders Centre on 30 October 1979. On that day, ownership over

the merchandise was already transferred to Petitioners who were to use the materials for their

construction project. It was only a day later, 31 October 1979, that they went to the bank to apply for aloan to pay for the merchandise.

This situation belies what normally obtains in a pure trust receipt transaction where goods are owned by

the bank and only released to the importer in trust subsequent to the grant of the loan

. The bank acquires a security interest in the goods as holder of a security title for the advances it had

made to the entrustee. The ownership of the merchandise continues to be vested in the person who had

advanced payment until he has been paid in full, or if the merchandise has already been sold, the

proceeds of the sale should be turned over to him by the importer or by his representative or successor

in interest. To secure that the bank shall be paid, it takes full title to the goods at the very beginning and

continues to hold that title as his indispensable security until the goods are sold and the vendee is called

upon to pay for them; hence, the importer has never owned the goods and is not able to deliver

possession. In a certain manner, trust receipts partake of the nature of a conditional sale where the

importer becomes absolute owner of the imported merchandise as soon as he has paid its price.

G.R. No. 145578 November 18, 2005

JOSE C. TUPAZ IV and PETRONILA C. TUPAZ, Petitioners,vs.THE COURT OF APPEALS and BANK OF THE PHILIPPINE ISLANDS, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the Decision2 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 October2000 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 Corporations suppliers,

Tanchaoco Manufacturing Incorporated3 ("Tanchaoco Incorporated") and Maresco Rubber and

Retreading Corporation4 ("Maresco Corporation"). Respondent bank granted petitioners applicationand 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 banks counsel5 and its representative6 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 Fiscals

Office found probable cause to indict petitioners. The Makati Fiscals 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 Corporations principal debt under the trust receipts. The dispositive portion of the trial courts

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


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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 attorneys 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 thetrust 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 Corporations

debts.

The Ruling of the Court of Appeals

In its Decision of 7 September 2000, the Court of Appeals affirmed the trial courts 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 ofAsia 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 attorneys fees, P5,000.00 as expenses of litigation andcosts 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 Corporations 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 Corporations 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

corporations debts only if they so contractually agree or stipulate.13

Here, the dorsal side of the trust receipts contains the following stipulation:


6/12

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 Tupazs signature are the words "Vice -PresTreasurer" and

under petitioner Jose Tupazs signature are the words "Vice-PresOperations." By so signing that trust

receipt, petitioners did not bind themselves personally liable for El Oro Corporations 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 corporations 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 ARMAGRIs 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 Corporations 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 Corporations Vice-President for Operations. Hence, petitioner Jose Tupaz bound

himself personally liable for El Oro Corporations 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 ofPetitioner Jose Tupazs 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 withEl Oro Corporation for the latters debt under that trust receipt.

This is error.

In Prudential Bank v. Intermediate Appellate Court,16 the Court interpreted a substantially identical

clause17 in a trust receipt signed by a corporate officer who bound himself personally liable for the

corporations 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] Chis

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 "wejointly 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; Chis 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 banks suit against petitioner Jose Tupaz stands despite the Courts 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 ex haust 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 Corporations 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 attorneys 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


7/12

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 Corporations 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 theexecution of this Decision, the trial court shall compute El Oro Corporations 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 made26

Interest = principal x 18 % per annum x no. of years from due date27 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

Attorneys 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 Corporation28 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 Tupazs 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 action30 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 Corporations 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 Corporations 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 Corporations 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

G.R. No. 173905 April 23, 2010

ANTHONY L. NG, Petitioner,vs.PEOPLE OF THE PHILIPPINES, Respondent.

D E C I S I O N

VELASCO, JR.

The Case

This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the August 29,

2003 Decision1 and July 25, 2006 Resolution of the Court of Appeals (CA) in CA-G.R. CR No. 25525, which

affirmed the Decision2 of the Regional Trial Court (RTC), Branch 95 in Quezon City, in Criminal Case No.

Q-99-85133 for Estafa under Article 315, paragraph 1(b) of the Revised Penal Code (RPC) in relation to

Section 3 of Presidential Decree No. (PD) 115 or the Trust Receipts Law.

The Facts

Sometime in the early part of 1997, petitioner Anthony Ng, then engaged in the business of building and

fabricating telecommunication towers under the trade name "Capitol Blacksmith and Builders," applied

for a credit line of PhP 3,000,000 with Asiatrust Development Bank, Inc. (Asiatrust). In support of

Asiatrusts credit investigation, petitioner voluntarily submitted the following documents: (1) the

contracts he had with Islacom, Smart, and Infocom; (2) the list of projects wherein he was commissioned

by the said telecommunication companies to build several steel towers; and (3) the collectible amounts

he has with the said companies.3


8/12

On May 30, 1997, Asiatrust approved petitioners loan application. Petitioner was then required to sign

several documents, among which are the Credit Line Agreement, Application and Agreement for

Irrevocable L/C, Trust Receipt Agreements,4 and Promissory Notes. Though the Promissory Notes

matured on September 18, 1997, the two (2) aforementioned Trust Receipt Agreements did not bear any

maturity dates as they were left unfilled or in blank by Asiatrust.5

After petitioner received the goods, consisting of chemicals and metal plates from his suppliers, he

utilized them to fabricate the communication towers ordered from him by his clients which were

installed in three project sites, namely: Isabel, Leyte; Panabo, Davao; and Tongonan.

As petitioner realized difficulty in collecting from his client Islacom, he failed to pay his loan to Asiatrust.Asiatrust then conducted a surprise ocular inspection of petitioners business through Villarva S. Linga,

Asiatrusts representative appraiser. Linga thereafter reported to Asiatrust that he found that

approximately 97% of the subject goods of the Trust Receipts were "sold-out and that only 3 % of the

goods pertaining to PN No. 1963 remained." Asiatrust then endorsed petitioners account to its Account

Management Division for the possible restructuring of his loan. The parties thereafter held a series of

conferences to work out the problem and to determine a way for petitioner to pay his debts. However,

efforts towards a settlement failed to be reached.

On March 16, 1999, Remedial Account Officer Ma. Girlie C. Bernardez filed a Complaint-Affidavit before

the Office of the City Prosecutor of Quezon City. Consequently, on September 12, 1999, an Information

for Estafa, as defined and penalized under Art. 315, par. 1(b) of the RPC in relation to Sec. 3, PD 115 or

the Trust Receipts Law, was filed with the RTC. The said Information reads:

That on or about the 30th day of May 1997, in Quezon City, Philippines, the above-named petitioner, didthen and there willfully, unlawfully, and feloniously defraud Ma. Girlie C. Bernardez by entering into a

Trust Receipt Agreement with said complainant whereby said petitioner as entrustee received in trust

from the said complainant various chemicals in the total sum of P4.5 million with the obligation to hold

the said chemicals in trust as property of the entruster with the right to sell the same for cash and to

remit the proceeds thereof to the entruster, or to return the said chemicals if unsold; but said petitioner

once in possession of the same, contrary to his aforesaid obligation under the trust receipt agreement

with intent to defraud did then and there misappropriated, misapplied and converted the said amount

to his own personal use and benefit and despite repeated demands made upon him, said petitioner

refused and failed and still refuses and fails to make good of his obligation, to the damage and prejudice

of the said Ma. Girlie C. Bernardez in the amount of P2,971,650.00, Philippine Currency.

CONTRARY TO LAW.

Upon arraignment, petitioner pleaded not guilty to the charges. Thereafter, a full-blown trial ensued.

During the pendency of the abovementioned case, conferences between petitioner and Asiatrusts

Remedial Account Officer, Daniel Yap, were held. Afterward, a Compromise Agreement was drafted by

Asiatrust. One of the requirements of the Compromise Agreement was for petitioner to issue six (6)

postdated checks. Petitioner, in good faith, tried to comply by issuing two or three checks, which were

deposited and made good. The remaining checks, however, were not deposited as the Compromise

Agreement did not push through.

For his defense, petitioner argued that: (1) the loan was granted as his working capital and that the Trust

Receipt Agreements he signed with Asiatrust were merely preconditions for the grant and approval of his

loan; (2) the Trust Receipt Agreement corresponding to Letter of Credit No. 1963 and the Trust Receipt

Agreement corresponding to Letter of Credit No. 1964 were both contracts of adhesion, since the

stipulations found in the documents were prepared by Asiatrust in fine print; (3) unfortunately for

petitioner, his contract worth PhP 18,000,000 with Islacom was not yet paid since there was a squabble

as to the real ownership of the latters company, but Asiatrust was aware of petitioners receivableswhich were more than sufficient to cover the obligation as shown in the various Project Listings with

Islacom, Smart Communications, and Infocom; (4) prior to the Islacom problem, he had been faithfully

paying his obligation to Asiatrust as shown in Official Receipt Nos. 549001, 549002, 565558, 577198,

577199, and 594986,6 thus debunking Asiatrusts claim of fraud and bad faith against him; (5) during the

pendency of this case, petitioner even attempted to settle his obligations as evidenced by the two

United Coconut Planters Bank Checks7 he issued in favor of Asiatrust; and (6) he had already paid PhP

1.8 million out of the PhP 2.971 million he owed as per Statement of Account dated January 26, 2000.

Ruling of the Trial Court

After trial on the merits, the RTC, on May 29, 2001, rendered a Decision, finding petitioner guilty of the

crime of Estafa. The fallo of the Decision reads as follows:

WHEREFORE, judgment is hereby rendered finding the petitioner, Anthony L. Ng GUILTY beyond

reasonable doubt for the crime of Estafa defined in and penalized by Article 315, paragraph 1(b) of the

Revised Penal Code in relation to Section 3 of Presidential Decree 115, otherwise known as the Trust

Receipts Law, and is hereby sentenced to suffer the indeterminate penalty of from six (6) y ears, eight (8)

months, and twenty one (21) days of prision mayor, minimum, as the minimum penalty, to twenty (20)

years of reclusion temporal maximum, as the maximum penalty.

The petitioner is further ordered to return to the Asiatrust Development Bank Inc. the amount of Two

Million, Nine Hundred Seventy One and Six Hundred Fifty Pesos (P2,971,650.00) with legal rate of

interest computed from the filing of the information on September 21,1999 until the amount is fully

paid.

IT IS SO ORDERED.

In rendering its Decision, the trial court held that petitioner could not simply argue that the contracts he

had entered into with Asiatrust were void as they were contracts of adhesion. It reasoned that petitioner

is presumed to have read and understood and is, therefore, bound by the provisions of the Letters of

Credit and Trust Receipts. It said that it was clear that Asiatrust had furnished petitioner with a

Statement of Account enumerating therein the precise figures of the outstanding balance, which he

failed to pay along with the computation of other fees and charges; thus, Asiatrust did not violate

Republic Act No. 3765 (Truth in Lending Act). Finally, the trial court declared that petitioner, being the

entrustee stated in the Trust Receipts issued by Asiatrust, is thus obliged to hold the goods in trust for

the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust

receipts; otherwise, he is obliged to return the goods in the event of non-sale or upon demand of the

entruster, failing thus, he evidently violated the Trust Receipts Law.

Ruling of the Appellate Court

Petitioner then elevated the case to the CA by filing a Notice of Appeal on August 6, 2001. In his

Appellants Brief dated March 25, 2002, petitioner argued that the court a quo erred: (1) in changing the

name of the offended party without the benefit of an amendment of the Information which violates his

right to be informed of the nature and cause of accusation against him; (2) in making a finding of facts

not in accord with that actually proved in the trial and/or by the evidence provided; (3) in not

considering the material facts which if taken into account would have resulted in his acquittal; (4) in

being biased, hostile, and prejudiced against him; and (5) in considering the prosecutions evidence

which did not prove the guilt of petitioner beyond reasonable doubt.1avvphi1

On August 29, 2003, the CA rendered a Decision affirming that of the RTC, the fallo of which reads:

WHEREFORE, the foregoing considered, the instant appeal is DENIED. The decision of the Regional Trial

Court of Quezon City, Branch 95 dated May 29, 2001 is AFFIRMED.

SO ORDERED.


9/12

The CA held that during the course of the trial, petitioner knew that the complainant Bernardez and the

other co-witnesses are all employees of Asiatrust and that she is suing in behalf of the bank. Since

petitioner transacted with the same employees for the issuance of the subject Trust Receipts, he cannot

feign ignorance that Asiatrust is not the offended party in the instant case. The CA further stated that the

change in the name of the complainant will not prejudice and alter the fact that petitioner was being

charged with the crime of Estafa in relation to the Trust Receipts Law, since the information clearly set

forth the essential elements of the crime charged, and the constitutional right of petitioner to be

informed of the nature and cause of his accusations is not violated.8

As to the alleged error in the appreciation of facts by the trial court, the CA stated that it was undisputedthat petitioner entered into a trust receipt agreement with Asiatrust and he failed to pay the bank his

obligation when it became due. According to the CA, the fact that petitioner acted without malice or

fraud in entering into the transactions has no bearing, since the offense is punished as malum

prohibitum regardless of the existence of intent or malice; the mere failure to deliver the proceeds of the

sale or the goods if not sold constitutes the criminal offense.

With regard to the failure of the RTC to consider the fact that petitioners outstanding receivables are

sufficient to cover his indebtedness and that no written demand was made upon him hence his

obligation has not yet become due and demandable, the CA stated that the mere query as to the

whereabouts of the goods and/or money is tantamount to a demand.9

Concerning the alleged bias, hostility, and prejudice of the RTC against petitioner, the CA said that

petitioner failed to present any substantial proof to support the aforementioned allegations against the

RTC.

After the receipt of the CA Decision, petitioner moved for its reconsideration, which was denied by the

CA in its Resolution dated July 25, 2006. Thereafter, petitioner filed this Petition for Review on Certiorari.

In his Memorandum, he raised the following issues:

Issues:

1. The prosecution failed to adduce evidence beyond a reasonable doubt to satisfy the 2nd essential

element that there was misappropriation or conversion of subject money or property by petitioner.

2. The state was unable to prove the 3rd essential element of the crime that the alleged

misappropriation or conversion is to the prejudice of the real offended property.

3. The absence of a demand (4th essential element) on petitioner necessarily results to the dismissal of

the criminal case.

The Courts Ruling

We find the petition to be meritorious.

Essentially, the issues raised by petitioner can be summed up into one whether or not petitioner is

liable for Estafa under Art. 315, par. 1(b) of the RPC in relation to PD 115.

It is a well-recognized principle that factual findings of the trial court are entitled to great weight and

respect by this Court, more so when they are affirmed by the appellate court. However, the rule is not

without exceptions, such as: (1) when the conclusion is a finding grounded entirely on speculations,

surmises, and conjectures; (2) the inferences made are manifestly mistaken; (3) there is grave abuse of

discretion; and (4) the judgment is based on misapprehension of facts or premised on the absence of

evidence on record.10 Especially in criminal cases where the accused stands to lose his liberty by virtue

of his conviction, the Court must be satisfied that the factual findings and conclusions of the lower courts

leading to his conviction must satisfy the standard of proof beyond reasonable doubt.

In the case at bar, petitioner was charged with Estafa under Art. 315, par. 1(b) of the RPC in relation to

PD 115. The RPC defines Estafa as:

ART. 315. Swindling (estafa).Any person who shall defraud another by any of the means mentioned

hereinbelow x x x

1. With unfaithfulness or abuse of confidence, namely:

a. x x x

b. By misappropriating or converting, to the prejudice of another, money, goods, or any other personal

property received by the offender in trust or on commission, or for administration, or under any other

obligation involving the duty to make delivery of or to return the same, even though such obligation be

totally or partially guaranteed by a bond; or by denying having received such money, goods, or other

property x x x.11

Based on the definition above, the essential elements of Estafa are: (1) that money, goods or other

personal property is received by the offender in trust or on commission, or for administration, or under

any obligation involving the duty to make delivery of or to return it; (2) that there be misappropriation or

conversion of such money or property by the offender, or denial on his part of such receipt; (3) that such

misappropriation or conversion or denial is to the prejudice of another; and (4) there is demand by the

offended party to the offender.12

Likewise, Estafa can also be committed in what is called a "trust receipt transaction" under PD 115,

which is defined as:

Section 4. What constitutes a trust receipts 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 latters execution and delivery to the entruster of a

signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated

goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods,

documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the

extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents

or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms

and conditions specified in the trust receipt, or for other purposes substantially equivalent to any 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

full 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 good, documents or instruments by a person in the business of selling goods, documents orinstruments for profit who, at the outset of transaction, has, as against the buyer, general property rights


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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.

In other words, a trust receipt transaction is one where the entrustee has the obligation to deliver to the

entruster the price of the sale, or if the merchandise is not sold, to return the merchandise to the

entruster. There are, therefore, 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 the merchandise received under the obligation to "return"

it (devolvera) to the owner.13 A violation of any of these undertakings constitutes Estafa defined under

Art. 315, par. 1(b) of the RPC, as provided in Sec. 13 of PD 115, viz:

Section 13. Penalty Clause.The failure of an entrustee to turn over the proceeds of the sale of the

goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the

entruster or as appears in the trust receipt or to return said goods, documents or instruments if they

were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime

of estafa, punishable under the provisions of Article Three hundred fifteen, paragraph one (b) of Act

Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised

Penal Code. x x x (Emphasis supplied.)

A thorough examination of the facts obtaining in the instant case, however, reveals that the transaction

between petitioner and Asiatrust is not a trust receipt transaction but one of simple loan.

PD 115 Does Not Apply

It must be remembered that petitioner was transparent to Asiatrust from the very beginning that the

subject goods were not being held for sale but were to be used for the fabrication of steel

communication towers in accordance with his contracts with Islacom, Smart, and Infocom. In these

contracts, he was commissioned to build, out of the materials received, steel communication towers, not

to sell them.

The true nature of a trust receipt transaction can be found in the "whereas" clause of PD 115 which

states that a trust receipt is to be utilized "as a convenient business device to assist importers and

merchants solve their financing problems." Obviously, the State, in enacting the law, sought to find a

way to assist importers and merchants in their financing in order to encourage commerce in the

Philippines.

As stressed in Samo v. People,14 a trust receipt is considered 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. Similarly, American Jurisprudence

demonstrates that trust receipt transactions always refer to a method of "financing importations or

financing sales."15 The principle is of course not limited in its application to financing importations, since

the principle is equally applicable to domestic transactions.16 Regardless of whether the transaction is

foreign or domestic, it is important to note that the transactions discussed in relation to trust receipts

mainly involved sales.

Following the precept of the law, such transactions affect situations wherein the entruster, who owns or

holds absolute title or security interests over specified goods, documents or instruments, releases the

subject goods to the possession of the entrustee. The release of such goods to the entrustee is

conditioned upon his execution and delivery to the entruster of a trust receipt wherein the former binds

himself to hold the specific 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 to the extent of the amount owing to the entruster or the goods, documents orinstruments themselves if they are unsold. Similarly, we held in State Investment House v. CA, et al. that

the entruster is entitled "only to the proceeds derived from the sale of goods released under a trust

receipt to the entrustee."17

Considering that the goods in this case were never intended for sale but for use in the fabrication of steel

communication towers, the trial court erred in ruling that the agreement is a trust receipt transaction.

In applying the provisions of PD 115, the trial c ourt relied on the Memorandum of Asiatrusts appraiser,

Linga, who stated that the goods have been sold by petitioner and that only 3% of the goods remained in

the warehouse where it was previously stored. But for reasons known only to the trial court, the latter

did not give weight to the testimony of Linga when he testified that he merely presumed that the goods

were sold, viz:

COURT (to the witness)

Q So, in other words, when the goods were not there anymore. You presumed that, that is already sold?

A Yes, your Honor.

Undoubtedly, in his testimony, Linga showed that he had no real personal knowledge or proof of the fact

that the goods were indeed sold. He did not notify petitioner about the inspection nor did he talk to or

inquire with petitioner regarding the whereabouts of the subject goods. Neither did he confirm with

petitioner if the subject goods were in fact sold. Therefore, the Memorandum of Linga, which was based

only on his presumption and not any actual personal knowledge, should not have been used by the trial

court to prove that the goods have in fact been sold. At the very least, it could only show that the goods

were not in the warehouse.

Having established the inapplicability of PD 115, this Court finds that petitioners liability is on ly limited

to the satisfaction of his obligation from the loan. The real intent of the parties was simply to enter into a

simple loan agreement.

To emphasize, the Trust Receipts Law was created to "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." Since Asiatrust knew that petitioner was neither an importer nor retail dealer, it

should have known that the said agreement could not possibly apply to petitioner.

Moreover, this Court finds that petitioner is not liable for Estafa both under the RPC and PD 115.

Goods Were Not Received in Trust

The first element of Estafa under Art. 315, par. 1(b) of the RPC requires that the money, goods or other

personal property must be received by the offender in trust or on commission, or for administration, or

under any other obligation involving the duty to make delivery of, or to return it. But as we already

discussed, the goods received by petitioner were not held in trust. They were also not intended for sale

and neither did petitioner have the duty to return them. They were only intended for use in the

fabrication of steel communication towers.

No Misappropriation of Goods or Proceeds

The second element of Estafa requires that there be misappropriation or conversion of such money or

property by the offender, or denial on his part of such receipt.

This is the very essence of Estafa under Art. 315, par. 1(b). The words "convert" and "misappropriated"

connote an act of using or disposing of anothers property as if it were ones own, or of devoting it to a

purpose or use different from that agreed upon. To misappropriate for ones own use includes not only


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conversion to ones personal advantage, but also every attempt to dispose of the property of another

without a right.18

Petitioner argues that there was no misappropriation or conversion on his part, because his liability for

the amount of the goods subject of the trust receipts arises and becomes due only upon receipt of the

proceeds of the sale and not prior to the receipt of the full price of the goods.

Petitioner is correct. Thus, assuming arguendo that the provisions of PD 115 apply, petitioner is not liable

for Estafa because Sec. 13 of PD 115 provides that an entrustee is only liable for Estafa when he fails "to

turn over the proceeds of the sale of the goods x x x covered by a trust receipt to the extent of the

amount owing to the entruster or as appears in the trust receipt x x x in accordance with the terms ofthe trust receipt."

The trust receipt entered into between Asiatrust and petitioner states:

In case of sale I/we agree to hand the proceeds as soon as received to the BANK to apply against the

relative acceptance (as described above) and for the payment of any other indebtedness of mine/ours to

ASIATRUST DEVELOPMENT BANK.19 (Emphasis supplied.)

Clearly, petitioner was only obligated to turn over the proceeds as soon as he received payment.

However, the evidence reveals that petitioner experienced difficulties in collecting payments from his

clients for the communication towers. Despite this fact, petitioner endeavored to pay his indebtedness

to Asiatrust, which payments during the period from September 1997 to July 1998 total approximately

PhP 1,500,000. Thus, absent proof that the proceeds have been actually and fully received by petitioner,

his obligation to turn over the same to Asiatrust never arose.

What is more, under the Trust Receipt Agreement itself, no date of maturity was stipulated. The

provision left blank by Asiatrust is 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 within ________ days from the date of execution

of the Trust Receipt x x x20

In fact, Asiatrust purposely left the space designated for the date blank, an action which in ordinary

banking transactions would be noted as highly irregular. Hence, the only way for the obligation to

mature was for Asiatrust to demand from petitioner to pay the obligation, which it never did.

Again, it also makes the Court wonder as to why Asiatrust decided to leave the provisions for the

maturity dates in the Trust Receipt agreements in blank, since those dates are elemental part of the

loan. But then, as can be gleaned from the records of this case, Asiatrust also knew that the capacity of

petitioner to pay for his loan also hinges upon the latters receivables from Islacom, Smart, and Infocom

where he had ongoing and future projects for fabrication and installation of steel communication towers

and not from the sale of said goods. Being a bank, Asiatrust acted inappropriately when it left such a

sensitive bank instrument with a void circumstance on an elementary but vital feature of each and every

loan transaction, that is, the maturity dates. Without stating the maturity dates, it was impossible for

petitioner to determine when the loan will be due.

Moreover, Asiatrust was aware that petitioner was not engaged in selling the subject goods and that

petitioner will use them for the fabrication and installation of communication towers. Before granting

petitioner the credit line, as aforementioned, Asiatrust conducted an investigation, which showed that

petitioner fabricated and installed communication towers for well-known communication companies to

be installed at designated project sites. In fine, there was no abuse of confidence to speak of nor was

there any intention to convert the subject goods for another purpose, since petitioner did not withhold

the fact that they were to be used to fabricate steel communication towers to Asiatrust. Hence, no

malice or abuse of confidence and misappropriation occurred in thi s instance due to Asiatrusts

knowledge of the facts.

Furthermore, Asiatrust was informed at the time of petitioners application for the loan that the

payment for the loan would be derived from the collectibles of his clients. Petitioner informed Asiatrust

that he was having extreme difficulties in collecting from Islacom the full contracted price of the towers.

Thus, the duty of petitioner to remit the proceeds of the goods has not yet arisen since he has yet to

receive proceeds of the goods. Again, petitioner could not be said to have misappropriated or converted

the proceeds of the transaction since he has not yet received the proceeds from his client, Islacom.

This Court also takes judicial notice of the fact that petitioner has fully paid his obligation to Asiatrust,making the claim for damage and prejudice of Asiatrust baseless and unfounded. Given that the

acceptance of payment by Asiatrust necessarily extinguished petitioners obligation, then there is no

longer any obligation on petitioners part to speak of, thus precluding Asiatrust from claiming any

damage. This is evidenced by Asiatrusts Affidavit of Desistance21 acknowledging full payment of the

loan.

Reasonable Doubt Exists

In the final analysis, the prosecution failed to prove beyond reasonable doubt that petitioner was guilty

of Estafa under Art. 315, par. 1(b) of the RPC in relation to the pertinent provision of PD 115 or the Trust

Receipts Law; thus, his liability should only be civil in nature.

While petitioner admits to his civil liability to Asiatrust, he nevertheless does not have criminal liability. It

is a well-established principle that person is presumed innocent until proved guilty. To overcome the

presumption, his guilt must be shown by proof beyond reasonable doubt. Thus, we held in People v.

Mariano22 that while the principle does not connote absolute certainty, it means the degree of proof

which produces moral certainty in an unprejudiced mind of the culpability of the accused. Such proof

should convince and satisfy the reason and conscience of those who are to act upon it that the accused is

in fact guilty. The prosecution, in this instant case, failed to rebut the constitutional innocence of

petitioner and thus the latter should be acquitted.

At this point, the ruling of this Court in Colinares v. Court of Appeals is very apt, thus:

The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place

them under the threats of criminal prosecution should they be unable to pay it may be unjust and

inequitable, if not reprehensible. Such agreements are contracts of adhesion which borrowers have no

option but to sign lest their loan be disapproved. The resort to this scheme leaves poor and hapless

borrowers at the mercy of banks, and is prone to misinterpretation x x x.23

Such is the situation in this case.

Asiatrusts intention became more evident when, on March 30, 2009, it, along with petitioner, filed their

Joint Motion for Leave to File and Admit Attached Affidavit of Desistance to qualify the Affidavit of

Desistance executed by Felino H. Esquivas, Jr., attorney-in-fact of the Board of Asiatrust, which

Documents

Spec Com (Trust Receipts Cases)