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SECOND DIVISION

[G.R. No. 199481. December 3, 2012.] ILDEFONSO S. CRISOLOGO, petitioner, vs. PEOPLE OF THE PHILIPPINES and CHINA BANKING CORPORATION, respondents.

DECISION

PERLAS-BERNABE, J :
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Sometime in January and February 1989, petitioner, as President of Novachemical Industries, Inc. (Novachem), applied for commercial letters of credit from private respondent China Banking Corporation (Chinabank) to finance the purchase of 1,600 4 kgs. of amoxicillin trihydrate micronized from Hyundai Chemical Company based in Seoul, South Korea and glass containers from San Miguel Corporation (SMC). Subsequently, Chinabank issued Letters of Credit Nos. 89/0301 5 and DOM-33041 6 in the respective amounts of US$114,400.00 7 (originally US$135,850.00) 8 with a peso equivalent of P2,139,119.80 9 and P1,712,289.90. After petitioner received the goods, he executed for and in behalf of Novachem the corresponding trust receipt agreements dated May 24, 1989 and August 31, 1989 in favor of Chinabank. On January 28, 2004, Chinabank, through its Staff Assistant, Ms. Maria Rosario De Mesa (Ms. De Mesa), filed before the City Prosecutor's Office of Manila a Complaint-Affidavit 10 charging petitioner for violation of P.D. No. 115 in relation to Article 315 1 (b) of the RPC for his purported failure to turn-over the goods or the proceeds from the sale thereof, despite repeated demands. It averred that the latter, with intent to defraud, and with unfaithfulness and abuse of confidence, misapplied, misappropriated and converted the goods subject of the trust agreements, to its damage and prejudice. In his defense, petitioner claimed that as a regular client of Chinabank, Novachem was granted a credit line and

This Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court assails the November 23, 2011 Decision 2 of the Court of Appeals (CA) in CA-G.R. CV No. 80350, which affirmed the December 4, 2002 Decision 3 of the Regional Trial Court (RTC), Manila, Branch 21. The RTC Decision acquitted petitioner Ildefonso S. Crisologo (petitioner) of the charges for violation of Presidential Decree (P.D.) No. 115 (Trust Receipts Law) in relation to Article 315 1 (b) of the Revised Penal Code (RPC), but adjudged him civilly liable under the subject letters of credit.
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The Factual Antecedents

letters of credit (L/Cs) secured by trust receipt agreements. The subject L/Cs were included in the special termpayment arrangement mutually agreed upon by the parties, and payable in installments. In the payment of its obligations, Novachem would normally give instructions to Chinabank as to what particular L/C or trust receipt obligation its payments would be applied. However, the latter deviated from the special arrangement and misapplied payments intended for the subject L/Cs and exacted unconscionably high interests and penalty charges. The City Prosecutor found probable cause to indict petitioner as charged and filed the corresponding informations before the RTC of Manila, docketed as Criminal Case Nos. 94-139613 and 94-139614. The RTC Ruling After due proceedings, the RTC rendered a Decision 11 dated December 4, 2002 acquitting petitioner of the criminal charges for failure of the prosecution to prove his guilt beyond reasonable doubt. It, however, adjudged him civilly liable to Chinabank, without need for a separate civil action, for the amounts of P1,843,567.90 and P879,166.81 under L/C Nos. 89/0301 and DOM-33041, respectively, less the payment of P500,000.00 made during the preliminary investigation, with legal interest from the filing of the informations on October 27, 1994 until full payment, and for the costs.

The CA Ruling On appeal of the civil aspect, the CA affirmed 12 the RTC Decision holding petitioner civilly liable. It noted that petitioner signed the "Guarantee Clause" of the trust receipt agreements in his personal capacity and even waived the benefit of excussion against Novachem. As such, he is personally and solidarily liable with Novachem.
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The Petition In the instant petition, petitioner contends that the CA erred in declaring him civilly liable under the subject L/Cs which are corporate obligations of Novachem, and that the adjudged amounts were without factual basis because the obligations had already been settled. He also questions the unilaterally-imposed interest rates applied by Chinabank and, accordingly, prays for the application of the stipulated interest rate of 18% per annum (p.a.) on the corporation's obligations. He further assails the authority of Ms. De Mesa to prosecute the case against him sans authority from Chinabank's Board of Directors. The Court's Ruling The petition is partly meritorious. Section 13 of the Trust Receipts Law explicitly provides that if the violation or offense is committed by a corporation, as in this case, the penalty provided for under

the law shall be imposed upon the directors, officers, employees or other officials or person responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense. In this case, petitioner was acquitted of the charge for violation of the Trust Receipts Law in relation to Article 315 1 (b) 13 of the RPC. As such, he is relieved of the corporate criminal liability as well as the corresponding civil liability arising therefrom. However, as correctly found by the RTC and the CA, he may still be held liable for the trust receipts and L/C transactions he had entered into in behalf of Novachem. Settled is the rule that debts incurred by directors, officers, and employees acting as corporate agents are not their direct liability but of the corporation they represent, except if they contractually agree/stipulate or assume to be personally liable for the corporation's debts, 14 as in this case. The RTC and the CA adjudged petitioner personally and solidarily liable with Novachem for the obligations secured by the subject trust receipts based on the finding that he signed the guarantee clauses therein in his personal capacity and even waived the benefit of excussion. However, a review of the records shows that petitioner signed only the guarantee clauses of the Trust Receipt dated May 24, 1989 15 and the corresponding Application and Agreement for Commercial Letter of Credit No. L/C No. 89/0301. 16 With respect to the Trust Receipt 17

dated August 31, 1989 and Irrevocable Letter of Credit 18 No. L/C No. DOM-33041 issued to SMC for the glass containers, the second pages of these documents that would have reflected the guarantee clauses were missing and did not form part of the prosecution's formal offer of evidence. In relation thereto, Chinabank stipulated 19 before the CA that the second page of the August 31, 1989 Trust Receipt attached to the complaint before the court a quo would serve as the missing page. A perusal of the said page, however, reveals that the same does not bear the signature of the petitioner in the guarantee clause. Hence, it was error for the CA to hold petitioner likewise liable for the obligation secured by the said trust receipt (L/C No. DOM-33041). Neither was sufficient evidence presented to prove that petitioner acted in bad faith or with gross negligence as regards the transaction that would have held him civilly liable for his actions in his capacity as President of Novachem.
aHSAIT

On the matter of interest, while petitioner assailed the unilateral imposition of interest at rates above the stipulated 18% p.a., he failed to submit a summary of the pertinent dates when excessive interests were imposed and the purported over-payments that should be refunded. Having failed to prove his affirmative defense, the Court finds no reason to disturb the amount awarded to Chinabank. Settled is the rule that in civil cases, the party who asserts the affirmative of an issue has the onus to prove his assertion in order to obtain a favorable judgment. Thus, the burden rests on the debtor to prove

payment rather than on the creditor to prove non-payment. 20 Lastly, the Court affirms Ms. De Mesa's capacity to sue on behalf of Chinabank despite the lack of proof of authority to represent the latter. The Court noted that as Staff Assistant of Chinabank, Ms. De Mesa was tasked, among others, to review applications for L/Cs, verify the documents of title and possession of goods covered by L/Cs, as well as pertinent documents under trust receipts (TRs); prepare/send/cause the preparation of statements of accounts reflecting the outstanding balance under the said L/Cs and/or TRs, and accept the corresponding payments; refer unpaid obligations to Chinabank's lawyers and follow-up results thereon. As such, she was in a position to verify the truthfulness and correctness of the allegations in the Complaint-Affidavit. Besides, petitioner voluntarily submitted 21 to the jurisdiction of the court a quo and did not question Ms. De Mesa's authority to represent Chinabank in the instant case until an adverse decision was rendered against him. WHEREFORE, the assailed November 23, 2011 Decision of the Court of Appeals in CA-G.R. CV No. 80350 is AFFIRMED with the modification absolving petitioner Ildefonso S. Crisologo from any civil liability to private respondent China Banking Corporation with respect to the Trust Receipt dated August 31, 1989 and L/C No. DOM-33041. The rest of the Decision stands. SO ORDERED.

Carpio, * Brion, Del Castillo and Perez, JJ., concur.


Footnotes

*Acting Chief Justice per Special Order No. 1384. 1.Rollo, pp. 9-35. 2.Penned by Associate Justice Noel G. Tijam, with Associate Justices Romeo F. Barza and Edwin D. Sorongon, concurring. Id. at 38-50. 3.Id. at 56-70. 4.Trust Receipt dated May 24, 1989. RTC records, p. 268. 5.Id. at 260. 6.Id. at 261. 7.Bill of Exchange. Id. at 267. 8.Id. at 268. 9.Disclosure Statement on Loan/Credit Transaction. Id. at 275. 10.Id. at 9-14. 11.Supra note 3.

12.Supra note 2. 13.Art. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned herein below shall be punished . . . : xxx xxx xxx 1. With unfaithfulness or abuse of confidence, namely: xxx xxx xxx (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. 14.Tupaz IV v. CA, G.R. No. 145578, November 18, 2005, 475 SCRA 398, 407. See also Canonigo v. Suico, G.R. No. 170284, March 16, 2007, citing MAM Realty Development Corporation v. NLRC, 244 SCRA 797, 802-803 (1995), where the Court said: "In MAM Realty Development Corporation v. NLRC, the Court stated: A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising

it. The general rule is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities. There are times, however, when solidary liabilities may be incurred but only when exceptional circumstances warrant such as in the following cases: 1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons; 2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto; 3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; or 4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.

xxx xxx xxx 15.RTC records, reverse side of page 268. 16.Id. at reverse side of page 260. 17.Id. at 271. 18.Id. at 261. 19.CA rollo, pp. 129-131. 20.Bank of the Philippine Islands v. Royeca, G.R. No. 176664, July 21, 2008, 559 SCRA 207, 215-216. 21.He entered a plea of not guilty on September 25, 1995. RTC records, p. 96.

THIRD DIVISION
[G.R. No. 164904. October 19, 2007.] JOSE ANTONIO U. GONZALEZ, petitioner, vs. HONGKONG & SHANGHAI BANKING CORPORATION, respondent.

D ECI SI ON

CHICO-NAZARIO, J :
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In this petition for review on certiorari 1 under Rule 45 of the Rules of Court, as amended, petitioner Jose Antonio U. Gonzalez (Gonzalez) seeks; 1) the reversal of the 13 January 2004 Decision, 2 and 6 August 2004 Resolution, 3 both of the Court of Appeals in CA-G.R. SP No. 75469; and 2) the dismissal of the complaint 4 for violation of Presidential Decree No. 115, otherwise known as the "Trust Receipts Law," in relation to Article 315 (1) (b) of the Revised Penal Code, filed by respondent Hongkong & Shanghai Banking Corporation (HSBC) against him before the City Prosecutor of Makati and docketed as I.S. No. 00-G-24734-35.
HCSEcI

The Court of Appeals, in its assailed decision and resolution, found no grave abuse of discretion on the part

of the Secretary and the succeeding Acting Secretary, both of the Department of Justice (DOJ), in their denial of petitioner Gonzalez's petition for review and motion for reconsideration, respectively. Consequently, the appellate court affirmed the 17 October 2002, 5 and 14 January 2003 6 twin resolutions of the DOJ, which in turn affirmed the 13 September 2000 Resolution, 7 of the City Prosecutor of Makati, recommending the filing of an Information for violation of Presidential Decree No. 115, in relation to Article 315 (1) (b) of the Revised Penal Code against petitioner Gonzalez. The case stemmed from a complaint filed by respondent HSBC against petitioner Gonzalez for estafa, more particularly, the violation of Presidential Decree No. 115, in relation to Art. 315 (1) (b) of the Revised Penal Code. The antecedents of the present petition are beyond dispute. They are: At the time of the incident subject of the case at bar, petitioner Gonzalez was the Chairman and Chief Executive Officer of Mondragon Leisure and Resorts Corporation (MLRC). MLRC is the owner, developer and operator of Mimosa Leisure Estate 8 located at the Clark Special Economic Zone (CSEZ), Clark Field, Pampanga. On 1 August 1997, petitioner Gonzalez, for and in behalf of MLRC, acknowledged receipt of various golfing equipments and assorted Walt Disney items, and signed the corresponding two Trust Receipt agreements, i.e., Trust Receipt No. 001-016310-205, 9 covering the various

golfing equipments, and Trust Receipt No. 001-016310206, 10 covering the assorted Walt Disney items, both in favor of respondent HSBC.
cAHIST

The due date for Trust Receipt No. 001-016310-205, for the value of HK$85,540.00, was on 1 September 1997, while that of Trust Receipt No. 001-016310-206, for the value of HK$143,993.90, was on 28 January 1998. When the due dates of subject Trust Receipts came and went without word from MLRC, respondent HSBC, through Paula L. Felipe (Felipe), Vice-President of respondent HSBC's Credit Control Department, in a letter 11 dated 28 March 2000, demanded from MLRC the turnover of the proceeds of the sale of the assorted goods covered by the Trust Receipts or the return of said goods. Despite demand, however, MLRC failed to return the assorted goods or their value. Consequently, Felipe, for respondent HSBC, filed a criminal complaint for estafa, i.e., for violation of Presidential Decree No. 115, the "Trust Receipts Law," in relation to Art. No. 315 (1) (b) of the Revised Penal Code against petitioner Gonzalez before the Office of the City Prosecutor of Makati, docketed as I.S. No. 00-G-24734-35. The complaint-affidavit contained the following allegations:
4. On August 1, 1997, Mr. Antonio U. Gonzalez, Chairman and Chief Executive of Mondragon, executed in favor of the Bank Trust Receipt No. 001-016310-205, by virtue of which he acknowledged receipt from the

Bank of "(Sporting Goods) Golf Equipments" (sic) with the value of HK$85,540.00. Under this trust receipt, Mr. Gonzalez bound himself to turn over to the Bank the proceeds of the sale of the goods or to return them in case of non-sale on January 28, 1998. xxx xxx xxx 5. On August 1, 1997, Mr. Gonzalez executed in favor of the Bank Trust Receipt No. 001016310-206, by virtue of which he acknowledged receipt from the Bank of "Assorted Disney Items" with the value of HK$143,993.90. Under this trust receipt, Mr. Gonzalez bound himself to turn over to the Bank the proceeds of the sale of the goods or to return them in case of non-sale on September 1, 1997.
aITECD

the purpose of selling the Goods unless you [HSBC] shall direct otherwise. 2. The Documents, the Goods and the proceeds of their sale are and will be held by the entrustee in trust for you [HSBC] as entruster and solely to your [HSBC] order and the entrustee shall pay the proceeds to you [HSBC], immediately on receipt thereof or of each portion thereof, as the case may be, without set-off or any deduction. The records of the entrustee shall properly record your [HSBC] interest in the Goods. xxx xxx xxx 10. This Trust Receipt shall be governed and construed in all respects in accordance with P.D. 115 otherwise known as Trust Receipts Law.'
TIDcEH

xxx xxx xxx 6. All the abovementioned trust receipts . . . executed by the respondents ( sic) contain the following provisions: '1. The Document and the goods and/or proceeds to which they relate ("The Goods") will be held for your [HSBC] benefit and the entrustee will receive the Documents and take delivery of the Good exclusively for

7. Despite repeated oral and written demands upon respondent, respondent has not turned over to the Bank a single centavo of the proceeds of the sale of the abovementioned goods covered by the Trust Receipts, or returned any of the goods. 12

In his defense, petitioner Gonzalez countered that:

2. At the outset, it must be stressed that the transactions subject of the instant Complaint are between the complainant bank and Mondragon Leisure and Resorts Corporation ("MLRC") and that the officers of the latter, including respondent herein, in all of their official acts and transactions, are not acting in their own personal capacity but, rather, are merely acting on behalf of the corporation and performing a valid corporate act pursuant to a validly enacted resolution of the Board of Directors. 3. Moreover, it is clear that I cannot be held criminally responsible for alleged violation of the Trust Receipts subject hereof. The aforesaid transactions, while reportedly denominated as "Trust Receipts" were not really intended by the parties to be trust receipt transaction within the purview of P.D. 115. At best, they are loan transactions, for which the respondent cannot be held criminally liable. xxx xxx xxx 6. . . . respondent, who merely performed a valid corporate act may not be held personally and criminally liable therefore ( sic), absent a clear showing of fault or negligence on his part . . ..

7. . . . it is required that the person charged with estafa pursuant to a trust receipt transaction must be proved to have misappropriated, misused or converted to his own personal use to the damage of the entruster, the proceeds of the goods covered by the trust receipts. Thus, mere failure to pay the amounts covered by the trust receipts does not conclusively constitute estafa as defined under P.D. 115 and the Revised Penal Code.
AEHTIC

8. . . . . [W]hile respondent may have failed on behalf of MLRC (which is actually the debtor) to make payments on the due dates, such failure is neither attributable to respondent or due to his wrongdoing or fault but on account of circumstances concerning the corporation . ... xxx xxx xxx 13. . . . there was a tacit agreement among the parties that defendant, being a stable company with good credit standing, would be accorded leniency and given enough leeway in the settlement of its obligations. xxx xxx xxx 17. . . . the unlawful closure of the Casino by CDC and PAGCOR, coupled with the Asian economic crisis, severely affected its ability to pay its creditors, including complainant bank

herein, which have an aggregate exposure of about P5.3 Billion in Mondragon. These events rendered it impossible for MLRC to duly comply with its financial obligations. These events barred plaintiff bank from declaring MLRC's obligation due and demandable, and consequently from declaring MLRC in default. Thus, since MLRC is not in default, respondents herein cannot be charged for estafa as the obligations on the basis of which they are being charged are not yet due and demandable. 13
CHIEDS

Following the requisite preliminary investigation, in a Resolution dated 13 September 2000, the City Prosecutor found probable cause to hold petitioner Gonzalez liable for two counts of estafa, more specifically, the violation of Presidential Decree No. 115, in relation to Art. 315 (1) (b) of the Revised Penal Code. The City Prosecutor recommended that:
WHEREFORE, premises considered, it is respectfully recommended that respondent Jose Antonio U. Gonzalez be indicted with two (2) counts of Violation of P.D. 115 and that the attached Information for that purpose be approved for filing in court. 14

After study, assessment and thorough evaluation of the evidence obtaining in this case at bar, the undersigned finds probable cause to warrant respondent's indictment with the offense charge ( sic) all the elements of which are obtaining under the aforementioned circumstances. This is so because respondent admitted having executed the trust receipts subject matter of the case in point. The defense raised by the respondent though it appears to be meritorious are ( sic) matters of defense best left for the court to consider and appreciate during trial of the case. As shown above, the failure of the entrustee/respondent to account for the goods covered by the two (2) Trust Receipts which he received after notice and demand caused him to be liable for two (2) counts of violation of P.D. 115. 15

On 24 October 2000, petitioner Gonzalez appealed the foregoing resolution of the City Prosecutor to the DOJ by means of a petition for review. In a Resolution dated 17 October 2002, Honorable Hernando B. Perez, then Secretary of the DOJ, denied said petition. In affirming the resolution of the City Prosecutor of Makati, the Secretary held that:
The gravamen of violation of PD 115 is the failure to account, upon demand, for fund or property held in trust by virtue of a trust

In finding probable cause to prosecute petitioner Gonzalez for the crime supposedly committed, the City Prosecutor held that:

receipt . . .. This failure, being clearly present in the instant case, prima facie evidence of misappropriation lies. A fortiori, the charges of dishonesty and abuse of confidence will hold. 16
EaISDC

Subsequently, on 14 January 2003, Hon. Merceditas N. Gutierrez, then Acting Secretary of the DOJ, denied the motion for reconsideration of petitioner Gonzalez. Undaunted, petitioner Gonzalez went to the Court of Appeals via a Petition for Review under Rule 43 19 of the Rules of Court, as amended. On 13 January 2004, the Court of Appeals promulgated its Decision denying petitioner Gonzalez's recourse for lack of merit.
CaDATc

Further, the Secretary ruled that:


The allegation of respondent that he cannot be made liable for the offense as he was just performing a valid corporate act is untenable . . . . The respondent being the Chairman and Chief Executive Officer and the person who signed the trust receipts, there can be no doubt that there is no other person who can be considered as more responsible than him. He appears to be the most responsible person contemplated under the aforesaid provision of P.D. 115. Finally, we agree with the Prosecutor's findings that the other defenses raised by the respondent are evidentiary in nature and best left to the sound appreciation of the court in the course of the trial. 17

The appellate court, notwithstanding the procedural infirmity, as the petition filed under Rule 43 of the Rules of Court, as amended, was the wrong mode of appeal, took cognizance of and proceeded to resolve the petition based on substantive grounds. In holding that no grave abuse of discretion amounting to lack or excess of jurisdiction tainted the actions of the Secretary as well as the Acting Secretary of the DOJ in denying petitioner Gonzalez's petition, the decision explained that:
In the case at bar, it is decisively clear that petitioner executed the trust receipts in behalf of MLRC and that there was a failure to turn over the proceeds from the goods sold and the goods themselves subject of the trust receipts despite demand from the respondent bank. Such failure to account or turn over the proceeds or to return the goods subject of the trust receipts gives rise to the crime punished under the Trust Receipts Law. [Citation

The dispositive of the resolution provides:


WHEREFORE, the assailed resolution is hereby AFFIRMED and consequently, the petition is DENIED. 18

omitted.] Petitioner is ventilating before us the merits of his causes or defenses, but this is not the occasion for the full and exhaustive display of evidence. The presence or absence of the elements of the crime is evidentiary in nature and shall be passed upon after a fullblown trial on the merits. Petitioner's defenses are matters best left to the discretion of the court during trial. 20

The fallo of the preceding decision reads:


WHEREFORE, the petition is DENIED for lack of merit. 21

ARTICLE 315, PARAGRAPH 1 (B) OF THE REVISED PENAL CODE WHICH REQUIRES THAT THE PERSON CHARGED WITH ESTAFA PURSUANT TO A TRUST RECEIPT TRANSACTION MUST BE PROVED TO HAVE MISAPPROPRIATED, MISUSED OR CONVERTED TO HIS PERSONAL USE THE PROCEEDS OF THE GOODS COVERED BY THE TRUST RECEIPTS TO THE DAMAGE OF THE ENTRUSTER; and II. NO PROBABLE CAUSE EXISTS TO WARRANT THE INDICTMENT OF PETITIONER FOR VIOLATION OF SECTION 13 OF PRESIDENTIAL DECREE 115. 22
cDTCIA

Petitioner's motion for reconsideration was likewise denied in a Resolution dated 6 August 2004. Hence, the present petition filed under Rule 45 of the Rules of Court, as amended. In the present petition, petitioner Gonzalez fundamentally seeks to reverse the ruling of the Court of Appeals on the following grounds:
I. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN NOT FINDING THAT FOR A VALID INDICTMENT UNDER PRESIDENTIAL DECREE NO. 115 TO LIE, THE SAID LAW MUST BE READ IN CONJUNCTION WITH

On the whole, the basic issue presented before this Court in this petition is, given the facts of the case, whether or not there is probable cause to hold petitioner Gonzalez liable to stand trial for violation of Presidential Decree No. 115, in relation to Art. 315 (1) (b) of the Revised Penal Code. Petitioner Gonzalez contends that the Court of Appeals committed manifest error in ruling, that, probable cause existed to hold him liable to stand trial merely on the basis of "his admission that he executed the trust receipts subject matter of the case below and his failure to account

for the goods covered by the same." 23 He argues that the City Prosecutor of Makati and the DOJ failed to appreciate two important facts: 1) that the real transaction that led to the present controversy was in fact a loan agreement; and 2) that MLRC simply extended to Best Price PX, Inc., the owner and operator of Mimosa Mart at the CESZ, its credit line with respondent HSBC, such that Best Price was the actual debtor of respondent bank. Paradoxically, he maintains that "the fact that (he) held a high position in MLRC was not sufficient reason to charge him for alleged violation of trust receipts." 24 He insists further that he is not the person responsible for the offense allegedly committed because of the absence of "a clear showing of fault or negligence on his part." According to petitioner Gonzalez, "President (sic) Decree No. 115 must be read in conjunction with Article 315, paragraph 1 (b) of the Revised Penal Code . . . under both . . . it is required that the person charged with estafa pursuant to a trust receipt transaction must be proved to have misappropriated, misused or converted to his own personal use the proceeds of the goods covered by the trust receipts to the damage of the entruster." Thus, petitioner concludes that "mere failure to pay the amounts covered by the trust receipts does not conclusively constitute estafa as defined under Presidential Decree No. 115 and Article 315, paragraph 1 (b)." Respondent HSBC, on the other hand, contends that "petitioner is criminally liable since he signed the trust receipts . . .;" 25 and, that, "[f]raud is not necessary for conviction for violation of the Trust Receipts Law," 26 the

latter being in the nature of a malum prohibitum decree. On the issue of company reverses, Asian currency crisis and the closure of the Mimosa Regency Casino, respondent HSBC counters that "[t]hey do not excuse petitioner for his failure to comply with his obligations under the trust receipts," 27 because unlike "motor vehicles or parcels of land, which are frequently purchased on credit or on installment basis," 28 the goods covered by the two trust receipts, i.e., assorted Disney items and various golfing equipments, are usually paid for in cash upon receipt by buyers; and if not sold, the merchandise should still be with MLRC. Hence, there was no reason for petitioner Gonzalez's failure to comply with his obligation under the two Trust Receipts to turn over the proceeds of the sale of the goods or to return the goods if they remained unsold.
STcEIC

We find no merit in the petition. We agree with the Court of Appeals that no grave abuse of discretion amounting to lack or excess of jurisdiction marred the assailed resolutions of the DOJ. Herein, petitioner Gonzalez questions the finding of probable cause by the City Prosecutor to hold him liable to stand trial for the crime complained of. Probable cause has been defined as the existence of such facts and circumstances as would excite the belief in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. 29 A finding of probable

cause merely binds over the suspect to stand trial. It is not a pronouncement of guilt. 30 To determine the existence of probable cause, there is a need to conduct preliminary investigation. A preliminary investigation 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. Such investigation is designed to secure the (accused) against hasty, malicious and oppressive prosecution, the conduct of which is executive in nature.
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only review whether or not the executive determination of probable cause was done without or in excess of jurisdiction resulting from grave abuse of discretion. Thus, although it is entirely possible that the investigating prosecutor may erroneously exercise the discretion lodged in him by law, this does not render his act amenable to correction and annulment by the extraordinary remedy of certiorari, absent any showing of grave abuse of discretion amounting to excess of jurisdiction. 35
acAESC

The executive department of the government is accountable for the prosecution of crimes, its principal obligation being the faithful execution of the laws of the land. A necessary component of the power to execute the laws is the right to prosecute their violators. 32 Corollary to this, the right to prosecute vests the prosecutor with a wide range of discretion, the discretion of whether, what and whom to charge, the exercise of which depends on a smorgasbord of factors which are best appreciated by prosecutors. 33 Having said the foregoing, this Court consistently adheres to the policy of non-interference in the conduct of preliminary investigations, and to leave to the investigating prosecutor sufficient latitude of discretion in the determination of what constitutes sufficient evidence as will establish probable cause for the filing of an information against the supposed offender, 34 courts can

And for courts of law to grant the extraordinary writ of certiorari, so as to justify the reversal of the finding on the existence of probable cause to file an information, the one seeking the writ must be able to establish that the investigating prosecutor exercised his power in an arbitrary and despotic manner, by reason of passion or personal hostility, and it must be patent and gross as would amount to an evasion or to a unilateral refusal to perform the duty enjoined or to act in contemplation of law. Grave abuse of discretion is not enough. 36 Excess of jurisdiction signifies that he had jurisdiction over the case but has transcended the same or acted without authority. 37 Try as we might, this Court cannot find substantiation that the executive determination of probable cause was done without or in excess of jurisdiction resulting from grave abuse of discretion, when the City Prosecutor resolved to recommend the filing of the Information for two counts of violation of Presidential Decree No. 115 against petitioner Gonzalez. Similarly, there is absolutely no showing that

the DOJ, in the exercise of its power to review on appeal the findings of the City Prosecutor of Makati, acted in an arbitrary or despotic manner that amounted to an excess or lack of jurisdiction. In the case at bar, petitioner Gonzalez is charged by respondent HSBC with violating Presidential Decree No. 115. Section 4 of the "Trust Receipts Law" defines a trust receipt transaction 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 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 good, documents or instruments by a person in the business of selling goods, documents or instruments for profit who, at the outset of 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.
HCITDc

In general, 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. 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, 38 while the second refers to merchandise received under the obligation to "return" it (devolvera) to the owner. 39 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, viz:
Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article Three Hundred and Fifteen, paragraph one (b) of Act Numbered Three Thousand Eight Hundred and fifteen, as amended, otherwise known as the Revised

Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense.
cSaATC

Article 315 (1) (b) of the Revised Penal Code punishes estafa committed as follows:
1. With unfaithfulness or abuse of confidence, namely: xxx xxx xxx (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.
aAcDSC

As found in the complaint-affidavit of respondent HSBC's representative, petitioner Gonzalez is charged with failing to turn over "to the Bank a single centavo of the proceeds of the sale of the (assorted) goods covered by the Trust Receipts, or . . ." 40 or to return any of the assorted goods. From the evidence adduced before the City Prosecutor of Makati i.e., 1) the two Trust Receipts bearing the acknowledgment signature of petitioner Gonzalez; 2) the official documents concerning the transaction between MLRC and respondent HSBC; 3) the demand letter of respondent HSBC; and, significantly, 4) the counteraffidavit of petitioner Gonzalez containing his initial admission that on behalf of MLRC, he entered into a trust receipt transaction with respondent HSBC the investigating officer determined that there existed probable cause to hold petitioner Gonzalez for trial for the crime charged. Time and again, this Court has stated that probable cause need not be based on clear and convincing evidence of guilt, neither on evidence establishing guilt beyond reasonable doubt and, definitely, not on evidence establishing absolute certainty of guilt; but it certainly demands more than bare suspicion and can never be left to presupposition, conjecture, or even convincing logic. 41 In the present case, there being sufficient evidence to support the finding of probable cause by the City Prosecutor of Makati, the same cannot be said to have resulted from bare suspicion, presupposition, conjecture or logical deduction. 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. 42 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. 43
ECaHSI

As a last ditch effort to exculpate himself from the offense charged, petitioner Gonzalez posits that, "the fact that (he) held a high position in MLRC was not sufficient reason to charge him for alleged violation of trust receipts." 44 Unfortunately, it is but a futile attempt. Though petitioner Gonzalez signed the Trust Receipts merely as a corporate officer of MLRC and had no physical possession of the goods subject of such receipts, he cannot avoid responsibility for violation of Presidential Decree No. 115 for two unpretentious reasons: first, that the last sentence of Section 13 of the "Trust Receipts Law," explicitly imposes the penalty provided therein upon "directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense," of a

corporation, partnership, association or other juridical entities found to have violated the obligation imposed under the law. The rationale for making such officers and employees responsible for the offense is that they 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. 45 And second, a corporation or other juridical entity cannot be arrested and imprisoned; hence, cannot be penalized for a crime punishable by imprisonment. 46

Secretary of the DOJ in directing the filing of the Information against petitioner Gonzalez for violation of Presidential Decree No. 115 in relation to Article 315 (1) (b) of the Revised Penal Code. WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The assailed 13 January 2004 Decision and 6 August 2004 Resolution, both of the Court of Appeals in CA-G.R. SP No. 75469 are hereby AFFIRMED. Costs against petitioner.
EDcIAC

SO ORDERED. Petitioner Gonzalez's allegation that Best Price PX, Inc. is the real party in the trust receipt transaction and his assertion that the real transaction between respondent HSBC and MLRC is a loan agreement, are matters of defense best left to the trial court's deliberation and contemplation after conducting the trial of the criminal case. To reiterate, a preliminary investigation for the purpose of determining the existence of probable cause is not part of the trial. A full and exhaustive presentation of the parties' evidence is not required, but only such as may engender a well-grounded belief that an offense has been committed and that the accused is probably guilty thereof. 47 In fine, the Court of Appeals committed no reversible error when it ruled that there was no grave abuse of discretion on the part of the Secretary and Acting Ynares-Santiago, Austria-Martinez, Nachura and Reyes, JJ., concur.
Footnotes 1. Rollo, pp. 11-38. 2. Penned by Court of Appeals Associate Justice Perlita J. Tria-Tirona with Associate Justices Portia AlioHormachuelos and Rosalinda Asuncion-Vicente concurring; Annex "A" of the Petition; id. at 39-46. 3. Annex "B" of the Petition; id. at 48-49. 4. Annex "E" of the Petition; id. at 53-54. 5. Annex "K" of the Petition; id. at 92-94. 6. Annex "M" of the Petition; id. at 111-112.

7. Annex "I" of the Petition; id. at 68-69. 8. Composed of The Mimosa Golf and Country Club, the Holiday Inn Resort Clark Field, the Monte Vista Hotel and the Mimosa Regency Casino. 9. Annex "1" of respondent HSBC's Comment; rollo, p. 195. 10. Annex "2" of respondent HSBC's Comment; id. at 196. 11. Annex "3" of respondent HSBC's Comment; id. at 197198. 12. Annex "E" of the Petition; id. at 53-54.

21. Id. 22. Petition, pp. 14-15; id. at 24-25. 23. Petitioner Gonzalez's Memorandum, p. 14; id. at 309. 24. Petitioner Gonzalez's Memorandum, p. 16; id. at 311. 25. Respondent HSBC's Memorandum, p. 7; id. at 260. 26. Id. 27. Id. at 263. 28. Id. at 264.

13. Petitioner Gonzalez's Counter-Affidavit; Annex "F" of the Petition; id. at 55-57.
aHDTAI

29. R.R. Paredes v. Calilung, G.R. No. 156055, 5 March 2007, 517 SCRA 369, 394. 30. Webb v. Hon. De Leon, 317 Phil. 758, 789 (1995).
cAaTED

14. Id. at 69. 15. Id. 16. Id. at 93. 17. Id. 18. Id. 19. APPEALS FROM THE COURT OF TAX APPEALS AND QUASI-JUDICIAL AGENCIES TO THE COURT OF APPEALS. 20. Rollo, pp. 44-45. 31. Lim, Sr. v. Felix, G.R. No. 94054-57, 19 February 1991, 194 SCRA 292, 304. 32. R.R. Paredes v. Calilung, supra note 29 at 394. 33. Webb v. Hon. De Leon, supra note 30 at 800. 34. Andres v. Cuevas, G.R. No. 150869, 9 June 2005, 460 SCRA 38, 52. 35. D.M. Consuji, Inc. v. Esguerra, 328 Phil. 1168, 1185 (1996).

36. R.R. Paredes v. Calilung, supra note 29 at 397. 37. Sarigumba v. Sandiganbayan, G.R. Nos. 154239-41, 16 February 2005, 451 SCRA 533, 549. 38. People v. Cuevo, 191 Phil. 622, 630 (1981). 39. Id. 40. Rollo, pp. 53-54. 41. Kilosbayan, Inc. v. COMELEC, 345 Phil. 1141, 1174 (1997). 42. People v. Nitafan, G.R. Nos. 81559-60, 6 April 1992, 207 SCRA 726, 731.

SECOND DIVISION
[G.R. No. 166884. June 13, 2012.] LAND BANK OF THE PHILIPPINES, petitioner, vs. LAMBERTO C. PEREZ, NESTOR C. KUN, MA. ESTELITA P. ANGELES-PANLILIO, and NAPOLEON O. GARCIA, respondents.

DECISION

BRION, J :
p

43. Colinares v. Court of Appeals, 394 Phil. 106, 120 (2000). 44. Rollo, pp. 55-57. 45. Ching v. Secretary of Justice, G.R. No. 164317, 6 February 2006, 481 SCRA 609, 635, citing U.S. v. Park, 421 U.S. 658, 95, S.Ct. 1903 (1975). 46. Ong v. Court of Appeals, 449 Phil. 691, 704 (2003). 47. Ledesma v. Court of Appeals, 344 Phil. 207, 226 (1997).
SHADcT

Before this Court is a petition for review on certiorari, 1 under Rule 45 of the Rules of Court, assailing the decision 2 dated January 20, 2005 of the Court of Appeals in CAG.R. SP No. 76588. In the assailed decision, the Court of Appeals dismissed the criminal complaint for estafa against the respondents, Lamberto C. Perez, Nestor C. Kun, Ma. Estelita P. Angeles-Panlilio and Napoleon Garcia, who allegedly violated Article 315, paragraph 1 (b) of the Revised Penal Code, in relation with Section 13 of Presidential Decree No. (P.D.) 115 the "Trust Receipts Law." Petitioner Land Bank of the Philippines (LBP) is a government financial institution and the official

depository of the Philippines. 3 Respondents are the officers and representatives of Asian Construction and Development Corporation (ACDC), a corporation incorporated under Philippine law and engaged in the construction business. 4 On June 7, 1999, LBP filed a complaint for estafa or violation of Article 315, paragraph 1 (b) of the Revised Penal Code, in relation to P.D. 115, against the respondents before the City Prosecutor's Office in Makati City. In the affidavit-complaint 5 of June 7, 1999, the LBP's Account Officer for the Account Management Development, Edna L. Juan, stated that LBP extended a credit accommodation to ACDC through the execution of an Omnibus Credit Line Agreement (Agreement) 6 between LBP and ACDC on October 29, 1996. In various instances, ACDC used the Letters of Credit/Trust Receipts Facility of the Agreement to buy construction materials. The respondents, as officers and representatives of ACDC, executed trust receipts 7 in connection with the construction materials, with a total principal amount of P52,344,096.32. The trust receipts matured, but ACDC failed to return to LBP the proceeds of the construction projects or the construction materials subject of the trust receipts. LBP sent ACDC a demand letter, 8 dated May 4, 1999, for the payment of its debts, including those under the Trust Receipts Facility in the amount of P66,425,924.39. When ACDC failed to comply with the demand letter, LBP filed the affidavit-complaint.
TAcSaC

The respondents filed a joint affidavit 9 wherein they stated that they signed the trust receipt documents on or about the same time LBP and ACDC executed the loan documents; their signatures were required by LBP for the release of the loans. The trust receipts in this case do not contain (1) a description of the goods placed in trust, (2) their invoice values, and (3) their maturity dates, in violation of Section 5 (a) of P.D. 115. Moreover, they alleged that ACDC acted as a subcontractor for government projects such as the Metro Rail Transit, the Clark Centennial Exposition and the Quezon Power Plant in Mauban, Quezon. Its clients for the construction projects, which were the general contractors of these projects, have not yet paid them; thus, ACDC had yet to receive the proceeds of the materials that were the subject of the trust receipts and were allegedly used for these constructions. As there were no proceeds received from these clients, no misappropriation thereof could have taken place. On September 30, 1999, Makati Assistant City Prosecutor Amador Y. Pineda issued a Resolution 10 dismissing the complaint. He pointed out that the evidence presented by LBP failed to state the date when the goods described in the letters of credit were actually released to the possession of the respondents. Section 4 of P.D. 115 requires that the goods covered by trust receipts be released to the possession of the entrustee after the latter's execution and delivery to the entruster of a signed trust receipt. He adds that LBP's evidence also fails to show the

date when the trust receipts were executed since all the trust receipts are undated. Its dispositive portion reads:
WHEREFORE, premises considered, and for insufficiency of evidence, it is respectfully recommended that the instant complaints be dismissed, as upon approval, the same are hereby dismissed. 11

(1) (b) of the Revised Penal Code in relation to Section 13, Presidential Decree No. 115 against respondents Lamberto C. Perez, Nestor C. Kun, [Ma. Estelita P. AngelesPanlilio] and Napoleon O. Garcia and to report the action taken within ten (10) days from receipt hereof. 14

LBP filed a motion for reconsideration which the Makati Assistant City Prosecutor denied in his order of January 7, 2000. 12 On appeal, the Secretary of Justice reversed the Resolution of the Assistant City Prosecutor. In his resolution of August 1, 2002, 13 the Secretary of Justice pointed out that there was no question that the goods covered by the trust receipts were received by ACDC. He likewise adopted LBP's argument that while the subjects of the trust receipts were not mentioned in the trust receipts, they were listed in the letters of credit referred to in the trust receipts. He also noted that the trust receipts contained maturity dates and clearly set out their stipulations. He further rejected the respondents' defense that ACDC failed to remit the payments to LBP due to the failure of the clients of ACDC to pay them. The dispositive portion of the resolution reads:
ACIESH

The respondents filed a motion for reconsideration of the resolution dated August 1, 2002, which the Secretary of Justice denied. 15 He rejected the respondents' submission that Colinares v. Court of Appeals 16 does not apply to the case. He explained that in Colinares, the building materials were delivered to the accused before they applied to the bank for a loan to pay for the merchandise; thus, the ownership of the merchandise had already been transferred to the entrustees before the trust receipts agreements were entered into. In the present case, the parties have already entered into the Agreement before the construction materials were delivered to ACDC. Subsequently, the respondents filed a petition for review before the Court of Appeals. After both parties submitted their respective Memoranda, the Court of Appeals promulgated the assailed decision of January 20, 2005. 17 Applying the doctrine in Colinares, it ruled that this case did not involve a trust receipt transaction, but a mere loan. It emphasized that construction materials, the subject of the trust receipt transaction, were delivered to ACDC even before the trust receipts were executed. It noted

WHEREFORE, the assailed resolution is REVERSED and SET ASIDE. The City Prosecutor of Makati City is hereby directed to file an information for estafa under Art. 315

that LBP did not offer proof that the goods were received by ACDC, and that the trust receipts did not contain a description of the goods, their invoice value, the amount of the draft to be paid, and their maturity dates. It also adopted ACDC's argument that since no payment for the construction projects had been received by ACDC, its officers could not have been guilty of misappropriating any payment. The dispositive portion reads:
WHEREFORE, in view of the foregoing, the Petition is GIVEN DUE COURSE. The assailed Resolutions of the respondent Secretary of Justice dated August 1, 2002 and February 17, 2003, respectively in I.S. No. 99F-9218-28 are hereby REVERSED and SET ASIDE. 18

informed the Court that LBP had already assigned to Philippine Opportunities for Growth and Income, Inc. all of its rights, title and interests in the loans subject of this case in a Deed of Absolute Sale dated June 23, 2005 (attached as Annex "C" of the motion). The respondents also stated that Avent Holdings Corporation, in behalf of ACDC, had already settled ACDC's obligation to LBP on October 8, 2009. Included as Annex "A" in this motion was a certification 21 issued by the Philippine Opportunities for Growth and Income, Inc., stating that it was LBP's successor-in-interest insofar as the trust receipts in this case are concerned and that Avent Holdings Corporation had already settled the claims of LBP or obligations of ACDC arising from these trust receipts. We deny this petition. The disputed transactions are not trust receipts. Section 4 of P.D. 115 defines a trust receipt transaction in this manner:
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

LBP now files this petition for review on certiorari, dated March 15, 2005, raising the following error:
AEIDTc

THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND SET ASIDE THE RESOLUTIONS OF THE HONORABLE SECRETARY OF JUSTICE BY APPLYING THE RULING IN THE CASE OF COLINARES V. COURT OF APPEALS, 339 SCRA 609, WHICH IS NOT APPLICABLE IN THE CASE AT BAR. 19

On April 8, 2010, while the case was pending before this Court, the respondents filed a motion to dismiss. 20 They

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:
cCHITA

There are two obligations in a trust receipt transaction. The first is covered by the provision that refers to money under the obligation to deliver it (entregarla) to the owner of the merchandise sold. The second is covered by the provision referring to merchandise received under the obligation to return it (devolvera) to the owner. Thus, under the Trust Receipts Law, 22 intent to defraud is presumed when (1) the entrustee fails to turn over the proceeds of the sale of goods covered by the trust receipt to the entruster; or (2) when the entrustee fails to return the goods under trust, if they are not disposed of in accordance with the terms of the trust receipts. 23 In all trust receipt transactions, both obligations on the part of the trustee exist in the alternative the return of the proceeds of the sale or the return or recovery of the goods, whether raw or processed. 24 When both parties enter into an agreement knowing that the return of the goods subject of the trust receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt transaction penalized under Section 13 of P.D. 115; the only obligation actually agreed upon by the parties would be the return of the proceeds of the sale transaction. This transaction becomes a mere loan, 25 where the borrower is obligated to pay the bank the amount spent for the purchase of the goods. Article 1371 of the Civil Code provides that "[i]n order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered." Under this provision, we can examine the

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 tranship or otherwise deal with them in a manner preliminary or necessary to their sale[.]

contemporaneous actions of the parties rather than rely purely on the trust receipts that they signed in order to understand the transaction through their intent.
IAEcCa

domain. As an immovable property, the ownership of whatever was constructed with those materials would presumably belong to the owner of the land, under Article 445 of the Civil Code which provides:
Article 445.Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong to the owner of the land, subject to the provisions of the following articles.

We note in this regard that at the onset of these transactions, LBP knew that ACDC was in the construction business and that the materials that it sought to buy under the letters of credit were to be used for the following projects: the Metro Rail Transit Project and the Clark Centennial Exposition Project. 26 LBP had in fact authorized the delivery of the materials on the construction sites for these projects, as seen in the letters of credit it attached to its complaint. 27 Clearly, they were aware of the fact that there was no way they could recover the buildings or constructions for which the materials subject of the alleged trust receipts had been used. Notably, despite the allegations in the affidavit-complaint wherein LBP sought the return of the construction materials, 28 its demand letter dated May 4, 1999 sought the payment of the balance but failed to ask, as an alternative, for the return of the construction materials or the buildings where these materials had been used. 29 The fact that LBP had knowingly authorized the delivery of construction materials to a construction site of two government projects, as well as unspecified construction sites, repudiates the idea that LBP intended to be the owner of those construction materials. As a government financial institution, LBP should have been aware that the materials were to be used for the construction of an immovable property, as well as a property of the public

Even if we consider the vague possibility that the materials, consisting of cement, bolts and reinforcing steel bars, would be used for the construction of a movable property, the ownership of these properties would still pertain to the government and not remain with the bank as they would be classified as property of the public domain, which is defined by the Civil Code as:
Article 420.The following things are property of public dominion: (1)Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2)Those which belong to the State, without being for public use, and are intended for

some public service or for the development of the national wealth.


HAaScT

In contrast with the present situation, it is fundamental in a trust receipt transaction that the person who advanced payment for the merchandise becomes the absolute owner of said merchandise and continues as owner until he or she is paid in full, or if the goods had already been sold, the proceeds should be turned over to him or to her. 30 Thus, in concluding that the transaction was a loan and not a trust receipt, we noted in Colinares that the industry or line of work that the borrowers were engaged in was construction. We pointed out that the borrowers were not importers acquiring goods for resale. 31 Indeed, goods sold in retail are often within the custody or control of the trustee until they are purchased. In the case of materials used in the manufacture of finished products, these finished products if not the raw materials or their components similarly remain in the possession of the trustee until they are sold. But the goods and the materials that are used for a construction project are often placed under the control and custody of the clients employing the contractor, who can only be compelled to return the materials if they fail to pay the contractor and often only after the requisite legal proceedings. The contractor's difficulty and uncertainty in claiming these materials (or the buildings and structures which they become part of), as soon as the bank demands them, disqualify them from being covered by trust receipt agreements.
EHTIDA

Based on these premises, we cannot consider the agreements between the parties in this case to be trust receipt transactions because (1) from the start, the parties were aware that ACDC could not possibly be obligated to reconvey to LBP the materials or the end product for which they were used; and (2) from the moment the materials were used for the government projects, they became public, not LBP's, property. Since these transactions are not trust receipts, an action for estafa should not be brought against the respondents, who are liable only for a loan. In passing, it is useful to note that this is the threat held against borrowers that Retired Justice Claudio Teehankee emphatically opposed in his dissent in People v. Cuevo, 32 restated in Ong v. CA, et al. :
33

The very definition of trust receipt . . . sustains the lower court's rationale in dismissing the information that the contract covered by a trust receipt is merely a secured loan. The goods imported by the small importer and retail dealer through the bank's financing remain of their own property and risk and the old capitalist orientation of putting them in jail for estafa for non-payment of the secured loan (granted after they had been fully investigated by the bank as good credit risks) through the fiction of the trust receipt device should no longer be permitted in this day and age.

As the law stands today, violations of Trust Receipts Law are criminally punishable, but no criminal complaint for violation of Article 315, paragraph 1 (b) of the Revised Penal Code, in relation with P.D. 115, should prosper against a borrower who was not part of a genuine trust receipt transaction. Misappropriation or abuse of confidence is absent in this case. Even if we assume that the transactions were trust receipts, the complaint against the respondents still should have been dismissed. 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 singularly seek to enforce payment of the loan, as "there can be no violation of [the] right against imprisonment for non-payment of a debt." 34
TCAScE

trustor] for the remittance of the proceeds or the return of the unsold goods." 36 In this case, no dishonesty or abuse of confidence existed in the handling of the construction materials. In this case, the misappropriation could be committed should the entrustee fail to turn over the proceeds of the sale of the goods covered by the trust receipt transaction or fail to return the goods themselves. The respondents could not have failed to return the proceeds since their allegations that the clients of ACDC had not paid for the projects it had undertaken with them at the time the case was filed had never been questioned or denied by LBP. What can only be attributed to the respondents would be the failure to return the goods subject of the trust receipts. We do not likewise see any allegation in the complaint that ACDC had used the construction materials in a manner that LBP had not authorized. As earlier pointed out, LBP had authorized the delivery of these materials to these project sites for which they were used. When it had done so, LBP should have been aware that it could not possibly recover the processed materials as they would become part of government projects, two of which (the Metro Rail Transit Project and the Quezon Power Plant Project) had even become part of the operations of public utilities vital to public service. It clearly had no intention of getting these materials back; if it had, as a primary government lending institution, it would be guilty of extreme negligence and incompetence in not foreseeing

In order that the respondents "may be validly prosecuted for estafa under Article 315, paragraph 1 (b) of the Revised Penal Code, 35 in relation with Section 13 of the Trust Receipts Law, the following elements must be established: (a) they received the subject goods in trust or under the obligation to sell the same and to remit the proceeds thereof to [the trustor], or to return the goods if not sold; (b) they misappropriated or converted the goods and/or the proceeds of the sale; (c) they performed such acts with abuse of confidence to the damage and prejudice of Metrobank; and (d) demand was made on them by [the

the legal complications and public inconvenience that would arise should it decide to claim the materials. ACDC's failure to return these materials or their end product at the time these "trust receipts" expired could not be attributed to its volition. No bad faith, malice, negligence or breach of contract has been attributed to ACDC, its officers or representatives. Therefore, absent any abuse of confidence or misappropriation on the part of the respondents, the criminal proceedings against them for estafa should not prosper.
CAcDTI

from the records that the complaint was filed with the participation or consent of the Office of the Solicitor General (OSG). Section 35, Chapter 12, Title III, Book IV of the Administrative Code of 1987 provides that:
Section 35.Powers and Functions. The Office of the Solicitor General shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceedings, investigation or matter requiring the services of lawyers. . . . It shall have the following specific powers and functions: (1)Represent the Governme nt in the Supre me Court and the Court of Appeals in all criminal proceedings ; represent the Government and its officers in the Supreme Court, the Court of Appeals 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. (Emphasis provided.)

In Metropolitan Bank, 37 we affirmed the city prosecutor's dismissal of a complaint for violation of the Trust Receipts Law. In dismissing the complaint, we took note of the Court of Appeals' finding that the bank was interested only in collecting its money and not in the return of the goods. Apart from the bare allegation that demand was made for the return of the goods (raw materials that were manufactured into textiles), the bank had not accompanied its complaint with a demand letter. In addition, there was no evidence offered that the respondents therein had misappropriated or misused the goods in question. The petition should be dismissed because the OSG did not file it and the civil liabilities have already been settled. The proceedings before us, regarding the criminal aspect of this case, should be dismissed as it does not appear

In Heirs of Federico C. Delgado v. Gonzalez , 38 we ruled that the preliminary investigation is part of a criminal proceeding. As all criminal proceedings before the Supreme Court and the Court of Appeals may be brought and defended by only the Solicitor General in behalf of the Republic of the Philippines, a criminal action brought to us by a private party alone suffers from a fatal defect. The present petition was brought in behalf of LBP by the

Government Corporate Counsel to protect its private interests. Since the representative of the "People of the Philippines" had not taken any part of the case, it should be dismissed.
DSAICa

agents refuse to act on the case to the prejudice of the State and the private offended party; 39 and (2) when the private offended party questions the civil aspect of a decision of the lower court. 40 In this petition, LBP fails to allege any inaction or refusal to act on the part of the OSG, tantamount to a denial of due process. No explanation appears as to why the OSG was not a party to the case. Neither can LBP now question the civil aspect of this decision as it had already assigned ACDC's debts to a third person, Philippine Opportunities for Growth and Income, Inc., and the civil liabilities appear to have already been settled by Avent Holdings Corporation, in behalf of ACDC. These facts have not been disputed by LBP. Therefore, we can reasonably conclude that LBP no longer has any claims against ACDC, as regards the subject matter of this case, that would entitle it to file a civil or criminal action.
TacADE

On the other hand, if we look at the mandate given to the Office of the Government Corporate Counsel, we find that it is limited to the civil liabilities arising from the crime, and is subject to the control and supervision of the public prosecutor. Section 2, Rule 8 of the Rules Governing the Exercise by the Office of the Government Corporate Counsel of its Authority, Duties and Powers as Principal Law Office of All Government Owned or Controlled Corporations, filed before the Office of the National Administration Register on September 5, 2011, reads:
Section 2.Extent of legal assistance. The OGCC shall represent the complaining GOCC in all stages of the criminal proceedings. The legal assistance extended is not limited to the preparation of appropriate sworn statements but shall include all aspects of an effective private prosecution including recovery of civil liability arising from the crime, subject to the control and supervision of the public prosecutor.

WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005 decision of the Court of Appeals in CA-G.R. SP No. 76588. No costs. SO ORDERED. Carpio, Perez, Sereno and Reyes, JJ., concur.
Footnotes

Based on jurisprudence, there are two exceptions when a private party complainant or offended party in a criminal case may file a petition with this Court, without the intervention of the OSG: (1) when there is denial of due process of law to the prosecution, and the State or its

1.Rollo, pp. 15-30. 2.Penned by Associate Justice Lucenito N. Tagle, and concurred in by Associate Justices Martin S. Villarama, Jr. (now a member of this Court) and Regalado E. Maambong; id. at 35-48. 3.Id. at 15-16.

11.Id. at 95. 12.Id. at 96. 13.Id. at 97-102. 14.Id. at 101. 15.Id. at 103-105.

4.Id. at 16. 16.394 Phil. 106 (2000). 5.Id. at 89-91. 17.Supra note 2. 6.Id. at 49-50. 18.Rollo, p. 47. 7.The affidavit-complaint of June 7, 1999 and the resolution of Makati Assistant City Prosecutor Amador Y. Pineda dated September 30, 1999 refer to eleven trust receipts marked as Annexes "C" to "C-10." However, the Annexes found in the records of the Department of Justice, the Court of Appeals and the Supreme Court show only ten trust receipts marked as "C" to "C-9." The letters used for the markings vary before each quasi-judicial or judicial office, but there are only ten trust receipts attached. (Records, pp. 89-108; CA rollo, pp. 75-93; and rollo, pp. 69-88.) 8.CA rollo, p. 94. 9.Records, p. 32. 10.Rollo, pp. 92-95. 19.Id. at 21. 20.Id. at 265-279. 21.Id. at 273. 22.Section 13 of P.D. 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, docume nts or instrume nts 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 ours.) 23.Colinares v. Court of Appeals, supra note 16, at 120; and Gonzales v. Hongkong and Shanghai Banking Corporation, G.R. No. 164904, October 19, 2007, 537 SCRA 255, 272. 24.See Allied Banking Corporation v. Ordoez , G.R. No. 82495, December 10, 1990, 192 SCRA 246, 254; and Ching v. The Secretary of Justice, 517 Phil. 151, 174175 (2006). We clarified in these two cases that a trust receipt agreement covers materials used in manufacturing. It covers all the components of a product that is ultimately sold, even if this component is fungible or comes in the form of machineries and equipment. The fact that the raw material or process can no longer be distinguished within the finished product does not remove it from the protection of the Trust Receipts Law. 25.Article 1953 of the Civil Code states that: Article 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof,

and is bound to pay to the creditor an equal amount of the same kind and quality. 26.Records, p. 29. 27.Rollo, pp. 55-68. 28.Id. at 90. 29.CA rollo, p. 94. The crucial parts of the letter read: "Records indicate that your unpaid obligation under the Short Term Loan Line Facility as of March 31, 1999 amounts to P44,392,455.58, including interest and penalties. Further, availments under the Trust Receipt Facility as of said date amounts to P66,425,924.39 or an aggregate total obligation of P110,818,379.97. Attached herewith is the Statement of Account for your reference. In view thereof, you are hereby given ten (10) days from receipt of this letter, to settle said obligation, otherwise, we have no recourse but to file civil and criminal actions against you and other officers of the corporation to protect the interest of our client." 30.National Bank v. Viuda e Hijos de Angel Jose , 63 Phil. 814, 821 (1936). 31.Supra note 16, at 124. 32.191 Phil. 622, 633 (1981).

33.209 Phil. 475, 479 (1983). 34.People v. Nitafan, G.R. Nos. 81559-60, April 6, 1992, 207 SCRA 726, 730. 35.Article 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow . . .: xxx xxx xxx 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. 36.Metropolitan Bank and Trust Company v. Go, G.R. No. 155647, November 23, 2007, 538 SCRA 337, 345346. 37.Id. at 350-351. 38.G.R. No. 184337, August 7, 2009, 595 SCRA 501, 522524. 39.Merciales v. Court of Appeals , 429 Phil. 70, 78-80 (2002); Narciso v. Sta. Romana-Cruz, 385 Phil. 208, 221-224 (2000); and People v. Calo, Jr., 264 Phil. 1007, 10121014 (1990).

40.Perez v. Hagonoy Rural Bank, Inc., 384 Phil. 322, 337 (2000); and People v. Judge Santiago, 255 Phil. 851, 861-862 (1989). 2012 CD Technologies Asia, Inc. Click here for our Disclaimer and Copyright Notice

THIRD DIVISION
[G.R. No. 173905. April 23, 2010.] ANTHONY L. NG, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.

DECISION

VELASCO, JR., J :
p

The Case This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the August 29, 2003 Decision 1 and July 25, 2006 Resolution of the Court of Appeals (CA) in CA-G.R. CR No. 25525, which affirmed the Decision 2 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.
aEcDTC

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 PhP3,000,000 with Asiatrust Development Bank, Inc. (Asiatrust). In support of Asiatrust's 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 On May 30, 1997, Asiatrust approved petitioner's 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 petitioner's business through Villarva S. Linga, Asiatrust's 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 petitioner's 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:
cSATDC

That on or about the 30th day of May 1997, in Quezon City, Philippines, the above-named petitioner, did then 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.

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 PhP18,000,000 with Islacom was not yet paid since there was a squabble as to the real ownership of the latter's company, but Asiatrust was aware of petitioner's receivables which 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 Asiatrust's 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 Checks 7 he issued in favor of Asiatrust; and (6) he had

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 Asiatrust's Remedial Account Officer, Daniel Yap, were held. Afterward, a Compromise Agreement was drafted by Asiatrust. One of

already paid PhP1.8 million out of the PhP2.971 million he owed as per Statement of Account dated January 26, 2000.
cAEaSC

IT IS SO ORDERED.

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) years, 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.

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.
AacSTE

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 Appellant's 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 prosecution's evidence which did not prove the guilt of petitioner beyond reasonable doubt. 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.

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 undisputed that 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.
HSaCcE

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

With regard to the failure of the RTC to consider the fact that petitioner's 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.

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.
STECAc

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 . . . 1.With unfaithfulness or abuse of confidence, namely: a.. . . b.By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the

The Court's 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.

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 . . . . 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 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:
HacADE

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 or instruments for profit who, at the outset of 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.

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. . . . (Emphasis supplied.)
SAEHaC

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.:

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 or instruments 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
caIETS

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 court relied on the Memorandum of Asiatrust's 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)

QSo, in other words, when the goods were not there anymore. You presumed that, that is already sold? AYes, your Honor.

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 another's property as if it were one's own, or of devoting it to a purpose or use

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 petitioner's liability is only 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

different from that agreed upon. To misappropriate for one's own use includes not only conversion to one's personal advantage, but also every attempt to dispose of the property of another without a right. 18
DaTICc

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 . . . covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt . . . in accordance with the terms of the 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 PhP1,500,000. 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:
. . . 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 . . . 20

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.
DSTCIa

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 latter's 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 this instance due to Asiatrust's knowledge of the facts. Furthermore, Asiatrust was informed at the time of petitioner's 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 petitioner's obligation, then there is no longer any obligation on petitioner's part to speak of, thus precluding Asiatrust from claiming any damage. This is evidenced by Asiatrust's Affidavit of Desistance 21 acknowledging full payment of the loan.
DcAaSI

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. Mariano 22 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 . . . . 23

Such is the situation in this case. Asiatrust's 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 acknowledged the full payment of the obligation of the petitioner and the successful mediation between the parties. From the foregoing considerations, we deem it unnecessary to discuss and rule upon the other issues raised in the appeal.
HSCATc

WHEREFORE, the CA Decision dated August 29, 2003 affirming the RTC Decision dated May 29, 2001 is SET ASIDE. Petitioner ANTHONY L. NG is hereby ACQUITTED of the charge of violation of Art. 315, par. 1 (b) of the RPC in relation to the pertinent provision of PD 115. SO ORDERED. Corona, Abad, * and Perez **, JJ., concur. Mendoza, J., in the result.
Footnotes

1.Penned by Associate Justice Elvi John S. Asuncion and concurred in by Associate Justices Eugenio S. Labitoria and Lucas P. Bersamin (now member of the Court). 2.Penned by then Presiding Judge Diosdado Madarang Peralta (now member of the Court). 3.Rollo, pp. 61-69. 4.Trust Receipt Agreements under Letter of Credit Nos. 1963 and 1964. 5.Rollo, pp. 58 & 60.

11.Murao v. People, G.R. No. 141485, June 30, 2005, 462 SCRA 366. 12.Salazar v. People, G.R. No. 149472, August 18, 2004, 437 SCRA 41, 46. 13.People v. Cuevo, 191 Phil. 622 (1981). 14.Nos. L-17603-04, May 31, 1962, 5 SCRA 354. 15.49 A.L.R. 282. 16.Id. 17.G.R. No. 130365, July 14, 2000, 335 SCRA 703.

6.Exhibits "1" & "1-A." 7.Check Nos. 5094129 and 5094133 dated January 31, 2000 and May 31, 2000, respectively. *Note from the Publisher: Copied verbatim from the official copy. 8.Abaca v. Court of Appeals, G.R. No. 127162, June 5, 1998, 290 SCRA 657. 9.Barrameda v. Court of Appeals, G.R. No. 96428, September 2, 1999, 313 SCRA 477. 10.Cosep v. People, G.R. No. 110353, May 21, 1998, 290 SCRA 378. 18.Luces v. Damole, G.R. No. 150900, March 14, 2008, 548 SCRA 373. 19.Rollo, p. 60. 20.Id. at 58. 21.Joint Motion for Leave to File and Admit Attached Affidavit of Desistance, March 30, 2009, Annex "A"; Corporate Resolution No. 4155 (s. 2009) "Authorized signatory for the Affidavit of Desistance pertaining to the Settlement Agreement for the account of Anthony Ng/Capitol Blacksmith," March 26, 2009. 22.G.R. No. 134309, November 17, 2000, 345 SCRA 1.

23.G.R. No. 90828, September 5, 2000, 339 SCRA 609. *Designated as additional member in lieu of Associate Justice Diosdado M. Peralta, per raffle dated March 29, 2010. **Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per raffle dated April 7, 2010.

of one of its customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. 2. ID.; ID.; ID.; PRESENTMENT FOR ACCEPTANCE, NOT NECESSARY IN CASE AT BAR. The transaction in the case at bar stemmed from Philippine Rayon's application for a commercial letter of credit with the petitioner in the amount of $128,548.78 to cover the former's contract to purchase and import loom and textile machinery from Nissho Company, Ltd. of Japan under a five-year deferred payment plan. Petitioner approved the application. The drawee was necessarily the herein petitioner. It was to the latter that the drafts were presented for payment. There was no need for acceptance as the issued drafts are sight drafts. They are, pursuant to Section 7 of the Negotiable Instruments Law (NIL), payable on demand. Presentment for acceptance is defined as the production of a bill of exchange to a drawee for acceptance. Contrary to both courts' pronouncements, Philippine Rayon immediately became liable thereon upon petitioner's payment thereof. Such is the essence of the letter of credit issued by the petitioner. A different conclusion would violate the principle upon which commercial letters of credit are founded because in such a case, both the beneficiary and the issuer, Nissho Company Ltd. and the petitioner, respectively, would be placed at the mercy of Philippine Rayon even if the latter had already received the imported machinery and the petitioner had fully paid for it. Presentment for acceptance

THIRD DIVISION
[G.R. No. 74886. December 8, 1992.] PRUDENTIAL BANK , petitioner, vs. INTERMEDIATE APPELLATE COURT, PHILIPPINE RAYON MILLS INC. and ANACLETO R. CHI , respondents. SYLLABUS 1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; LETTER OF CREDIT; CONSTRUED. A letter of credit is defined as an engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. Through a letter of credit, the bank merely substitutes its own promise to pay for the promise to pay

is necessary only in the cases expressly provided for in Section 143 of the Negotiable Instruments Law (NIL). 3. ID.; ID.; ACCEPTANCE OF A BILL, EXPLAINED. The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer; this may be done in writing by the drawee in the bill itself, or in a separate instrument. 4. ID.; TRUST RECEIPTS LAW (P.D. 115), TRUST RECEIPT TRANSACTION, DEFINED. Under P.D. No. 115, otherwise known as the Trust Receipts Law, which took effect on 29 January 1973, a trust receipt transaction is defined 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 the 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, 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: . . ." 5. ID.; ID.; VIOLATIONS THEREOF; PENDENCY OF CRIMINAL ACTION, NOT A LEGAL OBSTACLE TO A SEPARATE CIVIL ACTION. Although petitioner commenced a criminal action for the violation of the Trust Receipts Law, no legal obstacle prevented it from enforcing the civil liability arising out of the trust receipt in a separate civil action. Under Section 13 of the Trust Receipts Law, the failure of an entrustee to turn over the proceeds of the sale of goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article 315, paragraph 1(b) of the Revised Penal Code. Under Article 33 of the Civil Code, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party in cases of defamation, fraud and physical injuries. Estafa falls under fraud. 6. ID.; ID.; ID.; PENALTY WHEN VIOLATION COMMITTED BY JURIDICAL ENTITIES. A close examination of Sec. 13 of P.D. No. 115 reveals that the penalty referred to therein which shall be imposed upon the directors, officers, employees or other officials or persons of the corporation, partnership, association or other judicial utility is imprisonment, the duration of

which would depend on the amount of the fraud as provided for in Article 315 of the Revised Penal Code. The reason for this is obvious: corporations, partnerships, associations and other juridical entities cannot be put in jail. However, it is these entities which are made liable for the civil liability arising from the criminal offense. This is the import of the clause "without prejudice to the civil liabilities arising from the criminal offense." 7. CIVIL LAW; CONTRACTS; GUARANTY; VALIDITY THEREOF. The attestation by witnesses and the acknowledgment before a notary public are not required by law to make a party liable on the instrument. The rule is that contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present; however, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that it be proved in a certain way, that requirement is absolute and indispensable. With respect to a guaranty, which is a promise to answer for the debt or default of another, the law merely requires that it, or some note or memorandum thereof, be in writing. Otherwise, it would be unenforceable unless ratified. While the acknowledgment of a surety before a notary public is required to make the same a public document, under Article 1358 of the Civil Code, a contract of guaranty does not have to appear in a public document. 8. ID.; ID.; ID.; DEFENSE OF EXCUSSION; NOT A CONDITION SINE QUA NON FOR THE

INSTITUTION OF ACTION AGAINST GUARANTOR. 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. However, excussion is not a condition sine qua non for the institution of an action against the guarantor. In Southern Motors, Inc. vs. Barbosa (99 Phil. 263, 268 [1956]), this Court stated: "4. Although an ordinary personal guarantor not a mortgagor or pledgor may demand the aforementioned exhaustion, the creditor may, prior thereto, secure a judgment against said guarantor, who shall be entitled, however, to a deferment of the execution of said judgment against him until after the properties of the principal debtor shall have been exhausted to satisfy the obligation involved in the case." 9. ID.; ID.; CONTRACT OF ADHESION; CONSTRUCTION THEREOF. 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. 10. REMEDIAL LAW; CIVIL PROCEDURE; PERMISSIVE JOINDER OF PARTIES; RATIONALE. There was then nothing procedurally objectionable in impleading private respondent Chi as a co-defendant in

Civil Case No. Q-19312 before the trial court. Section 6, Rule 3 of the Rules of Court on permissive joinder of parties explicitly allows it. This is the equity rule relating to multifariousness. It is based on trial convenience and is designed to permit the joinder of plaintiffs or defendants whenever there is a common question of law or fact. It will save the parties unnecessary work, trouble and expense. 11. CIVIL LAW; CONTRACTS; GUARANTY; GUARANTOR; LIABILITY IN CASE AT BAR. Chi's liability is limited to the principal obligation in the trust receipt plus all the accessories thereof including judicial costs; with respect to the latter, he shall only be liable for those costs incurred after being judicially required to pay. Interest and damages, being accessories of the principal obligation, should also be paid; these, however, shall run only from the date of the filing of the complaint. Attorney's fees may even be allowed in appropriate cases. In the instant case, the attorney's fees to be paid by Chi cannot be the same as that to be paid by Philippine Rayon since it is only the trust receipt that is covered by the guaranty and not the full extent of the latter's liability. All things considered, he can be held liable for the sum of P10,000.00 as attorney's fees in favor of the petitioner.

Petitioner seeks to review and set aside the decision 1 of public respondent Intermediate Appellate Court (now Court of Appeals), dated 10 March 1986, in AC-G.R. No. 66733 which affirmed in toto the 15 June 1978 decision of Branch 9 (Quezon City) of the then Court of First Instance (now Regional Trial Court) of Rizal in Civil Case No. Q19312. The latter involved an action instituted by the petitioner for the recovery of a sum of money representing the amount paid by it to the Nissho Company Ltd. of Japan for textile machinery imported by the defendant, now private respondent, Philippine Rayon Mills, Inc. (hereinafter Philippine Rayon), represented by codefendant Anacleto R. Chi.

The facts which gave rise to the instant controversy are summarized by the public respondent as follows:
"On August 8, 1962, defendant-appellant Philippine Rayon Mills, Inc. entered into a contract with Nissho Co., Ltd. of Japan for the importation of textile machineries under a five-year deferred payment plan (Exhibit B, Plaintiff's Folder of Exhibits, p. 2). To effect payment for said machineries, the defendantappellant applied for a commercial letter of credit with the Prudential Bank and Trust Company in favor of Nissho. By virtue of said application, the Prudential Bank opened Letter of Credit No. DPP-63762 for $128,548.78 (Exhibit A, Ibid., p. 1). Against this letter of

D ECI SI ON

DAVIDE, JR., J :
p

credit, drafts, were drawn and issued by Nissho (Exhibits X, X-1 to X-11, Ibid., pp. 65, 66 to 76), which were all paid by the Prudential Bank through its correspondent in Japan, the Bank of Tokyo, Ltd. As indicated on their faces, two of these drafts (Exhibits X and X-1, Ibid., pp. 65-66) were accepted by the defendant-appellant through its president, Anacleto R. Chi, while the others were not (Exhibits X-2 to X-11, Ibid., pp. 66 to 76). Upon the arrival of the machineries, the Prudential Bank indorsed the shipping documents to the defendant-appellant which accepted delivery of the same. To enable the defendant-appellant to take delivery of the machineries, it executed, by prior arrangement with the Prudential Bank, a trust receipt which was signed by Anacleto R. Chi in his capacity as President (sic) of defendant-appellant company (Exhibit C, Ibid., p. 13). At the back of the trust receipt is a printed form to be accomplished by two sureties who, by the very terms and conditions thereof, were to be jointly and severally liable to the Prudential Bank should the defendantappellant fail to pay the total amount or any portion of the drafts issued by Nissho and paid for by Prudential Bank. The defendantappellant was able to take delivery of the textile machineries and installed the same at

its factory site at 69 Obudan Street, Quezon City. Sometime in 1967, the defendant-appellant ceased business operation (sic). On December 29, 1969, defendant-appellant's factory was leased by Yupangco Cotton Mills for an annual rental of P300,000.00 (Exhibit I, Ibid., p. 22). The lease was renewed on January 3, 1973 (Exhibit J, Ibid., p. 26). On January 5, 1974, all the textile machineries in the defendant-appellant's factory were sold to AIC Development Corporation for P300,000.00 (Exhibit K, Ibid., p. 29) The obligation of the defendant-appellant arising from the letter of credit and the trust receipt remained unpaid and unliquidated. Repeated formal demands (Exhibits U, V, and W, Ibid., pp. 62, 63, 64) for the payment of the said trust receipt yielded no result. Hence, the present action for the collection of the principal amount of P956,384.95 was filed on October 3, 1974 against the defendantappellant and Anacleto R. Chi. In their respective answers, the defendants interposed identical special defenses, viz., the complaint states no cause of action; if there is, the same has prescribed; and the plaintiff is guilty of laches." 2

On 15 June 1978, the trial court rendered its decision the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered sentencing the defendant Philippine Rayon Mills, Inc. to pay plaintiff the sum of P153,645.22, the amounts due under Exhibits "X" & "X-1", with interest at 6% per annum beginning September 15, 1974 until fully paid.
LLphil

Insofar as the amounts involved in drafts Exhs. "X" (sic) to "X-11", inclusive, the same not having been accepted by defendant Philippine Rayon Mills, Inc., plaintiff's cause of action thereon has not accrued, hence, the instant case is premature. Insofar as defendant Anacleto R. Chi is concerned, the case is dismissed. Plaintiff is ordered to pay defendant Anacleto R. Chi the sum of P20,000.00 as attorney's fees. With costs against defendant Philippine Rayon Mills, Inc. SO ORDERED." 3

reimbursement provided for in the second paragraph of Article 1236 of the Civil Code and under the rule against unjust enrichment; (b) refusing to hold Anacleto R. Chi, as the responsible officer of defendant corporation, liable under Section 13 of P.D. No 115 for the entire unpaid balance of the imported machines covered by the bank's trust receipt (Exhibit "C"); (c) finding that the solidary guaranty clause signed by Anacleto R. Chi is not a guaranty at all; (d) controverting the judicial admissions of Anacleto R. Chi that he is at least a simple guarantor of the said trust receipt obligation; (e) contravening, based on the assumption that Chi is a simple guarantor, Articles 2059, 2060 and 2062 of the Civil Code and the related evidence and jurisprudence which provide that such liability had already attached; (f) contravening the judicial admissions of Philippine Rayon with respect to its liability to pay the petitioner the amounts involved in the drafts (Exhibits "X", "X-1" to "X-11"); and (g) interpreting "sight" drafts as requiring acceptance by Philippine Rayon before the latter could be held liable thereon. 4 In its decision, public respondent sustained the trial court in all respects. As to the first and last assigned errors, it rules that the provision on unjust enrichment, Article 2142 of the Civil Code, applies only if there is no express contract between the parties and there is a clear showing that the payment is justified. In the instant case, the relationship existing between the petitioner and Philippine Rayon is governed by specific contracts, namely the application for letters of credit, the promissory note, the drafts and the trust receipt. With respect to the last ten

Petitioner appealed the decision to the then Intermediate Appellate Court. In urging the said court to reverse or modify the decision, petitioner alleged in its Brief that the trial court erred in (a) disregarding its right to reimbursement from the private respondents for the entire unpaid balance of the imported machines, the total amount of which was paid to the Nissho Company Ltd., thereby violating the principle of the third party payor's right to

(10) drafts (Exhibits "X-2" to "X-11") which had not been presented to and were not accepted by Philippine Rayon, petitioner was not justified in unilaterally paying the amounts stated therein. The public respondent did not agree with the petitioner's claim that the drafts were sight drafts which did not require presentment for acceptance to Philippine Rayon because paragraph 8 of the trust receipt presupposes prior acceptance of the drafts. Since the ten (10) drafts were not presented and accepted, no valid demand for payment can be made.
LLphil

for under Articles 2052 and 2054 of the Civil Code, the obligation of a guarantor is merely accessory and subsidiary, respectively. Chi's liability would therefore arise only when the principal debtor fails to comply with his obligation. 5 Its motion to reconsider the decision having been denied by the public respondent in its Resolution of 11 June 1986, 6 petitioner filed the instant petition on 31 July 1986 submitting the following legal issues:
"I. WHETHER OR NOT THE RESPONDENT APPELLATE COURT GRIEVOUSLY ERRED IN DENYING PETITIONER'S CLAIM FOR FULL REIMBURSEMENT AGAINST THE PRIVATE RESPONDENTS FOR THE PAYMENT PETITIONER MADE TO NISSHO CO. LTD. FOR THE BENEFIT OF PRIVATE RESPONDENT UNDER ART. 1283 OF THE NEW CIVIL CODE OF THE PHILIPPINES AND UNDER THE GENERAL PRINCIPLE AGAINST UNJUST ENRICHMENT; II. WHETHER OR NOT RESPONDENT CHI IS SOLIDARILY LIABLE UNDER THE TRUST RECEIPT (EXH. C); III. WHETHER OR NOT ON THE BASIS OF THE JUDICIAL ADMISSIONS OF RESPONDENT CHI HE IS LIABLE THEREON AND TO WHAT EXTENT;

Public respondent also disagreed with the petitioner's contention that private respondent Chi is solidarily liable with Philippine Rayon pursuant to Section 13 of P.D. No. 115 and based on his signature on the solidary guaranty clause at the dorsal side of the trust receipt. As to the first contention, the public respondent ruled that the civil liability provided for in said Section 13 attaches only after conviction. As to the second, it expressed misgivings as to whether Chi's signature on the trust receipt made the latter automatically liable thereon because the so-called solidary guaranty clause at the dorsal portion of the trust receipt is to be signed not by one (1) person alone, but by two (2) persons; the last sentence of the same is incomplete and unsigned by witnesses; and it is not acknowledged before a notary public. Besides, even granting that it was executed and acknowledged before a notary public, Chi cannot be held liable therefor because the records fail to show that petitioner had either exhausted the properties of Philippine Rayon or had resorted to all legal remedies as required in Article 2058 of the Civil Code. As provided

IV. WHETHER OR NOT RESPONDENT CHI IS MERELY A SIMPLE GUARANTOR; AND IF SO, HAS HIS LIABILITY AS SUCH ALREADY ATTACHED; V. WHETHER OR NOT AS THE SIGNATORY AND RESPONSIBLE OFFICER OF RESPONDENT PHIL. RAYON RESPONDENT CHI IS PERSONALLY LIABLE PURSUANT TO THE PROVISION OF SECTION 13, P.D. 115; VI. WHETHER OR NOT RESPONDENT PHIL. RAYON IS LIABLE TO THE PETITIONER UNDER THE TRUST RECEIPT (EXH. C); VII. WHETHER OR NOT ON THE BASIS OF THE JUDICIAL ADMISSIONS RESPONDENT PHIL. RAYON IS LIABLE TO THE PETITIONER UNDER THE DRAFTS (EXHS. X, X-1 TO X-11) AND TO WHAT EXTENT; VIII. WHETHER OR NOT SIGHT DRAFTS REQUIRE PRIOR ACCEPTANCE FROM RESPONDENT PHIL. RAYON BEFORE THE LATTER BECOMES LIABLE TO PETITIONER." 7

In the Resolution of 12 March 1990, 8 this Court gave due course to the petition after the filing of the Comment thereto by private respondent Anacleto Chi and of the Reply to the latter by the petitioner; both parties were also required to submit their respective memoranda which they subsequently complied with. As We see it, the issues may be reduced as follows:

1. Whether presentment for acceptance of the drafts was indispensable to make Philippine Rayon liable thereon; 2. Whether Philippine Rayon is liable on the basis of the trust receipt; 3. Whether private respondent Chi is jointly and severally liable with Philippine Rayon for the obligation sought to be enforced and if not, whether he may be considered a guarantor; in the latter situation, whether the case should have been dismissed on the ground of lack of cause of action as there was no prior exhaustion of Philippine Rayon's properties.
cdrep

Both the trial court and the public respondent ruled that Philippine Rayon could be held liable for the two (2) drafts, Exhibits "X" and "X-1", because only these appear to have been accepted by the latter after due presentment.

The liability for the remaining ten (10) drafts (Exhibits "X-2" to "X-11" inclusive) did not arise because the same were not presented for acceptance. In short, both courts concluded that acceptance of the drafts by Philippine Rayon was indispensable to make the latter liable thereon. We are unable to agree with this proposition. The transaction in the case at bar stemmed from Philippine Rayon's application for a commercial letter of credit with the petitioner in the amount of $128,548.78 to cover the former's contract to purchase and import loom and textile machinery from Nissho Company, Ltd. of Japan under a five-year deferred payment plan. Petitioner approved the application. As correctly ruled by the trial court in its Order of 6 March 1975: 9
". . . By virtue of said Application and Agreement for Commercial Letter of Credit, plaintiff bank 10 was under obligation to pay through its correspondent bank in Japan the drafts that Nisso (sic) Company, Ltd., periodically drew against said letter of credit from 1963 to 1968, pursuant to plaintiff's contract with the defendant Philippine Rayon Mills, Inc. In turn, defendant Philippine Rayon Mills, Inc., was obligated to pay plaintiff bank the amounts of the drafts drawn by Nisso (sic) Company, Ltd. against said plaintiff bank together with any accruing commercial charges, interest, etc. pursuant to the terms and conditions stipulated in the Application and Agreement of Commercial Letter of Credit Annex "A"."

A letter of credit is defined as an engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. 11 Through a letter of credit, the bank merely substitutes its own promise to pay for the promise to pay of one of its customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. 12 In the instant case then, the drawee was necessarily the herein petitioner. It was to the latter that the drafts were presented for payment. In fact, there was no need for acceptance as the issued drafts are sight drafts. Presentment for acceptance is necessary only in the cases expressly provided for in Section 143 of the Negotiable Instruments Law (NIL). 13 The said section reads:
"SECTION 143. When presentment for acceptance must be made. Presentment for acceptance must be made: (a) Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the instrument; or (b) Where the bill expressly stipulates that it shall be presented for acceptance; or

(c) Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. In no other case is presentment for acceptance necessary in order to render any party to the bill liable."

Corollarily, they are, pursuant to Section 7 of the NIL, payable on demand. Section 7 provides:
"SECTION 7. When payable on demand. An instrument is payable on demand (a) When so it is expressed to be payable on demand, or at sight, or on presentation; or (b) In which no time for payment is expressed. Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person so issuing, accepting, or indorsing it, payable on demand." (Emphasis supplied)

Obviously then, sight drafts do not require presentment for acceptance. The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer; 14 this may be done in writing by the drawee in the bill itself, or in a separate instrument. 15 The parties herein agree, and the trial court explicitly ruled, that the subject drafts are sight drafts. Said the latter:
LLpr

". . . In the instant case the drafts being at sight, they are supposed to be payable upon acceptance unless plaintiff bank has given the Philippine Rayon Mills Inc. time within which to pay the same. The first two drafts (Annexes C & D, Exh. X & X-1) were duly accepted as indicated on their face (sic), and upon such acceptance should have been paid forthwith. These two drafts were not paid and although Philippine Rayon Mills ought to have paid the same, the fact remains that until now they are still unpaid." 16

Paragraph 8 of the Trust Receipt which reads: "My/our liability for payment at maturity of any accepted draft, bill of exchange or indebtedness shall not be extinguished or modified" 17 does not, contrary to the holding of the public respondent, contemplate prior acceptance by Philippine Rayon, but by the petitioner. Acceptance, however, was not even necessary in the first place because the drafts which were eventually issued were sight drafts. And even if these were not sight drafts, thereby necessitating acceptance, it would be the petitioner and not Philippine Rayon which had to accept the same for the latter was not the drawee. Presentment for acceptance is defined as the production of a bill of exchange to a drawee for

acceptance. 18 The trial court and the public respondent, therefore, erred in ruling that presentment for acceptance was an indispensable requisite for Philippine Rayon's liability on the drafts to attach. Contrary to both courts' pronouncements, Philippine Rayon immediately became liable thereon upon petitioner's payment thereof. Such is the essence of the letter of credit issued by the petitioner. A different conclusion would violate the principle upon which commercial letter of credit are founded because in such a case, both the beneficiary and the issuer. Nissho Company Ltd. and the petitioner, respectively, would be placed at the mercy of Philippine Rayon even if the latter had already received the imported machinery and the petitioner had fully paid for it. The typical setting and purpose of a letter of credit are described in Hibernia Bank and Trust Co. vs. J. Aron & Co., Inc. , 19 thus:
"Commercial letters of credit have come into general use in international sales transactions where much time necessarily elapses between the sale and the receipt by a purchaser of the merchandise, during which interval great price changes may occur. Buyers and sellers struggle for the advantage of position. The seller is desirous of being paid as surely and as soon as possible, realizing that the vendee at a distant point has it in his power to reject on trivial grounds merchandise on arrival, and cause considerable hardship to the shipper. Letters of credit meet this condition by

affording celerity and certainty of payment. Their purpose is to insure to a seller payment of a definite amount upon presentation of documents. The bank deals only with documents. It has nothing to do with the quality of the merchandise. Disputes as to the merchandise shipped may arise and be litigated later between vendor and vendee, but they may not impede acceptance of drafts and payment by the issuing bank when the proper documents are presented."

The trial court and the public respondent likewise erred in disregarding the trust receipt and in not holding that Philippine Rayon was liable thereon. In People vs. Yu Chi Ho, 20 this Court explains the nature of a trust receipt by quoting In re Dunlap Carpet Co. , 21 thus:
"By this arrangement a banker advances money to an intending importer, and thereby lends the aid of capital, of credit, or of business facilities and agencies abroad, to the enterprise of foreign commerce. Much of this trade could hardly be carried on by any other means, and therefore it is of the first importance that the fundamental factor in the transaction, the banker's advance of money and credit, should receive the amplest protection. Accordingly, in order to secure that the banker shall be repaid at the critical point that is, when the imported goods finally reach the hands of the intended vendee the banker takes the full title to the goods

at the very beginning; he takes it as soon as the goods are bought and settled for by his payments or acceptances in the foreign country, and he continues to hold that title as his indispensable security until the goods are sold in the United States and the vendee is called upon to pay for them. This security is not an ordinary pledge by the importer to the banker, for the importer has never owned the goods, and moreover he is not able to deliver the possession; but the security is the complete title vested originally in the bankers, and this characteristic of the transaction has again and again been recognized and protected by the Courts. Of course, the title is at bottom a security title, as it has sometimes been called, and the banker is always under the obligation to reconvey; but only after his advances have been fully repaid and after the importer has fulfilled the other terms of the contract."

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."

As further stated in National Bank vs. Viuda e Hijos de Angel Jose, 22 trust receipts:
". . . [I]n a certain manner. . . partake of the nature of a conditional sale as provided by the Chattel Mortgage Law, that is, the importer becomes absolute owner of the imported merchandise as soon as he has paid its price. The ownership of the merchandise continues to be vested in the owner thereof or in the person who has advanced payment, until he has been paid in full, or if the merchandise has

Under P.D. No. 115, otherwise known as the Trust Receipts Law, which took effect on 29 January 1973, a trust receipt transaction is defined 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 the 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, 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: . . . ." It is alleged in the complaint that private respondents "not only have presumably put said machinery to good use and

have profited by its operation and/or disposition but very recent information that (sic) reached plaintiff bank that defendants already sold the machinery covered by the trust receipt to Yupangco Cotton Mills," and that "as trustees of the property covered by the trust receipt, . . . and therefore acting in fiduciary (sic) capacity, defendants have willfully violated their duty to account for the whereabouts of the machinery covered by the trust receipt or for the proceeds of any lease; sale or other disposition of the same that they may have made, notwithstanding demands therefor; defendants have fraudulently misapplied or converted to their own use any money realized from the lease, sale, and other disposition of said machinery." 23 While there is no specific prayer for the delivery to the petitioner by Philippine Rayon of the proceeds of the sale of the machinery covered by the trust receipt, such relief is covered by the general prayer for "such further and other relief as may be just and equitable on the premises." 24 And although it is true that the petitioner commenced a criminal action for the violation of the Trust Receipts Law, no legal obstacle prevented it from enforcing the civil liability arising out of the trust receipt in a separate civil action. Under Section 13 of the Trust Receipts Law, the failure of an entrustee to turn over the proceeds of the sale of goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article 315,

paragraph 1(b) of the Revised Penal Code. 25 Under Article 33 of the Civil Code, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party in cases of defamation, fraud and physical injuries. Estafa falls under fraud.
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We also conclude, for the reason hereinafter discussed, and not for that adduced by the public respondent, that private respondent Chi's signature in the dorsal portion of the trust receipt did not bind him solidarily with Philippine Rayon. The statement at the dorsal portion of the said trust receipt, which petitioner describes as a "solidary guaranty clause", reads:
"In consideration of the PRUDENTIAL BANK AND TRUST COMPANY complying with the foregoing, we jointly and severally agree and undertake to pay on demand to the PRUDENTIAL BANK AND TRUST COMPANY all sums of money which the said PRUDENTIAL BANK AND TRUST COMPANY may call upon us to pay arising out of or pertaining to, and/or in any event connected with the default of and/or nonfulfillment in any respect of the undertaking of the aforesaid: PHILIPPINE RAYON MILLS, INC. We further agree that the PRUDENTIAL BANK AND TRUST COMPANY does not

have to take any steps or exhaust its remedy against aforesaid: before making demand on me/us. (Sgd.) Anacleto R. Chi ANACLETO R. CHI" 26

was disregarded and, therefore, not consummated. But granting arguendo that the guaranty provision in Exhibit "C-1" was fully executed and acknowledged still defendant-appellee Chi cannot be held liable thereunder because the records show that the plaintiff-appellant had neither exhausted the property of the defendant-appellant nor had it resorted to all legal remedies against the said defendantappellant as provided in Article 2058 of the Civil Code. The obligation of a guarantor is merely accessory under Article 2052 of the Civil Code and subsidiary under Article 2054 of the Civil Code. Therefore, the liability of the defendant-appellee arises only when the principal debtor fails to comply with his obligation." 27

Petitioner insists that by virtue of the clear wording of the statement, specifically the clause ". . . we jointly and severally agree and undertake . . .," and the concluding sentence on exhaustion, Chi's liability therein is solidary. In holding otherwise, the public respondent ratiocinates as follows:
"With respect to the second argument, we have our misgivings as to whether the mere signature of defendant-appellee Chi of (sic) the guaranty agreement, Exhibit "C-1", will make it an actionable document. It should be noted that Exhibit "C-1" was prepared and printed by the plaintiff-appellant. A perusal of Exhibit "C-1" shows that it was to be signed and executed by two persons. It was signed only by defendant-appellee Chi. Exhibit "C-1" was to be witnessed by two persons, but no one signed in that capacity. The last sentence of the guaranty clause is incomplete. Furthermore, the plaintiff-appellant also failed to have the purported guarantee clause acknowledged before a notary public. All these show that the alleged guaranty provision

Our own 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. Elsewise stated, their liability is not divisible as between them, i.e., it can be enforced to its full extent against any one of them. 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; 28 as such, it must be strictly construed against the party responsible for its preparation. 29 Neither can We agree with the reasoning of the public respondent that this solidary guaranty clause was effectively disregarded simply because it was not signed and witnessed by two (2) persons and acknowledged before a notary public. While indeed, the clause ought to have been signed by two (2) guarantors, the fact that it was only Chi who signed the same did not make his act an idle ceremony or render the clause totally meaningless. By his signing, Chi became the sole guarantor. The attestation

by witnesses and the acknowledgment before a notary public are not required by law to make a party liable on the instrument. The rule is that contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present; however, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that it be proved in a certain way, that requirement is absolute and indispensable. 30 With respect to a guaranty, 31 which is a promise to answer for the debt or default of another, the law merely requires that it, or some note or memorandum thereof, be in writing. Otherwise, it would be unenforceable unless ratified. 32 While the acknowledgment of a surety before a notary public is required to make the same a public document, under Article 1358 of the Civil Code, a contract of guaranty does not have to appear in a public document. And now to the other ground relied upon by the petitioner as basis for the solidary liability of Chi, namely the criminal proceedings against the latter for the violation of P.C. No. 115. Petitioner claims that because of the said criminal proceedings, Chi would be answerable for the civil liability arising therefrom pursuant to Section 13 of P.D. No. 115. Public respondent rejected this claim because such civil liability presupposes prior conviction as can be gleaned from the phrase "without prejudice to the civil liability arising from the criminal offense." Both are wrong. The said section 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. 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."

Revised Penal Code. The reason for this is obvious: corporations, partnerships, associations and other juridical entities cannot be put in jail. However, it is these entities which are made liable for the civil liability arising from the criminal offense. This is the import of the clause "without prejudice to the civil liabilities arising from the criminal offense." And, as We stated earlier, since that violation of a trust receipt constitutes fraud under Article 33 of the Civil Code, petitioner was acting well within its rights in filing an independent civil action to enforce the civil liability arising therefrom against Philippine Rayon. The remaining issue to be resolved concerns the propriety of the dismissal of the case against private respondent Chi. The trial court based the dismissal, and the respondent Court its affirmance thereof, on the theory that Chi is not liable on the trust receipt in any capacity either as surety or as guarantor because his signature at the dorsal portion thereof was useless; and even if he could be bound by such signature as a simple guarantor, he cannot, pursuant to Article 2058 of the Civil Code, be compelled to pay until after petitioner has exhausted and resorted to all legal remedies against the principal debtor, Philippine Rayon. The records fail to show that petitioner had done so. 33 Reliance is thus placed on Article 2058 of the Civil Code which provides:
"ARTICLE 2058. The guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor,

A close examination of the quoted provision reveals that it is the last sentence which provides for the correct solution. It is clear that if the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense. The penalty referred to is imprisonment, the duration of which would depend on the amount of the fraud as provided for in Article 315 of the

and has resorted to all the legal remedies against the debtor."

Simply stated, there is as yet no cause of action against Chi. We are not persuaded. Excussion is not a condition sine qua non for the institution of an action against a guarantor. In Southern Motors, Inc. vs. Barbosa, 34 this Court stated:
"4. Although an ordinary personal guarantor not a mortgagor or pledgor may demand the aforementioned exhaustion, the creditor may, prior thereto, secure a judgment against said guarantor, who shall be entitled, however, to a deferment of the execution of said judgment against him until after the properties of the principal debtor shall have been exhausted to satisfy the obligation involved in the case."

provided in these rules, join as plaintiffs or be joined as defendants in one complaint, where any gotten of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest."

This is the equity rule relating to multifariousness. It is based on trial convenience and is designed to permit the joinder of plaintiffs or defendants whenever there is a common question of law or fact. It will save the parties unnecessary work, trouble and expense. 35 However, Chi's liability is limited to the principal obligation in the trust receipt plus all the accessories thereof including judicial costs; with respect to the latter, he shall only be liable for those costs incurred after being judicially required to pay. 36 Interest and damages, being accessories of the principal obligation, should also be paid; these, however, shall run only from the date of the filing of the complaint. Attorney's fees may even be allowed in appropriate cases. 37 In the instant case, the attorney's fees to be paid by Chi cannot be the same as that to be paid by Philippine Rayon since it is only the trust receipt that is covered by the guaranty and not the full extent of the latter's liability. All things considered, he can be held liable for the sum of P10,000.00 as attorney's fees in favor of the petitioner.

There was then nothing procedurally objectionable in impleading private respondent Chi as a co-defendant in Civil Case No. Q-19312 before the trial court. As a matter of fact, Section 6, Rule 3 of the Rules of Court on permissive joinder of parties explicitly allows it. It reads:
"SECTION 6. Permissive joinder of parties . All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise

Thus, the trial court committed grave abuse of discretion in dismissing the complaint as against private respondent Chi and condemning petitioner to pay him P20,000 00 as attorney's fees. In the light of the foregoing, it would no longer be necessary to discuss the other issues raised by the petitioner. WHEREFORE, the instant Petition is hereby GRANTED. The appealed Decision of 10 March 1986 of the public respondent in AC-G.R. CV No. 66733 and, necessarily, that of Branch 9 (Quezon City) of the then Court of First Instance of Rizal in Civil Case No. Q-19312 are hereby REVERSED and SET ASIDE and another is hereby entered:
1. Declaring private respondent Philippine Rayon Mills, Inc. liable on the twelve drafts in question (Exhibits "X", "X-1" to "X-11", inclusive) and on the trust receipt (Exhibit "C'), and ordering it to pay petitioner: (a) the amounts due thereon in the total sum of P956,384.95 as of 15 September 1974, with interest thereon at six percent (6%) per annum from 16 September 1974 until it is fully paid, less whatever may have been applied thereto by virtue of foreclosure of mortgages, if any; (b) a sum equal to ten percent (10%) of the aforesaid amount as attorney's fees; and (c) the costs.

2. Declaring private respondent Anacleto R. Chi secondarily liable on the trust receipt and ordering him to pay the face value thereof, with interest at the legal rate, commencing from the date of the filing of the complaint in Civil Case No Q-19312 until the same is fully paid as well as the costs and attorney's fees in the sum of P10,000.00 if the writ of execution for the enforcement of the above awards against Philippine Rayon Mills, Inc. is returned unsatisfied.

Costs against private respondents. SO ORDERED. Gutierrez, Jr., Bidin, Romero and Melo, JJ ., concur.
Footnotes 1. Rollo, 39-47; per Associate Justice Crisolito Pascual, concurred in by Associate Justices Jose C. Campos, Jr. and Serafin E. Camilon. 2. Rollo, 39-41. 3. Rollo, 81-83. 4. Brief for Appellant, 1-4; Rollo, 85, et seq. 5. Rollo, 45-46. 6. Id., 48.

7. Rollo, 16. 8. Id., 131.

20. 53 Phil. 874, 876-877 [1928]; see also, Samo vs. People, 115 Phil. 346 [1962]. 21. 206 Fed., 726.

9. Record on Appeal, 123. 22. 63 Phil. 814, 821 [1936]. 10. Herein petitioner. 23. Record on Appeal, 6-7. 11. Black's Law Dictionary, Fifth ed., 813; DAVIDSON, KNOWLES, FORSYTHE AND JESPERSEN, Business Law, Principles and Cases, 1984 ed., 390. 12. ROSE, Money and Capital Markets, 1983 ed., 692. 13. Act No. 2031. 14. Section 132, NIL. 15. Sections 133 and 134, Id. 16. Rollo, 66. 17. Id., 17. 18. AGBAYANI, A.F., Commercial Laws of the Philippines , 1987 ed., vol. 1, 409, citing Windham Bank vs. Norton, 22 Conn, 213, 56 Am. Dec. 397. 19. 134 Misc. 18, 21-22, 233 N.Y.S. 486, 490-491, cited in Johnston vs. State Bank, 195 N.W. 2d 126, 130-131 (Iowa 1972), and excerpted in CORMAN, Commercial Law, Cases and Materials , 1976 ed., 622. 29. Western Guaranty Corp. vs. Court of Appeals, 187 SCRA 652 [1990]; BPI Credit Corp. vs. Court of Appeals, 204 SCRA 601 [1991]. 30. Article 1356, Civil Code. 31. Article 2047 of the Civil Code defines it as follows: 24. Id., 9. 25. Even before P.D. No. 115, these acts covered by Section 13 were already considered as estafa; see People vs. Yu Chai Ho, supra.; Samo vs. People, supra.; Robles vs. Court of Appeals, 199 SCRA 195 [1991]. 26. Record on Appeal, 43. 27. Rollo, 45-46. 28. Sweet Lines, Inc. vs. Teves, 83 SCRA 361 [1978]; Angeles vs. Calasanz, 135 SCRA 323 [1985].

"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so." 32. Article 1403 (2)(b), Civil Code. 33. Rollo, 75. 34. 99 Phil. 263, 268 [1956]. 35. FRANCISCO, V.J., The Revised Rules of Court , vol. I, 1973 ed., 258. 36. Second paragraph, Article 2055, Civil Code; see National Marketing Corp. vs. Marquez, 26 SCRA 722 [1969]; Republic vs. Pal-Fox Lumber Co., Inc., 43 SCRA 365 [1972]. 37. Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc., 100 Phil. 679 [1957]; Philippine National Bank vs. Luzon Surety Co., Inc., 68 SCRA 207 [1975].

THIRD DIVISION
[G.R. No. 78671. March 25, 1988.] SPOUSES TIRZO VINTOLA and LORETA DY VINTOLA, defendants-appellants, vs. INSULAR BANK OF ASIA AND AMERICA, plaintiff-appellee. SYLLABUS 1. REMEDIAL LAW; EVIDENCE; FINDINGS AND CONCLUSIONS OF TRIAL COURT, IN A SIMILAR CASE, ADOPTED. In Vintola vs. IBAA (150 SCRA 578), this Court said: ". . . 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 . . . 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." This Tribunal adopts and reiterates this ruling considering the facts and circumstances obtaining in the aforecited and the present cases. 2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; RELIANCE ON ART. 2177, NEW CIVIL CODE, ERRONEOUS. According to Petitioners, "the situation is akin to an act or omission constituting both a quasidelict under the Civil Code and also criminal negligence under the Revised Penal Code", hence they invoke the rule under Art. 2177 of the New Civil Code against double recovery. Petitioner's reliance on said provision of law is erroneous. As correctly argued by IBAA, there is no double recovery since the bank has not yet recovered from them. Petitioner's deposit in court of the puka and olive shells does not amount to recovery by IBAA.

Spouses Tirzo Vintola and Loreta Dy Vintola, hereinafter referred to as the VINTOLAS, are the proprietors of Dax Kin International, a company engaged in the manufacture of raw seashells into finished products. On August 20, 1975, the VINTOLAS applied for, and were granted, a commercial letter of credit with the Insular Bank of Asia and America (IBAA for short), Cebu City. The letter of credit authorized the bank to negotiate for their account, drafts drawn in favor of one of their suppliers, Efren Alani, on Dax Kin International in the amount of P35,000.00 to represent a shipment of a variety of puka and olive shells. For their part the VINTOLAS promised and agreed to pay the bank at maturity said amount together with the usual charges. To secure the release of the raw seashells, on the same day the VINTOLAS executed in favor of IBAA a trust receipt agreement which was to mature on October 19, 1975. On January 9, 1976 IBAA demanded from the VINTOLAS payment of the P35,000.00, the latter having failed to make good their obligation. The VINTOLAS offered to return the raw seashells to IBAA as they were unable to dispose of the same. IBAA refused to accept them.
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D ECI SI ON

CORTES, J :
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This case is on all fours with the decision of this Tribunal in G.R. No. 73271 promulgated on May 29, 1987, entitled Spouses Tirso I. Vintola and Loreto Dy Vintola v. Insular Bank of Asia and America (150 SCRA 578). The same issues and virtually the same facts were involved in that case between the same parties, hence, the decision in said case forecloses this appeal.

As found by the Regional Trial Court, the VINTOLAS made several promises to IBAA to settle their account. But due to their failure to pay their obligation, on August 4, 1977 IBAA was constrained to institute Criminal Case

No. CU-2928 for estafa under Art. 315 No. 1 (b) of the Revised Penal Code in relation to Pres. Dec. No. 115 (The Trust Receipts Law). During the trial of the criminal case, the VINTOLAS deposited in court the various puka and olive shells. Subsequently, the VINTOLAS were acquitted for insufficiency of evidence. Thereafter IBAA brought Civil Case No. R-21103, subject of this appeal, to recover from the VINTOLAS the P35,000.00 plus interest and other charges. On May 13, 1985, the Regional Trial Court promulgated its decision the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants to pay the plaintiff the sum of P62,704.23 which was the outstanding account of the defendants to the plaintiff as of September 30, 1981 and to pay legal interest on the amount from October 1, 1981 up to the time this amount shall have been fully paid; and ordering the defendants further to pay P6,270.00 as attorney's fees and the costs of this action.

goods held in trust were not sold and IBAA never demanded for their return and even if the VINTOLAS deposited them in court because the bank refused to accept their return. As stated at the outset, this issue has been squarely met in the case of Vintola v. Insular Bank of Asia and America [G.R. No. 73271, May 29, 1987, 150 SCRA 578]. In that case, involving the same parties and essentially the same set of facts, the Supreme Court affirmed the judgment of the lower court ordering the VINTOLAS to make payment to IBAA. In disposing of the arguments raised by the VINTOLAS, this court said:
xxx xxx xxx 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

The VINTOLAS appealed to the Court of Appeals but upon motion filed by IBAA, the appellate court resolved to elevate the case to the Supreme Court considering that purely questions of law are involved. The parties agree that the sole issue involved in this case is whether or not the lower court was correct in holding that the VINTOLAS still owe IBAA even though the

transaction involves a loan feature represented by the letter of credit, and a security feature which is in the covering trust receipt. xxx xxx xxx 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." . . . As elucidated in Samo vs. People "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 . . ." 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 . . . [At pp. 582, 583, 584, Emphasis supplied.]

This Tribunal adopts and reiterates this ruling considering the facts and circumstances obtaining in the aforecited and the present cases.
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To support their case, the VINTOLAS argue that their return of the goods amounted to recovery by IBAA and to order them to further make payment would be tantamount to double recovery. According to them, "the situation is akin to an act or omission constituting both a quasi-delict under the Civil Code and also criminal negligence under the Revised Penal Code" [Petition, p. 15], hence they invoke the rule under Art. 2177 of the New Civil Code against double recovery. The VINTOLAS' reliance on said provision of law is erroneous. As correctly argued by IBAA, there is no double recovery since the bank has not yet recovered from them. The VINTOLAS' deposit in court of the puka and olive shells does not amount to recovery by IBAA. WHEREFORE, the decision of the trial court is AFFIRMED. SO ORDERED. Fernan, Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

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