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G.R. No. 80544 July 5, 1989

ROSEMARIE M. LEE, petitioner,

vs.

HON. JOSEFINA CRUZ RODIL, Judge of Regional Trial Court, Branch X, Manila and PEOPLE OF THE PHILIPPINES, respondents.

Manuel B. Imbong for petitioner.

GUTIERREZ, JR., J.:

In this petition we are asked to reconsider the liability for estafa of an entrustee in a trust receipt agreement who disposes of the goods covered by it

but fails to deliver the proceeds of the sale to the bank.

Petitioner Rosemarie M. Lee was charged with estafa in an information which alleged:

That on or about July 26,1982 in the City of Manila, Philippines, the said accused, did then and there wilfully, unlawfully and

feloniously defraud the Philippine Bank of Communications, a banking institution duly organized and existing under the laws of

the Republic of the Philippines, in the following manner, to wit: the said accused, being then the duly authorized representative

of C.S. Lee Enterprises, Inc., after opening letter of credit with the said bank under L/C No. 63251 dated July 26, 1982, for the

amount of P 154,711.97, coveting the purchase price of a certain merchandise consisting of 23 ctns. Lab. Culture Media in favor

of said bank, received from the latter the necessary document and thereafter the said merchandise and forthwith, executed trust

receipt for, the aforesaid merchandise dated July 26, 1982, by virtue of which, the said accused obligated herself to hold said

merchandise in trust with liberty to sell the same in cash for the account of the said bank and to account for the proceeds of the

sale thereof, if sold or of returning the said merchandise to said bank in case of failure to sell the same, on or before October

24, 1982, but the said accused, once in possession of the said merchandise, far from complying with her aforesaid obligation

and despite the lapse of a long period of time and repeated demands made upon her to that effect, did then and there willfully,

unlawfully and feloniously, with intent to defraud, misappropriate, misapply and convert the said merchandise or the value

thereof, to her own personal use and benefit, to the damage and prejudice of the said Philippine Bank of Communications in the

amount of P154,711.97, Philippine currency. (Rollo, p. 19)

The accused moved to quash this information on the ground that the facts charged do not constitute an offense. She alleges that the violation of a trust

receipt agreement does not constitute estafa notwithstanding an express provision in the "Trust Receipts Law" (P.D. 115) characterizing such violation

as estafa. She attacks P. D. 115 for being unconstitutional.

The trial court, in its order dated August 21, 1987 denied the motion to quash the information and upheld the constitutionality of P.D. No. 115.

The subsequent Motion for Reconsideration was also denied for lack of merit in an order dated October 12, 1987.

Hence, this petition.

The issue posed in this case is whether or not the violation of a trust receipt agreement constitutes the crime of estafa.

We answer in the affirmative in the light of a specific provision in P.D. No. 115.

Sec. 13 of P.D. No. 115 provides:

... 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. (Italics supplied).

The petitioner cites the cases of People v. Cuevo, (104 SCRA 312 [1981]) and Sia v. People, (121 SCRA 655 [1983]) to support her stand that the

violation of a trust receipt does not constitute estafa.

The petitioner's citation of People v. Cuevo, supra does not strengthen her case at all. Of the eleven (11) members of the Court, a majority of six (6)

were clearly of the view that the violation of a trust receipt constitutes estafa. The Chief Justice concurred with them on the issue of absence of double

jeopardy. Two Justices inhibited themselves. Only two (2) out of the eleven members strongly adhered to the view now presented by the petitioner.

However, for want of one vote needed to reverse the dismissal order of the lower court, the view of the dissenting Justices prevailed as the result in

that case. Excerpts from the majority opinion show as follows:

... (I)t is a well-entrenched rule in our jurisprudence that the conversion by the importer of the goods covered by a trust receipt

constitutes estafa through misappropriation under article 315(l) (b) of the Revised Penal Code. (People vs. Yu Chai Ho, 53 Phil.

874 and Samo vs. People, 115 Phil, 346. As to civil cases, see National Bank vs. Viuda e Hijos de Angel Jose, 63 Phil. 814;

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

xxx xxx xxx

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

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

Thus, it was held that where, notwithstanding repeated oral and written demands by the bank, the petitioner had failed either to

turn over to the said bank the proceeds of the sale of the goods, or to return said goods if they were not sold, the petitioner is

guilty of estafa under article 315 (1) (b) (Samo vs. People, 115 Phil. 346).

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

transactions, was issued on January 29,1973.

xxx xxx xxx

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

that, heretofore, the misappropriation of the proceeds of a sale made under a trust receipt was not punishable under article 315.

That penal provision removed any doubt as to the criminal liability of the holder of a trust receipt who misappropriated the

proceeds of the sale.

It was the lower court in the Cuevo case which ruled that violation of a trust receipt gives rise to a civil action only. This was not the ruling in the

Supreme Court's decision.

It was made quite clear in the majority opinion that the lower court erred in holding that the accused did not commit estafa under article 315 (1) (b).

(104 SCRA 312, 316).

The petitioner quotes the dissenting opinion of Justice De Castro in this case that:

The parties, therefore, are deemed to have consciously entered into a purely commercial transaction that could give rise only to

civil liability, never to subject the 'entrustee' to criminal prosecution. Unlike, for instance, when several pieces of jewelry are

received by a person from the owner for sale on commission, and the former misappropriates for his personal use and benefit,

either the jewelries or the proceeds of the sale, instead of returning them to the owner as is his obligation, the bank is not in the

same concept as the jewelry owner with full power of disposition of the goods, which the bank does not have, 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 it were really 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 by 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, a feature totally

absent in the case of the transaction between the jewel-owner and his agent.

Equally emphatic is the dissent of then Senior Associate Justice Claudio Teehankee that:

I concur with the dissent of Mr. Justice De Castro insofar as it upholds the more liberal interpretation to the trust receipt

transaction which would give rise only to civil liability on the part of the offender. The very definition of trust receipt as given in

the main opinion (at pp. 4-5), '(A) trust receipt is considered as a security transaction intended to aid in financing importers and

retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who

may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased' (53 Am. Jr.

961, cited in Samo v. People, 115 Phil. 346, 349),' 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.

It should, however, be noted that even as Justice de Castro filed a dissent, he also made the following observations:

The question is whether the violation of the terms of a trust receipt would constitute estafa. There is no more doubt that under

P.D. 115, the violation is defined as estafa, but before the promulgation of said decree, I have entertained grave doubts to such

extent that I would acquit a person accused of the crime allegedly committed before said decree, the promulgation of which

serves to confirm my doubts. For if there had been no such doubt, especially as some decisions had already been rendered by

this Court holding that estafa is committed where there is a violation of a trust receipt,there would have been no need for P.D.

115. (Emphasis supplied)

The dissenting opinions later became the Court's ruling on the matter when the Sia decision penned by Justice De Castro was promulgated.

In the Sia case, supra, it was held that:

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G.R. No. 80544 July 5, 1989 ROSEMARIE M. LEE,?petitioner,? vs. HON. JOSEFINA CRUZ RODIL, Judge of Regional Trial Court, Branch X, Manila and PEOPLE OF THE PHILIPPINES,?respondents. Manuel B. Imbong for petitioner. GUTIERREZ, JR.,?J.: In this petition we are asked to reconsider the liability for estafa of an entrustee in a trust receipt agreement who disposes of the goods covered by it but fails to deliver the proceeds of the sale to the bank. Petitioner Rosemarie M. Lee was charged with estafa in an information which alleged: That on or about July 26,1982 in the City of Manila, Philippines, the said accused, did then and there wilfully, unlawfully and feloniously defraud the Philippine Bank of Communications, a banking institution duly organized and existing under the laws of the Republic of the Philippines, in the following manner, to wit: the said accused, being then the duly authorized representative of C.S. Lee Enterprises, Inc., after opening letter of credit with the said bank under L/C No. 63251 dated July 26, 1982, for the amount of P 154,711.97, coveting the purchase price of a certain merchandise consisting of 23 ctns. Lab. Culture Media in favor of said bank, received fr ...
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