Allied Banking Corporation vs. Hon. Secretary Sedfrey Ordonez and Alfredo Ching
### Facts:
This case involves a special civil action for certiorari challenging the interpretation of the Department of Justice (DOJ) of the penal provision of Presidential Decree No. 115 (PD 115), also known as the Trust Receipts Law. The petitioner, Allied Banking Corporation, issued an irrevocable letter of credit to Philippine Blooming Mills (PBM) for the purchase of materials. PBM, through Alfredo Ching, executed four Trust Receipt Agreements with Allied Bank but failed to comply with their obligations under these agreements, leading to a criminal complaint for violation of PD 115. The DOJ initially found a prima facie case but later reversed its position, holding that the goods covered by the trust receipts were not contemplated by PD 115 as they were used up in the operation of PBM’s equipment and machinery and were not sold. Allied Bank filed a motion for reconsideration which was denied, prompting this petition to the Supreme Court.
### Issues:
1. Whether the penal provision of PD 115 applies when the goods covered by a Trust Receipt are utilized in the operation of equipment and machineries of the entrustee and are not sold.
2. Whether the DOJ acted with grave abuse of discretion in its interpretation of PD 115 and its subsequent rulings.
### Court’s Decision:
The Supreme Court granted the petition, holding that the penal provisions of PD 115 apply irrespective of whether the goods covered by the Trust Receipt are sold or used in the manufacturing process. The Court emphasized that PD 115 is designed to cover any act violative of an obligation covered by the trust receipt and is not limited to transactions in goods intended for resale. The Court criticized the DOJ’s narrow interpretation of PD 115 and its failure to recognize the broader scope of “entrustee” obligations under Trust Receipt transactions, thereby annulling the DOJ’s resolutions and remanding the case to the Regional Trial Court (RTC) for further proceedings.
### Doctrine:
The case reiterates the doctrine that trust receipt transactions under PD 115 encompass a wide range of obligations and are not limited to goods intended for resale. Any failure of the entrustee to comply with the conditions of the trust receipt, including but not limited to the sale of goods or their return if unsold, constitutes estafa under the law. PD 115 penalizes the failure to turn over proceeds from the sale of goods (or the goods themselves if unsold) as specified in the trust receipt agreement.
### Class Notes:
– **Trust Receipts Law (PD 115):** Provides for the regulation of trust receipt transactions to facilitate financing of importations and local transactions involving goods, documents, or instruments.
– **Estafa under PD 115:** Constituted by the failure to turn over the proceeds of the sale or return the unsold goods covered by a trust receipt, punishable under Article 315, paragraph one (b) of the Revised Penal Code.
– **Doctrine of Strict Interpretation:** Penal statutes are construed strictly against the State and liberally in favor of the accused. However, the obligations under a trust receipt are interpreted within the broader scope of preventing fraud and ensuring compliance.
### Historical Background:
The Trust Receipts Law (PD 115) was enacted to address the growing importance of trust receipts in the Philippine business landscape. It aims to define the rights and obligations of parties involved in trust receipt transactions, providing a legal framework to regulate these transactions, ensure compliance, and penalize violations. This case exemplifies the nuances involved in interpreting the law, especially in discerning the scope of transactions it covers and the resulting obligations of the entrustee.
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