ROSEMARIE M. LEE, PETITIONER, VS. HON. JOSEFINA CRUZ RODIL, JUDGE OF REGIONAL TRIAL COURT, BRANCH X, MANILA AND PEOPLE OF THE PHILIPPINES, RESPONDENTS.

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 P154,711.97, covering 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 wilfully, 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:

“x x x
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.” (Underscoring 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:

“x x x (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(1) (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

“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(1) (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:

“Consequently, if only from the fact that the trust receipt
transaction is susceptible to two reasonable interpretation(s), one as giving rise only to
civil liability for the violation of the condition thereof, and the
other, as generating
also criminal liability, the former should be adopted as more favorable
to the supposed offender.x x x“

A closer look at the two decisions cited by the petitioner shows
attendant facts that are different from those
in the instant case.

As noted by the Solicitor General, in the Cuevo
and Sia, cases, both violations of the trust receipt agreements happened in the
1960’s, way before the promulgation of P.D. 115 in 1973.  (Rollo, p. 55) In the present case, the accused was
charged in 1985 for an act committed in 1982.

While the Cuevo and Sia cases
were decided when P.D. 115 had already been promulgated, the decree was not applied in either of the cases because the
questioned acts were committed before its effectivity.

Thus, the view held by the Court in the Sia case that violation of a trust receipt only gives rise to civil liability did not take into consideration
P.D. 115, as it ruled:

“We consider the view that the trust receipt arrangement gives
rise only to civil liability as the more feasible, before the promulgation of P.D. 115.” (121 SCRA 655, 664) (Emphasis supplied).

Acts involving the violation of trust receipt agreements occurring after 29 January 1973 would make the accused criminally liable
for estafa under paragraph 1 (b), Article 315 of the
Revised Penal Code, pursuant to the
explicit provision in Sec. 13 of P.D.
115.  (Sia
v. Court of Appeals, G.R. No.
40324, October 5, 1988).

The petitioner questions the constitutionality of Sec. 13 of P.D. 115.  She contends that it is violative
of the constitutional right that “No person shall be imprisoned for debt
or non-payment of a poll tax”.

The petitioner has failed to make out a strong case that P.D. 115 conflicts with the constitutional
prohibition against imprisonment for non-payment of debt.  A convincing showing is
needed to overcome the presumption of the validity of an existing statute.

The criminal liability springs from the violation of the trust
receipt.

We bear in mind the nature
of a trust receipt agreement.  This Court pronounced in the Vintola cases, 150 SCRA 578 (1987); G.R. No. 78671, March 25, 1988 that:

“xxx A letter of credit-trust receipt
arrangement is endorsed with its own distinctive features and
characteristics.  Under the set-up, a bank extends a loan covered by the letter of
credit, with the trust receipt as a security for the loan.  In other words, the transaction involves a
loan feature represented the letter of
credit, and a security feature which is in
the covering trust receipt.” (Emphasis supplied)

Therefore, the loan feature
is separate and distinct from the trust
receipt.  The violation of a trust
receipt committed by disposing of the goods covered thereby and failing to
deliver the proceeds of such sale has
been squarely made to fall under Art. 315 (i) (b) of the Revised Penal Code which provides:

“xxx
Swindling (estafa). – Any person who shall defraud another by any of the
means mentioned herein below shall be punished by:

xxx                               xxx                               xxx

“a. 
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.”

The fact that the bank does not become the factual owner of the
goods does not make the law unconstitutional (See the Vintola
cases, supra) The
language of the above-mentioned penal provision has been clarified by P.D.
115.  The person who is prejudiced through the
misappropriation or conversion of the goods need not be the owner, thereof; if
such had been the intention of the authors of the Code, the phrase “to the
prejudice of another” would have read “to the prejudice of the
owner.” (People v. Yu Chai Ho, 53 Phil. 874, 877-878).

Moreover, we agree with the Solicitor General who expressed the
policy behind the law:

“Verily, P.D. 115 is a declaration by the legislative
authority that, as a matter of public policy, the failure of a person to turn
over the proceeds of the sale of goods covered by a trust receipt or to return
said goods if not sold is a public nuisance to be abated by the imposition of
penal sanctions.  As held in Lozano
vs. Martinez. (146 SCRA 323, 338):

” ‘x x x
certainly it is within the authority of the lawmaking body to prescribe certain
acts deemed pernicious and inimical to
public welfare.  Acts mala in se are not the only acts that the law can punish. 
An act may not be considered by society as inherently wrong, hence, not malum in se, but because of the harm that it inflicts on
the community, it can be outlawed and criminally punished as malum prohibitum.  The State can do this in the exercise of its
police power.’

“In fine, P.D. 115 is a valid exercise of police power and is not repugnant to the constitutional provision on
non-imprisonment for non-payment of debt.”

The undersigned ponente concurred in
the Sia
decision in 1983 because the allegedly criminal act was committed before
the pointedly deliberate expression of legislative intent was manifested in a
statute.  There were then doubts as to
the susceptibility of a trust
receipt transaction to two different interpretations, one which limits the
effects of a violation to civil liability
and the other to include criminal responsibility.  Certain factual considerations in the Sia
case strengthened the arguments for acquittal of the accused.  There have been two legislatures since then –
the Batasang Pambansa and
the present Congress of the Philippines
– but no repeal of P.D. 115 has been made. 
To declare this law unconstitutional is an entirely different
proposition from merely choosing one of two reasonable alternatives.

An examination of P.D. 115 shows the growing importance of trust
receipts in Philippine business,
the need to provide for the rights and obligations of parties to a trust
receipt transaction, the study of the problems
involved and the action by monetary authorities, and the necessity of
regulating the enforcement of rights arising from default or violations of
trust receipt agreements.  The
legislative intent to meet a pressing
need is clearly expressed.  We see no
unconstitutionality in the means deliberately employed to enforce the integrity
of trust receipts.

WHEREFORE, the trial court’s orders are AFFIRMED and the
case is remanded to the trial court for further proceedings.

SO ORDERED.

Fernan, C.J., (Chairman), Feliciano, Bidin, and Cortes, JJ., concur.