PEOPLE OF THE PHILIPPINES, (PUBLIC PETITIONER), AND ALLIED BANKING CORPORATION (PRIVATE PETITIONER), VS. HON. JUDGE DAVID G. NITAFAN, (PUBLIC RESPONDENT), AND BETTY SIA ANG (PRI…

This petition for certiorari
involves an issue that has been raised before this Court several times in the
past.  The petitioner, in effect, is
asking for a re-examination of our decisions on the issue of whether or not an
entrustee in a trust receipt agreement who fails to deliver the proceeds of the
sale or to return the goods if not sold to the entruster-bank is liable for the
crime of estafa.

Petitioner Allied Banking Corporation charged Betty Sia Ang with
estafa in Criminal Case No. 87-53501 in an information
which alleged:

“That on or about July 18, 1980, in the City of Manila,
Philippines, the said accused, being then the proprietress of Eckart
Enterprises, a business entity located at 756 Norberto Amoranto Avenue, Quezon
City, did then and there wilfully, unlawfully and feloniously defraud the
Allied Banking Corporation, a banking institution, represented by its Account
Officer, Raymund S. Li, in the following manner, to wit:  the said accused received in trust from the
aforesaid bank Gordon Plastics, plastic sheeting and Hook Chromed, in the total
amount of  P398,000.00, specified in a trust receipt and covered by
Domestic Letter of Credit No. DLC?002-801254, under the express
obligation on the part of said accused to sell the same and account for the proceeds of the sale
thereof, if sold, or to return
said merchandise, if not sold, on or before
October 16, 1980, or upon
demand, but the said accused, once in possession of the said articles, far from
complying with the aforesaid obligation, notwithstanding repeated demands made
upon her to that effect, paid only the amount of P283,115.78, thereby leaving
unaccounted for the amount of P114,884.22 which, once in her possession, with
intent to defraud, she misappropriated, misapplied and converted to her own
personal use and benefit, to the damage and prejudice of said Allied Banking
Corporation in the aforesaid sum of P114,884.22, Philippine Currency.”
(Rollo, pp. 13-14)

The accused filed a motion to quash the information on the ground
that the facts charged do not
constitute an offense.

On January 7, 1988,
the respondent judge granted the motion to quash.  The order was anchored on the premise that a trust receipt transaction is an
evidence of a loan being secured so that there is, as between the parties to
it, a creditor-debtor relationship.  The
court ruled that the penal clause of Presidential Decree No. 115 on the Trust
Receipts Law is inoperative because it does not actually punish an offense mala
prohibita.  The law only refers to
the relevant estafa provision in the Revised Penal Code.  The Court relied on the judicial
pronouncements in People v. Cuevo, 104 SCRA 312 [1981]
where, for lack of the required number of votes, this Court upheld the
dismissal of a charge for estafa for a violation of a trust receipt agreement;
and in Sia v. People, 121
SCRA 655 [1983] where we held that the violation merely gives rise to a civil
obligation.  At the time the order
to quash was issued or on January 7,
1988, these two decisions were the only most recent ones.  Hence, this petition.

The private respondent
adopted practically the same stance of the lower court.  She likewise
asserts that P.D. 115 is unconstitutional as it violates the constitutional
prohibition against imprisonment for non-payment of a debt.  She argues that where no malice exists in a
breach of a purely commercial undertaking, P.D. 115 imputes it.

This Court notes that the petitioner bank brought a similar case
before this Court in G.R. No. 82495, entitled Allied Banking Corporation
v. Hon. Secretary Sedfrey Ordoñez and
Alfredo Ching which we decided on December 10, 1990 (192 SCRA
246).  In that case, the petitioner
additionally questioned, and we accordingly reversed, the pronouncement of the Secretary of
Justice limiting the application of the penal provision of P.D. 115 only to
goods intended to be sold to the exclusion of those still to be manufactured.

As in G.R. No. 82495, we resolve the instant petition in the light of the Court’s ruling in Lee
v. Rodil, 175 SCRA 100 [1989] and Sia v. Court
of Appeals, 166 SCRA 263 [1988]. 
We have held in the latter
cases that acts involving the violation of trust receipt agreements occuring after 29 January 1973 (date of enactment of P.D. 115) would make the accused criminally
liable for estafa under paragraph 1 (b), Article 315 of the Revised Penal Code
(RPC) pursuant to the explicit provision in Section 13 of P.D. 115.

The relevant penal provision of P.D. 115 provides:

“SEC. 13 of P.D. No. 115 provides:

“xxx 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.”

Section 1 (b), Article 315 of the RPC under which the violation
is made to fall, states:

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

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 factual circumstances in the present case show that the
alleged violation was committed sometime in 1980 or during the effectivity of
P.D. 115.  The failure, therefore, to
account for the P114,884.22 balance is what makes the accused-respondent
criminally liable for estafa.  The Court
reiterates its definitive ruling that, in the Cuevo and Sia
(1983) cases relied upon by the accused, P.D. 115 was
not applied because the questioned acts were committed before its
effectivity.  (Lee v. Rodil, supra, p. 108) At the
time those cases were decided, the failure to comply with the obligations under
the trust receipt was susceptible to two interpretations.  The Court in Sia adopted the view that
a violation gives rise only to a civil liability as the more feasible view
“before the promulgation of P.D. 115,” notwithstanding prior
decisions where we ruled that a breach also gives rise to a liability for
estafa.  (People v. Yu
Chai Ho, 53 Phil. 874 [1929]; Samo v. People, 115
Phil. 346 [1962]; Philippine National Bank v. Arrozal, 103 Phil. 213 [1958];
Philippine National Bank v. Viuda e Hijos
de Angel Jose, 63 Phil. 814 [1936]).

Contrary to the reasoning of the respondent court and the
accused, a trust receipt arrangement does not involve a simple loan transaction
between a creditor and a debtor-importer. 
Apart from a loan feature, the trust receipt arrangement has a security
feature that is covered by the trust receipt itself.  (Vintola v. Insular Bank of Asia and America,
151 SCRA 578 [1987]) That second feature is what provides the much needed
financial assistance to our traders in the importation or purchase of goods or
merchandise through the use of those goods or merchandise as collateral for the
advancements made by a bank.  (Samo v. People, supra).  The title of the bank to
the security is the one sought to be protected and not the loan which is a
separate and distinct agreement.

The Trust Receipts Law punishes the dishonesty and abuse of confidence
in the handling of money or goods to the prejudice of another regardless of
whether the latter is the owner or not. 
The law does not seek to enforce payment of the loan.  Thus, there can be no violation of a right against imprisonment for non-payment of a debt.

Trust receipts are indispensable contracts in international and
domestic business transactions.  The
prevalent use of trust receipts, the danger of their misuse and/or
misappropriation of the goods or proceeds realized from the sale of goods, documents
or instruments held in trust for entruster-banks, and the need for
regulation of trust receipt transactions to safeguard the rights and enforce
the obligations of the parties involved are the main thrusts of P.D. 115.  As correctly
observed by the Solicitor General, P.D. 115, like Batas Pambansa Blg.
22, punishes the act “not as an offense
against property, but as an offense against public order.  x x
x The misuse of trust receipts therefore should be deterred to prevent any possible havoc in trade circles and the banking
community (citing Lozano v. Martinez,
146 SCRA 323 [1986]; Rollo, p. 57).  It is in the context of upholding public
interest that the law now specifically designates a breach of a trust
receipt agreement to be an act that “shall” make one liable for estafa.

The offense is punished as a malum prohibitum
regardless of the existence of intent or malice.  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.

We are continually re-evaluating the opposite view which insists
that the violation of a trust receipt agreement should result only in a civil
action for collection.  The respondent
contends that there is no malice involved. 
She cites the dissent of the late Chief Justice Claudio Teehankee in Ong
v. Court of Appeals, (124 SCRA 578 [1983]) to wit:

“The old capitalist orientation of putting importers in jail
for supposed estafa or swindling for non-payment of the price of the imported
goods released to them under trust receipts (a purely commercial transaction)
under the fiction of the trust receipt device, should no longer be permitted in
this day and age.”

As earlier stated, however, the law punishes the dishonesty and abuse of confidence in the
handling of money or goods to the prejudice of the bank.

The Court reiterates that
the enactment of P.D. 115 is a valid exercise of the police power of the
State and is, thus, constitutional.  (Lee
v. Rodil, supra; Lozano v. Martinez,
supra) The arguments of the respondent are appropriate for a repeal or
modification of the law and should be directed to
Congress.  But until the law is repealed,
we are constrained to apply it.

WHEREFORE, the petition is hereby GRANTED.  The Order of the respondent Regional Trial Court of Manila, Branch 52 dated
January 7, 1988 is SET ASIDE.  Let this case be remanded to the said court
for disposition in accordance with this decision.

SO ORDERED.

Feliciano, Bidin, Davide, Jr.,
and Romero, JJ.,
concur.