G.R. No.
117913 February 1, 2002 from their letters of credit and trust receipt transactions with plaintiff PBCom
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO
and ALFONSO CO, petitioners,
vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
x-----------------------x
G.R. NO. 117914
MICO METALS CORPORATION, petitioner,
vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
DECISION
DE LEON, JR., J:
Before us is the joint and consolidated petition for review of the Decision 1 dated
June 15, 1994 of the Court of Appeals in CA-G.R. CV No. 27480 entitled, "Philippine
Bank of Communications vs. Mico Metals Corporation, Charles Lee, Chua Siok Suy,
Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co," which reversed the
decision of the Regional Trial Court (RTC) of Manila, Branch 55 dismissing the
complaint for a sum of money filed by private respondent Philippine Bank of
Communications against herein petitioners, Mico Metals Corporation (MICO, for
brevity), Charles Lee, Chua Siok Suy,2 Mariano Sio, Alfonso Yap, Richard Velasco and
Alfonso Co.3 The dispositive portion of the said Decision of the Court of Appeals,
reads:
WHEREFORE, the decision of the Regional Trial Court is hereby reversed and in lieu
thereof, a new one is entered:
a) Ordering the defendants-appellees jointly and severally to pay plaintiff
PBCom the sum of Five million four hundred fifty-one thousand six hundred
sixty-three pesos and ninety centavos (P5,451,663.90) representing
defendants-appellees unpaid obligations arising from ordinary loans granted by
the plaintiff plus legal interest until fully paid.
b) Ordering defendants-appellees jointly and severally to pay PBCom the sum
of Four hundred sixty-one thousand six hundred pesos and sixty-six centavos
(P46 1,600.66) representing defendants-appellees unpaid obligations arising
plus legal interest until fully paid.
c) Ordering defendants-appellees jointly and severally to pay PBCom the sum of
P50,000.00 as attorneys fees.
No pronouncement as to costs.
The facts of the case are as follows:
On March 2, 1979, Charles Lee, as President of MICO wrote private respondent
Philippine Bank of Communications (PBCom) requesting for a grant of a discounting
loan/credit line in the sum of Three Million Pesos (P3,000,000.00) for the purpose
of carrying out MICOs line of business as well as to maintain its volume of business.
On the same day, Charles Lee requested for another discounting loan/credit line of
Three Million Pesos (P3,000,000.00) from PBCom for the purpose of opening letters
of credit and trust receipts.
In connection with the requests for discounting loan/credit lines, PBCom was
furnished by MICO the following resolution which was adopted unanimously by
MICOs Board of Directors:
RESOLVED, that the President, Mr. Charles Lee, and the Vice-President and General
Manager, Mr. Mariano A. Sio, singly or jointly, be and they are duly authorized and
empowered for and in behalf of this Corporation to apply for, negotiate and secure
the approval of commercial loans and other banking facilities and accommodations,
such as, but not limited to discount loans, letters of credit, trust receipts, lines for
marginal deposits on foreign and domestic letters of credit, negotiate out-of-town
checks, etc. from the Philippine Bank of Communications, 216 Juan Luna, Manila in
such sums as they shall deem advantageous, the principal of all of which shall not
exceed the total amount of TEN MILLION PESOS (P10,000,000.00), Philippine
Currency, plus any interests that may be agreed upon with said Bank in such loans
and other credit lines of the same kind and such further terms and conditions as
may, upon granting of said loans and other banking facilities, be imposed by the
Bank; and to make, execute, sign and deliver any contracts of mortgage, pledge or
sale of one, some or all of the properties of the Company, or any other agreements
or documents of whatever nature or kind, including the signing, indorsing, cashing,
negotiation and execution of promissory notes, checks, money orders or other
negotiable instruments, which may be necessary and proper in connection with said
loans and other banking facilities, or with their amendments, renewals and
extensions of payment of the whole or any part thereof. 4
On March 26, 1979, MICO availed of the first loan of One Million Pesos
(P1,000,000.00) from PBCom. Upon maturity of the loan, MICO caused the same to
be renewed, the last renewal of which was made on May 21, 1982 under
Promissory Note BNA No. 26218.5
Another loan of One Million Pesos (P1,000,000.00) was availed of by MICO from
PBCom which was likewise later on renewed, the last renewal of which was made
on May 21, 1982 under Promissory Note BNA No. 26219.6 To complete MICOs
availment of Three Million Pesos (P3,000,000.00) discounting loan/credit line with
PBCom, MICO availed of another loan from PBCom in the sum of One Million Pesos
(P1,000,000.00) on May 24, 1979. As in previous loans, this was rolled over or
renewed, the last renewal of which was made on May 25, 1982 under Promissory
Note BNA No. 26253.7
As security for the loans, MICO through its Vice-President and General Manager,
Mariano Sio, executed on May 16, 1979 a Deed of Real Estate Mortgage over its
properties situated in Pasig, Metro Manila covered by Transfer Certificates of Title
(TCT) Nos. 11248 and 11250.
On March 26, 1979 Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap and
Richard Velasco, in their personal capacities executed a Surety Agreement 8 in favor
of PBCom whereby the petitioners jointly and severally, guaranteed the prompt
payment on due dates or at maturity of overdrafts, promissory notes, discounts,
drafts, letters of credit, bills of exchange, trust receipts, and other obligations of
every kind and nature, for which MICO may be held accountable by PBCom. It was
provided, however, that the liability of the sureties shall not at any one time exceed
the principal amount of Three Million Pesos (P3,000,000.00) plus interest, costs,
losses, charges and expenses including attorneys fees incurred by PBCom in
connection therewith.
On July 14, 1980, petitioner Charles Lee, in his capacity as president of MICO, wrote
PBCom and applied for an additional loan in the sum of Four Million Pesos
(P4,000,000.00). The loan was intended for the expansion and modernization of the
companys machineries. Upon approval of the said application for loan, MICO
availed of the additional loan of Four Million Pesos (P4,000,000.00) as evidenced by
Promissory Note TA No. 094.9
As per agreement, the proceeds of all the loan availments were credited to MICOs
current checking account with PBCom. To induce the PBCom to increase the credit
line of MICO, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco
and Alfonso Co (hereinafter referred to as petitioners-sureties), executed another
surety agreement10 in favor of PBCom on July 28, 1980, whereby they jointly and
severally guaranteed the prompt payment on due dates or at maturity of
overdrafts, promissory notes, discounts, drafts, letters of credit, bills of exchange,
trust receipts and all other obligations of any kind and nature for which MICO may
be held accountable by PBCom. It was provided, however, that their liability shall
not at any one time exceed the sum of Seven Million Five Hundred Thousand Pesos
(P7,500,000.00) including interest, costs, charges, expenses and attorneys fees
incurred by MICO in connection therewith.
On July 29, 1980, MICO furnished PBCom with a notarized certification issued by its
corporate secretary, Atty. P.B. Barrera, that Chua Siok Suy was duly authorized by
the Board of Directors to negotiate on behalf of MICO for loans and other credit
availments from PBCom. Indicated in the certification was the following resolution
unanimously approved by the Board of Directors:
RESOLVED, AS IT IS HEREBY RESOLVED, That Mr. Chua Siok Suy be, as he is hereby
authorized and empowered, on behalf of MICO METALS CORPORATION from time to
time, to borrow money and obtain other credit facilities, with or without security,
from the PHILIPPINE BANK OF COMMUNICATIONS in such amount(s) and under such
terms and conditions as he may determine, with full power and authority to execute,
sign and deliver such contracts, instruments and papers in connection therewith,
including real estate and chattel mortgages, pledges and assignments over the
properties of the Corporation; and to renew and/or extend and/or roll-over and/or
reavail of the credit facilities granted thereunder, either for lesser or for greater
amount(s), the intention being that such credit facilities and all securities of
whatever kind given as collaterals therefor shall be a continuing security.
RESOLVED FURTHER, That said bank is hereby authorized, empowered and directed
to rely on the authority given hereunder, the same to continue in full force and
effect until written notice of its revocation shall be received by said Bank.11
On July 2, 1981, MICO filed with PBCom an application for a domestic letter of
credit in the sum of Three Hundred Forty-Eight Thousand Pesos (P348,000.00).12
The corresponding irrevocable letter of credit was approved and opened under LC
No. L-16060.13 Thereafter, the domestic letter of credit was negotiated and
accepted by MICO as evidenced by the corresponding bank draft issued for the
purpose.14 After the supplier of the merchandise was paid, a trust receipt upon
MICOs own initiative, was executed in favor of PBCom.15
On September 14, 1981, MICO applied for another domestic letter of credit with
PBCom in the sum of Two Hundred Ninety Thousand Pesos (P290,000.00).16 The
corresponding irrevocable letter of credit was issued on September 22, 1981 under
LC No. L-16334.17 After the beneficiary of the said letter of credit was paid by
PBCom for the price of the merchandise, the goods were delivered to MICO which
executed a corresponding trust receipt18 in favor of PBCom.
On November 10, 1981, MICO applied for authority to open a foreign letter of credit
in favor of Ta Jih Enterprises Co., Ltd.,19 and thus, the corresponding letter of
credit20 was then issued by PBCom with a cable sent to the beneficiary, Ta Jih
Enterprises Co., Ltd. advising that said beneficiary may draw funds from the account
of PBCom in its correspondent banks New York Office. 21 PBCom also informed its
corresponding bank in Taiwan, the Irving Trust Company, of the approved letter of
credit. The correspondent bank acknowledged PBComs advice through a
confirmation letter22 and by debiting from PBComs account with the said
correspondent bank the sum of Eleven Thousand Nine Hundred Sixty US Dollars
($11 ,960.00).23 As in past transactions, MICO executed in favor of PBCom a
corresponding trust receipt.24
On January 4, 1982, MICO applied, for authority to open a foreign letter of credit in
the sum of One Thousand Nine Hundred US Dollars ($1,900.00), with PBCom. 25
Upon approval, the corresponding letter of credit denominated as LC No. 62293 26
was issued whereupon PBCom advised its correspondent bank and MICO 27 of the
same. Negotiation and proper acceptance of the letter of credit were then made by
MICO. Again, a corresponding trust receipt28 was executed by MICO in favor of
PBCom.
In all the transactions involving foreign letters of credit, PBCom turned over to
MICO the necessary documents such as the bills of lading and commercial invoices
to enable the latter to withdraw the goods from the port of Manila.
On May 21, 1982 MICO obtained from PBCom another loan in the sum of Three
Hundred Seventy-Seven Thousand Pesos (P377,000.00) covered by Promissory Note
BA No. 7458.29
Upon maturity of all credit availments obtained by MICO from PBCom, the latter
made a demand for payment. 30 For failure of petitioner MICO to pay the obligations
incurred despite repeated demands, private respondent PBCom extrajudicially
foreclosed MICOs real estate mortgage and sold the said mortgaged properties in a
public auction sale held on November 23, 1982. Private respondent PBCom which
emerged as the highest bidder in the auction sale, applied the proceeds of the
purchase price at public auction of Three Million Pesos (P3,000,000.00) to the
expenses of the foreclosure, interest and charges and part of the principal of the
loans, leaving an unpaid balance of Five Million Four Hundred Forty-One Thousand
Six Hundred Sixty-Three Pesos and Ninety Centavos (P5,441,663.90) exclusive of
penalty and interest charges. Aside from the unpaid balance of Five Million Four
Hundred Forty-One Thousand Six Hundred Sixty-Three Pesos and Ninety Centavos
(P5,441,663.90), MICO likewise had another standing obligation in the sum of Four
Hundred Sixty-One Thousand Six Hundred Pesos and Six Centavos (P461,600.06)
representing its trust receipts liabilities to private respondent. PBCom then
demanded the settlement of the aforesaid obligations from herein petitioners-
sureties who, however, refused to acknowledge their obligations to PBCom under
the surety agreements. Hence, PBCom filed a complaint with prayer for writ of
preliminary attachment before the Regional Trial Court of Manila, which was raffled
to Branch 55, alleging that MICO was no longer in operation and had no properties
to answer for its obligations. PBCom further alleged that petitioner Charles Lee has
disposed or concealed his properties with intent to defraud his creditors. Except for
MICO and Charles Lee, the sheriff of the RTC failed to serve the summons on herein
petitioners-sureties since they were all reportedly abroad at the time. An alias
summons was later issued but the sheriff was not able to serve the same to
petitioners Alfonso Co and Chua Siok Suy who was already sickly at the time and
reportedly in Taiwan where he later died.
Petitioners (MICO and herein petitioners-sureties) denied all the allegations of the
complaint filed by respondent PBCom, and alleged that: a) MICO was not granted
the alleged loans and neither did it receive the proceeds of the aforesaid loans; b)
Chua Siok Suy was never granted any valid Board Resolution to sign for and in
behalf of MICO; c) PBCom acted in bad faith in granting the alleged loans and in
releasing the proceeds thereof; d) petitioners were never advised of the alleged
grant of loans and the subsequent releases therefor, if any; e) since no loan was
ever released to or received by MICO, the corresponding real estate mortgage and
the surety agreements signed concededly by the petitioners-sureties are null and
void.
The trial court gave credence to the testimonies of herein petitioners and dismissed
the complaint filed by PBCom. The trial court likewise declared the real estate
mortgage and its foreclosure null and void. In ruling for herein petitioners, the trial
court said that PBCom failed to adequately prove that the proceeds of the loans
were ever delivered to MICO. The trial court pointed out, among others, that while
PBCom claimed that the proceeds of the Four Million Pesos (P4,000,000.00) loan
covered by promissory note TA 094 were deposited to the current account of
petitioner MICO, PBCom failed to produce the ledger account showing such
deposit. The trial court added that while PBCom may have loaned to MICO the
other sums of Three Hundred Forty-Eight Thousand Pesos (P348,000.00) and Two
Hundred Ninety Thousand Pesos (P290,000.00), no proof has been adduced as to
the existence of the goods covered and paid by the said amounts. Hence, inasmuch
as no consideration ever passed from PBCom to MICO, all the documents involved
therein, such as the promissory notes, real estate mortgage including the surety
agreements were all void or nonexistent for lack of cause or consideration. The trial
court said that the lack of proof as regards the existence of the merchandise
covered by the letters of credit bolstered the claim of herein petitioners that no
purchases of the goods were really made and that the letters of credit transactions
were simply resorted to by the PBCom and Chua Siok Suy to accommodate the
latter in his financial requirements.
The Court of Appeals reversed the ruling of the trial court, saying that the latter
committed an erroneous application and appreciation of the rules governing the
burden of proof. Citing Section 24 of the Negotiable Instruments Law which
provides that "Every negotiable instrument is deemed prima facie to have been
issued for valuable consideration and every person whose signature appears
thereon to have become a party thereto for value", the Court of Appeals said that
while the subject promissory notes and letters of credit issued by the PBCom made
no mention of delivery of cash, it is presumed that said negotiable instruments
were issued for valuable consideration. The Court of Appeals also cited the case of
Gatmaitan vs. Court of Appeals31 which holds that "there is a presumption that an
instrument sets out the true agreement of the parties thereto and that it was
executed for valuable consideration". The appellate court noted and found that a
notarized Certification was issued by MICOs corporate secretary, P.B. Barrera, that
Chua Siok Suy, was duly authorized by the Board of Directors of MICO to borrow
money and obtain credit facilities from PBCom.
Petitioners filed a motion for reconsideration of the challenged decision of the
Court of Appeals but this was denied in a Resolution dated November 7, 1994
issued by its Former Second Division. Petitioners-sureties then filed a petition for
review on certiorari with this Court, docketed as G.R. No. 117913, assailing the
decision of the Court of Appeals. MICO likewise filed a separate petition for review
on certiorari, docketed as G.R. No. 117914, with this Court assailing the same
decision rendered by the Court of Appeals. Upon motion filed by petitioners, the
two (2) petitions were consolidated on January 11, 1995.32
Petitioners contend that there was no proof that the proceeds of the loans or the
goods under the trust receipts were ever delivered to and received by MICO. But
the record shows otherwise. Petitioners-sureties further contend that assuming
that there was delivery by PBCom of the proceeds of the loans and the goods, the
contracts were executed by an unauthorized person, more specifically Chua Siok
Suy who acted fraudulently and in collusion with PBCom to defraud MICO.
The pertinent issues raised in the consolidated cases at bar are: a) whether or not
the proceeds of the loans and letters of credit transactions were ever delivered to
MICO, and b) whether or not the individual petitioners, as sureties, may be held
liable under the two (2) Surety Agreements executed on March 26, 1979 and July
28, 1980.
In civil cases, the party having the burden of proof must establish his case by
preponderance of evidence.33 Preponderance of evidence means evidence which is
more convincing to the court as worthy of belief than that which is offered in
opposition thereto. Petitioners contend that the alleged promissory notes, trust
receipts and surety agreements attached to the complaint filed by PBCom did not
ripen into valid and binding contracts inasmuch as there is no evidence of the
delivery of money or loan proceeds to MICO or to any of the petitioners-sureties.
Petitioners claim that under normal banking practice, borrowers are required to
accomplish promissory notes in blank even before the grant of the loans applied for
and such documents become valid written contracts only when the loans are
actually released to the borrower.
We are not convinced.
During the trial of an action, the party who has the burden of proof upon an issue
may be aided in establishing his claim or defense by the operation of a
presumption, or, expressed differently, by the probative value which the law
attaches to a specific state of facts. A presumption may operate against his
adversary who has not introduced proof to rebut the presumption. The effect of a
legal presumption upon a burden of proof is to create the necessity of presenting
evidence to meet the legal presumption or the prima facie case created thereby,
and which if no proof to the contrary is presented and offered, will prevail. The
burden of proof remains where it is, but by the presumption the one who has that
burden is relieved for the time being from introducing evidence in support of his
averment, because the presumption stands in the place of evidence unless
rebutted.
Under Section 3, Rule 131 of the Rules of Court the following presumptions, among
others, are satisfactory if uncontradicted: a) That there was a sufficient
consideration for a contract and b) That a negotiable instrument was given or
indorsed for sufficient consideration. As observed by the Court of Appeals, a similar
presumption is found in Section 24 of the Negotiable Instruments Law which
provides that every negotiable instrument is deemed prima facie to have been
issued for valuable consideration and every person whose signature appears
thereon to have become a party for value. Negotiable instruments which are meant
to be substitutes for money, must conform to the following requisites to be
considered as such a) it must be in writing; b) it must be signed by the maker or
drawer; c) it must contain an unconditional promise or order to pay a sum certain in
money; d) it must be payable on demand or at a fixed or determinable future time;
e) it must be payable to order or bearer; and f) where it is a bill of exchange, the
drawee must be named or otherwise indicated with reasonable certainty.
Negotiable instruments include promissory notes, bills of exchange and checks.
Letters of credit and trust receipts are, however, not negotiable instruments. But
drafts issued in connection with letters of credit are negotiable instruments.
Private respondent PBCom presented the following documentary evidence to prove
petitioners credit availments and liabilities:
1) Promissory Note No. BNA 26218 dated May 21, 1982 in the sum of
P1,000,000.00 executed by MICO in favor of PBCom.
2) Promissory Note No. BNA 26219 dated May 21, 1982 in the sum of
P1,000,000.00 executed by MICO in favor of PBCom.
3) Promissory Note No. BNA 26253 dated May 25, 1982 in the sum of
P1,000,000.00 executed by MICO in favor of PBCom.
4) Promissory Note No. BNA 7458 dated May 21, 1982 in the sum of
P377,000.00 executed by MICO in favor of PBCom.
5) Promissory Note No. TA 094 dated July 29, 1980 in the sum of
P4,000.000.00 executed by MICO in favor of PBCom.
6) Irrevocable letter of credit No. L-16060 dated July 2,1981 issued in favor
of Perez Battery Center for account of Mico Metals Corp.
7) Draft dated July 2, 1981 in the sum of P348,000.00 issued by Perez
Battery Center, beneficiary of irrevocable Letter of Credit No. No. L-16060
and accepted by MICO Metals corporation.
8) Letter dated July 2, 1981 from Perez Battery Center addressed to private
respondent PBCom showing that proceeds of the irrevocable letter of credit
No. L- 16060 was received by Mr. Moises Rosete, representative of Perez
Battery Center.
9) Trust receipt dated July 2, 1981 executed by MICO in favor of PBCom
covering the merchandise purchased under Letter of Credit No. 16060.
10) Irrevocable letter of credit No. L-16334 dated September 22, 1981
issued in favor of Perez Battery Center for account of MICO Metals Corp.
11) Draft dated September 22, 1981 in the sum of P290,000.00 issued by
Perez Battery Center and accepted by MICO.
12) Letter dated September 17, 1981 from Perez Battery addressed to
PBCom showing that the proceeds of credit no. L-16344 was received by
Mr. Moises Rosete, a representative of Perez Battery Center.
13) Trust Receipt dated September 22, 1981 executed by MICO in favor of
PBCom covering the merchandise under Letter of Credit No. L-16334.
14) Irrevocable Letter of Credit no. 61873 dated November 10, 1981 for
US$11,960.00 issued by PBCom in favor of TA JIH Enterprises Co. Ltd.,
through its correspondent bank, Irving Trust Company of Taipei, Taiwan.
15) Trust Receipt dated December 15, 9181 executed by MICO in favor of
PBCom showing that possession of the merchandise covered by Irrevocable
Letter of Credit no. 61873 was released by PBCom to MICO.
16) Letters dated March 2, 1979 from MICO signed by its president, Charles
Lee, showing that MICO sought credit line from PBCom in the form of loans,
letters of credit and trust receipt in the sum of P7,500,000.00.
17) Letter dated July 14, 1980 from MICO signed by its president, Charles
Lee, showing that MICO requested for additional financial assistance in the
sum of P4,000,000.00.
18) Board resolution dated March 6, 1979 of MICO authorizing Charles Lee
and Mariano Sio singly or jointly to act and sign for and in behalf of MICO
relative to the obtention of credit facilities from PBCom.
19) Duly notarized Deed of Mortgage dated May 16, 1979 executed by
MICO in favor of PBCom over MICO s real properties covered by TCT Nos.
11248 and 11250 located in Pasig.
20) Duly notarized Surety Agreement dated March 26, 1979 executed by
herein petitioners Charles Lee, Mariano Sio, Alfonso Yap, Richard Velasco
and Chua Siok Suy in favor of PBCom.
21) Duly notarized Surety Agreement dated July 28, 1980 executed by
herein petitioners Charles Lee, Mariano Sio, Alfonso Yap, Richard Velasco
and Chua Siok Suy in favor of PBCom.
22) Duly notarized certification dated July 28, 1980 issued by MICO s
corporate secretary, Mr. P.B. Barrera, attesting to the adoption of a board
resolution authorizing Chua Siok Suy to sign, for and in behalf of MICO, all
the necessary documents including contracts, loan instruments and
mortgages relative to the obtention of various credit facilities from PBCom.
The above-cited documents presented have not merely created a prima facie case
but have actually proved the solidary obligation of MICO and the petitioners, as
sureties of MICO, in favor of respondent PBCom. While the presumption found
under the Negotiable Instruments Law may not necessarily be applicable to trust
receipts and letters of credit, the presumption that the drafts drawn in connection
with the letters of credit have sufficient consideration. Under Section 3(r), Rule 131
of the Rules of Court there is also a presumption that sufficient consideration was
given in a contract. Hence, petitioners should have presented credible evidence to
rebut that presumption as well as the evidence presented by private respondent
PBCom. The letters of credit show that the pertinent materials/merchandise have
been received by MICO. The drafts signed by the beneficiary/suppliers in
connection with the corresponding letters of credit proved that said suppliers were
paid by PBCom for the account of MICO. On the other hand, aside from their bare
denials petitioners did not present sufficient and competent evidence to rebut the
evidence of private respondent PBCom. Petitioner MICO did not proffer a single
piece of evidence, apart from its bare denials, to support its allegation that the loan
transactions, real estate mortgage, letters of credit and trust receipts were issued
allegedly without any consideration.
Petitioners-sureties, for their part, presented the By-Laws34 of Mico Metals
Corporation (MICO) to prove that only the president of MICO is authorized to
borrow money, arrange letters of credit, execute trust receipts, and promissory
notes and consequently, that the loan transactions, letters of credit, promissory
notes and trust receipts, most of which were executed by Chua Siok Suy in
representation of MICO were not allegedly authorized and hence, are not binding
upon MICO. A perusal of the By-Laws of MICO, however, shows that the power to
borrow money for the company and issue mortgages, bonds, deeds of trust and
negotiable instruments or securities, secured by mortgages or pledges of property
belonging to the company is not confined solely to the president of the corporation.
The Board of Directors of MICO can also borrow money, arrange letters of credit,
execute trust receipts and promissory notes on behalf of the corporation. 35
Significantly, this power of the Board of Directors according to the by-laws of MICO,
may be delegated to any of its standing committee, officer or agent. 36 Hence,
PBCom had every right to rely on the Certification issued by MICO's corporate
secretary, P.B. Barrera, that Chua Siok Suy was duly authorized by its Board of
Directors to borrow money and obtain credit facilities in behalf of MICO from
PBCom.
Petitioners-sureties also presented a letter of their counsel dated October 9, 1982,
addressed to private respondent PBCom purportedly to show that PBCom knew
that Chua Siok Suy allegedly used the credit and good names of the petitioner-
sureties for his benefit, and that petitioner-sureties were made to sign blank
documents and were furnished copies of the same. The letter, however, is in fact
merely a reply of petitioners-sureties counsel to PBComs demand for payment of
MICOs obligations, and appears to be an inconsequential piece of self-serving
evidence.
In addition to the foregoing, MICO and petitioners-sureties cited the decision of the
trial court which stated that there was no proof that the proceeds of the loans were
ever delivered to MICO. Although the private respondents witness, Mr. Gardiola,
testified that the proceeds of the loans were deposited in MICOs current account
with PBCom, his testimony was allegedly not supported by any bank record, note or
memorandum. A careful scrutiny of the record including the transcript of
stenographic notes reveals, however, that although private respondent PBCom was
willing to produce the corresponding account ledger showing that the proceeds of
the loans were credited to MICOs current account with PBCom, MICO in fact
vigorously objected to the presentation of said document. That point is shown in
the testimony of PBComs witness, Gardiola, thus:
Q: Now, all of these promissory note Exhibits "I" and "J" which as you have said
previously (sic) availed originally by defendant Mico Metals Corp. sometime in
1979, my question now is, do you know what happened to the proceeds of the
original availment?
A: Well, it was credited to the current account of Mico Metals Corp.
Q: Why did it was credited to the proceeds to the account of Mico Metals Corp?
(sic)
A: Well, that is our understanding.
ATTY. DURAN:
Your honor, may we be given a chance to object, the best evidence is the so-called
current account...
COURT:
Can you produce the ledger account?
A: Yes, Your Honor, I will bring.
COURT:
The ledger or record of the current account of Mico Metals Corp.
A: Yes, Your Honor. ATTY. ACEJAS:

ATTY. ACEJAS: Objection your Honor, that is the disclose of the deposit of defendant Mico Metals
Corporation and it cannot disclosed without the authority of the depositor. (sic) 37
Your Honor, these are a confidential record, and they might not be disclosed
without the consent of the person concerned. (sic) That proceeds of the loans which were originally availed of in 1979 were delivered
to MICO is bolstered by the fact that more than a year later, specifically on July 14,
ATTY. SANTOS: 1980, MICO through its president, petitioner-surety Charles Lee, requested for an
additional loan of Four Million Pesos (P4,000,000.00) from PBCom. The fact that
Well, you are the one who is asking that. MICO was requesting for an additional loan implied that it has already availed of
earlier loans from PBCom.
ATTY. DURAN:
Petitioners allege that PBCom presented no evidence that it remitted payments to
cover the domestic and foreign letters of credit. Petitioners placed much reliance
Your Honor, Im precisely want to show for the ... (sic)
on the erroneous decision of the trial court which stated that private respondent
PBCom allegedly failed to prove that it actually made payments under the letters of
COURT:
credit since the bank drafts presented as evidence show that they were made in
favor of the Bank of Taiwan and First Commercial Bank.
But the amount covered by the current account of defendant Mico Metals Corp. is
the subject matter of this case.
Petitioners allegations are untenable.

xxx xxx xxx

Q: Are those availments were release? (sic)
A: Yes, Your Honor, to the defendant corporation.
Q: By what means?
A: By the credit to their current account.
ATTY. ACEJAS:
We object to that, your Honor, because the disclose is the secrecy of the bank
deposit. (sic)
xxx xxx xxx
Q: Before the recess Mr. Gardiola, you stated that the proceeds of the three (3)
promissory notes were credited to the accounts of Mico Metals Corporation, now
do you know what kind of current account was that which you are referring to?
Modern letters of credit are usually not made between natural persons. They
involve bank to bank transactions. Historically, the letter of credit was developed to
facilitate the sale of goods between, distant and unfamiliar buyers and sellers. It
was an arrangement under which a bank, whose credit was acceptable to the seller,
would at the instance of the buyer agree to pay drafts drawn on it by the seller,
provided that certain documents are presented such as bills of lading accompanied
the corresponding drafts. Expansion in the use of letters of credit was a natural
development in commercial banking.38 Parties to a commercial letter of credit
include (a) the buyer or the importer, (b) the seller, also referred to as beneficiary,
(c) the opening bank which is usually the buyers bank which actually issues the
letter of credit, (d) the notifying bank which is the correspondent bank of the
opening bank through which it advises the beneficiary of the letter of credit, (e)
negotiating bank which is usually any bank in the city of the beneficiary. The
services of the notifying bank must always be utilized if the letter of credit is to be
advised to the beneficiary through cable, (f) the paying bank which buys or
discounts the drafts contemplated by the letter of credit, if such draft is to be
drawn on the opening bank or on another designated bank not in the city of the
beneficiary. As a rule, whenever the facilities of the opening bank are used, the
beneficiary is supposed to present his drafts to the notifying bank for negotiation
and (g) the confirming bank which, upon the request of the beneficiary, confirms
the letter of credit issued by the opening bank.
From the foregoing, it is clear that letters of credit, being usually bank to bank
transactions, involve more than just one bank. Consequently, there is nothing
unusual in the fact that the drafts presented in evidence by respondent bank were
not made payable to PBCom. As explained by respondent bank, a draft was drawn
on the Bank of Taiwan by Ta Jih Enterprises Co., Ltd. of Taiwan, supplier of the
goods covered by the foreign letter of credit. Having paid the supplier, the Bank of
Taiwan then presented the bank draft for reimbursement by PBComs
correspondent bank in Taiwan, the Irving Trust Company which explains the
reason why on its face, the draft was made payable to the Bank of Taiwan. Irving
Trust Company accepted and endorsed the draft to PBCom. The draft was later
transmitted to PBCom to support the latters claim for payment from MICO. MICO
accepted the draft upon presentment and negotiated it to PBCom.
Petitioners further aver that MICO never requested that legal possession of the
merchandise be transferred to PBCom by way of trust receipts. Petitioners insist
that assuming that MICO transferred possession of the merchandise to PBCom by
way of trust receipts, the same would be illegal since PBCom, being a banking
institution, is not authorized by law to engage in the business of importing and
selling goods.
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.39 A trust receipt, therefor, is a document of security pursuant to
which a bank acquires a "security interest" in the goods under trust receipt. Under a
letter of credit-trust receipt arrangement, a bank extends a loan covered by a letter
of credit, with the trust receipt as a security for the loan. The transaction involves a
loan feature represented by a letter of credit, and a security feature which is in the
covering trust receipt which secures an indebtedness.
Petitioners averments with regard to the second issue are no less
incredulous.1wphi1 Petitioners contend that the letters of credit, surety
agreements and loan transactions did not ripen into valid and binding contracts
since no part of the proceeds of the loan transactions were delivered to MICO or to
any of the petitioners-sureties. Petitioners-sureties allege that Chua Siok Suy was
the beneficiary of the proceeds of the loans and that the latter made them sign the
surety agreements in blank. Thus, they maintain that they should not be held
accountable for any liability that might arise therefrom.
It has not escaped our notice that it was petitioner-surety Charles Lee, as president
of MICO Metals Corporation, who first requested for a discounting loan of Three
Million Pesos (P3,000,000.00) from PBCom as evidenced by his letter dated March
2, 1979.40 On the same day, Charles Lee, as President of MICO, requested for a
Letter of Credit and Trust Receipt line in the sum of Three Million Pesos
(P3,000,000.00).41 Still, on the same day, Charles Lee again as President of MICO,
wrote another letter to PBCOM requesting for a financing line in the sum of One
Million Five Hundred Thousand Pesos (P1,500,000.00) to be used exclusively as
marginal deposit for the opening of MICOs foreign and local letters of credit with
PBCom.42 More than a year later, it was also Charles Lee, again in his capacity as
president of MICO, who asked for an additional loan in the sum of Four Million
Pesos (P4,000,000.00). The claim therefore of petitioners that it was Chua Siok Suy,
in connivance with the respondent PBCom, who applied for and obtained the loan
transactions and letters of credit strains credulity considering that even the Deed of
the Real Estate Mortgage in favor of PBCom was executed by petitioner-surety
Mariano Sio in his capacity as general manager of MICO43 to secure the loan
accommodations obtained by MICO from PBCom.
Petitioners-sureties allege that they were made to sign the surety agreements in
blank by Chua Siok Suy. Petitioner Alfonso Yap, the corporate treasurer, for his part
testified that he signed booklets of checks, surety agreements and promissory notes
in blank; that he signed the documents in blank despite his misgivings since Chua
Siok Suy assured him that the transaction can easily be taken cared of since Chua
Siok Suy personally knew the Chairman of the Board of PBCom; that he was not
receiving salary as treasurer of Mico Metals and since Chua Siok Suy had a direct
hand in the management of Malayan Sales Corporation, of which Yap is an
employee, he (Yap) signed the documents in blank as consideration for his
continued employment in Malayan Sales Corporation. Petitioner Antonio Co
testified that he worked as office manager for MICO from 1978-1982. As office
manager, he was the one in charge of transacting business like purchasing, selling
and paying the salary of the employees. He was also in charge of the handling of
documents pertaining to surety agreements, trust receipts and promissory notes;44
that when he first joined MICO Metals Corporation, he was able to read the by-laws
of the corporation and he came to know that only the chairman and the president
can borrow money in behalf of the corporation; that Chua Siok Suy once called him
up and told him to secure an invoice so that a credit line can be opened in the bank
with a local letter of credit; that when the invoice was secured, he (Co) brought it
together with the application for a credit line to Chua Siok Suy, and that he
questioned the authority of Chua Siok Suy pointing out that he (Co) is not
empowered to sign the document inasmuch as only the latter, as president, was
authorized to do so. However, Chua Siok Suy allegedly just said that he had already
talked with the Chairman of the Board of PBCom; and that Chua Siok Suy reportedly
said that he needed the money to finance a project that he had with the Taipei
government. Co also testified that he knew of the application for domestic letter of
credit in the sum of Three Hundred Forty-Eight Thousand Pesos (P348,000.00); and
that a certain Moises Rosete was authorized to claim the check covering the Three
Hundred Forty-Eight Thousand Pesos (P348,000.00) from PBCom; and that after
claiming the check Rosete brought it to Perez Battery Center for indorsement after
which the same was deposited to the personal account of Chua Siok Suy. 45
We consider as incredible and unacceptable the claim of petitioners-sureties that
the Board of Directors of MICO was so careless about the business affairs of MICO
as well as about their own personal reputation and money that they simply relied
on the say so of Chua Siok Suy on matters involving millions of pesos. Under Section
3 (d), Rule 131 of the Rules of Court, it is presumed that a person takes ordinary
care of his concerns. Hence, the natural presumption is that one does not sign a
document without first informing himself of its contents and consequences. Said
presumption acquires greater force in the case at bar where not only one but
several documents were executed at different times and at different places by the
petitioner sureties and Chua Siok Suy as president of MICO.
MICO and herein petitioners-sureties insist that Chua Siok Suy was not duly
authorized to negotiate for loans in behalf of MICO from PBCom. Petitioners
allegation, however, is belied by the July 28, 1980 Certification issued by the
corporate secretary of PBCom, Atty. P.B. Barrera, that MICO's Board of Directors
gave Chua Siok Suy full authority to negotiate for loans in behalf of MICO with
PBCom. In fact, the Certification even provided that Chua Siok Suys authority
continues until and unless PBCom is notified in writing of the withdrawal thereof by
the said Board. Notably, petitioners failed to contest the genuineness of the said
Certification which is notarized and to show any written proof of any alleged
withdrawal of the said authority given by the Board of Directors to Chua Siok Suy to
negotiate for loans in behalf of MICO.
There was no need for PBCom to personally inform the petitioners-sureties
individually about the terms of the loans, letters of credit and other loan
documents. The petitioners-sureties themselves happen to comprise the Board of
Directors of MICO, which gave full authority to Chua Siok Suy to negotiate for loans
in behalf of MICO. Notice to MICOs authorized representative, Chua Siok Suy, was
notice to MICO. The Certification issued by PBComs corporate secretary, Atty. P.B.
Barrera, indicated that Chua Siok Suy had full authority to negotiate and sign the
necessary documents, in behalf of MICO for loans from PBCom. Respondent PBCom
therefore had the right to rely on the said notarized Certification of MICOs
Corporate Secretary.
Anent petitioners-sureties contention that they obtained no consideration
whatsoever on the surety agreements, we need only point out that the
consideration for the sureties is the very consideration for the principal obligor,
MICO, in the contracts of loan. In the case of Willex Plastic Industries Corporation
vs. Court of Appeals,46 we ruled that the consideration necessary to support a
surety obligation need not pass directly to the surety, a consideration moving to the
principal alone being sufficient. For a guarantor or surety is bound by the same
consideration that makes the contract effective between the parties thereto. It is
not necessary that a guarantor or surety should receive any part or benefit, if such
there be, accruing to his principal.
Petitioners placed too much reliance on the rule in evidence that the burden of
proof does not shift whereas the burden of going forward with the evidence does
pass from party to party. It is true that said rule is not changed by the fact that the
party having the burden of proof has introduced evidence which established prima
facie his assertion because such evidence does not shift the burden of proof; it
merely puts the adversary to the necessity of producing evidence to meet the prima
facie case. Where the defendant merely denies, either generally or otherwise, the
allegations of the plaintiffs pleadings, the burden of proof continues to rest on the
plaintiff throughout the trial and does not shift to the defendant until the plaintiffs
evidence has been presented and duly offered. The defendant has then no burden
except to produce evidence sufficient to create a state of equipoise between his
proof and that of the plaintiff to defeat the latter, whereas the plaintiff has the
burden, as in the beginning, of establishing his case by a preponderance of
evidence.47 But where the defendant has failed to present and marshall evidence
sufficient to create a state of equipoise between his proof and that of plaintiff, the
prima facie case presented by the plaintiff will prevail.
In the case at bar, respondent PBCom, as plaintiff in the trial court, has in fact
presented sufficient documentary and testimonial evidence that proved by
preponderance of evidence its subject collection case against the defendants who
are the petitioners herein. In view of all the foregoing, the Court of Appeals
committed no reversible error in its appealed Decision.
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 27480
entitled, "Philippine Bank of Communications vs. Mico Metals Corporation, Charles
Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co," is
AFFIRMED in toto.
Costs against the petitioners.
SO ORDERED.
G.R. No. 161865. March 10, 2005
LAND BANK OF THE PHILIPPINES, Petitioners,
vs.
MONETS EXPORT AND MANUFACTURING CORPORATION, SPOUSES VICENTE V.
TAGLE, SR. and MA. CONSUELO G. TAGLE, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the October 9, 2003 Decision1 of the Court of Appeals2 in CA-G.R. CV No.
57436, and its January 20, 2004 Resolution3 denying petitioners motion for
reconsideration.
The factual antecedents are as follows:
On June 25, 1981, petitioner, Land Bank of the Philippines (Land Bank), and Monets
Export and Manufacturing Corporation (Monet) executed an Export Packing Credit
Line Agreement4 under which Monet was given a credit line in the amount of
P250,000.00, secured by the proceeds of its export letters of credit, 5 the continuing
guaranty of the spouses Vicente V. Tagle, Sr. and Ma. Consuelo G. Tagle, 6 and the
third party mortgage executed by Pepita C. Mendigoria.7
The credit line agreement was renewed and amended several times 8 until it was
increased to P5,000,000.00.9 Owing to the continued failure and refusal of Monet,
notwithstanding repeated demands, to pay its indebtedness to Land Bank, which
have ballooned to P11,464,246.1910 by August 31, 1992, a complaint11 for collection
of sum of money with prayer for preliminary attachment was filed by Land Bank
with the Regional Trial Court of Manila, docketed as Civil Case No. 93-64350.12
In their joint Answer with Compulsory Counterclaim, 13 Monet and the Tagle spouses
alleged that Land Bank failed and refused to collect the receivables on their export
letter of credit against Wishbone Trading Company of Hong Kong in the sum of
US$33,434.00, while it made unauthorized payments on their import letter of credit
to Beautilike (H.K.) Ltd. in the amount of US$38,768.40, which seriously damaged
the business interests of Monet.
On July 15, 1997, the trial court rendered decision,14 the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
1. Recognizing the obligation of the defendants as stated in the "Schedule of
Amortization from the Loans and Discount Department of LAND BANK" (Exh. "39"),
as well as the interest mentioned therein, but deleting the penalty thereof as no
penalty should be charged and sentencing defendants jointly and severally to pay
the amounts stated therein as verified;
2. Granting the counterclaim interposed by the defendants in the amount of
US$30,000.00 payable in Philippine Pesos at the official exchange rate when
payment is to be made, to compensate for the defendants lost income
opportunities occasioned by defendants transaction with Wishbone Trading
Corporation and with Beautilike, the same to be deducted from the confirmed and
computed obligation mentioned in No. 1 hereof; and
3. Denying the claim for attorneys fees for lack of merit.15
From the foregoing decision, Land Bank filed an appeal16 with the Court of Appeals.
On October 9, 2003, the Court of Appeals promulgated the decision subject of the
present petition for review. In affirming the trial court, the Court of Appeals found
that, indeed, Land Bank was responsible for the mismanagement of the Wishbone
and Beautilike accounts of Monet. It held that because of the non-collection and
unauthorized payment made by Land Bank on behalf of Monet, and considering
that the latter could no longer draw from its credit line with Land Bank, it suffered
from lack of financial resources sufficient to buy the needed materials to fill up the
standing orders from its customers.
The Court of Appeals disposed of Land Banks appeal in this wise:
WHEREFORE, premises considered, and finding no reversible error in the assailed
Decision of the Regional Trial Court of Manila, Branch 49, in Civil Case No. 93-64350
dated July 15, 1997, said Decision is hereby AFFIRMED and UPHELD and the appeal
is DISMISSED for lack of merit.
SO ORDERED.17
Land Banks Motion for Reconsideration18 was denied by the Court of Appeals on
January 20, 2004,19 hence, this petition raising the following issues:
1. Whether or not the respondent Court seriously erred in upholding the findings
and conclusion of the trial court limiting the liability of private respondents based
on [the] Summary of Availment and Schedule of Amortization and granting the
latter opportunity losses anchored on the theory that petitioner disrupted the
cas[h] flow of respondent MONETs which led to its decline;
2. Whether or not the respondent Court palpably erred in not clearly establishing
petitioners right to collect payment from private respondents loan validly obtained
in the sum of P11,464,246.19 Million which has become long overdue and
demandable.20
The petition is partly impressed with merit.
As regards the Beautilike account, the trial court and the Court of Appeals erred in
holding that Land Bank failed to protect Monets interest when it paid the suppliers
despite discrepancies in the shipment vis--vis the order specifications of Monet.
Our ruling in Bank of America, NT & SA v. Court of Appeals,21 is pertinent:
A letter of credit is a financial device developed by merchants as a convenient and
relatively safe mode of dealing with sales of goods to satisfy the seemingly
irreconcilable interests of a seller, who refuses to part with his goods before he is
paid, and a buyer, who wants to have control of the goods before paying. To break
the impasse, the buyer may be required to contract a bank to issue a letter of credit
in favor of the seller so that, by virtue of the letter of credit, the issuing bank can
authorize the seller to draw drafts and engage to pay them upon their presentment
simultaneously with the tender of documents required by the letter of credit. The
buyer and the seller agree on what documents are to be presented for payment,
but ordinarily they are documents of title evidencing or attesting to the shipment of
the goods to the buyer.
Once the credit is established, the seller ships the goods to the buyer and in the
process secures the required shipping documents or documents of title. To get paid,
the seller executes a draft and presents it together with the required documents to
the issuing bank. The issuing bank redeems the draft and pays cash to the seller if it
finds that the documents submitted by the seller conform with what the letter of
credit requires. The bank then obtains possession of the documents upon paying
the seller. The transaction is completed when the buyer reimburses the issuing
bank and acquires the documents entitling him to the goods. Under this
arrangement, the seller gets paid only if he delivers the documents of title over the
goods, while the buyer acquires the said documents and control over the goods
only after reimbursing the bank.
What characterizes letters of credit, as distinguished from other accessory
contracts, is the engagement of the issuing bank to pay the seller once the draft
and the required shipping documents are presented to it. In turn, this
arrangement assures the seller of prompt payment, independent of any breach of
the main sales contract. By this so-called "independence principle," the bank
determines compliance with the letter of credit only by examining the shipping
documents presented; it is precluded from determining whether the main
contract is actually accomplished or not. (Emphasis supplied)
Moreover, Article 3 of the Uniform Customs and Practice (UCP) for Documentary
Credits provides that credits, by their nature, are separate transactions from the
sales or other contract(s) on which they may be based and banks are in no way
concerned with or bound by such contract(s), even if any reference whatsoever to
such contract(s) is included in the credit. Consequently, the undertaking of a bank
to pay, accept and pay draft(s) or negotiate and/or fulfill any other obligation under
the credit is not subject to claims or defenses by the applicant resulting from his
relationships with the issuing bank or the beneficiary.
In particular, Article 15 of the UCP states:
Banks assume no liability or responsibility for the form, sufficiency, accuracy,
genuineness, falsification or legal effect of any documents, or for the general
and/or particular conditions stipulated in the documents or superimposed thereon;
nor do they assume any liability or responsibility for the description, weight,
quality, condition, packing, delivery, value or existence of the goods represented
by any documents, or for the good faith or acts and/or omissions, solvency,
performance or standing of the consignor, the carriers, or the insurers of the goods,
or any other person whomsoever. (Emphasis supplied)
In Transfield Philippines, Inc. v. Luzon Hydro Corporation, et al.,22 we held that the
engagement of the issuing bank is to pay the seller or beneficiary of the credit once
the draft and the required documents are presented to it. The so-called
"independence principle" assures the seller or the beneficiary of prompt payment
independent of any breach of the main contract and precludes the issuing bank
from determining whether the main contract is actually accomplished or not.
For, if the letter of credit is drawable only after the settlement of any dispute on the
main contract entered into by the applicant of the said letter of credit and the
beneficiary, then there would be no practical and beneficial use for letters of credit
in commercial transactions.
Accordingly, we find merit in the contention of Land Bank that, as the issuing bank
in the Beautilike transaction involving an import letter of credit, it only deals in
documents and it is not involved in the contract between the parties. The
relationship between the beneficiary and the issuer of a letter of credit is not
strictly contractual, because both privity and a meeting of the minds are lacking.
Thus, upon receipt by Land Bank of the documents of title which conform with what
the letter of credit requires, it is duty bound to pay the seller, as it did in this case.
Thus, no fault or acts of mismanagement can be attributed to Land Bank relative to
Monets import letter of credit. Its actions find solid footing on the legal principles
and jurisprudence earlier discussed. Consequently, it was error for the trial court
and for the Court of Appeals to grant opportunity losses to the respondents on this
account.
On the matter, however, of the Wishbone transaction where it is alleged by
respondents that petitioner failed in its duty to protect its (Monets) interest in
collecting the amount due to it from its customers, we find that the trial court and
the Court of Appeals committed no reversible error in holding Land Bank liable for
opportunity losses. The trial court summarized the transaction in this manner:
The shipment to Wishbone Trading Company was for US16,119.00 on October 16,
1986. Documents were submitted without requesting for purchase of export bills.
This was sent by plaintiff (Land Bank) via telex to Hongkong Bank requesting advice
to pay as there were discrepancies. On advice of Hongkong Bank plaintiff paid the
first shipment. At this point defendants (Monet and the Tagle spouses) were
reluctant to release the two subsequent documents to the buyer until payment of
the first shipment is made. When LANDBANK paid the defendants, believing that
everything was in order, defendants released the documents for the two
subsequent shipments, thinking that the LANDBANKs international department had
taken the necessary measures for them to be paid. Wishbone then came up with
new additional discrepancies not listed in the cable sent by LANDBANK. Defendants
argue that if LANDBANK had acted prudently on this as it used to do, Mantruste
Hongkong could not have denied payment upon the first instructions of the buyer
based on the cable of LANDBANKs international department. Defendants therefore
asked LANDBANK to share with them the burden of compelling the shrewd buyers
to effect the payment of the export bills. Furthermore, referring to the telex of
Mantruste Hongkong the original documents to Wishbone were sent per
requirement under the term of the Letter of Credit, but the goods were consigned
to the order of Wells Fargo Bank. Defendants believed that Wells Fargo Bank should
be responsible to the shipper. Thus the defendants requested for assistance to telex
Wells Fargo Bank to inquire about the whereabouts of the merchandise shipped to
them as consignee. As early as November 30, 1986, Mantruste Hongkong sent a
telex addressed to the bank instructing it to pay MONET the sum of US$16,119.00
for the first shipment despite discrepancies which were minor and properly
corrected. The evidence indicates that in the Wishbone case the foreign buyer was
actually putting one over the defendants, which LANDBANK could have properly
prevented had it been more aggressive as is expected of a bank.
Exhibits "27" and "27-A" clearly show that the terms and conditions of the Letter of
Credit were substantially complied with by MONET. And the evidence shows that
Wells Fargo Bank was included to receive the bills of lading, notifying only Style Up
of California, and yet LANDBANK did not consider this for purposes of collection.
These were testified to by defendant Consuelo Tagle who explained what
happened, including payments of account, which LANDBANK failed to rebut.
LANDBANK did not pursue collection on this despite the fact that the goods were
acceptable merchandise.23
A careful review of the records reveal that the trial court correctly considered Land
Bank as the attorney-in-fact of Monet with regard to its export transactions with
Wishbone Trading Company. It was stipulated in the Deed of Assignment24
executed between Monet and Land Bank on June 26, 1981:
That the ASSIGNOR/s (Monet) by these presents, does/do hereby appoint/s the
ASSIGNEE (Land Bank) their/his/her true and lawful attorney-in-fact and in
their/his/her place and stead, to demand, collect and receive the proceeds of the
export letters of credit at a loan value of 80% to be applied to the payment of the
credit accommodation herein secured. (Underscoring supplied)
Clearly, petitioners refusal to own its responsibility in the handling of the Wishbone
account fails against the aforequoted provision.
As the attorney-in-fact of Monet in transactions involving its export letters of credit,
such as the Wishbone account, Land Bank should have exercised the requisite
degree of diligence in collecting the amount due to the former. The records of this
case are bereft of evidence showing that Land Bank exercised the prudence
mandated by its contractual obligations to Monet.
The failure of Land Bank to judiciously safeguard the interest of Monet is not
without any repercussions vis--vis the viability of Monet as a business enterprise.
As correctly observed by the Court of Appeals:
In fine, because of the non-collection defendants-appellees suffered from a lack
of financial resources sufficient to buy new materials. And since they also could no
longer draw on their existing credit line with Landbank, they could not purchase
materials to fill up the orders of their customers. Because of this the business
reputation of Monets suffered which hastened its decline. 25
The right of the respondents to be awarded opportunity losses having been
established, we now go to the determination of the proper amount to be awarded
to them under the circumstances obtaining in this case. The lower court awarded to
herein respondents opportunity losses in the amount of US$30,000.00 based on its
findings of two (2) acts of mismanagement committed by Land Bank. The Court of
Appeals affirmed the amount of the award in the assailed decision. In view of our
findings that Land Bank is not guilty of mismanagement in its handling of Monets
import letter of credit relative to the Beautilike transaction, we hold that a
reduction of the amount of the grant is in order. It is not possible for us to totally do
away with the award of opportunity losses having affirmed the findings of the trial
court and the Court of Appeals that Land Bank, as the attorney-in-fact of Monet in
its transaction with Wishbone Trading Company, committed acts of
mismanagement. On account of the foregoing reasons, we reduce the amount of
opportunity losses granted to Monet to US$15,000.00 payable in Philippine pesos at
the official exchange rate when payment is to be made.
Anent the second issue, we find that the trial court erred in limiting the obligation
of the respondents to Land Bank to what was stated in the "Schedule of
Amortization from the Loans and Discounts Department of LANDBANK", or Exhibit
"39",26 for the respondents.
Prefatorily, we restate the time honored principle that in a petition for review
under Rule 45, only questions of law may be raised. It is not our function to analyze
or weigh all over again evidence already considered in the proceedings below, our
jurisdiction is limited to reviewing only errors of law that may have been committed
by the lower court.27 The resolution of factual issues is the function of lower courts,
whose findings on these matters are received with respect. A question of law which
we may pass upon must not involve an examination of the probative value of the
evidence presented by the litigants.28
The above rule, however, admits of certain exceptions. The findings of fact of the
Court of Appeals are generally conclusive but may be reviewed when: (1) the
factual findings of the Court of Appeals and the trial court are contradictory; (2) the
findings are grounded entirely on speculation, surmises or conjectures; (3) the
inference made by the Court of Appeals from its findings of fact is manifestly
mistaken, absurd or impossible; (4) there is grave abuse of discretion in the
appreciation of facts; (5) the appellate court, in making its findings, goes beyond the
issues of the case and such findings are contrary to the admissions of both
appellant and appellee; (6) the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) the Court of Appeals fails to notice certain relevant
facts which, if properly considered, will justify a different conclusion; and (8) the
findings of fact of the Court of Appeals are contrary to those of the trial court or are
mere conclusions without citation of specific evidence, or where the facts set forth
by the petitioner are not disputed by respondent, or where the findings of fact of
the Court of Appeals are premised on the absence of evidence but are contradicted
by the evidence on record.29
Our review of the records of this case reveal that the reversible error committed by
the lower court, and that of the Court of Appeals, partook of the form of over
reliance and sole reliance on the figures contained in Exhibit "39", to the exclusion
of other pieces of documentary evidence annexed by Land Bank to its complaint.
There is no doubt that the respondents indeed owed Land Bank a sum of money.
This much was clearly established by the series of letters30 written by the officers of
Monet to Land Bank acknowledging the corporations indebtedness, albeit without
specifying any amount, and asking for understanding and more time within which
they can settle their obligations. We note, however, that the respondents have
been consistent and persistent in their stand that they do not harbor any intention
of evading the payment of the amount they actually owed to the petitioner,
provided that there be a reconciliation of the payments made by the respondents
on their loan obligations.31
Indeed, Exhibit "39" or the Summary of Availment and Schedule of Amortization,
which was made by the trial court as the basis in determining the amount of
indebtedness of the respondents to the petitioner, is a document issued by the
Loans and Discounts Department of Land Bank itself. Nevertheless, we note that
the amount covered by the said summary pertains only to the indebtedness of
Monet to Land Bank amounting to P2,500,000.00, as covered by Promissory Note
No. P-981. The amount reflected in Exhibit "39" is so small when compared to the
P11,464,246.19 which Land Bank sought to collect from the respondents in its
complaint before the trial court. The records of this case show that respondents, in
the course of their credit transactions with Land Bank, executed not only one, but
several promissory notes in varying amounts in favor of the bank.
On the other hand, Land Bank submitted a Consolidated Statement of Account
dated August 31, 199232 in support of its claim as to the amount owed to it. The
said document illustrated how, based on the computations made by Land Bank, the
indebtedness of Monet ballooned to P11,464,246.19. Land Bank also submitted a
Summary of Availments and Payments from 1981 to 198933 which detailed the
series of availments and payments made by Monet.
Notwithstanding the above facts, and considering that Monets Exhibit "39" was
prepared before its due date of April 29, 1991, while Land Banks Consolidated
Statement of Account was prepared much later on August 31, 1992, the trial court
chose to overlook them and conveniently held that the correct basis of Monets
indebtedness to Land Bank are the figures contained in Exhibit "39". Nonetheless,
no explanation was proferred why it used Exhibit "39" as basis in determining the
actual indebtedness of Monet. We note that instead of dealing squarely with the
issue of resolving the total amount of indebtedness due to Land Bank, the trial
court and the Court of Appeals chose to expound on Land Banks alleged acts of to US$15,000.00 payable in Philippine pesos at the official exchange rate when
mismanagement. payment is to be made.

In "discussing" this issue, all the trial court said was:
LANDBANK claims that as of August 31, 1992, the defendants owe them the sum of
P11,464,246.19 payable with interest at the rate of 10% per annum. But this is
disputed by the defendants as shown in their Summary of Availment and Schedule
of Amortization (Exh. "39").34
While both the petitioner and the respondents submitted their respective pieces of
documentary evidence in support of their contentions as to the amount of
indebtedness due to petitioner, the trial court failed to calibrate and harmonize
them.
Insofar as the amount of indebtedness of the respondents to the petitioner is
concerned, the October 9, 2003 decision and the January 20, 2004 resolution of the
Court of Appeals in CA-G.R. CV No. 57436, are SET ASIDE. The case is hereby
remanded to its court of origin, the Regional Trial Court of Manila, Branch 49, for
the reception of additional evidence as may be needed to determine the actual
amount of indebtedness of the respondents to the petitioner. The trial court is
INSTRUCTED to deduct the award of opportunity losses granted to the respondents,
in the amount of US$15,000.00 payable in Philippine pesos at the official exchange
rate when payment is to be made, from the amount ultimately determined as the
actual amount of indebtedness of the respondents to the petitioner. No
pronouncement as to costs.

Unfortunately, despite the pieces of evidence submitted by the parties, our review SO ORDERED.
of the same is inconclusive in determining the total amount due to the petitioner.
The petitioner had failed to establish the effect of Monets Exhibit "39" to its own
Consolidated Statement of Account as of August 31, 1992, nor did the respondents
categorically refute the said statement of account vis--vis its Exhibit "39". The
interest of justice will best be served if this case be remanded to the court of origin
for the purpose of determining the amount due to petitioner. The dearth in the
records of sufficient evidence with which we can utilize in making a categorical
ruling on the amount of indebtedness due to the petitioner constrains us to remand
this case to the trial court with instructions to receive additional evidence as
needed in order to fully thresh out the issue and establish the rights and obligations
of the parties. From the amount ultimately determined by the trial court as the
outstanding obligation of the respondents to the petitioner, will be deducted the
award of opportunity losses granted to the respondents in the amount of US$
15,000.00 payable in Philippine pesos at the official exchange rate when payment is
to be made.

WHEREFORE, the instant petition is GRANTED. The October 9, 2003 decision and
the January 20, 2004 resolution of the Court of Appeals in CA-G.R. CV No. 57436,
are MODIFIED insofar as the award of the counterclaim to the respondents is
concerned. Accordingly, there being no basis to award opportunity costs to the
respondents, Monets Export and Manufacturing Corporation and the spouses,
Vicente V. Tagle, Sr. and Ma. Consuelo G. Tagle, relative to the Beautilike account,
but finding good cause to sustain the award of opportunity costs to the
respondents on account of the failure of the petitioner to diligently perform its
duties as the attorney-in-fact of the respondents in the Wishbone Trading Company
account, the amount of opportunity costs granted to the respondents, is REDUCED
[G.R. No. 133176. August 8, 2002]
PILIPINAS BANK, petitioner, vs. ALFREDO T. ONG and LEONCIA LIM,
respondents.
Facts:
On April 1991, Baliwag Mahogany Corporation (BMC), through its president,
respondent Alfredo T. Ong, applied for a domestic commercial letter of credit
with petitioner Pilipinas Bank (hereinafter referred to as the bank) to finance
the purchase of about 100,000 board feet of "Air Dried, Dark Red Lauan"
sawn lumber.
The bank approved the application and issued Letter of Credit No. 91/725-
HO in the amount of P3,500,000.00. To secure payment of the amount,
BMC, through respondent Ong, executed two (2) trust receipts[3] providing
inter alia that it shall turn over the proceeds of the goods to the bank, if sold,
or return the goods, if unsold, upon maturity on July 28, 1991 and August 4,
1991.
On due dates, BMC failed to comply with the trust receipt agreement. On
November 22, 1991, it filed with the Securities and Exchange Commission
(SEC) a Petition for Rehabilitation and for a Declaration in a State of
Suspension of Payments under Section 6 (c) of P.D. No. 902-A,[4] as
amended, docketed as SEC Case No. 4109. On November 27, 1992, the
SEC rendered a Decision[7] approving the Rehabilitation Plan of BMC as
contained in the MOA and declaring it in a state of suspension of payments.
However, BMC and respondent Ong defaulted in the payment of their
obligations under the rescheduled payment scheme provided in the MOA.
Issue: WON respondents Ong and Leoncia Lim (as president and treasurer
of BMC, respectively) violated the Trust Receipts Law (PD No. 115).
Held: NO. The execution of the MOA constitutes a novation which "places
petitioner Bank in estoppel to insist on the original trust relation and
constitutes a bar to the filing of any criminal information for violation of the
trust receipts law."
It has the effect of a compromise agreement, novated BMCs existing
obligations under the trust receipt agreement. The novation converted the
parties relationship into one of an ordinary creditor and debtor. Moreover,
the execution of the MOA precludes any criminal liability on their part which
may arise in case they violate any provision thereof.
The execution of the MOA extinguished respondents obligation under the
trust receipts. Respondents liability, if any, would only be civil in nature
since the trust receipts were transformed into mere loan documents after the
execution of the MOA. This is reinforced by the fact that the mortgage
contracts executed by the BMC survive despite its non-compliance with the
conditions set forth in the MOA.
_____________________________________________________________
____________________
[G.R. NO. 117913. February 1, 2002]
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP,
RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT OF
APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
Facts:
On March 2, 1979, Charles Lee, as President of MICO wrote private
respondent Philippine Bank of Communications (PBCom) requesting for a
grant of a discounting loan/credit line in the sum of Three Million Pesos
(P3,000,000.00) for the purpose of carrying out MICOs line of business as
well as to maintain its volume of business.
On the same day, Charles Lee requested for another discounting loan/credit
line of Three Million Pesos (P3,000,000.00) from PBCom for the purpose of
opening letters of credit and trust receipts.
As per agreement, the proceeds of all the loan availments were credited to
MICOs current checking account with PBCom. To induce the PBCom to
increase the credit line of MICO, petitioners executed another surety
agreement in favor of PBCom on July 28, 1980, whereby they jointly and
severally guaranteed the prompt payment on due dates or at maturity of
overdrafts, promissory notes, discounts, drafts, letters of credit, bills of
exchange, trust receipts and all other obligations of any kind and nature for
which MICO may be held accountable by PBCom
Upon maturity of all credit availments obtained by MICO from PBCom, the
latter made a demand for payment. Private respondent PBCom
extrajudicially foreclosed MICOs real estate mortgage upon repeated
demands & emerged as the highest bidder. For the unpaid balance, PBCom
then demanded the settlement of the aforesaid obligations from herein
petitioners-sureties who, however, refused to acknowledge their obligations
to PBCom under the surety agreements. Hence, PBCom filed a complaint
with prayer for writ of preliminary attachment before the Regional Trial Court
of Manila.
Petitioners (MICO and herein petitioners-sureties) denied all the allegations
of the complaint filed by respondent PBCom, and alleged that: a) MICO was
not granted the alleged loans and neither did it receive the proceeds of the
aforesaid loans; b) Chua Siok Suy was never granted any valid Board
Resolution to sign for and in behalf of MICO; c) PBCom acted in bad faith in
granting the alleged loans and in releasing the proceeds thereof; d)
petitioners were never advised of the alleged grant of loans and the
subsequent releases therefor, if any; e) since no loan was ever released to or
received by MICO, the corresponding real estate mortgage and the surety
agreements signed concededly by the petitioners-sureties are null and void.

Issue: WON the proceeds of the loans or the goods under the trust receipts
were ever delivered to and received by MICO.

Held: It is clear that letters of credit, being usually bank to bank transactions,
involve more than just one bank. Consequently, there is nothing unusual in
the fact that the drafts presented in evidence by respondent bank were not
made payable to PBCom.

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.

A trust receipt, therefor, is a document of security pursuant to which a bank

acquires a security interest in the goods under trust receipt. Under a letter
of credit-trust receipt arrangement, a bank extends a loan covered by a letter
of credit, with the trust receipt as a security for the loan. The transaction
involves a loan feature represented by a letter of credit, and a security
feature which is in the covering trust receipt which secures an indebtedness.
G.R. No. L-27607 May 7, 1981
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee
vs.
BEN CUEVO, defendant-appellant.
AQUINO, J.:
This case presents for reexamination the liability for estafa of the holder of a trust
receipt who disposed of the goods covered thereby and, in violation of its terms,
failed to deliver to the bank the proceeds of the sale as payment of the debt
secured by the trust receipt.
We say reexamination because it 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).
In this case, an information dated July 27, 1966 was filed in the Court of First
Instance of Manila, charging Ben Cuevo with estafa committed as follows (Criminal
Case No. 83309): 1wph1.t Judge Kapunan, Jr., in sustaining the motion to dismiss, relied on the Spanish
That on or about the 16th day of February, 1964 in the City of Manila,
Philippines, the said accused did then and there willfully, unlawfully and
feloniously defraud the Prudential Bank and Trust Company in the
following manner, to wit: the said accused having received in trust from
the Prudential Bank and Trust Company merchandise, i.e., 1,000 bags of
grind yellow corn and 1,000 bags of palay specified in a trust receipt
covered by Letter of Credit No. 5643, executed by him in favor of said
bank, of the total value of P24,000.00, to be sold by him, under the express
obligation on the part of the said accused to account for the said
merchandise, or to deliver and turn over to the Prudential Bank and Trust
Company the proceeds of the sale thereof;
But said accused once in possession of said merchandise, far from
complying with the aforesaid obligation, notwithstanding repeated
demands made upon him, with intent to defraud, willfully, unlawfully and
feloniously misappropriated, misapplied and converted the said
merchandise or the value, thereof in the sum of P24,000.00 to his own
personal use and benefit, to the damage and prejudice of the Prudential
Bank and Trust Company in the aforesaid of P24,000.00, Philippine
Currency. (p. 2, Rollo.)
Upon arraignment, the accused pleaded not guilty (p. 11, Record). Later, or on
December 13, 1966, before the trial had started, Cuevo filed a motion to dismiss on
the ground that the facts alleged in the information do not constitute an offense.
Judge Ruperto Kapunan, Jr., in his order of January 3, 1967, granted the motion and
dismissed the case but "without prejudice to whatever civil action the complaining
bank may take to recover the amount of P24,000" which it had advanced to cover
the price of the merchandise delivered to the accused (p. 7, Rollo). From that order
of dismissal, the prosecution appealed to this Court.
The appeal is meritorious. Judge Kapunan, Jr. erred in holding that the accused did
not commit estafa under article 315(l) (b), which reads: 1wph1.t
(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.
version of paragraph (b) of article 315 wherein the expression used is "recibido en
deposito". In his opinion, that phrase is not accurately translated as "in trust" and,
as he explained, it does not allegedly cover the conversion or misappropriation of
the goods covered by a trust receipt. The Spanish version reads: 1wph1.t
(b) Apropiandose o distrayendo, en perjuicio de otro dinero, efectos o
cualquiera otra cosa mueble, que hubiere recibido en deposito,
commission o administracion o por otro titulo que produzca obligacion de
entregarla o devolveria, aungue dicha obligacion estuviese afianzada total
or parcialmente, o negando haberla recibido.
The lower court ratiocinated that the contract covered by a trust receipt is merely a
secured loan (U.S. vs. Tan Tok, 15 Phil. 538) where the borrower is allowed to
dispose of the collateral, whereas, in a deposit the depositary is not empowered to
dispose of the property deposited. Hence, the lower court concluded that the
violation of the provisions of the trust receipt gives rise to a civil action and not to a
criminal prosecution for estafa.
The lower court also ventured the opinion that the other phrase in paragraph (b),
por otro titulo que produzca obligacion de entregarla o devolverla" ("under any
other obligation involving the duty to make delivery of or to return the same") is
not applicable because that phrase allegedly refers to the very "money, goods, or
any other personal property received by the offender" as a deposit, and not to the
proceeds of the sale of the goods covered by the trust receipt.
The lower court observed further that the framers of the Spanish Penal Code could
not have contemplated the inclusion of the trust receipt in article 315(l) (b) because
that transaction did not exist in the nineteenth century. The usual form of a trust
receipt is as follows: 1wph1.t
I/We hereby agree to hold said goods in trust for the said corporation
(meaning the bank as trustor), and as its property with liberty to sell the
same for its account, but without authority to make any other disposition
whatever of the said goods or any part thereof (or of proceeds thereof)
either by way of conditional sale, pledge or otherwise.
In case of sale I/We further agree to hand the proceeds, as soon as
received, to the International Banking Corporation to apply against the
relative acceptances (as described above) and for the payment of any
other indebtedness of mine/ours to the International Banking Corporation.
(People vs. Yu Chai Ho 53 Phil. 874, 876.)
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. Jur. 961, cited in Samo vs. People, 115 Phil. 346, 349).
In the instant case, it is alleged in the indictment that the accused, by means of a
trust receipt, received from the Prudential Bank and Trust Company 1,000 bags of
corn and 1,000 bags of palay to be sold by him with the express obligation to deliver
the proceeds of the sale to the bank or, if not sold, to account for the merchandise
and that, instead of complying with either obligation, he misappropriated the
merchandise or the value thereof (p. 2, Rollo).
We hold that even if the accused did not receive the merchandise for deposit, he is,
nevertheless, covered by article 315(l) (b) because after receiving the price of the
sale, he did not deliver the money to the bank or, if he did not sell the merchandise,
he did not return it to the bank.
Those two situations are within the purview of article 315(l) (b). The first situation is
covered by the provision which refers to money received under the obligation
involving the duty to deliver it (entregarla) to the owner of the merchandise sold.
The other contingency is covered by the provision which refers to merchandise
received under the obligation to "return" it (devolvelra) to the owner.
The fact that in the first case the money was received from the purchaser of the
merchandise and not from the bank does not remove it from the operation of
article 315(l) (b).
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(l) (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 receipts transactions, was issued on January 29, 1973.
One objective of that law is "to declare the misuse and/or misappropriation of
goods or proceeds realized from the sale of goods, documents or instruments
released under trust receipts as a criminal offense punishable under" article 315.
Section 13 of the decree provides that "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 315 of the Revised
Penal Code.
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.
The other issue raised in the last part of accused Cuevo's brief is whether the lower People vs. Salico, 84 Phil. 722. As already stated, in the instant case the dismissal
court's erroneous dismissal of the information against him amounts to an acquittal was with the consent of accused Cuevo. The dismissal did not place him in jeopardy.
which placed him in jeopardy and whether the return of the case to the lower court
for trial would place him in double jeopardy. The Chief Justice and six Justices voted to reverse the order of dismissal. Justices
Teehankee and De Castro dissented. As only seven Justices voted to reverse the
No person shall be twice put in jeopardy of punishment for the same offense" (Sec. order of dismissal, the same has to be affirmed.
22, Art. IV of the Constitution). The maxim is non bis in Idem (not twice for the
same). The ban against double jeopardy is similar to the rule on res judicata in civil WHEREFORE, the order of dismissal is affirmed. Costs de oficio.
cases.
SO ORDERED.
Jeopardy attaches when an accused was charged with an offense (a) upon a valid
complaint or information sufficient in form and substance to sustain a conviction (b)
in a court of competent jurisdiction and (c) after the accused had been arraigned
and entered his plea, he was convicted or acquitted, or the case against him was
"dismissed or otherwise terminated without his express consent".

In such a case, his conviction or acquittal (autrefois convict or autrefois acquit) is a

"bar to another prosecution for the offense charged, or for any attempt to commit
the same or frustration thereof, or for any offense charged in the former complaint
or information " (Sec. 9, Rule 117, Rules of Court).

The accused invokes the ruling that "where a trial court has jurisdiction but
mistakenly dismisses the complaint or information on the ground of lack of it, the
order of dismissal is, after the prosecution has presented its evidence, unappealable
because an appeal by the government therefrom would place the accused in
second jeopardy for the same offense" (People vs. Duran, Jr., 107 Phil. 979).

That ruling has no application to this case because in the Duran case (as in People
vs. Caderao 69 Phil. 327, also cited by the accused herein) the dismissal was made
after the prosecution had presented its evidence. The accused filed a demurrer to
the evidence but the trial court dismissed the case, not on the ground of
insufficiency of evidence, but on the ground of lack of jurisdiction. In the instant
case, the prosecution has not commenced the presentation of its evidence. The
dismissal was with the consent of the accused because he filed a motion to dismiss.

In Esguerra vs. De la Costa, 66 Phil. 134, another case cited by the accused, the
erroneous dismissal on the ground of lack of jurisdiction was made by the lower
court motu proprio. Hence, the dismissal without the consent of the accused
amounted to an acquittal which placed him in jeopardy.

Moreover, in the Duran case, it was expressly indicated that the erroneous
dismissal on the ground of lack of jurisdiction does not place the accused in
jeopardy if the dismissal was made with the consent of the accused, as held in