Corpo full text 2

HERMAN C. CRYSTAL, LAMBERTO G.R. No. 172428

C. CRYSTAL, ANN GEORGIA C.
SOLANTE, and DORIS C. Present:
MAGLASANG, as Heirs of
Deceased SPOUSES RAYMUNDO QUISUMBING, J.,
I. CRYSTAL and DESAMPARADOS Chairperson,
C. CRYSTAL, CARPIO MORALES,
Petitioners, TINGA,
VELASCO, JR., and
BRION, JJ.
- versus -
Promulgated:
November 28, 2008
BANK OF THE PHILIPPINE ISLANDS,
Respondent.

x----------------------------------------------------------------------------x

DECISION

TINGA, J.:

Before us is a Petition for Review[1] of the Decision[2] and Resolution[3] of the Court
of Appeals dated 24 October 2005 and 31 March 2006, respectively, in CA G.R. CV
No. 72886, which affirmed the 8 June 2001 decision of the Regional Trial Court,
Branch 5, of Cebu City.[4]

The facts, as culled from the records, follow.

On 28 March 1978, spouses Raymundo and Desamparados Crystal obtained

a P300,000.00 loan in behalf of the Cebu Contractors Consortium Co. (CCCC) from
the Bank of the Philippine Islands-Butuan branch (BPI-Butuan). The loan was
secured by a chattel mortgage on heavy equipment and machinery of CCCC. On the
same date, the spouses executed in favor of BPI-Butuan a Continuing
Suretyship[5] where they bound themselves as surety of CCCC in the aggregate
principal sum of not exceeding P300,000.00. Thereafter, or on 29 March
1979, Raymundo Crystal executed a promissory note[6] for the amount
of P300,000.00, also in favor of BPI-Butuan.

Sometime in August 1979, CCCC renewed a previous loan, this time from
BPI, Cebu City branch (BPI-Cebu City). The renewal was evidenced by a
promissory note[7] dated 13 August 1979, signed by the spouses in their personal
capacities and as managing partners of CCCC. The promissory note states that the
spousesare jointly and severally liable with CCCC. It appears that before the original
loan could be granted, BPI-Cebu City required CCCC to put up a security.

However, CCCC had no real property to offer as security for the loan; hence, the
spouses executed a real estate mortgage[8] over their own real property on 22
September 1977.[9] On 3 October 1977, they executed another real estate
mortgage over the same lot in favor of BPI-Cebu City, to secure an additional loan
ofP20,000.00 of CCCC.[10]

CCCC failed to pay its loans to both BPI-Butuan and BPI-Cebu City when they
became due. CCCC, as well as the spouses, failed to pay their obligations despite
demands. Thus, BPI resorted to the foreclosure of the chattel mortgage and the real
estate mortgage. The foreclosure sale on the chattel mortgage was initially stalled
with the issuance of a restraining order against BPI.[11] However,
following BPIs compliance with the necessary requisites of extrajudicial
foreclosure, the foreclosure sale on the chattel mortgage was consummated on 28
February 1988, with the proceeds amounting to P240,000.00 applied to the loan
from BPI-Butuan which had then reached P707,393.90.[12] Meanwhile, on 7 July
1981, Insular Bank of Asia and America (IBAA), through its Vice-President for
Legal and Corporate Affairs, offered to buy the lot subject of the two (2) real

estate mortgages and to pay directly the spouses indebtedness in exchange for the
release of the mortgages. BPI rejected IBAAs offer to pay.[13]
BPI filed a complaint for sum of money against CCCC and the spouses before
the Regional Trial Court of Butuan City (RTC Butuan), seeking to recover the
deficiency of the loan of CCCC and the spouses with BPI-Butuan. The trial court
ruled in favor of BPI. Pursuant to the decision, BPI instituted extrajudicial
foreclosure of the spouses mortgaged property.[14]

On 10 April 1985, the spouses filed an action for Injunction With Damages,
With A Prayer For A Restraining Order and/ or Writ of Preliminary
Injunction.[15] The spouses claimed that the foreclosure of the real estate mortgages
is illegal because BPI should have exhausted CCCCs properties first, stressing that
they are mere guarantors of the renewed loans. They also prayed that they be
awarded moral and exemplary damages, attorneys fees, litigation expenses and cost
of suit. Subsequently, the spouses filed an amended complaint,[16] additionally
alleging that CCCC had opened and maintained a foreign currency savings account
(FCSA-197) with bpi, Makati branch (BPI-Makati), and that said FCSA was used as
security for a P450,000.00 loan also extended by BPI-Makati. The P450,000.00 loan
was allegedly paid, and thereafter the spouses demanded the return of the FCSA
passbook. BPI rejected the demand; thus, the spouses were unable to withdraw from
the said account to pay for their other obligations to BPI.
The trial court dismissed the spouses complaint and ordered them to pay moral and
exemplary damages and attorneys fees to BPI.[17] It ruled that since the spouses
agreed to bind themselves jointly and severally, they are solidarily liable for the
loans; hence, BPI can validly foreclose the two real estate mortgages. Moreover,
being guarantors-mortgagors, the spouses are not entitled to the benefit of
exhaustion. Anent the FCSA, the trial court found that CCCC originally had FCDU
SA No. 197 with BPI, Dewey Boulevard branch, which was transferred to BPI-
Makati as FCDU SA 76/0035, at the request of Desamparados Crystal. FCDU SA
76/0035 was thus closed, but Desamparados Crystal failed to surrender the passbook
because it was lost. The transferred FCSA in BPI-Makati was the one used as
security for CCCCs P450,000.00 loan from BPI-Makati. CCCC was no longer
allowed to withdraw from FCDU SA No. 197 because it was already closed.
The spouses appealed the decision of the trial court to the Court of Appeals, but their
appeal was dismissed.[18] The spouses moved for the reconsideration of the decision,
but the Court of Appeals also denied their motion for reconsideration.[19] Hence, the
present petition.

Before the Court, petitioners who are the heirs of the spouses argue that the failure
of the spouses to pay the BPI-Cebu City loan of P120,000.00 was due to BPIsillegal
refusal to accept payment for the loan unless the P300,000.00 loan from BPI-Butuan
would also be paid. Consequently, in view of BPIs unjust refusal to accept payment
of the BPI-Cebu City loan, the loan obligation of the spouses was extinguished,
petitioners contend.

The contention has no merit. Petitioners rely on IBAAs offer to purchase the
mortgaged lot from them and to directly pay BPI out of the proceeds thereof to settle
the loan.[20] BPIs refusal to agree to such payment scheme cannot extinguish the
spouses loan obligation. In the first place, IBAA is not privy to the loan agreement
or the promissory note between the spouses and BPI. Contracts, after all,
take effect only between the parties, their successors in interest, heirs

and assigns.[21] Besides, under Art. 1236 of the Civil Code, the creditor is not bound
to accept payment or performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the contrary. We see no
stipulation in the promissory note which states that a third person may fulfill the
spouses obligation. Thus, it is clear that the spouses alone bear responsibility for the
same.

In any event, the promissory note is the controlling repository of the obligation of
the spouses. Under the promissory note, the spouses defined the parameters of their
obligation as follows:
On or before June 29, 1980 on demand, for value received, I/we promise to pay, jointly and severally,
to the BANK OF THE PHILIPPINE ISLANDS, at its office in the city of Cebu Philippines, the sum
of ONE HUNDRED TWENTY THOUSAND PESOS (P120,0000.00), Philippine Currency, subject
to periodic installments on the principal as follows: P30,000.00 quarterly amortization starting
September 28, 1979. x x x [22]
A solidary obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction of the
whole obligation from any or all of the debtors. [23] A liability is solidary only when
the obligation expressly
so states, when the law so provides or when thenature of the

obligation so requires.[24] Thus, when the obligor undertakes to be jointly and

severally liable, it means that the obligation is solidary,[25] such as in this case.By
stating I/we promise to pay, jointly and severally, to the BANK OF THE
PHILIPPINE ISLANDS, the spouses agreed to be sought out and be demanded
payment from, by BPI. BPI did demand payment from them, but they failed to
comply with their obligation, prompting BPIs valid resort to the foreclosure of the
chattel mortgage and the real estate mortgages.

More importantly, the promissory note, wherein the spouses undertook to be

solidarily liable for the principal loan, partakes the nature of a suretyship and
therefore is an additional security for the loan. Thus we held in one case that if
solidary liability was instituted to guarantee a principal obligation, the law deems
the contract to be one of suretyship.[26] And while a contract of a surety is in essence
secondary only to a valid principal obligation, the suretys liability to the creditor or
promisee of the principal is said to be direct, primary, and absolute; in other words,
the surety is directly and equally bound with the principal. The surety therefore
becomes liable for the debt or duty of another even if he possesses no direct or
personal interest over the obligations nor does he receive any benefit therefrom.[27]

Petitioners contend that the Court of Appeals erred in not granting their
counterclaims, considering that they suffered moral damages in view of the unjust
refusal of BPI to accept the payment scheme proposed by IBAA and the allegedly
unjust and illegal foreclosure of the real estate mortgages on their
property.[28]Conversely, they argue that the Court of Appeals erred in awarding
moral damages to BPI, which is a corporation, as well as exemplary damages,
attorneys fees and expenses of litigation.[29]
We do not agree. Moral damages are meant to compensate the claimant for any
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and similar injuries unjustly
caused.[30] Such damages, to be recoverable, must be the proximate result of a
wrongful act or omission the factual basis for which is satisfactorily established by
the aggrieved party.[31] There being no wrongful or unjust act on the part of BPI in
demanding payment from them and in seeking the foreclosure of the chattel and real
estate mortgages, there is no lawful basis for award of damages in favor of
the spouses.

Neither is BPI entitled to moral damages. A juridical person is generally not entitled
to moral damages because, unlike a natural person, it cannot experience physical
suffering or such sentiments as wounded feelings, serious anxiety, mental anguish
or moral shock.[32] The Court of Appeals found BPI as being famous and having
gained its familiarity and respect not only in the Philippines but also in the whole
world because of its good will and good reputation must protect and defend the same
against any unwarranted suit such as the case at bench.[33] In holding that BPI is
entitled to moral damages, the Court of Appeals relied on the case of People v.
Manero,[34] wherein the Court ruled that [i]t is only when a juridical person has a
good reputation that is debased, resulting in social humiliation, that moral damages
may be awarded.[35]

We do not agree with the Court of Appeals. A statement similar to that made by the
Court in Manero can be found in the case of Mambulao Lumber Co. v. PNB, et
al.,[36] thus:

x x x Obviously, an artificial person like herein appellant corporation

cannot experience physical sufferings, mental anguish, fright, serious
anxiety, wounded feelings, moral shock or social humiliation which are
 basis of moral damages. A corporation may have good
reputation which, if besmirched may also be a ground for the award of
moral damages. x x x (Emphasis supplied)

Nevertheless, in the more recent cases of ABS-CBN Corp. v. Court of Appeals, et

al.,[37] and Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational
Center-Bicol Christian College of Medicine (AMEC-BCCM),[38] the Court held that
the statements in Manero and Mambulao were mere obiter dicta, implying that the
award of moral damages to corporations is not a hard and fast rule. Indeed, while the
Court may allow the grant of moral damages to corporations, it is not automatically
granted; there must still be proof of the existence of the factual basis of the damage
and its causal relation to the defendants acts. This is so because moral damages,
though incapable of pecuniary estimation, are in the category of an award designed
to compensate the claimant for actual injury suffered and not to impose a penalty
on the wrongdoer.[39]

The spouses complaint against BPI proved to be unfounded, but it does not
automatically entitle BPI to moral damages. Although the institution of a clearly
unfounded civil suit can at times be a legal

justification for an award of attorney's fees, such filing, however, has almost
invariably been held not to be a ground for an award of moral damages. The rationale
for the rule is that the law could not have meant to impose a penalty on the right to
litigate. Otherwise, moral damages must every time be awarded in favor of the
prevailing defendant against an unsuccessful plaintiff.[40] BPI may have been
inconvenienced by the suit, but we do not see how it could have possibly suffered
besmirched reputation on account of the single suit alone. Hence, the award of moral
damages should be deleted.

The awards of exemplary damages and attorneys fees, however, are

proper. Exemplary damages, on the other hand, are imposed by way of example or
correction for the public good, when the party to a contract acts in a wanton,
fraudulent, oppressive or malevolent manner, while attorneys fees are allowed when
exemplary damages are awarded and when the party to a suit is compelled to incur
expenses to protect his interest.[41] The spouses instituted their complaint against BPI
notwithstanding the fact that they were the ones who failed to pay their obligations.
Consequently, BPI was forced to litigate and defend its interest. For these reasons,
BPI is entitled to the awards of exemplary damages and attorneys fees.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court
of Appeals dated 24 October 2005 and 31 March 2006, respectively, are hereby
AFFIRMED, with the MODIFICATION that the award of moral damages to Bank
of the Philippine Islands is DELETED.

Costs against the petitioners.

SO ORDERED.

G.R. No. L-8527 March 30, 1914

WEST COAST LIFE INSURANCE CO., plaintiff,

vs.
GEO N. HURD, Judge of Court of First Instance, defendant.

Southworth, Hargis & Springer for plaintiff.

Haussermann, Cohn & Fisher for defendant.

MORELAND, J.:

This is an action for the issuance of a writ of prohibition against the defendant "commanding the
defendant to desist or refrain from further proceedings in a criminal action pending in that court."

The petitioner is a foreign life-insurance corporation, duly organized under and by virtue of the laws
of the State of California, doing business regularly and legally in the Philippine Islands pursuant to its
laws.

On the 16th of December, 1912, the assistant prosecuting attorney of the city of Manila filed an
information in a criminal action in the Court of First Instance of that city against the plaintiff, said
corporation, and also against John Northcott and Manuel C. Grey, charging said corporation and
said individuals with the crime of libel. On the 17th day of December the defendant in his official
capacity as judge of the court of First Instance signed and issued a process directed to the plaintiff
and the other accused in said criminal action, which said process reads as follows:

UNITED STATES OF AMERICA,

 PHILIPPINE ISLANDS.

In the Court of First Instance of the Judicial District of Manila.

THE UNITED STATES No. 9661

versus Libel.

WEST COAST LIFE INSURANCE CO., JOHN NORTHCOTT, AND MANUEL C. GREY.

To West Coast Life Insurance Co., John Northcott, and Manuel C. Grey, Manila.

SUMMONS.

You are hereby summoned to appear before the Court of First Instance of the city of Manila
P.I., on the 18th day of December, 1912, at the hour of 8 a.m., to answer the charge made
against you upon the information of F. H. Nesmith, assistant prosecuting attorney of the city
of Manila, for libel, as set forth in the said information filed in this copurt on December 16,
1912, a copy of which is hereto attached and herewith served upon you.

Dated at the city of Manila, P. I., this 17th day of December, 1912.

(Sgd.) GEO N. HURD,

Judge, Court of First Instance.

The information upon which said process was issued is as follows:

The undersigned accuses the West Coast Life Insurance Company, John Northcott, and
Manuel C. Grey of the crime of libel, committed as follows:

That on or about the 14th day of September, 1912, and continuously thereafter up to and
including the date of this complaint, in the city of Manila, P. I., the said defendant West Coast
Life Insurance Company was and has been a foreign corporation duly organized in the State
of California, United States of America, and registered and doing business in the Philippine
Islands; that the said defendant John Nortcott then and there was and has been the general
agent and manager for the Philippine Islands of the said defendant corporation West Coast
Life Insurance Company, and the said defendant Manuel C. Grey was and has been an
agent and employee of the said defendant corporation West Coast Life Insurance Company,
acting in the capacity of treasurer of the branch of the said defendant corporation in the
Philippine Islands; that on or about the said 14th day of September, 1912, and for some time
thereafter, to wit, during the months of September and October, 1912, in the city of Manila,
P.I., the said defendants West Coast Life Insurance Company, John Northcott, and Manuel
C. Grey, conspiring and confederating together, did then and there willfully, unlawfully, and
maliciously, and to the damage of the Insular Life Insurance Company, a domestic
corporation duly organized, registered, and doing business in the Philippine Islands, and with
intent o cause such damage and to expose the said Insular Life Insurance Company to
public hatred, contempt, and ridicule, compose and print, and cause to be printed a large
number of circulars, and, in numerous printings in the form of said circulars, did publish and
distribute, and cause to be published and distributed, among other persons, to policy holders
and prospective policy holders of the said Insular Life Insurance Company, among other
things, a malicious defamation and libel in the Spanish language, of the words and tenor
following:
 "First. For some time past various rumors are current to the effect that the Insular Life
Insurance Company is not in as good a condition as i should be at the present time,
and that really it is in bad shape. Nevertheless, the investigations made by the
representative of the "Bulletin" have failed fully to confirm these rumors. It is known
that the Insular Auditor has examined the books of the company and has found that
its capital has diminished, and that by direction of said official the company has
decided to double the amount of its capital, and also to pay its reserve fund. All this is
true."

That the said circulars, and the matters therein contained hereinbefore set forth in this
information, tend to impeach and have impeached the honesty, virtue, and reputation of the
said Insular Life Insurance Company by exposing it to public hatred, contempt, and ridicule;
that by the matters printed in said circulars, and hereinbefore set forth in this information, the
said defendants West Coast Life Insurance Company, John Northcott, and Manuel C. Grey
meant and intended to state and represent to those to whom the said defendants delivered
said circulars as aforesaid, that the said Insular Life Insurance Company was then and there
in a dangerous financial condition and on the point of going into insolvency, to the detriment
of the policy holders of the said Insular Life Insurance Company, and of those with whom the
said Insular Life Insurance Company have and have had business transactions, and each
and all of said persons to whom the said defendants delivered said circulars, and all persons
as well who read said circulars understood the said matters in said circulars to have said
libelous sense and meaning. Contrary to law.

On the 20th day of December, 1912, the plaintiff, together with the other persons named as accused
in said process through their attorneys, served upon the prosecuting attorney and filed with the clerk
of the court a motion to quash said summons and the service thereof, on the ground that the court
had no jurisdiction over the said company, there being no authority in the court for the issuance of
the process, Exhibit B, the order under which it was issued being void. The court denied the motion
and directed plaintiff to appear before it on the 28th day of December, 1912, and to plead to the
information, to which order the plaintiff then and there duly excepted.

It is alleged in the complaint that "unless restrained by this Court the respondent will proceed to carry
out said void order and compel your petitioner to appear before his court and plead and submit to
criminal prosecution without having acquired any jurisdiction whatever over your petitioner."

The prayer of the complaint is, "your petitioner prays judgment for the issuance of a writ of
prohibition against the respondent, commanding the respondent absolutely to desist or refrain from
further proceedings against your petitioner in the said criminal action."

The basis of the action is that the Court of First Instance has no power or authority, under the laws of
the Philippine Islands, to proceed against a corporation, as such, criminally, to bring it into court for
the purpose of making it amenable to the criminal laws. It is contended that the court had no
jurisdiction to issue the process in evidence against the plaintiff corporation; that the issuance and
service thereof upon the plaintiff corporation were outside of the authority and jurisdiction of the
court, were authorized by no law, conferred no jurisdiction over said corporation, and that they were
absolutely void and without force or effect.

The plaintiff, further attacking said process, alleges that the process is a mixture of civil and criminal
process, that it is not properly signed, that it does not direct or require an arrest; that it s an order to
appear and answer on a date certain without restraint of the person, and that it is not in the form
required by law.
Section 5 of General Orders, No. 58, defines an information as "accusation in writing charging a
period with a public offense." Section 6 provide that a complaint or information is sufficient it if shows
"the name of the defendant, or if his name cannot be discovered, that he is described under a
fictitious name with a statement that his true name is unknown to the informant or official signing the
same. His true name may be inserted at any stage of the proceedings instituted against him,
whenever ascertained." These provisions, as well as those which relate to arraignment and counsel,
and to demurrers and pleas, indicate clearly that the maker of the Code of Criminal Procedure had
no intention or expectation that corporations would be included among those who would fall within
the provisions thereof. The only process known to the Code of Criminal Procedure, or which any
court is by that order authorized to issue, is an order of arrest. The Code of Criminal Procedure
provides that "if the magistrate be satisfied from the investigation that the crime complained of has
been committed, and there is reasonable ground to believe that the party charged has committed it,
he must issue an order for his arrest. If the offense be bailable, and the defendant offer a sufficient
security, he shall be admitted to bail; otherwise he shall be committed to prison." There is no
authority for the issuance of any other process than an order of arrest. As a necessary
consequence, the process issued in the case before us is without express authorization of statute.

The question remains as to whether or not he court may, of itself and on its own motion, create not
only a process but a procedure by which the process may be made effective.

We do not believe that the authority of the courts of the Philippine Islands extends so far. While
having the inherent powers which usually go with courts of general jurisdiction, we are of the opinion
that, under the circumstances of their creation, they have only such authority in criminal matters as is
expressly conferred upon them by statute or which it is necessary to imply from such authority in
order to carry out fully and adequately the express authority conferred. We do not feel that Courts of
First Instance have authority to create new procedure and new processes in criminal law. The
exercise of such power verges too closely on legislation. Even though it be admitted, a question we
do not now decide, that there are various penal laws in the Philippine Islands which corporation as
such may violate, still we do not believe that the courts are authorized to go to the extent of creating
special procedure and special processes for the purpose of carrying out those penal statutes, when
the legislature itself has neglected to do so. To bring a corporation into court criminally requires
many additions to the present criminal procedure. While it may be said to be the duty of courts to
see to it that criminals are punished, it is no less their duty to follow prescribed forms of procedure
and to go out upon unauthorized ways or act in an unauthorized manner.

There are many cases cited by counsel for the defendant which show that corporations have been
proceeded against criminally by indictment and otherwise and have been punished as malefactors
by the courts. Of this, of course, there can be no doubt; but it is clear that, in those cases, the
statute, by express words or by necessary intendment, included corporations within the persons who
could offend against the criminal laws; and the legislature, at the same time established a procedure
applicable to corporations. No case has been cited to us where a corporation has been proceeded
against under a criminal statute where the court did not exercise its common law powers or where
there was not in force a special procedure applicable to corporations.

The courts of the Philippine Islands are creatures of statute and, as we have said, have only those
powers conferred upon them by statute and those which are required to exercise that authority fully
and adequately. The courts here have no common law jurisdiction or powers. If they have any
powers not conferred by statute, expressly or impliedly, they would naturally come from Spanish and
not from common law sources. It is undoubted that, under the Spanish criminal law and procedure, a
corporation could not have been proceeded against criminally, as such, if such an entity as a
corporation in fact existed under the Spanish law, and as such it could not have committed a crime
in which a willful purpose or a malicious intent was required. Criminal actions would have been
restricted or limited, under that system, to the officials of such corporations and never would have
been directed against the corporation itself. This was the rule with relation to associations or
combinations of persons approaching, more or less, the corporation as it is now understood, and it
would undoubtedly have been the rue with corporations. From this source, then, the courts derive no
authority to bring corporations before them in criminal actions, nor to issue processes for that
purpose.

The case was submitted to this Court on an agreed statement of facts with a stipulation for a
decision upon the merits. We are of the opinion that the plaintiff is entitled, under that stipulation, to
the remedy prayed for.

It is adjudged that the Court of First Instance of the city of Manila be and it is hereby enjoined and
prohibited from proceeding further in the criminal cause which is before us in this proceeding,
entitled United States vs. West Coast Life Insurance Company, a corporation, John Northcott and
Manuel C. Grey, so far as said proceedings relate to the said West Coast Life Insurance Company,
a corporation, the plaintiff in the case.

Arellano, C.J. and Araullo, J., concur.

Carson, J., concurs in the result.

G.R. No. L-30896 April 28, 1983

JOSE O. SIA, petitioner,

vs.
THE PEOPLE OF THE PHILIPPINES, respondent.

DE CASTRO, J.:

Petition for review of the decision of the Court of Appeals affirming the decision of the Court of First
Instance of Manila convicting the appellant of estafa, under an information which reads:

That in, about or during the period comprised' between July 24, 1963 and December
31, 1963, both dates inclusive, in the City of Manila, Philippines, the said accused did
then and there willfully, unlawfully and feloniously defraud the Continental Bank, a
banking institution duly organized and doing business in the City of Manila, in the
following manner, to wit: the said accused, in his capacity as president and general
manager of the Metal Manufacturing of the Philippines, Inc. (MEMAP) and on behalf
of said company, obtained delivery of 150 M/T Cold Rolled Steel Sheets valued at P
71,023.60 under a trust receipt agreement under L/C No. 63/109, which cold rolled
steel sheets were consigned to the Continental Bank, under the express obligation
on the part of said accused of holding the said steel sheets in trust and selling them
and turning over the proceeds of the sale to the Continental Bank; but the said
accused, once in possession of the said goods, far from complying with his aforesaid
obligation and despite demands made upon him to do so, with intent to defraud,
failed and refused to return the said cold rolled sheets or account for the proceeds
thereof, if sold, which the said accused willfully, unlawfully and feloniously
misappropriated, misapplied and converted to his own personal use and benefit, to
the damage and prejudice of the said Continental Bank in the total amount of
P146,818.68, that is the balance including the interest after deducting the sum of
P28,736.47 deposited by the said accused with the bank as marginal deposit and
 forfeited by the said from the value of the said goods, in the said sum of P71,023.60.
(Original Records, p. 1).

In reviewing the evidence, the Court of Appeals came up with the following findings of facts which
the Solicitor General alleges should be conclusive upon this Court:

There is no debate on certain antecedents: Accused Jose 0. Sia sometime prior to

24 May, 1963, was General Manager of the Metal Manufacturing Company of the
Philippines, Inc. engaged in the manufacture of steel office equipment; on 31 May,
1963, because his company was in need of raw materials to be imported from
abroad, he applied for a letter of credit to import steel sheets from Mitsui Bussan
Kaisha, Ltd. of Tokyo, Japan, the application being directed to the Continental Bank,
herein complainant, Exhibit B and his application having been approved, the letter of
credit was opened on 5 June, 1963 in the amount of $18,300, Exhibit D; and the
goods arrived sometime in July, 1963 according to accused himself, tsn. II:7; now
from here on there is some debate on the evidence; according to Complainant Bank,
there was permitted delivery of the steel sheets only upon execution of a trust
receipt, Exhibit A; while according to the accused, the goods were delivered to him
sometime before he executed that trust receipt in fact they had already been
converted into steel office equipment by the time he signed said trust receipt, tsn.
II:8; but there is no question - and this is not debated - that the bill of exchange
issued for the purpose of collecting the unpaid account thereon having fallen due
(see Exh. B) neither accused nor his company having made payment thereon
notwithstanding demands, Exh. C and C-1, dated 17 and 27 December, 1963, and
the accounts having reached the sum in pesos of P46,818.68 after deducting his
deposit valued at P28,736.47; that was the reason why upon complaint by
Continental Bank, the Fiscal filed the information after preliminary investigation as
has been said on 22 October, 1964. (Rollo [CA], pp. 103- 104).

The first issue raised, which in effect combines the first three errors assigned, is whether petitioner
Jose O. Sia, having only acted for and in behalf of the Metal Manufacturing Company of the
Philippines (Metal Company, for short) as President thereof in dealing with the complainant, the
Continental Bank, (Bank for short) he may be liable for the crime charged.

In discussing this question, petitioner proceeds, in the meantime, on the assumption that the acts
imputed to him would constitute the crime of estafa, which he also disputes, but seeks to avoid
liability on his theory that the Bank knew all along that petitioner was dealing with him only as an
officer of the Metal Company which was the true and actual applicant for the letter of credit (Exhibit
B) and which, accordingly, assumed sole obligation under the trust receipt (Exhibit A). In disputing
the theory of petitioner, the Solicitor General relies on the general principle that when a corporation
commits an act which would constitute a punishable offense under the law, it is the responsible
officers thereof, acting for the corporation, who would be punished for the crime, The Court of
Appeals has subscribed to this view when it quoted approvingly from the decision of the trial court
the following:

A corporation is an artificial person, an abstract being. If the defense theory is

followed unscrupulously legions would form corporations to commit swindle right and
left where nobody could be convicted, for it would be futile and ridiculous to convict
an abstract being that can not be pinched and confined in jail like a natural, living
person, hence the result of the defense theory would be hopeless chose in business
and finance. It is completely untenable. (Rollo [CA], p. 108.)
The above-quoted observation of the trial court would seem to be merely restating a general
principle that for crimes committed by a corporation, the responsible officers thereof would
personally bear the criminal liability. (People vs. Tan Boon Kong, 54 Phil. 607. See also Tolentino,
Commercial Laws of the Philippines, p. 625, citing cases.)

The case cited by the Court of Appeals in support of its stand-Tan Boon Kong case, supra-may
however not be squarely applicable to the instant case in that the corporation was directly required
by law to do an act in a given manner, and the same law makes the person who fails to perform the
act in the prescribed manner expressly liable criminally. The performance of the act is an obligation
directly imposed by the law on the corporation. Since it is a responsible officer or officers of the
corporation who actually perform the act for the corporation, they must of necessity be the ones to
assume the criminal liability; otherwise this liability as created by the law would be illusory, and the
deterrent effect of the law, negated.

In the present case, a distinction is to be found with the Tan Boon Kong case in that the act alleged
to be a crime is not in the performance of an act directly ordained by law to be performed by the
corporation. The act is imposed by agreement of parties, as a practice observed in the usual pursuit
of a business or a commercial transaction. The offense may arise, if at all, from the peculiar terms
and condition agreed upon by the parties to the transaction, not by direct provision of the law. The
intention of the parties, therefore, is a factor determinant of whether a crime was committed or
whether a civil obligation alone intended by the parties. With this explanation, the distinction
adverted to between the Tan Boon Kong case and the case at bar should come out clear and
meaningful. In the absence of an express provision of law making the petitioner liable for the criminal
offense committed by the corporation of which he is a president as in fact there is no such provisions
in the Revised Penal Code under which petitioner is being prosecuted, the existence of a criminal
liability on his part may not be said to be beyond any doubt. In all criminal prosecutions, the
existence of criminal liability for which the accused is made answerable must be clear and certain.
The maxim that all doubts must be resolved in favor of the accused is always of compelling force in
the prosecution of offenses. This Court has thus far not ruled on the criminal liability of an officer of a
corporation signing in behalf of said corporation a trust receipt of the same nature as that involved
herein. In the case of Samo vs. People, L-17603-04, May 31, 1962, the accused was not clearly
shown to be acting other than in his own behalf, not in behalf of a corporation.

The next question is whether the violation of a trust receipt constitutes estafa under Art. 315 (1-[2])
of the Revised Penal Code, as also raised by the petitioner. We now entertain grave doubts, in the
light of the promulgation of P.D. 115 providing for the regulation of trust receipts transaction, which is
a very comprehensive piece of legislation, and includes an express provision that 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 civil liabilities arising from the
criminal offense. The question that suggests itself is, therefore, whether the provisions of the
Revised Penal Code, Article 315, par. 1 (b) are not adequate to justify the punishment of the act
made punishable by P.D. 115, that the necessity was felt for the promulgation of the decree. To
answer this question, it is imperative to make an indepth analysis of the conditions usually embodied
in a trust receipt to best their legal sufficiency to constitute the basis for holding the violation of said
conditions as estafa under Article 315 of the Revised Penal Code which P.D. 115 now seeks to
punish expressly.

As executed, the trust receipt in question reads:

I/WE HEREBY AGREE TO HOLD SAID GOODS IN TRUST FOR THE SAID BANK
as its property with liberty to sell the same for its account but without authority to
 make any other disposition whatsoever of the said goods or any part thereof (or the
proceeds thereof) either 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
BANK to apply against the relative acceptance (as described above) and for the
payment of any other indebtedness of mine/ours to CONTINENTAL BANK. (Original
Records, p. 108)

One view is to consider the transaction as merely that of a security of a loan, and that the trust
element is but and inherent feature of the security aspect of the arrangement where the goods are
placed in the possession of the "entrustee," to use the term used in P.D. 115, violation of the
element of trust not being intended to be in the same concept as how it is understood in the criminal
sense. The other view is that the bank as the owner and "entrustor" delivers the goods to the
"entrustee, " with the authority to sell the goods, but with the obligation to give the proceeds to the
"entrustor" or return the goods themselves if not sold, a trust being thus created in the full sense as
contemplated by Art. 315, par. 1 (b).

We consider the view that the trust receipt arrangement gives rise only to civil liability as the more
feasible, before the promulgation of P.D. 115. The transaction being contractual, the intent of the
parties should govern. Since the trust receipt has, by its nature, to be executed upon the arrival of
the goods imported, and acquires legal standing as such receipt only upon acceptance by the
"entrustee," the trust receipt transaction itself, the antecedent acts consisting of the application of the
L/C, the approval of the L/C and the making of the marginal deposit and the effective importation of
the goods, all through the efforts of the importer who has to find his supplier, arrange for the
payment and shipment of the imported goods-all these circumstances would negate any intent of
subjecting the importer to criminal prosecution, which could possibly give rise to a case of
imprisonment for non-payment of a debt. The parties, therefore, are deemed to have consciously
entered into a purely commercial transaction that could give rise only to civil liability, never to subject
the "entrustee" to criminal prosecution. Unlike, for instance, when several pieces of jewelry are
received by a person from the owner for sale on commission, and the former misappropriates for his
personal use and benefit, either the jewelries or the proceeds of the sale, instead of returning them
to the owner as is his obligation, the bank is not in the same concept as the jewelry owner with full
power of disposition of the goods, which the bank does not have, for the bank has previously
extended a loan which the L/C represents to the importer, and by that loan, the importer should be
the real owner of the goods. If under the trust receipt the bank is made to appear as the owner, it
was but an artificial expedient, more of a legal fiction than fact, for if it were really so, it could dispose
of the goods in any manner it wants, which it cannot do, just to give consistency with the purpose of
the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the
bank as the true owner from the inception of the transaction would be to disregard the loan feature
thereof, a feature totally absent in the case of the transaction between the jewel-owner and his
agent.

Consequently, if only from the fact that the trust receipt transaction is susceptible to two reasonable
interpretation, one as giving rise only to civil liability for the violation of the condition thereof, and the
other, as generating also criminal liability, the former should be adopted as more favorable to the
supposed offender. (Duran vs. CA, L-39758, May 7, 1976, 71 SCRA 68; People vs. Parayno, L-
24804, July 5, 1968, 24 SCRA 3; People vs. Abendan, L-1481, January 28,1949,82 Phil. 711;
People vs. Bautista, L-1502, May 24, 1948, 81 Phil. 78; People vs. Abana, L-39, February 1, 1946,
76 Phil. 1.)

There is, moreover, one circumstance appearing on record, the significance of which should be
properly evaluated. As stated in petitioner's brief (page 2), not denied by the People, "before the
Continental Bank approved the application for a letter of credit (Exhibit 'D'), subsequently covered by
the trust receipt, the Continental Bank examined the financial capabilities of the applicant, Metal
Manufacturing Company of the Philippines because that was the bank's standard procedure
(Testimony of Mr. Ernesto Garlit, Asst. Manager of the Foreign Department, Continental Bank, t.s.n.,
August 30, 1965). The Continental Bank did not examine the financial capabilities of herein
petitioner, Jose O. Sia, in connection with the same letter of credit. (Ibid). " From this fact, it would
appear as positively established that the intention of the parties in entering into the "trust receipt"
agreement is merely to afford a stronger security for the loan evidenced by the letter of credit, may
be not as an ordinary pledge as observed in P.N.B. vs. Viuda e Hijos de Angel Jose, et al., 63 Phil.
814, citing In re Dunlap C (206 Fed. 726) but neither as a transaction falling under Article 315-1 (b)
of the Revised Penal Code giving rise to criminal liability, as previously explained and demonstrated.

It is worthy of note that the civil liability imposed by the trust receipt is exclusively on the Metal
Company. Speaking of such liability alone, as one arising from the contract, as distinguished from
the civil liability arising out of a crime, the petitioner was never intended to be equally liable as the
corporation. Without being made so liable personally as the corporation is, there would then be no
basis for holding him criminally liable, for any violation of the trust receipt. This is made clearly so
upon consideration of the fact that in the violation of the trust agreement and in the absence of
positive evidence to the contrary, only the corporation benefited, not the petitioner personally, yet,
the allegation of the information is to effect that the misappropriation or conversion was for the
personal use and benefit of the petitioner, with respect to which there is variance between the
allegation and the evidence.

It is also worthy of note that while the trust receipt speaks of authority to sell, the fact is undisputed
that the imported goods were to be manufactured into finished products first before they could be
sold, as the Bank had full knowledge of. This fact is, however, not embodied in the trust agreement,
thus impressing on the trust receipt vagueness and ambiguity which should not be the basis for
criminal prosecution, in the event of a violation of the terms of the trust receipt. Again, P.D. 115 has
express provision relative to the "manufacture or process of the good with the purpose of ultimate
sale," as a distinct condition from that of "to sell the goods or procure their sale" (Section 4, (1). Note
that what is embodied in the receipt in question is the sale of imported goods, the manufacture
thereof not having been mentioned. The requirement in criminal prosecution, that there must be
strict harmony, not variance, between the allegation and the evidence, may therefore, not be said to
have been satisfied in the instance case.

FOR ALL THE FOREGOING, We reverse the decision of the Court of Appeals and hereby acquit the
petitioner, with costs de oficio.

SO ORDERED.

Concepcion, Jr., Guerrero, Vasquez, Relova and Gutierrez, JJ., concur.

Fernando, CJ., Escolin, Plana, Abad Santos, JJ., concur in the result.

Separate Opinions
TEEHANKEE, J., concurring:

In concur. Petitioner personally cannot be charged and convicted for the crime of estafa for failure of
the corporation(MEMAP) represented by him as president and general manager to pay "the balance
of P46,818.68 .... including the interest after deducting the sum of P28,736.47" which sum, according
to the very information, it was "deposited by the said accused with the [Continental] bank as
marginal deposit and forfeited by the said bank from the value of said goods, in the said sum of P
71,023.60" representing the value of the cold rolled steel sheets imported by the corporation with the
bank's financing under its letter of credit and released to the importer corporation under trust receipt
in favor of the bank.

All these acts were corporate acts with the accused duly representing the corporation as its
president and general manager: the application for bank financing, the deposit (which was
from corporate funds, and not a deposit made by the petitioner, as wrongly alleged in the
information), the receipt of the steel sheets, then manufactured into finished products (which could
not technically be done under the terms of the trust receipt required by the bank, under which the
very sheets were supposed to be sold by the corporation) and the non-payment of the credit
extended by the bank. There is not the slightest evidence nor intimation that these corporate acts
were unauthorized or that petitioner personally had committed any fraud or deceit in connection
therewith or that he had personallybeen responsible for or benefited from the corporation's failure to
pay the bank the balance due under the trust receipt.

In the recent case of People vs. Cuevo, G. R. No. L-27607, decided by the Court on May 7, 1981,
the Court, for lack of necessary votes, affirmed the dismissal of the same charge of estafa, for non-
payment of the debt evidenced by the trust receipt, by the trial court presided by Judge Ruperto
Kapunan, Jr. who ruled that "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" incurs only civil and not criminal liability for non-payment of the
debt thus incurred. I reiterate my separate opinion therein supporting the more liberal interpretation
that the trust receipt transaction "gives rise only to civil liability on the part of the offender" and
holding that the very definition of a trust receipt, to wit," ' (A) trust receipt is considered as a security
transaction intended to aid in financing importers and retail dealers who do not have sufficient funds
or resources to finance the importation or purchase of merchandise, and who may not be able to
acquire credit except through utilization, as collateral, of the merchandise imported or purchased' (53
Am. Jr. 961, cited in Samo vs. People, 115 Phil. 346, 349), sustains the lower court's rationale in
dismissing the information that the contract covered by a trust receipt is merely a secured loan. The
goods imported by the small importer and retail dealer through the bank's financing remain of their
own property and risk and the old capitalist orientation of putting them in jail for estafa for non-
payment of the secured loan (granted after they had been fully investigated by the bank as good
credit risks) through the fiction of the trust receipt device should no longer be permitted in this day
and age." **

The charge in the case at bar against petitioner-accused must accordingly be dismissed.

MELENCIO-HERRERA, J., concurring and dissenting:

I dissent in so far as the Decision states that violation of the terms of a trust receipt does not
constitute Estafa under Art. 315, par. 1 (b) of the Revised Penal Code, for being contrary to the
rulings in People vs. Yu Chai Ho, 53 Phil. 874 (1928); PNB vs. Arrozal, 103 Phil. 213 (1958),
and Samo vs. People, 5 SCRA 355 (1962).
I concur in so far as the Decision holds that petitioner should not be held liable for the crime of
Estafa considering that in the cases above enumerated, the persons who executed the trust receipts
acted in their own individual capacities unlike in this case where petitioner acted for and on behalf of
the Metal Manufacturing Company, as its General Manager, and was presumably authorized to do
so. This Court has not as yet laid down a ruling on the criminal liability of a corporation officer signing
a trust receipt on behalf of the corporation, a trust receipt being essentially a financing transaction. It
was only upon the promulgation of PD 115 on January 29, 1973 that responsible directors, officers,
employees or other officials of a corporation, partnership, associations or other juridical entities are
made expressly responsible for violation of the terms of a trust receipt agreement committed by said
corporation, partnership, association or other juridical entities.

Makasiar, J., dissent. The C.A. decision should be affirmed.

Aquino, J., dissent. I vote for the affirmance of the judgement of the C.A.

[G.R. No. 129577-80. February 15, 2000]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. BULU

CHOWDURY, accused-appellant.

DECISION

PUNO, J.:

In November 1995, Bulu Chowdury and Josephine Ong were charged before the
Regional Trial Court of Manila with the crime of illegal recruitment in large
scalecommitted as follows:

"That sometime between the period from August 1994 to October 1994 in
the City of Manila, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, representing themselves to have the
capacity to contract, enlist and transport workers for employment abroad,
conspiring, confederating and mutually helping one another, did then and
there willfully, unlawfully and feloniously recruit the herein complainants:
Estrella B. Calleja, Melvin C. Miranda and Aser S. Sasis, individually or as
a group for employment in Korea without first obtaining the required
license and/or authority from the Philippine Overseas Employment
Administration."[1]

They were likewise charged with three counts of estafa committed against private
complainants.[2] The State Prosecutor, however, later dismissed the estafa charges
against Chowdury[3] and filed an amended information indicting only Ong for the
offense.[4]

Chowdury was arraigned on April 16, 1996 while Ong remained at large. He pleaded
"not guilty" to the charge of illegal recruitment in large scale.[5]
Trial ensued.

The prosecution presented four witnesses: private complainants Aser Sasis, Estrella
Calleja and Melvin Miranda, and Labor Employment Officer Abbelyn Caguitla.

Sasis testified that he first met Chowdury in August 1994 when he applied with
Craftrade Overseas Developers (Craftrade) for employment as factory worker in South
Korea. Chowdury, a consultant of Craftrade, conducted the interview. During the
interview, Chowdury informed him about the requirements for employment. He told him
to submit his passport, NBI clearance, passport size picture and medical certificate. He
also required him to undergo a seminar. He advised him that placement would be on a
first-come-first-serve basis and urged him to complete the requirements immediately.
Sasis was also charged a processing fee of P25,000.00. Sasis completed all the
requirements in September 1994. He also paid a total amount of P16,000.00 to
Craftrade as processing fee. All payments were received by Ong for which she issued
three receipts.[6] Chowdury then processed his papers and convinced him to complete
his payment.[7]

Sasis further said that he went to the office of Craftrade three times to follow up his
application but he was always told to return some other day. In one of his visits to
Craftrades office, he was informed that he would no longer be deployed for employment
abroad. This prompted him to withdraw his payment but he could no longer find
Chowdury. After two unsuccessful attempts to contact him, he decided to file with the
Philippine Overseas Employment Administration (POEA) a case for illegal recruitment
against Chowdury. Upon verification with the POEA, he learned that Craftrade's license
had already expired and has not been renewed and that Chowdury, in his personal
capacity, was not a licensed recruiter.[8]

Calleja testified that in June 1994, she applied with Craftrade for employment as factory
worker in South Korea. She was interviewed by Chowdury. During the interview, he
asked questions regarding her marital status, her age and her province. Toward the end
of the interview, Chowdury told her that she would be working in a factory in Korea. He
required her to submit her passport, NBI clearance, ID pictures, medical certificate and
birth certificate. He also obliged her to attend a seminar on overseas employment. After
she submitted all the documentary requirements, Chowdury required her to
pay P20,000.00 as placement fee. Calleja made the payment on August 11, 1994 to
Ong for which she was issued a receipt.[9] Chowdury assured her that she would be able
to leave on the first week of September but it proved to be an empty promise. Calleja
was not able to leave despite several follow-ups. Thus, she went to the POEA where
she discovered that Craftrade's license had already expired. She tried to withdraw her
money from Craftrade to no avail. Calleja filed a complaint for illegal recruitment against
Chowdury upon advice of POEA's legal counsel.[10]

Miranda testified that in September 1994, his cousin accompanied him to the office of
Craftrade in Ermita, Manila and introduced him to Chowdury who presented himself as
consultant and interviewer. Chowdury required him to fill out a bio-data sheet before
conducting the interview. Chowdury told Miranda during the interview that he would
send him to Korea for employment as factory worker. Then he asked him to submit the
following documents: passport, passport size picture, NBI clearance and medical
certificate. After he complied with the requirements, he was advised to wait for his visa
and to pay P25,000.00 as processing fee. He paid the amount of P25,000.00 to Ong
who issued receipts therefor.[11] Craftrade, however, failed to deploy him. Hence,
Miranda filed a complaint with the POEA against Chowdury for illegal recruitment. [12]

Labor Employment Officer Abbelyn Caguitla of the Licensing Branch of the POEA
testified that she prepared a certification on June 9, 1996 that Chowdury and his co-
accused, Ong, were not, in their personal capacities, licensed recruiters nor were they
connected with any licensed agency. She nonetheless stated that Craftrade was
previously licensed to recruit workers for abroad which expired on December 15, 1993.
It applied for renewal of its license but was only granted a temporary license effective
December 16, 1993 until September 11, 1994. From September 11, 1994, the POEA
granted Craftrade another temporary authority to process the expiring visas of overseas
workers who have already been deployed. The POEA suspended Craftrade's temporary
license on December 6, 1994.[13]

For his defense, Chowdury testified that he worked as interviewer at Craftrade from
1990 until 1994. His primary duty was to interview job applicants for abroad. As a mere
employee, he only followed the instructions given by his superiors, Mr. Emmanuel
Geslani, the agencys President and General Manager, and Mr. Utkal Chowdury, the
agency's Managing Director. Chowdury admitted that he interviewed private
complainants on different dates. Their office secretary handed him their bio-data and
thereafter he led them to his room where he conducted the interviews. During the
interviews, he had with him a form containing the qualifications for the job and he filled
out this form based on the applicant's responses to his questions. He then submitted
them to Mr. Utkal Chowdury who in turn evaluated his findings. He never received
money from the applicants. He resigned from Craftrade on November 12, 1994. [14]

Another defense witness, Emelita Masangkay who worked at the Accreditation Branch
of the POEA presented a list of the accredited principals of Craftrade Overseas
Developers[15] and a list of processed workers of Craftrade Overseas Developers from
1988 to 1994.[16]

The trial court found Chowdury guilty beyond reasonable doubt of the crime of illegal
recruitment in large scale. It sentenced him to life imprisonment and to pay a fine
of P100,000.00. It further ordered him to pay Aser Sasis the amount of P16,000.00,
Estrella Calleja, P20,000.00 and Melvin Miranda, P25,000.00. The dispositive portion of
the decision reads:

"WHEREFORE, in view of the foregoing considerations, the prosecution

having proved the guilt of the accused Bulu Chowdury beyond reasonable
doubt of the crime of Illegal Recruitment in large scale, he is hereby
sentenced to suffer the penalty of life imprisonment and a fine
 of P100,000.00 under Art. 39 (b) of the New Labor Code of the
Philippines. The accused is ordered to pay the complainants Aser Sasis
the amount of P16,000.00; Estrella Calleja the amount of P20,000.00;
Melvin Miranda the amount of P25,000.00."[17]

Chowdury appealed.

The elements of illegal recruitment in large scale are:

(1) The accused undertook any recruitment activity defined under Article
13 (b) or any prohibited practice enumerated under Article 34 of the Labor
Code;

(2) He did not have the license or authority to lawfully engage in the
recruitment and placement of workers; and

(3) He committed the same against three or more persons, individually or

as a group.[18]

The last paragraph of Section 6 of Republic Act (RA) 8042[19] states who shall be held
liable for the offense, thus:

"The persons criminally liable for the above offenses are the principals,
accomplices and accessories. In case of juridical persons, the officers
having control, management or direction of their business shall be
liable."

The Revised Penal Code which supplements the law on illegal recruitment [20] defines
who are the principals, accomplices and accessories. The principals are: (1) those who
take a direct part in the execution of the act; (2) those who directly force or induce
others to commit it; and (3) those who cooperate in the commission of the offense by
another act without which it would not have been accomplished. [21] The accomplices are
those persons who may not be considered as principal as defined in Section 17 of the
Revised Penal Code but cooperate in the execution of the offense by previous or
simultaneous act.[22] The accessories are those who, having knowledge of the
commission of the crime, and without having participated therein, either as principals or
accomplices, take part subsequent to its commission in any of the following manner: (1)
by profiting themselves or assisting the offenders to profit by the effects of the crime; (2)
by concealing or destroying the body of the crime, or the effects or instruments thereof,
in order to prevent its discovery; and (3) by harboring, concealing, or assisting in the
escape of the principal of the crime, provided the accessory acts with abuse of his
public functions or whenever the author of the crime is guilty of treason, parricide,
murder, or an attempt at the life of the chief executive, or is known to be habitually guilty
of some other crime.[23]
Citing the second sentence of the last paragraph of Section 6 of RA 8042, accused-
appellant contends that he may not be held liable for the offense as he was merely an
employee of Craftrade and he only performed the tasks assigned to him by his
superiors. He argues that the ones who should be held liable for the offense are the
officers having control, management and direction of the agency.

As stated in the first sentence of Section 6 of RA 8042, the persons who may be held
liable for illegal recruitment are the principals, accomplices and accessories. An
employee of a company or corporation engaged in illegal recruitment may be held liable
as principal, together with his employer,[24] if it is shown that he actively and
consciously participated in illegal recruitment.[25] It has been held that the existence of
the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally causes the corporation to commit a crime. The corporation
obviously acts, and can act, only by and through its human agents, and it is their
conduct which the law must deter. The employee or agent of a corporation engaged in
unlawful business naturally aids and abets in the carrying on of such business and will
be prosecuted as principal if, with knowledge of the business, its purpose and effect, he
consciously contributes his efforts to its conduct and promotion, however slight his
contribution may be.[26] The law of agency, as applied in civil cases, has no application in
criminal cases, and no man can escape punishment when he participates in the
commission of a crime upon the ground that he simply acted as an agent of any
party.[27] The culpability of the employee therefore hinges on his knowledge of the
offense and his active participation in its commission. Where it is shown that the
employee was merely acting under the direction of his superiors and was unaware that
his acts constituted a crime, he may not be held criminally liable for an act done for and
in behalf of his employer.[28]

The fundamental issue in this case, therefore, is whether accused-appellant knowingly

and intentionally participated in the commission of the crime charged.

We find that he did not.

Evidence shows that accused-appellant interviewed private complainants in the months

of June, August and September in 1994 at Craftrade's office. At that time, he was
employed as interviewer of Craftrade which was then operating under a temporary
authority given by the POEA pending renewal of its license.[29] The temporary license
included the authority to recruit workers.[30] He was convicted based on the fact that he
was not registered with the POEA as employee of Craftrade. Neither was he, in his
personal capacity, licensed to recruit overseas workers. Section 10 Rule II Book II of the
Rules and Regulation Governing Overseas Employment (1991) requires that every
change, termination or appointment of officers, representatives and personnel of
licensed agencies be registered with the POEA. Agents or representatives appointed by
a licensed recruitment agency whose appointments are not previously approved by the
POEA are considered "non-licensee " or "non-holder of authority" and therefore not
authorized to engage in recruitment activity.[31]
Upon examination of the records, however, we find that the prosecution failed to prove
that accused-appellant was aware of Craftrade's failure to register his name with the
POEA and that he actively engaged in recruitment despite this knowledge. The
obligation to register its personnel with the POEA belongs to the officers of the
agency.[32] A mere employee of the agency cannot be expected to know the legal
requirements for its operation. The evidence at hand shows that accused-appellant
carried out his duties as interviewer of Craftrade believing that the agency was duly
licensed by the POEA and he, in turn, was duly authorized by his agency to deal with
the applicants in its behalf. Accused-appellant in fact confined his actions to his job
description. He merely interviewed the applicants and informed them of the
requirements for deployment but he never received money from them. Their payments
were received by the agency's cashier, Josephine Ong. Furthermore, he performed his
tasks under the supervision of its president and managing director. Hence, we hold that
the prosecution failed to prove beyond reasonable doubt accused-appellant's conscious
and active participation in the commission of the crime of illegal recruitment. His
conviction, therefore, is without basis.

This is not to say that private complainants are left with no remedy for the wrong
committed against them. The Department of Justice may still file a complaint against the
officers having control, management or direction of the business of Craftrade Overseas
Developers (Craftrade), so long as the offense has not yet prescribed. Illegal
recruitment is a crime of economic sabotage which need to be curbed by the strong arm
of the law. It is important, however, to stress that the government's action must be
directed to the real offenders, those who perpetrate the crime and benefit from it.

IN VIEW WHEREOF, the assailed decision of the Regional Trial Court is REVERSED
and SET ASIDE. Accused-appellant is hereby ACQUITTED. The Director of the Bureau
of Corrections is ordered to RELEASE accused-appellant unless he is being held for
some other cause, and to REPORT to this Court compliance with this order within ten
(10) days from receipt of this decision. Let a copy of this Decision be furnished the
Secretary of the Department of Justice for his information and appropriate action.

SO ORDERED.

The corporation also incurs criminal liability for the act of its employee or agent if (1) the employee or agent
[24]

committed the offense while acting within the scope of his employment and (2) the offense was committed with at
least some intent to benefit the employer. The liability is imputed to the corporation not because it actively
participated in the malice or fraud but because the act is done for the benefit of the corporation while the employee
or agent was acting within the scope of his employment in the business of the corporation, and justice requires that
the latter shall be held responsible for damages to the individual who suffered by such conduct. [New York Central
& Hudson River Railroad Co. vs. US, 212 U.S. 481, 53 L. ed. 613 (1909); US vs. Basic Construction Co., et al., 711
F.2d 570 (1983); US vs. Automated Medical Laboratories, Inc., 770 F.2d 399 (1985)].

G. R. No. 164317 February 6, 2006

ALFREDO CHING, Petitioner,
vs.
THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR ECILYN BURGOS-VILLAVERT,
JUDGE EDGARDO SUDIAM of the Regional Trial Court, Manila, Branch 52; RIZAL
COMMERCIAL BANKING CORP. and THE PEOPLE OF THE PHILIPPINES, Respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 57169 dismissing the petition for certiorari, prohibition and mandamus filed by
petitioner Alfredo Ching, and its Resolution2 dated June 28, 2004 denying the motion for
reconsideration thereof.

Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). Sometime in
September to October 1980, PBMI, through petitioner, applied with the Rizal Commercial Banking
Corporation (respondent bank) for the issuance of commercial letters of credit to finance its
importation of assorted goods.3

Respondent bank approved the application, and irrevocable letters of credit were issued in favor of
petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13 trust
receipts4 as surety, acknowledging delivery of the following goods:

T/R Date Granted Maturity Date Principal Description of Goods

Nos.

1845 12-05-80 03-05-81 P1,596,470.05 79.9425 M/T "SDK"

Brand Synthetic Graphite
Electrode

1853 12-08-80 03-06-81 P198,150.67 3,000 pcs. (15 bundles)

Calorized Lance Pipes

1824 11-28-80 02-26-81 P707,879.71 One Lot High Fired

Refractory Tundish
Bricks

1798 11-21-80 02-19-81 P835,526.25 5 cases spare parts for

CCM

1808 11-21-80 02-19-81 P370,332.52 200 pcs. ingot moulds

2042 01-30-81 04-30-81 P469,669.29 High Fired Refractory

Nozzle Bricks

1801 11-21-80 02-19-81 P2,001,715.17 Synthetic Graphite

Electrode [with] tapered
pitch filed nipples

1857 12-09-80 03-09-81 P197,843.61 3,000 pcs. (15 bundles

calorized lance pipes [)]
 1895 12-17-80 03-17-81 P67,652.04 Spare parts for
Spectrophotometer

1911 12-22-80 03-20-81 P91,497.85 50 pcs. Ingot moulds

2041 01-30-81 04-30-81 P91,456.97 50 pcs. Ingot moulds

2099 02-10-81 05-11-81 P66,162.26 8 pcs. Kubota Rolls for

rolling mills

2100 02-10-81 05-12-81 P210,748.00 Spare parts for

Lacolaboratory
Equipment5

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with authority to sell
but not by way of conditional sale, pledge or otherwise; and in case such goods were sold, to turn
over the proceeds thereof as soon as received, to apply against the relative acceptances and
payment of other indebtedness to respondent bank. In case the goods remained unsold within the
specified period, the goods were to be returned to respondent bank without any need of demand.
Thus, said "goods, manufactured products or proceeds thereof, whether in the form of money or
bills, receivables, or accounts separate and capable of identification" were respondent bank’s
property.

When the trust receipts matured, petitioner failed to return the goods to respondent bank, or to return
their value amounting to ₱6,940,280.66 despite demands. Thus, the bank filed a criminal complaint
for estafa6 against petitioner in the Office of the City Prosecutor of Manila.

After the requisite preliminary investigation, the City Prosecutor found probable cause estafa under
Article 315, paragraph 1(b) of the Revised Penal Code, in relation to Presidential Decree (P.D.) No.
115, otherwise known as the Trust Receipts Law. Thirteen (13) Informations were filed against the
petitioner before the Regional Trial Court (RTC) of Manila. The cases were docketed as Criminal
Cases No. 86-42169 to 86-42181, raffled to Branch 31 of said court.

Petitioner appealed the resolution of the City Prosecutor to the then Minister of Justice. The appeal
was dismissed in a Resolution7 dated March 17, 1987, and petitioner moved for its reconsideration.
On December 23, 1987, the Minister of Justice granted the motion, thus reversing the previous
resolution finding probable cause against petitioner.8 The City Prosecutor was ordered to move for
the withdrawal of the Informations.

This time, respondent bank filed a motion for reconsideration, which, however, was denied on
February 24, 1988.9The RTC, for its part, granted the Motion to Quash the Informations filed by
petitioner on the ground that the material allegations therein did not amount to estafa.10

In the meantime, the Court rendered judgment in Allied Banking Corporation v. Ordoñez,11 holding
that the penal provision of P.D. No. 115 encompasses any act violative of an obligation covered by
the trust receipt; it is not limited to transactions involving goods which are to be sold (retailed),
reshipped, stored or processed as a component of a product ultimately sold. The Court also ruled
that "the non-payment of the amount covered by a trust receipt is an act violative of the obligation of
the entrustee to pay."12

On February 27, 1995, respondent bank re-filed the criminal complaint for estafa against petitioner
before the Office of the City Prosecutor of Manila. The case was docketed as I.S. No. 95B-07614.
Preliminary investigation ensued. On December 8, 1995, the City Prosecutor ruled that there was no
probable cause to charge petitioner with violating P.D. No. 115, as petitioner’s liability was only civil,
not criminal, having signed the trust receipts as surety.13 Respondent bank appealed the resolution
to the Department of Justice (DOJ) via petition for review, alleging that the City Prosecutor erred in
ruling:

1. That there is no evidence to show that respondent participated in the misappropriation of

the goods subject of the trust receipts;

2. That the respondent is a mere surety of the trust receipts; and

3. That the liability of the respondent is only civil in nature.14

On July 13, 1999, the Secretary of Justice issued Resolution No. 25015 granting the petition and
reversing the assailed resolution of the City Prosecutor. According to the Justice Secretary, the
petitioner, as Senior Vice-President of PBMI, executed the 13 trust receipts and as such, was the
one responsible for the offense. Thus, the execution of said receipts is enough to indict the petitioner
as the official responsible for violation of P.D. No. 115. The Justice Secretary also declared that
petitioner could not contend that P.D. No. 115 covers only goods ultimately destined for sale, as this
issue had already been settled in Allied Banking Corporation v. Ordoñez,16 where the Court ruled
that P.D. No. 115 is "not limited to transactions in goods which are to be sold (retailed), reshipped,
stored or processed as a component of a product ultimately sold but covers failure to turn over the
proceeds of the sale of entrusted goods, or to return said goods if unsold or not otherwise disposed
of in accordance with the terms of the trust receipts."

The Justice Secretary further stated that the respondent bound himself under the terms of the trust
receipts not only as a corporate official of PBMI but also as its surety; hence, he could be proceeded
against in two (2) ways: first, as surety as determined by the Supreme Court in its decision in Rizal
Commercial Banking Corporation v. Court of Appeals;17 and second, as the corporate official
responsible for the offense under P.D. No. 115, via criminal prosecution. Moreover, P.D. No. 115
explicitly allows the prosecution of corporate officers "without prejudice to the civil liabilities arising
from the criminal offense." Thus, according to the Justice Secretary, following Rizal Commercial
Banking Corporation, the civil liability imposed is clearly separate and distinct from the criminal
liability of the accused under P.D. No. 115.

Conformably with the Resolution of the Secretary of Justice, the City Prosecutor filed 13
Informations against petitioner for violation of P.D. No. 115 before the RTC of Manila. The cases
were docketed as Criminal Cases No. 99-178596 to 99-178608 and consolidated for trial before
Branch 52 of said court. Petitioner filed a motion for reconsideration, which the Secretary of Justice
denied in a Resolution18 dated January 17, 2000.

Petitioner then filed a petition for certiorari, prohibition and mandamus with the CA, assailing the
resolutions of the Secretary of Justice on the following grounds:

1. THE RESPONDENTS ARE ACTING WITH AN UNEVEN HAND AND IN FACT, ARE
ACTING OPPRESSIVELY AGAINST ALFREDO CHING WHEN THEY ALLOWED HIS
PROSECUTION DESPITE THE FACT THAT NO EVIDENCE HAD BEEN PRESENTED TO
PROVE HIS PARTICIPATION IN THE ALLEGED TRANSACTIONS.

2. THE RESPONDENT SECRETARY OF JUSTICE COMMITTED AN ACT IN GRAVE

ABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION WHEN THEY
CONTINUED PROSECUTION OF THE PETITIONER DESPITE THE LENGTH OF TIME
 INCURRED IN THE TERMINATION OF THE PRELIMINARY INVESTIGATION THAT
SHOULD JUSTIFY THE DISMISSAL OF THE INSTANT CASE.

3. THE RESPONDENT SECRETARY OF JUSTICE AND ASSISTANT CITY PROSECUTOR

ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO AN EXCESS OF
JURISDICTION WHEN THEY CONTINUED THE PROSECUTION OF THE PETITIONER
DESPITE LACK OF SUFFICIENT BASIS.19

In his petition, petitioner incorporated a certification stating that "as far as this Petition is concerned,
no action or proceeding in the Supreme Court, the Court of Appeals or different divisions thereof, or
any tribunal or agency. It is finally certified that if the affiant should learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different
divisions thereof, of any other tribunal or agency, it hereby undertakes to notify this Honorable Court
within five (5) days from such notice."20

In its Comment on the petition, the Office of the Solicitor General alleged that -

A.

THE HONORABLE SECRETARY OF JUSTICE CORRECTLY RULED THAT PETITIONER

ALFREDO CHING IS THE OFFICER RESPONSIBLE FOR THE OFFENSE CHARGED AND
THAT THE ACTS OF PETITIONER FALL WITHIN THE AMBIT OF VIOLATION OF P.D.
[No.] 115 IN RELATION TO ARTICLE 315, PAR. 1(B) OF THE REVISED PENAL CODE.

B.

THERE IS NO MERIT IN PETITIONER’S CONTENTION THAT EXCESSIVE DELAY HAS

MARRED THE CONDUCT OF THE PRELIMINARY INVESTIGATION OF THE CASE,
JUSTIFYING ITS DISMISSAL.

C.

THE PRESENT SPECIAL CIVIL ACTION FOR CERTIORARI, PROHIBITION AND

MANDAMUS IS NOT THE PROPER MODE OF REVIEW FROM THE RESOLUTION OF
THE DEPARTMENT OF JUSTICE. THE PRESENT PETITION MUST THEREFORE BE
DISMISSED.21

On April 22, 2004, the CA rendered judgment dismissing the petition for lack of merit, and on
procedural grounds. On the procedural issue, it ruled that (a) the certification of non-forum shopping
executed by petitioner and incorporated in the petition was defective for failure to comply with the
first two of the three-fold undertakings prescribed in Rule 7, Section 5 of the Revised Rules of Civil
Procedure; and (b) the petition for certiorari, prohibition and mandamus was not the proper remedy
of the petitioner.

On the merits of the petition, the CA ruled that the assailed resolutions of the Secretary of Justice
were correctly issued for the following reasons: (a) petitioner, being the Senior Vice-President of
PBMI and the signatory to the trust receipts, is criminally liable for violation of P.D. No. 115; (b) the
issue raised by the petitioner, on whether he violated P.D. No. 115 by his actuations, had already
been resolved and laid to rest in Allied Bank Corporation v. Ordoñez;22 and (c) petitioner was
estopped from raising the
City Prosecutor’s delay in the final disposition of the preliminary investigation because he failed to do
so in the DOJ.

Thus, petitioner filed the instant petition, alleging that:

THE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION ON THE

GROUND THAT THE CERTIFICATION OF NON-FORUM SHOPPING INCORPORATED
THEREIN WAS DEFECTIVE.

II

THE COURT OF APPEALS ERRED WHEN IT RULED THAT NO GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WAS COMMITTED
BY THE SECRETARY OF JUSTICE IN COMING OUT WITH THE ASSAILED
RESOLUTIONS.23

The Court will delve into and resolve the issues seriatim.

The petitioner avers that the CA erred in dismissing his petition on a mere technicality. He claims
that the rules of procedure should be used to promote, not frustrate, substantial justice. He insists
that the Rules of Court should be construed liberally especially when, as in this case, his substantial
rights are adversely affected; hence, the deficiency in his certification of non-forum shopping should
not result in the dismissal of his petition.

The Office of the Solicitor General (OSG) takes the opposite view, and asserts that indubitably, the
certificate of non-forum shopping incorporated in the petition before the CA is defective because it
failed to disclose essential facts about pending actions concerning similar issues and parties. It
asserts that petitioner’s failure to comply with the Rules of Court is fatal to his petition. The OSG
cited Section 2, Rule 42, as well as the ruling of this Court in Melo v. Court of Appeals.24

We agree with the ruling of the CA that the certification of non-forum shopping petitioner
incorporated in his petition before the appellate court is defective. The certification reads:

It is further certified that as far as this Petition is concerned, no action or proceeding in the Supreme
Court, the Court of Appeals or different divisions thereof, or any tribunal or agency.

It is finally certified that if the affiant should learn that a similar action or proceeding has been filed or
is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, of any
other tribunal or agency, it hereby undertakes to notify this Honorable Court within five (5) days from
such notice.25

Under Section 1, second paragraph of Rule 65 of the Revised Rules of Court, the petition should be
accompanied by a sworn certification of non-forum shopping, as provided in the third paragraph of
Section 3, Rule 46 of said Rules. The latter provision reads in part:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. — The petition
shall contain the full names and actual addresses of all the petitioners and respondents, a concise
statement of the matters involved, the factual background of the case and the grounds relied upon
for the relief prayed for.
 xxx

The petitioner shall also submit together with the petition a sworn certification that he has not
theretofore commenced any other action involving the same issues in the Supreme Court, the Court
of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action
or proceeding, he must state the status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or
different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the
aforesaid courts and other tribunal or agency thereof within five (5) days therefrom. xxx

Compliance with the certification against forum shopping is separate from and independent of the
avoidance of forum shopping itself. The requirement is mandatory. The failure of the petitioner to
comply with the foregoing requirement shall be sufficient ground for the dismissal of the petition
without prejudice, unless otherwise provided.26

Indubitably, the first paragraph of petitioner’s certification is incomplete and unintelligible. Petitioner
failed to certify that he "had not heretofore commenced any other action involving the same issues in
the Supreme Court, the Court of Appeals or the different divisions thereof or any other tribunal or
agency" as required by paragraph 4, Section 3, Rule 46 of the Revised Rules of Court.

We agree with petitioner’s contention that the certification is designed to promote and facilitate the
orderly administration of justice, and therefore, should not be interpreted with absolute literalness. In
his works on the Revised Rules of Civil Procedure, former Supreme Court Justice Florenz Regalado
states that, with respect to the contents of the certification which the pleader may prepare, the rule of
substantial compliance may be availed of.27However, there must be a special circumstance or
compelling reason which makes the strict application of the requirement clearly unjustified. The
instant petition has not alleged any such extraneous circumstance. Moreover, as worded, the
certification cannot even be regarded as substantial compliance with the procedural requirement.
Thus, the CA was not informed whether, aside from the petition before it, petitioner had commenced
any other action involving the same issues in other tribunals.

On the merits of the petition, the CA ruled that the petitioner failed to establish that the Secretary of
Justice committed grave abuse of discretion in finding probable cause against the petitioner for
violation of estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to P.D.
No. 115. Thus, the appellate court ratiocinated:

Be that as it may, even on the merits, the arguments advanced in support of the petition are not
persuasive enough to justify the desired conclusion that respondent Secretary of Justice gravely
abused its discretion in coming out with his assailed Resolutions. Petitioner posits that, except for his
being the Senior Vice-President of the PBMI, there is no iota of evidence that he was a participes
crimines in violating the trust receipts sued upon; and that his liability, if at all, is purely civil because
he signed the said trust receipts merely as a xxx surety and not as the entrustee. These assertions
are, however, too dull that they cannot even just dent the findings of the respondent Secretary, viz:

"x x x it is apropos to quote section 13 of PD 115 which states in part, viz:

‘xxx If the violation or offense is committed by a corporation, partnership, association or other judicial
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.’
"There is no dispute that it was the respondent, who as senior vice-president of PBM, executed the
thirteen (13) trust receipts. As such, the law points to him as the official responsible for the offense.
Since a corporation cannot be proceeded against criminally because it cannot commit crime in which
personal violence or malicious intent is required, criminal action is limited to the corporate agents
guilty of an act amounting to a crime and never against the corporation itself (West Coast Life Ins.
Co. vs. Hurd, 27 Phil. 401; Times, [I]nc. v. Reyes, 39 SCRA 303). Thus, the execution by respondent
of said receipts is enough to indict him as the official responsible for violation of PD 115.

"Parenthetically, respondent is estopped to still contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like those imported by PBM, for use in manufacture. This
issue has already been settled in the Allied Banking Corporation case, supra, where he was also a
party, when the Supreme Court ruled that PD 115 is ‘not limited to transactions in goods which are to
be sold (retailed), reshipped, stored or processed as a component or a product ultimately sold’ but
‘covers failure to turn over the proceeds of the sale of entrusted goods, or to return said goods if
unsold or disposed of in accordance with the terms of the trust receipts.’

"In regard to the other assigned errors, we note that the respondent bound himself under the terms
of the trust receipts not only as a corporate official of PBM but also as its surety. It is evident that
these are two (2) capacities which do not exclude the other. Logically, he can be proceeded against
in two (2) ways: first, as surety as determined by the Supreme Court in its decision in RCBC vs.
Court of Appeals, 178 SCRA 739; and, secondly, as the corporate official responsible for the offense
under PD 115, the present case is an appropriate remedy under our penal law.

"Moreover, PD 115 explicitly allows the prosecution of corporate officers ‘without prejudice to the civil
liabilities arising from the criminal offense’ thus, the civil liability imposed on respondent in RCBC vs.
Court of Appeals case is clearly separate and distinct from his criminal liability under PD 115.’"28

Petitioner asserts that the appellate court’s ruling is erroneous because (a) the transaction between
PBMI and respondent bank is not a trust receipt transaction; (b) he entered into the transaction and
was sued in his capacity as PBMI Senior Vice-President; (c) he never received the goods as an
entrustee for PBMI, hence, could not have committed any dishonesty or abused the confidence of
respondent bank; and (d) PBMI acquired the goods and used the same in operating its machineries
and equipment and not for resale.

The OSG, for its part, submits a contrary view, to wit:

34. Petitioner further claims that he is not a person responsible for the offense allegedly because
"[b]eing charged as the Senior Vice-President of Philippine Blooming Mills (PBM), petitioner cannot
be held criminally liable as the transactions sued upon were clearly entered into in his capacity as an
officer of the corporation" and that [h]e never received the goods as an entrustee for PBM as he
never had or took possession of the goods nor did he commit dishonesty nor "abuse of confidence in
transacting with RCBC." Such argument is bereft of merit.

35. Petitioner’s being a Senior Vice-President of the Philippine Blooming Mills does not exculpate
him from any liability. Petitioner’s responsibility as the corporate official of PBM who received the
goods in trust is premised on Section 13 of P.D. No. 115, which provides:

Section 13. 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. (Emphasis supplied)

36. Petitioner having participated in the negotiations for the trust receipts and having received the
goods for PBM, it was inevitable that the petitioner is the proper corporate officer to be proceeded
against by virtue of the PBM’s violation of P.D. No. 115.29

The ruling of the CA is correct.

In Mendoza-Arce v. Office of the Ombudsman (Visayas),30 this Court held that the acts of a quasi-
judicial officer may be assailed by the aggrieved party via a petition for certiorari and enjoined (a)
when necessary to afford adequate protection to the constitutional rights of the accused; (b) when
necessary for the orderly administration of justice; (c) when the acts of the officer are without or in
excess of authority; (d) where the charges are manifestly false and motivated by the lust for
vengeance; and (e) when there is clearly no prima facie case against the accused.31 The Court also
declared that, if the officer conducting a preliminary investigation (in that case, the Office of the
Ombudsman) acts without or in excess of his authority and resolves to file an Information despite the
absence of probable cause, such act may be nullified by a writ of certiorari.32

Indeed, under Section 4, Rule 112 of the 2000 Rules of Criminal Procedure,33 the Information shall
be prepared by the Investigating Prosecutor against the respondent only if he or she finds probable
cause to hold such respondent for trial. The Investigating Prosecutor acts without or in excess of his
authority under the Rule if the Information is filed against the respondent despite absence of
evidence showing probable cause therefor.34 If the Secretary of Justice reverses the Resolution of
the Investigating Prosecutor who found no probable cause to hold the respondent for trial, and
orders such prosecutor to file the Information despite the absence of probable cause, the Secretary
of Justice acts contrary to law, without authority and/or in excess of authority. Such resolution may
likewise be nullified in a petition for certiorari under Rule 65 of the Revised Rules of Civil
Procedure.35

A preliminary investigation, designed to secure the respondent against hasty, malicious and
oppressive prosecution, is an inquiry to determine whether (a) a crime has been committed; and (b)
whether there is probable cause to believe that the accused is guilty thereof. It is a means of
discovering the person or persons who may be reasonably charged with a crime. Probable cause
need not be based on clear and convincing evidence of guilt, as the investigating officer acts upon
probable cause of reasonable belief. Probable cause implies probability of guilt and requires more
than bare suspicion but less than evidence which would justify a conviction. A finding of probable
cause needs only to rest on evidence showing that more likely than not, a crime has been committed
by the suspect.36

However, while probable cause should be determined in a summary manner, there is a need to
examine the evidence with care to prevent material damage to a potential accused’s constitutional
right to liberty and the guarantees of freedom and fair play37 and to protect the State from the burden
of unnecessary expenses in prosecuting alleged offenses and holding trials arising from false,
fraudulent or groundless charges.38

In this case, petitioner failed to establish that the Secretary of Justice committed grave abuse of
discretion in issuing the assailed resolutions. Indeed, he acted in accord with law and the evidence.
Section 4 of P.D. No. 115 defines a trust receipt transaction, thus:

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning
of this Decree, is any transaction by and between a person referred to in this Decree as the
entruster, and another person referred to in this Decree as entrustee, whereby the entruster, who
owns or holds absolute title or security interests over certain specified goods, documents or
instruments, releases the same to the possession of the entrustee upon the latter’s execution and
delivery to the entruster of a signed document called a "trust receipt" wherein the entrustee binds
himself to hold the designated goods, documents or instruments in trust for the entruster and to sell
or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the
entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in
the trust receipt or the goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, or
for other purposes substantially equivalent to any of the following:

1. In case of goods or documents, (a) to sell the goods or procure their sale; or (b) to
manufacture or process the goods with the purpose of ultimate sale; Provided, That, in the
case of goods delivered under trust receipt for the purpose of manufacturing or processing
before its ultimate sale, the entruster shall retain its title over the goods whether in its original
or processed form until the entrustee has complied fully with his obligation under the trust
receipt; or (c) to load, unload, ship or otherwise deal with them in a manner preliminary or
necessary to their sale; or

2. In the case of instruments a) to sell or procure their sale or exchange; or b) to deliver them
to a principal; or c) to effect the consummation of some transactions involving delivery to a
depository or register; or d) to effect their presentation, collection or renewal.

The sale of goods, documents or instruments by a person in the business of selling goods,
documents or instruments for profit who, at the outset of the transaction, has, as against the buyer,
general property rights in such goods, documents or instruments, or who sells the same to the buyer
on credit, retaining title or other interest as security for the payment of the purchase price, does not
constitute a trust receipt transaction and is outside the purview and coverage of this Decree.

An entrustee is one having or taking possession of goods, documents or instruments under a trust
receipt transaction, and any successor in interest of such person for the purpose of payment
specified in the trust receipt agreement.39 The entrustee is obliged to: (1) hold the goods, documents
or instruments in trust for the entruster and shall dispose of them strictly in accordance with the
terms and conditions of the trust receipt; (2) receive the proceeds in trust for the entruster and turn
over the same to the entruster to the extent of the amount owing to the entruster or as appears on
the trust receipt; (3) insure the goods for their total value against loss from fire, theft, pilferage or
other casualties; (4) keep said goods or proceeds thereof whether in money or whatever form,
separate and capable of identification as property of the entruster; (5) return the goods, documents
or instruments in the event of non-sale or upon demand of the entruster; and (6) observe all other
terms and conditions of the trust receipt not contrary to the provisions of the decree.40

The entruster shall be entitled to the proceeds from the sale of the goods, documents or instruments
released under a trust receipt to the entrustee to the extent of the amount owing to the entruster or
as appears in the trust receipt, or to the return of the goods, documents or instruments in case of
non-sale, and to the enforcement of all other rights conferred on him in the trust receipt; provided,
such are not contrary to the provisions of the document.41
In the case at bar, the transaction between petitioner and respondent bank falls under the trust
receipt transactions envisaged in P.D. No. 115. Respondent bank imported the goods and entrusted
the same to PBMI under the trust receipts signed by petitioner, as entrustee, with the bank as
entruster. The agreement was as follows:

And in consideration thereof, I/we hereby agree to hold said goods in trust for the said BANK as its
property with liberty to sell the same within ____days from the date of the execution of this Trust
Receipt and for the Bank’s account, but without authority to make any other disposition whatsoever
of the said goods or any part thereof (or the proceeds) either by way of conditional sale, pledge or
otherwise.

I/we agree to keep the said goods insured to their full value against loss from fire, theft, pilferage or
other casualties as directed by the BANK, the sum insured to be payable in case of loss to the
BANK, with the understanding that the BANK is, not to be chargeable with the storage premium or
insurance or any other expenses incurred on said goods.

In case of sale, I/we further agree to turn over the proceeds thereof as soon as received to the
BANK, to apply against the relative acceptances (as described above) and for the payment of any
other indebtedness of mine/ours to the BANK. In case of non-sale within the period specified herein,
I/we agree to return the goods under this Trust Receipt to the BANK without any need of demand.

I/we agree to keep the said goods, manufactured products or proceeds thereof, whether in the form
of money or bills, receivables, or accounts separate and capable of identification as property of the
BANK.42

It must be stressed that P.D. No. 115 is a declaration by legislative authority that, as a matter of
public policy, the failure of person to turn over the proceeds of the sale of the goods covered by a
trust receipt or to return said goods, if not sold, is a public nuisance to be abated by the imposition of
penal sanctions.43

The Court likewise rules that the issue of whether P.D. No. 115 encompasses transactions involving
goods procured as a component of a product ultimately sold has been resolved in the affirmative in
Allied Banking Corporation v. Ordoñez.44 The law applies to goods used by the entrustee in the
operation of its machineries and equipment. The non-payment of the amount covered by the trust
receipts or the non-return of the goods covered by the receipts, if not sold or otherwise not disposed
of, violate the entrustee’s obligation to pay the amount or to return the goods to the entruster.

In Colinares v. Court of Appeals,45 the Court declared that there are two possible situations in a trust
receipt transaction. The first 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
second is covered by the provision which refers to merchandise received under the obligation to
return it (devolvera) to the owner.46 Thus, failure of the entrustee to turn over the proceeds of the
sale of the goods covered by the trust receipts to the entruster or to return said goods if they were
not disposed of in accordance with the terms of the trust receipt is a crime under P.D. No. 115,
without need of proving intent to defraud. The law punishes dishonesty and abuse of confidence in
the handling of money or goods to the prejudice of the entruster, regardless of whether the latter is
the owner or not. A mere failure to deliver the proceeds of the sale of the goods, if not sold,
constitutes a criminal offense that causes prejudice, not only to another, but more to the public
interest.47
The Court rules that although petitioner signed the trust receipts merely as Senior Vice-President of
PBMI and had no physical possession of the goods, he cannot avoid prosecution for violation of P.D.
No. 115.

The penalty clause of the law, Section 13 of P.D. No. 115 reads:

Section 13. 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,
1âwphi1

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.

The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under paragraph
1(b), Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It may be committed
by a corporation or other juridical entity or by natural persons. However, the penalty for the crime is
imprisonment for the periods provided in said Article 315, which reads:

ARTICLE 315. Swindling (estafa). – Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:

1st. The penalty of prision correccional in its maximum period to prision mayor in its
minimum period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000
pesos; and if such amount exceeds the latter sum, the penalty provided in this paragraph
shall be imposed in its maximum period, adding one year for each additional 10,000 pesos;
but the total penalty which may be imposed shall not exceed twenty years. In such cases,
and in connection with the accessory penalties which may be imposed and for the purpose of
the other provisions of this Code, the penalty shall be termed prision mayor or reclusion
temporal, as the case may be;

2nd. The penalty of prision correccional in its minimum and medium periods, if the amount of
the fraud is over 6,000 pesos but does not exceed 12,000 pesos;

3rd. The penalty of arresto mayor in its maximum period to prision correccional in its
minimum period, if such amount is over 200 pesos but does not exceed 6,000 pesos; and

4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200
pesos, provided that in the four cases mentioned, the fraud be committed by any of the following
means; xxx

Though the entrustee is a corporation, nevertheless, the law specifically makes the officers,
employees or other officers or persons responsible for the offense, without prejudice to the civil
liabilities of such corporation and/or board of directors, officers, or other officials or employees
responsible for the offense. The rationale is that such officers or employees are vested with the
authority and responsibility to devise means necessary to ensure compliance with the law and, if
they fail to do so, are held criminally accountable; thus, they have a responsible share in the
violations of the law.48
If the crime is committed by a corporation or other juridical entity, the directors, officers, employees
or other officers thereof responsible for the offense shall be charged and penalized for the crime,
precisely because of the nature of the crime and the penalty therefor. A corporation cannot be
arrested and imprisoned; hence, cannot be penalized for a crime punishable by
imprisonment.49 However, a corporation may be charged and prosecuted for a crime if the imposable
penalty is fine. Even if the statute prescribes both fine and imprisonment as penalty, a corporation
may be prosecuted and, if found guilty, may be fined.50

A crime is the doing of that which the penal code forbids to be done, or omitting to do what it
commands. A necessary part of the definition of every crime is the designation of the author of the
crime upon whom the penalty is to be inflicted. When a criminal statute designates an act of a
corporation or a crime and prescribes punishment therefor, it creates a criminal offense which,
otherwise, would not exist and such can be committed only by the corporation. But when a penal
statute does not expressly apply to corporations, it does not create an offense for which a
corporation may be punished. On the other hand, if the State, by statute, defines a crime that may
be committed by a corporation but prescribes the penalty therefor to be suffered by the officers,
directors, or employees of such corporation or other persons responsible for the offense, only such
individuals will suffer such penalty.51Corporate officers or employees, through whose act, default or
omission the corporation commits a crime, are themselves individually guilty of the crime.52

The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies
to those corporate agents who themselves commit the crime and to those, who, by virtue of their
managerial positions or other similar relation to the corporation, could be deemed responsible for its
commission, if by virtue of their relationship to the corporation, they had the power to prevent the
act.53 Moreover, all parties active in promoting a crime, whether agents or not, are
principals.54 Whether such officers or employees are benefited by their delictual acts is not a
touchstone of their criminal liability. Benefit is not an operative fact.

In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind the cloak of
the separate corporate personality of PBMI. In the words of Chief Justice Earl Warren, a corporate
officer cannot protect himself behind a corporation where he is the actual, present and efficient
actor.55

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the
petitioner.

SO ORDERED.