Ching vs. The Secretary of Justice

A corporate officer who executes trust receipts on behalf of a corporation may be held criminally liable under P.D. No. 115 for the corporation's failure to turn over the proceeds of sale or to return the goods if unsold, and cannot invoke the separate corporate personality of the corporation to shield himself from prosecution.

Petitioner Alfredo Ching was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). In September to October 1980, PBMI, through Ching, applied with Rizal Commercial Banking Corporation (RCBC) for commercial letters of credit to finance its importation of assorted goods used in the operation of PBMI's machineries and equipment. RCBC approved the application and issued irrevocable letters of credit; the goods were purchased and delivered in trust to PBMI under 13 trust receipts signed by Ching as surety. Presidential Decree No. 115, the Trust Receipts Law, governs such transactions and penalizes the failure of an entrustee to turn over proceeds or return goods as estafa under Article 315, paragraph 1(b) of the Revised Penal Code.

Sometime in September to October 1980, Philippine Blooming Mills, Inc. (PBMI), through its Senior Vice-President Alfredo Ching, applied with Rizal Commercial Banking Corporation (RCBC) for the issuance of commercial letters of credit to finance its importation of assorted goods. RCBC approved the application and issued irrevocable letters of credit in favor of petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13 trust receipts as surety, acknowledging delivery of goods including synthetic graphite electrodes, calorized lance pipes, refractory tundish bricks, ingot moulds, nozzle bricks, spare parts, and Kubota rolls, with principal amounts totaling ₱6,940,280.66.

Under the trust receipts, petitioner agreed to hold the goods in trust for RCBC as its property, with liberty to sell the same within a specified period and for the bank's account, but without authority to make any other disposition by way of conditional sale, pledge, or otherwise. In case of sale, petitioner agreed to turn over the proceeds as soon as received to RCBC, to apply against the relative acceptances and payment of other indebtedness. In case of non-sale within the specified period, the goods were to be returned to RCBC without any need of demand. The goods, manufactured products, or proceeds thereof, whether in the form of money, bills, receivables, or accounts, were to be kept separate and capable of identification as property of the bank.

When the trust receipts matured, petitioner failed to return the goods to RCBC or to return their value amounting to ₱6,940,280.66 despite demands. RCBC filed a criminal complaint for estafa against petitioner in the Office of the City Prosecutor of Manila. The City Prosecutor found probable cause and filed 13 Informations before the RTC of Manila. Petitioner appealed to the then Minister of Justice, who initially dismissed the appeal but later granted reconsideration, reversing the finding of probable cause and ordering the withdrawal of the Informations. The RTC granted petitioner's Motion to Quash. Meanwhile, the Supreme Court decided Allied Banking Corporation vs. Ordoñez, holding that P.D. No. 115 is not limited to transactions involving goods ultimately destined for sale but covers failure to turn over proceeds or return goods under trust receipts.

On February 27, 1995, RCBC re-filed the criminal complaint. The City Prosecutor again found no probable cause, ruling that petitioner's liability was only civil, having signed the trust receipts merely as surety. RCBC appealed to the Department of Justice, which reversed the City Prosecutor via Resolution No. 250 dated July 13, 1999, finding that petitioner, as Senior Vice-President who executed the 13 trust receipts, was the official responsible for the offense under P.D. No. 115. Thirteen Informations were filed before RTC Manila, Branch 52. Petitioner moved for reconsideration, which the Secretary of Justice denied on January 17, 2000. Petitioner then filed a petition for certiorari, prohibition, and mandamus with the Court of Appeals, which dismissed the petition on April 22, 2004, on procedural grounds and on the merits. Petitioner elevated the case to the Supreme Court via petition for review on certiorari.

• Liberal Construction of Procedural Rules: Petitioner argued that the rules of procedure should be used to promote, not frustrate, substantial justice, and that the deficiency in his certification of non-forum shopping should not result in the dismissal of his petition, especially since his substantial rights were adversely affected.
• No Grave Abuse of Discretion by Secretary of Justice: Petitioner contended that the Secretary of Justice committed grave abuse of discretion in issuing the assailed resolutions finding probable cause, because there was no evidence of his participation in any misappropriation and his liability was purely civil.
• Not a Trust Receipt Transaction: Petitioner asserted that the transaction between PBMI and RCBC was not a trust receipt transaction within the coverage of P.D. No. 115.
• Capacity as Corporate Officer: Petitioner maintained that he entered into the transaction and was sued in his capacity as PBMI Senior Vice-President, and that he never received the goods as an entrustee for PBMI, hence could not have committed any dishonesty or abused the confidence of RCBC.
• Goods Not for Resale: Petitioner argued that PBMI acquired the goods and used the same in operating its machineries and equipment, not for resale, and therefore the transaction fell outside P.D. No. 115.
• Delay in Preliminary Investigation: Petitioner contended that the excessive delay in the conduct of the preliminary investigation justified dismissal of the case.

• Defective Certification of Non-Forum Shopping: The OSG asserted that the certificate of non-forum shopping was defective because it failed to disclose essential facts about pending actions concerning similar issues and parties, and that such failure was fatal to the petition.
• Proper Finding of Probable Cause: The OSG maintained that the Secretary of Justice correctly ruled that petitioner was the officer responsible for the offense and that his acts fell within the ambit of violation of P.D. No. 115 in relation to Article 315, paragraph 1(b) of the Revised Penal Code.
• No Excessive Delay: The OSG argued that there was no merit in petitioner's contention that excessive delay had marred the preliminary investigation.
• Improper Remedy: The OSG asserted that the petition for certiorari, prohibition, and mandamus was not the proper mode of review from the resolution of the Department of Justice.

• Certification of Non-Forum Shopping: Whether the Court of Appeals erred in dismissing the petition on the ground that the certification of non-forum shopping incorporated therein was defective.
• Grave Abuse of Discretion: Whether the Court of Appeals erred in ruling that no grave abuse of discretion amounting to lack or excess of jurisdiction was committed by the Secretary of Justice in issuing the assailed resolutions.

• Certification of Non-Forum Shopping: No. The Court of Appeals did not err; the certification was incomplete and unintelligible, failing to state that petitioner had not commenced any other action involving the same issues in any other tribunal, as required by Section 3, Rule 46 of the Revised Rules of Court.
• Grave Abuse of Discretion: No. The Secretary of Justice acted in accord with law and the evidence; the transaction constituted a trust receipt transaction under P.D. No. 115, and petitioner as the corporate officer who signed the trust receipts was the proper party to be prosecuted under Section 13 of the decree.

• Certification of Non-Forum Shopping: The certification against forum shopping is mandatory and separate from the avoidance of forum shopping itself. Petitioner's certification was incomplete and unintelligible — it failed to certify that he had not theretofore commenced any other action involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency, as required by Section 3, Rule 46. While the rule of substantial compliance may be availed of, there must be a special circumstance or compelling reason justifying liberal application, and petitioner alleged none. As worded, the certification could not even be regarded as substantial compliance, as it did not inform the CA whether petitioner had commenced any other action involving the same issues in other tribunals. The dismissal was therefore proper.

• Grave Abuse of Discretion: The Secretary of Justice did not commit grave abuse of discretion in finding probable cause. The transaction between petitioner and RCBC falls squarely within the trust receipt transactions defined in Section 4 of P.D. No. 115: RCBC owned or held absolute title or security interests over the specified goods, released them to PBMI upon execution of signed trust receipts, and the entrustee (PBMI, through petitioner) bound itself to hold the goods in trust, sell or dispose of them, and turn over the proceeds or return the goods if unsold. The issue of whether P.D. No. 115 covers goods used in manufacturing — not merely goods destined for sale — was settled in Allied Banking Corporation vs. Ordoñez, where the Court ruled that the law is not limited to transactions in goods to be sold, reshipped, stored, or processed as a component of a product ultimately sold, but covers failure to turn over proceeds or return goods under trust receipts. The non-payment of the amount covered by the trust receipts or the non-return of the goods violates the entrustee's obligation. Under Section 13 of P.D. No. 115, if the offense is committed by a corporation, the penalty shall be imposed upon the directors, officers, employees, or other officials or persons responsible for the offense. Petitioner, as Senior Vice-President who signed the 13 trust receipts, was the official responsible for the offense. A corporation cannot be arrested and imprisoned; hence, the law specifically makes the responsible corporate officers criminally accountable. Petitioner could not hide behind the cloak of PBMI's separate corporate personality, he being the actual, present, and efficient actor who signed the trust receipts. His signing of the trust receipts as both corporate official and surety created two capacities that do not exclude each other — he could be proceeded against civilly as surety and criminally as the corporate official responsible for the offense, these liabilities being separate and distinct.

• Coverage of the Trust Receipts Law (P.D. No. 115) — P.D. No. 115 is not limited to transactions involving goods which are to be sold, reshipped, stored, or processed as a component of a product ultimately sold. It covers any trust receipt transaction where the entruster releases goods to the entrustee upon execution of a trust receipt, and the entrustee binds itself to hold the goods in trust, sell or dispose of them, and turn over the proceeds or return the goods if unsold. 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 a trust receipt or the non-return of the goods if unsold constitutes a violation of the entrustee's obligation under P.D. No. 115, punishable as estafa under Article 315, paragraph 1(b) of the Revised Penal Code. The crime is malum prohibitum but is classified as estafa with abuse of confidence; no intent to defraud need be proved.

• Corporate Officer Liability for Corporate Crimes — When a penal statute defines a crime that may be committed by a corporation but prescribes the penalty to be suffered by the officers, directors, or employees responsible for the offense, only such individuals shall suffer the penalty. Corporate officers or employees through whose act, default, or omission the corporation commits a crime are themselves individually guilty. This principle applies whether or not the crime requires consciousness of wrongdoing, and to those corporate agents who, by virtue of their managerial positions or other similar relation to the corporation, could be deemed responsible for its commission if they had the power to prevent the act. Whether such officers or employees are benefited by their delictual acts is not a touchstone of criminal liability — benefit is not an operative fact. A corporate officer cannot protect himself behind a corporation where he is the actual, present, and efficient actor.

• Probable Cause in Preliminary Investigation — 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. The Secretary of Justice acts without or in excess of authority if he orders the filing of an Information despite the absence of probable cause, and such resolution may be nullified in a petition for certiorari under Rule 65.

• Certification Against Forum Shopping — Compliance with the certification against forum shopping is mandatory and separate from the avoidance of forum shopping itself. The failure of a petitioner to comply is sufficient ground for dismissal of the petition without prejudice. While the rule of substantial compliance may be availed of, there must be a special circumstance or compelling reason making strict application clearly unjustified; absent such circumstance, a defective certification warrants dismissal.

• "Corporate officers or employees, through whose act, default or omission the corporation commits a crime, are themselves individually guilty of the crime." — This passage articulates the ratio decidendi on corporate officer liability under P.D. No. 115, establishing that the responsible corporate official who signed the trust receipts cannot evade criminal prosecution by invoking the corporation's separate personality.

• "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." — This statement confirms the broad coverage of P.D. No. 115 beyond goods destined for resale, applying it to goods used in manufacturing operations, and defines the core obligation whose breach triggers criminal liability.

• "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." — This passage crystallizes the application of the corporate officer liability doctrine to the facts, tying the act of signing the trust receipts to personal criminal accountability notwithstanding corporate personality.

• "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." — This formulation clarifies that violation of P.D. No. 115 is malum prohibitum and does not require proof of fraudulent intent, distinguishing it from ordinary estafa requiring dolo.

• Allied Banking Corporation vs. Ordoñez, G.R. No. 82495, December 10, 1990, 192 SCRA 246 — Controlling precedent on the scope of P.D. No. 115. The Court held that the penal provision encompasses any act violative of an obligation covered by the trust receipt, not limited to transactions involving goods ultimately destined for sale. Petitioner was a party in that case. The Secretary of Justice and the Supreme Court relied on this ruling to reject petitioner's contention that P.D. No. 115 did not cover goods used in manufacturing.

• Rizal Commercial Banking Corporation vs. Court of Appeals, G.R. No. 85396, October 27, 1989, 178 SCRA 739 — Cited for the proposition that petitioner bound himself under the trust receipts not only as a corporate official but also as surety, and that these two capacities do not exclude each other. Civil liability as surety is separate and distinct from criminal liability under P.D. No. 115.

• Colinares vs. Court of Appeals, 394 Phil. 106 (2000) — Cited for the distinction between the two situations in a trust receipt transaction: (1) money received under an obligation to deliver it to the owner of the merchandise sold, and (2) merchandise received under an obligation to return it to the owner. Both situations are covered by the estafa provision.

• Mendoza-Arce vs. Office of the Ombudsman (Visayas), 430 Phil. 101 (2002) — Cited for the rule that the acts of a quasi-judicial officer conducting a preliminary investigation may be assailed via certiorari when the officer acts without or in excess of authority, including when an Information is filed despite the absence of probable cause.

• Melo vs. Court of Appeals, 376 Phil. 204 (1999) — Cited on the mandatory nature of the certification against forum shopping and the rule of substantial compliance as discussed by Justice Regalado.

• Section 4, P.D. No. 115 (Trust Receipts Law) — Defines a trust receipt transaction as one where the entruster releases goods, documents, or instruments to the entrustee upon execution of a trust receipt, with the entrustee bound to hold them in trust and to sell or dispose of them, turning over proceeds or returning the goods if unsold. Applied to hold that the transaction between PBMI and RCBC constituted a trust receipt transaction under the decree.

• Section 13, P.D. No. 115 (Penalty Clause) — Provides that the failure of an entrustee to turn over proceeds or return goods constitutes estafa under Article 315, paragraph 1(b) of the Revised Penal Code. If the offense is committed by a corporation, the penalty shall be imposed upon the directors, officers, employees, or other officials responsible for the offense, without prejudice to civil liabilities. Applied to hold petitioner criminally liable as the corporate officer who signed the trust receipts.

• Sections 7 and 9, P.D. No. 115 — Define the obligations of the entrustee (to hold goods in trust, turn over proceeds, insure goods, keep them separate and identifiable, return goods if unsold) and the rights of the entruster (to proceeds, return of goods, enforcement of rights). Applied to characterize the trust receipt arrangement between PBMI and RCBC.

• Article 315, paragraph 1(b), Revised Penal Code — Defines and penalizes estafa with abuse of confidence. P.D. No. 115 classifies the violation of trust receipt obligations as estafa under this provision, with penalties graduated according to the amount of fraud.

• Section 3, Rule 46, Revised Rules of Court — Requires a sworn certification of non-forum shopping in petitions filed with the Court of Appeals. Applied to hold that petitioner's certification was defective for failing to state that he had not commenced any other action involving the same issues.

• Section 4, Rule 112, 2000 Rules of Criminal Procedure — Provides that the Information shall be prepared by the Investigating Prosecutor only if he finds probable cause to hold the respondent for trial. Cited in discussing the standard of probable cause and the authority of the Secretary of Justice to reverse the Investigating Prosecutor.

Chief Justice Artemio V. Panganiban (Chairperson), Associate Justice Consuelo Ynares-Santiago, Associate Justice Ma. Alicia Austria-Martinez, and Associate Justice Minita V. Chico-Nazario.