Sarmiento, Jr. vs. Court of Appeals

A separate civil action for a trust receipt obligation is not barred by the offended party’s failure to expressly reserve it in the criminal case where the reservation may be implied from the absence of any active intervention in the criminal proceedings and from the criminal decision’s lack of any award of civil liability; the civil action, being ex contractu, may proceed independently under Article 31 of the Civil Code.

Associated Banking Corporation was the bank that extended a domestic letter of credit and trust receipt facility to Gregorio Limpin, Jr. and Antonio Apostol, doing business as Davao Libra Industrial Sales, for the purchase of assorted scrap iron from LS Parts Hardware and Machine Shop; Lorenzo M. Sarmiento, Jr. was a surety/guarantor on the trust receipt. The transaction is governed by the Trust Receipts Law, P.D. 115, which punishes misuse or misappropriation of goods or proceeds under trust receipts, and by Rule 111 on the implied institution of civil liability with a criminal action.

On September 6, 1978, Gregorio Limpin, Jr. and Antonio Apostol, doing business under the name and style of “Davao Libra Industrial Sales,” filed with Associated Banking Corporation an application for an Irrevocable Domestic Letter of Credit for P495,000 in favor of LS Parts Hardware and Machine Shop for the purchase of assorted scrap irons. The application was signed by Limpin and Apostol, was approved, and the bank issued Domestic Letter of Credit No. DLC No. DVO-78-006 in favor of LS Parts for P495,000. Thereafter, a Trust Receipt dated September 6, 1978 was executed by Limpin and Apostol. In the trust receipt, Lorenzo M. Sarmiento, Jr. signed as surety/guarantor, stipulating that in consideration of the bank releasing to Limpin and Apostol the goods mentioned in the trust receipt, he jointly and severally undertook to pay on demand all sums the bank may call upon them to pay arising out of or connected with the trust receipt, and that his liability was direct and immediate and not contingent on the bank pursuing remedies against Limpin and Apostol.

The trust receipt provided that Limpin and Apostol acknowledged receiving in trust from the bank the merchandise covered by the documents and agreed to hold it in storage as the bank’s property, with liberty to sell it for cash for the bank’s account provided the proceeds were turned over in their entirety to the bank to be applied against the acceptance and any other indebtedness; that they would immediately notify the bank of any average damage, non-shipment, shortage, non-delivery, or other happening not in the usual and ordinary course of business; and that the due date of the trust receipt was December 5, 1978.

The defendants failed to comply with their undertaking under the trust receipt. According to the bank, demands were made as early as March 1980 for them to comply, but they failed to pay their account. Legal action was deferred due to a proposed settlement, but no settlement was reached, so the bank, through counsel, sent a final letter of demand on May 26, 1986. On June 11, 1986, a complaint for Violation of the Trust Receipt Law was filed against the defendants before the City Fiscal’s Office, and the corresponding Information was thereafter filed. In an Amended Information dated April 1, 1987, Lorenzo M. Sarmiento, Jr. was dropped as an accused; Gregorio Limpin, Jr. was convicted in Criminal Case No. 14,126.

The defendants claimed they could not be held liable because the 825 tons of assorted scrap iron subject of the trust receipt were lost when the vessel transporting them sank, and because the scrap iron were delivered to Davao Libra Industrial Sales, a business concern over which they had no interest whatsoever. They tried to show that the scrap irons were loaded on board Barge L-1853, owned and operated by Luzon Stevedoring, for shipment to Toledo Atlas Pier in Cebu; that the barge capsized on October 4, 1978 while on its way to Toledo City; and that a notice of Marine Protest was made by Capt. Jose C. Barrientos. They also presented an affidavit by Benigno Azarcon attesting that Barge L-1853 capsized on October 4, 1978 and all its cargoes were washed away, and an Incident Report prepared by Charlie Torregoza, a security guard of L.S. Sarmiento and Company, Inc. who was one of those assigned to escort Barge L-1853, showing that the barge capsized on October 4, 1978 and that cargoes were washed away.

The bank’s counsel made a formal entry of appearance in Criminal Case No. 14,126, but in the early proceedings of the criminal action the bank’s counsel moved to withdraw his appearance, and the RTC granted the motion in its Order dated September 4, 1987. The RTC of Davao City (Branch 15) rendered its Decision dated July 14, 1988 in Criminal Case No. 14,126. Associated Banking Corporation filed the present civil complaint for a sum of money against Sarmiento and Limpin in the RTC of Davao City, docketed as Civil Case No. 19,272-88, based on their failure to comply with their obligation under the Trust Receipt. In its Order dated December 16, 1988, the RTC of Davao City (Branch 12) found that the decision in Criminal Case No. 14,126 did not contain an award of civil liability as it appeared in the dispositive portion of the July 14, 1988 Decision.

• Reservation of Civil Action: Petitioners argued that Associated Banking Corporation’s claim for civil liability of P495,000 was not expressly reserved in Criminal Case No. 14,126, so it was impliedly instituted in that criminal action and the separate civil case was procedurally barred; the Information in the criminal case had been filed ahead and the proceedings conducted prior to the civil case before the same RTC of Davao City.
• Prior Adjudication of Civil Liability: Petitioners argued that the RTC of Davao City in Criminal Case No. 14,126 had already adjudged the civil liability of the same claim in favor of Associated Banking Corporation against Gregorio Limpin, Jr.
• Formal Appearance of Bank’s Counsel: Petitioners argued that the CA ignored the admitted fact that the complainant bank’s counsel had entered a formal appearance in Criminal Case No. 14,126.

• Reservation of Civil Action: Whether the civil action for recovery of civil liability is barred because Associated Banking Corporation did not expressly reserve its right to institute it separately in the criminal action against Gregorio Limpin, Jr.
• Prior Adjudication of Civil Liability: Whether the RTC of Davao City in Criminal Case No. 14,126 had already adjudged the civil liability of the same claim in favor of Associated Banking Corporation against Gregorio Limpin, Jr., barring the civil case.
• Formal Appearance of Bank’s Counsel: Whether the formal entry of appearance of Associated Banking Corporation’s counsel in Criminal Case No. 14,126 amounted to an implied institution of the civil action or a waiver of the right to file it separately.
• Independent Civil Action Under Article 31: Whether Associated Banking Corporation’s civil action based on the trust receipt obligation may proceed independently of the criminal proceedings under Article 31 of the Civil Code.

• Reservation of Civil Action: No. The failure to expressly reserve the separate civil action did not bar it; reservation may be implied, and the bank did not actively intervene to press civil liability in the criminal case.
• Prior Adjudication of Civil Liability: No. The RTC Branch 12 Order dated Dec. 16, 1988 found that the decision in Criminal Case No. 14,126 contained no award of civil liability.
• Formal Appearance of Bank’s Counsel: No. The bank’s counsel’s formal appearance did not amount to an implied election or waiver because counsel withdrew his appearance early, and the RTC granted the withdrawal on Sept. 4, 1987.
• Independent Civil Action Under Article 31: Yes. The bank’s complaint was based on the trust receipt obligation, an obligation ex contractu not ex delicto, so it could proceed independently of the criminal proceedings regardless of the result.

• Reservation of Civil Action: Section 1, Rule 111 of the 1985 Rules on Criminal Procedure provides that when a criminal action is instituted, the civil action for recovery of civil liability is impliedly instituted unless the offended party waives it, reserves the right to institute it separately, or institutes it prior to the criminal action; reservation must be made before the prosecution starts presenting evidence. The SC held that the reservation need not be express and may be implied from the acts of the offended party or from acts other than those of the latter. In Vintola vs. Insular Bank of Asia and America, the acquittal expressly declared that the bank’s remedy was civil, which amounted to a reservation. In Bernaldes, Sr. vs. Bohol Land Transp., Inc., there was no showing that the plaintiffs made a claim for damages in the criminal case, and the failure to pronounce civil liability was due to the absence of such claim. In Jarantilla vs. Court of Appeals, the failure of the RTC to make any pronouncement on civil liability amounted to a reservation. Here, nothing in the records showed that the bank attempted to enforce its right to recover civil liability during the prosecution of the criminal action. Also, Sarmiento was dropped from the Amended Information dated April 1, 1987, so the criminal case could not bar the civil action against him. For Limpin, the absence of an express reservation did not bar the separate civil action because the reservation could be implied.
• Prior Adjudication of Civil Liability: The SC found no cogent reason to disturb the RTC of Davao City (Branch 12) Order dated December 16, 1988, which found that the decision promulgated by the RTC of Davao City (Branch 15) in Criminal Case No. 14,126 did not contain an award of civil liability as it appeared in the dispositive portion of the Decision dated July 14, 1988. Thus, there was no prior adjudication of the same civil liability that could bar the civil case.
• Formal Appearance of Bank’s Counsel: The SC acknowledged that the bank’s counsel made a formal entry of appearance in Criminal Case No. 14,126. However, the appearance of the offended party in the criminal case through a private prosecutor may not per se be considered either as an implied election to have the claim for damages determined in the criminal proceedings or as a waiver of the right to have it determined separately. The offended party must actually or actively intervene in the criminal proceedings to leave no doubt of the intention to press a claim for damages in the same action. Here, the bank’s counsel moved to withdraw his appearance in the early proceedings, and the RTC granted the withdrawal in its Order dated September 4, 1987. By that withdrawal, the bank had no intention of submitting its claim for civil liability against petitioners in the criminal action.
• Independent Civil Action Under Article 31: Article 31 of the Civil Code provides that when the civil action is based on an obligation not arising from the act or omission complained of as a felony, the civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. The bank’s complaint against petitioners was based on their failure to comply with their obligation as spelled out in the Trust Receipt. This breach of obligation is separate and distinct from any criminal liability for misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents, or instruments released under trust receipts, punishable under Section 13 of the Trust Receipts Law (P.D. 115) in relation to Article 315(1)(b) of the Revised Penal Code. Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently of the criminal proceedings regardless of the result.

• Implied Reservation of Separate Civil Action — Under Rule 111, the offended party must reserve the right to institute a separate civil action, but the reservation need not be express; it may be implied from the acts of the offended party or from acts other than those of the latter, and the RTC’s failure to pronounce on civil liability amounts to a reservation. The SC applied this where the bank did not expressly reserve, did not actively press civil liability in the criminal case, and the criminal decision contained no award of civil liability; the separate civil action was not barred.
• Appearance of Private Prosecutor Not Per Se Waiver — The appearance of the offended party in the criminal case through a private prosecutor does not by itself amount to an implied election to have damages determined in the criminal proceedings or a waiver of the right to file a separate civil action; the offended party must actually or actively intervene to press the claim. The SC applied this where the bank’s counsel entered a formal appearance but withdrew early, with the RTC granting the withdrawal on September 4, 1987.
• Independent Civil Action Based on Obligation Ex Contractu — Article 31 of the Civil Code allows a civil action based on an obligation not arising from the act or omission complained of as a felony to proceed independently of the criminal proceedings and regardless of the result. The SC applied this because the bank’s collection suit rested on the trust receipt obligation, which is ex contractu and separate from criminal liability under the Trust Receipts Law.
• Trust Receipts Law Liability — Section 13 of P.D. 115, in relation to Article 315(1)(b) of the Revised Penal Code, punishes misuse or misappropriation of goods or proceeds under trust receipts; this criminal liability is separate from the civil obligation arising from the trust receipt. The SC used this to classify the bank’s action as ex contractu.

• “While a reading of the aforequoted provisions shows that the offended party is required to make a reservation of his right to institute a separate civil action, jurisprudence instructs that such reservation may not necessarily be express but may be implied which may be inferred not only from the acts of the offended party but also from acts other than those of the latter.” — The SC establishes that a separate civil action may be impliedly reserved, so the absence of an express reservation is not necessarily fatal.
• “This Court has previously held that the appearance of the offended party in the criminal case through a private prosecutor may not per se be considered either as an implied election to have his claim for damages determined in said proceedings or a waiver of his right to have it determined separately.” — The SC rejects the argument that the bank’s formal appearance in the criminal case automatically waived its separate civil action.
• “He must actually or actively intervene in the criminal proceedings as to leave no doubt with respect to his intention to press a claim for damages in the same action.” — The SC sets the standard for when participation in the criminal case amounts to an implied election to press civil liability there.
• “Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently of the criminal proceedings instituted against petitioners regardless of the result of the latter.” — The SC classifies the trust receipt collection suit as an independent civil action under Article 31 of the Civil Code.

• Vintola vs. Insular Bank of Asia and America, 150 SCRA 578 — Relied on to show that a reservation of the separate civil action may be implied; the acquittal’s statement that the bank’s remedy was civil amounted to a reservation.
• Bernaldes, Sr. vs. Bohol Land Transp., Inc., 7 SCRA 276 — Relied on to show that the failure to pronounce civil liability may be due to the absence of a claim for damages in the criminal case, and that no active claim was made.
• Jarantilla vs. Court of Appeals, 171 SCRA 429 — Relied on to hold that the RTC’s failure to make any pronouncement on civil liability amounts to a reservation of the right to litigate it in a separate action.
• Meneses vs. Luat, 12 SCRA 454 — Cited for the rule that the appearance of the offended party through a private prosecutor is not per se an implied election to have damages determined in the criminal case or a waiver of the separate civil action.
• Reyes vs. Sempio-Diy, 141 SCRA 208 — Cited with Meneses vs. Luat for the same rule on the effect of a private prosecutor’s appearance.

• Section 1, Rule 111, 1985 Rules on Criminal Procedure — When a criminal action is instituted, the civil action for recovery of civil liability is impliedly instituted unless the offended party waives it, reserves the right to institute it separately, or institutes it prior to the criminal action; reservation must be made before the prosecution starts presenting evidence. Applied: the bank did not expressly reserve, but the reservation could be implied, so the civil action was not barred.
• Section 1, Rule 111, Revised Rules of Criminal Procedure (effective December 1, 2000) — The SC noted the same rule under the current Rules: the civil action is deemed instituted unless waived, reserved, or filed prior to the criminal action. Applied as the current formulation of the same reservation requirement.
• Article 31, Civil Code — A civil action based on an obligation not arising from the act or omission complained of as a felony may proceed independently of the criminal proceedings and regardless of the result of the latter. Applied: the trust receipt obligation was ex contractu, so the collection suit could proceed independently.
• Section 13, Trust Receipts Law (P.D. 115) in relation to Article 315(1)(b), Revised Penal Code — Punishes misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents, or instruments released under trust receipts. Applied: the criminal liability under this provision was separate from the civil obligation under the trust receipt.