Sia vs. The People of the Philippines

Before P.D. 115, a corporation’s violation of a trust receipt does not constitute estafa under Article 315(1)(b) of the Revised Penal Code, and a corporate officer who signed the trust receipt for and in behalf of the corporation cannot be criminally liable absent an express provision of law imposing such liability.

Jose O. Sia was president and general manager of Metal Manufacturing of the Philippines, Inc. (MEMAP), a corporation engaged in the manufacture of steel office equipment. Continental Bank financed MEMAP’s importation of raw materials through a letter of credit and a trust receipt arrangement. At the time of the transaction, Presidential Decree No. 115, which regulates trust receipt transactions and expressly imposes liability on responsible corporate officers for violations committed by juridical entities, had not yet been promulgated; the prosecution proceeded under Article 315(1)(b) of the Revised Penal Code.

Jose O. Sia was General Manager of Metal Manufacturing Company of the Philippines, Inc. (MEMAP), a corporation engaged in the manufacture of steel office equipment. Sometime prior to 24 May 1963, he served in that capacity. Because MEMAP needed raw materials to be imported from abroad, on 31 May 1963 Sia applied for a letter of credit to import steel sheets from Mitsui Bussan Kaisha, Ltd. of Tokyo, Japan. The application was directed to Continental Bank, the complainant. The application was approved, and the letter of credit was opened on 5 June 1963 in the amount of $18,300.

The goods arrived sometime in July 1963, according to Sia. The parties disputed the circumstances of delivery. According to Continental Bank, delivery of the steel sheets was permitted only upon execution of a trust receipt. According to Sia, the goods were delivered to him sometime before he executed the trust receipt; by the time he signed it, the goods had already been converted into steel office equipment. The trust receipt provided that Sia would hold the goods in trust for the Bank as its property, with liberty to sell them for the Bank’s account but without authority to make any other disposition of the goods or proceeds; in case of sale, the proceeds were to be handed to the Bank to apply against the relative acceptance and other indebtedness.

Before approving the application for the letter of credit, Continental Bank examined the financial capabilities of MEMAP, not Sia, as part of its standard procedure. The Bank knew that the imported goods were to be manufactured into finished products before they could be sold, although this fact was not embodied in the trust agreement.

The bill of exchange issued to collect the unpaid account fell due, but neither Sia nor MEMAP made payment despite demands dated 17 and 27 December 1963. The accounts reached P46,818.68 after deducting the deposit valued at P28,736.47. Upon complaint by Continental Bank, the Fiscal filed an information after preliminary investigation on 22 October 1964. The information charged Sia, in his capacity as president and general manager of MEMAP and on behalf of the company, with obtaining delivery of 150 M/T Cold Rolled Steel Sheets valued at P71,023.60 under a trust receipt agreement under L/C No. 63/109, consigned to Continental Bank, with the obligation to hold the steel sheets in trust, sell them, and turn over the proceeds; it alleged that he failed and refused to return the goods or account for the proceeds despite demands, misappropriated and converted them to his personal use and benefit, to the damage of Continental Bank in the total amount of P146,818.68. The information charged the offense as committed between July 24, 1963 and December 31, 1963.

In reviewing the evidence, the Court of Appeals found certain antecedents undisputed: Sia was General Manager of MEMAP; the company needed imported raw materials; Sia applied for the letter of credit; the letter of credit was opened; and the goods arrived in July 1963. It found no debate that the bill of exchange fell due and that neither Sia nor his company paid despite demands, and that the accounts reached P46,818.68 after deducting the P28,736.47 deposit. The only factual dispute it noted was whether delivery was permitted only upon execution of the trust receipt or whether the goods had already been converted into steel office equipment before Sia signed it. It also noted that the Bank examined MEMAP’s financial capabilities, not Sia’s, and that the goods were to be manufactured into finished products before sale, as the Bank knew.

• Corporate Officer Acting for Corporation: Petitioner argued that he acted only for and in behalf of Metal Manufacturing Company of the Philippines, Inc. as its president in dealing with Continental Bank; the Bank knew he was dealing only as an officer, and the company was the true and actual applicant for the letter of credit and assumed sole obligation under the trust receipt. Thus he could not be liable for the crime charged.
• No Estafa Under Article 315(1)(b): Petitioner disputed that the acts imputed to him constituted estafa and argued that violation of a trust receipt did not constitute estafa under Article 315(1)(b) of the Revised Penal Code.

• Corporate Officer Liability: Respondent, through the Solicitor General, relied on the general principle that when a corporation commits an act constituting a punishable offense, the responsible officers acting for the corporation are the ones punished for the crime.
• Conclusiveness of Court of Appeals Findings: Respondent alleged that the Court of Appeals’ findings of fact should be conclusive upon the Supreme Court.

• Corporate Officer Liability: Whether Jose O. Sia, having acted only for and in behalf of Metal Manufacturing Company of the Philippines, Inc. as its president in dealing with Continental Bank, may be liable for the crime charged.
• Trust Receipt Violation as Estafa: Whether violation of a trust receipt constitutes estafa under Article 315(1)(b) of the Revised Penal Code.

• Corporate Officer Liability: No. Sia, acting for and in behalf of MEMAP, cannot be held criminally liable for estafa absent an express provision of law making corporate officers liable for the corporation’s trust receipt violation; before P.D. 115, the Revised Penal Code contained no such provision.
• Trust Receipt Violation as Estafa: No. Before P.D. 115, violation of a trust receipt did not constitute estafa under Article 315(1)(b) of the Revised Penal Code; the transaction is contractual and susceptible to two reasonable interpretations, and the civil-liability interpretation must be adopted as more favorable to the accused.

• Corporate Officer Liability: The general principle that responsible officers of a corporation may be punished for crimes committed by the corporation was recognized, but the Court distinguished People vs. Tan Boon Kong. There, the corporation was directly required by law to perform an act in a given manner, and the law expressly made the person who failed to perform it criminally liable. Here, the act alleged as a crime was not directly ordained by law to be performed by the corporation; it was imposed by agreement of the parties as a practice in a commercial transaction. The offense, if any, arose from the terms and conditions agreed upon, not from a direct provision of law. The intention of the parties was therefore determinative of whether a crime was committed or only a civil obligation was intended. No express provision of the Revised Penal Code made Sia liable for the criminal offense committed by the corporation. Criminal liability must be clear and certain, and all doubts must be resolved in favor of the accused. Samo vs. People was not applicable because the accused there was not clearly shown to be acting other than in his own behalf, not for a corporation. The civil liability imposed by the trust receipt was exclusively on the Metal Company; Sia was never intended to be equally liable as the corporation. Without personal civil liability, there was no basis for holding him criminally liable. In the absence of positive evidence to the contrary, only the corporation benefited, not Sia personally, yet the information alleged that the misappropriation or conversion was for his personal use and benefit; this created a variance between allegation and evidence. The trust receipt also spoke of authority to sell, but the goods were to be manufactured into finished products first before sale, as the Bank knew; this fact was not embodied in the trust agreement, making it vague and ambiguous and an improper basis for criminal prosecution. P.D. 115 expressly treats “manufacture or process of the goods with the purpose of ultimate sale” as a distinct condition from “to sell the goods or procure their sale,” while the receipt here mentioned only sale. The requirement of strict harmony between allegation and evidence was not satisfied.
• Trust Receipt Violation as Estafa: The Court considered two views of a trust receipt: one, that it is merely security for a loan, with the trust element inherent in the security arrangement and not intended in the criminal sense; the other, that the bank as owner and entrustor delivers goods to the entrustee with authority to sell but with the obligation to give the proceeds or return the goods, creating a trust in the full sense under Article 315(1)(b). The Court considered the first view more feasible before P.D. 115. The transaction being contractual, the intent of the parties should govern. The trust receipt is executed upon the arrival of the imported goods and acquires legal standing only upon acceptance by the entrustee; the antecedent acts—application for the L/C, approval, marginal deposit, and importation through the importer’s efforts—negate any intent to subject the importer to criminal prosecution for non-payment of a debt. Unlike a person who receives jewelry from the owner for sale on commission and misappropriates it, the bank is not in the same concept as the jewelry owner with full power of disposition. The bank had previously extended a loan represented by the L/C, and by that loan the importer should be the real owner of the goods. The bank’s appearance as owner under the trust receipt was an artificial expedient or legal fiction to give stronger security for the loan. To consider the bank as true owner from inception would disregard the loan feature. Since the trust receipt transaction was susceptible to two reasonable interpretations—one giving rise only to civil liability and the other also to criminal liability—the former should be adopted as more favorable to the supposed offender. The fact that the Bank examined MEMAP’s financial capabilities, not Sia’s, before approving the L/C showed that the intention was merely to afford stronger security for the loan. P.D. 115, a comprehensive legislation regulating trust receipts, expressly punishes violations and makes corporate officers liable, suggesting that Article 315(1)(b) of the Revised Penal Code was inadequate to justify punishment of the act. Thus, the violation did not constitute estafa under Article 315(1)(b).

• Trust Receipt Violation Before P.D. 115 Gives Rise Only to Civil Liability — A trust receipt transaction is essentially a security arrangement for a loan; before the promulgation of P.D. 115, violation of its terms by an entrustee gives rise only to civil liability, not criminal liability for estafa under Article 315(1)(b) of the Revised Penal Code. Where the transaction is susceptible to two reasonable interpretations—one civil and one criminal—the civil-liability interpretation must be adopted as more favorable to the accused. The Court applied this to Sia’s failure to pay the balance under the trust receipt, holding that it did not constitute estafa.
• Corporate Officer Criminal Liability Requires Express Provision — A corporate officer acting for and in behalf of a corporation cannot be held criminally liable for an offense committed by the corporation absent an express provision of law imposing such liability on the officer. The general principle that responsible officers may be punished applies where the law directly imposes a duty on the corporation and expressly makes the officer criminally liable; it does not apply to obligations arising merely from contract. The Court applied this because no provision of the Revised Penal Code made Sia liable for MEMAP’s trust receipt violation; P.D. 115 later supplied such express liability.
• Strict Harmony Between Allegation and Evidence — In criminal prosecutions, there must be strict harmony, not variance, between the allegation in the information and the evidence presented. A conviction cannot stand where the information alleges personal misappropriation or conversion but the evidence shows that only the corporation benefited. The Court applied this because the information alleged Sia misappropriated the goods for his personal use and benefit, while the evidence showed only the corporation benefited, and because the trust receipt mentioned sale but not manufacture although the parties knew the goods would be manufactured.
• All Doubts Resolved in Favor of the Accused — The existence of criminal liability must be clear and certain, and all doubts must be resolved in favor of the accused. The Court applied this in light of the absence of an express provision making Sia criminally liable and the ambiguity of the trust receipt.

• "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." — This states the core holding that, before P.D. 115, a trust receipt violation was civil in character and not a criminal offense under the Revised Penal Code.
• "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." — This articulates the rule that corporate officer criminal liability must rest on an express statutory provision.
• "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." — This is the Court’s application of the rule that ambiguity in a criminal statute or transaction must be resolved in favor of the accused.
• "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." — This supports the acquittal on the additional ground that the information alleged personal misappropriation while the evidence showed only corporate benefit.

• People vs. Tan Boon Kong, 54 Phil. 607 — Cited for the general principle that responsible officers of a corporation may be criminally liable for offenses committed by the corporation; distinguished because there the corporation was directly required by law to act in a given manner and the law expressly made the person failing to perform it criminally liable, unlike the contract-based trust receipt here.
• Samo vs. People, L-17603-04, May 31, 1962 — Cited to note that the accused there was not clearly shown to be acting other than in his own behalf, not in behalf of a corporation; distinguished from Sia, who acted for and in behalf of MEMAP.
• 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 — Cited collectively for the rule that where a trust receipt transaction is susceptible to two reasonable interpretations, the interpretation giving rise only to civil liability should be adopted as more favorable to the supposed offender.
• P.N.B. vs. Viuda e Hijos de Angel Jose, et al., 63 Phil. 814 — Cited in the discussion that the trust receipt is not an ordinary pledge, but neither is it a transaction falling under Article 315(1)(b) of the Revised Penal Code giving rise to criminal liability.

• Article 315, paragraph 1(b), Revised Penal Code — Defines estafa by misappropriation or conversion of goods received in trust. The provision was held not to cover the trust receipt violation before P.D. 115 and could not support Sia’s conviction.
• Presidential Decree No. 115 — Regulates trust receipt transactions and expressly provides that if the violation or offense is committed by a corporation, partnership, association, or other juridical entity, the penalty shall be imposed upon the directors, officers, employees, or other officials responsible, without prejudice to civil liability. The Court noted its promulgation and express corporate-officer liability provision in holding that no such liability existed under the Revised Penal Code before P.D. 115.
• Section 4(1), Presidential Decree No. 115 — Includes “manufacture or process of the goods with the purpose of ultimate sale” as a distinct condition from “to sell the goods or procure their sale.” The Court noted that the trust receipt here mentioned only sale, not manufacture, creating vagueness and ambiguity and a variance between allegation and evidence.

Concepcion, Jr., Guerrero, Vasquez, Relova, and Gutierrez, JJ., concurred. Fernando, C.J., Escolin, Plana, and Abad Santos, JJ., concurred in the result. Teehankee, J., filed a separate concurring opinion, reasoning that petitioner personally cannot be charged and convicted because all the acts were corporate acts and there was no evidence that he personally committed fraud or deceit or benefited; he reiterated his separate opinion in People vs. Cuevo, G.R. No. L-27607, May 7, 1981, that a trust receipt transaction gives rise only to civil liability. Melencio-Herrera, J., concurred and dissented, as summarized below.

• Justice Makasiar — Dissented; the Court of Appeals decision should be affirmed.
• Justice Aquino — Dissented; voted for the affirmance of the judgment of the Court of Appeals.
• Justice Melencio-Herrera — Concurring and dissenting. She dissented from the majority’s holding that violation of a trust receipt does not constitute estafa under Article 315(1)(b) of the Revised Penal Code, citing People vs. Yu Chai Ho, 53 Phil. 874 (1928); PNB vs. Arrozal, 103 Phil. 213 (1958); and Samo vs. People, 5 SCRA 355 (1962). She concurred that petitioner should not be liable because he acted for and on behalf of MEMAP as General Manager, unlike the persons in those cases who acted in their individual capacities; the Court had not yet ruled on the criminal liability of a corporate officer signing a trust receipt until P.D. 115 was promulgated on January 29, 1973.