Tupaz vs. Court of Appeals

A corporate officer who signs a trust receipt in a personal capacity, without indicating his corporate capacity, binds himself personally liable for the corporation's debt, but such liability is that of a guarantor—not a surety—where the stipulation uses the words "jointly and severally" together with "guarantee" and contains a waiver of exhaustion. The solidary liability under such a clause exists only between multiple guarantors, not between the guarantor and the principal debtor. Furthermore, acquittal of estafa under Section 13 of Presidential Decree No. 115 does not extinguish civil liability where such liability arises from the trust receipt contract (ex contractu) rather than from the criminal act (ex delicto) .

Petitioners Jose C. Tupaz IV and Petronila C. Tupaz were Vice-President for Operations and Vice-President/Treasurer, respectively, of El Oro Engraver Corporation, which had a contract with the Philippine Army to supply "survival bolos." To finance the purchase of raw materials, petitioners applied with respondent Bank of the Philippine Islands for two commercial letters of credit in favor of El Oro Corporation's suppliers. The Trust Receipts Law, Presidential Decree No. 115, governs the obligations of entrustees who receive goods under trust receipts and penalizes the failure to turn over proceeds or return unsold goods as estafa. The civil liability arising from trust receipt violations is distinct from the criminal liability imposed therein.

Petitioners Jose C. Tupaz IV and Petronila C. Tupaz were Vice-President for Operations and Vice-President/Treasurer, respectively, of El Oro Engraver Corporation, which had a contract with the Philippine Army to supply "survival bolos." To finance the purchase of raw materials, petitioners, on behalf of El Oro Corporation, applied with respondent Bank of the Philippine Islands for two commercial letters of credit in favor of the corporation's suppliers, Tanchaoco Manufacturing Incorporated and Maresco Rubber and Retreading Corporation. Respondent bank granted the application and issued Letter of Credit No. 2-00896-3 for ₱564,871.05 to Tanchaoco Incorporated and Letter of Credit No. 2-00914-5 for ₱294,000 to Maresco Corporation.

Simultaneous with the issuance of the letters of credit, petitioners signed trust receipts in favor of respondent bank. On 30 September 1981, petitioner Jose C. Tupaz IV signed, in his personal capacity, a trust receipt corresponding to Letter of Credit No. 2-00896-3, binding himself to sell the goods covered by the letter of credit and to remit the proceeds to respondent bank, if sold, or to return the goods, if not sold, on or before 29 December 1981. On 9 October 1981, petitioners signed, in their capacities as officers of El Oro Corporation, a trust receipt corresponding to Letter of Credit No. 2-00914-5, binding themselves to sell the goods and to remit the proceeds or return the goods on or before 8 December 1981. After the suppliers delivered the raw materials, respondent bank paid them the amounts covered by the letters of credit.

Petitioners did not comply with their undertaking under the trust receipts. Respondent bank made several demands for payment, but El Oro Corporation made partial payments only. On 27 June 1983 and 28 June 1983, respondent bank's counsel and representative respectively sent final demand letters to El Oro Corporation, which replied that it could not fully pay its debt because the Armed Forces of the Philippines had delayed paying for the survival bolos. Respondent bank charged petitioners with estafa under Section 13, Presidential Decree No. 115. After preliminary investigation, the Makati Fiscal's Office found probable cause and filed the corresponding Informations with the Regional Trial Court, Makati, on 17 January 1984.

During the trial, respondent bank presented evidence on the civil aspect of the cases. The trial court acquitted petitioners of estafa on reasonable doubt but found them solidarily liable with El Oro Corporation for the balance of the principal debt under the trust receipts. The dorsal side of the trust receipts contained a stipulation providing that the signatories "jointly and severally" agree to pay the bank on demand any sums arising from the trust receipt in the event of default, with liability described as a "guarantee" that is "DIRECT AND IMMEDIATE, without any need whatsoever" for the bank to take steps or exhaust legal remedies against the principal debtor before making demand. In the trust receipt dated 9 October 1981, petitioners signed below this clause as officers of El Oro Corporation, with the words "Vice-Pres–Treasurer" and "Vice-Pres–Operations" under their respective signatures. In the trust receipt dated 30 September 1981, petitioner Jose Tupaz signed alone without indicating his corporate capacity.

• Acquittal Extinguishes Civil Liability: Petitioners contended that their acquittal of estafa operates to extinguish their civil liability.
• Obligation Not Yet Due: Petitioners argued that, granting without admitting that the obligation was incurred by the corporation, the same is not yet due and payable.
• No Personal Liability: Petitioners maintained that they are not personally liable to respondent bank because they signed the letters of credit as "surety" as officers of El Oro Corporation, making the obligation an exclusive liability of the corporation.
• Simulation of Transactions: In the alternative, petitioners argued that the questioned transactions are simulated and void.

• Civil Liability Distinct from Criminal: Respondent bank argued that civil liability arising from the violation of the trust receipt agreement is distinct from the criminal liability imposed under Section 13, PD 115, citing Vintola vs. Insular Bank of Asia and America for the proposition that acquittal in an estafa case under PD 115 is no bar to a civil action for collection.
• Solidary Liability as Surety: Respondent bank maintained that the trust receipt agreement indicated in clear and unmistakable terms that petitioners signed as sureties for the corporation, binding themselves directly and immediately liable in the event of default, and that the application for the letter of credit likewise showed their undertaking as surety, with the words "the undersigned Applicant and Surety hereby agree, jointly and severally."

• Personal Liability Under Trust Receipts: Whether petitioners bound themselves personally liable for El Oro Corporation's debts under the trust receipts.
• Nature of Liability (Solidary vs. Guaranty): If so, whether petitioners' liability is solidary with El Oro Corporation.
• Effect of Acquittal on Civil Liability: Whether petitioners' acquittal of estafa under Section 13, PD 115 extinguished their civil liability.

• Personal Liability Under Trust Receipts: Partly. Petitioner Jose Tupaz bound himself personally liable for El Oro Corporation's debt under the trust receipt dated 30 September 1981, having signed it in his personal capacity without indicating his corporate office. Neither petitioner bound themselves personally liable under the trust receipt dated 9 October 1981, having signed it in their capacities as corporate officers.
• Nature of Liability (Solidary vs. Guaranty): No. Petitioner Jose Tupaz's liability under the trust receipt dated 30 September 1981 is that of a guarantor, not a surety. The clause "jointly and severally agree and promise to pay" refers to the undertaking between multiple signatories as guarantors, not between the guarantor and the principal debtor. The solidary liability would exist only between guarantors had more than one signed.
• Effect of Acquittal on Civil Liability: No. The acquittal did not extinguish petitioner Jose Tupaz's civil liability because his liability arose not from the criminal act of which he was acquitted (ex delicto) but from the trust receipt contract (ex contractu) of 30 September 1981.

• Personal Liability Under Trust Receipts: A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they represent. As an exception, directors or officers are personally liable for the corporation's debts only if they so contractually agree or stipulate. In the trust receipt dated 9 October 1981, petitioners signed below the guarantee clause as officers of El Oro Corporation, with the words "Vice-Pres–Treasurer" and "Vice-Pres–Operations" under their signatures. Citing Ong vs. Court of Appeals, the Court held that by so signing, petitioners did not bind themselves personally liable for El Oro Corporation's obligation. For the trust receipt dated 30 September 1981, petitioner Jose Tupaz signed alone without indicating that he was signing as El Oro Corporation's Vice-President for Operations; hence, he bound himself personally liable. Not being a party to that trust receipt, petitioner Petronila Tupaz is not liable under it.

• Nature of Liability (Solidary vs. Guaranty): The dorsal side of the trust receipt dated 30 September 1981 provides that the signatory "jointly and severally" agrees to pay the bank on demand, describing the liability as a "guarantee" that is "DIRECT AND IMMEDIATE, without any need whatsoever" for the bank to take steps or exhaust legal remedies. The lower courts interpreted this as creating solidary liability with El Oro Corporation, which the Court held to be error. Citing Prudential Bank vs. Intermediate Appellate Court, which interpreted a substantially identical clause, the Court held that the obligation of the signatory is only that of a guarantor. The clause "we jointly and severally agree and undertake" refers to the undertaking of the parties who are to sign it or to the liability existing between themselves; it does not refer to the undertaking between either one or both of them on the one hand and the bank on the other. The last sentence speaking of waiver of exhaustion further bolsters the conclusion that the liability is that of a guarantor. Any doubt as to the import of the solidary guaranty clause should be resolved against the bank, as the trust receipt is a contract of adhesion drafted and prepared solely by the bank and must be strictly construed against the party responsible for its preparation. However, the bank's suit against petitioner Jose Tupaz stands despite his being a guarantor only, because excussion is not a pre-requisite to secure judgment against a guarantor—the guarantor can demand deferment of execution until after the principal debtor's assets are exhausted—and the benefit of excussion may be waived. Petitioner Jose Tupaz waived excussion when he agreed that his liability "shall be DIRECT AND IMMEDIATE, without any need whatsoever" for the bank to take steps or exhaust legal remedies.

• Effect of Acquittal on Civil Liability: The rule is that where the civil action is impliedly instituted with the criminal action, the civil liability is not extinguished by acquittal in three instances: (1) where the acquittal is based on reasonable doubt, as only preponderance of evidence is required in civil cases; (2) where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and (3) where the civil liability does not arise from or is not based upon the criminal act of which the accused was acquitted. Here, respondent bank chose not to file a separate civil action but instead sought to recover payment in the criminal cases. Although the trial court acquitted petitioner Jose Tupaz, his acquittal did not extinguish his civil liability because his liability arose not from the criminal act of which he was acquitted (ex delicto) but from the trust receipt contract (ex contractu) of 30 September 1981, which he signed in his personal capacity.

• Other Matters: Petitioners raised for the first time on appeal the contention that El Oro Corporation's debts under the trust receipts were not yet due and demandable, and alternatively assailed the trust receipts as simulated. These assertions had no merit. Under the terms of the trust receipts, El Oro Corporation's debts fell due on 29 December 1981 and 8 December 1981, respectively. Neither was there merit to the claim of simulation, as petitioners did not deny during trial applying for the letters of credit and executing the trust receipts to secure payment of the drafts drawn under them.

• Corporate Officer Personal Liability — A corporation may act only through its directors, officers, and employees; debts incurred by these individuals acting as corporate agents are not theirs but the direct liability of the corporation. As an exception, directors or officers are personally liable for the corporation's debts only if they so contractually agree or stipulate. The Court applied this doctrine by examining the signatures on the trust receipts: where the officer signed in a corporate capacity (indicated by the words "Vice-Pres–Treasurer" or "Vice-Pres–Operations"), no personal liability attached; where the officer signed alone without indicating corporate capacity, personal liability attached.

• Guaranty vs. Suretyship — A stipulation using the words "jointly and severally agree and promise to pay" together with the word "guarantee" and a waiver of exhaustion creates the liability of a guarantor, not a surety. The solidary liability under such a clause refers to the undertaking between multiple guarantors who sign the instrument, not between the guarantor and the principal debtor. The Court applied this doctrine in interpreting the dorsal clause of the trust receipt dated 30 September 1981, following Prudential Bank vs. Intermediate Appellate Court.

• Excussion (Benefit of Exhaustion) — Under Article 2058 of the Civil Code, a guarantor may raise the defense of exhaustion (excussion) before being held liable for the obligation. However, excussion is not a pre-requisite to secure judgment against a guarantor; the guarantor can demand deferment of execution until after the principal debtor's assets are exhausted. The benefit of excussion may be waived under Article 2059(1) of the Civil Code. The Court applied this doctrine by holding that petitioner Jose Tupaz waived excussion when he agreed that his liability "shall be DIRECT AND IMMEDIATE, without any need whatsoever" for the bank to exhaust legal remedies against the principal debtor.

• Acquittal and Civil Liability — Where the civil action is impliedly instituted with the criminal action, the civil liability is not extinguished by acquittal in three instances: (1) where the acquittal is based on reasonable doubt, as only preponderance of evidence is required in civil cases; (2) where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and (3) where the civil liability does not arise from or is not based upon the criminal act of which the accused was acquitted. The Court applied the third instance, holding that petitioner Jose Tupaz's liability arose ex contractu from the trust receipt, not ex delicto from the criminal offense.

• Contract of Adhesion — A trust receipt with a solidary guaranty clause on a form drafted and prepared solely by the bank is a contract of adhesion and must be strictly construed against the party responsible for its preparation. The Court applied this doctrine in resolving any doubt as to the import of the solidary guaranty clause against the bank.

• "In consideration of your releasing to ………………………………… under the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree and promise to pay to you, on demand, whatever sum or sums of money which you may call upon me/us to pay to you, arising out of, pertaining to, and/or in any way connected with, this Trust Receipt, in the event of default and/or non-fulfillment in any respect of this undertaking on the part of the said ……………………………………. I/we further agree that my/our liability in this guarantee shall be DIRECT AND IMMEDIATE, without any need whatsoever on your part to take any steps or exhaust any legal remedies that you may have against the said …………………………………. before making demand upon me/us." — This is the dorsal clause of the trust receipts that the Court interpreted to determine the nature of petitioner Jose Tupaz's liability; the Court held that the use of "guarantee" together with the waiver of exhaustion indicates guarantor, not surety, liability.

• "The clause 'we jointly and severally agree and undertake' refers to the undertaking of the two (2) parties who are to sign it or to the liability existing between themselves. It does not refer to the undertaking between either one or both of them on the one hand and the petitioner on the other with respect to the liability described under the trust receipt." — This quotation from Prudential Bank v. Intermediate Appellate Court, adopted by the Court, defines the scope of the solidary liability clause: it creates solidary liability between multiple guarantors, not between the guarantor and the principal debtor.

• "Furthermore, any doubt as to the import or true intent of the solidary guaranty clause should be resolved against the petitioner. The trust receipt, together with the questioned solidary guaranty clause, is on a form drafted and prepared solely by the petitioner; Chi's participation therein is limited to the affixing of his signature thereon. It is, therefore, a contract of adhesion; as such, it must be strictly construed against the party responsible for its preparation." — This quotation from Prudential Bank v. Intermediate Appellate Court, adopted by the Court, applies the contract of adhesion doctrine to resolve ambiguity in the trust receipt against the bank that drafted it.

• "The rule is that where the civil action is impliedly instituted with the criminal action, the civil liability is not extinguished by acquittal — [w]here the acquittal is based on reasonable doubt xxx as only preponderance of evidence is required in civil cases; where the court expressly declares that the liability of the accused is not criminal but only civil in nature xxx as, for instance, in the felonies of estafa, theft, and malicious mischief committed by certain relatives who thereby incur only civil liability (See Art. 332, Revised Penal Code); and, where the civil liability does not arise from or is not based upon the criminal act of which the accused was acquitted xxx." — This passage states the rule on when acquittal does not extinguish civil liability; the Court applied the third instance to hold that petitioner Jose Tupaz's liability arose ex contractu from the trust receipt, not ex delicto from the criminal offense.

• Ong vs. Court of Appeals, 449 Phil. 691 (2003) — Controlling precedent on corporate officer liability under trust receipts. The Court followed this case in holding that a corporate representative who signs a solidary guarantee clause in a trust receipt in his corporate capacity does not undertake to guarantee personally the payment of the corporation's debts.

• Prudential Bank vs. Intermediate Appellate Court, G.R. No. 74886, 8 December 1992, 216 SCRA 257 — Controlling precedent on the interpretation of a substantially identical solidary guaranty clause in a trust receipt. The Court followed this case in holding that the signatory's obligation is that of a guarantor, not a surety, and that the solidary liability exists only between multiple guarantors.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78 — Followed for the guidelines on interest computation: when the obligation is breached and consists in the payment of a sum of money, the interest due should be that stipulated in writing, and the interest due shall itself earn legal interest from the time it is judicially demanded.

• Rizal Commercial Banking Corporation vs. Alfa RTW Manufacturing Corporation, 420 Phil. 702 (2001) — Followed for the formula used to compute the amount of obligation due, where the Court ordered the trial court to compute the amount based on a specified formula, noting that "mathematics is an exact science, the application of which needs no further proof from the parties."

• Padilla, et al. vs. CA, 214 Phil. 492 (1984) — Followed for the rule on when acquittal does not extinguish civil liability where the civil action is impliedly instituted with the criminal action.

• Vintola vs. Insular Bank of Asia and America, No. L-78671, 25 March 1988, 159 SCRA 140 — Cited for the proposition that the action to recover payment under a trust receipt may be instituted separately under Article 31 of the Civil Code based on the trust receipt contract, and that acquittal in an estafa case under PD 115 is no bar to a civil action for collection.

• Southern Motors, Inc. vs. Barbosa, 99 Phil. 263 (1956) — Cited for the proposition that excussion is not a pre-requisite to secure judgment against a guarantor; the guarantor can demand deferment of execution until after the principal debtor's assets are exhausted.

• MAM Realty Devt. Corp. vs. NLRC, 314 Phil. 838 (1995) — Cited for the doctrine that a corporation may act only through its directors, officers, and employees, and that debts incurred by these individuals acting as corporate agents are not theirs but the direct liability of the corporation.

• Section 13, Presidential Decree No. 115 (Trust Receipts Law) — The penalty clause providing that the failure of an entrustee to turn over the proceeds of the sale of goods covered by a trust receipt or to return the goods if not sold constitutes the crime of estafa, punishable under Article 315, Paragraph 1(b) of the Revised Penal Code. If the violation is committed by a corporation, the penalty is imposed upon the directors, officers, employees, or other persons responsible, "without prejudice to the civil liabilities arising from the criminal offense." The Court applied this provision in determining that the civil liability arising from the violation of the trust receipt agreement is distinct from the criminal liability imposed therein.

• Article 2058, Civil Code — Provides that the defense of exhaustion (excussion) may be raised by a guarantor before he may be held liable for the obligation. The Court cited this provision in Prudential Bank vs. Intermediate Appellate Court to support the conclusion that the signatory's liability is that of a guarantor.

• Article 2059(1), Civil Code — Provides that excussion shall not take place if the guarantor has expressly renounced it. The Court applied this provision in holding that petitioner Jose Tupaz waived excussion when he agreed that his liability "shall be DIRECT AND IMMEDIATE, without any need whatsoever" for the bank to exhaust legal remedies.

• Article 31, Civil Code — Cited for the proposition that the action to recover payment under a trust receipt may be instituted separately based on the trust receipt contract, proceeding independently of the criminal action.

• Article 33, Civil Code — Cited for the proposition that a civil action based on fraud may proceed independently of the criminal action.

• Article 1169, Civil Code — Cited in Eastern Shipping Lines, Inc. vs. Court of Appeals for the rule that in the absence of stipulation, the rate of interest shall be 12% per annum computed from default, i.e., from judicial or extrajudicial demand.

• Articles 1252-1254, Civil Code — Cited in the formula for computing El Oro Corporation's total liability, which takes into account the application of partial payments.

Chief Justice Hilario G. Davide, Jr. (Chairman), Associate Justice Leonardo A. Quisumbing, Associate Justice Consuelo Ynares-Santiago, and Associate Justice Adolfo S. Azcuna concurred in the decision.