Facts:

The case involves Bank of Commerce (hereinafter referred to as "petitioner") and Teresita S. Serrano (referred to as "respondent"), with a decision rendered on February 16, 2005, by the First Division of the Supreme Court of the Philippines in G.R. No. 151895. The facts of the case unfold from a series of financial transactions between the petitioner, a private domestic banking institution, and the respondent, who serves as the General Manager and Treasurer of Via Moda International, Inc., a business entity focusing on textile import and export.

In May 1994, Via Moda secured an export packing loan from the petitioner amounting to US$50,000, which was secured by a Deed of Assignment over Irrevocable Transferable Letter of Credit No. 100072119. On the same date, Serrano executed Promissory Note No. 94/086 with a maturity date set for July 14, 1994. Subsequently, Via Moda also opened a deposit account to manage the loan's proceeds.

On March 15, 1994, the pe

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Facts:

Parties and Transaction Background

• Petitioner: Bank of Commerce (formerly Boston Bank of the Philippines), a private domestic banking institution.
• Respondent: Teresita S. Serrano, General Manager and Treasurer of Via Moda International, Inc., a domestic business entity engaged primarily in the import and export of textile materials and fabrics.

Loan and Security Arrangements

• Via Moda International obtained an export packing loan amounting to US$50,000 (approximately P1,382,250) from Bank of Commerce’s Diliman, Quezon City Branch.
• The transaction was secured by a Deed of Assignment over an Irrevocable Transferable Letter of Credit.
• Subsequently, respondent Serrano executed Promissory Note No. 94/086 dated May 6, 1994, with a maturity date of July 14, 1994.

Trust Receipt and Letter of Credit Transactions

• On March 15, 1994, Bank of Commerce issued Irrevocable Letter of Credit No. BCZ-940051 in the amount of US$56,735 to facilitate the importation of fabric and textile products from Tiger Ear Fabric Co. Ltd. of Taiwan.
• In connection with the letter of credit, respondent, on behalf of Via Moda, executed Trust Receipt No. 94-22221 dated April 21, 1994.
• The trust receipt was valued at US$55,944.73 (approximately P1,554,424.32).
• Its terms required Via Moda to hold the goods in trust for Bank of Commerce, sell them, and remit the sales proceeds to the bank no later than the maturity date.
• Provisions stipulated the application of proceeds to cover the relative acceptances with interest at 26% per annum, and a penalty of 36% per annum on the total amount due in the event of non-payment, or failing which, the goods were to be returned.

Shipment of Goods and Application of Proceeds

• The goods covered by the trust receipt were shipped to a consignee in New Jersey, USA, following an Export Letter of Credit issued by the Bank of New York.
• The Regional Operations Officer of Bank of Commerce signed the export declarations indicating consent to the shipment.
• The total value of the goods, as per the export declaration, was US$81,987 (approximately P2,246,443.80).
• Proceeds from the sale of the goods were not credited directly to the trust receipt but were applied by the bank to the principal, penalties, and interest of the export packing loan.
• The excess amount of P472,114.85 was subsequently applied to reduce the trust receipt balance, leaving a remaining balance of P1,444,802.28 as of November 15, 1994.

Demand for Payment and Subsequent Judicial Proceedings

• On November 16, 1994, Bank of Commerce sent a demand letter to Via Moda for the payment of the balance, including interest and penalty charges, or alternatively, to return the goods covered by the trust receipt within 5 days from receipt.
• The demand was not met, and the outstanding balance as of December 15, 1998, totaled P4,783,487.15.
• On March 8, 1998, respondent Serrano was charged with the crime of estafa under Article 315(b) of the Revised Penal Code, in connection with Presidential Decree No. 115.

Trial Court Ruling

• On May 31, 2000, the Regional Trial Court (RTC) Branch 105 of Quezon City rendered a judgment finding respondent Serrano guilty beyond reasonable doubt of estafa.
• The sentence imposed ranged from a minimum of eight years and one day of prision mayor to a maximum of twenty years of reclusion temporal, along with accessory penalties.
• Serrano was also ordered to pay her civil liability amounting to P4,783,487.15 with accruing interest, plus the costs of the suit.

Court of Appeals Decision

• The Court of Appeals reversed the trial court's decision in its ruling dated September 28, 2001.
• It held that the element of misappropriation or conversion under PD No. 115, pertinent to the crime of estafa, was absent in the case.
• Consequently, respondent Serrano was acquitted, and her civil liability as adjudged by the RTC was deleted.
• The CA emphasized that Serrano executed the trust receipt merely in representation of Via Moda International, a separate legal entity, and that no evidence justified piercing the corporate veil.

Issues Raised on Appeal

• Petitioner Bank of Commerce contended that the Guarantee Clause in the Letter of Credit (secured by the Trust Receipt) imposed joint and several liability on respondent Serrano with Via Moda.
• It further argued that the Court of Appeals committed reversible error by deleting Serrano’s civil liability related to the loan obligation.

Evidentiary and Legal Arguments

• The petitioner asserted that the Guarantee Clause unequivocally binds respondent Serrano personally, thereby making her liable on a joint and solidary basis.
• The Court clarified that a letter of credit and a trust receipt are separate financial instruments involving distinct obligations.
• The issue of respondent’s personal guarantee under the LC was not raised in the lower courts, and therefore, could not be introduced at the appellate level in violation of principles of fair procedure and due process.

Final Outcome

• The Supreme Court, reviewing the civil aspect of the case on certiorari, ultimately denied the petition for lack of merit.
• The appellate court’s decision, with its factual findings and legal conclusions, was affirmed.
• The court reiterated that any further resolution on these issues must be sought through a separate civil action, as the matter involved factual determinations that could not be re-examined on certiorari.

Issue:

Whether respondent Serrano is jointly and severally liable with Via Moda International under the Guarantee Clause of the Irrevocable Letter of Credit secured by Trust Receipt No. 94-22221.

• This centers on whether the Guarantee Clause creates a personal obligation on the part of Serrano independent of her representation of Via Moda.

Whether the Court of Appeals committed a reversible error in deleting the civil liability of respondent Serrano in its decision dated September 28, 2001.

• This involves examining if the appellate court’s decision properly considered the implications of the Guarantee Clause and the separate nature of the financial instruments discussed.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)