Title
Ching vs. Secretary of Justice
Case
G.R. No. 164317
Decision Date
Feb 6, 2006
A corporate officer was held criminally liable for failing to return goods or their value under trust receipts, violating P.D. No. 115, despite procedural dismissal.
trust receipt
violation
goods
A

Case Summary (G.R. No. 164317)

Factual Background

Between September and October 1980, Rizal Commercial Banking Corporation imported assorted goods under irrevocable letters of credit for Philippine Blooming Mills, Inc. and released the goods to the company under trust receipts. Alfredo Ching, Senior Vice-President of PBMI, signed thirteen trust receipts as surety and acknowledged delivery of goods totaling P6,940,280.66. The trust receipts bound the entrustee to hold the goods in trust for the bank, to insure them, to sell them only for the bank’s account and to turn over proceeds or return unsold goods within specified periods.

Initial Criminal Proceedings and Ministerial Action

When the trust receipts matured and the goods were neither returned nor the proceeds remitted, the bank demanded payment and subsequently filed criminal complaints for estafa against Ching with the Manila City Prosecutor. The Prosecutor initially found probable cause under Article 315, paragraph 1(b) in relation to P.D. No. 115 and filed Informations before the Regional Trial Court, Manila, Branch 31. Ching appealed the preliminary-investigation resolution to the Minister of Justice, who first dismissed the appeal on March 17, 1987, but later granted reconsideration and, on December 23, 1987, reversed the finding of probable cause and ordered withdrawal of the Informations.

Subsequent Civil and Criminal Proceedings

The bank’s motion for reconsideration of the Minister’s reversal was denied on February 24, 1988, and the RTC granted Ching’s Motion to Quash the Informations on the ground that the allegations did not constitute estafa. Thereafter, the Supreme Court decided Allied Banking Corporation v. Ordonez, holding that P.D. No. 115 covered failures to turn over proceeds or return goods even when the goods were used in manufacture and not solely those intended for resale. Following that jurisprudential development, the bank re-filed criminal complaints on February 27, 1995.

Department of Justice Proceedings

After preliminary investigation of the re-filed complaints, the Manila City Prosecutor again found no probable cause on December 8, 1995, concluding that Ching’s liability was civil only because he had signed as surety. The bank sought review with the Department of Justice. On July 13, 1999, the Secretary of Justice issued Resolution No. 250 granting the bank’s petition, reversing the Prosecutor’s no-probable-cause finding, and holding that Ching, as signatory and Senior Vice-President, was the corporate officer responsible under Section 13 of P.D. No. 115 and thus subject to criminal prosecution. The Secretary further reasoned that civil liability as surety did not bar criminal liability as an officer responsible for the offense. The Secretary denied Ching’s motion for reconsideration on January 17, 2000.

Petition for Certiorari to the Court of Appeals

Ching filed a petition for certiorari, prohibition and mandamus with the Court of Appeals assailing the Secretary’s resolutions on grounds of oppressive and arbitrary prosecution, failure to present evidence of his participation, excessive delay in the preliminary investigation, and absence of sufficient basis for criminal proceedings. The petition included a certification against forum shopping which the appellate court found defective for failing to comply with the undertakings required by Rule 46, Section 3 of the Revised Rules of Court.

Court of Appeals Ruling

The Court of Appeals dismissed Ching’s petition on procedural and substantive grounds. Procedurally, it held the certification of non-forum shopping defective and the special civil action improper under the circumstances. On the merits, the appellate court upheld the Secretary of Justice’s resolutions and reasoned that Ching, as Senior Vice-President and signatory to the trust receipts, was an officer responsible for the offense under Section 13 of P.D. No. 115, and therefore probable cause existed to charge him with estafa as defined in Article 315, paragraph 1(b). The court relied on Allied Banking Corporation v. Ordonez and on prior rulings recognizing both civil and criminal accountability of corporate officers in trust-receipt violations.

Issues Presented to the Supreme Court

The petition for review raised two principal issues: whether the Court of Appeals erred in dismissing the petition for a defective certification of non-forum shopping, and whether the Court of Appeals erred in ruling that the Secretary of Justice did not commit grave abuse of discretion in directing the filing of Informations against Ching under P.D. No. 115.

Parties’ Contentions before the Supreme Court

Ching argued that the defective certification was merely technical and that the Rules should be liberally construed to avoid thwarting substantial justice; he also contended that he had no personal participation in misappropriation and that his liability, if any, was purely civil because he signed as surety and did not take possession of the goods. The Office of the Solicitor General maintained that the certification was fatally defective, that the special civil action was the wrong remedy, and that the Secretary of Justice correctly found probable cause under P.D. No. 115 and Article 315.

Supreme Court’s Ruling on Procedural Issue

The Supreme Court affirmed the Court of Appeals’ finding that the certification against forum shopping was defective. The Court explained that the requirement is mandatory under Rule 46, Section 3 and Rule 65, and that the text of Ching’s certification failed to state that he had not previously commenced any other action involving the same issues. The Court acknowledged the doctrine of substantial compliance but found no special circumstance to justify relaxation of the rule and held that the defect prevented the appellate court from being informed whether parallel proceedings existed.

Supreme Court’s Ruling on Merits

On the merits, the Supreme Court affirmed the Court of Appeals and the Secretary of Justice. The Court held that the transactions constituted trust receipt arrangements as defined in Section 4 of P.D. No. 115, that the entrusted goods and their proceeds remained the entruster’s property, and that the entrustee had statutory obligations to hold, insure, keep separate and either sell and remit proceeds or return unsold goods. The Court concluded that failure to comply with these obligations constituted estafa under Article 315, paragraph 1(b) as penalized by Section 13 of P.D. No. 115, and that such failure need not be accompanied by proof of intent to defraud.

Legal Basis and Reasoning

The Court relied on the statutory text of P.D. No. 115—notably Sections 3(b), 4, 7, 9 and 13—and on controlling precedents such as Allied Banking Corporation v. Ordonez and Colinares v. Court of Appeals to hold that trust receipts cover goods used in manufacturing and that nonpayment or nonreturn violates the entrustee’s obligation. The Court explained that the penalty clause expressly imposed criminal liability upon the corporate directors, officers, employees or other persons responsible f

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