Title
Ng vs. People
Case
G.R. No. 173905
Decision Date
Apr 23, 2010
Petitioner acquitted of Estafa; transaction deemed a simple loan, not a trust receipt, as goods were used for fabrication, not sale. No misappropriation proven; civil liability extinguished by payment.
estafa charges
loan agreement
trust receipt transaction

Case Summary (G.R. No. 173905)

Factual Background

In early 1997, petitioner was engaged in building and fabricating telecommunication towers. He applied for a bank credit line of PhP 3,000,000 with Asiatrust and, for Asiatrust’s credit investigation, voluntarily submitted contracts and documentation showing that he had projects with Islacom, Smart, and Infocom, including lists of projects and collectible amounts from those clients.

On May 30, 1997, Asiatrust approved the loan application. Petitioner then signed several documents: a Credit Line Agreement, an Application and Agreement for Irrevocable L/C, Trust Receipt Agreements corresponding to Letter of Credit Nos. 1963 and 1964, and Promissory Notes. Although the Promissory Notes matured on September 18, 1997, the two Trust Receipt Agreements did not bear maturity dates because those blank portions were not filled by Asiatrust.

Petitioner received goods—chemicals and metal plates—from his suppliers. He used those materials to fabricate communication towers ordered by his clients. The towers were installed in three project sites: Isabel, Leyte; Panabo, Davao; and Tongonan. As petitioner encountered difficulty collecting from his client Islacom, he failed to pay the loan to Asiatrust.

Asiatrust conducted a surprise ocular inspection of petitioner’s business through its representative appraiser, Villarva S. Linga. Linga reported that approximately ninety-seven percent (97%) of the trust receipt goods were “sold-out” and only three percent (3%) remained under PN No. 1963. Asiatrust then referred petitioner’s account for possible restructuring. The parties held conferences toward settlement, but those efforts failed.

Criminal Charge and Trial Posture

On March 16, 1999, Asiatrust’s remedial account officer, Ma. Girlie C. Bernardez, filed a Complaint-Affidavit before the Office of the City Prosecutor of Quezon City. Thereafter, on September 12, 1999, an Information for Estafa was filed with the RTC alleging that petitioner, through a Trust Receipt Agreement, had received chemicals totaling P4.5 million, with the obligation to hold them in trust, sell them for cash, and remit proceeds, or return unsold goods upon demand. The Information asserted that petitioner misappropriated and converted the goods to his own use with intent to defraud, despite repeated demands, to the prejudice of Bernardez in the amount of P2,971,650.00.

On arraignment, petitioner pleaded not guilty. At trial, petitioner’s defense was anchored on several points: the loan was essentially working capital; the Trust Receipt Agreements were allegedly preconditions for the credit approval; the trust receipt documents were allegedly contracts of adhesion drafted by Asiatrust; his difficulties stemmed from his clients’ payment issues; he claimed he had been paying Asiatrust prior to the prosecution; he attempted settlement during the case; and he alleged he had already paid around PhP 1.8 million of the P2.971 million stated as outstanding.

During the litigation, the parties also engaged in settlement discussions. A compromise agreement required petitioner to issue six postdated checks, and petitioner had initially issued and deposited two or three checks that were honored. The remaining checks were not deposited because the compromise did not proceed.

RTC Ruling of Conviction

After trial, the RTC rendered its decision on May 29, 2001, convicting petitioner of Estafa under Article 315, paragraph 1(b) of the RPC, in relation to Section 3 of PD 115. The RTC sentenced petitioner with an indeterminate penalty ranging from six (6) years, eight (8) months, and twenty-one (21) days of prision mayor as minimum to twenty (20) years of reclusion temporal maximum.

The RTC also ordered petitioner to return P2,971,650.00 to Asiatrust with legal interest computed from the filing of the Information on September 21, 1999 until fully paid.

In reasoning, the RTC rejected petitioner’s argument that the trust receipt documents were void as contracts of adhesion. It held that petitioner, presumed to have read and understood the letters of credit and trust receipts, was bound by their terms. It further stated that Asiatrust had provided a statement of account of petitioner’s outstanding balance and computed charges, without violating Republic Act No. 3765 (Truth in Lending Act). Finally, it held that because petitioner was the entrustee, he had the duty to hold goods in trust and dispose of them in accordance with the trust receipts. It found that petitioner violated the Trust Receipts Law by failing to do so.

CA Ruling and Treatment of the Elements

Petitioner appealed to the CA, raising among others the alleged change of the offended party’s name without amendment of the Information; the trial court’s alleged misappreciation of facts; the supposed failure of the evidence to prove guilt beyond reasonable doubt; and alleged bias.

On August 29, 2003, the CA affirmed the RTC decision. The CA held that petitioner knew that Bernardez and the other witnesses were Asiatrust employees, and that Bernardez sued in behalf of the bank. The CA found that petitioner could not claim ignorance of Asiatrust’s status as the real offended party because petitioner had transacted with Asiatrust’s employees regarding issuance of the subject trust receipts. It further ruled that the change in the name of the complainant did not violate petitioner’s right to be informed because the Information sufficiently alleged the essential elements of the Estafa charge.

On the merits, the CA ruled that petitioner’s lack of malice or fraud was immaterial because the offense was treated as malum prohibitum. It held that failure to deliver the proceeds of the sale or the goods if unsold sufficed for criminal liability. As to petitioner’s claim that Asiatrust demanded neither payment nor return despite adequate receivables and alleged absence of maturity, the CA held that inquiry as to the whereabouts of the goods or money amounted to a demand.

Petitioner’s motion for reconsideration was denied on July 25, 2006.

Core Issues Raised on Certiorari

In the Court, petitioner argued that: (i) the prosecution failed to prove beyond reasonable doubt the second essential element—misappropriation or conversion of the subject money or property; (ii) the prosecution failed to prove the third essential element—prejudice to the real offended property; and (iii) the absence of demand necessarily required dismissal because demand was an essential element.

The Court, however, distilled the case into the broader question of whether petitioner could be criminally liable for Estafa under Article 315, paragraph 1(b) of the RPC in relation to PD 115.

Legal Basis and Reasoning

The Court began by reiterating that factual findings of the RTC are generally respected, especially when affirmed by the CA. It recognized exceptions in criminal cases where conviction must still rest on proof beyond reasonable doubt.

It then set out the essential elements of Estafa under Article 315, paragraph 1(b) of the RPC, namely: receipt of money or goods in trust or under obligation involving duty to deliver or return; misappropriation or conversion (or denial of receipt); resulting prejudice; and demand by the offended party.

The Court also explained that Estafa may arise from trust receipt transactions under PD 115, where an entrustee receives specified goods or documents released by the entruster upon execution of a trust receipt, binding the entrustee to hold them in trust and either sell them and turn over proceeds to the extent owing or return the goods if unsold. It emphasized that PD 115 defines the trust receipt mechanism as a financing device designed to assist importers and merchants facing financing problems. It cited the principle that trust receipts are security transactions to aid financing and that they relate to the financing of importations or sales, and it treated the trust receipt’s dual obligations as either turning over sale proceeds or returning the merchandise.

Applying these principles, the Court held that the transaction between petitioner and Asiatrust was not a trust receipt transaction but a simple loan. The Court reasoned that petitioner was transparent from the outset that the goods were not for holding for sale; they were to be used to fabricate steel communication towers pursuant to petitioner’s contracts with Islacom, Smart, and Infocom. In those contracts, petitioner was commissioned to build towers out of materials received, not to sell the goods themselves. The Court therefore concluded that the RTC erred in classifying the arrangement as a trust receipt transaction under PD 115.

The Court also scrutinized the RTC’s reliance on Asiatrust appraiser Linga’s memorandum. It found that Linga’s testimony showed he merely presumed the goods were sold based on the fact that they were no longer in the warehouse. The Court stated that Linga had no real personal knowledge or proof that the goods had indeed been sold. He did not notify petitioner about the inspection, did not inquire about the goods’ whereabouts, and did not confirm with petitioner whether the goods were in fact sold. On that basis, the Court held the memorandum should not have been used to prove that the goods were actually sold; at most, it could indicate that the goods were not in the warehouse.

Given the Court’s conclusion that PD 115 did not govern, petitioner’s liability was limited to the satisfaction of his loan obligation, not criminal liability under trust receipts.

Even assuming, arguendo, that PD 115 applied, the Court found that petitioner still lacked criminal liability for multiple reasons tied to the Estafa elements and PD 115’s mechanics.

First, for the first element of Estafa, the Court held that goods were not received in trust. It reiterated that the goods were not held for sale, were not intended for sale, and petitioner had no duty to return them, because they were meant for use in fabrication of communication towers.

Secon

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