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[G.R. No. 134436. August 16, 2000.]




This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision 1 of the Court of Appeals 2 dated June 29, 1998 in CA-G.R. SP No. 38113 which: (1) reversed Resolution No. 417, s. 1994, 3 dated June 1, 1994 of the Department of Justice 4 directing to file the appropriate Information against herein respondents Joaquin P. Tonda and Ma. Cristina V. Tonda for violation of P.D. 115 in relation to Article 315 (1) (b) of the Revised Penal Code; and (2) effectively set aside the-Resolutions dated April 7, 1995 5 and July 12 1995 6 of the Department of Justice denying the motions for reconsideration.chanrob1es virtua1 1aw 1ibrary

Spouses Joaquin G. Tonda and Ma. Cristina U. Tonda, hereinafter referred to as the TONDAS, applied for and were granted commercial letters of credit by petitioner Metropolitan Bank and Trust Company, hereinafter referred to as METROBANK for a period of eight (8) months beginning June 14, 1990 to February 1, 1991 in connection with the importation of raw textile materials to be used in the manufacturing of garments. The TONDAS acting both in their capacity as officers of Honey Tree Apparel Corporation (HTAC) and in their personal capacities, executed eleven (11) trust receipts to secure the release of the raw materials to HTAC. The imported fabrics with a principal value of P2,803,000.00 were withdrawn by HTAC under the 11 trust receipts executed by the TONDAS. Due to their failure to settle their obligations under the trust receipts upon maturity, METROBANK through counsel, sent a letter dated August 10, 1992, making its final demand upon the TONDAS to settle their past due TR/LC accounts on or before August 15, 1992. They were informed that by said date, the obligations would amount to P4,870,499.13. Despite repeated demands therefor, the TONDAS failed to comply with their obligations stated in the trust receipts agreements, i.e. the TONDAS failed to account to METROBANK the goods and/or proceeds of sale of the merchandise, subject of the trust receipts.

Consequently, on November 9, 1992, Metrobank, through its account officer Eligio Labog, Jr., filed with the Provincial Prosecutor of Rizal a complaint/affidavit against the TONDAS for violation of P.D. No. 115 (Trust Receipts Law) in relation to Article 315 (1) (b) of the Revised Penal Code. On February 12, 1993, the assigned Assistant Prosecutor of Rizal submitted a Memorandum to the Provincial Prosecutor recommending that the complaint in I.S. No. 92-8703 be dismissed on the ground that the complainants had failed to establish "the existence of the essential elements of Estafa as charged." The recommendation was approved by Rizal Provincial Prosecutor Mauro Castro on May 18,1993.

METROBANK then appealed to the Department of Justice (DOJ). On June 1, 1994, Undersecretary Ramon S. Esguerra reversed the findings of the Provincial Prosecutor of Rizal and ordered the latter to file the appropriate information against the TONDAS as charged in the complaint.

The TONDAS immediately sought a reconsideration of the DOJ Resolution but their motion was denied by the then acting Justice Secretary Demetrio G. Demetria in a Letter-Resolution dated April 7, 1995. A second motion for reconsideration by the TONDAS was likewise denied by then Justice Secretary Teofisto Guingona on July 12, 1995.

Subsequently, the TONDAS filed with the Court of Appeals a special civil action for certiorari and prohibition with application for a temporary restraining order or a writ of preliminary injunction, 7 which was docketed as CA-G.R. SP No. 38113. They contended therein that the Secretary of Justice acted without or in excess of jurisdiction in issuing the aforementioned Resolution dated July 12, 1995 denying with finality their motion for the reconsideration of the Resolution dated April 7, 1995 of the Acting Secretary of Justice, which in turn denied their motion for the reconsideration of Resolution No. 417, s. 94, dated June 1, 1994, directing to file the appropriate Information against the TONDAS.chanrob1es virtua1 1aw 1ibrary

The Court of Appeals granted the TONDAS’ petition and ordered the criminal complaint against them dismissed. The Court of Appeals held that METROBANK had failed to show a prima facie case that the TONDAS violated the Trust Receipts Law in relation to Art. 315 (1) (b) of the Revised Penal Code in the face of convincing proof that "that the amount of P2.8 Million representing the outstanding obligation of the TONDAS under the trust receipts account had already been settled by them in compliance with the loan restructuring proposal; and that in the absence of a loan restructuring agreement, METROBANK could still validly apply the amount as payment thereof." The relevant portions of the Court of Appeals decision are quoted as follows:chanrob1es virtual 1aw library

Petitioners admitted that in 1991 their company, the Honey Tree Apparel Corporation (HTAC), had some financial reversals making it difficult for them to comply with their loan obligations with Metrobank. They were then constrained to propose a loan restructuring agreement with the private respondent to enable them to finally settle all outstanding obligations with the latter. In a letter dated 23 September 1991, petitioner Joaquin Tonda submitted a proposed Loan restructuring Scheme to Metrobank. In said letter, petitioner Tonda proposed to immediately pay in full the outstanding principal charges under the trust receipts account and the remaining obligations under a separate schedule of payment. Petitioners attached with said letter an itemized proposal (Attachment "A"), part of which reads:chanrob1es virtual 1aw library

1. Trust Receipts — The new management and Mr. Joaquin G. Tonda will pay immediately the entire principal of the outstanding Trust Receipts amounting to P2,803,097.14. While the interest accrued up to September 13, 1991 amounting to P409,601.57 plus the additional interest shall be re-structured together with item no. 2 below. A joint sharing account in the name of Joaquin G. Tonda and Wang Tien En equal to Trust Receipt amount of 1.8 Million will be opened at Metrobank Makati. (Emphasis supplied)

It would appear that the aforestated amount of 1.8 Million was erroneously written since the intention of the petitioners was to open an account of P2.8 Million to pay the entire principal of the outstanding trust receipts account. In fact, also on 23 September 1991, petitioner Joaquin Tonda and Wang Tien En deposited four different checks with a total amount of P2,800,000.00 with Metrobank. The checks were received by a certain Flor C. Naanep. Notably, the petitioners had obtained a written acknowledgment of receipt of the checks totaling P2.8 Million from the Metrobank officer in order to show proof of compliance with the loan restructuring proposal. If the petitioners had intended it to be a simple deposit, then a deposit slip with a machine validation by the private respondent bank would have otherwise been sufficient.

In a letter dated 22 October 1991, Metrobank wrote to the petitioners informing them that the bank had accepted their proposal subject to certain conditions, the first of which referred to the immediate payment of the amount of P2.8 Million, representing the outstanding trust receipts account. The petitioners appeared to have offered a counter proposal such that no final agreement had yet been reached.chanrob1es virtua1 1aw 1ibrary

However, the succeeding negotiations between petitioners and Metrobank, after the initial offer of 23 September 1991 was made, dealt with the other outstanding obligations while the matter regarding the trust receipts account remained unchanged; therefore, it was settled between the parties that the amount of P2.8 Million should be paid to cover all outstanding obligations under the trust receipts account. Despite the inability of both parties to reach a mutually agreeable loan restructured agreement, the amount of P2.8 Million which was deposited on 23 September 1991 by the petitioners appears to remain intact and untouched as Metrobank had failed to show evidence that the money has been withdrawn from the savings account of the petitioners.

Moreover, the deposit made by the petitioners was made known to Metrobank clearly as a compliance with the proposed loan restructuring agreement. As shown in the correspondence made by the petitioners on 28 February 1992 to Metrobank, after the latter had made a formal demand for payment of all outstanding obligations, the deposit was mentioned, to wit:jgc:chanrobles.com.ph

"May we emphasize that to show sincerity and financial capability, soon after we received your letter dated October 22,1991 informing us of your approval of the restructuring and consolidation of our firm’s obligations, a personal account was opened by two (2) of our stockholders in the amount equivalent to the TR/LC Account of about P2.8 Million which deposit is still maintained with your bank, free from any lien or encumbrance, and may be applied anytime to the payment of the TR/LC Account upon the implementation by the parties of the terms of restructuring." (Emphasis supplied)

The contention of Metrobank that the money had not been actually applied as payment for petitioners’ outstanding obligation under the trust receipts account is absolutely devoid of merit, considering that the petitioners were still in the process of negotiating for a reasonable loan restructuring arrangement with Metrobank when the latter abruptly abandoned all efforts to negotiate and instantly demanded from the petitioners the fulfillment of all their outstanding obligations.

In the case of Tan Tiong Tick v. American Apothecaries, 65 Phil. 414, the Supreme Court had held that:jgc:chanrobles.com.ph

"When a depositor is indebted to a bank, and the debts are mutual — that is, between the same parties and in the same right the bank may apply the deposit, or such portion thereof as may be necessary, to the payment of the debt due it by the depositor, provided there is no express agreement to the contrary and the deposit is not specifically applicable to some other particular purpose."cralaw virtua1aw library

Applying the above-mentioned ruling in this case, if the parties therefore fail to reach an agreement regarding the restructuring of HTAC’s loan, Metrobank can validly apply the amount deposited by the petitioners as payment of the principal obligation under the trust receipts account.

On the basis of all the evidence before Us, this Court is convinced that the amount of P2.8 Million representing the outstanding obligation of the petitioners under the trust receipts account had already been settled by the petitioners. The money remains deposited under the savings account of the petitioners awaiting a final agreement with Metrobank regarding the loan restructuring arrangement. Meanwhile, Metrobank has the right to use the deposited amount in connection with any of its banking business.

With convincing proof that the amount of P2.8 Million deposited under petitioners’ savings account with Metrobank was indeed intended to be applied as payment for the outstanding obligations of HTAC under the trust receipts, Metrobank, therefore, had failed to show a prima facie case that the petitioners had violated the Trust Receipts Law (P.D. No. 115) in relation to Art 315 of the Revised Penal Code. Besides, there is absolutely no evidence suggesting that Metrobank has been damaged by the proposal and the deposit made by the petitioners. As noted by the prosecutor:chanrob1es virtua1 1aw 1ibrary

It is clear from the evidence that complainant bank had, all the while, been informed of the steps undertaken by the respondents relative to the trust receipts and other financial obligations vis-a-vis HTAC’s financial difficulties. Hardly therefore, could it be said that respondents were unfaithfully, deceptively, deceitfully and fraudulently dealing with complainant bank to warrant an indictment for Estafa." 8

Hence, this recourse to this Court where petitioner submits for the consideration of this Court the following issues:chanrob1es virtual 1aw library













In response to the foregoing, the TONDAS maintain that METROBANK has no legal standing to file the present petition without the conformity or authority of the prosecutor as it deals solely with the criminal aspect of the case, a separate action to recover civil liability having already been instituted; that the issues raised in the present petition are purely factual; and that the subject trust receipts obligations have been extinguished by payment or legal compensation.

We find for petitioner bank.

Preliminarily, we shall resolve the issues raised by the TONDAS regarding the standing of METROBANK to file the instant petition and whether the same raises questions of law.

The general rule is that it is only the Solicitor General who is authorized to bring or defend actions on behalf of the People or the Republic of the Philippines once the case is brought before this Court or the Court of Appeals. However, an exception has been made that "if there appears to be grave error committed by the judge or lack of due process, the petition will be deemed filed by the private complainants therein as if it were filed by the Solicitor General." 10 In that case, the Court gave due course to the petition and allowed the petitioners to argue their case in lieu of the Solicitor General. We accord the same treatment to the instant petition on account of the grave errors committed by the Court of Appeals. We add that no information having been filed yet in court, there is, strictly speaking, no case yet for the People or the Republic of the Philippines. In answer to the second issue raised by the TONDAS, while the jurisdiction of the Supreme Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, one exception to the rule is when the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on misappreciation of fact 11 , as will be shown to have happened in the instant case.

In the main, the issue is whether or not the dismissal by the Court of Appeals of the charge for violation of the Trust Receipts Law in relation to Art. 315 (1) (b) of the Revised Penal Code against the TONDAS is warranted by the evidence at hand and by law.

The Court of Appeals gravely erred in reversing the Department of Justice on the finding of probable cause to hold the TONDAS for trial. The documentary evidence presented during the preliminary investigation clearly show that there was probable cause to warrant a criminal prosecution for violation of the Trust Receipts Law.

The relevant penal provision of P.D. 115 provides:chanrob1es virtual 1aw library

SECTION 13. Penalty Clause. — The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article Three Hundred and Fifteen, Paragraph One (b), of Act Numbered Three Thousand Eight Hundred and Fifteen, as amended, otherwise known as the Revised Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense.

Section 1 (b), Article 315 of the Revised Penal Code- under which the violation is made to fall, states:jgc:chanrobles.com.ph

". . . Swindling (estafa). — Any person who shall defraud another by any of the means mentioned herein below . . .:chanrob1es virtual 1aw library

x       x       x

b. By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property."cralaw virtua1aw library

Based on the foregoing, it is plain to see that the Trust Receipts Law declares the failure to turn over the goods or the proceeds realized from the sale thereof, as a criminal offense punishable under Article 315 (1) (b) of the Revised Penal Code. The law is violated whenever the entrustee or the person to whom the trust receipts were issued in favor of fails to: (1) return the good covered by the trust receipts; or (2) return the proceeds of the sale of the said goods. The foregoing acts constitute estafa punishable under Article 315 (1) (b) of the Revised Penal Code. Given that various trust receipts were executed by the TONDAS and that as entrustees, they did not return the proceeds from the goods sold nor the goods themselves to METROBANK, there is no dispute that that the TONDAS failed to comply with the obligations under the trust receipts despite several demands from METROBANK.

Finding favorably for the TONDAS, however, and ordering the dismissal of the complaint against them, the Court of Appeals held that: (1) the TONDAS opened a savings account of P2.8 Million to pay the entire principal of the outstanding trust receipts account; (2) the TONDAS obtained from a METROBANK officer 12 a written acknowledgment of receipt of checks totaling P2.8 Million in order to show proof of compliance with the loan restructuring proposal; (3) it was settled between the parties that the amount of 2.8 Million should be paid to cover all outstanding obligations under the trust receipts account; (4) the money remains deposited under the savings account of petitioners awaiting a final agreement with METROBANK regarding the loan restructuring arrangement; and that (5) there is no evidence suggesting that METROBANK has been damaged by the proposal and the deposit or that the TONDAS employed fraud and deceit in their dealings with the bank.

The foregoing findings and conclusions are palpably erroneous.

First, the amount of P2.8 million was not directly paid to METROBANK to settle the trust receipt accounts, but deposited in a joint account of Joaquin G. Tonda and a certain Wang Tien En. In a letter dated February 28, 1992, signed by HTAC’s Vice President for Finance, METROBANK was informed that the amount may be applied anytime to the payment of the trust receipts account upon implementation of the parties of the terms of the restructuring." 13 The parties failed to agree on the terms of the loan restructuring agreement as the offer by the TONDAS to restructure the loan was followed by a series of counter-offers which yielded nothing. It is axiomatic that acceptance of an offer must be unqualified and absolute 14 to perfect a contract. The alleged payment of the trust receipts accounts never became effectual on account of the failure of the parties to finalize a loan restructuring arrangement.chanrob1es virtua1 1aw 1ibrary

Second, the handwritten note by the METROBANK officer acknowledging receipt of the checks amounting to P2.8 Million made no reference to the TONDAS’ trust receipt obligations, and we cannot presume that it was anything more than an ordinary bank deposit. The Court of Appeals citing the case of Tan Tiong Tick v. American Apothecaries 15 implied that in making the deposit, the TONDAS are entitled to set off, by way of compensation, their obligations to METROBANK. However, Article 1288 of the Civil Code provides that "compensation shall not be proper when one of the debts consists in civil liability arising from a penal offense" as in the case at bar. The raison d’etre for this is that, "if one of the debts consists in civil liability arising from a penal offense, compensation would be improper and inadvisable because the satisfaction of such obligation is imperative." 16

Third, reliance on the negotiations for the settlement of the trust receipts obligations between the TONDAS and METROBANK is simply misplaced. The negotiations pertain and affect only the civil aspect of the case but does not preclude prosecution for the offense already committed. It has been held that" [any] compromise relating to the civil liability arising from an offense does not automatically terminate the criminal proceeding against or extinguish the criminal liability of the malefactor." 17 All told, the P2.8 Million deposit could not be considered as having settled the trust receipts obligations of the TONDAS to the end of extinguishing any incipient criminal culpability arising therefrom.chanrob1es virtua1 1aw 1ibrary

Hence, it has been held in Office of the Court Administrator v. Soriano 18 that:jgc:chanrobles.com.ph

". . . it is too well-settled for any serious argument that whether in malversation of public funds or estafa, payment, indemnification, or reimbursement of, or compromise as to, the amounts or funds malversed or misappropriated, after the commission of the crime, affects only the- civil liability of the offender but does not extinguish his criminal liability or relieve him from the penalty prescribed by law for the offense committed, because both crimes are public offenses against the people that must be prosecuted and penalized by the Government on its own motion, though complete reparation should have been made of the damage suffered by the offended parties. . . . ."cralaw virtua1aw library

As to the statement of the Court of Appeals that there is no evidence that METROBANK has been damaged by the proposal and the deposit, it must be clarified that the damage can be traced from the non-fulfillment of an entrustee’s obligation under the trust receipts. The nature of trust receipt agreements and the damage caused to trade circles and the banking community in case of violation thereof was explained in Vintola v. IBAA 19 and echoed in People v. Nitafan20 , as follows:jgc:chanrobles.com.ph

" [t]rust receipt arrangements do not involve a simple loan transaction between a creditor and a debtor-importer. Apart from a loan feature, the trust receipt arrangement has a security feature that is covered by the trust receipt itself. The second feature is what provides the much needed financial assistance to traders in the importation or purchase of goods or merchandise through the use of those goods or merchandise as collateral for the advancements made by the bank. The title of the bank to the security is the one sought to be protected and not the loan which is a separate and distinct agreement."cralaw virtua1aw library

x       x       x

"Trust receipts are indispensable contracts in international and domestic business transactions. The prevalent use of trust receipts, the danger of their misuse and/or misappropriation of the goods or proceeds realized from the sale of goods, documents or instruments held in trust for entruster-banks, and the need for regulation of trust receipt transactions to safeguard the rights and enforce the obligations of the parties involved are the main thrusts of P.D. 115. As correctly observed by the Solicitor General, P.D. 115, like Batas Pambansa Blg. 22, punishes the act "not as an offense against property, but as an offense against public order . . . The misuse of trust receipts therefore should be deterred to prevent any possible havoc in trade circles and the banking community (citing Lozano v. Martinez, 146 SCRA 323 [1986]; Rollo, p. 57) It is in the context of upholding public interest that the law now specifically designates a breach of a trust receipt agreement to be an act that "shall" make one liable for estafa." cralaw : red

The finding that there was no fraud and deceit is likewise misplaced considering that the offense is punished as a malum prohibitum regardless of the existence of intent or malice. A mere failure to deliver the proceeds of the sale or the goods if not sold, constitutes a criminal offense that causes prejudice not only to another, but more to the public interest. 21

Finally, it is worthy of mention that a preliminary investigation proper whether or not there is reasonable ground to believe that the accused is guilty of the offense and therefore, whether or not he should be subjected to the expense, rigors and embarrassment of trial — is the function of the prosecutor. 22 Preliminary investigation is an executive, not a judicial function. 23 Such investigation is not part of the trial, hence, a full and exhaustive presentation of the parties’ evidence is not required, but only such as may engender a well-grounded belief that an offense has been committed and that the accused is probably guilty thereof. 24

Section 4, Rule 112 of the Rules of Court recognizes the authority of the Secretary of Justice to reverse the resolution of the provincial or city prosecutor or chief state prosecutor upon petition by a proper party. 25 Judicial review of the resolution of the Secretary of Justice is limited to a determination of whether there has been a grave abuse of discretion amounting to lack or excess of jurisdiction considering that the full discretionary authority has been delegated to the executive branch in the determination of probable cause during a preliminary investigation. Courts are not empowered to substitute their judgment for that of the executive branch; it may, however, look into the question of whether such exercise has been made in grave abuse of discretion. 26

Verily, there was no grave abuse of discretion on the part of the Secretary of Justice in directing the filing of the Information against the TONDAS, and the Court of Appeals overstepped its boundaries in reversing the same without basis in law and in evidence. We emphasize that for purposes of preliminary investigation, it is enough that there is evidence showing that a crime has been committed and that the accused is probably guilty thereof. 27 By reason of the abbreviated nature of preliminary investigations, a dismissal of the charges as a result thereof is not equivalent to a judicial pronouncement of acquittal, 28 a converso, the finding of a prima facie case to hold the accused for trial is not equivalent to a finding of guilt.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision is REVERSED and SET ASIDE.


Melo, Vitug, Panganiban and Purisima, JJ., concur.


1. Rollo, pp. 9-18.

2. Third Division, composed of J. Eubolo G. Verzola (member and ponente); and JJ. Jorge S. Imperial (chairman) and Artemio G. Tuquero (member), concurring.

3. Rollo, pp. 68-71.

4. Per Undersecretary Ramon S. Esguerra as acting Secretary of the Department of Justice.

5. Per Acting Secretary Demetrio G. Demetria; rollo, pp. 66-67.

6. Per Secretary Teofisto T. Guingona, Jr.; rollo, p. 65.

7. Rollo, CA-G.R. SP No. 38113, pp. 2-21.

8. Rollo, pp. 13-17.

9. Rollo, pp. 267-268.

10. Columbia Pictures Entertainment, Inc. v. Court of Appeals, 262 SCRA 219 (1996).

11. Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385 (1998).

12. Flor C. Naanep.

13. Annex "D" ; OR, p. 141.

14. First Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996); Limketkai Sons Milling, Inc. v. Court of Appeals, 255 SCRA 626 (1996).

15. Supra.

16. Arturo M. Tolentino, Civil Code of the Philippines (Quezon City: Central Lawbook Publishing Co., Inc., 1997).

17 Chavez v. Presidential Commission on Good Government, 299 SCRA 744 (1998).

18. 136 SCRA 461 (1 985).

19. 150 SCRA 578 (1987).

20. 207 SCRA 726 (1992).

21. Ibid.

22. Ho v. People, 280 SCRA 365 (1997).

23. People v. Navarro, 270 SCRA 393 (1997).

24. Ledesma v. Court of Appeals, 278 SCRA 656 (1997).

25. Roberts, Jr. v. Court of Appeals, 254 SCRA 307 (1996).

26. Ibid.

27. Flores v. Sumaljag, 290 SCRA 568 (1998).

28. Ledesma case, supra.

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