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ALLIED BANKING CORPORATION v. SECRETARY ORDONEZ

FACTS:

Philippine Blooming Mills (PBM) sought commercial letters of credit from the petitioner's branch to finance the purchase of goods. The petitioner issued a letter of credit in favor of Nikko Industry Co., Ltd. (Nikko), while PBM executed Trust Receipt Agreements acknowledging the petitioner's ownership of the goods and PBM's obligation to turn over the proceeds or return the goods if unsold. PBM failed to fulfill its obligation, resulting in an overdue amount. The petitioner filed a criminal complaint against PBM's officer, Alfredo Ching, for violating the Trust Receipts Law. Private respondent appealed, claiming lack of proper preliminary investigation, lack of jurisdiction, and novation of the obligation. The Secretary of Justice held that Ching's obligation constituted a violation of PD 115. Ching filed motions for reconsideration, arguing that PBM was under rehabilitation receivership and that the goods covered by the trust receipt agreements did not fall under PD 115. The Secretary of Justice denied the motions, stating that the offense preceded the receivership appointment and that the trust receipt agreements were within the scope of PD 115.

ISSUES:

  1. Whether the act of non-payment of the amount covered by a trust receipt constitutes estafa under Sec. 13, PD 115.

  2. Whether trust receipt agreements only cover goods intended for sale.

RULING:

  1. The act of non-payment of the amount covered by a trust receipt is an act violative of the entrustee's obligation to pay. The penal provision of PD 115 encompasses any act violative of an obligation covered by the trust receipt, and it is not limited to transactions in goods which are to be sold, reshipped, stored, or processed as a component of a product ultimately sold. Therefore, the act constitutes estafa under par. 1(b), Art. 315 of the Revised Penal Code.

  2. Trust receipt agreements cover not only goods intended for sale, but also goods for use in manufacturing operations. The wording of Sec. 13 of PD 115 covers failure to turn over the proceeds of the sale of entrusted goods, or to return said goods if unsold or disposed of in accordance with the terms of the trust receipts. Hence, all transactions covered by trust receipts are subject to the penal provisions of PD 115, except those expressly excluded.

PRINCIPLES:

  • Penal statutes are strictly construed against the state and liberally in favor of the accused.

  • Penal statutes cannot be enlarged or extended by intendment, implication, or any equitable consideration.

  • Trust receipt transactions must be interpreted in accordance with the general rules on contracts, with the law being alert to prevent fraud on the part of either party.

  • The entrustee under a trust receipt has the obligation to repay the entruster and must observe all terms and conditions of the trust receipt. A violation of this undertaking constitutes estafa under Sec. 13 of PD 115.

  • Acts involving the violation of trust receipt agreements occurring after 29 January 1973 render the accused criminally liable for estafa under par. 1(b), Art. 315 of the Revised Penal Code, pursuant to the explicit provision in Sec. 13 of PD 115.

  • The act punishable under PD 115 is malum prohibitum.

  • The non-payment of the amount covered by a trust receipt is an act violative of the entrustee's obligation to pay.

  • The Court should interpret the statute to give it efficient operation and effect as a whole, avoiding constructions that nullify or render the statute insignificant, meaningless, or nugatory.

  • Trust receipts cover not only goods intended for sale, but also goods for use in manufacturing operations.

  • The legislative intent of PD 115 is to meet the pressing need to regulate the enforcement of rights arising from default or violations of trust receipt agreements.