I find the Trust Receipts Law (P.D. No. 115), one of the obnoxious legacies of the late dictator Pres. Ferdinand Marcos to the Filipino people, to be cruel, oppressive, unreasonable, and unconstitutional for being violative of the due process clause and the equal protection clause of the 1987 Philippine Constitution.
I believe that, unless there is a clear showing of criminal fraud or deceit, any violation of the Trust Receipt Law should not be treated as a crime and that the pecuniary claim of the banks under the trust receipt agreement should be treated merely as an ordinary civil obligation of the defaulting customer. The true spirit of a trust receipt agreement is one of a secured loan obligation. The financial liability of the customer thereunder should be treated as purely civil in character.
The banks are indeed very happy with the law, for it protects their multi-billion treasuries. They will collectively use all their financial and political resources to vehemently oppose and defeat any attempt to repeal the law. Fortunately for the banks, as the Philippine jurisprudence now stands, the law is fair, just, reasonable, and constitutional.
The truth of the matter is that the banks have abused and continue to abuse the law to harass their customers, thus, making our trial courts as their obedient de facto collection agencies.
The very recent case of METROPOLITAN BANK & TRUST COMPANY vs. HON. SECRETARY OF JUSTICE RAUL M. GONZALES, OLIVER T. YAO and DIANA T. YAO, G.R. No. 180165, April 7, 2009 was one such case. It involved the case of estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to Presidential Decree No. 115. (Trust Receipts Law).
In this case, the investigating prosecutor indicted the private respondents for the crime charged by the bank. They subsequently appealed their indictment to the Secretary of Justice, who ruled that there was no probable cause to prosecute private respondents. He declared that the legitimate transactional relationship between the parties being merely a contract of loan, violations of the terms thereunder were not covered by Presidential Decree No. 115.
Acting on the directive of the Secretary of Justice, the City Prosecutor moved for the withdrawal of the Informations. The Regional Trial Court (RTC) granted the same. The bank elevated the matter to the Court of Appeals (CA), which dismissed its petition after finding that the Secretary of Justice committed no grave abuse of discretion in ruling against the existence of probable cause to prosecute private respondents.
The CA recognized the authority of the Secretary of Justice to control and supervise the prosecutors, which included the power to reverse or modify their decisions without committing grave abuse of discretion. Unfazed by the turn of events, petitioner went up to the Supreme Court, urging it to reverse the Court of Appeals and to direct the filing of the proper criminal Informations against private respondents.
The Supreme Court found the petition to be meritorious. It concluded that there was probable cause to warrant the prosecution of private respondents for estafa. It stressed that “probable cause did not require an inquiry into whether there is sufficient evidence to procure a conviction”.
The Court held that the offense punished under Presidential Decree No. 115 is in the nature of malum prohibitum. A mere failure to deliver the proceeds of the sale or the goods, if not sold, constituted a criminal offense that caused prejudice not only to another, but more to the public interest.
The Court rejected the allegation of private respondents that they did not give much significance to the documents that they had signed. According to the Court, considering the enormous value of the transaction involved, it was highly improbable to mistake trust receipt documents for a contract of loan when the heading thereon printed in bold and legible letters reads: “Trust Receipts.” Although it said that it was “not prejudging the case on the merits”, the Court stated that “by merely glancing at the documents submitted by petitioner entitled Trust Receipts and the arguments advanced by private respondents, it was convinced that there was probable cause to file the case and to hold them for trial.”
I wish to digest the doctrinal pronouncements of the Court in the above-cited, for legal research purposes of the visitors of this blog. Thus:
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Probable cause has been defined as the existence of such facts and circumstances as would excite the belief in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. Probable cause is a reasonable ground of presumption that a matter is, or may be, well founded on such a state of facts in the mind of the prosecutor as would lead a person of ordinary caution and prudence to believe, or entertain an honest or strong suspicion, that a thing is so.
The term does not mean “actual or positive cause” nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the charge.
To determine the existence of probable cause, there is need to conduct preliminary investigation. A preliminary investigation constitutes a realistic judicial appraisal of the merits of a case. Its purpose is to determine whether (a) a crime has been committed; and (b) whether there is a probable cause to believe that the accused is guilty thereof. It is a means of discovering which person or persons may be reasonably charged with a crime.
The conduct of preliminary investigation is executive in nature. The Court may not be compelled to pass upon the correctness of the exercise of the public prosecutor’s function unless there is a showing of grave abuse of discretion or manifest error in his findings. Grave abuse of discretion implies a capricious and whimsical exercise of judgment tantamount to lack or excess of jurisdiction. The exercise of power must have been done in an arbitrary or a despotic manner by reason of passion or personal hostility. It must have been so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.
In the present case, the abuse of discretion is patent in the act of the Secretary of Justice holding that the contractual relationship forged by the parties was a simple loan, for in so doing, the Secretary of Justice assumed the function of the trial judge of calibrating the evidence on record, done only after a full-blown trial on the merits. The fact of existence or non-existence of a trust receipt transaction is evidentiary in nature, the veracity of which can best be passed upon after trial on the merits, for it is virtually impossible to ascertain the real nature of the transaction involved based solely on the self-serving allegations contained in the opposing parties’ pleadings. Clearly, the Secretary of Justice is not in a competent position to pass judgment on substantive matters. The bases of a party’s accusation and defenses are better ventilated at the trial proper than at the preliminary investigation.
We need not overemphasize that in a preliminary investigation, the public prosecutor merely determines whether there is probable cause or sufficient ground to engender a well-founded belief that a crime has been committed, and that the respondent is probably guilty thereof and should be held for trial. It does not call for the application of rules and standards of proof that a judgment of conviction requires after trial on the merits. The complainant need not present at this stage proof beyond reasonable doubt. A preliminary investigation does not require a full and exhaustive presentation of the parties’ evidence. Precisely, there is a trial to allow the reception of evidence for both parties to substantiate their respective claims.
Having said the foregoing, this Court now proceeds to determine whether probable cause exists for holding private respondents liable for estafa in relation to Presidential Decree No. 115.
Trust receipt transactions are governed by the provisions of Presidential Decree No. 115 which defines such a transaction as follows:
Section 4. What constitutes a trust receipt transaction. – A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree as the entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt” wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any one of the following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with the purpose of ultimate sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied fully with his obligation under the trust receipt; or (c) to load, unload, ship or transship or otherwise deal with them in a manner preliminary or necessary to their sale; or
2. In the case of instruments, a) to sell or procure their sale or exchange; or b) to deliver them to a principal; or c) to effect the consummation of some transactions involving delivery to a depository or register; or d) to effect their presentation, collection or renewal.
The sale of goods, documents or instruments by a person in the business of selling goods, documents or instruments for profit who, at the outset of the transaction, has, as against the buyer, general property rights in such goods, documents or instruments, or who sells the same to the buyer on credit, retaining title or other interest as security for the payment of the purchase price, does not constitute a trust receipt transaction and is outside the purview and coverage of this Decree.
An entrustee is one having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose of payment specified in the trust receipt agreement. The entrustee is obliged to (1) hold the goods, documents or instruments in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipt; (2) receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owed to the entruster or as appears on the trust receipt; (3) insure the goods for their total value against loss from fire, theft, pilferage or other casualties; (4) keep said goods or the proceeds therefrom whether in money or whatever form, separate and capable of identification as property of the entruster; (5) return the goods, documents or instruments in the event of non-sale or upon demand of the entruster; and (6) observe all other terms and conditions of the trust receipt not contrary to the provisions of the decree.
The entruster shall be entitled to the proceeds from the sale of the goods, documents or instruments released under a trust receipt to the entrustee to the extent of the amount owed to the entruster or as appears in the trust receipt; or to the return of the goods, documents or instruments in case of non-sale; and to the enforcement of all other rights conferred on him in the trust receipt, provided these are not contrary to the provisions of the document. A violation of any of these undertakings constitutes estafa defined under Article 315(1)(b) of the Revised Renal Code, as provided by Section 13 of Presidential Decree No. 115 viz:
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.
Apropos thereto, Article 315(1)(b) of the Revised Renal Code punishes estafa committed as follows:
ARTICLE 315. Swindling (estafa). – Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years. In such case, and in connection with the accessory penalties which may be imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor to reclusion temporal, as the case may be.
2nd. The penalty of prision correccional in its minimum and medium periods, if the amount of the fraud is over 6,000 pesos but does not exceed 12,000 pesos;
3rd. The penalty of arresto mayor in its maximum period to prision correccional in its minimum period, if such amount is over 200 pesos but does not exceed 6,000 pesos; and
4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200 pesos, provided that in the four cases mentioned, the fraud be committed by any of the following means; x x x.
As found in the Complaint-Affidavit of petitioner, private respondents were charged with failing to account for or turn over to petitioner the merchandise or goods covered by the trust receipts or the proceeds of the sale thereof in payment of their obligations thereunder. The following pieces of evidence adduced from the affidavits and documents submitted before the City Prosecutor are sufficient to establish the existence of probable cause, to wit:
First, the trust receipts bearing the genuine signatures of private respondents; second, the demand letter of petitioner addressed to respondents; and third, the initial admission by private respondents of the receipt of the imported goods from petitioner.
Prescinding from the foregoing, we conclude that there is ample evidence on record to warrant a finding that there is a probable cause to warrant the prosecution of private respondents for estafa. It must be once again stressed that probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged.
That private respondents did not sell the goods under the trust receipt but allowed it to be used by their sister company is of no moment. The offense punished under Presidential Decree No. 115 is in the nature of malum prohibitum. 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. Even more incredible is the contention of private respondents that they did not give much significance to the documents they signed, considering the enormous value of the transaction involved. Thus, it is highly improbable to mistake trust receipt documents for a contract of loan when the heading thereon printed in bold and legible letters reads: “Trust Receipts.” We are not prejudging this case on the merits. However, by merely glancing at the documents submitted by petitioner entitled “Trust Receipts” and the arguments advanced by private respondents, we are convinced that there is probable cause to file the case and to hold them for trial.
All told, the evidentiary measure for the propriety of filing criminal charges has been reduced and liberalized to a mere probable cause. As implied by the words themselves, “probable cause” is concerned with probability, not absolute or moral certainty.
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