In the recent case of JOSE ANTONIO U. GONZALEZ[1] v. HONGKONG & SHANGHAI BANKING CORPORATION, G. R. No. 164904, October 19, 2007, the Supreme Court had the opportunity to reaffirm the prevailing doctrine on the proper determination of the existence of probable cause, specifically in relation to Presidential Decree No. 115 (Trust Receipt Law) and Art. 315(1)(b) of the Revised Penal Code.
Petitioner Gonzalez contends that the Court of Appeals committed manifest error in ruling, that, probable cause existed to hold him liable to stand trial merely on the basis of “his admission that he executed the trust receipts subject matter of the case below and his failure to account for the goods covered by the same.”
He argues that the City Prosecutor of Makati and the DOJ failed to appreciate two important facts:
1) that the real transaction that led to the present controversy was in fact a loan agreement; and
2) that MLRC simply extended to Best Price PX, Inc., the owner and operator of Mimosa Mart at the CESZ, its credit line with respondent HSBC, such that Best Price was the actual debtor of respondent bank.
He maintains that “the fact that (he) held a high position in MLRC was not sufficient reason to charge him for alleged violation of trust receipts.”
He insists further that he is not the person responsible for the offense allegedly committed because of the absence of “a clear showing of fault or negligence on his part.”
According to petitioner, “President (sic) Decree No. 115 must be read in conjunction with Article 315, paragraph 1(b) of the Revised Penal Code x x x under both x x x it is required that the person charged with estafa pursuant to a trust receipt transaction must be proved to have misappropriated, misused or converted to his own personal use the proceeds of the goods covered by the trust receipts to the damage of the entruster.”
Thus, petitioner concludes that “mere failure to pay the amounts covered by the trust receipts does not conclusively constitute estafa as defined under Presidential Decree No. 115 and Article 315, paragraph 1(b).”
Respondent HSBC, on the other hand, contends that “petitioner is criminally liable since he signed the trust receipts x x x;” and, that, “[f]raud is not necessary for conviction for violation of the Trust Receipts Law,” the latter being in the nature of a malum prohibitum decree.
On the issue of company reverses, Asian currency crisis and the closure of the Mimosa Regency Casino, respondent HSBC counters that “[t]hey do not excuse petitioner for his failure to comply with his obligations under the trust receipts,” because unlike “motor vehicles or parcels of land, which are frequently purchased on credit or on installment basis,” the goods covered by the two trust receipts, i.e., assorted Disney items and various golfing equipments, are usually paid for in cash upon receipt by buyers; and if not sold, the merchandise should still be with MLRC. Hence, there was no reason for petitioner Gonzalez’s failure to comply with his obligation under the two Trust Receipts – to turn over the proceeds of the sale of the goods or to return the goods if they remained unsold.
The Supreme Court found no merit in the petition of Gonzalez.
The Court held that probable cause is 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”. A finding of probable cause “merely binds over the suspect to stand trial”. It is “not a pronouncement of guilt”.
To determine the existence of probable cause, there is a need to conduct preliminary investigation, which is “an inquiry to determine “whether (a) a crime has been committed; and (b) whether there is probable cause to believe that the accused is guilty thereof”. Such investigation is designed “to secure the (accused) against hasty, malicious and oppressive prosecution, the conduct of which is executive in nature”.
The Court adhered to “the policy of non-interference in the conduct of preliminary investigations, and to leave to the investigating prosecutor sufficient latitude of discretion in the determination of what constitutes sufficient evidence as will establish probable cause”. It held that “courts can only review whether or not the executive determination of probable cause was done without or in excess of jurisdiction resulting from grave abuse of discretion”.
Thus, although it is entirely possible that the investigating prosecutor may “erroneously exercise the discretion” lodged in him by law, this does not render his act amenable to correction and annulment by the extraordinary remedy of certiorari, “absent any showing of grave abuse of discretion amounting to excess of jurisdiction”.
Grave abuse of discretion is “an arbitrary and despotic manner, by reason of passion or personal hostility, and it must be patent and gross as would amount to an evasion or to a unilateral refusal to perform the duty enjoined or to act in contemplation of law.
In the case at bar, petitioner Gonzalez is charged by respondent HSBC with violating Presidential Decree No. 115. Section 4 of the “Trust Receipts Law” defines a trust receipt transaction as –
Section 4. What constitutes a trust receipts 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 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 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 good, documents or instruments by a person in the business of selling goods, documents or instruments for profit who, at the outset of 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.
In general, a trust receipt transaction imposes upon the entrustee the obligation to deliver to the entruster the price of the sale, or if the merchandise is not sold, to return the same to the entruster.
There are thus two obligations in a trust receipt transaction: the first, refers to money received under the obligation involving the duty to turn it over (entregarla) to the owner of the merchandise sold, while the second refers to merchandise received under the obligation to “return” it (devolvera) to the owner.
A violation of any of these undertakings constitutes estafa defined under Art. 315(1)(b) of the Revised Penal Code, as provided by Sec. 13 of Presidential Decree 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.
Article 315(1)(b) of the Revised Penal Code punishes estafa committed as follows:
1. With unfaithfulness or abuse of confidence, namely:
x 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.
As found in the complaint-affidavit of respondent HSBC’s representative, petitioner Gonzalez is charged with failing to turn over “to the Bank a single centavo of the proceeds of the sale of the (assorted) goods covered by the Trust Receipts, or x x x” or to return any of the assorted goods.
From the evidence adduced before the City Prosecutor of Makati i.e., 1) the two Trust Receipts bearing the acknowledgment signature of petitioner Gonzalez; 2) the official documents concerning the transaction between MLRC and respondent HSBC; 3) the demand letter of respondent HSBC; and, significantly, 4) the counter-affidavit of petitioner Gonzalez containing his initial admission that on behalf of MLRC, he entered into a trust receipt transaction with respondent HSBC – the investigating officer determined that there existed probable cause to hold petitioner Gonzalez for trial for the crime charged.
The Court stated that “probable cause need not be based on clear and convincing evidence of guilt, neither on evidence establishing guilt beyond reasonable doubt and, definitely, not on evidence establishing absolute certainty of guilt; but it certainly demands more than bare suspicion and can never be left to presupposition, conjecture, or even convincing logic”.
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”. This is a matter of public policy as declared by the legislative authority.
As a last ditch effort to exculpate himself from the offense charged, petitioner Gonzalez posits that, “the fact that (he) held a high position in MLRC was not sufficient reason to charge him for alleged violation of trust receipts.”
The Court viewed it as a futile attempt. Though petitioner Gonzalez signed the Trust Receipts merely as a corporate officer of MLRC and had no physical possession of the goods subject of such receipts, he cannot avoid responsibility for violation of Presidential Decree No. 115 for two unpretentious reasons: first, that the last sentence of Section 13 of the “Trust Receipts Law,” explicitly imposes the penalty provided therein upon “directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense,” of a corporation, partnership, association or other juridical entities found to have violated the obligation imposed under the law. The rationale for making such officers and employees responsible for the offense is that they are vested with the authority and responsibility to devise means necessary to ensure compliance with the law and, if they fail to do so, are held criminally accountable; thus, they have a responsible share in the violations of the law. And second, a corporation or other juridical entity cannot be arrested and imprisoned; hence, cannot be penalized for a crime punishable by imprisonment.
Petitioner Gonzalez’s allegation that Best Price PX, Inc. is the real party in the trust receipt transaction and his assertion that the real transaction between respondent HSBC and MLRC is a loan agreement, “are matters of defense best left to the trial court’s deliberation and contemplation after conducting the trial of the criminal case”.
The Court reiterated that a preliminary investigation for the purpose of determining the existence of probable cause is not part of the trial. “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”, it added.
In fine, the Court held that the Court of Appeals committed no reversible error when it ruled that there was no grave abuse of discretion on the part of the Secretary and Acting Secretary of the DOJ in directing the filing of the Information against petitioner Gonzalez for violation of Presidential Decree No. 115 in relation to Article 315(1)(b) of the Revised Penal Code.
The Court cited the following: R.R. Paredes v. Calilung, G.R. No. 156055, 5 March 2007, 517 SCRA 369, 394. Webb v. Hon. De Leon, 317 Phil. 758, 789 (1995). Lim, Sr. v. Felix, G.R. No. 94054-57, 19 February 1991, 194 SCRA 292, 304. R.R. Paredes v. Calilung , supra note 29 at 394. Webb v. Hon. De Leon, supra note 30 at 800. Andres v. Cuevas, G.R. No. 150869, 9 June 2005, 460 SCRA 38, 52. D.M. Consuji, Inc. v. Esguerra, 328 Phil. 1168, 1185 (1996). R.R. Paredes v. Calilung , supra note 29 at 397. Sarigumba v. Sandiganbayan, G.R. Nos. 154239-41, 16 February 2005, 451 SCRA 533, 549. People v. Cuevo, 191 Phil. 622, 630 (1981). Kilosbayan, Inc. v. COMELEC, 345 Phil. 1141, 1174 (1997). People v. Nitafan, G.R. Nos. 81559-60, 6 April 1992, 207 SCRA 726, 731. Colinares v. Court of Appeals, 394 Phil. 106, 120 (2000). Ching v. Secretary of Justice, G.R. No. 164317, 6 February 2006, 481 SCRA 609, 635, citing U.S. v. Park, 421 U.S. 658, 95, S.Ct. 1903 (1975). Ong v. Court of Appeals, 449 Phil. 691, 704 (2003). Ledesma v. Court of Appeals, 344 Phil. 207, 226 (1997).