The Supreme Court held that for an entrustee to be prosecuted for estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to Section 13 of the Trust Receipts Law, the prosecution must prove that the entrustee misappropriated or converted the goods or proceeds and that a demand was made for the remittance of proceeds or the return of unsold goods. The Court affirmed the dismissal of criminal charges against the respondents because the prosecution failed to prove misappropriation or conversion, and the demand for the return of goods was not sufficiently established.

Unsold Goods and Unproven Demand: Did Metrobank Establish Estafa?

This case revolves around the application of the Trust Receipts Law (Presidential Decree No. 115) and its intersection with the crime of estafa, as defined under Article 315, paragraph 1(b) of the Revised Penal Code. Metropolitan Bank & Trust Company (Metrobank) sought to prosecute Jimmy Go and Benjamin Go for allegedly violating the terms of several trust receipts. The core legal question is whether the failure to remit proceeds from the sale of goods or return unsold goods automatically constitutes estafa, even in the absence of a formal demand and clear evidence of misappropriation.

The factual backdrop involves a credit line agreement between Metrobank and BGB Industrial Textile Mills, Inc. (BGB), secured by a continuing surety agreement from Benjamin Go. BGB, through Jimmy Go, applied for and was granted eleven commercial letters of credit, resulting in eleven trust receipts. Under these receipts, BGB was obligated to hold the goods in trust for Metrobank and, upon sale, remit the proceeds. However, the goods remained largely unsold. Metrobank, alleging a violation of the trust receipts, filed criminal charges against Jimmy and Benjamin Go for violation of Presidential Decree No. 115 (Trust Receipts Law).

The City Prosecutor dismissed the case, finding the liability to be civil in nature due to the absence of misappropriation, a decision affirmed by the Department of Justice and later by the Court of Appeals. Metrobank then elevated the matter to the Supreme Court, arguing that the lower courts erred in not recognizing the violation of the Trust Receipts Law. Metrobank cited jurisprudence contending that the penal provision of the Trust Receipts Law encompasses any act violative of an obligation covered by the trust receipt and is not limited to transactions in goods which are to be sold.

The Supreme Court, however, upheld the findings of the lower courts, emphasizing that a crucial element of estafa – misappropriation or conversion – was not adequately proven. The Court outlined the essential elements for estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to Section 13 of the Trust Receipts Law:

(a) they received the subject goods in trust or under the obligation to sell the same and to remit the proceeds thereof to Metrobank, or to return the goods if not sold; (b) they misappropriated or converted the goods and/or the proceeds of the sale; (c) they performed such acts with abuse of confidence to the damage and prejudice of Metrobank; and (d) demand was made on them by Metrobank for the remittance of the proceeds or the return of the unsold goods.

Building on this framework, the Court noted the consistent finding that the goods were not sold, negating the possibility of remitting proceeds. Furthermore, the Court highlighted that the offer to return the goods, which remained intact in the warehouse, effectively rebutted any presumption of misappropriation. This offer, made even prior to the filing of civil cases, indicated a willingness to comply with the trust agreement, further undermining the claim of criminal intent.

The Court also addressed Metrobank’s contention that the mere failure to comply with the terms of the trust receipt constitutes a criminal offense. While the Trust Receipts Law indeed carries penal sanctions, the Court clarified that the prosecution must still establish the element of criminal intent or abuse of confidence. This principle ensures that the law is not used to unjustly criminalize legitimate business failures or disagreements, but rather to punish acts of dishonesty and bad faith.

Another critical aspect of the Court’s decision focused on the issue of demand. The trust receipts contained a provision stating that failure to account for the goods or proceeds within thirty days of demand would constitute an admission of misappropriation. However, Metrobank failed to present any evidence of a formal demand for the return of the goods or remittance of proceeds. This deficiency was considered particularly significant, especially given the varying maturity dates of the trust receipts. The absence of proof of demand weakened Metrobank’s case, as it failed to demonstrate that the respondents had been given a clear opportunity to fulfill their obligations before being subjected to criminal charges.

The Supreme Court also noted that the trust receipts in question were contracts of adhesion, prepared solely by Metrobank, leaving the respondents with little room for negotiation. Such contracts are not inherently invalid, but any ambiguities are construed strictly against the party that drafted them. In this case, an ambiguity existed as to whether the obligation to remit proceeds or return goods arose upon maturity of the trust receipts or upon demand by Metrobank. Applying the principle of strict construction, the Court held that the obligation arose upon demand, which Metrobank failed to prove.

The Court emphasized the importance of proving the elements of the crime beyond a reasonable doubt, a burden that rests squarely on the prosecution. Since Metrobank failed to establish misappropriation/conversion and demand, the criminal complaints were rightly dismissed. Furthermore, the Court reiterated its deference to the findings of the City Prosecutor, the Department of Justice, and the Court of Appeals, all of whom had consistently ruled in favor of the respondents. The Supreme Court found no grave abuse of discretion that would warrant overturning these findings.

This case underscores the importance of adhering to the specific requirements of the Trust Receipts Law and the Revised Penal Code when prosecuting alleged violations. It also serves as a reminder that criminal charges should not be used as a tool to pressure debtors in commercial disputes, especially when there is no clear evidence of criminal intent or wrongdoing.

FAQs

What was the key issue in this case?	The key issue was whether Jimmy Go and Benjamin Go could be held criminally liable for estafa under the Trust Receipts Law, despite the absence of evidence of misappropriation and a formal demand for the return of goods.
What is a trust receipt?	A trust receipt is a security agreement where a bank releases imported goods to an importer, who is obligated to sell the goods and remit the proceeds to the bank or return the goods if unsold. It is a document in which is expressed a security transaction where the lender, having no prior title to the goods on which the lien is to be constituted, and not having possession over the same since possession thereof remains in the borrower, lends his money to the borrower on security of the goods which the borrower is privileged to sell, clear of the lien, with an agreement to pay all or part of the proceeds of the sale to the lender.
What are the elements of estafa in relation to a trust receipt?	The elements are: (1) receipt of goods in trust; (2) misappropriation or conversion of the goods or proceeds; (3) abuse of confidence; and (4) demand for remittance of proceeds or return of goods.
Why were the criminal charges dismissed in this case?	The charges were dismissed because Metrobank failed to prove that the respondents misappropriated or converted the goods and that a formal demand was made for the return of the unsold goods.
What is a contract of adhesion?	A contract of adhesion is a standardized contract drafted by one party (usually a corporation with stronger bargaining power) and offered to another on a “take it or leave it” basis, without opportunity for negotiation.
How does the nature of the trust receipt as a contract of adhesion affect the case?	Since the trust receipt was a contract of adhesion, any ambiguities in its terms were construed strictly against Metrobank, the party that drafted the contract.
What is the significance of the absence of a demand letter?	The absence of a demand letter meant that Metrobank could not prove that it had given the respondents a clear opportunity to comply with their obligations before filing criminal charges.
Can a mere failure to comply with a trust receipt agreement lead to criminal liability?	No, a mere failure to comply is not enough. The prosecution must prove criminal intent, misappropriation, or abuse of confidence.
What was the ruling of the Supreme Court?	The Supreme Court affirmed the dismissal of the criminal charges, finding that the prosecution failed to prove the elements of estafa beyond a reasonable doubt.

In conclusion, this case highlights the stringent requirements for prosecuting estafa under the Trust Receipts Law. It reinforces the principle that criminal charges should not be used as a collection tool and that the prosecution must prove all elements of the crime beyond a reasonable doubt, including misappropriation and demand.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Metropolitan Bank & Trust Company v. Jimmy Go and Benjamin Go Bautista, G.R. No. 155647, November 23, 2007