Trust Receipt

G.R. No. 199481 December 3, 2012

ILDEFONSO S. CRISOLOGO
vs.
PEOPLE OF THE PHILIPPINES and CHINA BANKING CORPORATION

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the November 23,
2011 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 80350, which affirmed the December 4,
2002 Decision3 of the Regional Trial Courtt (RTC); Manila, Branch 21. The RTC Decision acquitted
petitioner Ildefonso S. Crisologo (petitioner) of the charges for violation of Presidential Decree (P.D.) No.
115 (Trust Receipts Law) in relation to Article 315 1(b) of the Revised Penal Code (RPC), but adjudged
him civilly liable under the subject letters of credit.

The Factual Antecedents

Sometime in January and February 1989, petitioner, as President of Novachemical Industries, Inc.
(Novachem), applied for commercial letters of credit from private respondent China Banking Corporation
(Chinabank) to finance the purchase of 1,6004 kgs. of amoxicillin trihydrate micronized from Hyundai
Chemical Company based in Seoul, South Korea and glass containers from San Miguel Corporation
(SMC). Subsequently, Chinabank issued Letters of Credit Nos. 89/03015 and DOM-330416 in the
respective amounts of US$114,400.007 (originally US$135,850.00)8 with a peso equivalent of
P2,139,119.809 and P1,712,289.90. After petitioner received the goods, he executed for and in behalf of
Novachem the corresponding trust receipt agreements dated May 24, 1989 and August 31, 1989 in favor
of Chinabank.

On January 28, 2004, Chinabank, through its Staff Assistant, Ms. Maria Rosario De Mesa (Ms. De Mesa),
filed before the City Prosecutor's Office of Manila a Complaint-Affidavit10 charging petitioner for violation
of P.D. No. 115 in relation to Article 315 1(b) of the RPC for his purported failure to turn-over the goods or
the proceeds from the sale thereof, despite repeated demands. It averred that the latter, with intent to
defraud, and with unfaithfulness and abuse of confidence, misapplied, misappropriated and converted the
goods subject of the trust agreements, to its damage and prejudice.

In his defense, petitioner claimed that as a regular client of Chinabank, Novachem was granted a credit
line and letters of credit (L/Cs) secured by trust receipt agreements. The subject L/Cs were included in
the special term-payment arrangement mutually agreed upon by the parties, and payable in installments.
In the payment of its obligations, Novachem would normally give instructions to Chinabank as to what
particular L/C or trust receipt obligation its payments would be applied. However, the latter deviated from
the special arrangement and misapplied payments intended for the subject L/Cs and exacted
unconscionably high interests and penalty charges.

The City Prosecutor found probable cause to indict petitioner as charged and filed the corresponding
informations before the RTC of Manila, docketed as Criminal Case Nos. 94-139613 and 94-139614.

The RTC Ruling

After due proceedings, the RTC rendered a Decision11 dated December 4, 2002 acquitting petitioner of
the criminal charges for failure of the prosecution to prove his guilt beyond reasonable doubt. It, however,
adjudged him civilly liable to Chinabank, without need for a separate civil action, for the amounts of
P1,843,567.90 and P879,166.81 under L/C Nos. 89/0301 and DOM-33041, respectively, less the
payment of P500,000.00 made during the preliminary investigation, with legal interest from the filing of the
informations on October 27, 1994 until full payment, and for the costs.

The CA Ruling
On appeal of the civil aspect, the CA affirmed12 the RTC Decision holding petitioner civilly liable. It noted
that petitioner signed the "Guarantee Clause" of the trust receipt agreements in his personal capacity and
even waived the benefit of excussion against Novachem. As such, he is personally and solidarily liable
with Novachem.

The Petition

In the instant petition, petitioner contends that the CA erred in declaring him civilly liable under the subject
L/Cs which are corporate obligations of Novachem, and that the adjudged amounts were without factual
basis because the obligations had already been settled. He also questions the unilaterally-imposed
interest rates applied by Chinabank and, accordingly, prays for the application of the stipulated interest
rate of 18% per annum (p.a.) on the corporation’s obligations. He further assails the authority of Ms. De
Mesa to prosecute the case against him sans authority from Chinabank's Board of Directors.

The Court's Ruling

The petition is partly meritorious.

Section 13 of the Trust Receipts Law explicitly provides that if the violation or offense is committed by a
corporation, as in this case, the penalty provided for under the law shall be imposed upon the directors,
officers, employees or other officials or person responsible for the offense, without prejudice to the civil
liabilities arising from the criminal offense.

In this case, petitioner was acquitted of the charge for violation of the Trust Receipts Law in relation to
Article 315 1(b)13 of the RPC. As such, he is relieved of the corporate criminal liability as well as the
corresponding civil liability arising therefrom. However, as correctly found by the RTC and the CA, he may
still be held liable for the trust receipts and L/C transactions he had entered into in behalf of Novachem.

Settled is the rule that debts incurred by directors, officers, and employees acting as corporate agents are
not their direct liability but of the corporation they represent, except if they contractually agree/stipulate or
assume to be personally liable for the corporation’s debts,14 as in this case.

The RTC and the CA adjudged petitioner personally and solidarily liable with Novachem for the
obligations secured by the subject trust receipts based on the finding that he signed the guarantee
clauses therein in his personal capacity and even waived the benefit of excussion. However, a review of
the records shows that petitioner signed only the guarantee clauses of the Trust Receipt dated May 24,
198915 and the corresponding Application and Agreement for Commercial Letter of Credit No. L/C No.
89/0301.16 With respect to the Trust Receipt17 dated August 31, 1989 and Irrevocable Letter of Credit18
No. L/C No. DOM-33041 issued to SMC for the glass containers, the second pages of these documents
that would have reflected the guarantee clauses were missing and did not form part of the prosecution's
formal offer of evidence. In relation thereto, Chinabank stipulated19 before the CA that the second page
of the August 31, 1989 Trust Receipt attached to the complaint before the court a quo would serve as the
missing page. A perusal of the said page, however, reveals that the same does not bear the signature of
the petitioner in the guarantee clause. Hence, it was error for the CA to hold petitioner likewise liable for
the obligation secured by the said trust receipt (L/C No. DOM-33041). Neither was sufficient evidence
presented to prove that petitioner acted in bad faith or with gross negligence as regards the transaction
that would have held him civilly liable for his actions in his capacity as President of Novachem.1âwphi1

On the matter of interest, while petitioner assailed the unilateral imposition of interest at rates above the
stipulated 18% p.a., he failed to submit a summary of the pertinent dates when excessive interests were
imposed and the purported over-payments that should be refunded. Having failed to prove his affirmative
defense, the Court finds no reason to disturb the amount awarded to Chinabank. Settled is the rule that in
civil cases, the party who asserts the affirmative of an issue has the onus to prove his assertion in order
to obtain a favorable judgment. Thus, the burden rests on the debtor to prove payment rather than on the
creditor to prove non-payment.20
Lastly, the Court affirms Ms. De Mesa's capacity to sue on behalf of Chinabank despite the lack of proof
of authority to represent the latter. The Court noted that as Staff Assistant of Chinabank, Ms. De Mesa
was tasked, among others, to review applications for L/Cs, verify the documents of title and possession of
goods covered by L/Cs, as well as pertinent documents under trust receipts (TRs); prepare/send/cause
the preparation of statements of accounts reflecting the outstanding balance under the said L/Cs and/or
TRs, and accept the corresponding payments; refer unpaid obligations to Chinabank's lawyers and follow-
up results thereon. As such, she was in a position to verify the truthfulness and correctness of the
allegations in the Complaint-Affidavit. Besides, petitioner voluntarily submitted21 to the jurisdiction of the
court a quo and did not question Ms. De Mesa's authority to represent Chinabank in the instant case until
an adverse decision was rendered against him.

WHEREFORE, the assailed November 23, 2011 Decision of the Court of Appeals in CA-G.R. CV No.
80350 is AFFIRMED with the modification absolving petitioner lldefonso S. Crisologo from any civil liability
to private respondent China Banking Corporation with respect to the Trust Receipt dated August 31, 1989
and L/C No. DOM-33041. The rest of the Decision stands.