Chua v. Secretary of Justice
REITERATIONFacts
The Antecedents: This case originated from a complaint filed by BDO Unibank, Inc. (BDO) against petitioners Tony N. Chua, Jimmy N. Chua, and Ernest T. Jeng, officers of NF Agri-Business Corporation (NF ABC). The complaint alleged violations of the Trust Receipts Law. In 1999, Equitable Banking Corporation (now BDO) issued commercial letters of credit for merchandise imported by NF ABC, consisting of peruvian fish meal and soybean meals. Petitioners executed four trust receipts totaling P20,409,638.23, which were due for payment within 90 days. NF ABC failed to pay the obligations, and by December 16, 2008, the outstanding amount was P17,430,882.88. Petitioners claimed that economic crises and typhoons affected their ability to sell the perishable goods profitably, leading to some spoilage and the need to sell others at a loss. They also asserted that they entered into a new payment agreement with BDO, which they argued constituted a novation of the original trust receipt obligations into a simple loan. Procedural History: The City Prosecutor of Makati City initially dismissed BDO's complaint, finding no probable cause due to a perceived novation and lack of dishonesty or abuse of confidence. BDO appealed to the Secretary of Justice (SOJ), which affirmed the dismissal. However, upon BDO's motion for reconsideration, the SOJ reversed its prior resolution, finding no novation and sufficient probable cause for Estafa under Article 315, paragraph 1(b) of the Revised Penal Code in relation to the Trust Receipts Law. The SOJ directed the filing of four counts of Estafa. Petitioners sought reconsideration, which was denied. They then filed a Petition for Certiorari with the Court of Appeals (CA), which affirmed the SOJ's finding of probable cause, holding that the new payment schedule did not novate the trust receipt obligations. Petitioners are now before the Supreme Court via a Petition for Review on Certiorari. The Petition: Petitioners seek review of the CA's decision, arguing that the CA erred in affirming the SOJ's finding of probable cause. They contend that the new payment schedule constituted a novation, converting the trust receipt transaction into a simple loan, thereby extinguishing any criminal liability. They also argue that BDO is estopped from invoking the original trust receipt transaction. Petitioners pray for the issuance of a writ of preliminary injunction and a temporary restraining order to enjoin the enforcement of the SOJ's resolution. BDO and the SOJ, in their respective comments, argue that novation does not extinguish criminal liability and that the mere failure to remit proceeds or return goods constitutes a violation of the Trust Receipts Law, supporting the finding of probable cause.
Issue(s)
Whether the Court of Appeals erred in affirming the Secretary of Justice's finding of probable cause to charge petitioners with Estafa under the RPC in relation to the Trust Receipts Law. Whether the new schedule of payments constituted a novation of the trust receipt agreements, thereby extinguishing the criminal liability.
Ruling
The Petition for Review on Certiorari is DENIED. The Court affirms the finding of the Court of Appeals that the Secretary of Justice did not commit grave abuse of discretion in ordering the filing of four counts of Estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to the Trust Receipts Law, against petitioners. The City Prosecutor of Makati City is directed to file four counts of Estafa, and the Regional Trial Court of Makati City is directed to commence or continue with the proceedings with dispatch.
Ratio Decidendi
On the issue of probable cause for Estafa under the Trust Receipts Law: The Court reiterated that Section 4 of the Trust Receipts Law defines a trust receipt transaction where the entrustee holds goods in trust for the entruster and is obligated to turn over the proceeds of the sale or return the goods if unsold. Section 13 of the law punishes the entrustee's failure to do so as Estafa under Article 315, paragraph 1(b) of the RPC. The offense is malum prohibitum, meaning mere failure to remit proceeds or return goods constitutes a violation, and intent to defraud is immaterial. In this case, petitioners admitted to failing to turn over proceeds or return the goods, which is the gravamen of the offense. Their defense of being unable to sell at a profitable price due to economic crisis and typhoons is unavailing because the offense is malum prohibitum; they could have returned the goods instead of selling them at a loss. Therefore, there is probable cause to hold petitioners liable. On the issue of novation: The Court held that the petitioners' obligation under the trust receipt agreements was not novated. Novation requires the extinguishment of the old obligation by a new one, which must be declared in unequivocal terms or the old and new obligations must be on every point incompatible. It is never presumed and must be proven. The new schedule of payments did not unequivocally declare the extinguishment of the old obligation, nor were the old and new obligations on every point incompatible. The new agreement recognized the old obligation, and the object—payment of the amount owed—was retained, with the period for payment merely extended. This made the new schedule merely modificatory and supplementary, not a novation that would extinguish the original obligation. The CA correctly concluded that the new agreement precisely revived the unpaid original obligation whose term had expired. Since there was no novation, the argument that BDO is estopped from invoking the original agreement fails, as does the argument that novation can prevent criminal liability if executed prior to the filing of an information. Consequently, the SOJ did not err or commit grave abuse of discretion in finding probable cause.
Main Doctrine
The mere failure to turn over the proceeds of the sale of goods covered by a trust receipt, or to return the goods themselves if not sold, constitutes a violation of the Trust Receipts Law, punishable as Estafa under Article 315, paragraph 1(b) of the Revised Penal Code, regardless of intent to defraud, as the offense is malum prohibitum. A subsequent agreement for a new schedule of payments does not constitute novation if it does not unequivocally extinguish the old obligation or if the old and new obligations are not incompatible.