Lee v.

Rodil
July 5, 1989 | Gutierrez, Jr., J.
X. Crimes Against Property - E. Swindling and Other Deceits

Doctrines: The failure of an entrustee to turn over the proceeds of the 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 (swindiling).
Case Summary: Lee opened a Letter of Credit (LC) with Philippine Bank of Communication in behalf of CS Lee Enterprises
Inc. However, she failed to comply with her obligations pertinent to said LC and appropriated merchandise that were held in-
trust for her own personal use. She averred that violation of trust agreement does not constitute estafa and that PD 115 violates
the right that no person shall be imprisoned for non-payment of debt. SC held that violation of trust receipt agreement
constitute estafa as expressly provided in PD 115.

FACTS:
1. July 1982: Rosemarie Lee, representative of CS Lee Enterprises Inc, opened a Letter of Credit (LC) worth Php 154,711.97
with Philippine Bank of Communications (PBC) for the purchase of merchandise consisting 23 ctns. Lab.
2. Culture Media received from Lee the necessary document and then executed a trust receipt for the said merchandise:
3. Lee obligated herself to hold the merchandise in trust to sell the same in cash for the account of the bank; To
account for the proceeds if sold; To return the merchandise to the bank in case of failure to sell the same;
4. Despite the lapse of a long period of time and repeated demands, she failed to comply with her obligation and instead
appropriated the merchandise for her own personal use.
5. 1985: Lee was charged for estafa. She moved to quash the information on the following grounds:
- The violation of a trust agreement does not constitute estafa despite an express provision in the Trust Receipts Law
characterizing it as estafa.
- PD 115 is violative of the right that no person shall be imprisoned for non-payment of debt.
6. Aug. 1987: RTC denied the motion to quash and upheld the constitutionality of the law.
7. Oct. 1987: Motion for Reconsideration was denied. Hence, the present petition.

ISSUE: WON violation of a trust receipt agreement constitute estafa – YES.

RATIO:
1. PD 115, S3 expressly provides: 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…
2. On the case of People v. Cuevo (1981):
o It was the lower court that dismissed the information and ruled that a violation gives rise to a civil action only.
o Out of the 11 members of the SC, a majority of 6 justices +CJ were of the view that the violation constitutes estafa,
2 voted otherwise, another 2 inhibited themselves. The view of the dissenting justices prevailed as a result of the
want of 1 vote to reverse the order of the lower court. (SC affirmed the LC decision despite the majority view)
o SC Majority view: The conversion by the trustee in a trust receipt of the proceeds of the sale falls most literally and
directly under the provision of estafa thru misappropriation under Art 315 (1)(b) of the RPC. The enactment of the
Trust Receipts Law confirmed the said criminal liability.
o Dissent of J. Teehankee:
 A contract covered by a trust receipt is a secured loan. The goods imported by the dealer, through the bank’s
financing, remain of their own property and risk.
 The view of putting them in jail for estafa for non-payment of the secured loan through a trust receipt should
not be permitted in this day and age.
o Dissent of De Castro:
 The bank cannot be considered as the true owner of the goods which has full power of disposition over the
same. Otherwise, it would disregard the loan feature (L/C).
 The trust receipt is supposed to give a stronger security for the loan obtained by the importer.
 There would have been no need for PD 115 had there been no such doubt if the violation constitutes estafa.
3. On the case of Sia v. People (1983):
 o De Castro penned the said case.
o If the trust receipt transaction is susceptible to two reasonable interpretations, one giving rise only to civil liability
and the other also generating criminal liability, the first should be adopted as more favorable to the offender.
4. Lee used the Cuevo and Sia case to support her stand. However, the violations in both cases occurred in the 1960’s.
PD115 was not applied because the questioned acts were committed before its effectivity/promulgation in 1973.
5. Violations of trust receipt agreements occurring after 29 Jan 1973 would thus make the accused criminally liable
for estafa pursuant to PD115.
6. On the constitutionality of PD115: A convincing showing is needed to overcome the presumption of the validity of a
statute.
7. On the nature of a trust receipt agreement:
o An LC-TR arrangement involves a loan feature represented by a letter of credit and a security feature which is
the trust receipt. Each feature is separate and distinct.
o The person prejudiced by the misappropriation or conversion of goods need not be the owner thereof. The
authors simply used the phrase “to the prejudice of another”
o The failure of a person to turn over the proceeds or goods not sold covered by a trust receipt is a public nuisance.
The act is not inherently wrong but because of the harm it inflicts on the community, it may be punished as malum
prohibitum.

Disposition: RTC’s orders are AFFIRMED and the case is remanded to RTC for further proceedings.

Note/s –
1. The criminal liability springs from the violation of the trust receipt.
2. We bear in mind the nature of a trust receipt agreement. This Court pronounced in the Vintola cases, 150 SCRA 578
(1987); G.R. No. 78671, March 25, 1988 that:
„x x x A letter of credit-trust receipt arrangement is endorsed with its own distinctive features and characteristics. Under that
setup, a bank extends a loan covered by the letter of credit, with the trust receipt as a security for the loan. In other words, the
transaction involves a loan feature represented by the letter of credit, and a security feature which is in the covering trust receipt.”

3. Therefore, the loan feature is separate and distinct from the trust receipt. The violation of a trust receipt committed by
disposing of the goods covered thereby and failing to deliver the proceeds of such sale has been squarely made to fall
under Art. 315 (1) (b) of the Revised Penal Code, which provides:
x x x Swindling (estafa).·Any person who shall defraud another by any of the means mentioned herein below shall
be punished by:
xxx xxx xxx
a. With unfaithfulness or abuse of confidence, namely:
xxx xxx xxx
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.”