Trust Receipts Law: Corporate Officers' Liability and Due Diligence in Criminal Demurrers

The Supreme Court's 2019 ruling in BDO Unibank, Inc. v. Choa clarifies two important points for banks, corporate officers, and their counsel: first, a private complainant in a criminal case may challenge the grant of a demurrer to evidence, but only on the civil aspect of the case; and second, a trial court commits grave abuse of discretion when it grants a demurrer based on grounds that ignore settled law on trust receipt transactions.

The case arose from trust receipt agreements executed in 1999 by Antonio Choa, then president and general manager of Camden Industries, Inc., in favor of Equitable PCI Bank (now BDO Unibank). When Camden failed to remit proceeds or return goods, BDO filed a criminal complaint for violation of Presidential Decree No. 115, the Trust Receipts Law. The Information alleged that Choa misappropriated P7,875,904.96 worth of goods covered by eight trust receipt agreements.

The Trial Court Grants the Demurrer

After the prosecution rested, Choa filed a Motion for Leave to File Demurrer to Evidence, arguing that BDO and Camden were mutual creditors and debtors. He pointed to a separate civil case where BDO was ordered to pay Camden P90 million, which he claimed offset Camden's P20 million obligation to the bank. The trial court granted the demurrer, ruling that: (1) the amounts could be legally compensated; (2) the prosecution failed to prove the specific amount of P7,875,904.96; and (3) the prosecution failed to prove Choa's criminal intent.

The Court of Appeals affirmed, prompting BDO to elevate the case to the Supreme Court.

Private Complainants May Question Only the Civil Aspect

The Supreme Court first addressed whether BDO had legal standing to file a petition for certiorari before the Court of Appeals. Under settled doctrine, the authority to appeal the criminal aspect of an acquittal rests solely with the Office of the Solicitor General. However, a private complainant may question the acquittal or dismissal insofar as the civil liability of the accused is concerned.

The Court found that although BDO's petition discussed Choa's criminal liability, the totality of its arguments concerned the civil aspect—specifically, whether the trial court gravely abused its discretion in ruling that BDO failed to prove Choa's liability for P7,875,904.96. BDO therefore had the legal personality to file the petition.

The Demurrer Was Filed Out of Time

On the procedural issue, the Court noted that under Rule 119, Section 23 of the Revised Rules of Criminal Procedure, a motion for leave to file a demurrer must be filed within a non-extendible period of five days after the prosecution rests its case.

The prosecution's Formal Offer of Documentary Evidence included a reservation stating that it would rest its case only if the court admitted its exhibits. The trial court admitted the evidence on September 12, 2014, and directed Choa to comment. Since Choa filed his comment on September 25, 2014, he must have received the Order before that date. His Motion for Leave, filed October 13, 2014, was therefore beyond the five-day period, and the trial court should have denied it outright.

Grave Abuse of Discretion in Granting the Demurrer

Even assuming the demurrer was timely filed, the Supreme Court held that the trial court committed grave abuse of discretion in granting it. The Court identified three fatal errors.

First, the trial court erred in ruling that the P90 million judgment debt in the Pasig civil case could be compensated against Camden's P20 million obligation. The civil case was irrelevant to the criminal case and had not yet attained finality. The issue was whether Camden violated the trust receipt agreements by failing to deliver proceeds or return unsold goods.

Second, the trial court wrongly ruled that the prosecution failed to prove the amount of P7,875,904.96. The prosecution's Formal Offer of Documentary Evidence listed eight trust receipt agreements with specific amounts that, when added, totaled exactly P7,875,904.96. The trial court could not claim the prosecution presented no evidence.

Third, the trial court erred in requiring proof of criminal intent. The offense punished under Presidential Decree No. 115 is malum prohibitum. As the Court explained in Gonzalez v. Hongkong & Shanghai Banking Corporation, a mere failure to deliver proceeds or return goods constitutes a criminal offense without need of proving intent to defraud.

Because the trial court's orders were based on these erroneous grounds, the Court found grave abuse of discretion and reversed the Court of Appeals' ruling.

Practical Takeaways

• Corporate officers can be personally liable under the Trust Receipts Law. A president or general manager who signs trust receipt agreements as the corporation's representative may be charged for violations, even without proof of personal misappropriation.
• Criminal intent need not be proven. Trust receipt violations are malum prohibitum; the mere failure to remit proceeds or return unsold goods is enough.
• Timing matters in demurrers. The five-day period to file a motion for leave runs from receipt of the order admitting the prosecution's evidence, not from the filing of the formal offer.
• Private complainants have limited appellate rights. After an acquittal or dismissal, the private complainant may only question the civil aspect of the case through a petition for certiorari, provided grave abuse of discretion is shown.
• Compensation is not a defense. A separate civil judgment debt owed by the bank to the corporation does not extinguish criminal liability arising from trust receipt violations.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.