Case Citation G.R. No.

110844

Date April 27, 2000

Petitioners ALFREDO CHING, petitioner

Respondents HON. COURT OF APPEALS, HON. ZOSIMO Z. ANGELES,

RTC- BR. 58, MAKATI, METRO MANILA, PEOPLE OF THE
PHILIPPINES AND ALLIED BANKING CORPORATION
Commercial
transaction
involved
Instrument Confronting the Court in this instant petition for review
involved on certiorari under Rule 45 is the task of resolving the issue of
whether the pendency of a civil action for damages and
declaration of nullity of documents, specifically trust receipts,
warrants the suspension of criminal proceedings instituted for
violation of Article 315 1(b) of the Revised Penal Code, in
relation to P.D. 115, otherwise known as the "Trust Receipts
Law".

Parties to the
instrument

Antecedent Petitioner was charged before the Regional Trial Court of Makati
Facts with four counts of estafa punishable under Article 315 par. 1(b)
of the Revised Penal Code, in relation to Presidential Decree 115,
otherwise known as the "Trust Receipts Law".
The four separate informations which were couched in similar
language except for the date, subject goods and amount thereof,
charged herein petitioner in this wise:
That on or about the (18th day of May 1981; 3rd day of June 1981;
24th day of June 1981 and 24th day of June 1981), in the
Municipality of Makati, Metro Manila, Philippines and within the
jurisdiction of this Honorable Court, the above-named accused
having executed a trust receipt agreement in favor of Allied
Banking Corporation in consideration of the receipt by the said
accused of goods described as "12 Containers (200 M/T) Magtar
Brand Dolomites"; "18 Containers (Zoom M/T) Magtar Brand
Dolomites"; "High Fired Refractory Sliding Nozzle Bricks"; and
"High Fired Refractory Sliding Nozzle Bricks" for which there is
now due the sum of (P278, 917.80; P419,719.20; P387, 551. 95;
and P389,085.14 respectively) under the terms of which the
accused agreed to sell the same for cash with the express
 obligation to remit to the complainant bank the proceeds of the
sale and/or to turn over the goods, if not sold, on demand, but the
accused, once in possession of said goods, far from complying
with his obligation and with grave abuse of confidence, did then
and there, willfully, unlawfully and feloniously misappropriate,
misapply and convert to his own personal use and benefit the said
goods and/or the proceeds of the sale thereof, and despite
repeated demands, failed and refused and still fails and refuses,
to account for and/or remit the proceeds of sale thereof to the
Allied Banking Corporation to the damage and prejudice of the
said complainant bank in the aforementioned amount of

An "Omnibus Motion to Strike Out Information, or in the

Alternative to Require Public Prosecutor to Conduct Preliminary
Investigation, and to Suspend in the Meantime Further
Proceedings in these Cases," was filed by the petitioner.
The Regional Trial Court of Makati, Branch 58, acting on the
omnibus motion, required the prosecutor's office to conduct a
preliminary investigation and suspended further proceedings in
the criminal cases.
Petitioner Ching, together with Philippine Blooming Mills Co. Inc.,
filed a case before the Regional Trial Court of Manila for
declaration of nullity of documents and for damages
Ching filed a petition before the RTC-Makati, for the suspension
of the criminal proceedings on the ground of prejudicial question
in a civil action.
The prosecution then filed an opposition to the petition for
suspension, against which opposition, herein petitioner filed a
reply.

TRIAL On 26 August 1992, the RTC-Makati issued an order which denied

COURT the petition for suspension and scheduled the arraignment and
RULING pre-trial of the criminal cases. As a result, petitioner moved to
reconsider the order to which the prosecution filed an opposition.
In an order, the RTC-Makati, before which the criminal cases are
pending, denied petitioner's motion for reconsideration and set
the criminal cases for arraignment and pre-trial.

CA Ruling In denying the petition, the Court of Appeals, in CA G.R. SP No.

28912, ruled:
 . . . Civil Case No. 90-60600 pending before the Manila Regional
Trial Court seeking (sic) the declaration of nullity of the trust
receipts in question is not a prejudicial question to Criminal Case
Nos. 92-0934 to 37 pending before the respondent court charging
the petitioner with four counts of violation of Article 315, par.
1(b), RPC, in relation to PD 115 as to warrant the suspension of
the proceedings in the latter.

Notwithstanding the decision rendered by the Court of Appeals,

the RTC-Manila admitted petitioner's amended complaint.

Issue/s WON THERE IS A PREJUDICIAL QUESTION EXISTS IN THE

PRESENT CASE.
Law/s
Applied
Held NO. PREJUDICIAL QUESTION DOES NOT EXISTS IN THE
PRESENT CASE.
As defined, a prejudicial question is one that arises in a case the
resolution of which is a logical antecedent of the issue involved
therein, and the cognizance of which pertains to another tribunal.
The prejudicial question must be determinative of the case before
the court but the jurisdiction to try and resolve the question must
be lodged in another court or tribunal.
It is a question based on a fact distinct and separate from the
crime but so intimately connected with it that it determines
the guilt or innocence of the accused, and for it to suspend the
criminal action, it must appear not only that said case involves
facts intimately related to those upon which the criminal
prosecution would be based but also that in the resolution of
the issue or issues raised in the civil case, the guilt or
innocence of the accused would necessarily be determined.
It comes into play generally in a situation where a civil action and
a criminal action are both pending and there exists in the
former an issue which must be preemptively resolved before
the criminal action may proceed, because howsoever the issue
raised in the civil action is resolved would be determinative juris et
de jure of the guilt or innocence of the accused in the criminal
case.
More simply, for the court to appreciate the pendency of a
prejudicial question, the law, in no uncertain terms, requires the
concurrence of two essential requisites, to wit:
a) The civil action involves an issue similar or intimately
related to the issue raised in the criminal action; and
b) The resolution of such issue determines whether or not the
criminal action may proceed.
Verily, under the prevailing circumstances, the alleged prejudicial
question in the civil case for declaration of nullity of documents
and for damages, does not juris et de jure determine the guilt
or innocence of the accused in the criminal action for estafa.
Assuming arguendo that the court hearing the civil aspect of the
case adjudicates that the transaction entered into between the
parties was not a trust receipt agreement, nonetheless the guilt of
the accused could still be established and his culpability under
penal laws determined by other evidence. To put it differently,
even on the assumption that the documents are declared of null, it
does not ipso facto follow that such declaration of nullity shall
exonerate the accused from criminal prosecution and liability.
Accordingly, the prosecution may adduce evidence to prove the
criminal liability of the accused for estafa, specifically under Article
315 1(b) of the Revised Penal Code which explicitly provides that
said crime is committed:
. . . (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
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.
Applying the foregoing principles, the criminal liability of the
accused for violation of Article 315 1(b) of the Revised Penal Code,
may still be shown through the presentation of evidence to the
effect that: (a) the accused received the subject goods in trust or
under the obligation to sell the same and to remit the proceeds
thereof to Allied Banking Corporation, or to return the goods, if not
sold; (b) that accused Ching misappropriated or converted the
goods and/or the proceeds of the sale; (c) that accused Ching
performed such acts with abuse of confidence to the damage and
prejudice of Allied Banking Corporation; and (d) that demand was
made by the bank to herein petitioner.
Presidential Decree 115, otherwise known as the "Trust Receipts
Law", specifically Section 13 thereof, 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, punishable
under the provisions of Article Three hundred fifteen, paragraph
one (b) of Act Numbered Three thousand eight hundred and
fifteen, as amended, otherwise known as the Revised Penal Code.
We must stress though, that an act violative of a trust receipt
agreement is only one mode of committing estafa under the
abovementioned provision of the Revised Penal Code. Stated
differently, a violation of a trust receipt arrangement is not the sole
basis for incurring liability under Article 315 1 (b) of the Code.
In Jimenez vs. Averia,22 where the accused was likewise charged
with estafa, this Court had occasion to rule that a civil case
contesting the validity of a certain receipt is not a prejudicial
question that would warrant the suspension of criminal
proceedings for estafa.1âwphi1.nêt
In the abovementioned case, a criminal charge for estafa was filed
in the Court of First Instance of Cavite against the two accused.
The information alleged that the accused, having received the
amount of P20,000.00 from Manuel Jimenez for the purchase of a
fishing boat, with the obligation on the part of the former to return
the money in case the boat was not purchased, misappropriated
the said amount to the damage and prejudice of Jimenez.23
Before arraignment, the accused filed a civil case contesting the
validity of a certain receipt signed by them. In the receipt, the
accused acknowledged having received the aforesaid sum, in
addition to the amount of P240.00 as agent's commission. The
complaint, however, alleged that the accused never received any
amount from Jimenez and that the signatures on the questioned
receipt were secured by means of fraud, deceit and intimidation.
In ruling out the existence of prejudicial question, we declared:
. . . It will be readily seen that the alleged prejudicial question is
not determinative of the guilt or innocence of the parties charged
with estafa, because even on the assumption that the execution of
the receipt whose annulment they sought in the civil case was
vitiated by fraud, duress or intimidation, their guilt could still be
established by other evidence showing, to the degree required by
law, that they had actually received from the complainant the sum
of P20,000,00 with which to buy for him a fishing boat, and that,
instead of doing so, they misappropriated the money and refused
or otherwise failed to return it to him upon demand. . . .
Furthermore, petitioner submits that the truth or falsity of the
parties' respective claims as regards the true nature of the
transactions and of the documents, shall have to be first
determined by the Regional Trial Court of Manila, which is the
court hearing the civil case.
While this may be true, it is no less true that the Supreme Court
may, on certain exceptional instances, resolve the merits of a case
on the basis of the records and other evidence before it, most
especially when the resolution of these issues would best serve the
ends of justice and promote the speedy disposition of cases.
Thus, considering the peculiar circumstances attendant in the
instant case, this Court sees the cogency to exercise its plenary
power:
It is a rule of procedure for the Supreme Court to strive to settle
the entire controversy in a single proceeding leaving no root or
branch to bear the seeds of future litigation. No useful purpose will
be served if a case or the determination of an issue in a case is
remanded to the trial court only to have its decision raised again to
the Court of Appeals and from there to the Supreme Court
(citing Board of Commissioners vs. Judge Joselito de la Rosa and
Judge Capulong, G.R. Nos. 95122-23).
We have laid down the rule that the remand of the case or of an
issue to the lower court for further reception of evidence is not
necessary where the Court is in position to resolve the dispute
based on the records before it and particularly where the ends of
justice would not be subserved by the remand thereof (Escudero
vs. Dulay, 158 SCRA 69). Moreover, the Supreme Court is clothed
with ample authority to review matters, even those not raised on
appeal if it finds that their consideration is necessary in arriving at
a just disposition of the case. 24
On many occasions, the Court, in the public interest and for the
expeditious administration of justice, has resolved actions on the
merits instead of remanding them to the trial court for further
proceedings, such as where the ends of justice would not be
subserved by the remand of the case.25
Inexorably, the records would show that petitioner signed and
executed an application and agreement for a commercial letter of
credit to finance the purchase of imported goods. Likewise, it is
undisputed that petitioner signed and executed trust receipt
documents in favor of private respondent Allied Banking
Corporation.
In its amended complaint, however, which notably was filed only
after the Court of Appeals rendered its assailed decision, petitioner
urges that the transaction entered into between the parties was
one of "pure loan without any trust receipt agreement". According
to petitioner, the trust receipt documents were intended merely as
"additional or side documents covering the said loan" contrary to
petitioner's allegation in his original complaint that the trust
receipts were executed as collateral or security.
We do not agree. As Mr. Justice Story succinctly puts it: "Naked
statements must be entitled to little weight when the parties hold
better evidence behind the scenes. 26
Hence, with affirmance, we quote the findings of the Court of
Appeals:
The concept in which petitioner signed the trust receipts, that is
whether he signed the trust receipts as such trust receipts or as a
mere evidence of a pure and simple loan transaction is not decisive
because precisely, a trust receipt is a security agreement of an
indebtedness.
Contrary to petitioner's assertions and in view of jurisprudence
established in this jurisdiction, a trust receipt is not merely an
additional or side document to a principal contract, which in the
instant case is alleged by petitioner to be a pure and simple loan.
As elucidated in Samo vs. People,27 a trust receipt is considered a
security transaction intended to aid in financing importers and
retail dealers who do not have sufficient funds or resources to
finance the importation or purchase of merchandise, and who may
not be able to acquire credit except through utilization, as
collateral, of the merchandise imported or purchased.
Further, a trust receipt is a document in which is expressed a
security transaction whereunder the lender, having no prior title in
the goods on which the lien is to be given and not having
possession which 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.28 It is a security agreement
pursuant to which a bank acquires a "security interest" in the
goods. It secures an indebtedness and there can be no such thing
as security interest that secures no obligation.29
Clearly, a trust receipt partakes the nature of a security
transaction. It could never be a mere additional or side document
as alleged by petitioner. Otherwise, a party to a trust receipt
agreement could easily renege on its obligations thereunder, thus
undermining the importance and defeating with impunity the
purpose of such an indispensable tool in commercial transactions.
Of equal importance is the fact that in his complaint in Civil Case
No. 92-60600, dated 05 March 1992, petitioner alleged that the
trust receipts were executed and intended as collateral or security.
Pursuant to the rules, such particular allegation in the complaint is
tantamount to a judicial admission on the part of petitioner Ching
to which he must be bound.
Thus, the Court of Appeals in its resolution dated 28 June 1993,
correctly observed:
It was petitioner himself who acknowledged the trust receipts as
mere collateral and security for the payment of the loan but kept
on insisting that the real and true transaction was one of pure loan.
...
In his present motion, the petitioner alleges that the trust receipts
are evidence of a pure loan or that the same were additional or
side documents that actually stood as promissory notes and not a
collateral or security agreement. He cannot assume a position
inconsistent with his previous allegations in his civil complaint that
the trust receipts were intended as mere collateral or security . . . .
Perhaps, realizing such flaw, petitioner, in a complete turn around,
filed a motion to admit amended complaint before the RTC-Manila.
Among others, the amended complaint alleged that the trust
receipts stood as additional or side documents, the real transaction
between the parties being that of a pure loan without any trust
receipt agreement.
In an order dated 19 November 1993, the RTC-Manila, Branch 53,
admitted the amended complaint. Accordingly, with the lower
court's admission of the amended complaint, the judicial admission
made in the original complaint was, in effect, superseded.
Under the Rules, pleadings superseded or amended disappear from
the record, lose their status as pleadings and cease to be judicial
admissions. While they may nonetheless be utilized against the
pleader as extrajudicial admissions, they must, in order to have
such effect, be formally offered in evidence. If not offered in
evidence, the admission contained therein will not be
considered.30
Consequently, the original complaint, having been amended, lost
its character as a judicial admission, which would have required no
proof, and became merely an extrajudicial admission, the
admissibility of which, as evidence, required its formal offer.31
In virtue thereof, the amended complaint takes the place of the
original. The latter is regarded as abandoned and ceases to
perform any further function as a pleading. The original complaint
no longer forms part of the record.32
Thus, in the instant case, the original complaint is deemed
superseded by the amended complaint. Corollarily, the judicial
admissions in the original complaint are considered abandoned.
Nonetheless, we must stress that the actuations of petitioner, as
sanctioned by the RTC-Manila, Branch 53 through its order
admitting the amended complaint, demands stern rebuke from this
Court.
Certainly, this Court is not unwary of the tactics employed by the
petitioner specifically in filing the amended complaint only after
the promulgation of the assailed decision of the Court of Appeals. It
bears noting that a lapse of almost eighteen months (from March
1992 to September 1993), from the filing of the original complaint
to the filing of the amended complaint, is too lengthy a time
sufficient to enkindle suspicion and enflame doubts as to the true
intentions of petitioner regarding the early disposition of the
pending cases.
Although the granting of leave to file amended pleadings is a
matter peculiarly within the sound discretion of the trial court and
such discretion would not normally be disturbed on appeal, it is
also well to mention that this rule is relaxed when evident abuse
thereof is apparent. 33
Hence, in certain instances we ruled that amendments are not
proper and should be denied when delay would arise,34 or when
the amendments would result in a change of cause of action or
defense or change the theory of the case, 35 or would be
inconsistent with the allegations in the original complaint.36
Applying the foregoing rules, petitioner, by filing the amended
complaint, in effect, altered the theory of his case. Likewise, the
allegations embodied in the amended complaint are inconsistent
with that of the original complaint inasmuch as in the latter,
petitioner alleged that the trust receipts were intended as mere
collateral or security, the principal transaction being one of pure
loan.
Yet, in the amended complaint, petitioner argued that the said
trust receipts were executed as additional or side documents, the
transaction being strictly one of pure loan without any trust receipt
arrangement. Obviously these allegations are in discord in relation
to each other and therefore cannot stand in harmony.
These circumstances, taken as a whole, lead this Court to doubt
the genuine purpose of petitioner in filing the amended
complaint.1âwphi1 Again, we view petitioner's actuations with
abhorrence and displeasure.
Moreover, petitioner contends that the transaction between
Philippine Blooming Mills (PBM) and private respondent Allied
Banking Corporation does not fall under the category of a trust
receipt arrangement claiming that the goods were not to be sold
but were to be used, consumed and destroyed by the importer
PBM.
To our mind, petitioner's contention is a stealthy attempt to
circumvent the principle enunciated in the case of Alied Banking
Corporation vs. Ordonez, 37 thus:
. . . In an attempt to escape criminal liability, private respondent
claims P.D. 115 covers goods which are ultimately destined for sale
and not goods for use in manufacture. But the wording of Section
13 covers failure to turn over the proceeds of the sale of the
entrusted goods, or to return said goods if unsold or disposed of in
accordance with the terms of the trust receipts. Private respondent
claims that at the time of PBM's application for the issuance of the
LC's, it was not represented to the petitioner that the items were
intended for sale, hence, there was no deceit resulting in a
violation of the trust receipts which would constitute a criminal
liability. Again we cannot uphold this contention. The non-payment
of the amount covered by a trust receipt is an act violative of the
entrustee's obligation to pay. There is no reason why the law
should not apply to all transactions covered by trust receipts,
except those expressly excluded (68 Am. Jur. 125).
The Court takes judicial notice of customary banking and business
practices where trust receipts are used for importation of heavy
equipment, machineries and supplies used in manufacturing
operations. We are perplexed by the statements in the assailed DOJ
resolution that the goods subject of the instant case are outside the
ambit of the provisions of PD 115 albeit covered by trust receipt
agreements (17 February 1988 resolution) and that not all
transactions covered by trust receipts may be considered as trust
receipt transactions defined and penalized under P.D. 115 (11
January 1988 resolution). A construction should be avoided when it
affords an opportunity to defeat compliance with the terms of a
statute.
xxx xxx xxx
The penal provision of P.D. 115 encompasses any act violative of an
obligation covered by the trust receipt; it is not limited to
transactions in goods which are to be sold (retailed), reshipped,
 stored or processed as a component of a product ultimately sold.
An examination of P.D. 115 shows the growing importance of trust
receipts in Philippine business, the need to provide for the rights
and obligations of parties to a trust receipt transaction, the study
of the problems involved and the action by monetary authorities,
and the necessity of regulating the enforcement of rights arising
from default or violations of trust receipt agreements. The
legislative intent to meet a pressing need is clearly expressed. 38
In fine, we reiterate that the civil action for declaration of nullity of
documents and for damages does not constitute a prejudicial
question to the criminal cases for estafa filed against petitioner
Ching.

Dispositiv WHEREFORE, premises considered, the assailed decision and

e Portion resolution of the Court of Appeals are hereby AFFIRMED and the
instant petition is DISMISSED for lack of merit. Accordingly, the
Regional Trial Court of Makati, Branch 58, is hereby directed to
proceed with the hearing and trial on the merits of Criminal Case
Nos. 92-0934 to 92-0937, inclusive, and to expedite proceedings
therein, without prejudice to the right of the accused to due
process.
SO ORDERED.