TUPAZ IV v. CA G.R. No.

145578
November 18, 2005 Ponente J. Carpio
TOPIC IN SYLLABUS: Directors and officers of corporation not civilly liable unless they assume personal liability
SUMMARY: El Oro Corporation's officers applied for letters of credit on behalf of El Oro Corporation, to finance raw
materials for the making of survival bolos. The two officers signed two trust receipts for the two letters of credit issued,
binding themselves to be liable in case of default by El Oro Corporation. El Oro Corp. could not pay. The two officers
were charged with estafa. The SC held that the officer who signed the trust receipt in his personal capacity is personally
liable for the debt, but when both officers signed another trust receipt with an indication that they are officers of the
corporation, they are not personally liable for the corporation's debt.
PROCEDURAL ANTECEDENTS: RTC (liable) Appeal to CA (affirmed) Petition for Review on Certiorari

FACTS:
 El Oro Engraver Corporation entered into a contract with the Philippine Army, to supply the Army with survival
bolos. To finance the purchase of the raw materials for the survival bolos, Jose C. Tupaz IV (El Oro's Vice-
President for Operations) and Petronila C. Tupaz (El Oro's Vice-President/Treasurer), applied for two commercial
letters of credit with Bank of the Philippine Islands (BPI). The application was granted and two letters of credit
were issued in favor of El Oro's suppliers: Letter of Credit No. 2-00896-3, for P564,871.05, in favor of supplier
Tanchaoco Manufacturing Inc. and Letter of Credit No. 2-00914-5, for P294,000 in favor of supplier Maresco
Corp.
 Simultaneous with the issuance of the letters of credit, Jose IV and Petronila signed two trust receipts in favor of
BPI. The first trust receipt was on 30 September 1981, signed by Jose IV (only) in his personal capacity,
corresponding to the first letter of credit issued; the second trust receipt was on 9 October 1981, signed by both
Jose IV and Petronila in their capacities as officers of El Oro Corporation, corresponding to the second letter of
credit issued. Respectively to the trust receipts signed, the signatories bound themselves to sell the goods covered
by each letter of credit and to remit the proceeds to BPI, if sold, or to return the goods, if not sold.
 The raw materials were delivered to El Oro Corp. by the suppliers. BPI paid the amounts on the Letters of Credit
to the suppliers. Jose IV and Petronila did not comply with their undertaking in the trust receipts, with BPI
sending its final demand letters in June 1983. El Oro Corp. could not pay because the Armed Forces of the
Philippines had delayed paying for the survival bolos.
 BPI charged Jose IV and Petronila with estafa. Informations were filed against them. Pled not guilty.
o RTC: Acquitted them on reasonable doubt but found them solidarily liable with El Oro Corporation for
the balance of El Oro's principal debt under the trust receipts.
o CA: Affirmed. The trust receipt agreement indicated in clear and unmistakable terms that the accused
signed the same as surety for the corporation and that they bound themselves directly and immediately
liable in the event of default with respect to the obligation under the letter of credit. Undertaking of
accused is in the nature of a surety as indicated in the trust receipt: “...the undersigned Applicant and
Surety hereby agree, jointly and severally, to each and all stipulations, provisions and conditions...”
thereby agreeing to hold themselves solidarily liable with El Oro Corp. under the trust receipt agreements.
They therefore may not invoke the separate legal personality of El Oro Corp.

ISSUE: WoN Jose IV and Petronila bound themselves personally liable for El Oro Corporation's debts under the two trust
receipts—For the first trust receipt (dated 30 September 1981) which only Jose signed, Jose bound himself
personally liable; for the second trust receipt (9 October 1981) which both had signed, both are not personally
liable.
W Jose IV's personal liability on the first trust receipt is that of a surety, and solidary with El Oro Corporation—No, he is
only a guarantor. However, he may already be held as liable because he waived the benefit of excussion (among
other things).

PETITIONER ARGUMENT: A judgment of acquittal extinguishes their liabilities; if they are found personally liable,
the amounts are not yet due and payable; they are not personally liable to BPI because they signed the letters of credit as
surety as “officers” of El Oro Corporation, making the debts the exclusive liability of El Oro Corporation.

HELD:
1. Jose IV is personally liable on the first trust receipt dated 30 September 1981, while Jose IV and Petronila are not
personally liable on the second trust receipt dated 9 October 1981.
Alinne CASE #11
  The trust receipts contain this clause on the dorsal side of said receipts: “To BPI...In consideration of your
releasing to...under the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree
and promise to pay...”
 In the second trust receipt dated 9 October 1981, Jose IV and Petronila signed below this clause as officers of El
Oro Corporation. Under the signature of Petronila were the words “Vice-Pres—Treasurer” and under Jose IV's
signature were the words “Vice-Ores—Operations.” By signing in that manner, as merely on behalf of El Oro,
they did not bind themselves personally liable for El Oro Corporation's obligation.
 In the first trust receipt dated 30 September 1981, however, wherein Jose IV signed alone, the Court finds that he
did so in his personal capacity. Jose IV did not indicate that he was signing as El Oro Corporation's Vice-
President for Operations. Hence, he bound himself personally liable for El Oro's debts. Since Petronila did not
sign this trust receipt, she is not a party to it and is not liable under said trust receipt.

2. The first trust receipt dated 30 September 1981 indicates that Jose IV is a surety and is jointly, not solidarily, liable
with El Oro Corporation.
 The dorsal side of the trust receipt, to continue, provides: “To BPI...In consideration of your releasing to...under
the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree and promise to
pay......in the event of default and/or non-fulfillment in any respect of this undertaking...I/we further agree that
my/our liability in this guarantee shall be DIRECT AND IMMEDIATE, without any need whatsover on your part
to take any steps or exhaust any legal remedies that you may have...”
 The lower court interpreted the first part to mean that Jose IV bound himself solidarily liable with Elo Oro
Corporation under the trust receipt. This is an error. Citing Prudential Bank v. IAC, the clause “we jointly and
severally agree and undertake” refers to the undertaking of and between the two (2) parties who will sign as
sureties or guarantors—it refers to the liability existing between themselves; between the two surety/guarantor-
obligors. It does not refer to the undertaking between either one or both of them on the one hand, and the principal
debtor (El Oro) on the other hand, with respect to the liability described under the trust receipt.

3. However, even though the trust receipt indicates that Jose IV is liable as a guarantor only, BPI's suit against Jose IV
stands.
 Jose IV can still be held to be directly liable, because of the following:
o First, excussion is not a pre-requisite to secure judgment against a guarantor. The guarantor can still
demand deferment of the execution of the judgment against him until after the assets of the principal
debtor shall have been exhausted.
o Second, the benefit of excussion may be waived. Jose IV waived excussion when he agreed that his
“liability in [the] guaranty shall be DIRECT AND IMMEDIATE, without any need whatsoever on... [the]
part [of BPI] to take any steps or exhaust any legal remedies.” It is clear from this stipulation that Jose IV
waived the benefit of excussion under his guarantee.

4. Trial Court is to compute El Oro's total liability under each of the trust receipts dated 30 September 1981 and 9
October 1981 based on TOTAL AMOUNT DUE = [principal + interest + interest on interest] – partial payments
made. Interest = principal x 18% per annum x no. of years from due date until finality of judgment. Interest on interest
= interest computed as of the filing of the complaint x 12% x no. of years until finality of judgment.
5. Acquittal does not extinguish civil liability.

Alinne CASE #11