REPUBLIC OF THE PHILIPPINES

COURT OF APPEALS
MANILA

FIFTEENTH DIVISION

CA-G.R CR No. 42943

(RTC Case No. 10-250)
Regional Trial Court
Branch 148, Makati City

For: Violation of Article 315(1)(b) of the Revised Penal Code,

in relation to PD 115

PEOPLE OF THE PHILIPPINES,

Plaintiff-Appellee

- versus -

JOHNNY D. ONG and WILSON CHING KIAN CHUAN ONG

Accused-Appellants

BRIEF FOR THE

ACCUSED-APPELLANTS

DIMAANO FUERTE LAYOS ALMORADIE AND GARCIA

(D' FLAG) LAW OFFICE
Suite 101 The Gregorian Building,
2178 Taft Avenue, Malate, Manila
Counsel for the ACCUSED-APPELLANTS
Tel. No. 988123 loc. 098

1
 SUBJECT INDEX

Page
STATEMENT OF THE CASE 3

STATEMENT OF FACTS 6

ARGUMENTS
13
1. Accused-Appellants are mere agents of Grand
East Empire Corporation, thus, they cannot be
held liable as corporate officers of the latter
16
2. Accused-Appellants, even as sureties cannot be
held liable for the implied adherence of the
Principal to pay the obligation through its
rehabilitation plan 17

3. Surety Agreement signed by Accused-

Appellants should be extinguished by operation
of law through the renewal of the Credit Line
Agreement between Grand East Empire and
Bangkok Bank

4. The rate of interests imposed shall conform with

latest jurisprudence.

PRAYER
CASES CITED: ~

1. University of Mindanao vs BSP, G.R. No. 194964- 14, 15

65, January 11, 2016.
2. Secosa v. Francisco, G.R. No. 160039, June 29, 15
2004.
3. Bañez v. Social Security System, GR No. 189574, 16
July 18, 2014. 18
4. Security Bank And Trust Company, Inc., vs
Cuenca, G.R. No. 138544, October 03, 2000.
5.

2
 REPUBLIC OF THE PHILIPPINES
COURT OF APPEALS
MANILA

FIFTEENTH DIVISION

PEOPLE OF THE PHILIPPINES,

Plaintiff-Appellee,

C.A – G.R No. 42943

(RTC Case No. 10-250
-versus- For: Violation of Article 315(1)(b) of
the Revised Penal Code (RPC), in
relation to PD 115)

JOHNNY D. ONG and WILSON

CHING KIAN CHUAN ONG,
Accused-Appellants.
x--------------------------------------------------------------x

BRIEF FOR THE ACCUSED-APPELLANTS

STATEMENT OF THE CASE

1. In an INFORMATION, ACCUSED-APPELLANTS were charged with

violation of Article 315(1)(b) of Revised Penal Code (RPC) in relation
to PD 115. The INFORMATION filed before the Regional Trial Court
in City of Makati, Branch 148 and docketed as Criminal Case No. 10-
250, which reads:

Information
(Criminal Case No. 10-250)
For: Violation of Article 315(1)(b) of the
Revised Penal Code in relation to PD 115

“In January 2007, in the city of Makati, the

Philippines, the accused executed a trust receipt with
number INM270031 and thereby received in trust
from the complainant, Bangkok Bank Public
Company, Inc. the goods worth Php 567,384.35
under the said trust receipt with the obligation to

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 deliver on or before July 30, 2007 to the said bank
the unsold goods and/or proceeds of those sold, but
the said accused once in possession of the said goods
and/or proceeds of the sale, conspiring and
confederating with one another, with intent to gain
and with abuse of confidence, did then and there,
willfully, unlawfully, and feloniously
misappropriate, misapply, and convert to their own
purpose and benefit the said goods and/or proceeds
of the sale and despite demand to account therefore,
the said accused failed and refused and still fail and
refuse to do so, to the damage and prejudice of the
aforesaid complaint in the amount of Php
567,384.45. ”

2. On May 25, 2010, upon arraignment, ACCUSED JOHNNY D. ONG

with the assistance of his counsel de parte, pleaded not guilty to the
offense charged.

3. On June 15, 2010, ACCUSED WILSON CHING KIAN CHUAN ONG

with the assistance of his counsel de parte and entered a plea of NOT
GUILTY to the crime charged.

4. On January 10, 2011, ACCUSED WILSON CHING KIAN CHUAN

ONG filed a Demurrer to Evidence, which was subsequently granted on
January 5, 2012, thereby dismissing the criminal aspect of said accused
without prejudice to the resolution of the civil aspect thereof.

5. As to ACCUSED JOHNNY ONG, after trial on merits, the trial court

rendered its DECISION dated February 24, 2014, dismissing the case
for failure of the prosecution to prove the guilt of JOHNNY ONG
beyond reasonable doubt. The dispositive portion of the DECISION
reads:

“WHEREFORE, for failure of the prosecution to

prove the guilt of accused JOHNNY ONG beyond
reasonable doubt, the criminal aspect of the case
against the latter is hereby DISMISSED.

Meanwhile, accused JOHNNY ONG and WILSON

CHING KIAN CHUAN ONG shall be jointly and
solidarily with Grand the East Empire Corporation
for the obligation or loan covered by Trust Receipt
No. INM270031. This civil liability however is
considered a claim covered by the rehabilitation
plan duly approved by RTC, Branch 24 of Manila,

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 and its payment and satisfaction shall be that
provided for in the said corporate rehabilitation
plan.

SO ORDERED.

City of Makati. February 24, 2014.”

6. On May 5, 2012, Private Complainant BANGKOK BANK filed Motion

for Reconsideration, to which the court granted in an ORDER dated
April 29, 2014. The dispositive portion of said ORDER states that:

“WHEREFORE, premises considered, the Motion

for Reconsideration is hereby GRANTED.

Accused Johnny Ong and Wilson Ong, as sureties

ate directed to pay to Private Complainant
Bangkok Bank solidarily:

1) The principal amount of P567, 384.35

representing the loan obligation covered by
Trust Receipt No. INM270031 with interest
rate of 8.75% and 12% penalty charge per
annum until the obligation is fully paid.

2) Costs of suit.

Satisfaction of the foregoing precludes the private

complainant from collecting under the rehabilitatio
plan.

SO ORDERED.

City of Makati. April 29, 2014”

7. Hence, this appeal.

8. Maintaining that the ACCUSED-APPELLANTS, though absolved

from their criminal liability, shall not be held civilly liable, based on the
following issues, to wit:

ISSUES

I.
The trial court erred in finding ACCUSED-APPELLANTS solidarily

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 liable as sureties, in the amount of PHP 567,384.35 to BANGKOK
BANK, as ACCUSED-APPELLANTS are merely agents of Grand East

II.
The trial court erred in holding that the interest for the said amount of
PHP 567,384.35 shall be in the rate of 8.75% and in imposing 12%
penalty charge per annum until the obligation is fully paid.

STATEMENT OF FACTS

9. The relevant facts, as synthesized by the trial court in its DECISION,

are as follows:

“On July 23, 2010, the prosecution filed a Motion for the issuance
of Hold Departure order. In the order of the Court dated November 17, 2010
the Court only granted the issuance of Hold Departure Order against
accused Johnny Ong and denied the motion with respect to accused Wilson
Ching Kian Ong.

On September 28, 2010, the prosecution filed a Motion to Amend

Pre-Trial Order to reflect that both accused Johnny and Wilson Ong
admitted or stipulated on their identities and the said motion was granted in
the Order of the Court dated October 01, 2010.

The Prosecution’s first witness was Oliver C. Bulaong, 39 years old,

single, employee and residing at Cityland IX, Makati City. He testified that
he was the current Administrative Officer of Bangok Bank since October
2000; that Bangkok Bank is a corporation duly registered under the Laws
of the Kingdom of Thailand with license to do business in the Philippines,
particularly banking transactions as evidenced by the Certificate of
Authority (Exhibit “A”) issued by the Bangko Sentral ng Pilipinas; that as
Administrative Officer, he was assigned to facilitate documentaries and
related loans, to update records regarding the said loans and to issue
confirmation statement of statements of account pertaining to the loans; that
he knows Johnny Ong because he met him during the signing of credit
documents between Grand East Empire and Bangkok Bank on several
occasions; that he met Mr. Johnny Ong together with Mr. Wilson Ong
sometime in 2003 when Bangok Bank and Grand East Empire and Bangkok
Bank; that in the said meeting Johnny Ong and Wilson Ong signed in his
presence credit documents which included the Offer Letter dated June 29,
2005 (Exhibit “B”); the Credit Line Agreement (Exhibit “C”) and the
Continuing Surety Agreement (EXHIBIT “D”); that the Offer letter
contained the signatures of the authorized representatives of Bangkok Bank
in the person of Prasarn Tuntasood, and those of Johnny Ong and Wilson
Ong for Grand East Empire; , with Ms. Carmen Soliven signing as witness
for Bangkok Bank and Ma. Angela Ong, for Grand East Empire; that he
now that the signatures appearing in the Offer letter were that of aforesaid
persons as he was present when they signed the document; that the aforesaid
documents were executed to document the approval of Bangkok Bank of
the credit line application of Grand East Empire amounting to US Dollar
One Million (US$1,000,000.00) ; that Johnny Ong and Wilson Ong were

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authorized to sign in behalf of Grand East Empire the aforesaid credit
documents because of the Secretary’s Cerificate (Exhibit”K”) executed by
Grand East Empire in favor of Johnny and Wilson Ong; that Johnny Ong
was indicated as President and Wilson Ong as Assistant Treasurer; that aside
from the Secretary’s Certificate, the General Information Sheet (Exhibit
“J”) of Grand East for the years 2005,2006 and 2007 obtained from the
Securities and Exchange Commission (SEC) also indicate Johnny Ong as
the President or General Manager of Grand East and Wilson Ong as the
Assistant Treasurer; that the Credit Line Agreement with the same
signatories in the offer letter was executed to document that Bangkok Bank
granted One Million US Dollars (US$1,000,000.00) credit line facility for
Grand East Empire; that a continuing Suretyship Agreement was likewise
executed by the same parties with the marital consent of the wives of Johnny
Ong and Wilson Ong; that aside from signing the first credit line transaction,
Johnny Ong and Wilson Ong likewise signed the renewal of the Credit Line
Agreement between Grand East Empire and Bangkok Bank in the same
amount of US Dollar One Million ( US$1,000,000.00) as evidenced by
another offer letter for purposes of renewal marked as (Exhibit “E”; that
Grand East Empire made several draw outs against the renewed credit line
by way of trust receipts; that in the said availment, Grand East Empire
would execute trust receipts in favor of Bangkok Bank and the latter would
pay the importation costs by Grand East Empire from its supplier; that
Grand East Empire, availed of the aforesaid credit line by executing among
others trust receipt No. INM270031 (Exhibit ‘F”) in the amount of
P567,284.35 covering canned cream of mushroom goods; that under
Section 1 of the said trust receipt the trustee (Grand East Empire)
acknowledged receipt from the holds in trust for Bangkok Bank (the trustor)
the described (trust) goods over which the trustor had and maintained a
security interest; that the due date of the trust receipt was July 30, 2007 and
said trust receipt was signed by Johnny Ong and Wilson Ong; that Grand
east Empire before and after the execution of the aforesaid trust receipt, had
already executed several trust receipts likewise signed by Johnny Ong and
Wilson Ong; that as a matter of operation and after the credit documents
were executed and found in order, Grand East Empire could make draw outs
against the credit line; that in such case, Grand East Empire would make
their importation from their suppliers and Bangkok Bank would finance
those importations; that Grand East Empire would execute particular draw
out; that for Grand East Empire’s importation, the import documents
coming from the suppliers would be directly channeled to Bangkok Bank;
the Bangkok Bank would inform Grand East Empire of those documents,
and at the latter’s discretion, would execute the trust receipts; that in turn
Bangkok Bank would release those documents to their authorized agent or
broker and that said agents or broker would then deliver those documents
to the shipping line where the underlying goods or imported goods are
brought in for subsequent release; that he imported goods would be released
by the shipping line directly to Grand East Empire through their
agent/broker and in doing so, Bangkok Bank would pay their suppliers
directly; that the aforesaid procedure was followed in the execution of trust
receipt no. INM270031; that after the execution of the said trust receipt at
the time of draw out, Grand East Empire was supposed to sell the goods
covered by the trust receipt and turn over the sales proceeds to Bangkok
Bank to pay off the trust receipt; that in case the goods are not sold, Grand
East was to turn-over those goods to Bangkok Bank; that Grand East Empire
failed to remit or turn over the subject goods and/or sales proceeds, Bangkok
Bank sent several demand letters to Grand East for the latter to settle its
obligation; that the demand letters (Exhibit “G-G-5”) prepared by the

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witness were sent to Grand East Empire and to the sureties, Johnny Ong and
Wilson Ong; that the demand letters were sent via personal delivery and
received by certain Cassandra Ong; that same demand letters were likewise
sent by registered mail; that despite receipt of the demand letters were
likewise sent by registered mail; that despite receipt of the demand letters,
Grand East Empire, Wilson Ong and Johnny Ong as personal sureties failed
to settle their obligations, that they were force to seek help from their legal
counsel and the latter sent three final demand letters dated March 18, 2009
(Exhibits “H-H-2”) to Grand East Empire, Johnny Ong and his wife also as
personal surety for the full payment of their obligation; that based on the
Statement of Account prepared by the witness the outstanding obligation of
the accused amounts to P567,384.35.

On cross examination by the counsel for accused Johnny Ong, the

witness testified that Grand East Empire became client of Bangkok Bank in
2013; that at the end of the 2005 to 2006 term, he believed that Grand East
Empire first became a client of Bangkok Bank in 2003, that at the end of
the 2005 to 2006 term, he believed that Grand East Empire had no unsettled
obligations and were still in good standing with the bank; that the credit line
agreement between Bangkok Bank and Grand East Empire was renewed in
2007 and he was always present and a witness to the execution of the credit
documents; that he prepared said Credit Line Agreement; that he believed
that the signature appearing above the name Johnny Ong was that of the
latter since in several occasions starting in the year 2003 he was always
present during the signing by Johnny Ong; that he was however not present
when the subject documents were notarized; that he was not sure as to which
hand Johnny Ong used in signing the aforesaid documents.

On cross examination by counsel for accused Wilson Ong, it was

stipulated based on the General Information Sheets presented previously
marked by the prosecution that Wilson Ong was not a stockholder of Grand
East Empire and that he (the witness) was not present when accused Wilson
Ong allegedly signed Trust Receipt No. INM270031; that he was not aware
that during the alleged notarization of the aforesaid trust receipt, on
February 12, 2007, Wilson Ong was not in the country; that in the collection
notice he prepared dated September 29, 2008 he did not mention in
particular Trust Receipt No. INM270031 and that he did not attach any
statement of account to show the details of the alleged outstanding
obligation of Wilson Ong; that he was not the one who personally served
the notices to the accused which appeared to have been received by a certain
Cassandra Ong; and that in the collection notice he prepared dated
November 6, 2008, he likewise did not state or mention the subject Trust
Receipt No. INM270031.

On re-direct examination, the witness testified that it is not his duty

personally serve collection notices to their clients; that in the collection
notices dated November 6, 2008 and December 03, 2008, the obligations
covered in notices pertained to the entire obligation of Grand East Empire
including the trust receipt which is the subject matter of this case; that a
statement of account was attached to the three demand letters sent by their
legal counsel to the accused.

On re-cross examination, the witness testified that he did not know

if Cassandra Ong actually received the collection notices.

Upon clarificatory questioning by the Court, the witness testified

8
that the only evidence available to show that the accused received the goods
covered by the subject trust receipt was the import documents.

Prosecution’s witness Maria Liza S. De Leon, 43 years old, single,

Senior Manager for OOCL Phils., resident of 811 Santos Street, Phase !V,
Marcela Village, Paranaque City, testified that she was the Senior Manager
for Strategic Accounts and Head of Customer Service for Orient Overseas
Container Line (OOCL) Philippines, Inc.; that their company is engaged in
International Container Lines Transportation or in layman’s term, a
shipping line but engaged in container’s only; that as a Senior Manager of
OOCL, she handled strategic accounts particularly on sales and partly heads
the customer service; that as customer service head she handled booking.
Bound and outbound documentation; that with respect to the process
followed by the shipping line for the release or delivery of goods, inbound
cargo was released only full settlement of the charges and receipt of
complete sets of document like the original bills of lading; that based on the
documents they have to wit (reprinted copy of bills of lading No.
00LU3008827080 (Exhibit “V”), reprint of OOCL invoice NO.
4200451890 dated October 17, 2006 (Exhibit “T”), hard copy of the Official
Receipt No. 101036 dated February 5, 2007 (Exhibit “S”, “V”, and “U” and
bank records), Grand East Empire with address at 22 Miller Street, San
Francisco Del Monte, Quezon City; that since the invoice was issued to
Grand East Empire, the latter was considered responsible for the charges
were paid as evidenced by the above said official receipt and screenshots of
the payment record; that the payment was coursed through a bank as
evidenced by the deposit slip; that as part of the process, after payment, the
customer would go to their office and present the bill of lading and proof of
payment; that they would stamp the same and after which the customer
could go to the port and have the container released to it; that the official
receipt as proof of payment was issued to Grand East Empire ; that based
on the Historical Data Enquiry System Container Movement History, the
particular shipment BL No. 3008827080 was issued to the customer on
February 06, 2007 and the empty container was likewise returned to them
on the same date; that they no longer have the original copy of the subject
bill of lading and could no longer retrieve it since it pertained to a 2006
shipment.

On cross-examination by counsel for accused Wilson Ong, the

witness testified that her knowledge was limited only to the container
movement history. On cross-examination by counsel for accused Johnny
Ong, she testifies that her only involvement in the preparation of the
documents she testified on was that she personally asked their Help Desk to
retrieve those data since it pertained to a shipment.

On re-direct examination, the witness averred that it is not her duty

to prepare physically all the paper works for the company.

Upon clarificatory questioning by the Court, the witness testified

that she did not know who emptied the containers and her knowledge was
only with respect to the date the containers were issued and returned; that
based on the records regarding the container movement, the shipment was
released to the customer on February 06, 2007, but their records did not
show the party’s name, but the subject bill of lading described the goods as
canned cream of mushroom and no other.

Upon request and motion of the prosecution, Oliver Bulaong was

9
recalled to the witness stand and testified on the following: that on January
31, 2007, he released the related import documents such as original bill of
lading, the packing list, health certificate, together with some official receipt
for the said importation to Grand East Empire; that the bill of lading issued
to Grand east is Bill of Lading No. 3008827080, the same bill of lading
identified and provided by witness De Leon when she testified in Court; the
said bill of lading came from the correspondent bank of the supplier from
China, and they received those import documents sometime in October
2006 and informed Grand East Empire about it; that out of the three original
bill of lading sent to them, they retained one copy and sent the import
documents and two copies of the bill of lading to Grand East Empire. The
witness identified the original copy of bill of lading No. 3008827080 which
they retained in their possession.

On December 06, 2010 the prosecution filed their offer of

documentary exhibits, the exhibits were admitted on December 16, 2010.

On January 10, 2011, accused Wilson Ching Kian Chuan Ong filed
a Demurrer to Evidence. On January 17, 2011, the prosecution filed an
Opposition to the said Demurrer.

On January 05, 2011, the Court granted the demurrer to evidence

filed by accused Wilson Ching Kian Chuan Ong alias Wilson Ong and the
criminal aspect of the case was dismissed with respect to the said accused
without prejudice to the resolution of the civil aspect thereof.

The prosecution filed a motion for reconsideration on February 15,

2011, which was denied by the Court on February 05, 2012.

Accused Wilson Ong aka WILSON CHING KIAN CHUAN ONG,

testified on the civil aspect of the case stating that he is the accused in this
case and he used to work for the defendant Grand East Empire Corporation
as an Assistant Treasurer from 1995 to 2006; that he personally wrote a
letter to Johnny Ong stating his desire to leave the company and he thus
ceased to be Assistant Treasurer of Grand East Empire Corporation since
2006, when the company, was not doing well; that although he was an
Assistant Treasurer of Grand East Empire Corporation, he was not a
stockholder or member of the board; that he and accused Johnny Ong are
brothers; that Johnny Ong was the President, General Manager, majority
stockholder and member of the board; that plaintiff Bangkok Bank Public
Company granted Grand East Empire a credit facility which the latter used
to avail through Trust Receipts from the year 1997 to 2006; that he could
not have executed the Trust Receipt No. INM270031 (Exh. “F”) because he
already left the company in December 2006 and the said Trust Receipt was
dated January 31, 2007; that he never appeared to subscribe any documents
before the notary public who notarized the said Trust Receipt; that when
the Trust Receipt was apparently notarized on February 12, 2007, he was in
Hongkong as shown by the Certificate issued by the Bureau of Immigration
when the counsel for the bank requested for a Hold Departure Order with
the attached list of departures and arrivals; that the said certificate was
attached as Annex “B” of the Motion for Hold Departure Order, filed by the
counsel for the plaintiff dated July 22, 2010; that his departure date was
February 11, 2007, and his arrival date was February 13, 2007; that neither
he nor his family received any benefit from the Trust Receipt transaction
and the execution of the Surety Agreement ; that the General Information
Sheet could not be used as proof that he was connected with the company

10
because he ceased to be connected with defendant Grand East Empire when
the General Information Sheet dated 24 July 2007 was notarized on August
6, 2007; that after he ceased to be connected with defendant Grand East in
2006 he was hired by Iberia Steel Corporation on February 2007 until April
2010 as Sales Executive as shown by the Certificate of Employment issued
by the General Manager of Iberia Steel Corporation, Mr. Stanley C. Chan;
that the filing of this case caused hi emotional stress and constrained him to
hire the services of counsel, particularly Lara Uy Santos Tayag and
Danganan Law Firm; that a service agreement was entered into regarding
the legal services to be rendered; that the arrangement as to the fees to be
paid to the counsel are as follows: for appearance fees. P3,500 and for the
pleadings drafted P5,000.00.

On cross-examination, he testified that based on his Sinumpaang

Kontra Salaysay dated June 9, 2009, he confirmed that he signed the Trust
Receipts in advance because he was out of the office most of the time; that
he maintained a record of the Trust receipts he signed in advance, and
because he was always out of the office he entrusted the possession of those
Trust Receipts, with Grand East Empire; that when he signed those Trust
Receipts he knew that Grand East Empire would use them to avail of credit
facility from Bangkok Bank; that he signed those Trust receipts in advance
so that Grand East Empire could use them even while he was not physically
present in office; that he executed Continuing Suretyship Agreement dated
June 29, 2005; that under clause 1 thereof he bound himself to ‘irrevocably
and unconditionally guarantee to the Bank, as principal debtors who are
jointly and severally liable with Grand East Empire, the payment when due
of any and all indebtedness of Grand East Empire under the Credit Line
Agreement, including any and all availments drawn after expiry of the
Credit Line Agreement’; that he did not try to have this Continuing
Suretyship Agreement cancelled after he resigned from Grand East Empire;
that he did not tell Bangkok Bank after he resigned from Grand East Empire
that he was no longer connected with the latter.

On re-direct examination, he further testified that the Trust Receipts

referred to in the Sinumpaang Kontra Salaysay dated June 9, 2009 are Trust
Receipts the he signed while he was still working with the company.

On re-cross examination, he confirmed that the only Trust Receipt

subject of this case was the Trust Receipt subject of this case was the Trust
Receipt No. INM270031 granted on January 31, 2007.

Accused Wilson Ong orally offered his evidence and after the
prosecution filed their Comment thereto, the formal offer of evidence was
admitted on November 07, 2012.

For his part accused Johnny Ong first offered the testimony of one
VIVEL MANALO, 32 years old, married, secretary and a resident of Brgy.
Holy Spirit, Quezon City, to prove that she was an employee of Grand East
Empire Corporation when the said transaction took place; and that she was
familiar with the day to day operations of the corporation and the duties and
responsibilities of both accused. However, the testimony of the witness was
expunged from the records due to irrelevancy.

On December 04, 2013, accused Johnny Ong testified in his defense

through a Judicial Affidavit which served as his direct testimony and he
testified that he was the President and General Manager of Grand east

11
 Empire Corporation with office address at 19H Marina Square
Condominium, M.H> Del Pilar cor. Mabini St. Malate, Manila; that he was
with Grand East Empire since its incorporation in 1995; that Grand East is
engaged in the business of importing, exporting, selling, distributing,
marketing, and wholesaling all kinds of goods, commodities, wares, and
merchandise of every kind and description since its incorporation on March
23, 1995; that the corporation has been very viable and financially
profitable; that Grand East Empire became an integral part of the trade in
critical areas in Metro Manila, by supplying around 70% of the restaurants
with vermicelli, oyster sauce, sesame oil, tomato paste; that at present, the
corporation is under corporate rehabilitation as evidenced by the Petition
for Corporate Rehabilitation (Exhibit “1”) which he prepared and caused to
be filed; that he knew private complainant Bangkok Bank being a creditor
of Grand East Empire Corporation; that Bangkok Bank extended loans to
the Corporation starting 2005 and trust receipts were executed in favor of
the bank; that although the amounts due on in the trust receipts were not
paid on time, a schedule of repayment has been approved by the
rehabilitation court and the same is binding upon the debtor and all persons
who may be affected by it, including creditors; that whether such persons
have or have not participated in the proceedings or have opposed the plan
or whether their claims have or have not been scheduled, with the approval
by the rehabilitation court of the plan for Grand East Empire Corporation,
there is nothing left to be done but to enforce the terms and schedule of
payment as provided in the said plan; that said rehabilitation plan covers
complaint Bangkok bank as the latter was recognized as one of the creditors
of Grand East Empire Corporation; that Grand East filed a Statement of
Claims dated March 02, 2012 in SP proc. Case No. 12-127162 entitled “In
the Matter of the Corporate Rehabilitation of Grand East Empire
Corporation, pending with RTC, Manila Branch 24 as evidenced by the
Statement of Claims dated March 2, 2012; (Exhibit “2”); that a schedule of
repayment has been approved by the rehabilitation court as evidenced by
the order of the Court dated May 20, 2013 (Exhibit ‘3”) approving the
rehabilitation of Grand East Empire.

On December 19, 2013, accused Johnny Ong filed his formal offer
of evidence. All exhibits offered were admitted by the Court.”

ARGUMENTS/DISCUSSIONS

Accused-Appellants are mere agents

of Grand East Empire Corporation,
thus, they cannot be held liable as
corporate officers of the latter

10. The trial court, in its ORDER dated August 29, 2014, which
granted the MOTION FOR RECONSIDERATION, held that
ACCUSED-APPELLANTS are sureties of GRAND EAST EMPIRE
CORPORATION (Hereinafter referred to as GRAND EAST for brevity).
The said ORDER further provides that:

“WHEREFORE, premises considered, the Motion for

Reconsideration is hereby GRANTED.

12
 Accused Johnny Ong and Wilson Ong, as sureties
are directed to pay to Private Complainant
Bangkok Bank solidarily:

1) The principal amount of P567, 384.35

representing the loan obligation covered by Trust
Receipt No. INM270031 with interest rate of
8.75% and 12% penalty charge per annum until
the obligation is fully paid.

2) Costs of suit.

Satisfaction of the foregoing precludes the private

complainant from collecting under the rehabilitation
plan.

SO ORDERED.

City of Makati. April 29, 2014”

11. Act no. 1459 or the Corporation Law provides the statutory
definition of a Corporation, which provides:

Section 2. A corporation is an artificial being created

by operation of law, having the right of succession
and the powers, attributes, and properties expressly
authorized by law or incident to its existence.

12. A corporation, can only exercise those powers which are duly
conferred by the Corporation Code, its own articles of incorporation,
by-laws, and those which are necessary or incidental to the exercise of
the powers conferred, otherwise, it is considered void acts of
corporations.1 In effect, the officers who acted on such powers would
be held personally liable.

13. It is the contention of herein Accused-Appellants that he cannot

be made liable for contracting the Credit Line Agreement and
continuing Suretyship Agreement with Bangkok Bank, as President and
Treasurer of the Grand East Empire, as it is a necessary or incidental act
to the exercise of the powers conferred by the Secretary’s Cerificate
(Exhibit”K”) executed by Grand East Empire in favor of Johnny and
Wilson Ong.

14. In order to determine if a corporate act, through its corporate

1SEC. 45. Ultra vires acts of corporations.—No corporation under this Code shall possess or exercise any
corporate powers except those conferred by this Code or by its articles of incorporation and except such as
are necessary or incidental to the exercise of the powers so conferred.

13
 officers, is in accordance with its purposes, one should consider the
logical relation of the act to the corporate purpose expressed in the
charter. If that act is one which is lawful in itself, and not otherwise
prohibited, is done for the purpose of serving corporate ends, and is
reasonably tributary to the promotion of those ends, in a substantial, and
not in a remote and fanciful, sense, it may fairly be considered within
charter powers. The test to be applied is whether the act in question is
in direct and immediate furtherance of the corporation’s business, fairly
incident to the express powers and reasonably necessary to their
exercise. If so, the corporation has the power to do it; otherwise, not.2

15. In the present case, the Credit Line Agreement was a valid act of
the Grand East Empire as specifically allowed by the Secretary’s
Cerificate (Exhibit”K”) executed by Grand East Empire.

16. Also, the continuing Suretyship Agreement, although signed by

the Accused-Appellant in their personal capacity, is done for the purpose
of accommodating the Credit Line Agreement, thus serving a direct
corporate ends. It is contracted in furtherance of the corporation’s
business, fairly incident to the express powers given to them as
President and Treasurer of the Grand East Empire.

17. It is a settled principle in this jurisdiction that a corporation is

invested by law with a personality separate from that of its stockholders
or members. It has a personality separate and distinct from those of the
persons composing it as well as from that of any other entity to which it
may be related. Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not
in itself sufficient ground for disregarding the separate corporate
personality. A corporation's authority to act and its liability for its
actions are separate and apart from the individuals who own it.3

18. The so-called veil of corporation fiction treats as separate and

distinct the affairs of a corporation and its officers and stockholders. As
a general rule, a corporation will be looked upon as a legal entity, unless
and until sufficient reason to the contrary appears. When the notion of
legal entity is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, the law will regard the corporation as an
association of persons. Also, the corporate entity may be disregarded in
the interest of justice in such cases as fraud that may work inequities
among members of the corporation internally, involving no rights of the
public or third persons. In both instances, there must have been fraud
and proof of it. For the separate juridical personality of a corporation to
be disregarded, the wrongdoing must be clearly and convincingly

2 University of Mindanao vs BSP, G.R. No. 194964-65, January 11, 2016 , citing Montelibano, et al. v. Baco-
lod-Murcia Milling Co., Inc., 115 Phil. 18 (1962).
3 Villanueva, Philippine Commercial Law Review, 2013 edition, p. 345.

14
 established. It cannot be presumed.4

19. The acts of the Grand East Empire through the issuance of the
Secretary’s Certificate created a presumption that corporate acts
exercised by Accused-Appellants are valid if, on their face, the acts were
within the corporation’s powers or purposes.

20. Therefore, it is the contention of the Accused-Appellants that the

case is bereft of any evidence tending to show the presence of any
grounds that will justify the piercing of the veil of corporate fiction such
as to hold the previous President and the Treasurer of Grand East
Empire solidarily liable with it.

Accused-Appellants, even as sureties

cannot be held liable for the implied
adherence of the Principal to pay the
obligation through its rehabilitation
plan

21. The trial court, in its DECISION dated February 24, 2014, held
that this civil liability is considered a claim covered by the rehabilitation
plan and its payment and satisfaction shall be that provided for in the
said corporate rehabilitation plan. The said ORDER further provides
that:

“WHEREFORE, for failure of the prosecution to

prove the guilt of accused JOHNNY ONG beyond
reasonable doubt, the criminal aspect of the case
against the latter is hereby DISMISSED.

Meanwhile, accused JOHNNY ONG and WILSON

CHING KIAN CHUAN ONG shall be jointly and
solidarily with Grand the East Empire Corporation for
the obligation or loan covered by Trust Receipt No.
INM270031. This civil liability however is
considered a claim covered by the rehabilitation plan
duly approved by RTC, Branch 24 of Manila, and its
payment and satisfaction shall be that provided for in
the said corporate rehabilitation plan.

SO ORDERED.

City of Makati. February 24, 2014.”

22. It is the position of the Accused-Appellants that when Grand East

4Secosa v. Francisco, G.R. No. 160039, June 29, 2004, citing Volume 1,Fletcher Cyclopedia Corporations,
Chapter 2, Section 41.7, Matuguina Integrated Wood Products, Inc. v. Court of Appeals, G.R. No. 98310, 24
October 1996, and Avelina G. Ramoso, et al. v. Court of Appeals, et al., G.R. No. 117416, 8 December 2000.

15
 Empire, as the Principal of the Credit Line Agreement, failed to appeal
the original decision of the Trial Court directing the same to pay
Bangkok Bank through its Rehabilitation Plan within the reglementary
period, the corporation impliedly abide to the court’s order to pay
Bangkok Bank.

23. The rule is that failure to file or perfect an appeal within the
reglementary period will make the judgment final and executory by
operation of law.5

24. In the case at bar, Principal Grand East Empire failed to oppose
the February 24, 2014 Decision of the trial court within the
reglementary period. Therefore, the judgment provided therein,
specifically ordering Grand East Empire to pay Bangkok Bank through
their rehabilitation plan is final and executory by operation of law as to
them. Grand East Empire cannot be affected by the appeal made by the
Accused-Appellant in this case.

25. Thus, when the debtor agreed to pay the creditor, the obligation
of the former is extinguished. Corollary, the obligation of the guarantor
or the surety is also extinguished.6

Surety Agreement signed by Accused-

Appellants should be extinguished by
operation of law through the renewal
of the Credit Line Agreement between
Grand East Empire and Bangkok Bank

26. The statutory definition of suretyship is found on Article 2407 of

the Civil Code, thus:

Art. 2407. By a guaranty, a person called the

guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter
should fail to do so.

If a person binds himself solidarily with the

principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In
such case the contract is called a suretyship.”

27. The surety's liabilities is determined strictly by the terms of the

contract of suretyship, in relation to the principal contract between the
5 Bañez v. Social Security System, GR No. 189574, July 18, 2014.
6 Art. 2076. The obligation of the guarantor is extinguished at the same time as that of the debtor, and for
the same causes as all other obligations.

16
 obligor and the obligee. Once the principal contract is extended or
novation takes place without the consent of the guarantor or surety, that
latter is released from the obligation.7

28. Being an onerous undertaking, a surety agreement is strictly

construed against the creditor, and every doubt is resolved in favor of
the solidary debtor. The fundamental rules of fair play require the
creditor to obtain the consent of the surety to any material alteration in
the principal loan agreement, or at least to notify it thereof. Hence,
petitioner bank cannot hold herein respondent liable for loans obtained
in excess of the amount or beyond the period stipulated in the original
agreement, absent any clear stipulation showing that the latter waived
his right to be notified thereof, or to give consent thereto. This is
especially true where, as in this case, respondent was no longer the
principal officer or major stockholder of the corporate debtor at the time
the later obligations were incurred. He was thus no longer in a position
to compel the debtor to pay the creditor and had no more reason to bind
himself anew to the subsequent obligations.8

29. Similar to Security Bank vs Cuenca, the Suretyship Agreement

contracted between the Accused-Appellant and Bangkok Bank as a
continuing surety does not authorize the bank to extend the scope of the
principal obligation inordinately. The Court held that "a continuing
guaranty is one which covers all transactions, including those arising in
the future, which are within the description or contemplation of the
contract of guaranty, until the expiration or termination thereof.”9

30. In the present case, it was a continuing surety only in regard to

the first Credit Line Agreement. The same does not include its renewal
through the second Credit Line Agreement signed by Accused-
Appellants Johnny Ong and Wilson Ong as agents of Grand East Empire
and Bangkok Bank in the same amount of US Dollar One Million (
US$1,000,000.00) as evidenced by a different offer letter for purposes
of renewal marked as (Exhibit “E”) by way of trust receipts.

31. Accused-Appellants claim that the Suretyship Agreement

guaranteeing the first Credit Line Agreement is extinguished by
novation through the renewal of the principal contract.

The rate of interests imposed shall

conform with latest jurisprudence.

16. Article 2209 of the Civil Code provides that:

7 Art. 2079. An extension granted to the debtor by the creditor without the consent of the guarantor extin-
guishes the guaranty. The mere failure on the part of the creditor to demand payment after the debt has
become due does not of itself constitute any extension of time referred to herein.
8 Security Bank And Trust Company, Inc., vs Cuenca, G.R. No. 138544, October 03, 2000.
9 Id., citing Dino v. Court of Appeals, 216 SCRA 9, November 26, 1992.

17
 “If the obligation consists in the payment of a sum
of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation
to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the
legal interest, which is six percent per annum.”

17. In the line of cases promulgated by the Supreme Court, it held

that:

When the obligation is breached, and it

consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the
interest due should be that which may have
been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from
the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall
be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of
Article 1169 of the Civil Code. (Eusebio-
Calderon v. People, G.R. No. 158495,
October 21, 2004, 441 SCRA 137; Eastern
Shipping Lines, Inc. v. CA, G.R. No. 97412,
July 12, 1994, 234 SCRA 78; Garcia v. Thio,
G.R. No. 154878, March 16, 2007).

Hence, the debtor is liable for the payment of

legal interest per annum to be computed from
the date when she received the demand letter.
From the finality of the decision until it is
fully paid, the amount due shall earn interest
at 12% per annum, the interim period being
deemed equivalent to a forbearance of credit.
(Cabrera v. People, G.R. 150618, July 24,
2003, 407 SCRA 247; Garcia v. Rica Marie
Thio, G.R. No. 154878, March 16, 2007).

18.

19.

20.

18
 PRAYER

WHEREFORE, premises considered , it is respectfully prayed to this

Honorable Court to modify the appealed decision, as follows:

a)

Other reliefs just and equitable are likewise prayed for,

City of Manila. November 27, 2019.

DIMAANO FUERTE LAYOS ALMORADIE AND GARCIA

(D’ FLAG) LAW OFFICE
Suite 101 The Gregorian Building, 2178 Taft Avenue, Malate, Manila

BY:

DOREEN YSABELLE E. GARCIA

ROA: 70001
IBP No. 123456/01-19-19/Manila
PTR No. 098765/01-19-19/Manila
MCLE Compliance No. 11121313
(Valid until 04-22-2022)

COPIES FURNISHED:

OFFICE OF THE SOLICITOR GENERAL

No. 134 Amorsolo St., Legazpi Village,
Makati City, Metro Manila

ATTY. JOSE PAULINO DOMINGO

Bangkok Bank
10th Floor Tower 2, The Enterprise Center
Ayala Avenue, Makati City,
1200 Metro Manila

EXPLANATION

Copies of the foregoing APPELLANT'S BRIEF were furnished to other

parties through registered mail, due to distance of our law office and lack of

19
messengerial services in our office to effect personal service.

DOREEN YSABELLE E. GARIA

AFFIDAVIT OF SERVICE

I, ALEXANDER B. LAYOS II, of DIMAANO FUERTE LAYOS

ALMORADIE AND GARCIA (D’ FLAG) LAW OFFICE, with office adress
at Suite 101 The Gregorian Building, 2178 Taft Avenue, Malate, Manila, after
being sworn to in accordance with law depose and say:

THAT on November 27, 2019, I caused to be served a copy of

the following paper:

NATURE OF THE PLEADING

Appellant's Brief

In case No. CA-G.R CR No. 42943, entitled PEOPLE OF THE

PHILIPPINES vs JOHNNY D. ONG and WILSON CHING KIAN CHUAN
ONG pursuant to Section 3, 4, 5 and 10, Rule 13 of the Rules of Court, as
follows:

BY REGISTERED MAIL TO:

ATTY. JOSE PAULINO DOMINGO

Bangkok Bank
th
10 Floor Tower 2, The Enterprise Center
Ayala Avenue, Makati City,
1200 Metro Manila

OFFICE OF THE SOLICITOR GENERAL

No. 134 Amorsolo St., Legazpi Village,
Makati City, Metro Manila

ALEXANDER B. LAYOS II
Affiant

SUBSCRIBED AND SWORN TO before me this ____ day of __________ in

___________________, affiant having exhibited to me his _________.

NOTARY PUBLIC

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Series of 2019

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