trust receipts cases

7/29/2019 Trust Receipts Cases

1/44

S P O U S E S T I R S O V I N T O L A A N D L O R E T A D Y V S I N S U L A R B A N K O FA SI A A N D AMERICA, (1987)150 SCRA 578

F A C T S :

P e t i t i o n e r s p o u s e s V i n t o l a o w n s a n d m a n a g e s m a n u f a c t u r i n g o f r a ws ea shells into finished products, under their business name, Dax kin International.

They applied for domestic letter of credit by respondent Insular Bank of Asia and

America which was granted. Then, executed a Trust Receipt Agreement with Insular

bank stipulating that the Vintolas shall hold the goods in trust for IBAA. Having defaulted

in its payment, the Vintolas offered to return the goods to IBAA, but the latter refused.

Due to their continued refusal, IBAA charged them with estafa. The Court acquitted the

Vintolas.

I S S U E : Wh et he r o r n ot I BA A be ca me th e r ea l owners of the goods held intrust by the Vintolas.

RULING: No. Insular bank of Asia and America did not become the holder orrealowner of the goods. The Vintolas retained ownership of the goods. TheCourt held

that the trust receipt arrangement did not convert the IBAA intoan investor, it remained

a lendor and creditor. Under the law, a trust receipt is a document wherein the

entrustee binds himself to hold thedesignated goods, documents or instruments in trust

for the entruster to sell or otherwise dispose of the goods, to the amount owing to the

entruster.

METROPOLITAN BANK and TRUST COMPANY, petitioner, vs. JOAQUIN TONDA and MA.

CRISTINA TONDA, respondents.

[G.R. No. 134436. August 16, 2000]

Facts:Spouses Joaquin G. Tonda and Ma. Cristina U. Tonda, hereinafter referred to as the

TONDAS, applied for and were granted commercial letters of credit by petitioner

Metropolitan Bank and Trust Company, hereinafter referred to as METROBANK for aperiod of eight (8) months beginning June 14, 1990 to February 1, 1991 in connection

with the importation of raw textile materials to be used in the manufacturing of

garments. The TONDAS acting both in their capacity as officers of Honey Tree Apparel

Corporation (HTAC) and in their personal capacities, executed eleven (11) trust receipts

to secure the release of the raw materials to HTAC. The imported fabrics with a

principal value of P2,803,000.00 were withdrawn by HTAC under the 11 trust receipts

executed by the TONDAS. Due to their failure to settle their obligations under the trust


2/44

receipts upon maturity, METROBANK through counsel, sent a letter dated August 10,

1992, making its final demand upon the TONDAS to settle their past due TR/LC accounts

on or before August 15, 1992. They were informed that by said date, the obligations

would amount to P4,870,499.13. Despite repeated demands therefor, the TONDAS

failed to comply with their obligations stated in the trust receipts agreements, i.e. the

TONDAS failed to account to METROBANK the goods and/or proceeds of sale of themerchandise, subject of the trust receipts.

Issue: WHETHER METROBANK HAS SHOWN A PRIMA FACIE VIOLATION OF THE TRUSTRECEIPTS LAW IN RELATION TO ART. 315 OF THE REVISED PENAL CODE.

Held:SEC. 13 of P.D. 115 provides that 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.

Given that various trust receipts were executed by the TONDAS and that as entrustees,

they did not return the proceeds from the goods sold nor the goods themselves to

METROBANK, there is no dispute that that the TONDAS failed to comply with the

obligations under the trust receipts despite several demands from METROBANK.

.It is in the context of upholding public interest that the law now specifically designates

a breach of a trust receipt agreement to be an act that "shall" make one liable for

estafa."

Colinares vs. Court of Appeals [339 SCRA 609 (Sept. 25,2000)]Trust Receipts Law

Facts: Melvin Colinares and Lordino Veloso (Petitioners) were contracted for aconsideration of P40,000 by the Carmelite Sisters of Cagayan de Oro City to renovate

the latters convent. Petitioners obtained the materials needed for the construction

project from CM Builders Centre. Petitioners applied for a commercial letter of creditwith the Philippine Banking Corporation (PBC) in favor of CM Builders Centre. PBC

approved the letter of credit to cover the full invoice value of the goods. Petitioners

signed a pro-forma trus receipt as security.

PBC wrote to Petitioners demanding that the amount be paid within seven days from

notice. Instead of complying with the demand, Veloso confessed that they lost P19,195

in the Carmelite Monastery Project and requested for a grace period to settle the


3/44

account. The grace period lapsed and PBC sent a new demand letter to

Petitioners. Petitioners proposed that the terms of payment of the loan be

modified. Petitioners were charged with the violation of P.D. No. 115 (Trust Receipts

Law) in relation to Art. 315 of the Revised Penal Code. The Petitioners were convicted.

Issue: Assuming there was a valid trust receipt, whether or not the accused wereproperly charged, tried and convicted for violation of P.D. No. 115 in relation to Art. 315

of the RPC, notwithstanding the novation of the so-called trust receipt converting the

trustor-trustee relationship to creditor-debtor situation

Held: Section 4 of P.D. No. 115 defines a trust receipt transaction as any transaction byand between a person referred to as the entruster, and another person referred to as

the entrustee, whereby the entruster who owns or holds absolute title or security

interest over certain specified goods, documents or instruments, releases the same to

the possession of the entrustee upon the latters execution and delivery to the entruster

of a signed document called a trust receipt wherein the enteustee binds himself to

hold the designated goods, documents or instruments with the obligation to turn over

to the entruster the proceeds thereof to the extent of the amount owing to the

entruster or as appears in the trust receipt or the goods, documents or instruments

themselves if they are unsold or not otherwise disposed of, in accordance with the

terms and conditions specified in the trust receipt. A thorough examination of the

facts obtaining in the case at bar reveals that the transaction intended by the parties

was a simple loan, not a trust receipt agreement. On the day the Petitioners received

the merchandise from CM Builders Centre, ownership was already transferred to

Petitioners who were to use the materials for the construction project. It was only a day

later that they went to the bank to apply for a loan to pay for the merchandise. This

situation belies what normally obtains in a pure trust receipt transaction where goodsare owned by the bank and only released to the importer in trust subsequent to the

grant of the loan. Nowhere in the testimony of PBCs witness does it appear that PBC

represented to Petitioners that the transaction they were entering into was not a pure

loan but had trust receipt implications. The Information charged Petitioners with intent

to defraud and misappropriating the money for their personal use. But Petitioners

employed no artifice in dealing with PBC and never did they evade payment of their

obligation. Petitioners acquitted.

Consolidated Bank vs CAGR No. 114286, 19 April 2001356 SCRA 671

FACTSContinental Cement Corp obtained from Consolidated Bank letter of credit used

to purchased 500,000 liters of bunker fuel oil. Respondent Corporation made a marginal


4/44

deposit to petitioner. A trust receipt was executed by respondent corporation, with

respondent Gregory Lim as signatory. Claiming that respondents failed to turn over the

goods or proceeds, petitioner filed a complaint for sum of money before the RTC of

Manila. In their answer, respondents aver that the transaction was a simple loan and

not a trust receipt one, and tht the amount claimed by petitioner did not take into

account payments already made by them. The court dismissed the complaint, CAaffirmed the same.

ISSUEWhether or not the marginal deposit should not be deducted outright from the

amount of the letter of credit.

HELDNo. petitioner argues that the marginal deposit should be considered only after

computing the principal plus accrued interest and other charges. It could be onerous to

compute interest and other charges on the face value of the letter of credit which a

bank issued, without first crediting or setting off the marginal deposit which the

borrower paid to it-compensation is proper and should take effect by operation of law

because the requisited in Art. 1279 are present and should extinguish both debts to the

concurrent amount. Unjust enrichment.

Abad v. Court of Appeals, 181 SCRA 191 (1990)

FACTS:

- TOMCO, Inc.applied for, and was granted by the Philippine Commercial and Industrial

Bank (hereafter called "PCIB"), a domestic letter of credit in favor of its supplier, Oregon

Industries, Inc., to pay for one Skagit Yarder with accessories. PCIB paid to Oregon

Industries the cost of the machinery against a bill of exchange .

-After making the required marginal deposit, TOMCO, Inc. signed and delivered to the

bank a trust receipt acknowledging receipt of the merchandise in trust for the bank,

with the obligation "to hold the same in storage" as property of PCIB, with a right to sell

the same for cash provided that the entire proceeds thereof are turned over to the

bank, to be applied against acceptance(s) and any other indebtedness of TOMCO, Inc.

-In consideration of the release to TOMCO, Inc. by PCIB of the machinery covered by the

trust receipt, Ramon Abad signed an undertaking entitled, "Deed of Continuing


5/44

Guaranty" appearing on the back of the trust receipt, whereby he Promised to pay the

obligation jointly and severally with TOMCO, Inc.

-Except for TOMCOs P28,000 marginal deposit in the bank, no payment has been made

to PCIB by either TOMCO, Inc. or its surety, Abad, on the P80,000 letter of credit.

-Consequently, the bank sued TOMCO, Inc. and Abad

-TOMCO did not deny its liability to PCIB under the letter of credit but it alleged that

inasmuch as it made a marginal deposit the same should have been deducted from its

principal obligation, on which the bank should have computed the interest, bank

charges, and attorney's fees.

TC:

-in favor of PCIB ordering TOMCO and ABAD to pay jointly and severally to PCIB with the

marginal deposit still included in the computation of the obligation.

CA:

- Affirmed in toto decision of TC.

ISSUE:

- Whether or not the marginal deposit paid for should first be deducted from its

principal before computing interests and other charges.

HELD:

- The marginal deposit requirement is a Central Bank measure to cut off excess currency

liquidity which would create inflationary pressure. It is a collateral security given by the

debtor, and is supposed to be returned to him upon his compliance with his secured

obligation. Consequently, the bank pays no interest on the marginal deposit, unlike an

ordinary bank deposit which earns interest in the bank. As a matter of fact, the marginal

deposit requirement for letters of credit has been discontinued, except in those cases


6/44

where the applicant for a letter of credit is not known to the bank or does not maintain

a good credit standing therein.

- It is only fair then that the marginal deposit (if one was made, as in this case), should

be set off against his debt, for while the importer earns no interest on his marginaldeposit, the bank, apart from being able to use said deposit for its own purposes, also

earns interest on the money it loaned to the importer. It would be onerous to compute

interest and other charges on the face value of the letter of credit which the bank

issued, without first crediting or setting off the marginal deposit which the importer

paid to the bank. To allow such would be a clear case of unjust enrichment.

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,vs.

YU CHAI HO, defendant-appellant.

Vicente Pelaez for appellant.

Office of the Solicitor-General Reyes for appellee.

Ross, Lawrence & Selph, Araneta and Zaragoza, Ohnick and McFie, and Abad Santos,

Camus and Delgado as amici curiae.

OSTRAND,J.:

This is an appeal from a decision of the Court of First Instance of Cebu in which the

defendant was found guilty of the crime ofestafa under paragraph 5 of article 535 of

the Penal Code and was sentenced to suffer five months ofarresto mayorand to pay

the costs.

It appears from the evidence that on December 19, 1925, the accused Yu Chai Ho,

in representation of his firm, Gui Sing & Co., of which he was the managing partner,

placed an order with Wm. H. Anderson & Co. for a quantity of Colgate perfumes and

soap to be shipped from New York to Cebu. The order was transmitted to Colgate & Co.,New York, and the merchandise was by them shipped to Cebu, consigned to themselves

and subject to their order. The bill of lading and the invoices were forwarded to the

Cebu branch of the International Banking Corporation, subject to delivery to the

purchaser on payment of the purchase price, $259.70. The shipping documents were

accompanied by a draft on Gui Sing & Co., who accepted the draft but was unable to

pay. The International Banking Corporation of Cebu, therefore, retained the shipping

documents and invoices, without which the merchandise could not be cleared through


7/44

the customhouse and delivered to the defendant or his firm. Through the intervention

of Morrison, the Manager of the Cebu branch of Wm. H. Anderson & Co., the

International Banking Corporation agreed to deliver the documents to Gui Sing & Co.

upon their giving a trust receipt. The trust receipt was duly executed by Gui Sing & Co.

and delivered to the International Banking Corporation, whereupon the shipping

documents were surrendered to the defendant, who upon presentation of them to thecustoms authorities, obtained delivery of the merchandise. The defendant thereupon

sold the merchandise but, in violation of the terms of the trust receipt, failed to make

payment to the International Banking Corporation, and Wm. H. Anderson & Co., as

guarantors, were compelled to pay the amount of the draft for the purchase price of the

merchandise to the International Banking Corporation.

The trust receipt is in the usual form and, among other things, contains the

following provisions:

I/We hereby agree to hold said goods in trust for the said corporation, and

as its property with liberty to sell the same for its account, but without authority

to make any other disposition whatever of the said goods or any part thereof (or

to proceeds thereof) either by way of conditional sale, pledge, or otherwise.

In case of sale I/We further agree to hand the proceeds, as soon as

received, to the International Banking Corporation to apply against the relative

acceptances (as described above) and for the payment of any other

indebtedness of mine/ours to the International Banking Corporation.

That under this trust receipt the title to the merchandise remained in the

International Banking Corporation and did not pass to the defendant, is almost tooelementary for discussion. It is sufficient to quote the language of the court in the case

of In re Dunlap Carpet Co. (206 Fed., 726), in regard to trust receipts:

By this arrangement a banker advances money to an intending importer,

and thereby lends the aid of capital of credit, or of business facilities and

agencies abroad, to the enterprise of foreign commerce. Much of this trade

could hardly be carried on by any other means, and therefore it is of the first

importance that the fundamental factor in the transaction, the banker's advance

of money and credit should receive the amplest protection. Accordingly, in order

to secure that the banker shall be repaid at the critical point that is, when the

imported goods finally reach the hands of the intended vendee the banker

takes the full title to the goods at the very beginning; he takes it as soon as the

goods are brought and settled for by his payments or acceptances in the foreign

country, and he continues to hold that title as his indispensable security until the

goods are sold in the United States and the vendee is called upon to pay for

them. This security is not an ordinary pledge by the importer to the banker, for

the importer has never owned the goods, and moreover he is not able to deliver


8/44

the possession; but the security is the complete title vested originally in the

bankers, and this characteristics of the transaction has again and again been

recognized and protected by the courts. Of course, the title is at bottom a

security title, as it has sometimes been called, and the banker is always under

the obligation to reconvey; but only after his advances have been fully repaid

and after the importer has fulfilled the other terms of the contract. (Emphasisours.) (See also Moors vs. Kidder, 106 N. Y., 32; Farmers & Mechanics' Nat. Bk.

vs. Logan, 74 N. Y., 568; Barry vs. Boninger, 46 Md., 59 Moors vs. Wyman, 146

Mass., 60; and New Haven Wire Co. Cases, 5 L. R. A., 300.)

But counsel for the defendant argues vigorously that inasmuch as the price of the

merchandise in question had been paid to the International Banking Corporation by

Wm. H. Anderson & Co., the bank had suffered no loss, and that, therefore, an essential

element of the crime ofestafa was lacking; that the only party prejudiced by the actions

of the defendant was Wm. H. Anderson & Co. and that as to the latter, the defendant

had incurred a civil obligation.

We cannot accept this theory. Paragraph 5 of article 535 of the Penal Code reads

as follows:

Any person who, to the prejudice of another, shall convert or

misappropriate any money, goods, or other personal property received by such

person for safe-keeping, or on commission, or for administration, or under any

other circumstances giving rise to the obligation to make delivery of or to return

the same, or shall deny having received such money, goods, or other property.

The language of the paragraph is clear and requires no special construction. As willbe seen, the person whose interests are prejudiced through the conversion or

misappropriation of the money, goods, or other personal property need not necessarily

be the owner thereof; if such had been the intention of the authors of the Code, the

phrase "to the prejudice of another" would have read "to the prejudice of the owner."

Our opinion is also supported by the Supreme Court of Spain in its sentence of

May 8, 1884, which in principle is exactly in point. The facts of that case are that one

Enrique Mariano handed his watch to his friend, the accused, keep for him while he,

Mariano, was engaged in certain professional work in a circus. Instead of returning the

watch to its owner, Mariano the accused pawned it in a pawnshop for a loan of 225

pesetas. Mariano recovered the watch from the pawnbroker almost immediately and

without any expense. In that case, as in the present one, it was argued that as the

owner of the watch suffered no loss, no estafa had been committed. the Spanish

Supreme Court held that it was immaterial whether the loss had been suffered by the

owner or by a third person, and among other things, said:


9/44

Considering that in view of the literal terms of the provision of said article,

as well as its spirit and legal reason, whenever damages are caused as a

consequence of the aforesaid appropriation or taking away, the act constitutes

the crime ofestafa, even though the person who suffered the damage is a third

party, and not the on to whom the misappropriated or converted goods belongs

or to whom it is to be returned, for this is an incidental element which in no wayaffects the juridical nature of the crime.

The correctness of the view we taken seems quite clear when it is considered that

the action is not one between the defendant and Wm. H. Anderson & Co. or between

the defendant and the International Banking Corporation; it deals with a public offense

and is brought against the defendant by the People of the Philippine Islands. The very

evident object of the article of the Penal Code under which the action is brought is to

discourage dishonesty and unfaithfulness in the administration or care of money, goods,

or other personal property received for such purposes. The object is not simply to

enforce payment of indemnities; that is merely a side issue of aquasicivil nature and is

not the gist of the crime or the cause of action.

The fact that the defendant gave surety for the fulfillment of his obligations under

the trust receipt, is of no consequence and does not alter the case. In the case of United

States vs. Tabotabo (11 Phil., 372), the court said: "Assuming that the surety company

has in fact paid the sum misappropriated, this payment by the bonding company, made

by virtue of its obligation to guarantee the liability of their client does not exempt the

latter from the punishment provided for . . . ."

In the case of Canal-Commercial Trust & Savings Bank vs. N. O. Tex. & Mex. Ry. Co.,

Appt., International Trading & Rice Company, Warrantor, Appt. (49 A. L. R., 274), it washeld that the bank could recover from the appellants, including the warrantor, the value

of the sugar, the bill of lading for which had been delivered upon trust receipt. In that

case the court said: "The improper use of pledged securities, by the pledgor holding

them under a trust receipt, is a species of embezzlement."

In the case of People vs. De Lay (80 Cal., 52), the defendant, an assigneee for the

benefit of creditors, was convicted of embezzlement of funds which came into his

possession by virtue of collection of accounts and sales of property of the assignor. The

court said: "The fact that Nunan and Lowney took a written indemnity from the

defendant in no way affects the guilt or innocence of the defendant, who is charged

with embezzling the property entrusted to him for certain purposes by Mrs. Furlong."

The fact that a defendant has given an indemnity bond is no defense to a

prosecution for embezzlement; (20 C. J., 456).

It has been asserted that the information upon which the present action is brought

is defective in that it is alleged therein that the offense was committed to the prejudice


10/44

of Wm. H. Anderson & Co. when it should have been alleged that the International

Banking Corporation was the prejudiced party inasmuch as the loss suffered by Wm. H.

Anderson & Co. was not contemporaneous with the commission of the crime. The

information itself is the best answer to this proposition. It reads as follows in

translation:

The undersigned, sworn, accuses Yu Chai Ho of the crime ofestafa,

because on or about April 25, 1926, in the municipality of Cebu, Province of

Cebu, the above-named defendant, under a trust receipt and a guaranty signed

by Wm. H. Anderson & Co., in favor of the International Banking Corporation,

withdrew and received from said International Banking Corporation, 2 cases of

merchandise worth P539.65, consisting of bottles of perfumes and soap, Colgate

brand, belonging to Colgate & Co., which merchandise was consigned to said

bank in Cebu for the purpose of holding them in trust and selling them with the

express obligation of turning over the proceeds of the sale to said International

Banking Corporation, but the said accused, instead of complying with this

obligation, wilfully, unlawfully, and criminally, with intent of gain, and through

fraud, converted said merchandise to his own use and benefit, to the damage of

Wm. H. Anderson & Co., who for lack of payment by the accused,

notwithstanding the repeated demands made to that effect, had to pay the sum

of P539.65 to said International Banking Corporation. Contrary to law.

Cebu, Cebu, P. I., August 24, 1926.

(Sgd.) LUCIO SANCHEZ

Deputy Provincial Fiscal

As will be seen, the facts of the case are fully set forth in the information; it clearly

shows the consequences of the defendant's acts to the International Banking

Corporation as well as to Wm. H. Anderson & Co. and was entirely sufficient to enable

the defendant to prepare his defense. Assuming for the sake of the argument, that the

fiscal erred in alleging that Wm. H. Anderson & Co. suffered damages by reason of the

defendant's acts, the alleged error was , therefore, non-prejudicial and did not vitiate

the proceedings. (Sec. 10, G. O., 58.)

We do not however, think that the fiscal erred in alleging that the commission of

the crime resulted to the prejudice of Wm. H. Anderson & Co. It is true that originally

the International Banking Corporation was the prejudiced party, but Wm. H. Anderson &

Co. compensated it for its loss and thus became subrogated to all its rights against the

defendant (article 1839, Civil Code). Wm. H. Anderson & Co., therefore, stood exactly in

the shoes of the International Banking Corporation in relation to the defendant's acts,

and the commission of the crime resulted to the prejudice of the firm previously to the

filing of the information in the case. The loss suffered by the firm was the ultimate result

of the defendant's unlawful acts, and we see no valid reason why this fact should not be


11/44

stated in the information; it stands to reason that, in the crime ofestafa, the damage

resulting therefrom need not necessarily occur simultaneously with the acts constituting

the other essential elements of the crime.

In the sentence of the court below provision for the payment of indemnity is

omitted on the ground that the defendant being insolvent, the prejudiced party hasprobably presented his claim in the insolvency proceedings. There being no direct

evidence to that effect, we do not think that there is sufficient reason for such

omission. 1awph!l.net

For the reasons stated the appealed sentence is modified by ordering the

defendant to indemnify Wm. H. Anderson & Co. in the sum of P519, with subsidiary

imprisonment in case of insolvency. In all other respects the judgment of the court

below is affirmed, with the costs of this instance against the appellant. So ordered.

Avancea, C. J., Johnson, Malcolm, Villamor, Romualdez, and Villa-Real, JJ., concur.

People vs. CuevoNo. L-27607, 104 SCRA 312, May 07, 1981

G.R. No. L-27607 May 7, 1981THE PEOPLE OF THE PHILIPPINES, plaintiff-appelleevs.

BEN CUEVO, defendant-appellant.

AQUINO,J.:This case presents for reexamination the liability for estafa of the holder of a trust

receipt who disposed of the goods covered thereby and, in violation of its terms, failed

to deliver to the bank the proceeds of the sale as payment of the debt secured by the

trust receipt.

We say reexamination because it is a well-entrenched rule in our jurisprudence that the

conversion by the importer of the goods covered by a trust receipt constitutes estafa

through misappropriation under article 315(l) (b) of the Revised Penal Code, (People vs.

Yu Chai Ho 53 Phil. 874 and Samo vs. People. 115 Phil. 346. As to civil cases, see National

Bank vs. Viuda e Hijos de Angel Jose, 63 Phil. 814; Philippine National Bank vs. Catipon,

98 Phil. 286 and Philippine National Bank vs. Arrozal 103 Phil. 213).

In this case, an information dated July 27, 1966 was filed in the Court of First Instance of

Manila, charging Ben Cuevo with estafa committed as follows (Criminal Case No.

83309):


12/44

That on or about the 16th day of February, 1964 in the City of Manila, Philippines, the

said accused did then and there willfully, unlawfully and feloniously defraud the

Prudential Bank and Trust Company in the following manner, to wit: the said accused

having received in trust from the Prudential Bank and Trust Company merchandise, i.e.,

1,000 bags of grind yellow corn and 1,000 bags of palay specified in a trust receipt

covered by Letter of Credit No. 5643, executed by him in favor of said bank, of the totalvalue of P24,000.00, to be sold by him, under the express obligation on the part of the

said accused to account for the said merchandise, or to deliver and turn over to the

Prudential Bank and Trust Company the proceeds of the sale thereof;

But said accused once in possession of said merchandise, far from complying with the

aforesaid obligation, notwithstanding repeated demands made upon him, with intent to

defraud, willfully, unlawfully and feloniously misappropriated, misapplied and converted

the said merchandise or the value, thereof in the sum of P24,000.00 to his own personal

use and benefit, to the damage and prejudice of the Prudential Bank and Trust Company

in the aforesaid of P24,000.00, Philippine Currency. (p. 2, Rollo.)

Upon arraignment, the accused pleaded not guilty (p. 11, Record). Later, or on

December 13, 1966, before the trial had started, Cuevo filed a motion to dismiss on the

ground that the facts alleged in the information do not constitute an offense.

Judge Ruperto Kapunan, Jr., in his order of January 3, 1967, granted the motion and

dismissed the case but "without prejudice to whatever civil action the complaining bank

may take to recover the amount of P24,000" which it had advanced to cover the price of

the merchandise delivered to the accused (p. 7, Rollo). From that order of dismissal, the

prosecution appealed to this Court.

The appeal is meritorious. Judge Kapunan, Jr. erred in holding that the accused did notcommit estafa under article 315(l) (b), which reads:

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any

other personal property received by the offender in trustor 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.

Judge Kapunan, Jr., in sustaining the motion to dismiss, relied on the Spanish version of

paragraph (b) of article 315 wherein the expression used is "recibido en deposito". In his

opinion, that phrase is not accurately translated as "in trust" and, as he explained, it

does not allegedly cover the conversion or misappropriation of the goods covered by atrust receipt. The Spanish version reads:

(b) Apropiandose o distrayendo, en perjuicio de otro dinero, efectos o cualquiera otra

cosa mueble, que hubiere recibido en deposito, commission o administracion o por otro

titulo que produzca obligacion de entregarla o devolveria, aungue dicha obligacion

estuviese afianzada total or parcialmente, o negando haberla recibido.


13/44

The lower court ratiocinated that the contract covered by a trust receipt is merely a

secured loan (U.S. vs. Tan Tok, 15 Phil. 538) where the borrower is allowed to dispose of

the collateral, whereas, in a deposit the depositary is not empowered to dispose of the

property deposited. Hence, the lower court concluded that the violation of the

provisions of the trust receipt gives rise to a civil action and not to a criminal

prosecution for estafa.

The lower court also ventured the opinion that the other phrase in paragraph (b), por

otro titulo que produzca obligacion de entregarla o devolverla" ("under any other

obligation involving the duty to make delivery of or to return the same") is not

applicable because that phrase allegedly refers to the very "money, goods, or any other

personal property received by the offender" as a deposit, and not to the proceeds of the

sale of the goods covered by the trust receipt.

The lower court observed further that the framers of the Spanish Penal Code could not

have contemplated the inclusion of the trust receipt in article 315(l) (b) because that

transaction did not exist in the nineteenth century. The usual form of a trust receipt is as

follows:

I/We hereby agree to hold said goods in trust for the said corporation (meaning the

bank as trustor), and as its property with liberty to sell the same for its account, but

without authority to make any other disposition whatever of the said goods or any part

thereof (or of proceeds thereof) either by way of conditional sale, pledge or otherwise.

In case of sale I/We further agree to hand the proceeds, as soon as received, to the

International Banking Corporation to apply against the relative acceptances (as

described above) and for the payment of any other indebtedness of mine/ours to the

International Banking Corporation. (People vs. Yu Chai Ho 53 Phil. 874, 876.)

A trust receipt is considered as 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" (53

Am. Jur. 961, cited in Samo vs. People, 115 Phil. 346, 349).

In the instant case, it is alleged in the indictment that the accused, by means of a trust

receipt, received from the Prudential Bank and Trust Company 1,000 bags of corn and

1,000 bags of palay to be sold by him with the express obligation to deliver the proceedsof the sale to the bank or, if not sold, to account for the merchandise and that, instead

of complying with either obligation, he misappropriated the merchandise or the value

thereof (p. 2, Rollo).

We hold that even if the accused did not receive the merchandise for deposit, he is,

nevertheless, covered by article 315(l) (b) because after receiving the price of the sale,


14/44

he did not deliver the money to the bank or, if he did not sell the merchandise, he did

not return it to the bank.

Those two situations are within the purview of article 315(l) (b). The first situation is

covered by the provision which refers to moneyreceived under the obligation involving

the duty to deliver it (entregarla) to the owner of the merchandise sold.The other contingency is covered by the provision which refers to merchandise received

under the obligation to "return" it (devolvelra) to the owner.

The fact that in the first case the money was received from the purchaser of the

merchandise and not from the bank does not remove it from the operation of article

315(l) (b).

As noted by Justice Street in People vs. Yu Chai Ho, supra, the conversion by the trustee

in a trust receipt of the proceeds of the sale falls "most literally and directly under" the

provisions of article 315(l) (b).

Thus, it was held that where, notwithstanding repeated oral and written demands by

the bank, the petitioner had failed either to turn over to the said bank the proceeds of

the sale of the goods, or to return said goods if they were not sold, the petitioner is

guilty of estafa under article 315(l) (b) (Samo vs. People, 115 Phil. 346).

In this connection, it is relevant to state that Presidential Decree No. 115, the Trust

Receipts Law, regulating trust receipts transactions, was issued on January 29, 1973.

One objective of that law is "to declare the misuse and/or misappropriation of goods or

proceeds realized from the sale of goods, documents or instruments released under

trust receipts as a criminal offense punishable under" article 315.

Section 13 of the decree provides that "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 315 of the Revised Penal Code.

The enactment of the said penal provision is confirmatory of existing jurisprudence and

should not be construed as meaning that, heretofore, the misappropriation of theproceeds of a sale made under a trust receipt was not punishable under article 315.

That penal provision removed any doubt as to the criminal liability of the holder of a

trust receipt who misappropriated the proceeds of the sale.

The other issue raised in the last part of accused Cuevo's brief is whether the lower

court's erroneous dismissal of the information against him amounts to an acquittal


15/44

which placed him in jeopardy and whether the return of the case to the lower court for

trial would place him in double jeopardy.

No person shall be twice put in jeopardy of punishment for the same offense" (Sec. 22,

Art. IV of the Constitution). The maxim is non bis in Idem (not twice for the same). The

ban against double jeopardy is similar to the rule onres judicata in civil cases.Jeopardy attaches when an accused was charged with an offense (a) upon a valid

complaint or information sufficient in form and substance to sustain a conviction (b) in a

court of competent jurisdiction and (c) after the accused had been arraigned and

entered his plea, he was convicted or acquitted, or the case against him was "dismissed

or otherwise terminated without his express consent".

In such a case, his conviction or acquittal (autrefois convict or autrefois acquit) is a "bar

to another prosecution for the offense charged, or for any attempt to commit the same

or frustration thereof, or for any offense charged in the former complaint or

information " (Sec. 9, Rule 117, Rules of Court).

The accused invokes the ruling that "where a trial court has jurisdiction but mistakenly

dismisses the complaint or information on the ground of lack of it, the order of dismissal

is, after the prosecution has presented its evidence, unappealable because an appeal by

the government therefrom would place the accused in second jeopardy for the same

offense" (People vs. Duran, Jr., 107 Phil. 979).

That ruling has no application to this case because in the Duran case (as in People vs.

Caderao 69 Phil. 327, also cited by the accused herein) the dismissal was made after the

prosecution had presented its evidence. The accused filed a demurrer to the evidence

but the trial court dismissed the case, not on the ground of insufficiency of evidence,but on the ground of lack of jurisdiction. In the instant case, the prosecution has not

commenced the presentation of its evidence. The dismissal was with the consent of the

accused because he filed a motion to dismiss.

In Esguerra vs. De la Costa, 66 Phil. 134, another case cited by the accused, the

erroneous dismissal on the ground of lack of jurisdiction was made by the lower

court motu proprio. Hence, the dismissal without the consent of the accused amounted

to an acquittal which placed him in jeopardy.

Moreover, in the Duran case, it was expressly indicated that the erroneous dismissal onthe ground of lack of jurisdiction does not place the accused in jeopardy if the dismissal

was made with the consent of the accused, as held in People vs. Salico, 84 Phil. 722. As

already stated, in the instant case the dismissal was with the consent of accused Cuevo.

The dismissal did not place him in jeopardy.


16/44

The Chief Justice and six Justices voted to reverse the order of dismissal. Justices

Teehankee and De Castro dissented. As only seven Justices voted to reverse the order of

dismissal, the same has to be affirmed.

WHEREFORE, the order of dismissal is affirmed. Costs de oficio.

SO ORDERED.Makasiar, Fernandez, Guerrero, Abad Santos, De Castro and Melencio-Herrera, JJ.,

concur.

Fernando, CJ., concurs on the basis of absence of double jeopardy.

Barredo, J., and Concepcion Jr., J., took no part.

Separate Opinions

TEEHANKEE,J., dissenting:I concur with the dissent of Mr. Justice De Castro insofar as it upholds the more liberal

interpretation to the trust receipt transaction which would give rise only to civil liability

on the part of the offender. The very definition of trust receipt as given in the main

opinion (at pp. 4-5) to wit, "'(A) trust receipt is considered as 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' (53 Am. Jr. 961, cited in Samo vs. People, 115 Phil.

346, 349)," sustains the lower court's rationale in dismissing the information that the

contract covered by a trust receipt is merely a secured loan. The goods imported by the

small importer and retail dealer through the bank's financing remain of their own

property and risk and the old capitalist orientation of putting them in jail for estafa fornon-payment of the secured loan (granted after they had been fully investigated by the

bank as good credit risks) through the fiction of the trust receipt device should no longer

be permitted in this day and age.

DE CASTRO,J., dissenting:I regret to have to dissent from the majority opinion.

The question is whether the violation of the terms of a trust receipt would constitute

estafa. There is no more doubt that under P.D. 115, the violation is defined as estafa,

but before the promulgation of said decree, I have entertained grave doubts to such anextent that I would acquit a person accused of the crime allegedly committed before

said decree, the promulgation of which serves to confirm my doubts. For if there had

been no such doubt, especially as some decisions had already been rendered by this

Court holding that estafa is committed when there is a violation of a trust receipt, there

would have been no need for P.D. 115.


17/44

One view is to consider the transaction as merely that of a security of a loan, and that

the trust element is but an inherent feature of the security aspect of the arrangement

where the goods are placed in the possession of the "entrustee," to use the term used

in P.D. 115, violation of the element of trust not being intended to be in the same

concept as how it is understood in the criminal sense. The other view is that the bank as

the owner and "entrustor" delivers the goods to the "entrustee " with the authority tosell the goods, but with the obligation to give the proceeds to the "entrustor" or return

the goods themselves if not sold, a trust being thus created in the full sense as

contemplated by Art. 315, par. 1(b)

I consider the view that the trust receipt arrangement gives rise only to civil liability as

the more feasible, before the promulgation of P.D. 115. The transaction being

contractual, the intent of the parties should govern. Since the trust receipt has, by its

nature, to be executed upon the arrival of the goods imported, and acquires legal

standing as such receipt only upon acceptance by the "entrustee," the trust receipt

transaction itself, the antecedent acts consisting of the application of the L/C the

approval of the L/C and the making of the marginal deposit and the effective

importation of the goods, all through the efforts of the importer who has to find his

supplier, arrange for the payment and shipment of the imported goods all these

circumstances would negate any intent of subjecting the importer to criminal

prosecution, which could possibly give rise to a case of imprisonment for non-payment

of a debt.

The parties, therefore, are deemed to have consciously entered into a purely

commercial transaction that could give rise only to civil liability, never to subject the

"entrustee" to criminal prosecution. Unlike, for instance, when several pieces of jewelry

are received by a person from the owner for sale on commission, and the formermisappropriates for his personal use and benefit, either the jewelries or the proceeds of

the sale, instead of returning them to the owner as is his obligation, the bank is not in

the same concept as the jewelry owner with full power of disposition of the goods,

which the bank does not have, for the bank has previously extended a loan which the

L/C represents to the importer, and by that loan, the importer should be the real owner

of the goods. If under the trust receipt, the bank is made to appear as the owner, it was

but an artificial expedient more of a legal fiction than fact, for if it were really so, it could

dispose of the goods on any manner it wants, which is cannot do, just to give

consistency with the purpose of the trust receipt of giving a stronger security for the

loan obtained by the importer. To consider the bank as the true owner from theinception of the transaction would be to disregard the loan feature thereof, a feature

totally absent in the case of the transaction between the jewel owner and his agent.

Consequently, if only from the fact that the trust receipt transaction is susceptible to

two (2) reasonable interpretations, one as giving rise only to civil liability for the

violation of the condition thereof, and the other, as generating also criminal liability, the

former should be adopted as more favorable to the supposed offender. (Duran vs. CA, L-


18/44

39758, May 7, 1976, 71 SCRA 68; People vs. Parayno L-24804, July 5, 1968, 24 SCRA 3;

People vs. Abendan, L-1481, January 28, 1949, 82 Phil. 711; People vs. Bautista. L- 1502,

May 24, 1948, 81 Phil. 78; People v . Abana, L-39, February 1, 1946, 76 Phil. 1.)

Accordingly, I vote for the affirmance of the questioned order.

Sia vs. PeoplePost under case digests, Commercial Law at Monday, February 27, 2012 Posted

by Schizophrenic Mind

Facts: Jose Sia, president and GM of Metal ManufacturingCompany of the Phil., on

behalf of said company, obtained delivery of 150 cold rolled steel sheets valued at

P71,023.60 under a trust receipt agreement. Said sheets were consigned to the

Continental Bank, under the express obligation on the part of Sia of holding the

sheets in trust and selling them and turning over the proceeds to the bank. Sia,

however, allegedly failed and refused to return the sheets or account for the proceeds

thereof if sold, converting it to his own personal use and benefit. Continental Bank filed

a complaint for estafa against Sia. The trial court and CA ruled against Sia.

Issue: Whether or not Sia, acting as President of MMCP, may be held liable for estafa

Held: Sia was acquitted. CA decision is reversed.

An officer of a corporation can be held criminally liable for acts or omissions done in

behalf of the corporation only where the law directly requires the corporation to do an

act in a given manner. In he absence of a law making a corporate officer liable for

a criminal offense committed by the corporation, the existence of the criminal liability of

he former may not be said to be beyond doubt. Hence in the absence of an express

provision of law making Sia liable for the offense done by MMCP of which he

is President, as in fact there is no such provision under the Revised Penal Code, Sia

cannot be said to be liable for estafa.

Lee v. Rodil, 1989

Facts:

Petitioner Rosemarie M. Lee was charged with estafa.
http://coffeeafficionado.blogspot.com/2012/02/sia-vs-people.htmlhttp://coffeeafficionado.blogspot.com/search/label/case%20digestshttp://coffeeafficionado.blogspot.com/search/label/Commercial%20Lawhttp://coffeeafficionado.blogspot.com/2012/02/sia-vs-people.htmlhttp://coffeeafficionado.blogspot.com/2012/02/sia-vs-people.htmlhttp://coffeeafficionado.blogspot.com/search/label/Commercial%20Lawhttp://coffeeafficionado.blogspot.com/search/label/case%20digestshttp://coffeeafficionado.blogspot.com/2012/02/sia-vs-people.html


19/44

The accused moved to quash the information on the ground that thefacts charged do not constitute an offense.

She alleges that the violation of a trust receipt agreement does not constitute estafa

notwithstanding an express provision in the "Trust Receipts Law" (P.D. 115)characterizing such violation as estafa and therefore attacks P.D. 115 for being

unconstitutional.

Issue:Whether the violation of a trust receipt agreement constitutes the crime ofestafa. Ruling:

Yes. Acts involving the violation of trust receipt agreements occurring after 29 January

1973 would make the accused criminally liable for estafa under paragraph 1 (b), Article

315 of the Revised Penal Code, pursuant to the explicit provision in Sec. 13 of P.D. 115.

The petitioner has failed to make out a strong case that P.D. 115 conflicts with theconstitutional prohibition against imprisonment for non-payment of debt. 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. P.D. 115 is a valid exercise of police power and is not repugnant to the

constitutional provision on non- imprisonment for non-payment of debt.

ALLIED BANKING CORPORATION VS SECRETARY SEDFREY ORDOEZ ANDALFREDOCHING192 SCRA 246 (1990)

FACTS: Respondent Alfredo Ching duly authorized officer of PhilippineBloo ming Mi lls (PBM) applied for the issuance of commercial letters of credit with

petitioner Allied banking Corporation. The latter issued an irrevocable letter of credit

infavor of Nikko Industry wherein it drew four (4) drafts which were accepted by

Blooming Mills and duly honored and paid by Allied Bank. In order to secure the

payment of the loan, Blooming Mills as entrustee, executed four (4) Trust Receipt

Agreements acknowledging Allied banks ownership of the goods and Blooming Millsobligation to turn over the proceeds of the sale of the goods if sold or to return the

same within the stated period. Blooming Mills failed to pay itsobligation, thereby

prompting petitioner bank to file a criminal complaint for violation of Presidential

Decree 115.

ISSUE: Whether or not the penal provision of Presidential decree 115apply when th e goods covered by a Trust Receipt do not form part of the finished


20/44

products which are ultimately sold but are instead, utilized in the operation of the

equipment of entrustee-manufacturer?

RULING: Yes. In trust receipts, there is an obligation to repay the entruster. Theentrusteebinds himself to sell or otherwise dispose of the entrusted goods with the

obligation to turn over to the entruster the proceeds if sold, or return the goodsif unsold or not otherwise disposed of according to the terms and conditions of the trust

receipt. Petition granted.

People vs. NitafanG.R. Nos. 81559-60, 207 SCRA 726, April 06, 1992

PEOPLE OF THE PHILIPPINES, (public petitioner) and ALLIED BANKINGCORPORATION (private petitioner),vs.

HON. JUDGE DAVID G. NITAFAN (public respondent) and BETTY SIA ANG (privaterespondent).

GUTIERREZ, JR.,J.:This petition for certiorariinvolves an issue that has been raised before this Court

several times in the past. The petitioner, in effect, is asking for a re-examination of our

decisions on the issue of whether or not an entrustee in a trust receipt agreement who

fails to deliver the proceeds of the sale or to return the goods if not sold to the

entruster-bank is liable for the crime of estafa.

Petitioner Allied Banking Corporation charged Betty Sia Ang with estafa in Criminal Case

No. 87-53501 in an information which alleged:

That on or about July 18, 1980, in the City of Manila, Philippines, the said accused, being

then the proprietress of Eckart Enterprises, a business entity located at 756 Norberto

Amoranto Avenue, Quezon City, did then and there wilfully, unlawfully and feloniously

defraud the Allied Banking Corporation, a banking institution, represented by its

Account Officer, Raymund S. Li, in the following manner, to wit: the said accused

received in trust from the aforesaid bank Gordon Plastics, plastic sheeting and Hook

Chromed, in the total amount of P398,000.00, specified in a trust receipt and covered byDomestic Letter of Credit No. DLC-002-801254, under the express obligation on the part

of said accused to sell the same and account for the proceeds of the sale thereof, if sold,

or to return said merchandise, if not sold, on or before October 16, 1980, or upon

demand, but the said accused, once in possession of the said articles, far from

complying with the aforesaid obligation, notwithstanding repeated demands made

upon her to that effect, paid only the amount of P283,115.78, thereby leaving

unaccounted for the amount of P114,884.22 which, once in her possession, with intent


21/44

to defraud, she misappropriated, misapplied and converted to her own personal use

and benefit, to the damage and prejudice of said Allied Banking Corporation in the

aforesaid sum of P114,884.22, Philippine Currency. (Rollo, pp. 13-14)

The accused filed a motion to quash the information on the ground that the facts

charged do not constitute an offense.

On January 7, 1988, the respondent judge granted the motion to quash. The order was

anchored on the premise that a trust receipt transaction is an evidence of a loan being

secured so that there is, as between the parties to it, a creditor-debtor relationship. The

court ruled that the penal clause of Presidential Decree No. 15 on the Trust Receipts

Law is inoperative because it does not actually punish an offense mala prohibita. The

law only refers to the relevant estafa provision in the Revised Penal Code. The Court

relied on the judicial pronouncements inPeople v. Cuevo, 104 SCRA 312 [1981] where,

for lack of the required number of votes, this Court upheld the dismissal of a charge for

estafa for a violation of a trust receipt agreement; and in Sia v. People, 121 SCRA 655

[1983] where we held that the violation merely gives rise to a civil obligation. At the

time the order to quash was issued or on January 7, 1988, these two decisions were the

only most recent ones. Hence, this petition.

The private respondent adopted practically the same stance of the lower court. She

likewise asserts that P.D. 115 is unconstitutional as it violates the constitutional

prohibition against imprisonment for non-payment of a debt. She argues that where no

malice exists in a breach of a purely commercial undertaking, P.D. 115 imputes it.

This Court notes that the petitioner bank brought a similar case before this Court in G.R.

No. 82495, entitledAllied Banking Corporation v. Hon. Secretary Sedfrey Ordoez and

Alfredo Ching which we decided on December 10, 1990 (192 SCRA 246). In that case, thepetitioner additionally questioned, and we accordingly reversed, the pronouncement of

the Secretary of Justice limiting the application of the penal provision of P.D. 115 only to

goods intended to be sold to the exclusion of those still to be manufactured.

As in G.R. No. 82495, we resolve the instant petition in the light of the Court's ruling

in Lee v. Rodil, 175SCRA 100 [1989] and Sia v. Court of Appeals, 166 SCRA 263 [1988].

We have held in the latter cases that acts involving the violation of trust receipt

agreements occurring after 29 January 1973 (date of enactment of P.D. 115) would

make the accused criminally liable for estafa under paragraph 1 (b), Article 315 of the

Revised Penal Code (RPC) pursuant to the explicit provision in Section 13 of P.D. 115.

The relevant penal provision of P.D. 115 provides:

Sec. 13 of P.D. No. 115 provides:

. . . Penalty clause. 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


22/44

terms of the trust receipt shall constitute the crime of estafa, punishable under the

provisions of Article Three Hundred and Fifteen, paragraph one (b) of Act Numbered

Three Thousand Eight Hundred and Fifteen, as amended, otherwise known as the

Revised Penal Code. If the violation or offense is committed by a corporation,

partnership, association or other juridical entities, the penaltyprovidedfor in this

Decree shall be imposed upon the directors, officers, employees or other officials orpersons therein responsible for the offense, without prejudice to the civil liabilities

arising from the criminal offense.

Section 1 (b), Article 315 of the RPC under which the violation is made to fall, states:

. . . Swindling (estafa). Any person who shall defraud another by any of the means

mentioned herein below . . . :

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, good, or other property.

The factual circumstances in the present case show that the alleged violation was

committed sometime in 1980 or during the effectivity of P.D. 115. The failure, therefore,

to account for the P114,884.22 balance is what makes the accused-respondent

criminally liable for estafa. The Court reiterates its definitive ruling that, in

the Cuevo and Sia(1983) cases relied upon by the accused, P.D. 115 was not applied

because the questioned acts were committed before its effectivity. (Lee v.

Rodil, supra, p. 108) At the time those cases were decided, the failure to comply with

the obligations under the trust receipt was susceptible to two interpretations. The Courtin Sia adopted the view that a violation gives rise only to a civil liability as the more

feasible view "before the promulgation of P.D. 115," notwithstanding prior decisions

where we ruled that a breach also gives rise to a liability for estafa. (People v. Yu Chai

Ho, 53 Phil. 874 [1929]; Samo v. People, 115 Phil. 346 [1962]; Philippine National Bank v.

Arrozal, 103 Phil. 213 [1958]; Philippine National Bank v. Viuda e Hijos de Angel Jose, 63

Phil. 814 [1936]).

Contrary to the reasoning of the respondent court and the accused, a trust receipt

arrangement does not involve a simple loan transaction between a creditor and debtor-

importer. Apart from a loan feature, the trust receipt arrangement has a securityfeature that is covered by the trust receipt itself. (Vintola v. Insular Bank of Asia and

America, 151 SCRA 578 [1987]) That second feature is what provides the much needed

financial assistance to our traders in the importation or purchase of goods or

merchandise through the use of those goods or merchandise as collateral for the

advancements made by a bank. (Samo v. People, supra). The title of the bank to the

security is the one sought to be protected and not the loan which is a separate and

distinct agreement.


23/44

The Trust Receipts Law punishes the dishonesty and abuse of confidence in the handling

of money or goods to the prejudice of another regardless of whether the latter is the

owner or not. The law does not seek to enforce payment of the loan. Thus, there can be

no violation of a right against imprisonment for non-payment of a debt.

Trust receipts are indispensable contracts in international and domestic businesstransactions. The prevalent use of trust receipts, the danger of their misuse and/or

misappropriation of the goods or proceeds realized from the sale of goods, documents

or instruments held in trustfor entruster-banks, and the need for regulation of trust

receipt transactions to safeguard the rights and enforce the obligations of the parties

involved are the main thrusts of P.D. 115. As correctly observed by the Solicitor General,

P.D. 115, like Batas Pambansa Blg. 22, punishes the act "not as an offense against

property, but as an offense against public order. . . ." The misuse of trust receipts

therefore should be deterred to prevent any possible havoc in trade circles and the

banking community (citing Lozano v. Martinez, 146 SCRA 323 [1986]; Rollo, p. 57) It is in

the context of upholding public interest that the law now specifically designates a

breach of a trust receipt agreement to be an act that "shall" make one liable for estafa.

The offense is punished as a malum prohibitum regardless of the existence of intent or

malice. A mere failure to deliver the proceeds of the sale or the goods if not sold,

constitutes a criminal offense that causes prejudice not only to another, but more to the

public interest.

We are continually re-evaluating the opposite view which insists that the violation of a

trust receipt agreement should result only in a civil action for collection. The respondent

contends that there is no malice involved. She cites the dissent of the late Chief Justice

Claudio Teehankee in Ong v. Court of Appeals, (124 SCRA 578 [1983]) to wit:

The old capitalist orientation of putting importers in jail for supposed estafa or swindlingfor non-payment of the price of the imported goods released to them under trust

receipts (a purely commercial transaction) under the fiction of the trust receipt device,

should no longer be permitted in this day and age.

As earlier stated, however, the law punishes the dishonesty and abuse of confidence in

the handling of money or goods to the prejudice of the bank.

The Court reiterates that the enactment of P.D. 115 is a valid exercise of the police

power of the State and is, thus, constitutional. (Lee v. Rodil, supra; Lozano v.

Martinez, supra) The arguments of the respondent are appropriate for a repeal ormodification of the law and should be directed to Congress. But until the law is

repealed, we are constrained to apply it.

WHEREFORE, the petition is hereby GRANTED. The Order of the respondent Regional

Trial Court of Manila, Branch 52 dated January 7, 1988 is SET ASIDE. Let this case be

remanded to the said court for disposition in accordance with this decision.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.


24/44

PRUDENTIAL BANK, petitioner,

vs.NATIONAL LABOR RELATIONS COMMISSION, CECILIA ORQUELLO, et al., ZENAIDAUCHI, et al., ALU-INTERASIA CONTAINER INDUSTRIES, INC., and RAULREMODO, respondents.

BELLOSILLO,J.:

This petition for certiorariimpugns the Resolutions of the National Labor Relations

Commission (NLRC) dated 18 August and 12 November 1993 in NLRC Cases Nos. RAB-III-

580-82 (Orquillo v. Interasia Container Industries, Inc.), RAB-III-3-585-82, (Uchi v.

Interasia Container Industries, Inc.) and RAB-III-08-0049-87, (ALU-Interasia Container

Industries, Inc. v. Interasia Container Industries, Inc.) dismissing the appeal of petitioner

from the order of the Labor Arbiter denying its third-party claim to the personal

properties subject of levy on execution based on its trust receipts.

The records show that Interasia Container Industries, Inc. (INTERASIA), was embroiled in

three (3) labor cases which were eventually resolved against it. Thus in NLRC Cases Nos.

RAB-III-03-580-82 and RAB-III-03-585-82 monetary awards consisting of 13th-month pay

differentials and other benefits were granted to complainants. Subsequently the

monetary award was recomputed to include separation pay in the total sum ofP126,788.30 occasioned by the closure of operations of INTERASIA. In RAB-03-08-0049-

87 the Labor Arbiter declared the closure or shutdown of operations effected by

INTERASIA as illegal and awarded to complainants the sum of P1,188,466.32 as wage

differentials, separation pay and other benefits.

With the finality of the three (3) decisions, writs of execution were issued. The Sheriff

levied on execution personal properties located in the factory of INTERASIA thus "For

Case 580 and 585: One (1) lot-plastic sacks (scrap, one (1) lot sling sacks, one (1) lot

plastic in spools; and, For Case 0049: Five hundred (500) bags plastic resins, one (1)

lot plastic resins sweaping (scrap) and one (1) lot all plastic linings."

Petitioner filed an Affidavit of Third-Party Claim asserting ownership over the seized

properties on the strength of trust receipts executed by INTERASIA in its favor. As a

result, the Sheriff suspended the public auction sale. But on 18 September 1992 the

Labor Arbiter denied the claim of petitioner and directed the Sheriff to proceed with the

levy of the properties. Petitioner then filed separate appeals to the NLRC.


25/44

On 14 October 1992 the Sheriff posted Notices of levy and Sale of the seized properties

on 21 October 1992. However, no bidder appeared on the scheduled date hence the

public auction sale was postponed to 5 November 1992. At the rescheduled date the

Sheriff declared Angel Peliglorio the highest bidder with an offer of P128,000.00 on the

properties levied in Cases Nos. 580 (RAB-III-580-82) and 585 (RAB-III-3-585-82), and

P1,191,110.00 in Case No. 0049 (RAB-111-08-0049-87).

On 12 December 1992 the Labor Arbiter ordered the release of the properties to

Peliglorio prompting INTERASIA to file a Motion to Set Aside and/or Declare Public

Auction Sale Null and VoidAb Initio for non-compliance with legal requisites. On 23

December 1992 the Labor Arbiter denied the motion and directed the Sheriff to break

open the plant of INTERASIA in order that Peliglorio could enter and take possession of

the auctioned properties. INTERASIA moved to reconsider the order.

On 12 January 1993 the Labor Arbiter inhibited himself from the case because of

INTERASIAS's accusation of partiality. The records were then forwarded to the NLRC. On

the other hand, petitioner filed a Third-Party Claimant's Appeal/Memorandum. On 18

August 1993 the NLRC dismissed petitioner's appeal as well as INTERASIA's Motion for

Reconsideration of the resolution dated 23 December 1992. INTERASIA and petitioner

separately moved to reconsider the ruling but on 12 November 1993 their motions were

denied.1

Hence petitioner brought this present recourse raising questions on the

validity not only of the NLRC resolutions of 18 August and 12 November 1993 but also of

the public auction sale.2

Petitioner rails against the public auction of 5 November 1992 which was allegedly

conducted without notice and in a place other than the premises of INTERASIA as

required by the Manual of Instructions for Sheriffs. It also raises issue on the extent ofits security title over the properties subject of the levy on execution, submitting that

while it may not have absolute ownership over the properties, still it has right, interest

and ownership consisting of a security title which attaches to the properties. Petitioner

differentiates a trust receipt, which is a security for the payment of the obligations of

the importer, from a real estate mortgage executed as security for the payment of an

obligation of a borrower. Petitioner argues that in the latter the ownership of the

mortgagor may not necessarily have any bearing on its acquisition, whereas in the case

of a trust receipt the acquisition of the goods by the borrower results from the advances

made by the bank. It concludes that the security title of the bank in a trust receipt must

necessarily be of the same or greater extent than the nature of the security arising from

a real estate mortgage. Petitioner maintains that it is a preferred claimant to the

proceeds from the foreclosure to the extent of its security title in the goods which are

valued at P46,100,253.92 otherwise its security title will become useless.3

In their comment, private respondents support the findings of the NLRC. They submit

that petitioner's negligence to immediately assert its right to cancel the Trust Receipt

Agreements, upon INTERASIA's failure to comply with its obligation, is fatal to its claim.


26/44

For its part, the NLRC claims to rely on our pronouncement on trust receipts in Vintola

v. Insular Bank of Asia and America.4

It justifies the dismissal of petitioner's third-party

claim on the ground that trust receipts are mere security transactions which do not vest

upon petitioner any title of ownership, and that although the Trust Receipt Agreements

described petitioner as owner of the goods, there was no showing that it canceled the

trust receipts and took possession of the goods.5

The petition is impressed with merit. We cannot subscribe to NLRC's simplistic

interpretation of trust receipt arrangements. In effect, it has reduced the Trust Receipt

Agreements to a pure and simple loan transaction. This perception was clearly dispelled

in People v. Nitafan,6citing the Vintola and Samo cases, where we explained the nature

of a trust receipt thus

(A) trust receipt arrangement does not involve a simple loan transaction

between a creditor and debtor-importer. Apart from a loan feature, the

trust receipt arrangement has a security feature that is covered by the

trust receipt itself. (Vintola v. Insular Bank of Asia and America, 150 SCRA

578 [1987] That second feature is what provides the much needed

financial assistance to our traders in the importation or purchase of

goods or merchandise through the use of those goods or merchandise as

collateral for the advancements made by a bank (Samo v. People, 115

Phil 346 [1962]). The title of the bank to the security is the one sought to

be protected and not the loan which is a separate and distinct

agreement.

Reliance cannot be placed upon the Vintola case as an excuse for the dismissal of

petitioner's claim. For in that case we sustained, rather than frustrated, the claim of thebank for payment of the advances it had made to the purchaser of the goods,

notwithstanding that it was not the factual owner thereof and that petitioners had

already surrendered the goods to it due to their inability to sell them. We stated that

the fact that the Vintolas were unable to sell the seashells in question did not affect

IBAA's right to recover the advances it had made under the loan covered by the Letter of

Credit, with the trust receipt as a security for the loan. Thus, except for our disquisition

on the nature of a trust receipt as restated in Nitafan, Vintola hardly has any bearing on

the case at bench since the issue here involves the effect and enforcement of the

security aspect whereas the former case deals with the loan aspect of a trust receipt

transaction. Apparently, the NLRC was confused about the nature of a trust receipt,

specifically the security aspect thereof.

The mechanics and effects flowing from a trust receipt transaction, particularly the

importance given to the security held by the entruster, i.e., the person holding title over

the goods, were fully discussed in earlier decisions, as follows


27/44

By this arrangement a banker advances money to an intending importer,

and thereby lends the aid of capital, of credit, or of business facilities and

agencies abroad, to the enterprise of foreign commerce. Much of this

trade could hardly be carried on by any other means, and therefore it is

of the first importance that the fundamental factor in the transaction, the

banker's advance of money and credit, should receive the amplestprotection. Accordingly, in order to secure that the banker shall be repaid

at the critical point that is, when the imported goods finally reach the

hands of the intended vendee the banker takes the full title to the

goods at the very beginning; he takes it as soon as the goods are bought

and settled for by his payments or acceptances in the foreign country, and

he continues to hold that title as his indispensable securityuntil the goods

are sold in the United States and the vendee is called upon to pay for

them. This security is not an ordinary pledge by the importer to the

banker, for the importer has never owned the goods, and moreover, he is

not able to deliver the possession; but the security is the complete title

vested originally in the bankers, and this characteristic of the transaction

has again and again been recognized and protected by the courts. Of

course, the title is at bottom a security title, as it has sometimes been

called, and the banker is always under the obligation to reconvey; but

only after his advances have been fully repaid and after the importer has

fulfilled the other terms of the contract(emphasis supplied).7

. . . . [I]n a certain manner, (trust receipt contracts) partake of the nature

of a conditional sale as provided by the Chattel Mortgage Law, that is, the

importer becomes absolute owner of the imported merchandise as soon

as he has paid its price. The ownership of the merchandise continues tobe vested in the owner thereof or in the person who has advanced

payment, until he has been paid in full, or if the merchandise has already

been sold, the proceeds of the sale should be turned over to him by the

importer or by his representative or successor in interest (emphasis

supplied).8

More importantly, owing to the vital role trust receipts play in international and

domestic commerce, Sec. 12 of P.D. No. 1159

assures the entruster of the validity of his

claim against all creditors

Sec. 12. Validity of entruster's security interest as against creditors.

The entruster's security interest in goods, documents, or instruments

pursuant to the written terms of a trust receipt shall be valid as against

all creditors of the entrustee for the duration of the trust receipt

agreement.


28/44

From the legal and jurisprudential standpoint it is clear that the security interest of the

entruster is not merely an empty or idle title. To a certain extent, such interest, such

interest becomes a "lien" on the goods because the entruster's advances will have to be

settled first before the entrustee can consolidate his ownership over the goods. A

contrary view would be disastrous. For to refuse to recognize the title of the banker

under the trust receipt as security for the advance of the purchase price would be tostrike down a bona fide and honest transaction of great commercial benefit and

advantage founded upon a well-recognized custom by which banking credit is officially

mobilized for manufacturers and importers of small means.10

The NLRC argues that inasmuch as petitioner did not cancel the Trust Receipt

Agreements and took possession of the properties it could not claim ownership of the

properties.

We do not agree. Significantly, the law uses the word "may" in granting to the entruster

the right to cancel the trust and take possession of the goods.11

Consequently,

petitioner has the discretion to avail of such right or seek any alternative action, such as

a third-party claim or a separate civil action which it deems best to protect its right, at

anytime upon default or failure of the entrustee to comply with any of the terms and

conditions of the trust agreement.

Besides, as earlier stated, the law warrants the validity of petitioner's security interest in

the goods pursuant to the written terms of the trust receipt as against all creditors of

the trust receipt agreement.12

The only exception to the rule is when the properties are

in the hands of an innocent purchaser for value and in good faith. The records however

do not show that the winning bidder is such purchaser. Neither can private respondents

plead preferential claims to the properties as petitioner has the primary right to themuntil its advances are fully paid.

In fine, we hold that under the law and jurisprudence the NLRC committed grave abuse

of discretion in disregarding the third-party claim of petitioner. Necessarily the auction

sale held on 5 November 1992 should be set aside. For there would be neither justice

nor equity in taking the funds from the party whose means had purchased the property

under the contract.13

WHEREFORE, the petition for certiorari is GRANTED. The Resolutions of the National

Labor Relations Commission dated 18 August and 12 November 1993 are SET ASIDE and

a new judgment is entered GRANTING the Third-Party Claim and ORDERING the Sheriff

or his representative to immediately deliver to petitioner PRUDENTIAL BANK the

properties subject of the Trust Receipt Agreements.

SO ORDERED.

Padilla, Davide, Jr., Kapunan and Hermosisima, Jr., JJ., concur.


29/44

PHILIPPINE NATIONAL BANK, Plaintiff-Appellee, vs. DALMACIO CATIPON, Defendant-Appellant.

D E C I S I O N

REYES, J. B. L.,J.:

This appeal is taken from the decision of the Court of First Instance of Manila in its Civil

Case No. 15711 sentencing Dalmacio Catipon to pay the Philippine National Bank the

principal sum of P3,050.83 with interest thereon from September 1, 1951 until full

payment plus costs.

The facts are set forth in the judgment appealed from to be as

follows:chanroblesvirtuallawlibrary

The parties stipulate, among other things, thatDefendantaffixed his signature on the

Trust Receipt, Exhibit A because of his strong desire to get the onions purchased by

him from J. V. Ramirez & Co., Inc., and which were duly paid for to said J. V. Ramirez &

Co., Inc., and not toPlaintiffBank, as evidenced by receipts marked Exhibits 1, 2 and

3; chan roblesvirtualawlibrarythat his signature was affixed at the Divisoria Market

when a son of J. V. Ramirez came to him and explained that the only way to get onions

which he bought was to sign the said Trust Receipt Exhibit A; chan

roblesvirtualawlibrarythat the signature of Dalmacio Catipon (Defendant) was affixed

long after the trust receipt Exhibit A was signed by J. V. Ramirez; chan

roblesvirtualawlibrarythat J. V. Ramirez, who is the President and General Manager of J.V. Ramirez & Co., Inc., is the indentor and importer and that Dalmacio Catipon is only a

customer of J. V. Ramirez & Co., Inc.; chan roblesvirtualawlibrarythat Plaintifffiled a

claim against J. V. Ramirez in the Insolvency Proceedings of J. V. Ramirez & Co., Inc. (Civil

Case No. 3191 of the Court of First Instance of Manila) long before the present

complaint was filed;chan roblesvirtualawlibraryand that Plaintiffdid not realize any

cent out of its claim filed in the insolvency proceedings as J. V. Ramirez & Co. has no

sufficient assets to meet all claims of the creditors including that of the Plaintiff. (Rec.

App. pp. 92-93.)

It is also of record that at the instance of the bank, Catipon was charged with estafa

(Criminal Case No. 8190) for having misappropriated, misapplied and converted themerchandise covered by the trust receipt; chan roblesvirtualawlibrarybut after due trial

was acquitted from the charge. Shortly thereafter, the bank commenced the present

action to recover the value of the goods.

Dalmacio Catipon rests his present appeal on three points, the same ones invoked by

him in the court below. They are:chanroblesvirtuallawlibrary (1) That his acquittal in the

estafa case is a bar to the Banks instituting the present civil action, because the Bank


30/44

did not reserve in the criminal case its right to separately enforce the civil liability of

theAppellant; chan roblesvirtualawlibrary(2) That under the facts stipulated,

theDefendantwas not liable under the trust receipt; chan roblesvirtualawlibraryand (3)

That if at all, he should be held liable only for one-half of the value of the goods under

trust, there being no stipulation that he would be solidarily liable with his co-signer.

We agree with the trial court that theAppellants case has no merit. The decision

acquittingAppellantCatipon of the charge of estafa does not preclude or bar the filing of

this action to enforce his liability as one of the signers of the trust receipt Exhibit A, for

several reasons:chanroblesvirtuallawlibrary

(a) Because the acquittal was predicated on the conclusion that the guilt of

the Defendant, Dalmacio Catipon has not been satisfactorily established, as expressly

recited by the decision of acquittal of Judge Alejandro Panlilio Exhibit 4-b, p. 4) and this

acquittal being equivalent to one on reasonable doubt, does not preclude a suit to

enforce the civil liability for the same act or omission, under Article 29 of the new Civil

Code; chan roblesvirtualawlibraryit does not finally determine nor expressly declare that

the fact from which the civil action might arise did not exist (Rule 107, section 1 [d]);

(b) Because the declaration in the decision of acquittal to the effect that if any

responsibility was incurred by the accused that is civil in nature and not criminal

amounts to a reservation of the civil action in favor of the offended party, for the court

in its decision had no reason to dwell on a civil liability that it intended to extinguish by

the same decision; chan roblesvirtualawlibraryand

(c) Because if theAppellantexecuted the trust receipt (that the present action seeks to

enforce), he is liable ex contractu for its breach, whether he did or he did not

misappropriate, misapply or convert the said merchandise as charged in the

information filed in the criminal case.The second issue raised byAppellantis likewise unmeritorious. Whether or not Catipon

appended his signature to the trust receipts at the request of the son of his cosigner J.

V. Ramirez, and regardless of the arrangements between them, the fact remains that by

signing the trust receipt theAppellantcaused the Bank to believe he assumed the

obligations thereunder together with his co-signer; chan roblesvirtualawlibraryand the

Bank having acted on that assumption, induced by theAppellant, Catipon, the latter

cannot, in equity, be heard now to deny his liability, under the well known principle of

estoppel. There is no finding that the Bank was not warned or had reason to believe that

theAppellant, in signing the trust receipt, nevertheless did not intend to be bound by its

terms, or that there were special arrangements between Ramirez and theAppellant.As to the third defense, it appearing from the stipulation that the merchandise (onions)

covered by the trust receipt were delivered by Ramirez to theAppellantherein, who

disposed thereof, it is but right that he should be the one to answer for their

value.Appellants payments to Ramirez cannot diminish the rights of the Bank, since the

trust receipt expressly obligated hereinAppellantto pay the Bank and not to his co-

signer.


31/44

The decision appealed from is affirmed, without prejudice to theAppellants rights

against his co-signer J. V. Ramirez & Co., Inc. Costs againstAppellant. SO ORDERED.

EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE OF THEPHILIPPINES, respondents.

Facts:

Assi

trust receipts cases

Documents