TRUST RECEIPT

G.R. No. L-58476. September 2, 1983.FERNANDO ONG, petitioner, vs.

THE COURT OF APPEALS and JUDGE FIDEL P. PURISIMA, respondents.

FACTS:Ong obtained and received from the Tramat Mercantile Inc. several units of machineries in trust for the purpose of displaying and selling the machineries for cash. Ong failed to turnover the proceeds of he sale or to return the goods.

An information for Estafa was filed by the Asst. Fiscal before CFI of Manila against Ong. Tramat Mercantile Inc. subsequently filed for collection of sum of money.

Parties entered into a compromise agreement to settle the claim in the case of collection of sum of money which is approved by CFI.

Ong moved for the dismissal of the criminal charge of Estafa against him on the ground of novation because of the compromise agreement entered into between him and the complaint.

RTC denied the motion to dismiss the Estafa case. CA dismissed the petition for a certiorari. Novation does not extinguish the criminal liability if the crime of Estafa has been completed. In the instant case, the crime of Estafa had been consummated long before the compromise agreement was agreed upon. The criminal case had already been filed in the court. The subsequent agreement did not affect the criminal culpability of Ong.

Hence petition.

ISSUE: Whether compromise agreement on the civil case of collection of sum of money made after the filing of the criminal case of Estafa extinguishes the criminal case by way of novation

HELD:

Petition DISMISSED.

Compromise of Estafa case arising from trust receipt transaction, after the case has been filed in court, does not amount to novation and does not erase the criminal liability of the accused.

Novation theory may perhaps apply to the filing of the criminal information in court by the state prosecutors because up to that time the original trust relation may be converted by the parties into an ordinary creditor-debtor situation, thereby placing the complaint in estoppel to insist on the original trust.

But after the justice authorities have taken cognizance of the crime and instituted action in the court, the offended party may no longer divest the prosecution of its power to exact the criminal liability, as distinguished from the civil liability. The crime being an offense against the state, only the latter can renounce it.

Vintola v Insular Bank of Asia and America

FACTS: Vintola spouses have business engaged in the manufacture of raw and seashells into finish products. They applied for a domestic letter of credit with the Insular Bank of Asia and America (IBAA) which in turn granted the application. Vintolas jointly and severally agreed to pay the bank at maturity date.

The letter of credit authorized IBAA to negotiate for the spouses’ accounts drafts draw by their supplier Stalin Tan for the purchase of the pucha and olive sea shells.

Vintolas received the shells from Tan. For the release of the shells, Vintolas executed a Trust Receipt Agreement with IBAA. Vintolas defaulted from their obligation to IBAA. IBAA demanded the payment but because they were unable to dispose the shells, Vintolas offered to return the shells however IBAA refused.

IBAA charged Vintolas with Estafa for having misappropriated, misapplied, and converted for their personal use and benefit the goods. During the trial, Vintolas surrendered the shells to the custody of the court.

RTC acquitted the spouses of the crime of Estafa.

IBAA filed a civil action to recover the value of the goods. RTC dismissed the case because the complaint was barred by judgment of acquittal in the Estafa case. On motion, the court reconsidered. check

Hence petition.

ISSUE:

HELD:Petition _

Letter of Credit-Trust Receipt Agreement is endowed with its own distinctive features and characteristics. A bank extends a loan covered by the letter of credit with the trust receipt as security for the loan. The transaction involves a loan feature represented by the letter of credit and security feature which is in the covering trust receipt.

A trust receipt is a security agreement, pursuant to which a bank acquires a security interest in goods. It secures an indebtedness and there can be no such thing as security interest that secures no obligation.

IBAA did not become the real owner of the goods. It is merely the holder of a security title for the advances it made to the Vintolas. The goods that Vintolas purchased through IBAA financing remained their own property and they hold it at their own risk. IBAA is not converted into an investor, it remained the lender and creditor.

Since is not the factual owner of the goods, even Vintolas surrendered the goods to IBAA and subsequently deposited them in the custody of the court, Vintolas were not relieved of their obligation to pay the loan.

The acquittal of the Vintolas in the criminal case of Estafa as a result of the surrender or consignation of the goods is not a bar to the filing of a separate civil action to enforce payment of the loan.

The civil suit instituted by IBAA is based ex contractu. As such, it is diticnt and independent from any criminal proceeding and may proceed regardless of the result of the criminal proceeding.

G.R. No. L-39922-25. August 21, 1987TRINIDAD RAMOS, petitioner, vs.

THE HONORABLE COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents

FACTS:Ramos filed with Philippine National Cooperative Bank (PNCB) four applications for letters of credit. After the applications were processed and approved, domestic letters of credit were opened on the same dates of the applications and in the amounts applied for. Among the papers filed for the issuance of the domestic letters of credit were commercial invoices of the different suppliers of the merchandise sought to be purchased

Suppliers drew sight drafts payable to the order of PNCB which in turn drew its own draft against Ramos, which drafts were accepted by her on the same date of application. After such acceptance, Ramos signed the trust receipts.

The records of the PNCB which had been presented in evidence show that the drafts drawn by the bank against the accused and accepted by the latter were supposed to be due in 90 days from the dates thereof. No payments were made excepting partial payments. These partial payments were evidently in pursuance of written demands for payment addressed by the PNCB to Ramos. A last formal demand was addressed to Ramos in a letter of counsel for the PNCB.

Ramos was charged of the crime of Estafa.

CFI of Manila convicted Ramos. CA affirmed with modification, her conviction of four felonies of Estafa.

Hence appeal.

ISSUE:

HELD:

Judgments of the Trial Court and of the Court of Appeals convicting the accused, Trinidad Ramos, of the crime with which she is charged are REVERSED, and she is acquitted on reasonable doubt.

Ramos pleads for acquittal on the proposition that the factual predicate on which her conviction is laid is chiefly comprised of speculations, conjectures and presumptions without substantial and actual support in the evidence.

She asserts that it behooved the prosecution, which had charged her with Estafa under Article 315, par. 1 (b) of the Revised Penal Code. But, she contends, in her case (1) that there is no adequate proof of her receipt of the goods subject of the trust receipts in question or of her having paid any thing on account thereof or in connection therewith; (2) that complainant Bank had suffered no damage

whatever, since it had made no payment at all on account of the commercial invoices for which the trust receipts were issued; and (3) that under the laws at the time, transactions involving trust receipts could only give rise to purely civil liability.

The proofs are indeed inadequate on these propositions of fact. It is difficult to accept the prosecution's theory that it has furnished sufficient proof of delivery by the introduction in evidence of the commercial invoices attached to the applications for the letters of credit and of the trust receipts. The invoices are actually nothing more than lists of the items sought to be purchased and their prices; and it can scarcely be believed that goods worth no mean sum actually transferred hands without the unpaid vendor requiring the vendee to acknowledge this fact in some way, even by a simple signature on these documents alone if not in fact by the execution of some appropriate document, such as a delivery receipt.

The trust receipts do not fare any better as proofs of the delivery to Ramos of the goods. Except for the invoices, all documents relating to each trust receipt agreement, including the trust receipts themselves, appear to be standard Bank forms accomplished by the Bank personnel, and were all signed by Ramos in one sitting, no doubt with a view to facilitating the pending transactions between the parties.

The issue could quite easily have been resolved by the production of the delivery receipts or the testimony of the employees who made the supposed deliveries. Yet the existence of that evidence is placed in serious doubt by the fact that the prosecution made no effort to bring it before the Court, although it could have done so routinely and without any difficulty whatever. Certainly, this omission cannot be taken against the accused, who is presumed innocent until the contrary is proved beyond reasonable doubt. It is after all the duty of the prosecution to establish the existence of all the elements of the crime charged.

G.R. No. 82495. December 10, 1990.ALLIED BANKING CORPORATION, petitioner, vs.

HON. SECRETARY SEDFREY ORDOÑEZ (Public Respondent) and ALFREDO CHING (Private Respondent), respondents.

FACTS:Philippine Blooming Mills (PBM), through Ching, applied for a letter of credit with Allied Banking Corp. (ABC) to finance the purchase of dolomites and nozzle bricks

ABC issued an irrevocable letter of credit in favor of Nikko Ind. Co. which in turn drew four drafts.

To secure the payment and in consideration of transfer of the possession of goods to PBM, the four trust receipts were executed acknowledging ABC’s ownership of the goods and PBM’s obligation to turnover the proceeds or return if sold.

PBM failed and refused to turnover the proceeds or return the goods.

ABC filed a criminal complaint against Ching for violation of Trust Receipts Law before the office of the Provincial Fiscal of Rizal. After preliminary investigation wherein Ching failed to appear or submit a counter-affidavit and even refused to receive the subpoena, the Fiscal found a prima facie case for violation of Trust Receipts Law on four (4) counts and filed the corresponding information in court.

DOJ Secretary Neptali Gonzales held that there is a violation of the law. Undersecretary Bello denied motion for reconsideration.

Another motion for reconsideration was filed. Justice Secretary Ordoñez rectified his predecessor's supposed reversible error and held that the goods subject of the trust receipt agreements were dolomites which are specifically used for patching purposes over the surface of the furnaces and nozzles bricks which are insulating materials in the lower portion of the ladle which do not form part of the steel product itself. Since the goods covered by the trust receipts and subject matter of these proceedings are to be utilized in the operation of the equipment and machineries of the corporation, they could not have been contemplated as being covered by PD 115. Apparently, the trust receipt agreements were executed as security for the payment of the drafts. As such, the main transaction was that of a loan. In essence, therefore, the relationship between the Bank and the corporation, consequently, the respondent herein likewise included, is that of debtor and creditor.

Hence special civil action for certiorari to review the decision of the Department of Justice.ISSUE:

HELD:

Petition GRANTED

Goods covered by the trust receipts do not form part of the finished products which are not ultimately sold but are instead, utilized/used up in the operation of the equipments and machineries of the entrustee-manufacturer.

The non-payment of the amount covered by a trust receipt is an act inviolative of the entrustee’s obligation to pay. The penal provision of P.D. 115 encompasses any act violative of an obligation covered by the trust receipt; it is not limited to the transactions in goods which are to be sold/retailed, reshipped, stored or processed as a component of a product ultimately sold. Thus, PBM could not escape criminal liability even if the goods subject of the transaction were used in the operation of the equipment and machineries of the corporation.

G.R. No. 46658. May 13, 1991.*PHILIPPINE NATIONAL BANK, petitioner, vs.

HON. GREGORIO G. PINEDA, in his capacity as Presiding Judge of the Court of First Instance of Rizal, Branch XXI and TAYABAS CEMENT COMPANY,

INC., respondents.

FACTS: check facts!

Ignacio Arroyo obtained a loan from Philippine National Bank (PNB) to purchase 60% subscribed capital stock of Tayabas Cement Company (TCC). A real estate mortgage over a parcel of land was executed as a security.

TCC filed with PNB a letter of credit in favor of Tokyo Menka Kaisha Ltd. of Japan (TMKLJ) to cover importation of cement plant machinery. Arroyo executed a surety agreement to secure the loan accommodation.

The machinery was released to TCC under a trust receipt agreement. However, TCC failed to remit or pay the drawings of TMKLJ.

PNB had been fully paid by reason of its repossession of the machinery and equipment.

RTC

CA

Hence petition.

ISSUE:

HELD:

PNB took possession of the imported cement plant machinery and equipment pursuant to the trust receipt agreement executed by and between PNB and TCC giving PNB the unqualified right to the repossession and disposal of all the property shipped under the letter of credit until such time as all the liabilities and obligations under said letter had been discharged.

PNB’s possession of the subject machinery and equipment being precisely a form of security for the advances given to TCC under the letter of credit, said letter possession by itself cannot be considered payment of the loan secure thereby.

Payment would be legally result only after PNB had foreclosed on said securities sold the same and applied to the proceeds thereof to TCC’s loan obligation.

Mere possession does not amount to foreclosure. Foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.

PNB has the right to foreclose the mortgages executed by the spouses Arroyo as sureties of TCC. As sureties, Arroyo spouses are primarily liable as original promisors and are bout immediately to pay the creditor of the amount outstanding.

People v. Nifatan

G.R. Nos. 81559-60. April 6, 1992.*

PEOPLE OF THE PHILIPPINES, (Public Petitioner) and ALLIED BANKING CORPORATION (Private Petitioner), vs. HON. JUDGE DAVID G. NITAFAN (Public Respondent) and BETTY SIA ANG (Private Respondent).

FACTS

Betty Sia Ang, being then the proprietress of Eckart Enterprises, received in trust from the bank Gordon Plastics, plastic sheeting and Hook Chromed, 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, 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 to defraud, she misappropriated, misapplied and converted to her own personal use and benefit, to the damage and prejudice of said Allied Banking Corporation. The accused filed a motion to quash the information on the ground that the facts charged do not constitute an offense.

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. 115 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.

Hence, this petition.

ISSUE

HELD

Petition is GRANTED. The Order of the respondent Regional Trial Court of Manila is SET ASIDE.

This Court notes that the petitioner bank brought a similar case before this Court, Allied Banking Corporation v. Hon. Secretary Sedfrey Ordoñez and Alfredo Chin. In that case, the petitioner additionally questioned, and the Court 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.

The Court 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 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.

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 a debtor-importer. Apart from a loan feature, the trust receipt arrangement has a security feature that is covered by the trust receipt itself. 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.

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.

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. 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.

G.R. No. 112592. December 19, 1995.*PRUDENTIAL BANK, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, CECILIA ORQUELLO, et al., ZENAIDA UCHI, et al., ALU-INTERASIA CONTAINER INDUSTRIES INC., and RAUL REMODO, respondents.

FACTS

Interasia Container Industries, Inc. (INTERASIA), was embroiled in three (3) labor cases which were eventually resolved against it. 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

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 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.

The Sheriff posted Notices of Levy and Sale of the seized properties. However, no bidder appeared on the scheduled date hence the public auction sale was postponed. At the rescheduled date the Sheriff declared Angel Peliglorio the highest bidder.

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 Void Ab Initio for non-compliance with legal requisites. 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.

The Labor Arbiter inhibited himself from the case because of INTERASIA’s accusation of partiality. The records were then forwarded to the NLRC. Petitioner filed a Third-Party Claimant’s Appeal/Memorandum. NLRC dismissed petitioner’s appeal as well as INTERASIA’s Motion for Reconsideration. INTERASIA and petitioner separately moved to reconsider the ruling but their motions were denied.

Hence petitioner brought this present recourse raising questions on the validity not only of the NLRC resolutions but also of the public auction sale.

ISSUE

HELD

Petition for certiorari is GRANTED. The Resolutions of the National Labor Relations Commission 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.

The Supreme Court 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.

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 the bank 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. 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 security interest of the entruster is not merely an empty or idle title. To a certain extent, 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 to strike 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.

The law uses the word may in granting to the entruster the right to cancel the trust and take possession of the goods. 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 any time upon default or failure of the entrustee to comply with any of the terms and conditions of the trust agreement.

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. 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.

G.R. No. 134436. August 16, 2000.*METROPOLITAN BANK and TRUST COMPANY, petitioner, vs. JOAQUIN TONDA and MA. CRISTINA TONDA, respondents.

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 a period of eight 8 months 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 11 trust receipts to secure the release of the raw materials to HTAC. The imported fabrics withdrawn by HTAC under the 11 trust receipts executed by the TONDAS. Due to their failure to settle their obligations under the trust receipts upon maturity, METROBANK through counsel, sent a letter making its final demand upon the TONDAS to settle their past due TR/LC accounts. Despite repeated demands therefor, the TONDAS failed to comply with their obligations stated in the trust receipts agreements. TONDAS failed to account to METROBANK the goods and/or proceeds of sale of the merchandise, subject of the trust receipts.

Metrobank filed with the Provincial Prosecutor of Rizal a complaint/affidavit against the TONDAS for violation of P.D. No. 115 (Trust Receipts Law) in relation to Article 315 (1) (b) of the Revised Penal Code. The assigned Assistant Prosecutor of Rizal submitted a Memorandum to the Provincial Prosecutor recommending that the complain be dismissed on the ground that the complainants had failed to establish the existence of the essential elements of Estafa as charged.

METROBANK then appealed to the Department of Justice (DOJ). Undersecretary Ramon S. Esguerra reversed the findings of the Provincial Prosecutor of Rizal and ordered the latter to file the appropriate information against the TONDAS as charged in the complaint.

The TONDAS immediately sought a reconsideration of the DOJ Resolution but their motion was denied. A second motion for reconsideration by the TONDAS was likewise denied.

Subsequently, the TONDAS filed with the Court of Appeals a special civil action for certiorari and prohibition with application for a temporary restraining order or a writ of preliminary injunction. The Court of Appeals granted the TONDAS’ petition and ordered the criminal complaint against them dismissed. The Court of Appeals held that METROBANK had failed to show a prima facie case that the TONDAS violated the Trust Receipts Law. The outstanding obligation of the TONDAS under the trust receipts account had already been settled by them in compliance with the loan restructuring proposal and that in the absence of a loan restructuring agreement, METROBANK could still validly apply the amount as payment thereof.

In a Loan Reconstructuring Agreement, where the outstanding trust receipt is P2.8M, the joint account of Joaquin Tonda and Wang Tien En which is P2.8M is alleged to pay the entire principal of the outstanding trust receipt account. Despite the inability of both parties to reach a mutually agreeable loan restructured agreement, the amount of P2.8M which was deposited, a personal account was opened by two (2) of our stockholders in the amount equivalent to

the TR/LC Account of about P2.8 Million which deposit is still maintained with your bank, free from any lien or encumbrance, and may be applied anytime to the payment of the TR/LC Account upon the implementation by the parties of the terms of restructuring.’

ISSUEWhether or not the dismissal by the Court of Appeals of the charge for violation of the Trust Receipt Law against Tondas is warranted by the evidence at hand by law

HELD

Petition GRANTED. The assailed Decision is REVERSED and SET ASIDE.

Trust Receipts Law declares the failure to turn over the goods or the proceeds realized from the sale thereof, as a criminal offense punishable under Article 315 (1) (b) of the Revised Penal Code. 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 the TONDAS failed to comply with the obligations under the trust receipts despite several demands from METROBANK.

The amount of P2.8 million was not directly paid to METROBANK to settle the trust receipt accounts, but deposited in a joint account of Joaquin G. Tonda and a certain Wang Tien En. The alleged payment of the trust receipts accounts never became effectual on account of the failure of the parties to finalize a loan restructuring arrangement. The handwritten note by the METROBANK officer acknowledging receipt of the checks amounting to P2.8 Million made no reference to the TONDAS’ trust receipt obligations, and we cannot presume that it was anything more than an ordinary bank deposit.

Article 1288 of the Civil Code provides that “compensation shall not be proper when one of the debts consists in civil liability arising from a penal offense” as in the case at bar. The raison d’etre for this is that, “if one of the debts consists in civil liability arising from a penal offense, compensation would be improper and inadvisable because the satisfaction of such obligation is imperative.”

The negotiations pertain and affect only the civil aspect of the case but does not preclude prosecution for the offense already committed. The P2.8 Million deposit could not be considered as having settled the trust receipts obligations of the TONDAS to the end of extinguishing any incipient criminal culpability arising therefrom.

In estafa, payment, indemnification, or reimbursement of, or compromise as to, the amounts or funds malversed or misappropriated, after the commission of the crime, affects only the civil liability of the offender but does not extinguish his criminal liability or relieve him from the penalty prescribed by law for the offense committed, because both crimes are public offenses against the people

that must be prosecuted and penalized by the Government on its own motion, though complete reparation should have been made of the damage suffered by the offended parties.

Colinares v. CA

G.R. No. 114286. April 19, 2001.THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK),

petitioner, vs. THE COURT OF APPEALS, CONTINENTAL CEMENT CORPORATION,

GREGORY T. LIM and SPOUSE, respondents.

FACTS: Continental Cement Corporation (CCC) and Gregory Lim (Lim) obtained a letter of credit from Consolidated Bank and Trust Corp. (CBTC). CCC paid a marginal deposit to CBTC.

The letter of credit obtained was used to purchase bunker fuel oil from PetroPhil Corp. which was delivered to CCC. Trust receipt was executed by CCC with Lim as signatory.

CBCT filed a complaint for sum of money against CCC and Lim because of the failure to turnover the goods covered by the trust receipt/proceeds thereof.

CCC averred that the transaction between them was a simple loan and not a trust receipt transaction. The amount claimed by CBCT did not take into account payments already made by them.

RTC dismissed the complaint and ordered CBCT to pay overpayments of CCC. CA modified the decision of the RTC partially.

Hence petition.

ISSUE:

HELD:

Petition DENIED.

CBCT failed to convince the court that its transaction with CCC is really a trust receipt transaction instead of merely a simple loan.

As held in Colinares v. CA, debtor received the goods subject of the trust receipt before the trust receipt itself was entered into, the transaction in question was a simple loan and not a trust receipt agreement.

Prior to the date of execution of the trust receipt, the ownership of the goods was already transferred to the debtor.

The Trust Receipt Law does not seek to enforce payment of the loan, rather it 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.

G.R. No. 115678. February 23, 2001.PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs.

HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.

G.R. No. 119723. February 23, 2001.PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs.

HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.Fix factsPayment

FACTS: Philippine Bank of Communications (PBCom) sought the payment of P2M representing the proceeds or value of various textile goods which are covered by the irrevocable letter of credit and trust receipts executed by PBCom with Filipinas Textile Mills (FTM) as obligor.

The letters of credit and the trust receipts were covered by surety agreement executed by Bernardino and Sochi Villanueva.

PBCom filed complaint against Bernardino and Sochi and FTM. PBCom sought the payment of the amount representing the proceeds or value of various textile goods, the purchase of which was covered by irrevocable letters of credit and trust receipts executed by Bernardo Villanueva with Filipinas Textile Mills as obligor, which, in turn, were covered by surety agreements executed by private respondent Bernardino Villanueva and Sochi Villanueva.

In their Answer, they admitted the existence of the surety agreement and trust receipts but they had already made payments of the amount demanded and that the interest and other charges imposed by petitioner were onerous.

In the said Complaint, petitioner PBCom filed a motion for attachment for the violation of the Trust Receipts Law which constitutes Estafa.

The lower court ordered the issuance of a writ of preliminary attachment, conditioned upon the filing of an attachment bond. Motion for reconsideration was denied.

Separate petitions for certiorari before CA assailing the order granting the writ of preliminary attachment. Both were granted.

The Court of the Appeals held that that the lower court was guilty of grave abuse of discretion in not conducting a hearing on the application for a writ of preliminary attachment and not requiring petitioner to substantiate its allegations of fraud, embezzlement or misappropriation.

Hence consolidated petitions.

ISSUE:

HELD:

Petition DENIED.

The Supreme Court in accord with the Court of Appeals that the Motion for Attachment filed by PBCom and its supporting affidavit did not sufficiently established the grounds relied upon in applying for the writ of preliminary attachment.

While the Motion refers to the transaction complained involves trust receipts, the violation of the terms of which is qualified by law as constituting Estafa, it does not follow that a writ of attachment can and should automatically be issued.

PBCom cannot merely cite Sec. 1 (b) and (d), Rule 57 of the Revised Rules of Court, as a mere reproduction of the rules, without more cannot serve as a good ground for issuing a writ of attachment. An order of attachment cannot be issued on a general averment, such as one ceremoniously quoting from pertinent rule.

The allegation that FTM failed to remit the proceeds of the sale of the entrusted goods or to return the same in not sufficient for attachment to issue. A debt is fraudulently contracted if at the time of contracting it the debtor has a pre-conceived plan or intention not to pay. Fraudulent intent not to honor the admitted obligation cannot be inferred from the debtor’s inability to pay or to comply with the obligations. If the entrustee has made partial payment, it cannot be said the entrustee harbored a pre-conceived plan or intention not to pay the entruster.

G.R. No. 135462. December 7, 2001.*SOUTH CITY HOMES, INC., FORTUNE MOTORS (PHILS.), PALAWAN LUMBER MANUFACTURING CORPORATION, petitioners, vs. BA FINANCE CORPORATION, respondent.

FACTS:

Fortune Motor Corp. (FMC) has been availing the credit facilities of BA Finance Corp.

Chua, President of Fortune Motor Corp., executed in favor of BA Finance a Continuing Suretyship Agreement, which he jointly and severally unconditionally guaranteed the full, faithful and prompt payment and discharge of any and all indebtedness of FMC to BA Finance.

Palawan Lumber Manufacturing Corp. (PLMC), represented by Chua, Tan, Rodrigueza, and Baltazar, executed in favor of BA Finance Continuing Suretyship Agreement which the said corporation jointly and unconditionally guaranteed the fall, faithful, and prompt payment and discharge of any and all indebtedness of FMC to BA Finance.

South City Homes, Inc., represented by Rodrigueza and Tablante, executed an Continuing Suretyship Agreement.

Canlubang Automotive Resources Corp. drew

G.R. No. 117913. February 1, 2002.CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD

VELASCO and ALFONSO CO, petitioners, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.

G.R. No. 117914. February 1, 2002. MICO METALS CORPORATION, petitioner, vs. COURT OF APPEALS and

PHILIPPINE BANK OF COMMUNICATIONS, respondents.

FACTS:Lee, President of MICO Metals Corp. (MICO), wrote to Philippine Bank of Communications (PBCom) requesting for a grant of discounting loan/credit line in the sum of P3M for carrying out MICO’s line of business and maintain its volume of business.

On the same day, Lee requested for another discounting loan/credit line of P3M for opening letters of credit and trust receipts.

In connection with requests for discounting loan/credit lines, PBCom was furnished by MICO a resolution adopted by MICO’s Board of Director wherein President Lee and Vice President and General Manager Sio are authorized to singly and jointly apply for negotiate and secure the approval of commercial loans and other banking facilities and accomodations from PBCom

MICO made three separate loans of P1M each from PBCom under a promissory note. As security for the loans, MICO, through VP and GM Sio, executed a Deed of Real Estate Mortgage over its properties situated in Pasig.

Lee, Siok Suy, Sio, Yap, and Velasco, in their personal capacities, executed a surety agreement in favor of PBCom, wherein they jointly and severally, guaranteed payment for which MICO may be held accountable by PBCom as long as not to exceed P3M.

Lee, in his capacity as President of MICO, obtained an additional loan worth P4M for the expansion and modernization of the company’s machineries.

In an agreement, the proceeds of all loan availments will be credited to MICO’s current checking account with PBCom.

MICO furnished PBCom with notarized certification issued by the Corporate Secretary, that Siok Suy is duly authorized by the Board to negotiate on behalf of MICO for loans and other credit availments from PBCom.

MICO obtained two irrevocable letters of credit from PBCom. After the supplier of the merchandise was paid, the trust receipt upon MICO’s own initiative was executed in favor of PBCom.

Two foreign letters of credit in favor of Ta Jih Enterprise Co. Ltd. were issued by PBCom. The correspondent bank acknowledged PBCom’s advise. As security, MICO executed trust receipts in favor of PBCom.

MICO again obtained a loan from PBCom amounting to P377,000 covered by a promissory note.

Upon the maturity of all credit availment, PBCom made a demand for payment.

MICO failed to pay which led PBCom to extrajudicially foreclose MICO’s real estate mortgage and sold in public auction wherein PBCom was the highest bidder. PBCom applied the proceeds of the purchase price to the expenses of the foreclosure, interest and part of the principal of the loans, leaving an unpaid balance of P5441663.90. MICO likewise had another standing obligation in the sum of P461,600.06 representing its trust receipts liabilities to PBCom.

The sureties refused to acknowledge obligations to PBCom under the surety agreement.

Hence, PBCom filed a complaint with prayer for writ of preliminary attachment before the RTC alleging that MICO was no longer in operation and had no properties to answer for its obligations. PBCom further alleged that Lee has disposed or concealed his properties with intent to defraud his creditors. Except for MICO and Lee, the sheriff of the RTC failed to serve the summons on herein sureties since they were all reportedly abroad at the time. An alias summons was later issued but the sheriff was not able to serve the same to Alfonso Co and Chua Siok Suy who was already sickly at the time and reportedly in Taiwan where he later died.

RTC dismissed the complaint of PBCom. PBCom failed to prove the proceeds of the loan were delivered to MICO. There was no consideration passed from PBCom to MICO. All documents involved were void and non-existent. There is lack of proof of the existence of merchandise covered by the letter of credit. CA reversed the decision of the RTC.

Hence petition.

ISSUE: Whether or not proceeds of the loans and the letters of credit transactions were delivered to MICO

Whether or not the sureties should be held liable.

HELD:

Decision of the CA is AFFIRMED.

Sec. 24 of the Negotiable Instruments Law states that every negotiable instrument is deemed prima facie to have been indorsed for sufficient consideration

Sec. 3, Rule 131 of Rules of Court, there is a disputable presumption that there is a sufficient consideration for a contract and that a negotiable instrument given or indorsed for sufficient consideration. Hence, the natural presumption is that one does not sign a document without first informing himself of its contents and consequences. Said presumption acquires greater force in the case at bar where not only one but several documents were executed at different times and at different places by the sureties and Chua Siok Suy as president of MICO.

Letters of credit and trust receipts are not the same as negotiable instruments. However, the drafts issued in connection to the letter of credit are negotiable instruments.

PBCom when it presented documents, created a prima facie case but have actually proved solidary obligation of MICO and its sureties in favor of MICO. Sureties should have presented credible evidence to rebut the disputable presumption as well as the evidence presented by PBCom. Petitioners failed to contest the genuineness of the said Certification which is notarized and to show any written proof of any alleged withdrawal of the said authority given by the Board of Directors to Chua Siok Suy to negotiate for loans in behalf of MICO.

The letter of credit shows that pertinent material/merchandise have been received by MICO. Drafts were signed by beneficiary in connection with the letter of credit proved that the beneficiary was paid by PBCom.

In the By Laws of MICO, the power to borrow money for the company and to issue documents are not confined solely to the President of the company.

PBCom had every right to rely on the certification issued by MICO’s Corporate Secretary that Chua Siok Suy was duly authorized by its Board of Directors to borrow money and obtain credit facilities in behalf of MICO.

In the case at bar, respondent PBCom, as plaintiff in the trial court, has in fact presented sufficient documentary and testimonial evidence that proved by preponderance of evidence its subject collection case against the defendants who are the petitioners herein. In view of all the foregoing, the Court of Appeals committed no reversible error in its appealed Decision.

G.R. No. 133176. August 8, 2002.PILIPINAS BANK, petitioner, vs.

ALFREDO T. ONG and LEONCIA LIM, respondents.

FACTS: Baliwag Mahogany Corp. (BMC), through President Ong, obtained domestic commercial letter of credit with Pilipinas Bank to finance air dried, dark red lauan sawn lumber.

BMC, through Ong, executed 2 trust receipts. On due dates, BMC failed to comply with the Trust Receipt Agreement.

BMC it filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments. After BMC informed its creditors (including the bank) of the filing of the petition, a Creditors’ Meeting was held to inform all creditor banks of the present status of BMC to avert any action which would affect the company’s operations, and reach an accord on a common course of action to restore the company to sound financial footing.

SEC issued an order creating a Management Committee wherein the bank is represented. The Committee shall, among others, undertake the management of BMC, take custody and control of all its existing assets and liabilities, study, review and evaluate its operation and/or the feasibility of its being restructured.

BMC and fourteen creditor banks executed a Memorandum of Agreement (MOA) rescheduling the payment of BMC’s existing debts.

SEC approved the Rehabilitation Plan of BMC and declaring in state of suspension of payments

BMC and Ong defaulted in payment of their obligations under the rescheduled payment scheme provided in the MOA.

Bank filed a complaint for the violation of Trust Receipts Law. Provincial Prosecutor dismissed the complaint. DOJ subsequently denied the appeal.

CA held that the execution of MOA constitutes novation which places Bank in estoppel to insist on the original trust relation and constitutes a bar to the filing of any criminal information for violation of the trust receipts law.

ISSUE: Whether respondents can be held liable for violation of the Trust Receipts Law

HELD:

What is being punished by law is the dishonesty and abuse of confidence in handling of money or goods to the prejudice of another regardless of whether the latter is the owner.

There is no dishonesty and abuse of confidence can be attributed to the respondents. BMC failed to comply with its obligations upon maturity of the trust receipts due to serious liquidity problems.

The Management Committee took custody of all BMC’s assets and liabilities, including the red lauan lumber subject of the trust receipts and authorized their use in the ordinary course of business operations. It was the Management Committee which could settle BMC’s obligations.

Ong paid P21M in compliance with the equity infusion required by the MOA. The mala prohibita nature of the offense notwithstanding BMC’s intent to misuse or misappropriate the goods and their proceeds has not been established by the records.

MOA rescheduled BMC’s debts. It provided principal conditions which are incompatible with the trust agreement. MOA novated and effectively extinguished BMC’s obligations under the trust receipt agreement.

The contention of Pilipinas Bank that BMC’s non-compliance with the MOA revived BMC’s original liabilities under trust agreement is misplaced.

What is automatically terminated in case BMC failed to comply with the conditions under the MOA is not the MOA itself but the obligation of the Bank to reschedule the existing credits.

The execution of the MOA extinguished BMC’s obligation under the trust receipts. BMC’s liability, if any, would only be civil in nature since trust receipts were transformed into a mere loan document after the execution of the MOA.

G.R. No. 122502. December 27, 2002.LORENZO M. SARMIENTO, JR. and GREGORIO LIMPIN, JR., petitioners, vs.

COURT OF APPEALS and ASSOCIATED BANKING CORP., respondents.

FACTS:Limpin and Apostol of Davao Libra Industrial Sales, obtained an irrevocable domestic letter of credit with Associated Banking Corp. in favor of LS Parts Hardware and Machine Shop for purchase of assorted scrap iron.

Trust receipt was executed by Limpin and Apostol, which was signed by Sarmiento. They failed to comply with their undertaking under the trust receipt.

A complaint for violation of the Trust Receipt Law was filed against defendants. Sarmiento was dropped and Limpin was convicted. Apostol?

The scrap irons were lost because the vessel sunk and said scrap irons were delivered to Davao Libra Industrial Sales – business concern over which they had no interest whatsoever.

The lower court ruled in favor of the Associated Banking Corp. CA affirmed the judgment of the lower court.

Hence petition. bakit si sarmiento ang petitioner

ISSUE:

HELD: Petition _

According to the Rule III of Revised Rules of Criminal Procedure, the offended party is required to make a reservation of his right to institute a separate civil action. However, jurisprudence instructs that such reservation may not necessarily be express but may be implied.

The Principle of Implied Reservation of Separate Civil Action – inferred from the acts of the offended party/other than the offended party

Nothing in the records at had shown that Bank ever attempted to enforce its right to recover civil liability during the prosecution of the criminal action against petitioners.

Bank’s right to file a separate complaint for a sum of money is governed by the provisions of Art. 31 of the Civil Code. Banks complaint against petitioners based their failure to comply with their obligation as spelled out in the trust receipt executed by them. The breach of obligation is separate and distinct from the criminal the criminal liability.

The criminal liability on the misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released under the trust receipts is criminally punishable under Sec. 13 of the Trust Receipts Law in relation to Art. 315 of the Revised Penal Code.

Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently of the criminal proceedings instituted against petitioners regardless of the result of the latter.

Ong v. Court of Appeals

FACTS:Ong, representing ARMAGRI Int’l Corp. (ARMAGRI), received in trust from Solidbank Corp. 1000 bags of urea specified in a Trust Receipt Agreement and covered by letter of credit in favor of Fertiphil Corp. He also received in trust 125 pieces of rear diff. RN2049, 50 pieces of front and rear diff. ass Isuzu ….. in favor of Metropole Industrial Sales.

Ong, in possession of the goods, failed to comply with his obligations. He was charged with 2 counts of Estafa.

RTC convicted Ong. CA affirmed RTC’s decision.

Hence petition.

ISSUE:

HELD:

Petition _

Ong is a person responsible for violation of Trust Receipts Law.

The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. If the entrustee is a corporation, law makes the officer or other person responsible for the offense liable to suffer the penalty of imprisonment. Corporations, partnerships, associations and other juridical entities cannot be put to jail. The criminal liability falls on human agent responsible for violation of the Trust Receipt Law.

Solidbank was the entrsuster and ARMAGRI was entrustee responsible to the account for the goods or its proceeds in case of sale. Criminal liability for violation of Trust Receipt Law falls on human agent responsible for the violation.

Ong admits being agent of ARMAGRI is the person responsible for the offense. He is the signatory of the trust receipts, the loan application and the letters of credit. Despite being signatory to the trust receipt receipts and other document, Ong did not explain or show why he is not responsible for the failure to turnover the proceeds of the sale or account for the goods covered by the trust receipts.

When Ong signed the trust receipts, he acknowledged receipt of the goods covered by the trust receipts. He is fully aware of the terms and conditions stated in the trust receipts.

Ong acted on behalf of ARMAGRI. Law on Agency governing civil cases has no application in criminal cases. Bank accepted the trust receipts signed by the Ong based on his representation. It is a direct participation to the crime which makes Ong a person responsible for the offense.

Under the Trust Receipt Law, it is sufficient to allege and establish the failure of ARMAGRI, which Ong represented, to remit the proceeds or to return the goods to the Bank. The existence of corporate entity does not shield from protection the agent who knowingly and intentionally commits a crime at the instance of the corporation.

As for the civil liability arising from the criminal offense, Ong signing the trust receipt for the corporation is not solidarily liable with the entrustee-corporation for the civil liability arising from the criminal offense. He may, however, be personally liable if he bound himself to pay the debt of the corporation under the contract of surety or guarantee.

Landl & Company v. Metropolitan Bank

Landl & Company (Landl) is engaged in selling imported welding rods and alloys. Landl opened a commercial letter of credit with Metrobank to purchase various welding rods and electrodes from Perma Alloys, Inc. in New York, USA.

Landl put up a marginal deposit from the proceeds of a separate clean loan.

Metrobank required Llaban and Lucente, directors of Landl, to execute a Continuing Suretyship Agreement in favor of Metrobank. Lucente executed a Deed of Assignment in favor of Metrobank to cover the amount of Landl’s obligation to the bank. Metrobank opened an irrevocable letter of credit for Landl.

Metrobank required the execution of trust receipt as a security with the amount equivalent to the letter of credit.

Upon the arrival of the goods, Landl took possession.

On the maturity date of the trust receipt, Landl defaulted in the payment of its obligation to Metrobank and failed to turnover the goods.

Ten months after, Landl turnover the subject goods to Metrobank. The bank sold the goods on public auction on which Metrobank was declared the highest bidder. The proceeds of the auction sale were insufficient to completely satisfy Landl’s outstanding obligation to Metrobank.

Metrobank demanded that Landl pay the remaining balance but the latter failed to do so.

An action for collection for sum of money was filed against Landl.

RTC ruled in favor of Metrobank. CA affirmed the decision of RTC.

Hence petition.

ISSUE:

HELD:

Trust Receipt Agreement is merely a collateral agreement which is a security for a loan.

As stated in the second paragraph of Sec. 7 of P.D. 115 with respect to the rights of entruster, the statutory remedy available to an entruster in the event of default or failure of the entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the entruster and the entrustee.

The entruster may cancel the trust and take possession of the goods, documents, or instruments subject of the trust or of the proceeds realized therefrom at anytime. The entruster in possession of the goods, documents, or instruments may, on or after default, give notice to the entrustee of the intention to sell, and may, not less thatn 5 days after the serving or sending of such notice, sell the goods, documents or instruments at public or private sale, and the entruster may, at public sale, become a purchaser.

The proceeds of the sale shall be applied in the following order:1. to the payment of the expenses thereof;2. to the payment of the expenses of the re-taking, keeping, and storing the

goods, documents or instruments; and3. to the satisfaction of the entrustee’s indebtedness to the entruster.

The entrustee amy receive any surplus but shall be liable to the entruster for any deficiency.

The trust receipt contains the same.

The initial repossession by the bank of the goods subject of the trust receipt did not result in the full satisfaction of Landl’s loan obligation. Metrobank’s repossession of the property and subsequent sale of the goods were completely in accordance with its statutory and contractual rights upon default of Landl.

In the case, proceeds of the auction sale were insufficient to satisfy entirely Landl’s indebtedness to Metrobank. It is within the right of Metrobank to institute the instant case to collect the deficiency.

Llaban and Lucente as co-signatories of the Continuing Suretyship Agreement are bound to pay the principal sum in the amount of not more than P40,000. All the 3 petitioners thus share the solidary obligation in favor of Metrobank which is given the the right, under the Civil Code, to proceed against any one of the solidary debtors or some or all of them simultaneously.