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De Reny Fabric Industries, Inc. applied to the Bank It was uncontrovertibly proven by the Bank during
for four (4) irrevocable commercial letters of credit the trial below that banks, in providing financing in
to cover the purchase by the corporation of goods international business transactions such as those
from its American supplier, the J.B. Distributing entered into by the appellants, do not deal with the
Company. property to be exported or shipped to the importer,
but deal only with documents.
As each shipment arrived in the Philippines, the De
Reny Fabric Industries, Inc. made partial payments The existence of a custom in international banking
to the Bank amounting. Further payments were, and financing circles negating any duty on the part
however, subsequently discontinued by the of a bank to verify whether what has been
corporation when it became established, as a result described in letters of credits or drafts or shipping
of a chemical test conducted by the National documents actually tallies with what was loaded
Science Development Board, that the goods that aboard ship, having been positively proven as a
arrived in Manila were colored chalks instead of fact, the appellants are bound by this established
dyestuffs. usage. They were, after all, the ones who tapped
the facilities afforded by the Bank in order to
engage in international business.
The corporation also refused to take possession of
these goods, and for this reason, the Bank caused
them to be deposited with a bonded warehouse PHILIPPINE VIRGINIA TOBACCO
paying therefor the amount of P12,609.64 up to the ADMINISTRATION
filing of its complaint with the court. vs.
HON. WALFRIDO DE LOS ANGELES, TIMOTEO
A. SEVILLA, PHILIPPINE ASSOCIATED
Issue:
RESOURCES and PRUDENTIAL BANK AND
TRUST COMPANY
Whether or not De Reny fabrics is liable under the
letter of Credit?
Facts :
Ruling:
Timoteo Sevilla, proprietor and General Manager of
the Philippine Associated Resources (PAR) together
Under the terms of their Commercial Letter of with two other entities, namely, the Nationwide
Credit Agreements with the Bank, the appellants Agro-Industrial Development Corp. and the
agreed that the Bank shall not be responsible for Consolidated Agro-Producers Inc. were awarded in
the "existence, character, quality, quantity, a public bidding the right to import Virginia leaf
conditions, packing, value, or delivery of the tobacco at a rate of one (1) kilo of imported
property purporting to be represented by tobacco for every nine (9) kilos of leaf tobacco
documents; for any difference in character, quality, actually exported. Subsequently, the other two
quantity, condition, or value of the property from entities assigned their rights to PVTA and
that expressed in documents," or for "partial or respondent remained the only private entity
incomplete shipment, or failure or omission to ship accorded the privilege.
any or all of the property referred to in the Credit,"
as well as "for any deviation from instructions,
The contract entered into between the petitioner
delay, default or fraud by the shipper or anyone
and respondent Sevilla was for the importation of
else in connection with the property the shippers or
Virginia leaf tobacco and a counterpart exportation.
2
In accordance with their contract, Sevilla purchased abuse of discretion because the letter of credit
from petitioner and actually exported 2,101.470 issued by respondent bank is irrevocable
kilos of tobacco. Before Sevilla could import the
counterpart blending Virginia tobacco, Republic Act Issue:
No. 4155 was passed authorizing the PVTA to grant
import privileges at the ratio of 4 to 1 instead of 9 Whether or not the judge can order a decision that
to 1 and to dispose of all its tobacco stock at the will modify or cancel an irrevocable letter of credit
best price available. without the permission of the beneficiary
The Real Estate Mortgage, which secured the two own prestation under the loan agreements. And
(2) standby L/Cs. was extrajudicially foreclosed by, although these payments could result in the
and sold at public auction for P775,000.00, to reduction of the actual amount which could
petitioner IBAA as the lone and highest bidder. ultimately be collected from IBAA, the latter's
separate undertaking under its L/Cs remains. That
Philam Life filed suit against Respondent Spouses there still remains a balance on the loan, Pursuant
and IBAA before the Regional Trial Court of Manila, to its absolute undertaking under the L/Cs,
Branch XXXXI, for the recovery of the sum of therefore, IBAA cannot escape the obligation to pay
P274,779.56, the amount allegedly still owing under Philam Life for this unexpended balance.
the loan.
lapsed without the private respondent receiving any the petitioner is only a notifying bank and not a
certification from Christiansen. confirming bank.
Since the demands by the private respondent for Since the petitioner was only a notifying bank, its
Christiansen to execute the certification proved responsibility was solely to notify and/or transmit
futile, Villaluz, instituted an action for mandamus the documentary of credit to the private respondent
and specific performance against Christiansen and and its obligation ends there. In order that the
the Feati Bank and Trust Company. While the case petitioner may be held liable under the letter, there
was still pending trial, Christiansen left the should be proof that the petitioner confirmed the
Philippines without informing the Court and his letter of credit.
counsel. Hence, Villaluz, filed an amended
complaint to make the petitioner solidarily liable Finally, even if the petitioner is a confirming bank,
with Christiansen. the petitioner cannot be forced to pay the amount
under the letter because there was a failure on the
Issue: part of the private respondent to comply with the
terms of the letter of credit.
Whether or not a correspondent bank is to be held
liable under the letter of credit despite non- PRUDENTIAL BANK
compliance by the beneficiary with the terms vs.
thereof INTERMEDIATE APPELLATE COURT,
PHILIPPINE RAYON MILLS, INC. and
Ruling: ANACLETO R. CHI
but by the petitioner. Acceptance, however, was drafts. Presentment for acceptance is necessary
not even necessary in the first place because the only in the cases expressly provided for in Section
drafts which were eventually issued were sight 143 of the Negotiable Instruments Law (NIL).
drafts And even if these were not sight drafts,
thereby necessitating acceptance, it would be the
petitioner — and not Philippine Rayon — which had
to accept the same for the latter was not the BANK OF AMERICA, NT & SA
drawee. Presentment for acceptance is defined an vs.
the production of a bill of exchange to a drawee for COURT OF APPEALS, INTER-RESIN
acceptance. 18 The trial court and the public INDUSTRIAL CORPORATION, FRANCISCO
respondent, therefore, erred in ruling that TRAJANO, JOHN DOE AND JANE DOE
presentment for acceptance was an indispensable
requisite for Philippine Rayon's liability on the drafts
Facts :
to attach. Contrary to both courts' pronouncements,
Philippine Rayon immediately became liable thereon
upon petitioner's payment thereof. Such is the Bank of America received an Irrevocable Letter of
essence of the letter of credit issued by the Credit issued bu Bank of Ayudhya for the Account
petitioner. A different conclusion would violate the of General Chemicals Ltd., Inc. for the sale of
principle upon which commercial letters of credit plastic ropes and agricultural files with Bank of
are founded because in such a case, both the America as advising bank and Inter-Resin Industrial
beneficiary and the issuer, Nissho Company Ltd. Corp. as beneficiary.
and the petitioner, respectively, would be placed at
the mercy of Philippine Rayon even if the latter had Upon receipt of the letter advice with letter of credit
already received the imported machinery and the by Inter- Resin told Bank of America to confirm said
petitioner had fully paid for it. letter of credit, but the bank did not confirm such.
Bank of America explained that there was no need
Commercial letters of credit have come into general for confirmation.
use in international sales transactions where much
time necessarily elapses between the sale and the Inter-Resin made a partial availment of the Letter
receipt by a purchaser of the merchandise, during of Credit after presentment of the required
which interval great price changes may occur. Their documents to Bank of America. After confirmation
purpose is to insure to a seller payment of a of all the documents BA issued a check in favor of
definite amount upon presentation of documents. IR. BA advice Bank of Ayudhya of IR’s availment
The bank deals only with documents. It has nothing under the letter of credit and asked for the
to do with the quality of the merchandise. Disputes corresponding reimbursement.
as to the merchandise shipped may arise and be
litigated later between vendor and vendee, but they IR presented documents for the second availment
may not impede acceptance of drafts and payment under the same LC but BA stopped the processing
by the issuing bank when the proper documents of such after they received a telex from Bank of
are presented. Ayudhya delaring that the LC fraudulent. BA sued
IR for the recovery of the first LC payment.
A letter of credit is defined as an engagement by a
bank or other person made at the request of a Issue:
customer that the issuer will honor drafts or other
demands for payment upon compliance with the Whether or not Bank of America may recover what
conditions specified in the credit. 11 Through a letter it has paid under the letter of credit to Inter-Resin?
of credit, the bank merely substitutes its own
promise to pay for one of its customers who in Ruling:
return promises to pay the bank the amount of
funds mentioned in the letter of credit plus credit or First, petitioner Bank of America has acted merely
commitment fees mutually agreed upon. 12 In the as a notifying bank and did not assume the
instant case then, the drawee was necessarily the responsibility of a confirming bank; and
herein petitioner. It was to the latter that the drafts
were presented for payment. In fact, there was no
need for acceptance as the issued drafts are sight
6
Second, petitioner bank, as a negotiating bank, is provisions of the letter of credit itself, the petitioner
entitled to recover on Inter-Resin's partial availment bank's letter of advice, its request for payment of
as beneficiary of the letter of credit which has been advising fee, and the admission of Inter-Resin that
disowned by the alleged issuer bank. it has paid the same. That Bank of America has
asked Inter-Resin to submit documents required by
A letter of credit is a financial device developed by the letter of credit and eventually has paid the
merchants as a convenient and relatively safe mode proceeds thereof, did not obviously make it a
of dealing with sales of goods to satisfy the confirming bank. The fact, too, that the draft
seemingly irreconcilable interests of a seller, who required by the letter of credit is to be drawn under
refuses to part with his goods before he is paid, the account of General Chemicals (buyer) only
and a buyer, who wants to have control of the means the same had to be presented to Bank of
goods before paying. To break the impasse, the Ayudhya (issuing bank) for payment. It may be
buyer may be required to contract a bank to issue a significant to recall that the letter of credit is an
letter of credit in favor of the seller so that, by engagement of the issuing bank, not the advising
virtue of the latter of credit, the issuing bank can bank, to pay the draft.
authorize the seller to draw drafts and engage to
pay them upon their presentment simultaneously As an advising or notifying bank, Bank of America
with the tender of documents required by the letter did not incur any obligation more than just notifying
of credit. The buyer and the seller agree on what Inter-Resin of the letter of credit issued in its favor,
documents are to be presented for payment, but let alone to confirm the letter of credit. The bare
ordinarily they are documents of title evidencing or statement of the bank employees, aforementioned,
attesting to the shipment of the goods to the buyer. in responding to the inquiry made by Atty. Tanay,
Inter-Resin's representative, on the authenticity of
There would at least be three (3) parties: (a) the the letter of credit certainly did not have the effect
buyer, who procures the letter of credit and obliges of novating the letter of credit and Bank of
himself to reimburse the issuing bank upon receipts America's letter of advise, nor can it justify the
of the documents of title; (b) the bank issuing the conclusion that the bank must now assume total
letter of credit, which undertakes to pay the seller liability on the letter of credit. Indeed, Inter-Resin
upon receipt of the draft and proper document of itself cannot claim to have been all that free from
titles and to surrender the documents to the buyer fault. As the seller, the issuance of the letter of
upon reimbursement; and, (c) the seller, who in credit should have obviously been a great concern
compliance with the contract of sale ships the to it. It would have, in fact, been strange if it did
goods to the buyer and delivers the documents of not, prior to the letter of credit, enter into a
title and draft to the issuing bank to recover contract, or negotiated at the every least, with
payment. General Chemicals. In the ordinary course of
business, the perfection of contract precedes the
The number of the parties, not infrequently and issuance of a letter of credit.
almost invariably in international trade practice,
may be increased. Thus, the services of an advising RELIANCE COMMODITIES, INC.
(notifying) bank may be utilized to convey to the vs.
seller the existence of the credit; or, of a DAEWOO INDUSTRIAL CO., LTD
confirming bank which will lend credence to the
letter of credit issued by a lesser known issuing Facts :
bank; or, of a paying bank, which undertakes to
encash the drafts drawn by the exporter. Further, On 9 January 1980, petitioner Reliance
instead of going to the place of the issuing bank to Commodities, Inc. and Daewoo Industrial Co., Ltd.
claim payment, the buyer may approach another entered into a contract of sale under the terms of
bank, termed the negotiating bank, to have the which the latter undertook to ship and deliver to
draft discounted. the former 2,000 metric tons of foundry pig iron.
Pursuant to this contract, Daewoo shipped the
It cannot seriously be disputed, looking at this case, foundry pig iron on board for carriage to and
that Bank of America has, in fact, only been an delivery in Manila to its consignee, Reliance. The
advising, not confirming, bank, and this much is shipment was fully paid for. Upon arrival in Manila,
clearly evident, among other things, by the the subject cargo was found to be short.
7
Another contract was entered into between the A letter of credit transaction is composed of at least
same parties for the purchase of another 2,000 three (3) distinct but intertwined relationships being
metric tons of foundry pig iron. Daewoo concretized in a contract:
acknowledged the short shipment and, to
compensate Reliance therefor, bound itself to (a) One contract relationship links the party
reduce the price for succeeding orders. However, applying for the L/C (the account party or buyer or
that contract was not consummated and was later importer) and the party for whose benefit the L/C is
superseded by still another contract. issued (the beneficiary or seller or exporter). In this
contract, the account party, here Reliance, agrees,
Reliance filed with the China Banking Corporation, among other things and subject to the terms and
an application for a Letter of Credit (L/C) in favor of conditions of the contract, to pay money to the
Daewoo. The application was endorsed to the Iron beneficiary, here Daewoo.
and Steel Authority (ISA) or approval but the
application was denied. Reliance was instead asked (b) A second contract relationship is between the
to submit purchase orders from end-users to account party and the issuing bank. Under this
support its application for a Letter of Credit. contract, (sometimes called the "Application and
However, Reliance was not able to raise purchase Agreement" or the "Reimbursement Agreement"),
orders for 2,000 metric tons. Whatever the exact the account party among other things, applies to
amount of the purchase orders was, Daewoo the issuing bank for a specified L/C and agrees to
rejected the proposed L/C for the reason that the reimburse the bank for amounts paid by that bank
covered quantity fell short of the contracted pursuant to the L/C.
tonnage. Thus, Reliance withdrew the application
for the L/C. (c) The third contract relationship is established
between the issuing bank and the beneficiary, in
Subsequently, Daewoo learned that the failure of order to support the contract, under (a) above, of
Reliance to open the L/C was due to the fact that the account party and the beneficiary to, inter alia,
Reliance has already exceeded its foreign exchange pay certain monies to the latter.
allocation for 1980. Because of the failure of
Reliance to comply with its undertaking Daewoo In the case at bar, the opening of an L/C upon
was compelled to sell the 2,000 metric tons to application of Reliance was not a condition
another buyer at a lower price, to cut losses and precedent for the birth of the obligation of Reliance
expenses Daewoo had begun to incur due to its to purchase foundry pig iron from Daewoo.
inability to ship the 2000 metric tons to Reliance Reliance and Daewoo, having reached "a meeting
under their contract. of minds" in respect of the subject matter of the
contract, the price thereof, and other principal
Reliance wrote Daewoo requesting payment provisions, "they had a perfected contract." The
representing the value of the short delivery. Not failure of Reliance to open, the appropriate L/C did
being heeded, Reliance filed an action for damages not prevent the birth of that contract, and neither
against Daewoo with the trial court. Daewoo did such failure extinguish that contract. The
responded, inter alia, with a counterclaim for opening of the L/C in favor of Daewoo was an
damages, contending that Reliance was guilty of obligation of Reliance and the performance of that
breach of contract when it failed to open an L/C as obligation by Reliance was a condition of
required in the contract. enforcement of the reciprocal obligation of Daewoo
to ship the subject matter of the contract to
Issue: Reliance. But the contract itself between Reliance
and Daewoo had already sprung into legal
Whether or not the failure of an importer to open a existence and was enforceable.
letter of credit on the date agreed upon makes him
liable to the exporter for damages. The L/C provided for in that contract was the mode
or mechanism by which payment was to be
Ruling: effected. In undertaking to accept or pay the drafts
presented to it by the beneficiary according to the
tenor of an L/C, and only later on being reimbursed
by the account party, the issuing bank in effect
8
extends a loan to the account party. This loan that Rodzssen’s offer to return the 2 units to
feature, combined with the bank's undertaking to FEBTC was made only 3 years after it received the
accept the beneficiary's drafts drawn on the bank, goods and when FEBTC pressed for the payments.
constitutes the L/C as a mode of payment.
Issues:
The failure of a buyer seasonably to furnish an
agreed letter of credit is a breach of contract Whether or not it is proper for a banking institution
between buyer and seller. Where the buyer fails to to pay a letter of credit which has long expired or
open a letter of credit as stipulated, the seller or been cancelled
exporter is entitled to claim damages for such
breach. Damages for failure to open a commercial Whether or not the petitioner was liable to
credit may, in appropriate cases, include the loss of respondent.
profit which the seller would reasonably have made
had the transaction been carried out.
Ruling:
Consequently, the bank sued TOMCO, Inc. and In compliance with this requirement, Maynilad
Abad. TOMCO did not deny its liability to PCIB arranged on July 14, 2000 for a three-year facility
under the letter of credit but it alleged that with a number of foreign banks, led by Citicorp
inasmuch as it made a marginal deposit of P28,000, International Limited, for the issuance of an
this amount should have been deducted from its Irrevocable Standby Letter of Credit in the amount
principal obligation, leaving a balance of P52,000 of US$120,000,000.
only, on which the bank should have computed the
interest, bank charges, and attorney's fees. In 2000, Maynilad wanted to recover its foreign
currency losses due to the depreciation of the
Issue: Philippine Peso. It was unheeded by MWSS, thus,
Maynilad issued a Force Majeure Notice in 2001,
Whether or not the marginal deposit in the which effectively stopped the concession payments.
possession of the bank should first be deducted
from its principal indebtness before computing This led to arbitration between MWSS and
interest and other charges Maynilad. They agreed to new terms. However, in
2002, Maynilad served a notice of Event of
Ruling: Termination, citing failure of MWSS to comply with
the agreed arbitration terms. MWSS contested such
The marginal deposit requirement is a Central Bank Notice of Termination and was awarded by the
measure to cut off excess currency liquidity which Appeals panel. Thus, MWSS sent a written notice
would create inflationary pressure. It is a collateral that it was it was drawing on the Irrevocable
security given by the debtor, and is supposed to be Standby Letter of Credit (IRLC) and thereby
returned to him upon his compliance with his demanded payment in the amount of
secured obligation. Consequently, the bank pays no US$98,923,640.15.
interest on the marginal deposit, unlike an ordinary
10
Prior to this, however, Maynilad had filed on The participating banks’ obligation are solidary with
November 13, 2003, a petition for rehabilitation. respondent Maynilad in that it is a primary, direct,
The rehabilitation court (Respondent RTC) ten definite and an absolute undertaking to pay and is
issued an order staying the enforcement of claims not conditioned on the prior exhaustion of the
(including the IRLC) and stopping payment of debtor’s assets. These are the same characteristics
liabilities, kasi nga under rehabilitation. It effectively of a surety or solidary obligor. Being solidary, the
stopped the commencing process of payment by claims against them can be pursued separately
the bank to MWSS. Thus the petition. from and independently of the rehabilitation case.
MWSS argues that IRLC is an asset of the bank and As held in Feati Bank & Trust Company v. Court of
not of Maynilad’s, thus should not be under Appeals, the concept of guarantee vis-à-vis the
corporate rehabilitation. It cannot be considered a concept of an irrevocable letter of credit is
“claim” under the purview of the stop order by the inconsistent with each other. The guarantee theory
RTC. Maynilad on the other hand argues that the destroys the independence of the bank’s
order of the RTC is correct; that it never claimed responsibility from the contract upon which it was
that the IRLC is part of its property; the more opened and the nature of both contracts is mutually
important issue is not whether the IRLC is part of it in conflict with each other. In contracts of
assets, but whether MWSS violated stop order; that guarantee, the guarantor’s obligation is merely
the publication of the order covers not only the collateral and it arises only upon the default of the
assets of MWSS but also “all affected by the person primarily liable. On the other hand, in an
proceedings”, such order being an in rem irrevocable letter of credit, the bank undertakes a
proceeding. primary obligation.
Issue:
Under the terms of the trust receipt, Via Moda
agreed to hold the goods in trust for petitioner as
Whether or not it is only the issuing bank that may the latter’s property and to sell the same for the
invoke the independence principle latter’s account. In case of sale, the proceeds are
to be remitted to the bank as soon as it is
Whether or not there is a necessity of received. Said proceeds are to be applied to the
resolving first any dispute by the parties before the relative acceptances or in the alternative, to return
beneficiary is entitled to call on the letter of credit the goods in case of non-sale.
principal, penalties and interest of the export obligations under the export packing loan. It
packing loan. Petitioner then sent a demand letter further stated that such application of payment to
to Via Moda to pay the amount plus interest and another obligation was done by petitioner on its
penalty charges, or to return the goods covered by own and should not create a criminal liability on the
Trust Receipt. Since the demand was not heeded, part of respondent who did not take part nor had
respondent was charged with the crime of estafa any knowledge thereof. It is on this premise that
under Article 315 (b) of the Revised Penal Code in the respondent was acquitted of the crime charged.
relation to Presidential Decree No. 115.
Issue:
LAND BANK OF THE PHILIPPINES
Whether or not the respondent can be held vs.
criminally liable if there was actual payment but MONET'S EXPORT AND MANUFACTURING
such was applied to the principal and not to the CORP., VICENTE V. TAGLE, SR. and MA.
trust receipt CONSUELO G. TAGLE
Ruling: Facts :
A letter of credit is a separate document from a On June 25, 1981 petitioner Land Bank of the
trust receipt. While the trust receipt may have Philippines and respondent Monet's Export and
been executed as a security on the letter of credit, Manufacturing Corporation executed an Export
still the two documents involve different Packing Credit Line Agreement under which the
undertakings and obligations. A letter of credit is bank gave Monet a credit line, secured by the
an engagement by a bank or other person made at proceeds of its export letters of credit, promissory
the request of a customer that the issuer will honor notes, a continuing guaranty executed by
drafts or other demands for payment upon respondent spouses Vicente V. Tagle, Sr. and Ma.
compliance with the conditions specified in the Consuelo G. Tagle and a third-party mortgage
credit. Through a letter of credit, the bank merely executed by one Pepita C. Mendigoria. Land Bank
substitutes its own promise to pay for the promise renewed and amended this credit line agreement
to pay of one of its customers who in return several times until it reached a ceiling of P5 million.
promises to pay the bank the amount of funds
mentioned in the letter of credit plus credit or Monet's obligation under the Agreement had
commitment fees mutually agreed upon. By swelled to P11,464,246.19. Since Monet failed to
contrast, a trust receipt transaction is one where pay despite demands, the bank filed a collection
the entruster, who holds an absolute title or suit against Monet and the Tagles. In their answer,
security interests over certain goods, documents or Monet and the Tagles claimed that Land Bank had
instruments, released the same to the entrustee, refused to collect the receivables on Monet's export
who executes a trust receipt binding himself to hold letter of credit against Wishbone Trading Company
the goods, documents or instruments in trust for of Hong Kong while making an unauthorized
the entruster and to sell or otherwise dispose of the payment on its import letter of credit. This
goods, documents and instruments with the damaged Monet's business interests since it ran
obligation to turn over to the entruster the short of funds to carry on with its usual business. In
proceeds thereof to the extent of the amount owing other words, Land Bank mismanaged its client's
to the entruster, or as appears in the trust receipt, affairs under the Agreement.
or return the goods, documents or instruments
themselves if they are unsold, or not otherwise Issue:
disposed of, in accordance with the terms and
conditions specified in the trust receipt.
Whether or not Land Bank's motion to reopen the
hearing to allow it to present the bank's updated
There was no misappropriation or conversion by the Consolidated Billing Statement that reflects
respondent of the proceeds of the sale in the respondents Monet and the Tagles' remaining
goods, subject of the trust receipt since the indebtedness to it should be allowed.
proceeds were actually received by petitioner but
the latter applied the same to Via Moda’s other
Ruling:
13
FERNANDO ONG vs. COURT OF APPEALS SPOUSES TIRSO I. VINTOLA and LORETO DY
VINTOLA
vs.
Facts :
INSULAR BANK OF ASIA AND AMERICA
loan covered by the Letter of Credit, with the trust The accused filed with Philippine National
receipt as a security for the loan. In other words, Cooperative Bank four applications for letters of
the transaction involves a loan feature represented credit. Among the papers filed for the issuance of
by the letter of credit, and a security feature which the domestic letters of credit were commercial
is in the covering trust receipt. invoices of the different suppliers of the
merchandise sought to be purchased. The different
A trust receipt, therefore, is a security agreement, suppliers then drew sight drafts against the
pursuant to which a bank acquires a "security applicant payable to the order of the PNCB. The
interest" in the goods. "It secures an indebtedness PNCB then drew its own drafts against the accused
and there can be no such thing as security interest as the buyer of the merchadise and which drafts
that secures no obligation." were accepted by the accused also on the same
dates of the respective applications. After such
IBAA did not become the real owner of the goods. acceptance, the corresponding trust receipts were
It was merely the holder of a security title for the signed by the accused also on the same dates of
advances it had made to the VINTOLAS The goods the respective applications.
the VINTOLAS had purchased through IBAA
financing remain their own property and they hold No payments were made excepting a partial
it at their own risk. The trust receipt arrangement payment of P3,900.00, inclusive of interests and
did not convert the IBAA into an investor; the latter another partial payment of P2,000.00 made on the
remained a lender and creditor. same letter of' credit.
The foregoing premises considered, it follows that Trinidad Ramos pleads for acquittal on the
the acquittal of the VINTOLAS in the Estafa case is proposition that the factual predicate on which her
no bar to the institution of a civil action for conviction is laid is chiefly comprised of
collection. It is inaccurate for the VINTOLAS to speculations, conjectures and presumptions without
claim that the judgment in the estafa case had substantial and actual support in the evidence. She
declared that the facts from which the civil action asserts that it behooved the prosecution, which had
might arise, did not exist, for, it will be recalled that charged her with estafa under Article 315 prove the
the decision of acquittal expressly declared that essential elements thereof. She contends, in her
"the remedy of the Bank is civil and not criminal in case that there is no adequate proof of her receipt
nature." The VINTOLAS are liable ex contractu for of the goods subject of the trust receipts in
breach of the Letter of Credit — Trust Receipt, question or of her having paid anything on account
whether they did or they did not "misappropriate, thereof or in connection therewith.
misapply or convert" the merchandise as charged in
the criminal case. Their civil liability does not arise Issue:
ex delicto, the action for the recovery of which
would have been deemed instituted with the Whether or not commercial invoices are sufficient
criminal-action (unless waived or reserved) and proof of delivery that is necessary in order for
where acquittal based on a judicial declaration that conviction for estafa could lie
the criminal acts charged do not exist would have
extinguished the civil action. Rather, the civil suit Ruling:
instituted by IBAA is based ex contractu and as
such is distinct and independent from any criminal
The assailed factual findings as to the receipt of the
proceedings and may proceed regardless of the
merchandise and the damage sustained by the
result of the latter.
Bank cannot stand. The proofs are indeed
inadequate on these propositions of fact. It is
TRINIDAD RAMOS difficult to accept the prosecution's theory that it
vs. has furnished sufficient proof of delivery by the
THE HONORABLE COURT OF APPEALS and introduction in evidence of the commercial invoices
PEOPLE OF THE PHILIPPINES attached to the applications for the letters of credit
and of the trust receipts. The invoices are actually
Facts : 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
16
transferred hands without the unpaid vendor Despite repeated demands, Philippine Blooming
requiring the vendee to acknowledge this fact in Mills failed and refused to either turn over the
some way, even by a simple signature on these proceeds of the goods or to return the same. When
documents alone if not in fact by the execution of Allied Banking Corporation filed a criminal
some appropriate document, such as a delivery complaint for violation of PD 115, the fiscal found a
receipt. prima facie case and file the information with the
court. On appeal, the DOJ Secretary, Neptali
The trust receipts do not fare any better as proofs Gonzales, held that the raw materials for
of the delivery to Ramos of the goods. Except for manufacture of goods to be ultimately sold are the
the invoices, an documents relating to each trust only proper objects of Trust Receipts and the failure
receipt agreement, including the trust receipts to remit the proceeds of such will constitute a
themselves, appear to be standard Bank forms violation of PD 115.
accomplished by the Bank personnel, and were all
signed by Ramos in one sitting, no doubt with a In another motion for reconsideration filed by
view to facilitating the pending transactions Philippine Blooming Mills , the new DOJ Secretary
between the parties. If, as she claims, Ramos was Seafrey Ordoñez, rectified the decision of his
made to believe that bank usage or regulations predecessor because of Philippine Blooming Mills’
require the signing of the papers in this way, i.e., clarification that the goods subject of the trust
on a single occasion, there was neither reason nor receipt agreements were used for patching
opportunity for her to question the statement purposes over the surface of the furnaces and
therein of receipt of the goods since it was nozzle bricks which are insulating materials in the
evidently assumed that delivery to her of the goods lower portion of the ladle which do not form part of
would shortly come to pass. the steel product itself and held that since the
goods covered by the trust receipt agreements and
ALLIED BANKING CORPORATION subject matter of those proceedings are to be
vs. utilized in the operation of the equipment and
ORDOÑEZ machineries of the corporation, they could have not
been contemplated as being covered by PD 115. In
Facts : an attempt to escape criminal liability, private
respondent claims P.D. 115 covers goods which are
ultimately destined for sale and not goods for use in
Philippine Blooming Mills, a manufacturer of steel
manufacture and that at the time of PBMs
and steel products, not in the business of selling
application for the issuance of the LCs, it was not
mag-ar branch dolomites or high fired refractory
represented to the petitioner that the items were
sliding nozzle bricks applied for the issuance of
intended for sale, hence, there was no deceit
commercial letters of credit with Allied Banking
resulting in a violation of the trust receipts which
Corporation to finance the purchase of said items.
would constitute a criminal liability.
Allied Banking Corporation, in turn, issued an
irrevocable letter of credit in favor of Nikko Industry
Co. Ltd. by virtue of which Nikko Industry Co. Ltd Issue:
drew four (4) drafts which were accepted by
Philippine Blooming Mills and duly honored and paid Whether or not P.D. 115 covers only goods which
by Allied Banking Corporation . are ultimately destined for sale and not goods for
use in manufacture
To secure the payment and in consideration of the
transfer by Allied Banking Corporation of the Ruling:
possession of the goods to Philippine Blooming Mills
, the latter as entrustee executed four (4) trust the wording of Section 13 covers failure to turn
receipt agreements acknowledging the former’s over the proceeds of the sale of the entrusted
ownershiop over the goods and its obligation to goods, or to return said goods if unsold or disposed
turn over the proceeds of the sale of the goods if of in accordance with the terms of the trust
sold, or to return the same if unsold within the receipts. Private respondent claims that at the time
period stated. of PBMs application for the issuance of the LCs, it
was not represented to the petitioner that the items
were intended for sale, hence, there was no deceit
17
resulting in a violation of the trust receipts which of Tokyo, Japan, to cover the importation of a
would constitute a criminal liability. Again, this cement plant machinery and equipment.
contention cannot be upheld. The non-payment of
the amount covered by a trust receipt is an act Upon approval of said application and opening of
violative of the entrustees obligation to pay. There an L/C by PNB in favor of Toyo Menka Kaisha, Ltd.
is no reason why the law should not apply to all for the account of TCC, the Arroyo spouses
transactions covered by trust receipts, except those executed a Surety Agreement and Covenant.
expressly excluded.
The imported cement plant machinery and
The Court takes judicial notice of customary equipment arrived from Japan and were released to
banking and business practices where trust receipts TCC under a trust receipt agreement. Subsequently,
are used for importation of heavy equipment, Toyo Menka Kaisha, Ltd. made the corresponding
machineries and supplies used in manufacturing drawings against the L/C as scheduled. TCC,
operations. We are perplexed by the statements in however, failed to remit and/or pay the
the assailed DOJ resolution that the goods subject corresponding amount covered by the drawings.
of the instant case are outside the ambit of the Thus, pursuant to the trust receipt agreement, PNB
provisions of PD 115 albeit covered by trust receipt notified TCC of its intention to repossess, as it later
agreements ( 17 February 1988 resolution) and that did, the imported machinery and equipment for
not all transactions covered by trust receipts may failure of TCC to settle its obligations under the L/C.
be considered as trust receipt transactions defined
and penalized under P.D. 115 (11 January 1988 In the meantime, the personal accounts of the
resolution). A construction should be avoided when spouses Arroyo, which included another loan
it affords an opportunity to defeat compliance with secured by a real estate mortgage over parcels of
the terms of a statute. agricultural land had likewise become due. The
spouses Arroyo having failed to satisfy their
The penal provision of P.D. 115 encompasses any obligations with PNB, the latter decided to foreclose
act violative of an obligation covered by the trust the real estate mortgages executed by the spouses
receipt; it is not limited to transactions in goods Arroyo in its favor.
which are to be sold (retailed), reshipped, stored or
processed as a component of a product ultimately At the auction sale, PNB was the highest bidder
sold. however, when said property was about to be
awarded to PNB, the representative of the
PHILIPPINE NATIONAL BANK mortgagor-spouses objected and demanded from
vs. the PNB the difference between the bid price and
HON. GREGORIO G. PINEDA and TAYABAS the indebtedness of spouses on their personal
CEMENT COMPANY, INC account. To remedy the situation, PNB requested to
proceed with the sale of the subject real properties
Facts : to satisfy not only the amount owed by the spouses
Arroyos on their personal account but also the
In 1963, Ignacio Arroyo, married to Lourdes Tuason amount owed by said spouses as sureties of TCC.
Arroyo (the Arroyo Spouses), obtained a loan of Said petition was opposed by the spouses Arroyo
P580,000.00 from petitioner bank to purchase 60% and the other bidder, Jose L. Araneta. Which was
of the subscribed capital stock, and thereby acquire granted thru respondent Judge Gregorio Pineda,
the controlling interest of private respondent who issued a restraining order and, granted a writ
Tayabas Cement Company, Inc. (TCC). As security of preliminary injunction.
for said loan, the spouses Arroyo executed a real
estate mortgage over a parcel of land known as the Issue:
La Vista property.
Whether or not TCC’s liability has been
Thereafter, TCC filed with petitioner bank an extinguished by the repossession of PNB of the
application and agreement for the establishment of imported cement plant machinery and equipment
an eight (8) year deferred letter of credit (L/C) for
$7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. Ruling:
18
It must be remembered that PNB took possession Upon demand, private respondent paid only
of the imported cement plant machinery and P283,115.78.
equipment pursuant to the trust receipt agreement
executed by and between PNB and TCC giving the Betty Sia Ang filed a motion to quash the
former the unqualified right to the possession and information on the grounds that the facts charged
disposal of all property shipped under the Letter of do not constitute an offense. Respondent judge
Credit until such time as all the liabilities and granted the motion to quash.
obligations under said letter had been discharged.
Issue:
PNB's possession of the subject machinery and
equipment being precisely as a form of security for Whether or not an entrustee in a trust receipt
the advances given to TCC under the Letter of agreement who fails to deliver the proceeds of the
Credit, said possession by itself cannot be sale or to return the goods if not sold to the
considered payment of the loan secured thereby. entruster-bank is liable for the crime of estafa?
Payment would legally result only after PNB had
foreclosed on said securities, sold the same and
Ruling:
applied the proceeds thereof to TCC's loan
obligation. Mere possession does not amount to
foreclosure for foreclosure denotes the procedure The factual circumstances in the present case show
adopted by the mortgagee to terminate the rights that the alleged violation was committed sometime
of the mortgagor on the property and includes the in 1980 or during the effectivity of P.D. 115. The
sale itself. failure, therefore, to account for the P114,884.22
balance is what makes the accused-respondent
criminally liable for estafa.
Neither can said repossession amount to dacion en
pago. Dation in payment takes place when property
is alienated to the creditor in satisfaction of a debt A trust receipt arrangement does not involve a
in money and the same is governed by sales. simple loan transaction between a creditor and
Dation in payment is the delivery and transmission debtor-importer. Apart from a loan feature, the
of ownership of a thing by the debtor to the trust receipt arrangement has a security feature
creditor as an accepted equivalent of the that is covered by the trust receipt itself. (Vintola v.
performance of the obligation. 20 As aforesaid, the Insular Bank of Asia and America, 151 SCRA 578
repossession of the machinery and equipment in [1987]) That second feature is what provides the
question was merely to secure the payment of much needed financial assistance to our traders in
TCC's loan obligation and not for the purpose of the importation or purchase of goods or
transferring ownership thereof to PNB in merchandise through the use of those goods or
satisfaction of said loan. Thus, no dacion en pago merchandise as collateral for the advancements
was ever accomplished. 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
PEOPLE OF THE PHILIPPINES and ALLIED
distinct agreement.
BANKING CORPORATION
vs.
HON. JUDGE DAVID G. NITAFAN and BETTY The Trust Receipts Law punishes the dishonesty
SIA ANG 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
Facts :
does not seek to enforce payment of the loan.
Thus, there can be no violation of a right against
Petitioner Allied banking Corporation (ABC) charged imprisonment for non-payment of a debt.
private respondent, Betty Sia Ang, for estafa for
willfully, unlawfully and feloniously defraud ABC.
Trust receipts are indispensable contracts in
Private respondent received a trust from ABC
international and domestic business transactions.
amounting to P398,000.00 covered by a domestic
The prevalent use of trust receipts, the danger of
letter of credit, under the express obligation to sell
their misuse and/or misappropriation of the goods
the same and account for the proceeds of the sale,
or proceeds realized from the sale of goods,
if sold, or to return the merchandise , if not sold.
documents or instruments held in trust for
19
entruster-banks, and the need for regulation of absolute ownership over the properties, still it has
trust receipt transactions to safeguard the rights right, interest and ownership consisting of a
and enforce the obligations of the parties involved security title which attaches to the properties.
are the main thrusts of P.D. 115. As correctly Petitioner differentiates a trust receipt, which is a
observed by the Solicitor General, P.D. 115, like security for the payment of the obligations of the
Batas Pambansa Blg. 22, punishes the act "not as importer, from a real estate mortgage executed as
an offense against property, but as an offense security for the payment of an obligation of a
against public order. . . ." The misuse of trust borrower. Petitioner argues that in the latter the
receipts therefore should be deterred to prevent ownership of the mortgagor may not necessarily
any possible havoc in trade circles and the banking have any bearing on its acquisition, whereas in the
community (citing Lozano v. Martinez, 146 SCRA case of a trust receipt the acquisition of the goods
323 [1986]; Rollo, p. 57) It is in the context of by the borrower results from the advances made by
upholding public interest that the law now the bank. It concludes that the security title of the
specifically designates a breach of a trust receipt bank in a trust receipt must necessarily be of the
agreement to be an act that "shall" make one liable same or greater extent than the nature of the
for estafa. 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 otherwise its
PRUDENTIAL BANK security title will become useless.
vs.
NATIONAL LABOR RELATIONS COMMISSION, Issue:
CECILIA ORQUELLO, et al., ZENAIDA UCHI, et
al., ALU-INTERASIA CONTAINER Whether or not the entruster has a better right as
INDUSTRIES, INC., and RAUL REMODO against creditors over the proceeds of the
foreclosure
Facts :
Ruling:
Interasia Container Industries, Inc. (INTERASIA),
was embroiled in three (3) labor cases which were We cannot subscribe to NLRC's simplistic
eventually resolved against it. Thus in NLRC Cases interpretation of trust receipt arrangements. In
monetary awards consisting of 13th-month pay effect, it has reduced the Trust Receipt Agreements
differentials and other benefits were granted to to a pure and simple loan transaction.
complainants. Subsequently the monetary award
was recomputed to include separation pay Sec. 12 of P.D. No. 115 assures the entruster of
occasioned by the closure of operations of the validity of his claim against all creditors -
INTERASIA. With the finality of the three (3)
decisions, writs of execution were issued. The Sec. 12. Validity of entruster's
Sheriff levied on execution personal properties security interest as against
located in the factory of INTERASIA creditors. - The entruster's security
interest in goods, documents, or
Petitioner filed an Affidavit of Third-Party Claim instruments pursuant to the written
asserting ownership over the seized properties on terms of a trust receipt shall be
the strength of trust receipts executed by valid as against all creditors of the
INTERASIA in its favor. As a result, the Sheriff entrustee for the duration of the
suspended the public auction sale. But the Labor trust receipt agreement.
Arbiter denied the claim of petitioner and directed
the Sheriff to proceed with the levy of the From the legal and jurisprudential standpoint it is
properties. Petitioner then filed separate appeals to clear that the security interest of the entruster is
the NLRC. not merely an empty or idle title. To a certain
extent, such interest, such interest becomes a "lien"
Petitioner raises issue on the extent of its security on the goods because the entruster's advances will
title over the properties subject of the levy on have to be settled first before the entrustee can
execution, submitting that while it may not have consolidate his ownership over the goods. A
20
favor of CM builders for the purchased of various provision which refers to money received under the
construction supplies. PBC approved the letter of obligation involving the duty to deliver it
credit to cover the full invoice value of the goods (entregarla) to the owner of the merchandise sold.
and subsequently signed a prom-forma trust The second is covered by the provision which refers
receip0t as security. to merchandise received under the obligation to
“return” it (devolvera) to the owner.
PBC wrote a demand letter to petitioner demanding
the amount be paid within seven days but instance Failure of the entrustee to turn over the
of complying they confessed that they can’t pay proceeds of the sale of the goods, covered by the
and requested a grace period to settle the account. trust receipt to the entruster or to return said goods
Petitioners proposed to modify the payment of the if they were not disposed of in accordance with the
loan. terms of the trust receipt shall be punishable as
estafa under Article 315 (1) of the Revised Penal
Petitioners were charged with estafa. During trial, Code, without need of proving intent to defraud.
petitioner Veloso insisted that the transaction was a
“clean loan”. He and petitioner Colinares signed the Petitioners received the merchandise from CM
documents without reading the fine print, and Builders Centre on 30 October 1979. On that day,
learning that the trust receipt was merely a ownership over the merchandise was already
formality. transferred to Petitioners who were to use the
materials for their construction project. It was only
The trial court render a decision convicting the a day later, 31 October 1979, that they went to the
petitioner estafa. The trial court considered the bank to apply for a loan to pay for the
transaction between PBC and Petitioners as a trust merchandise.
receipt transaction under Section 4, P.D. No. 115.
Petitioners appealed from the judgment to the This situation belies what normally obtains in a
Court of Appeals and the CA modified the judgment pure trust receipt transaction where goods are
of the trial court by increasing the penalty. owned by the bank and only released to the
importer in trust subsequent to the grant of the
Issue: loan. The bank acquires a “security interest” in the
goods as holder of a security title for the advances
Whether of not the petitioner were properly it had made to the entrustee. The ownership of the
charged, tried and convicted for violation of PD 115 merchandise continues to be vested in the person
in relation to article 315 of the RPC? who had 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
Ruling:
him by the importer or by his representative or
successor in interest. To secure that the bank shall
A thorough examination of the facts obtaining in be paid, it takes full title to the goods at the very
the case at bar reveals that the transaction beginning and continues to hold that title as his
intended by the parties was a simple loan, not a indispensable security until the goods are sold and
trust receipt agreement. the vendee is called upon to pay for them; hence,
The Trust Receipts Law does not seek to enforce the importer has never owned the goods and is not
payment of the loan, rather it punishes the able to deliver possession. In a certain manner,
dishonesty and abuse of confidence in the handling trust receipts partake of the nature of a conditional
of money or goods to the prejudice of another sale where the importer becomes absolute owner of
regardless of whether the latter is the owner. Here, the imported merchandise as soon as he has paid
it is crystal clear that on the part of Petitioners its price.
there was neither dishonesty nor abuse of
confidence in the handling of money to the
prejudice of PBC. Petitioners continually PHILIPPINES BANK OF COMMUNICATIONS
endeavored to meet their obligations, as shown by vs.
several receipts issued by PBC acknowledging HON. COURT OF APPEALS and FILIPINAS
payment of the loan. TEXTILE MILLS, INC.
There are two possible situations in a trust
Facts :
receipt transaction. The first is covered by the
22
Petitioner sought the payment representing the hardly be said that private respondents harbored a
proceeds or value of various textile goods, the preconceived plan or intention not to pay petitioner.
purchase of which was covered by irrevocable
letters of credit and trust receipts executed by SOUTH CITY HOMES, INC., FORTUNE
petitioner with private respondent Filipinas Textile MOTORS (PHILS.), PALAWAN LUMBER
Mills as obligor; which, in turn, were covered by MANUFACTURING CORPORATION
surety agreements executed by private respondent vs.
Bernardino Villanueva and Sochi Villanueva. In their BA FINANCE CORPORATION
Answer, private respondents admitted the existence
of the surety agreements and trust receipts but Facts :
countered that they had already made payments on
the amount demanded and that the interest and
Prior to the transactions covered by the subject
other charges imposed by petitioner were onerous.
drafts and trust receipts, defendant-appellant
Fortune Motors Corporation (Phils.) has been
Petitioner filed a Motion for Attachment contending availing of the credit facilities of plaintiff-appellant
that violation of the trust receipts law constitutes BA Finance Corporation. Fortune Motors
estafa, thus providing ground for the issuance of a Corporation executed in favor of plaintiff-appellant
writ of preliminary attachment and further claimed a Continuing Suretyship Agreement, in which he
that attachment was necessary since private jointly and severally unconditionally guaranteed the
respondents were disposing of their properties to full, faithful and prompt payment and discharge of
its detriment as a creditor. any and all indebtedness of Fortune Motors
Corporation to BA Finance Corporation.
Issue:
Palawan Lumber Manufacturing Corporation,
Whether or not the allegations for must be executed in favor of plaintiff-appellant a Continuing
embezzlement, misappropriation nor incipient fraud Suretyship Agreement in which, said corporation
may be presumed to establish an order for a writ of jointly and severally unconditionally guaranteed the
preliminary attachment to be issued. full, faithful and prompt payment and discharge of
any and all indebtedness of Fortune Motors
Ruling: Corporation to BA Finance Corporation. On the
same date, South City Homes, Inc. likewise
The Motion for Attachment filed by petitioner and executed a Continuing Suretyship Agreement in
its supporting affidavit did not sufficiently establish which said corporation jointly and severally
the grounds relied upon in applying for the writ of unconditionally guaranteed the full, faithful and
preliminary attachment. prompt payment and discharge of any and all
indebtedness of Fortune Motors Corporation to BA
Petitioner cannot insist that its allegation that Finance Corporation.
private respondents failed to remit the proceeds of
the sale of the entrusted goods nor to return the Subsequently, Canlubang Automotive Resources
same is sufficient for attachment to issue. There is Corporation (CARCO) drew six (6) Drafts in its own
absence of factual allegations as to how the fraud favor, payable thirty (30) days after sight, charged
alleged by petitioner was committed. Such to the account of Fortune Motors Corporation.
fraudulent intent not to honor the admitted Fortune Motors Corporation thereafter executed
obligation cannot be inferred from the debtor's trust receipts covering the motor vehicles delivered
inability to pay or to comply with the obligations. to it by CARCO under which it agreed to remit to
On the other hand, as stressed, above, fraud may the Entruster (CARCO) the proceeds of any sale
be gleaned from a preconceived plan or intention and immediately surrender the remaining unsold
not to pay. This does not appear to be so in the vehicles. The drafts and trust receipts were
case at bar. In fact, it is alleged by private assigned to plaintiff-appellant, under Deeds of
respondents that out of the total P419,613.96 Assignment executed by CARCO.
covered by the subject trust receipts, the amount of
P400,000.00 had already been paid, leaving only Upon failure of the defendant-appellant Fortune
P19,613.96 as balance. Hence, regardless of the Motors Corporation to pay the amounts due under
arguments regarding penalty and interest, it can the drafts and to remit the proceeds of motor
23
vehicles sold or to return those remaining unsold in relation to Art. 1475, Civil Code), his knowledge
accordance with the terms of the trust receipt thereof affecting only the validity of the payment he
agreements, BA Finance Corporation sent demand might make (Article 1626, Civil Code). Article 1626
letter to Edgar C. Rodrigueza, South City Homes, also shows that payment of an obligation which is
Inc., Aurelio Tablante, Palawan Lumber already existing does not depend on the consent of
Manufacturing Corporation, Joseph L. G. Chua, the debtor. It, in effect, mandates that such
George D. Tan and Joselito C. Baltazar. Since the payment of the existing obligation shall already be
defendants-appellants failed to settle their made to the new creditor from the time the debtor
outstanding account with plaintiff-appellant, the acquires knowledge of the assignment of the
latter filed a complaint for a sum of money with obligation.
prayer for preliminary attachment. Defendants filed
a Motion to Dismiss. Therein, they alleged that LEE
conventional subrogation effected a novation vs.
without the consent of the debtor (Fortune Motors COURT OF APPEALS
Corporation) and thereby extinguished the latters
liability; that pursuant to the trust receipt Facts :
transaction, it was premature under P. D. No. 115
to immediately file a complaint for a sum of money
On 15 November 1985, a complainant for sum of
as the remedy of the entruster is an action for
money was filed by the International Corporate
specific performance; that the suretyship
Bank, Inc. against Sacoba Manufacturing Corp.,
agreements are null and void for having been
Pablo Gonzales Jr., and Tomas Gonzales who, in
entered into without an existing principal obligation;
turn, filed a third party complaint against Alfa
and that being such sureties does not make them
Integrated Textile Mills (ALFA), Ramon C. Lee
solidary debtors.
(ALFA's president) and Antonio DM. Lacdao (ALFA's
vice president) on 17 March 1986. On 17
Issue: September 1987, Lee and Lacdao filed a motion to
dismiss the third party complaint which the
Whether or not there was a novation of the Regional Trial Court of Makati, Branch 58 denied in
obligation so as to extinguish the liability of the an Order dated 27 June 1988. On 18 July 1988, Lee
sureties and Lacdao filed their answer to the third party
complaint. Meanwhile, on 12 July 1988, the trial
Ruling: issued an order requiring the issuance of an alias
summons upon ALFA through the DBP as a
Petitioners next posit that a novation, as a result of consequence of Lee and Lacdao's letter informing
the assignment of the drafts and trust receipts by the court that the summons for ALFA was
the creditor (CARCO) in favor of respondent BAFC erroneously served upon them considering that the
without the consent of the principal debtor (Fortune management of ALFA had been transferred to the
Motors), extinguished their liabilities. DBP. In a manifestation dated 22 July 1988, the
DBP claimed that it was not authorized to receive
An assignment of credit is an agreement by virtue summons on behalf of ALFA since the DBP had not
of which the owner of a credit, known as the taken over the company which has a separate and
assignor, by a legal cause, such as sale, dacion en distinct corporate personality and existence. On 4
pago, exchange or donation, and without the August 1988, the trial court issued an order
consent of the debtor, transfers his credit and advising Sacoba Manufacturing, et. al. to take the
accessory rights to another, known as the assignee, appropriate steps to serve the summons to ALFA.
who acquires the power to enforce it to the same On 16 August 1988, Sacoba Manufacturing, et. al.
extent as the assignor could enforce it against the filed a Manifestation and Motion for the Declaration
debtor. As a consequence, the third party steps of Proper Service of Summons which the trial court
into the shoes of the original creditor as subrogee granted on 17 August 1988. On 12 September
of the latter. Petitioners obligations were not 1988, Lee and Lacdao filed a motion for
extinguished. reconsideration submitting that the Rule 14, section
13 of the Revised Rules of Court is not applicable
since they were no longer officers of ALFA and
In assignment, the debtors consent is not essential
Sacoba Manufacturing, et. al. should have availed
for the validity of the assignment (Art. 1624 in
24
of another mode of service under Rule 14, Section petition for certiorari. In the meantime, the
16 of the said Rules, i.e., through publication to appellate court inadvertently made an entry of
effect proper service upon ALFA. On 2 January judgment on 16 July 1990 erroneously applying the
1989, the trial court upheld the validity of the rule that the period during which a motion for
service of summons on ALFA through Lee and reconsideration has been pending must be
Lacdao, thus, denying the latter's motion for deducted from the 15-day period to appeal.
reconsideration and requiring ALFA to file its However, in its Resolution dated 3 January 1991,
answer through Lee and Lacdao as its corporate the appellate court set aside the aforestated entry
officers. On 19 January 1989, a second motion for of judgment after further considering that the rule
reconsideration was filed by Lee and Lacdao it relied on applies to appeals from decisions of the
reiterating their stand that by virtue of the voting Regional Trial Courts to the Court of Appeals, not to
trust agreement they ceased to be officers and appeals from its decision to the Supreme Court
directors of ALFA, hence, they could no longer pursuant to the Supreme Court's ruling in the case
receive summons or any court processes for or on of Refractories Corporation of the Philippines v.
behalf of ALFA. In support of their second motion Intermediate Appellate Court, 176 SCRA 539
for reconsideration, Lee and Lacdao attached [1989].
thereto a copy of the voting trust agreement
between all the stockholders of ALFA (Lee and Issue:
Lacdao included), on the one hand, and the DBP,
on the other hand, whereby the management and Whether the execution of the voting trust
control of ALFA became vested upon the DBP. On agreement by Lee and Lacdao whereby all their
25 April 1989, the trial court reversed itself by shares to the corporation have been transferred to
setting aside its previous Order dated 2 January the trustee deprives the stockholder of their
1989 and declared that service upon Lee and positions as directors of the corporation.
Lacdao who were no longer corporate officers of
ALFA cannot be considered as proper service of
Ruling:
summons on ALFA. On 15 May 1989, Sacoba
Manufacturing, et. al. moved for a reconsideration
of the Order which was affirmed by the court in is Lee and Lacdao, by virtue of the voting trust
Order dated 14 August 1989 denying Sacoba agreement executed in 1981 disposed of all their
Manufacturing, et. al.'s motion for reconsideration. shares through assignment and delivery in favor of
On 18 September 1989, a petition for certiorari was the DBP, as trustee. Consequently, Lee and Lacdao
belatedly submitted by Sacoba Manufacturing, et. ceased to own at least one share standing in their
al. before the Court of Appeals which, nonetheless, names on the books of ALFA as required under
resolved to give due course thereto on 21 Section 23 of the new Corporation Code. They also
September 1989. On 17 October 1989, the trial ceased to have anything to do with the
court, not having been notified of the pending management of the enterprise. Lee and Lacdao
petition for certiorari with the appellate court issued ceased to be directors. Hence, the transfer of their
an Order declaring as final the Order dated 25 April shares to the DBP created vacancies in their
1989. Sacoba Manufacturing, et. al. in the said respective positions as directors of ALFA. The
Order were required to take positive steps in transfer of shares from the stockholders of ALFA to
prosecuting the third party complaint in order that the DBP is the essence of the subject voting trust
the court would not be constrained to dismiss the agreement. Considering that the voting trust
same for failure to prosecute. Subsequently, on 25 agreement between ALFA and the DBP transferred
October 1989 Sacoba Manufacturing, et. al. filed a legal ownership of the stocks covered by the
motion for reconsideration on which the trial court agreement to the DBP as trustee, the latter
took no further action. On 19 March 1990, after Lee because the stockholder of record with respect to
and Lacdao filed their answer to Sacoba the said shares of stocks. In the absence of a
Manufacturing, et. al.'s petition for certiorari, the showing that the DBP had caused to be transferred
appellate court rendered its decision, setting aside in their names one share of stock for the purpose
the orders of trial court judge dated 25 April 1989 of qualifying as directors of ALFA, Lee and Lacdao
and 14 August 1989. On 11 April 1990, Lee and can no longer be deemed to have retained their
Lacdao moved for a reconsideration of the decision status as officers of ALFA which was the case
of the appellate court which resolved to deny the before the execution of the subject voting trust
same on 10 May 1990. Lee and Lacdao filed the agreement. There is no dispute from the records
25
that DBP has taken over full control and Reconsideration was denied.
management of the firm. Hence this Petition.
Facts : Ruling:
On April 1991, Baliwag Mahogany Corporation Petition is DENIED, MOA novates the trust
(BMC), through its president, respondent Alfredo T. agreement.
Ong, applied for a domestic commercial letter credit Mere failure to deliver the proceeds of the sale of
with petitioner Pilipinas Bank (the bank) to finance the goods, if not sold, constitutes violation of PD
the purchase of “Air Dried, Dark Lauan” sawn 115. However, what is being punished by the law is
lumber. the dishonesty and abuse of confidence in the
The bank approved the application and issued a handling of money or goods to the prejudice of
Letter of Credit. To secure payment of the amount, another regardless of whether the latter is the
BMC, through respondent Ong, executed two (2) owner. It bears emphasis that when the petitioner
trust receipts providing that it shall turn over the bank made a demand upon a BMC on February 11,
proceeds of the goods to the bank, if sold, or return 1994 to comply with its obligations under the trust
the goods, if unsold, upon maturity on July 28, receipts, the latter was already under the control of
1991 and August 4, 1981. the Management Committee created by SEC. The
On due dates, BMC failed to comply with the trust Management Committee took custody of all BMC’s
receipt agreement. On November 22, 1991, it filed assets and liabilities, including the red lauan lumber
with the Securities and Exchange Commission (SEC) subject of trust receipts, and authorized their use in
a Petition for Rehabilitation and for a Declaration in the ordinary course of business operations. Clearly,
a State of Suspension of Payments. On January 8, it was the Management Committee which could
1992, the SEC issued an order creating a settle BMC’s obligations.
Management Committee wherein the bank is In Quinto vs. People, this Court held that there are
represented. two ways which could indicate the presence of
On October 13, 1992, BMC and a consortium of 14 novation, thereby producing the effect of
of its creditor banks entered into a Memorandum of extinguishing an obligation by another which
Agreement (MOA) rescheduling the payment of substitutes the same. The first is when novation
BMC’s existing debts. has been stated and declared in unequivocal terms.
On November 27, 1992, the SEC rendered a The second is when the old and the new obligations
Decision approving the Rehabilitation Plan of BMC are incompatible on every point. The test of
as contained in the MOA and declaring it in a state incompatibility is whether or not the two obligations
of suspension of payments. can stand together. If they cannot, they are
However, BMC and respondent Ong defaulted in incompatible and the latter obligation novates the
the payment of the obligations under the first. The incompatibility must take place in any of
rescheduled payment scheme provided in the MOA. the essential elements of the obligation, such as its
On April 1994, the bank filed a complaint charging object, cause or principal conditions.
respondents Ong and Leoncia Lim (as president and Contrary to petitioner’s contention, the MOA did not
treasurer of BMC) with violation of the Trust only reschedule BMC’s debts, but more importantly,
Receipts Law (PD 115). The bank alleged that both it provided principal conditions, which are
respondents failed to pay their obligation under the incompatible with the trust agreement. The
trust receipt despite demand. execution of the MOA extinguished respondent’s
The Court of Appeals renders its decision holding obligation under the trust receipts. Respondent’s
that the execution of the MOA constitutes novation liability, if any, would only be civil in nature since
which places petitioner bank in estoppel to insist on the trust receipts were transformed into mere loan
the original trust relation and constitutes a bar to documents after the execution of the MOA.
the filing of any criminal information for violation of
the trust receipts law. The Motion for
26
LORENZO M. SARMIENTO, JR. and GREGORIO In the present case, private respondent’s complaint
LIMPIN, JR against petitioners was based on the failure of the
Vs latter to comply with their obligation as spelled out
COURT OF APPEALS and ASSOCIATED in the Trust Receipt executed by them. This breach
BANKING CORP. of obligation is separate and distinct from any
criminal liability for "misuse and/or misappropriation
Facts : On September 6, 1978, defendant Gregorio of goods or proceeds realized from the sale of
Limpin, Jr. and Antonio Apostol, doing business goods, documents or instruments released under
under the name and style of ‘Davao Libra Industrial trust receipts", punishable under Section 13 of the
Sales,’ filed an application for an Irrevocable Trust Receipts Law (P.D. 115) in relation to Article
Domestic Letter of Credit with the plaintiff Bank in 315(1), (b) of the Revised Penal Code. Being based
favor of LS Parts Hardware and Machine Shop for on an obligation ex contractu and not ex delicto,
the purchase of assorted scrap irons. The aforesaid the civil action may proceed independently of the
application was approved, and plaintiff Bank issued criminal proceedings instituted against petitioners
Domestic Letter of Credit. Thereafter, a Trust regardless of the result of the latter.
Receipt was executed by defendant Limpin and
Antonio Apostol. EDWARD ONG
vs.
The defendants failed to comply with their COURT OF APPEALS
undertaking under the Trust Receipt. Hence
demands were made for them to comply with their Facts :
undertaking. However, defendants failed to pay
their account. A complaint for Violation of the Trust Petitioner Edward Ong, representing ARMAGRI
Receipt Law was filed against the defendants. International Corporation (ARMAGRI), executed two
Defendant Lorenzo Sarmiento, Jr. was, however, trust receipts acknowledging receipt from the Solid
dropped from the Information while defendant Bank Corp. of goods valued at P 2,532,500 and P 2,
Gregorio Limpin, Jr. was convicted. 050,000. In addition, he bounded himself to any
increase or decrease of interest rate in case Central
The defendants claim that they cannot be held Bank floated rates and to pay any additional
liable as the 825 tons of assorted scrap iron, penalty until the trust receipts are fully paid.
subject of the trust receipt agreement, were lost When the trust receipts became due and
when the vessel transporting them sunk, and that demandable, ARMAGRI failed to pay or deliver the
said scrap iron were delivered to ‘Davao Libra goods to the Bank despite several demand letters.
Industrial Sales’, a business concern over which The trial court convicted Ong of two counts of
they had no interest whatsoever. estafa for violation of the Trust Receipts Law.
Issue:
Issue:
loan transactions of ARMAGRI. The Bank had a To secure the indebtedness of petitioner
right to demand from ARMAGRI payment or at least corporation, respondent bank required the
a return of the goods. ARMAGRI failed tom pay or execution of a Trust Receipt in an amount
return the goods despite repeated demands by the equivalent to the letter of credit, on the condition
Bank. that petitioner corporation would hold the goods in
It is well-settled doctrine long before the enactment trust for respondent bank, with the right to sell the
of the Trust Receipts Law, that the failure to goods and the obligation to turn over to respondent
account, upon demand, for funds or property held bank the proceeds of the sale, if any. If the goods
in trust is evidence of conversion or remained unsold petitioner corporation had the
misappropriation. Under the law, mere failure by further obligation to return them to respondent
the entrustee to account for the goods received in bank. Upon arrival of the goods in the Philippines,
trust constitutes estafa. The Trust Receipts Law petitioner corporation took possession and custody
punishes dishonesty and abuse of confidence in the thereof.
handling of money or goods to prejudice the public
order. The mere failure to deliver proceeds of the Petitioner corporation defaulted in the payment of
sale or the goods if not sold constitutes a criminal its obligation to respondent bank and failed to turn
offense that causes prejudice not only to the over the goods to the latter. Respondent bank
creditor, but also to the public interest. Evidently, demanded that petitioners, as entrustees, turn over
the Bank suffered prejudice for neither money nor the goods subject of the trust receipt which was
the goods were turned over the Bank. turned over by the petitioners.
LANDL & COMPANY (PHIL.) INC., PERCIVAL The goods were sold at a public auction with
G. LLABAN and MANUEL P. LUCENTE respondent bank as the highest bidde but the
vs. proceeds of the auction sale were insufficient to
METROPOLITAN BANK & TRUST COMPANY completely satisfy petitioners' outstanding
obligation to respondent bank, notwithstanding the
Facts : application of the time deposit account of petitioner
Lucente. Accordingly, respondent bank demanded
Respondent Metropolitan Bank and Trust Company that petitioners pay the remaining balance of their
(Metrobank) filed a complaint for sum of money obligation. After petitioners failed to do so,
against Landl and Company (Phil.) Inc. (Landl) and respondent bank instituted the case to collect the
its directors, Percival G. Llaban and Manuel P. said deficiency.
Lucente. Respondent alleged that petitioner
corporation is engaged in the business of selling Petitioners appealed to the Court of Appeals, raising
imported welding rods and alloys. It opened the issues of: (1) whether or not respondent bank
Commercial Letter of Credit with respondent bank has the right to recover any deficiency after it has
to purchase various welding rods and electrodes retained possession of and subsequently effected a
from Perma Alloys, Inc., New York, U.S.A. Petitioner public auction sale of the goods covered by the
corporation put up a marginal deposit of trust receipt; (2) whether or not respondent bank is
P50,414.00 from the proceeds of a separate clean entitled to the amount of P3,000.00 as and for
loan. litigation expenses and costs of the suit; and (3)
whether or not respondent bank is entitled to the
As an additional security, and as a condition for the award of attorney's fees.
approval of petitioner corporation's application for
the opening of the commercial letter of credit, Issue:
respondent bank required petitioners Percival G.
Llaban and Manuel P. Lucente to execute a Whether or not the respondent had the right to
Continuing Suretyship Agreement in favor of claim the deficiency from petitioners
respondent bank. Petitioner Lucente also executed notwithstanding the fact that the goods covered by
a Deed of Assignment in favor of respondent bank the trust receipt were fully turned over to
to cover the amount of petitioner corporation's respondent.
obligation to the bank. Upon compliance with these
requisites, respondent bank opened an irrevocable
Ruling:
letter of credit for the petitioner corporation.
28
A trust receipt is inextricably linked with the primary RTMC and Yujuico contend that they should be
agreement between the parties. Time and again, absolved from liability. They claimed that although
we have emphasized that a trust receipt agreement the grant of the credit line and the execution of the
is merely a collateral agreement, the purpose of suretyship agreement are admitted, the bank gave
which is to serve as security for a loan. assurance that the suretyship agreement was
merely a formality under which Yujuico will not be
Respondent bank's repossession of the properties personally liable. They argue that the importation of
and subsequent sale of the goods were completely raw materials under the credit line was with a grant
in accordance with its statutory and contractual of option to them to turn-over to the bank the
rights upon default of petitioner corporation. imported raw materials should these fail to meet
their manufacturing requirements. RTMC offered to
The second paragraph of Section 7 expressly make such turn-over since the imported materials
provides that the entrustee shall be liable to the did not conform to the required specifications.
entruster for any deficiency after the proceeds of However, the bank refused to accept the same,
the sale have been applied to the payment of the until the materials were destroyed by a fire which
expenses of the sale, the payment of the expenses gutted down RTMC’s premises.
of re-taking, keeping and storing the goods,
documents or instruments, and the satisfaction of Issue:
the entrustee's indebtedness to the entruster.
Whether or not the petitioners are not relieved of
In the case at bar, the proceeds of the auction sale their obligation to pay their loan after they tried to
were insufficient to satisfy entirely petitioner tender the goods to the bank which refused to
corporation's indebtedness to the respondent bank. accept the same, and which goods were
Respondent bank was thus well within its rights to subsequently lost in a fire
institute the instant case to collect the deficiency.
Ruling:
ROSARIO TEXTILE MILLS CORPORATION and
EDILBERTO YUJUICO It is clear that the principal transaction between
vs. petitioner RTMC and the bank is a contract of loan.
HOME BANKERS SAVINGS AND TRUST RTMC used the proceeds of this loan to purchase
COMPANY raw materials from a supplier abroad. In order to
secure the payment of the loan, RTMC delivered
Facts : the raw materials to the bank as collateral. Trust
receipts were executed by the parties to evidence
Sometime in 1989, Rosario Textile Mills Corporation this security arrangement. Simply stated, the trust
(RTMC) applied from Home Bankers Savings & receipts were mere securities.
Trust Co. for an Omnibus Credit Line. The bank
notified RTMC of the grant of the said. On March 3, If under the trust receipt, the bank is made to
1989, Yujuico signed a Surety Agreement in favor appear as the owner, it was but an artificial
of the bank, in which he bound himself jointly and expedient, more of legal fiction than fact, for if it
severally with RTMC for the payment of all RTMC’s were really so, it could dispose of the goods in any
indebtedness to the bank. RTMC availed of the manner it wants, which it cannot do, just to give
credit line by making numerous drawdowns, each consistency with purpose of the trust receipt of
drawdown being covered by a separate promissory giving a stronger security for the loan obtained by
note and trust receipt. RTMC, represented by the importer. To consider the bank as the true
Yujuico, executed in favor of the bank a total of owner from the inception of the transaction would
eleven (11) promissory notes. be to disregard the loan feature thereof. Thus,
petitioners cannot be relieved of their obligation to
Despite the lapse of the respective due dates under pay their loan in favor of the bank.
the promissory notes and notwithstanding the
bank’s demand letters, RTMC failed to pay its loans. JOSE C. TUPAZ IV and PETRONILA C. TUPAZ
Hence, the bank filed a complaint for sum of money vs.
against RTMC and Yujuico. THE COURT OF APPEALS and
BANK OF THE PHILIPPINE ISLANDS
29
Prudential Bank learned about DBP's plan for the Article 2085 of the Civil Code requires that, in a
overall rehabilitation of Litex. Prudential Bank contract of pledge or mortgage, it is essential that
notified DBP of its claim over the various items the pledgor or mortgagor should be the absolute
covered by the 'trust receipts' which had been owner of the thing pledged or mortgaged. Article
installed and used by Litex in the textile mill. 2085 further mandates that the person constituting
Prudential Bank informed DBP that it was the the pledge or mortgage must have the free disposal
absolute and juridical owner of the said items and of his property, and in the absence thereof, that he
they were thus not part of the mortgaged assets be legally authorized for the purpose.
that could be legally ceded to DBP.
Litex had neither absolute ownership, free disposal
For the failure of Litex to pay its obligation, DBP nor the authority to freely dispose of the articles.
extra-judicially foreclosed on the real estate and Litex could not have subjected them to a chattel
chattel mortgages, including the articles claimed by mortgage. Their inclusion in the mortgage was void
Prudential Bank and DBP acquired the foreclosed and had no legal effect. There being no valid
properties as the highest bidder. mortgage, there could also be no valid foreclosure
or valid auction sale. Thus, DBP could not be
Prudential Bank wrote a letter to DBP reasserting its considered either as a mortgagee or as a purchaser
claim over the items covered by 'trust receipts' in its in good faith.
name and advising DBP not to include them in the
auction. It also demanded the turn-over of the No one can transfer a right to another greater than
articles or alternatively, the payment of their value. what he himself has. Nemo dat quod non habet.
DBP requested documents to enable it to evaluate Hence, Litex could not transfer a right that it did
Prudential Bank's claim which was provided by the not have over the disputed items. Corollarily, DBP
latter. DBP informed Prudential Bank that its claim could not acquire a right greater than what its
had been referred to DBP's legal department and predecessor-in-interest had. The spring cannot rise
instructed Prudential Bank to get in touch with its higher than its source. DBP merely stepped into the
chief legal counsel. There being no concrete action shoes of Litex as trustee of the imported articles
on DBP's part, Prudential Bank, in a letter made a with an obligation to pay their value or to return
final demand on DBP for the turn-over of the them on Prudential Bank's demand. By its failure to
contested articles or the payment of their value. pay or return them despite Prudential Bank's
Without the knowledge of Prudential Bank, repeated demands and by selling them to Lyon
however, DBP sold the Litex textile mill, as well as without Prudential Bank's knowledge and
the machineries and equipments therein, to Lyon conformity, DBP became a trustee ex maleficio.
Textile Mills, Inc. (Lyon). Since its demands
remained unheeded, Prudential Bank filed a ALFREDO CHING
complaint for a sum of money with damages vs.
against DBP. THE SECRETARY OF JUSTICE, ASST. CITY
PROSECUTOR ECILYN BURGOS-VILLAVERT,
JUDGE EDGARDO SUDIAM; RIZAL
Issue: COMMERCIAL BANKING CORP. and THE
PEOPLE OF THE PHILIPPINES
Whether or not the mortgagee has a right over the
goods subject of the trust receipt agreement which Facts :
was mortgaged by the entrustee
31
Petitioner was the Senior Vice-President of If the crime is committed by a corporation or other
Philippine Blooming Mills, Inc. (PBMI). PBMI, juridical entity, the directors, officers, employees or
through petitioner, applied with the Rizal other officers thereof responsible for the offense
Commercial Banking Corporation (respondent bank) shall be charged and penalized for the crime,
for the issuance of commercial letters of credit to precisely because of the nature of the crime and
finance its importation of assorted goods. the penalty therefor. A corporation cannot be
arrested and imprisoned; hence, cannot be
Respondent bank approved the application, and penalized for a crime punishable by imprisonment.
irrevocable letters of credit were issued in favor of However, a corporation may be charged and
petitioner. The goods were purchased and delivered prosecuted for a crime if the imposable penalty is
in trust to PBMI. Petitioner signed 13 trust receipts fine. Even if the statute prescribes both fine and
as surety, acknowledging delivery of the goods. imprisonment as penalty, a corporation may be
Under the receipts, petitioner agreed to hold the prosecuted and, if found guilty, may be fined.
goods in trust for the said bank, with authority to
sell but not by way of conditional sale, pledge or A crime is the doing of that which the penal code
otherwise; and in case such goods were sold, to forbids to be done, or omitting to do what it
turn over the proceeds thereof as soon as received, commands. A necessary part of the definition of
to apply against the relative acceptances and every crime is the designation of the author of the
payment of other indebtedness to respondent bank. crime upon whom the penalty is to be inflicted.
In case the goods remained unsold within the When a criminal statute designates an act of a
specified period, the goods were to be returned to corporation or a crime and prescribes punishment
respondent bank without any need of demand. therefor, it creates a criminal offense which,
Thus, said "goods, manufactured products or otherwise, would not exist and such can be
proceeds thereof, whether in the form of money or committed only by the corporation. But when a
bills, receivables, or accounts separate and capable penal statute does not expressly apply to
of identification" were respondent bank’s property. corporations, it does not create an offense for
which a corporation may be punished. On the other
When the trust receipts matured, petitioner failed hand, if the State, by statute, defines a crime that
to return the goods to respondent bank, or to may be committed by a corporation but prescribes
return their value despite demands. Thus, the bank the penalty therefor to be suffered by the officers,
filed a criminal complaint for estafa against directors, or employees of such corporation or other
petitioner. persons responsible for the offense, only such
individuals will suffer such penalty. Corporate
Issue: officers or employees, through whose act, default
or omission the corporation commits a crime, are
themselves individually guilty of the crime.
Whether or not the officers of the corporation can
be held civilly and criminally liable of estafa for
violation of the trust receipts law The principle applies whether or not the crime
requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves
Ruling:
commit the crime and to those, who, by virtue of
their managerial positions or other similar relation
Though the entrustee is a corporation, to the corporation, could be deemed responsible for
nevertheless, the law specifically makes the its commission, if by virtue of their relationship to
officers, employees or other officers or persons the corporation, they had the power to prevent the
responsible for the offense, without prejudice to the act. Moreover, all parties active in promoting a
civil liabilities of such corporation and/or board of crime, whether agents or not, are principals.
directors, officers, or other officials or employees Whether such officers or employees are benefited
responsible for the offense. The rationale is that by their delictual acts is not a touchstone of their
such officers or employees are vested with the criminal liability. Benefit is not an operative fact.
authority and responsibility to devise means
necessary to ensure compliance with the law and, if
In this case, petitioner signed the trust receipts in
they fail to do so, are held criminally accountable;
question. He cannot, thus, hide behind the cloak of
thus, they have a responsible share in the violations
the separate corporate personality of PBMI. In the
of the law.
32