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PD 115 is not barred by the constitutional prohibition against imprisonment for non
payment of debt. 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 or not the latter is the owner. The law does not seek to enforce payment of
the loan. There is thus no violation of the Constitutional right imprisonment for non
payment of debts.
Facts: Allied Banking Corporation filed an information for estafa against Betty Sia Ang,
proprietess of Eckart Enterprises. The comlaint alleged that Ang received from the bank
Goardon plastics amounting to P398,000 specified in a trust receipt and covered by a
Domestic Letter of Credit. Ang had the obligation to sell the goods and to account for the
proceeds, if sold, or to return the goods, if not sold, on or before 16 October 1980, or
upon demand. Despite repeated demands, Ang paid only P283,115. It was alleged that
she misappropriated, misapplied and converted the balance to her own personal use and
benefit. Ang filed a motion to quash the information, alleging that violation of the trust
receipt constitutes only a civil liability. Judge Nitafan granted the Motion to quash. Ang
also questioned the constitutionality of PD 115, contending that it violates the
constitutional prohibition for imprisonment for debt .
Issue: Whether or not PD 115 is constitutional.
Held: 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 or not the
latter is the owner. The law does not seek to enforce payment of the loan. There is thus no
violation of the Constitutional right imprisonment for nonpayment of debts.
Section 1(b) of Article 315 states that one of the means by which to commit estafa is “by
misappropriating or converting, to the prejudice of another, money, goods received by the
offender in trust or under any other obligation involving the duty to make delivery of or
to return the same. It is the failure of Ang to account for the balance that makes her
liable for estafa.
Trust receipt arrangements do not involve a simple loan transaction. Apart from a loan
feature, the trust receipt arrangement has a security feature covered by the trust receipt
itself. The second feature provides needed financial assistance to traders in the
importation or purchase of goods through the use of the goods as collateral for the
advancements made by the bank. The title of the bank to the security is the one sought to
be protected and not the loan which is a separate and distinct agreement. Like BP 22, PD
115 punishes the act as an offense against public order, not against property. The offense
is punished as a mala prohibitum regardless of the existence of intent or malice. A mere
failure to deliver the proceeds of the sale or the goods constitute a criminal offense that
causes prejudice to another and, more importantly, to the public interest.
Lee
Colinares
Facts: Melvin Colinares and Lordino Veloso (hereafter Petitioners) were contracted for a
consideration of P40,000 by the Carmelite Sisters of Cagayan de Oro City to renovate the
latter’s convent at Camamanan, Cagayan de Oro City. Colinares applied for a
commercial letter of credit with the Philippine Banking Corporation, Cagayan de Oro
City branch (hereafter PBC) in favor of CM Builders Centre. PBC approved the letter of
credit for P22,389.80 to cover the full invoice value of the goods. Petitioners signed a
proforma trust receipt as security.
PBC debited P6,720 from Petitioners’ marginal deposit as partial payment of the loan.
After the initial payment, the spouses defaulted. PBC wrote to Petitioners demanding
that the amount be paid within seven days from notice. Instead of complying with PBC’s
demand, Veloso confessed that they lost P19,195.83 in the Carmelite Monastery Project
and requested for a grace period of until 15 June 1980 to settle the account. Colinares
proposed that the terms of payment of the loan be modified P2,000 on or before 3
December 1980, and P1,000 per month . Pending approval of the proposal, Petitioners
paid P1,000 to PBC on 4 December 1980, and thereafter P500 on 11 February 1981, 16
March 1981, and 20 April 1981. Concurrently with the separate demand for attorney’s
fees by PBC’s legal counsel, PBC continued to demand payment of the balance. On 14
January 1983, Petitioners were charged with the violation of P.D. No. 115 (Trust
Receipts Law) in relation to Article 315 of the Revised Penal Code
During trial, petitioner Veloso insisted that the transaction was a “clean loan” as per
verbal guarantee of Cayo Garcia Tuiza, PBC’s former manager. He and petitioner
Colinares signed the documents without reading the fine print, only learning of the trust
receipt implication much later. When he brought this to the attention of PBC, Mr. Tuiza
assured him that the trust receipt was a mere formality. The Trust Receipts 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. Here, it is crystal clear that on the part of Petitioners there
was neither dishonesty nor abuse of confidence in the handling of money to the prejudice
of PBC. Petitioners continually endeavored to meet their obligations, as shown by several
receipts issued by PBC acknowledging payment of the loan.
Issue: Whether or not the transaction of Colinares falls within the ambit of the Law on
Trust Receipt
Held: Colinares received the merchandise from CM Builders Centre on 30 October 1979.
On that day, ownership over the merchandise was already transferred to Petitioners who
were to use the materials for their construction project. It was only a day later, 31 October
1979, that they went to the bank to apply for a loan to pay for the merchandise. This
situation belies what normally obtains in a pure trust receipt transaction where goods are
owned by the bank and only released to the importer in trust subsequent to the grant of
the loan.
The bank acquires a “security interest” in the goods as holder of a security title for the
advances it had made to the entrustee. The ownership of the merchandise continues to be
vested in the person 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 him
by the importer or by his representative or successor in interest. To secure that the bank
shall be paid, it takes full title to the goods at the very beginning and continues to hold
that title as his indispensable security until the goods are sold and the vendee is called
upon to pay for them; hence, the importer has never owned the goods and is not able to
deliver possession. In a certain manner, trust receipts partake of the nature of a
conditional sale where the importer becomes absolute owner of the imported merchandise
as soon as he has paid its price.
There are two possible situations in a trust receipt transaction. The first is covered by the
provision which refers to money received under the obligation involving the duty to
deliver it (entregarla) to the owner of the merchandise sold.
The second is covered by the provision which refers to merchandise received under the
obligation to “return” it (devolvera) to the owner.
Failure of the entrustee to turn over the proceeds of the sale of the goods, covered by the
trust receipt to the entruster or to return said goods if they were not disposed of in
accordance with the terms of the trust receipt shall be punishable as estafa under Article
315 (1) of the Revised Penal Code, without need of proving intent to defraud.
Ng v. PP
Anthony Ng was engaged in the business of building and fabricating telecommunication
towers under the trade name Capitol Blacksmith and Builders. Petitioner applied for a
credit line of Php 3,000,000 with Asia trust. In support of Asia trusts credit investigation,
petitioner voluntarily submitted the following documents: (1)the contracts he had with
Islacom, Smart, and Infocom; (2) the list of projects wherein he was commissioned by the
said telecommunication companies to build several steel towers; and (3) the collectible
amounts he has with the said companies. Asiatrust approved petitioner’s loan application.
Petitioner was then required to sign several documents, among which are the Credit
Line Agreement, Application and Agreement for Irrevocable L/C, Trust
Receipt Agreements,[4] and Promissory Notes.
Though the Promissory Notes had maturity dates, the two Trust Receipt Agreements did
not bear any maturity dates. After petitioner received the goods, consisting of chemicals
and metal plates from his suppliers, he utilized them to fabricate the communication
towers ordered from him by his clients. As petitioner realized difficulty in collecting
from his client Islacom, he failed to pay his loan to Asiatrust. Asiatrusts representative
appraiser, reported that approximately 97% of the subject goods of the Trust Receipts
were soldout and that only 3 % of the goods remained. Efforts towards a settlement
failed to be reached. Asiatrust Account Officer filed a ComplaintAffidavit for Estafa, as
defined and penalized under Art. 315,par. 1(b) of the RPC in relation to Sec.3, PD 115 or
the Trust Receipts Law.
Issue:
Whether the petitioner is liable for Estafa under Art. 315, par. 1(b) of the RPC in relation
to PD 115.
Ruling:
A trust receipt transaction is one where the entrustee has the obligation to deliver to the
entruster the price of the sale, or if the merchandise is not sold, to return the merchandise
to the entruster. There are, therefore, two obligations in a trust receipt transaction: the
first refers to money received under the obligation involving the duty to turn it over
(entregarla) the owner of the merchandise sold, while the second refers to the
merchandise received under the obligation to return it (devolvera) to the owner. A
violation of any of these undertakings constitutes Estafa defined under Art. 315, par. 1(b)
of the RPC, as provided in Sec. 13 of PD 115, viz: Section 13.
Penalty Clause
.
The failure of an entrustee to turn over the proceeds of the sale of the goods, documents
or instruments covered by a trust receipt to the extent of the amount owing to the
entruster or as appears in the trust receipt or to return said goods, documents or
instruments if they were not sold or disposed of in accordance with the terms of the trust
receipt shall constitute the crime of estafa, punishable under the provisions of Article
Three hundred fifteen, paragraph one (b) of Act Numbered Three thousand eight hundred
and fifteen, as amended, otherwise known as the Revised Penal Code. A trust receipt is
considered a security transaction intended to aid in financing importers and retail dealers
who do not have sufficient funds or resources to finance the importation or purchase of
merchandise, and who may not be able to acquire credit except through utilization, as
collateral, of the merchandise imported or purchased.
The principle is of course not limited in its application to financing importations, since
the principle is equally applicable to domestic transactions. Regardless of whether the
transaction is foreign or domestic, it is important to note that the transactions discussed in
relation to trust receipts mainly involved sales.
The release of such goods to the entrustee is conditioned upon his execution and delivery
to the entruster of a trust receipt wherein the former binds himself to hold the specific
goods in trust for the entruster and to sell or otherwise dispose of the goods with the
obligation to turn over to the entruster the proceeds to the extent of the amount owing to
the entruster or theg oods themselves if they are unsold. Considering that the goods in
this case were never intended for sale but for use in the fabrication of steel
communication towers, the trial court erred in ruling that the agreement is a trust receipt
transaction.
Petitioner is correct that there was no misappropriation or conversion on his part, because
his liability for the amount of the goods subject of the trust receipts arises and becomes
due only upon receipt of the proceeds of the sale and not prior to the receipt of the full
price of the goods. PD 115 provides that an entrustee is only liable for Estafa when he
fails to turn over the proceeds of the sale of the goods covered by a trust receipt to the
extent of the amount owing to the entruster or as appears in the trust receipt in accordance
with the terms of the trust receipt
LBP v. Perez
Doctrines of the case
1. Under the Trust Receipts Law, intent todefraud is presumed when (1) the entrustee
fails to turn over the proceeds of the sale of goods covered by the trust receipt to the
entruster? or (2) when the entrustee fails to return the goods under trust, if they are not
disposed of in accordance with the terms of the trust receipts.
2. In all trust receipt transactions, both obligations on the part of the trustee exist in the
alternative—the return of the proceeds of the sale or the return or recovery of the goods,
whether raw or processed.
3. In order that the respondents “may be validly prosecuted for estafa under Article 315,
paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of the Trust
Receipts Law, the following elements must be established:
(a) they received the subject goods in trust or under the obligation to sell the same and to
remit the proceeds thereof to [the trustor], or to return the goods if not sold?
(b) they misappropriated or converted the goods and/or the proceeds of the sale?
(c) they performed such acts with abuse of confidence to the damage and prejudice of
Metrobank? and
(d) demand was made on them by [the trustor] for the remittance of the proceeds or the
return of the unsold goods.”
FACTS:
1. Petitioner Land Bank of the Philippines (LBP) is a government financial institution and
the official depository of the Philippines. Respondents are the officers and representatives
of Asian Construction and Development Corporation (ACDC), a corporation incorporated
under Philippine law and engaged in the construction business.
2. LBP extended a credit accommodation to ACDC through the execution of an Omnibus
Credit Line Agreement (Agreement) between LBP and ACDC on October 29, 1996.
3. In various instances, ACDC used the Letters of Credit/Trust Receipts Facility of the
Agreement to buy construction materials. The respondents, as officers and representatives
of ACDC, executed trust receipts in connection with the construction materials, with a
total principal amount of P52,344,096.32. The trust receipts matured, but ACDC failed to
return to LBP the proceeds of the construction projects or the construction materials
subject of the trust receipts. LBP sent ACDC a demand letter, dated May 4, 1999, for the
payment of its debts, including those under the Trust Receipts Facility in the amount of
P66,425,924.39. When ACDC failed to comply with the demand letter, LBP filed the
affidavitcomplaint for estafa or violation of Article 315, paragraph 1(b) of the Revised
Penal Code, in relation to P.D. 115
4. Perez alleged that they signed the trust receipt documents on or about the same time
LBP and ACDC executed the loan documents? their signatures were required by LBP for
the release of the loans. The trust receipts in this case do not contain (1) a description of
the goods placed in trust, (2) their invoice values, and (3) their maturity dates, in violation
of Section 5(a) of P.D. 115.
5. They alleged that ACDC acted as a subcontractor for government projects such as the
Metro Rail Transit, the Clark Centennial Exposition and the Quezon Power Plant in
Mauban, Quezon. Its clients for the construction projects, which were the general
contractors of these projects, have not yet paid them? thus, ACDC had yet to receive the
proceeds of the materials that were the subject of the trust receipts and were allegedly
used for these constructions. As there were no proceeds received from these clients, no
misappropriation thereof could have taken place.
The CA ruled in favor of Perez ratiocinating in this wise
1.The case did not involve a trust receipt transaction, but a mere loan. It emphasized that
construction materials, the subject of the trust receipt transaction, were delivered to
ACDC even before the trust receipts were executed.
2. LBP did not offer proof that the goods were received by ACDC, and that the trust
receipts did not contain a description of the goods, their invoice value, the amount of the
draft to be paid, and their maturity dates. It also adopted ACDC’s argument
that since no payment for the construction projects had been received by ACDC, its
officers could not have been guilty of misappropriating any payment.
Issue: Whether or not CA erred in ruling that the case is merely a loan agreement and not
a trust receipt transaction?
Supreme court Decision
Yes. The transaction is a mere loan agreement and not a trust receipt transaction.
1. The disputed transactions are not trust receipts.
Section 4 of P.D. 115 defines a trust receipt transaction in this manner:
“Section 4. What constitutes a trust receipt transaction.—A trust receipt transaction,
within the meaning of this Decree, is any transaction by and between a person referred to
in this
Decree as the entruster, and another person referred to in this Decree as entrustee,
whereby the entruster, who owns or holds absolute title or security interests over certain
specified goods, documents or instruments, releases the same to the possession of the
entrustee upon the latter’s execution and delivery to the entruster of a signed document
called a “trust receipt” wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose of the
goods, documents or instruments with the obligation to turn over to the entruster the
proceeds thereof to the extent of the amount owing to the entruster or as appears in the
trust receipt or the goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any of the following: In the case
of goods or documents,
(a) to sell the goods or procure their sale? or
(b) to manufacture or process the goods with the purpose of ultimate sale:
Provided, That, in the case of goods delivered under trust receipt for the purpose of
manufacturing or processing before its ultimate sale, the entruster shall retain its title over
the goods whether in its original or processed form until the entrustee has complied fully
with his obligation under the trust receipt? or (c) to load, unload, ship or tranship or
otherwise deal with them in a manner preliminary or necessary to their sale[.]”
2. Two obligations in a trust receipt transaction.
a. By the provision that refers to money under the obligation to deliver it (entregarla) to
the owner of the merchandise sold.
b. By the provision referring to merchandise received under the obligation to return it
(devolvera) to the owner.
Thus, under the Trust Receipts Law, intent to defraud is presumed when:
(1) the entrustee fails to turn over the proceeds of the sale of goods vcovered by the trust
receipt to the entruster? or
(2) when the entrustee fails to return the goods under trust, if they are not disposed of in
accordance with the terms of the trust receipts.
In all trust receipt transactions, both obligations on the part of the trustee exist in the
alternative—the return of the proceeds of the sale or the return or recovery of the goods,
whether raw or processed. When both parties enter into an agreement knowing that the
return of the goods subject of the trust receipt is not possible even without any fault on
the part of the trustee, it is not a trust receipt transaction penalized under Section 13 of
P.D. 115? The only obligation actually agreed upon by the parties would be the return of
the proceeds of the sale transaction. This transaction becomes a mere loan, where the
borrower is obligated to pay the bank the amount spent for the purchase of the goods.
3. In the case at bar,
a. At the onset of these transactions, LBP knew that ACDC was in the construction
business and that the materials that it sought to buy under the letters of credit were to be
used for construction projects. LBP had in fact authorized the delivery of the materials on
the construction sites for these projects, as seen in the letters of credit it attached to its
complaint. Clearly, they were aware of the fact that there was no way they could recover
the buildings or constructions for which the materials subject of the alleged trust receipts
had been used. Notably, despite the allegations in the affidavitcomplaint wherein LBP
sought the return of the construction materials, its demand letter dated May 4, 1999
sought the payment of the balance but failed to ask, as an alternative, for the return of the
construction materials or the buildings where these materials had been used. The fact that
LBP had knowingly authorized the delivery of construction materials to a construction
site of two government projects, as well as unspecified construction sites, repudiates the
idea that LBP intended to be the owner of those construction materials.
As a government financial institution, LBP should have been aware that the materials
were to be used for the construction of an immovable property, as well as a property of
the public domain. As an immovable property, the ownership of whatever was
constructed with those materials would presumably belong to the owner of the land. In
contrast with the present situation, it is fundamental in a trust receipt transaction that the
person who advanced payment for the merchandise becomes the absolute owner of said
merchandise and continues as owner until he or she is paid in full, or if the goods had
already been sold, the proceeds should be turned over to him or to her.
b. Based on these premises, the agreements between the parties in this case are not trust
receipt transactions because
(1) from the start, the parties were aware that ACDC could not possibly be obligated to
reconvey to LBP the materials or the end product for which they were used? and
(2) from the moment the materials were used for the government.