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G.R. No. 109087 May 9, 2001 RODZSSEN SUPPLY CO. INC., petitioner, vs.

FAR EAST BANK & TRUST CO., respondent. FACTS EHG Company applied for and obtained an irrevocable 30-day domestic Letter of Credit from KDM Bank on January 15, 1979, in favor of AA Corporation, in order to finance the purchase of five units of hydraulic loaders. The Letter of Credit expires on October 16, 1979. The Bank paid for the first three hydraulic loaders that were delivered on March 16, 1979. The remaining two units were received by EHG Company before the expiry date of the Letter of Credit. KDM Bank paid AA Corporation for the same on March 14, 1980. Upon demand by KDM Bank, EHG Company refused to pay claiming that respondent bank was negligent in paying for the two hydraulic loaders, when it no longer had any obligation to do so the Letter of Credit has already expired. ISSUE Whether or not it is proper for a banking institution to pay a letter of credit which has long expired or been cancelled. HELD The Letter of Credit expires on October 16, 1979. KDM Bank however paid AA Corporation for the last two hydraulic loaders on March 14, 1980, five months after the expiration of the Letter of Credit on October 16, 1979. The subject Letter of Credit had become invalid upon the lapse of the period fixed therein. Thus, respondent should not have paid AA Corporation; it was not obliged to do so. KDMs right to seek recovery from petitioner is anchored not upon the inefficacious Letter of Credit, but on Article 2142 of the Civil Code, which reads, Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

G.R. No. 134436. August 16, 2000 METROPOLITAN BANK and TRUST COMPANY, petitioner, vs. JOAQUIN TONDA and MA. CRISTINA TONDA, respondents. FACTS Spouses Dwight Saba and Sherisse Saba applied for and was issued commercial letters of credit by KDM Bank for the purpose of importation of raw textile materials to be used in the manufacturing of garments. The Sabas acting both in their capacity as officers of EHG Corporation and in their personal capacities, executed trust receipts to secure the release of the raw materials to EHG Corporation. Despite repeated demands from the Bank, the Sabas failed to comply with their obligations, among others, to account to KDM Bank the goods and/or proceeds of sale of the merchandise, subject of the trust receipts. As a result, the Sabas were charged with violation of PD 115 or the Trust Receipts Law and estafa. Dwight Saba together with a certain Mr. A subsequently entered into a loan restructuring agreement with KDM Bank, however said agreement did not pursue. Subsequently, Dwight Saba and Mr. A deposited a certain sum of money to an account to pay the entire principal of the outstanding trust receipts account to be applied anytime to the payment of the Trust Receipt/ Letter of Credit Account upon the implementation by the parties of the terms of the restructuring. On appeal of the case, the Court of Appeals ruled in favor of the Spouses Saba and held that there is no evidence that KDM Bank has been damaged by the proposal and the deposit. ISSUE #1 Whether or not the Sabas violated the provision of the Trust Receipts Law in relation to Article 315(1) (b) of the Revised Penal Code. ISSUE #2 Whether or not damage has been caused to KDM Bank because of the proposal and of the deposit. HELD #1 The Trust Receipts Law declares the failure to turn over the goods or the proceeds realized from the sale thereof, as a criminal offense punishable under Article 315 (1) (b) of the Revised Penal Code. The law is violated whenever the entrustee or the person to whom the trust receipts were issued in favor of fails to: (1) return the goods covered by the trust receipts; or (2) return the proceeds of the sale of the said goods. The foregoing acts constitute estafa punishable under Article 315 (1) (b) of the Revised Penal Code. Given that various trust receipts were executed by the Sabas and that as entrustees, they did not return the proceeds from the goods sold nor the goods themselves to KDM Bank, then it is clear that the Sabas failed to comply with the obligations under the trust receipts despite several demands from KDM Bank; hence, the Sabas violated the provision of the Trust Receipts Law in relation to Article 315(1) (b) of the Revised Penal Code. HELD #2 Trust receipts are indispensable contracts in international and domestic business transactions. P.D. 115, like Bata Pambansa Blg. 22, punishes the act "not as an offense against property, but as an offense against public order. x x x The

misuse of trust receipts therefore should be deterred to prevent any possible havoc in trade circles and the banking community. The crime of Estafa is punished as a malum prohibitum regardless of the existence of intent or malice. Thus, there is no need to prove that damage has been caused to KDM Bank because of the proposal and of the deposit. A mere failure to deliver the proceeds of the sale or the goods if not sold, constitutes a criminal offense that causes prejudice not only to another, but more to the public interest.

G.R. No. 137232 June 29, 2005 ROSARIO TEXTILE MILLS CORPORATION and EDILBERTO YUJUICO, petitioners, vs. HOME BANKERS SAVINGS AND TRUST COMPANY, respondent. FACTS LYN Corporation obtained a loan from Bank of Ken (the Bank for brevity) and used the proceeds to purchase raw materials from a supplier abroad. As a security, LYN Corporation delivered the raw materials to the Bank as collateral. Trust receipts were executed by the parties to evidence this security arrangement. Despite demand from the Bank, LYN Corporation failed to pay its loans. It was established that under the agreement, LYN Corporation may turn-over the imported materials when the same did not conform to the required specifications, which LYN Corporation did. However, the bank refused to accept the same, until the materials were destroyed by a fire which gutted down LYN Corporations premises. LYN Corporation asserted that when it imported the raw materials needed for its manufacture, using the credit line, it was merely acting on behalf of the Bank, the true owner of the goods by virtue of the trust receipts. Hence, under the doctrine of res perit domino, the Bank took the risk of the loss of said raw materials. ISSUE Whether or not LYN Corporation are relieved of their obligation to pay their loan after tender by them of the goods to the bank which refused to accept the same, and which goods were subsequently lost in a fire. HELD The principal transaction between LYN Corporation and the Bank is a contract of loan. Trust receipts were executed by the parties to evidence this security arrangement. Simply stated, the trust receipts were mere securities. A trust receipt as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased. A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a security interest in the goods. If under the trust receipt, the bank is made to appear as the owner, it was but an artificial expedient, more of legal fiction than fact, for if it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof. Thus, LYN Corporation cannot be relieved of their obligation to pay their loan in favor of the Bank.