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10. MELVIN COLINARES and LORDINO VELOSO, petitioners, vs.

In 1979 petitioners were contracted for a consideration of P40,000 by the Carmelite
Sisters of Cagayan de Oro City to renovate the latters convent at Camaman-an, Cagayan de
Oro City.Subsequently, they obtained several construction materials from CM Builders Centre
for the project. Then petitioners applied for a commercial letter of credit with the Philippine
Banking Corporation(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 pro-forma
trust receipt as security. The loan was due on 29 January 1980.
On 31 October 1979, PBC debited P6,720 from Petitioners marginal deposit as partial
payment of the loan. On 7 May 1980, PBC demanded payment of the loan within seven days
from notice. Instead of complying with PBCs 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. PBC sent a new demand letter to Petitioners. Meanwhile,
petitioners proposed that the terms of payment of the loan be modified. Pending approval of the
proposal, petitioners made several partial payments. Concurrently with the separate demand for
attorneys fees by PBCs 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. The RTC found them guilty.
RULING: The court ruled for the petitioners.
Section 4, P.D. No. 115, the Trust Receipts Law, defines a trust receipt transaction as
any transaction by and between a person referred to as the entruster, and another person
referred to as the entrustee, whereby the entruster who owns or holds absolute title or security
interest over certain specified goods, documents or instruments, releases the same to the
possession of the entrustee upon the latters execution and delivery to the entruster of a signed
document called a trust receipt wherein the entrustee binds himself to hold the designated
goods, documents or instruments with the obligation to turn over to the entruster the proceeds
thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or
the goods, documents or instruments themselves if they are unsold or not otherwise disposed
of, in accordance with the terms and conditions specified in the trust receipt.
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.

. the Trust Receipts Law does not seek to enforce payment of the loan. In a certain manner. They are contractors who obtained the fungible goods for their construction project. Here. the importer has never owned the goods and is not able to deliver possession. hence. 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. Petitioners employed no artifice in dealing with PBC and never did they evade payment of their obligation nor attempt to abscond. Moreover. Also noteworthy is the fact that Petitioners are not importers acquiring the goods for resale. Thus. that they went to the bank to apply for a loan to pay for the merchandise. without need of proving intent to defraud. 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 are acquitted of the crime charged. not a trust receipt agreement. 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. 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 mala prohibita nature of the alleged offense notwithstanding. To secure that the bank shall be paid. The Information charges Petitioners with intent to defraud and misappropriating the money for their personal use. Instead. 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. contrary to the express provision embodied in the trust receipt. On that day. The ownership of the merchandise continues to be vested in the person who had advanced payment until he has been paid in full. as shown by several receipts issued by PBC acknowledging payment of the loan. Petitioners continually endeavored to meet their obligations. ownership over the merchandise was already transferred to Petitioners who were to use the materials for their construction project. 31 October 1979. the proceeds of the sale should be turned over to him by the importer or by his representative or successor in interest. Petitioners sought favorable terms precisely to meet their obligation. which should not be the basis for criminal prosecution in the event of violation of its provisions. or if the merchandise has already been sold. A thorough examination of the facts obtaining in the case at bar reveals that the transaction intended by the parties was a simple loan. It was only a day later.Failure of the entrustee to turn over the proceeds of the sale of the goods. intent as a state of mind was not proved to be present in Petitioners situation. 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. The bank acquires a security interest in the goods as holder of a security title for the advances it had made to the entrustee. This impresses upon the trust receipt in question vagueness and ambiguity. but directly to the Petitioners from CM Builders Centre. Petitioners received the merchandise from CM Builders Centre on 30 October 1979. At no time did title over the construction materials pass to the bank.

petitioners signed. (2) If so (a) whether petitioners liability is solidary with El Oro Corporation. Tupaz IV (petitioner Jose Tupaz) signed. applied with respondent Bank of the Philippine Islands (respondent bank) for two commercial letters of credit. Tanchaoco Manufacturing Incorporated[3] (Tanchaoco Incorporated) and Maresco Rubber and Retreading Corporation[4] (Maresco Corporation). Thereafter. Respondent bank made several demands for payments but El Oro Corporation made partial payments only. El Oro Corporation had a contract with the Philippine Army to supply the latter with survival bolos. petitioners.000). Presidential Decree No. Respondent bank charged petitioners with estafa under Section 13. petitioners signed trust receipts in favor of respondent bank. on or before 29 December 1981. Petitioners bound themselves to sell the goods covered by that letter of credit and to remit the proceeds to respondent bank. Respondent bank granted petitioners application and issued 2 Letters of Credit. the trial court found petitioners solidarily liable with El Oro Corporation for the balance of El Oro Corporations principal debt under the trust receipts. in his personal capacity. ISSUES: Whether petitioners bound themselves personally liable for El Oro Corporations debts under the trust receipts. if sold. or to return the goods. if not sold. Simultaneous with the issuance of the letters of credit.871.The raw materials were accordingly delivered and BPI paid both companies. if not sold. As a result. 2-00896-3 (for P564. and . On 30 September 1981.05).11. petitioner Jose C. 2-00914-5 (for P294. On 9 October 1981. if sold. TUPAZ IV vs Court of Appeals and BPI FACTS: Petitioners Jose C. However. of El Oro Engraver Corporation (El Oro Corporation). a trust receipt corresponding to Letter of Credit No. respectively. or to return the goods. they are not personally liable for El Oro Corporations debts. Tupaz (petitioners) were Vice-President for Operations and Vice-President/Treasurer. The trial court rendered judgment acquitting petitioners of estafa. El Oro Corporation replied that it could not fully pay its debt because the Armed Forces of the Philippines had delayed paying for the survival bolos. To finance the purchase of the raw materials for the survival bolos. The letters of credit were in favor of El Oro Corporations suppliers. Tupaz IV and Petronila C. in their capacities as officers of El Oro Corporation. a trust receipt corresponding to Letter of Credit No. Petitioner Jose Tupaz bound himself to sell the goods covered by the letter of credit and to remit the proceeds to respondent bank. Petitioners did not comply with their undertaking under the trust receipts. CA affirmed. respondent banks counsel and its representative respectively sent final demand letters to El Oro Corporation. Petitioners contended that: (1) their acquittal operates to extinguish [their] civil liability and (2) at any rate. on behalf of El Oro Corporation. on or before 8 December 1981. 115 or Trust Receipts Law (PD 115).

directors or officers are personally liable for the corporations debts only if they so contractually agree or stipulate. we find that he did so in his personal capacity. Here. his acquittal did not extinguish his civil liability. As guarantor. Under the trust receipt dated 30 September 1981. The clear import of this stipulation is that petitioner Jose Tupaz waived the benefit of excussion under his guarantee. [12] As an exception. Instead. respondent banks suit against petitioner Jose Tupaz stands despite the Courts finding that he is liable as guarantor only. the benefit of excussion may be waived. . Although the trial court acquitted petitioner Jose Tupaz. petitioner Jose Tupaz waived excussion when he agreed that his liability in [the] guaranty shall be DIRECT AND IMMEDIATE. First. excussion is not a pre-requisite to secure judgment against a guarantor. Debts incurred by these individuals. petitioners did not bind themselves personally liable for El Oro Corporations obligation. the civil liability is not extinguished by acquittal. are not theirs but the direct liability of the corporation they represent. Hence. petitioner Jose Tupaz bound himself personally liable for El Oro Corporations debts. being a juridical entity. Hence. 1981. under petitioner Petronila Tupazs signature are the words VicePresTreasurer and under petitioner Jose Tupazs signature are the words Vice-PresOperations. Not being a party to the trust receipt dated 30 September 1981. acting as such corporate agents. while for the trust receipt dated September 30. As the Court of Appeals correctly held. The guarantor can still demand deferment of the execution of the judgment against him until after the assets of the principal debtor shall have been exhausted. Petitioner Jose Tupaz did not indicate that he was signing as El Oro Corporations Vice-President for Operations. However. petitioners signed below this clause as officers of El Oro Corporation. Petitioner Jose Tupaz signed the trust receipt of 30 September 1981 in his personal capacity. [19] Second. 8848 and 8849. his liability arose not from the criminal act of which he was acquitted (ex delito) but from the trust receipt contract (ex contractu) of 30 September 1981. petitioner Petronila Tupaz is not liable under such trust receipt. and employees. petitioner Jose Tupaz is liable for El Oro Corporations principal debt and other accessory liabilities (as stipulated in the trust receipt and as provided by law) under the trust receipt dated 30 September 1981. only petitioner Jose Tupaz is found liable as a guarantor. may act only through its directors. b. officers. for the trust receipt dated 9 October 1981. For the trust receipt dated 30 September 1981. Thus. In the trust receipt dated 9 October 1981. PD 115 extinguished their civil liability. By so signing that trust receipt. we sustain petitioners claim that they are not personally liable for El Oro Corporations obligation. the dorsal portion of which petitioner Jose Tupaz signed alone. respondent bank sought to recover payment in Criminal Case Nos. RULING: The Court finds petitioners not personally liable for the trust receipt dated October 9. 1981. without any need whatsoever on xxx [the] part [of respondent bank] to take any steps or exhaust any legal remedies xxx. A corporation. The rule is that where the civil action is impliedly instituted with the criminal action. respondent bank chose not to file a separate civil action to recover payment under the trust receipts.(b) whether petitioners acquittal of estafa under Section 13.

We AFFIRM the Decision of the Court of Appeals dated 7 September 2000 and its Resolution dated 18 October 2000 with the following MODIFICATIONS: 1) El Oro Engraver Corporation is principally liable for the total amount due under the trust receipts dated 30 September 1981 and 9 October 1981. of years until finality of judgment Attorneys fees is 10% of the total amount computed as of finality of judgment Total amount due as of the date of finality of judgment will earn an interest of 18% per annum until fully paid.WHEREFORE. of years from due date finality of judgment [27] until Interest on interest = interest computed as of the filing of the complaint (17 January 1984) x 12% x no. Makati. based on the formula: TOTAL AMOUNT DUE = [principal + interest + interest on interest] partial payments made [26] Interest = principal x 18 % per annum x no. Tupaz are not liable under the trust receipt dated 9 October 1981. upon finality of this Decision. 2) Petitioner Jose C. and 3) Petitioners Jose C. Branch 144. Tupaz IV is liable for El Oro Engraver Corporations total debt under the trust receipt dated 30 September 1981 as thus computed by the Regional Trial Court. . as computed by the Regional Trial Court. Tupaz IV and Petronila C. Branch 144. we GRANT the petition in part. Makati.