TRUST RECEIPT Case Digest
consisting of chemicals and metal
1. Ng vs People
2. Hur Tin Yang vs People
3. LBP vs Peres
4. Crisologo vs People
5. Sps. Dela Cruz vs PPI
1. Ng vs People
Facts:
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,
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 sold-out and that only 3 % of the
goods remained. Efforts towards a
settlement failed to be reached.
Asiatrust Account Officer filed a
Complaint-Affidavit 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) to
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 the
goods 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.
2. Hur Tin Yang vs People
(Note: Similar fact with same ruling
as that of Ng vs People)
3. LBP vs Peres
(Note: Similar fact with same ruling
as that of Ng vs People)
4. Crisologo vs People
Facts:
Petitioner is the President of Novachem.
He applied for commercial letters of
credit from private respondent China
Banking Corporation (Chinabank) to
finance the purchase of amoxicillin
trihydrate micronized from Hyundai
Chemical Company based in Seoul,
South Korea and glass containers from
San Miguel Corporation (SMC).
Subsequently, Chinabank issued
Letters of Credit. After petitioner
received the goods, he executed for and
in behalf of Novachem the
corresponding trust receipt agreements
in favor of Chinabank.
Chinabank filed a Complaint-Affidavit
charging petitioner for violation of P.D.
No. 115 in relation to Article 315 1(b) of
the RPC for his purported failure to
turn-over the goods or the proceeds
from the sale, despite repeated
demands.
The RTC Decision acquitted the
petitioner of the charges for violation of
P.D. No. 115 in relation to Article 315
1(b) of the RPC, but adjudged him
civilly liable under the subject letters of
credit. The Court of Appeals (CA) in
affirmed the Decision of the Regional
Trial Court.
Issue:
Whether Crisologo is civilly liable under
the Trust Receipts Law.
Ruling:
Section 13 of the Trust Receipts Law
explicitly provides that if the violation
or offense is committed by a
corporation, as in this case, the penalty
provided for under the law shall be
imposed upon the directors, officers,
employees or other officials or person
responsible for the offense, without
prejudice to the civil liabilities arising
from the criminal offense.
In this case, petitioner was acquitted of
the charge for violation of the Trust
Receipts Law in relation to Article 315
1(b) of the RPC. As such, he is relieved
of the corporate criminal liability as well
as the corresponding civil liability
arising therefrom. However, as correctly
found by the RTC and the CA, he may
still be held liable for the trust receipts
and L/C transactions he had entered
into in behalf of Novachem. Crisologo is
only liable for only one trust receipt
that he signed his personal capacity in
as much as the guarantee clauses
therein is concerned.
Settled is the rule that debts incurred
by directors, officers, and employees
acting as corporate agents are not their
direct liability but of the corporation
they represent, except if they
contractually agree/stipulate or
assume to be personally liable for the
corporation’s debts.
5. Sps. Dela Cruz vs PPI
Facts:
Spouses Dela Cruz, petitioners herein,
operated the Barangay Agricultural
Supply. At the time material to the
case, Quirino, a lawyer, was the
Municipal Mayor of Aliaga, Nueva Ecija.
Gloria applied for and was granted by
respondent Planters Products, Inc. (PPI)
a regular credit line of P200,000.00 for
a 60- day term, with trust receipts as
collaterals.
Spouses submitted a list of their assets
in support of her credit application for
participation in the Special Credit
Scheme (SCS) of PPI. Gloria signed in
the presence of the PPI distribution
representative "Trust Receipt/Special
Credit Scheme," indicating the invoice
number, quantity, value, and names of
the agricultural inputs she received
"upon the trust" of PPI.
The 60-day credit term lapsed without
Gloria paying her obligation under the
Trust Receipt/SCS. Hence, PPI wrote
collection letters to her.
PPI alleged that Gloria had violated the
“fiduciary undertaking in the Trust
Receipt agreement covering product
withdrawals under the Special Credit
Scheme which were subsequently
charged to defendant dealer’s regular
credit line; therefore, she is guilty of
fraudulently misapplying or converting
to her own use the items delivered to
her as contained in the invoices.” It
charged that Gloria did not return the
goods indicated in the invoices and did
not remit the proceeds of sales.
The CA held the petitioners liable to PPI
“for the value of the fertilizers and
agricultural chemical products covered
by the trust receipts” because a
creditor-debtor relationship existed
between the parties when, the
petitioners “withdrew several fertilizers
and agricultural chemical products on
credit;” that the petitioners then came
under obligation to pay the equivalent
value of the withdrawn goods, “or to
return the undelivered and/or unused
products within the specified period.”
Issue:
Is Gloria liable under Trust Receipt
law?
Ruling:
These established circumstances
comprised by the contemporaneous and
subsequent acts of Gloria and Quirino
that manifested their intention to enter
into the creditor-debtor relationship
with PPI show that the CA properly held
the petitioners fully liable to PPI. The
law of contracts provides that in
determining the intention of the parties,
their contemporaneous and subsequent
acts shall be principally considered.
Consequently, the written terms of their
contract with PPI, being clear upon the
intention of the contracting parties,
should be literally applied.
The first circumstance was the credit
line of P200,000.00 that commenced
the business relationship between the
parties. A credit line is really a loan
agreement between the parties.
The second circumstance was the offer
by Gloria of trust receipts as her
collateral for securing the loans that
PPI extended to her. A trust receipt is “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 third circumstance was the offer of
Gloria and Quirino to have their
conjugal real properties beef up the
collaterals for the credit line.
The fourth circumstance had to do with
the undertakings under the trust
receipts. The position of the petitioners
was that the farmers participants alone
were obligated to pay for the goods
delivered to them by Gloria. However,
such position had no factual and legal
legs to prop it up. A close look at the
Trust Receipt/SCS indicates that the
farmer-participants were mentioned
therein only with respect to the duties
and responsibilities that Gloria
personally assumed to undertake in
holding goods “in trust for PPI.” Under
the notion of relativity of contracts
embodied in Article 1311 of the Civil
Code, contracts take effect only
between the parties, their assigns and
heirs. Hence, the farmer-participants,
not being themselves parties to the
contractual documents signed by
Gloria, were not to be thereby liable.