TRUST RECEIPT Case After petitioner received the goods,

Digest consisting of chemicals and metal plates

from his suppliers, he utilized them to
fabricate the communication towers
1. Ng vs People ordered from him by his clients. As
petitioner realized difficulty in collecting
2. Hur Tin Yang vs People from his client Islacom, he failed to pay
his loan to Asiatrust. Asiatrusts
3. LBP vs Peres
representative appraiser, reported that
4. Crisologo vs People approximately 97% of the subject goods
of the Trust Receipts were sold-out and
5. Sps. Dela Cruz vs PPI that only 3 % of the goods remained.
Efforts towards a settlement failed to be
reached.
1. Ng vs People
Asiatrust Account Officer filed a
Complaint-Affidavit for Estafa, as
Facts: defined and penalized under Art. 315,
par. 1(b) of the RPC in relation to Sec. 3,
Anthony Ng was engaged in the business PD 115 or the Trust Receipts Law.
of building and fabricating
telecommunication towers under the Issue:
trade name Capitol Blacksmith and Whether the petitioner is liable for
Builders. Petitioner applied for a credit Estafa under Art. 315, par. 1(b) of the
line of Php 3,000,000 with Asia trust. In RPC in relation to PD 115.
support of Asia trusts credit
investigation, petitioner voluntarily Ruling:
submitted the following documents: (1) A trust receipt transaction is one where
the contracts he had with Islacom, the entrustee has the obligation to
Smart, and Infocom; (2) the list of deliver to the entruster the price of the
projects wherein he was commissioned sale, or if the merchandise is not sold, to
by the said telecommunication return the merchandise to the entruster.
companies to build several steel towers; There are, therefore, two obligations in a
and (3) the collectible amounts he has trust receipt transaction: the first refers
with the said companies. to money received under the obligation
involving the duty to turn it over
Asiatrust approved petitioner’s loan (entregarla) to the owner of the
application. Petitioner was then required merchandise sold, while the second
to sign several documents, among which refers to the merchandise received under
are the Credit Line Agreement, the obligation to return it (devolvera) to
Application and Agreement for the owner. A violation of any of these
Irrevocable L/C, Trust Receipt undertakings constitutes Estafa defined
Agreements,[4] and Promissory Notes. under Art. 315, par. 1(b) of the RPC, as
Though the Promissory Notes had provided in Sec. 13 of PD 115, viz:
maturity dates, the two Trust Receipt
Section 13. Penalty Clause. The failure
Agreements did not bear any maturity
of an entrustee to turn over the
dates.
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.