Case Consolidated Bank & Trust Corp. v. CA G.R. No.

114286
Date April 19, 2001 Ponente YNARES-SANTIAGO
TOPIC IN SYLLABUS:
I.4. Parties to a Letter of Credit
II.1.c. The loan should be granted to finance acquisition of the goods under trust receipt. If loan is granted
when entrustee already has ownership of the goods, transaction only a simple loan.
II.4.a.i. No criminal liability in the following cases - entrustee already owns the goods when loan under TR
granted
SUMMARY:
Respondents obtained a letter of credit from Bank and subsequently signed a trust receipt. Bank sued for failure to turn-
over the fuel oil. Court held that the transaction is merely a simple loan.

PROCEDURAL ANTECEDENTS:
 Petition for review to set aside CA decision
 Appeal to CA (CA affirmed with modification the RTC decision)
 Complaint for sum of money with RTC

FACTS:
 July 13, 1982 – Respondents Continental Cement Corp (Corp) and Gregory Lim (Lim) obtained a Letter of Credit
(LOC) worth P1,068,150 from Petitioner Consolidated Bank and Trust Corp (Bank) and thereafter paid a
marginal deposit of P320,445 to the Bank. This is for the purchase of 500L of bunker fuel oil from Petrophil
Corp.
 The fuel oil was delivered to the Corp’s Bulacan plant from July 7-19, 1982. The oil was used in operations by
August.
 Sept 2, 1982 - A trust receipt for P1,001,520 was executed by the Corp.
 The Bank filed a complaint for sum of money before RTC Manila due to the Respondents’ failure to turn over the
goods covered by the trust receipt. Respondents answered that the transaction was a simple loan and that the
amount claimed should be net of the payments already paid. They filed a counterclaim for P490,228 as alleged
overpayments.
 Sep 17, 1990 – RTC dismissed the complaint and ordered the Bank to pay the amount of counterclaim plus 10k
attorney’s fees
 Both parties appealed to the CA, which modified the decision by deleting the atty fees to Respondents and instead
ordered the Corp to pay the Bank P37k as atty fees and costs.

ISSUES:
1. WON there was overpayment
2. WON considering the marginal deposit in the computation is in accordance with banking practice
3. WON the agreement re floating of interest rate is valid
4. WON the transaction is a trust receipt or simple loan
5. WON Sps Lim are liable under the trust receipt transaction

PETITIONER’S ARGUMENT:
1. Re marginal deposit, said amount should be considered only after computing the principal plus accrued interest
and other charges (ie. Principal + Int + other charges = Total obligation – marginal deposit).
2. Re personal liability of the Sps Lim, the Corp and Sps Lim are one and the same. Hence the liability of the Corp is
also the liability of the Sps.

RESPONDENT’S ARGUMENT:
1. The transaction was a simple loan and that the amount claimed should be net of the payments already paid.

HELD: Petition denied.

Dorothy CASE #14
1. There is overpayment
 Per SC’s computation, there is an overpayment of P563k but upheld the RTC and CA’s computed amount since
the respondents did not appeal said amount.

2. Marginal deposit should be considered

 Petitioner’s method of computation would amount to unjust enrichment because, while a marginal deposit earns
no interest in favor of the debtor-depositor (Corp), the bank is already able to use said amount for its own
purposes, interest-free, and could even earn interest on the money loaned to the respondent.
 Compensation should take effect by operation of law (A1279 NCC).

3. Floating interest rate is invalid

 While floating interest rates are acceptable, there should always be a reference rate upon which it is pegged.

4. Simple loan transaction

 When the goods subject of the trust receipt is received by the debtor before the trust receipt itself is entered into,
such transaction is a simple loan. Whereas in a trust receipt, the goods belong in ownership to the bank and are
only released to the importer in trust after the loan is granted.
 ICAB, the ownership over the fuel oil was already transferred to the Corp prior to the execution of the trust
receipt, which was nearly 2 mos after full delivery was made.
 There was really no trust receipt transaction but the Corp was merely required to sign the trust receipt to facilitate
collection of the loan.
 Trust Receipts Law does not seek to enforce the payment of the loan but is to punish 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.

5. Sps Lim should not be personally liable

 The transactions sued upon were entered into by Lim in his capacity as Executive Vice President.
 The personality of the corp is separate and distinct from the persons composing it.

Dorothy CASE #14