Case: Melvin Colinares And Lordino Veloso, vs. CA, People of G.R. No.

90828
the PH

Date: September 5, 2000 Ponente: Davide

TOPIC IN SYLLABUS: Trust Receipts Law > Definition/Concept of a Trust Receipt
SUMMARY: Petitioners were contracted by the Carmelite Sisters to renovate the latters convent.
Petitioners bought supplies from CM Builders. The next day they went to PBC to apply for a commercial letter of credit.
Such application was granted and a letter of credit was issued, along with a pro-forma trust receipt as a security.
Petitioners failed to pay on time and were subsequently charged with violating PD 115 in re to Art 315 of the RPC. RTC
and CA found them guilty. SC reversed saying that the contract was an ordinary loan and not one falling under the Trust
Receipts Law. At the time petitioners went to PBC, they had already owned the goods, unlike in a Trust Receipt
transaction wherein it is the entruster (PBC) who has absolute title over the goods 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.

FACTS:
1. 1979: petitioners were contracted by the Carmelite Sisters of Cagayan de Oro to renovate their convent for 40k.
2. October 1979: Petitioners obtained construction materials from CM Builders Center for the project. The next day,
they applied with the Philippine Banking Corporation (PBC) a commercial letter of credit in favor of CM
Builders.
a. A letter of credit for P22,389.80 (full value of the goods) was approved. The loan was due on Jan 29,
1980
b. Petitioners also signed a pro-forma trust receipt as a security. (but they didn’t really read the fine print)
3. May 1980: PBC demanded the remainder of the amount be paid. Petitioners requested a grace period to settle the
account on June 15, 1980.
4. October 1980: PBC issues new demand letter asking them to pay on Nov 17 1979
5. December 1980: petitioners were still unable to pay and wanted the terms of payment of the loan be modified.
6. Jan 1983: petitioners were charged with the violation of PD 115 (Trust Receipts Law) in relation to Article 315 of
the RPC.
7. During the trial petitioners claimed that the transaction was simply a “clean loan” bec of the verbal guarantee of
Cayo Garcia Tuiza, PBC’s former manager.
a. Petitioners signed the docs without reading it, only learning of the trust receipt implication waaaay later.
Mr. Tuiza told them that the trust receipt was a mere formality when they eventually found out about it.
8. RTC: Guilty for violating PD 115 in re A315 of RPC
a. It considered the transaction between the parties as a trust receipt transaction
9. CA: affirmed and Motion for New Trial (on the ground of newly discovered evidence) was denied
10. P to SC

ISSUES:
1. [Procedural] W/N the denial of the Motion for New Trial on the ground of newly discovered evidence (The
disclosure on loan/credit transaction”, which if introduced and admitted, would change the judgment, does
no constitute a denial of due process.
2. [Trust Receipts] W/N the contract entered by the Petitioners and PBC is under the Trust Receipts Law.

PETITIONER’S ARGUMENT:
1. The disclosure statement signed by them and Tuiza was suppressed by PBC. Said document would have probed
that the transaction was a loan as it bore a 14% interest (Trust receipt does not bear any interest)
2. What the parties entered into was merely an ORDINARY LOAN

RESPONDENT’S ARGUMENT:
1. Petitioners already fully paid PBC and was akin to voluntary surrender or plea of guilty.

HELD:
1. NO indiction that the Disclosure Statement is a newly discovered evidence.
DIGEST MAKER’S NAME: TRABOCO CASE #19?
  They failed to comply with the 2 nd requisite new and material evidence has been discovered which the accused
could not with reasonable diligence have discovered and produced at the trial, and which, if introduced and
admitted, would probably change the judgment. of granting Motion for new trial under said grounds..
 Said Document could have been compelled to be produced in court.

2. Contract entered into by the parties was a SIMPLE LOAN TRANSACTION

 S4, PD 115, the Trust Receipts Law, defines a trust receipt transaction 1
 There are 2 possible situations in a trust receipt transaction.
o First: It refers to money received under the obligation involving the duty to deliver it (entregarla) to the
owner of the merchandise sold.
o Second: Merchandise received under the obligation to “return” it to the owner
 Failure of the entrustee to turn over the proceeds of the sale of the goods, 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, without need of proving intent to
defraud.

CASE AT BAR:
- Petitioners received the goods on October 30, 1970, they already had ownership at this point. It was only the next
day did they apply for a loan
- In trust receipts transaction, goods are owned by the bank and released to the importer in trust subsequent to
the grant of the loan.
o The bank acquires a “security interest” in the goods as holder of a security title for the advances it had
made to the entrustee.
o Ownership of the merchandise continues to be vested in the person who had advanced payment until he
has been paid in full, or if the merchandise has already been sold, the proceeds of the sale should be
turned over to him by the importer or by his representative or successor in interest.
 To secure that the bank shall be paid, 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; hence, the importer has never owned the goods and is not able to
deliver possession. In a certain manner, 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.
- PBC tried to hide the true deliver date of the merchandise, as found in the TSN by superimposing the date August
30 from the August 31 charge invoice.
- PBC also did not deny that they made petitioners believe that the transaction was a loan.
- Note also that petitioners are also not importers acquiring the goods for re-sale contrary to the express provisions
in the trust receipts.

ACQUITTED

1
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 latter’s 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.
DIGEST MAKER’S NAME: TRABOCO CASE #19?