ALLIED BANKING CORPORATION v. HON.

ORDONEZ and ALFREDO

CHING

G. R. 82495, December 10, 1990

PADILLA, J.:

FACTS:

Philippine Blooming Mills (PBM, for short) thru its duly authorized officer, private
respondent Alfredo Ching, applied for the issuance of commercial letters of credit with
petitioner's Makati branch to finance the purchase of several items.

Petitioner issued an irrevocable letter of credit in favor of Nikko Industry Co., Ltd.
(Nikko) by virtue of which the latter drew four (4) drafts which were accepted by PBM
and duly honored and paid by the petitioner bank.

To secure payment of the amount covered by the drafts, private respondente executed
4 Trust Receipt Agreements. Out of the said obligations resulted an overdue amount of
P1,475,274.09. Despite repeated demands, PBM failed and refused to either turn over the
proceeds of the sale of the goods or to return the same.

The petitioner filed a criminal complaint against private respondent for violation of
PD 115. After preliminary investigation, the Fiscal found a prima facie case for violation
of PD 115 on four (4) counts and filed the corresponding information in court.

ISSUE:

Does the penal provision of Trust Receipts Law apply when the goods covered by a
Trust Receipt do not form part of the finished products which are ultimately sold but are
instead, utilized/used up in the operation of the equipment and machineries of the
entrustee-manufacturer?

RULING:

Yes. Section 4 of said PD 115 says in part:

"Sec. 4. What constitutes a trust receipt transaction. — A trust receipt transaction, within
the meaning of this Decree, is any transaction by and between a person referred to in this
Decree as the entrustee, and another person referred to in this Decree as the entrustee,
whereby the entruster, who owns or holds absolute title or security interests 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 in trust for the entruster and to sell or otherwise dispose of the
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, . . ."
PBM, as entrustee under the trust receipts has, under Sec. 9 of PD 115, the following
obligations, inter alia: (a) receive the proceeds of sale, in trust for the entruster and turn
over the same to the entruster to the extent of the amount owing to him or as appears on
the trust receipt; (b) keep said goods or proceeds thereof whether in money or whatever
form, separate and capable of identification as property of the entruster; (c) return the
goods, documents or instruments in the event of non-sale, or upon demand of the
entruster; and (d) observe all other terms and conditions of the trust receipt not contrary
to the provisions of said Decree.

METROPOLITAN BANK & TRUST COMPANY v. JIMMY GO and

BEMJAMIN GO BAUTISTA alias BENJAMIN GO

G.R. NO. 155647, November 23, 2007

NACHURA, J.:

FACTS:

Metrobank executed a Credit Line Agreement in favor of its client, BGB Industrial
Textile Mills, Inc. (BGB) in the total amount of P10,000,000.00. As security, respondent
Benjamin Go, as officer of BGB, executed a Continuing Surety Agreement in favor of
Metrobank, binding himself solidarily with BGB.

Jimmy Go, general manager of BGB, applied for eleven (11) commercial letters of
credit to cover the shipment of raw materials and spare parts. Accordingly, Metrobank
issued the 11 irrevocable letters of credit to BGB. Consequently, 11 trust receipts were
executed by BGB thru Jimmy Go and Benjamin Go, as entrustees, in favor of Metrobank
as entruster.

On maturity dates of the receipts, because the goods remained unsold, BGB and
Jimmy and Benjamin Go failed to satisfy their obligation. Metrobank filed three separate
complaints against BGB, for collection of sum of money equivalent to the value of the
goods subject of the trust receipts.

Later, Metrobank instituted 11 criminal charges against Jimmy and Benjamin Go for
violation of Presidential Decree No. 115 (Trust Receipts Law) before the Office of the
City Prosecutor of Manila. The Office of the Prosecutor recommended the dismissal of
the complaint stating that since the goods were unsold, no proceeds could be turned over
to Metrobank, and that the liability of respondents is only civil in the absence of
commission and misappropriation.

ISSUE:

What are the essential requisites for a successful prosecution for estafa under Article
315, paragraph 1(b) of the Revised Penal Code, in relation to Section 13 of the Trust
Receipts Law?

RULING:

The following elements must be established: (a) they received the subject goods in
trust or under the obligation to sell the same and to remit the proceeds thereof to
Metrobank, or to return the goods if not sold; (b) they misappropriated or converted the
goods and/or the proceeds of the sale; (c) they performed such acts with abuse of
confidence to the damage and prejudice of Metrobank; and (d) demand was made on
them by Metrobank for the remittance of the proceeds or the return of the unsold goods.

In here, there was a finding of the court a quo that Jimmy and Benjamin Go offered
to return the goods even prior to the filing of the civil cases against them, although the
offer was not accepted because Metrobank appeared more interested in collecting the
amount it advanced under the letters of credit. It also found that Metrobank failed to
prove its demand for the return of the goods.

The prosecution for estafa under Article 315, paragraph 1(b) of the Revised Penal
code, cannot prosper because the second (misappropriation/conversion) and the fourth
(demand) elements of the offense are not present.

SPOUSES TIRSO I. VINTOLA and LORETO DY VINTOLA, v.INSULAR

BANK OF ASIA AND AMERICA

G.R. No. 73271, May 29, 1987

 MELENCIO-HERRERA, J.:

FACTS:

The Spouses Vintola applied for and were granted a domestic letter of credit by the
Insular Bank of Asia and America (IBAA), Cebu City. On the same day, having received
from Stalin Tan the goods, the Vintolas executed a Trust Receipt agreement with IBAA,
Cebu City.

Having defaulted on their obligation, IBAA demanded payment from the Vintolas.
The Vintolas, unable to dispose of the shells, offered to return the goods. IBAA refused
to accept the merchandise, and due to the continued refusal of the Vintolas to make good
their undertaking, IBAA charged them with Estafa. During the trial of the criminal case
the Vintolas turned over the seashells to the custody of the Trial Court.

The trial court ruled in favor of the Vintolas and declared that the remedy of the
IBAA was merely civil, not criminal. A second action, this time to recover the value of
the goods was initiated against the Vintolas by the IBAA.

ISSUE:

Whether the Vintolas act of surrendering the unsold golds subject of the Trust
Receipt extinguished their loan obligation

RULING:

No. A trust receipt is a security agreement, pursuant to which a bank acquires a

"security interest" in the goods. "It secures an indebtedness and there can be no such
thing as security interest that secures no obligation."

Contrary to the allegation of the Vintolas IBAA did not become the real owner of the
goods. It was merely the holder of a security title for the advances it had made to the
Vintolas. The goods the Vintolas had purchased through IBAA financing remain their
own property and they hold it at their own risk. The trust receipt arrangement did not
convert the IBAA into an investor; the latter remained a lender and creditor.

Since the IBAA is not the factual owner of the goods, the Vintolas cannot justifiably
claim that because they have surrendered the goods to IBAA and subsequently deposited
them in the custody of the court, they are absolutely relieved of their obligation to pay
their loan because of their inability to dispose of the goods. The fact that they were
unable to sell the seashells in question does not affect IBAA's right to recover the
advances it had made under the Letter of Credit.