Allied Banking Corporation vs Ordonez
Ching appealed the fiscal’s resolution
Date: December 10, 1990
Petitioner: Allied Banking Corporation
Respondents: Sedfrey Ordonez and Alfredo Ching
Nature: This is a special civil action for certiorari to review the
decision of the Department of Justice regarding the interpretation of
the penal provision of PD 115.
Ponente: Padilla
Facts:
- On January 21, 1981, Philippine Blooming Mills thru Alfredo
Ching applied for the issuance of commercial letters of credit with
Allied Banking Corporation’s Makati branch to finance the purchase
of 500 M/T Magtar Branch Dolomites and one Lot High Fired
Refractory Sliding Nozzle Bricks which would be utilized in the
operation of machinery and equipment.
- ABC issued an irrevocable letter of credit in favor of Nikko
Industry Co Ltd by virtue of which the latter drew 4 drafts which were
accepted by PBM and paid by the bank.
- To secure payment of the amount covered by the drafts and in
consideration of the transfer by ABC of the possession of the goods to
PBM, Ching executed four Trust Receipt Agreements acknowledging
ABC’s ownership of the goods and its obligation to turn over the
proceeds of the sale of the goods, if sold, or to return the same, if
unsold within the stated period.
- Out of the said obligation 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.
- ABC filed a criminal complaint against Ching for violation of
PD 115. After preliminary investigation, the fiscal found a prima facie
case for violation of PD 115 on four counts and filed the
corresponding information.
alleging that the goods subject of the trust receipt agreements were
dolomites which were specifically used for patching purposes over the
surface of furnaces and nozzle bricks which are insulating materials in
the lower portion of the ladle which do not form part of the steel
product itself.
- Justice Secretary Ordonez reversed the resolution saying that
PD 115 contemplates or covers only goods, which have, for their
ultimate destination, the sale thereof or if unsold, their surrender to the
entruster, this whether the goods are in their original form or in their
manufactured or processed state. Not all transactions covered by trust
receipts may be considered as trust receipt transactions defined and
penalized under PD 115.
- ABC filed a motion for reconsideration of the Ordonez’
resolution.
Issue: WON the penal provision of PD 115 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.
Held: Yes
Ratio: - In trust receipts, there is an obligation to repay the entruster.
The entrustee binds himself to sell or dispose of the entrusted goods
with the obligation to turn over to the entruster the proceeds if sold, or
return the goods if unsold or not otherwise disposed of, in accordance
with the terms and condition specified in the trust receipt. A violation
of this undertaking constitutes estafa under Sec 13 of PD 115.
- The wording of Sec 13 covers failure to turn over the
proceeds of the sale of entrusted goods, or to return said goods, unsold
or disposed of in accordance with the terms of the trust receipts. The
non payment of the amount covered by a trust receipt is an act
violative of the entrustee’s obligation to pay. There is no reason why
the law should not apply to all transactions covered by trust receipts,
except those expressly excluded.
- The Court takes judicial notice of customary banking and
business practices where trust receipts are used for importation of
heavy equipment, machineries, and supplies used in manufacturing
operations. A construction should be avoided when it affords an
opportunity to defeat compliance with the terms of the statute.
- The penal provision of PD 115 encompasses any act violative
of an obligation covered by the trust receipt; it is not limited to
transactions in goods which are to be sold, reshipped, stored, or
processed as a component of a product ultimately sold. To uphold the
Justice Department’s ruling would contravene not only the letter but
the spirit of PD 115.
 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:
o the contracts he had with Islacom, Smart, and Infocom;
o the list of projects wherein he was commissioned by the
said telecommunication companies to build several
steel towers; and
o (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, 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, consisting of chemicals
and metal 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:
o the first refers to money received under the obligation
involving the duty to turn it over (entregarla) to the
owner of the merchandise sold,
o 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:
o 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 the entruster or as appears in the trust receipt in accordance
eight hundred and fifteen, as amended, otherwise with the terms of the trust receipt.
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
 SPOUSES QUIRINO V. DELA CRUZ and GLORIA DELA
CRUZ,
VS.
PLANTERS PRODUCTS, INC.
G. R. No. 158649; February 18, 2013; Bersamin
Action: Petition for Review on certiorari.
Facts:
Gloria de la Cruz applied for and was granted by respondent
Planters Products, Inc. (PPI) a regular credit line of P200,000 for a 60-
day term, with trust receipts as collaterals. She and her husband,
Quirino, submitted a list of their assets in support of her credit
application for participation in the Special Credit Scheme (SCS) of
PPI.
Gloria signed a Trust Receipt/Special Credit Scheme,
indicating the invoice number, quantity, value, and names of the
agricultural inputs she received “upon the trust” of PPI. Gloria thereby
subscribed to specific undertakings.
The products were released to Gloria under the supervision of
Cristina G. Llanera of PPI.The 60-day credit term lapsed without
Gloria paying her obligation under the Trust Receipt/SCS.
PPI brought against Quirino and Gloria a complaint for the
recovery of a sum of money with prayer for a writ of preliminary
attachment. 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.
In her answer, the petitioners alleged that Gloria was only a
marketing outlet of PPI under its SCS Program, not a dealer primarily
obligated to PPI for the products delivered to her; that she had not
collected from the farmers participating in the SCS Program because
of the typhoon Kading that had destroyed the participating farmers’
crops.
The RTC found that based on the terms and conditions of the
SCS Program, a creditor-debtor relationship was created between
Gloria and PPI. It ordered petitioners to pay the respondent. The CA
affirmed the judgment of the RTC.
Issue: whether the two transaction documents signed by Gloria
expressed the intent of the parties to establish a creditor-debtor
relationship between the petitioner and the respondent?
Ruling: Yes.
Gloria signed the application for credit facilities indicating that
a trust receipt would serve as collateral for the credit line. Gloria, as
“dealer,” signed together with Quirino the list of their assets that they
tendered to PPI “to support our credit application in connection with
our participation to your Special Credit Scheme.” Gloria further signed
the Trust Receipt/SCS documents defining her obligations under the
agreement, and also the invoices pursuant to the agreement with PPI,
indicating her having received PPI products on various dates.
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 CAproperly 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.
obligation to deliver it (entregarla) to the owner of the merchandise
sold. The second is covered by the provision referring to merchandise
received under the obligation to return it (devolverla) to the owner.
However, had PPI intended to charge Gloria with estafa, it could have
then done so. Instead, it brought this collection suit, a clear indication
that the trust receipts were only collaterals for the credit line as agreed
upon by the parties.

The first circumstance was the credit line of P200,000.00 that As the assignor "with recourse" of the Trust Agreement
commenced the business relationship between the parties. A credit line executed by the farmer participating in the SCS, therefore, Gloria
is really a loan agreement between the parties. The second made herself directly liable to PPI for the value of the inputs delivered
circumstance was the offer by Gloria of trust receipts as her collateral to the farmer-participants.
for securing the loans that PPI extended to her. The third circumstance
was the offer of Gloria and Quirino to have their conjugal real WHEREFORE, the Court AFFIRMS the Decision by the Court of
properties beef up the collaterals for the credit line. Gloria signed the Appeals, subject to the MODIFICATIONS.
list of the properties involved as "dealer," thereby ineluctably
manifesting that Gloria considered herself a dealer of the products
delivered by PPI under the credit line. The fourth circumstance had to
do with the undertakings under the trust receipts. 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.

At this juncture, the Court clarifies that the contract, its label
notwithstanding, was not a trust receipt transaction in legal
contemplation or within the purview of the Trust Receipts
Law (Presidential Decree No. 115) such that its breach would render
Gloria criminally liable for estafa.

There are two obligations in a trust receipt transaction. The

first is covered by the provision that refers to money under the
 HUR TIN YANG vs. PEOPLE OF THE PHILIPPINES
G.R. No. 195117; August 14, 2013; Velasco Jr., J.
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. 
When both parties enter into an agreement knowing fully well
that the return of the goods subject of the trust receipt is not possible
even without any fault on the part of the trustee, it is not a trust receipt
transaction penalized under Sec. 13 of PD 115 in relation to Art. 315,
par. 1(b) of the RPC, as the only obligation actually agreed upon by
the parties would be the return of the proceeds of the sale transaction.
This transaction becomes a mere loan, where the borrower is
obligated to pay the bank the amount spent for the purchase of the
goods.
FACTS:
Supermax Philippines, Inc. (Supermax) is a domestic corporation
engaged in the construction business. On various occasions,
Metropolitan Bank and Trust Company (Metrobank), extended
several commercial letters of credit (LCs) to Supermax. These
commercial LCs were used by Supermax to pay for the delivery of
several construction materials which will be used in their
construction business. Thereafter, Metrobank required petitioner,
as representative of Supermax, to sign trust receipts as security for
the construction materials and to hold those materials or the
proceeds of the sales in trust for Metrobank to the extent of the
amount stated in the trust receipts.
When the trust receipts fell due and despite the receipt of a demand
letter, Supermax failed to pay or deliver the goods or proceeds to
Metrobank. Instead, Supermax requested the restructuring of the
loan. When the intended restructuring of the loan did not
materialize, Metrobank sent another demand letter. As the
demands fell on deaf ears, Metrobank, filed the instant criminal
complaints against petitioner.
For his defense, while admitting signing the trust receipts,
petitioner argued that said trust receipts were demanded by
Metrobank as additional security for the loans extended to
Supermax for the purchase of construction equipment and
materials.
In support of this argument, petitioner presented a witness who
testified that the construction materials covered by the trust
receipts were delivered way before petitioner signed the
corresponding trust receipts. Further, petitioner argued that
Metrobank knew all along that the construction materials subject
of the trust receipts were not intended for resale but for personal
use of Supermax relating to its construction business.
The trial court rendered judgment convicting accused Hur Tin
Yang of the crime of estafa under Article 315 paragraph 1 (a) of
the Revised Penal Code.
Petitioner appealed to the CA. CA rendered a Decision, upholding
the findings of the RTC. The CA ruled that since the offense
punished under PD 115 is in the nature of malum prohibitum, a
mere failure to deliver the proceeds of the sale or goods, if not
sold, is sufficient to justify a conviction under PD 115.

Petitioner filed a MR, but it was denied. Not satisfied, petitioner
filed a petition for review under Rule 45 of the Rules of Court.
SC dismissed the Petition on the ground that the CA committed no
reversible error in the assailed decision. Hence, petitioner filed the
present MR contending that the transactions between the parties do
not constitute trust receipt agreements but rather of simple loans.
ISSUE:
Whether or not petitioner is liable for Estafa under Art. 315,
par. 1(b) of the RPC in relation to PD 115, even if it was sufficiently
proved that the entruster (Metrobank) knew beforehand that the goods
(construction materials) subject of the trust receipts were never
intended to be sold but only for use in the entrustee’s construction
business.
HELD:
In determining the nature of a contract, courts are not bound by
the title or name given by the parties. The decisive factor in evaluating
such agreement is the intention of the parties, as shown not necessarily
by the terminology used in the contract but by their conduct, words,
actions and deeds prior to, during and immediately after executing the
agreement. As such, therefore, documentary and parol evidence may
be submitted and admitted to prove such intention.
In the instant case, the factual findings of the trial and appellate
courts reveal that the dealing between petitioner and Metrobank was
not a trust receipt transaction but one of simple loan. Petitioner’s
admission––that he signed the trust receipts on behalf of Supermax,
which failed to pay the loan or turn over the proceeds of the sale or the
goods to Metrobank upon demand––does not conclusively prove that
the transaction was, indeed, a trust receipts transaction. In contrast to
the nomenclature of the transaction, the parties really intended a
contract of loan.
In Ng v. People and Land Bank of the Philippines v.
Perez, cases which are in all four corners the same as the instant
case––ruled that the fact that the entruster bank knew even before the
execution of the trust receipt agreements that the construction
materials covered were never intended by the entrustee for resale or
for the manufacture of items to be sold is sufficient to prove that the
transaction was a simple loan and not a trust receipts transaction.
The petitioner was charged with Estafa committed in what is
called, under PD 115, a "trust receipt transaction.
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.
Nonetheless, when both parties enter into an agreement
knowing fully well that the return of the goods subject of the trust
receipt is not possible even without any fault on the part of the trustee,
it is not a trust receipt transaction penalized under Sec. 13 of PD 115
in relation to Art. 315, par. 1(b) of the RPC, as the only obligation
actually agreed upon by the parties would be the return of the proceeds
of the sale transaction. This transaction becomes a mere loan, where
the borrower is obligated to pay the bank the amount spent for the
purchase of the goods.
In Ng v. People, Anthony Ng, then engaged in the business of
building and fabricating telecommunication towers, applied for a
credit line of PhP 3,000,000 with Asiatrust Development Bank, Inc.
Prior to the approval of the loan, Anthony Ng informed Asiatrust that
the proceeds would be used for purchasing construction materials
necessary for the completion of several steel towers he was
commissioned to build by several telecommunication companies.
Asiatrust approved the loan but required Anthony Ng to sign a trust
receipt agreement. When Anthony Ng failed to pay the loan, Asiatrust
filed a criminal case for Estafa in relation to PD 115 or the Trust
Receipts Law. This Court acquitted Anthony Ng and ruled that the
Trust Receipts Law was created to "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." Since Asiatrust knew that
Anthony Ng was neither an importer nor retail dealer, it should have
known that the said agreement could not possibly apply to petitioner,
viz:
The true nature of a trust receipt transaction can be found in the
"whereas" clause of PD 115 which states that a trust receipt is to be
utilized "as a convenient business device to assist importers and
merchants solve their financing problems." Obviously, the State, in
enacting the law, sought to find a way to assist importers and
merchants in their financing in order to encourage commerce in the
Philippines.
[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. Similarly, American Jurisprudence demonstrates that trust
receipt transactions always refer to a method of "financing
importations or financing sales." 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.
Following the precept of the law, such transactions affect
situations wherein the entruster, who owns or holds absolute title or
security interests over specified goods, documents or instruments,
releases the subject goods to the possession of the entrustee. 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, 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 to the extent of the amount owing to the
entruster or the goods, documents or instruments themselves if they
are unsold. x x x [T]he entruster is entitled "only to the proceeds
derived from the sale of goods released under a trust receipt to the
entrustee."
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.
To emphasize, the Trust Receipts Law was created to "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." Since
Asiatrust knew that petitioner was neither an importer nor retail dealer,
it should have known that the said agreement could not possibly apply
to petitioner.
Further, in Land Bank of the Philippines v. Perez, the
respondents were officers of Asian Construction and Development
Corporation (ACDC), a corporation engaged in the construction
business. On several occasions, respondents executed in favor of Land
Bank of the Philippines (LBP) trust receipts to secure the purchase of
construction materials that they will need in their construction projects.
When the trust receipts matured, ACDC failed to return to LBP the
proceeds of the construction projects or the construction materials
subject of the trust receipts. After several demands went unheeded,
LBP filed a complaint for Estafa or violation of Art. 315, par. 1(b) of
the RPC, in relation to PD 115, against the respondent officers of
ACDC. This Court, like in Ng, acquitted all the respondents on the
postulate that the parties really intended a simple contract of loan and
not a trust receipts transaction, viz:
When both parties enter into an agreement knowing that the
return of the goods subject of the trust receipt is not possible even
without any fault on the part of the trustee, it is not a trust receipt
transaction penalized under Section 13 of P.D. 115; the only obligation
actually agreed upon by the parties would be the return of the proceeds
of the sale transaction. This transaction becomes a mere loan, where
the borrower is obligated to pay the bank the amount spent for the
purchase of the goods.
xxxx
Thus, in concluding that the transaction was a loan and not a
trust receipt, we noted in Colinares that the industry or line of work
that the borrowers were engaged in was construction. We pointed out
that the borrowers were not importers acquiring goods for resale.
Indeed, goods sold in retail are often within the custody or control of
the trustee until they are purchased. In the case of materials used in the
manufacture of finished products, these finished products – if not the
raw materials or their components – similarly remain in the possession
of the trustee until they are sold. But the goods and the materials that
are used for a construction project are often placed under the control
and custody of the clients employing the contractor, who can only be
compelled to return the materials if they fail to pay the contractor and
often only after the requisite legal proceedings. The contractor’s
difficulty and uncertainty in claiming these materials (or the buildings
and structures which they become part of), as soon as the bank
demands them, disqualify them from being covered by trust receipt
agreements.
Since the factual milieu of Ng and Land Bank of the
Philippines are in all four corners similar to the instant case, it
behooves this Court, following the principle of stare decisis, to rule
that the transactions in the instant case are not trust receipts
transactions but contracts of simple loan. The fact that the entruster
bank, Metrobank in this case, knew even before the execution of the
alleged trust receipt agreements that the covered construction materials
were never intended by the entrustee (petitioner) for resale or for the
manufacture of items to be sold would take the transaction between
petitioner and Metrobank outside the ambit of the Trust Receipts Law.
For reasons discussed above, the subject transactions in the
instant case are not trust receipts transactions. Thus, the consolidated
complaints for Estafa in relation to PD 115 have really no leg to stand
on.
The Court’s ruling in Colinares v. Court of Appeals is very
apt, thus:
 The practice of banks of making borrowers sign trust receipts
to facilitate collection of loans and place them under the threats of
criminal prosecution should they be unable to pay it may be unjust and
inequitable. if not reprehensible. Such agreements are contracts of
adhesion which borrowers have no option but to sign lest their loan be
disapproved. The resort to this scheme leaves poor and hapless
borrowers at the mercy of banks and is prone to misinterpretation x x
x.

Unfortunately, what happened in Colinares is exactly the

situation in the instant case. This reprehensible bank practice described
in Colinares should be stopped and discouraged. For this Court to give
life to the constitutional provision of non-imprisonment for
nonpayment of debts, it is imperative that petitioner be acquitted of the
crime of Estafa under Art. 315, par. 1 (b) ofthe RPC, in relation to PD
115.

WHEREFORE, the Resolution upholding the CA's is hereby

RECONSIDERED. Petitioner Hur Tin Yang is ACQUITTED of the
charge of violating Art. 315, par. 1 (b) of the RPC, in relation to the
pertinent provision of PD 115 in Criminal Case Nos. 04-223911 to 34.

SO ORDERED.
COLINARES v s . COURT OF APPEALS
FACTS:
 In 1979, petitioners Melvin Colinares and Lordino Veloso were
contracted by the Carmelite Sisters of Cagayan de Oro City to
renovate the latter's convent at Camaman-an, Cagayan de Oro
City.
 On 30 October 1979, petitioners obtained various construction
materials from CM Builders Centre for the said
project.
 The following day, petitioners applied for a commercial letter
of credit with the Philippine Banking Corporation (PBC),
Cagayan de Oro City Branch in favor of CM Builders Centre.
 PBC approved the letter of credit to cover the full invoice value
of the goods.
 Petitioners signed the pro-forma trust receipt as security. The
said loan was due on 29 January 1980. However, petitioners
failed to pay the whole amount on its due date. Several demand
letters were sent to them. Petitioners proposed that the terms of
payment of the loan shall be modified.
 Pending approval of the said proposal, petitioners paid some
amounts.
 Concurrently with the separate demand for attorney's fees by
PBC's legal counsel, PBC continued to demand payment of the
balance.
 On 14 January 1983, petitioners were charged with violation of
P.D. No. 115 (Trust Receipts Law) in relation to Article 315 of
the Revised Penal Code.
 During trial, petitioners insisted that the transaction was that of
an ordinary loan. Subsequently, the trial court convicted the
petitioners for the offense charged.
 On appeal, the Court of Appeals affirmed the conviction of
petitioners and increased the penalty imposed.
ISSUE: WON the true nature of the contract was an ordinary loan or a
trust receipt agreement.
RULING: The transaction was an ordinary loan.
 Petitioners received the merchandise from CM Builders Centre
on 30 October 1979. On that day, ownership over the
merchandise was already transferred to Petitioners who were to
use the materials for their construction project. It was only a
day later, 31 October 1979, that they went to the bank to apply
for a loan to pay for the merchandise.
 This situation belies what normally obtains in a pure trust
receipt transaction where goods are owned by the bank and
only released to the importer in trust subsequent to the grant of
the loan. The bank acquires a "security interest" in the goods as
holder of a security title for the advances it had made to the
entrustee.
 The 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.
 Trust receipt transactions are 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 This impresses upon the trust receipt in question vagueness and
through utilization, as collateral, of the merchandise imported ambiguity, which should not be the basis for criminal
or purchased. prosecution in the event of violation of its provisions.
 The antecedent acts in a trust receipt transaction consist of the  The practice of banks of making borrowers sign trust receipts
application and approval of the letter of credit, the making of to facilitate collection of loans and place them under the threats
the marginal deposit and the effective importation of goods of criminal prosecution should they be unable to pay it may be
through the efforts of the importer. unjust and inequitable, if not reprehensible. Such agreements
 Petitioner Veloso's claim that they were made to believe that are contracts of adhesion which borrowers have no option but
the transaction was a loan was also not denied by PBC. to sign lest their loan be disapproved. The resort to this scheme
 The Trust Receipts Law does not seek to enforce payment of leaves poor and hapless borrowers at the mercy of banks, and is
the loan, rather it punishes the dishonesty and abuse of prone to misinterpretation, as had happened in this case.
confidence in the handling of money or goods to the prejudice Eventually, PBC showed its true colors and admitted that it
of another regardless of whether the latter is the owner. Here, it was only after collection of the money, as manifested by its
is crystal clear that on the part of Petitioners there was neither Affidavit of Desistance.
dishonesty nor abuse of confidence in the handling of money to
the prejudice of PBC.
 Petitioners continually endeavored to meet their obligations, as
shown by several receipts issued by PBC acknowledging
payment of the loan.
 The Information charges Petitioners with intent to defraud and
misappropriating the money for their personal use. The mala
prohibita nature of the alleged offense notwithstanding, intent
as a state of mind was not proved to be present in Petitioners'
situation. Petitioners employed no artifice in dealing with PBC
and never did they evade payment of their obligation nor
attempt to abscond. Instead, Petitioners sought favorable terms
precisely to meet their obligation.
 Also noteworthy is the fact that Petitioners are not importers
acquiring the goods for re-sale, contrary to the express
provision embodied in the trust receipt. They are contractors
who obtained the fungible goods for their construction project.
At no time did title over the construction materials pass to the
bank, but directly to the Petitioners from CM Builders Centre.
Rosario Textile Mills v Home Bankers Savings and Trust Company
G.R. No. 137232 June 29, 2005
MARCH 16, 2014
Doctrine: A trust receipt is a security agreement pursuant to which a
bank acquires a ‘security interest’ in the goods. In Vintola vs. Insular
Bank of Asia and America, we elucidated further that “a trust receipt,
therefore, 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.”
Facts:
 Sometime in 1989, Rosario Textile Mills Corporation (RTMC)
applied from Home Bankers Savings & Trust Co. for an
Omnibus Credit Line for P10 million. The bank approved
RTMC’s credit line but for only P8 million.
 The bank notified RTMC of the grant of the said loan thru a
letter dated March 2, 1989 which contains terms and conditions
conformed by RTMC thru Edilberto V. Yujuico.
 On March 3, 1989, Yujuico signed a Surety Agreement in
favor of the bank, in which he bound himself jointly and
severally with RTMC for the payment of all RTMC’s
indebtedness to the bank from 1989 to 1990. RTMC availed of
the credit line by making numerous drawdowns, each
drawdown being covered by a separate promissory note and
trust receipt. RTMC, represented by Yujuico, executed in favor
of the bank a total of eleven (11) promissory notes.
 Yujuico contend that he should be absolved from liability.
They claimed that although the grant of the credit line and the
execution of the suretyship agreement. They alleged that the
bank gave assurance that the suretyship agreement was merely
a formality under which Yujuico will not be personally liable.
He theorized that when RTMC imported the raw materials
needed for its manufacture, using the credit line, it was merely
acting on behalf of the bank, the true owner of the goods by
virtue of the trust receipts.
Issue: Whether or not Yujuico is absolved from liability by the grant
of the credit line and the execution of the suretyship agreement
Held: No.
 Yujuico’s argument conveniently ignores the true nature of its
transaction with the bank.
 A trust receipt is a security agreement pursuant to which a bank
acquires a ‘security interest’ in the goods.
 In Vintola vs. Insular Bank of Asia and America, we elucidated
further that “a trust receipt, therefore, 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.”
 In Samo vs. People, we described a trust receipt as “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.”
 “If under the trust receipt, the bank is made to appear as the
owner, it was but an artificial expedient, more of legal fiction
than fact, for if it were really so, it could dispose of the goods
in any manner it wants, which it cannot do, just to give
consistency with purpose of the trust receipt of giving a
stronger security for the loan obtained by the importer. To
consider the bank as the true owner from the inception of the
transaction would be to disregard the loan feature thereof.
 RTMC filed with the bank an application for a credit line in the
amount of P10 million, but only P8 million was approved.

 RTMC then made withdrawals from this credit line and issued
several promissory notes in favor of the bank. In banking and
commerce, a credit line is “that amount of money or
merchandise which a banker, merchant, or supplier agrees to
supply to a person on credit and generally agreed to in
advance.”[3]

 It is the fixed limit of credit granted by a bank, retailer, or

credit card issuer to a customer, to the full extent of which the
latter may avail himself of his dealings with the former but
which he must not exceed and is usually intended to cover a
series of transactions in which case, when the customer’s line
of credit is nearly exhausted, he is expected to reduce his
indebtedness by payments before making any further drawings.
Spouses Vintola v Insular Bank of America (IBAA) G.R. No.
73271 May 29, 1987
MARCH 15, 2014LEAVE A COMMENT
DOCTRINE:
The entruster does not become the real owner of the goods but merely
the holder of a security title for the advances made under the Letter of
Credit. 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.
Facts:
 On August 20, 1975 the spouses Tirso and Loreta Vintola
(VINTOLAS), doing business under the name and style “Dax
Kin International,” were granted a domestic letter of credit by
the Insular Bank of Asia and America (IBAA), Cebu City. in
the amount of P40,000.00.
 The Letter of Credit authorized the bank to negotiate for their
account drafts drawn by their supplier, one Stalin Tan, on Dax
Kin International for the purchase of puka and olive seashells.
 In consideration thereof, the VINTOLAS, jointly and severally,
agreed to pay the bank “at maturity, in Philippine currency, the
equivalent, of the aforementioned amount or such portion
thereof as may be drawn or paid, upon the faith of the said
credit together with the usual charges.
 On the same day, having received from Stalin Tan the puka and
olive shells worth P40,000.00, the VINTOLAS executed a
Trust Receipt agreement with IBAA, Cebu City.
 Under that Agreement, the VINTOLAS agreed to hold the
goods in trust for IBAA as the “latter’s property with liberty to
sell the same for its account, ” and “in case of sale” to turn over
the proceeds as soon as received to (IBAA) the due date
indicated in the document was October 19, 1975.
 Having defaulted on their obligation, IBAA demanded
payment from the VINTOLAS in a letter dated January 1,
1976. The VINTOLAS, who were unable to dispose of the
shells, responded by offering 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 for having
misappropriated, misapplied and converted for their own
personal use and benefit the aforesaid goods.
 During the trial of the criminal case the VINTOLAS turned
over the seashells to the custody of the Trial Court.
 The VINTOLAS rest their present appeal on the principal
allegation that their acquittal in the Estafa case bars IBAA’s
filing of the civil action because IBAA had not reserved in the
criminal case its right to enforce separately their civil liability.
Issue: Whether or not Vintolas in their criminal liability are absolved
by settlement of their liability to IBAA
Held:
 Entruster does not become the real owner of the goods but
merely the holder of a security title for the advances made
under the Letter of Credit—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.
 The foregoing premises considered, it follows that the acquittal
of the VINTOLAS in the Estafa case is no bar to the institution
of a civil action for collection.
 It is inaccurate for the VINTOLAS to claim that the judgment
in the estafa case had declared that the facts from which the
civil action might arise, did not exist, for, it will be recalled
that the decision of acquittal expressly declared that “the
remedy of the Bank is civil and not criminal in nature.”
 This amounts to a reservation of the civil action in IBAA’s
favor, for the Court would not have dwelt on a civil liability
that it had intended to extinguish by the same decision. The
VINTOLAS are liable ex contractu for breach of the Letter of
Credit—Trust Receipt, whether they did or they did not
“misappropriate, misapply or convert” the merchandise as
charged in the criminal case.
 Their civil liability does not arise ex delicto, the action for the
recovery of which would have been deemed instituted with the
criminal action (unless waived or reserved) and where acquittal
based on a judicial declaration that the criminal acts charged do
not exist would have extinguished the civil action.
 Rather, the civil suit instituted by IBAA is based ex contractu
and as such is distinct and independent from any criminal
proceedings and may proceed regardless of the result of the
latter.
People v. Nitafan G.R. No. 75954 October 22, 1992
Facts:
 On January 20, 1985, aid accused did then and there wilfully,
unlawfully and feloniously make or draw and issue to Fatima
Cortez Sasaki Philippine Trust Company Check No. 117383 in
the amount of P143,000.00
 He knew that at the time of issue he did not have sufficient
funds in or credit with the drawee bank.
 The check was subsequently dishonored by the drawee bank
for insufficiency of funds, and despite receipt of notice of such
dishonor, said accused failed to pay Sasaki the amount of said
check or to make arrangement for full payment of the same
within five banking days after receiving said notice.
 Private respondent, Mariano Lim moved to quash the
Information of the ground that the facts charged did not
constitute a felony as B.P. 22 was unconstitutional and that the
check he issued was a memorandum check which was in the
nature of a promissory note in thus, is civil in nature.
 On 1 September 1986, respondent judge, ruling that B.P. 22 on
which the Information was based was unconstitutional, issued
the questioned Order quashing the Information. Hence, this
petition for review on certiorari filed by the Solicitor General
in behalf of the government.
Issues:
 W/N B.P. 22 is unconstitutional
 W/N a memorandum check issued postdated in partial payment
of a pre-existing obligation is within the coverage of B.P. 22.
Ratio:
Dispositive Portion:
 The constitutionality of the Bouncing Check Law has already
been sustained by the SC through jurisprudence in Lozano v.
Martinez, and the seven other cases decided jointly with it.
 A memorandum check is in the form of an ordinary check, with
the word "memorandum", "memo" or "mem" written across its
face, signifying that the maker or drawer engages to pay the
bona fide holder absolutely, without any condition concerning
its presentment.
 Such a check is an evidence of debt against the drawer, and
although may not be intended to be presented has the same
effect as an ordinary check and if passed to the third person
will be valid in his hands like any other check.
 A memorandum check comes within the meaning of Sec. 185
of the Negotiable Instruments Law which defines a check as "a
bill of exchange drawn on a bank payable on demand."
 A memorandum check must therefore fall within the ambit of
B.P. 22 which does not distinguish but merely provides that
"any person who makes or draws and issues any check
knowing at the time of issue that he does not have sufficient
funds in or credit with the drawee bank which check is
subsequently dishonored shall be punished by imprisonment"
 A memorandum check, upon presentment, is generally
accepted by the bank. Hence it does not matter whether the
check issued is in the nature of a memorandum as evidence of
indebtedness or whether it was issued is partial fulfillment of a
pre-existing obligation, for what the law punishes is the
issuance itself of a bouncing check 15 and not the purpose for
which it was issuance.
 The mere act of issuing a worthless check, whether as a
deposit, as a guarantee, or even as an evidence of a pre-existing
debt, is malum prohibitum.
WHEREFORE, the petition is GRANTED and the Order of
respondent Judge of 1 September 1986 is SET ASIDE. Consequently,
respondent Judge, or whoever presides over the Regional Trial Court
of Manila, Branch 52, is hereby directed forthwith to proceed with the
hearing of the case until terminated.
SO ORDERED.