Consolidated Bank & Trust Corp. v.

Court of Appeals

G.R. No. 114286, 19 Apr 2001

FACTS:

Continental Cement Corporation (Continental Cement) and Mr. Gregory Lim, acting as
the Corporation’s President, obtained from Consolidated Bank and Trust Corporation (CBTC) a
Letter of Credit in the amount of P1,068,150.00 which was used to purchase fuel oil from
Petrophil Corporation. Continental Cement paid a marginal deposit of P320,445.00 to CBTC. A
trust receipt for the amount of P1,001,520.93 was then executed by Continental Cement. CBTC
filed a complaint for sum of money. They claimed that Continental Cement and Lim failed to turn
over the goods covered by the trust receipt or the proceeds. In turn, Continental Cement argued
that the transaction was a simple loan and not a trust receipt transaction, and that the amount
claimed by petitioner did not consider payments already made by them.

ISSUE: Whether or not the transaction involved is a trust receipt

RULING:

No, because it was a simple loan. As ruled by the Supreme Court in Colinares v. Court
of Appeals, since the debtor received the goods subject of the trust receipt before the trust
receipt itself was entered into, the transaction must be deemed as a simple loan and not a trust
receipt agreement. Ownership over the goods was already transferred to the debtor prior to the
date of execution of the trust receipt. This situation is inconsistent with what normally occurs in a
pure trust receipt transaction. In trust receipts, the goods belong in ownership to the bank and
are only released to the importer in trust once the loan is granted. In the case at bar, the
delivery to Continental Cement of the goods subject to the trust receipt occurred long before the
trust receipt itself was executed.

Furthermore, Continental Cement is not an importer, which acquired the bunker fuel oil
for re-sale. Instead, it needed the oil for its own operations. More importantly, title over the oil
never passed to CBTC, but directly to Continental Cement to which the oil was directly delivered
even before the trust receipt was executed. Continental Cement was required to sign the trust
receipt simply to facilitate collection by CBTC of the loan it had extended to the former.