11. Philippine Bank of Communications v.

CA and Filipinas Textile Mill, 352 SCRA 616 (2001) FACTS: Filipinas Textile Mills, Inc. (FTMI) purchased textile goods covered by irrevocable Letters of Credit and Trust Receipts obtained from Philippine Bank of Communications (PBCom), which, in turn, were covered by surety agreements executed by Bernardino Villanueva and Sochi Villanueva. FTMI made several partial payments. When FTMI defaulted on the balance, PBCom filed a complaint for the value of the goods. In their Answer, Villanuevas admitted the existence of the surety agreements and trust receipts but countered that they had already made payments on the amount demanded and that the interest and other charges imposed by PBCom were onerous. PBCom then filed a Motion for Attachment contending that violation of the trust receipt law constitutes estafa, thus providing a ground for the issuance of writ of preliminary attachment. TC: CA: -

Issued the order of the issuance of a writ of preliminary attachment.

Ruled that the lower court was guilty of grave abuse of discretion in not conducting a hearing on the application for writ of preliminary attachment and not requiring PBCom to prove its allegation of fraud, embezzlement at misappropriation.

ISSUE: WON the allegations of fraud, embezzlement and misappropriation sufficient basis for the issuance of writ of preliminary attachment. HELD: The allegation that the Entrustee (Villanuevas) failed to remit the proceeds of the sale of the entrusted goods nor to return the same is not sufficient for attachment to issue. There is absence of factual allegations as to how the fraud alleged by Entruster (PBCom) was committed. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay. Fraudulent intent not to honor the admitted obligation cannot be inferred from the debtor's inability to pay or to comply with the obligations. On the other hand fraud may be gleaned from a preconceived plan or intention not to pay. This does not appear to be so in the case at bar. In fact, it is alleged by Entrustee out of the total P419,613.96 covered by the subject trust receipts, the amount of P400,000.00 had already been paid, leaving only P19,613.96 as balance. Hence, regardless of the arguments regarding penalty and interest, it can hardly be said that the Entrustee harbored a pre-conceived plan or intention not to pay the Entruster.

12. South City Homes, Inc. v. BA Finance Corporation, 371 SCRA 603 (2001) FACTS: Fortune Motors Corporation has been availing of the credit facilities of BA Finance Corporation for the purchase of motor vehicles from Canlubang Automotive Resources Corporation (CARCO). Joseph Chua, President of Fortune, Palawan Lumber Manufacturing Corporation, and South City Homes executed a Continuing Suretyship Agreement in favor of BA Finance as a security. CARCO shipped the goods and drew 6 Drafts in its own favor, payable 30 days after sight, charged to the account of Fortune. Fortune (entrustee) thereafter executed trust receipts covering the motor st vehicles delivered to it by CARCO under which it agreed to remit to CARCO (1 entruster) the proceeds of any sale and immediately surrender the remaining unsold vehicles. Subsequently, the nd drafts and trust receipts were assigned to BA Finance (2 entruster), under Deeds of Assignment. When Fortune failed to pay the amounts due under the drafts and remit the proceeds of motor vehicles sold or return those remaining unsold in accordance with the terms of the trust receipts agreements, BA Finance demanded from the sureties. When the account remained unsettled, BA Finance filed a complaint for sum of money with preliminary attachment. However, South City contends, among others, that as an Entruster, BA Finance must first demand the return of the unsold vehicles from Fortune, pursuant to the terms of the trust receipts. Having failed to do so, it had no cause of action whatsoever against Fortune Motors and the action for collection of sum of money was, therefore, premature. TC and CA - The RTC ruled in favour of BA Finance. The CA affirmed this. Hence this petition.

ISSUE: WON in the event of default by the entrustee on his obligation under the trust receipt agreement, it is necessary that the entruster cancel the trust and take possession of the goods to be able to enforce his rights thereunder.

HELD: In the event of default by the entrustee on his obligations under the trust receipt agreement, it is not absolutely necessary for the entruster to cancel the trust and take possession of the goods to be able to enforce his rights thereunder. Significantly, the law uses the word may in granting the entruster the right to cancel the trust and take possession of the goods. Consequently, the entruster has the discretion to avail of such right or seek any alternative action, such as third party claim or a separate civil action which it deems best to protect its right, at any time upon default or failure of the entrustee to comply with any of the terms and conditions of the Trust Agreement.

13. Lee v. Court of Appeals, 375 SCRA 579 (2002) FACTS: Charles Lee, as President of Mico Metals Corp (buyer/applicant) applied for various letters of credit from PBCom for the purpose of maintaining its business operations in favor of several suppliers; one of them is Ta Jih Enterprises Co (seller/beneficiary). The letter of credit was issued and addressed to its correspondent bank in USA. PBCom also informed Irving Trust Co. of Taiwan of the approved letter of credit. Ta Jih draws a draft on the Bank of Taiwan and was paid by the latter. Bank of Taiwan then presented the bank draft for reimbursement to Irving Trust Company in Taiwan. (correspondent bank). Irving accepted and endorsed the draft to PBCom for reimbursement. Thereafter, PBCom presented the draft for payment to MICO. MICO accepted the draft upon presentment and negotiated it to PBCom. To secure the release of the goods, Lee (entrustee), et al. in their personal capacity executed a trust receipt agreement in favor of PBCom (entruster). Upon maturity of all credit availments, MICO failed to pay its obligations despite repeated demands of PBCom. As a result, PBCom extrajudicially foreclosed MICOs real estate mortgage and sold it in a public auction sale where PBCom appears to be the highest bidder. However, the proceeds of the auction sale were insufficient to satisfy all of MICOs obligations to PBCom. Hence, PBCom demanded payment from the surety of MICO. But MICOs sureties denied liability on the ground that the alleged loans were not received as well as its proceeds of such loan. Due to this, PBCom filed a complaint with prayer for writ of preliminary attachment against MICO and its sureties. TC -- RTC dismissed the case in favor of MICO, ruling that PBcom failed to adequately prove that the proceeds of the loan were ever delivered to MICO, no proof has been adduced as to the existence of the goods covered and paid by the said amounts. Hence, inasmuch as no consideration ever passed from PBCom to MICO, all the documents involved therein, such as the promissory notes, real estate mortgage, including the suretyship agreements were all void for lack of cause or consideration CA -- The CA reversed the ruling of RTC, saying that the latter committed an erroneous application and appreciation of the rules governing the burden of proof. Citing Section 24 of the Negotiable Instruments Law which provides that Every negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose signature appears thereon to have become a party thereto for value, the CA said that while the subject promissory notes and letters of credit issued by the PBCom made no mention of delivery of cash, it is presumed that said negotiable instruments were issued for valuable consideration.

ISSUE: Whether or not there is sufficient consideration with respect to the drafts issued in connection with the Letters of Credit. WON a trust receipt is a negotiable instrument

HELD: Under Section 3, Rule 131 of the Rules of Court there is a presumption, among others, that there was a sufficient consideration for a contract, and that a negotiable instrument was given or indorsed for sufficient consideration. As observed by the CA, a similar presumption is found in Section 24 of the Negotiable Instruments Law which provides that every negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose signature appears thereon to have become a party for value. Negotiable instruments which are meant to be substitutes for money, must conform to the following requisites to be considered as such: a) it must be in writing; b) it must be signed by the maker or drawer; c) it must contain an unconditional promise or order to pay a sum certain in money; d) it must be payable on demand or at a fixed or determinable future time; e) it must be payable to order or bearer; and f) where it is a bill of exchange, the drawee must be named or otherwise indicated with reasonable certainty. Negotiable instruments include promissory notes, bills of exchange and checks. Letters of credit and trust receipts are, however, not negotiable instruments. But drafts issued in connection with letters of credit are negotiable instruments. Hence, while the presumption found under the Negotiable Instruments Law may not necessarily be applicable to trust receipts and letters of credit, the presumption that the drafts drawn in connection with the letters of credit have sufficient consideration applies. Under Section 3(r), Rule 131 of the Rules of Court there is also a presumption that sufficient consideration was given in a contract. Hence, Lee, et al, should have presented credible evidence not just bare denials to rebut that presumption of consideration as well as the evidence presented by PBCom showing Lees credit availments as President of Mico Metals and liabilities showing the solidary obligation of Mico Metals and the Lee, et al, as sureties of Mico Metals, in favor of PBCom.

14. Pilipinas Bank v. Ong, 387 SCRA 37 (2002) FACTS: Baliwag Mahogany Corp. (entrustee), purchased "Air Dried, Dark Red Lauan" sawn lumber. To cover the payment of such, a Letter of Credit was applied for and granted by Pilipinas Bank (entruster). To secure the payment of the L/C, BMC thru Alfredo Ong, executed 2 trust receipts. BMC failed to comply with the trust receipt agreement. Hence, it filed with the SEC a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments Consequently, BMC was placed under the management of SEC, thru the Management Committee. The said Committee took custody and control of all its existing assets and liabilities, including the trust receipts. A MOA was entered between BMC and its creditors which provided the rescheduled payment of debts. However, BMC and Ong defaulted in the payment of their obligations under the rescheduled payment scheme as provided in the MOA Thus, the bank filed a complaint for the violation of PD No. 115 against the BMC and Ong. At first, CA directed the filing of the appropriate criminal charges for violation of P.D. No. 115 however, it reversed itself, holding that the execution of the MOA constitutes novation which "places the Bank in estoppel to insist on the original trust relation and constitutes a bar to the filing of any criminal information for violation of the trust receipts law." Hence this petition.

ISSUES: WON the MOA entered into extinguished the obligations of BMC under the Trust receipt Agreement. WON the officers of BMC can be held liable for the violation of the Trust receipts Law.

HELD: Failure of the entrustee to turn over the proceeds of the sale of the goods covered by a trust receipt to the entruster or to return the goods, if they were not disposed of, shall constitute the crime of estafa under Article 315, par. 1(b) of the RPC. Mere failure to deliver the proceeds of the sale or the goods, if not sold, constitutes violation of PD No. 115. However, what is being punished by the law is 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. In this case, no dishonesty nor abuse of confidence can be attributed to respondents/entrustee. Record shows that BMC failed to comply with its obligations upon maturity of the trust receipts due to serious liquidity problems, prompting it to file a Petition for Rehabilitation and Declaration in a State of Suspension of Payments. It bears emphasis that when the bank made a demand upon BMC on February 1994 to comply with its obligations under the trust receipts, BMC was already under the control of the Management Committee created by the SEC in its Order dated January 1992. The Management Committee took custody of all BMCs assets and liabilities, including the red lauan lumber subject of the trust receipts, and authorized their use in the ordinary course of business operations.

Clearly, it was the Management Committee which could settle BMCs obligations. Moreov er, it has not escaped this Courts observation that respondent Ong paid P21,000,000.00 in compliance with the equity infusion required by the MOA. The mala prohibita nature of the offense notwithstanding, entrustees intent to misuse or misappropriate the goods or their proceeds has not been established by the records.

MOA novated and extinguished the trust agreement between the parties There are two ways which could indicate the presence of novation, thereby producing the effect of extinguishing an obligation by another which substitutes the same. 1) The first is when novation has been stated and declared in unequivocal terms. 2) The second is when the old and the new obligations are incompatible on every point. The test of incompatibility is whether or not the two obligations can stand together. If they cannot, they are incompatible and the latter obligation novates the first. Corollarily, changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must take place in any of the essential elements of the obligation, such as its object, cause or principal conditions, otherwise, the change is merely modificatory in nature and insufficient to extinguish the original obligation. In the case at bar, the MOA did not only reschedule entrustee BMCs debts, but more importantly, it provided principal conditions which are incompatible with the trust agreement. Hence, the MOA novated and effectively extinguished BMC's obligations under the trust receipt agreement.

14. Sarmiento v. Court of Appeals, 394 SCRA 315 (2002) FACTS: Limpin and Apostol, proprietors of Davao Libra Industrial Sales, applied for and was granted an Irrevocable Domestic Letter of Credit by the Associated Banking Corporation in favor of LS Parts Hardware & Machine shop for the purchase of assorted scrap irons. Thereafter, a T/R was executed by Limpin and Apostol (entrustees) in favor of Associated Bank (entruster) which was guaranteed by Lorenzo Sarmiento. On due dates, demands were made for them to comply but Limpin and Apostol failed to comply with their undertaking under the Trust Receipt. Hence, the bank instituted a complaint for violation of T/R agreement. According to Limpin et al, they cannot be held liable because the goods subject of T/R were lost when the vessel transporting them sunk. Sarmiento was dropped from the information and Limpin was convicted. The judgment did not contain an award of civil liability. Later a separate complaint for sum of money was file against Sarmiento and Limpin. TC and CA -- Rendered judgment in favor of the Bank. With respect to Sarmiento, who was dropped as an accused in the criminal action, it cannot in anyway, bar the filing by Associated Banking Corporation of the present civil action against him.

ISSUE: Whether or not the right to claim for civil liability is already barred on the ground that the same was not reserved but in fact instituted already in the criminal action earlier filed. HELD: (NO) Jurisprudence instructs that such reservation may not necessarily be express but may be implied which may be inferred not only from the acts of the offended party but also from acts other than those of the latter. In the present case, the Banks (entruster) complaint in the civil case against petitioners (entrustee) was based on the failure of the latter to comply with their obligation as spelled out in the Trust Receipt agreement executed by them. This breach of obligation is separate and distinct from any criminal liability for "misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released under trust receipts", punishable under Section 13 of the Trust Receipts Law (P.D. 115) in relation to Article 315(1), (b) of the RPC. Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently of the criminal proceedings instituted against petitioners regardless of the result of the latter.

16. Ong v. Court of Appeals, 401 SCRA 649 (2003) FACTS: Edward Ong representing ARMAGRI International Corp applied for a L/C with SOLIDBANK Corporation to finance the purchase of the bags of urea from Metropole Industrial Sale and from Fertiphil Corporation. The L/C was issued and in connection therewith, Ong (entrustee) executed a T/R agreement in favor of SOLIDBANK (entruster). In addition, Ong bounded himself to any increase or decrease of interest rate in case Central Bank floated rates and to pay any additional penalty until the T/Rs are fully paid. When the T/R became due and demandable, ARMAGRI failed to pay or deliver the goods to SOLIDBANK despite repeated demands. Hence, a complaint for estafa was filed against Ong. TC: -- Guilty of two counts of estafa. CA: -- Affirmed the Trial Court, stating Edward Ong , although neither a director nor an officer of ARMAGRI, he certainly comes within the term employees or other xxx persons therein responsible for the offense in Section 13 of the Trust Receipts Law. EDWARD ONGS CONTENTION: In signing the trust receipts, he merely acted as an agent of ARMAGRI, and that nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI.

ISSUE: Whether or not Ong is criminally and civilly liable although he was not an officer of AMARI. HELD: Criminally YES. Civilly NO. Trust Receipt Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes the officer or employees or other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships, associations and other juridical entity cannot be put to jail. Hence, the criminal liability falls on the human agent responsible for the violation of the Trust Receipt Law. In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of the Trust Receipts Law falls on the human agent responsible for the violation. Ong, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for the failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts.

As for the civil liability arising from the criminal offense, the person signing the Trust Receipt for the corporation is not solidarily liable with the entrustee-corporation for the civil liability arising from the criminal offense. He may however, be personally liable if he bound himself to pay the debt of the corporation under a separate contract of surety or guaranty.

17. Landl & Company v. Metropolitan Bank, 435 SCRA 639 (2004) FACTS: Landl and Company applied for a L/C with Metropolitan Bank and Trust Co (METROBANK) for the purchase of various welding rods and electrodes from PERMA ALLOYS Inc., New York, USA. Landl put up a marginal deposit of P50, 000.00 from the proceeds of a separate clean loan. Thereafter, a T/R in favor of METROBANK was of executed to secure the indebtedness of Landl. When the T/R matured, the goods were not sold hence Landl returned the goods to the bank. The goods were sold at public auction to METROBANK as the highest bidder. However, the proceeds of the auction sale were insufficient to completely satisfy the outstanding obligation of Landl to the bank. Accordingly, the bank demanded that Landl pay the remaining balance of their obligation. For failure to pay, the bank filed a complaint for sum of money against Landl. TC and CA: -- Ruled in favor of the Bank and ordered Landl to pay the bank.

ISSUE: WON in a trust receipt transaction, an entruster (METROBANK) which had taken actual and juridical possession and subsequently effected a public auction sale of the goods covered by T/R may subsequently avail of the right to demand from the entrustee (Landl) the deficiency of the amount covered by the T/R. HELD A trust receipt agreement is merely a collateral agreement, the purpose of which is to serve as security for a loan. In the event of default, METROBANK has the right to cancel the trust, take possession of the goods and cause the subsequent sale at public auction, such rights were conferred by Sec. 7 of P.D. No. 115 and reinforced by the contract between the Landl and METROBANK.

Section 7 of PD 115 expressly provides that the entrustee shall be liable to the entruster for any deficiency after the proceeds of the sale have been applied to the payment of the expenses of the sale, the payment of the expenses of re-taking, keeping and storing the goods, documents or instruments, and the satisfaction of the entrustee's indebtedness to the entruster. In the case at bar, the proceeds of the auction sale were insufficient to satisfy entirely Landls indebtedness to the bank. METROBANK was thus well within its rights to institute the instant case to collect the deficiency.

18. Rosario Textile Mills Corp. v. Home Bankers Savings and Trust Company, 462 SCRA 88 (2005) FACTS: Rosario Textile Mills Corporation (RTMC) applied from Home Bankers Savings & Trust Co. for an omnibus credit line for the importation of raw materials. The credit line was issued and Yujuico signed a surety agreement in favor of the Home Bankers binding himself jointly and severally with RTMC f or the payment of the latters indebtedness to the Home Bankers (entruster). Rosario Textile (entrustee) made numerous drawdowns on the credit line, each drawdown being covered by a separate promissory note and trust receipt. When the promissory notes become due and demandable, Rosario Textile failed to pay Home Bankers despite repeated demands. Hence, the bank filed a complaint for sum of money against RTMC and Yujuico. RTMC argued that the importation of raw materials under the credit line was with a grant of option to them to turn-over to the bank the imported raw materials should these fail to meet their manufacturing requirements. RTMC tendered the return of the articles to Home Bankers because they did not meet its manufacturing requirements but the latter refused to accept it and as a consequence, RTMC stored them in its warehouse which was, however, gutted by fire. RTC: -- ruled in favor of the bank and ordered RTMC and Yujuico to pay. RTMC appealed contending that under the T/R contracts between the parties, they merely held the goods described therein in trust for Home Bankers (the bank) which owns the same. Since the ownership of the goods remains with the bank, then it should bear the loss. With the destruction of the goods by fire, RTMC should have been relieved of any obligation to pay.

CA: -- Affirmed the trial courts judgment, holding that the bank is merely the holder of the security for its advance payments to petitioners; and that the goods they purchased, through the credit line extended by the bank, belong to them and hold said goods at their own risk.

ISSUE: WON RTMCs obligation under the T/R is extinguished under the principle of res perit domino. HELD: (NO) Under the Trust Receipt Law, the loss of the goods under the trust receipt regardless of the cause and the period of time it occurred, does not extinguish the civil obligation of the entrustee-RTMC. Until and unless this loan is paid, the obligation to pay subsists. RTMCs obligation was not extinguished despite its tender to return the goods to Home Bankers and its invocation of the principle of res perit domino. It is only a legal fiction that Home Bankers is made to appear as the owner of the goods because to treat it otherwise, there is no prohibition to dispose of the goods in any manner he wants being its owner. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature of the trust receipt agreement.

19. Tupaz IV v. CA, 475 SCRA 398 (2005) FACTS: Jose Tupaz IV and Petronila Tupaz were the VP for Operations and Treasurer, respectively, of El Oro Engraver Corporation (El Oro Corporation). El Oro Corporation had a contract with the Philippine Army to supply the latter with survival bolos. To finance the purchase of the raw materials for the survival bolos, the Tupazs, on behalf of El Oro Corporation, applied with Bank of the Philippine Islands (BPI) for 2 commercial L/Cs in favor of El Oro Corporations suppliers, Tanchaoco Incorporated and Maresco Corporation.. BPI granted Tupazs application and issued L/Cs to Tanchaoco Incorporated and to Maresco Corporation. Simultaneous with the issuance of the L/Cs, the Tupazs signed T/Rs in favor of BPI. Jose Tupaz signed, in his personal capacity, a trust receipt corresponding to the letter of credit given to Tanchaoco Incorporated. Jose Tupaz and Petronila signed, in their capacities as officers of El Oro Corporation, a trust receipt corresponding to L/C in favor of Manresco Corporation. After Tanchaoco Incorporated and Maresco Corporation delivered the raw materials to El Oro Corporation, respondent bank paid the former. The Tupazs did not comply with their undertaking under the T/Rs. BPI made several demands for payments but El Oro Corporation made partial payments only. El Oro Corporation could not fully pay its debt because the Armed Forces of the Philippines had delayed paying for the survival bolos. BPI charged the Tupazs with estafa. RTC, affirmed by CA: -- The Tupazs are acquitted but held civilly liable. El Oro Corp and both Jose Tupaz and Petronila Tupaz are hereby ordered, jointly and solidarily, to pay BPI the outstanding principal obligation.

ISSUES: 1) Whether petitioners bound themselves personally liable for El Oro Corporations debts under the trust receipts; 2) If so a. whether petitioners liability is solidary with El Oro Corporation; and b. whether petitioners acquittal of estafa under Section 13, PD 115 extinguished their civil liability.

HELD: On Petitioners Undertaking Under the Trust Receipts A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they represent. As an exception, directors or officers are personally liable for the corporations debts only if they so contractually agree or stipulate. In the trust receipt (corresponding to L/C in favor of Manresco), the Tupazs signed below this clause as officers of El Oro Corporation. Thus, under petitioner Petronila Tupazs signature are the words Vice PresTreasurer and under petitioner Jose Tupazs signature are the words Vice-PresOperations. By so signing that trust receipt, the Tupaz did not bind themselves personally liable for El Oro Corporations obligation. A corporate representative signed a solidary guarantee clause in two trust receipts in his capacity as corporate representative. There, the Court held that the corporate representative did not undertake to guarantee personally the payment of the corporations debts. For the trust receipt dated 30 September 1981 (corresponding to L/C in favor of Tanchoco), the dorsal portion of which petitioner Jose Tupaz signed alone, we find that he did so in his personal capacity. Jose Tupaz did not indicate that he was signing as El Oro Corporations VP for Operations. Hence, Jose Tupaz bound himself personally liable for El Oro Corporations debts. Not being a party to the trust receipt dated 30 September 1981, Petronila Tupaz is not liable under such trust receipt. The Nature of Petitioner Jose Tupazs Liability Under the Trust Receipt Dated 30 September 1981 The Court interpreted a substantially identical clause in a trust receipt signed by a corporate officer who bound himself personally liable for the corporations obligation. The petitioner in that case contended that the stipulation we jointly and severally agree and undertake rendered the corporate officer solidarily liable with the corporation. The Court dismissed this claim and held the corporate officer liable as guarantor only. The Court further ruled that had there been more than one signatories to the trust receipt, the solidary liability would exist between the guarantors. However, BPIs suit against Jose Tupaz stands despite the Courts finding that he is liable as guarantor only. First, excussion is not a pre-requisite to secure judgment against a guarantor. The guarantor can still demand deferment of the execution of the judgment against him until after the assets of the principal debtor shall have been exhausted. Second, the benefit of excussion may be waived. Under the trust receipt dated 30 September 1981, Jose Tupaz waived excussion when he agreed that his liability in the guaranty shall be DIRECT AND IMMEDIATE, without any need whatsoever on xxx [the] part of respondent bank to take any steps or exhaust any legal remedies xxx. The clear import of this stipulation is that petitioner Jose Tupaz waived the benefit of excussion under his guarantee. Petitioner Jose Tupazs Acquittal did not Extinguish his Civil Liability The rule is that where the civil action is impliedly instituted with the criminal action, the civil liability is not extinguished by acquittal. Here, respondent bank chose not to file a separate civil action to recover payment under the trust receipts. Instead, respondent bank sought to recover payment in Criminal Case Nos. 8848 and 8849. Although the RTC acquitted Jose Tupaz, his acquittal did not extinguish his civil liability. As the CA correctly held, his liability arose not from the criminal act of which he was acquitted (ex delito) but from the trust receipt contract (ex contractu) of 30 September 1981. Jose Tupaz signed the trust receipt of 30 September 1981 in his personal capacity.

20. DBP v. Prudential Bank, 475 SCRA 623 (2005) FACTS: Lirag Textile Mills, Inc. (Litex) opened a L/C with Prudential Bank for the importation of drawing frames. In order to secure the payment, a T/R was issued by Litex in favor of Prudential Bank. Litex then installed and used the items in its textile mill in Rizal. Subsequently, Litex mortgaged the textile mill together with its machineries and equipment to DBP for the grant of foreign currency loan. Among the machineries and equipment mortgaged in favor of DBP were the articles covered by the T/Rs. Prudential Bank notified DBP of its claim over the various items covered by the trust receipts which had been installed and used by Litex. Prudential Bank informed DBP that it was the absolute and juridical owner of the said items and they were thus not part of the mortgaged assets that could be legally ceded to DBP. For the failure of Litex to pay its obligation, DBP extra-judicially foreclosed the mortgage, including the articles claimed by Prudential Bank. Prudential Bank sent again a letter to DBP reasserting its claim over the items covered by trust receipts in its name and advising DBP not to include them in the auction. It also demanded the turn-over of the articles or alternatively, the payment of their value. Subsequently, without the knowledge of Prudential Bank, however, DBP sold the Litex textile mill, as well as the machineries and equipment therein, to Lyon Textile Mills, Inc. (Lyon) Since its demands remained unheeded, Prudential Bank filed a complaint for a sum of money with damages against DBP. TC and CA: - In favor of Prudential Bank. Applying the provisions of PD 115 and held that the ownership over the contested articles belonged to Prudential Bank as entrustor, not to Litex. Consequently, even if Litex mortgaged the items to DBP and the latter foreclosed on such mortgage, DBP was duty bound to turn-over the proceeds to Prudential Bank being the party that advanced the payment for them.

ISSUE: WON the goods subject of the T/R can be mortgaged. HELD: The articles were owned by Prudential Bank and they were only held by Litex in trust. While it was allowed to sell the items, Litex had no authority to dispose of them or any part thereof or their proceeds through conditional sale, pledge or any other means. Article 2085 (2) of the Civil Code requires that, in a contract of pledge or mortgage, it is essential that the pledgor or mortgagor should be the absolute owner of the thing pledged or mortgaged . Article 2085 (3) further mandates that the person constituting the pledge or mortgage must have the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. Litex (entrustee) had neither absolute ownership, free disposal nor the authority to freely dispose of the articles. Thus, Litex could not have subjected them to a chattel mortgage. Their inclusion in the mortgage was void and had no legal effect. There being no valid mortgage, there could also be no valid foreclosure or valid auction sale.

21. Ching V. Secretary of Justice, 481 SCRA 609 (2006) FACTS: Ching was the Senior VP of Philippine Blooming Mills, Inc (PBMI). PBMI, through Ching applied with the Rizal Commercial Banking Corporation (RCBC) for the issuance of Commercial L/Cs to finance its importation of assorted goods. RCBC approved the application, and L/Cs were issued in favor of Ching (PBMI). The goods were purchased and delivered in trust to PBMI. Ching signed 13 trust receipts as SURETY, acknowledging delivery of the goods. When the trust receipt matured, Ching failed to return the goods or to the amount owing to the bank. Thus, RCBC filed a complaint for estafa against Ching. City Prosecutor found probable cause for estafa, thus 13 information were filed. Ching appealed to the Minister of Justice which ordered the withdrawal of the information. RCBC refiled the criminal complaint for estafa before the office of the City Prosecutor. City Prosecutor ruled that there was no probable cause to charge Ching as his liability was only civil and not criminal having signed the trust receipts as surety. RCBC appealed to the Secretary of Justice which reversed the resolution of the City prosecutor, holding that Ching as senior VP of PBMI, executed the 13 trust receipts and as such, was one responsible for the offense.The execution of said receipts is enough to charge Ching as the official responsible for the violation of PD 115. CA: Affirmed the Decision of Secretary of Justice.

ISSUE: WON Ching can be held criminally liable for violation of the Trust Receipts Law when he signed the trust receipts merely as a surety and not as the entrustee. HELD: There is no dispute that it was Ching, who as senior VP of PBMI, executed the thirteen (13) trust receipts. As such, the law points to him as the official responsible for the offense. Since a corporation cannot be proceeded against criminally because it cannot commit crime in which personal violence or malicious intent is required, criminal action is limited to the corporate agents guilty of an act amounting to a crime and never against the corporation. An officer of a corporation who signed a trust receipt cannot hide behind the cloak of the separate corporate personality of the corporation and cannot avoid criminal prosecution even though he had no physical possession of the goods nor are benefitted by the delictual acts. Though the entrustee is a corporation, nevertheless, the law specifically makes the officers, employees and other officers or persons responsible for the offense, without prejudice to the civil liabilities of such corporation and/or board of directors, officers, or other officials or employees responsible for the offense.

The rationale is that such officers or employees are vested with authority and responsibility to devise means necessary to ensure compliance with the law and, if they fail to do so, are held criminally accountable. A corporation cannot be arrested and imprisoned; hence, cannot be penalized for a crime punishable by imprisonment. However a corporation may be charged and prosecuted for a crime if the imposable penalty is FINE.

22. Ng v. People, 619 SCRA 295 (2010) FACTS: Anthony Ng, then engaged in the business of building and fabricating telecommunication towers under the trade name "Capitol Blacksmith and Builders," applied for a credit line with Asiatrust Development Bank, Inc. (Asiatrust) for the purchase of chemicals and metal plates to be used in building and fabricating telecommunication towers for Islacom, Smart, and Infocom. The credit line was approved and Ng (entrustee) executed a trust receipt agreement in favour of Asiatrust (entruster) to secure the credit line. However, the trust receipt agreement did not bear any maturity dates as they were left unfilled or in blank by Asiatrust. After Ng received the goods, he utilized them to fabricate the communication towers ordered from him by his clients which were installed in three project sites. As Ng realized difficulty in collecting from his client Islacom, he failed to pay his loan to Asiatrust. Asiatrust then conducted a surprise ocular inspection of Ng's business through a representative appraiser. The appraiser thereafter reported to Asiatrust that he found that approximately 97% of the subject goods of the Trust Receipts were "sold-out and that only 3 % of the goods pertaining to PN No. 1963 remained." Asiatrust then endorsed Ng's account to its Account Management Division for the possible restructuring of his loan. However, efforts towards a settlement failed to be reached. Ng still failed to pay its obligation despite repeated demands. Hence, Asiatrust filed a complaint for estafa with the RTC. Ruling of the Trial Court RTC rendered a Decision, finding Ng guilty of the crime of Estafa. The trial court declared that Ng, being the entrustee stated in the Trust Receipts issued by Asiatrust, is thus obliged to hold the goods in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipts; otherwise, he is obliged to return the goods in the event of non-sale or upon demand of the entruster, failing thus, he evidently violated the Trust Receipts Law. Ruling of the Appellate Court CA rendered a Decision affirming that of the RTC, . ISSUES: WON petitioner is liable for Estafa. (WON PD 115 applies)

HELD:

NO

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. A thorough examination of the facts obtaining in the instant case, however, reveals that the transaction between petitioner and Asiatrust is not a trust receipt transaction but one of SIMPLE LOAN.

PD 115 Does Not Apply Ng was transparent to Asiatrust from the very beginning that the subject goods were not being held for sale but were to be used for the fabrication of steel communication towers in accordance with his contracts with Islacom, Smart, and Infocom. In these contracts, he was commissioned to build, out of the materials received, steel communication towers, not to sell them. 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. Regardless of whether the transaction is foreign or domestic, it is important to note that the transactions in relation to trust receipts mainly involved sales. 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.

Considering that the goods in this case (chemicals and metal plates) were never intended for sale but for use in the fabrication of steel communication towers, the agreement is a not trust receipt transaction but a SIMPLE LOAN.
Having established the inapplicability of PD 115, this Court finds that Ng's liability is only limited to the satisfaction of his obligation from the loan. The real intent of the parties was simply to enter into a simple loan agreement. 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 Ng. Moreover, this Court finds that Ng is not liable for Estafa both under the RPC and PD 115. Goods Were Not Received in Trust The goods received by Ng were not held in trust. They were also not intended for sale and neither did Ng have the duty to return them. They were only intended for use in the fabrication of steel communication towers.

No Misappropriation of Goods or Proceeds No misappropriation or conversion on the part of Ng, 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. Thus, assuming arguendo that the provisions of PD 115 apply, Ng is not liable for Estafa because Sec. 13 of 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 x x x covered by a trust receipt to the extent of the amount owing to the

entruster or as appears in the trust receipt x x x in accordance with the terms of the trust receipt ." Ng was only obligated to turn over the proceeds as soon as he received payment. However, the evidence reveals that Ng experienced difficulties in collecting payments from his clients for the communication towers.Thus, absent proof that the proceeds have been actually and fully received by Ng, his obligation to turn over the same to Asiatrust never arose. What is more, under the Trust Receipt Agreement itself, no date of maturity was stipulated. In fact, Asiatrust purposely left the space designated for the date blank, an action which in ordinary banking transactions would be noted as highly irregular. Hence, the only way for the obligation to mature was for Asiatrust to demand from Ng to pay the obligation, which it never did. Again, it also makes the Court wonder as to why Asiatrust decided to leave the provisions for the maturity dates in the Trust Receipt agreements in blank, since those dates are elemental part of the loan. But then, as can be gleaned from the records of this case, Asiatrust also knew that the capacity of Ng to pay for his loan also hinges upon the latter's receivables from Islacom, Smart, and Infocom where he had ongoing and future projects for fabrication and installation of steel communication towers and not from the sale of said goods. Being a bank, Asiatrust acted inappropriately when it left such a sensitive bank instrument with a void circumstance on an elementary but vital feature of each and every loan transaction, that is, the maturity dates. Without stating the maturity dates, it was impossible for Ng to determine when the loan will be due. Moreover, Asiatrust was aware that Ng was not engaged in selling the subject goods and that Ng will use them for the fabrication and installation of communication towers. Before granting Ng the credit line, as aforementioned, Asiatrust conducted an investigation, which showed that Ng fabricated and installed communication towers for well-known communication companies to be installed at designated project sites. In fine, there was no abuse of confidence to speak of nor was there any intention to convert the subject goods for another purpose, since Ng did not withhold the fact that they were to be used to fabricate steel communication towers to Asiatrust. Hence, no malice or abuse of confidence and misappropriation occurred in this instance due to Asiatrust's knowledge of the facts. Furthermore, Asiatrust was informed at the time of Ng 's application for the loan that the payment for the loan would be derived from the collectibles of his clients. Ng informed Asiatrust that he was having extreme difficulties in collecting from Islacom the full contracted price of the towers. Thus, the duty of Ng to remit the proceeds of the goods has not yet arisen since he has yet to receive proceeds of the goods. Again, Ng could not be said to have misappropriated or converted the proceeds of the transaction since he has not yet received the proceeds from his client, Islacom.

Reasonable Doubt Exists The prosecution failed to prove beyond reasonable doubt that Ng was guilty of Estafa under Art. 315, par. 1(b) of the RPC in relation to the pertinent provision of PD 115 or the Trust Receipts Law; thus, his liability should only be civil in nature. While Ng admits to his civil liability to Asiatrust, he nevertheless does not have criminal liability. It is a well-established principle that person is presumed innocent until proved guilty. To overcome the presumption, his guilt must be shown by proof beyond reasonable doubt. The prosecution, in this instant case, failed to rebut the constitutional innocence of Ng and thus the latter should be acquitted.

WHEREFORE, the CA Decision affirming the RTC Decision is SET ASIDE. Petitioner ANTHONY L. NG is hereby ACQUITTED of the charge of violation of Art. 315, par. 1(b) of the RPC in relation to the pertinent provision of PD 115.

23. Land Bank v Perez, (2012)

FACTS: Land Bank of the Philippines (LBP) extended a credit accommodation to Asian Construction and Development Corporation (ACDC) through the execution of an Omnibus Credit Line Agreement between LBP and ACDC. In various instances, ACDC used the Letters of Credit/Trust Receipts Facility of the Agreement to buy construction materials. The respondents, as officers and representatives of ACDC, executed T/Rs in connection with the construction materials. The T/Rs matured, but ACDC failed to return to LBP the proceeds of the construction projects or the construction materials subject of the trust receipts, despite demands by the LBP. Thus, LBP filed the criminal complaint for estafa.
The respondents claimed that they signed the T/Rs documents on or about the same time LBP and ACDC executed the loan documents; their signatures were required by LBP for the release of the loans. The trust receipts in this case do not contain (1) a description of the goods placed in trust, (2) their invoice values, and (3) their maturity dates, in violation of Section 5(a) of P.D. 115. Moreover, they alleged that ACDC acted as a subcontractor for government projects such as the Metro Rail Transit, the Clark Centennial Exposition and the Quezon Power Plant in Quezon. Its clients for the construction projects, which were the general contractors of these projects, have not yet paid them; thus, ACDC had yet to receive the proceeds of the materials that were the subject of the trust receipts and were allegedly used for these constructions. As there were no proceeds received from these clients, no misappropriation thereof could have taken place. Assistant City Prosecutor dismissed the complaint. He pointed out that the evidence presented by LBP failed to state the date when the goods described in the letters of credit were actually released to the possession of the respondents. Section 4 of P.D. 115 requires that the goods covered by trust receipts be released to the possession of the entrustee after the latters execution and delivery to the entruster of a signed trust receipt. He adds that LBPs evidence also fails to show the date when the tru st receipts were executed since all the trust receipts are undated. LBP filed a motion for reconsideration which the Assistant City Prosecutor denied. On appeal, the Secretary of Justice reversed the Resolution of the Assistant City Prosecutor. The Secretary of Justice pointed out that there was no question that the goods covered by the trust receipts were received by ACDC. He likewise adopted LBPs argument that while the subjects of the trust receipts were not mentioned in the trust receipts, they were listed in the letters of credit referred to in the trust receipts. He also noted that the trust receipts contained maturity dates and clearly set out their stipulations. He further rejected the respondents defense that ACDC failed to remit the payments to LBP due to the failure of the clients of ACDC to pay them. The respondents filed a MR of the resolution which the Secretary of Justice denied. He rejected the respondents [16] submission that Colinares v. Court of Appeals does not apply to the case. He explained that in Colinares, the building materials were delivered to the accused before they applied to the bank for a loan to pay for the merchandise; thus, the ownership of the merchandise had already been transferred to the entrustees before the trust receipts agreements were entered into. In the present case, the parties have already entered into the Agreement before the construction materials were delivered to ACDC. Subsequently, the respondents filed a petition for review before the Court of Appeals. Applying the doctrine in Colinares, CA ruled that this case did not involve a trust receipt transaction, but a mere loan. It emphasized that construction materials, the subject of the trust receipt transaction, were delivered to ACDC even before the trust receipts were executed. It noted that LBP did not offer proof that the goods were received by ACDC, and that the trust receipts did not contain a description of the goods, their invoice value, the amount of the draft to be paid, and their maturity dates. It also adopted ACDCs argument that since no payment for the construction projects had been received by ACDC, its officers could not have been guilty of misappropriating any payment.

While the case was pending before this Court, the respondents filed a motion to dismiss. They informed the Court that LBP had already assigned to Philippine Opportunities for Growth and Income, Inc. all of its rights, title and interests in the loans subject of this case in a Deed of Absolute Sale. The respondents also stated that Avent Holdings Corporation, in behalf of ACDC, had already settled ACDCs obligation to LBP. ISSUE: WON the transactions are trust receipts; WON Ng can be held liable for estafa. HELD: