CASE 1: Rosemarie M. Lee vs. Hon.
Rodil (RTC Manila judge) and reverse the order of the lower court. (SC affirmed the LC
People of the Philippines
G.R. No. 80544; 5 July 1989
FACTS:
1. Lee was the representative of CS Lee Enterprises Inc which opened a
letter of credit worth Php 154,711.97 with Philippine Bank of
Communications for the purchase of merchandise.
2. 1982: Culture Media received the necessary document and then
executed a trust receipt for the said merchandise: Lee obligated
herself to hold the merchandise in trust to sell the same in cash
for the account of the bank; To account for the proceeds if sold; To
return the merchandise to the bank in case of failure to sell the same;
3. Despite repeated demands, she failed to comply with her
obligation and instead appropriated the merchandise for her own
personal use.
4. 1985: Lee was charged for estafa. She moved to quash the
information on the ff grounds:
o The violation of a trust agreement does not constitute
estafa despite an express provision in the Trust Receipts
Law characterizing it as estafa.
o PD 115 is violative of the right that no person shall be
imprisoned for non-payment of debt.
5. RTC denied the motion to quash and upheld the constitutionality of
the law.
6. MR denied. Hence, the present petition.
ISSUE: Does the violation of a trust receipt agreement constitute estafa?
YES
RATIO:
PD 115, S3 expressly provides: 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
On the case of People v. Cuevo (1981):
o It was the lower court that dismissed the information and ruled
that a violation gives rise to a civil action only.
o Out of the 11 members of the SC, a majority of 6 justices +CJ
were of the view that the violation constitutes estafa, 2 voted
otherwise, another 2 inhibited themselves. The view of the
dissenting justices prevailed as a result of the want of 1 vote to
decision despite the majority view)
o SC Majority view: The conversion by the trustee in a trust
receipt of the proceeds of the sale falls most literally and
directly under the provision of estafa thru misappropriation
under Art 315 (1)(b) of the RPC. The enactment of the Trust
Receipts Law confirmed the said criminal liability.
o Dissent of J. Teehankee:
A contract covered by a trust receipt is a secured loan.
The goods imported by the dealer, through the banks
financing, remain of their own property and risk.
The view of putting them in jail for estafa for non-
payment of the secured loan through a trust receipt
should not be permitted in this day and age.
o Dissent of De Castro:
The bank cannot be considered as the true owner of the
goods which has full power of disposition over the same.
Otherwise, it would disregard the loan feature (L/C).
The trust receipt is supposed to give a stronger security
for the loan obtained by the importer.
There would have been no need for PD 115 had there
been no such doubt if the violation constitutes estafa.
On the case of Sia v. People (1983):
o De Castro penned the said case.
o If the trust receipt transaction is susceptible to two reasonable
interpretations, one giving rise only to civil liability and the other
also generating criminal liability, the first should be adopted as
more favorable to the offender.
Lee used the Cuevo and Sia case to support her stand. However, the
violations in both cases occurred in the 1960s. PD115 was not
applied because the questioned acts were committed before its
effectivity/promulgation in 1973.
Violations of trust receipt agreements occurring after 29 Jan
1973 would thus make the accused criminally liable for estafa
pursuant to PD115.
On the constitutionality of PD115: A convincing showing is needed to
overcome the presumption of the validity of a statute.
On the nature of a trust receipt agreement:
o An LC-TR arrangement involves a loan feature represented
by a letter of credit and a security feature which is the trust
receipt. Each feature is separate and distinct.
o The person prejudiced by the misappropriation or
conversion of goods need not be the owner thereof. The
authors simply used the phrase to the prejudice of another
 o The failure of a person to turn over the proceeds or goods not
sold covered by a trust receipt is a public nuisance. The act
is not inherently wrong but because of the harm it inflicts on
the community, it may be punished as malum prohibitum.
CASE 2: Colinares vs. Veloso
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.
Facts: Melvin Colinares and Lordino Veloso (hereafter Petitioners) were
contracted for a consideration of P40,000 by the Carmelite Sisters of
Cagayan de Oro City to renovate the latters convent at Camaman-an,
Cagayan de Oro City. Colinares applied for a commercial letter of credit
with the Philippine Banking Corporation, Cagayan de Oro City branch
(hereafter PBC) in favor of CM Builders Centre. PBC approved the letter of
credit for P22,389.80 to cover the full invoice value of the goods.
Petitioners signed a pro-forma trust receipt as security.
PBC debited P6,720 from Petitioners marginal deposit as partial payment
of the loan. After the initial payment, the spouses defaulted. PBC wrote
to Petitioners demanding that the amount be paid within seven days from
notice. Instead of complying with PBCs demand, Veloso confessed that
they lost P19,195.83 in the Carmelite Monastery Project and requested for
a grace period of until 15 June 1980 to settle the account. Colinares
proposed that the terms of payment of the loan be modified P2,000 on or
before 3 December 1980, and P1,000 per month . Pending approval of the
proposal, Petitioners paid P1,000 to PBC on 4 December 1980, and
thereafter P500 on 11 February 1981, 16 March 1981, and 20 April 1981.
Concurrently with the separate demand for attorneys fees by PBCs legal
counsel, PBC continued to demand payment of the balance. On 14
January 1983, Petitioners were charged with the violation of P.D. No. 115
(Trust Receipts Law) in relation to Article 315 of the Revised Penal Code
During trial, petitioner Veloso insisted that the transaction was a clean
loan as per verbal guarantee of Cayo Garcia Tuiza, PBCs former
manager. He and petitioner Colinares signed the documents without
reading the fine print, only learning of the trust receipt implication much
later. When he brought this to the attention of PBC, Mr. Tuiza assured him
that the trust receipt was a mere formality. The Trust Receipts Law does
not seek to enforce payment of the loan, rather it punishes 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. Here, it
is crystal clear that on the part of Petitioners there was neither 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.
Issue: Whether or not the transaction of Colinares falls within the ambit of
the Law on Trust Receipt
Held: Colinares 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. There are two possible
situations in a trust receipt transaction. The first is covered by the provision
which refers to money received under the obligation involving the duty to
deliver it (entregarla) to the owner of the merchandise sold. The second is
covered by the provision which refers to merchandise received under the
obligation to return it (devolvera) to the owner. Failure of the entrustee to
turn over the proceeds of the sale of the goods, covered by the trust
receipt to the entruster or to return said goods if they were not disposed of
in accordance with the terms of the trust receipt shall be punishable as
estafa under Article 315 (1) of the Revised Penal Code, without need of
proving intent to defraud.
CASE 3: Hur Tin Yang v. People (2013)
FACTS:
1) Supermax Philippines, Inc. (Supermax) is a domestic corporation
engaged in the construction business
2) On various occasions in the month of April, May, July, August,
September, October and November 1998, Metropolitan Bank and
Trust Company (Metrobank), Magdalena Branch, Manila,
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.
3) Thereafter, Metrobank required Hur Tin Yang, as representative
and Vice-President for Internal Affairs of Supermax, to sign twenty-
four (24) 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.
4) When the 24 trust receipts fell due and despite the receipt of a
demand letter. Supermax failed to pay or deliver the goods or
proceeds to Metrobank.
5) Instead, Supermax, through petitioner, requested the restructuring
of the loan. When the intended restructuring of the loan did not
materialize, Metrobank sent another demand letter.
6) As the demands fell on deaf ears, Metrobank, through its
representative, Winnie M. Villanueva, filed the instant criminal
complaints (Estafa) against Hur Tin Yang.
7) PETITIONER
a. while admitting signing the trust receipts, he 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.
b. petitioner presented as witness, Priscila Alfonso, who
testified that the construction materials covered by the
trust receipts were delivered way before petitioner signed
the corresponding trust receipts
c. further, he 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 (take
note).
8) TC found Hur Tin Yang guilty of Estafa. CA affirmed.
9) Petitioner on MR aruged that the transactions between the parties
do not constitute trust receipts agreements but rather of simple
loans (petitioner is correct).
ISSUE:
Whether Hur Tin Yang is liable for Estafa under Art 315 in relation to PD
115 (Trust Receipts Law), even if it was sufficietnly proved that the
entrsuter (Metrobank) knew beforehand that the goods (construction
materials) suubject of the trust receipts were never intended to be sold but
only for use in the entrustees construction business? NO!! He is not
liable. 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
RULING:
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
Petitioners admissionthat 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 demanddoes 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. This Courtin Ng v. People14 and Land Bank
of the Philippines v. Perez, cases which are in all four corners the same as
the instant caseruled 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.
What is Trust Recept Transactions? 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.16 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.
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,
Moreover, 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.
In Ng v. People, 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.
CASE 4: Sps. Dela Cruz vs PPI
Facts: Spouses Dela Cruz, petitioners herein, operated the Barangay
Agricultural Supply. At the time material to the case, Quirino, a lawyer, was
the Municipal Mayor of Aliaga, Nueva Ecija. Gloria applied for and was
granted by respondent Planters Products, Inc. (PPI) a regular credit line of
P200,000.00 for a 60- day term, with trust receipts as collaterals.
Spouses submitted a list of their assets in support of her credit application
for participation in the Special Credit Scheme (SCS) of PPI. Gloria signed
in the presence of the PPI distribution representative "Trust
Receipt/Special Credit Scheme," indicating the invoice number, quantity,
value, and names of the agricultural inputs she received "upon the trust" of
PPI.
The 60-day credit term lapsed without Gloria paying her obligation under
the Trust Receipt/SCS. Hence, PPI wrote collection letters to her.
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 dealers 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.
The CA held the petitioners liable to PPI for the value of the fertilizers and
agricultural chemical products covered by the trust receipts because a
creditor-debtor relationship existed between the parties when, the
petitioners withdrew several fertilizers and agricultural chemical products
on credit; that the petitioners then came under obligation to pay the
equivalent value of the withdrawn goods, or to return the undelivered
and/or unused products within the specified period.
Issue: Is Gloria liable under Trust Receipt law?
Ruling: 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 CA properly 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.
The first circumstance was the credit line of P200,000.00 that commenced
the business relationship between the parties. A credit line is really a loan
agreement between the parties.
The second circumstance was the offer by Gloria of trust receipts as her
collateral for securing the loans that PPI extended to her. A trust receipt is
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 third circumstance was the offer of Gloria and Quirino to have their
conjugal real properties beef up the collaterals for the credit line.
The fourth circumstance had to do with the undertakings under the trust
receipts. The position of the petitioners was that the farmers participants
alone were obligated to pay for the goods delivered to them by Gloria.
However, such position had no factual and legal legs to prop it up. 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. Hence, the farmer-participants, not being themselves parties to
the contractual documents signed by Gloria, were not to be thereby liable.
CASE 05 Samo vs. People Nos. L-17603-04. May 31, 1962
Topic: trust receipts (Parian)
Petition for certiorari.
1. To facilitate the importation of tins of squid and sardines, Samo
opened two letters of credit with BPI.
2. Upon the arrival of goods, BPI advanced or paid the balances due
in order that the goods could be released, and required Samo to
execute two trust receipts in its favor as a condition for turning
over the possession of goods to her.
3. She did and acknowledged having received in trust from BPI the
goods and obligated herself to hold them in trust for the latter.
4. The document authorized her to sell the goods for the account of
the bank, under the obligation to remit to the latter the proceeds of
the saleif soldor to return them, if not sold on or before July
31, 1954.
5. Samo having failed to account for the goods and/or the proceeds
thereof despite repeated oral and written demands by BPI, a case
for estafa was instituted against her in CFI Manila.
6. CFI convicted Samo. CA affirmed.
7. Now this petition. She argues that part of the money paid for the
goods covered by said trust receipts belonged to her, BPI having
only advanced the balance due on the purchase;
8. that the money advanced constituted a loan;
9. that the requirement and execution of the trust receipts was a
mere formality "in order to comply with the standard banking
procedure, the true relation being that of creditor and debtor.
ISSUE: WON there is criminal liability arising from breach of trust receipts.
HELD: YES. CA affirmed.
A trust receipt is considered 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.
Philippine National Bank vs. Vda. e Hijos de Angel Jose: Trust
receipts, as contracts, in a certain manner partake of the nature of
a conditional sale, xxx that is, the importer becomes absolute
owner of the imported merchandise as soon as he has paid its
price. The ownership of the merchandise continues to be vested in
the owner thereof or in the person who has advanced payment,
until he has been paid in full, or if the merchandise has already
been sold, the proceeds of the sale be turned over to him by the
importer or by his representative or successor in interest."
In People vs. Yu Chai Ho, the defendant failed to make payments
under the the conditions of the trust receipts he issued in favor of
International Banking Corporation after possession of the imported
goods were transferred to him. The nonpayment of Yu Chai Ho
compelled a 3rd party guarantor to pay the amount of the imported
goods to said bank. It was there held that this constituted estafa, in
spite of the fact that the defendant had given surety for the
fulfillment of his obligation under the trust receipt.
In Philippine National Bank vs. Arrozal, where a party who fails to
comply with the terms of a trust receipt executed by him,
particularly to make payment of his obligation thereunder, such
failure would be a good ground for prosecution of estafa.
In this case, notwithstanding repeated oral and written demands
by BPI, Samo had failed either to turn over to the latter the
proceeds of the sale of the goods covered by the trust receipts, or
to return said goods, if they were not sold.
CA correctly found her to be guilty of having violated the provisions
of Art. 315, 1-(b) of the Revised Penal Code.
The fact that, subsequent to the filing of the cases in the Court of
First Instance, Samo made partial payments on account does not
alter the situation.
Payment does not extinguish criminal liability for estafa.
CASE 6: ALLIED BANK VS ORDOEZ
The crime of estafa for violation of the Trust Receipts Law is a
special offense or mala prohibita. It is a fundamental rule in criminal
law that when the crime is punished by a special law, the act alone,
irrespective of its motives, constitutes the offense. In the instant
case the failure of the entrustee to pay complainant the remaining
balance of the value of the goods covered by the trust receipt when
the same became due constitutes the offense penalized under
Section 13 of P.D. No. 115
Facts: Philippine Blooming Mills (PBM, for short) thru its duly authorized
officer, private respondent Alfredo Ching, applied for the issuance of
commercial letters of credit with petitioners Makati branch to finance the
purchase of 500 M/T Magtar Branch Dolomites and one (1) Lot High Fired
Refractory Sliding Nozzle Bricks. Allied Bank issued an irrevocable letter of
credit in favor of Nikko Industry Co., Ltd. (Nikko) by virtue of which the
latter drew four (4) drafts which were accepted by PBM and duly honored
and paid by the petitioner bank. To secure payment of the amount covered
by the drafts, and in consideration of the transfer by petitioner of the
possession of the goods to PBM, the latter as entrustee, thru private
respondent, executed four (4) Trust Receipt Agreements with maturity
dates on acknowledging petitioners ownership of the goods and its
(PBMS) 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.
PBM defaulted on the payment of the trust receipts.. Despite repeated
demands, PBM failed and refused to either turn over the proceeds of the
sale of the goods or to return the same. Allied Bank filed a criminal
complaint against private respondent for violation of PD 115 before the
office of the Provincial Fiscal of Rizal. The Fiscal found a prima facie case
for violation of PD 115 on four (4) counts and filed the corresponding
information in court. PBM contended that since it was under rehabilitation
receivership, no criminal liability can be imputed to Ching.
Issue: Whether or not rehabilitation bars the filing of the estafa case
against Ching
Held: It cannot be denied that the offense was consummated long before
the appointment of rehabilitation receivers. The filing of a criminal case
against respondent Ching is not only for the purpose of effectuating a
collection of a debt but primarily for the purpose of punishing an offender
for a crime committed not only against the complaining witness but also
against the state. The crime of estafa for violation of the Trust Receipts
Law is a special offense or mala prohibita. It is a fundamental rule in
criminal law that when the crime is punished by a special law, the act
alone, irrespective of its motives, constitutes the offense. In the instant
case the failure of the entrustee to pay complainant the remaining balance
of the value of the goods covered by the trust receipt when the same
became due constitutes the offense penalized under Section 13 of P.D.
No. 115; and on the basis of this failure alone, the prosecution has
sufficient evidence to establish a prima facie case (Res. No. 671, s. 1981;
Allied Banking Corporation vs. Reinhard Sagemuller, et al., Provincial
Fiscal of Rizal, September 18, 1981).
In examination of P.D. 115 shows the growing importance of trust receipts
in Philippine business, the need to provide for the rights and obligations of
parties to a trust receipt transaction, the study of the problems involved
and the action by monetary authorities, and the necessity of regulating the
enforcement of rights arising from default or violations of trust receipt
agreements. The legislative intent to meet a pressing need is clearly
expressed
CASE 7: Alfredo Ching vs. Secretary of Justice, Asst. City Prosecutor
Burgos-Villavert, Judge Sudiam, Rizal Commercial Banking Corp and
People of the Philippines
G.R. No.164317; 6 February 2006
FACTS:
7. Ching was the Senior VP of Philippine Blooming Mills Inc. (PBMI)
8. RCBC issued irrevocable L/C in favor of PBMIfor its importation of
assorted goods such as moulds, spare parts, pipes and bricks. The
goods were purchased and delivered in trust to PBMI.
9. Ching signed 13 trust receipts as a surety. He agreed to hold the
goods for sale, turn over the proceeds if sold and to return the goods
if unsold. The goods and proceeds thereof were the property of
RCBC.
10. When the trust receipts matured, the goods or their value was
not returned despite demands. The bank then filed a complaint
for estafa with OCP Manila. The City Prosecutor then filed 13
Informations against Ching before RTC Manila.
* Summary of #5-#11: The Informations against Ching were quashed.
They were filed again due to the Ordoez ruling concerning liability under
PD 115.
11. Ching appealed the prosecutors resolution to the then Minister of
Justice. His appeal was initially dismissed but later granted upon
reconsideration.
12. MR was denied. RTC granted the Motion to Quash the Informations.
13. In the meantime, SC rendered judgment in Allied Banking Corp vs.
Ordoez:
o The penal provision of PD 115 encompasses any act violative of
an obligation covered by the trust receipt.
PD 115 is not limited to transactions involving goods to be sold.
o Non-payment of the amount covered by the trust receipt is an act
violative of the obligation of the entrustee to pay.
14. RCBC then re-filed its complaint with the OCP. The city prosecutor
ruled that there was no probable cause because Chings liability was
only civil as a surety.
15. RCBC appealed the resolution to the DoJ. Granted.
o The execution of the receipts is enough to indict him as the
official responsible for the violation.
o As a surety, he could be proceeded against in 2 ways: (1) As
surety as determined in RCBC v. CA; (2) As the corporate official
responsible for the offense under PD 115;
o PD 115 explicitly allows the prosecution of corporate officers
without prejudice to the civil liabilities arising from the criminal
offense.
16. The city prosecutor filed 13 Informations against Ching for violation of
PD 115.
17. CA dismissed Chings petition for certiorari, prohibition and
mandamus:
o Defective certification of non-forum shopping
o Not the proper remedy.
o Ching was the VP and signatory to the trust receipts
o Ordoez case already resolved the issue on the violation of PD
115
o Estopped from questioning the prosecutors delay in the
disposition of the preliminary investigation
18. Hence, the present petition. Ching argues that: (1) It was not a
trust receipt transaction; (2) He acted in his capacity as Sr. VP;
(3) He never received the goods as an entrustee; and (4) PBMI
itself acquired the goods.
ISSUE: Is there probable cause against Ching for estafa? YES
RATIO:
The certification of non-forum shopping before the CA is defective. He
failed to certify that he had not commenced any other action involving
the same issues in the SC, CA or any other tribunal as required by the
RoC.
The purpose of preliminary investigation is to determine whether a
crime has been committed and whether there is probable cause to
believe that the accused is guilty thereof. Probable cause implies
probability of guilt and requires more than bare suspicion but less
than evidence that justifies a conviction.
An entrustee is having possession of goods, documents or
instruments under a trust receipt transaction. Obligations:
1. Hold the goods in trust and dispose of them strictly in
accordance with the terms of the receipt;
2. Receive the proceeds in trust and turn over the same to the
extent of the amount owing to the entruster or as appears on
the receipt;
3. Insure the goods against loss, fire and other casualties;
4. Keep said goods or proceeds, identifiable as property of the
entruster;
5. Return the goods in the event of non-sale or upon demand;
6. Observe all other terms and conditions of the trust receipt
not contrary to the provisions of the decree.
Here, there is a trust receipt transaction covered by PD 115.
Ching is the entrustee while RCBC is the entruster. The law
applies to goods used by PBMI in its operations.
Colinares v. CA provides for two possible situations in a trust receipt
transaction:
1. Entregarla: Money is received under the obligation of
delivering it to the owner of the merchandise sold.
2. Devolvera: Merchandise is received under the obligation to
return to the owner.
Failure of the entrustee to turn over the proceeds of the sale of the
goods or to return the goods not disposed of is a crime under PD 115.
Intent to defraud need not be proven. It is to punish dishonesty and
abuse of confidence, regardless of whether the entruster is the owner
or not.
Ching cannot avoid prosecution simply because he signed as Sr.
VP and had no physical possession over the goods.
o The crime in PD 115 is malum prohibitum and classified as
estafa under Art 315 1(b) of the RPC- estafa with abuse of
confidence.
o It may be committed by both juridical entities and natural
persons.
o A corporation cannot be penalized for a crime punishable by
imprisonment. So, its officers, employees or other persons
responsible for the offense shall be liable, without prejudice
to the civil liabilities of such corporation.
o Such officers are vested with the authority to devise the
means necessary to ensure compliance with the law or
prevent the wrong act. If they fail to do so, they are
criminally liable.
o A corporation may be prosecuted where the imposable penalty is
fine. It may still be fined if the statute prescribes both fine and
imprisonment.
A necessary part of the definition of every crime is the designation of
the author upon whom the penalty is to be inflicted:
 o If the statute designates an act of a corporation and a
punishment therefor, such can be committed only by the
corporation.
o If the statute does not expressly apply to corporations, then the
corporation cannot be punished therefor.
o If the statute designates a crime that may be committed by a
corporation but the penalty is to be suffered by the officers,
only such individual suffer the penalty.
CASE 8: LAND BANK VS PEREZ
FACTS: Petitioner Land Bank of the Philippines (LBP) is a
government financial institution and the official depository of the
Philippines. 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.
ISSUE: WON the disputed transactions is a trust receipt or a loan?
HELD:
1. TRUST RECEIPT.
There are two obligations in a trust receipt transaction. The first is
covered by the provision that refers to money under the 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 (devolvera) to the owner.
Thus, under the Trust Receipts Law,] intent to defraud is presumed
when (1) the entrustee fails to turn over the proceeds of the sale of
goods covered by the trust receipt to the entruster; or (2) when the
entrustee fails to return the goods under trust, if they are not
disposed of in accordance with the terms of the trust receipts.
In all trust receipt transactions, both obligations on the part of the
trustee exist in the alternative the return of the proceeds of the
sale or the return or recovery of the goods, whether raw or
processed. 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.
Article 1371 of the Civil Code provides that [i]n order to judge the
intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered. Under this
provision, we can examine the contemporaneous actions of the
parties rather than rely purely on the trust receipts that they signed
in order to understand the transaction through their intent.
We note in this regard that at the onset of these transactions, LBP
knew that ACDC was in the construction business and that the
materials that it sought to buy under the letters of credit were to be
used for the following projects: the Metro Rail Transit Project and
the Clark Centennial Exposition Project. LBP had in fact
authorized the delivery of the materials on the construction sites
for these projects, as seen in the letters of credit it attached to its
complaint. Clearly, they were aware of the fact that there was no
way they could recover the buildings or constructions for which the
materials subject of the alleged trust receipts had been used.
Notably, despite the allegations in the affidavit-complaint wherein
LBP sought the return of the construction materials, its demand
letter dated May 4, 1999 sought the payment of the balance but
failed to ask, as an alternative, for the return of the construction
materials or the buildings where these materials had been used.
The fact that LBP had knowingly authorized the delivery of
construction materials to a construction site of two
government projects, as well as unspecified construction
sites, repudiates the idea that LBP intended to be the owner
of those construction materials. As a government financial
institution, LBP should have been aware that the materials
were to be used for the construction of an immovable
property, as well as a property of the public domain. As an
immovable property, the ownership of whatever was
constructed with those materials would presumably belong to
the owner of the land, under Article 445 of the Civil Code.
Even if we consider the vague possibility that the materials,
consisting of cement, bolts and reinforcing steel bars, would be
used for the construction of a movable property, the ownership of
these properties would still pertain to the government and not
remain with the bank as they would be classified as property of the
public domain, which is defined by the Civil Code as:
 In contrast with the present situation, it is fundamental in a trust
receipt transaction that the person who advanced payment for the
merchandise becomes the absolute owner of said merchandise
and continues as owner until he or she is paid in full, or if the
goods had already been sold, the proceeds should be turned over
to him or to her.
WHEREFORE, we DENY the petition and AFFIRM the January
20, 2005 decision of the Court of Appeals in CA-G.R. SP No.
76588. No costs.
CASE 9: People v. Cuevo (1981)
FACTS:
This case presents for reexamination the liability for estafa of the holder of
a trust receipt who disposed of the goods covered thereby and, in violation
of its terms, failed to deliver to the bank the proceeds of the sale as
payment of the debt secured by the trust receipt
1) Ben Cuevo having received in trust from the Prudential Bank and
Trust Company merchandise, i.e., 1,000 bags of grind yellow corn
and 1,000 bags of palay specified in a trust receipt covered by
Letter of Credit No. 5643, executed by him in favor of said bank, of
the total value of P24,000.00, to be sold by him, under the express
obligation on the part of the said accused to account for the said
merchandise, or to deliver and turn over to the Prudential Bank
and Trust Company the proceeds of the sale thereof, did then and
there willfully, unlawfully and feloniously defraud the said bank.
2) Said accused once in possession of said merchandise, far from
complying with the aforesaid obligation, notwithstanding repeated
demands made upon him, with intent to defraud, willfully,
unlawfully and feloniously misappropriated, misapplied and
converted the said merchandise or the value, thereof in the sum of
P24,000.00 to his own personal use and benefit, to the damage
and prejudice of the Prudential Bank and Trust Company
3) Upon arraignment, the accused pleaded not guilty. Later, Cuevo
filed a motion to dismiss on the ground that the facts alleged in the
information do not constitute an offense. Judge Ruperto Kapunan,
Jr. granted the motion and dismissed the case but "without
prejudice to whatever civil action the complaining bank may take
to recover the amount of P24,000" which it had advanced to cover
the price of the merchandise delivered to the accused
ISSUE:
Whether the T.C. (Judge Kapunan) erred in dismissing the case holding
that the accused dod not commit Estafa under Art. 315? Yes! The
accused in this case is guilty of Estafa.
RULING:
In the instant case, it is alleged in the indictment that the accused, by
means of a trust receipt, received from the Prudential Bank and Trust
Company 1,000 bags of corn and 1,000 bags of palay to be sold by him
with the express obligation to deliver the proceeds of the sale to the bank
or, if not sold, to account for the merchandise and that, instead of
complying with either obligation, he misappropriated the merchandise or
the value thereof
We hold that even if the accused did not receive the merchandise for
deposit, he is, nevertheless, covered by article 315(l) (b) because after
receiving the price of the sale, he did not deliver the money to the bank or,
if he did not sell the merchandise, he did not return it to the bank.
Those two situations are within the purview of article 315(l) (b). The first
situation is covered by the provision which refers to money received under
the obligation involving the duty to deliver it (entregarla) to the owner of the
merchandise sold
The other contingency is covered by the provision which refers to
merchandise received under the obligation to "return" it (devolvelra) to the
owner
The fact that in the first case the money was received from the purchaser
of the merchandise and not from the bank does not remove it from the
operation of article 315(l) (b). As noted by Justice Street in People vs. Yu
Chai Ho, supra, the conversion by the trustee in a trust receipt of the
proceeds of the sale falls "most literally and directly under" the provisions
of article 315(l) (b).
Thus, it was held that where, notwithstanding repeated oral and written
demands by the bank, the petitioner had failed either to turn over to the
said bank the proceeds of the sale of the goods, or to return said goods if
they were not sold, the petitioner is guilty of estafa under article 315(l) (b)
(Samo vs. People, 115 Phil. 346).
It is relevant to state that Presidential Decree No. 115, the Trust Receipts
Law, regulating trust receipts transactions. One objective of that law is "to
declare the misuse and/or misappropriation of goods or proceeds realized
from the sale of goods, documents or instruments released under trust
receipts as a criminal offense punishable under" article 315.
Section 13 of the decree provides that "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 315 of the Revised
Penal Code.
Trial Courts ratio in case professor asks:
Judge Kapunan, Jr., in sustaining the motion to dismiss, relied on the
Spanish version of paragraph (b) of article 315 wherein the expression
used is "recibido en deposito". In his opinion, that phrase is not accurately
translated as "in trust" and, as he explained, it does not allegedly cover the
conversion or misappropriation of the goods covered by a trust receipt.
The lower court ratiocinated that the contract covered by a trust receipt is
merely a secured loan (U.S. vs. Tan Tok, 15 Phil. 538) where the borrower
is allowed to dispose of the collateral, whereas, in a deposit the depositary
is not empowered to dispose of the property deposited. Hence, the lower
court concluded that the violation of the provisions of the trust receipt gives
rise to a civil action and not to a criminal prosecution for estafa.
The lower court also ventured the opinion that the other phrase in
paragraph (b), por otro titulo que produzca obligacion de entregarla o
devolverla" ("under any other obligation involving the duty to make delivery
of or to return the same") is not applicable because that phrase allegedly
refers to the very "money, goods, or any other personal property received
by the offender" as a deposit, and not to the proceeds of the sale of the
goods covered by the trust receipt.
The lower court observed further that the framers of the Spanish Penal
Code could not have contemplated the inclusion of the trust receipt in
article 315(l) (b) because that transaction did not exist in the nineteenth
century.
I/We hereby agree to hold said goods in trust for the said
corporation (meaning the bank as trustor), and as its
property with liberty to sell the same for its account, but
without authority to make any other disposition whatever
of the said goods or any part thereof (or of proceeds
thereof) either by way of conditional sale, pledge or
otherwise.
In case of sale I/We further agree to hand the proceeds,
as soon as received, to the International Banking
Corporation to apply against the relative acceptances (as
described above) and for the payment of any other
indebtedness of mine/ours to the International Banking
Corporation. (People vs. Yu Chai Ho 53 Phil. 874, 876.)
CASE 10: Vintola vs Vintola
F AC T S :
Petitioner spouses Vintola owns and manages manufact
u r i n g o f r a w s e a shells into finished products, under their business
name, Dax kin International. They applied for domestic letter of credit by
respondent Insular Bank of Asia and America which was granted. Then,
executed a Trust Receipt Agreement with Insular bank stipulating that the
Vintolas shall hold the goods in trust for IBAA. Having defaulted in its
payment, the Vintolas offered to return the goods to IBAA, but the latter
refused. Due to their continued refusal, IBAA charged them with estafa.
The Court acquitted the Vintolas.
ISSUE: W hether or not IBAA b e c a m e t h e r e a l owners of
the goods held in trust by the Vintolas.
RULING: No. Insular bank of Asia and America did not become
the holder or realowner of the goods. The Vintolas retained ownership
of the goods. TheCourt held that the trust receipt arrangement did not
convert the IBAA intoan investor, it remained a lendor and creditor. Under
the law, a trust receipt is a document wherein the entrustee binds himself
to hold thedesignated goods, documents or instruments in trust for the
entruster to sell or otherwise dispose of the goods, to the amount owing to
the entruster.
CASE 11: 11 Prudential Bank vs. National Labor Relations
Commission G.R. No. 112592. December 19, 1995
Topic: trust receipts (Parian)
10. In 3 labor cases, NLRC ordered INTERASIA to pay its employees
wage differentials, separation pay, and other benefits.
 11. Writs of execution were issued and the Sheriff levied on execution
plastic merchandise of INTERASIA.
12. Prudential Bank filed an Affidavit of Third Party Claim asserting
ownership over the seized properties on the strength of trust
receipts executed by INTERASIA in its favor.
13. The Sheriff suspended the public auction sale. But the Labor
Arbiter denied the claim of Prudential Bank and directed the
Sheriff to proceed with the levy of the properties. The merchandise
was sold during the public auction.
14. NLRC dismissed the Third Party Claimants Appeal by the bank.
15. Prudential Bank now questions NLRCs resolution and the validity
of the auction sale in this certiorari---that while it may not have
absolute ownership over the properties, still it has right, interest
and ownership consisting of a security title which attaches to the
properties.
16. That it is a preferred claimant to the proceeds from the foreclosure
to the extent of its security title in the goods otherwise its security
title will become useless.
17. NLRC justifies the dismissal of the third-party claim; that trust
receipts are mere security transactions which do not vest upon
petitioner any title of ownership --- reducing trust receipts to a pure
and simple loan transaction.
ISSUE: WON Prudential Bank is a preferred claimant by virtue of the trust
receipts
HELD: YES. Auction sale void. NLRC decision set aside.
People v. Nitafan: A trust receipt arrangement does not involve a
simple loan transaction between a creditor and debtor-importer.
Apart from a loan feature, the trust receipt arrangement has a
security feature that is covered by the trust receipt itself. The title
of the bank to the security is the one sought to be protected and
not the loan which is a separate and distinct agreement.
By this arrangement a banker advances money to an intending
importer, and thereby lends the aid of credit to the enterprise of
foreign commerce. Much of this trade could hardly be carried on
by any other means, and therefore it is of the first importance that
the fundamental factor in the transaction, the bankers advance of
credit, should receive the amplest protection.
In order to secure that the banker shall be repaid at the critical
pointwhen the imported goods finally reach the hands of the
intended vendeethe banker takes the full title to the goods at the
very beginning, he takes it as soon as the goods are bought and
settled for by his payments, and he continues to hold that title as
his indispensable security until the goods are sold and the vendee
is called upon to pay for them.
This security is not an ordinary pledge by the importer to the
banker, for the importer has never owned the goods, and
moreover, he is not able to deliver the possession, but the security
is the complete title vested originally in the bankers.
In a certain manner, trust receipt contracts partake of the nature of
a conditional sale as provided by the Chattel Mortgage Law; the
importer becomes absolute owner of the imported merchandise as
soon as he has paid its price. The ownership of the merchandise
continues to be vested in the person who has 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.
Sec. 12 of P.D. No. 115 assures the entruster of the validity of his
claim against all creditors
Sec. 12. Validity of entrusters security interest as
against creditors.The entrusters security interest in
goods, documents, or instruments pursuant to the
written terms of a trust receipt shall be valid as against
all creditors of the entrustee for the duration of the trust
receipt agreement.
The security interest of the entruster is not merely an empty
or idle title. To a certain extent, such interest becomes a lien
on the goods because the entrusters advances will have to
be settled first before the entrustee can consolidate his
ownership over the goods.
NLRCs argument that Prudential Bank could not claim
ownership of the properties inasmuch as it did not cancel the
Trust Receipt Agreements and took possession of the
properties is without merit.
The law uses the word may in granting to the entruster the
right to cancel the trust and take possession of the goods.
The bank has the discretion to avail of such right or seek any
alternative action, such as a third-party claim which it deems
best to protect its right, at any time upon default of the
entrustee.
Sec. 7. Rights of the entruster.x x x The entruster
may cancel the trust and take possession of the
goods, documents or instruments subject of the trust
or of the proceeds realized therefrom at any time
upon default or failure of the entrustee to comply with
any of the terms and conditions of the trust receipt or
any other agreement between the entruster and the
entrustee x x x
 The law warrants the validity of Prudential Banks security
interest in the goods pursuant to the written terms of the trust
receipt as against all creditors of the trust receipt agreement.
The only exception to the rule is when the properties are in
the hands of an innocent purchaser for value and in good
faith.
The records however do not show that the winning bidder is
such purchaser. Neither can private respondents plead
preferential claims to the properties as Prudential Bank has
the primary right to them until its advances are fully paid.
CASE 12: PNB vs. Viuda Jose
FACTS: Upon petition of Coleman Petroleum Products Co., Inc.,
which is a mercantile company established in the City of Manila,
Export Petroleum Company of California, Ltd. sent from California to
Manila 1000 drums of gasoline valued at $6,227.50, addressed to
said Coleman Petroleum Products Co., Inc., consigning them to the
plaintiff-appellant Philippine National Bank.
This bank received the merchandise about the middle of July 1933,
together with the bill of lading covering it and the draft for $6,227.50
representing the price thereof. Export Petroleum Company of
California, Ltd. requested the appellant to collect the amount of the
draft from Coleman Petroleum Products Co., Inc. and deliver the
merchandise in question thereto only after it has been paid the price
thereof. Inasmuch as Coleman Petroleum Products Co., Inc., then
had no money to pay the draft, it asked the plaintiff to pay in its stead
in order to enable it to take delivery and dispose of the merchandise.
The plaintiff acceded to the petition on condition that Coleman
Petroleum Products Co., Inc., executed, as it in fact executed, the
"Trust Receipt" in favor of the former.
To better secure the payment of the plaintiff's credit stated in the said trust
receipt, Coleman Petroleum Products Co., Inc., bound itself to have all the
merchandise or the 1,000 drums of gasoline deposited in said plaintiff's
warehouses so that not a single drum could be withdrawn therefrom
without its knowledge. After these arrangements had been made and also
after Coleman Petroleum Products Co., Inc., had executed the trust receipt
above-stated in favor of the plaintiff, the former entered into a contract with
the Manila Railroad Company to supply it with gasoline at P0.42 a gallon
f.o.b. This latter contract of Coleman Petroleum Products Co., Inc.,
became effective about the end of July 1933. The gasoline with which said
company expected to supply the Manila Railroad Company was no other
than that sent to it by Export Petroleum Company of California, Ltd., the
same gasoline proceeds of which was paid by the plaintiff by virtue of the
understanding it had with Coleman Petroleum Products Co., Inc., and
which culminated in the execution of the aforesaid trust receipt.
In consonance with the stipulations and contract entered into between
Coleman Petroleum Products Co., Inc., and the plaintiff regarding the
payment of the sum of $6,227.50 advanced by the latter for the one
thousand drums of gasoline in question, it was agreed between both and
the Manila Railroad Company that the payments to be made by the latter
to Coleman Petroleum Products Co., Inc., would be made directly to the
plaintiff ; and so had it been done thereafter until October 16, 1933.
Such was the state of things when the defendant Viuda e Hijos de Angel
Jose, which had filed an action against Coleman Petroleum Products Co.,
Inc., for the recovery of a certain credit, obtained a judgment against said
company on August 23, 1933. By virtue of a writ of attachment and of
execution issued in said civil case on October 13 and 26, 1933,
respectively, the sheriff garnished the sum of P1,948.03 in the
possession of the Manila Railroad Company as proceeds of the
gasoline supplied to it by Coleman Petroleum Products Co., Inc.,
which sum should have been paid to the plaintiff by virtue of the
arrangements or understanding had between the latter and the said
two companies. Notwithstanding the opposition of the herein plaintiff
which had filed a third party claim therein the in question was applied to
the payment of the judgment rendered in favor of Viuda e Hijos de Angel
Jose, the latter having filed the above-stated bond of P2,200 through the
Fidelity & Surety Co. The plaintiff brought the action dismissed by virtue of
the judgment from which it has appealed, for the purpose of recovering the
sum in question.
It is reasonable that contracts contained in trust receipts, as the one
entered into between the plaintiff-appellant and Coleman Petroleum
Products Co., Inc., should be recognized and protected by the courts
because they are permitted by law, all the more so because there is a
cardinal principle that the contracting parties may establish any
agreements, terms and conditions they may deem advisable, provided
they are not contrary to law, morals, or public order (article 1255, Civil
Code); and certainly the agreements, terms and conditions of the trust
receipt agreement, under consideration are not contrary to law, morals, or
public order. In a certain manner, they partake of the nature of a
conditional sale as provided by the Chattel Mortgage Law, that is, the
importer becomes absolute owner of the imported merchandise as soon
as he has paid its price. The ownership of the merchandise continues to
be vested in the owner thereof or in the person who has 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.
Furthermore, under the very provisions of the Civil Code, the appellant's
credit enjoys preference over any other credit of any other creditor of
Coleman Petroleum Products Co., Inc., and its right to the sum of
P1,948.03 garnished by the defendant sheriff from the Manila Railroad
Co., is superior to that of the defendant Viuda e Hijos de Angel Jose, which
was a mere judgment creditor, on the ground that said sum was the
proceeds of the sale of a part of the one thousand drums of gasoline which
gave rise to the aforesaid trust receipt agreemenT. This is so by virtue of
the provisions contained in articles 1921, 1922 and 1926 of the Civil Code,
the pertinent parts of which read as follows:
ART. 1921. Credits shall be classified for their graduation and
payment in the order and manner specified in this chapter.
ART. 1922. With respect to determinate personal property of the
debtor, the following are preferred:
xxx xxx xxx
2. Credits secured by a pledge in the possession of the creditor,
with respect to the thing pledged and to the extent of its value.
xxx xxx xxx
ART. 1926. Credits which enjoy preference with respect to certain
personal property shall exclude all others to the extent of the value
of the property to which such preference relates.
When two or more creditors claim preference with respect to the
same specific personal property, the following rules shall be
observed as to the priority of payment:
1. Credits secured by a pledge shall exclude all others to the
extent of the value of the thing pledged.
xxx xxx xxx
The credits referred to in the above-cited articles are the so-called
specially privileged credits, or those which, according to Manresa (12 Civil
Code, 4th ed., page 639), enjoy preference with respect to determinate
property of the debtor.
The credit of Viuda e Hijos de Angel Jose as judgment creditor, does not
enjoy the same privilege enjoyed by that of the appellant, which is singular
and special. It is mentioned third only in article 1924 of the Civil Code
referring to credits which, while having preference among themselves,
have none over the specially privileged ones enumerated in articles 1922
and 1923.
For the foregoing reasons, it is declared that the first error assigned by the
appellant is well taken.
As to the second error, the Philippine National Bank contends that the
lower court's conclusion that said appellant lost every preference it had to
the gasoline in question from the time it permitted the sale and delivery
thereof to the Manila Railroad Company, is unfounded, because article
340 of the Code of Commerce upon which it is based is not applicable to
the case in question. In fact the abovecited article recognizes the vendor's
right of preference to the articles sold to obtain payment of the price
thereof, during the time they are in his possession even though they be in
the nature of deposit.
The lower court, however, has lost sight of the fact that the appellant's
purpose in authorizing the delivery to the Manila Railroad Company of said
merchandise, of the price of which the sum of P1,948.03 in question
formed part, was precisely to enable Coleman Petroleum Products Co.,
Inc., to comply not only with the terms of its contract with the Manila
Railroad Company, but also and more principally, with those of the trust
receipt entered into between it and the appellant.
Even granting that Coleman Petroleum Products Co., Inc., may be
considered the vendor of the gasoline, its preferential right to claim the
price of said merchandise from the Manila Railroad Company, which is the
thing attached by the appellee Viuda e Hijos de Angel Jose to be applied
later to satisfy or pay its judgment credit, was, however, expressly and
specially subject to the appellant's right to claim said price for the purpose
of applying it to the amount it had advanced in payment of the draft, , of
Export Petroleum Company of California, Ltd., which was the determining
cause of the execution of the trust receipt Exhibit A-1 by said Coleman
Petroleum Products Co., Inc. For all purposes, the appellee Viuda e Hijos
de Angel Jose was not a third person in connection with the contract
entered into between Coleman Petroleum Products Co., Inc. and the
appellant. Its right was merely that of said Coleman Petroleum Products
Co., Inc. singularly and specially subject, as already stated to the
appellant's credit, admitting now that the appellant was the vendor of the
gasoline in the sense of said article 340 of the Code of Commerce. This
court is of the opinion that the second error is likewise well founded.