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9) ALLIED BANKING CORPORATION vs. HON.

ORDONEZ, and were intended for sale, so there was no deceit that can result to a
ALFREDO CHING violation of the trust receipts law.
G.R. No. 82495 December 10, 1990 Padilla, J.
Digested By: Lopez, A. Issue: W/N PBM through Ching violated the trust receipts law
Topic: Trust Receipts
Held: Yes.
Doctrine: Bold in Held. 1. [Initial determination on w/n the agreement falls under the Trust
Receipts Law] PBM, under the agreement, had the following
Facts: obligations as an entrsutee: (a) receive the proceeds of sale, in trust
1. Philippine Blooming Mills (PBM), through respondent Alfredo Ching, for the entruster and turn over the same to the entruster to the extent
applied for the issuance of commercial letters of credit with Allied of the amount owing to him or as appears on the trust receipt; (b)
Banking (Allied Bank) to finance the purchase of 500 M/T of keep said goods or proceeds thereof whether in money or whatever
Dolomites, and one (1) Lot High Fired Refractory Sliding Nozzle form, separate and capable of identification as property of the
Bricks. entruster; (c) return the goods, documents or instruments in the
2. Allied Bank issued an irrevocable letter of credit in favor of Nikko event of non-sale, or upon demand of the entruster; and (d) observe
Industry, for which Nikko drew 4 drafts. These drafts were accepted all other terms and conditions of the trust receipt not contrary to the
by PBM and paid by Allied Bank. provisions of said Decree.
3. To secure the payment, and in consideration for the transfer of the 2. In trust receipts, there is an obligation to repay the entruster. The
goods to PBM, the latter (as entrustee) executed 4 Trust Receipt entrustee binds himself to sell or otherwise dispose of the entrusted
Agreements, acknowledging Allied Bank’s ownership of the goods goods with the obligation to turn over to the entruster the proceeds if
and PBM’s obligation to turn over the proceeds if sold, and to return sold, or return the goods if unsold or not otherwise disposed of, in
the goods if unsold. accordance with the terms and conditions specified in the trust
4. PBM failed/refused to turn over procceds or return the goods. Hence, receipt. A violation of this undertaking constitutes estafa under Sec.
Allied Bank filed a criminal complaint against Ching for violation of 13, PD 115.
P.D. 115. The Fiscal found a prima facie case for violation of P.D. 3. [As to whether the goods that were for the use in manufacture is
115 so 4 counts was filed in court. covered by the law] The wording of Sec. 13 covers failure to turn
5. This was appealed to the Department of Justice and the Sec. of over the proceeds of the sale of entrusted goods, or to return
Justice Gonzales ruled in favor of Allied Bank. Underscreatary Bello said goods if unsold or disposed of in accordance with the
affirmed the Secretary of Justice. terms of the trust receipts. The non-payment of the amount
6. PBM requested for reconsideration, arguing that the goods were not covered by a trust receipt is an act violative of the entrustee's
procured to be sold as they were fungible/consumable goods used obligation to pay. There is no reason why the law should not
for patching purposes for the steel products, there is no violation of apply to all transactions covered by trust receipts, except those
the trust receipts. expressly excluded.
7. Justice Secretary Ordonez ruled in favor of PBM, saying that the 4. The Court takes judicial notice of customary banking and business
goods were not covered by PD 115 as they were not to be sold as practices where trust receipts are used for importation of heavy
contemplated in the law. equipment, machineries and supplies used in manufacturing
8. Hence, Allied Bank raises this issue in the Supreme Court through a operations. We are perplexed by the DOJ statement that the goods
Certiorari and prohibition. in the instant case are outside the ambit of PD 115 albeit covered by
9. Ching argued that PBM was not in the business of selling dolomites Trust Receipt Agreements and that not all transactions covered by
or nozzle bricks, and that PD 115 covers goods which are ultimately trust receipts may be considered as trust receipt transactions defined
destined for sale and not goods for use in manufacture. Ching and penalized under PD 115. A construction should be avoided
claimed that it was not represented to Allied Bank that the goods when it affords an opportunity to defeat compliance with the terms of
a statute.
5. A construction of a statute which creates an inconsistency should be
avoided when a reasonable interpretation can be adopted which will
not do violence to the plain words of the act and will carry out the
intention of Congress.
6. The penal provision of PD 115 encompasses any act violative of
an obligation covered by the trust receipt; it is not limited to
transactions in goods which are to be sold (retailed), reshipped,
stored or processed as a component of a product ultimately
sold.

WHEREFORE, the petition is granted.