G.R. No. 90828 – MELVIN COLINARES and LORDINO VELOSO, petitioners, vs. HONORABLE COURT OF APPEALS, and THE PEOPLE OF THE PHILIPPINES, respondents.
DAVIDE, JR., C.J.
Rule Synopsis
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.
Facts
Petitioners were contracted by Carmelite Sisters for the construction of their convent. They obtained materials from CM Builders, and obtained a credit line from Ph Banking Corp. for the payment. The latter approved. The petitioners also signed a proforma trust receipt as security. Petitioners failed to pay the loan despite demands from PBC. Through a complaint filed by PBC, petitioners were prosecuted for violation of the trust receipts law, in relation to estafa. RTC and CA held them guilty. SC reversed saying that PBC and petitioners merely intended to enter into a contract of loan and not a trust receipt.
Issue
What is the true nature of the contract between Petitioners and PBC?
Ruling and Discussion
True nature of the contract between Petitioners and PBC is a loan and not a trust receipt.
A trust receipt transaction is any transaction by and between a person referred to as the entruster, and another person referred to as the entrustee, whereby the entruster who owns or holds absolute title or security interest over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt” wherein the entrustee binds himself to hold the designated goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt (Section 4, P.D. No. 115).
There are two possible situations in a trust receipt transaction: (a) 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; (b) 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 Arti cle 315 (1) of the RPC without need of proving intent to defraud.
THE TRANSACTION INTENDED BY THE PARTIES WAS A SIMPLE LOAN, NOT A TRUST RECEIPT AGREEMENT.
(a) Petitioners received the merchandise from CM 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.
(b) 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.
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.
Petitioners are also not importers acquiring the goods for re-sale, contrary to the express provision embodied in the trust receipt. They are contractors who obtained the fungible goods for their construction project. At no time did title over the construction materials pass to the bank, but directly to the Petitioners from CM Builders Centre. This impresses upon the trust receipt in question vagueness and ambiguity, which should not be the basis for criminal prosecution in the event of violation of its provisions.
dispositive
Judgment reversed and set aside. Petitioners acquitted.