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10 Prudential Bank v. Prudential Bank National Labor Labor cases were decided against Interasia Labor Arbiter – denied the claim.
NLRC Relations based on which writs of execution were
251 SCRA 421 (1995) Commission, issued by NLRC against the former’s NLRC – dismissed Prudential’s
G.R. No. 112592 Cecilia Orquello, et properties. appeal.
December 19, 1995 al., Zenaida Uchi, Et
Al., Alu-Interasia Prudential filed a third party claim SC – granted the petition; ordered
Container asserting ownership over the seized the Sheriff to deliver to Prudential
Industries, Inc., and properties on the strength of Trust the properties subject of the Trust
Raul Remodo Receipts issued to it by Interasia. Receipts.
The petition is impressed with merit. We cannot subscribe to NLRC's simplistic interpretation of trust receipt arrangements. In effect, it has
reduced the Trust Receipt Agreements to a pure and simple loan transaction. This perception was clearly dispelled in People v. Nitafan, citing the
Vintola and Samo cases, where we explained the nature of a trust receipt thus — “(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. (Vintola v. Insular Bank of Asia and America, 150 SCRA 578 [1987] That second feature is what provides the much
needed financial assistance to our traders in the importation or purchase of goods or merchandise through the use of those goods or merchandise
as collateral for the advancements made by a bank (Samo v. People, 115 Phil 346 [1962]). 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.” More importantly, owing to the vital role trust receipts play in
international and domestic commerce, Sec. 12 of P.D. No. 1159 assures the entruster of the validity of his claim against all creditors — “Sec. 12.
Validity of entruster's security interest as against creditors. — The entruster's 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.” From the legal
and jurisprudential standpoint it is clear that the security interest of the entruster is not merely an empty or idle title. To a certain extent, such
interest, such interest becomes a "lien" on the goods because the entruster's advances will have to be settled first before the entrustee can
consolidate his ownership over the goods. A contrary view would be disastrous.

The NLRC argues that inasmuch as petitioner did not cancel the Trust Receipt Agreements and took possession of the properties it could not
claim ownership of the properties. We do not agree. Significantly, the law uses the word "may" in granting to the entruster the right to cancel the
trust and take possession of the goods. Consequently, petitioner has the discretion to avail of such right or seek any alternative action, such as a
third-party claim or a separate civil action which it deems best to protect its right, at anytime upon default or failure of the entrustee to comply with
any of the terms and conditions of the trust agreement. Besides, as earlier stated, the law warrants the validity of petitioner's 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.
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11 Nacu v. Court of Spouses Ramon R. The Court of The Bank extended a loan to a Joint RTC – ruled in favor of the Spouses;
Appeals Nacu and Lourdes Appeals and Venture entity, represented among others ordered the Bank to cancel the
231 SCRA 237 (1994) I. Nacu Pilipinas Bank by Ramon. The Spouses mortgaged one mortgage.
G.R. No. L-108638 of their properties as security. Though the
March 11, 1994 loan was eventually fully paid and CA – reversed the RTC reasoning
extinguished, the Spouses were not able to that the Spouse’s property stood as
secure a cancellation/release of mortgage. continuing securities for the new
Subsequently, the Bank extended a new credit accommodations.
loan to a new joint venture entity, of which
Ramon was still a representative, this time SC - granted the petition and
secured by a Trust Receipt. When the reversed the CA; reinstated the
spouses requested the issuance of a decision of the RTC.
cancellation/release of mortgage, the Bank
refused, citing the new transaction covered
by the Trust Receipt.
The respondent Court in reversing the decision of the trial court, linked the trust receipts, signed by petitioner Nacu, together with Jose Sahagun,
with the real estate mortgage dated June 7, 1982 by finding that under the express terms of the trust receipts in favor of respondent Bank, petitioner
Nacu again bound himself "jointly and severally" with the Trustees (JBS Corporation and PI Construction) for the value of the goods covered by the
instruments. Rather than support the position of respondent Bank, the trust receipt agreement shows that the 1982 real estate mortgage is no longer
operative because otherwise, there would have been no need for the execution of said trust agreement to secure the second loan.

Under pertinent laws, the trust receipt is a separate and independent security transaction intended to aid in financing importers whereby the
imported goods are held as security by the lending institution for the loan obligation. In the case and Vintola v. Insular bank of Asia and America
this Court explained the nature and usage of trust receipts as follows: “A letter of credit-trust receipt arrangement is endowed with its own distinctive
features and characteristics. Under that set-up, a bank extends a loan covered by the letter of credit, with the trust receipt as a security for the loan.
In other words, the transaction involved a loan feature represented by the letter of credit, and security feature which is in the covering trust receipt.
A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a security interest in the goods. It secures an indebtedness and
there can be no such thing as security interest that secures no obligation. 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 or merchandise, and
who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.” Moreover, by virtue of
the trust receipt agreement, respondent Bank should proceed against the same because the trust receipt theoretically transferred the ownership of
the imported personal property to respondent Bank.
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12 South City Homes Inc. South City Homes, BA Finance Trust Receipts were issued by Fortune RTC – ruled in favor of BA and
v. BA Finance Corp. Inc., Fortune Corporation Motors in favor of CARCO covering order Fortune Motors et al. to pay.
371 SCRA 603 (2001) Motors (Phils.), motor vehicles it delivered to the former.
G.R. No. 135462 Palawan Lumber The same were assigned by CARCO to CA – affirmed the decision of the
December 7, 2001 Manufacturing BA. RTC.
Corporation
When Fortune Motors defaulted in SC – affirmed the ruling of the CA
payment and demands for payment went and RTC.
unheeded, BA filed a case for sum of
money against Fortune Motors and its
sureties.
Petitioners finally posit (third issue) that as an entruster, respondent BAFC must first demand the return of the unsold vehicles from Fortune
Motors Corporation, pursuant to the terms of the trust receipts. Having failed to do so, petitioners had no cause of action whatsoever against
Fortune Motors Corporation and the action for collection of sum of money was, therefore, premature. 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. In the
event of default by the entrustee on his obligations under the trust receipt agreement, it is not absolutely necessary that the entruster cancel the trust
and take possession of the goods to be able to enforce his rights thereunder. We ruled:

"x x x Significantly, the law uses the word "may" in granting to the entruster the right to cancel the trust and take possession of the goods.
Consequently, petitioner has the discretion to avail of such right or seek any alternative action, such as a 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."
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13 Rosario Textile Mills v. Rosario Textile Home Bankers Petitioners issued Trust Receipts in favor RTC – ruled in favor of the Bank
Home Bankers Savings Mills Corporation Savings and Trust of the Bank for the importation of raw and ordered the Petitioners to pay.
462 SCRA 88 (2005) and Edilberto Company materials. When it defaulted it payment of
G.R. No. 137232 Yujuico the loans, Petitioners offered to turn-over CA- affirmed the RTC’s judgment.
June 29, 2005 the raw materials to the Bank which
refused. SC – denied the petition and
Subsequently, the same were destroyed by affirmed both the RTC and CA’s
a fire in Petitioner’s premises. With this, judgments.
they argued that they have been relieved
of the obligation to pay.
On the first issue, petitioners theorize that when petitioner RTMC imported the raw materials needed for its manufacture, using the credit line, it
was merely acting on behalf of the bank, the true owner of the goods by virtue of the trust receipts. Hence, under the doctrine of res perit domino,
the bank took the risk of the loss of said raw materials. Petitioners’ stance, however, conveniently ignores the true nature of its transaction with the
bank. The principal transaction between petitioner RTMC and the bank is a contract of loan. RTMC used the proceeds of this loan to purchase
raw materials from a supplier abroad. In order to secure the payment of the loan, RTMC delivered the raw materials to the bank as collateral.
Trust receipts were executed by the parties to evidence this security arrangement. Simply stated, the trust receipts were mere securities.

In Samo vs. People, we described a trust receipt 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." In Vintola vs. Insular Bank of Asia and America, we elucidated further that "a
trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a ‘security interest’ in the goods. It secures an indebtedness and
there can be no such thing as security interest that secures no obligation." Section 3 (h) of the Trust Receipts Law (P.D. No. 115) defines a "security
interest" as follows: "(h) Security Interest means a property interest in goods, documents, or instruments to secure performance of some obligation
of the entrustee or of some third persons to the entruster and includes title, whether or not expressed to be absolute, whenever such title is in
substance taken or retained for security only."

Petitioners’ insistence that the ownership of the raw materials remained with the bank is untenable. In Sia vs. People, Abad vs. Court of Appeals,
and PNB vs. Pineda, we held that: "If under the trust receipt, the bank is made to appear as the owner, it was but an artificial expedient, more of
legal fiction than fact, for if it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with
purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the bank as the true owner from the
inception of the transaction would be to disregard the loan feature thereof..." Thus, petitioners cannot be relieved of their obligation to pay their
loan in favor of the bank.
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14 State Investment House State Investment Court of Appeals, The Spouses Franco bought vehicles from RTC – ruled that the claim of SIHI
v. CA House, Philippine National DMC and paid the same thru promissory was superior to that of PNB.
335 SCRA 703 (2000) Incorporated Bank (PNB) and notes (PNs). Meanwhile, the importation
G.R. No. 130365 (SIHI) Spouses Federico L. of the vehicles was financed by PNB thru CA – reversed the RTC and ruled
July 14, 2000 Franco and letters of credit and Trust Receipts. that PNB’s claims were superior to
Felicisima R. Franco However, subsequent to this, DMC those of SIHI under the Trust
executed a deed of sale of various Receipts Law.
receivables with SIHI, including the
subject PNs. SC – granted the petition by reversing
the CA and affirming the decision of
When DMC defaulted in payment both the RTC.
PNB and SIHI claimed rights over the
PNs forcing the Spouses to file an action
for interpleader to determine who had the
better right over the proceeds of the PN.
Section 7 of the Trust Receipts Law provides that the entruster shall be entitled to the proceeds from the sale of the goods released under a trust
receipt to the entrustee to the extent of the amount owing to the entruster or as appears in the trust receipt. The pivotal issue, therefore, is whether
the goods released under the trust receipt include the vehicles purchased by the Franco spouses from DMC and for which the promissory notes
were issued. PNB contends that this issue is a question of fact. It submits that both the RTC and the Court of Appeals found that the vehicles are
covered by the trust receipts agreement and such findings are conclusive upon this Court. We are not impressed.

The evidence for PNB fails to establish that the vehicles sold to the Francos were among those covered by the trust receipts. As petitioner points
out, neither the trust receipts covering the units imported nor the corresponding bills of lading contain the chassis and engine numbers of the
vehicles in question. PNB asseverates that "the records of the case… is replete with evidence to show that the subject vehicles are indeed covered by
the trust receipts issued by DMC to PNB." However, it has not pointed out which evidence specifically supports its claim. It does not even explain
why the bills of lading for the imported units do not contain the chassis numbers and serial numbers of the subject vehicles.

Verily, PNB has failed to prove its claim by a preponderance of evidence, the weakness of its evidence betrayed by the weakness of its arguments.
SIHI, for its part, has successfully discharged its burden. It is undisputed that the subject notes were covered by the Deed of Sale of receivables
executed by DMC in petitioner’s favor. Accordingly, SIHI is entitled to the promissory notes in question.
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15 Dela Cruz v. Planters Spouses Quirino Planters Products, PPI extended a credit line with a 60-day RTC – rendered judgment in favor of
Products V. Dela Cruz and Inc. (PPI) term for the purchase of agricultural PPI ordering the Spouses to pay.
691 SCRA 28 (2013) Gloria Dela Cruz inputs to Gloria who in turn a document
G.R. No. 158649 labelled “Trust Receipt/Special Credit CA – affirmed in toto the decision of
February 18, 2013 Scheme” in favor of PPI. the RTC.

Despite the lapse of the term and SC – affirmed the decision of the CA
repeated demands, Gloria failed to pay and RTC.
the loan which prompted PPI to file a
complaint for sum of money based on
Gloria’s violation of her fiduciary
undertaking under the Trust Receipt
agreement.
At this juncture, the Court clarifies that the contract, its label notwithstanding, was not a trust receipt transaction in legal contemplation or within the
purview of the Trust Receipts Law (Presidential Decree No. 115) such that its breach would render Gloria criminally liable for estafa. Under
Section 4 of the Trust Receipts Law, the sale of goods by a person in the business of selling goods for profit who, at the outset of the transaction,
has, as against the buyer, general property rights in such goods, or who sells the goods to the buyer on credit, retaining title or other interest as
security for the payment of the purchase price, does not constitute a trust receipt transaction and is outside the purview and coverage of the law.

It is not amiss to point out that the RTC even erred in citing Section 4 of the Trust Receipts Law as its basis for ordering Gloria to pay the total
amount of ₱240,355.10. Section 13 of the Trust Receipts Law considers 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" as constituting
the crime of estafa under Article 315 (b) of the Revised Penal Code. However, had PPI intended to charge Gloria with estafa, it could have then
done so. Instead, it brought this collection suit, a clear indication that the trust receipts were only collaterals for the credit line as agreed upon by the
parties. Under her arrangement with PPI, the trust receipts were mere securities for the credit line granted by PPI, having in fact indicated in her
application for the credit line that the trust receipts were "collaterals" or separate obligations "attached to any other contract to guaranty its
performance."

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.
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16 Pilipinas Bank v. Ong Pilipinas Bank Alfredo T. Ong and BMC through its President, Ong, applied Prosecutor – dismissed the
387 SCRA 37 (2002) Leoncia Lim for a letter of credit with the Bank for the Complaint.
G.R. No. 133176 purchase of lumber. It further executed a
August 8, 2002 Trust Receipt in favor of the Bank. DOJ – denied the MR.

After it defaulted in payment, BMC filed a CA – set aside the decisions of the
petition for rehabilitation during the DOJ and Prosecutor and directed the
proceedings of which, BMC and the Bank filing of appropriate criminal actions.
entered into a MOA with respect to the But it reversed itself upon MR.
loan. When BMC violated the MOA, the
Bank filed a criminal case against it under SC – denied the petition and
the Trust Receipts Law. affirmed the CA.
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 Revised Penal Code.19 If the violation or offense is
committed by a corporation, the penalty shall be imposed upon the directors, officers, employees or other officials or persons therein responsible
for the offense, without prejudice to the civil liabilities arising from the criminal offense. It is on this premise that petitioner bank charged
respondents with violation of the Trust Receipts Law. 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. 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 petitioner bank
made a demand upon BMC on February 11, 1994 to comply with its obligations under the trust receipts, the latter was already under the control of
the Management Committee created by the SEC in its Order dated January 8, 1992.23 The Management Committee took custody of all BMC’s
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 BMC’s obligations. Moreover, it has not escaped this Court’s
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, respondents’ intent to misuse or misappropriate the goods or their proceeds has not been established by the records.

Contrary to petitioner's contention, the MOA did not only reschedule BMC’s debts, but more importantly, it provided principal conditions which
are incompatible with the trust agreement. Hence, applying the pronouncement in Quinto, we can safely conclude that the MOA novated and
effectively extinguished BMC's obligations under the trust receipt agreement.
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17 Bank of Commerce v. Bank of Teresita S. Serrano Via Moda, represented by Serrano, RTC – found Serrano guilty of estafa
Serrano Commerce (BOC) obtained a loan from BOC secured by a and held her criminally and civilly
451 SCRA 484 (2005) Letter of Credit. To secure the release of liable.
G.R. NO. 151895 the goods covered, Serrano executed a
February 16, 2005 Trust Receipt in favor of BOC. CA – reversed the RTC and
acquitted Serrano.
When Via Moda defaulted in payment,
BOC charged Serrano of Estafa in SC – denied the petition for lack of
relation to the Trust Receipts law. merit and affirmed the CA’s ruling.
A letter of credit is a separate document from a trust receipt. While the trust receipt may have been executed as a security on the letter of credit,
still the two documents involve different undertakings and obligations. A letter of credit is an engagement by a bank or other person made at the
request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit.
Through a letter of credit, the bank merely substitutes its own promise to pay for the promise to pay of one of its customers who in return promises
to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. By contrast, a trust
receipt transaction is one where the entruster, who holds an absolute title or security interests over certain goods, documents or instruments,
released the same to the entrustee, who executes a trust receipt binding himself to hold the goods, documents or instruments in trust for the
entruster and to sell or otherwise dispose of the goods, documents and 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 return 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.

On the second issue, the Court of Appeals held that respondent Serrano cannot be held civilly liable under the trust receipt since she was not made
personally liable nor was she a guarantor therein. The parties stipulated during the pre-trial that respondent Serrano executed the trust receipt in
representation of Via Moda, Inc., which has a separate personality from Serrano, and petitioner BOC failed to show sufficient reason to justify the
piercing of the veil of corporate fiction. It thus ruled that this was not Serrano's personal obligation but that of Via Moda and there was no basis of
finding her solidarily liable with Via Moda. Worthy of mention at this point is the Court of Appeals' finding that there was no misappropriation or
conversion by the respondent of the proceeds of the sale in the goods, subject of the trust receipt since the proceeds were actually received by
petitioner but the latter applied the same to Via Moda's other obligations under the export packing loan. It further stated that such application of
payment to another obligation was done by petitioner on its own and should not create a criminal liability on the part of respondent who did not
take part nor had any knowledge thereof. It is on this premise that the respondent was acquitted of the crime charged.
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18 Prudential Bank v. IAC Prudential Bank Intermediate PRMI, represented by Chi, opened a RTC – held PRMI liable for the
216 SCRA 257 (1992) (PB) Appellate Court, Letter of Credit with PB for the drafts but not on the basis of the
G.R. No. 74886 Philippine Rayon importation of machineries. As a security Trust Receipts and ruled that Chi was
December 8, 1992 Mills, Inc. (PRMI) for the release of the machineries to not solidary liable with PRMI.
and Anacleto R. Chi PRMI, Chi signed a Trust Receipt in favor
of PB. CA – affirmed the ruling of the RTC.
When PRMI defaulted in payment and
after repeated demands from PB, the SC – granted the petition and
latter filed a collection case against PRMI reversed the RTC and the CA.
and Chi.
The trial court and the public respondent likewise erred in disregarding the trust receipt and in not holding that Philippine Rayon was liable
thereon. Under P.D. No. 115, otherwise known an the Trust Receipts Law, which took effect on 29 January 1973, a trust receipt transaction is
defined as "any transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree as the
entrustee, whereby the entruster, who owns or holds absolute title or security interests' 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 the "trust
receipt" wherein the entrustee binds himself to hold the designated 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 thereof to the extent of the
amount owing to the entruster or as appears in the trust receipt or the goods, instruments themselves if they are unsold or not otherwise disposed
of, in accordance with the terms and conditions specified in the trusts receipt, or for other purposes substantially equivalent to any one of the
following: . . ."

Under Section 13 of the Trust Receipts Law, the failure of an entrustee to turn over the proceeds of the sale of goods, documents or instruments
covered by a trust receipt to the extent of the amount owing to the entruster or as appear 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, paragraph 1(b) of the Revised Penal Code. 25 Under Article 33 of the Civil Code, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured party in cases of defamation, fraud and physical injuries.
Estafa falls under fraud. We also conclude, for the reason hereinafter discussed, and not for that adduced by the public respondent, that private
respondent Chi's signature in the dorsal portion of the trust receipt did not bind him solidarily with Philippine Rayon. Our own reading of the
questioned solidary guaranty clause yields no other conclusion than that the obligation of Chi is only that of a guarantor. This is further bolstered by
the last sentence which speaks of waiver of exhaustion, which, nevertheless, is ineffective in this case because the space therein for the party whose
property may not be exhausted was not filled up. However, Chi's liability is limited to the principal obligation in the trust receipt plus all the
accessories thereof including judicial costs.
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19 Hur Tin Yang v. People Hur Tin Yang People of the Supermax, represented by Hur, obtained RTC – convicted Hur of the crime of
703 SCRA 606 (2013) Philippines Letters of Credit from Metrobank to pay Estafa in relation to the Trust
G.R. No. 195117 for construction materials. Thereafter, Receipts law.
August 14, 2013 Metrobank required Hur to sign Trust
Receipts as security for the said materials. CA – affirmed the conviction.

When Supermax failed to pay, Metrobank SC – reconsidered its minute

filed a criminal action for Estafa against resolution and acquitted Hur.
Hur.
The sole issue for the consideration of the Court is whether or not petitioner is liable for Estafa under Art. 315, par. 1(b) of the RPC in relation to
PD 115, even if it was sufficiently proved that the entruster (Metrobank) knew beforehand that the goods (construction materials) subject of the
trust receipts were never intended to be sold but only for use in the entrustee’s construction business. The motion for reconsideration has merit.

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. Simply stated, 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. 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. Nonetheless, 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.

The Court’s ruling in Colinares v. Court of Appeals is very apt, thus: “The practice of banks of making borrowers sign trust receipts to facilitate
collection of loans and place them under the threats of criminal prosecution should they be unable to pay it may be unjust and inequitable. if not
reprehensible. Such agreements are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved. The resort to
this scheme leaves poor and hapless borrowers at the mercy of banks and is prone to misinterpretation x x x.”

Unfortunately, what happened in Colinares is exactly the situation in the instant case. This reprehensible bank practice described in Colinares
should be stopped and discouraged. For this Court to give life to the constitutional provision of non-imprisonment for nonpayment of debts,22 it is
imperative that petitioner be acquitted of the crime of Estafa under Art. 315, par. 1 (b) ofthe RPC, in relation to PD 115.
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20 Gonzales v. HSBC Jose Antonio U. Hongkong & On behalf of MLRC, Jose signed Trust Prosecutor – found Jose liable for
537 SCRA 255 (2007) Gonzalez Shanghai Banking Receipts covering golfing equipments and Estafa in connection with the Trust
G. R. No. 164904 Corporation assorted Walt Disney items in favor of Receipts Law.
October 19, 2007 (HSBC) HSBC.
DOJ – affirmed the findings of the
When the due date for payment of the Prosecutor.
Trust Receipts lapsed and demands for
payment went unheeded, HSBC CA – affirmed the decision of the
demanded the return of the items DOJ.
covered. However, MLRC also failed to
return the said items which prompted SC – denied the petition for lack of
HSBC to file an Estafa case against Jose. merit and affirmed the Court a quo.
In general, a trust receipt transaction imposes upon the entrustee the obligation to deliver to the entruster the price of the sale, or if the
merchandise is not sold, to return the same to the entruster. There are thus 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
merchandise received under the obligation to "return" it (devolvera) to the owner. A violation of any of these undertakings constitutes estafa defined
under Art. 315(1)(b) of the Revised Penal Code, as provided by Sec. 13 of Presidential Decree 115.

As found in the complaint-affidavit of respondent HSBC’s representative, petitioner Gonzalez is charged with failing to turn over "to the Bank a
single centavo of the proceeds of the sale of the (assorted) goods covered by the Trust Receipts, or x x x"40 or to return any of the assorted goods.
That petitioner Gonzalez neither had the intent to defraud respondent HSBC nor personally misused/misappropriated the goods subject of the
trust receipts is of no moment. The offense punished under Presidential Decree No. 115 is in the nature of malum prohibitum. A mere failure to
deliver the proceeds of the sale or the goods if not sold, constitutes a criminal offense that causes prejudice not only to another, but more to the
public interest. This is a matter of public policy as declared by the legislative authority. Moreover, this Court already held previously that 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 Art. 315(1)(b) of the Revised Penal Code without
need of proving intent to defraud. Though petitioner Gonzalez signed the Trust Receipts merely as a corporate officer of MLRC and had no
physical possession of the goods subject of such receipts, he cannot avoid responsibility for violation of Presidential Decree No. 115. The rationale
for making such officers and employees responsible for the offense is that they are vested with the authority and responsibility to devise means
necessary to ensure compliance with the law and, if they fail to do so, are held criminally accountable; thus, they have a responsible share in the
violations of the law. And second, a corporation or other juridical entity cannot be arrested and imprisoned; hence, cannot be penalized for a crime
punishable by imprisonment.
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21 Development Bank of Development Bank Prudential Bank Litex executed Trust Receipts (TR) in RTC – ruled in favor of PB and
the Philippines v. of the Philippines (PB) favor of PB for the release of articles to be recognized its title to the articles
Prudential Bank used in its textile mill. Meanwhile, to under the TR Law.
476 SCRA 627 (2005) secure a loan from DBP, Litex mortgaged
G. R. No. 164904 its equipments and machineries, among CA – affirmed the decision of the
October 19, 2007 which where the articles covered by the RTC.
TR.
SC – denied the petition for lack of
When Litex defaulted in payment, DBP merit and affirmed the Court a quo.
foreclosed the mortgage, despite
opposition from PB, who claimed that the
articles covered by the TR were its
properties; hence, Litex had no right to
mortgage them.
In a trust receipt transaction, the goods are released by the entruster (who owns or holds absolute title or security interests over the said goods) to
the entrustee on the latter’s execution and delivery to the entruster of a trust receipt. The trust receipt evidences the absolute title or security
interest of the entruster over the goods. As a consequence of the release of the goods and the execution of the trust receipt, a two-fold obligation is
imposed on the entrustee, namely: (1) to hold the designated goods, documents or instruments in trust for the purpose of selling or otherwise
disposing of them and (2) to turn over to the entruster either 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. Thus, in a trust receipt transaction, the release of the goods to the entrustee, on his execution of
a trust receipt, is essentially for the purpose of their sale or is necessarily connected with their ultimate or subsequent sale.

The various agreements between Prudential Bank and Litex commonly denominated as "trust receipts" were valid. As the Court of Appeals
correctly ruled, their provisions did not contravene the law, morals, good customs, public order or public policy. 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. Litex had neither absolute ownership, free disposal nor the
authority to freely dispose of the articles. 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. Thus, DBP could not be
considered either as a mortgagee or as a purchaser in good faith. DBP merely stepped into the shoes of Litex as trustee of the imported articles
with an obligation to pay their value or to return them on Prudential Bank’s demand. By its failure to pay or return them despite Prudential Bank’s
repeated demands and by selling them to Lyon without Prudential Bank’s knowledge and conformity, DBP became a trustee ex maleficio.
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22 Vintola v. Insular Bank Spouses Tirso I. Insular Bank of Asia To secure the release of raw sea shells, the RTC – ruled in favor of IBAA and
159 SCRA 140 (1987 Vintola and Loreto and America Spouses executed a Trust Receipt (TR) in ordered the Spouses to pay.
and 1988) Dy Vintola (IBAA) favor of IBAA. When the Spouses were
G.R. No. 73271 unable to pay their loan obligation, they CA – affirmed the decision of the
May 29, 1987 offered to return the raw sea shells to RTC.
and IBAA which the latter refused.
G.R. No. 78671 SC – denied the petition for lack of
March 25, 1988 Thereafter, IBAA filed an Estafa case merit and affirmed the Court a quo.
against the spouses who were eventually
acquitted. Thus, IBAA bought a civil case
to recover the loan amounts plus interest
G.R. No. 73271
A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a "security interest" in the goods. "It secures an indebtedness
and there can be no such thing as security interest that secures no obligation." As elucidated in Samo vs. People "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." Contrary to the allegation of the VINTOLAS, IBAA did not become the real owner of the goods. It was merely the
holder of a security title for the advances it had made to the VINTOLAS The goods the VINTOLAS had purchased through IBAA financing
remain their own property and they hold it at their own risk. The trust receipt arrangement did not convert the IBAA into an investor; the latter
remained a lender and creditor. Since the IBAA is not the factual owner of the goods, the VINTOLAS cannot justifiably claim that because they
have surrendered the goods to IBAA and subsequently deposited them in the custody of the court, they are absolutely relieved of their obligation
to pay their loan because of their inability to dispose of the goods. The fact that they were unable to sell the seashells in question does not affect
IBAA's right to recover the advances it had made under the Letter of Credit.
G.R. No. 78671
To support their case, the VINTOLAS argue that their return of the goods amounted to recovery by IBAA and to order them to further make
payment would be tantamount to double recovery. According to them, "the situation is akin to an act or omission constituting both a quasi-delict
under the Civil Code and also criminal negligence under the Revised Penal Code" [Petition, p. 15], hence they invoke the rule under Art. 2177 of
the New Civil Code against double recovery. The VINTOLAS' reliance on said provision of law is erroneous. As correctly argued by IBAA, there
is no double recovery since the bank has not yet recovered from them, The VINTOLAS' deposit in court of the puka and olive shells does not
amount to recovery by IBAA.
 CASE TITLE AND PETITIONER/S RESPONDENT/S FACTS OF THE CASE STATEMENT OF THE CASE
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23 Philippine National Philippine National Hon. Gregorio G. TCC was granted a loan by PNB, secured RTC – ruled in favor of PNB as
Bank v. Pineda Bank (PNB) Pineda, in his by a mortgage of the properties of the regards foreclosure but the execution
197 SCRA 1 (1991) capacity as Presiding Arroyo Spouses (also sureties of TCC), was prevented via injunction ordered
G.R. No. L-46658 Judge of the Court for the importation of cement plant by Judge Pineda of a different
May 13, 1991 of First Instance of machinery and equipment. Trust Receipts branch.
Rizal, Branch XXI were also issued for the release of the
and Tayabas machinery. SC – granted the petition and
Cement Company, nullified the order of Judge Pineda.
Inc. (TCC) When TCC failed to pay, PNB
repossessed the machinery. Thereafter, it
also sought to foreclose the mortgage
which TCC opposed through a petition
for injunction.
We rule for the petitioner PNB. It must be remembered that PNB took possession of the imported cement plant machinery and equipment
pursuant to the trust receipt agreement executed by and between PNB and TCC giving the former the unqualified right to the possession and
disposal of all property shipped under the Letter of Credit until such time as all the liabilities and obligations under said letter had been discharged.
n the case of Vintola vs. Insular Bank of Asia and America wherein the same argument was advanced by the Vintolas as entrustees of imported
seashells under a trust receipt transaction, we said: “Contrary to the allegation of the VINTOLAS, IBAA did not become the real owner of the
goods. It was merely the holder of a security title for the advances it had made to the VINTOLAS. The goods the VINTOLAS had purchased
through IBAA financing remain their own property and they hold it at their own risk. The trust receipt arrangement did not convert the IBAA into
an investor; the latter remained a lender and creditor. xxx xxx xxx Since the IBAA is not the factual owner of the goods, the VINTOLAS cannot
justifiably claim that because they have surrendered the goods to IBAA and subsequently deposited them in the custody of the court, they are
absolutely relieved of their obligation to pay their loan because of their inability to dispose of the goods. The fact that they were unable to sell the
seashells in question does not affect IBAA's right to recover the advances it had made under the Letter of Credit.”

PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of
Credit, said possession by itself cannot be considered payment of the loan secured thereby. Payment would legally result only after PNB had
foreclosed on said securities, sold the same and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to
foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes
the sale itself.
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24 Ramos v. CA Trinidad Ramos The Honorable Ramos applied for and was granted by RTC – convicted Ramos of Estafa in
153 SCRA 135 (1987) Court of Appeals PNCB letters of credit for the purchase of relation to the Trust Receipts Law.
G.R. No. L-39922-25 and People of the different merchandise. On the same date
August 21, 1987 Philippines of the application, Trust Receipts were CA – affirmed the conviction.
also signed by Ramos.
SC – acquitted Ramos.
When the drafts weren’t paid upon due
date, PNCB filed a case for Estafa against
Ramos.
Examined against the evidence of record, the assailed factual findings as to the receipt of the merchandise and the damage sustained by the Bank
cannot stand. The proofs are indeed inadequate on these propositions of fact. It is difficult to accept the prosecution's theory that it has furnished
sufficient proof of delivery by the introduction in evidence of the commercial invoices attached to the applications for the letters of credit and of the
trust receipts. The invoices are actually nothing more than lists of the items sought to be purchased and their prices; and it can scarcely be believed
that goods worth no mean sum actually transferred hands without the unpaid vendor requiring the vendee to acknowledge this fact in some way,
even by a simple signature on these documents alone if not in fact by the execution of some appropriate document, such as a delivery receipt.

The trust receipts do not fare any better as proofs of the delivery to Ramos of the goods. Except for the invoices, an documents relating to each
trust receipt agreement, including the trust receipts themselves, appear to be standard Bank forms accomplished by the Bank personnel, and were
all signed by Ramos in one sitting, no doubt with a view to facilitating the pending transactions between the parties. If, as she claims, Ramos was
made to believe that bank usage or regulations require the signing of the papers in this way, i.e., on a single occasion, there was neither reason nor
opportunity for her to question the statement therein of receipt of the goods since it was evidently assumed that delivery to her of the goods would
shortly come to pass.

At any rate, Ramos has categorically and consistently denied ever having received the goods either from the Bank or the suppliers. And this was
because, according to her, the suppliers simply refused to part with the goods as no payment had been made therefor by the Bank. Now, the issue
could quite easily have been resolved by the production of the delivery receipts or the testimony of the employees who made the supposed
deliveries. And the prosecution could not have been unaware of such evidence, its ready accessibility, and its importance, specially after the
appellant had disclaimed receipt of the goods in question. Yet the existence of that evidence is placed in serious doubt by the fact that the
prosecution made no effort to bring it before the Court, although it could have done so routinely and without any difficulty whatever. Certainly, this
omission cannot be taken against the accused, who is presumed innocent until the contrary is proved beyond reasonable doubt. It is after all the
duty of the prosecution to establish the existence of all the elements of the crime charged.
 CASE TITLE AND PETITIONER/S RESPONDENT/S FACTS OF THE CASE STATEMENT OF THE CASE
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25 Metropolitan Bank v. Metropolitan Bank Joaquin Tonda and The Tondas were granted letters of credit Prosecutor – dismissed the
Tonda and Trust Ma. Cristina Tonda by Metrobank for the importation of raw complaint.
338 SCRA 254 (2000) Company (Tondas) textile materials. They also executed trust
G.R. No. 134436 (Metrobank) receipts to secure the release of the DOJ – reversed the prosecutor and
August 16, 2000 materials. ordered the filing of information.

When they failed to pay the obligation, CA – reversed the DOJ and
negotiations for loan restructuring were dismissed the case.
commenced but fell through, prompting
Metrobank to file an Estafa case. SC – set aside the decision of the CA
and affirmed the ruling of the DOJ.
The Court of Appeals gravely erred in reversing the Department of Justice on the finding of probable cause to hold the TONDAS for trial. The
documentary evidence presented during the preliminary investigation clearly show that there was probable cause to warrant a criminal prosecution
for violation of the Trust Receipts Law. It is plain to see that the Trust Receipts Law declares the failure to turn over the goods or the proceeds
realized from the sale thereof, as a criminal offense punishable under Article 315 (1) (b) of the Revised Penal Code. The law is violated whenever
the entrustee or the person to whom the trust receipts were issued in favor of fails to: (1) return the goods covered by the trust receipts; or (2)
return the proceeds of the sale of the said goods. The foregoing acts constitute estafa punishable under Article 315 (1) (b) of the Revised Penal
Code. Given that various trust receipts were executed by the TONDAS and that as entrustees, they did not return the proceeds from the goods
sold nor the goods themselves to METROBANK, there is no dispute that that the TONDAS failed to comply with the obligations under the trust
receipts despite several demands from METROBANK.Reliance on the negotiations for the settlement of the trust receipts obligations between the
TONDAS and METROBANK is simply misplaced. The negotiations pertain and affect only the civil aspect of the case but does not preclude
prosecution for the offense already committed. It has been held that "[a]ny compromise relating to the civil liability arising from an offense does not
automatically terminate the criminal proceeding against or extinguish the criminal liability of the malefactor." As to the statement of the Court of
Appeals that there is no evidence that METROBANK has been damaged by the proposal and the deposit, it must be clarified that the damage can
be traced from the non-fulfillment of an entrustee's obligation under the trust receipts. The nature of trust receipt agreements and the damage
caused to trade circles and the banking community in case of violation thereof was explained in People vs. Nitafan, as follows: “Trust receipts are
indispensable contracts in international and domestic business transactions.1âwphi1 The prevalent use of trust receipts, the danger of their misuse
and/or misappropriation of the goods or proceeds realized from the sale of goods, documents or instruments held in trust for entruster-banks, and
the need for regulation of trust receipt transactions to safeguard the rights and enforce the obligations of the parties involved are the main thrusts of
P.D. 115.”The finding that there was no fraud and deceit is likewise misplaced considering that the offense is punished as a malum prohibitum
regardless of the existence of intent or malice. A mere failure to deliver the proceeds of the sale or the goods if not sold, constitutes a criminal
offense that causes prejudice not only to another, but more to the public interest.
 CASE TITLE AND PETITIONER/S RESPONDENT/S FACTS OF THE CASE STATEMENT OF THE CASE
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26 Robles v. CA Damian Robles The Court of Roberto Ng entrusted various business RTC – convicted Robles of Estafa.
199 SCRA 195 (1991) Appeals and the machines to Robles which were covered
G.R. No. L-59640 People of the by delivery trust receipts (DTR) wherein CA – affirmed the conviction.
July 15, 1991 Philippines the latter agreed to sell them and remit the
proceeds of the sales to Roberto Ng, or to SC – denied the petition and
return the items if they are unsold. affirmed the conviction.
When Robles was charged with Estafa for
non-payment and failure to return the
machines, he argued that the DTR were
"mere formalities" the terms of which were
not intended by the parties to govern their
transactions.
We note in this connection that the delivery trust receipts here involved in fact constituted trust receipts within the meaning of Presidential Decree
No. 115, known as the "Trust Receipts Law," which took effect on 29 January 1973. We note that under Section 13 of the Trust Receipts Law, the
violation by an entrustee of his obligations under a trust receipt document, more specifically his failure to turnover the proceeds of the sale of the
goods covered by the trust receipt, or to return said goods as they were not sold or disposed of, would constitute the crime of estafa under Article
315 (1) (b), Revised Penal Code.

In the case at bar, the acts of petitioner which were complained of were committed between 19 November 1976 and 9 March 1977, that is, long
after the beginning date of effectivity of Presidential Decree No. 115. In accordance with the provisions of Section 13, Presidential Decree No. 115,
quoted above, the failure of petitioner Damian Robles to turnover to the entruster Paramount the proceeds of the sale of goods covered by the
delivery trust receipts and to return the said goods, constituted estafa punishable under Article 315 (1) (b) of the Revised Penal Code. It is also
pertinent to point out that quite apart from and even in the absence of the provisions of Section 13 of the Trust Receipt Law, the failure of Damian
Robles to comply with his fiduciary obligation under the delivery trust receipts here involved, constituted the offense of estafa punishable under
Article 315 (1) (b) of the Revised Penal Code. In other words, the elements of the offense of estafa set out in Article 315 (1) (b) are present in the
instant case. Those elements are: (1) "unfaithfulness or abuse of confidence;" (2) "misappropriating . . . money or goods . . .; (3) received by the
offender in trust or on commission . . . or under any other obligation involving the duty to make delivery of or to return the same . . .;" and (4) "to
the prejudice of another." The delivery trust receipts, in the case at bar, admittedly signed by petitioner Damian Robles imposed on him the duty to
return the article or the proceeds thereof to Paramount within two (2) days from the specified dates of the trust receipts. The failure to account,
upon demand, for funds or property held in trust is evidence of misappropriation10 which, not having been explained away or rebutted by
petitioner Damian Robles, warranted his conviction for estafa under the Revised Penal Code. This was settled doctrine long before the
promulgation of the Trust Receipts Law.
 CASE TITLE AND PETITIONER/S RESPONDENT/S FACTS OF THE CASE STATEMENT OF THE CASE
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27 Land Bank of the Land Bank of the Lamberto C. Perez, Respondents, as officers of ACDC, signed Prosecutor – dismissed the
Philippines v. Perez Philippines (LBP) Nestor C. Kun, Ma. Trust Receipts to secure the release of complaint.
672 SCRA 117 (2012) Estelita P. Angeles- construction materials from LBP.
G.R. No. 166884 Panlilio, and DOJ – reversed the resolution of the
June 13, 2012 Napoleon O. Garcia When ACDC failed to pay, LBP prosecutor and directed the filing of
instituted an Estafa case against the an information in court.
Respondents in relation to the Trust
Receipts Law. Respondents argued that CA – reversed the decision of the
the transactions were not covered by the DOJ and dismissed the case.
said law in view of the nature of the
materials covered by the Trust Receipt. SC – denied the petition and
affirmed the CA.
The disputed transactions are not 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. 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. Thus, in concluding that the transaction was a loan and not a trust receipt,
we noted in Colinares that the industry or line of work that the borrowers were engaged in was construction. We pointed out that the borrowers
were not importers acquiring goods for resale. Indeed, goods sold in retail are often within the custody or control of the trustee until they are
purchased. Based on these premises, we cannot consider the agreements between the parties in this case to be trust receipt transactions because (1)
from the start, the parties were aware that ACDC could not possibly be obligated to reconvey to LBP the materials or the end product for which
they were used; and (2) from the moment the materials were used for the government projects, they became public, not LBP’s, property. Since
these transactions are not trust receipts, an action for estafa should not be brought against the respondents, who are liable only for a loan.

Even if we assume that the transactions were trust receipts, the complaint against the respondents still should have been dismissed. The Trust
Receipts Law 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 or not. The law does not singularly seek to enforce payment of the loan, as "there can be no violation of [the] right
against imprisonment for non-payment of a debt." In this case, no dishonesty or abuse of confidence existed in the handling of the construction
materials.