Trust Receipts

SECURITY BANK CORPORATION, Petitioner, v. GREAT WALL

COMMERCIAL PRESS COMPANY, INC., ALFREDO BURIEL ATIENZA,
FREDINO CHENG ATIENZA AND SPS. FREDERICK CHENG ATIENZA AND
MONICA CU ATIENZA, Respondents.
G.R. No. 219345, January 30, 2017
MENDOZA, J.

FACTS:
In 2013, Security Bank filed a Complaint for Sum of Money (with
Application for Issuance of a Writ of Preliminary Attachment) against respondents
Great Wall Commercial Press Company, Inc. (Great Wall) and its sureties before
the RTC. The complaint sought to recover from respondents their unpaid
obligations under a credit facility covered by several trust receipts and surety
agreements.

Security Bank argued that in spite of the lapse of the maturity date of the
obligations, respondents failed to pay their obligations. After due hearing, the
RTC granted the application for a writ of preliminary attachment of Security Bank,
which then posted a bond in the amount of P10,000,000.00.

On June 3, 2013, respondents filed their Motion to Lift Writ of Preliminary

Attachment Ad Cautelam, claiming that the writ was issued with grave abuse of
discretion based on the following grounds: (1) Security Bank's allegations in its
application did not show a prima facie basis therefor; (2) the application and the
accompanying affidavits failed to allege at least one circumstance which would
show fraudulent intent on their part; and (3) the general imputation of fraud was
contradicted by their efforts to secure an approval for a loan restructure.

In its Order, the RTC denied respondents' motion to lift, explaining that the;
1. that respondents executed various trust receipt agreements but did not
pay or return the goods covered by the trust receipts in violation
thereof;
2. that they failed to explain why the goods subject of the trust receipts
were not returned and the proceeds of sale thereof remitted

Upon appeal, The Court of Appeals reversed the decision of the RTC. It
pointed out that fraudulent intent could not be inferred from a debtor's inability to
pay or comply with its obligations. The CA opined that the non-return of the
proceeds of the sale and/or the goods subject of the trust receipts did not, by
itself, constitute fraud. Hence, this petition.

ISSUE:
Whether or not Great Wall committed fraud in the performance of their
obligation when they failed to turn over the goods subject of the trust receipt
agreements.
RULING:
YES. The Supreme Court held that despite the above covenants between
the petitioner and the defendants, the latter failed to pay nor return the goods
subject of the Trust Receipt Agreements.

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.
The obligations under the trust receipts are governed by a special law,
Presidential Decree (P.D.) No. 115, and non-compliance have particular legal
consequences.
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.
The offense punished under P.D. No. 115 is in the nature of malum
prohibitum. 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.
In this case, Security Bank's complaint stated that Great Wall, through its
Vice President Fredino Cheng Atienza, executed various trust receipt
agreements, it obligates itself to hold in trust for the bank the goods, to sell the
goods for the benefit of the bank, to tum over the proceeds of the sale to the
bank, and to return the goods to the bank in the event of non-sale. By signing the
trust receipt agreements, respondents fully acknowledged the consequences
under the law once they failed to abide by their obligations therein. The said trust
receipt agreements were attached to the complaint.
Upon the maturity date, however, respondents failed to deliver the
proceeds of the sale to Security Bank or to return the goods in case of non-sale.
Security Bank sent a final demand letter to respondents, which was also attached
to the complaint, but it was unheeded. Curiously, in their letter, dated January 23,
2013, respondents did not explain their reason for noncompliance with their
obligations under the trust receipts; rather, they simply stated that Great Wall
was having a sudden drop of its income. Such unsubstantiated excuse cannot
vindicate respondents from their failure to fulfill their duties under the trust
receipts.
 BDO Unibank, Inc. vs. Choa
G.R. No. 237553, July 10, 2019
Leonen, J

FACTS:
Respondent Antonio Choa, the then president and general manager of
Camden Industries, Inc. (Camden) was charged with violating P.D. 115 or the
Trust Receipts Law. Choa allegedly executed several Trust Receipt Agreements
in favor of Equitable PCI Bank (now Banco De Oro-EPCI, Inc.), with the due sum
of Php 7,875,904.96. The terms of which the accused agreed to sell the same
with express obligation to remit to the complainant bank proceeds of the sale
and/or turn over the same if not sold or disposed of in accordance with the said
Trust Receipt Agreements on demand, but the accused once in possession of
the said good, far from complying with his obligation, Choa instead
misappropriated the proceeds.

From the trial it was shown that from another civil case, BDO owed
Camden 90 million Pesos as judgment award. It was also evidenced that
Camden owed a money claim of 20 million Pesos to BDO. Upon filing of demurer
of evidence, respondent argued that since the P20M plus being claimed by the
bank is more than offset by the P90M plus judgment against the bank, there is no
basis for the claim of violation of the Trust Receipts Law.

The prosecution argued that such compensation is not allowed. It points

out that that since Choa’s civil liabilities stemmed from his criminal violations of
the Trust Receipts Law, they could not be the subject of compensation.

The RTC granted Choa’s demurrer and held that the amounts BDO and
Camden owed each other may be legally compensated and BDO failed to prove
Choa’s criminal intent in not paying or turning over the goods., and affirmed by
the Court of Appeals.

Petitioner submits to the Court the arguments that that there could be no
legal compensation between the judgment debt in Camden's favor and
respondent's civil liability arising from a criminal case, in ruling that respondent's
obligation to petitioner was a mere loan, despite his liability for violating the Trust
Receipts Law; and in ignoring that respondent's violation of the Trust Receipts
Law was malum prohibitum.

Respondent argues that the prosecution failed to prove that he "was

directly and personally responsible for the alleged violation of the Trust Receipts
Law, and that the elements to consummate the violation of PD 115 were not
present in this case.

ISSUE:
Whether or not respondent can be convicted of violating PD 115 as the
authorized representative of Camden

RULING:
No.
 A corporation, being a juridical entity, may act only through its directors,
officers, and employees. Debts incurred by these individuals, acting as such
corporate agents, are not theirs but the direct liability of the corporation they
represent. As an exception, directors or officers are personally liable for the
corporation's debts only if they so contractually agree or stipulate.

Here, although upon findings of the Court there really existed a violation of
the Trust Receipts Law, the pieces of evidence showed that respondent signed
the Trust Receipt Agreements, but not in his personal capacity. In all
agreements, "Camden Inds." was handwritten as the name of the corporation,
while respondent's signature appeared as the authorized signature. Clearly,
respondent affixed his signature only as Camden's representative. Moreover,
there was no guaranty clause or a similar clause on the page that he signed that
would have made him personally liable in case of default of the company.

Hence, without any evidence that respondent personally bound himself to

the debts of the company he represented, this Court cannot hold him civilly liable
under the Trust Receipt Agreements. The Petition is denied.
 MANUEL C. UBAS, SR., Petitioner, v. WILSON CHAN, Respondent.
G.R. No. 215910, February 06, 2017
PERLAS-BERNABE, J.:

Facts:
Petitioner filed a Complaint for Sum of Money with Application for Writ of
Attachment against respondent Wilson Chan alleging that respondent, "doing
business under the name and style of UNIMASTER," was indebted to him in the
amount of P1,500,000.00, representing the price of construction materials
allegedly purchased by respondent from him for the construction of the Macagtas
Dam Northern. He claimed that the said obligation has long become due and
demandable and yet, respondent unjustly refused to pay the same despite
repeated demands. He also avers that respondent is guilty of fraud in the
performance of said obligation because the subject checks issued to him by
respondent were dishonored on the ground of stop payment. As proof, petitioner
offered in evidence, among others, the demand letter he sent to respondent
detailing the serial numbers of the checks that were issued by the latter, including
the dates and amounts thereof. He also offered the dishonored checks which
were in his possession.

Respondent neither disputes the fact that he had indeed signed the subject
checks nor denies the demand letter sent to him by petitioner. Nevertheless, he
claims that the checks were not issued to petitioner but to the project engineer of
Unimasters who, however, lost the same. He also disclaims any personal
transaction with petitioner, stating that the subject checks were in fact, issued by
Unimasters and not him. Besides, petitioner failed to present any documentary
proof that he or his firm delivered construction materials for the Macagtas Dam
project.

RTC ruled that petitioner had a cause of action against respondent. It

found that respondent failed to overcome the disputable presumption that every
party to an instrument acquired the same for a valuable consideration under
Section 24 of Act No. 2031,23 or the Negotiable Instruments Law (NIL).

Upon appeal, the CA reversed and set aside the RTC's ruling, dismissing
petitioner's complaint on the ground of lack of cause of action and held that
respondent was not the proper party defendant in the case, considering that the
drawer of the subject checks was Unimasters, which, as a corporate entity, has a
separate and distinct personality from respondent.

ISSUE:
Whether or not the CA erred in dismissing petitioner's complaint for lack of
cause of action.

Held:
Yes, the Court holds that the CA erred in dismissing petitioner's complaint
against respondent on the ground of lack of cause of action.

Jurisprudence holds that "in a suit for a recovery of sum of money, as here, the
plaintiff-creditor [(petitioner in this case)] has the burden of proof to show that
defendant [(respondent in this case)] had not paid [him] the amount of the
contracted loan. However, it has also been long established that where the
plaintiff-creditor possesses and submits in evidence an instrument showing the
indebtedness, a presumption that the credit has not been satisfied arises in [his]
favor. Thus, the defendant is, in appropriate instances, required to overcome the
said presumption and present evidence to prove the fact of payment so that no
judgment will be entered against him." This presumption stems from Section 24
of the NIL, which provides that every negotiable instrument is deemed prima
facie to have been issued for a valuable consideration; and every person whose
signature appears thereon to have become a party thereto for value.

Respondent was not able to overcome the presumption of consideration

under Section 24 of the NIL and establish any of his affirmative defenses. On the
other hand, as the holder of the subject checks which are presumed to have
been issued for a valuable consideration, and having established his privity of
contract with respondent, petitioner has substantiated his cause of action by a
preponderance of evidence.