VOL.

339, SEPTEMBER 5, 2000 609

Colinares vs. Court of Appeals

*
G.R. No. 90828. September 5, 2000.

MELVTN COLINARES and LORDINO VELOSO,

petitioners, vs. HONORABLE COURT OF APPEALS, and
THE PEOPLE OF THE PHILIPPINES, respondents.

Actions; New Trial; The grant or denial of a motion for new trial
rests upon the discretion of the judge.The grant or denial of a
motion for new trial rests upon the discretion of the judge. New
trial may be granted if: (1) errors of law or irregularities have been
committed during the trial prejudicial to the substantial rights of
the accused; or (2) new and material evidence has been discovered
which the accused could not with reasonable diligence have
discovered and produced at the trial, and which, if introduced and
admitted, would probably change the judgment.

Same; Same; Newly Discovered Evidence; It is essential that the

offering party exercise reasonable diligence in seeking to locate the
evidence before or during trial but nonetheless failed to secure it.
For newly discovered evidence to be a ground for new trial, such
evidence must be (1) discovered after trial; (2) could not have been
discovered and produced at the trial even with the exercise of
reasonable diligence; and (3) material, not merely cumulative,
corroborative, or impeaching, and of such weight that, if admitted,
would probably change the judgment. It is essential that the
offering party exercised reasonable diligence in seeking to locate the
evidence before or during trial but nonetheless failed to secure it.

Same; Same; Same; Alleged newly discovered evidence which is

mere forgotten evidence is excluded as a ground for new trial.
Petitioners could not have been unaware that the two-page
document exists. The Disclosure Statement itself states, NOTICE
TO BORROWER: YOU ARE ENTITLED TO A COPY OF THIS
PAPER WHICH YOU SHALL SIGN. Assuming Petitioners copy
was then unavailable, they could have compelled its production in
court, which they never did. Petitioners have miserably failed to
establish the second requisite of the rule on newly discovered
evidence. Petitioners themselves admitted that they searched
again their voluminous records, meticulously and patiently, until
they discovered this new and material evidence only upon learning
of the Court of Appeals decision and after they were shocked by
the penalty imposed. Clearly, the alleged newly discovered
evidence is mere forgotten evidence that jurisprudence excludes as
a ground for new trial.

________________

* FIRST DIVISION.

610

610 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

Criminal Law; Trust Receipts Law (P.D. 115); Words and

Phrases; Trust Receipt Transaction, Defined.Section 4, P.D. No.
115, the Trust Receipts Law, defines a trust receipt transaction as
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 latters 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.

Same; Same; Estafa; 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 is punishable as estafa.
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.

Same; Same; Same; In a pure trust receipt transaction, the

goods are owned by the bank and only released to the importer in
trust subsequent to the grant of the loanthe bank acquires a
security interest in the goods as holder of a security title for the
advances it had made to the entrustee; 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.Petitioners 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

611

VOL. 339, SEPTEMBER 5, 2000 611

Colinares vs. Court of Appeals

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.

Same; Same; The Trust Receipts Law does not seek to enforce
the 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.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.

Same; Same; The mala prohibita nature of the alleged offense

notwithstanding, intent as a state of mind was not proved to be
present in the situation of the accusedthey employed no artifice in
dealing with the bank and never did they evade payment of their
obligation nor attempt to abscond.The Information charges
Petitioners with intent to defraud and misappropriating the money
for their personal use. The mala prohibita nature of the alleged
offense notwithstanding, intent as a state of mind was not proved to
be present in Petitioners situation. Petitioners employed no artifice
in dealing with PBC and never did they evade payment of their
obligation nor attempt to abscond. Instead, Petitioners sought
favorable terms precisely to meet their obligation.

Same; Same; The fact that the accused are not importers
acquiring the goods for re-sale, contrary to the express provision
embodied in the trust receipt and at no time did the title pass to the
bank impresses upon the

612

612 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

trust receipt in question vagueness and ambiguity which should not

be the basis for criminal prosecution in the event of violation of its
provisions.Also noteworthy is the fact that Petitioners are 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.

Same; Same; Banks and Banking; Contracts; Contracts of

Adhesion; 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.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, as had happened
in this case. Eventually, PBC showed its true colors and admitted
that it was only after collection of the money, as manifested by its
Affidavit of Desistance.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

Romualdo, Amado, Romualda and Associates Law
Office for petitioners.
The Solicitor General for the People.

DAVIDE, JR., C.J.:

In 1979 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.
On 30 October 1979, Petitioners obtained 5,376 SF
Solatone acoustical board 2x4x1/2, 300 SF tanguile Wood
tiles 12x 12,
613

VOL. 339, SEPTEMBER 5, 2000 613

 Colinares vs. Court of Appeals

260 SF Marcelo economy tiles and 2 gallons UMYLIN

cement adhesive from CM Builders Centre for the
1
construction project. The following day, 31 October 1979,
2
Petitioners 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.
3
PBC approved the letter of credit for P22,389.80 to cover
the full invoice value of the goods. Petitioners signed a pro-
4
forma trust receipt as security. The loan was due on 29
January 1980.
On 31 October 1979, PBC debited P6,720 from
Petitioners marginal deposit as partial payment of the
5
loan.
6
On 7 May 1980, 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
7
1980 to settle the account.
8
PBC sent a new demand letter to Petitioners on 16
October 1980 and informed them that their outstanding
balance as of 17 November 1979 was P20,824.40 exclusive
9
of attorney s fees of 25%.
10
On 2 December 1980, Petitioners proposed that the
terms of payment of the loan be modified as follows: P2,000
on or before 3 December 1980, and P1,000 per month
starting 31 January 1980 until the account is fully paid.
Pending approval of the proposal,
11
Petitioners paid P1,000
to PBC on 4 December
12
1980, and 13
thereafter P500 on 11
February 1981, 16 March 1981, and 20 April

_______________

1 Exhibit D, Original Record (OR), 115.

2 Exhibit A, Id., 112.
3 Exhibit B, OR, 113.
4 Exhibit C, Id., 114.
5 Exhibit 8-C, Id., 181.
6 Exhibit 4, Id., 160.
7 Exhibits 3, I, Id., 153.
8 Exhibit E, Id., 116.
9 Exhibit 5, Id., 161.
10 Exhibit F, Id., 117.
 11 Exhibit 7, Id., 167.
12 Exhibit 7-A, Id., 168.
13 Exhibit 7-B, Id., 169.

614

614 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

14
1981. Concurrently with the separate demand for
attorneys fees by PBCs legal counsel,
15
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 in an Information
which was filed with Branch 18, Regional Trial Court of
Cagayan de Oro City. The accusatory portion of the
Information reads:

That on or about October 31, 1979, in the City of Cagayan de Oro,

Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused entered into a trust receipt agreement with
the Philippine Banking Corporation at Cagayan de Oro City
wherein the accused, as entrustee, received from the entruster the
following goods to wit:
Solatone Acoustical board
Tanguile Wood Tiles
Marcelo Cement Tiles
Umylin Cement Adhesive
with a total value of P22,389.80, with the obligation on the part
of the accused-entrustee to hold the aforesaid items in trust for the
entruster and/or to sell on cash basis or otherwise dispose of the
said items and to turn over to the entruster the proceeds of the sale
of said goods or if there be no sale to return said items to the
entruster on or before January 29, 1980 but that the said accused
after receipt of the goods, with intent to defraud and cause damage
to the entruster, conspiring, confederating together and mutually
helping one another, did then and there wilfully, unlawfully and
feloniously fail and refuse to remit the proceeds of the sale of the
goods to the entruster despite repeated demands but instead
converted, misappropriated and misapplied the proceeds to their
own personal use, benefit and gain, to the damage and prejudice of
the Philippine Banking Corporation, in the aforesaid sum of
P22,389.80, Philippine Currency.
Contrary to PD 115 in relation to Article 315 of the Revised
 16
Penal Code.

________________

14 Exhibit 7-C, Id., 170.

15 Exhibit G, Id., 118.
16 OR, 33.

615

VOL. 339, SEPTEMBER 5, 2000 615

Colinares vs. Court of Appeals

The case was docketed as Criminal Case No. 1390.

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
17
formality.
18
On 7 July 1986, the trial court promulgated its decision
convicting Petitioners of estafa for violating P.D. No. 115 in
relation to Article 315 of the Revised Penal Code and
sentencing each of them to suffer imprisonment of two
years and one day of prision correccional as minimum to
six years and one day of prision mayor as maximum, and to
solidarity indemnify PBC the amount of P20,824.44, with
legal interest from 29 January 1980, 12% penalty charge
per annum, 25% of the sums due as attorneys fees, and
costs.
The trial court considered the transaction between PBC
and Petitioners as a trust receipt transaction under Section
4, P.D. No. 115. It considered Petitioners use of the goods in
their Carmelite monastery project an act of disposing as
contemplated under Section 13, P.D. No. 115, and treated
19
the charge invoice for goods issued by CM Builders Centre
as a document within the meaning of Section 3 thereof. It
concluded that the failure of Petitioners to turn over the
amount they owed to PBC constituted estafa.
Petitioners appealed from the judgment to the Court of
Appeals which was docketed as CA-G.R. CR No. 05408.
Petitioners asserted therein that the trial court erred in
ruling that they violated the Trust Receipt Law, and in
holding them criminally liable therefor. In the alternative,
they contend that at most they can only be made civilly
liable for payment of the loan.

________________

17 TSN, 21 May 1986, 21-22, 30.

18 Per Judge Senen C. Pearanda. Rollo 12-17.
19 Exhibit D, supra note 1.

616

616 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

20
In its decision 6 March 1989, the Court of Appeals
modified the judgment of the trial court by increasing the
penalty to six years and one day of prision mayor as
minimum to fourteen years eight months and one day of
reclusion temporal as maximum. It held that the
documentary evidence of the prosecution prevails over
Velosos testimony, discredited Petitioners claim that the
documents they signed were in blank, and disbelieved that
they were coerced into signing them.
On 25 March 1989, 21
Petitioners filed a Motion for New
Trial/Reconsideration alleging that the22 Disclosure
Statement on Loan/Credit Transaction (hereafter
Disclosure Statement) signed by them and Tuiza was
suppressed by PBC during the trial. That document would
have proved that the transaction was indeed a loan as it
bears a 14% interest as opposed to the trust receipt which
does not at all bear any interest. Petitioners further
maintained that when PBC allowed them to pay in
installment, the agreement was novated and a creditor-
debtor relationship was
23
created.
In its resolution of 16 October 1989 the Court of
Appeals denied the Motion for New Trial/Reconsideration
because the alleged newly discovered evidence was actually
forgotten evidence already in existence during the trial,
and would not alter the result of the case.
Hence, Petitioners filed with us the petition in this case
on 16 November 1989. They raised the following issues:

1. WHETHER OR NOT THE DENIAL OF THE

MOTION FOR NEW TRIAL ON THE GROUND
 OF NEWLY DISCOVERED EVIDENCE, NAMELY,
DISCLOSURE ON LOAN/CREDIT
TRANSACTION, WHICH IF INTRODUCED AND
ADMITTED, WOULD CHANGE THE
JUDGMENT, DOES NOT CONSTITUTE A
DENIAL OF DUE PROCESS.
2. ASSUMING THERE WAS A VALID TRUST
RECEIPT, WHETHER OR NOT THE ACCUSED
WERE PROPERLY CHARGED,

________________

20 Annex A Petition, Rollo, 3-10. Per Imperial, J., J., with the
concurrence of Puno, R. and Francisco, C, JJ.
21 Rollo, 27-39.
22 Id., 177-178.
23 Id., 45.

617

VOL. 339, SEPTEMBER 5, 2000 617

Colinares vs. Court of Appeals

TRIED AND CONVICTED FOR VIOLATION OF

SEC. 13, PD NO. 115 IN RELATION TO ARTICLE
315 PARAGRAPH (I) (B) NOTWITHSTANDING
THE NOVATION OF THE SO-CALLED TRUST
RECEIPT CONVERTING THE TRUSTOR-
TRUSTEE RELATIONSHIP TO
CREDITORDEBTOR SITUATION.

In its Comment of 22 January 1990, the Office of the

Solicitor General urged us to deny the petition for lack of
merit.
On 28 February 1990 Petitioners filed a Motion to
Dismiss the case on the ground that they had already fully
paid PBC on 2 February 1990 the amount of P70,000 for
the balance of the loan, including interest and other
charges,
24
as evidenced by the different receipts issued by
PBC, and25
that the PBC executed an Affidavit of
desistance.
We required the Solicitor General to comment on the
Motion to Dismiss.
In its Comment of 30 July 1990, the Solicitor General
opined that payment of the loan was akin to a voluntary
surrender or plea of guilty which merely serves to mitigate
Petitioners culpability, but does not in any way extinguish
their criminal liability.
In the Resolution of 13 August 1990, we gave due course
to the Petition and required the parties to file their
respective memoranda.
The parties subsequently filed their respective
memoranda.
It was only on 18 May 1999 when this case was assigned
to the ponente. Thereafter, we required the parties to move
in the premises and for Petitioners to manifest if they are
still interested in the further prosecution of this case and
inform us of their present whereabouts and whether their
bail bonds are still valid.
Petitioners submitted their Compliance.
The core issues raised in the petition are the denial by
the Court of Appeals of Petitioners Motion for New Trial
and the true nature of the contract between Petitioners and
the PBC. As to the latter,

________________

24 Rollo, 127.
25 Id., 128.

618

618 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

Petitioners assert that it was an ordinary loan, not a trust

receipt agreement under the Trust Receipts Law.
The grant or denial of a motion for new trial rests upon
the discretion of the judge. New trial may be granted if: (1)
errors of law or irregularities have been committed during
the trial prejudicial to the substantial rights of the accused;
or (2) new and material evidence has been discovered
which the accused could not with reasonable diligence have
discovered and produced at the trial, and which, if
introduced26 and admitted, would probably change the
judgment.
For newly discovered evidence to be a ground for new
trial, such evidence must be (1) discovered after trial; (2)
could not have been discovered and produced at the trial
even with the exercise of reasonable diligence; and (3)
material, not merely cumulative, corroborative, or
impeaching, and of such weight27 that, if admitted, would
probably change the judgment. It is essential that the
offering party exercised reasonable diligence in seeking to
locate the evidence 28
before or during trial but nonetheless
failed to secure it.
We find no indication in the pleadings that the
Disclosure Statement is a newly discovered evidence.
Petitioners could not have been unaware that the two-
page document exists. The Disclosure Statement itself
states, NOTICE TO BORROWER: YOU ARE ENTITLED
TO A 29COPY OF THIS PAPER WHICH YOU SHALL
SIGN. Assuming Petitioners copy was then unavailable,
30
they could have compelled its production in court, which
they never did. Petitioners have miserably failed to
establish the second requisite of the rule on newly
discovered evidence.

________________

26 Section 2, Rule 121, Revised Rules of Criminal Procedure.

27 See People v. Excija, 258 SCRA 424, 443 [1996]; People v. Tirona,
300 SCRA 431, 440 [1998]; Villanueva v. People, G.R. No. 135098, 12
April 2000, 7, 330 SCRA 695.
28 Tumang v. Court of Appeals, et al., 172 SCRA 328, 334 [1989]. See
Garrido v. CA, et al., 236 SCRA 450, 456 [1994].
29 Rollo, 178.
30 People v. Ducay, et al., 225 SCRA 1 [1993].

619

VOL. 339, SEPTEMBER 5, 2000 619

Colinares vs. Court of Appeals

Petitioners themselves admitted that they searched again

their voluminous records, meticulously and patiently, until
they discovered this new and material evidence only upon
learning of the Court of Appeals decision 31and after they
were shocked by the penalty imposed. Clearly, the
alleged newly discovered evidence is mere forgotten
evidence
32
that jurisprudence excludes as a ground for new
trial.
However, the second issue should be resolved in favor of
Petitioners.
Section 4, P.D. No. 115, the Trust Receipts Law, defines a
trust receipt transaction as 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
latters 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.
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 received33under 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-

________________

31 Motion for New Trial/Reconsideration; Rollo, 28.

32 People v. Hernando, et al., 108 SCRA 121 [1981]; People v. Ducay,
supra note 30; People v. Penones, 200 SCRA 624 [1994].
33 People v. Cuevo, 104 SCRA 312, 318 [1981].

620

620 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

34
cle 315 (1) of the Revised Penal Code, without need of
proving intent to defraud.
A thorough examination of the facts obtaining in the
case at bar reveals that the transaction intended by the
parties was a simple loan, not a trust receipt agreement.
 Petitioners 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
35
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 the36
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 37owned 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 38the imported merchandise as
soon as he has paid its price.

_______________

34 Section 13, P.D. No. 115.

35 Vintola v. IBAA, 150 SCRA 578, 583 [1987].
36 Prudential Bank v. NLRC, 251 SCRA 421 [1995], quoting National
Bank v. Vda. de Hijos de Angel Jose, 63 Phil. 814, 821 [1936].
37 People v. Yu Chai Ho, 53 Phil. 874 [1928], quoting In re: Dunlap
Carpet Co., 207 Fed. 726.
38 Prudential Bank v. NLRC, supra note 36.

621

VOL. 339, SEPTEMBER 5, 2000 621

Colinares vs. Court of Appeals

Trust receipt transactions are 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,
39
as collateral, of the merchandise
imported or purchased.
The antecedent acts in a trust receipt transaction consist
of the application and approval of the letter of credit, the
making of the marginal deposit and the effective 40
importation of goods through the efforts of the importer.
PBC attempted to cover up the true delivery date of the
merchandise, yet the trial court took notice even though it
failed to attach any significance to such fact in the
judgment. Despite the Court of Appeals contrary view that
the goods were delivered to Petitioners previous to the
execution of the letter of credit and trust receipt, we find
that the records of the case speak volubly and this fact
remains uncontroverted. It is not uncommon for us to
peruse through the transcript of the stenographic notes of
the proceedings to be satisfied that the records 41
of the case
do support the conclusions of the trial court. After such
perusal Grego Mutia, PBCs credit investigator, admitted
thus:

ATTY. CABANLET: (continuing)

Q Do you know if the goods subject matter of this letter of
credit and trust receipt agreement were received by the
accused?
A Yes, sir.
Q Do you have evidence to show that these goods subject
matter of this letter of credit and trust receipt were
delivered to the accused?
A Yes, sir.
Q I am showing to you this charge invoice, are you
referring to this document?
A Yes, sir.

_______________

39 Ceferina Samo v. People, 115 Phil. 346, 349-350; 5 SCRA 354,

356357, [1962], citing 53 Am Jur. 961. See also Prudential Bank v. NLRC,
supra note 36.
40 Sia v. People, 121 SCRA 655 [1983].
41 People v. Vergara, et al., 270 SCRA 624 [1997].

622
622 SUPREME COURT REPORTS ANNOTATED
Colinares vs. Court of Appeals

xxx
Q What is the date of the charge invoice?
A October 31, 1979.
COURT:
Make it of record as appearing in Exhibit D,
42
the zero in
30 has been superimposed with numeral 1.

During the cross and re-direct examinations he also

impliedly admitted that the transaction was indeed a loan.
Thus:

Q In short the amount stated in your Exhibit C, the trust

receipt was a loan to the accused you admit that?
A Because in the bank the loan is considered part of the
loan.
xxx
RE-DIRECT BY ATTY. CABANLET.
ATTY. CABANLET (to the witness)
Q What do you understand by loan when you were asked?
A Loan is a promise of a borrower from the value
received. The borrower will43pay the bank on a certain
specified date with interest

Such statement is akin to an admission against interest

binding upon PBC
Petitioner Velosos claim that they were made to believe
that the transaction was a loan was also not denied by
PBC. He declared:

Q Testimony was given here that that was covered by

trust receipt. In short it was a special kind of loan.
What can you say as to that?
A I dont think that would be a trust receipt because we
were made to understand by the manager who
encouraged us to avail
44
of their facilities that they will
be granting us a loan

PBC could have presented its former bank manager, Cayo

Garcia Tuiza, who contracted with Petitioners, to refute
Velosos testimony, yet it only presented credit investigator
Grego Mutia. No-

_______________

42 TSN, 18 December 1986, 10-11.

43 Id., 21-22.
44 TSN, 21 May 1986, 3-4.

623

VOL. 339, SEPTEMBER 5, 2000 623

Colinares vs. Court of Appeals

where from Mutias testimony can it be gleaned that PBC

represented to Petitioners that the transaction they were
entering into was not a pure loan but had trust receipt
implications.
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
45
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.
The Information charges Petitioners with intent to
defraud and misappropriating the money for their personal
use. The mala prohibita nature of the alleged offense
notwithstanding, intent as a state of mind was not proved
to be present in Petitioners situation. Petitioners employed
no artifice in dealing with PBC and never did they evade
payment of their obligation nor attempt to abscond.
Instead, Petitioners sought favorable terms precisely to
meet their obligation.
Also noteworthy is the fact that Petitioners are 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
46
prosecution in
the event of violation of its provisions.
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

_______________

45 People v. Nitafan, et al., 207 SCRA 726 [1992].

46 Sia v. People, supra note 40.

624

624 SUPREME COURT REPORTS ANNOTATED

Colinares vs. Court of Appeals

their loan be disapproved. The resort to this scheme leaves

poor and hapless borrowers at the mercy of banks, and is
prone to misinterpretation, as had happened in this case.
Eventually, PBC showed its true colors and admitted that
it was only after collection of the money, as manifested by
its Affidavit of Desistance.
WHEREFORE, the challenged Decision of 6 March 1989
and the Resolution of 16 October 1989 of the Court of
Appeals in CA-G.R. No. 05408 are REVERSED and SET
ASIDE. Petitioners are hereby ACQUITTED of the crime
charged, i.e., for violation of P.D. No. 115 in relation to
Article 315 of the Revised Penal Code.
No costs.
SO ORDERED.

Kapunan and Pardo, JJ., concur.

Puno, J., No part.
Ynares-Santiago, J., On leave.

Judgment reversed and set aside. Petitioners acquitted.

Notes.At the pith of the requirements for newly

discovered evidence as ground for new trial is that what is
essential is that the offering party had exercised
reasonable diligence in producing or locating such evidence
before or during trial but had nonetheless failed to secure
it. (Garrido vs. Court of Appeals, 236 SCRA 450 [1994])
 An affidavit of desistance can not be said to be newly
discovered evidence. (People vs. Delabajan, 280 SCRA 696
[1997])

o0o

625

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