HUR TIN YANG (petitioner) vs PEOPLE OF THE PHILIPPINES (respondent)

Velasco Jr., J. August 14, 2003 GR No. 195117

Doctrine Two obligations in a trust receipt: (1) the first refers to the money received with the duty to turn it over (entregarla) to the owner of the
merchandise sold; (2) the second refers to the merchandise received under the obligation to return it (devolvera) to the owner. A
violation of any of the two constitutes estafa.

When both parties enter into an agreement knowing full well that the return of the goods is not possible even without any fault
of the trustee, it is not a trust receipt penalized under RPC and PD 115 as the obligation agreed upon would be the return of
the proceeds of the sale transaction. The transaction then becomes a mere loan where the borrower is required to pay the amount
spent for the purchase of the goods
Summary Supermax, engaged in the construction business, obtained several commercial LC from Metrobank. It was also required to sign trust
receipts as security. However, Supermax failed to pay or deliver the goods or proceeds upon demand. Hence, a criminal complaint for
Estafa was filed against petitioner. RTC and CA held petitioner guilty. The court, however, ruled that despite the nomenclature of the
contract, it was not a trust receipt agreement but a simple contract of loan. The fact that Metrobank knew beforehand that the alleged
trust receipts that covered the construction materials were never intended by the trustee for resale or for manufacture of the items sold
would take the transaction outside the ambit of the Trust Receipts Law.
Facts  Supermax Philippines, Inc is a domestic corporation engaged in the construction business. On various occasions,
Metrobank extended several commercial letters of credit to Supermax which were used to pay for the delivery of several
construction supplies for the business.
 Metrobank required petitioner, as representative and VP for internal affairs of Supermax, to sign 2 trust receipts as
security for the construction materials and to hold those materials or the proceeds of the sales in trust to the extent of the
amount stated in the trust receipts.
 When the amount fell due, Supermax received a demand letter from Metrobank but the former failed to pay or deliver the
goods or proceeds. Instead, Supermax requested for a restructuring of the loan which did not materialize. Hence, another
demand letter was sent out.
 As the demands fell on deaf ears, Metrobank filed a criminal complaint against Supermax for Estafa under Art 315 (1)(b)
RPC in relation to PD 115 or the Trust Receipts Law.
 Defense – trust receipts were demanded by Metrobank as additional security for the loans. Further, Metrobank knew all along
that the construction materials subject of the trust receipts were not intended for resale but for personal use of Supermax
relating to its construction business.

 RTC – petitioner was held guilty beyond reasonable doubt

 CA – upheld the RTC decision because: (1) petitioner signed the trust receipts; (2) Supermax failed to pay the loan; (3)
Supermax failed to turn over the goods or the proceeds of the sale to Metrobank. The CA also noted that even before the
execution of the trust receipts, the bank knew or should have known that the construction materials were never intended for
resale or for the manufacture of items to be sold. Since the offense under PD 115 is malum prohibitum, mere failure to deliver the
proceeds or goods is sufficient to justify conviction.
 Petitioner then filed a petition for review before the SC. The court dismissed the petition via a Minute Resolution on the ground
that CA committed no reversible error.
 Hence the present MR. Petitioner argues that the transactions do not constitute trust receipt agreements but rather of simple loans.
Ratio/Issues I. WHETHER PETITIONER IS LIABLE FOR ESTAFA UNDER ART 315 (1)(b) RPC IN RELATION OT PD
115 EVEN IF THE ENTRUSTER KNEW BEFOREHAND THAT THE GOODS WERE NEVER INTENDED
TO BE SOLD – [NO]
(1) The courts are not bound by the name or title of the contract to determine the nature of the agreement or contract.
The decisive factor is the intention of the parties.
(2) Petitioners admission that he signed the trust receipts on behalf of Supermax which failed to pay or deliver the proceeds
or goods upon demand does not conclusively prove a trust receipt transaction. In contrast to the nomenclature of the
transaction, it appears that the parties intended a contract of loan.
(3) The fact that the entruster bank knew even before the execution of the trust receipt agreements that the construction
materials covered were never intended by the entrustee for resale or for manufacture of the items to be sold is
sufficient to prove that the transaction was a simple loan and not a trust receipt transaction (Ng vs People; Land Bank
vs Perez)
(4) 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. Two obligations in a
trust receipt: (1) the first refers to the money received with the duty to turn it over (entregarla) to the owner of the
merchandise sold; (2) the second refers to the merchandise received under the obligation to return it (devolvera) to
the owner. A violation of any of the two constitutes estafa.
(5) Nonetheless, when both parties enter into an agreement knowing full well that the return of the goods is not possible
even without any fault of the trustee, it is not a trust receipt penalized under RPC and PD 115 as the obligation
agreed upon would be the return of the proceeds of the sale transaction. The transaction then becomes a mere loan
where the borrower is required to pay the amount spent for the purchase of the goods.

(6) Trust receipts law was created to “aid in financing importers and retail dealers who do not have sufficient funds or
resources to finance the importation or purchase of the merchandise, and who may not be able to acquire credit except
through utilization, as collateral, of the merchandise imported or purchased”.
(7) In this case, however, petitioner was neither an importer or a retail dealer acquiring goods for resale. Hence, the law
cannot apply to petitioner.
(8) The fact that Metrobank knew beforehand that the alleged trust receipts that covered the construction materials were never
 intended by the trustee for resale or for manufacture of the items sold would take the transaction outside the ambit of the
Trust Receipts Law.
(9) CASE IN CONSTRUCTION BUSINESS: But the goods and the materials that are used for a construction project are often
placed under the control and custody of the clients employing the contractor, who can only be compelled to return
the materials if they fail to pay the contractor and often only after the requisite legal proceedings. The contractor’s
difficulty and uncertainty in claiming these materials (or the buildings and structures which they become part of), as soon as
the bank demands them, disqualify them from being covered by trust receipt agreements
(10) STARE DECISIS; NG V PEOPLE
(11) 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
Held Petitioner is ACQUITTED.
Prepared by: Yen Mercado [Credit | Vasquez]