G.R. No. 173905 April 23, 2010 Anthony L. NG vs. People of The Philippines Principle

G.R. No.
173905 April 23, 2010

ANTHONY L. NG vs. PEOPLE OF THE PHILIPPINES
PRINCIPLE:
A thorough examination of the facts obtaining in the instant case reveals that the transaction
between petitioner and Asiatrust is not a trust receipt transaction but one of simple loan. It
must be remembered that petitioner was transparent to Asiatrust from the very beginning that
the subject goods were not being held for sale but were to be used for the fabrication of steel
communication towers in accordance with his contracts with Islacom, Smart, and Infocom. In
these contracts, he was commissioned to build, out of the materials received, steel
communication towers, not to sell them. Following the precept of the law, such transactions
affect situations wherein the entruster, who owns or holds absolute title or security interests
over specified goods, documents or instruments, releases the subject goods to the possession
of the entrustee. The release of such goods to the entrustee is conditioned upon his execution
and delivery to the entruster of a trust receipt wherein the former binds himself to hold the
specific 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 to the extent of the amount owing to the entruster or the goods,
documents or instruments themselves if they are unsold. Similarly, we held in State Investment
House v. CA, et al. that the entruster is entitled "only to the proceeds derived from the sale of
goods released under a trust receipt to the entrustee." Considering that the goods in this case
were never intended for sale but for use in the fabrication of steel communication towers, the
trial court erred in ruling that the agreement is a trust receipt transaction.
FACTS:
Anthony Ng, then engaged in the business of building and fabricating telecommunication towers
under the trade name "Capitol Blacksmith and Builders," applied for a credit line of PhP
3,000,000 with Asiatrust Development Bank, Inc. (Asiatrust). In support of Asiatrust’s credit
investigation, petitioner voluntarily submitted the following documents: (1) the contracts he had
with Islacom, Smart, and Infocom; (2) the list of projects wherein he was commissioned by the
said telecommunication companies to build several steel towers; and (3) the collectible amounts
he has with the said companies.
Asiatrust approved petitioner’s loan application. Petitioner was then required to sign several
documents, among which are the Credit Line Agreement, Application and Agreement for
Irrevocable L/C, Trust Receipt Agreements, 4 and Promissory Notes. Though the Promissory
Notes matured on September 18, 1997, the two (2) aforementioned Trust Receipt Agreements
did not bear any maturity dates as they were left unfilled or in blank by Asiatrust.
After petitioner received the goods, consisting of chemicals and metal plates from his suppliers,
he utilized them to fabricate the communication towers ordered from him by his clients which
were installed in three project sites, namely: Isabel, Leyte; Panabo, Davao; and Tongonan.
As petitioner realized difficulty in collecting from his client Islacom, he failed to pay his loan to
Asiatrust. Asiatrust then conducted a surprise ocular inspection of petitioner’s business through
Villarva S. Linga, Asiatrust’s representative appraiser. Linga thereafter reported to Asiatrust that
he found that approximately 97% of the subject goods of the Trust Receipts were "sold-out and
that only 3 % of the goods pertaining to PN No. 1963 remained." Asiatrust then endorsed
petitioner’s account to its Account Management Division for the possible restructuring of his
loan. The parties thereafter held a series of conferences to work out the problem and to
determine a way for petitioner to pay his debts. However, efforts towards a settlement failed to
be reached.
Remedial Account Officer Ma. Girlie C. Bernardez filed a Complaint-Affidavit before the Office of
the City Prosecutor of Quezon City. Consequently, on September 12, 1999, an Information for
Estafa, as defined and penalized under Art. 315, par. 1(b) of the RPC in relation to Sec. 3, PD
115 or the Trust Receipts Law, was filed with the RTC.
ISSUE:
Whether or not there is a Trust Receipt Transaction between the parties.
RULING:
NO, A thorough examination of the facts obtaining in the instant case, however, reveals that
the transaction between petitioner and Asiatrust is not a trust receipt transaction but one of
simple loan.
Section 4 of PD 115. What constitutes a trust receipts transaction.—A trust receipt transaction,
within the meaning of this Decree, is any transaction by and between a person referred to in
this Decree as the entruster, and another person referred to in this Decree as 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
a "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, 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, or for other purposes
substantially equivalent to any of the following:
1. In the case of goods or documents: (a) to sell the goods or procure their sale; or (b)
to manufacture or process the goods with the purpose of ultimate sale: Provided, That,
in the case of goods delivered under trust receipt for the purpose of manufacturing or
processing before its ultimate sale, the entruster shall retain its title over the goods
whether in its original or processed form until the entrustee has complied full with his
obligation under the trust receipt; or (c) to load, unload, ship or transship or otherwise
deal with them in a manner preliminary or necessary to their sale; or
2. In the case of instruments: (a) to sell or procure their sale or exchange; or (b) to
deliver them to a principal; or (c) to effect the consummation of some transactions
involving delivery to a depository or register; or (d) to effect their presentation,
collection or renewal.
The sale of good, documents or instruments by a person in the business of selling goods,
documents or instruments for profit who, at the outset of transaction, has, as against the
buyer, general property rights in such goods, documents or instruments, or who sells the same
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 this Decree.
In other words, 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.
It must be remembered that petitioner was transparent to Asiatrust from the very beginning
that the subject goods were not being held for sale but were to be used for the fabrication of
steel communication towers in accordance with his contracts with Islacom, Smart, and Infocom.
In these contracts, he was commissioned to build, out of the materials received, steel
communication towers, not to sell them.
The true nature of a trust receipt transaction can be found in the "whereas" clause of PD 115
which states that a trust receipt is to be utilized "as a convenient business device to assist
importers and merchants solve their financing problems." Obviously, the State, in enacting the
law, sought to find a way to assist importers and merchants in their financing in order to
encourage commerce in the Philippines.
As stressed in Samo v. People,14 a trust receipt is considered 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. Similarly,
American Jurisprudence demonstrates that trust receipt transactions always refer to a method
of "financing importations or financing sales." 15 The principle is of course not limited in its
application to financing importations, since the principle is equally applicable to domestic
transactions.16 Regardless of whether the transaction is foreign or domestic, it is important to
note that the transactions discussed in relation to trust receipts mainly involved sales.
Following the precept of the law, such transactions affect situations wherein the entruster, who
owns or holds absolute title or security interests over specified goods, documents or
instruments, releases the subject goods to the possession of the entrustee. The release of such
goods to the entrustee is conditioned upon his execution and delivery to the entruster of a trust
receipt wherein the former binds himself to hold the specific 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 to the extent of the
amount owing to the entruster or the goods, documents or instruments themselves if they
are unsold. Similarly, we held in State Investment House v. CA, et al. that the entruster is
entitled "only to the proceeds derived from the sale of goods released under a trust receipt to
the entrustee."17
Considering that the goods in this case were never intended for sale but for use in the
fabrication of steel communication towers, the trial court erred in ruling that the agreement is a
trust receipt transaction. Having established the inapplicability of PD 115, this Court finds that
petitioner’s liability is only limited to the satisfaction of his obligation from the loan. The real
intent of the parties was simply to enter into a simple loan agreement.

G.R. No. 173905 April 23, 2010 Anthony L. NG vs. People of The Philippines Principle

Uploaded by

Copyright:

Available Formats

G.R. No. 173905 April 23, 2010 Anthony L. NG vs. People of The Philippines Principle

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

G.R. No. 173905 April 23, 2010 Anthony L. NG vs. People of The Philippines Principle

Uploaded by

Copyright:

Available Formats

G.R. No.

173905 April 23, 2010

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.