10. MELVIN COLINARES and LORDINO VELOSO, petitioners, vs.

HONORABLE COURT
OF APPEALS, and THE PEOPLE OF THE PHILIPPINES,respondents.
FACTS:
In 1979 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.Subsequently, they obtained several construction materials from CM Builders Centre
for the project. Then petitioners applied for a commercial letter of credit with the Philippine
Banking Corporation(hereafter PBC) in favor of CM Builders Centre. PBC approved the letter of
credit for P22,389.80 to cover the full invoice value of the goods. Petitioners signed a pro-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 loan. On 7 May 1980, PBC demanded payment of the loan 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 1980 to settle the account. PBC sent a new demand letter to Petitioners. Meanwhile,
petitioners proposed that the terms of payment of the loan be modified. Pending approval of the
proposal, petitioners made several partial payments. Concurrently with the separate demand for
attorneys fees by PBCs legal counsel, 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. The RTC found them guilty.
ISSUE: ASSUMING THERE WAS A VALID TRUST RECEIPT, WHETHER OR NOT THE
ACCUSED WERE PROPERLY CHARGED, 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 CREDITOR-DEBTOR
SITUATION.
RULING: The court ruled for the 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 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.
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 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.
Moreover, 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.
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 resale, 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.
Thus, petitioners are acquitted of the crime charged.

11. TUPAZ IV vs Court of Appeals and BPI

FACTS:
Petitioners Jose C. Tupaz IV and Petronila C. Tupaz (petitioners) were Vice-President
for Operations and Vice-President/Treasurer, respectively, of El Oro Engraver Corporation (El
Oro Corporation). El Oro Corporation had a contract with the Philippine Army to supply the latter
with survival bolos.
To finance the purchase of the raw materials for the survival bolos, petitioners, on behalf
of El Oro Corporation, applied with respondent Bank of the Philippine Islands (respondent bank)
for two commercial letters of credit. The letters of credit were in favor of El Oro Corporations
suppliers, Tanchaoco Manufacturing Incorporated[3] (Tanchaoco Incorporated) and Maresco
Rubber and Retreading Corporation[4] (Maresco Corporation). Respondent bank granted
petitioners application and issued 2 Letters of Credit. Simultaneous with the issuance of the
letters of credit, petitioners signed trust receipts in favor of respondent bank. On 30 September
1981, petitioner Jose C. Tupaz IV (petitioner Jose Tupaz) signed, in his personal capacity, a
trust receipt corresponding to Letter of Credit No. 2-00896-3 (for P564,871.05). Petitioner Jose
Tupaz bound himself to sell the goods covered by the letter of credit and to remit the proceeds
to respondent bank, if sold, or to return the goods, if not sold, on or before 29 December 1981.
On 9 October 1981, petitioners signed, in their capacities as officers of El Oro
Corporation, a trust receipt corresponding to Letter of Credit No. 2-00914-5 (for P294,000).
Petitioners bound themselves to sell the goods covered by that letter of credit and to remit the
proceeds to respondent bank, if sold, or to return the goods, if not sold, on or before 8
December 1981.The raw materials were accordingly delivered and BPI paid both companies.
Petitioners did not comply with their undertaking under the trust receipts. Respondent
bank made several demands for payments but El Oro Corporation made partial payments only.
Thereafter, respondent banks counsel and its representative respectively sent final demand
letters to El Oro Corporation. El Oro Corporation replied that it could not fully pay its debt
because the Armed Forces of the Philippines had delayed paying for the survival bolos.
As a result, Respondent bank charged petitioners with estafa under Section 13,
Presidential Decree No. 115 or Trust Receipts Law (PD 115). The trial court rendered judgment
acquitting petitioners of estafa. However, the trial court found petitioners solidarily liable with El
Oro Corporation for the balance of El Oro Corporations principal debt under the trust receipts.
Petitioners contended that: (1) their acquittal operates to extinguish [their] civil liability
and (2) at any rate, they are not personally liable for El Oro Corporations debts. CA affirmed.
ISSUES:
Whether petitioners bound themselves personally liable for El Oro Corporations debts
under the trust receipts;
(2) If so
(a)
whether petitioners liability is solidary with El Oro Corporation; and

(b)

whether petitioners acquittal of estafa under Section 13, PD 115 extinguished

their civil liability.

RULING:
The Court finds petitioners not personally liable for the trust receipt dated October 9, 1981; while
for the trust receipt dated September 30, 1981, only petitioner Jose Tupaz is found liable as a
guarantor.
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. [12] As an exception, directors or officers
are personally liable for the corporations debts only if they so contractually agree or stipulate.
In the trust receipt dated 9 October 1981, petitioners signed below this clause as officers of El
Oro Corporation. Thus, under petitioner Petronila Tupazs signature are the words VicePresTreasurer and under petitioner Jose Tupazs signature are the words Vice-PresOperations.
By so signing that trust receipt, petitioners did not bind themselves personally liable for El Oro
Corporations obligation. Hence, for the trust receipt dated 9 October 1981, we sustain
petitioners claim that they are not personally liable for El Oro Corporations obligation.
For the trust receipt dated 30 September 1981, the dorsal portion of which petitioner
Jose Tupaz signed alone, we find that he did so in his personal capacity. Petitioner Jose Tupaz
did not indicate that he was signing as El Oro Corporations Vice-President for Operations.
Hence, petitioner Jose Tupaz bound himself personally liable for El Oro Corporations debts. Not
being a party to the trust receipt dated 30 September 1981, petitioner Petronila Tupaz is not
liable under such trust receipt.
However, respondent banks suit against petitioner Jose Tupaz stands despite the Courts
finding that he is liable as guarantor only. First, excussion is not a pre-requisite to secure
judgment against a guarantor. The guarantor can still demand deferment of the execution of the
judgment against him until after the assets of the principal debtor shall have been exhausted. [19]
Second, the benefit of excussion may be waived.
Under the trust receipt dated 30 September 1981, petitioner Jose Tupaz waived
excussion when he agreed that his liability in [the] guaranty shall be DIRECT AND IMMEDIATE,
without any need whatsoever on xxx [the] part [of respondent bank] to take any steps or exhaust
any legal remedies xxx. The clear import of this stipulation is that petitioner Jose Tupaz waived
the benefit of excussion under his guarantee. As guarantor, petitioner Jose Tupaz is liable for El
Oro Corporations principal debt and other accessory liabilities (as stipulated in the trust receipt
and as provided by law) under the trust receipt dated 30 September 1981.
b. The rule is that where the civil action is impliedly instituted with the criminal action, the civil
liability is not extinguished by acquittal. Here, respondent bank chose not to file a separate civil
action to recover payment under the trust receipts. Instead, respondent bank sought to recover
payment in Criminal Case Nos. 8848 and 8849. Although the trial court acquitted petitioner
Jose Tupaz, his acquittal did not extinguish his civil liability. As the Court of Appeals
correctly held, his liability arose not from the criminal act of which he was acquitted (ex delito)
but from the trust receipt contract (ex contractu) of 30 September 1981. Petitioner Jose Tupaz
signed the trust receipt of 30 September 1981 in his personal capacity.

WHEREFORE, we GRANT the petition in part. We AFFIRM the Decision of the Court of
Appeals dated 7 September 2000 and its Resolution dated 18 October 2000 with the following
MODIFICATIONS:
1)

El Oro Engraver Corporation is principally liable for the total amount due under the
trust receipts dated 30 September 1981 and 9 October 1981, as computed by the
Regional Trial Court, Makati, Branch 144, upon finality of this Decision, based on the
formula:
TOTAL AMOUNT DUE = [principal + interest + interest on interest] partial
payments made

[26]

Interest = principal x 18 % per annum x no. of years from due date

finality of judgment

[27]

until

Interest on interest = interest computed as of the filing of the complaint (17

January 1984) x 12% x no. of years until finality of judgment
Attorneys fees is 10% of the total amount computed as of finality of
judgment
Total amount due as of the date of finality of judgment will earn an interest
of 18% per annum until fully paid.
2)

Petitioner Jose C. Tupaz IV is liable for El Oro Engraver Corporations total debt
under the trust receipt dated 30 September 1981 as thus computed by the Regional
Trial Court, Makati, Branch 144; and

3)

Petitioners Jose C. Tupaz IV and Petronila C. Tupaz are not liable under the trust
receipt dated 9 October 1981.