CASE NO.

50
Novation
Ong vs. Court of Appeals, 124 SCRA 578 (1983)

FACTS: A CRIMINAL information for estafa was filed by a Fiscal against Ong who allegedly failed to turn over the
proceeds of the sale or to return the goods received from Tramat Mercantile, Inc. After the case of estafa was filed
against Ong, Tramat Mercantile, Inc., filed a complaint against him in CIVIL Case for sum of money. Later, the
parties entered into a compromise agreement to settle the claim in said civil case. Petitioner moved for the
dismissal of the criminal charge on the ground of novation because of the compromise agreement entered into
between him and the complainant —RTC denied. Petitioner filed a petition for certiorari with CA—DISMISSED.

ISSUE: Whether, due to the compromise agreement by the parties in the civil case, the criminal charge should be
dismissed

RULING: NO. The novation theory cannot stand. The crime being an offense against the state, only the latter can
renounce it. Novation is not one of the means recognized by the Penal Code whereby criminal liability can be
extinguished.

CASE NO. 51
Pilipinas Bank v. Ong. 387 SCRA 37 (2002)

FACTS: BMC, through its president, Ong, applied for a domestic commercial letter of credit with Pilipinas Bank to
finance the purchase of sawn lumber—approved. As security, Ong, executed 2 trust receipts providing inter
alia that it shall turn over the proceeds of the goods to the bank if sold, or return the goods if unsold, upon
maturity on due dates agreed upon, but BMC failed to comply with the trust receipt agreement. It then filed with
the SEC a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments. SEC issued an
order creating a Management Committee wherein the bank is represented. BMC and Pilipinas Bank entered into a
MOA rescheduling the payment of BMC’s existing debts. SEC approved the Rehabilitation Plan of BMC. However,
BMC and respondent Ong still defaulted in the payment of their obligations.

ISSUE: W/N respondents can be held liable for violation of the Trust Receipts Law.

RULING: NO. Mere failure to deliver the proceeds of the sale or the goods, if not sold, constitutes violation of PD
No. 115. However, what is being punished by the law is 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. In this case, no
dishonesty nor abuse of confidence can be attributed to BMC because record shows that BMC were experiencing
serious liquidity problems prompting it to seek SEC. Further, The execution of the MOA extinguished
respondents’ obligation under the trust receipts. Respondents’ liability, if any, would only be civil in nature since
the trust receipts were transformed into mere loan documents after the execution of the MOA.

CASE NO. 54
Trust Receipts Law
Ong v. CA ǀ G.R. No. 119858, 29 April 2003

FACTS: Petitioner Ong was charged with two counts of estafa under separate Informations. Ong, representing
ARMAGRI International Corporation (ARMAGRI applied for LOCs with SOLIDBANK (Bank)—approved. The Bank
opened letters of credit and executed two trust receipts. Both contained the same stipulations under which
ARMAGRI undertook to account for the goods held in trust for the Bank, or if the goods are sold, to turn over the
proceeds to the Bank. ARMAGRI also undertook the obligation to return the goods upon demand by the Bank, if
not sold. When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods to the
Bank despite several demand letters. RTC found petitioner guilty. CA affirmed the RTC in toto.

ISSUE: Whether or not the CA erred in finding him liable for the default of ARMAGRI, arguing that in signing the
trust receipts, he merely acted as an agent of ARMAGRI.

RULING: NO.

The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation.
Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons responsible
for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships,
associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human
agent responsible for the violation of the Trust Receipts Law.

--lahat sila Ong, hehehe what are the odds

CASE NO. 55
Trust Receipts Law
Alfredo Ching v. The Secretary of Justice, Rizal Commercial Banking Corp. et. al.
G.R. No. 164317

FACTS: Philippine Blooming Mills, Inc. (PBMI), through petitioner, applied with the Rizal Commercial Banking
Corporation (RCBC) (respondent bank) for the issuance of commercial LOC to finance its importation of assorted
goods—approved. Petitioner signed 13 trust receipts under which petitioner agreed to hold the goods in trust for
the said bank, with authority to sell but not by way of conditional sale, pledge or otherwise; and in case such goods
were sold, to turn over the proceeds thereof as soon as received. In case the goods remained unsold within the
specified period, the goods were to be returned to respondent bank without need of demand. When the trust
receipts matured, petitioner failed to pay his obligation.

ISSUE: Whether or not Petitioner can be indicted for violation of the Trust Receipts Law.

RULING: YES. A trust receipt transaction, within the meaning of PD115, 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.
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".

CASE 56
II Trust Receipts Law: (8) Penal Sanctions if offender is a Corporation
Tupaz v. CA, G.R. No. 145578
CASE NATURE: Petition For Review: Partially Granted

FACTS: Philippine Army contracted with El Oro Corp. for the supply of survival Bolos. El Oro, thru Jose and
Petronila (both surnamed Tupaz)applied with BPI for 2 commercial L/C--granted. After the delivery of raw
materials to El Oro, BPI paid said 2 corporations. El Oro defaulted in payment due to delayed payments of AFP.
Thus, BPI, thru the fiscal, sued petitioners with estafa under Sec 13 of PD 115 (Trust Receipts Law) where the RTC
Makati acquitted petitioners but held them jointly and severally liable (civil liability) . CA affirmed. Hence this
petition.

ISSUE: w/n petitioners, as corporate officers of El Oro Corp, is jointly and severally liable to BPI for the payment of
the amount of L/C?

RULING: Only Jose relative to the first L/C issued by BPI. As guarantor, petitioner Jose Tupaz is liable for El Oro
Corporation's principal debt and other accessory liabilities (as stipulated in the trust receipt and as provided by
law. Further, Jose waived the benefit of excussion under his guarantee.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

Case No. 58
Trust Receipts Law
Sarmiento vs. Court of Appeals GR. 122502 (2002)

FACTS: Limpin, Jr. and Apostol of ‘Davao Libra Industrial Sales,’ filed an application for an Irrevocable Domestic
Letter of Credit with Associated Banking Corpo.—approved. Thereafter, a Trust Receipt was executed to which
Sarmiento signed as surety/guarantor. They failed to comply with their undertaking under the Trust Receipt and
failed to pay their account despite demands. A complaint for Violation of the Trust Receipt Law was filed against
them. Sarmiento, Jr. was, however, dropped from the Information, while Limpin was convicted. RTC rendered
judgment in favor of Associated Banking Corporation and ordered petitioners to pay. CA affirmed.

ISSUE: Whether the institution of the criminal case bars the filing of the present civil action against petitioners.

RULING: NO. private respondent’s complaint against petitioners was based on the failure of the latter to comply
with their obligation as spelled out in the Trust Receipt executed by them. This breach of obligation is separate
and distinct from any criminal liability violation of the Trust Receipts Law (P.D. 115) in relation to Article 315(1), (b)
RPC. Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently
of the criminal proceedings instituted against petitioners regardless of the result of the latter.

Case No. 59

Trust Receipts Law | 9.b Remedies Available

Philippine National Bank vs. Pineda | GR No. L-46658

Facts: PNB approved the application and opening by TCC Tayabas Cement Company, Inc of a L/C to cover the
importation of a cement plant machinery and equipment. Such machinery were released to TCC under a trust
receipt agreement.The seller of the equipment was able to draw against the L/C as scheduled but TCC was unable
to pay the corresponding amount covered by the drawings Thus, pursuant to the trust receipt agreement, PNB
notified TCC of its intention to repossess, as it later did, the imported machinery and equipment..
Issue: W/N TCC's liability has been extinguished by the repossession of PNB of the imported cement plant
machinery and equipment.

Ruling: No. A trust receipt, is a security agreement, pursuant to which a bank acquires a "security interest" in the
goods. . It must be remembered that PNB took possession of the imported cement plant machinery and
equipment pursuant to the trust receipt agreement. PNB's possession of the subject machinery and equipment
being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by
itself cannot be considered payment of the loan secured thereby.