G.R. No.

195117 August 14, 2013

HUR TIN YANG, PETITIONER

vs.
PEOPLE OF THE PHILIPPINES, RESPONDENT.

RESOLUTION

VELASCO JR., J.:

This is a motion for reconsideration of our February 1, 2012 Minute Resolution1 sustaining the July
28, 2010 Decision2 and December 20, 2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. CR
No. 30426, finding petitioner Hur Tin Yang guilty beyond reasonable doubt of the crime of Estafa
under A11icle 315, paragraph 1 (b) of the Revised Penal Code (RPC) in relation to Presidential
Decree No. 115 (PD 115) or the Trust Receipts Law.

In twenty-four (24) consolidated Informations, all dated March 15, 2002, petitioner Hur Tin Yang was
charged at the instance of the same complainant with the crime of Estafa under Article 315, par. 1(b)
of the RPC,4 in relation to PD 115,5 docketed as Criminal Case Nos. 04-223911 to 34 and raffled to
the Regional Trial Court of Manila, Branch 20. The 24 Informations––differing only as regards the
alleged date of commission of the crime, date of the trust receipts, the number of the letter of credit,
the subject goods and the amount––uniformly recite:

That on or about May 28, 1998, in the City of Manila, Philippines, the said accused being then the
authorized officer of SUPERMAX PHILIPPINES, INC., with office address at No. 11/F, Global Tower,
Gen Mascardo corner M. Reyes St., Bangkal, Makati City, did then and there willfully, unlawfully and
feloniously defraud the METROPOLITAN BANK AND TRUST COMPANY (METROBANK), a
corporation duly organized and existing under and by virtue of the laws of the Republic of the
Philippines, represented by its Officer in Charge, WINNIE M. VILLANUEVA, in the following manner,
to wit: the said accused received in trust from the said Metropolitan Bank and Trust Company
reinforcing bars valued at ₱1,062,918.84 specified in the undated Trust Receipt Agreement covered
by Letter of Credit No. MG-LOC 216/98 for the purpose of holding said merchandise/goods in trust,
with obligation on the part of the accused to turn over the proceeds of the sale thereof or if unsold, to
return the goods to the said bank within the specified period agreed upon, but herein accused once
in possession of the said merchandise/goods, far from complying with his aforesaid obligation, failed
and refused and still fails and refuses to do so despite repeated demands made upon him to that
effect and with intent to defraud and with grave abuse of confidence and trust, misappropriated,
misapplied and converted the said merchandise/goods or the value thereof to his own personal use
and benefit, to the damage and prejudice of said METROPOLITAN BANK AND TRUST COMPANY
in the aforesaid amount of ₱1,062,918.84, Philippine Currency.

Contrary to law.6

Upon arraignment, petitioner pleaded "not guilty." Thereafter, trial on the merits then ensued.

The facts of these consolidated cases are undisputed:

Supermax Philippines, Inc. (Supermax) is a domestic corporation engaged in the construction

business. On various occasions in the month of April, May, July, August, September, October and
November 1998, Metropolitan Bank and Trust Company (Metrobank), Magdalena Branch, Manila,
extended several commercial letters of credit (LCs) to Supermax. These commercial LCs were used
by Supermax to pay for the delivery of several construction materials which will be used in their
construction business. Thereafter, Metrobank required petitioner, as representative and Vice-
President for Internal Affairs of Supermax, to sign twenty-four (24) trust receipts as security for the
construction materials and to hold those materials or the proceeds of the sales in trust for Metrobank
to the extent of the amount stated in the trust receipts.

When the 24 trust receipts fell due and despite the receipt of a demand letter dated August 15, 2000,
Supermax failed to pay or deliver the goods or proceeds to Metrobank. Instead, Supermax, through
petitioner, requested the restructuring of the loan. When the intended restructuring of the loan did
not materialize, Metrobank sent another demand letter dated October 11, 2001. As the demands fell
on deaf ears, Metrobank, through its representative, Winnie M. Villanueva, filed the instant criminal
complaints against petitioner.

For his defense, while admitting signing the trust receipts, petitioner argued that said trust receipts
were demanded by Metrobank as additional security for the loans extended to Supermax for the
purchase of construction equipment and materials. In support of this argument, petitioner presented
as witness, Priscila Alfonso, who testified that the construction materials covered by the trust
receipts were delivered way before petitioner signed the corresponding trust receipts.7 Further,
petitioner argued that 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.8

The trial court a quo, by Judgment dated October 6, 2006, found petitioner guilty as charged and
sentenced him as follows:

His guilt having been proven and established beyond reasonable doubt, the Court hereby renders
judgment CONVICTING accused HUR TIN YANG of the crime of estafa under Article 315 paragraph
1 (a) of the Revised Penal Code and hereby imposes upon him the indeterminate penalty of 4 years,
2 months and 1 day of prision correccional to 20 years of reclusion temporal and to pay Metropolitan
Bank and Trust Company, Inc. the amount of Php13,156,256.51 as civil liability and to pay cost.

SO ORDERED.9

Petitioner appealed to the CA. On July 28, 2010, the appellate court rendered a Decision, upholding
the findings of the RTC that the prosecution has satisfactorily established the guilt of petitioner
beyond reasonable doubt, including the following critical facts, to wit: (1) petitioner signing the trust
receipts agreement; (2) Supermax failing to pay the loan; and (3) Supermax failing to turn over the
proceeds of the sale or the goods to Metrobank upon demand. Curiously, but significantly, the CA
also found that even before the execution of the trust receipts, Metrobank knew or should have
known that the subject construction materials were never intended for resale or for the manufacture
of items to be sold.10

The CA ruled that since the offense punished under PD 115 is in the nature of malum prohibitum, a
mere failure to deliver the proceeds of the sale or goods, if not sold, is sufficient to justify a
conviction under PD 115. The fallo of the CA Decision reads:

WHEREFORE, in view of the foregoing premises, the appeal filed in this case is hereby DENIED
and, consequently, DISMISSED. The assailed Decision dated October 6, 2006 of the Rregional Trial
Court, Branch 20, in the City of Manila in Criminal Cases Nos. 04223911 to 223934 is hereby
AFFIRMED.

SO ORDERED.
Petitioner filed a Motion for Reconsideration, but it was denied in a Resolution dated December 20,
2010. Not satisfied, petitioner filed a petition for review under Rule 45 of the Rules of Court. The
Office of the Solicitor General (OSG) filed its Comment dated November 28, 2011, stressing that the
pieces of evidence adduced from the testimony and documents submitted before the trial court are
sufficient to establish the guilt of petitioner.11

On February 1, 2012, this Court dismissed the Petition via a Minute Resolution on the ground that
the CA committed no reversible error in the assailed July 28, 2010 Decision. Hence, petitioner filed
the present Motion for Reconsideration contending that the transactions between the parties do not
constitute trust receipt agreements but rather of simple loans.

On October 3, 2012, the OSG filed its Comment on the Motion for Reconsideration, praying for the
denial of said motion and arguing that petitioner merely reiterated his arguments in the petition and
his Motion for Reconsideration is nothing more than a mere rehash of the matters already thoroughly
passed upon by the RTC, the CA and this Court.12

The sole issue for the consideration of the Court is whether or not petitioner is liable for Estafa under
Art. 315, par. 1(b) of the RPC in relation to PD 115, even if it was sufficiently proved that the
entruster (Metrobank) knew beforehand that the goods (construction materials) subject of the trust
receipts were never intended to be sold but only for use in the entrustee’s construction business.

The motion for reconsideration has merit.

In determining the nature of a contract, courts are not bound by the title or name given by the
parties. The decisive factor in evaluating such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by their conduct, words, actions and deeds
prior to, during and immediately after executing the agreement. As such, therefore, documentary and
parol evidence may be submitted and admitted to prove such intention.13

In the instant case, the factual findings of the trial and appellate courts reveal that the dealing
between petitioner and Metrobank was not a trust receipt transaction but one of simple loan.
Petitioner’s admission––that he signed the trust receipts on behalf of Supermax, which failed to pay
the loan or turn over the proceeds of the sale or the goods to Metrobank upon demand––does not
conclusively prove that the transaction was, indeed, a trust receipts transaction. In contrast to the
nomenclature of the transaction, the parties really intended a contract of loan. This Court––in Ng v.
People14 and Land Bank of the Philippines v. Perez,15 cases which are in all four corners the same
as the instant case––ruled that 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 the manufacture of items to be sold is sufficient to prove that the
transaction was a simple loan and not a trust receipts transaction.

The petitioner was charged with Estafa committed in what is called, under PD 115, a "trust receipt
transaction," which is defined as:

Section 4. 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.

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. 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.16 A violation of any of these undertakings constitutes Estafa
defined under Art. 315, par. 1(b) of the RPC, as provided in Sec. 13 of PD 115, viz:

Section 13. Penalty Clause.—The failure of an entrustee to turn over the proceeds of the sale of the
goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the
entruster or as appears in the trust receipt or to return said goods, documents or instruments if they
were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the
crime of estafa, punishable under the provisions of Article Three hundred fifteen, paragraph one (b)
of Act Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as the
Revised Penal Code. x x x (Emphasis supplied.)

Nonetheless, when both parties enter into an agreement knowing fully well that the return of the
goods subject of the trust receipt is not possible even without any fault on the part of the trustee, it is
not a trust receipt transaction penalized under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of
the RPC, as the only obligation actually agreed upon by the parties would be the return of the
proceeds of the sale transaction. This transaction becomes a mere loan, where the borrower is
obligated to pay the bank the amount spent for the purchase of the goods.17

In Ng v. People, Anthony Ng, then engaged in the business of building and fabricating
telecommunication towers, applied for a credit line of PhP 3,000,000 with Asiatrust Development
Bank, Inc. Prior to the approval of the loan, Anthony Ng informed Asiatrust that the proceeds would
be used for purchasing construction materials necessary for the completion of several steel towers
he was commissioned to build by several telecommunication companies. Asiatrust approved the
loan but required Anthony Ng to sign a trust receipt agreement. When Anthony Ng failed to pay the
loan, Asiatrust filed a criminal case for Estafa in relation to PD 115 or the Trust Receipts Law. This
Court acquitted Anthony Ng and ruled that the Trust Receipts Law was created to "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." Since Asiatrust knew that Anthony Ng was
neither an importer nor retail dealer, it should have known that the said agreement could not possibly
apply to petitioner, viz:

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.

[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." The
principle is of course not limited in its application to financing importations, since the principle is
equally applicable to domestic transactions. 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. x x x [T]he 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.

xxxx

To emphasize, the Trust Receipts Law was created to "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." Since Asiatrust knew that petitioner was neither an
importer nor retail dealer, it should have known that the said agreement could not possibly apply to
petitioner.18

Further, in Land Bank of the Philippines v. Perez, the respondents were officers of Asian
Construction and Development Corporation (ACDC), a corporation engaged in the construction
business. On several occasions, respondents executed in favor of Land Bank of the Philippines
(LBP) trust receipts to secure the purchase of construction materials that they will need in their
construction projects. When the trust receipts matured, ACDC failed to return to LBP the proceeds of
the construction projects or the construction materials subject of the trust receipts. After several
demands went unheeded, LBP filed a complaint for Estafa or violation of Art. 315, par. 1(b) of the
RPC, in relation to PD 115, against the respondent officers of ACDC. This Court, like in Ng,
acquitted all the respondents on the postulate that the parties really intended a simple contract of
loan and not a trust receipts transaction, viz:
When both parties enter into an agreement knowing that the return of the goods subject of the trust
receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt
transaction penalized under Section 13 of P.D. 115; the only obligation actually agreed upon by the
parties would be the return of the proceeds of the sale transaction. This transaction becomes a mere
loan, where the borrower is obligated to pay the bank the amount spent for the purchase of the
goods.

xxxx

Thus, in concluding that the transaction was a loan and not a trust receipt, we noted in Colinares that
the industry or line of work that the borrowers were engaged in was construction. We pointed out
that the borrowers were not importers acquiring goods for resale. Indeed, goods sold in retail are
often within the custody or control of the trustee until they are purchased. In the case of materials
used in the manufacture of finished products, these finished products – if not the raw materials or
their components – similarly remain in the possession of the trustee until they are sold. 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.19

Since the factual milieu of Ng and Land Bank of the Philippines are in all four corners similar to the
instant case, it behooves this Court, following the principle of stare decisis,20 to rule that the
transactions in the instant case are not trust receipts transactions but contracts of simple loan. The
fact that the entruster bank, Metrobank in this case, knew even before the execution of the alleged
trust receipt agreements that the covered construction materials were never intended by the
entrustee (petitioner) for resale or for the manufacture of items to be sold would take the transaction
between petitioner and Metrobank outside the ambit of the Trust Receipts Law.

For reasons discussed above, the subject transactions in the instant case are not trust receipts
transactions. Thus, the consolidated complaints for Estafa in relation to PD 115 have really no leg to
1âwphi1

stand on.

The Court’s ruling in Colinares v. Court of Appeals21 is very apt, thus:

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 x x x.

Unfortunately, what happened in Colinares is exactly the situation in the instant case. This
reprehensible bank practice described in Colinares should be stopped and discouraged. For this
Court to give life to the constitutional provision of non-imprisonment for nonpayment of debts,22 it is
imperative that petitioner be acquitted of the crime of Estafa under Art. 315, par. 1 (b) ofthe RPC, in
relation to PD 115.

WHEREFORE, the Resolution dated February 1, 2012, upholding theCA's Decision dated July 28,
2010 and Resolution dated December 20, 2010 in CA-G.R. CR No. 30426, is hereby
RECONSIDERED. Petitioner Hur Tin Yang is ACQUITTED of the charge of violating Art. 315, par. 1
(b) of the RPC, in relation to the pertinent provision of PD 115 in Criminal Case Nos. 04-223911 to
34.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice