Hur Tin Yang vs. People of the Philippines

When an entruster bank knows or should have known prior to the execution of trust receipt agreements that the subject goods are intended for use in the entrustee's construction business rather than for resale or manufacture for sale, the transaction is not a trust receipt transaction under Presidential Decree No. 115 but constitutes a simple loan; consequently, the failure to return the goods or their proceeds does not constitute estafa under Article 315, paragraph 1(b) of the Revised Penal Code in relation to PD 115.

Supermax Philippines, Inc., a domestic corporation engaged in the construction business, obtained multiple commercial letters of credit from Metropolitan Bank and Trust Company (Metrobank) to finance the purchase of construction materials for its various projects. Hur Tin Yang, in his capacity as Vice-President for Internal Affairs of Supermax, executed twenty-four trust receipts as security for these materials, which were subsequently delivered to and used by Supermax in its construction projects. The construction materials were never intended for resale but for consumption in the company's construction business, a fact that Metrobank knew or should have known prior to the approval of the loans and the execution of the trust receipts based on the company's submitted articles of incorporation, by-laws, and financial reports.

• Metropolitan Bank and Trust Company (Metrobank), Magdalena Branch, Manila, extended several commercial letters of credit to Supermax Philippines, Inc. on various occasions between April and November 1998 to pay for construction materials.
• Petitioner Hur Tin Yang, as authorized officer and Vice-President for Internal Affairs of Supermax, signed twenty-four trust receipts as security for the construction materials, undertaking to hold the goods in trust and to turn over the proceeds of sale or the goods themselves if unsold.
• The construction materials covered by the trust receipts were delivered to Supermax prior to the execution of the trust receipts, as testified to by witness Priscila Alfonso.
• The materials were intended for use in Supermax's construction business and not for resale or for the manufacture of items to be sold.
• Metrobank knew or should have known prior to the execution of the trust receipts that the goods were intended for construction use rather than resale, based on documents submitted for loan approval including Supermax's articles of incorporation, by-laws, and financial reports.
• When the trust receipts fell due, Supermax failed to pay the loan or deliver the proceeds or goods to Metrobank despite demand letters dated August 15, 2000 and October 11, 2001.
• Metrobank filed the twenty-four criminal complaints against petitioner on March 15, 2002, alleging violation of Article 315, paragraph 1(b) of the RPC in relation to PD 115.

• The transactions between the parties constituted simple loans rather than trust receipt transactions under Presidential Decree No. 115.
• The trust receipts were executed merely as additional security demanded by Metrobank as a condition for loan approval, not as genuine trust receipt transactions.
• The construction materials were delivered to Supermax prior to the execution of the trust receipts, negating the essential element of a trust receipt transaction where goods are released to the entrustee upon execution of the trust receipt.
• Metrobank knew that the construction materials were intended for Supermax's own use in its construction projects and not for resale, as evidenced by the company's business documents and nature as a construction company.

• The evidence adduced at trial, including the trust receipts bearing petitioner's genuine signatures and the demand letters, sufficiently established petitioner's guilt beyond reasonable doubt.
• The offense punished under PD 115 is malum prohibitum, requiring only a mere failure to deliver the proceeds of the sale or the goods if not sold to constitute criminal liability, regardless of intent.
• The Motion for Reconsideration merely rehashed arguments already thoroughly passed upon by the Regional Trial Court, Court of Appeals, and the Supreme Court.

• Procedural Issues:
  • Whether the Supreme Court should grant the Motion for Reconsideration of its February 1, 2012 Minute Resolution dismissing the petition for review.
• Substantive Issues:
  • Whether petitioner is liable for estafa under Article 315, paragraph 1(b) of the Revised Penal Code in relation to Presidential Decree No. 115 when the entruster bank knew beforehand that the goods subject of the trust receipts were never intended for resale but only for use in the entrustee's construction business.

• Procedural:
  • The Motion for Reconsideration has merit. The Court reconsidered its Resolution dated February 1, 2012, which had dismissed the petition for review for lack of reversible error in the Court of Appeals' decision.
• Substantive:
  • The transaction between petitioner and Metrobank was a contract of simple loan, not a trust receipt transaction under PD 115.
  • When both parties enter into an agreement knowing that the return of the goods subject of the trust receipt is impossible because the materials are intended for consumption in construction projects rather than resale, the transaction does not fall under the Trust Receipts Law.
  • Following the principle of stare decisis and the precedents established in Ng v. People and Land Bank of the Philippines v. Perez, the Court ruled that the entruster's knowledge that the goods were not intended for sale removes the transaction from the ambit of PD 115 and converts it into a simple loan obligation.
  • The practice of banks making borrowers sign trust receipts to facilitate collection of loans and threatening criminal prosecution for non-payment is unjust and inequitable.
  • Petitioner Hur Tin Yang is acquitted of the charge of estafa under Article 315, paragraph 1(b) of the RPC in relation to PD 115.

• True Nature of Trust Receipt Transactions — Trust receipts are security transactions intended to aid in financing importers and retail dealers who utilize merchandise as collateral; the law was created to assist importers and merchants solve financing problems as a convenient business device, not to finance construction companies purchasing materials for their own use and consumption.
• Simple Loan vs. Trust Receipt Transaction — When parties enter into an agreement knowing that the return of the goods subject of the trust receipt is impossible (as when materials are consumed in construction projects), the transaction becomes a mere loan where the borrower is obligated to pay the amount spent for the purchase, and the penal provisions of PD 115 do not apply.
• Stare Decisis — The doctrine of adhering to judicial precedents; the Court applied its previous rulings in Ng v. People and Land Bank of the Philippines v. Perez which involved substantially similar facts where construction companies obtained financing for materials not intended for resale.
• Non-Imprisonment for Debt — Constitutional prohibition under Article III, Section 20 of the Constitution against imprisonment for debt or non-payment of poll tax; the Court cited this to emphasize that using trust receipts to secure simple loans and threatening criminal prosecution for non-payment is reprehensible and violates the constitutional protection.

• "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."
• "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 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.'"
• "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."

• Ng v. People — Controlling precedent with facts in all four corners similar to the instant case; held that where the entruster bank knew the borrower was neither an importer nor retail dealer and that goods were for fabrication use, not sale, the agreement was not a trust receipt transaction.
• Land Bank of the Philippines v. Perez — Controlling precedent involving officers of a construction company; ruled that when parties know return of goods is impossible because materials are used in construction, the transaction is a simple loan, not a trust receipt transaction.
• Colinares v. Court of Appeals — Cited for its criticism of bank practices using trust receipts to secure loans and placing borrowers under threat of criminal prosecution, describing such agreements as contracts of adhesion.
• Aguirre v. Court of Appeals — Cited for the principle that in determining the nature of a contract, courts look at the intention of the parties as shown by their conduct, words, actions, and deeds prior to, during, and immediately after executing the agreement, not merely the terminology used.
• Agra v. Commission on Audit — Cited for the definition and application of the doctrine of stare decisis et non quieta movere.

• Article 315, paragraph 1(b) of the Revised Penal Code — Defines estafa committed with abuse of confidence by misappropriating or converting money, goods, or personal property received in trust.
• Presidential Decree No. 115 (Trust Receipts Law), Section 4 — Defines what constitutes a trust receipt transaction, requiring the entrustee to hold goods in trust for the entruster and to sell or dispose of them with the obligation to turn over proceeds or return the goods.
• Presidential Decree No. 115 (Trust Receipts Law), Section 13 — Penalizes the failure of an entrustee to turn over proceeds or return goods as estafa under Article 315 of the RPC.
• Constitution, Article III, Section 20 — Provides that no person shall be imprisoned for debt or non-payment of poll tax; cited to emphasize the constitutional protection against imprisonment for non-payment of debts.