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1. People vs Nitafan Digest provision of B.P.

22 on the basis of such


agreement or understanding would frustrate
Facts: the very purpose for which the law was
enacted to stem the proliferation of
Private respondent K.T. Lim was charged with unfunded checks. After having effectively
violation of B.P. 22. He moved to quash the reduced the incidence of worthless checks
Information of the ground that the facts changing hands, the country will once again
charged did not constitute a felony as B.P. 22 experience the limitless circulation of
was unconstitutional and that the check he bouncing checks in the guise of
issued was a memorandum check which was memorandum checks if such checks will be
in the nature of a promissory note, perforce, considered exempt from the operation of B.P.
civil in nature. Judge Nitafan, ruling that B.P. 22. It is common practice in commercial
22 on which the Information was based was transactions to require debtors to issue
unconstitutional, issued the questioned checks on which creditors must rely as
Order quashing the Information. Hence, the guarantee of payment. To determine the
appeal. reasons for which checks are issued, or the
terms and conditions for their issuance, will
Issue: greatly erode the faith the public responses
in the stability and commercial value of
Whether a memorandum check is within the checks as currency substitutes, and bring
coverage of B.P. 22 about havoc in trade and in banking
communities. (People vs. Judge
Held: Nitafan, G.R. No. 75954, October 22,
1992)
A memorandum check is in the form of an
ordinary check, with the word
"memorandum", "memo" or "mem" written 2. Lee v. Court of Appeals
across its face, signifying that the maker or
drawer engages to pay the bona fide holder Facts:On March 2, 1979, Charles Lee, as
absolutely, without any condition concerning President of MICO wrote private respondent
its presentment. Such a check is an evidence Philippine Bank of Communications (PBCom)
of debt against the drawer, and although requesting for a grant of a discounting
may not be intended to be presented, has loan/credit line in the sum of Three Million
the same effect as an ordinary check, and if Pesos (P3,000,000.00) for the purpose of
passed to the third person, will be valid in his carrying out MICOs line of business as well
hands like any other check. as to maintain its volume of business.
On the same day, Charles Lee requested for
A memorandum check comes within the another discounting loan/credit line of Three
meaning of Sec. 185 of the Negotiable Million Pesos (P3,000,000.00) from PBCom
Instruments Law which defines a check as "a for the purpose of opening letters of credit
bill of exchange drawn on a bank payable on and trust receipts.
demand. A memorandum check, upon As per agreement, the proceeds of all the
presentment, is generally accepted by the loan availments were credited to MICOs
bank. Hence it does not matter whether the current checking account with PBCom. To
check issued is in the nature of a induce the PBCom to increase the credit line
memorandum as evidence of indebtedness of MICO, petitioners executed another surety
or whether it was issued is partial fulfillment agreement in favor of PBCom on July 28,
of a pre-existing obligation, for what the law 1980, whereby they jointly and severally
punishes is the issuance itself of a bouncing guaranteed the prompt payment on due
check and not the purpose for which it was dates or at maturity of overdrafts,
issuance. The mere act of issuing a worthless promissory notes, discounts, drafts, letters of
check, whether as a deposit, as a guarantee, credit, bills of exchange, trust receipts and
or even as an evidence of a pre-existing all other obligations of any kind and nature
debt, is malumprohibitum. for which MICO may be held accountable by
PBCom
A memorandum check may carry with it the Upon maturity of all credit availments
understanding that it is not be presented at obtained by MICO from PBCom, the latter
the bank but will be redeemed by the maker made a demand for payment. Private
himself when the loan fall due. However, respondent PBComextrajudicially foreclosed
with the promulgation of B.P. 22, such MICOs real estate mortgage upon repeated
understanding or private arrangement may demands & emerged as the highest bidder.
no longer prevail to exempt it from penal For the unpaid balance, PBCom then
sanction imposed by the law. To require that demanded the settlement of the aforesaid
the agreement surrounding the issuance of obligations from herein petitioners-sureties
check be first looked into and thereafter who, however, refused to acknowledge their
exempt such issuance from the punitive obligations to PBCom under the surety
agreements. Hence, PBCom filed a complaint by the importer or by his representative
with prayer for writ of preliminary or successor in interest.
attachment before the Regional Trial Court of
Manila. Facts: Melvin Colinares and LordinoVeloso
Petitioners (MICO and herein petitioners- (hereafter Petitioners) were contracted for a
sureties) denied all the allegations of the consideration of P40,000 by the Carmelite
complaint filed by respondent PBCom, and
Sisters of Cagayan de Oro City to renovate
alleged that: a) MICO was not granted the
alleged loans and neither did it receive the the latters convent at Camaman-an,
proceeds of the aforesaid loans; b) Chua Cagayan de Oro City. Colinares applied for a
SiokSuy was never granted any valid Board commercial letter of credit with the
Resolution to sign for and in behalf of MICO; Philippine Banking Corporation, Cagayan de
c) PBCom acted in bad faith in granting the Oro City branch (hereafter PBC) in favor of
alleged loans and in releasing the proceeds CM Builders Centre. PBC approved the letter
thereof; d) petitioners were never advised of
of credit for P22,389.80 to cover the full
the alleged grant of loans and the
subsequent releases therefor, if any; e) since invoice value of the goods. Petitioners signed
no loan was ever released to or received by a pro-forma trust receipt as security.
MICO, the corresponding real estate
mortgage and the surety agreements signed PBC debited P6,720 from Petitioners
concededly by the petitioners-sureties are marginal deposit as partial payment of the
null and void. loan. After the initial payment, the spouses
defaulted. PBC wrote to Petitioners
Issue: WON the proceeds of the loans or the demanding that the amount be paid within
goods under the trust receipts were ever
seven days from notice. Instead of complying
delivered to and received by MICO.
with PBCs demand, Veloso confessed that
Held: It is clear that letters of credit, being they lost P19,195.83 in the Carmelite
usually bank to bank transactions, involve Monastery Project and requested for a grace
more than just one bank. Consequently, period of until 15 June 1980 to settle the
there is nothing unusual in the fact that the account. Colinares proposed that the terms
drafts presented in evidence by respondent of payment of the loan be modified P2,000
bank were not made payable to PBCom.
on or before 3 December 1980, and P1,000
A trust receipt is considered as a security per month . Pending approval of the
transaction intended to aid in financing proposal, Petitioners paid P1,000 to PBC on 4
importers and retail dealers who do not have December 1980, and thereafter P500 on 11
sufficient funds or resources to finance the February 1981, 16 March 1981, and 20 April
importation or purchase of merchandise, and 1981. Concurrently with the separate
who may not be able to acquire credit except
demand for attorneys fees by PBCs legal
through utilization, as collateral of the
merchandise imported or purchased. counsel, PBC continued to demand payment
of the balance. On 14 January 1983,
A trust receipt, therefor, is a document of Petitioners were charged with the violation of
security pursuant to which a bank acquires a P.D. No. 115 (Trust Receipts Law) in relation
security interest in the goods under trust to Article 315 of the Revised Penal Code
receipt. Under a letter of credit-trust receipt
arrangement, a bank extends a loan covered During trial, petitioner Veloso insisted that
by a letter of credit, with the trust receipt as the transaction was a clean loan as per
a security for the loan. The transaction verbal guarantee of Cayo Garcia Tuiza, PBCs
involves a loan feature represented by a
letter of credit, and a security feature which former manager. He and petitioner Colinares
is in the covering trust receipt which secures signed the documents without reading the
an indebtedness. fine print, only learning of the trust receipt
implication much later. When he brought this
to the attention of PBC, Mr.Tuiza assured him
3. Colinares v CA G.R. No. 90828. that the trust receipt was a mere formality.
September 5, 2000 The Trust Receipts Law does not seek to
The ownership of the merchandise enforce payment of the loan, rather it
continues to be vested in the person punishes the dishonesty and abuse of
who had advanced payment until he has confidence in the handling of money or
been paid in full, or if the merchandise goods to the prejudice of another regardless
has already been sold, the proceeds of of whether the latter is the owner. Here, it is
the sale should be turned over to him crystal clear that on the part of Petitioners
there was neither dishonesty nor abuse of
confidence in the handling of money to the receipt shall be punishable as estafa under
prejudice of PBC. Petitioners continually Article 315 (1) of the Revised Penal Code,
endeavored to meet their obligations, as without need of proving intent to defraud.
shown by several receipts issued by PBC
acknowledging payment of the loan. 5. Land Bank of the Philippines v. Perez Erwin

Issue: Whether or not the transaction of Petitioner Land Bank of the Philippines
(LBP) is a government fi nancial
Colinares falls within the ambit of the Law on
institution and the offi cial depository of
Trust Receipt the Philippines. Respondents were
offi cers of Asian Construction and
Held: Colinares received the merchandise
Development Corporation (ACDC),
from CM Builders Centre on 30 October 1979. a corporation engaged in the
On that day, ownership over the construction business. On several
merchandise was already transferred to occasion, respondents executed in favor
Petitioners who were to use the materials for of Land Bank of the Philippines (LBP)
their construction project. It was only a day trust receipts to secure the purchase of
later, 31 October 1979, that they went to the construction materials that they will need in
their construction projects
bank to apply for a loan to pay for the
when the trust receipts matured, ACDC failed
merchandise. This situation belies what to return to LBP the proceeds of the
normally obtains in a pure trust receipt construction projects or the
transaction where goods are owned by the construction materials subject of the
bank and only released to the importer in trust receipts. After several demands
trust subsequent to the grant of the loan. went unheeded, LBP fi led a complaint
for estafa or violation of Art. 315 par.
The bank acquires a security interest in the 1(b) of the RPC, in relation to PD 115,
goods as holder of a security title for the against the respondent officers of ACDC
advances it had made to the entrustee. The
ISSUE
ownership of the merchandise continues to WON the disputed transactions is a trust
be vested in the person who had advanced receipt or a loan?
payment until he has been paid in full, or if
the merchandise has already been sold, the HELD
proceeds of the sale should be turned over to
him by the importer or by his representative There are two obligations in a trust receipt
transaction. The first is covered by the
or successor in interest. To secure that the provision that refers to money under the
bank shall be paid, it takes full title to the obligation to deliver it (entregarla) to
goods at the very beginning and continues to the owner of the
hold that title as his indispensable security merchandises o l d . T h e s e c o n d i s c o v e
until the goods are sold and the vendee is re d b y the p rovi si on re f e rri ng to me
called upon to pay for them; hence, the r c h a n d i s e r e c e i v e d u n d e r t h e obligati
on to return it (devolvera) to the owner.
importer has never owned the goods and is
Thus, under the Trust Receipts Law,
not able to deliver possession. In a certain intent to defraud is presumed when (1)
manner, trust receipts partake of the nature the entrustee fails to turn over the
of a conditional sale where the importer proceeds of the sale of goods covered
becomes absolute owner of the imported by the trust receipt to the entruster/ or
merchandise as soon as he has paid its price. (2) when the entrustee fails to return
There are two possible situations in a trust the goodsunder trust, if they are not
disposed of in accordance with the terms of
receipt transaction. The first is covered by
the trust receipts.
the provision which refers to money received
under the obligation involving the duty to In all trust receipt transactions,
deliver it (entregarla) to the owner of the bothobligations on the part of the trustee
merchandise sold. The second is covered by exist in the alternativethe return of the
the provision which refers to merchandise proceeds of the sale or the return or
received under the obligation to return it recovery of the goods, whether
rawor processed. When both parties enter in
(devolvera) to the owner. Failure of the
to an agreement knowing that the return of t
entrustee to turn over the proceeds of the he goodssubject of the trust receipt is
sale of the goods, covered by the trust not possible even without any fault on
receipt to the entruster or to return said the part of the trustee, it is not a trust
goods if they were not disposed of in receipt transaction penalized under Section
accordance with the terms of the trust 13 of PD 115; the only obligationactually
ag re e d u p on b y the p arti e s wou l d
b e th e re tu rn of the p ro ce e d s of th e
s a l e t r a n s a c t i o n . T h i s transaction
becomes a mere loan, where the
borrower is obligated to pay the bank
the amountspent for the purchase of the
goods.

Under the Trust Receipts Law, intent to


defraud is presumed when (1) the entrustee
fails to turn over the proceeds of the sale of
goods covered by the trust receipt to the
entruster; or (2) when the entrustee fails to
return the goods under trust, if they are not
disposed of in accordance with the terms of
the trust receipts. When both parties know
that the entrustee could not have complied
with the obligations under the trust receipt
without his fault, as when the goods subject
of the agreement were not intended for sale
or resale, the transaction cannot be
considered a trust receipt but a simple loan,
where the liability is limited to the payment
of the purchase price. (Land Bank of the
Philippines vs. Perez, G.R. No. 166884, June
13, 2012)