[SIMPLE LOAN - MUTUUM]
07 CHING V. COURT OF APPEALS
April 27, 2000 | Buena, J. |
Doctrine: A trust receipt is a document in which is expressed a security transaction
whereunder the lender, having no prior title in the goods on which the lien is to be
given and not having possession which remains in the borrower, lends his money
to the borrower on security of the goods which the borrower is privileged to sell
clear of the lien with an agreement to pay all or part of the proceeds of the sale to
the lender. It is a security agreement pursuant to which a bank acquires a “security
interest” in the goods. It secures an indebtedness and there can be no such thing
as security interest that secures no obligation. Clearly, a trust receipt partakes the
nature of a security transaction. It could never be a mere additional or side
document as alleged by petitioner. Otherwise, a party to a trust receipt agreement
could easily renege on its obligations thereunder, thus undermining the
importance and defeating with impunity the purpose of such an indispensable tool
in commercial transactions.
Facts:
● Alfredo Ching executed a trust receipts agreement in favor of Allied Banking
Corporation (ABC) in consideration of the receipt by Ching’s goods
○ 12 containers 200M/T Magtar Brand Dolomites (P278k);
○ 18 Containers (Zoom M/T) Magtar Brand Dolomites (P419k);
○ High Fired Refractory Sliding Nozzle Bricks (P387k); and
○ High Fired Refractory Sliding Nozzle Bricks (P389k)
● Terms and Conditions of the agreement
○ Ching will sell the goods for cash
○ Remit the proceeds to ABC (if sold)
○ Return the goods to ABD (if not sold)
● Feb 1992 – Ching was charged with four counts of estafa in relation to “Trust
Receipts Law” in RTC of Makati (Criminal Case)
○ The allegation provides that the accused misappropriated, misapplied
and converted to his own personal use and benefit the said goods
and/or proceeds thereof
○ Despite repeated demands, did not remit proceeds or returned goods
● March 1992 - Ching, together with Philippine Blooming Mills Co. Inc. (PBM),
filed a case in RTC Manila (Civil Case) to declare the documents null and void
and to claim damages
● August 1992 – Ching filed petition before RTC Makati for suspension of
criminal proceedings on the ground of a prejudicial question1 in a civil action
● September 1992 – RTC Makati denied petitioner’s MR and set the criminal
cases for arraignment and pre-trial
● CA denied petitioner’s contention that there exists a prejudicial question. MR
was also denied.
● RTC of Manila (Civil Case) ruled that
○ The trust receipts are null and void for due to failure to express the true
intention of parties
○ The transaction is a pure and simple loan without any trust receipt
agreement (hence all documents are considered as loan documents)
Issue:
1. W/N a prejudicial question exists?
2. W/N the case should be remanded to ascertain the nature of the transactions
and documents?
3. W/N transaction was of a pure loan without any trust receipt agreement?
(MOST IMPORTANT ISSUE)
4. W/N the transaction does not fall under the category of a trust receipts
arrangement (since the goods were intended not to be sold but to be used,
consumed and destroyed by PBM)?
Held:
1. NO. Crime of estafa has been committed regardless of whether the
transaction was of the nature of a loan or a trust receipt.
● The following are the element of a prejudicial question:
○ The civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and
○ The resolution of such issue determines whether or not the criminal
action may proceed.
● Assuming arguendo that the court hearing the civil aspect of the case
adjudicates that the transaction entered into between the parties was
not a trust receipt agreement, nonetheless the guilt of the accused could
still be established and his culpability under penal laws determined by
other evidence.
1
A prejudicial question is one that arises in a case the resolution of which is a logical
antecedent of the issue involved therein, and the cognizance of which pertains to another
tribunal. The prejudicial question must be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged in another court or tribunal.
 ● Estafa, even without the trust receipts, may still be proven by the o In an attempt to escape criminal liability, private respondent claims
following: P.D. 115 covers goods which are ultimately destined for sale and not
a. the accused received the subject goods in trust or under the goods for use in manufacture. But the wording of Section 13 covers
obligation to sell the same and to remit the proceeds thereof to failure to turn over the proceeds of the sale of the entrusted goods,
Allied Banking Corporation, or to return the goods, if not sold; or to return said goods if unsold or disposed of in accordance with
b. that accused Ching misappropriated or converted the goods and/or the terms of the trust receipts. Private respondent claims that at the
the proceeds of the sale; time of PBM’s application for the issuance of the LCÊs, it was not
c. that accused Ching performed such acts with abuse of confidence to represented to the petitioner that the items were intended for sale,
the damage and prejudice of Allied Banking Corporation; and hence, there was no deceit resulting in a violation of the trust
d. that demand was made by the bank to herein petitioner. receipts which would constitute a criminal liability.
● The act of violating the trust receipts agreement is only one of many o Again we cannot uphold this contention. The non-payment of the
modes to prove the commission of estafa. amount covered by a trust receipt is an act violative of the
2. NO. The SC may still resolve the merits of a case on the basis of the entrustee’s obligation to pay. There is no reason why the law should
evidence and documents presented before it in the interest of justice and not apply to all transactions covered by trust receipts, except those
to resolve cases in a speedy disposition. expressly excluded.
 This Court sees the cogency to exercise its plenary power. It is a rule of
procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the Dispositive
seeds of future litigation. No useful purpose will be served if a case or the WHEREFORE, premises considered, the assailed decision and resolution of the
determination of an issue in a case is remanded to the trial court only to Court of Appeals are hereby AFFIRMED and the instant petition is DISMISSED for
have its decision raised again to the Court of Appeals and from there to lack of merit. Accordingly, the Regional Trial Court of Makati, Branch 58, is hereby
the Supreme Court directed to proceed with the hearing and trial on the merits of Criminal Case Nos.
3. NO. It is a trust receipts agreement even though petitioner avers that such 92-0934 to 92-0937, inclusive, and to expedite proceedings therein, without
documents were intended as “additional or side documents covering the prejudice to the right of the accused to due process.
said loan” which is contrary to his original allegation that the trust receipts
were intended to be collateral or security. SO ORDERED.
 Contrary to petitioner’s assertions and in view of jurisprudence Notes
established in this jurisdiction, a trust receipt is not merely an additional Insert notes
or side document to a principal contract, which in the instant case is
alleged by petitioner to be a pure and simple loan.
 Clearly, a trust receipt partakes the nature of a security transaction. It
could never be a mere additional or side document as alleged by
petitioner. Otherwise, a party to a trust receipt agreement could easily
renege on its obligations thereunder, thus undermining the importance
and defeating with impunity the purpose of such an indispensable tool in
commercial transactions.
 (See Doctrine)
4. NO. It is a trust receipts agreement. Ching is merely trying to attempt to
escape criminal liability since PD 115 covers goods which are ultimately
destined for sale and not goods for use in manufacture.
 Petitioner’s contention is a stealthy attempt to circumvent the principle
enunciated in the case of Allied Banking Corporation vs. Ordonez: