5. G.R. No. 90828.

September 5, 2000 complying with PBCs demand, Veloso

confessed that they lost P19,195.83 in the
MELVIN COLINARES and LORDINO VELOSO, Carmelite Monastery Project and requested
Petitioners, v. HONORABLE COURT OF for a grace period of until 15 June 1980 to
APPEALS, and THE PEOPLE OF THE settle the account.
PHILIPPINES, Respondents.
PBC sent a new demand letter8to
DECISION Petitioners on 16 October 1980 and
informed them that their outstanding
DAVIDE, JR., C.J.: balance as of 17 November 1979 was P20,
824.
In 1979 Melvin Colinares and Lordino
Veloso (hereafter Petitioners) were On 2 December 1980, Petitioners
contracted for a consideration of P40,000 proposed10 that the terms of payment of
by the Carmelite Sisters of Cagayan de Oro the loan be modified as follows: P2,000 on
City to renovate the latters convent at or before 3 December 1980, and P1,000 per
Camaman-an, Cagayan de Oro City. month starting 31 January 1980 until the
account is fully paid. Pending approval of
On 30 October 1979, Petitioners obtained the proposal, Petitioners paid P1,000 to PBC
5,376 SF Solatone acoustical board 2x4x, on 4 December 1980,11 and thereafter
300 SF tanguile wood tiles 12x12, 260 SF P500 on 11 February 1981,12 16 March
Marcelo economy tiles and 2 gallons 1981,13 and 20 April 1981.14 Concurrently
UMYLIN cement adhesive from CM Builders with the separate demand for attorneys
Centre for the construction project.1 The fees by PBCs legal counsel, PBC continued
following day, 31 October 1979, Petitioners to demand payment of the balance.
applied for a commercial letter of credit2 On 14 January 1983, Petitioners were
with the Philippine Banking Corporation, charged with the violation of P.D. No. 115
Cagayan de Oro City branch (hereafter PBC) (Trust Receipts Law) in relation to Article
in favor of CM Builders Centre. PBC 315 of the Revised Penal Code in an
approved the letter of credit3 for Information which was filed with Branch 18,
P22,389.80 to cover the full invoice value of Regional Trial Court of Cagayan de Oro City.
the goods. Petitioners signed a pro-forma The accusatory portion of the Information
trust receipt4 as security. The loan was due reads:
on 29 January 1980.
That on or about October 31, 1979, in the
On 31 October 1979, PBC debited P6,720 City of Cagayan de Oro, Philippines, and
from Petitioners marginal deposit as partial within the jurisdiction of this Honorable
payment of the loan. Court, the above-named accused entered
into a trust receipt agreement with the
On 7 May 1980, PBC wrote to Petitioners Philippine Banking Corporation at Cagayan
demanding that the amount be paid within de Oro City wherein the accused, as
seven days from notice. Instead of
entrustee, received from the entruster the During trial, petitioner Veloso insisted that
following goods to wit: the transaction was a clean loan as per
verbal guarantee of Cayo Garcia Tuiza, PBCs
Solatone Acoustical board former manager. He and petitioner
Colinares signed the documents without
Tanguile Wood Tiles reading the fine print, only learning of the
trust receipt implication much later. When
Marcelo Cement Tiles he brought this to the attention of PBC, Mr.
Tuiza assured him that the trust receipt was
Umylin Cement Adhesive a mere formality.

with a total value of P22,389.80, with the On 7 July 1986, the trial court promulgated
obligation on the part of the accused- its decision18 convicting Petitioners of
entrustee to hold the aforesaid items in estafa for violating P.D. No. 115 in relation
trust for the entruster and/or to sell on cash to Article 315 of the Revised Penal Code
basis or otherwise dispose of the said items and sentencing each of them to suffer
and to turn over to the entruster the imprisonment of two years and one day of
proceeds of the sale of said goods or if prision correccional as minimum to six years
there be no sale to return said items to the and one day of prision mayor as maximum,
entruster on or before January 29, 1980 but and to solidarily indemnify PBC the amount
that the said accused after receipt of the of P20,824.44, with legal interest from 29
goods, with intent to defraud and cause January 1980, 12 % penalty charge per
damage to the entruster, conspiring, annum, 25% of the sums due as attorneys
confederating together and mutually fees, and costs.
helping one another, did then and there
wilfully, unlawfully and feloniously fail and The trial court considered the transaction
refuse to remit the proceeds of the sale of between PBC and Petitioners as a trust
the goods to the entruster despite repeated receipt transaction under Section 4, P.D.
demands but instead converted, No. 115. It considered Petitioners use of the
misappropriated and misapplied the goods in their Carmelite monastery project
proceeds to their own personal use, benefit an act of disposing as contemplated under
and gain, to the damage and prejudice of Section 13, P.D. No. 115, and treated the
the Philippine Banking Corporation, in the charge invoice19 for goods issued by CM
aforesaid sum of P22,389.80, Philippine Builders Centre as a document within the
Currency. meaning of Section 3 thereof. It concluded
that the failure of Petitioners to turn over
Contrary to PD 115 in relation to Article 315 the amount they owed to PBC constituted
of the Revised Penal Code. estafa.

The case was docketed as Criminal Case No. Petitioners appealed from the judgment to
1390. the Court of Appeals which was docketed as
CA-G.R. CR No. 05408. Petitioners asserted
therein that the trial court erred in ruling existence during the trial, and would not
that they violated the Trust Receipt Law, alter the result of the case.
and in holding them criminally liable
therefor. In the alternative, they contend Hence, Petitioners filed with us the petition
that at most they can only be made civilly in this case on 16 November 1989. They
liable for payment of the loan. raised the following issues:

In its decision20 6 March 1989, the Court of I. WHETHER OR NOT THE DENIAL OF THE
Appeals modified the judgment of the trial MOTION FOR NEW TRIAL ON THE GROUND
court by increasing the penalty to six years OF NEWLY DISCOVERED EVIDENCE,
and one day of prision mayor as minimum NAMELY, DISCLOSURE ON LOAN/CREDIT
to fourteen years eight months and one day TRANSACTION, WHICH IF INTRODUCED AND
of reclusion temporal as maximum. It held ADMITTED, WOULD CHANGE THE
that the documentary evidence of the JUDGMENT, DOES NOT CONSTITUTE A
prosecution prevails over Velosos DENIAL OF DUE PROCESS.
testimony, discredited Petitioners claim
that the documents they signed were in 2. ASSUMING THERE WAS A VALID TRUST
blank, and disbelieved that they were RECEIPT, WHETHER OR NOT THE ACCUSED
coerced into signing them. WERE PROPERLY CHARGED, TRIED AND
CONVICTED FOR VIOLATION OF SEC. 13, PD
On 25 March 1989, Petitioners filed a NO. 115 IN RELATION TO ARTICLE 315
Motion for New Trial/Reconsideration21 PARAGRAPH (I) (B) NOTWITHSTANDING THE
alleging that the Disclosure Statement on NOVATION OF THE SO-CALLED TRUST
Loan/Credit Transaction22 (hereafter RECEIPT CONVERTING THE TRUSTOR-
Disclosure Statement) signed by them and TRUSTEE RELATIONSHIP TO CREDITOR-
Tuiza was suppressed by PBC during the DEBTOR SITUATION.
trial. That document would have proved
that the transaction was indeed a loan as it In its Comment of 22 January 1990, the
bears a 14% interest as opposed to the trust Office of the Solicitor General urged us to
receipt which does not at all bear any deny the petition for lack of merit.
interest. Petitioners further maintained that
when PBC allowed them to pay in On 28 February 1990 Petitioners filed a
installment, the agreement was novated Motion to Dismiss the case on the ground
and a creditor-debtor relationship was that they had already fully paid PBC on 2
created. February 1990 the amount of P70,000 for
the balance of the loan, including interest
In its resolution23of 16 October 1989 the and other charges, as evidenced by the
Court of Appeals denied the Motion for different receipts issued by PBC,24 and that
New Trial/Reconsideration because the the PBC executed an Affidavit of desistance.
alleged newly discovered evidence was
actually forgotten evidence already in We required the Solicitor General to
comment on the Motion to Dismiss.
 evidence has been discovered which the
In its Comment of 30 July 1990, the Solicitor accused could not with reasonable diligence
General opined that payment of the loan have discovered and produced at the trial,
was akin to a voluntary surrender or plea of and which, if introduced and admitted,
guilty which merely serves to mitigate would probably change the judgment.
Petitioners culpability, but does not in any
way extinguish their criminal liability. For newly discovered evidence to be a
ground for new trial, such evidence must be
In the Resolution of 13 August 1990, we (1) discovered after trial; (2) could not have
gave due course to the Petition and been discovered and produced at the trial
required the parties to file their respective even with the exercise of reasonable
memoranda. diligence; and (3) material, not merely
cumulative, corroborative, or impeaching,
The parties subsequently filed their and of such weight that, if admitted, would
respective memoranda. probably change the judgment.27 It is
essential that the offering party exercised
It was only on 18 May 1999 when this case reasonable diligence in seeking to locate
was assigned to the ponente. Thereafter, the evidence before or during trial but
we required the parties to move in the nonetheless failed to secure it.
premises and for Petitioners to manifest if
they are still interested in the further We find no indication in the pleadings that
prosecution of this case and inform us of the Disclosure Statement is a newly
their present whereabouts and whether discovered evidence.
their bail bonds are still valid.
Petitioners could not have been unaware
Petitioners submitted their Compliance. that the two-page document exists. The
Disclosure Statement itself states, NOTICE
The core issues raised in the petition are TO BORROWER: YOU ARE ENTITLED TO A
the denial by the Court of Appeals of COPY OF THIS PAPER WHICH YOU SHALL
Petitioners Motion for New Trial and the SIGN.29 Assuming Petitioners copy was
true nature of the contract between then unavailable, they could have
Petitioners and the PBC. As to the latter, compelled its production in court,30 which
Petitioners assert that it was an ordinary they never did. Petitioners have miserably
loan, not a trust receipt agreement under failed to establish the second requisite of
the Trust Receipts Law. the rule on newly discovered evidence.

The grant or denial of a motion for new trial Petitioners themselves admitted that they
rests upon the discretion of the judge. New searched again their voluminous records,
trial may be granted if: (1) errors of law or meticulously and patiently, until they
irregularities have been committed during discovered this new and material evidence
the trial prejudicial to the substantial rights only upon learning of the Court of Appeals
of the accused; or (2) new and material decision and after they were shocked by the
penalty imposed.31 Clearly, the alleged
newly discovered evidence is mere Failure of the entrustee to turn over the
forgotten evidence that jurisprudence proceeds of the sale of the goods, covered
excludes as a ground for new trial. by the trust receipt to the entruster or to
return said goods if they were not disposed
However, the second issue should be of in accordance with the terms of the trust
resolved in favor of Petitioners. receipt shall be punishable as estafa under
Article 315 (1) of the Revised Penal Code,34
Section 4, P.D. No. 115, the Trust Receipts without need of proving intent to defraud.
Law, defines a trust receipt transaction as
any transaction by and between a person A thorough examination of the facts
referred to as the entruster, and another obtaining in the case at bar reveals that
person referred to as the entrustee, the transaction intended by the parties
whereby the entruster who owns or holds was a simple loan, not a trust receipt
absolute title or security interest over agreement.
certain specified goods, documents or
instruments, releases the same to the Petitioners received the merchandise from
possession of the entrustee upon the latters CM Builders Centre on 30 October 1979. On
execution and delivery to the entruster of a that day, ownership over the merchandise
signed document called a trust receipt was already transferred to Petitioners who
wherein the entrustee binds himself to hold were to use the materials for their
the designated goods, documents or construction project. It was only a day later,
instruments with the obligation to turn over 31 October 1979, that they went to the
to the entruster the proceeds thereof to the bank to apply for a loan to pay for the
extent of the amount owing to the merchandise.
entruster or as appears in the trust receipt
or the goods, documents or instruments This situation belies what normally obtains
themselves if they are unsold or not in a pure trust receipt transaction where
otherwise disposed of, in accordance with goods are owned by the bank and only
the terms and conditions specified in the released to the importer in trust
trust receipt. subsequent to the grant of the loan. The
bank acquires a security interest in the
There are two possible situations in a trust goods as holder of a security title for the
receipt transaction. The first is covered by advances it had made to the entrustee.35
the provision which refers to money The ownership of the merchandise
received under the obligation involving the continues to be vested in the person who
duty to deliver it (entregarla) to the owner had advanced payment until he has been
of the merchandise sold. The second is paid in full, or if the merchandise has
covered by the provision which refers to already been sold, the proceeds of the sale
merchandise received under the obligation should be turned over to him by the
to return it (devolvera) to the importer or by his representative or
owner.33cräläwvirtualibräry successor in interest.36 To secure that the
bank shall be paid, it takes full title to the stenographic notes of the proceedings to be
goods at the very beginning and continues satisfied that the records of the case do
to hold that title as his indispensable support the conclusions of the trial court.41
security until the goods are sold and the After such perusal Grego Mutia, PBCs credit
vendee is called upon to pay for them; investigator, admitted thus:
hence, the importer has never owned the
goods and is not able to deliver ATTY. CABANLET: (continuing)
possession.37 In a certain manner, trust
receipts partake of the nature of a Q Do you know if the goods subject matter
conditional sale where the importer of this letter of credit and trust receipt
becomes absolute owner of the imported agreement were received by the accused?
merchandise as soon as he has paid its
price.38cräläwvirtualibräry A Yes, sir

Trust receipt transactions are intended to Q Do you have evidence to show that these
aid in financing importers and retail dealers goods subject matter of this letter of credit
who do not have sufficient funds or and trust receipt were delivered to the
resources to finance the importation or accused?
purchase of merchandise, and who may not
be able to acquire credit except through A Yes, sir.
utilization, as collateral, of the merchandise
imported or purchased. Q I am showing to you this charge invoice,
are you referring to this document?
The antecedent acts in a trust receipt
transaction consist of the application and A Yes, sir.
approval of the letter of credit, the making
of the marginal deposit and the effective xxx
importation of goods through the efforts of
the importer. Q What is the date of the charge invoice?

PBC attempted to cover up the true delivery A October 31, 1979.

date of the merchandise, yet the trial court
took notice even though it failed to attach COURT:
any significance to such fact in the
judgment. Despite the Court of Appeals Make it of record as appearing in Exhibit D,
contrary view that the goods were the zero in 30 has been superimposed with
delivered to Petitioners previous to the numeral 1.42cräläwvirtualibräry
execution of the letter of credit and trust
receipt, we find that the records of the case During the cross and re-direct examinations
speak volubly and this fact remains he also impliedly admitted that the
uncontroverted. It is not uncommon for us transaction was indeed a loan. Thus:
to peruse through the transcript of the
Q In short the amount stated in your Exhibit contracted with Petitioners, to refute
C, the trust receipt was a loan to the Velosos testimony, yet it only presented
accused you admit that? credit investigator Grego Mutia. Nowhere
from Mutias testimony can it be gleaned
A Because in the bank the loan is that PBC represented to Petitioners that the
considered part of the loan. transaction they were entering into was not
a pure loan but had trust receipt
xxx implications.

RE-DIRECT BY ATTY. CABANLET: The Trust Receipts Law does not seek to
enforce payment of the loan, rather it
ATTY. CABANLET (to the witness) punishes the dishonesty and abuse of
confidence in the handling of money or
Q What do you understand by loan when goods to the prejudice of another
you were asked? regardless of whether the latter is the
owner.45 Here, it is crystal clear that on the
A Loan is a promise of a borrower from the part of Petitioners there was neither
value received. The borrower will pay the dishonesty nor abuse of confidence in the
bank on a certain specified date with handling of money to the prejudice of PBC.
interest43cräläwvirtualibräry Petitioners continually endeavored to meet
their obligations, as shown by several
Such statement is akin to an admission receipts issued by PBC acknowledging
against interest binding upon PBC. payment of the loan.

Petitioner Velosos claim that they were The Information charges Petitioners with
made to believe that the transaction was a intent to defraud and misappropriating the
loan was also not denied by PBC. He money for their personal use. The mala
declared: prohibita nature of the alleged offense
notwithstanding, intent as a state of mind
Q Testimony was given here that that was was not proved to be present in Petitioners
covered by trust receipt. In short it was a situation. Petitioners employed no artifice
special kind of loan. What can you say as to in dealing with PBC and never did they
that? evade payment of their obligation nor
attempt to abscond. Instead, Petitioners
A I dont think that would be a trust receipt sought favorable terms precisely to meet
because we were made to understand by their obligation.
the manager who encouraged us to avail of
their facilities that they will be granting us a Also noteworthy is the fact that Petitioners
loan. are not importers acquiring the goods for
re-sale, contrary to the express provision
PBC could have presented its former bank embodied in the trust receipt. They are
manager, Cayo Garcia Tuiza, who contractors who obtained the fungible
goods for their construction project. At no
time did title over the construction
materials pass to the bank, but directly to
the Petitioners from CM Builders Centre.
This impresses upon the trust receipt in
question vagueness and ambiguity, which
should not be the basis for criminal
prosecution in the event of violation of its
provisions.46cräläwvirtualibräry

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, as had happened in this
case. Eventually, PBC showed its true colors
and admitted that it was only after
collection of the money, as manifested by
its Affidavit of Desistance.

WHEREFORE, the challenged Decision of 6

March 1989 and the Resolution of 16
October 1989 of the Court of Appeals in CA-
GR. No. 05408 are REVERSED and SET
ASIDE. Petitioners are hereby ACQUITTED of
the crime charged, i.e., for violation of P.D.
No. 115 in relation to Article 315 of the
Revised Penal Code.

No costs.

SO ORDERED.