SECOND DIVISION

[G.R. No. 110844. April 27, 2000.]

ALFREDO CHING, petitioner, vs. HON. COURT OF APPEALS, HON. ZOSIMO Z. ANGELES, RTC - BR. 58, MAKATI,
METRO MANILA, PEOPLE OF THE PHILIPPINES AND ALLIED BANKING CORPORATION, respondents.
Jaime S. Linsangan for petitioner.
Sison Labitag Avena Sereno & Muyot collaborating counsel for petitioner.
The Solicitor General for public respondent.
Ocampo, Quiroz, Pesayco & Associates for private respondent.
SYNOPSIS
Petitioner was charged before the Regional Trial Court of Makati, Branch 58, with four counts of estafa punishable
under Article 315, par. 1 (b) of the Revised Penal Code, in relation to Presidential Decree 115, otherwise known as
the "Trust Receipts Law." Petitioner filed an "Omnibus Motion to Strike Out Information, or in the Alternative to
Require Public Prosecutor to Conduct Preliminary Investigation, and to Suspend in the Meantime Further
Proceedings in these Cases." Acting on the omnibus motion, the Regional Trial Court required the prosecutor's
office to conduct a preliminary investigation and suspended further proceedings in the criminal cases. Petitioner
Ching, together with Philippine Blooming Mills Co., Inc., filed a case before the Regional Trial Court of Manila (RTCManila), Branch 53, for declaration of nullity of documents and for damages. Then Ching filed a petition before the
RTC-Makati, Branch 58, for the suspension of the criminal proceedings on the ground of prejudicial question in a
civil action. The RTC-Makati issued an order which denied the petition for suspension and scheduled the
arraignment and pre-trial of the criminal cases. As a result, petitioner moved to reconsider the order to which the
prosecution filed an opposition which was denied. Petitioner brought before the Court of Appeals a petition for
certiorari and prohibition, which sought to declare the nullity of the aforementioned orders. The Court of Appeals
denied the petition. Reconsideration having been denied, petitioner filed this petition.
The Supreme Court agreed with the findings of the trial court, as affirmed by the Court of Appeals, that no
prejudicial question exists in the case. Even on the assumption that the documents are declared null, it does not
ipso facto follow that such declaration of nullity shall exonerate the accused from criminal prosecution and
liability. Accordingly, the prosecution may adduce evidence to prove the criminal liability of the accused for estafa,
specifically under Article 315, 1(b) of the Revised Penal Code. The assailed decision and resolution of the Court of
Appeals were affirmed and the petition was dismissed for lack of merit. cEHSIC
SYLLABUS
1.
CIVIL LAW; ACTIONS; PREJUDICIAL QUESTION; DEFINED AND CONSTRUED. As defined, 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. It is a question based on a fact distinct and separate from the crime but so intimately connected with it
that it determines the guilt or innocence of the accused, and for it to suspend the criminal action, it must appear
not only that said case involves facts intimately related to those upon which the criminal prosecution would be
based but also that in the resolution of the issue or issues raised in the civil case, the guilt or innocence of the

accused would necessarily be determined. It comes into play generally in a situation where a civil action and a
criminal action are both pending and there exists in the former an issue which must be preemptively resolved
before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be
determinative juris et de jure of the guilt or innocence of the accused in the criminal case.
2.
ID.; ID.; ID.; ESSENTIAL REQUISITES THEREOF. More simply, for the court to appreciate the pendency of
a prejudicial question, the law, in no uncertain terms, requires the concurrence of two essential requisites, to wit:
a) The civil action involves an issue similar or intimately related to the issue raised in the criminal action; and b)
The resolution of such issue determines whether or not the criminal action may proceed.
3.
CRIMINAL LAW; ESTAFA (UNDER ARTICLE 315 1(B) OF THE REVISED PENAL CODE); VIOLATION OF THE
TRUST RECEIPTS LAW; AS A MODE OF COMMITTING ESTAFA; CONSTRUED. Presidential Decree 115, otherwise
known as the "Trust Receipts Law", specifically Section 13 thereof, provides: "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."
The Court must stress though, that an act violative of a trust receipt agreement is only one mode of committing
estafa under the abovementioned provision of the Revised Penal Code. Stated differently, a violation of a trust
receipt arrangement is not the sole basis for incurring liability under Article 315 1(b) of the Code.
4.
ID.; ID.; ID.; ID.; WHEN NOT A PREJUDICIAL QUESTION. In Jimenez vs. Averia, 22 SCRA 1380 [1968],
where the accused was likewise charged with estafa, this Court had occasion to rule that a civil case contesting the
validity of a certain receipt is not a prejudicial question that would warrant the suspension of criminal proceedings
for estafa. In ruling out the existence of prejudicial question, the Court declared: ". . . It will be readily seen that the
alleged prejudicial question is not determinative of the guilt or innocence of the parties charged with estafa,
because even on the assumption that the execution of the receipt whose annulment they sought in the civil case
was vitiated by fraud, duress or intimidation, their guilt could still be established by other evidence showing, to the
degree required by law, that they had actually received from the complainant the sum of P20,000.00 with which to
buy for him a fishing boat, and that, instead of doing so, they misappropriated the money and refused or
otherwise failed to return it to him upon demand. . . ."
5.
POLITICAL LAW; JUDICIARY; SUPREME COURT; HAS THE PLENARY POWER TO STRIVE TO SETTLE THE
ENTIRE CONTROVERSY IN A SINGLE PROCEEDING; RATIONALE. While this may be true, it is no less true that the
Supreme Court may, on certain exceptional instances, resolve the merits of a case on the basis of the records and
other evidence before it, most especially when the resolution of these issues would best serve the ends of justice
and promote the speedy disposition of cases. Thus, considering the peculiar circumstances attendant in the instant
case, 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 seeds of future
litigation. No useful purpose will be served if a case or the determination of an issue in a case is remanded to the
trial court only to have its decision raised again to the Court of Appeals and from there to the Supreme Court
(citing Board of Commissioners vs. Judge Joselito de la Rosa and Judge Capulong, G.R. Nos. 95122-23). We have
laid down the rule that the remand of the case or of an issue to the lower court for further reception of evidence is
not necessary where the Court is in position to resolve the dispute based on the records before it and particularly
where the ends of justice would not be subserved by the remand thereof (Escudero vs. Dulay, 158 SCRA 69).
Moreover, the Supreme Court is clothed with ample authority to review matters, even those not raised on appeal

if it finds that their consideration is necessary in arriving at a just disposition of the case." On many occasions, the
Court, in the public interest and for the expeditious administration of justice, has resolved actions on the merits
instead of remanding them to the trial court for further proceedings, such as where the ends of justice would not
be subserved by the remand of the case. aDcETC
6.
COMMERCIAL LAW; TRUST RECEIPT; NATURE THEREOF; CASE AT BAR. Contrary to petitioner's
assertions and in view of jurisprudence established in this jurisdiction, a trust receipt is not merely an additional or
side document to a principal contract, which in the instant case is alleged by petitioner to be a pure and simple
loan. As elucidated in Samo vs. People, 5 SCRA 354 [1962], 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. Further, 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.
7.
REMEDIAL LAW; PLEADINGS; WHEN SUPERSEDED OR AMENDED SHALL CEASE ITS CHARACTER TO BE A
JUDICIAL ADMISSION. Under the Rules, pleadings superseded or amended disappear from the record, lose their
status as pleadings and cease to be judicial admissions. While they may nonetheless be utilized against the pleader
as extrajudicial admissions, they must, in order to have such effect, be formally offered in evidence. If not offered
in evidence, the admission contained therein will not be considered. Consequently, the original complaint, having
been amended, lost its character as a judicial admission, which would have required no proof, and became merely
an extrajudicial admission, the admissibility of which, as evidence, required its formal offer.
8.
ID.; ID.; ID.; WHEN AMENDMENTS THEREOF WOULD NOT BE PROPER. Although the granting of leave to
file amended pleadings is a matter peculiarly within the sound discretion of the trial court and such discretion
would not normally be disturbed on appeal, it is also well to mention that this rule is relaxed when evident abuse
thereof is apparent. Hence, in certain instances the Court ruled that amendments are not proper and should be
denied when delay would arise, or when the amendments would result in a change of cause of action or defense
or change the theory of the case, or would be inconsistent with the allegations in the original complaint.
DECISION
BUENA, J p:
Confronting the Court in this instant petition for review on certiorari under Rule 45 is the task of resolving the issue
of whether the pendency of a civil action for damages and declaration of nullity of documents, specifically trust
receipts, warrants the suspension of criminal proceedings instituted for violation of Article 315 1(b) of the Revised
Penal Code, in relation to P.D. 115, otherwise known as the "Trust Receipts Law". cdasia

Petitioner Alfredo Ching challenges before us the decision 1 of the Court of Appeals promulgated on 27 January
1993 in CA G.R. SP No. 28912, dismissing his "Petition for Certiorari and Prohibition with Prayer for Issuance of
Temporary Restraining Order/Preliminary Injunction", on the ground of lack of merit.
Assailed similarly is the resolution 2 of the Court of Appeals dated 28 June 1993 denying petitioner's motion for
reconsideration.
As borne by the records, the controversy arose from the following facts:
On 04 February 1992, 3 petitioner was charged before the Regional Trial Court of Makati (RTC-Makati), Branch 58,
with four counts of estafa punishable under Article 315 par. 1(b) of the Revised Penal Code, in relation to
Presidential Decree 115, otherwise known as the "Trust Receipts Law".
The four separate informations 4 which were couched in similar language except for the date, subject goods and
amount thereof, charged herein petitioner in this wise:
"That on or about the (18th day of May 1981; 3rd day of June 1981; 24th day of June 1981 and 24th day of June
1981), in the Municipality of Makati, Metro Manila, Philippines and within the jurisdiction of this Honorable Court,
the above-named accused having executed a trust receipt agreement in favor of Allied Banking Corporation in
consideration of the receipt by the said accused of goods described as '12 Containers (200 M/T) Magtar Brand
Dolomites'; '18 Containers (Zoom M/T) Magtar Brand Dolomites'; 'High Fired Refractory Sliding Nozzle Bricks'; and
'High Fired Refractory Sliding Nozzle Bricks' for which there is now due the sum of (P278,917.80; P419,719.20;
P387,551.95; and P389,085.14 respectively) under the terms of which the accused agreed to sell the same for cash
with the express obligation to remit to the complainant bank the proceeds of the sale and/or to turn over the
goods, if not sold, on demand, but the accused, once in possession of said goods, far from complying with his
obligation and with grave abuse of confidence, did then and there, willfully, unlawfully and feloniously
misappropriate, misapply and convert to his own personal use and benefit the said goods and/or the proceeds of
the sale thereof, and despite repeated demands, failed and refused and still fails and refuses, to account for
and/or remit the proceeds of sale thereof to the Allied Banking Corporation to the damage and prejudice of the
said complainant bank in the aforementioned amount of (P278,917.80; P419,719.20; P387,551.95; and
P389,085.14)."
On 10 February 1992, an "Omnibus Motion 5 to Strike Out Information, or in the Alternative to Require Public
Prosecutor to Conduct Preliminary Investigation, and to Suspend in the Meantime Further Proceedings in these
Cases," was filed by the petitioner.
In an order dated 13 February 1992, the Regional Trial Court of Makati, Branch 58, acting on the omnibus motion,
required the prosecutor's office to conduct a preliminary investigation and suspended further proceedings in the
criminal cases.
On 05 March 1992, petitioner Ching, together with Philippine Blooming Mills Co. Inc., filed a case 6 before the
Regional Trial Court of Manila (RTC-Manila), Branch 53, for declaration of nullity of documents and for damages
docketed as Civil Case No. 92-60600, entitled "Philippine Blooming Mills, Inc. et al. vs. Allied Banking Corporation."
On 07 August 1992, Ching filed a petition 7 before the RTC-Makati, Branch 58, for the suspension of the criminal
proceedings on the ground of prejudicial question in a civil action.
The prosecution then filed an opposition to the petition for suspension, against which opposition, herein petitioner
filed a reply. 8

On 26 August 1992, the RTC-Makati issued an order 9 which denied the petition for suspension and scheduled the
arraignment and pre-trial of the criminal cases. As a result, petitioner moved to reconsider 10 the order to which
the prosecution filed an opposition.
In an order 11 dated 04 September 1992, the RTC-Makati, before which the criminal cases are pending, denied
petitioner's motion for reconsideration and set the criminal cases for arraignment and pre-trial.
Aggrieved by these orders 12 of the lower court in the criminal cases, petitioner brought before the Court of
Appeals a petition for certiorari and prohibition which sought to declare the nullity of the aforementioned orders
and to prohibit the RTC-Makati from conducting further proceedings in the criminal cases.
In denying the petition, 13 the Court of Appeals, in CA G.R. SP No. 28912, ruled:
". . . Civil Case No. 90-60600 pending before the Manila Regional Trial Court seeking (sic) the declaration of nullity
of the trust receipts in question is not a prejudicial question to Criminal Case Nos. 92-0934 to 37 pending before
the respondent court charging the petitioner with four counts of violation of Article 315, par. 1(b), RPC, in relation
to PD 115 as to warrant the suspension of the proceedings in the latter . . . ."
Consequently, petitioner filed a motion for reconsideration of the decision which the appellate court denied for
lack of merit, via a resolution 14 dated 28 June 1993.
Notwithstanding the decision rendered by the Court of Appeals, the RTC-Manila, Branch 53 in an order dated 19
November 1993 in Civil Case No. 92-60600, admitted petitioner's amended complaint 15 which, inter alia, prayed
the court for a judgment:
"xxx

xxx

xxx

"1.
Declaring the 'Trust Receipts,' annexes D, F, H and J hereof, null and void, or otherwise annulling the
same, for failure to express the true intent and agreement of the parties;
"2.
Declaring the transaction subject hereof as one of pure and simple loan without any trust receipt
agreement and/or not one involving a trust receipt, and accordingly declaring all the documents annexed hereto as
mere loan documents . . ."(italics ours)
In its amended answer, 16 herein private respondent Allied Banking Corporation submitted in riposte that the
transaction applied for was a "letter of credit/trust receipt accommodation" and not a "pure and simple loan with
the trust receipts as mere additional or side documents", as asserted by herein petitioner in its amended
complaint. 17
Through the expediency of Rule 45, petitioner seeks the intervention of this Court and prays:
"After due consideration, to render judgment reversing the decision and resolution, Annexes A and B hereof,
respectively, and ordering the suspension of Criminal Cases (sic) Nos. 92-0934 to 92-0937, inclusive, entitled
"People of the Philippines vs. Alfredo Ching" pending before Branch 58 of the Regional Trial Court of Makati, Metro
Manila, until final determination of Civil Case No. 92-600 entitled Philippine Blooming Mills Co. Inc. and Alfredo
Ching vs. Allied Banking Corporation" pending before Branch 53 of the Regional Trial Court of Manila."
The instant petition is bereft of merit.

We agree with the findings of the trial court, as affirmed by the Court of Appeals, that no prejudicial question
exists in the present case.
As defined, 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. 18
It is a question based on a fact distinct and separate from the crime but so intimately connected with it that it
determines the guilt or innocence of the accused, and for it to suspend the criminal action, it must appear not only
that said case involves facts intimately related to those upon which the criminal prosecution would be based but
also that in the resolution of the issue or issues raised in the civil case, the guilt or innocence of the accused would
necessarily be determined. 19 It comes into play generally in a situation where a civil action and a criminal action
are both pending and there exists in the former an issue which must be preemptively resolved before the criminal
action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris
et de jure of the guilt or innocence of the accused in the criminal case. 20
More simply, for the court to appreciate the pendency of a prejudicial question, the law, 21 in no uncertain terms,
requires the concurrence of two essential requisites, to wit:
a)

The civil action involves an issue similar or intimately related to the issue raised in the criminal action; and

b)

The resolution of such issue determines whether or not the criminal action may proceed.

Verily, under the prevailing circumstances, the alleged prejudicial question in the civil case for declaration of nullity
of documents and for damages, does not juris et de jure determine the guilt or innocence of the accused in the
criminal action for estafa. 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. To put it
differently, even on the assumption that the documents are declared null, it does not ipso facto follow that such
declaration of nullity shall exonerate the accused from criminal prosecution and liability.
Accordingly, the prosecution may adduce evidence to prove the criminal liability of the accused for estafa,
specifically under Article 315 1(b) of the Revised Penal Code which explicitly provides that said crime is committed:
". . . (b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal
property received by the offender in trust or on commission, or for administration, or any other obligation
involving the duty to make delivery of or to return the same, even though such obligation be totally or partially
guaranteed by a bond; or by denying having received such money, goods, or other property."
Applying the foregoing principles, the criminal liability of the accused for violation of Article 315 1(b) of the Revised
Penal Code, may still be shown through the presentation of evidence to the effect that: (a) the accused received
the subject goods in trust or under the obligation to sell the same and to remit the proceeds thereof to Allied
Banking Corporation, or to return the goods, if not sold; (b) that accused Ching misappropriated or converted the
goods and/or the proceeds of the sale; (c) that accused Ching performed such acts with abuse of confidence to the
damage and prejudice of Allied Banking Corporation; and (d) that demand was made by the bank to herein
petitioner.
Presidential Decree 115, otherwise known as the "Trust Receipts Law", specifically Section 13 thereof, provides:

"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."
We must stress though, that an act violative of a trust receipt agreement is only one mode of committing estafa
under the abovementioned provision of the Revised Penal Code. Stated differently, a violation of a trust receipt
arrangement is not the sole basis for incurring liability under Article 315 1(b) of the Code.
In Jimenez vs. Averia, 22 where the accused was likewise charged with estafa, this Court had occasion to rule that a
civil case contesting the validity of a certain receipt is not a prejudicial question that would warrant the suspension
of criminal proceedings for estafa. llcd
In the abovementioned case, a criminal charge for estafa was filed in the Court of First Instance of Cavite against
the two accused. The information alleged that the accused, having received the amount of P20,000.00 from
Manuel Jimenez for the purchase of a fishing boat, with the obligation on the part of the former to return the
money in case the boat was not purchased, misappropriated the said amount to the damage and prejudice of
Jimenez. 23
Before arraignment, the accused filed a civil case contesting the validity of a certain receipt signed by them. In the
receipt, the accused acknowledged having received the aforesaid sum, in addition to the amount of P240.00 as
agent's commission. The complaint, however, alleged that the accused never received any amount from Jimenez
and that the signatures on the questioned receipt were secured by means of fraud, deceit and intimidation.
In ruling out the existence of prejudicial question, we declared:
". . . It will be readily seen that the alleged prejudicial question is not determinative of the guilt or innocence of the
parties charged with estafa, because even on the assumption that the execution of the receipt whose annulment
they sought in the civil case was vitiated by fraud, duress or intimidation, their guilt could still be established by
other evidence showing, to the degree required by law, that they had actually received from the complainant the
sum of P20,000.00 with which to buy for him a fishing boat, and that, instead of doing so, they misappropriated
the money and refused or otherwise failed to return it to him upon demand. . . ."
Furthermore, petitioner submits that the truth or falsity of the parties' respective claims as regards the true nature
of the transactions and of the documents, shall have to be first determined by the Regional Trial Court of Manila,
which is the court hearing the civil case.
While this may be true, it is no less true that the Supreme Court may, on certain exceptional instances, resolve the
merits of a case on the basis of the records and other evidence before it, most especially when the resolution of
these issues would best serve the ends of justice and promote the speedy disposition of cases.
Thus, considering the peculiar circumstances attendant in the instant case, 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 seeds of future litigation. No useful purpose will be served if a case or the
determination of an issue in a case is remanded to the trial court only to have its decision raised again to the Court

of Appeals and from there to the Supreme Court (citing Board of Commissioners vs. Judge Joselito de la Rosa and
Judge Capulong, G.R. Nos. 95122-23).
"We have laid down the rule that the remand of the case or of an issue to the lower court for further reception of
evidence is not necessary where the Court is in position to resolve the dispute based on the records before it and
particularly where the ends of justice would not be subserved by the remand thereof (Escudero vs. Dulay, 158
SCRA 69). Moreover, the Supreme Court is clothed with ample authority to review matters, even those not raised
on appeal if it finds that their consideration is necessary in arriving at a just disposition of the case." 24
On many occasions, the Court, in the public interest and for the expeditious administration of justice, has resolved
actions on the merits instead of remanding them to the trial court for further proceedings, such as where the ends
of justice would not be subserved by the remand of the case. 25
Inexorably, the records would show that petitioner signed and executed an application and agreement for a
commercial letter of credit to finance the purchase of imported goods. Likewise, it is undisputed that petitioner
signed and executed trust receipt documents in favor of private respondent Allied Banking Corporation.
In its amended complaint, however, which notably was filed only after the Court of Appeals rendered its assailed
decision, petitioner urges that the transaction entered into between the parties was one of "pure loan without any
trust receipt agreement." According to petitioner, the trust receipt documents were intended merely as
"additional or side documents covering the said loan" contrary to petitioner's allegation in his original complaint
that the trust receipts were executed as collateral or security.

We do not agree. As Mr. Justice Story succinctly puts it: "Naked statements must be entitled to little weight when
the parties hold better evidence behind the scenes." 26
Hence, with affirmance, we quote the findings of the Court of Appeals:
"The concept in which petitioner signed the trust receipts, that is whether he signed the trust receipts as such trust
receipts or as a mere evidence of a pure and simple loan transaction is not decisive because precisely, a trust
receipt is a security agreement of an indebtedness."
Contrary to petitioner's assertions and in view of jurisprudence established in this jurisdiction, a trust receipt is not
merely an additional or side document to a principal contract, which in the instant case is alleged by petitioner to
be a pure and simple loan.
As elucidated in Samo vs. People, 27 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.
Further, 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. 28 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. 29

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.
Of equal importance is the fact that in his complaint in Civil Case No. 92-60600, dated 05 March 1992, petitioner
alleged that the trust receipts were executed and intended as collateral or security. Pursuant to the rules, such
particular allegation in the complaint is tantamount to a judicial admission on the part of petitioner Ching to which
he must be bound.
Thus, the Court of Appeals in its resolution dated 28 June 1993, correctly observed:
"It was petitioner himself who acknowledged the trust receipts as mere collateral and security for the payment of
the loan but kept on insisting that the real and true transaction was one of pure loan . . ."
"In his present motion, the petitioner alleges that the trust receipts are evidence of a pure loan or that the same
were additional or side documents that actually stood as promissory notes and not a collateral or security
agreement. He cannot assume a position inconsistent with his previous allegations in his civil complaint that the
trust receipts were intended as mere collateral or security . . . ."
Perhaps, realizing such flaw, petitioner, in a complete turn around, filed a motion to admit amended complaint
before the RTC-Manila. Among others, the amended complaint alleged that the trust receipts stood as additional
or side documents, the real transaction between the parties being that of a pure loan without any trust receipt
agreement.
In an order dated 19 November 1993, the RTC-Manila, Branch 53, admitted the amended complaint. Accordingly,
with the lower court's admission of the amended complaint, the judicial admission made in the original complaint
was, in effect, superseded.
Under the Rules, pleadings superseded or amended disappear from the record, lose their status as pleadings and
cease to be judicial admissions. While they may nonetheless be utilized against the pleader as extrajudicial
admissions, they must, in order to have such effect, be formally offered in evidence. If not offered in evidence, the
admission contained therein will not be considered. 30
Consequently, the original complaint, having been amended, lost its character as a judicial admission, which would
have required no proof, and became merely an extrajudicial admission, the admissibility of which, as evidence,
required its formal offer. 31
In virtue thereof, the amended complaint takes the place of the original. The latter is regarded as abandoned and
ceases to perform any further function as a pleading. The original complaint no longer forms part of the record. 32
Thus, in the instant case, the original complaint is deemed superseded by the amended complaint. Corollarily, the
judicial admissions in the original complaint are considered abandoned. Nonetheless, we must stress that the
actuations of petitioner, as sanctioned by the RTC-Manila, Branch 53 through its order admitting the amended
complaint, demands stern rebuke from this Court.
Certainly, this Court is not unwary of the tactics employed by the petitioner specifically in filing the amended
complaint only after the promulgation of the assailed decision of the Court of Appeals. It bears noting that a lapse
of almost eighteen months (from March 1992 to September 1993), from the filing of the original complaint to the

filing of the amended complaint, is too lengthy a time sufficient to enkindle suspicion and enflame doubts as to the
true intentions of petitioner regarding the early disposition of the pending cases.
Although the granting of leave to file amended pleadings is a matter peculiarly within the sound discretion of the
trial court and such discretion would not normally be disturbed on appeal, it is also well to mention that this rule is
relaxed when evident abuse thereof is apparent. 33
Hence, in certain instances we ruled that amendments are not proper and should be denied when delay would
arise, 34 or when the amendments would result in a change of cause of action or defense or change the theory of
the case, 35 or would be inconsistent with the allegations in the original complaint. 36
Applying the foregoing rules, petitioner, by filing the amended complaint, in effect, altered the theory of his case.
Likewise, the allegations embodied in the amended complaint are inconsistent with that of the original complaint
inasmuch as in the latter, petitioner alleged that the trust receipts were intended as mere collateral or security,
the principal transaction being one of pure loan.
Yet, in the amended complaint, petitioner argued that the said trust receipts were executed as additional or side
documents, the transaction being strictly one of pure loan without any trust receipt arrangement. Obviously these
allegations are in discord in relation to each other and therefore cannot stand in harmony.
These circumstances, taken as a whole, lead this Court to doubt the genuine purpose of petitioner in filing the
amended complaint. Again, we view petitioner's actuations with abhorrence and displeasure.
Moreover, petitioner contends that the transaction between Philippine Blooming Mills (PBM) and private
respondent Allied Banking Corporation does not fall under the category of a trust receipt arrangement claiming
that the goods were not to be sold but were to be used, consumed and destroyed by the importer PBM.
To our mind, petitioner's contention is a stealthy attempt to circumvent the principle enunciated in the case of
Allied Banking Corporation vs. Ordonez, 37 thus:
". . . In an attempt to escape criminal liability, private respondent claims P.D. 115 covers goods which are
ultimately destined for sale and not goods for use in manufacture. But the wording of Section 13 covers failure to
turn over the proceeds of the sale of the entrusted goods, or to return said goods if unsold or disposed of in
accordance with the terms of the trust receipts. Private respondent claims that at the time of PBM's application for
the issuance of the LC's, it was not represented to the petitioner that the items were intended for sale, hence,
there was no deceit resulting in a violation of the trust receipts which would constitute a criminal liability. Again
we cannot uphold this contention. The non-payment of the amount covered by a trust receipt is an act violative of
the entrustee's obligation to pay. There is no reason why the law should not apply to all transactions covered by
trust receipts, except those expressly excluded (68 Am. Jur. 125).
"The Court takes judicial notice of customary banking and business practices where trust receipts are used for
importation of heavy equipment, machineries and supplies used in manufacturing operations. We are perplexed
by the statements in the assailed DOJ resolution that the goods subject of the instant case are outside the ambit of
the provisions of PD 115 albeit covered by trust receipt agreements (17 February 1988 resolution) and that not all
transactions covered by trust receipts may be considered as trust receipt transactions defined and penalized under
P.D. 115 (11 January 1988 resolution). A construction should be avoided when it affords an opportunity to defeat
compliance with the terms of a statute.
xxx

xxx

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"The penal provision of P.D. 115 encompasses any act violative of an obligation covered by the trust receipt; it is
not limited to transactions in goods which are to be sold (retailed), reshipped, stored or processed as a component
of a product ultimately sold."
An examination of P.D. 115 shows the growing importance of trust receipts in Philippine business, the need to
provide for the rights and obligations of parties to a trust receipt transaction, the study of the problems involved
and the action by monetary authorities, and the necessity of regulating the enforcement of rights arising from
default or violations of trust receipt agreements. The legislative intent to meet a pressing need is clearly expressed.
38
In fine, we reiterate that the civil action for declaration of nullity of documents and for damages does not
constitute a prejudicial question to the criminal cases for estafa filed against petitioner Ching.
WHEREFORE, premises considered, the assailed decision and resolution of the Court of Appeals are hereby
AFFIRMED and the instant petition is DISMISSED for lack of merit. Accordingly, the Regional Trial Court of Makati,
Branch 58, is hereby directed to proceed with the hearing and trial on the merits of Criminal Case Nos. 92-0934 to
92-0937, inclusive, and to expedite proceedings therein, without prejudice to the right of the accused to due
process. Cdpr
SO ORDERED.
Bellosillo, Mendoza, Quisumbing and De Leon, Jr., JJ., concur.