Opic IN Yllabus Ummary: Villarama, Bianca Danica S. CASE #20

NG v. PEOPLE G.R. No.
173905
23 April 2010 Velasco, Jr.
TOPIC IN SYLLABUS: Trust Receipts Law; The goods must be intended for sale or resale, otherwise, it is a simple loan
SUMMARY: Anthony Ng, engaged in the business of building telecom towers, obtained a P3 million credit line with
Asiatrust Development Bank. He met difficulties in collecting from his client Islacom, so he failed to pay the loan to
Asiatrust. The bank filed a complaint for estafa (RPC in relation to the Trust Receipts Law, PD 115) against him. RTC
convicted him; CA sustained the conviction. SC acquitted Ng because the agreement was not a trust receipts transaction,
and the elements of estafa were not present. In these contracts, he was commissioned to build, out of the materials
received, steel communication towers, not to sell them. The transaction is merely one of simple loan.
PROCEDURAL ANTECEDENTS: Petition for Review on Certiorari (R45) seeking to reverse and set aside the CA
decision, which affirmed the RTC decision convicting Ng of Estafa (RPC 315 1(b)) in relation to PD 115
FACTS:
 1997 – Anthony Ng was engaged in the business of building and fabricating telecommunication towers under the
name "Capitol Blacksmith and Builders." He applied for a credit line of P3 million with Asiatrust Development
Bank, Inc. (Asiatrust). He submitted the following documents: (1) the contracts he had with Islacom, Smart, and
Infocom; (2) the list of projects wherein he was commissioned by the said companies to build steel towers; and
(3) the collectible amounts he has with the said companies.
 After conducting a credit investigation, Asiatrust approved the loan application. Ng was then required to sign
several documents, among which are the Credit Line Agreement, Application and Agreement for Irrevocable L/C,
Trust Receipt Agreements and Promissory Notes.
 As Ng realized difficulty in collecting from his client Islacom, he failed to pay his loan to Asiatrust. Asiatrust
conducted a surprise ocular inspection of Ng’s business through Villarva Linga, their appraiser. Linga reported
that approximately 97% of the subject goods of the Trust Receipts were "sold-out and that only 3% of the goods
pertaining to PN No. 1963 remained." The parties held a series of conferences to work out the problem and to
determine a way for petitioner to pay his debts. However, they failed to reach a settlement. Asiatrust filed a
Complaint-Affidavit against Ng for Estafa.
ISSUE: Whether or not petitioner is liable for Estafa under Art. 315, par. 1(b) of the RPC in relation to PD 115.
PETITIONER NG’S ARGUMENT:

1. The loan was granted as his working capital and that the Trust Receipt Agreements he signed with Asiatrust were
merely preconditions for the grant and approval of his loan;
2. The agreements were contracts of adhesion, prepared by Asiatrust in fine print;
3. He was unable to collect from Islacom because of conflicts within the company, but Asiatrust was aware of Ng’s
receivables which were more than sufficient to cover the obligation;
4. Prior to the Islacom problem, he had been faithfully paying his obligation to Asiatrust as shown in official
receipts, thus debunking Asiatrust's claim of fraud and bad faith against him;
5. During the pendency of this case, petitioner even attempted to settle his obligations as evidenced by the two
UCPB checks he issued in favor of Asiatrust; and
6. He had already paid PhP 1.8 million out of the PhP 2.971 million he owed as per Statement of Account dated
January 26, 2000.
HELD: No.
1. The agreement was not a trust receipt transaction.
 A trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of the
sale, or if the merchandise is not sold, to return the merchandise to the entruster.
 There are, therefore, two obligations in a trust receipt transaction: the first refers to money received under the
obligation involving the duty to turn it over (entregarla) to the owner of the merchandise sold, while the second
refers to the merchandise received under the obligation to "return" it (devolvera) to the owner. A violation of any
of these undertakings constitutes Estafa defined under Art. 315, par. 1(b) of the RPC, as provided in Sec. 13 of
PD 115.
VILLARAMA, BIANCA DANICA S. CASE #20

 A thorough examination of the facts obtaining in the instant case, however, reveals that the transaction between
petitioner and Asiatrust is not a trust receipt transaction but one of simple loan. It must be remembered that
petitioner was transparent to Asiatrust from the very beginning that the subject goods were not being held for sale
but were to be used for the fabrication of steel communication towers in accordance with his contracts with
Islacom, Smart, and Infocom. In these contracts, he was commissioned to build, out of the materials
received, steel communication towers, not to sell them.
 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." Obviously, the State, in enacting the law, sought to find a way to assist importers and
merchants in their financing in order to encourage commerce in the Philippines.
 Considering that the goods in this case were never intended for sale but for use in the fabrication of steel
communication towers, the trial court erred in ruling that the agreement is a trust receipt transaction.
o In applying the provisions of PD 115, the trial court relied on the Memorandum of Asiatrust's appraiser,
Linga, who stated that the goods have been sold. However, Linga testified that he merely presumed–and
had no actual knowledge–that the goods were sold.
 To emphasize, the Trust Receipts Law was created to "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 ." Since
Asiatrust knew that petitioner was neither an importer nor retail dealer, it should have known that the said
agreement could not possibly apply to petitioner.
2. Ng is not liable for Estafa.
 The essential elements of Estafa are:
(1) that money, goods or other personal property is received by the offender in trust or on commission, or for
administration, or under any obligation involving the duty to make delivery of or to return it;
(2) that there be misappropriation or conversion of such money or property by the offender, or denial on his part
of such receipt;
(3) that such misappropriation or conversion or denial is to the prejudice of another; and
(4) there is demand by the offended party to the offender
 The goods received by petitioner were not held in trust. They were also not intended for sale and neither did
petitioner have the duty to return them. They were only intended for use in the fabrication of steel
communication towers.
 There was no misappropriation/conversion. Under the trust receipt entered into by the parties, Ng’s liability for
the amount of the goods subject of the trust receipts arises and becomes due only upon receipt of the proceeds of
the sale and not prior to the receipt of the full price of the goods. Clearly, petitioner was only obligated to turn
over the proceeds as soon as he received payment. However, the evidence reveals that petitioner experienced
difficulties in collecting payments from his clients for the communication towers. What is more, under the Trust
Receipt Agreement itself, no date of maturity was stipulated. The provision was left blank by Asiatrust. Hence,
the only way for the obligation to mature was for Asiatrust to demand from petitioner to pay the obligation,
which it never did.
 Reasonable doubt exists.
VILLARAMA, BIANCA DANICA S. CASE #20

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NG v. PEOPLE G.R. No.

PETITIONER NG’S ARGUMENT:

VILLARAMA, BIANCA DANICA S. CASE #20

VILLARAMA, BIANCA DANICA S. CASE #20

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