CASE DIGEST: Consolidated Bank v. Court of Appeals

 

CONSOLIDATED BANK AND TRUST CORPORATION v. COURT OF APPEALS

G.R. No. 114286                April 19, 2001

FACTS:

On July 13, 1982, respondents Continental Cement Corporation and Gregory T. Lim obtained from petitioner Consolidated Bank and Trust Corporation Letter of Credit No. DOM-23277 in the amount of P1,068,150.00. On the same date, respondent Corporation paid a marginal deposit of P320,445.00 to petitioner. The letter of credit was used to purchase around five hundred thousand liters of bunker fuel oil from Petrophil Corporation. In relation to the same transaction, a trust receipt for the amount of P1,001,520.93 was executed by respondent Corporation.

Claiming that respondents failed to turn over the goods covered by the trust receipt or the proceeds thereof, petitioner filed a complaint for sum of money with application for preliminary attachment before the Regional Trial Court of Manila. In answer to the complaint, respondents averred that the transaction between them was a simple loan and not a trust receipt transaction, and that the amount claimed by petitioner did not take into account payments already made by them. In a Supplemental Answer, respondents prayed for reimbursement of alleged overpayment to petitioner of the amount of P490,228.90.

ISSUE:

Whether or not the transaction involved is a loan transaction or a trust receipt transaction

RULING:

Petitioner failed to convince the Court that its transaction with respondent Corporation is really a trust receipt transaction instead of merely a simple loan.

Inasmuch as the debtor received the goods subject of the trust receipt before the trust receipt itself was entered into, the transaction in question was a simple loan and not a trust receipt agreement. Prior to the date of execution of the trust receipt, ownership over the goods was already transferred to the debtor. This situation is inconsistent with what normally obtains in a pure trust receipt transaction, wherein the goods belong in ownership to the bank and are only released to the importer in trust after the loan is granted.

In the case at bar, the delivery to respondent Corporation of the goods subject of the trust receipt occurred long before the trust receipt itself was executed. Delivery of the bunker fuel oil to respondent Corporation's Bulacan plant commenced on July 7, 1982 and was completed by July 19, 1982. Further, the oil was used up by respondent Corporation in its normal operations by August, 1982. On the other hand, the subject trust receipt was only executed nearly two months after full delivery of the oil was made to respondent Corporation, or on September 2, 1982.

By all indications, then, it is apparent that there was really no trust receipt transaction that took place. Evidently, respondent Corporation was required to sign the trust receipt simply to facilitate collection by petitioner of the loan it had extended to the former