Bar Q and A #52

I would advice MFC that, having a contractual mortgage (the value of the mortgaged property being well over the secured obligation), it should refrain from participating in the proceedings and instead pursue its preferential right to foreclose the mortgage.

a. The contention of the assignee in insolvency is correct. The payment made by Edzo to Integrity Bank was a fraudulent preference or payment, being made within 30 days before the filing of the insolvency petition.

b. The claim of the Handyman Garage for P10,000 has a specific lien on the car repaired.
The remaining 4 claims have preference or priority against each other in the following order:

1. No. 4- claim of the BIR for unpaid VAT;
2. No. 3- claim of Joselyn Reyes for unlawful termination;
3. No. 1- claim of Ace Equipment Supplies as an unpaid seller; and
4. No. 5- claim of Integrity Bank.

NO, the planholders are not correct. On November 21, 2000, the Court approved the Interim Rules of Procedure on Corporate Rehabilitation of 2000 (Interim Rules), which took effect on December 15, 2000. The Interim Rules apply to petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to PD 902-A, as amended. Under the Interim Rules, “claim” shall include “all claims or demands of whatever nature or character against the debtor or its property, whether for money or otherwise.” “Creditor” shall mean “any holder of a claim.” Hence, the claim of the planholders from PA is included in the definition of “claims” under the Interim Rules.

The rights of the data subject under the Data Privacy Act are:
1. The right to be informed
a. on whether personal data pertaining to him or her shall be, are being, or have been processed, including the existence of automated decision making and profiling; and
b. notified about the following information before the entry thereof into the processing system of the personal information controller, or at the next practical opportunity:
− Description of the personal data to be entered into the system;
− Purposes for which they are being or will be processed;
− Basis of processing, when processing is not based on the consent of data subject;
− Scope and method of the personal data processing; Recipients or classes of recipients to whom the personal data are or may be disclosed;
− Methods utilized for automated access, if the same is allowed by the data subject, and the extent to which such access is authorized, including meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject;
− Identity and contact details of the personal data controller or its representative;
− Period for which the information will be stored; and
− Existence of their rights as data subjects. (Section 34a, IRR)

2. The right to access
This means reasonable access upon demand to the following:
− Contents of his or her personal data that were processed;
− Sources from which personal data were obtained;
− Names and addresses of recipients of the personal data;
− Manner by which such data were processed;
− Reasons for the disclosure of the personal data to recipients, if any;

− Information on automated processes where the data will, or is likely to, be made as the sole basis for any decision that significantly affects or will affect the data subject;
− Date when his or her personal data concerning the data subject were last accessed and modified;
− The designation, name or identity, and address of the personal information controller. (Section 34c, IRR)

3. The right to object
The data subject shall have the right to object to the processing of his or her personal data, including processing for direct marketing, automated processing or profiling.
GR: When a data subject objects or withholds consent, the personal information controller shall no longer process the personal data
XPNs:
a. The personal data is needed pursuant to a subpoena;
b. The collection and processing are for obvious purposes, including, when it is necessary for the performance of or in relation to a contract or service to which the data subject is a party, or when necessary or desirable in the context of an employer-employee relationship between the collector and the data subject; or
c. The information is being collected and processed as a result of a legal obligation. (Section 34b, IRR)

4. The right to erasure or blocking
The data subject shall have the right to suspend, withdraw or order the blocking, removal or destruction of his or her personal data from the personal information controller’s filing system, upon proof of any of the following grounds:
− The personal data is incomplete, outdated, false, or unlawfully obtained;
− The personal data is being used for purpose not authorized by the data subject;
− The personal data is no longer necessary for the purposes for which they were collected;
− The data subject withdraws consent or objects to the processing, and there is no other legal ground or overriding legitimate interest for the processing;
− The personal data concerns private information that is prejudicial to data subject, unless justified by freedom of speech, of expression, or of the press or otherwise authorized;
− The processing is unlawful;
− The personal information controller or personal information processor violated the rights of the data subject. (Section 34e, IRR)

5. The right to damages
The data subject shall be indemnified for any damages sustained due to such inaccurate, incomplete, outdated, false, unlawfully obtained or unauthorized use of personal data, taking into account any violation of his or her rights and freedoms as data subject. (Section 34f, IRR)

6. The right to file a complaint
a. The complainant must have first informed, in writing, the personal information controller or concerned entity of the privacy violation or personal data breach to allow for appropriate action on the same; AND
b. The personal information controller or concerned entity did not take timely or appropriate action on the claimed privacy violation or personal data breach, or there is no response from the personal information controller within fifteen (15) days from receipt of information from the complaint; AND
c. The complaint is filed within six (6) months from the occurrence of the claimed privacy violation or personal data breach, or thirty (30) days from the last communiqué with the personal information controller or concerned entity, whichever is earlier.

7. The right to rectify
The data subject has the right to dispute the inaccuracy or error in the personal data and have the personal information controller correct it immediately and accordingly, unless the request is vexatious or otherwise unreasonable. If the personal data has been corrected, the personal information controller shall ensure the accessibility of both the new and the retracted information and the simultaneous receipt of the new and the retracted information by the intended recipients thereof: Provided, That recipients or third parties who have previously received such processed personal data shall be informed of its inaccuracy and its rectification, upon reasonable request of the data subject. (Section 34d, IRR)

8. Right to data portability
This right gives data subjects the mechanism to obtain their personal data in an electronic or structured format from personal information controllers if such personal data is being processed through electronic means, and enables the further use of such personal data by the data subjects. (Section 36, IRR; Section 18, DPA)

a. A trust receipt is a written or printed document signed by the entrustee in favor of the entruster containing terms and conditions substantially complying with the provision of PD 115 whereby the bank as entruster releases the goods to the possession of the entrustee but retain ownership thereof while the entrustee may sell the goods and apply the proceeds for the full payment of his liability to the bank. [Sec. 3 (j), Trust Receipts Law] It is also defined as a document in which is expressed a security transaction, where 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 lien on agreement to pay all or part of the proceeds of sale to the lender. The term is specifically applied to a written instrument whereby a banker having advanced money for purchase of imported merchandise and having taken title in his own name, delivers possession to an importer on agreement in writing to hold the merchandise in trust for the banker until he is paid. Finally, a document executed between an entrustor and an entrustee, under which the goods are released to the latter who binds himself to hold the goods in trust, or to sell or dispose of the goods with the obligation to turn over the proceeds to the entrustor to the extent of the entrustee’s obligation to him, or if unsold, to return the same.

b. The case of estafa against C will not prosper. PD 115 does not apply in this case because the proceeds of the loan are used to renovate C’s commercial building. Trust receipts transactions are 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. The transactions contemplated under the Trust Receipts Law mainly involved acquisition of goods for the sale thereof. The transaction is properly called a simple loan with the trust receipt merely as a collateral or security for the loan. (Ng v. People G.R. No. 173905, April 23, 2010 citing Samo v. People, G.R. No. L-17603-04, May 31, 1962; Consolidated Bank and Trust Corporation v. Court of Appeals, 356 SCRA 671)

NO. Violation of a trust receipt is criminal as it is punished as estafa under Art. 315 of the RPC. There is a public policy involved which is to assure the entruster with the reimbursement of the amount advanced or the balance thereof for the goods subject of the trust receipt. The execution of the trust receipt or the use thereof promotes the smooth flow of commerce as it helps the importer or buyer of the goods covered thereby.

a. The dismissal of the complaint for estafa is justified. Under recent jurisprudence, the Supreme Court held that transactions referred to in relation to trust receipts, mainly involved sales, and if the entruster knew even before the execution of the alleged trust receipt agreement that the goods subject of the trust receipt were never intended by the entrustee for resale or for the manufacture of items to be sold, the agreement is not a trust receipt transaction but a simple loan, notwithstanding the label. In this case, the object of the trust receipt, spare parts for textile mills, were for the use of the entrustee and never intended for sale. As such, the transaction is a simple loan. (Ng v. People of the Philippines, G.R. No. 173905, April 23, 2010;Land Bank V. Perez, G.R. No. 166884, June 13, 2012; and Hur Ting Yang v. People of the Philippines, G.R. No. 195117, August 14, 2013)

b. NO. This is because the loss of the goods, documents or instruments which are the subject of a trust receipt pending their disposition, irrespective of whether or not it was due to the fault or negligence of the entrustee, shall not extinguish the entrustee’s obligation to the entruster for the value thereof.

Also, while the entruster is made to appear as owner of the goods covered by the trust receipt, such ownership is only a legal fiction to enhance the entruster’s security interest over the goods. (Section 10 of Pres. Decree No. 115; Rosario Textile Mills Corp. v. Home Bankers Savings and Trust Company, G.R. No. 1372323, June 29, 2005, 462 SCRA 88)

True, because the criminal violation of the trust receipts agreement as when the entrustee does not deliver the proceeds of the sale of the goods subject of the trust receipt or fails to return the goods in case of non sale already constitutes estafa under the Revised Penal Code.

I will not advise BDP Bank to file a criminal case for estafa against Delano. Delano received the iron pellets he imported one year before the trust receipt was executed. As held by the Supreme Court, where the execution of a trust receipt agreement was made after the goods covered by it had been purchased by and delivered to the entrustee and the latter as a consequence acquired ownership to the goods, the transaction does not involve a trust receipt but a simple loan even though the parties denominated the transaction as one of trust receipt. (Colinares v. Court of Appeals, 339 SCRA 609, 2000; Consolidated Bank and Trust Corporation v. CA, 356 SCRA 671, 2001)

Sec. 13 of P.D. 115, Trust Receipts Law, provides that 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.