Philtrust Bank v. Commissioner of Customs

SIXTH DIVISION [CA-G.R. SP No. 49269. April 30, 2001.] PHILTRUST BANK , petitioner , vs . THE COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS , respondents . D E C I S I O N VERZOLA , E. , J p : This is a petition for review under Rule 43 seeking the reversal of the Decision 1 of the Court of Tax Appeals dismissing petitioner's petition and the subsequent Resolution 2 dismissing its motion for reconsideration. Briefly, the facts show that Bonded Warehouse Services, Inc., for the account of A.D. Manufacturing Philippines Incorporated, filed an "Application and Agreement for Commercial Letter of Credit" 3 with petitioner for the importation of 496 M/T of Daelim Poly HDPE. Petitioner approved the application and the corresponding letter of credit was issued in favor of the exporter for the full invoice value. The goods were then shipped to Manila with the corresponding bill of lading and commercial invoice indicating therein that the goods were to the order of petitioner with a right of notification in favor of Philippine Bonded Warehouse Services, Inc., for the account of A.D. Manufacturing Phils., Inc. 4 (A.D. manufacturing for brevity). HcSaAD Thereafter, petitioner and A.D. Manufacturing executed a Trust Receipt Agreement, 5 wherein the latter was authorized to file the necessary warehousing entry for the possession of the shipment and documents with the Bureau of Customs. While some of the shipments were released to A.D. Manufacturing upon payment of the required taxes and duties, a shipment covered by Entry No. 17357-95 was subject to a hold order because apparently A.D. Manufacturing has an outstanding and demandable account with the Bureau of Customs for its previous importations. The hold order was issued pursuant to Section 1508 of the Tariff and Customs Code authorizing the Bureau of Customs to hold the delivery of an imported article to the importer when the latter has an outstanding and demandable account with the Bureau. As consignee of the goods, petitioner requested the Bureau of Customs to cancel the warehousing entry over the imported goods and convert the same to a consumption entry so that the payment of the required taxes and duties due over the goods may be effected. 6 This request was however denied by the Bureau of Customs since the goods were already owned by A.D. Manufacturing. Section 1508 of the Tariff and Customs Code will apply. Thereafter, petitioner, through counsel requested that the subject goods be cleared in its favor, 7 asserting that the ownership of the goods belongs to them and not to A.D. Manufacturing hence, Section 1508 of the Tariff and Customs Code will not apply because they do not have any outstanding and demandable account with the Bureau of Customs. The request was denied by the Commissioner of the Bureau of Customs on November 28, 1996. 8 Petitioner sought reconsideration of the same on December 10, 1996. 9 However, the letter for reconsideration suffered the same fate. Petitioner then went to the Court of Tax Appeals questioning the legality of the hold order. On August 25, 1998, the Court of Tax Appeals dismissed the petition for lack of merit and legal bases. Hence, the present recourse. The pith of the issues in this petition hinges on the determination of who is the owner of the imported merchandise/goods, is it the petitioner or A.D. Manufacturing? We so hold that the owner of the shipment is A.D. Manufacturing. A.D. Manufacturing was the one in need of the subject goods. To aid it in the importation of the same, a commercial transaction known as "Commercial Letter of Credit" was availed from petitioner. Upon approval of the Commercial Letter of Credit, petitioner, as a matter of course in the conduct of its business, would require the importer (A.D. Manufacturing) to execute a "Trust Receipt Arrangement" in its favor. 10 Under the foregoing arrangement, petitioner extended a loan to the importer as evidenced by the Letter of Credit. As security for the loan, the trust receipt was duly executed. In other words, a letter of credit-trust receipt arrangement involves a loan feature represented by the letter of credit, and a security feature, which is in the covering trust receipt. 10a However, this arrangement does not make petitioner the real owner of the imported articles. It was merely the holder of a "security title" for the advances it made for the imported (i.e., A.D. Manufacturing). The merchandise A.D. Manufacturing had purchased through petitioner's financing remain as their property and they hold it at their own risk. The trust receipt arrangement did not convert the petitioner as investor; the latter remained a lender and creditor. 11 As held by the Supreme Court in Sia vs. People : 12 ". . . for the bank has previously extended a loan which the L/C represents to the importer, and by that loan, the importer should be the real owner of the goods. If under the trust receipt the bank is made to appear as the owner, it was but an artificial expedient, more of a legal fiction than fact, for if it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with the purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof . . . " Petitioner further asserts that the ruling in the foregoing cases was "effectively reversed" in the case of People vs. Nitafan . 13 We do not agree. The crux of the ruling in the case of People vs. Nitafan has something to do with the probable liability of an entrustee in a trust receipt agreement for the crime of estafa, for failure to deliver the proceeds of the sale or to return the goods if not sold to the entruster-bank. Nowhere in the pronouncement did it expressly mention that it is abandoning the ruling in Vintola vs. Insular Bank of Asia and America . 14 Moreover, even assuming that a later decision governs for purposes of jurisprudence, still we are not convinced of the alleged "effective reversal". Since the two (2) cases were decided only by a division of the Supreme Court, the latter case may not effectively reverse the earlier ruling since it is a settled principle that only the Supreme Court sitting en banc can effectively reverse its previous ruling. But even if we assume further that there was an effective reversal of ruling in the foregoing cases, still, petitioner's claim of real ownership over the subject goods was lost when it endorsed the accompanying bill of lading to A.D. Manufacturing. Hence, Section 1508 in relation to Sections 1203 and 2303 par. 2 of the Tariff and Customs Code justifies the "hold order" issued by the Commissioner of Customs over the subject imported goods. WHEREFORE, finding the decision and resolution of the Court of Tax Appeals to be in accordance with law, the petition for review under consideration is hereby DISMISSES. SO ORDERED. Buzon and Reyes, JJ . , concur. Footnotes 1. Rollo, pp. 11-23. 2. Rollo, p. 25. 3. Rollo, p. 26. 4. Rollo, pp. 27-28. 5. Rollo, p. 29. 6. Rollo, p. 34. 7. Rollo, p. 37-38. 8. Rollo, p. 39. 9. Rollo, p. 40. 10. See Samo vs. People, 5 SCRA 354 (1962). 10a. Vintola vs. Insular Bank of Asia and America, 150 SCRA 578 (1987). 11. Ibid . 12 121 SCRA 655 (1983). 13. 207 SCRA 726 (1992). 14. Supra .