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Introductory*Concepts* There"are"two"obligations"in"a"trust"receipt"transaction."
* The"first"is"covered"by"the"provision"that"refers"to"money"
Trust*receipt,*definition* under" the" obligation" to" deliver" it"(entregarla)"to" the"
a" security" transaction" intended" to" aid" in" financing" owner"of"the"merchandise"sold."The"second"is"covered"by"
importers" and" retail" dealers" who" do" not" have" sufficient" the" provision" referring" to" merchandise" received" under"
funds"or"resources"to"finance"the"importation"or"purchase" the"obligation"to"return"it"(devolvera)"to"the"owner.""
of"merchandise,"and"who"may"not"be"able"to"acquire"credit" "
except" through" utilization," as" collateral," of" the" In"all"trust"receipt"transactions,"both"obligations"on"the"
merchandise"imported"or"purchased"(Samo%v.%People)" part"of"the"trustee"exist"in"the"alternative"—"the"return"of"
the"proceeds"of"the"sale"or"the"return"or"recovery"of"the"
"
goods," whether" raw" or" processed." When" both" parties"
Trust*Receipts*Law,*purpose* enter"into"an"agreement"knowing"that"the"return"of"the"
to"aid"in"financing"importers"and"retail"dealers"who"do" goods" subject" of" the" trust" receipt" is" not" possible" even"
not" have" sufficient" funds" or" resources" to" finance" the" without" any" fault" on" the" part" of" the" trustee," it" is" not" a"
importation"or"purchase"of"merchandise,"and"who"may" trust" receipt" transaction" penalized" under" Section" 13"
not"be"able"to"acquire"credit"except"through"utilization," of"P.D."115;"the"only"obligation"actually"agreed"upon"by"
as"collateral,"of"the"merchandise"imported"or"purchased" the" parties" would" be" the" return" of" the" proceeds" of" the"
" sale"transaction."This"transaction"becomes"a"mere"loan,"
" where" the" borrower" is" obligated" to" pay" the" bank" the"
Trust*Receipt*Transaction* amount"spent"for"the"purchase"of"the"goods."(Land%Bank%
of%the%Phils.%v.%Perez,%G.R.%No.%166884,%[June%13,%2012],%687%
Trust*receipt*transaction,*nature*
PHIL%106S125)"
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" Intent*to*defraud,*presumed*
to" assist" importers" and" merchants" solve" their" financing" Thus,"under"the"Trust"Receipts"Law,"intent"to"defraud"is"
problems."" Obviously," the" State," in" enacting" the" law," presumed"when"(1)"the"entrustee"fails"to"turn"over"the"
sought"to"find"a"way"to"assist"importers"and"merchants"in" proceeds"of"the"sale"of"goods"covered"by"the"trust"receipt"
their" financing" in" order" to" encourage" commerce" in" the" to"the"entruster;"or"(2)"when"the"entrustee"fails"to"return"
Philippines."" the" goods" under" trust," if" they" are" not" disposed" of" in"
" accordance" with" the" terms" of" the" trust" receipts." (Land%
A" trust" receipt" is" considered" a" security" transaction" Bank%of%the%Phils.%v.%Perez,%G.R.%No.%166884,%[June%13,%2012],%
intended"to"aid"in"financing"importers"and"retail"dealers" 687%PHIL%106S125)%
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" Loan*and*Security*Features*of*TR*
utilization,"as"collateral,"of"the"merchandise"imported"or" "
purchased." (Hur% Tin% Yang% v.% People,% G.R.% No.% 195117% A"letter"of"creditRtrust"receipt"arrangement"is"endowed"
(Resolution),%[August%14,%2013])% with" its" own" distinctive" features" and" characteristics."
% Under"that"setRup,"a"bank"extends"a"loan"covered"by"the"
Trust*receipt*is*a*security*agreement* Letter"of"Credit,"with"the"trust"receipt"as"a"security"for"the"
A" trust" receipt," therefore," is" a" security" agreement," loan." In" other" words," the" transaction" involves" a" loan"
pursuant"to"which"a"bank"acquires"a""security"interest"" feature"represented"by"the"letter"of"credit,"and"a"security"
in"the"goods.""It"secures"an"indebtedness"and"there"can" feature"which"is"in"the"covering"trust"receipt."
be" no" such" thing" as" security" interest" that" secures" no" "
obligation."""As"defined"in"our"laws:" A" trust" receipt," therefore," is" a" security" agreement,"
(h)""Security" Interest" means" a" property" pursuant"to"which"a"bank"acquires"a""security"interest""
interest"in"goods,"documents"or"instruments"to" in"the"goods.""It"secures"an"indebtedness"and"there"can"
secure"performance"of"some"obligations"of"the" be" no" such" thing" as" security" interest" that" secures" no"
entrustee" or" of" some" third" persons" to" the" obligation."|||"(Spouses" Vintola" v." Insular" Bank" of" Asia"
entruster" and" includes" title," whether" or" not" and" America," G.R." No." 73271," [May% 29,% 1987],% 234% PHIL%
expressed"to"be"absolute,"whenever"such"title"is" 562S570)%
in" substance" taken" or" retained" for" security" %
only."%%
Ownership*of*the*Goods,*Documents,*and*
%
Instruments*under*a*Trust*Receipt*
(Spouses%Vintola%v.%Insular%Bank%of%Asia%and%America,%G.R.%
*
No.%73271,%[May%29,%1987],%234%PHIL%562S570)"
" Development* Bank* of* the* Phils.* v.* Prudential* Bank,*
% G.R.*No.*143772,*[November*22,*2005],*512*PHIL*267S
Two* obligations* in* a* TR* transaction:* Obligation* 280*
entregarla*and*obligation*devolvera* "
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MERCANTILE TRUST RECEIPTS
Litex"was"not"engaged"in"the"business"of"selling"spinning" Entruster*and*Entrustee*
machinery," its" accessories" and" spare" parts" but" in" *
manufacturing" and" producing" textile" and" various" kinds" Entrustee*
of" fabric." The" articles" were" not" released" to" Litex" to" be"
*
sold."Nor"was"the"transfer"of"possession"intended"to"be"a"
Entrustee,*definition*
preliminary" step" for" the" said" goods" to" be" ultimately" or"
An"entrustee"is"one"having"or"taking"possession"of"
subsequently" sold." Instead," the" contemporaneous" and"
goods,"documents"or"instruments"under"a"trust"receipt"
subsequent" acts" of" both" Litex" and" Prudential" Bank"
transaction,"and"any"successor"in"interest"of"such"
showed"that"the"imported"articles"were"released"to"Litex"
person"for"the"purpose"of"payment"specified"in"the"trust"
to"be"installed"in"its"textile"mill"and"used"in"its"business."
receipt"agreement."
DBP"itself"was"aware"of"this."
"
"
Obligations*of*an*entrustee*
In"a"trust"receipt"transaction,"the"goods"are"released"by"
The"entrustee"is"obliged"to""
the" entruster" (who" owns" or" holds" absolute" title" or"
1.! hold"the"goods,"documents"or"instruments"in"
security"interests"over"the"said"goods)"to"the"entrustee" trust"for"the"entruster"and"shall"dispose"of"
on"the"latter's"execution"and"delivery"to"the"entruster"of" them"strictly"in"accordance"with"the"terms"and"
a"trust"receipt."The"trust"receipt"evidences"the"absolute" conditions"of"the"trust"receipt;""
title"or"security"interest"of"the"entruster"over"the"goods." 2.! receive"the"proceeds"in"trust"for"the"entruster"
As" a" consequence" of" the" release" of" the" goods" and" the" and"turn"over"the"same"to"the"entruster"to"the"
execution" of" the" trust" receipt," a" twoRfold" obligation" is" extent"of"the"amount"owed"to"the"entruster"or"
imposed" on" the" entrustee," namely:" (1)" to" hold" the" as"appears"on"the"trust"receipt;"
designated"goods,"documents"or"instruments"in"trust"for"
3.! insure"the"goods"for"their"total"value"against"
the"purpose"of"selling"or"otherwise"disposing"of"them"and"
loss"from"fire,"theft,"pilferage"or"other"
(2)" to" turn" over" to" the" entruster" either" the" proceeds"
casualties;""
thereof" to" the" extent" of" the" amount" owing" to" the"
4.! keep"said"goods"or"the"proceeds"therefrom"
entruster"or"as"appears"in"the"trust"receipt,"or"the"goods,"
whether"in"money"or"whatever"form,"separate"
documents"or"instruments"themselves"if"they"are"unsold"
and"capable"of"identification"as"property"of"the"
or" not" otherwise" disposed" of," in" accordance" with" the"
entruster;""
terms"and"conditions"specified"in"the"trust"receipt."In"the"
5.! return"the"goods,"documents"or"instruments"in"
case" of" goods," they" may" also" be" released" for" other"
the"event"of"nonRsale"or"upon"demand"of"the"
purposes"substantially"equivalent"to"(a)"their"sale"or"the"
entruster;"and""
procurement" of" their" sale;" or" (b)" their" manufacture" or"
6.! observe"all"other"terms"and"conditions"of"the"
processing" with" the" purpose" of" ultimate" sale," in" which"
trust"receipt"not"contrary"to"the"provisions"of"
case" the" entruster" retains" his" title" over" the" said" goods"
the"decree.""
whether" in" their" original" or" processed" form" until" the"
(Metropolitan%Bank%&%Trust%Co.%v.%Gonzales,%G.R.%
entrustee" has" complied" fully" with" his" obligation" under"
No.% 180165,% [April% 7,% 2009],% 602% PHIL% 1000S
the"trust"receipt;"or"(c)"the"loading,"unloading,"shipment"
1015)%
or" transshipment" or" otherwise" dealing" with" them" in" a"
%
manner"preliminary"or"necessary"to"their"sale."Thus,"in"a"
PD*115*and*Art.*315,*par.*1(b)*of*RPC*(Estafa)*
trust"receipt"transaction,"the"release"of"the"goods"to"the"
The"failure"of"an"entrustee"to"turn"over"the"proceeds"of"
entrustee," on" his" execution" of" a" trust" receipt," is"
the"sale"of"the"goods,"documents"or"instruments"covered"
essentially"for"the"purpose"of"their"sale"or"is"necessarily"
by"a"trust"receipt"to"the"extent"of"the"amount"owing"to"the"
connected"with"their"ultimate"or"subsequent"sale.|||"" entruster"or"as"appears"in"the"trust"receipt"or"to"return"
" said" goods," documents" or" instruments" if" they" were" not"
Trustee*ex*maleficio* sold"or"disposed"of"in"accordance"with"the"terms"of"the"
No"one"can"transfer"a"right"to"another"greater"than"what" trust" receipt" shall" constitute" the" crime" of" estafa,"
he"himself"has."Nemo"dat"quod"non"habet."Hence,"Litex" punishable" under" the" provisions" of" Article" Three"
could" not" transfer" a" right" that" it" did" not" have" over" the" hundred"and"fifteen,"paragraph"one"(b)"of"Act"Numbered"
disputed"items."Corollarily,"DBP"could"not"acquire"a"right" Three"thousand"eight"hundred"and"fifteen,"as"amended,"
greater" than" what" its" predecessorRinRinterest" had." The" otherwise" known" as" the" Revised" Penal" Code." If" the"
spring" cannot" rise" higher" than" its" source." DBP" merely" violation" or" offense" is" committed" by" a" corporation,"
stepped"into"the"shoes"of"Litex"as"trusteeof"the"imported" partnership," association" or" other" juridical" entities," the"
articles"with"an"obligation"to"pay"their"value"or"to"return" penalty" provided" for" in" this" Decree" shall" be" imposed"
them"on"Prudential"Bank's"demand."By"its"failure"to"pay" upon"the"directors,"officers,"employees"or"other"officials"
or" return" them" despite" Prudential" Bank's" repeated" or" persons" therein" responsible" for" the" offense," without"
demands"and"by"selling"them"to"Lyon"without"Prudential" prejudice"to"the"civil"liabilities"arising"from"the"criminal"
Bank's" knowledge" and" conformity," DBP" became" offense."(sec.%13,%PD%115)"
a"trustee"ex"maleficio.|||%(Development%Bank%of%the%Phils.% "
v.%Prudential%Bank,%G.R.%No.%143772,%[November%22,%2005],% When*entrustee*is*liable*for*Estafa*
512%PHIL%267S280)"
"
ToTheBarAndBeyond2018 dennisaranabril !
MERCANTILE TRUST RECEIPTS
ToTheBarAndBeyond2018 dennisaranabril !
MERCANTILE TRUST RECEIPTS
ToTheBarAndBeyond2018 dennisaranabril !
MERCANTILE TRUST RECEIPTS
constitutes"a"criminal"offense"that"causes"prejudice"not" goods"were"not"being"held"for"sale"but"were"to"be"used"
only"to"another,"but"more"to"the"public"interest."* for" the" fabrication" of" steel" communication" towers" in"
* accordance"with"his"contracts"with"Islacom,"Smart,"and"
The"present"case,"however,"only"deals"with"the"civil"fraud" Infocom."In" these" contracts," he" was" commissioned" to"
in"the"nonRcompliance"with"the"trust"receipts"to"warrant" build,"out"of"the"materials"received,"steel"communication"
the"issuance"of"a"writ"of"preliminary"attached."A"fortiori," towers,"not"to"sell"them."
in" a" civil" case" involving" a" trust" receipt," the" entrustee's" "
failure" to" comply" with" its" obligations" under" the" trust" The" true" nature" of" a" trust" receipt" transaction" can" be"
receipt"constitute"as"civil"fraud"provided"that"it"is"alleged," found" in" the" "whereas"" clause" of"PD" 115"which" states"
and" substantiated" with" specificity," in" the" complaint," its" that" a" trust" receipt" is" to" be" utilized" "as" a" convenient"
attachments"and"supporting"evidence.* business"device"to"assist"importers"and"merchants"solve"
* their" financing" problems."" Obviously," the" State," in"
Security" Bank's" complaint" stated" that" Great" Wall," enacting"the"law,"sought"to"find"a"way"to"assist"importers"
through" its" Vice" President" Fredino" Cheng" Atienza," and"merchants"in"their"financing"in"order"to"encourage"
executed"various"trust"receipt"agreements"in"relation"to" commerce"in"the"Philippines."
its" loan" transactions." The" trust" receipts" stated" that" in" "
consideration" of" the" delivery" to" the" entrustee" (Great" As" stressed" in"Samo" v." People,"14"a" trust" receipt" is"
Wall)"of"the"possession"of"the"goods,"it"obligates"itself"to" considered" a" security" transaction" intended" to" aid" in"
hold"in"trust"for"the"bank"the"goods,"to"sell"the"goods"for" financing"importers"and"retail"dealers"who"do"not"have"
the"benefit"of"the"bank,"to"turn"over"the"proceeds"of"the" sufficient"funds"or"resources"to"finance"the"importation"
sale"to"the"bank,"and"to"return"the"goods"to"the"bank"in" or"purchase"of"merchandise,"and"who"may"not"be"able"to"
the" event" of" nonRsale." By" signing" the" trust" receipt" acquire"credit"except"through"utilization,"as"collateral,"of"
agreements," respondents" fully" acknowledged" the" the" merchandise" imported" or" purchased." Similarly,"
consequences"under"the"law"once"they"failed"to"abide"by" American"Jurisprudence"demonstrates"that"trust"receipt"
their" obligations" therein." The" said" trust" receipt" transactions" always" refer" to" a" method" of" "financing"
agreements"were"attached"to"the"complaint.* importations" or" financing" sales.""15"The" principle" is" of"
* course" not" limited" in" its" application" to" financing"
Upon"the"maturity"date,"however,"respondents"failed"to" importations,"since"the"principle"is"equally"applicable"to"
deliver" the" proceeds" of" the" sale" to" Security" Bank" or" to" domestic" transactions."16"Regardless" of" whether" the"
return"the"goods"in"case"of"nonRsale."Security"Bank"sent"a" transaction"is"foreign"or"domestic,"it"is"important"to"note"
final" demand" letter" to" respondents," which" was" also" that" the" transactions" discussed" in" relation" to" trust"
attached" to" the" complaint," but" it" was" unheeded." receipts"mainly"involved"sales.""
Curiously," in" their" letter," dated" January" 23," 2013," Following"the"precept"of"the"law,"such"transactions"affect"
respondents" did" not" explain" their" reason" for" nonR situations" wherein" the" entruster," who" owns" or" holds"
compliance" with" their" obligations" under" the" trust" absolute"title"or"security"interests"over"specified"goods,"
receipts;"rather,"they"simply"stated"that"Great"Wall"was" documents"or"instruments,"releases"the"subject"goods"to"
having" a" sudden" drop" of" its" income." Such" the" possession" of" the" entrustee." The" release" of" such"
unsubstantiated" excuse" cannot" vindicate" respondents" goods"to"the"entrustee"is"conditioned"upon"his"execution"
from" their" failure" to" fulfill" their" duties" under" the" trust" and"delivery"to"the"entruster"of"a"trust"receipt"wherein"
receipts.* the" former" binds" himself" to" hold" the" specific" goods,"
* documents" or" instruments" in" trust" for" the" entruster"
The"Court"is"of"the"view"that"Security"Bank's"allegations" and"to"sell"or"otherwise"dispose"of"the"goods,"documents"
of" violation" of" the" trust" receipts" in" its" complaint" was" or" instruments" with" the" obligation" to" turn" over" to" the"
specific" and" sufficient" to" assert" fraud" on" the" part" of" entruster"the"proceeds"to"the"extent"of"the"amount"owing"
respondents."These"allegations"were"duly"substantiated" to"the"entruster"or"the"goods,"documents"or"instruments"
by"the"attachments"thereto"and"the"testimony"of"Security" themselves"if"they"are"unsold."Similarly,"we"held"in"State"
Bank's"witness.* Investment" House" v." CA," et" al." that" the" entruster" is"
" entitled" "only" to" the" proceeds" derived" from" the" sale" of"
Entrustee*bears*the*Risk*of*Loss* goods"released"under"a"trust"receipt"to"the"entrustee.""
The"risk"of"loss"shall"be"borne"by"the"entrustee."Loss"of" "
goods,"documents"or"instruments"which"are"the"subject" "
of"a"trust"receipt,"pending"their"disposition,"irrespective" Entruster*
of"whether"or"not"it"was"due"to"the"fault"or"negligence"of" "
the" entrustee," shall" not" extinguish" his" obligation" to" the" Entruster,*definition*
entruster"for"the"value"thereof."(sec.%10,%PD%115)" the" person" holding" title" over" the" goods," documents," or"
" instruments" subject" of" a" trust" receipt" transaction," and"
When*goods*are*not*held*for*sale* any"successor"in"interest"of"such"person"
" "
Ng*v.*People,*G.R.*No.*173905,*[April*23,*2010]* Rights*of*an*entruster*(sec.*7,*PD*115)*
It"must"be"remembered"that"petitioner"was"transparent"
to" Asiatrust" from" the" very" beginning" that" the" subject"
ToTheBarAndBeyond2018 dennisaranabril !
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The"entruster"shall"be"entitled"to"the"proceeds"from"the" The"proceeds"of"any"such"sale,"whether"public"or"private,"
sale" of" the" goods," documents" or" instruments" released" shall"be"applied:*
under"a"trust"receipt"to"the"entrustee"to"the"extent"of"the" a.! to"the"payment"of"the"expenses"thereof;""
amount"owed"to"the"entruster"or"as"appears"in"the"trust" b.! to" the" payment" of" the" expenses" of" reRtaking,"
receipt;" or" to" the" return" of" the" goods," documents" or" keeping" and" storing" the" goods," documents" or"
instruments"in"case"of"nonRsale;"and"to"the"enforcement" instruments;""
of"all"other"rights"conferred"on"him"in"the"trust"receipt," c.! to" the" satisfaction" of" the" entrustee’s"
provided"these"are"not"contrary"to"the"provisions"of"the" indebtedness" to" the" entruster." The" entrustee"
document."A" violation" of" any" of" these" undertakings" shall"receive"any"surplus"but"shall"be"liable"to"
constitutes"estafa"defined"under"Article"315"(1)"(b)"of"the" the"entruster"for"any"deficiency.*
Revised" Penal" Code," as" provided" by" Section" 13" of" If"there"is"an"excess"from"the"sale,"the"entrustee"shall"be"
Presidential"Decree"No."115" entitled"to"the"surplus"of"the"sale."*
|||"(Metropolitan% Bank% &% Trust% Co.% v.% Gonzales,% G.R.% No.% "
180165,%[April%7,%2009],%602%PHIL%1000S1015)% Entruster*not*responsible*on*sale*by*entrustee*
" The" entruster" holding" a" security" interest" shall" not,"
Validity* of* Entruster’s* security* interest* as* against* merely" by" virtue" of" such" interest" or" having" given" the"
creditors* entrustee"liberty"of"sale"or"other"disposition"of"the"goods,"
The"entruster's"security"interest"in"goods,"documents,"or" documents"or"instruments"under"the"terms"of"the"trust"
instruments" pursuant" to" the" written" terms" of" a" trust" receipt" transaction" be" responsible" as" principal" or" as"
receipt" shall" be" valid" as" against" all" creditors" of" the" vendor" under" any" sale" or" contract" to" sell" made" by" the"
entrustee"for"the"duration"of"the"trust"receipt"agreement." entrustee."(sec.%8,%PD%115)"
(sec.%12,%PD%115)* "
* Rights*of*purchaser*for*value*and*in*good*faith*
Remedies*of*an*Entruster* Any"purchaser"of"goods"from"an"entrustee"with"right"to"
The"entruster"may"cancel"the"trust"and"take"possession" sell," or" of" documents" or" instruments" through" their"
of" the" goods," documents" or" instruments" subject" of" the" customary" form" of" transfer," who" buys" the" goods,"
trust"or"of"the"proceeds"realized"therefrom"at"any"time" documents," or" instruments" for" value" and" in" good" faith"
upon" default" or" failure" of" the" entrustee" to" comply" with" from" the" entrustee," acquires" said" goods," documents" or"
any"of"the"terms"and"conditions"of"the"trust"receipt"or"any" instruments" free" from" the" entruster's" security" interest."
other" agreement" between" the" entruster" and" the" (sec.%11,%PD%115)*
entrustee,"and"the"entruster"in"possession"of"the"goods,"
documents"or"instruments"may,"on"or"after"default,"give"
notice"to"the"entrustee"of"the"intention"to"sell,"and"may,"
not" less" than" five" days" after" serving" or" sending" of" such"
notice," sell" the" goods," documents" or" instruments" at"
public"or"private"sale,"and"the"entruster"may,"at"a"public"
sale,"become"a"purchaser."The"proceeds"of"any"such"sale,"
whether" public" or" private," shall" be" applied" (a)" to" the"
payment"of"the"expenses"thereof;"(b)"to"the"payment"of"
the"expenses"of"reRtaking,"keeping"and"storing"the"goods,"
documents"or"instruments;"(c)"to"the"satisfaction"of"the"
entrustee's"indebtedness"to"the"entruster."The"entrustee"
shall" receive" any" surplus" but" shall" be" liable" to" the"
entruster" for" any" deficiency." Notice" of" sale" shall" be"
deemed" sufficiently" given" if" in" writing," and" either"
personally"served"on"the"entrustee"or"sent"by"postRpaid"
ordinary" mail" to" the" entrustee's" last" known" business"
address."(sec.%7,%PD%115)"
"
Remedies*of*entruster*when*there*is*a*breach*of*the*
trust*receipt*contract*
•! He"may"demand"for"a"return"of"the"goods;"
•! He"may"sell"the"goods"in"a"public"or"private"sale"
and"apply"the"proceeds"to"the"amount"covered"
by"the"trust"receipt;"or"
•! If"the"proceeds"are"still"insufficient,"he"may"still"
demand"for"the"deficiency"from"the"entrustee."
"
Proceeds*of*the*sale,*where*applied*
ToTheBarAndBeyond2018 dennisaranabril !