TRUST RECEIPTS LAW (PD 115) Section 2. Declaration of Policy.

It is hereby declared to be the policy of the state (a) to encourage and promote the use of trust receipts as an additional and convenient aid to commerce and trade; (b) to provide for the regulation of trust receipts transactions in order to assure the protection of the rights and enforcement of obligations of the parties involved therein; and (c) to declare the misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released under trust receipts as a criminal offense punishable under Article Three hundred and fifteen of the Revised Penal Code. Section 3. Definition of terms. (a) "Document" shall mean written or printed evidence of title to goods.

purposes specified in the trust receipt agreement

(d) "Goods" shall include chattels and personal property other than: money, things in action, or things so affixed to land as to become a part thereof. (e) "Instrument" means: - any negotiable instrument as defined in the Negotiable Instrument Law; - any certificate of stock, or bond or debenture for the payment of money issued by a public or private corporation, - any certificate of deposit, participation certificate or receipt, - any credit or investment instrument of a sort marketed in the ordinary course of business or finance, whereby the entrustee, after the issuance of the trust receipt, appears by virtue of possession and the face of the instrument to be the owner. "Instrument" shall not include a document as defined in this Decree. (f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge, legal or equitable. (g) "Purchaser" means any person taking by purchase.

Entrustor shall refer to the person holding title over the goods, documents, or instruments subject of a trust receipt transaction, and any successor in interest of such person.

Entrustee shall refer to the person having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose or

with the obligation to turn over to the entruster: the proceeds to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods. or for other purposes substantially equivalent to any of the following: 1. containing terms and conditions substantially complying with the provisions of this Decree. a. (j) "Trust Receipt" a. or . the written or printed document b. and two more persons having a joint or common interest. includes title. documents or instruments themselves if they are unsold or not otherwise disposed of. Section 4. releases them to the possession of the entrustee d. the entruster. That. upon the entrustee’s execution and delivery to the entruster of a "trust receipt" where entrustee binds himself to: . In the case of goods or documents. receiver. unload. What constitutes a trust receipt transaction. documents or instruments in trust for the entruster and . trustee. (k) "Value" means any consideration sufficient to support a simple contract. or other fiduciary. b. in favor of the entruster d.hold the designated goods. documents or instruments .(h) "Security Interest" means a property interest in goods. as the case may be. partnership. signed by the entrustee c. (i) "Person" means. documents or instruments. or (b) to manufacture or process the goods with the purpose of ultimate sale: Provided. an individual. or (c) to load. the entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied fully with his obligation under the trust receipt.to sell or otherwise dispose of the goods. corporation. No further formality of execution or authentication shall be necessary to the validity of a trust receipt. who owns or holds absolute title or security interests over certain specified goods. Any transaction between an entruster and an entrustee. whether or not expressed to be absolute. whenever such title is in substance taken or retained for security only. in accordance with the terms and conditions specified in the trust receipt. business trust or other association. c. (a) to sell the goods or procure their sale. in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale. documents or instruments to secure performance of some obligations of the entrustee or of some third persons to the entruster. ship or tranship or otherwise deal with them in a manner preliminary or necessary to their sale.

documents or instruments therein described. documents or instruments. Section 7. contents. documents or instruments by a person in the business of selling goods. documents or instruments held in trust by the entrustee are turned over to the entruster or on such other date as may be stipulated in the trust receipt or other agreements executed between the entruster and the entrustee. a) to sell or procure their sale or exchange. That in the case of trust receipts denominated in foreign currency. documents or instruments in the event of their non-sale within the period specified therein. executive orders. or b) to deliver them to a principal. Section 5. Section 6. In the case of instruments. A trust receipt need not be in any particular form. public policy or morals. or d) to effect their presentation. Currency in which a trust receipt may be denominated. has. any existing laws. public order or good customs. but every such receipt must substantially contain (a) a description of the goods. A trust receipt may be denominated in the Philippine currency or any foreign currency acceptable and eligible as part of international reserves of the Philippines. general property rights in such goods. and (c) to turn over the proceeds of the sale of the goods. payment shall be made in its equivalent in Philippine currency computed at the prevailing exchange rate on the date the proceeds of sale of the goods. Form of trust receipts. Rights of the entruster. (2) the total invoice value of the goods and the amount of the draft to be paid by the entrustee. documents or instruments to the entruster to the extent of the amount owing to the entruster or as appears in the trust receipt or to return the goods. documents or instruments subject of the trust receipt. as against the buyer. however. rules and regulations to the contrary notwithstanding: Provided.2. The trust receipt may contain other terms and conditions agreed upon by the parties in addition to those hereinabove enumerated provided that such terms and conditions shall not be contrary to the provisions of this Decree. (b) to dispose of them in the manner provided for in the trust receipt. collection or renewal The sale of goods. retaining title or other interest as security for the payment of the purchase price. The entruster shall: . (3) an undertaking or a commitment of the entrustee (a) to hold in trust for the entruster the goods. the provisions of existing law. or c) to effect the consummation of some transactions involving delivery to a depository or register. does not constitute a trust receipt transaction and is outside the purview and coverage of this Decree. at the outset of the transaction. or who sells the same to the buyer on credit. documents or instruments for profit who.

sell the goods. (5) return the goods. the return of the goods. documents or instruments in the event of non-sale or upon demand of the entruster. theft. Entruster not responsible on sale by entrustee. keeping and storing the goods. whether public or private. Notice of sale shall be deemed sufficiently given if in writing. documents or instruments released under a trust receipt to the entrustee to the extent of the amount owing to the entruster or as appears in the trust receipt. on or after default. shall be applied (a) to the payment of the expenses thereof. merely by virtue of such interest or having given the entrustee liberty of sale or other disposition of the goods.a. The entruster in possession of the goods. give notice to the entrustee of the intention to sell. documents or instruments may. (2) receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to the entruster or as appears on the trust receipt. Obligations of the entrustee. The proceeds of any such sale. be responsible as principal or as vendor under any sale or contract to sell made by the entrustee. (4) keep said goods or proceeds thereof whether in money or whatever form. and the entruster may. documents or instruments in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipt. not less than five days after serving or sending of such notice. The entruster holding a security interest shall not. pilferage or other casualties. separate and capable of identification as property of the entruster. (c) to the satisfaction of the entrustee's indebtedness to the entruster. be entitled to the proceeds from the sale of the goods. documents or instruments subject of the trust or of the proceeds realized at any time upon default or failure of the entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the entruster and the entrustee. become a purchaser. documents or instruments in case of non-sale. and . b. at a public sale. documents or instruments at public or private sale. documents or instruments under the terms of the trust receipt transaction Section 9. (3) insure the goods for their total value against loss from fire. The entrustee shall (1) hold the goods. and either personally served on the entrustee or sent by post-paid ordinary mail to the entrustee's last known business address. (b) to the payment of the expenses of re-taking. and may. and to the enforcement of all other rights conferred on him in the trust receipt The entruster may cancel the trust and take possession of the goods. Section 8. The entrustee shall receive any surplus but shall be liable to the entruster for any deficiency. documents or instruments.

or of documents or instruments through their customary form of transfer. shall not extinguish his obligation to the entruster for the value thereof. Liability of entrustee for loss. . 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. The entruster's security interest in goods. Section 10. Section 11. pending their disposition. officers. Rights of purchaser for value and in good faith. or instruments pursuant to the written terms of a trust receipt shall be valid as against all creditors of the entrustee for the duration of the trust receipt agreement. partnership. documents. The risk of loss shall be borne by the entrustee. Section 12. Penalty clause. Validity of entruster's security interest as against creditors. employees or other officials or persons therein responsible for the offense. the penalty shall be imposed upon the directors. documents or instruments which are the subject of a trust receipt. without prejudice to the civil liabilities arising from the criminal offense. If the violation or offense is committed by a corporation. Section 13. 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 free from the entruster's security interest.(6) observe all other terms and conditions of the trust receipt not contrary to the provisions of this Decree. acquires said goods. Loss of goods. association or other juridical entities. irrespective of whether or not it was due to the fault or negligence of the entrustee. documents. who buys the goods. Any purchaser of goods from an entrustee with right to sell. or instruments for value and in good faith from the entrustee. The failure of an entrustee to turn over the proceeds of the sale of the goods.

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