Landl & Company v Metropolitan Bank 435 SCRA 639

FACTS: Landl opened with Metrobank Letter of Credit for purchase of welding rods and alloy from New
York. A marginal deposit of P50,000 was put up. Private petitioners also executed a Continuing Surety
agreement. Landl executed a Trust receipt over the goods. Terms and conditions were fixed. Landl
defaulted. Metrobank returned possession of the goods after the notice. The same were sold at public
auction fro 30,000 pesos. The proceeds were not enough to cover the indebtedness and sued Landl for
collection. Landl contended that they are liable for deficiency as owners of the goods vest with
Metrobank upon return.

ISSUE: Whether or not Metrobank is entitled to deficiency?

HELD: Yes. Respondent bank's repossession of the properties and subsequent sale of the goods were
completely in accordance with its statutory and contractual rights upon default of petitioner
corporation.

The second paragraph of Section 7 expressly provides that the entrustee shall be liable to the entruster
for any deficiency after the proceeds of the sale have been applied to the payment of the expenses of
the sale, the payment of the expenses of re-taking, keeping and storing the goods, documents or
instruments, and the satisfaction of the entrustee's indebtedness to the entruster.

In the case at bar, the proceeds of the auction sale were insufficient to satisfy entirely petitioner
corporation's indebtedness to the respondent bank. Respondent bank was thus well within its rights to
institute the instant case to collect the deficiency.