Landl Co vs. METROPOLITAN BANK & TRUST COMPANY.

G.R. No. 159622 July 30, 2004

Ynares-Santiago, J.

Doctrine:
The possession by the bank of the goods under the trust receipts does not bar collection of
the loan.

Facts:
Landl opened a Commercial Letter of Credit (LOC) with metrobank in the amount of
$19, 606.77 while Metrobank issued an irrevocable LOC for Landl and required the execution of
Trust Receipt equivalent to the LOC in the form of goods. Landl defaulted and was obligated to
turn over goods but they were insufficient to satisfy the demand. Metropolitan Bank filed a case
to collect the balance where RTC decided in favor of. CA affirmed the decision.

Issue:
Whether or not possession by the bank of the goods under the trust receipts bar collection
of the loan?

Ruling:

No. The possession by the bank of the goods under the trust receipts does not bar
collection of the loan. Mere possession does not amount to foreclosure for foreclosure denotes
the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property
and includes the sale itself. Neither can said repossession amount to dacion en pago. Dation in
payment takes place when property is alienated to the creditor in satisfaction of a debt in money
and the same is governed by sales. Dation in payment is the delivery and transmission of
ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance
of the obligation.