Article 5p. 5

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

PD No 115 | Trust Receipts Law

January 29, 1973

PRESIDENTIAL DECREE NO. 115

PROVIDING FOR THE REGULATION OF TRUST RECEIPT

TRANSACTIONS

WHEREAS,

the

utilization

of

trust

receipts,

as

a

convenient

business

device

to

assist

importers

and

merchants solve their financing problems, had gained

popular

acceptance

in

international

and

domestic

business practices, particularly in commercial banking

transactions;

WHEREAS, there is no specific law in the Philippines that

governs trust receipt transactions, especially the rights

and obligations of the parties involved therein and the

enforcement of the said rights in case of default or

violation of the terms of the trust receipt agreement;

WHEREAS, the recommendations contained in the report

on the financial system which have been accepted, with

certain

modifications

by

the

monetary

authorities

included,

among

others,

the

enactment

of

a

law

regulating the trust receipt transactions;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President

of the Philippines, by virtue of the powers vested in me by

the Constitution, as Commander-in-Chief of all the Armed

Forces of the Philippines, and pursuant to Proclamation

No. 1081, dated September 21, 1972 , and General Order No.

1 , dated September 22, 1972, as amended, and in order to

effect the desired changes and reforms in the social,

economic, and political structure of our society, do hereby

order and decree and make as part of the law of the land

the following:

SECTION 1. Short Title . — This Decree shall be known as

the Trust Receipts Law.

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 receipt transactions in order to assure

the protection of the rights and the 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 . — As used in this

Decree, unless the context otherwise requires, the term

—

( a ) "Document" shall mean written or printed evidence of

title to goods.

( b ) "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 purposes specified in the

trust receipt agreement.

( c ) "Entruster" 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.

( 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, or 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.

( h ) "Security Interest" means a property interest in goods,

documents or instruments to secure performance of

some obligations of the entrustee or of some third

persons to the entruster and includes title, whether or not

expressed to be absolute, whenever such title is in

substance taken or retained for security only.

( i ) "Person" means, as the case may be, an individual,

trustee,

receiver,

or

other

fiduciary,

partnership,

corporation, business trust or other association, and two

or more persons having a joint or common interest.

( j ) "Trust Receipt" shall refer to the written or printed

document

signed

by

the

entrustee in favor of the

entruster containing terms and conditions substantially

complying with the provisions of this Decree. No further

formality

of

execution

or

authentication

shall

be

necessary to the validity of a trust receipt.

( k ) "Value" means any consideration sufficient to support

a simple contract.

SECTION

4.

What

constitutes

a

trust

receipt

transaction . — A trust receipt transaction, within the

meaning

of

this

Decree,

is any transaction by and

between a person referred to in this Decree as the

entruster, and another person referred to in this Decree

as the entrustee, whereby the entruster, who owns or

holds absolute title or security interests over certain

specified goods, documents or instruments, releases the

same to the possession of the entrustee upon the latter's

execution and delivery to the entruster of a signed

document called a "trust receipt" wherein the entrustee

binds himself to hold the designated goods, documents

or instruments in trust for the entruster and to sell or

otherwise

dispose

of

the

goods,

documents

or

instruments with the obligation to turn over to the

entruster the proceeds thereof to the extent of the

amount owing to the entruster or as appears in the trust

receipt

or

the

goods,

documents

or

instruments

themselves if they are unsold or not otherwise disposed

of, in accordance with the terms and conditions specified

in the trust receipt, or for other purposes substantially

equivalent to any of the following:

1. In the case of goods or documents, (a) to sell the goods

or procure their sale; or (b) to manufacture or process the

goods with the purpose of ultimate sale: Provided , That,

in the case of goods delivered under trust receipt for the

purpose

of

manufacturing

or

processing

before

its

ultimate sale, 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; or (c) to load, unload, ship or transship or

otherwise deal with them in a manner preliminary or

necessary to their sale; or

2. In the case of instruments, (a) to sell or procure their

sale or exchange; or (b) to deliver them to a principal; or

(c) to effect the consummation of some transactions

involving delivery to a depository or register; or (d) to

effect their presentation, collection or renewal.

The sale of goods, documents or instruments by a person

in

the

business

of

selling

goods,

documents

or

instruments

for

profit

who,

at

the

outset

of

the

transaction, has, as against the buyer, general property

rights in such goods, documents or instruments, or who

sells the same to the buyer on credit, retaining title or

other interest as security for the payment of the purchase

price, does not constitute a trust receipt transaction and

is outside the purview and coverage of this Decree.

SECTION 5. Form of trust receipts ; contents . — A trust

receipt need not be in any particular form, but every such

receipt must substantially contain (a) a description of the

goods, documents or instruments subject of the trust

© Compiled by RGL

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