Article 6p. 6

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

receipt; (2) the total invoice value of the goods and the

amount of the draft to be paid by the entrustee; (3) an

undertaking or a commitment of the entrustee (a) to hold

in

trust for the entruster the goods, documents or

instruments therein described; (b) to dispose of them in

the manner provided for in the trust receipt; and (c) to

turn

over

the

proceeds

of

the

sale

of

the

goods,

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 in the event of their non-sale within the

period specified therein.

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, any existing laws, public policy or morals, public

order or good customs.

SECTION 6. Currency in which a trust receipt may be

denominated . — A trust receipt may be denominated in

Philippine currency or any foreign currency acceptable

and eligible as part of international reserves of the

Philippines,

the

provisions

of

existing law, executive

orders,

rules

and

regulations

to

the

contrary

notwithstanding: Provided, however , That in the case of

trust receipts denominated in foreign currency, 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,

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.

SECTION 7. Rights of the entruster . — The entruster shall

be entitled to the proceeds from the sale of the goods,

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, or to the

return of the goods, documents or instruments in case of

non-sale, and to the enforcement of all other rights

conferred on him in the trust receipt provided such are

not contrary to the provisions of this Decree.

The entruster may cancel the trust and take possession of

the goods, documents or instruments subject of the trust

or of the proceeds realized therefrom 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, 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

re-taking, 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 post-paid ordinary mail to the

entrustee's last known business address.

SECTION

8.

Entruster

not

responsible

on

sale

by

entrustee . — The entruster holding a security interest

shall not, merely by virtue of such interest or having given

the entrustee liberty of sale or other disposition of the

goods, documents or instruments under the terms of the

trust receipt transaction, be responsible as principal or as

vendor under any sale or contract to sell made by the

entrustee.

SECTION

9.

Obligations

of

the

entrustee .

—

The

entrustee

shall

(1)

hold

the

goods,

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; (2) receive the proceeds in

trust for the entruster and turnover the same to the

entruster to the extent of the amount owing to the

entruster or as appears on the trust receipt; (3) insure the

goods for their total value against loss from fire, theft,

pilferage or other casualties; (4) keep said goods or

proceeds thereof whether in money or whatever form,

separate and capable of identification as property of the

entruster;

(5)

return

the

goods,

documents

or

instruments in the event of non-sale or upon demand of

the

entruster;

and

(6)

observe

all other terms and

conditions

of

the

trust

receipt

not contrary to the

provisions of this Decree.

SECTION 10. Liability of entrustee for loss . — 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 of

whether or not it was due to the fault or negligence of the

entrustee,

shall not extinguish his obligation to the

entruster for the value thereof.

SECTION 11. Rights of purchaser for value and in good

faith . — Any purchaser of goods from an entrustee with

right to sell, or of documents or instruments through

their customary form of transfer, who buys the goods,

documents, or instruments for value and in good faith

from the entrustee, acquires said goods, documents or

instruments free from the entruster's security interest.

SECTION 12. Validity of entruster's security interest as

against creditors . — The entruster's security interest in

goods,

documents,

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.

SECTION 13. Penalty clause . — The failure of an entrustee

to turn over the proceeds of the sale of the goods,

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 if they were not sold or

disposed of in accordance with the terms of the trust

receipt shall constitute the crime of estafa, punishable

under the provisions of Article Three hundred and fifteen,

paragraph one (b) of Act Numbered Three thousand

eight hundred and fifteen, as amended, otherwise known

as the Revised Penal Code. If the violation or offense is

committed by a corporation, partnership, association or

other juridical entities, the penalty provided for in this

Decree shall be imposed upon the directors, officers,

employees

or

other

officials

or

persons

therein

responsible for the offense, without prejudice to the civil

liabilities arising from the criminal offense.

SECTION 14. Cases not covered by this Decree . — Cases

not provided for in this Decree shall be governed by the

applicable provisions of existing laws.

SECTION 15. Separability clause . — If any provision or

section of this Decree or the application thereof to any

person

or

circumstance

is

held

invalid,

the

other

provisions or sections hereof and the application of such

provisions or sections to other persons or circumstances

shall not be affected thereby.

SECTION 16. Repealing clause . — All Acts inconsistent

with this Decree are hereby repealed.

SECTION 17. This Decree shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the

year of Our Lord, nineteen hundred and seventy-three.

(Trust Receipts Law, Presidential Decree No. 115, [January

29, 1973])

Act No 2031 | The Negotiable

Instruments Law

February 3, 1911

© Compiled by RGL

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