QuestionsQuestions (PRESIDENTIAL DECREE NO. 115)
PD No. 115 is known as the “Trust Receipts Law.”
To encourage and promote the use of trust receipts; to regulate trust receipt transactions to assure protection of rights and enforcement of obligations of the parties; and to declare misuse/misappropriation of goods or proceeds under trust receipts as a criminal offense punishable under Article 315 of the Revised Penal Code.
A “document” is written or printed evidence of title to goods; an “instrument” is a negotiable instrument (per the Negotiable Instruments Law) or certain financial certificates/receipts where the entrustee appears by possession and the face of the instrument to be the owner; “instrument” does not include a “document.”
The “entrustee” is the person who has or takes possession of the goods/documents/instruments under the trust receipt transaction (and any successor for the purposes in the agreement). The “entruster” is the person holding title over those items (and any successor).
“Goods” include chattels and personal property other than money, things in action, or things so affixed to land as to become part thereof.
It must substantially contain: (1) a description of the goods/documents/instruments; (2) the total invoice value and the amount of the draft to be paid; (3) the entrustee’s undertaking/commitment to hold the items in trust, dispose of them as provided, and turn over the proceeds or return the items in case of non-sale within the period specified.
A transaction where the entruster (owning or holding security interest over specified goods/documents/instruments) releases them to the entrustee upon the entrustee’s execution and delivery of a trust receipt, binding the entrustee to hold in trust, sell/dispose as provided, and turn over proceeds to the extent owing (or return the items if unsold), for purposes substantially equivalent to those listed (sale/manufacture-load/unload/ship for goods; sale/collection/renewal/consummation for instruments).
A sale by a person in the business of selling goods/documents/instruments for profit who, at the outset, has general property rights against the buyer, or who sells on credit retaining title or other interest as security for the purchase price.
It may be denominated in Philippine currency or any foreign currency acceptable and eligible as part of international reserves. If denominated in foreign currency, payment is made in its Philippine currency equivalent at the prevailing exchange rate on the date the proceeds are turned over or on such other date stipulated.
The entruster may cancel the trust and take possession of the goods/documents/instruments (or proceeds). The entruster in possession may, after default, give notice of intention to sell and, not less than five days after serving/sending such notice, sell at public or private sale, apply proceeds to expenses (including re-taking, keeping, storing) and to satisfaction of the entrustee’s indebtedness; surplus goes to the entrustee while the entrustee is liable for any deficiency.
Notice is 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.
No. The entruster is not responsible merely by virtue of holding a security interest or having given the entrustee liberty of sale/disposition under the trust receipt terms.
The entrustee must: (1) hold the items in trust and dispose strictly per the trust receipt; (2) receive and turn over proceeds in trust; (3) insure goods for total value against loss from fire/theft/pilferage/other casualties; (4) keep goods/proceeds separate and identifiable as entruster’s property; (5) return goods/documents/instruments upon non-sale or upon demand; and (6) observe all other compliant terms and conditions.
The risk of loss is borne by the entrustee. Loss pending disposition does not extinguish the entrustee’s obligation to pay the entrustee the value thereof.
A purchaser of goods from an entrustee with the right to sell, or of documents/instruments through their customary form of transfer, who buys for value and in good faith acquires the goods/documents/instruments free from the entruster’s security interest.
If in writing and pursuant to the trust receipt, the entruster’s security interest is valid against all creditors of the entrustee for the duration of the trust receipt agreement.
Failure to turn over proceeds or to return goods/documents/instruments as required constitutes estafa punishable under Article 315, Paragraph 1(b) of Act No. 3815 (Revised Penal Code). If committed by a juridical entity, the penalty is imposed on responsible directors/officers/employees/officers.
Applicable provisions of existing laws govern the case.
There is a separability clause (invalidity of one section does not affect others) and a repealing clause (all acts inconsistent with PD No. 115 are repealed).