Regulation of Trust Receipt Transactions Law

Encourages use of trust receipts as a trade and commercial aid.
Regulates trust receipts to protect parties’ rights and enforce obligations.
Declares misuse of trust goods or proceeds a criminal offense under Article 315 of the Revised Penal Code.

Document: Written or printed ownership evidence of goods.
Entrustee: Person in possession of goods/documents under trust receipt, including successors.
Entruster: Owner or holder of title/security interest in goods/documents.
Goods: Chattels and personal property excluding money and things affixed to land.
Instrument: Negotiable instruments excluding "documents" under the decree.
Purchase/Purchaser: Taking or acquiring goods through various means including sale or lease.
Security Interest: Property interest securing entrustee’s or third party’s obligations.
Person: Includes individuals, corporations, partnerships, fiduciaries, and associations.
Trust Receipt: Written document binding entrustee to hold goods/documents in trust and comply with terms.
Value: Any sufficient consideration supporting a contract.

Transaction between entruster (title holder) and entrustee (possessor).
Goods/documents released to entrustee with obligation to hold in trust, sell or dispose and remit proceeds.
Use covers sale, manufacturing, loading/shipping, or other equivalent dealings with goods.
Instruments may be sold, delivered to principal, registered, presented, collected or renewed.
Transactions involving sales with retained title as security do not fall under this decree.

No strict form required.
Must describe goods/documents/instruments subject.
Must state invoice value and draft amount payable by entrustee.
Entrustee undertakes to hold goods/document in trust, dispose as agreed, and remit proceeds or return goods if unsold.
May include additional lawful terms.

May be denominated in Philippine or foreign currency acceptable as international reserves.
Payments in foreign currency converted to Philippine peso using prevailing exchange rate at remittance time or agreed date.

Entitled to proceeds of sale up to amount owed or return of goods if not sold.
May cancel trust upon default and retake possession.
May notify entrustee and sell goods/documents after at least 5 days’ notice.
Sale proceeds applied to expenses and debts; surplus to entrustee; deficiency borne by entrustee.

Entruster holding security interest not liable as principal or vendor for sales made by entrustee.

Good faith purchaser for value from entrustee acquires goods free of entruster’s security interest.

Entruster’s security interest valid against entrustee’s creditors during trust receipt term.

Failure to remit proceeds or return goods as required is estafa (fraud) under Article 315 of the Revised Penal Code.
Liability extends to responsible persons in corporations or juridical entities.
Civil liabilities also apply from criminal acts.

Invalidity of any provision or application does not affect the remaining provisions or other applications.