Hala Ka Diha

SOUTH CITY HOMES, INC., FORTUNE MOTORS (PHILS.
), PALAWAN LUMBER
MANUFACTURING CORPORATION, petitioners,
vs.
BA FINANCE CORPORATION, respondent.
Facts:
On January 17, 1983, Joseph L. G. Chua, President of Fortune Motors Corporation, executed in favor
of plaintiff-appellant a Continuing Suretyship Agreement, in which he "jointly and severally
unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all
indebtedness" of Fortune Motors Corporation to BA Finance Corporation. On February 3, 1983,
Palawan Lumber Manufacturing Corporation represented by Joseph L.G. Chua, George D. Tan,
Edgar C. Rodrigueza and Joselito C. Baltazar, executed in favor of plaintiff-appellant a Continuing
Suretyship Agreement in which, said corporation "jointly and severally unconditionally" guaranteed
the "full, faithful and prompt payment and discharge of any and all indebtedness of Fortune Motors
Corporation to BA Finance Corporation (Folder of Exhibits, pp. 19-20). On the same date, South
City Homes, Inc. represented by Edgar C. Rodrigueza and Aurelio F. Tablante, likewise executed a
Continuing Suretyship Agreement in which said corporation "jointly and severally unconditionally"
guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness" of
Fortune Motors Corporation to BA Finance Corporation.
Fortune Motors Corporation thereafter executed trust receipts covering the motor vehicles
delivered to it by CARCO under which it agreed to remit to the Entruster (CARCO) the proceeds of
any sale and immediately surrender the remaining unsold vehicles. ). The drafts and trust receipts
were assigned to plaintiff-appellant, under Deeds of Assignment executed by CARCO.
Upon failure of the defendant-appellant Fortune Motors Corporation to pay the amounts due under
the drafts and to remit the proceeds of motor vehicles sold or to return those remaining unsold in
accordance with the terms of the trust receipt agreements, BA Finance Corporation sent demand
letter to Edgar C. Rodrigueza, South City Homes, Inc., Aurelio Tablante, Palawan Lumber
Manufacturing Corporation, Joseph L. G. Chua, George D. Tan and Joselito C. Baltazar (Folder of
Exhibits, pp. 29-37). Since the defendants-appellants failed to settle their outstanding account
with plaintiff-appellant, the latter filed on December 22, 1983 a complaint for a sum of money with
prayer for preliminary attachment, with the Regional Trial Court of Manila.
Issue: WON respondent BAFC has a valid cause of action for a sum of money following the drafts
and trust receipts transactions.
Held: As an entruster, respondent BAFC must first demand the return of the unsold vehicles from
Fortune Motors Corporation, pursuant to the terms of the trust receipts. Having failed to do so,
petitioners had no cause of action whatsoever against Fortune Motors Corporation and the action
for collection of sum of money was, therefore, premature.
A trust receipt is a security transaction intended to aid in financing importers and retail dealers
who do not have sufficient funds or resources to finance the importation or purchase of
merchandise, and who may not be able to acquire credit except through utilization, as collateral, of
the merchandise imported or purchased.9 In the event of default by the entrustee on his
obligations under the trust receipt agreement, it is not absolutely necessary that the entruster
cancel the trust and take possession of the goods to be able to enforce his rights thereunder.
ROBLES VS CA
GR NO. 59640, JULY 15, 1991
FACTS: Roberto Ng is the owner and sales manager of the Paramount Business Machines. He
entrusted to Damian Robles a calculator and adding machine which were covered by a delivery
trust receipt. The latter was then entrusted with several office equipment: two standard typewriter
and one electronic typewriter which were also covered by a delivery trust receipt. For these,
Robles issued postdated checks for those items that were entrusted to him. Later on, he was again
entrusted with standard and portable typewriter which were also covered by delivery trust
receipts. The postdated checks that were issued by Damian were not honored by the bank since
Damian caused the stoppage of its payment. Roberto instituted a criminal complaint against
Damian for estafa. The trial court found Damian guilty of estafa which was affirmed by the Court of
Appeals, ruling that under the delivery trust receipts petitioner received the articles covered
therein in trust or with the obligation to account for the proceeds thereof, or to return the same.
ISSUE: Whether or not the accused should be held liable for estafa on the ground of failure to
account or return the articles entrusted to him.
RULING: Yes. The transactions between Robert and Damian were covered under the Trust Receipts
Law and under Section 13 of the said law, the violation by an entrustee of his obligations under a
trust receipt document, more specifically his failure to turnover the proceeds of the sale of the
goods covered by the trust receipt, or to return said goods as they were not sold or disposed of,
would constitute the crime of estafa under Article 315 (1) (b), Revised Penal Code.
It was also found out that under the delivery trust receipts, it clearly showed (1) that Paramount
retained ownership of the office equipment covered by the receipts; (2) that possession of the
goods was conveyed to petitioner subject to a fiduciary obligation either to return them within a
specified period of time or to pay or account for the price of proceeds thereof. Hence, accused
Damian should be held liable for estafa.

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SOUTH CITY HOMES, INC., FORTUNE MOTORS (PHILS.

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