7/25/2019 Rosario Textile Mills Corporation v. Home Bankers Savings and Trust Company

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Rosario Textile Mills Corporation v. Home BankersSavings and Trust Company

Sometime in 1989, Rosario Textile Mills CorporationRTMC! applied "rom Home Bankers Savings # Trust Co."or an $mni%us Credit &ine "or '1( million. T)e %ankapproved RTMC*s +redit line %ut "or only '8 million. no""i+er o" RTMC, -dil%erto u/ui+o, signed a Surety

 greement in "avor o" t)e %ank in 0)i+) )e %ound )imsel"  /ointly and severally 0it) RTMC "or t)e payment o" allRTMC*s inde%tedness to t)e %ank "rom 1989 to 199(.RTMC availed o" t)e +redit line %y making numerousdra0do0ns, ea+) dra0do0n %eing +overed %y a separatepromissory note and trust re+eipt. RTMC, represented %yu/ui+o, exe+uted in "avor o" t)e %ank a total o" 11promissory notes. espite t)e lapse o" t)e respe+tive duedates under t)e promissory notes and not0it)standing t)e%ank*s demand letters, RTMC "ailed to pay its loans.Hen+e, t)e %ank "iled a +omplaint "or sum o" moneyagainst RTMC and u/ui+o %e"ore t)e RTC. T)e latter +ourt ruled in "avor o" t)e %ank 0)i+) 0as a""irmed %y t)eappellate +ourt. RTMC et al . +ontended t)at under t)etrust re+eipt +ontra+ts %et0een t)e parties, t)ey merely

)eld t)e goods des+ri%ed t)erein in trust "or respondentHome Bankers Savings and Trust Company t)e %ank!0)i+) o0ns t)e same. Sin+e t)e o0ners)ip o" t)e goodsremains 0it) t)e %ank, t)en it s)ould %ear t)e loss. 2it)t)e destru+tion o" t)e goods %y "ire, petitioners s)ould)ave %een relieved o" any o%ligation to pay.

3SS4-5 2)et)er t)e goods pur+)ased %y RTMC %elongedto t)em and not to t)e %ank and t)us, )old t)e goods att)eir o0n risk

H-&5 'etitioners t)eori6e t)at 0)en petitioner RTMCimported t)e ra0 materials needed "or its manu"a+ture,

using t)e +redit line, it 0as merely a+ting on %e)al" o" t)e%ank, t)e true o0ner o" t)e goods %y virtue o" t)e trustre+eipts. Hen+e, under t)e do+trine o"  res perit domino,t)e %ank took t)e risk o" t)e loss o" said ra0 materials.RTMC*s role in t)e transa+tion 0as t)at o" end user o" t)era0 materials and 0)en it did not a++ept t)ose materialsas t)ey did not meet t)e manu"a+turing re7uirements,RTMC made a valid and e""e+tive tender o" t)e goods tot)e %ank. Sin+e t)e %ank re"used to a++ept t)e ra0materials, RTMC stored t)em in its 0are)ouse. 2)en t)e0are)ouse and its +ontents 0ere gutted %y "ire,petitioners* o%ligation to t)e %ank 0as a++ordinglyextinguis)ed. 3t is t)us +lear t)at t)e prin+ipal transa+tion

%et0een petitioner RTMC and t)e %ank is a +ontra+t o"loan. RTMC used t)e pro+eeds o" t)is loan to pur+)asera0 materials "rom a supplier a%road. 3n order to se+uret)e payment o" t)e loan, RTMC delivered t)e ra0materials to t)e %ank as +ollateral. Trust re+eipts 0ereexe+uted %y t)e parties to eviden+e t)is se+urityarrangement. Simply stated, t)e trust re+eipts 0ere merese+urities.

3n Samo vs. People, 0e des+ri%ed a trust re+eipt as ase+urity transa+tion intended to aid in "inan+ing importersand retail dealers 0)o do not )ave su""i+ient "unds orresour+es to "inan+e t)e importation or pur+)ase omer+)andise, and 0)o may not %e a%le to a+7uire +rediex+ept t)roug) utili6ation, as +ollateral, o" t)emer+)andise imported or pur+)ased.

 

3n Vintola vs. Insular Bank of Asia and America, 0eelu+idated "urt)er t)at a trust re+eipt, t)ere"ore, is ase+urity agreement, pursuant to 0)i+) a %ank a+7uires ase+urity interest* in t)e goods. 3t se+ures an inde%tednessandt)ere +an %e no su+) t)ing as se+urity interest t)atse+ures no o%ligation. Se+tion : )! o" t)e Trust Re+eipts

&a0 '.. ;o. 11<! de"ines a se+urity interest as "ollo0s5)! Se+urity 3nterest means a property interest in goodsdo+uments, or instruments to se+ure per"orman+e o" someo%ligation o" t)e entrustee or o" some t)ird persons to t)eentruster and in+ludes title, 0)et)er or not expressed to%e a%solute, 0)enever su+) title is in su%stan+e taken oretained "or se+urity only.

'etitioners* insisten+e t)at t)e o0ners)ip o" t)e ra0materials remained 0it) t)e %ank is untena%le. 3n Sia vsPeople,  Abad vs. Court of Appeals, and PNB vsPineda, 0e )eld t)at5

3" under t)e trust re+eipt, t)e %ank is made to appear ast)e o0ner, it 0as %ut an arti"i+ial expedient, more o" lega"i+tion t)an "a+t, "or i" it 0ere really so, it +ould dispose o"t)e goods in any manner it 0ants, 0)i+) it +annot do, /ustto give +onsisten+y 0it) purpose o" t)e trust re+eipt o"giving a stronger se+urity "or t)e loan o%tained %y t)eimporter. To +onsider t)e %ank as t)e true o0ner "rom t)ein+eption o" t)e transa+tion 0ould %e to disregard t)e loan"eature t)ereo"...

T)us, petitioners +annot %e relieved o" t)eir o%ligation topay t)eir loan in "avor o" t)e %ank.