SPS. QUIRINO V. DELA CRUZ and GLORIA DELA CRUZ vs. PLANTERS PRODUCTS, INC.

G.R. No. 158649 February 18, 2013

BERSAMIN, J.:
FACTS: Gloria applied for and was granted by Planters Products, Inc. (PPI) a regular credit
line with trust receipts (TR) as collaterals with it the spouses submitted a list of their assets
in support of her credit application for participation in the Special Credit Scheme (SCS) of
PPI. Gloria signed two documents labelled "TR/SCS," indicating the agricultural inputs she
received "upon the trust" of PPI subscribing to these specific undertakings:
- that she would hold said goods in trust for PPI, as its
property, with liberty to deliver and sell the same for PPI’s
account, in favor of farmers accepted to participate in PPI’s
SCS;
- that in case of such delivery and sale, Gloria would agree to
require the execution of a Trust Agreement by the farmer-
participants in her favor, which Agreement will in turn be
Assigned by Gloria in favor of PPI with Recourse;
- that in the event, Gloria cannot deliver/serve to the farmer-
participants all the inputs, then Gloria will agree that the
undelivered inputs will be charged to her credit line.
The products were released to Gloria, the 60-day credit term lapsed without Gloria
paying her obligation under the TR/SCS. Hence, PPI brought against Quirino and Gloria a
complaint.

ISSUE: Are the Spouses liable to PPI for the value of the agricultural inputs delivered to
Gloria?

HELD: YES. When Gloria (1) signed the application for credit facilities indicating that a TR
would serve as collateral for her credit line; (2) submitted a list of their (spouses) assets "to
support our credit application; and (3) the signing of Gloria TR/SCS documents defining
her obligations and the invoices indicating her having received PPI, established the
intention of the spouses to enter into a creditor-debtor relationship with PPI and thus are
fully liable to PPI.
Moreover to say that the farmers-participants were obligated to pay for the goods
delivered to them by Gloria has no basis because TR/SCS indicates that Gloria personally
assumed to undertake holding the goods "in trust for PPI," and under the notion of
relativity of contracts, contracts take effect only between the parties. Hence, the farmer-
participants, not being themselves parties to the documents signed by Gloria, were not to
be thereby liable.
At this juncture, the contract, its label notwithstanding, was not a trust receipt
transaction in legal contemplation or within the purview of the Trust Receipts Law such
that its breach would render Gloria criminally liable for estafa. There are two obligations in
a trust receipt transaction, first: the obligation to deliver the money to the owner of the
merchandise sold and second: the obligation to return it to the owner. Thus, under the
Trust Receipts Law, intent to defraud is presumed when (1) the entrustee fails to turn over
the proceeds of the sale of goods covered by the trust receipt to the entruster; or (2) when
the entrustee fails to return the goods under trust, if they are not disposed of in accordance
with the terms of the trust receipts.

NOTE: 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." It is a security
agreement that "secures an indebtedness and there can be no such thing as security
interest that secures no obligation."

NOTE: A credit line is "that amount of money or merchandise which a banker, a merchant,
or supplier agrees to supply to a person on credit and generally agreed to in advance." It is
a fixed limit of credit granted by a bank, retailer, or credit card issuer to a customer, to the
full extent of which the latter may avail himself of his dealings with the former but which
he must not exceed and is usually intended to cover a series of transactions in which case,
when the customer’s line of credit is nearly exhausted, he is expected to reduce his
indebtedness by payments before making any further drawings.