PROVIDING FOR THE REGULATION OF TRUST RECEIPTS TRANSACTIONS

WHEREAS, the utilization of trust receipts, as a convenient
business device to assist importers and merchants solve their financing
problems, had gained popular acceptance in international and domestic
business practices, particularly in commercial banking transactions;

WHEREAS, there is no specific law in the Philippines that
governs trust receipt transactions, especially the rights and
obligations of the parties involved therein and the enforcement of the
said rights in case of default or violation of the terms of the trust
receipt agreement; and

WHEREAS, the recommendations contained in the report on the
financial system which have been accepted, with certain modifications
by the monetary authorities included, among others, the enactment of a
law regulating the trust receipt transactions;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution as
Commander-in-Chief of the Armed Forces of the Philippines, and pursuant
to Proclamation No. 1081, dated September 21, 1972, and General Order
No. 1, dated September 22, 1972, as amended, and in order to effect the
desired changes and reforms in the social, economic, and political
structure of our society, do hereby order and decree and make as part of
the law of the land the following:

SECTION 1. Short Title. — This Decree shall be known
as the Trust Receipts Law.

SEC. 2. Declaration of Policy. — It is
hereby declared to be the policy of the State (a) to encourage and
promote the use of the trust receipts as an additional and convenient
aid to commerce and trade; (b) to provide for the regulation of trust
receipt transactions in order to assure the protection of the rights and
the enforcement of obligations of the parties involved therein; and (c)
to declare the misuse and/or misappropriation of goods or proceeds
realized from the sale of goods, documents or instruments released under
trust receipts as a criminal offense punishable under Article Three
Hundred and Fifteen of the Revised Penal Code.

SEC. 3. Definition of terms. — As used in this
Decree, unless the context otherwise requires, the term —

(a) “Document” shall mean written or printed evidence of title
to goods.
(b) “Entrustee” shall refer to the person having or taking
possession of goods, documents or instruments under a trust receipt
transaction, and any successor in interest of such person for the
purpose or purposes specified in the trust receipt agreement
(c) “Entruster” shall refer to the person holding title over the
goods, documents, or instruments subject of a trust receipt transaction,
and any successor in interest of such person.
(d) “Goods” shall include chattels and personal property other than:
money, things in action, or things so affixed to land as to become a
part thereof.
(e) “Instrument” means any negotiable instrument as defined in
the Negotiable Instrument Law; any certificate of stock, or bond or
debenture for the payment of money issued by a public or private
corporation, or any certificate of deposit, participation certificate or
receipt, any credit or investment instrument of a sort marketed in the
ordinary course of business or finance, whereby the entrustee, after the
issuance of the trust receipt, appears by virtue of possession and the
face of the instrument to be the owner. “Instrument” shall not include a
document as defined in this Decree.
(f) “Purchase” means taking by sale, conditional sale, lease,
mortgage, or pledge, legal or equitable.
(g) “Purchaser” means any person taking by purchase.
(h) “Security Interest” means a property interest in goods,
documents or instruments to^ secure performance of some obligations of
the entrustee or of some third persons to the entruster and includes
title, whether or not expressed to be absolute, whenever such title is
in substance taken or retained for security only.
(i) “Person” means, as the case may be, an individual, trustee,
receiver, or other fiduciary, partnership, corporation, business trust
or other association, and two or more persons having a joint or common
interest.
(j) “Trust Receipt” shall refer to the written or printed document
signed by the entrustee in favor of the entruster containing terms and
conditions substantially complying with the provisions of this Decree,
No further formality of execution or authentication shall be necessary
to die validity of a trust receipt.

(k) “Value” means any consideration sufficient to support a simple
contract.

SEC. 4. What constitutes a trust receipt transaction.
— A trust receipt transaction, within the meaning of this Decree, is
any transaction by and between a person referred to in this Decree as
the entruster, and another person referred to in this Decree as the
entrustee, whereby the entruster, who owns or holds absolute title or
security interests over certain specified goods, documents or
instruments, releases the same to the possession of the entrustee upon
the latter’s execution and delivery to the entruster of a signed
document called a “trust receipt” wherein the entrustee binds
himself to hold the designated goods, documents or instruments in
trust for the entruster and to sell of otherwise dispose of the goods,
documents or instruments with the obligation to turn over to the
entruster the proceeds thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the goods, documents or
instruments themselves if they are unsold or not otherwise disposed of,
in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any one of
the following:

1. In the case of goods or documents — (a) to sell the goods
   or procure their sale; or (b) to manufacture or process the goods with
   the purpose of ultimate sale: Provided, That, in the case of goods
   delivered under trust receipt for the purpose of manufacturing or
   processing before its ultimate sale, the entruster shall retain its
   title over the goods whether in its original or processed form until the
   entrustee has complied fully with his obligation under the trust
   receipt; or (c) to load, unload, ship or tranship or otherwise deal with
   them in a manner preliminary or necessary to their sale; or
2. In the case of instruments — (a) to sell or procure their
   sale or exchange; or (b) to deliver them to a principal; or (c) to
   effect the consummation of some transactions involving delivery to a
   depository or register; or (d) to effect their presentation, collection
   or renewal.

The sale of goods, documents or instruments by a person in the
business of selling goods, documents or instruments for profit who, at
the outset of the transaction, has, as against the buyer, general
property rights in such goods, documents or instruments, or who sells
the same to the buyer on credit, retaining title or other interest as
security for the payment of the purchase price, does not constitute a
trust receipt transaction and is outside the purview and coverage of
this Decree.

SEC. 5. Form of trust receipts; contents. — A trust
receipt need not be in any particular form, but every such receipt must
substantially contain — (1) a description of the goods, documents or
instruments subject of the trust receipt; (2) the total invoice value of
the goods and the amount of the draft to be paid by the entrustee; (3)
an undertaking or a commitment of the entrustee — (a) to hold in trust
for the entruster the goods, documents or instruments therein described;
(b) to dispose of them in the manner provided for in the trust receipt;
and (c) to turn over the proceeds of the sale of the goods, documents
or instruments to the entruster to the extent of the amount owing to the
entruster or as appears in the trust receipt or to return the goods,
documents or instruments in the event of their non-sale within the
period specified therein.

The trust receipt may contain other terms and conditions agreed
upon by the parties in addition to those hereinabove enumerated
provided that such terms and conditions shall not be contrary to the
provisions of this Decree, any existing laws, public policy or morals,
public order or good customs.

SEC. 6. Currency in which a trust receipt may be
denominated. — A trust receipt may be denominated in Philippine
currency or any foreign currency acceptable and eligible as part of
international reserves of the Philippines, the provisions of existing
law, executive orders, rules and regulations to the contrary
notwithstanding: Provided, however. That in the case of trust receipts
denominated ‘in foreign currency, payment shall be made in its
equivalent in Philippine currency computed at the prevailing exchange
rate on the date the proceeds of sale of the goods, documents or
instruments held in trust by the entrustee are turned over to the
entruster or on such other date as may be stipulated in the trust
receipt or other agreements executed between the entruster and the
entrustee.

SEC. 7. Rights of the entruster. — The entruster
shall be entitled to the proceeds from the sale of the goods, documents
or instruments released under a trust receipt to the entrustee to the
extent of the amount owing to the entruster or as appears in the trust
receipt, or to the return of the goods, documents or instruments in case
of non-sale, and to the enforcement of all other rights conferred on
him in the trust receipt provided such are not contrary to the
provisions of this Decree.

The entruster may cancel the trust and take possession of the
goods, documents or instruments subject to the trust or of the proceeds
realized therefrom at any time upon default or failure of the entrustee
to comply with any of the terms and conditions of the trust receipt or
any other agreement between the entruster and the entrustee, and the
entruster in possession of the goods, documents or instruments may, on
or after default give notice to the entrustee of the intention to sell,
and may, not less than five days after serving or sending of such
notice, sell the goods, documents or instruments at public or private
sale, and the entruster may, at a public sale, become a purchaser. The
proceeds of any such sale, whether public or private, shall be applied
(a) to the payment of the expenses thereof; (b) to the payment of the
expenses of re-taking, keeping and storing the goods, documents or
instruments; (c) to the satisfaction of the entrustee’s indebtedness to
the entruster. The entrustee shall receive any surplus but shall be
liable to the entruster for any deficiency. Notice of sale shall be
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.

SEC. 8. Entruster not responsible on sate by
entrustee. — The entruster holding a security interest shall not,
merely by virtue of such interest or having given the entrustee liberty
of sale or other disposition of the goods, documents or instruments
under the terms of the trust receipt transaction, be responsible as
principal or as vendor under any sale or contract to sell made by the
entrustee.

SEC. 9. Obligations of the entrustee. — The entrustee
shall (1) hold the goods, documents or instruments in trust for the
entruster and shall dispose of them strictly in accordance with the
terms and conditions of the trust receipt; (2) receive the proceeds in
trust for the entruster and rum over the same to the entruster to the
extent of the amourit owing to the entruster or as appears on the trust
receipt; (3) insure the goods for their total value against loss from
fire, theft, pilferage or other casualties; (4) keep said goods or
proceeds thereof whether in money or whatever form, separate and capable
of identification as property of the entruster; (5) return the goods,
documents or instruments in the event of non-sale or upon demand of the
entruster; and (6) observe all other terms and conditions of the trust
receipt not contrary to the provisions of this Decree.

SEC. 10. Liability of entrustee for loss. — The risk
of loss shall be borne by the entrustee. Loss of goods, documents, or
instruments which are the subject of a trust receipt, pending their
disposition, irrespective of whether or not it was due to the fault or
negligence of the entrustee, shall not extinguish his obligation to the
entruster for the value thereof.

SEC. 11. Rights of purchaser for value in good faith.
— Any purchaser of goods from an entrustee with right to sell, or of
documents or instruments through their customary form of transfer, who
buys the goods, documents, or instruments for value and in good faith
from the entrustee, acquires said goods, documents, or instruments free
from the entruster’s security interest.

SEC. 12. Validity of entruster’s security interest as
against creditors. — The entruster’s security interest in goods,
documents, or instruments pursuant to the written terms of a trust
receipt shall be valid as against all creditors of the entrustee for the
duration of the trust receipt agreement.

SEC. 13. Penalty clause. — The failure of an
entrustee to turn over the proceeds of the sale of the goods, documents
or instruments covered by a trust receipt to the extent of the amount
owing to the entruster or as appears in the trust receipt or to return
said goods, documents or instruments if they were not sold or disposed
of in accordance with the terms of the trust receipt shall constitute
the crime of estafa, punishable under the provisions of Article Three
Hundred and Fifteen, Paragraph One (b) of Act Numbered Three Thousand
Eight Hundred and Fifteen, as amended, otherwise known as the Revised
Penal Code. If the violation or offense is committed by a corporation,
partnership, association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon the directors,
officers, employees or other officials or persons therein responsible
for the offense, without prejudice to the civil liabilities arising from
the criminal offense.

SEC. 14. Cases not covered by this Decree. — Cases
not provided for in this Decree shall be governed by the applicable
provisions of existing laws.

SEC. 15. Separability clause. — If any provision or
section of this Decree or the application thereof to any person or
circumstance is held invalid, the other provisions or sections hereof
and the application of such provisions or sections to other persons or
circumstances shall not be affected thereby.

SEC. 16. Repealing clause. — All acts inconsistent
with this Decree are hereby repealed.

SEC. 17. This Decree shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the year
of Our Lord, nineteen hundred and seventy-three.