G.R. No. 158649 ; February 18, 2013
Spouses Quirino V. Dela Cruz and Gloria Dela Cruz, Petitioners, vs. Planters Products, Inc., Respondent.

FACTS

Petitioners, spouses Quirino and Gloria Dela Cruz, operated an agricultural supply store. Gloria applied for and was granted a credit line by respondent Planters Products, Inc. (PPI). On August 28, 1978, Gloria executed documents labeled “Trust Receipt/Special Credit Scheme” with PPI. Under these agreements, she received agricultural inputs upon trust, with the liberty to sell them to farmer-participants within 60 days. She undertook specific obligations, including supervising collections, insuring the goods, and requiring farmer-participants to deposit palay or corn after harvest. The contracts stipulated that her liability would be joint and several, bear interest, and include attorney’s fees in case of enforcement. PPI later demanded payment for undelivered goods, leading to the filing of a collection suit.
The Regional Trial Court ruled in favor of PPI, holding petitioners liable. The Court of Appeals affirmed this decision. Petitioners argued that the transaction was not a true trust receipt but a simple loan, and that their obligation was extinguished when the goods were delivered to the farmers under PPI’s Special Credit Scheme. They contended they acted merely as agents, and the primary obligation to pay shifted to the farmer-participants.

ISSUE

Whether the petitioners are liable to PPI for the value of the undelivered agricultural inputs under the terms of the “Trust Receipt/Special Credit Scheme” contracts.

RULING

Yes, the petitioners are liable. The Supreme Court affirmed the lower courts’ decisions. The contract terms are clear and leave no doubt as to the intention of the parties. Under Article 1370 of the Civil Code, if the terms are clear, the literal meaning controls. The agreements explicitly stated that if Gloria could not deliver the inputs to farmer-participants within 60 days, the undelivered goods would be charged to her credit line. This created a direct and primary obligation on her part. The contemporaneous and subsequent acts of the parties, principally considered under Article 1371, showed that petitioners treated the transaction as creating a personal obligation, as they made partial payments and acknowledged the debt.
The Court rejected the argument that the obligation was extinguished upon delivery to the farmers. The contract specifically provided that her liability would not be modified by any act or regulation affecting the inputs. By agreeing to hold the goods in trust for PPI and to account for them, Gloria assumed the role of a trustee with a personal duty to remit the proceeds or account for the goods. Her failure to ensure the farmer-participants deposited the required palay or corn, and to notify PPI of any refusal, triggered her direct liability under the clear stipulations of the contract. The terms were unambiguous and binding.