GR L 78671; (March, 1988) (Digest)
G.R. No. L-78671 March 25, 1988
Spouses Tirzo Vintola and Loreta Dy Vintola, defendants-appellants, vs. Insular Bank of Asia and America, plaintiff-appellee.
FACTS
Spouses Tirzo and Loreta Vintola, proprietors of Dax Kin International, obtained a commercial letter of credit from Insular Bank of Asia and America (IBAA) on August 20, 1975, to finance a shipment of seashells. To secure the release of the goods, they executed a trust receipt agreement in favor of IBAA, with the obligation maturing on October 19, 1975. The Vintolas failed to pay the amount at maturity. After IBAA’s demand for payment on January 9, 1976, the Vintolas offered to return the unsold raw seashells, but the bank refused to accept them.
The bank subsequently filed a criminal case for estafa under the Trust Receipts Law. During the trial, the Vintolas deposited the unsold goods with the court. They were later acquitted. IBAA then instituted this civil case to recover the loan amount of P35,000.00 plus interest and charges. The Regional Trial Court ruled in favor of IBAA, ordering the Vintolas to pay. The Vintolas appealed, arguing their obligation was extinguished by the deposit of the goods.
ISSUE
The sole issue is whether the Vintolas’ obligation to pay IBAA was extinguished by their deposit of the unsold goods with the court, thereby relieving them of liability for the loan.
RULING
The Supreme Court affirmed the trial court’s decision, ruling that the Vintolas remain liable for the loan. The Court held that a trust receipt transaction is essentially a loan secured by the goods. The bank’s security title is a legal fiction; the importer-debtor remains the true owner of the goods and bears the risk of loss. The arrangement involves two distinct features: a loan (the letter of credit) and a security agreement (the trust receipt). The bank is a lender, not an investor or absolute owner of the merchandise.
Consequently, the Vintolas’ inability to sell the seashells and their subsequent deposit of the goods with the court does not discharge their primary obligation to repay the loan. The deposit did not constitute recovery by the bank, as the goods were merely the security for the loan and were never sold to satisfy the debt. The Court rejected the argument that requiring payment would constitute double recovery under Article 2177 of the Civil Code, as the bank had not recovered anything from the transaction. The civil liability for the loan persists independently of the criminal case and the disposition of the goods.