Title: #19 ROSARIO TEXTILE CORP. v. HOME BANKERS SAVINGS & TRUST CO.
customers line of credit is nearly exhausted, he is expected to reduce his
Details: G.R. No. 137232 | June 29, 2005 | J. Sandoval - Gutierrez indebtedness by payments before making any further drawings.
Topic: Trust Receipts It is thus clear that the principal transaction between petitioner RTMC and
ER: the bank is a contract of loan. RTMC used the proceeds of this loan to
RTMC sought a credit line from the bank for 10 million. The bank granted purchase raw materials from a supplier abroad. In order to secure the
only 8 million, with Yujuico banding himself solidarily with RTMC on the payment of the loan, RTMC delivered the raw materials to the bank as
loans. RTMC made numerous drawdowns which it failed to pay. RTMC defaulted. collateral. Trust receipts were executed by the parties to evidence this
Bank sued Yujuico. security arrangement. Simply stated, the trust receipts were mere
securities.
Facts: In Samo vs. People, the SC described a trust receipt as a security
1. Sometime in 1989, Rosario Textile Mills Corporation (RTMC) applied from transaction intended to aid in financing importers and retail dealers who do
Home Bankers Savings & Trust Co. for an Omnibus Credit Line for P10 not have sufficient funds or resources to finance the importation or
million. The bank approved RTMC’s credit line but for only P8 million. purchase of merchandise, and who may not be able to acquire credit
2. The bank notified RTMC of the grant of the said loan thru a letter dated except through utilization, as collateral, of the merchandise imported or
March 2, 1989 which contains terms and conditions conformed by RTMC purchased.
thru Edilberto V. Yujuico. On March 3, 1989, Yujuico signed a Surety If under the trust receipt, the bank is made to appear as the owner, it was
Agreement in favor of the bank, in which he bound himself jointly and but an artificial expedient, more of legal fiction than fact, for if it were really
severally with RTMC for the payment of all RTMC’s indebtedness to the so, it could dispose of the goods in any manner it wants, which it cannot do,
bank from 1989 to 1990. just to give consistency with purpose of the trust receipt of giving a
3. RTMC availed of the credit line by making numerous drawdowns, each stronger security for the loan obtained by the importer. To consider the
drawdown being covered by a separate promissory note and trust receipt. bank as the true owner from the inception of the transaction would
RTMC, represented by Yujuico, executed in favor of the bank a total of be to disregard the loan feature thereof.
eleven (11) promissory notes. Thus, petitioners cannot be relieved of their obligation to pay their loan in
4. Despite the lapse of the respective due dates under the promissory notes favor of the bank.
and notwithstanding the banks demand letters, RTMC failed to pay its
loans. The Bank filed a complaint for a sum of money.
5. Yujuico contend that he should be absolved from liability. They claimed that
although the grant of the credit line and the execution of the suretyship
agreement are admitted, they alleged that the bank gave assurance that
the suretyship agreement was merely a formality under which Yujuico will
not be personally liable.
6. He theorized that when RTMC imported the raw materials needed for its
manufacture, using the credit line, it was merely acting on behalf of the
bank, the true owner of the goods by virtue of the trust receipts.
7. RTMC offered to make such turn-over since the imported materials did not
conform to the required specifications. However, the bank refused to
accept the same, until the materials were destroyed by a fire which gutted
down RTMCs premises.
Issue:
WON Yujuico is absolved from liability by the grant of the credit line and the
execution of the suretyship agreement – NO
Held:
Petitioners stance, however, conveniently ignores the true nature of its
transaction with the bank. We recall that RTMC filed with the bank an
application for a credit line in the amount of P10 million, but only P8 million
was approved.
RTMC then made withdrawals from this credit line and issued several
promissory notes in favor of the bank. In banking and commerce, a credit
line is that amount of money or merchandise which a banker, merchant, or
supplier agrees to supply to a person on credit and generally agreed to in
advance.
It is the 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
