Textile Mills Corp. v. Home Bankers Savings
REITERATIONFacts
The Antecedents: Rosario Textile Mills Corporation (RTMC), through Edilberto Yujuico, applied for an Omnibus Credit Line of ₱10 million with Home Bankers Savings & Trust Co. (the bank), which was approved for ₱8 million. RTMC executed several promissory notes and a Surety Agreement binding Yujuico jointly and severally with RTMC for RTMC's indebtedness. RTMC availed of the credit line, but failed to pay its loans despite demands. RTMC and Yujuico claimed they should be absolved, alleging the bank assured Yujuico would not be personally liable and that they had an option to turn over imported raw materials if they did not meet specifications. RTMC offered to turn over the materials, but the bank refused, and the materials were later destroyed by fire. Procedural History: The Regional Trial Court (RTC) ruled in favor of the bank, ordering RTMC and Yujuico to pay the outstanding loan amounts with stipulated interest and penalties, and dismissing their counterclaims. The Court of Appeals (CA) affirmed the RTC decision, holding that the bank was merely a holder of the security and the goods belonged to RTMC, who bore the risk of loss. The CA denied petitioners' motion for reconsideration. The Petition: Petitioners filed a petition for review on certiorari, arguing that the CA erred in not holding that their acts constituted a valid tender of goods, in not applying the doctrine of res perit domino, in violating Article 1370 of the Civil Code by not upholding the parties' intention that the surety agreement was a mere formality, in violating the precept that a surety is not liable unless the debtor is liable, and in violating the purpose of the Trust Receipts Law.
Issue(s)
Whether petitioners are relieved of their obligation to pay their loan after attempting to tender the goods to the bank, which refused acceptance, and the goods were subsequently lost in a fire. Whether petitioners are solidarily liable for their obligations to the bank. Whether the Court of Appeals violated the Trust Receipts Law.
Ruling
The petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48708 are AFFIRMED IN TOTO. Costs against petitioners.
Ratio Decidendi
On the issue of tender of goods and risk of loss: The Court held that the principal transaction was a contract of loan, not a sale where ownership passed to the bank. The credit line was used by RTMC to purchase raw materials, and the trust receipts served as mere securities for the loan. The Court reiterated that in such transactions, the bank's ownership is an artificial expedient for security purposes, not actual ownership. Therefore, the doctrine of res perit domino (the thing perishes with the owner) did not apply to the bank. Petitioners could not be relieved of their obligation to pay the loan simply because the goods, which they purchased with the loan proceeds and held at their own risk, were destroyed by fire. Petitioners' recourse would be against their supplier if the materials were indeed defective. On the issue of solidary liability: The Court rejected petitioner Yujuico's contention that the surety agreement was a mere formality. It found no record to support this claim and held that the Surety Agreement, as signed by Yujuico, clearly bound him to pay jointly and severally with RTMC. The Court invoked the parole evidence rule, stating that when the terms of an agreement are reduced to writing, the writing is considered to contain all agreed terms, and no evidence aliunde is admissible to vary or contradict it, absent any ambiguity, mistake, or failure to express the true intent of the parties. The Suretyship Agreement was found to be clear and unambiguous. On the issue of violation of the Trust Receipts Law: The Court reiterated that the contract was fundamentally a loan. The bank sought to collect the loan it granted. The Trust Receipts Law is intended to aid in financing importers and retail dealers, but it does not alter the nature of the underlying loan transaction. The Court found that the bank was merely collecting its loan, and the trust receipts were part of the security arrangement for that loan. Petitioners' recourse for defective materials would be against their supplier, not by claiming relief from the loan obligation to the bank.
Main Doctrine
A trust receipt executed in a credit line transaction is a mere security for the loan granted, and the ownership of the goods remains with the importer, not the bank. The bank's interest is a security interest, not ownership. The parole evidence rule bars evidence aliunde to contradict a clear and unambiguous written agreement, such as a surety agreement.