Manila Banking Corp. v Anastacio Teodoro, Jr.

and Grace Anna Teodoro (Legal Effect of Assignment of Credit,

Applicability of Exhaustion of All Properties of Debtor by Creditor)

1. Sps Teodoro and Teodoro Sr. executed a Promissory Note in favor of MBC, failed to pay
2., Teodoro Sr. and Jr. executed two PNs - 8k and 1k respectively payable, made partial payment but left balance
3. Prior to said transactions, Teodoro Jr executed a Deed of Assignment of Receivables in favor of MBC from
Emergency Employment Administration -
4. Deed provided it was: a.for consideration of certain credits, loans, overdrafts and other credit accommodations
extended to Teodoros as security for the payment of said sum and interest
b. they release and quitclaim all its rights, title and interest in the receivables
c. the assignment will stand as a continuing guaranty for future loans of Teodoros and shall also extend to all the accounts
receivable;
5. Non-payment of the PNs was due to failure of the Commission to pay spouses. Bank took steps to collect from
theCommission but no collection was effectedMBC instituted suit against them. RTC ordered Teodoros to pay MBC the
amounts in PNs plus interests.

Issues:
1.WON the assignment of receivables has the effect of payment of all the loans contracted by the spouses; No.
2.W/N MBC must exhaust all legal remedies againstPFC before it can proceed against the spouses. No.

Assignment of credit - agreement by virtue of which the owner of a credit (assignor), by a legal cause, such as sale,
dation in payment, exchange or donation, and without the need of the consent of the debtor, transfers his credit and its
accessory rights to assignee, who acquires the power to enforce it to the same extent as the assignor could have
enforced it against the debtor.

I.Assignment of receivables did not transfer the ownership of the receivables to MBC and release Teodoros from their
loans. The deed of assignment is not a quitclaim but a mere guaranty even if it provided that the assignors quit-
claim unto MBC all their rights and interest in the accounts receivable and MBC have the right to collect directly from the
debtor. A transfer of property by the debtor to a creditor, even if sufficient on its form to make an absolute
conveyance, should be treated as a pledge if the debt continues in existence and is not discharged by the transfer.

At the time the deed of assignment was executed, said loans were non-existent yet . It was a dation in payment for
P10,000, the amount indicated in the deed of assignment. The deed of assignment was intended as collateral security
for the bank loans - a continuing guaranty for whatever sums would be owing by Teodoro to MBC. In case of
doubt as to whether a transaction is a pledge or a dation in payment, the presumption is in favor of pledge, the
latter being the lesser transmission of rights and interests.

II. The obligation of Teodoros under the PNs were not released by the assignment of receivables thus, they remain as the
principal debtors rather than mere guarantors. The deed of assignment merely guarantees said obligations. Art. 2058
of the Civil Code which requires exhaustion of all the property of the debtor before creditor can collect from guarantor is
not applicable. MBC did try to collect on the pledged receivables. Emergency Employment Agency which issued the
receivables had been abolished.The collection had to be coursed through the Office of the President which disapproved
the same. The receivable became worthless leaving Teodoros' loans unsecured. MBC should proceed against them.
Ching v The Secretary of Justice G. R. No. 164317 February 6, 2006 (Trust Receipt Law Coverage)

1.Ching - Senior Vice-President of Philippine PBMI.

2. He signed 13 trust receipts as surety acknowledging receipt of goods to be used in operating its machines and agreed to
hold the goods in trust for RCBC, with authority to sell and to turn over the proceeds as soon as received, to apply against
the relative acceptances and payment of other indebtedness to RCBC. In case the goods remained unsold within specified
period, they are to be returned without any need of demand.
3.Said goods, manufactured products or proceeds thereof, whether in the form of money or bills, receivables, or accounts
separate and capable of identification were respondent banks property.
4. Trust receipts matured, Ching failed to return the goods or their value despite demands.
5. RCBC filed a estafa case. Ching argued that the transaction is not a trust receipt transaction and PBMI acquired the
goods in operating its machines and not for resale.

WON the transaction is a trust receipt

Yes. TRUST RECEIPT TRANSACTION: any transaction by and between an entruster, and an 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 entrustees execution and delivery to the entruster of a
signed "trust receipt" where the entrustee binds himself to hold the designated Goods/Docs./ Instruments in trust for the
entruster and to sell or dispose of G/D/I/ 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 G/D/I if they are unsold or not otherwise
disposed of, in accordance with the terms and conditions specified in the trust receipt.

P.D. No. 115 (Trust Receipts Law) is "not limited to transactions in goods which are to be sold (retailed), reshipped,
stored or processed as a component of a product ultimately sold but covers failure to turn over the proceeds of the sale
of entrusted goods, or to return said goods if unsold or not otherwise disposed of in accordance with the terms of
the trust receipts." The law applies to goods used by the entrustee in the operation of its machineries and equipment.

RCBC imported the goods and entrusted them to PBMI under trust receipts signed by Ching, as entrustee, with RCBC as
entruster. The mere failure of person to turn over the proceeds of the sale of the goods covered by the trust receipt
to the entruster or to return said goods, if not sold, is a public nuisance, a crime under P.D. No. 115, without need of
proving intent to defraud. PBMI, as a corporation is liable for violation of Trust Receipt Law which is equivalent to estafa
with abuse of confidence under RPC. However, the sanction is imprisonment which cannot be imposed upon the
corporation itself. Ching, the officer responsible for the offense is liable.