Article 31 of the Civil Code of the Philippines

Article 31.  When the civil action which is based on an obligation not arising from the act or omission complained of as felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter.

This article refers to a civil action which is no longer based in the criminal liability of the defendant, but on an obligation arising from other sources, like law, contracts, quasi-contracts and quasi-delicts.

Civil action to recover the proceeds of sale of goods covered by a trust receipt. "Violation of the Trust Receipt Law" (P.D No. 115 January 29, 1973)

CASE: 

            South City Homes, Inc. vs. BA Finance G.R No. 135462, 07 December 2001

FACTS: 

On January 17, 1983, Joseph L. G. Chua, President of Fortune Motors Corporation, executed in favor of plaintiff-appellant a Continuing Suretyship Agreement, in which he "jointly and severally unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness" of Fortune Motors Corporation to BA Finance Corporation. On February 3, 1983, Palawan Lumber Manufacturing Corporation represented by Joseph L.G. Chua, George D. Tan, Edgar C. Rodrigueza and Joselito C. Baltazar, executed in favor of plaintiff-appellant a Continuing Suretyship Agreement in which, said corporation "jointly and severally unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness of Fortune Motors Corporation to BA Finance Corporation (Folder of Exhibits, pp. 19-20). On the same date, South City Homes, Inc. represented by Edgar C. Rodrigueza and Aurelio F. Tablante, likewise executed a Continuing Suretyship Agreement in which said corporation "jointly and severally unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness" of Fortune Motors Corporation to BA Finance Corporation.

Fortune Motors Corporation thereafter executed trust receipts covering the motor vehicles delivered to it by CARCO under which it agreed to remit to the Entruster (CARCO) the proceeds of any sale and immediately surrender the remaining unsold vehicles. ). The drafts and trust receipts were assigned to plaintiff-appellant, under Deeds of Assignment executed by CARCO.

Upon failure of the defendant-appellant Fortune Motors Corporation to pay the amounts due under the drafts and to remit the proceeds of motor vehicles sold or to return those remaining unsold in accordance with the terms of the trust receipt agreements, BA Finance Corporation sent demand letter to Edgar C. Rodrigueza, South City Homes, Inc., Aurelio Tablante, Palawan Lumber Manufacturing Corporation, Joseph L. G. Chua, George D. Tan and Joselito C. Baltazar (Folder of Exhibits, pp. 29-37). Since the defendants-appellants failed to settle their outstanding account with plaintiff-appellant, the latter filed on December 22, 1983 a complaint for a sum of money with prayer for preliminary attachment, with the Regional Trial Court of Manila.

ISSUE:

Whether or not respondent BAFC has a valid cause of action for a sum of money following the drafts and trust receipts transactions.

HELD:

As an entruster, respondent BAFC must first demand the return of the unsold vehicles from Fortune Motors Corporation, pursuant to the terms of the trust receipts. Having failed to do so, petitioners had no cause of action whatsoever against Fortune Motors Corporation and the action for collection of sum of money was, therefore, premature.

A trust receipt is a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.9 In the event of default by the entrustee on his obligations under the trust receipt agreement, it is not absolutely necessary that the entruster cancel the trust and take possession of the goods to be able to enforce his rights thereunder.