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Commercial Law Case Digests
Commercial Law Case Digests
LETTERS OF CREDIT
PRUDENTIAL BANK vs. INTERMEDIATE APPELLATE COURT
G.R. No. 74886 December 8, 1992, 216 scra 257
--presentment for payment
FACTS:
Philippine Rayon Mills, Inc. entered into a contract with Nissho Co.,
Ltd. of Japan for the importation of textile machineries under a fiveyear deferred payment plan. To effect payment for said machineries,
Philippine Rayon Mills opened a commercial letter of credit with the
Prudential Bank and Trust Company in favor of Nissho. Against this
letter of credit, drafts were drawn and issued by Nissho, which were
all paid by the Prudential Bank through its correspondent in Japan.
Two of these drafts were accepted by Philippine Rayon Mills while
the others were not. Petitioner instituted an action for the recovery of
the sum of money it paid to Nissho as Philippine Rayon Mills was not
able to pay its obligations arising from the letter of credit.
Respondent court ruled that with regard to the ten drafts which were
not presented and accepted, no valid demand for payment can be
made. Petitioner however claims that the drafts were sight drafts
which did not require presentment for acceptance to Philippine
Rayon.
ISSUE:
Whether presentment for acceptance of the drafts was indispensable
to make Philippine Rayon liable thereon.
RULING:
In the case at bar, the drawee was necessarily the herein petitioner. It
was to the latter that the drafts were presented for payment. There
was in fact no need for acceptance as the issued drafts are sight
drafts. Presentment for acceptance is necessary only in the cases
expressly provided for in Section 143 of the Negotiable Instruments
Law (NIL). The said section provides that presentment for
acceptance must be made:
(a) Where the bill is payable after sight, or in any other case,
where presentment for acceptance is necessary in order to fix the
maturity of the instrument; or
(b) Where the bill expressly stipulates that it shall be presented
for acceptance; or
(c) Where the bill is drawn payable elsewhere than at the
residence or place of business of the drawee.
In no other case is presentment for acceptance necessary in order to
render any party to the bill liable. Obviously then, sight drafts do not
require presentment for acceptance.
Bank of America, NT v. Court of Appeals
228 SCRA 357
Bank of America received by registered mail an irrevocable letter of
credit purportedly issued by Bank of Ayudhya Samyek Branch, for the
account of General Chemicals, Ltd., of Thailand in the amount of
$2,782,000.00 to cover the sale of plastic ropes and agricultural files,
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negotiating bank but even then Feati bank was still not liable
because there was no contractual relationship between Feati and
Villaluz.
Neither was there a trust5 between Feati Bank (trustee) and Villaluz
(beneficiary). the mere opening of a LC does not involve a specific
appropriation of a sum of money in favor of the beneficiary. It only
signifies that the beneficiary may be able to draw funds upon the
letter of credit up to the designated amount specified in the LC. The
correspondent bank does not receive in advance the sum of money
from the issuing bank. On the contrary, when they accept the tender
and pays the amount, it gets the money from its own funds and then
later seeks reimbursement from the issuing bank. Also as notifying
bank it cannot be held liable even if there is a trust created.
Neither was there a guarantee. It is fundamental that an irrevocable
credit is independent not only of the contract between the buyer and
the seller but also of the credit agreement between the issuing bank
and the buyer. Feati Bank has no business with the relationship of
Christiansen and Security it merely being a notifying bank. Feati
Bank was only following instruction of the issuing bank.
But even if all of this argument existed (trust, guarantee, and
confirming bank, Feati Bank cannot be compelled to pay because
there was a failure on the part of Villaluz to comply with the terms of
the LC which is the absence of the certificate. It cannot be argued
that such a requirement is illegal because such pronouncement by
the Central Bank was only done after the issuance of the LC, when
the LC was issued there was still no such prohibition.
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letters, RTMC failed to pay its loans. Hence, the bank filed a
complaint for sum of money against RTMC and Yujuico.
FACTS:
ISSUE:
-Whether or not RMTC and Yujuico are not relieved of their obligation
to pay their loan after they rtried to tender te goods to the bank which
the bank refused to accept the same, and which goods
weresubsequently lost in fire.
HELD:
-Petitioners theorize that when petitioner 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. Hence, under the doctrine of res perit
domino, the bank took the risk of the loss of said raw materials.
RTMCs role in the transaction was that of end user of the raw
materials and when it did not accept those materials as they did not
meet the manufacturing requirements, RTMC made a valid and
effective tender of the goods to the bank. Since the bank refused to
accept the raw materials, RTMC stored them in its warehouse.
When the warehouse and its contents were gutted by fire, petitioners
obligation to the bank was accordingly extinguished.
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ISSUE:
Whether or not CA erred in Reversing RTC decision? NO
HELD:
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ISSUE:
-Whether or not in a trust receipt transaction, an entruster which had
taken actual and juridical possession of the goods covered by trust
receipt may subsequently avail of the right to demand from the
entrustee the deficiency of the amount covered by the trust receipt.
HELD
- A trust receipt agreement is merely a collateral agreement, the
purpose of which is to serve as security for a loan.
-In the event of default or failure of the entrustee to comply with the
terms of the trust receipt agreement, the entruster may cancel the
trust and take possession of the goods subject of the trust receipt
and while in possession cause the sale of the goods after at least five
(5) day notice to the entrustee, in a private or public sale. The
entruster may at public sale become a purchaser. If the proceeds of
the sale were insufficient to satisfy entirely entrustees indebtedness,
the entruster is well within its rights to file an action to collect the
deficiency.
NEGOTIABLE INSTRUMENTS LAW:
EQUITABLE BANKING V. IAC
161 SCRA 518
FACTS:
Nell Company issued a check to help Casals and Casville
Enterprises obtain a letter of credit from Equitable Banking in
connection with equipment, a garrett skidder, which Casals and
Casville were buying from Nell. Nell indicated the payee as
follows EQUITABLE BANKING CORPORATION A/C
CASVILLE ENTERPRISES INC.
Casals deposited the check with the bank and the bank teller
accepted the same and in accordance with customary bank
practice, stamped in the check the words non-negotiable.
The amount was withdrawn after the deposit.
This prompted Nell to file a case against the bank, Casals
and Casville. While the instant case was being tried, Casals
and Casville assigned the garrett skidder to plaintiff which credited
in favor of defendants the amount of P450,000, as partial satisfaction
of its claim against them.
HELD:
Equitable is not liable to Nell. Nell should bear the loss as it was
through its own acts, which put it into the power of Casals and
Casville Enterprises to perpetuate the fraud against it.
The check wasnt initially non-negotiable. Neither was it crosschecked. The rubber-stamping transversally on the face of the check
was only made the bank teller in accordance with customary bank
practice, and not by Nell as the drawer of the check, and simply
meant that thereafter the same
check could no longer be negotiated.
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were forged by Tamlinco and the checks were deposited in his own
account with petitioner. Ong then sought to collect the money
from the family of Tamlinco first before filing a complaint with the
Central Bank. As his efforts were futile to recover his money, he filed
an action against the petitioner. The trial and appellate court
decided in favor of Ong.
HELD:
Since the signature of the payee was forged, such signature
should be deemed inoperative and ineffectual. Petitioner, as
the collecting bank, grossly erred in making payment by virtue of
said forged signature. The payee, herein respondent, should
therefore be allowed to collect from the collecting bank.
It should be liable for the loss because it is its legal duty to ascertain
that the payees endorsement was genuine before cashing the
check. As a general rule, a bank or corporation who has obtained
possession of a check with an unauthorized or forged indorsement of
the payees signature and who collects the amount of the check other
from the drawee, is liable for the proceeds thereof to the payee or the
other owner, notwithstanding that the amount has been paid to
the person from whom the check was obtained.
DOCTRINE OF DESIRABLE SHORT CUTplaintiff uses one action
to reach, by desirable short cut, the person who ought to be
ultimately liable as among the innocent persons involved in the
transaction. In other words, the payee ought to be allowed to recover
directly from the collecting bank, regardless of whether the check
was delivered to the payee or not.
On the issue of laches, Ong didn't sit on his rights. He immediately
sought the intervention of Tamlincos family to collect the sum of
money, and later the Central Bank. Only after exhausting all
the measures to settle the issue amicably did he file the action.
ILLUSORIO V. CA
393 SCRA 89
FACTS:
Petitioner was a prominent businessman who, because of different
business commitments, entrusted to his then secretary the
handling of his credit cards and checkbooks. For a material
period of time, the secretary was able to encash and deposit
in her personal account money from the account of petitioner.
Upon knowledge of her acts, she was fired immediately and
criminal actions were filed against her. Thereafter, petitioner
requested the bank to restore its money but the bank refused to
do so.
HELD:
The petitioner doesnt have a course of action against the
bank. To be entitled to damages, petitioner has the burden of
proving negligence on the part of the bank for failure to detect the
discrepancy in the signatures on the checks. It is incumbent upon
petitioner to establish the fact of forgery. Curiously though, petitioner
failed to supply additional signature specimens as requested by the
NBI. The bank was not also remiss in performance of its duties, it
practices due diligence in encashing checks. The bank didnt
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FACTS:
RPN, IBC and BBC were all assessed for tax by the BIR. To
pay the assessed taxes, they bought managers checks from
petitioner bank. None of these checks were paid to the BIR.
They were found to have been deposited in the account of a third
person in Security Bank. As the taxes remained unpaid, the BIR
issued a levy, distraint and garnishment against the three
networks. An action was filed wherein it was decided that the
networks should be reimbursed for the amounts of the checks by
petitioner bank and the latter in turn, must be reimbursed by Security
Bank. In the appellate court, it was held that Traders Bank
should be the only bank liable.
HELD:
Petitioner ought to have known that where a check is drawn payable
to the order of one person and is presented for payment by another
and purports upon its face to have been duly indorsed by the payee
of the check, it is the primary duty of the petitioner to know that
the check was duly indorsed by the original payee, and it pays the
amount of the check to the third person, who has forged the
signature of the payee, the loss falls upon the petitioner who cashed
the check. Its only remedy is against the person
to whom it paid the money.
It should be further noted that one of the checks was a crossed
check. The crossing of the check should have put petitioner on
guard; it was duty-bound to ascertain the indorsers title to the
check or the nature of his possession.
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METROBANK V. CABLIZO
510 SCRA 259
FACTS:
Cablizo maintained an account with petitioner. It drew a check
payable to cash payable to a certain Marquez, for the latters sales
commission. The check was subsequently deposited in
Westmont bank and the latter submitted it with Metrobank for
clearing. The check was cleared.
Thereafter, the banks representative asked Cablizo if he issued a
check for P91,000. The answer was in the negative. This prompted
Cablizo to call Metrobank and ask for the recrediting of P90,000
but petitioner failed to recredit the amount prompting Cablizo to file
an action against it.
HELD:
An alteration is said to be material if it alters the effect of the
instrument. It means an unauthorized change in the instrument that
purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an
incomplete instrument relating to the obligation of the party. In
other words, a material alteration is one which changes the items
which are required to be stated under Section 1 of the NIL.
The check in issue was materially altered when its amount was
increased from P1000 to P91000. Cablizo was not the one who
authorized or made such increase. There is no showing that he
was negligent in exercising what was due in a prudent man which
could have otherwise prevented the
loss. Cablizo was never remiss in the preparation and
issuance of the check.
The doctrine of equitable estoppel is inapplicable against
Cablizo. This doctrine states that when one of the two innocent
person, each guiltiness of an intentional or moral wrong, must suffer
a loss, it must be borne by the one whose erroneous conduct, either
by omission or commission, was the cause of the injury. Negligence
is never presumed.
Metrobank was actually the one remiss in its duties. The CA
took into consideration that the alterations were actually visible in
the eye and yet the bank allowed someone not acquainted with the
examination of checks to do the same. Furthermore, it cannot
rely on the indorsement of
Westmont Bank of the check. It should have exercised meticulous
care in handling the affairs of its clients especially if the clients
money is involved.
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