Mercantile Law- Special Commercial Laws

S.Y. 2020-2021

LIST OF CASES

I. LETTERS OF CREDIT
1. Definition and Nature of Letter of Credit

- A Financial devise to facilitate commercial transaction

 Bank of America vs. Court of Appeals, 228 SCRA 357 (1993)
 Prudential Bank and Trust Company vs. IAC, 216 SCRA 257 (1992)

- Security arrangements but not accessory contracts

 Feati Bank & Trust Company vs. Court of Appeals, 196 SCRA 576 (1991)
 MWSS vs. Hon. Daway, 432 SCRA 559 (2004)

- A composite of at least three distinct but intertwined relationships, each relationship

being concretized in a contract:
 Reliance Commodities, Inc. vs. Daewoo Industrial Co., Ltd., 228 SCRA 545 (1993)

- Not a negotiable instrument

 Lee vs. Court of Appeals, 375 SCRA 579 (2002)

- Different from trust receipt

 Bank of Commerce vs. Serrano, 451 SCRA 484 (2005)

2. Laws governing letter of credit

- Applicability of usage and customs apply in commercial transactions in the absence

of any particular provision in the Code of Commerce

 Bank of the Philippine Islands vs. De Reny Fabric Industries, Inc., 35 SCRA 253
(1970)

3. Kinds of letter of credit

a. Commercial and stand by letter of credit
 Insular Bank of Asia & America vs. Intermediate Appellate Court, 167 SCRA 450
(1988)
 Bank of America vs Court of Appeals 228 SCRA 357
 Transfield Philippines, Inc. vs. Luzon Hydro Corp. 443 SCRA 307 (2004)

b. Irrevocable and revocable letter of credit

 Philippine Virginia Tobacco Administration vs. De Los Angeles, 164 SCRA 543
(1988)

c. Confirmed and unconfirmed letter of credit

 Feati Bank & Trust Company vs. Court of Appeals, 196 SCRA 576 (1991)

4. Parties to a Letter of Credit

a. Rights and Obligations of Parties

i. Applicant
ii. Issuing Bank
iii. Beneficiary
  Reliance Commodities, Inc. vs. Daewoo Industrial Co., Ltd., 228 SCRA 545 (1993)
 Prudential Bank & Trust Company vs. IAC, 216 SCRA 257 (1992)
 Rodzssen Supply Company, Inc. vs. Far East Bank and Trust Company, 357
SCRA 618 (2001)
 Abad vs. Court of Appeals, 181 SCRA 191 (1990);
 Consolidated Bank & Trust Corporation vs. Court of Appeals, 356 SCRA 671
(2001)
 MARPHIL EXPORT CORPORATION and IRENEO LIM, Petitioners, - versus –
ALLIED BANKING CORPORATION, substituted by PHILIPPINE NATIONAL
BANK, Respondent. (G.R. No. 187922, September 21, 2016, THIRD DIVISION,
JARDELEZA, J.)

iv. Advising/Notifying Bank

v. Paying Bank
vi. Confirming Bank

 Bank of America vs. Court of Appeals, ibid.

 Feati Bank and Trust Company vs. Court of Appeals, ibid.

5. Basic Principles of Letter of Credit

a. Doctrine of Independence
i. In commercial letter of credit

 BPI vs. De reny Fabrics, ibid..

 Land Bank of the Philippines vs. Monet’s Export and Manufacturing Corp., 453
SCRA 173 (2005)
 Philippine National Bank vs. San Miguel Corporation, G.R. No. 186063, January
15, 2014
 THE HONGKONG & SHANGHAI BANKING CORPORATION, LIMITED,
Petitioner, v. NATIONAL STEEL CORPORATION AND CITYTRUST
BANKING CORPORATION (NOW BANK OF THE PHILIPPINE ISLANDS),
Respondents. (G.R. No. 183486, February 24, 2016, JARDELEZA, J.)

ii. In Standby letter of credit

 Insular Bank of Asia & America vs. Intermediate Appellate Court, 167 SCRA 450
(1988)

b. Fraud Exception Principle

 Transfield Philippines, Inc. vs. Luzon Hydro Corp. Ibid.

c. Doctrine of Strict Compliance

 Feati Bank & Trust Company vs. Court of Appeals, ibid.

II. TRUST RECEIPTS LAW

1. Definition/Concept of a Trust Receipt Transaction
a. 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.

 Lee vs. Court of Appeals, 375 SCRA 579 (2002)

b. The loan and security features of a trust receipt

  Vintola vs. Insular Bank of Asia and America, 150 SCRA 140 (1987)
 Rosario Textile Mills Corp. vs. Home Bankers Savings and Trust Company, 462
SCRA 88 (2005)

c. The loan should be granted to finance acquisition of the goods under trust
receipt. If loan is granted when entrustee already has ownership of the goods,
transaction only a simple loan

 Colinares vs. Court of Appeals, 339 SCRA 609 (2000)

 Consolidated Bank & Trust Corp. vs. Court of Appeals, 356 SCRA 671 (2001)

d. The goods must be intended for sale or resale, otherwise, it is a simple loan

 Anthony L. Ng vs. People of the Philippines, G.R. No. 173905, April 23, 2010;
 Land Bank of the Philippines vs. Perez, G.R. No. 166884, June 13, 2012;
 Hur Tin Yang vs. People of the Philippines, G.R. No. 195117, August 14, 2013

e. No trust receipt, notwithstanding the label, if goods offered as security for a

loan accommodation are goods sold to the debtor

 Sps. Dela Cruz vs. Dela Cruz, GR No. 158649, February 18, 2013

f. Failure of the entrustee to remit sale proceeds or return the goods in case of
non-sale constitutes criminal liability

g. Crime against public order

 People vs. Hon. Nitafan 207 SCRA 726 (1992)

 Metropolitan Bank & Trust Company vs. Tonda, 338 SCRA 254 (2000)

2. Ownership of the Goods, Documents and Instruments under a Trust Receipt

a. Entrustee is the owner of the goods

 Vintola vs IBAA, ibid

 Rosario Textile Mills vs Home Bankers Trust, ibid.

b. Entrustee cannot mortgage the goods under trust receipt

 DBP vs. Prudential Bank, 475 SCRA 623 (2005)

3. Rights of the Entruster

a. Validity of the Security Interest as Against the Creditors of the

Entrustee/Innocent Purchaser for Value

 Prudential Bank vs. National Labor Relations Commission, 251 SCRA 412 (1995)

4. Obligation and Liability of the Entrustee

a. No criminal liability in the following cases
i. entrustee already owns the goods when loan under TR granted

 Colinares vs Court of Appeals, ibid.

 Consolidated vs Court of Appeals, ibid.

ii. goods not intended for sale or resale

 Ng vs People, ibid.
  Land Bank vs Court of Appeals, ibid.
 Hur Ting Yang vs People, ibid.

iii. Non-delivery of the goods

 Ramos vs. Court of Appeals, 153 SCRA 276 (1987)

iv. Novation

 Ong vs. Court of Appeals, 124 SCRA 578 (1983)

 Pilipinas Bank vs. Ong, 387 SCRA 37 (2002)

5. Payment/Delivery of Proceeds of Sale or Disposition of Goods, Documents or

Instruments

6. Return of Goods, Documents or Instruments in Case of Non-Sale

 Vintola vs. Insular Bank of Asia and America, ibid

7. Liability for Loss of Goods, Documents or Instruments

 Rosario Textile Mills Corp. vs. Home Bankers Savings and Trust Company, ibid.

8. Penal Sanctions if Offender is a Corporation

a. Criminal Liability of directors, officers and agents

 Ong vs. Court of Appeals, 401 SCRA 649 (2003)

 Ching vs Secretary of Justice

b. Directors and officers of the corporation not civilly liable unless they
assume personal liability

 Tupaz IV vs. Court of Appeals, 475 SCRA 398 (2005)

9. Remedies Available
a. Criminal and civil actions

 Vintola vs. Insular Bank of Asia and America, ibid

 Sarmiento vs. Court of Appeals, 394 SCRA 315 (2002)

b. Entruster’s repossession of the goods under trust receipt not a bar to

foreclosure of mortgage of other collateral

 Philippine National Bank vs. Pineda, 197 SCRA 1 (1991)

c. cancellation of trust and repossession of goods

 South City Homes, Inc. vs. BA Finance Corporation, 371 SCRA 603 (2001)

d. entrustee liable for deficiency

 Landl & Company vs. Metropolitan Bank, 435 SCRA 639 (2004)

III. WAREHOUSE RECEIPT’S LAW

 Estrada vs. Court of Agrarian Relations, 2 SCRA 986 (1961)
 Consolidated Terminals vs. Artex Development Co., 63 SCRA 46 (1975)
 Philippine National Bank vs. Noah’s Ark Sugar Refinery, 226 SCRA 36 (1993)
 Philippine National Bank vs. Se. Jr., 256 SCRA 380 (1996)
 Philippine Naitonal Bank vs. Sayo, Jr., 292 SCRA 202 (1998)