Feati Bank & Trust Company vs.

Court of Appeals
G.R. No. 94209. April 0! "99".#
F$AT% BAN& & TR'(T C)*+AN, -no. C%T,TR'(T BAN&%NG C)R+)RAT%)N/! petitioner!
vs. T0$ C)'RT )F A++$A1(! an2 B$RNAR3) $. 4%11A1'5! respon2ents.
Commer6ial 1a.7 1etters of Cre2it7 Commer6ial transa6tions involvin8 letters of 6re2it are
8overne2 9y t:e rule of stri6t 6omplian6e.;%t is settle2 rule in 6ommer6ial transa6tions involvin8
letters of 6re2it t:at t:e 2o6uments ten2ere2 must stri6tly 6onform to t:e terms of t:e letter of
6re2it. T:e ten2er of 2o6uments 9y t:e 9enefi6iary -seller/ must in6lu2e all 2o6uments re<uire2
9y t:e letter. A 6orrespon2ent 9ank .:i6: 2eparts from .:at :as 9een stipulate2 un2er t:e
letter of 6re2it! as .:en it a66epts a faulty ten2er! a6ts on its o.n risks an2 it may not t:ereafter
9e a9le to re6over from t:e 9uyer or t:e issuin8 9ank! as t:e 6ase may 9e! t:e money t:us pai2
to t:e 9enefi6iary. T:us t:e rule of stri6t 6omplian6e. %n t:e 'nite2 (tates! 6ommer6ial
transa6tions involvin8 letters of 6re2it are 8overne2 9y t:e rule of stri6t 6omplian6e. %n t:e
+:ilippines! t:e same :ol2s true. T:e same rule must also 9e follo.e2. T:e 6ase of An8lo=
(out: Ameri6an Trust Co. v. ':e et al. -">4 N.$. ?4" @"9A/ eBpoun2e2 6learly on t:e rule of
stri6t 6omplian6e. CDe :ave :eretofore :el2 t:at t:ese letters of 6re2it are to 9e stri6tly 6omplie2
.it:! .:i6: 2o6uments! an2 s:ippin8 2o6uments must 9e follo.e2 as state2 in t:e letter. T:ere
is no 2is6retion in t:e 9ank or trust 6ompany to .aive any re<uirements. T:e terms of t:e letter
6onstitutes an a8reement 9et.een t:e pur6:aser an2 t:e 9ank.E
(ame7 (ame7 An irrevo6a9le letter of 6re2it is not synonymous .it: a 6onfirme2 letter of 6re2it7
in an irrevo6a9le letter of 6re2it! t:e issuin8 9ank may not! .it:out t:e 6onsent of t:e 9enefi6iary
an2 t:e appli6ant revoke :is un2ertakin8 un2er t:e letter7 .:ereas! in a 6onfirme2 letter of
6re2it! t:e 6orrespon2ent 9ank 8ives an2 a9solute assuran6e to t:e 9enefi6iary t:at it .ill
un2ertake t:e issuin8 9ankFs o9li8ation as its o.n a66or2in8 to t:e terms an2 6on2itions of t:e
6re2it.;T:e trial 6ourt appears to :ave overlooke2 t:e fa6t t:at an irrevo6a9le 6re2it is not
synonymous .it: a 6onfirme2 6re2it. T:ese types of letters :ave 2ifferent meanin8s an2 t:e
le8al relations arisin8 from t:ere varies. A 6re2it may 9e an irrevo6a9le 6re2it an2 at t:e same
time a 6onfirme2 6re2it or vi6e=versa. An irrevo6a9le 6re2it refers to t:e 2uration of t:e letter of
6re2it. D:at it simply means is t:at t:e issuin8 9ank may not
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4)1. "9I! A+R%1 0! "99"
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Feati Bank & Trust Company vs. Court of Appeals
.it:out t:e 6onsent of t:e 9enefi6iary -seller/ an2 t:e appli6ant -9uyer/ revoke :is un2ertakin8
un2er t:e letter. T:e issuin8 9ank 2oes not reserve t:e ri8:t to revoke t:e 6re2it. )n t:e ot:er
:an2! a 6onfirme2 letter of 6re2it pertains to t:e kin2 of o9li8ation assume2 9y t:e
6orrespon2ent 9ank. %n t:is 6ase! t:e 6orrespon2ent 9ank 8ives an a9solute assuran6e to t:e
9enefi6iary t:at it .ill un2ertake t:e issuin8 9ankFs o9li8ation as its o.n a66or2in8 to t:e terms
an2 6on2itions of t:e 6re2it.
(ame7 (ame7 (ame7 *ere openin8 of a letter of 6re2it 2oes not involve a spe6ifi6 appropriation
of a sum of money in favor of t:e 9enefi6iary.;T:e mere openin8 of a letter of 6re2it! it is to 9e
note2! 2oes not involve a spe6ifi6 appropriation of a sum of money in favor of t:e 9enefi6iary. %t
only si8nifies t:at t:e 9enefi6iary may 9e a9le to 2ra. fun2s upon t:e letter of 6re2it up to t:e
2esi8nate2 amount spe6ifie2 in t:e letter. %t 2oes not 6onvey t:e notion t:at a parti6ular sum of
money :as 9een spe6ifi6ally reserve2 or :as 9een :el2 in trust. D:at a6tually transpires in an
irrevo6a9le 6re2it is t:at t:e 6orrespon2ent 9ank 2oes not re6eive in a2van6e t:e sum of money
from t:e 9uyer or t:e issuin8 9ank. )n t:e 6ontrary! .:en t:e 6orrespon2ent 9ank a66epts t:e
ten2er an2 pays t:e amount state2 in t:e letter! t:e money t:at it 2oles out 6omes not from any
parti6ular fun2 t:at :as 9een a2van6e2 9y t:e issuin8 9ank! rat:er it 8ets t:e money from its
o.n fun2s an2 t:en later seeks reim9ursement from t:e issuin8 9ank.
(ame7 (ame7 (ame7 T:e 6on6ept of 8uarantee vis=a=vis t:e 6on6ept of an irrevo6a9le 6re2it are
in6onsistent .it: ea6: ot:er.;T:e t:eory of 8uarantee relie2 upon 9y t:e Court of Appeals :as
to ne6essarily fail. T:e 6on6ept of 8uarantee vis=a=vis t:e 6on6ept of an irrevo6a9le 6re2it are
in6onsistent .it: ea6: ot:er. %n t:e first pla6e! t:e 8uarantee t:eory 2estroys t:e in2epen2en6e
of t:e 9ankFs responsi9ility from t:e 6ontra6t upon .:i6: it .as opene2. %n t:e se6on2 pla6e! t:e
nature of 9ot: 6ontra6ts is mutually in 6onfli6t .it: ea6: ot:er. %n 6ontra6ts of 8uarantee! t:e
8uarantorFs o9li8ation is merely 6ollateral an2 it arises only upon t:e 2efault of t:e person
primarily lia9le. )n t:e ot:er :an2! in an irrevo6a9le 6re2it t:e 9ank un2ertakes a primary
o9li8ation.
+$T%T%)N for revie. from t:e 2e6ision of t:e Court of Appeals.
T:e fa6ts are state2 in t:e opinion of t:e Court.
+elaeJ! A2riano & Gre8orio for petitioner.
$Je<uiel (. Consulta for private respon2ent.
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('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
G'T%$RR$5! KR.! K.L
T:is is a petition for revie. seekin8 t:e reversal of t:e 2e6ision of t:e Court of Appeals 2ate2
Kune 29! "990 .:i6: affirme2 t:e 2e6ision of t:e Re8ional Trial Court of RiJal 2ate2 )6to9er 20!
"9>I or2erin8 t:e 2efen2ants C:ristiansen an2 t:e petitioner! to pay various sums to
respon2ent 4illaluJ! Mointly an2 severally.
T:e fa6ts of t:e 6ase are as follo.sL
)n Kune ! "9?"! Bernar2o $. 4illaluJ a8ree2 to sell to t:e t:en 2efen2ant ABel C:ristiansen
2!000 6u9i6 meters of lauan lo8s at N2?.00 per 6u9i6 meter F)B.
After inspe6tin8 t:e lo8s! C:ristiansen issue2 pur6:ase or2er No. ?I"?".
)n t:e arran8ements ma2e an2 upon t:e instru6tions of t:e 6onsi8nee! 0anmi Tra2e
3evelopment! 1t2.! 2e (anta Ana! California! t:e (e6urity +a6ifi6 National Bank of 1os An8eles!
California issue2 %rrevo6a9le 1etter of Cre2it No. %C=4I2I> availa9le at si8:t in favor of 4illaluJ
for t:e sum of NH4!000.00! t:e total pur6:ase pri6e of t:e lauan lo8s.
T:e letter of 6re2it .as maile2 to t:e Feati Bank an2 Trust Company -no. Citytrust/ .it: t:e
instru6tion to t:e latter t:at it Cfor.ar2 t:e en6lose2 letter of 6re2it to t:e 9enefi6iary.E -Re6or2s!
4ol. %! p. ""/
T:e letter of 6re2it furt:er provi2e2 t:at t:e 2raft to 9e 2ra.n is on (e6urity +a6ifi6 National
Bank an2 t:at it 9e a66ompanie2 9y t:e follo.in8 2o6umentsL
C". (i8ne2 Commer6ial %nvoi6e in four 6opies s:o.in8 t:e num9er of t:e pur6:ase or2er an2
6ertifyin8 t:at;
a. All terms an2 6on2itions of t:e pur6:ase or2er :ave 9een 6omplie2 .it: an2 t:at all lo8s are
fres: 6ut an2 <uality e<ual to or 9etter t:an t:at 2es6ri9e2 in 0.A. C:ristiansenFs teleB O20" of
*ay "! "9?0! an2 t:at all lo8s :ave 9een marke2 CB$4=$PE.
9. )ne 6omplete set of 2o6uments! in6lu2in8 "Q ori8inal 9ills of la2in8 .as airmaile2 to
Consi8nee an2 +arties to 9e a2vise2 9y 0ans=ABel C:ristiansen! (:ip an2 *er6:an2ise Broker.
6. )ne set of non=ne8otia9le 2o6uments .as airmaile2 to 0an *i Tra2e 3evelopment Company
an2 one set to Consi8nee
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Feati Bank & Trust Company vs. Court of Appeals
an2 +arties to 9e a2vise2 9y 0ans=ABel C:ristiansen! (:ip an2 *er6:an2ise Broker.
2. Tally s:eets in <ua2rupli6ate.
. 2Q )ri8inal Clean on Boar2 )6ean Bills of 1a2in8 .it: Consi8nee an2 +arties to 9e a2vise2
9y 0ans ABel C:ristiansen! s:o.in8 Frei8:t +repai2 an2 marke2 NotifyL
0an *i Tra2e 3evelopment Company! 1t2.! (anta Ana! California
1etter of Cre2it No. 4I2I> 2ate2 Kune ?! "9?"
0an *i Tra2e 3evelopment Company! 1t2.! +.). BoB "04>0! (anta Ana! California 92?"" an2
0an *i Tra2e 3evelopment Company! 1t2.! (eoul! &orea.
4. Certifi6ation from 0an=ABel C:ristiansen! (:ip an2 *er6:an2ise Broker! statin8 t:at lo8s
:ave 9een approve2 prior to s:ipment in a66or2an6e .it: terms an2 6on2itions of
6orrespon2in8 pur6:ase )r2er. -Re6or2! 4ol. " pp. ""="2/
Also in6orporate2 9y referen6e in t:e letter of 6re2it is t:e 'niform Customs an2 +ra6ti6e for
3o6umentary Cre2its -"9I2 Revision/.
T:e lo8s .ere t:ereafter loa2e2 on t:e vessel C5enlin GloryE .:i6: .as 6:artere2 9y
C:ristiansen. Before its loa2in8! t:e lo8s .ere inspe6te2 9y 6ustom inspe6tors Nelo 1aurente!
AleMan2ro Ca9iao! $stanislao $2era from t:e Bureau of Customs -Re6or2s! 4ol. %! p. "24/ an2
representatives Ro8elio Cantu9a an2 Kesus Ta2ena of t:e Bureau of Forestry -Re6or2s! 4ol. %!
pp. "I="?/ all of .:om 6ertifie2 to t:e 8oo2 6on2ition an2 eBporta9ility of t:e lo8s.
After t:e loa2in8 of t:e lo8s .as 6omplete2! t:e C:ief *ate! (:ao (:u Dan8 issue2 a mate
re6eipt of t:e 6ar8o .:i6: state2 t:e same are in 8oo2 6on2ition -Re6or2s! 4ol. %! p. I/.
0o.ever! C:ristiansen refuse2 to issue t:e 6ertifi6ation as re<uire2 in para8rap: 4 of t:e letter
of 6re2it! 2espite several re<uests ma2e 9y t:e private respon2ent.
Be6ause of t:e a9sen6e of t:e 6ertifi6ation 9y C:ristiansen! t:e Feati Bank an2 Trust Company
refuse2 to a2van6e t:e payment on t:e letter of 6re2it.
T:e letter of 6re2it lapse2 on Kune 0! "9?"! -eBten2e2! :o.ever up to Kuly "! "9?"/ .it:out
t:e private respon2ent re6eivin8 any 6ertifi6ation from C:ristiansen.
T:e persistent refusal of C:ristiansen to issue t:e 6ertifi6a=
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('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
tion prompte2 t:e private respon2ent to 9rin8 t:e matter 9efore t:e Central Bank. %n a
memoran2um 2ate2 Au8ust "I! "9?"! t:e Central Bank rule2 t:atL
CB B B pursuant to t:e *onetary Boar2 Resolution No. "20 2ate2 Au8ust ! "9?"! in all lo8
eBports! t:e 6ertifi6ation of t:e lum9er inspe6tors of t:e Bureau of Forestry B B B s:all 9e
6onsi2ere2 final for purposes of ne8otiatin8 2o6uments. Any provision in any letter of 6re2it
6overin8 lo8 eBports re<uirin8 6ertifi6ation of 9uyerFs a8ent or representative t:at sai2 lo8s :ave
9een approve2 for s:ipment as a 6on2ition pre6e2ent to ne8otiation of s:ippin8 2o6uments s:all
not 9e allo.e2.E -Re6or2s! 4ol. %! p. I?/
*ean.:ile! t:e lo8s arrive2 at %n6:on! &orea an2 .ere re6eive2 9y t:e 6onsi8nee! 0anmi Tra2e
3evelopment Company! to .:om C:ristiansen sol2 t:e lo8s for t:e amount of N?.H0 per 6u9i6
meter! for a net profit of N"0 per 6u9i6 meter. 0anmi Tra2e 3evelopment Company! on t:e ot:er
:an2 sol2 t:e lo8s to Taisun8 1um9er Company at %n6:on! &orea. -Rollo! p. 9/
(in6e t:e 2eman2s 9y t:e private respon2ent for C:ristiansen to eBe6ute t:e 6ertifi6ation
prove2 futile! 4illaluJ! on (eptem9er "! "9?"! institute2 an a6tion for man2amus an2 spe6ifi6
performan6e a8ainst C:ristiansen an2 t:e Feati Bank an2 Trust Company -no. Citytrust/ 9efore
t:e t:en Court of First %nstan6e of RiJal. T:e petitioner .as implea2e2 as 2efen2ant 9efore t:e
lo.er 6ourt only to affor2 6omplete relief s:oul2 t:e 6ourt a <uo or2er C:ristiansen to eBe6ute
t:e re<uire2 6ertifi6ation.
T:e 6omplaint praye2 for t:e follo.in8L
". C:ristiansen 9e or2ere2 to issue t:e 6ertifi6ation re<uire2 of :im un2er t:e 1etter of Cre2it7
2. 'pon issuan6e of su6: 6ertifi6ation! or! if t:e 6ourt s:oul2 fin2 it unne6essary! F$AT% BAN&
9e or2ere2 to a66ept ne8otiation of t:e 1etter of Cre2it an2 make payment t:ereon to 4illaluJ7
. )r2er C:ristiansen to pay 2ama8es to t:e plaintiff. -Rollo! p. 9/
)n or a9out "9?9! .:ile t:e 6ase .as still pen2in8 trial! C:ristiansen left t:e +:ilippines .it:out
informin8 t:e Court an2 :is 6ounsel. 0en6e! 4illaluJ! file2 an amen2e2 6omplaint to
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Feati Bank & Trust Company vs. Court of Appeals
make t:e petitioner soli2arily lia9le .it: C:ristiansen.
T:e trial 6ourt! in its or2er 2ate2 Au8ust 29! "9?9! a2mitte2 t:e amen2e2 6omplaint.
After trial! t:e lo.er 6ourt foun2L
CT:e lia9ility of t:e 2efen2ant C0R%(T%AN($N is 9eyon2 2ispute! an2 t:e plaintiffFs ri8:t to
2eman2 payment is a9solute. 3efen2ant C0R%(T%AN($N :avin8 a66epte2 2elivery of t:e lo8s
9y :avin8 t:em loa2e2 in :is 6:artere2 vessel t:e R5enlin GloryF an2 s:ippin8 t:em to t:e
6onsi8nee! :is 9uyer 0an *i Tra2e in %n6:on! (out: &orea -Art. "H>H! Civil Co2e/! :is o9li8ation
to pay t:e pur6:ase or2er :a2 6learly arisen an2 t:e plaintiff may sue an2 re6over t:e pri6e of
t:e 8oo2s -Art. "H9H! i2/.
CT:e Court 9elieves t:at t:e 2efen2ant C0R%(T%AN($N a6te2 in 9a2 fait: an2 2e6eit an2 .it:
intent to 2efrau2 t:e plaintiff! refle6te2 in an2 a88ravate2 9y! not only :is refusal to issue t:e
6ertifi6ation t:at .oul2 :ave ena9le2 .it:out <uestion t:e plaintiff to ne8otiate t:e letter of
6re2it! 9ut :is a66usin8 t:e plaintiff in :is ans.er of frau2! intimi2ation! violen6e an2 2e6eit.
T:ese a66usations sai2 2efen2ant 2i2 not attempt to prove! as in fa6t :e left t:e 6ountry .it:out
even notifyin8 :is o.n la.yer. %t .as to t:e CourtFs min2 a pure s.in2le.
CT:e 2efen2ant Feati Bank an2 Trust Company! on t:e ot:er :an2! must 9e :el2 lia9le to8et:er
.it: :is -si6/ 6o=2efen2ant for :avin8! 9y its .ron8ful a6t! i.e.! its refusal to ne8otiate t:e letter of
6re2it in t:e a9sen6e of C0R%(T%AN($NFs 6ertifi6ation -in spite of t:e Central BankFs rulin8 t:at
t:e re<uirement .as ille8al/! prevente2 payment to t:e plaintiff. T:e sai2 letter of 6re2it! as may
9e seen on its fa6e! is irrevo6a9le an2 t:e issuin8 9ank! t:e (e6urity +a6ifi6 National Bank in
1os An8eles! California! un2ertook 9y its terms t:at t:e same s:all 9e :onore2 upon its
presentment. )n t:e ot:er :an2! t:e notifyin8 9ank! t:e 2efen2ant Feati Bank an2 Trust
Company! 9y a66eptin8 t:e instru6tions from t:e issuin8 9ank! itself assume2 t:e very same
un2ertakin8 as t:e issuin8 9ank un2er t:e terms of t:e letter of 6re2it.
BBB BBB BBB
CT:e Court like.ise a8rees .it: t:e plaintiff t:at t:e 2efen2ant BAN& may also 9e :el2 lia9le
un2er t:e prin6iples an2 la.s on 9ot: trust an2 estoppel. D:en t:e 2efen2ant BAN& a66epte2
its role as t:e notifyin8 an2 ne8otiatin8 9ank for an2 in 9e:alf of t:e issuin8 9ank! it in effe6t
a66epte2 a trust repose2 on it! an2 9e6ame a trustee in relation to plaintiff as t:e 9enefi6iary of
t:e letter of 6re2it. As trustee! it .as t:en 2uty 9oun2 to prote6t t:e interests of t:e plaintiff
un2er t:e terms of t:e letter of 6re2it! an2 must 9e :el2 lia9le for 2ama8es an2 loss resultin8 to
t:e plaintiff from its failure to perform t:at
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('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
o9li8ation.
CFurt:ermore! .:en t:e 2efen2ant BAN& assume2 t:e role of a notifyin8 an2 ne8otiatin8 BAN&
it in effe6t represente2 to t:e plaintiff t:at! if t:e plaintiff 6omplie2 .it: t:e terms an2 6on2itions
of t:e letter of 6re2it an2 presents t:e same to t:e BAN& to8et:er .it: t:e 2o6uments
mentione2 t:erein t:e sai2 BAN& .ill pay t:e plaintiff t:e amount of t:e letter of 6re2it. T:e
Court is 6onvin6e2 t:at it .as upon t:e stren8t: of t:is letter of 6re2it an2 t:is implie2
representation of t:e 2efen2ant BAN& t:at t:e plaintiff 2elivere2 t:e lo8s to 2efen2ant
C0R%(T%AN($N! 6onsi2erin8 t:at t:e issuin8 9ank is a forei8n 9ank .it: .:om plaintiff :a2 no
9usiness 6onne6tions an2 C0R%(T%AN($N :a2 not offere2 any ot:er (e6urity for t:e payment
of t:e lo8s. 3efen2ant BAN& 6annot no. 9e allo.e2 to 2eny its 6ommitment an2 lia9ility un2er
t:e letter of 6re2itL
RA :ol2er of a promissory note 8iven 9e6ause of 8am9lin8 .:o in2orses t:e same to an
inno6ent :ol2er for value an2 .:o assures sai2 party t:at t:e note :as no le8al 2efe6t! is in
estoppel from assertin8 t:at t:ere :a2 9een an ille8al 6onsi2eration for t:e note! an2 so! :e :as
to pay its value.F -Ro2ri8ueJ v. *artineJ! H +:il. I?/.F
CT:e 2efen2ant BAN&! in insistin8 upon t:e 6ertifi6ation of 2efen2ant C0R%(T%AN($N as a
6on2ition pre6e2ent to ne8otiatin8 t:e letter of 6re2it! like.ise in t:e CourtFs opinion a6te2 in 9a2
fait:! not only 9e6ause of t:e 6lear 2e6laration of t:e Central Bank t:at su6: a re<uirement .as
ille8al! 9ut 9e6ause t:e BAN&! .it: all t:e le8al 6ounsel availa9le to it! must :ave kno.n t:at
t:e 6on2ition .as voi2 sin6e it 2epen2e2 on t:e sole .ill of t:e 2e9tor! t:e 2efen2ant
C0R%(T%AN($N. -Art. "">2! Civil Co2e/E -Rollo! pp. 29="/
)n t:e 9asis of t:e fore8oin8 t:e trial 6ourt on )6to9er 20! "9>I! rule2 in favor of t:e private
respon2ent. T:e 2ispositive portion of its 2e6ision rea2sL
CD0$R$F)R$! Mu28ment is :ere9y ren2ere2 for t:e plaintiff! or2erin8 t:e 2efen2ants to pay t:e
plaintiff! Mointly an2 severally! t:e follo.in8 sumsL
Ca/ NH4!000.00 -'(/! or its peso e<uivalent at t:e prevailin8 rate as of t:e time payment is
a6tually ma2e! representin8 t:e pur6:ase pri6e of t:e lo8s7
C9/ +"?!40.00! representin8 8overnment fees an2 6:ar8es pai2 9y plaintiff in 6onne6tion .it:
t:e lo8s s:ipment in <uestion7
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Feati Bank & Trust Company vs. Court of Appeals
C6/ +"0!000.00 as temperate 2ama8es -for trips ma2e to Ba6olo2 an2 &orea/.
CAll t:ree fore8oin8 sums s:all 9e .it: interest t:ereon at "2S per annum from (eptem9er "!
"9?"! .:en t:e 6omplaint .as file2! until fully pai2L
C2/ +?0!000.00 as moral 2ama8es7
Ce/ +0!000.00 as eBemplary 2ama8es7 an2
Cf/ +0!000.00 as attorneyFs fees an2 liti8ation eBpense.E -Rollo! p. 2>/
T:e petitioner re6eive2 a 6opy of t:e 2e6ision on Novem9er ! "9>I. T.o 2ays t:ereafter! or on
Novem9er H! "9>I! it file2 a noti6e of appeal.
)n Novem9er "0! "9>I! t:e private respon2ent file2 a motion for t:e imme2iate eBe6ution of t:e
Mu28ment on t:e 8roun2 t:at t:e appeal of t:e petitioner .as frivolous an2 2ilatory.
T:e trial 6ourt or2ere2 t:e imme2iate eBe6ution of its Mu28ment upon t:e private respon2entFs
filin8 of a 9on2.
T:e petitioner t:en file2 a motion for re6onsi2eration an2 a motion to suspen2 t:e
implementation of t:e .rit of eBe6ution. Bot: motions .ere! :o.ever! 2enie2. T:us! petitioner
file2 9efore t:e Court of Appeals a petition for 6ertiorari an2 pro:i9ition .it: preliminary
inMun6tion to enMoin t:e imme2iate eBe6ution of t:e Mu28ment.
T:e Court of Appeals in a 2e6ision 2ate2 April 9! "9>? 8rante2 t:e petition an2 nullifie2 t:e
or2er of eBe6ution! t:e 2ispositive portion of t:e 2e6ision statesL
CD0$R$F)R$! t:e petition for 6ertiorari is 8rante2. Respon2ent Ku28eFs or2er of eBe6ution
2ate2 3e6em9er 29! "9>I! as .ell as :is or2er 2ate2 Kanuary "4! "9>? 2enyin8 t:e petitionerFs
ur8ent motion to suspen2 t:e .rit of eBe6ution a8ainst its properties are :ere9y annulle2 an2
set asi2e insofar as t:ey are sou8:t to 9e enfor6e2 an2 implemente2 a8ainst t:e petitioner Feati
Bank & Trust Company! no. Citytrust Bankin8 Corporation! 2urin8 t:e pen2en6y of its appeal
from t:e a2verse 2e6ision in Civil Case No. "H"2". 0o.ever! t:e eBe6ution of t:e same
2e6ision a8ainst 2efen2ant ABel C:ristiansen .:o 2i2 not appeal sai2 2e6ision may pro6ee2
unimpe2e2. T:e (:eriffFs levy on t:e petitionerFs properties! an2 t:e noti6e of sale 2ate2
Kanuary "! "9>? -AnneB */! are :ere9y annulle2 an2 set asi2e. -Rollo! p. 44/
H>4
H>4
('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
A motion for re6onsi2eration .as t:ereafter file2 9y t:e private respon2ent. T:e Court of
Appeals! in a resolution 2ate2 Kune 29! "9>? 2enie2 t:e motion for re6onsi2eration.
%n t:e meantime! t:e appeal file2 9y t:e petitioner 9efore t:e Court of Appeals .as 8iven 2ue
6ourse. %n its 2e6ision 2ate2 Kune 29! "990! t:e Court of Appeals affirme2 t:e 2e6ision of t:e
lo.er 6ourt 2ate2 )6to9er 20! "9>I an2 rule2 t:atL
". Feati Bank a2mitte2 in t:e Cspe6ial an2 ne8ative 2efensesE se6tion of its ans.er t:at it .as
t:e 9ank to ne8otiate t:e letter of 6re2it issue2 9y t:e (e6urity +a6ifi6 National Bank of 1os
An8eles! California. -Re6or2! pp. "HI! "H?/. Feati Bank 2i2 notify 4illaluJ of su6: letter of 6re2it.
%n fa6t! as su6: ne8otiatin8 9ank! even 9efore t:e letter of 6re2it .as presente2 for payment!
Feati Bank :a2 alrea2y ma2e an a2van6e payment of +?H!000.00 to 4illaluJ in anti6ipation of
su6: presentment. As t:e ne8otiatin8 9ank! Feati Bank! 9y notifyin8 4illaluJ of t:e letter of 6re2it
in 9e:alf of t:e issuin8 9ank -(e6urity +a6ifi6/! 6onfirme2 su6: letter of 6re2it an2 ma2e t:e
same also its o.n o9li8ation. T:is rulin8 fin2s support in t:e aut:ority 6ite2 9y 4illaluJL
CA 6onfirme2 letter of 6re2it is one in .:i6: t:e notifyin8 9ank 8ives its assuran6e also t:at t:e
openin8 9ankFs o9li8ation .ill 9e performe2. %n su6: a 6ase! t:e notifyin8 9ank .ill not simply
transmit 9ut .ill 6onfirm t:e openin8 9ankFs o9li8ation 9y makin8 it also its o.n un2ertakin8! or
6ommitment! or 8uaranty or o9li8ation.E -Dar2 & 0arfiel2! 2>=29! 6ite2 in A89ayani! Commer6ial
1a.s! "9?> e2ition! p. ??/.
Feati Bank ar8ues furt:er t:at it .oul2 9e 6onsi2ere2 as t:e ne8otiatin8 9ank only upon
ne8otiation of t:e letter of 6re2it. T:is stan6e is untena9le. Assuran6e! 6ommitments or
8uaranties suppose2 to 9e ma2e 9y notifyin8 9anks to t:e 9enefi6iary of a letter of 6re2it! as
2efine2 a9ove! 6an 9e relevant or meanin8ful only .it: respe6t to a future transa6tion! t:at is!
ne8otiation. 0en6e! even 9efore a6tual ne8otiation! t:e notifyin8 9ank! 9y t:e mere a6t of
notifyin8 t:e 9enefi6iary of t:e letter of 6re2it! assumes as of t:at moment t:e o9li8ation of t:e
issuin8 9ank.
2. (in6e Feati Bank a6te2 as 8uarantor of t:e issuin8 9ank! an2 in effe6t also of t:e latterFs
prin6ipal or 6lient! i.e. 0ans ABel=C:ristiansen. -si6/ (u6: 9ein8 t:e 6ase! .:en C:ristiansen
refuse2 to issue t:e 6ertifi6ation! it .as as t:ou8: refusal .as ma2e 9y Feati Bank itself. Feati
Bank s:oul2 :ave taken steps to se6ure t:e 6ertifi6ation from C:ristiansen7 an2! if t:e latter
s:oul2 still refuse to 6omply! to :ale :im to 6ourt. %n s:ort! Feati Bank s:oul2 :ave :onore2
4illaluJFs
H>H
4)1. "9I! A+R%1 0! "99"
H>H
Feati Bank & Trust Company vs. Court of Appeals
2eman2 for payment of :is lo8s 9y virtue of t:e irrevo6a9le letter of 6re2it issue2 in 4illaluJFs
favor an2 8uarantee2 9y Feati Bank.
. T:e 2e6ision promul8ate2 9y t:is Court in CA=G.R. (p No. ""0H"! .:i6: 6ontaine2 t:e
statement C(in6e 4illaluJF 2raft .as not 2ra.n stri6tly in 6omplian6e .it: t:e terms of t:e letter
of 6re2it! Feati BankFs refusal to ne8otiate it .as Mustifie2!E 2i2 not 2ispose of t:is <uestion on
t:e merits. %n t:at 6ase! t:e <uestion involve2 .as Muris2i6tion or 2is6retion! an2 not Mu28ment.
T:e <uote2 pronoun6ement s:oul2 not 9e taken as a preemptive Mu28ment on t:e merits of t:e
present 6ase on appeal.
4. T:e ori8inal a6tion .as for Cman2amus an2Qor spe6ifi6 performan6e.E Feati Bank may not 9e
a party to t:e transa6tion 9et.een C:ristiansen an2 (e6urity +a6ifi6 National Bank on t:e one
:an2! an2 4illaluJ on t:e ot:er :an27 still! 9ein8 8uarantor or a8ent of C:ristiansen an2Qor
(e6urity +a6ifi6 National Bank .:i6: :a2 2ire6tly 2ealt .it: 4illaluJ! Feati Bank may 9e sue2
properly on spe6ifi6 performan6e as a pro6e2ural means 9y .:i6: t:e relief sou8:t 9y 4illaluJ
may 9e entertaine2. -Rollo! pp. 2=/
T:e 2ispositive portion of t:e 2e6ision of t:e Court of Appeals rea2sL
D0$R$F)R$! t:e 2e6ision appeale2 from is affirme27 an2 a66or2in8ly! t:e appeal is :ere9y
2ismisse2. Costs a8ainst t:e petitioner. -Rollo! p. /
0en6e! t:is petition for revie..
T:e petitioner interposes t:e follo.in8 reasons for t:e allo.an6e of t:e petition.
First Reason
T0$ R$(+)N3$NT C)'RT $RR)N$)'(1, C)NC1'3$3 FR)* T0$ $(TAB1%(0$3
FACT( AN3 %N3$$3! D$NT AGA%N(T T0$ $4%3$NC$ AN3 3$C%(%)N )F T0%(
0)N)RAB1$ C)'RT! T0AT +$T%T%)N$R BAN& %( 1%AB1$ )N T0$ 1$TT$R )F CR$3%T
3$(+%T$ +R%4AT$ R$(+)N3$NTF( N)N=C)*+1%ANC$ D%T0 T0$ T$R*( T0$R$)F.
(e6on2 Reason
T0$ R$(+)N3$NT C)'RT C)**%TT$3 AN $RR)R )F 1AD D0$N %T 0$13 T0AT
+$T%T%)N$R BAN&! B, N)T%F,%NG +R%=
H>I
H>I
('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
4AT$ R$(+)N3$NT )F T0$ 1$TT$R )F CR$3%T! C)NF%R*$3 ('C0 CR$3%T AN3
*A3$ T0$ (A*$ A1() %T( )B1%GAT%)N A( G'ARANT)R )F T0$ %(('%NG BAN&.
T:ir2 Reason
T0$ R$(+)N3$NT C)'RT 1%&$D%($ C)**%TT$3 AN $RR)R )F 1AD D0$N %T
AFF%R*$3 T0$ TR%A1 C)'RTF( 3$C%(%)N. -Rollo! p. "2/
T:e prin6ipal issue in t:is 6ase is .:et:er or not a 6orrespon2ent 9ank is to 9e :el2 lia9le un2er
t:e letter of 6re2it 2espite non=6omplian6e 9y t:e 9enefi6iary .it: t:e terms t:ereofT
T:e petition is impresse2 .it: merit.
%t is a settle2 rule in 6ommer6ial transa6tions involvin8 letters of 6re2it t:at t:e 2o6uments
ten2ere2 must stri6tly 6onform to t:e terms of t:e letter of 6re2it. T:e ten2er of 2o6uments 9y
t:e 9enefi6iary -seller/ must in6lu2e all 2o6uments re<uire2 9y t:e letter. A 6orrespon2ent 9ank
.:i6: 2eparts from .:at :as 9een stipulate2 un2er t:e letter of 6re2it! as .:en it a66epts a
faulty ten2er! a6ts on its o.n risks an2 it may not t:ereafter 9e a9le to re6over from t:e 9uyer or
t:e issuin8 9ank! as t:e 6ase may 9e! t:e money t:us pai2 to t:e 9enefi6iary. T:us t:e rule of
stri6t 6omplian6e.
%n t:e 'nite2 (tates! 6ommer6ial transa6tions involvin8 letters of 6re2it are 8overne2 9y t:e rule
of stri6t 6omplian6e. %n t:e +:ilippines! t:e same :ol2s true. T:e same rule must also 9e
follo.e2.
T:e 6ase of An8lo=(out: Ameri6an Trust Co. v. ':e et al. -">4 N.$. ?4" @"9A/ eBpoun2e2
6learly on t:e rule of stri6t 6omplian6e.
CDe :ave :eretofore :el2 t:at t:ese letters of 6re2it are to 9e stri6tly 6omplie2 .it:! .:i6:
2o6uments! an2 s:ippin8 2o6uments must 9e follo.e2 as state2 in t:e letter. T:ere is no
2is6retion in t:e 9ank or trust 6ompany to .aive any re<uirements. T:e terms of t:e letter
6onstitutes an a8reement 9et.een t:e pur6:aser an2 t:e 9ank.E -p. ?4/
Alt:ou8: in some Ameri6an 2e6isions! 9anks are 8rante2 a little 2is6retion to a66ept a faulty
ten2er as .:en t:e ot:er
H>?
4)1. "9I! A+R%1 0! "99"
H>?
Feati Bank & Trust Company vs. Court of Appeals
2o6uments may 9e 6onsi2ere2 immaterial or superfluous! t:is t:eory 6oul2 lea2 to 2an8erous
pre6e2ents. (in6e a 9ank 2eals only .it: 2o6uments! it is not in a position to 2etermine .:et:er
or not t:e 2o6uments re<uire2 9y t:e letter of 6re2it are material or superfluous. T:e mere fa6t
t:at t:e 2o6ument .as spe6ifie2 t:erein rea2ily means t:at t:e 2o6ument is of vital importan6e
to t:e 9uyer.
*oreover! t:e in6orporation of t:e 'niform Customs an2 +ra6ti6e for 3o6umentary Cre2it
-'.C.+. for s:ort/ in t:e letter of 6re2it resulte2 in t:e appli6a9ility of t:e sai2 rules in t:e
8overnan6e of t:e relations 9et.een t:e parties.
An2 even if t:e '.C.+. .as not in6orporate2 in t:e letter of 6re2it! .e :ave alrea2y rule2 in t:e
affirmative as to t:e appli6a9ility of t:e '.C.+. in 6ases 9efore us.
%n Bank of +.%. v. 3e Nery -H (CRA 2HI @"9?0A/! .e pronoun6e2 t:at t:e o9servan6e of t:e
'.C.+. in t:is Muris2i6tion is Mustifie2 9y Arti6le 2 of t:e Co2e of Commer6e. Arti6le 2 of t:e Co2e
of Commer6e enun6iates t:at in t:e a9sen6e of any parti6ular provision in t:e Co2e of
Commer6e! 6ommer6ial transa6tions s:all 9e 8overne2 9y t:e usa8es an2 6ustoms 8enerally
o9serve2.
T:ere 9ein8 no spe6ifi6 provision .:i6: 8overns t:e le8al 6ompleBities arisin8 from transa6tions
involvin8 letters of 6re2it not only 9et.een t:e 9anks t:emselves 9ut also 9et.een 9anks an2
seller an2Qor 9uyer! t:e appli6a9ility of t:e '.C.+. is un2enia9le.
T:e pertinent provisions of t:e '.C.+. -"9I2 Revision/ areL
Arti6le .
CAn irrevo6a9le 6re2it is a 2efinite un2ertakin8 on t:e part of t:e issuin8 9ank an2 6onstitutes
t:e en8a8ement of t:at 9ank to t:e 9enefi6iary an2 9ona fi2e :ol2ers of 2rafts 2ra.n an2Qor
2o6uments presente2 t:ereun2er! t:at t:e provisions for payment! a66eptan6e or ne8otiation
6ontaine2 in t:e 6re2it .ill 9e 2uly fulfille2! provi2e2 t:at all t:e terms an2 6on2itions of t:e
6re2it are 6omplie2 .it:.
CAn irrevo6a9le 6re2it may 9e a2vise2 to a 9enefi6iary t:rou8: anot:er 9ank -t:e a2visin8 9ank/
.it:out en8a8ement on t:e part of t:at 9ank! 9ut .:en an issuin8 9ank aut:oriJes or re<uests
anot:er 9ank to 6onfirm its irrevo6a9le 6re2it an2 t:e latter 2oes so! su6: 6onfirmation
6onstitutes a 2efinite un2ertakin8 of t:e 6onfirmin8 9ank . . . .E
H>>
H>>
('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
Arti6le ?. CBanks must eBamine all 2o6uments .it: reasona9le 6are to as6ertain t:at t:ey
appear on t:eir fa6e to 9e in a66or2an6e .it: t:e terms an2 6on2itions of t:e 6re2it.E
Arti6le >.
C+ayment! a66eptan6e or ne8otiation a8ainst 2o6uments .:i6: appear on t:eir fa6e to 9e in
a66or2an6e .it: t:e terms an2 6on2itions of a 6re2it 9y a 9ank aut:oriJe2 to 2o so! 9in2s t:e
party 8ivin8 t:e aut:oriJation to take up 2o6uments an2 reim9urse t:e 9ank .:i6: :as effe6te2
t:e payment! a66eptan6e or ne8otiation.E -$mp:asis (upplie2/
'n2er t:e fore8oin8 provisions of t:e '.C.+.! t:e 9ank may only ne8otiate! a66ept or pay! if t:e
2o6uments ten2ere2 to it are on t:eir fa6e in a66or2an6e .it: t:e terms an2 6on2itions of t:e
2o6umentary 6re2it. An2 sin6e a 6orrespon2ent 9ank! like t:e petitioner! prin6ipally 2eals only
.it: 2o6uments! t:e a9sen6e of any 2o6ument re<uire2 in t:e 2o6umentary 6re2it Mustifies t:e
refusal 9y t:e 6orrespon2ent 9ank to ne8otiate! a66ept or pay t:e 9enefi6iary! as it is not its
o9li8ation to look 9eyon2 t:e 2o6uments. %t merely :as to rely on t:e 6ompleteness of t:e
2o6uments ten2ere2 9y t:e 9enefi6iary.
%n re8ar2 to t:e rulin8 of t:e lo.er 6ourt an2 affirme2 9y t:e Court of Appeals t:at t:e petitioner
is not a notifyin8 9ank 9ut a 6onfirmin8 9ank! .e fin2 t:e same erroneous.
T:e trial 6ourt .ron8ly miBe2 up t:e meanin8 of an irrevo6a9le 6re2it .it: t:at of a 6onfirme2
6re2it. %n its 2e6ision! t:e trial 6ourt rule2 t:at t:e petitioner! in a66eptin8 t:e o9li8ation to notify
t:e respon2ent t:at t:e irrevo6a9le 6re2it :as 9een transmitte2 to t:e petitioner on 9e:alf of t:e
private respon2ent! :as 6onfirme2 t:e letter.
T:e trial 6ourt appears to :ave overlooke2 t:e fa6t t:at an irrevo6a9le 6re2it is not synonymous
.it: a 6onfirme2 6re2it. T:ese types of letters :ave 2ifferent meanin8s an2 t:e le8al relations
arisin8 from t:ere varies. A 6re2it may 9e an irrevo6a9le 6re2it an2 at t:e same time a
6onfirme2 6re2it or vi6e=versa.
An irrevo6a9le 6re2it refers to t:e 2uration of t:e letter of 6re2it. D:at is simply means is t:at
t:e issuin8 9ank may not
H>9
4)1. "9I! A+R%1 0! "99"
H>9
Feati Bank & Trust Company vs. Court of Appeals
.it:out t:e 6onsent of t:e 9enefi6iary -seller/ an2 t:e appli6ant -9uyer/ revoke :is un2ertakin8
un2er t:e letter. T:e issuin8 9ank 2oes not reserve t:e ri8:t to revoke t:e 6re2it. )n t:e ot:er
:an2! a 6onfirme2 letter of 6re2it pertains to t:e kin2 of o9li8ation assume2 9y t:e
6orrespon2ent 9ank. %n t:is 6ase! t:e 6orrespon2ent 9ank 8ives an a9solute assuran6e to t:e
9enefi6iary t:at it .ill un2ertake t:e issuin8 9ankFs o9li8ation as its o.n a66or2in8 to t:e terms
an2 6on2itions of t:e 6re2it. -A89ayani! Commer6ial 1a.s of t:e +:ilippines! 4ol. "! pp. >"=>/
0en6e! t:e mere fa6t t:at a letter of 6re2it is irrevo6a9le 2oes not ne6essarily imply t:at t:e
6orrespon2ent 9ank in a66eptin8 t:e instru6tions of t:e issuin8 9ank :as also 6onfirme2 t:e
letter of 6re2it. Anot:er error .:i6: t:e lo.er 6ourt an2 t:e Court of Appeals ma2e .as to
6onfuse t:e o9li8ation assume2 9y t:e petitioner.
%n 6ommer6ial transa6tions involvin8 letters of 6re2it! t:e fun6tions assume2 9y a 6orrespon2ent
9ank are 6lassifie2 a66or2in8 to t:e o9li8ations taken up 9y it. T:e 6orrespon2ent 9ank may 9e
6alle2 a notifyin8 9ank! a ne8otiatin8 9ank! or a 6onfirmin8 9ank.
%n 6ase of a notifyin8 9ank! t:e 6orrespon2ent 9ank assumes no lia9ility eB6ept to notify an2Qor
transmit to t:e 9enefi6iary t:e eBisten6e of t:e letter of 6re2it. -&ronman an2 Co.! %n6. v. +u9li6
National Bank of Ne. ,ork! 2"> N.,.(. I"I @"92IA7 (:aterian! $Bport=%mport Bankin8! p. 292!
6ite2 in A89ayani! Commer6ial 1a.s of t:e +:ilippines! 4ol. "! p. ?I/ A ne8otiatin8 9ank! on t:e
ot:er :an2! is a 6orrespon2ent 9ank .:i6: 9uys or 2is6ounts a 2raft un2er t:e letter of 6re2it. %ts
lia9ility is 2epen2ent upon t:e sta8e of t:e ne8otiation. %f 9efore ne8otiation! it :as no lia9ility
.it: respe6t to t:e seller 9ut after ne8otiation! a 6ontra6tual relations:ip .ill t:en prevail
9et.een t:e ne8otiatin8 9ank an2 t:e seller. -(6anlon v. First National Bank of *eBi6o! "I2
N.$. HI? @"92>A7 (:aterian! $Bport=%mport Bankin8! p. 29! 6ite2 in A89ayani! Commer6ial 1a.s
of t:e +:ilippines! 4ol. "! p. ?I/
%n t:e 6ase of a 6onfirmin8 9ank! t:e 6orrespon2ent 9ank assumes a 2ire6t o9li8ation to t:e
seller an2 its lia9ility is a primary one as if t:e 6orrespon2ent 9ank itself :a2 issue2 t:e letter of
6re2it. -(:aterian! $Bport=%mport Bankin8! p. 294! 6ite2 in A89ayani Commer6ial 1a.s of t:e
+:ilippines! 4ol. "!
H90
H90
('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
p. ??/
%n t:is 6ase! t:e letter merely provi2e2 t:at t:e petitioner Cfor.ar2 t:e en6lose2 ori8inal 6re2it to
t:e 9enefi6iary.E -Re6or2s! 4ol. %! p. ""/ Consi2erin8 t:e aforesai2 instru6tion to t:e petitioner 9y
t:e issuin8 9ank! t:e (e6urity +a6ifi6 National Bank! it is in2u9ita9le t:at t:e petitioner is only a
notifyin8 9ank an2 not a 6onfirmin8 9ank as rule2 9y t:e 6ourts 9elo..
%f t:e petitioner .as a 6onfirmin8 9ank! t:en a 6ate8ori6al 2e6laration s:oul2 :ave 9een state2
in t:e letter of 6re2it t:at t:e petitioner is to :onor all 2rafts 2ra.n in 6onformity .it: t:e letter of
6re2it. D:at .as simply state2 t:erein .as t:e instru6tion t:at t:e petitioner for.ar2 t:e ori8inal
letter of 6re2it to t:e 9enefi6iary.
(in6e t:e petitioner .as only a notifyin8 9ank! its responsi9ility .as solely to notify an2Qor
transmit t:e 2o6umentary of 6re2it to t:e private respon2ent an2 its o9li8ation en2s t:ere.
T:e notifyin8 9ank may su88est to t:e seller its .illin8ness to ne8otiate! 9ut t:is fa6t alone 2oes
not imply t:at t:e notifyin8 9ank promises to a66ept t:e 2raft 2ra.n un2er t:e 2o6umentary
6re2it.
A notifyin8 9ank is not a privy to t:e 6ontra6t of sale 9et.een t:e 9uyer an2 t:e seller! its
relations:ip is only .it: t:at of t:e issuin8 9ank an2 not .it: t:e 9enefi6iary to .:om :e
assumes no lia9ility. %t follo.s t:erefore t:at .:en t:e petitioner refuse2 to ne8otiate .it: t:e
private respon2ent! t:e latter :as no 6ause of a6tion a8ainst t:e petitioner for t:e enfor6ement
of :is ri8:ts un2er t:e letter. -(ee &ronman an2 Co.! %n6. v. +u9li6 National Bank of Ne. ,ork!
supra/
%n or2er t:at t:e petitioner may 9e :el2 lia9le un2er t:e letter! t:ere s:oul2 9e proof t:at t:e
petitioner 6onfirme2 t:e letter of 6re2it.
T:e re6or2s are! :o.ever! 9ereft of any evi2en6e .:i6: .ill 2is6lose t:at t:e petitioner :as
6onfirme2 t:e letter of 6re2it. T:e only evi2en6e in t:is 6ase! an2 upon .:i6: t:e private
respon2ent premise2 :is ar8ument! is t:e +?H!000.00 loan eBten2e2 9y t:e petitioner to :im.
T:e private respon2ent relies on t:is loan to a2van6e :is 6ontention t:at t:e letter of 6re2it .as
6onfirme2 9y t:e petitioner. 0e 6laims t:at t:e loan .as 8rante2 9y t:e petitioner to :im! Cin
anti6ipation of t:e presentment of t:e letter of 6re2it.E
H9"
4)1. "9I! A+R%1 0! "99"
H9"
Feati Bank & Trust Company vs. Court of Appeals
T:e proposition a2van6e2 9y t:e private respon2ent :as no 9asis in fa6t or la.. T:at t:e loan
a8reement 9et.een t:em 9e 6onstrue2 as an a6t of 6onfirmation is rat:er far=fet6:e2! for it
2epen2s prin6ipally on spe6ulative reasonin8.
As earlier state2! t:ere must :ave 9een an a9solute assuran6e on t:e part of t:e petitioner t:at
it .ill un2ertake t:e issuin8 9ankFs o9li8ation as its o.n. 4erily! t:e loan a8reement it entere2
into 6annot 9e 6ate8oriJe2 as an emp:ati6 assuran6e t:at it .ill 6arry out t:e issuin8 9ankFs
o9li8ation as its o.n.
T:e loan a8reement is more reasona9ly 6lassifie2 as an isolate2 transa6tion in2epen2ent of t:e
2o6umentary 6re2it.
)f 6ourse! it may 9e presume2 t:at t:e petitioner loane2 t:e money to t:e private respon2ent in
anti6ipation t:at it .oul2 later 9e pai2 9y t:e latter upon t:e re6eipt of t:e letter. ,et! .e .oul2
:ave no 9asis to rule 2efinitively t:at su6: Ca6tE s:oul2 9e 6onstrue2 as an a6t of 6onfirmation.
T:e private respon2ent no 2ou9t .as in nee2 of money in loa2in8 t:e lo8s on t:e s:ip C5enlin
GloryE an2 t:e only .ay to satisfy t:is nee2 .as to 9orro. money from t:e petitioner .:i6: t:e
latter 8rante2. From t:ese 6ir6umstan6es! a lo8i6al 6on6lusion t:at 6an 9e 8at:ere2 is t:at t:e
letter of 6re2it .as merely to serve as a 6ollateral.
At t:e most! .:en t:e petitioner eBten2e2 t:e loan to t:e private respon2ent! it assume2 t:e
6:ara6ter of a ne8otiatin8 9ank. $ven t:en! t:e petitioner .ill still not 9e lia9le! for a ne8otiatin8
9ank 9efore ne8otiation :as no 6ontra6tual relations:ip .it: t:e seller.
T:e 6ase of (6anlon v. First National Bank -supra/ perspi6uously eBplaine2 t:e relations:ip
9et.een t:e seller an2 t:e ne8otiatin8 9ank! viJL
%t may 9uy or refuse to 9uy as it 6:ooses. $<ually! it must 9e true t:at it o.es no 6ontra6tual
2uty to.ar2 t:e person for .:ose 9enefit t:e letter is .ritten to 2is6ount or pur6:ase any 2raft
2ra.n a8ainst t:e 6re2it. No relations:ip of a8ent an2 prin6ipal! or of trustee an2 6estui!
9et.een t:e re6eivin8 9ank an2 t:e 9enefi6iary of t:e letter is esta9lis:e2.E -+. HI>/
D:et:er t:erefore t:e petitioner is a notifyin8 9ank or a ne8otiatin8 9ank! it 6annot 9e :el2
lia9le. A9sent any 2efinitive
H92
H92
('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
proof t:at it :as 6onfirme2 t:e letter of 6re2it or :as a6tually ne8otiate2 .it: t:e private
respon2ent! t:e refusal 9y t:e petitioner to a66ept t:e ten2er of t:e private respon2ent is
Mustifie2.
%n re8ar2 to t:e fin2in8 t:at t:e petitioner 9e6ame a Ctrustee in relation to t:e plaintiff -private
respon2ent/ as t:e 9enefi6iary of t:e letter of 6re2it!E t:e same :as no le8al 9asis.
A trust :as 9een 2efine2 as t:e Cri8:t! enfor6ea9le solely in e<uity! to t:e 9enefi6ial enMoyment
of property t:e le8al title to .:i6: is veste2 to anot:er.E ->9 C.K.(. ?"2/
T:e 6on6ept of a trust presupposes t:e eBisten6e of a spe6ifi6 property .:i6: :as 9een
6onferre2 upon t:e person for t:e 9enefit of anot:er. %n or2er t:erefore for t:e trust t:eory of t:e
private respon2ent to 9e sustaine2! t:e petitioner s:oul2 :ave :a2 in its possession a sum of
money as spe6ifi6 fun2 a2van6e2 to it 9y t:e issuin8 9ank an2 to 9e :el2 in trust 9y it in favor of
t:e private respon2ent. T:is 2oes not o9tain in t:is 6ase.
T:e mere openin8 of a letter of 6re2it! it is to 9e note2! 2oes not involve a spe6ifi6 appropriation
of a sum of money in favor of t:e 9enefi6iary. %t only si8nifies t:at t:e 9enefi6iary may 9e a9le to
2ra. fun2s upon t:e letter of 6re2it up to t:e 2esi8nate2 amount spe6ifie2 in t:e letter. %t 2oes
not 6onvey t:e notion t:at a parti6ular sum of money :as 9een spe6ifi6ally reserve2 or :as 9een
:el2 in trust.
D:at a6tually transpires in an irrevo6a9le 6re2it is t:at t:e 6orrespon2ent 9ank 2oes not re6eive
in a2van6e t:e sum of money from t:e 9uyer or t:e issuin8 9ank. )n t:e 6ontrary! .:en t:e
6orrespon2ent 9ank a66epts t:e ten2er an2 pays t:e amount state2 in t:e letter! t:e money t:at
it 2oles out 6omes not from any parti6ular fun2 t:at :as 9een a2van6e2 9y t:e issuin8 9ank!
rat:er it 8ets t:e money from its o.n fun2s an2 t:en later seeks reim9ursement from t:e issuin8
9ank.
Grantin8 t:at a trust :as 9een 6reate2! still! t:e petitioner may not 9e 6onsi2ere2 a trustee. As
t:e petitioner is only a notifyin8 9ank! its a66eptan6e of t:e instru6tions of t:e issuin8 9ank .ill
not 6reate estoppel on its part resultin8 in t:e a66eptan6e of t:e trust. +re6isely! as a notifyin8
9ank! its only o9li8ation is to notify t:e private respon2ent of t:e eBisten6e of t:e letter of 6re2it.
0o. t:en 6an su6: 6reate estoppel .:en t:at is its only 2uty un2er t:e la.T
H9
4)1. "9I! A+R%1 0! "99"
H9
Feati Bank & Trust Company vs. Court of Appeals
De also fin2 erroneous t:e statement of t:e Court of Appeals t:at t:e petitioner Ca6te2 as a
8uarantor of t:e issuin8 9ank an2 in effe6t also of t:e latterFs prin6ipal or 6lient! i.e.! 0ans ABel
C:ristiansen.E
%t is a fun2amental rule t:at an irrevo6a9le 6re2it is in2epen2ent not only of t:e 6ontra6t
9et.een t:e 9uyer an2 t:e seller 9ut also of t:e 6re2it a8reement 9et.een t:e issuin8 9ank an2
t:e 9uyer. -(ee &in82om of (.e2en v. Ne. ,ork Trust Co.! 9I N.,.(. 22 ??9 @"949A/ T:e
relations:ip 9et.een t:e 9uyer -C:ristiansen/ an2 t:e issuin8 9ank -(e6urity +a6ifi6 National
Bank/ is entirely in2epen2ent from t:e letter of 6re2it issue2 9y t:e latter.
T:e 6ontra6t 9et.een t:e t.o :as no 9earin8 as to t:e non6omplian6e 9y t:e 9uyer .it: t:e
a8reement 9et.een t:e latter an2 t:e seller. T:eir 6ontra6t is similar to t:at of a 6ontra6t of
servi6es -to open t:e letter of 6re2it/ an2 not t:at of a8en6y as .as intimate2 9y t:e Court of
Appeals. T:e unMustifie2 refusal t:erefore 9y C:ristiansen to issue t:e 6ertifi6ation un2er t:e
letter of 6re2it s:oul2 not like.ise 9e 6:ar8e2 to t:e issuin8 9ank.
As a mere notifyin8 9ank! not only 2oes t:e petitioner not :ave any 6ontra6tual relations:ip .it:
t:e 9uyer! it :as also not:in8 to 2o .it: t:e 6ontra6t 9et.een t:e issuin8 9ank an2 t:e 9uyer
re8ar2in8 t:e issuan6e of t:e letter of 6re2it.
T:e t:eory of 8uarantee relie2 upon 9y t:e Court of Appeals :as to ne6essarily fail. T:e 6on6ept
of 8uarantee vis=a=vis t:e 6on6ept of an irrevo6a9le 6re2it are in6onsistent .it: ea6: ot:er.
%n t:e first pla6e! t:e 8uarantee t:eory 2estroys t:e in2epen2en6e of t:e 9ankFs responsi9ility
from t:e 6ontra6t upon .:i6: it .as opene2. %n t:e se6on2 pla6e! t:e nature of 9ot: 6ontra6ts is
mutually in 6onfli6t .it: ea6: ot:er. %n 6ontra6ts of 8uarantee! t:e 8uarantorFs o9li8ation is
merely 6ollateral an2 it arises only upon t:e 2efault of t:e person primarily lia9le. )n t:e ot:er
:an2! in an irrevo6a9le 6re2it t:e 9ank un2ertakes a primary o9li8ation. -(ee National Bank of
$a8le +ass! TeB v. Ameri6an National Bank of (an Fran6is6o! 2>2 F. ? @"922A/
T:e relations:ip 9et.een t:e issuin8 9ank an2 t:e notifyin8 9ank! on t:e 6ontrary! is more
similar to t:at of an a8en6y an2 not t:at of a 8uarantee. %t may 9e o9serve2 t:at t:e notifyin8
H94
H94
('+R$*$ C)'RT R$+)RT( ANN)TAT$3
Feati Bank & Trust Company vs. Court of Appeals
9ank is merely to follo. t:e instru6tions of t:e issuin8 9ank .:i6: is to notify or to transmit t:e
letter of 6re2it to t:e 9enefi6iary. -(ee &ronman v. +u9li6 National Bank of Ne. ,ork! supra/. %ts
6ommitment is only to notify t:e 9enefi6iary. %t 2oes not un2ertake any assuran6e t:at t:e
issuin8 9ank .ill perform .:at :as 9een man2ate2 to or eBpe6te2 of it. As an a8ent of t:e
issuin8 9ank! it :as only to follo. t:e instru6tions of t:e issuin8 9ank an2 to it alone is it
o9li8ate2 an2 not to 9uyer .it: .:om it :as no 6ontra6tual relations:ip.
%n fa6t t:e notifyin8 9ank! even if t:e seller ten2ers all t:e 2o6uments re<uire2 un2er t:e letter of
6re2it! may refuse to ne8otiate or a66ept t:e 2rafts 2ra.n t:ereun2er an2 it .ill still not 9e :el2
lia9le for its only en8a8ement is to notify an2Qor transmit to t:e seller t:e letter of 6re2it.
Finally! even if .e assume t:at t:e petitioner is a 6onfirmin8 9ank! t:e petitioner 6annot 9e
for6e2 to pay t:e amount un2er t:e letter. As .e :ave previously eBplaine2! t:ere .as a failure
on t:e part of t:e private respon2ent to 6omply .it: t:e terms of t:e letter of 6re2it.
T:e failure 9y :im to su9mit t:e 6ertifi6ation .as fatal to :is 6ase. T:e '.C.+. .:i6: is
in6orporate2 in t:e letter of 6re2it or2ains t:at t:e 9ank may only pay t:e amount spe6ifie2
un2er t:e letter if all t:e 2o6uments ten2ere2 are on t:eir fa6e in 6omplian6e .it: t:e 6re2it. %t is
not taske2 .it: t:e 2uty of as6ertainin8 t:e reason or reasons .:y 6ertain 2o6uments :ave not
9een su9mitte2! as it is only 6on6erne2 .it: t:e 2o6uments. T:us! .:et:er or not t:e 9uyer :as
performe2 :is responsi9ility to.ar2s t:e seller is not t:e 9ankFs pro9lem.
De are a.are of t:e inMusti6e 6ommitte2 9y C:ristiansen on t:e private respon2ent 9ut .e are
2e6i2in8 t:e 6ontroversy on t:e 9asis of .:at t:e la. is! for t:e la. is not meant to favor only
t:ose .:o :ave 9een oppresse2! t:e la. is to 8overn future relations amon8 people as .ell. %ts
6ommitment is to all an2 not to a sin8le in2ivi2ual. T:e fait: of t:e people in our Musti6e system
may 9e ero2e2 if .e are to 2e6i2e not .:at t:e la. states 9ut .:at .e 9elieve it s:oul2 2e6lare.
3ura leB se2 leB.
Consi2erin8 t:e fore8oin8! t:e materiality of rulin8 upon t:e vali2ity of t:e 6ertifi6ate of approval
re<uire2 of t:e private respon2ent to su9mit un2er t:e letter of 6re2it! :as 9e6ome insi8nifi6ant.
H9H
4)1. "9I! A+R%1 0! "99"
H9H
Feati Bank & Trust Company vs. Court of Appeals
%n any event! .e affirm t:e earlier rulin8 of t:e Court of Appeals 2ate2 April 9! "9>? in re8ar2 to
t:e petition 9efore it for 6ertiorari an2 pro:i9ition .it: preliminary inMun6tion! to .itL
CT:ere is no merit in t:e respon2entFs 6ontention t:at t:e 6ertifi6ation re<uire2 in 6on2ition No. 4
of t:e letter of 6re2it .as Cpatently ille8al.E At t:e time t:e letter of 6re2it .as issue2 t:ere .as
no Central Bank re8ulation pro:i9itin8 su6: a 6on2ition in t:e letter of 6re2it. T:e letter of 6re2it
-$B:. C/ .as issue2 on Kune ?! "9?"! more t:an t.o mont:s 9efore t:e issuan6e of t:e Central
Bank *emoran2um on Au8ust "I! "9?" 2isallo.in8 su6: a 6on2ition in a letter of 6re2it. %n fa6t
t:e letter of 6re2it :a2 alrea2y eBpire2 on Kuly 0! "9?" .:en t:e Central Bank memoran2um
.as issue2. %n any event! it is 2iffi6ult to see :o. su6: a 6on2ition 6oul2 9e 6ate8oriJe2 as
ille8al or unreasona9le sin6e all t:at plaintiff 4illaluJ! as seller of t:e lo8s! 6oul2 an2 s:oul2 :ave
2one .as to refuse to loa2 t:e lo8s on t:e vessel C5enlin GloryE! unless C:ristiansen first issue2
t:e re<uire2 6ertifi6ation t:at t:e lo8s :a2 9een approve2 9y :im to 9e in a66or2an6e .it: t:e
terms an2 6on2itions of :is pur6:ase or2er. Apparently! 4illaluJ .as in too mu6: :aste to s:ip
:is lo8s .it:out takin8 all 2ue pre6autions to assure t:at all t:e terms an2 6on2itions of t:e letter
of 6re2it :a2 9een stri6tly 6omplie2 .it:! so t:at t:ere .oul2 9e no :it6: in its ne8otiation.E
-Rollo! p. >/
D0$R$F)R$! t:e C)'RT R$()14$3 to GRANT t:e petition an2 :ere9y N'11%F%$( an2
($T( A(%3$ t:e 2e6ision of t:e Court of Appeals 2ate2 Kune 29! "990. T:e amen2e2
6omplaint in Civil Case No. "H"2" is 3%(*%(($3.
() )R3$R$3.
Feli6iano! Bi2in an2 3avi2e! Kr.! KK.! 6on6ur.
Fernan -C.K.! C:airman/! No part;relate2 to 6ounsel for petitioner.
+etition 8rante2. 3e6ision nullifie2 an2 set asi2e.
Note.;A trust re6eipt transa6tion is a mere se6urity a8reement. -(ia vs. +eople! "2" (CRA
IHH./
;;o0o;; @Feati Bank & Trust Company vs. Court of Appeals! "9I (CRA H?I-"99"/A