G.R. No. 186063, January 15, 2014
PHILIPPINE NATIONAL BANK, Petitioner, v. SAN MIGUEL CORPORATION, Respondent.
D E C I S I O N
On July 1, 1996, respondent San Miguel Corporation (SMC, for brevity) entered into an Exclusive Dealership Agreement with a certain Rodolfo R. Goroza (Goroza, hereafter), wherein the latter was given by SMC the right to trade, deal, market or otherwise sell its various beer products.
Goroza applied for a credit line with SMC, but one of the requirements for the credit line was a letter of credit. Thus, Goroza applied [for] and was granted a letter of credit by the PNB in the amount of two million pesos (P2,000,000.00). Under the credit agreement, the PNB has the obligation to release the proceeds of Goroza's credit line to SMC upon presentation of the invoices and official receipts of Goroza's purchases of SMC beer products to the PNB, Butuan Branch.
On August 1, 1996, Goroza availed of his credit line with PNB and started selling SMC's beer products x x x.
On February 11, 1997, Goroza applied for an additional credit line with the PNB. The latter granted Goroza a one (1) year revolving credit line in the amount not exceeding two million four hundred [thousand] pesos (P2,400,000.00). Thus, Goroza's total [credit line] reached four million four hundred thousand pesos (P4,400,000.00) x x x. Initially, Goroza was able to pay his credit purchases with SMC x x x. Sometime in January 1998, however, Goroza started to become delinquent with his accounts.
Demands to pay the amount of three million seven hundred twenty-two thousand four hundred forty pesos and 88/100 (P3,722,440.88) were made by SMC against Goroza and PNB, but neither of them paid. Thus, on April 23, 2003, SMC filed a Complaint for collection of sum of money against PNB and Goroza with the respondent Regional Trial Court Branch 3, Butuan City.3
WHEREFORE, the Court hereby renders judgment in favor of plaintiff [SMC] ordering defendant Rodolfo Goroza to pay plaintiff the following:chanroblesvirtuallawlibrary
1. The principal amount of P3,722,440.00;
2. The interest of 12% per annum on the principal amount reckoned from January 27, 1998 up to the time of execution of the Judgment of this case;
3. Attorney's fees of P30,000.00;
4. Litigation expenses of P20,000.00.
x x x x
Finding the Notice of Appeal filed within the reglementary period and the corresponding appeal fee paid, x x x. The same is hereby given due course.
Considering that the case as against defendant PNB is still on-going, let the Record in this case insofar as defendant Rodolfo R. Goroza is concerned, be reproduced at the expense of defendant-appellant so that the same can be forwarded to the Court of Appeals, together with the exhibits and transcript of stenographic notes in the required number of copies.
The Court omitted by inadvertence to insert in its decision dated May 10, 2005 the phrase “without prejudice to the decision that will be made against the other co-defendant, PNB, which was not declared in default.”ChanRoblesVirtualawlibrary
WHEREFORE, the phrase “without prejudice to the decision made against the other defendant PNB which was not declared in default” shall be inserted in the dispositive portion of said decision.
The Court's Order dated July 25, 2005 is hereby amended to include the phrase “this appeal applies only to defendant Rolando Goroza and without prejudice to the continuance of the hearing on the other defendant Philippine National Bank”.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURT WAS CORRECT IN RENDERING A SUPPLEMENTAL JUDGMENT AND AMENDED ORDER AGAINST THE BANK DESPITE THE PERFECTION OF APPEAL OF ONE OF THE DEFENDANTS.
THE COURT OF APPEALS ERRED IN HOLDING THAT PROCEEDINGS MAY CONTINUE AGAINST PNB DESPITE THE COMPLETE ADJUDICATION OF RELIEF IN FAVOR OF SMC.24
By definition, a letter of credit is a written instrument whereby the writer requests or authorizes the addressee to pay money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee. A letter of credit, however, changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto.cralawred
x x x x
Thus, the engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft and the required documents are presented to it. The so-called "independence principle" assures the seller or the beneficiary of prompt payment independent of any breach of the main contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not. Under this principle, banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever.cralawred
x x x x
As discussed above, in a letter of credit transaction, such as in this case, where the credit is stipulated as irrevocable, there is a definite undertaking by the issuing bank to pay the beneficiary provided that the stipulated documents are presented and the conditions of the credit are complied with. Precisely, the independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract. As the principle's nomenclature clearly suggests, the obligation under the letter of credit is independent of the related and originating contract. In brief, the letter of credit is separate and distinct from the underlying transaction.27
1 Penned by Associate Justice Mario V. Lopez, with Associate Justices Romulo V. Borja and Elihu A. Ybañez, concurring; Annex “S” to petition, rollo, pp. 107-119.
2 Annex “U” to petition, id. at 132-135.
3Rollo, pp. 109-110.
4 Annex “C” to petition, id. at 40-43.
5 Annex “D” to petition, id. at 44-45.
6 See Pre-Trial Order, Annex “G” to petition, id. at 62-64.
7 Annex “H” to petition, id. at 65-72.
8Id. at 72.
9 Annex “I” to petition, id. at 73-74.
10 Annex “K” to petition, id. at. 77-78.
11 See RTC Resolution, Annex “L” to petition, id. at 79-80.
12 Annex “J” to petition, id. at 76.
14 Annex “M” to petition, id. at 81-86.
15 Annex “B” to comment, id. at 165.
16 Annex “N” to petition, id. at 87.
18 Annex “O” to petition, id. at 88.
20 Annex “P” to petition, id. at 89-91.
21 Annex “Q” to petition, id. at 92-95.
22 Annex “R” to petition, id. at 96-106.
23 Annex “T” to petition, id. at 120-131.
24Rollo, p. 13.
25Id. at 180.
26 485 Phil. 699 (2004).
27Id. at 718-721. (Emphasis supplied; citations omitted)