Facts:

The case revolves around Allied Banking Corporation (petitioner) and several respondents: G.G. Sportswear Manufacturing Corporation (GGS), Nari Gidwani, the spouses Leticia and Leon de Villa, and Alcron International Ltd. The events began on January 6, 1981, when Allied Bank purchased Export Bill No. BDO-81-002 for US $20,085.00 from GGS, which pertained to Men’s Valvoline Training Suits being shipped to West Germany. The contract was under a letter of credit issued by Chekiang First Bank Ltd. in Hong Kong. Upon purchase, Allied credited GGS with the peso equivalent of US $20,085.00, amounting to P151,474.52, as acknowledged in GGS's letter dated June 22, 1981.

In conjunction, Nari Gidwani and Alcron International Ltd. executed respective Letters of Guaranty to assume liability for the export bill should it be dishonored. Additionally, spouses Leon and Leticia de Villa signed a Continuing Guaranty/Comprehensive Surety, which guaranteed any credit extended by Allied to GGS. H

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Facts:

Transaction and Documentary Background

• On January 6, 1981, Allied Bank (petitioner) purchased Export Bill No. BDO-81-002 amounting to US$20,085.00 from G.G. Sportswear Manufacturing Corporation (GGS).
• The export bill pertained to a Men’s Valvoline Training Suit being shipped to West Germany under a letter of credit (No. BB640549) and was drawn under Chekiang First Bank Ltd., Hongkong.
• Allied Bank credited GGS the peso equivalent of the export bill (P151,474.52), acknowledged by GGS in its letter dated June 22, 1981.

Execution of Guaranties and Surety Agreements

• On the same day the payment was credited, respondents Nari Gidwani and Alcron International Ltd. executed respective Letters of Guaranty, undertaking liability in case the export bill was dishonored or retired by the drawee.
• Subsequently, spouses Leon and Leticia de Villa, along with Nari Gidwani, executed a Continuing Guaranty/Comprehensive Surety, thereby undertaking joint and several liability for any credit accommodations extended by Allied Bank to GGS.

Dishonor of the Export Bill and Demand for Payment

• The export bill was discounted by Allied Bank rather than presented to the issuing bank; however, payment was refused due to material discrepancies in the shipping documents submitted by GGS.
• Allied Bank then demanded payment from all respondents based on the executed Letters of Guaranty and Continuing Guaranty.
• Respondents contended:
• GGS and Nari Gidwani admitted to signing the documents but claimed that they signed blank forms later filled in by Allied Bank.
• The documents did not cover the specific transaction involving the subject export bill.
• The spouses de Villa asserted they were unaware of the export bill and maintained that the guaranty was not intended to secure its payment.
• Alcron International Ltd. argued that its Philippine branch was a liaison office lacking authority to issue such Letters of Guaranty and invoked the doctrine of laches.

Court Proceedings and Decisions

• At the trial level, respondents sought a Motion for Summary Judgment claiming discharge from liability due to the absence of protest upon dishonor; the motion was denied by the trial court which subsequently dismissed the complaint.
• On appeal, the Court of Appeals modified the trial court’s ruling:
• GGS was held liable to reimburse Allied Bank the peso equivalent of the export bill (P151,474.52).
• The guarantors were exonerated from any liability under their Letters of Guaranty, as the underlying bill had been discharged.
• Allied Bank filed a Motion for Reconsideration, which was denied, prompting the petition for review on certiorari.

Issue:

Primary Issue

• Whether respondents Nari Gidwani, spouses Leon and Leticia de Villa, and Alcron International Ltd. are liable under the Letters of Guaranty and the Continuing Guaranty/Comprehensive Surety, even though there was no protest made on the dishonored export bill.

Related Issue

• Whether Section 152 of the Negotiable Instruments Law, which discharges indorsers in the absence of protest, applies to guarantors/sureties in this case.
• Whether the waiver of protest and notice of dishonor contained in the surety agreement precludes the discharge of liability normally afforded to indorsers.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)