Title
Bank of Commerce vs. Goodman Fielder International Philippines, Inc.
Case
G.R. No. 191561
Decision Date
Mar 7, 2011
Bank of Commerce issued conditional letters for credit lines, not guarantees; Supreme Court ruled no liability for unpaid obligations, dismissing claims.
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Case Digest (G.R. No. 191561)

Facts:

  1. Parties Involved:

    • Petitioner: Bank of Commerce.
    • Respondent: Goodman Fielder International Philippines, Inc. (a corporation engaged in marketing fats and oil shortening).
    • Other Parties: Keraj Marketing Company (Keraj), represented by Sunil K. Amarnani (Amarnani), and Bacolod RK Distributors and Co. (Bacolod RK).
  2. Background of the Case:

    • Keraj sought a distributorship agreement with respondent. As a prerequisite, respondent required a credit line/bank guaranty of P500,000.00 from Keraj.
    • Amarnani applied for a credit line with petitioner’s Bacolod branch but had not yet submitted the required documents.
    • On August 21, 2000, Amarnani requested a conditional certification from petitioner’s branch manager, Eli Aragon, stating that Keraj was arranging for a credit line.
  3. Issuance of Letters:

    • On August 23, 2000, Aragon issued a letter to respondent, stating that Keraj had arranged for a credit line of P500,000.00, subject to compliance with the bank’s policies.
    • On October 18, 2000, Aragon issued a similar letter for Bacolod RK, indicating a credit line of P2,000,000.00.
    • Both letters contained a “check write” on the left side, indicating the amount applied for as a credit line.
  4. Distributorship Agreement:

    • On October 2, 2000, respondent and Keraj entered into a Distributorship Agreement.
  5. Default and Demand for Payment:

    • Keraj and Bacolod RK failed to pursue their credit line applications despite follow-ups.
    • On October 24, 2001, respondent informed petitioner of its intent to claim against the bank guaranty for Keraj and Bacolod RK’s unpaid accounts.
    • On November 20, 2001, respondent demanded payment of P1,817,691.30 for unpaid obligations.
  6. Legal Action:

    • Respondent filed a complaint for collection of sum of money against Keraj, Amarnani, Bacolod RK, petitioner, and Aragon before the Regional Trial Court (RTC) of Pasig.
    • Petitioner and Aragon denied liability, claiming the letters were merely certifications of pending credit line applications, not actual bank guarantees.
  7. RTC Decision:

    • The RTC held petitioner, Aragon, Keraj, and Amarnani jointly and severally liable, citing estoppel and the apparent authority of Aragon as branch manager.
  8. Court of Appeals Decision:

    • The appellate court affirmed the RTC’s decision, interpreting Aragon’s letters as bank guarantees. However, it deleted the award of attorney’s fees.

Issue:

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Ruling:

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Ratio:

  1. Interpretation of Aragon’s Letters:

    • The Court held that Aragon’s letters did not constitute a bank guarantee. The phrase “arranged for a credit line” merely indicated that Keraj and Bacolod RK had applied for a credit line, subject to compliance with the bank’s policies.
    • The use of a “check writer” on the letters did not alter their meaning, as the wording clearly indicated that the credit line was conditional and not yet approved.
  2. Doctrine of Apparent Authority:

    • The Court ruled that the doctrine of apparent authority did not apply. Respondent could not rely on Aragon’s letters as a bank guarantee without verifying the actual approval of the credit line.
    • The Court emphasized that respondent had sufficient time (39 days) to verify the status of the credit line before entering into the Distributorship Agreement.
  3. Estoppel:

    • Petitioner was not estopped from denying liability. The letters were not misleading, and respondent’s reliance on them as bank guarantees was unreasonable.
  4. Circumstances of the Case:

    • The Court considered the circumstances under which the letters were issued, including the fact that Amarnani had not yet submitted the required documents for the credit line application.
    • The Court concluded that petitioner could not have conveyed that it was issuing a bank guarantee, as the letters explicitly stated that the credit line was subject to compliance with the bank’s policies.

Conclusion:

The Supreme Court ruled that the letters issued by Aragon were not bank guarantees but merely certifications of pending credit line applications. Petitioner, Bank of Commerce, was not liable for the unpaid obligations of Keraj and Bacolod RK.


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