Case Digest (G.R. No. 94209)
Facts:
Feati Bank & Trust Company (now Citytrust Banking Corporation) v. The Court of Appeals and Bernardo E. Villaluz, G.R. No. 94209, April 30, 1991, Supreme Court Third Division, Gutierrez, Jr., J., writing for the Court.On June 3, 1971 Bernardo E. Villaluz agreed to sell 2,000 cubic meters of lauan logs to Axel Christiansen at $27.00 per cubic meter. Christiansen issued Purchase Order No. 76171 and, pursuant to instructions from the consignee Hanmi Trade Development, Ltd., Security Pacific National Bank of Los Angeles issued Irrevocable Letter of Credit No. IC-46268 (dated June 7, 1971) for $54,000 in favor of Villaluz. The letter of credit was mailed to Feati Bank with the instruction to "forward the enclosed letter of credit to the beneficiary." The credit incorporated the Uniform Customs and Practice for Documentary Credits (1962 Revision) and required, among other documents, a certification from Hans-Axel Christiansen that the logs had been approved prior to shipment.
The logs were inspected by Customs and Bureau of Forestry inspectors and loaded aboard the chartered vessel Zenlin Glory; a mate’s receipt attested to the cargo’s good condition. Christiansen nevertheless refused to issue the buyer’s certification required by the letter of credit. Because that certification was absent, Feati Bank refused to negotiate or advance payment under the credit. The credit lapsed (with a brief extension) without Villaluz obtaining Christiansen’s certification. Villaluz sought relief from the Central Bank; on August 16, 1971 the Central Bank issued a memorandum (citing Monetary Board Resolution No. 1230 dated August 3, 1971) declaring that, for log exports, Bureau of Forestry inspectors’ certification would be final and that buyer/agent certifications as a condition precedent to negotiation should not be allowed — but that memorandum issued after the letter of credit had been issued and after its expiration.
The logs reached Inchon and were sold by Christiansen for $37.50 per cubic meter. On September 1, 1971 Villaluz sued Christiansen and Feati Bank in the Court of First Instance (Rizal) for mandamus and specific performance and for damages; Feati was impleaded to afford complete relief. Christiansen left the Philippines before trial and Villaluz amended to make Feati solidarily liable; the trial court admitted the amendment. After trial, the trial court found Christiansen liable for the sale price and held Feati liable for refusing to negotiate the irrevocable credit (finding trust and estoppel theories applicable), and on October 20, 1986 ordered the defendants jointly and severally to pay Villaluz specified sums (including $54,000 or peso equivalent, various pesos amounts, interest, moral and exemplary damages, and attorney’s fees).
Feati received the decision November 3, 1986 and filed notice of appeal November 5. Villaluz moved for immediate execution; the trial court ordered execution upon bond. Feati’s motions for reconsideration and to suspend execution were denied, and Feati sought certiorari and prohibition with preliminary injunction in the Court of Appeals to enjoin execution. The Court of Appeals on April 9, 1987 nullified the execution order ...(Pro-only)
Issues:
- Whether a correspondent/notifying bank may be held liable under an irrevocable letter of credit despite the beneficiary’s non‑compliance with the credit’s documentary con...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)