Case Digest (G.R. No. 231765)
Facts:
In The Hongkong & Shanghai Banking Corporation, Limited v. National Steel Corporation and Citytrust Banking Corporation, National Steel Corporation (NSC) contracted on October 12, 1993 with Klockner East Asia Limited for the sale of 1,200 metric tons of cold-rolled coils under FOB Iligan terms. Klockner secured an irrevocable sight letter of credit (LC No. HKH 239409) in NSC’s favor from HSBC on October 22, 1993, expressly governed by UCP 400. The LC required presentation of specific shipping and certificate documents within two days after shipment. NSC shipped the goods on November 21, 1993 and delivered the documents via Citytrust Banking Corporation (Citytrust), its collection agent, on November 29, 1993. Citytrust’s collection order directed HSBC to handle the transaction “subject to URC 322,” another ICC rule for documentary collections. HSBC treated the LC as a collection under URC 322, repeatedly demanded payment from Klockner (which refused for unspecified reasons), andCase Digest (G.R. No. 231765)
Facts:
- Underlying Contract and Letter of Credit
- National Steel Corporation (NSC) entered into an export sales contract with Klockner East Asia Ltd. on October 12, 1993 to sell 1,200 MT of cold-rolled coils FOB Iligan; Klockner opened an irrevocable sight letter of credit (LC No. HKH 239409) with HSBC for US$468,000, expressly governed by UCP 400.
- The LC was amended on November 2, 1993 to change delivery to FOB Manila and increase the amount to US$488,400, and on November 18, 1993 to extend shipment and expiry to December 8, 1993.
- Shipment and Documentation
- NSC shipped the goods aboard MV Sea Dragon on November 21, 1993 and procured the documents required by the LC: commercial invoice, packing list, bill of lading, mill test certificate, beneficiary’s telex and certificates of fax and courier transmission.
- NSC engaged CityTrust Banking Corp. as collecting bank; CityTrust’s pro forma collection order instructed HSBC to handle the transaction under URC 322 instead of UCP 400.
- Correspondence and Refusal of Payment
- Between November 29, 1993 and February 17, 1994, HSBC repeatedly cabled that it was collecting under URC 322, presented documents to Klockner who refused payment without giving reasons, then returned the documents to CityTrust.
- CityTrust protested that the LC required payment under UCP 400; NSC made extrajudicial demands and filed suit on July 8, 1994 for US$485,767.93.
- Trial and Appeals
- RTC Makati (Feb 23, 2000) held URC 322 applicable, dismissed NSC’s complaint, and ordered CityTrust to indemnify HSBC.
- CA (Nov 19, 2007) reversed, applied UCP 400, ordered HSBC to pay NSC US$485,767.93 plus 6% interest p.a. and attorney’s fees; denied HSBC’s motion for reconsideration (June 23, 2008).
- HSBC filed a Rule 45 petition before the Supreme Court.
Issues:
- Applicable Rule
- Is the transaction governed by UCP 400 (letter of credit) or by URC 322 (collection)?
- Liability of Parties
- Does HSBC, as issuing bank, have primary liability to pay under the LC?
- Did CityTrust, as collecting agent, validly modify the LC terms and incur liability to NSC?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)