G.R. No. 157309 - Velasquez vs. Solidbank Corp.

Marlou L. Velasquez: exporter operating under the name Wilderness Trading who applied for pre-shipment financing on November 12, 1992.
Solidbank Corporation: domestic banking corporation that granted the pre-shipment credit accommodation.
Export sale: Wilderness Trading (seller) contracted to sell dried sea cucumber to Goldwell Trading of Pusan, South Korea (buyer); Goldwell opened Irrevocable Letter of Credit No. M2073210NS00040 on October 6, 1992 for US$87,500 with the Bank of Seoul, Pusan, Korea.

Third shipment: petitioner presented documents for the third export and negotiated for a documentary sight draft chargeable to the LC in the amount of US$59,640 drawn on the Bank of Seoul.
Letter of undertaking executed February 22, 1993 as condition for issuance of the sight draft; petitioner warranted draft genuineness, that it would be accepted and paid according to tenor, and undertook jointly and severally to hold respondent free and harmless and to pay on demand the full amount with interest, charges, expenses and attorneys fees; enumerated discrepancies in the letter included: (1) B/L marked "said to contain shippers load, stowage count"; (2) late shipment; (3) quantity overdrawn by 0.06 ton at US$14.00 per unit; (4) no inspection certificate presented.
Respondent advanced the shipment value equivalent to P1,495,115.16 (less bank charges) to petitioner and forwarded all documents to the Bank of Seoul.

Bank of Seoul dishonored the sight draft by non-acceptance, citing late shipment, forged inspection certificate, and absence of countersignature by the negotiating bank on the inspection certificate.
Goldwell Trading issued a stop payment order because most exported bags allegedly contained soil rather than dried sea cucumber.
Respondent demanded restitution by demand letters dated March 9, March 23, and April 7, 1993; petitioner failed to pay.
Respondent filed suit for recovery of sum of money on June 3, 1993, docketed as Civil Case No. CEB-14080, RTC, Branch 8, Cebu City.
Petitioner pleaded that respondent’s failure to protest the dishonor extinguished his liability under the sight draft pursuant to the Negotiable Instruments Law; he also alleged the letter of undertaking was superfluous and not binding and denied violation of the letter of credit.

RTC, Branch 8, Cebu City rendered judgment on September 25, 1996 ordering petitioner to pay P1,495,115.16 plus interest at twenty percent per annum from February 22, 1993 until full payment, attorneys fees equivalent to ten percent of the total amount due, and costs.
RTC rationale: petitioner remained bound by ...(Subscriber-Only)

Whether the Court of Appeals erred in holding petitioner liable on the accessory contract, the letter of undertaking, despite petitioner’s alleged release from liability under the sight draft by operation of the Negotiable Instruments Law and the Civil Code.
Whether the Court of Appeals erred in holding petitioner liable under the letter of undertaking ...(Subscriber-Only)