LOC and TR Cases

7/23/2019 LOC and TR Cases

1/11

Letters of Credit

MWSS vs. DAWAY AND MAYNILAD

G.R. No. 160732.

Jue 21! 200"

#AC$S% MWSS &r'ted M'(i)'d uder ' Co*essio A&ree+et to +''&e!

o,er'te! re,'ir! de*o++issio 'd refur-is te e/isti& MWSS 'ter de)iver( 'd

seer'&e servi*es i te West oe Servi*e Are'! for i* M'(i)'d udertoo to

,'( te *orres,odi& *o*essio fees i*! '+o& oter ti&s! *osisted of

,'(+ets of ,etitioers +ost)( forei& )o's.

$o se*ure te *o*essio'ires ,erfor+'*e of its o-)i&'tios! M'(i)'d 's reuired

uder Se*tio 6.4 of s'id *otr'*t to ,ut u, ' -od! -' &u'r'tee or oter

se*urit( '**e,t'-)e to MWSS.

I *o+,)i'*e it tis reuire+et! M'(i)'d 'rr'&ed for ' tree5(e'r f'*i)it( it

' u+-er of forei& -'s! )ed -( Citi*or, It) Ltd.! for te issu'*e of '

Irrevo*'-)e St'd-( Letter of Credit i f'vor of MWSS for te fu)) 'd ,ro+,t

,erfor+'*e of M'(i)'ds o-)i&'tios to MWSS 's 'forest'ted.

L'ter! te ,'rties '&reed to reso)ve te issues -etee te+ M'(i)'d is 'si& for

' +e*'is+ -( i* it o,ed to re*over te )osses it 'd '))e&ed)( i*urred 'dou)d -e i*urri& 's ' resu)t of te de,re*i'tio of te 8i)i,,ie 8eso '&'ist te

9S Do))'r 'd i :)i& to &et 't it desired! M'(i)'d ui)'ter'))( sus,eded te

,'(+et of te *o*essio fees; trou& ' '+ed+et of te Co*essio

A&ree+et i* 's -'sed o te ter+s set do i MWSS vet of $er+i'tio! *)'i+i&

t't MWSS f'i)ed to *o+,)( it its o-)i&'tios uder te Co*essio A&ree+et'd its A+ed+et re&'rdi& te 'd?ust+et +e*'is+ t't ou)d *over

M'(i)'ds forei& e/*'&e )osses. M'(i)'d :)ed ' Noti*e of >'r)( $er+i'tio of

te *o*essio! i* 's *'))e&ed -( MWSS. $is +'tter 's evetu'))(

-rou&t -efore te A,,e')s 8'e) -( MWSS. te A,,e')s 8'e) ru)ed t't tere 's

o >vet of $er+i'tio 's de:ed uder Art. 10.2 @ii or 10.3 @iii of te Co*essio

A&ree+et 'd t't! terefore! M'(i)'d sou)d ,'( te *o*essio fees t't 'd

f'))e due.


2/11

$e ''rd of te A,,e')s 8'e) -e*'+e :'). MWSS! tere'fter! su-+itted ' ritte

oti*e to Citi*or, It) Ltd! 's '&et for te ,'rti*i,'ti& -'s! t't -( virtue of

M'(i)'ds f'i)ure to ,erfor+ its o-)i&'tios uder te Co*essio A&ree+et! it 's

dr'i& o te Irrevo*'-)e St'd-( Letter of Credit 'd tere-( de+'ded

,'(+et.

8rior to tis! oever! M'(i)'d 'd :)ed o ' ,etitio for re'-i)it'tio -efore te

R$C of Bueo Cit( i* resu)ted i te issu'*e of te St'( rder 'd te

dis,uted rder of Nove+-er 27! 2003.

ISS9>% WN te re'-i)it'tio *ourt sitti& 's su*! '*t i e/*ess of its 'utorit( or

?urisdi*tio e it e?oied erei ,etitioer fro+ seei& te ,'(+et of te

*o*essio fees fro+ te -'s t't issued te Irrevo*'-)e St'd-( Letter of Credit

i its f'vor

=>LD% te ,etitio for *ertior'ri is &r'ted.$e rder of Nove+-er 27! 2003 of te

R$C of Bueo Cit( 40! is ere-( de*)'red u)) 'd void'd set 'side.

Y>S

#irst! te *)'i+ is ot oe '&'ist te de-tor -ut '&'ist ' etit( t't res,odetM'(i)'d 's ,ro*ured to 'ser for its o5,erfor+'*e of *ert'i ter+s 'd

*oditios of te Co*essio A&ree+et! ,'rti*u)'r)( te ,'(+et of *o*essio

fees.

Se*od)(! Se*. 6 @- of Ru)e " of te Iteri+ Ru)es does ot e?oi te efor*e+et

of ')) *)'i+s '&'ist &u'r'tors 'd sureties! -ut o)( tose *)'i+s '&'ist

&u'r'tors 'd sureties o 're ot so)id'ri)( )i'-)e it te de-tor. Res,odet

M'(i)'ds *)'i+ t't te -'s 're ot so)id'ri)( )i'-)e it te de-tor does ot :d

su,,ort i ?uris,rude*e.

Letters of *redit ere deve)o,ed for te ,ur,ose of isuri& to ' se))er ,'(+et of '

de:ite '+out u,o te ,reset'tio of do*u+ets'd is tus ' *o++it+et -(

te issuer t't te ,'rt( i ose f'vor it is issued 'd o *' *o))e*t u,o it i))

've is *redit '&'ist te ',,)i*'t of te )etter! du)( ,'id i te '+out s,e*i:ed

i te )etter $e( 're i eEe*t '-so)ute udert'i&s to ,'( te +oe( 'dv'*ed or

te '+out for i* *redit is &ive o te f'it of te istru+et. $e( 're ,ri+'r(


3/11

o-)i&'tios 'd ot '**essor( *otr'*ts 'd i)e te( 're se*urit( 'rr'&e+ets!

te( 're ot *overted tere-( ito *otr'*ts of &u'r't(. W't disti&uises

)etters of *redit fro+ oter '**essor( *otr'*ts! is te e&'&e+et of te issui&

-' to ,'( te se))er o*e te dr'ft 'd oter reuired si,,i& do*u+ets 're

,reseted to it. $e( 're de:ite udert'i&s to ,'( 't si&t o*e te do*u+ets

sti,u)'ted terei 're ,reseted.

$e ,roi-itio uder Se* 6 @- of Ru)e " of te Iteri+ Ru)es does ot ',,)( to

erei ,etitioer 's te ,roi-itio is o te efor*e+et of *)'i+s '&'ist

&u'r'tors or sureties of te de-tors ose o-)i&'tios 're ot so)id'r( it te

de-tor. $e ,'rti*i,'ti& -'s o-)i&'tio 're so)id'r( it res,odet M'(i)'d i

t't it is ' ,ri+'r(! dire*t! de:ite 'd ' '-so)ute udert'i& to ,'( 'd is ot

*oditioed o te ,rior e/'ustio of te de-tors 'ssets. $ese 're te s'+e

*'r'*teristi*s of ' suret( or so)id'r( o-)i&or. Ad -ei& so)id'r(! te *)'i+s '&'ist

te+ *' -e ,ursued se,'r'te)( fro+ 'd ide,edet)( of te re'-i)it'tio *'se.

$e ter+s of te Irrevo*'-)e St'd-( Letter of Credit do ot so t't te

o-)i&'tios of te -'s 're ot so)id'r( it tose of res,odet M'(i)'d. te

*otr'r(! it is issued 't te reuest of 'd for te '**out of M'(i)'d i f'vor of te

MWSS 's ' -od for te fu)) 'd ,ro+,t ,erfor+'*e of te o-)i&'tios -( te

*o*essio'ire uder te Co*essio A&ree+et 'd erei MWSS is 'utoried -(

te -'s to dr' o it -( te si+,)e '*t of de)iveri& to te '&et ' ritte

*erti:*'tio su-st'ti'))( i te for+ of te Letter of Credit.

$'i& ito *osider'tio our o ru)i&s o te 'ture of )etters of *redit 'd te*usto+s 'd us'&e deve)o,ed over te (e'rs i te -'i& 'd *o++er*i')

,r'*ti*e of )etters of *redit! e o)d t't e/*e,t e ' )etter of *redit s,e*i:*'))(

sti,u)'tes oterise! te o-)i&'tio of te -'s issui& )etters of *redit 're so)id'r(

it t't of te ,erso or etit( reuesti& for its issu'*e! te s'+e -ei& ' dire*t!

,ri+'r(! '-so)ute 'd de:ite udert'i& to ,'( te -ee:*i'r( u,o te

,reset'tio of te set of do*u+ets reuired terei.

$e ,u-)i* res,odet! terefore! e/*eeded is ?urisdi*tio! i o)di& t't e 's

*o+,etet to '*t o te o-)i&'tio of te -'s uder te Letter of Credit uder te

'r&u+et t't tis 's ot ' so)id'r( o-)i&'tio it t't of te de-tor.


4/11

N$>S%

We e)d i #e'ti


5/11

correspondin$ real estate mort$a$e and the sret* a$reements si$ned concededl* * the petitioners5

sreties are nll and void)

I++ue8 ;O< the proceeds of the loans or the $oods nder the trst receipts were ever delivered to and

received * MICO)

He& It is clear that letters of credit, ein$ sall* ank to ank transactions, involve more than st one

ank) Conse#entl*, there is nothin$ nsal in the fact that the drafts presented in evidence *

respondent ank were not made pa*ale to PBCom)

- trst receipt is considered as a secrit* transaction intended to aid in financin$ importers and retail

dealers who do not have sfficient fnds or resorces to finance the importation or prchase of

merchandise, and who ma* not e ale to ac#ire credit e.cept thro$h tili=ation, as collateral of the

merchandise imported or prchased)

- trst receipt, therefor, is a docment of secrit* prsant to which a ank ac#ires a >secrit* interest?

in the $oods nder trst receipt) nder a letter of credit5trst receipt arran$ement, a ank e.tends a loan

covered * a letter of credit, with the trst receipt as a secrit* for the loan) &he transaction involves a

loan featre represented * a letter of credit, and a secrit* featre which is in the coverin$ trst receipt

which secres an indetedness

r's:e)d 8i)i,,ies vs Luo =(dro >)e*tri* Cor,.

@GR No 1"6717! Nov 22! 200"! $i&'

$r's:e)d etered ito ' tur5e( *otr'*t it Luo =(dro Cor,. @L=C. 9der te

*otr'*t! $r's:e)d ere to *ostru*t ' (dro5e)e*tri* ,)'ts i


6/11

9der te ide,ede*e ,ri*i,)e! ' LC '**o++od'tio is etire)( disti*t 'd

se,'r'te! ide,edet '&ree+et. It is ot su,,osed to -e 'Ee*ted -( te +'i

*otr'*t u,o i* it rests.

$e *ourt e)d for te L=C. #o))oi& te ide,ede*e ,ri*i,)e! eve &r'ti&t't tere is sti)) issue to -e reso)ved 'risi& fro+ te tur5e( ,ro?e*t. $is issue is

ot su,,osed to 'Ee*t te o-)i&'tio of te -' to ,'( te )etter of *redit i

uestio. $e *ourt stressed t't ' LC '**o++od'tio is iteded to -ee:t ot

o)( te -ee:*i'r( terei -ut te ',,)i*'t tereo. te issue of fr'ud! te SC

e)d t't tere is oti& i te tur5e( *otr'*t i* st'tes t't ')) issues

-etee te ,'rties +ust -e reso)ved :rst -efore L=C *' *')) o te st'd5-( LC

-ut te *otr'*t ,rovides t't if $r's:e)d def'u)ts! te L=C *' *')) o tese

st'd5-( LC.

$rust Re*ei,t L'

D


7/11

fore*)osure s')e e)d o A,ri) 14! 143! D


8/11

etrustee! o is e/e*utio of ' trust re*ei,t! is esseti'))( for te ,ur,ose of teir

s')e or is e*ess'ri)( *oe*ted it teir u)ti+'te or su-seuet s')e.

L'd) F Co. vs Metro-'

The possession by the bank of the goods under the trust receipts doesnot bar collection of the loan. Mere possession does not amount to

foreclosure for foreclosure denotes the procedure adopted by the

mortgagee to terminate the rights of the mortgagor on the property

and includes the sale itself. Neither can said repossession amount to

dacion en pago. Dation in payment takes place when property is

alienated to the creditor in satisfaction of a debt in money and the

same is governed by sales. Dation in payment is the delivery and

transmission of ownership of a thing by the debtor to the creditor as

an accepted equivalent of the performance of the obligation.

4acts8 Landl Co opened Commercial Letter of Credit


9/11

6eld8 &he initial repossession * the ank of the $oods sect of the trst receipt did not

reslt in the fll satisfaction of the petitioners+ loan oli$ation) Petitioners are apparentl*

laorin$ nder the mistaken impression that the fll trn5over of the $oods sffices to divest

them of their oli$ation to repa* the principal amont of their loan oli$ation) &he

entrstee+s possession of the sect machiner* and e#ipment ein$ precisel* as a form of

secrit* for the advances $iven to &CC nder the Letter of Credit, said possession * itself

cannot e considered pa*ment of the loan secred there*) Pa*ment wold le$all* reslt

onl* after P


10/11

I N& v. 8eo,)e! Ato( N&! te e&'&ed i te -usiess of -ui)di& 'd

f'-ri*'ti& te)e*o++ui*'tio toers! ',,)ied for ' *redit )ie of 88 3!000!000

it Asi'trust Deve)o,+et


11/11

if te( 're uso)d. / / / $;e etruster is etit)ed o)( to te ,ro*eeds derived

fro+ te s')e of &oods re)e'sed uder ' trust re*ei,t to te etrustee.

Cosideri& t't te &oods i tis *'se ere ever iteded for s')e -ut for use i

te f'-ri*'tio of stee) *o++ui*'tio toers! te tri') *ourt erred i ru)i& t't te'&ree+et is ' trust re*ei,t tr's'*tio.

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LOC and TR Cases