Rodzssen Supply v.

Far East
Recit ready digest:

Petitioner opened with respondent a domestic letter of credit (LOC) in favor of Ekman
and Company, Inc. (Ekman) for the purchase of five hydraulic loaders. The first three
hydraulic loaders were received by the petitioner before the expiry of LOC and
respondent paid Ekman. The remaining two hydraulic loaders were received by the
petitioner after the expiry of LOC/contract but respondent still paid Ekman. Petitioner
refused to pay respondent.
Petitioner should pay respondent bank the amount the latter expended for the equipment
belatedly delivered by Ekman and voluntarily received and kept by petitioner. When
both parties to a transaction are mutually negligent in the performance of their
obligations, the fault of one cancels the negligence of the other and, as in this case, their
rights and obligations may be determined equitably under the law proscribing unjust
enrichment.

Petition:

Petition for certiorari for the decision of CA

Factual Antecedents:
Petitioner opened with respondent a domestic letter of credit (LOC) in favor of Ekman
and Company, Inc. (Ekman) for the purchase of five hydraulic loaders.
The first three hydraulic loaders were received by the petitioner before the expiry of LOC
and respondent paid Ekman. The remaining two hydraulic loaders were received by the
petitioner after the expiry of LOC/contract but respondent still paid Ekman.
Petitioner refused to pay respondent. Respondent filed a case.
Ruling of the lower court/s:
The RTC rendered judgment in favor of herein respondent, stating that upon delivery by
Ekman of the loaders, Rodzssen became liable for the payment of the units. In the honest
belief that it was still under obligation to, and upon presentation of necessary documents
by Ekman, FEBTC was in good faith in paying Ekman. The RTC further noted that
Rodzssens offer to return the 2 units to FEBTC was made only 3 years after it received
the goods and when FEBTC pressed for the payments.
CA affirmed

Position of Petitioner:
FEBTC had no cause of action since there was a breach of contract on the part of FEBTC
who in bad faith paid Ekman, knowing that the 2 units of hydraulic loaders had been
delivered to Rodzssen after the expiry date of the LC

ISSUE:
Whether or not the respondent is entitled of reimbursement from petitioner for its
payment out of mutual negligence.

HELD/RATIO:
YES
Petitioner should pay respondent bank the amount the latter expended for the equipment
belatedly delivered by Ekman and voluntarily received and kept by petitioner.
Respondent banks right to seek recovery from petitioner is anchored, not upon the
inefficacious Letter of Credit, but on Article 2142 of the Civil Code which reads:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly enriched or benefited at the expense of
another.
When both parties to a transaction are mutually negligent in the performance of their
obligations, the fault of one cancels the negligence of the other and, as in this case, their
rights and obligations may be determined equitably under the law proscribing unjust
enrichment.