RODZSSEN SUPPLY CO. INC. vs.

FAR EAST BANK & One of Monet’s, Wishbone Trading Company of Hong Kong
TRUST CO.
G.R. No. 109087 | May 9, 2001
FACTS:
Before us is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court, assailing the January 21, 1993 Decision2 of
the CA which affirmed with modification the ruling of the RTC of
Bacolod City.
On January 15, 1979, defendant Rodzssen Supply, Inc. opened
with plaintiff Far East Bank and Trust Co. a 30-day domestic
letter of credit, in the amount of P190,000.00 in favor of Ekman
and Company, Inc. (Ekman) for the purchase from the latter of
five units of hydraulic loaders, to expire on February 15, 1979.
The three loaders were delivered to defendant for which plaintiff
paid Ekman and which defendant paid plaintiff before expiry
date of LC. The remaining two loaders were delivered to
defendant but the latter refused to pay. Ekman pressed payment
to plaintiff. Plaintiff paid Ekman for the two loaders and later
demanded from defendant such amount as it paid Ekman.
Defendant refused payment contending that there was a breach
of contract by plaintiff who in bad faith paid Ekman, knowing that
the two units of hydraulic loaders had been delivered to
defendant after the expiry date of subject LC.
ISSUE:
Whether or not petitioner is liable to respondent.
RULING:
The SC agrees with the CA that petitioner should pay
respondent bank the amount the latter expended for the
equipment belatedly delivered by Ekman and voluntarily
received and kept by petitioner. Equitable considerations
behoove us to allow recovery by respondent. True, it erred in
paying Ekman, but petitioner itself was not without fault in the
transaction. It must be noted that the latter had voluntarily
received and kept the loaders since October 1979. 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.
(Wishbone), drew the amount of US$38,768.40 on the letter of
credit. However, Landbank was not able to collect from
Wishbone.
Monet alleged as a consequence that they are not liable for the
letter of credit as Land Bank failed and refused to collect the
receivables on their export letter of credit against Wishbone.
ISSUE:
Whether or not the failure of Landbank to collect from Wishbone
Trading Company of Hong Kong absolves Monet from liability
RULING:
Monet is still liable notwithstanding Lanbank’s failure to collect.
Land Bank that, as the issuing bank in the transaction involving
an import letter of credit, is independent from its function as an
agent of the spouses. As the issuer of the letter of credit, it only
deals in documents and it is not involved in the contract between
the parties. The relationship between the beneficiary and the
issuer of a letter of credit is not strictly contractual, because both
privity and a meeting of the minds are lacking. Thus, upon
receipt by Land Bank of the documents of title which conform
with what the letter of credit requires, it is duty bound to pay the
seller, as it did in this case.
The engagement of the issuing bank is to pay the seller or
beneficiary of the credit once the draft and the required
documents are presented to it. The so-called “independence
principle” assures the seller or the beneficiary of prompt
payment independent of any breach of the main contract and
precludes the issuing bank from determining whether the main
contract is actually accomplished or not.
However, Monet’s liabilities are mitigated as the bank failed to
exercised the required diligence in its collection. In transactions
involving its export letters of credit, such as the Wishbone
account, Land Bank should have exercised the requisite degree
of diligence in collecting the amount due to the former.

LAND BANK OF THE PHILIPPINES V. MONETS EXPORT

ABD MANUFACTURING CORPORATION
GR No. 161865 | March 10, 2005

The issuing bank in the transaction involving an import letter of

credit, is independent from its function as an agent of the same
transaction. As the issuer of the letter of credit, it only deals in
documents and it is not involved in the contract between the
parties. However, a party’s liability is mitigated as the bank failed
to exercised the required diligence in its function as a collection
agent of the same transaction.

FACTS:
Land Bank of the Philippines (Land Bank), and Monet’s Export
and Manufacturing Corporation (Monet) executed an Export
Packing Credit Line Agreementunder which Monet was given a
credit line in the amount of P250,000.00, secured by the
proceeds of its export letters of credit, the continuing guaranty
of the spouses Vicente V. Tagle, Sr. and Ma. Consuelo G. Tagle.
The credit line agreement was renewed and amended several
times until it was increased to P5,000,000.00. Subsequently,
Monet appointed Land Bank as an assignor to demand, collect
and receive the proceeds of the export letters of credit of their
clients at a oan value of 80%.