Land Bank v. Monet's Export and Manufacturing
Land Bank v. Monet's Export and Manufacturing
Land Bank v. Monet's Export and Manufacturing
161865
(2005)
March 10, 2005
YNARES-SANTIAGO, J.
TOPIC IN SYLLABUS: Doctrine of Independence In commercial letter of credit
SUMMARY: Monet contended that Land Bank (issuing bank) ought to be held liable for paying on
the LOC when the goods actually delivered to Monet (as the applicant of the LOC and also the
buyer of the goods) did not conform to the specifications given.
[Divina,p.9] The issuing bank is not liable for damages even if the shipment did not conform to
the specifications of the applicant. Under the independence principle, the obligation of the
issuing bank to pay the beneficiary arises once the latter is able to submit the stipulated
documents under the letter of credit.
PROCEDURAL ANTECEDENTS: Petition for Review on Certiorari (R45) filed by Land Bank before
the SC.
FACTS:
25 June 1981: Land Bank and Monet executed an agreement whereby the latter was given
a credit line (P250k) secured by the proceeds of its export letters of credit (LOC)
eventually this was increased to P5M.
o However, Monet repeatedly failed to pay its debts, which ballooned to P11.5M
(P11,464,246.19).
31 August 1992: Land Bank filed a complaint for the collection of sum of money, w/
prayer for preliminary attachment, against Monet and the guarantors. [Manila RTC]
Monet, et al. filed a joint Answer w/ Compulsory Counterclaim.
o Alleged that Land Bank had (1) failed and refused to collect the receivables on their
export LOC against Wishbone Trading (HK) totaling $33.4k ($33,434); AND, (2) had
made unauthorized payments on their import LOC to Beautilike (HK) in the amount
of $38.8k ($38,768.4).
15 July 1997: RTC recognized the obligation of Monet, et al. to Land Bank BUT
granted the counterclaim against Land Bank ($30k).
Land Bank filed an appeal with the CA.
9 October 2003: CA affirmed the RTC (and denied the MR).
o Held that due to the non-collection (Wishbone) and the unauthorized payment
(Beautilike), Monet suffered from lack of financial resources sufficient to buy the
necessary materials to fill up standing orders from customers.
ISSUES:
1. ***Did the RTC and CA err in holding that Land Bank failed to protect Monets
interest, vis--vis the unauthorized payment to Beautilike, despite discrepancies
in the shipment vis--vis the order specifications of Monet?***
2. Did the RTC and CA err in holding that Land Bank was liable for opportunity
losses, vis--vis the Wishbone transaction?
3. Did the RTC and CA err in limiting the obligation of Monet to Land Bank to what
was stated in Exhibit 9 (Schedule of Amortization from the Loans and Discounts
Department of LANDBANK)?
PETITIONERS ARGUMENT:
1. Upon its receipt of the documents of title conforming with what the LOC requires, it was
duty-bound to pay the seller.
o As the issuing bank (Beautilike), it only deals in documents and is NOT involved in
the contract between the parties the relationship between the beneficiary and the
issuer is NOT strictly contractual as privity and meeting of the minds are lacking.
2. [Note: not expressly discussed.]
DODOT
CASE #16
CASE #16
No explanation was given why only Exhibit 39 was used to determine the indebtedness
due to Land Bank.
NOTE: SC had to remand the case to the lower court in order to determine the total
amount of indebtedness due.
DODOT
CASE #16