Arrieta V NARIC. Oblicon Ruling

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Arrieta v NARIC

The defense that the delay, if any in opening the letter of credit was due to the failure of plaintiff to name the
supplier, the amount and the bank is not tenable. Plaintiff stated in Court that these facts were known to defendant
even before the contract was executed because these facts were necessarily revealed to the defendant before she
could qualify as a bidder.

Secondly, from the correspondence and communications which form part of the record of this case, it is clear that
what singularly delayed the opening of the stipulated letter of credit and which, in turn, caused the cancellation of
the allocation in Burma, was the inability of the appellant corporation to meet the condition importation by the
Bank for granting the same. We do not think the appellant corporation can refute the fact that had it been able to
put up the 50% marginal cash deposit demanded by the bank, then the letter of credit would have been approved,
opened and released as early as August 4, 1952.

The liability of the appellant, however, stems not alone from this failure or inability to satisfy the requirements of
the bank. Its culpability arises from its willful and deliberate assumption of contractual obligations even as it was
well aware of its financial incapacity to undertake the prestation. We base this judgment upon the letter which
accompanied the application filed by the appellant with the bank, a part of which letter was quoted earlier in this
decision. In the said accompanying correspondence, appellant admitted and owned that it did "not have sufficient
deposit with your institution (the PNB) with which to cover the amount required to be deposited as a condition for
the opening of letters of credit. ... .

Under this provision (Art. 1170), not only debtors guilty of fraud, negligence or default in the performance of
obligations a decreed liable; in general, every debtor who fails in performance of his obligations is bound to
indemnify for the losses and damages caused thereby. The phrase "any manner contravene the tenor" of the
obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation or every kind or
defective performance

In the case of Engel v. Velasco & Co., 47 Phil. 115, We ruled that in an action for recovery of damages for breach
of contract, even if the obligation assumed by the defendant was to pay the plaintiff a sum of money expressed in
American currency, the indemnity to be allowed should be expressed in Philippine currency at the rate of
exchange at the time of the judgment rather than at the rate of exchange prevailing on the date of
defendant's breach.

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