CASE NO.

11
I. SHORT TITLE: TRANSFIELD VS. LUZON HYDRO

II. FULL TITLE: TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON

HYDRO CORPORATION, AUSTRALIA and NEW ZEALAND BANKING
GROUP LIMITED and SECURITY BANK CORPORATION, respondents – G.R.
No. 146717, November 22, 2004

III. TOPIC: LETTERS OF CREDIT- KINDS OF LETTER OF CREDIT

(COMMERCIAL AND STAND BY LETTER OF CREDIT)

IV. STATEMENT OF FACTS:

Petitioner and respondent Luzon Hydro Corporation entered into a Turnkey

Contract3 whereby petitioner, as Turnkey Contractor, undertook to construct, on a turnkey
basis, a seventy (70)-Megawatt hydro-electric power station at the Bakun River in the
provinces of Benguet and Ilocos Sur (hereinafter, the Project). Petitioner was given the sole
responsibility for the design, construction, commissioning, testing and completion of the
Project. . The contract provides for a period for which the project is to be completed and also
allows for the extension of the period provided that the extension is based on justifiable
grounds such as fortuitous event. To secure performance of petitioner's obligation, petitioner
opened in favor of LHC two (2) standby letters of credit. During the construction of the plant,
Transfield requested for extension of time citing typhoon and various disputes delaying the
construction. LHC did not give due course to the extension of the period prayed for but
referred the matter to arbitration committee. Because of the delay in the construction of the
plant, LHC called on the stand-by letters of credit because of default. However, the demand
was objected by Transfield on the ground that there is still pending arbitration on their
request for extension of time.

On 5 November 2000, petitioner as plaintiff filed a Complaint for Injunction, with prayer for
temporary restraining order and writ of preliminary injunction, against herein respondents as
defendants before the Regional Trial Court (RTC) of Makati.Petitioner sought to restrain
respondent LHC from calling on the Securities and respondent banks from transferring,
paying on, or in any manner disposing of the Securities or any renewals or substitutes
thereof. The RTC issued a seventy-two (72)-hour temporary restraining order on the same
day and it was also extended later on.

The RTC denied petitioner's application for a writ of preliminary injunction. It ruled that
petitioner had no legal right and suffered no irreparable injury to justify the issuance of the writ.
Employing the principle of "independent contract" in letters of credit, the trial court ruled that
LHC should be allowed to draw on the Securities for liquidated damages. Dissatisfied with the
trial court's denial of its application for a writ of preliminary injunction, petitioner elevated the
case to the Court of Appeals via a Petition for Certiorari under Rule 65. The appellate court
dismissed the petition for certiorari expressing conformity with the trial court's decision that
LHC could call on the Securities pursuant to the first principle in credit law that the credit itself
is independent of the underlying transaction and that as long as the beneficiary complied with the
credit, it was of no moment that he had not complied with the underlying contract.

V. STATEMENT OF THE CASE:

Subject of this case is the letter of credit which has evolved as the ubiquitous and most important
device in international trade. A creation of commerce and businessmen, the letter of credit is also
unique in the number of parties involved and its supranational character.

Petitioner has appealed from the Decision1 of the Court of Appeals in CA-G.R. SP No. 61901
entitled "Transfield Philippines, Inc. v. Hon. Oscar Pimentel, et al.," promulgated on 31 January
2001.

VI. ISSUE:

Whether or not the "independence principle" on letters of credit may be invoked by a beneficiary
thereof where the beneficiary's call thereon is wrongful or fraudulent

VII. RULING:

In a letter of credit transaction, such as in this case, where the credit is stipulated as irrevocable,
there is a definite undertaking by the issuing bank to pay the beneficiary provided that the
stipulated documents are presented and the conditions of the credit are complied with. Precisely,
the independence principle liberates the issuing bank from the duty of ascertaining compliance
by the parties in the main contract.  As the principle's nomenclature clearly suggests, the
obligation under the letter of credit is independent of the related and originating contract.  In
brief, the letter of credit is separate and distinct from the underlying transaction. To say that the
independence principle may only be invoked by the issuing banks would render nugatory the
purpose for which the letters of credit are used in commercial transactions.  As it is, the
independence doctrine works to the benefit of both the issuing bank and the beneficiary.
Letters of credit are employed by the parties desiring to enter into commercial transactions, not
for the benefit of the issuing bank but mainly for the benefit of the parties to the original
transactions.  With the letter of credit from the issuing bank, the party who applied for and
obtained it may confidently present the letter of credit to the beneficiary as a security to convince
the beneficiary to enter into the business transaction.  On the other hand, the other party to the
business transaction, can be rest assured of being empowered to call on the letter of credit as a
security in case the commercial transaction does not push through, or the applicant fails to
perform his part of the transaction. 
Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that
the settlement of a dispute between the parties is not a pre-requisite for the release of funds under
a letter of credit.  In other words, the argument is incompatible with the very nature of the letter
of credit.  If a letter of credit is drawable only after settlement of the dispute on the contract
entered into by the applicant and the beneficiary, there would be no practical and beneficial use
for letters of credit in commercial transactions.
Respondent banks had squarely raised the independence principle to justify their releases of the
amounts due under the Securities.  Owing to the nature and purpose of the standby letters of
credit, this Court rules that the respondent banks were left with little or no alternative but to
honor the credit and both of them in fact submitted that it was "ministerial" for them to honor the
call for payment.
Of course, prudence should have impelled LHC to await resolution of the pending issues before
the arbitral tribunals prior to taking action to enforce the Securities. But, as earlier stated, the
Turnkey Contract did not require LHC to do so and, therefore, it was merely enforcing its rights
in accordance with the tenor thereof.  Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith.

VIII. DISPOSITIVE PORTION :

WHEREFORE, the instant petition is DENIED, with costs against petitioner.

Petitioner is hereby required to answer the charge of forum-shopping within fifteen (15) days
from notice.

CASE NO. 34
I. SHORT TITLE: NG vs. PEOPLE

II. FULL TITLE: ANTHONY L. NG, Petitioner, vs. PEOPLE OF THE

PHILIPPINES, Respondent.- G.R. No. 173905, April 23, 2010

III. TOPIC: Trusts Receipt Law- The goods must be intended for sale or resale,
otherwise, it is a simple loan

IV. STATEMENT OF FACTS:

Sometime in the early part of 1997, petitioner Anthony Ng, then engaged in the business of
building and fabricating telecommunication towers under the trade name "Capitol Blacksmith
and Builders," applied for a credit line of PhP 3,000,000 with Asiatrust Development Bank, Inc.
(Asiatrust). In support of Asiatrust's credit investigation, petitioner voluntarily submitted the
following documents: (1) the contracts he had with Islacom, Smart, and Infocom; (2) the list of
projects wherein he was commissioned by the said telecommunication companies to build
several steel towers; and (3) the collectible amounts he has with the said companies. Asiatrust
approved petitioner's loan application and petitioner was then required to sign several
documents, among which are the Credit Line Agreement, Application and Agreement for
Irrevocable L/C, Trust Receipt Agreements, and Promissory Notes. Though the Promissory
Notes matured on September 18, 1997, the two (2) aforementioned Trust Receipt Agreements
did not bear any maturity dates as they were left unfilled or in blank by Asiatrust.

As petitioner realized difficulty in collecting from his client Islacom, he failed to pay his loan to
Asiatrust. Asiatrust then conducted a surprise ocular inspection of petitioner's business through
Linga, Asiatrust's representative appraiser. Linga thereafter reported to Asiatrust that he found
that approximately 97% of the subject goods of the Trust Receipts were "sold-out and that only 3
% of the goods pertaining to PN No. 1963 remained." Asiatrust then endorsed petitioner's
account to its Account Management Division for the possible restructuring of his loan. The
parties thereafter held a series of conferences to work out the problem and to determine a way for
petitioner to pay his debts. However, efforts towards a settlement failed to be reached.

A Complaint-Affidavit before the Office of the City Prosecutor of Quezon City. The RTC
rendered a Decision, finding petitioner guilty of the crime of Estafa under Art. 315, par. 1(b) of
the RPC in relation to PD 115. which was then affirmed by the CA.

V. STATEMENT OF THE CASE:

This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the
August 29, 2003 Decision1 and July 25, 2006 Resolution of the Court of Appeals (CA) in CA-
G.R. CR No. 25525, which affirmed the Decision2 of the Regional Trial Court (RTC), Branch 95
in Quezon City, in Criminal Case No. Q-99-85133 for Estafa under Article 315, paragraph 1(b)
of the Revised Penal Code (RPC) in relation to Section 3 of Presidential Decree No. (PD) 115 or
the Trust Receipts Law.

VI. ISSUE:
Whether or not PD 115 will apply

VII. RULING:

No, PD 115 will not apply. It must be remembered that petitioner was transparent to Asiatrust
from the very beginning that the subject goods were not being held for sale but were to be used
for the fabrication of steel communication towers in accordance with his contracts with Islacom,
Smart, and Infocom. In these contracts, he was commissioned to build, out of the materials
received, steel communication towers, not to sell them.

The true nature of a trust receipt transaction can be found in the "whereas" clause of PD 115
which states that a trust receipt is to be utilized "as a convenient business device to assist
importers and merchants solve their financing problems." Following the precept of the law, such
transactions affect situations wherein the entruster, who owns or holds absolute title or security
interests over specified goods, documents or instruments, releases the subject goods to the
possession of the entrustee. The release of such goods to the entrustee is conditioned upon his
execution and delivery to the entruster of a trust receipt wherein the former binds himself to hold
the specific goods, documents or instruments in trust for the entruster and to sell or otherwise
dispose of the goods, documents or instruments with the obligation to turn over to the entruster
the proceeds to the extent of the amount owing to the entruster or the goods, documents or
instruments themselves if they are unsold.

Considering that the goods in this case were never intended for sale but for use in the fabrication
of steel communication towers, the trial court erred in ruling that the agreement is a trust receipt
transaction. Having established the inapplicability of PD 115, this Court finds that petitioner’s
liability is only limited to the satisfaction of his obligation from the loan. The real intent of the
parties was simply to enter into a simple loan agreement.

To emphasize, the Trust Receipts Law was created to "to aid in financing importers and retail
dealers who do not have sufficient funds or resources to finance the importation or purchase of
merchandise, and who may not be able to acquire credit except through utilization, as collateral,
of the merchandise imported or purchased." Since Asiatrust knew that petitioner was neither an
importer nor retail dealer, it should have known that the said agreement could not possibly apply
to petitioner.

VIII. DISPOSITIVE PORTION :

WHEREFORE, the CA Decision dated August 29, 2003 affirming the RTC Decision dated May
29, 2001 is SET ASIDE. Petitioner ANTHONY L. NG is hereby ACQUITTED of the charge of
violation of Art. 315, par. 1(b) of the RPC in relation to the pertinent provision of PD 115.

SO ORDERED.

I. SHORT TITLE: BDO vs. CHOA

II. FULL TITLE: BDO UNIBANK, INC., PETITIONER, v. ANTONIO CHOA,

RESPONDENT

III. TOPIC: Trusts Receipt Law- Directors and officers of the corporation not civilly
liable unless they assume personal liability

IV. STATEMENT OF FACTS:

 V. STATEMENT OF THE CASE:

When a demurrer is granted in a criminal case, the private complainant can file a Rule 65 petition
on the civil aspect of the case, as long as he or she can show that the trial court committed grave
abuse of discretion in granting the demurrer.

This Court resolves a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil
Procedure, assailing the October 24, 2017 Decision and February 13, 2018 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 140059. The Court of Appeals affirmed the November 26,
2014 and February 12, 2015 Orders of the Regional Trial Court, which granted Antonio Choa
(Choa)'s Demurrer to Evidence.

VI. ISSUE:

Whether or not

VII. RULING:

VIII. DISPOSITIVE PORTION :

Without any evidence that respondent personally bound himself to the debts of the company he
represented, this Court cannot hold him civilly liable under the Trust Receipt Agreements.

WHEREFORE, the Petition is DENIED.

SO ORDERED.