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    Land Bank of The Philippines vs. Monets Export and Manufacturing Corporation

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    Caroru El
    1) Letters of credit engage the issuing bank to pay the seller once the required documents are presented, ensuring prompt payment independent of any issues with the main sales contract. 2) Land Bank of the Philippines issued Monets Export credit lines secured by export letters of credit. When Monets failed to repay its debts, Land Bank sued for collection. 3) The court ruled that as the issuing bank, Land Bank properly paid the supplier Beautilike under the letter of credit when the required documents were presented, as banks only examine documents and are not involved in the underlying contract. The "independence principle" precludes considering contract issues.

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    Land Bank of The Philippines vs. Monets Export and Manufacturing Corporation

    Uploaded by

    Caroru El
    209 views2 pages
    1) Letters of credit engage the issuing bank to pay the seller once the required documents are presented, ensuring prompt payment independent of any issues with the main sales contract. 2) Land Bank of the Philippines issued Monets Export credit lines secured by export letters of credit. When Monets failed to repay its debts, Land Bank sued for collection. 3) The court ruled that as the issuing bank, Land Bank properly paid the supplier Beautilike under the letter of credit when the required documents were presented, as banks only examine documents and are not involved in the underlying contract. The "independence principle" precludes considering contract issues.

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    5. Land Bank of the Philippines vs. Monets Export and Manufacturing Corporation

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    1) Letters of credit engage the issuing bank to pay the seller once the required documents are presented, ensuring prompt payment independent of any issues with the main sales contract. 2) Land Bank of the Philippines issued Monets Export credit lines secured by export letters of credit. When Monets failed to repay its debts, Land Bank sued for collection. 3) The court ruled that as the issuing bank, Land Bank properly paid the supplier Beautilike under the letter of credit when the required documents were presented, as banks only examine documents and are not involved in the underlying contract. The "independence principle" precludes considering contract issues.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    209 views2 pages

    Land Bank of The Philippines vs. Monets Export and Manufacturing Corporation

    Uploaded by

    Caroru El
    1) Letters of credit engage the issuing bank to pay the seller once the required documents are presented, ensuring prompt payment independent of any issues with the main sales contract. 2) Land Bank of the Philippines issued Monets Export credit lines secured by export letters of credit. When Monets failed to repay its debts, Land Bank sued for collection. 3) The court ruled that as the issuing bank, Land Bank properly paid the supplier Beautilike under the letter of credit when the required documents were presented, as banks only examine documents and are not involved in the underlying contract. The "independence principle" precludes considering contract issues.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Land Bank of the Philippines vs.

    Monets Export and Manufacturing Corporation, Spouses


    Vicente V. Tagle, Sr. and Consuelo G. Tagle
    GR No. 161865, March 10, 2005
    Ponente: Ynares-Santiago J.
    Topic: Independence principle

    What characterizes letters of credit, as distinguished from other accessory contracts, is the
    engagement of the issuing bank to pay the seller once the draft and the required shipping
    documents are presented to it. In turn, this arrangement assures the seller of prompt payment,
    independent of any breach of the main sales contract. By this so-called "independence
    principle," the bank determines compliance with the letter of credit only by examining the
    shipping documents presented; it is precluded from determining whether the main contract is
    actually accomplished or not.

    Facts:
    Land Bank of the Philippine and Monets executed and Export Packing Credit Line
    Agreement under 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 and Ma.
    Consuelo Tagle, and third party mortgage executed by Pepita Mendigoria.
    The credit line agreement was renewed and amended several times until it was increased
    to P5,000,000.00. Owing to the continued failure and refusal of Monet, notwithstanding repeated
    demands, to pay its indebtedness to Land bank, which have ballooned to P11,464,246.19 by
    August 31, 1992, a complaint for collection of sum of money with prayer for preliminary
    attachment was filed by Land Bank with the Regional Trial Court of Manila, docketed as Civil
    Case No. 93-64350.
    In their joint Answer with Compulsory Counterclaim, Monet and the Tagle spouses
    alleged that Land Bank failed and refused to collect the receivables on their export letter of credit
    against Wishbone Trading Company of Hongkong in the sum of US$33,434.00, while it made
    unauthorized payments on their import letter of credit to Beautilike (H.K.) Ltd. In the amount of
    US$38,768.40, which seriously damaged the business interests of Monet.
    The trial court rendered decision recognizing the obligation of the defendants as stated in
    the Schedule of Amortization from the Loans and Discount Department of LAND BANK as well
    as the interest mentioned therein, but deleting the penalty thereof as no penalty should be
    charged and sentencing defendants jointly and severally to pay the amounts stated therein as
    verified. It also granted the counterclaim interposed by the defendants in the amount of
    US$30,000.00 payable in Philippine Pesos at the official exchange rate when payment is to be
    made, to compensate for the defendants lost income opportunities occassioned by defendants
    transaction with Wishborne Trading Corporation and with Beautilike, the same to be deducted
    from the confirmed and computed obligation mentioned in No. 1 hereof.
    Lan Bank appealed and the Court of Appeals affirmed the trial court finding that Land
    Bank was responsible for the mismanagement of the Wishbone and Beautilike accounts of
    Monet. It held that because of the non-collection and unauthorized payment made by Land Bank
    on behalf of Monet, and considering that the latter could no longer draw from its credit line with
    Land Bank, it suffered from lack of financial resources sufficient to buy the needed materials to
    fill up the standing orders from its customers.
    Land Bank’s Motion for reconsideration was denied by the Court of Appeals.
    Hence, the Petitioner filed a petition for review on certiorari under Rule 45 of the Rules
    of Court assailing the October 9, 2003 Decision of the Court of Appeals in CA.GR. CV No.
    57436, and its January 20, 2004 Resolution denying petitioner’s motion for reconsideration.
    Issue:
    Whether or not the Landbank is liable for making unauthorized payments in favor of
    Beautilike.
    Ruling:
    As regards the Beautilike account, the trial court and the CA erred in holding that Land
    Bank failed to protect Monet’s interest when it paid the suppliers despite discrepancies in the
    shipment vis-a-vis the order specifications of Monet.
    In Transfield Philippines, Inc. v. Luzon Hydro Corporation, et al., we held that 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.
    Land Bank, as the issuing bank in the Beautilike transaction involving an import 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.
    Thus, no fault or acts of mismanagement can be attributed to Land Bank relative to
    Monet’s import letter of credit.

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