G.R. No. 166726 , November 25, 2019
Equitable PCI Bank (Formerly Insular Bank of Asia & America/Phil. Commercial and Industrial Bank), Petitioner, vs. Manila Adjusters & Surveyors, Inc., Ilocos Sur Federation of Farmers Cooperative, Inc., Estate of Ng Yek Kiong and Ernesto Cokai, Respondents.

FACTS

On June 27, 1975, respondent Ilocos Sur Federation of Farmers Cooperatives, Inc. (Federation) and Philippine American General Insurance Co., Inc. (Philam), represented by its adjuster respondent Manila Adjusters & Surveyors, Company (MASCO), executed a Deed of Sale for salvaged fertilizers. The Federation agreed to pay P5,159,725.00 in installments and was required to open an irrevocable Letter of Credit (LOC) for P1,000,000.00 in favor of MASCO, forfeitable upon the Federation’s default. The Federation obtained Domestic LOC No. D-75126 from petitioner Equitable PCI Bank (Bank), amended to extend its expiry date to October 22, 1975, and drawable by MASCO upon submission of a certification of the Federation’s default.
The Federation only paid P500,000.00 and a bounced check for P259,725.00. Upon the Federation’s default, MASCO, through its President Dominador Tiongco, wrote a letter-claim dated October 8, 1975, to the Bank demanding payment under the LOC, purportedly delivering it along with required documents via its cashier. The Bank refused payment, denying receipt of the claim and citing instructions from the Federation not to pay due to alleged violations of the sale agreement.
The Federation filed a Complaint for replevin and damages against MASCO and Philam, later amended to implead the Bank to enjoin LOC payment, and Ng Yek Kiong and Ernesto Cokai as third-party defendants. The Bank filed a cross-claim against MASCO and a Third-Party Complaint against Ng Yek Kiong and Ernesto Cokai based on a surety agreement. The Federation’s Complaint was eventually dismissed for failure to prosecute, but proceedings continued on the counterclaims and cross-claims.
The Regional Trial Court (RTC) ruled that the Federation defaulted and that MASCO properly filed its claim against the LOC. It dismissed the Bank’s cross-claim and ordered the Bank to pay MASCO the LOC face value of P1,000,000.00 plus 12% interest per annum from October 8, 1975, and attorney’s fees. It also ordered the Federation to indemnify the Bank for any amounts paid to MASCO, holding third-party defendants jointly and severally liable under their surety agreement. The Court of Appeals affirmed the RTC with modification, reducing the interest rate to 6% per annum from October 8, 1975, until finality, and 12% per annum from finality until full payment. The Bank filed a Petition for Review on Certiorari.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s finding that MASCO duly presented its claim under the Letter of Credit to the Bank, thereby making the Bank liable for its proceeds.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ Decision. It held that the factual findings of the lower courts, particularly that MASCO duly presented its claim under the LOC, are generally conclusive and binding. The Court found no compelling reason to deviate from these findings, as the Bank failed to sufficiently prove that the appellate court’s judgment was based on a misapprehension of facts. The evidence, including the Partial Stipulation of Facts jointly submitted by the Federation and MASCO stating that MASCO duly and timely filed a claim, and the testimony of MASCO’s President corroborated by a receiving copy of the letter-claim with a handwritten receipt date, supported the conclusion that the claim was presented. The Bank’s denial of receipt, based on its internal procedure requiring a metered stamp, was insufficient to overturn the positive evidence of presentation. Consequently, the Bank’s obligation under the LOC became due and demandable upon MASCO’s proper submission of the required documents. The Court also sustained the modified interest rates imposed by the Court of Appeals.