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2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443

VOL. 443, NOVEMBER 22, 2004 307
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

*
G.R. No. 146717. November 22, 2004.

TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON
HYDRO CORPORATION, AUSTRALIA and NEW
ZEALAND BANKING GROUP LIMITED and SECURITY
BANK CORPORATION, respondents.

Commercial Law; Banks and Banking; Letters of Credit;
Standby Credits; Words and Phrases; In commercial transactions,
a letter of credit is a financial device developed by merchants as a
convenient and relatively safe mode of dealing with sales of goods
to satisfy the seemingly irreconcilable interests of a seller, who
refuses to part with his goods before he is paid, and a buyer, who
wants to have control of the goods before paying; Generally, credits
in non­sale settings have come to be known as standby credits.—
The letter of credit evolved as a mercantile specialty, and the only
way to understand all its facets is to recognize that it is an entity
unto itself. 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, yet strict
compliance with its terms is an enforceable right. Nor is it a third­
party beneficiary contract, because the issuer must honor drafts
drawn against a letter regardless of problems subsequently
arising in the underlying contract. Since the bank’s customer
cannot draw on the letter, it does not function as an assignment
by the customer to the beneficiary. Nor, if properly used, is it a
contract of suretyship or guarantee, because it entails a primary
liability following a default. Finally, it is not in itself a negotiable
instrument, because it is not payable to order or bearer and is
generally conditional, yet the draft presented under it is often
negotiable. In commercial transactions, a letter of credit is a
financial device developed by merchants as a convenient and
relatively safe mode of dealing with sales of goods to satisfy the
seemingly irreconcilable interests of a seller, who refuses to part
with his goods before he is paid, and a buyer, who wants to have
control of the goods before paying. The use of credits in
commercial transactions serves to reduce the risk of nonpayment
of the purchase price under the contract for the sale of goods.
http://www.central.com.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 1/14

A letter of credit. The beneficiary of the standby credit must certify that his obligor has not performed the contract. The beneficiary of a commercial credit must demonstrate by documents that he has performed his contract. First.com.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 2/14 . credits in the non­sale settings have come to be known as standby credits. Such credits become payable upon the presentation by the seller­ beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement. In the standby type.central.—There are three significant differences between commercial and standby credits. 308 308 SUPREME COURT REPORTS ANNOTATED Transfield Philippines. credits are also used in non­sale settings where they serve to reduce the risk of nonperfor­ _______________ * SECOND DIVISION. vs. Same; Same; Same; Same; Commercial Credits and Standby Credits. changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto. Distinguished. Inc. The documents that accompany the beneficiary’s draft tend to show that the applicant has not performed.—By definition. the credit is payable upon certification of a party’s nonperformance of the agreement.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 However. Generally. Same; Same; Same; Uniform Customs and Practice (UCP) for Documentary Credits; Since letters of credit have gained general http://www. however. a letter of credit is a written instrument whereby the writer requests or authorizes the addressee to pay money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee. Luzon Hydro Corporation mance. Same; Same; Same; A letter of credit changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto. commercial credits involve the payment of money under a contract of sale.

Same; Same; Same; “Independence Principle”; Under the “independence principle. as the case may be. falsification or legal effect of any documents. or the insurers of the goods. The vast majority of letters of credit incorporate the UCP. 443. quality. quantity. nor do they assume any liability or responsibility for the description.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 3/14 .. the applicability of the UCP is undeniable. or for the general and/or particular conditions stipulated in the documents or superimposed thereon. In Bank of the Philippine Islands v. commercial transactions shall be governed by usages and customs generally observed. performance or standing of the consignor. weight. Inc. this Court ruled that the observance of the UCP is justified by Article 2 of the Code of Commerce which provides that in the absence of any particular provision in the Code of Commerce. NOVEMBER 22. the UCP for Documentary Credits has undergone several revisions. the International Chamber of Commerce (ICC) has published from time to time updates on the Uniform Customs and Practice for Documentary Credits to standardize practices in the letter of credit area; The observance of the UCP is justified by Article 2 of the Code of Commerce which provides that in the absence of any particular provision in the Code of Commerce. More recently. this Court ruled that there being no specific provisions which govern the legal complexities arising from transactions involving letters of credit. sufficiency.—Article 3 of the UCP provides that credits. NT & SA v. solvency.com. the ICC 309 VOL.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 acceptability in international trade transactions. First published in 1933. commercial transactions shall be governed by usages and customs generally observed. delivery. the latest of which was in 1993. condition. not only between or among banks themselves but also between banks and the seller or the buyer. 2004 309 Transfield Philippines. Inc. Luzon Hydro Corporation has published from time to time updates on the Uniform Customs and Practice (UCP) for Documentary Credits to standardize practices in the letter of credit area. Court of Appeals. packing. genuineness.—Since letters of credit have gained general acceptability in international trade transactions. vs. accuracy. value or existence of the goods represented by any documents.central. or for the good faith or acts and/or omissions. or any other person whomsoever. De Reny Fabric Industries. by their http://www. the carriers. in Bank of America.” banks assume no liability or responsibility for the form.

or any other person whomsoever. quality. banks assume no liability or responsibility for the form. solvency. vs.central. Consequently. accuracy. though in both cases the payment may be enjoined if in the light of the purpose of the credit the payment of the credit would constitute fraudulent abuse of the credit. Under this principle. The so­ called “independence principle” assures the seller or the 310 310 SUPREME COURT REPORTS ANNOTATED Transfield Philippines. falsification or legal effect of any documents. packing. genuineness. are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s). sufficiency. delivery. nor do they assume any liability or responsibility for the description. quantity. Thus. or for the general and/or particular conditions stipulated in the documents or superimposed thereon. A beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the applicant and the issuing bank.—The independent nature of the letter of credit may be: (a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying agreement like for instance a typical standby; or (b) independence may be only as to the justification aspect like in a http://www. the carriers. performance or standing of the consignor. weight. 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. Luzon Hydro Corporation 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. or the insurers of the goods. value or existence of the goods represented by any documents. Same; Same; Same; Same; The independent nature of the letter of credit may be: (a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying agreement; or (b) independence may be only as to the justification aspect. Inc. even if any reference whatsoever to such contract(s) is included in the credit. condition.com. or for the good faith or acts and/or omissions. accept and pay draft(s) or negotiate and/or fulfill any other obligation under the credit is not subject to claims or defenses by the applicant resulting from his relationships with the issuing bank or the beneficiary.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 nature.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 4/14 . the undertaking of a bank to pay.

Given the nature of letters of credit. the obligation under the letter of credit is independent of the related and originating contract. the independence doctrine works to the benefit of both the issuing bank and the beneficiary. 443. Same; Same; Same; Same; The independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract; As it is. the independence principle liberates the issuing bank from the duty of ascertaining compliance by 311 VOL. such as in this case.—As discussed above. 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 pre­requisite for the release of funds http://www. Inc. In brief. As the principle’s nomenclature clearly suggests. 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. in a letter of credit transaction. petitioner’s argument—that it is only the issuing bank that may invoke the independence principle on letters of credit—does not impress this Court.— Petitioner’s argument that any dispute must first be resolved by the parties. In both cases the payment may be enjoined if in the light of the purpose of the credit the payment of the credit would constitute fraudulent abuse of the credit. Precisely. As it is. which is identical with the same obligations under the underlying agreement.central.com. the independence doctrine works to the benefit of both the issuing bank and the beneficiary. Same; Same; Same; Same; Guarantee; 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 prerequisite for the release of funds under a letter of credit.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 commercial letter of credit or repayment standby. vs. the letter of credit is separate and distinct from the underlying transaction. whether through negotiations or arbitration. Luzon Hydro Corporation the parties in the main contract. 2004 311 Transfield Philippines.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 5/14 . NOVEMBER 22. where the credit is stipulated as irrevocable. before the beneficiary is entitled to call on the letter of credit in essence would convert the letter of credit into a mere guarantee. 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.

— A contract once perfected. Same; Same; Same; Same; Owing to the nature and purpose of standby letters of credit. banks are left with little or no alternative but to honor the credit or the call for payment. may be in keeping with good faith. vs.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 6/14 . may be in keeping with good faith. http://www.” the Turnkey Contract itself bestows upon LHC the right to call on the Securities in the event of default. Inc. The call upon the Securities. while not an exclusive remedy on the part of LHC. usage.central. A careful perusal of the Turnkey Contract reveals the intention of the parties to make the Securities answerable for the liquidated damages occasioned by any delay on the part of petitioner. Respondent banks had squarely raised the independence principle to justify their releases of the amounts due under the Securities.com. Luzon Hydro Corporation 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. If a letter of credit is drawable only after settlement of the dispute on the contract entered into by the applicant and the beneficiary. more so in this case where the banks concerned were impleaded as parties by petitioner itself. The situation itself emasculates petitioner’s posture that LHC cannot invoke the independence principle and highlights its puerility. binds the parties not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature. and law. this Court rules that the 312 312 SUPREME COURT REPORTS ANNOTATED Transfield Philippines. usage. and law. Same; Same; Same; Same; Contracts; A contract once perfected. is certainly an alternative recourse available to it upon the happening of the contingency for which the Securities have been proffered. even without the use of the “independence principle. binds the parties not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature. In other words. it is the beneficiary who has the right to ask the bank to honor the credit by allowing him to draw thereon. Owing to the nature and purpose of the standby letters of credit.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 under a letter of credit. Thus.—While it is the bank which is bound to honor the credit. there would be no practical and beneficial use for letters of credit in commercial transactions. the argument is incompatible with the very nature of the letter of credit.

However.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 Same; Same; Same; Same; Injunction; Requisites; Most writers agree that fraud is an exception to the independence principle; The remedy for fraudulent abuse is an injunction. an injunctive remedy may only be resorted to when there is a http://www. Before a writ of preliminary injunction may be issued. injunction should not be granted unless: (a) there is clear proof of fraud; (b) the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud under the main agreement; and (c) irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously damaged. Luzon Hydro Corporation it is not a cause of action in itself but merely a provisional remedy. 2004 313 Transfield Philippines. Inc. Professor Dolan opines that the untruthfulness of a certificate accompanying a demand for payment under a standby credit may qualify as fraud sufficient to support an injunction against payment. —Most writers agree that fraud is an exception to the independence principle. there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right. Moreover. that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage. It must be shown that the invasion of the right sought to be protected is material and substantial.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 7/14 . NOVEMBER 22. The remedy for fraudulent abuse is an injunction. The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case.central.com. injunction is a preservative remedy for the protection of one’s substantive right or interest; 313 VOL. Same; Same; Same; Same; Same; The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case. the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law. vs. 443.—Generally. the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law. an adjunct to a main suit.

http://www. but more so. Matters. What petitioner did assert before the courts below was the fact that LHC’s draws on the Securities would be premature and without basis in view of the 314 314 SUPREME COURT REPORTS ANNOTATED Transfield Philippines. did petitioner invoke the fraud exception rule as a ground to justify the issuance of an injunction. The lower courts could thus not be faulted for not applying the fraud exception rule not only because the existence of fraud was fundamentally interwoven with the issue of default still pending before the arbitral tribunals. Same; Same; Same; Same; Actions; Appeals; Pleadings and Practice; Matters.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 8/14 . Luzon Hydro Corporation pending disputes between them. theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for the first time on appeal. It is therefore premature and absurd to conclude that the draws on the Securities were outright fraudulent given the fact that the ICC and CIAC have not ruled with finality on the existence of default. vs. because petitioner never raised it as an issue in its pleadings filed in the courts below.central.— Nowhere in its complaint before the trial court or in its pleadings filed before the appellate court.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. petitioner utterly failed to show that it had a clear and unmistakable right to prevent LHC’s call upon the Securities. At any rate.com. Inc. Same; Same; Same; Same; It is premature and absurd to conclude that the draws on the Securities were outright fraudulent where the International Chamber of Commerce and the Construction Industry Authority Commission have not ruled with finality on the existence of default.—The pendency of the arbitration proceedings would not per se make LHC’s draws on the Securities wrongful or fraudulent for there was nothing in the Contract which would indicate that the parties intended that all disputes regarding delay should first be settled through arbitration before LHC would be allowed to call upon the Securities. theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for the first time on appeal. Petitioner should not be allowed in this instance to bring into play the fraud exception rule to sustain its claim for the issuance of an injunctive relief.

2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 Same; Same; Same; Same; Obligations and Contracts; Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 9/14 . Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Actions; Injunction; Settled is the rule that injunction would not lie where the acts sought to be enjoined have already become fait accompli or an accomplished or consummated act.central. This fact alone would have been sufficient reason to dismiss the instant petition. this Court ruled that where the period within which the former employees were 315 VOL. any declaration upholding the propriety of the writ would be entirely useless as there would be no actual case or controversy between the parties insofar as the preliminary injunction is concerned. as earlier stated. Settled is the rule that injunction would not lie where the acts sought to be enjoined have already become fait accompli or an accomplished or consummated act. But. — Prudence should have impelled LHC to await resolution of the pending issues before the arbitral tribunals prior to taking action to enforce the Securities. vs. In Ticzon v. Video Post Manila. In the instant case. Luzon Hydro Corporation prohibited from engaging in or working for an enterprise that competed with their former employer—the very purpose of the preliminary injunction—has expired.—In a Manifestation. it would have to live with its inaction. However. 2004 315 Transfield Philippines. The other issues raised by petitioner particularly with respect to its http://www. Inc. 443. pursuant to the principle of autonomy of contracts embodied in Article 1306 of the Civil Code. therefore. dated 30 March 2001. the Turnkey Contract did not require LHC to do so and. the fact is petitioner did not do so; hence. Inc. it was merely enforcing its rights in accordance with the tenor thereof.com. the consummation of the act sought to be restrained had rendered the instant petition moot—for any declaration by this Court as to propriety or impropriety of the non­issuance of injunctive relief could have no practical effect on the existing controversy. petitioner could have incorporated in its Contract with LHC. LHC informed this Court that the subject letters of credit had been fully drawn. More importantly. a proviso that only the final determination by the arbitral tribunals that default had occurred would justify the enforcement of the Securities. NOVEMBER 22.

simultaneously or successively. It exists when a party repetitively avails of several judicial remedies in different courts. It may also consist in the act of a party against whom an adverse judgment has been rendered in one forum. 316 316 SUPREME COURT REPORTS ANNOTATED Transfield Philippines.com. and all raising substantially the same issues either pending in. Samillano & Mangrobang for respondent Security Bank.      Castro. could properly be threshed out in a separate proceeding. Luzon Hydro Corporation PETITION for review on certiorari of a decision of the Court of Appeals.central. Yan Binas. To determine whether a party violated the rule against forum shopping. or already resolved adversely. or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court might look with favor upon the other party. all substantially founded on the same transactions and the same essential facts and circumstances.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 right to recover the amounts wrongfully drawn on the Securities. the Court will refrain from making any definitive ruling on the issue until the party alleged to have committed forum shopping has been given ample opportunity to respond to the charge. according to it. Forum Shopping constitutes improper conduct and may be punished with summary dismissal of the multiple petitions and direct contempt of court. http://www. Ortile. Same; Pleadings and Practice; Forum Shopping; Considering the seriousness of the charge of forum shopping and the severity of the sanctions for its violation. Tomacruz & Associates Law Offices for petitioner. by some other court. the test applied is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another.—Forum Shopping is a very serious charge. of seeking another and possibly favorable opinion in another forum other than by appeal or special civil action of certiorari. The facts are stated in the opinion of the Court. Inc. Considering the seriousness of the charge of forum Shopping and the severity of the sanctions for its violation. vs. the Court will refrain from making any definitive ruling on this issue until after petitioner has been given ample opportunity to respond to the charge.           Romulo. Mabanta. B. Buenaventura. Sayoc and Delos Angeles and M.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 10/14 .

ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 11/14 . construction.           Sycip. as Turnkey Contractor. in case of dispute. 3 Id. among which are5 variations. Ancheta. Salazar.. Luzon Hydro Corporation inces of Benguet and Ilocos Sur (hereinafter.central.R. A creation of commerce and businessmen. or such later date as may be agreed upon between petitioner and respondent LHC or otherwise determined in accordance with the Turnkey Contract; and (2) petitioner is entitled to claim extensions of time (EOT) for reasons enumerated in the Turn­key Contract. testing and completion of the Project. the letter of credit is also unique in the number of parties involved and its supranational 1 character. 52­61. Further. Rivera. NOVEMBER 22.: Subject of this case is the letter of credit which has evolved as the ubiquitous and most important device in international trade. 4 commissioning.. Hon. 443.com. v. 61901 entitled “Transfield Philippines. petitioner and respondent Luzon Hydro Corporation3 (hereinafter. Inc. TINGA. Oscar 2 Pimentel. concurred in by Justices Conchita Carpio­Morales and Rebecca de Guia­Salvador. Peña & Nolasco for respondent ANZ Bank. Inc. at pp. on a turnkey basis. Petitioner was given the sole responsibility for the design. undertook to construct. pp.” promulgated on 31 January 2001. SP No. 2004 317 Transfield Philippines. 317 VOL. vs. Hernandez & Gatmaitan for respondent LHC. The Turnkey Contract provides that: (1) the target completion date of the Project shall be on 1 June 2000. On 26 March 1997. et al. 2 Rollo. LHC) entered into a Turnkey Contract whereby petitioner. a seventy (70)­Megawatt hydro­electric power station at the Bakun River in the prov­ _______________ 1 Penned by Justice Candido V. the Project). the parties are bound to settle http://www. 62­252. J. force majeure. Petitioner has appealed from the Decision of the Court of Appeals in CA­G.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443           Quasha. and delays caused by LHC itself.

75­76.. conciliation and such other means 6 enumerated under Clause 20. such as force majeure occasioned by typhoon Zeb. E001126/8400 with _______________ 4 Id. be referred to arbitration in accordance with Clause 20. LHC denied the requests.4. 81. This gave rise to a series of legal actions between the parties which culminated in the instant petition. p. petitioner sought various EOT to complete the Project. Volume II of the Turnkey Contract. the parties together shall in good faith exert all efforts to resolve such dispute or difference by whatever means they deem appropriate. (Id. petitioner opened in favor of LHC two (2) standby letters of credit both dated 20 March 2000 (hereinafter referred to as “the Securities”)..central. barricades and demonstrations.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 12/14 .988.907. To secure performance of petitioner’s obligation on or before the target completion date. Inc. http://www. 5 Clause 1. At the request of any party. to wit: Standby Letter of Credit No.com. at pp. including conciliation.2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 their differences through mediation. In the course of the construction of the project. 6 20. at p. mediation and seeking the assistance of technical. 179) 318 318 SUPREME COURT REPORTS ANNOTATED Transfield Philippines.3 Dispute Resolution. the chief executives of the Employer and the Contractor shall meet in a good­faith effort to reach an amicable settlement of the dispute or difference. accounting or other experts. Any dispute or difference that the parties are unable to resolve within a reasonable time may. If at anytime any dispute or difference shall arise between the Employer and the Contractor in connection with or arising out of this Contract or the carrying out of the Works. Luzon Hydro Corporation the local branch of respondent Australia 7 and New Zealand Banking Group Limited (ANZ Bank) and Standby Letter of Credit No.00. vs.3 of the Turnkey Contract. Rollo. however. at the option of either party. or such time for completion as may be determined by the parties’ agreement. The extensions were requested allegedly due to several factors which prevented the completion of the Project on target date.1. IBDIDSB­00/4 8 with respondent Security Bank Corporation (SBC) 9 each in the amount of US$8.

or disposition of the Securities in favor of LHC or any person claiming under LHC would constrain it to hold respondent banks liable for liquidated damages. This was followed by another Request for Arbitration. at pp. pp. 319 VOL. 254­256. Id. 257­259. As petitioner had anticipated. Volume II of the Turnkey Contract. 14 LHC sent notice to petitioner that pursuant to Clause 8. Asserting that LHC had no right to call on the Securities until the resolution of disputes before the arbitral tribunals. Rollo. 94. petitioner warned respondent banks that any transfer. pp. In both arbitration proceedings.1. Id. the common issues presented were: [1) whether typhoon Zeb and any of its associated events constituted force majeure to justify the extension of time sought by petitioner; and [2) whether LHC had the right to terminate the Turnkey Contract for failure of petitioner to complete the Project on target date.central... on 27 June 2000. at p. Luzon Hydro Corporation proceedings already pending before the CIAC and ICC in connection with its alleged default in the performance of its obligations. Inc.2 of the Turnkey Contract.2..com. Rollo. p. p. 9 Clause 4. in relation to Clause 8. 12 Turnkey Contract. 11 Id. Rollo. Rollo. 13 Annex “H”. petitioner—in two separate letters both dated 10 August 2000—advised respondent banks of the arbitration _______________ 7 Annex “C”.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 13/14 . release.1. 8 Annex “D”.7. this time filed by petitioner 11 before the International Chamber of Commerce (ICC) on 3 November 2000. 443. NOVEMBER 22. foreseeing that LHC would call on the Securities pursuant12 to the pertinent provisions of the 13 Turnkey Contract..2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 The first of the actions was a Request for Arbitration which LHC filed before the Construction10 Industry Arbitration Commission (CIAC) on 1 June 1999.2.5. 359­382. 94. 132. Rollo. 2004 319 Transfield Philippines. 320­322. 287­289; Annex “H­1”. vs. Meanwhile. at pp. 10 Id. pp. 261­265. it failed to comply with its obligation http://www. at pp. Clause 4..

2/14/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 443 http://www.ph/sfsreader/session/0000015a3c5f2bc2d4bbf706003600fb002c009e/t/?o=False 14/14 .central.com.