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CASE OUTLINE IN MERCANTILE LAW 1

Dean Nilo T. Divina

I. LETTERS OF CREDIT

1. Definition and Nature of Letter of Credit

- A Financial devise to facilitate commercial transaction

Bank of America vs. Court of Appeals, 228 SCRA 357 (1993)

Prudential Bank and Trust Company vs. IAC, 216 SCRA 257 (1992)

- Security arrangements but not accessory contracts

Feati Bank & Trust Company vs. Court of Appeals, 196 SCRA 576 (1991)

MWSS vs. Hon. Daway, 432 SCRA 559 (2004)

- A composite of at least three distinct but intertwined relationships, each


relationship being concretized in a contract:

Reliance Commodities, Inc. vs. Daewoo Industrial Co., Ltd., 228 SCRA 545 (1993)

- Not a negotiable instrument

Lee vs. Court of Appeals, 375 SCRA 579 (2002)

- Different from trust receipt

Bank of Commerce vs. Serrano, 451 SCRA 484 (2005)

2. Laws governing letter of credit

- Applicability of usage and customs apply in commercial transactions in the


absence of any particular provision in the Code of Commerce

Bank of the Philippine Islands vs. De Reny Fabric Industries, Inc., 35 SCRA 253
(1970)

3. Kinds of letter of credit

a. Commercial and stand by letter of credit


Insular Bank of Asia & America vs. Intermediate Appellate Court, 167 SCRA 450 (1988)

Bank of America vs Court of Appeals 228 SCRA 357

Transfield Philippines, Inc. vs. Luzon Hydro Corp. 443 SCRA 307 (2004)

b. Irrevocable and revocable letter of credit

Philippine Virginia Tobacco Administration vs. De Los Angeles, 164 SCRA 543 (1988)

c. Confirmed and unconfirmed letter of credit

Feati Bank & Trust Company vs. Court of Appeals, 196 SCRA 576 (1991)

4. Parties to a Letter of Credit

a. Rights and Obligations of Parties

i. Applicant
ii. Issuing Bank
iii. Beneficiary

Reliance Commodities, Inc. vs. Daewoo Industrial Co., Ltd., 228 SCRA 545 (1993)

Prudential Bank & Trust Company vs. IAC, 216 SCRA 257 (1992)

Rodzssen Supply Company, Inc. vs. Far East Bank and Trust Company, 357 SCRA 618
(2001)

Abad vs. Court of Appeals, 181 SCRA 191 (1990); Consolidated Bank & Trust
Corporation vs. Court of Appeals, 356 SCRA 671 (2001)

MARPHIL EXPORT CORPORATION and IRENEO LIM, Petitioners, - versus - ALLIED


BANKING CORPORATION, substituted by PHILIPPINE NATIONAL BANK, Respondent.
(G.R. No. 187922, September 21, 2016, THIRD DIVISION, JARDELEZA, J.)

iv. Advising/Notifying Bank


v. Paying Bank
vi. Confirming Bank

Bank of America vs. Court of Appeals, ibid.


Feati Bank and Trust Company vs. Court of Appeals, ibid.
5. Basic Principles of Letter of Credit

a. Doctrine of Independence

i. In commercial letter of credit

BPI vs. De reny Fabrics, ibid..

Land Bank of the Philippines vs. Monet’s Export and Manufacturing Corp., 453 SCRA
173 (2005)

Philippine National Bank vs. San Miguel Corporation, G.R. No. 186063, January 15,
2014

THE HONGKONG & SHANGHAI BANKING CORPORATION, LIMITED, Petitioner, v.


NATIONAL STEEL CORPORATION AND CITYTRUST BANKING CORPORATION (NOW
BANK OF THE PHILIPPINE ISLANDS), Respondents. (G.R. No. 183486, February 24,
2016, JARDELEZA, J.)

ii. In Standby letter of credit

Insular Bank of Asia & America vs. Intermediate Appellate Court, 167 SCRA 450
(1988)

b. Fraud Exception Principle

Transfield Philippines, Inc. vs. Luzon Hydro Corp. Ibid.

c. Doctrine of Strict Compliance

Feati Bank & Trust Company vs. Court of Appeals, ibid.

II. Trust Receipts Law

1. Definition/Concept of a Trust Receipt Transaction

a. A security transaction intended 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.

Lee vs. Court of Appeals, 375 SCRA 579 (2002)


b. The loan and security features of a trust receipt

Vintola vs. Insular Bank of Asia and America, 150 SCRA 140 (1987)
Rosario Textile Mills Corp. vs. Home Bankers Savings and Trust
Company, 462 SCRA 88 (2005)

c. The loan should be granted to finance acquisition of the goods under trust
receipt. If loan is granted when entrustee already has ownership of the
goods, transaction only a simple loan

Colinares vs. Court of Appeals, 339 SCRA 609 (2000)


Consolidated Bank & Trust Corp. vs. Court of Appeals, 356 SCRA 671
(2001)

d. The goods must be intended for sale or resale, otherwise, it is a simple loan

Anthony L. Ng vs. People of the Philippines, G.R. No. 173905, April 23,
2010;

Land Bank of the Philippines vs. Perez, G.R. No. 166884, June 13, 2012;

Hur Tin Yang vs. People of the Philippines, G.R. No. 195117, August 14,
2013

e. No trust receipt, notwithstanding the label, if goods offered as security for


a loan accommodation are goods sold to the debtor

Sps. Dela Cruz vs. Dela Cruz, GR No. 158649, February 18, 2013

f. Failure of the entrustee to remit sale proceeds or return the goods in case
of non-sale constitutes criminal liability
g. Crime against public order

People vs. Hon. Nitafan 207 SCRA 726 (1992)

Compensation shall not be proper when one of the debts consists in civil liability arising
from a penal offense; moreover, any compromise relating to the civil liability does not
automatically extinguish the criminal liability of the accused. The mere failure of the
entrustee to deliver the proceeds of the sale or the goods if not sold, constitutes a
criminal offense that causes prejudice not only to another, but more to the public
interest. Metropolitan Bank & Trust Company vs. Tonda, 338 SCRA 254 (2000)

2. Ownership of the Goods, Documents and Instruments under a Trust Receipt


a. Entrustee is the owner of the goods

Vintola vs IBAA, ibid


Rosario Textile Mills vs Home Bankers Trust, ibid.

b. Entrustee can not mortgage the goods under trust receipt

DBP vs. Prudential Bank, 475 SCRA 623 (2005)

3. Rights of the Entruster

a. Validity of the Security Interest as Against the Creditors of the


Entrustee/Innocent Purchaser for Value

Prudential Bank vs. National Labor Relations Commission, 251 SCRA 412
(1995)

4. Obligation and Liability of the Entrustee

a. No criminal liability in the following cases

i. entrustee already owns the goods when loan under TR granted

Colinares vs Court of Appeals, ibid.


Consolidated vs Court of Appeals, ibid.

ii. goods not intended for sale or resale

Ng vs People, ibid.
Land Bank vs Court of Appeals, ibid.
Hur Ting Yang vs People, ibid.

iii. Non-delivery of the goods

Ramos vs. Court of Appeals, 153 SCRA 276 (1987)

iv. Novation

Ong vs. Court of Appeals, 124 SCRA 578 (1983)

Pilipinas Bank vs. Ong, 387 SCRA 37 (2002)


5. Payment/Delivery of Proceeds of Sale or Disposition of Goods, Documents or
Instrume

6. Return of Goods, Documents or Instruments in Case of Non-Sale

Vintola vs. Insular Bank of Asia and America, ibid

7. Liability for Loss of Goods, Documents or Instruments

Rosario Textile Mills Corp. vs. Home Bankers Savings and Trust Company, ibid.

8. Penal Sanctions if Offender is a Corporation

a. Criminal Liability of directors, officers and agents

Ong vs. Court of Appeals, 401 SCRA 649 (2003)

Ching vs Secretary of Justice

b. Directors and officers of the corporation not civilly liable unless they
assume personal liability

Tupaz IV vs. Court of Appeals, 475 SCRA 398 (2005)

9. Remedies Available

a. Criminal and civil actions

Vintola vs. Insular Bank of Asia and America, ibid

Sarmiento vs. Court of Appeals, 394 SCRA 315 (2002)

b. Entruster’s repossession of the goods under trust receipt not a bar to


foreclosure of mortgage of other collateral

Philippine National Bank vs. Pineda, 197 SCRA 1 (1991)

c. cancellation of trust and repossession of goods

South City Homes, Inc. vs. BA Finance Corporation, 371 SCRA 603 (2001)

d. entrustee liable for deficiency

Landl & Company vs. Metropolitan Bank, 435 SCRA 639 (2004)
III. Warehouse Receipt’s Law

Estrada vs. Court of Agrarian Relations, 2 SCRA 986 (1961)

Consolidated Terminals vs. Artex Development Co., 63 SCRA 46 (1975)

Philippine National Bank vs. Noah’s Ark Sugar Refinery, 226 SCRA 36 (1993)

Philippine National Bank vs. Se. Jr., 256 SCRA 380 (1996)

Philippine Naitonal Bank vs. Sayo, Jr., 292 SCRA 202 (1998)

IV. Banking Laws

A. The New Central Bank Act (R.A. No. 7653)

1. Responsibility and Primary Objective

Perez vs. Monetary Board, 20 SCRA 592 (1967)

Romeo Busuego vs. Court of Appeals, G.R. No. 95326, March 11, 1999

Ana Maria Koruga vs. Teodoro Arcenas, Jr., G.R. No. 168332/ G.R. No. 169053, June
19, 2009

2. Monetary Board - Powers and Functions

Ana Maria Koruga vs. Teodoro Arcenas, Jr., G.R. No. 168332/G.R. No. 169053, June
19, 2009

BSP Monetary Board vs. Hon. Antonio-Valenzuela, G.R. No. 184778, October 2, 2009

BANGKO SENTRAL NG PILIPINAS, Petitioner, v. FELICIANO P. LEGASPI, Respondent.


G.R. No. 205966, March 02, 2016, PERALTA, J.

Philippine veterans bank vs Mb

3. How the BSP handles Banks in Distress

a. Conservatorship

Central Bank of the Philippines vs. Court of Appeals, G.R. No. L-45710 October 3,
1985
Central Bank of the Philippines vs. Court of Appeals, G.R. No. 88353, May 8, 1992

First Philippine International Bank vs. Court of Appeals, G.R. No. 115849, January
24, 1996

b. Closure

Lipana vs. Development Bank of Rizal, 154 SCRA 257 (1987)

Banco Filipino Savings and Mortgage Bank vs. Central Bank, G.R. No. 70054,
December 11, 1991

Central Bank of the Philippines vs. Court of Appeals, 208 SCRA 652 (1992)

Rural Bank of San Miguel vs. Monetary Board, G.R. No. 150886, February 16,
2007

BSP Monetary Board vs. Hon. Antonio-Valenzuela, G.R. No. 184778, October 2,
2009

SPOUSES JAIME and MATILDE POON vs. PRIME SAVINGS BANK represented by
the PHILIPPINE DEPOSIT INSURANCE CORPORATION as Statutory Liquidator
(G.R. No. 183794, June 13, 2016, SERENO, CJ)

c. Receivership

Abacus Real Estate Development Center, Inc.,vs. Manila Banking Corp., G.R. No.
162270, April 06, 2005

Alfeo D. Vivas, vs. Monetary Board and PDIC, G.R. No. 191424, August 7, 2013

d. Liquidation

Apollo M. Salud vs. Central Bank of the Philippines, G.R. No. L-17620, August 19,
1986

Jerry Ong vs. Court of Appeals, G.R. No. 112830, February 1, 1996

Domingo Manalo vs. Court of Appeals, G.R. No. 141297, October 8, 2001
Rural Bank of Sta. Catalina vs. Land Bank of the Philippines, G.R. No. 148019, July
26, 2004

Leticia G. Miranda vs. Philippine Deposit Insurance Corporation, G.R. No.


169334, September 8, 2006

In Re : Petition for Assistance in the Liquidation in the Rural Bank of Bokod


(Benguet), PDIC vs. Bureau of Internal Revenue, 511 SCRA 123 (2006)

Cu v. Small Business Guarantee and Finance Corp., G.R. No. 211222, August 7,
2017, Justice Caguioa New Central Bank Act, Liquidation of Banks

APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, et al., v.


BANGKO SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT INSURANCE
CORPORATION, G.R. No. 214866, October 2, 2017, Second Division, PERLAS-
BERNABE, J.

Yuseco vs PDIC, August 2016

B. Law on Secrecy of Bank Deposits (R.A. No. 1405, as amended)

1. Purpose

BSB Group, Inc. vs. Sally Go, G.R. No. 168644, February 16, 2010

2. Prohibited Acts

Oñate vs. Abrogar, G.R. No. 107303, February 23, 1995

Philippine Commercial International Bank vs. Court of Appeals, 255 SCRA 299 (1996)

Union Bank of the Philippines vs. Court of Appeals, G.R. No. 134699, December 23,
1999

3. Deposits Covered

Intengan vs. Court of Appeals, G.R. No. 128996, February 15, 2002

Ejercito vs. Sandiganbayan, G.R. Nos. 157294-95, November 30, 2006

4. Exceptions

PNB vs. Gancayco, 15 SCRA 91 (1965); Banco Filipino Saving and Mortgage Bank vs.
Purisima, 161 SCRA 576 (1988)
Mellon Bank, N.A. vs. Magsino, G.R. No. 71479, October 18, 1990

PCIB vs. Court of Appeals, G.R. No. 84526, January 28, 1991

Van Twest vs. Court of Appeals, 230 SCRA 42 (1994)

Marquez vs. Desierto, G.R. No. 135882, June 27, 2001; Office of the Ombudsman vs.
Ibay, G. R. No. 137538, September 3, 2001

China Bank Corporation vs. Court of Appeals 511 SCRA 110 (2006)

BSB Group, Inc.,vs. Sally Go, G.R. No. 168644, February 16, 2010

Rizal Commercial Banking Corporation vs. Hi-Tri Development Corporation, 672


SCRA 514 (2012)

Dona Adela Export International Inc., vs. Trade and Investment Development
Corporation and the Bank of the Philippine Islands, G.R. No. 201931, February 11,
2015

5. Garnishment of Deposits, Including Foreign Deposits

De la Rama vs. Villarosa, 8 SCRA 413 (1963)

PCIB vs. Court of Appeals, G.R. No. 84526, January 28, 1991

Salvacion vs. Central Bank of the Philippines, G.R. No. 94723, August 21, 1997

C. General Banking Law of 2000 (R.A. No. 8791)

1. Definition and Classification of Banks

Republic of the Philippines vs. Security Credit and Acceptance Corporation, G.R. No.
L-20583, January 23, 1967

2. Distinction of Banks from Quasi-Banks and Trust Entities

Teodoro Bañas vs. Asia Pacific Finance Corporation, G.R. No. 128703, October 18,
2000
First Planters Pawnshop, Inc.,vs. Commissioner of Internal Revenue, G.R. No. 174134, July 30,
2008

3. Bank Powers and Liabilities

a. Corporate Powers

Register of Deeds of Manila vs. China Banking Corporation, 4 SCRA 1145 (1962)

Banco de Oro-EPCI, Inc. vs. JAPRL Development Corporation, G.R. No. 179901,
April 14, 2008

b. Banking and Incidental Powers

Spouses Raul and Amalia Panlilio vs. Citibank, N.A., G.R. No. 156335, November
28, 2007

4. Diligence Required of Banks—Relevant Jurisprudenc

Simex International (Manila) Inc. vs. Court of Appeals, 183 SCRA 360 (1990)

Luzan Sia vs. Court of Appeals, G.R. No. 102970, May 13, 1993

Gregorio Reyes vs. Court of Appeals, G.R. No. 118492, August 15, 2001

Philippine National Bank vs. Erlando T. Rodriguez, et. al., G.R. No. 170325,
September 26, 2008

Central Bank of the Philippines vs. Citytrust Banking Corporation, G.R. No. 141835,
February 4, 2009

Bank of America, NT and SA vs. Associated Citizens Bank, G.R. No. 141018, May 21,
2009

DRA. MERCEDES OLIVER, Petitioner, v. PHILIPPINE SAVINGS BANK AND LILIA


CASTRO,Respondents. (G.R. No. 214567, April 04, 2016,

MA. LORENA FLORES and ALEXANDER CRUZ vs. NARCISO L. KHO (G.R. No. 205840,
July 7, 2016,
ANNA MARIE L. GUMABON vs. PHILIPPINE NATIONAL BANK (G.R. No. 202514, July
25, 2016,

PHILIPPINE NATIONAL BANK vs. JUAN F. VILA (G.R. No. 213241, August 1, 2016,
PEREZ

PHILIPPINE NATIONAL BANK, Petitioner, -versus- PABLO V. RAYMUNDO,


Respondents. (G.R. No. 208672, THIRD DIVISION, December 7, 2016,

SPOUSES CRISTINO and EDNA CARBONELL v. METROPOLITAN BANK and TRUST


COMPANY, G.R. No. 178467, April 26, 2017, Third Division,

5. Nature of Bank Funds and Bank Deposits

Consolidated Bank and Trust Corporation vs. Court of Appeals, G.R. No. 138569,
September 11, 2003

Suan vs. Gonzales, 518 SCRA 82 (2007)

6. Stipulation on Interests

Fidelity Savings and Mortgage Bank vs. Hon. Pedro Cenzon, G.R. No. L-46208, April
5, 1990

Ileana Macalinao vs. Bank of the Philippine Islands, G.R. No. 175490, September 17,
2009

Heirs of Estelita Burgos-Lipat namely: Alan B. Lipat and Alfredo B. Lipat, Jr. vs. Heirs
of Eugenio D. Trinidad namely: Asuncion R. Trinidad, et. al., G.R. No. 185644, March
2, 2010

Asia Trust Development Bank vs. Carmelo H. Tuble, G.R. No. 183987, July 25, 2012

Advocates for Truth in Lending vs. BSP, G.R. No. 192986, January 15, 2013

7. Grant of Loans and Security Requirements

a. Single Borrower’s Limit

b. Restrictions on Bank Exposure to DOSRI (Directors, Officers, Stockholders and


their Related Interests

Banco de Oro vs. Bayuga, 93 SCRA 443 (1979)


Jose C. Go vs. BSP, G.R. No. 178429, October 23, 2009

Hilario P. Soriano vs. People of the Philippines, et. al., G.R. No. 162336, February 1,
2010

Republic of the Philippines vs. Sandiganbayan, et. al., G.R. No. 166859/G.R. No.
169203/G.R. No. 180702, April 12, 2011

Philippine Amanah Bank (Now Al-Amanah Islamic Investment Bank of the


Philippines, also known as Islamic Bank) vs. Evangelista Contreras, G.R. No. 173168,
September 29, 2014

c.loan values of property

C.1 Redemption right

WHITE MARKETING DEVELOPMENT CORPORATION, Petitioner, - versus -


GRANDWOOD FURNITURE & WOODWORK, INC., Respondent. (G.R. No. 222407,
SECOND DIVISION, November 23, 2016,

Golden gateway merchandising vs Equitable PCI Bank, GR No. 195540, March 13,
2013

c. Anti-Money Laundering Act (R.A. No. 9160, as amended)

a. Unlawful Activities or Predicate Crimes

Republic of the Philippines vs. Glasgow Credit and Collection Services, Inc., G.R. No.
170281, January 18, 2008

Republic of the Philippines vs. Hon. Antonio Eugenio, G.R. No. 174629, February 14,
2008

REPUBLIC OF THE PHILIPPINES, represented by the ANTI-MONEY LAUNDERING


COUNCIL v.JOCELYN I. BOLANTE, OWEN VINCENT D. BOLANTE, MA. CAROL D.
BOLANTE, ALEJO LAMERA, CARMEN LAMERA, EDNA CONSTANTINO, ARIEL C.
PANGANIBAN, KATHERINE G. BOMBEO, SAMUEL S. BOMBEO, MOLUGAN
FOUNDATION, SAMUEL G. BOMBEO, JR., and NATIONAL LIVELIHOOD
DEVELOPMENT CORPORATION (Formerly Livelihood Corporation), G.R. No. 186717,
April 17, 2017, First Division, SERENO, CJ.
b. Freezing of Monetary Instrument or Property

Republic of the Philippines vs. Cabrini Green & Ross, Inc., G.R. No. 154522, May 5,
2006

Ret. Lt. Gen. Jacinto Ligot, et. al. vs. Republic of the Philippines, G.R. No. 176944,
March 6, 2013

SUBIDO PAGENTE CERTEZA MENDOZA and BINAY LAW OFFICES, Petitioner, - versus
- THE COURT OF APPEALS, HON. ANDRES B. REYES, JR., in his capacity as Presiding
Justice of the Court of Appeals, and the ANTI-MONEY LAUNDERING COUNCIL,
represented by its members, HON. AMANDO M. TETANGCO, JR., Governor of the
BANGKO SENTRAL NG PILIPINAS, HON. TERESITA J. HERBOSA, Chairperson of the
Securities and Exchange Commission, and HON. EMMANUEL F. DOOC, Insurance
Commissioner of the Insurance Commission. Respondents. (G.R. No. 216914, EN
BANC, December 6, 2016, PEREZ,J.)