PHIL. VIRGINIA TOBACCO ADMIN. v. DE LOS ANGELES G.R. No.

L-27829
August 19, 1988 Ponente J. Paras
TOPIC IN SYLLABUS: Irrevocable and revocable letter of credit
SUMMARY: Sevilla, as proprietor of the Philippine Associated Resources, has rights to import and export Philippine
Virginia Tobacco Administration (PVTA) and farmer's low-grade tobacco in and out of the country. It has a contract with
PVTA performing such activities. PVTA granted more beneficial import privileges (by virtue of RA 4155) in favor of
Sevilla, with several conditions, one of which is for Sevilla to open an irrevocable letter of credit in favor of PVTA. An
irrevocable letter of credit was opened with Prudential Bank. Later, PVTA procured two drafts to be drawn against the
letter of credit. Sevilla filed a complaint to which PVTA filed an answer with a Counter-Claim. Judge De los Angeles
issued a writ of preliminary injunction to prevent PVTA from drawing against the letter of credit, and later a writ
directing Prudential Bank to release the funds on the letter of credit, thereby allowing Sevilla to obtain the amounts. SC
held that the WPI Orders violated the irrevocability of the irrevocable letter of credit in favor of PVTA, which in its
lifetime may not be cancelled or modified without the express permission of the beneficiary (PVTA). Judge also violated
several provisions of the Rules of Court in issuing the WPI.

PROCEDURAL ANTECEDENTS: Petition for Certiorari, Prohibition and Mandamus

FACTS:
 Timoteo Sevilla is the proprietor and General Manager of the Philippine Associated Resources (PAR). PAR,
along with two other entities, were awarded in a public bidding: (1) the right to import Virginia leaf tobacco for
blending purposes; and (2) the right to export Philippine Virginia Tobacco Administration (PVTA) and farmer's
low-grade tobacco. They would be allowed to import one (1) kilo of tobacco for every nine (9) kilos of leaf
tobacco actually exported. The other two entities assigned their rights to PVTA, making PAR the only private
entity which enjoyed the privilege of such rights.
 PVTA and Sevilla entered a contract wherein 85 million kilos of Virginia leaf tobacco would be imported, while
2.53 million kilos of PVTA and 5.1 million kilos of farmer's and/or PVTA at P3.00 per kilo. Sevilla actually
exported 2,101.470 kilos of tobacco, and paid PVTA P2,482,938.50 (leaving a balance of P3,713,908.91).
 Republic Act No. 4155 was passed, authorizing PVTA to grant import privileges at the ratio of 4 to 1 instead of
the previous 9 to 1. The contract was amended to grant Sevilla the privileges under the law, subject to the
conditions that the price of P3.00 per kilo was maintained; the unpaid balance would be paid at P4.00 per kilo;
and that Sevilla open an irrevocable letter of credit No. 6232 with the Prudential Bank and Trust Co. in favor of
PVTA.
 PVTA procured two drafts to be drawn against the letter of credit for amounts which have become due and
demandable. Sevilla filed a Complaint for Damages with preliminary injunction against PVTA. PVTA filed an
Answer with Counter-Claim, alleging that Sevilla violated the terms of the contract by filing for preliminary
injunction to prevent PVTA from drawing from the letter of credit.
 Judge Walfrido De los Angeles (also a respondent here) issued a writ of preliminary injunction (WPI) enjoining
PVTA from drawing against the letter of credit. Sevilla's Complaint was dismissed upon his own motion and the
WPI was lifted. PVTA filed MR to set aside Order of Dismissal, which was granted. Sevilla filed MR. Pending
the MR, Judge De los Angeles issued an Order Dated 17 July 1967, directing Prudential Bank & Trust Co. to
make the questioned release of funds from the Letter of Credit. Sevilla was able to secure the release of P300,000
and the rest of the amount, leading PVTA to file a Petition for Certiorari, Prohibition and Mandamus before SC.
Sevilla filed in the lower court an urgent ex parte petition for the issuance of preliminary mandatory and
preventive injunction which was granted by Judge De los Angeles in an Order Dated 3 November 1967. MR by
PVTA was denied in an Order Dated 16 March 1968.
 SC issued WPI enjoining Judge from enforcing his Order Dated 17 July 1967, or if it has already been enforced,
then Sevilla is ordered to return the amounts released. Prudential Bank stated that it already released the funds.
PVTA filed motion to declare Prudential Bank and Sevilla in contempt for not following SC's WPI, since they
failed to return the released funds. Another WPI was prayed for and issued, preventing implementation of Judge
De los Angeles' Orders Dated 3 November 1967 and 16 March 1968.

ISSUE: WoN the irrevocability of the letter of credit issued by Prudential Bank in favor of PVTA was violated—YES.

PETITIONER ARGUMENT: PVTA claims that Judge De los Angeles acted w/o or in excess of jurisdiction or w/ grave
abuse of discretion in issuing Order Dated 17 July 1967, ordering the release of funds from the letter of credit, since (a)
the letter of credit is irrevocable; (b) the Order was issued w/o notice; and (c) Order disturbed status quo of parties
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prejudicing case on the merits. There's no reason to issue the WPI, and in fact PVTA stands to suffer greater damage if the
Order Dated 3 November 1967 is not annulled.

HELD:
1. In issuing the Order Dated 17 July 2016, commanding the release of the funds from the Letter of Credit issued by
Prudential Bank in favor of PVTA, Judge De los Angeles violated the irrevocability of the letter of credit.
 Substantive violation: An irrevocable letter of credit cannot during its lifetime be cancelled or modified without
the express permission of the beneficiary. The consequence of doing so is that if the finding after the trial on the
merits is that Sevilla has an unpaid balance due PVTA, such unpaid obligation would be unsecured.
 Procedural violations: The issuance of the Order also violated: (a) Sec. 4 of R15 of Rules of Court, requiring that
notice of a motion be served by the applicant to all parties concerned at least 3 days before the hearing thereof; (b)
Sec. 5 of R15 of ROC requiring notice to parties concerned stating the time and place for the hearing of the
motion; (c) Sec. 6 of R15 requiring proof of service of the notice thereof except when Court is satisfied rights of
adverse party/ies won't be affected; and (d) Sec. 5 of R58 requiring notice before a preliminary injunction is
granted unless it appears from the facts of the affidavits that great or irreparable injury would result to applicant
before the matter can be heard on notice. It is also improper to issue a WPI prior to the final hearing except in
cases of extreme urgency, where the right of the petition to the writ is clear, where inconveniences bear strongly
in complainant's favor, or a wilful or unlawful invasion of right, or the injury is a contributing one.
 There was no clear legal right, the violation of which is so recent as to make its vindication an urgent one, shown
by Sevilla when he applied for issuance of WPI. There was no urgency for the issuance of the WPIs in the Orders
Dated 17 July 1967 and 3 November 1967. Hence a WPI is premature and improper.
 Any alleged damage suffered or might possibly be suffered by Sevilla refers to expected profits claimed by him to
be P5 million. This does not necessitate the issuance of the Order Dated 3 November 1967.
 It is PVTA which will suffer greater damage if the Order of 3 November 1967 is not annulled, as its stock if not
made available to other parties will require warehouse storage and servicing fees worth P4,704,236 yearly or
more than P9 million in two years time.

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