Equitable PCI Bank v. Manila Adjusters & Surveyors, Inc.
REITERATIONFacts
1. The Antecedents: On June 27, 1975, the Ilocos Sur Federation of Farmers Cooperatives, Inc. (Federation) entered into a Deed of Sale with Philippine American General Insurance Co., Inc. (Philam), represented by its adjuster, Manila Adjusters and Surveyors, Company (MASCO), for the purchase of salvaged fertilizers. The agreement stipulated that the Federation would pay P5,159,725.00 in installments and would be responsible for storage and warehousing charges. A crucial term was the requirement for the Federation to open an irrevocably confirmed, without recourse Letter of Credit (LOC) for P1,000,000.00 in favor of MASCO, which would be forfeited upon the Federation's non-compliance. The Federation only managed to pay P500,000.00 of the total amount, with a tendered personal check for P259,725.00 bouncing due to insufficient funds. Consequently, MASCO demanded payment, which the Federation failed to provide. 2. Procedural History: On October 8, 1975, MASCO declared the Federation in default and sought to claim the proceeds of the LOC from Equitable PCI Bank (then Insular Bank of Asia & America). The Federation subsequently filed a Complaint for replevin and damages against MASCO and Philam, later amended to include the Bank as a defendant to prevent payment of the LOC, and Ng Yek Kiong and Ernesto Cokai as third-party defendants. The Bank denied receiving MASCO's claim documents and filed a cross-claim against MASCO and a third-party complaint against Ng Yek Kiong and Ernesto Cokai. MASCO, in turn, filed a counterclaim against the Bank for the LOC proceeds. The Regional Trial Court (RTC) dismissed the Federation's complaint but ordered the Bank to pay MASCO the P1,000,000.00 LOC proceeds with interest and attorney's fees, and ordered the Federation and third-party defendants to indemnify the Bank. The Court of Appeals (CA) affirmed the RTC's decision with modification, deleting the award of attorney's fees against the Bank. 3. The Petition: Equitable PCI Bank filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, challenging the CA's decision. The Bank argued that strict compliance with the handling of documents in a Letter of Credit transaction is necessary and questioned the CA's finding that MASCO had submitted the required documents. It also contended that interest should not be due during the period an injunction was in effect, preventing payment. The Supreme Court, however, found the petition unmeritorious, emphasizing that a Rule 45 petition is limited to questions of law and that the core issue of whether MASCO submitted the required documents was a question of fact. The Court affirmed the findings of the lower courts that MASCO had sufficiently proven its submission of the documents to claim the LOC proceeds and modified the interest rate and accrual based on prevailing jurisprudence.
Issue(s)
Whether the Court of Appeals erred in not holding that strict compliance in the handling of documents in a Letter of Credit transaction is necessary. Whether interest is due during the time an injunction was issued and prior to the reversal thereof by the Supreme Court. Whether the Court of Appeals failed to cite evidence to support its conclusion that petitioner Bank was liable under the letter of credit. Whether petitioner Bank can be held liable for payment of interest despite the existence of an injunctive order that prevented it from paying.
Ruling
The petition is denied for failure to establish any reversible error on the part of the Court of Appeals. The assailed Decision and Resolution of the Court of Appeals are affirmed with modifications regarding the interest rate computation.
Ratio Decidendi
On the necessity of strict compliance with Letter of Credit terms: The Court reiterated that a petition for review on certiorari under Rule 45 is limited to questions of law, not fact. The Bank's contention that MASCO failed to submit the required documents was a question of fact, which the RTC and CA had already resolved against the Bank. Both lower courts found that MASCO properly presented the documentary requirements to claim the LOC proceeds. The Bank's denial of receipt, unsupported by corroborating evidence beyond its internal procedure of using a metered machine, was insufficient to overturn MASCO's assertion of personal delivery to the bank manager. The Court noted that the Bank did not present the manager's testimony and that the practice of using a metered machine might not have been strictly enforced in 1975. On the payment of interest during the injunction: The Court found no sufficient legal or factual basis for the Bank's contention that the period of the injunction should be excluded from the computation of interest. The Deed of Sale did not stipulate an interest rate in case of default. The Bank also failed to show it was willing to pay the LOC proceeds despite the injunction and the Federation's instructions not to pay MASCO. Therefore, legal interest should commence from the date of extrajudicial demand, which was October 8, 1975. On the sufficiency of evidence for the Bank's liability: The Court affirmed the findings of the CA and RTC that MASCO proved by preponderant evidence that it submitted the required documents to claim from the LOC. The Bank's denial of receipt was not sufficiently substantiated. The Court emphasized that factual findings of the CA, especially when coinciding with those of the RTC, are generally binding on the Supreme Court, and this case did not fall under any exceptions warranting a re-examination of facts. On the Bank's liability for interest despite the injunction: The Court reiterated that the Bank failed to present sufficient basis to exclude the period of the injunction from interest computation. The Bank had no legal right to question the injunction's validity at the time it was served and had to comply with the order. However, this compliance did not absolve it from the obligation to pay interest from the date of extrajudicial demand once the obligation became due and demandable, especially since the injunction was eventually dissolved. The Court applied the guidelines from Nacar v. Gallery Frames for the computation of legal interest, setting the rate at 12% per annum from October 8, 1975, until June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction.
Main Doctrine
MASCO proved by preponderant evidence that it submitted the required documents to the Bank to claim the proceeds of the Letter of Credit, thus entitling it to payment. The Bank's denial of receipt, without corroborating evidence, was insufficient to overcome MASCO's assertion of personal delivery to the bank manager. Interest on the amount awarded shall commence from the date of extrajudicial demand.