G.R. No. 74886 December 8, 1992
Lessons Applicable: Presentment for acceptance (Negotiable Instrument Law)
FACTS:
- August 8, 1962: Philippine Rayon Mills, Inc.(PRMI) entered into a contract with Nissho Co., Ltd. of Japan for the importation of textile machineries under a 5-year deferred payment plan
- To effect the payment, PRMI applied for a commercial letter of credit with the Prudential Bank and Trust Company in favor of Nissho.
- Prudential Bank opened Letter of Credit No. DPP-63762 for $128,548.78
- Against this letter of credit, drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through its correspondent in Japan, the Bank of Tokyo, Ltd.
- 2 of these drafts were accepted by PRMI through its president, Anacleto R. Chi, while the others were not
- Upon the arrival of the machineries, the Prudential Bank indorsed the shipping documents to the PRMI which accepted delivery of the same.
- To enable PRMI to take delivery of the machineries, it executed, by prior arrangement with the Prudential Bank, a trust receipt which was signed by Anacleto R. Chi in his capacity as President of PRMI company
- At the back of the trust receipt is a printed form to be accomplished by 2 sureties who, by the very terms and conditions thereof, were to be jointly and severally liable to the Prudential Bank should the PRMI fail to pay the total amount or any portion of the drafts issued by Nissho and paid for by Prudential Bank.
- The PRMI was able to take delivery of the textile machineries and installed the same at its factory site
- 1967: PRMI ceased business operation
- December 29, 1969: PRMI's factory was leased by Yupangco Cotton Mills for an annual rental of P200K T
- January 3, 1973: lease was renewed
- January 5, 1974: all the textile machineries in PRMI's factory were sold to AIC Development Corporation for P300K
- The PRMI's obligation from the letter of credit and the trust receipt remained unpaid and unliquidated despite repeated demands
- October 3, 1974: present action for the collection of the principal amount of P956,384.95 was filed on against PRMI and Anacleto R. Chi.
- RTC: PRMI ordered to pay for the 2 drafts which were accepted the 10 were not yet accepted and for Chi it was dismissed
- CA: Affirmed
- relationship governed by specific contracts: application for letters of credit, the promissory note, the drafts and the trust receipt
- acceptance of the drafts by Philippine Rayon was indispensable to make the latter liable
ISSUE: W/N presentment for acceptance of the drafts was indispensable to make PRMI liable
HELD: NO. Petition GRANTED. Philippine Rayon Mills, Inc. liable on the 12 drafts. Anacleto R. Chi (as guarantor) secondarily liable on the trust receipt
- letter of credit
- an engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit.
- Through a letter of credit, the bank merely substitutes its own promise to pay for one of its customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon.
- affording celerity and certainty of payment
- In the instant case
- drawee (to whom drafts were presented for payment) = Prudential Bank
- no need for acceptance as the issued drafts are sight drafts
- NOTE: sight drafts vs. after sight drafts
- Presentment for acceptance is necessary only in the cases expressly provided for in Section 143 of the Negotiable Instruments Law (NIL).
Sec. 143. When presentment for acceptance must be made. - Presentment for acceptance must be made:
(a) Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the instrument; or
(b) Where the bill expressly stipulates that it shall be presented for acceptance; or
(c) Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee.
In no other case is presentment for acceptance necessary in order to render any party to the bill liable.
- acceptance of a bill
- signification by the drawee of his assent to the order of the drawer
- may be done in writing by the drawee in:
- the bill itself, or
- a separate instrument
- PRMI immediately became liable upon Prudential Bank's payment - essence of the letter of credit issued by the Prudential Bank
- trust receipt
- banker advances money to an intending importer
- banker takes the full title to the goods at the very beginning until the goods are sold and the vendee is called upon to pay for them
- any transaction by and between an entruster, and entrustee, whereby the entruster, who owns or holds absolute title or security interests' over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster of a signed document called the "trust receipt" wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trusts receipt, or for other purposes substantially equivalent to any one of the following