feati v ca

8/12/2019 feati v ca

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Feati Bank & Trust Company vs. Court of Appeals

G.R. No. 94209. April 0! "99".#

F$AT% BAN & TR'(T C)*+AN, -no C%T,TR'(T BAN %NG C)R+)RAT%)N/! petitioner!vs. T $ C)'RT )F A++$A1(! an B$RNAR3) $. %11A1'5! respon ents.

Commer6ial 1a 7 1etters of Cre it7 Commer6ial transa6tions involvin8 letters of 6re it are8overne y t:e rule of stri6t 6omplian6e.;%t is settle rule in 6ommer6ial transa6tions involvin8letters of 6re it t:at t:e o6uments ten ere must stri6tly 6onform to t:e terms of t:e letter of6re it. T:e ten er of o6uments y t:e enefi6iary -seller/ must in6lu e all o6uments re


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it:out t:e 6onsent of t:e enefi6iary -seller/ an t:e appli6ant - uyer/ revoke :is un ertakin8un er t:e letter. T:e issuin8 ank oes not reserve t:e ri8:t to revoke t:e 6re it. )n t:e ot:er:an ! a 6onfirme letter of 6re it pertains to t:e kin of o li8ation assume y t:e6orrespon ent ank. %n t:is 6ase! t:e 6orrespon ent ank 8ives an a solute assuran6e to t:eenefi6iary t:at it ill un ertake t:e issuin8 ank s o li8ation as its o n a66or in8 to t:e termsan 6on itions of t:e 6re it.

(ame7 (ame7 (ame7 *ere openin8 of a letter of 6re it oes not involve a spe6ifi6 appropriationof a sum of money in favor of t:e enefi6iary.;T:e mere openin8 of a letter of 6re it! it is to enote ! oes not involve a spe6ifi6 appropriation of a sum of money in favor of t:e enefi6iary. %tonly si8nifies t:at t:e enefi6iary may e a le to ra fun s upon t:e letter of 6re it up to t:eesi8nate amount spe6ifie in t:e letter. %t oes not 6onvey t:e notion t:at a parti6ular sum ofmoney :as een spe6ifi6ally reserve or :as een :el in trust. D:at a6tually transpires in anirrevo6a le 6re it is t:at t:e 6orrespon ent ank oes not re6eive in a van6e t:e sum of money

from t:e uyer or t:e issuin8 ank. )n t:e 6ontrary! :en t:e 6orrespon ent ank a66epts t:eten er an pays t:e amount state in t:e letter! t:e money t:at it oles out 6omes not from anyparti6ular fun t:at :as een a van6e y t:e issuin8 ank! rat:er it 8ets t:e money from itso n fun s an t:en later seeks reim ursement from t:e issuin8 ank.

(ame7 (ame7 (ame7 T:e 6on6ept of 8uarantee vis=a=vis t:e 6on6ept of an irrevo6a le 6re it arein6onsistent it: ea6: ot:er.;T:e t:eory of 8uarantee relie upon y t:e Court of Appeals :asto ne6essarily fail. T:e 6on6ept of 8uarantee vis=a=vis t:e 6on6ept of an irrevo6a le 6re it arein6onsistent it: ea6: ot:er. %n t:e first pla6e! t:e 8uarantee t:eory estroys t:e in epen en6eof t:e ank s responsi ility from t:e 6ontra6t upon :i6: it as opene . %n t:e se6on pla6e! t:enature of ot: 6ontra6ts is mutually in 6onfli6t it: ea6: ot:er. %n 6ontra6ts of 8uarantee! t:e

8uarantor s o li8ation is merely 6ollateral an it arises only upon t:e efault of t:e personprimarily lia le. )n t:e ot:er :an ! in an irrevo6a le 6re it t:e ank un ertakes a primaryo li8ation.

+$T%T%)N for revie from t:e e6ision of t:e Court of Appeals.

T:e fa6ts are state in t:e opinion of t:e Court.

+elaeJ! A riano & Gre8orio for petitioner.

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('+R$*$ C)'RT R$+)RT( ANN)TAT$3


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G'T%$RR$5! KR.! K.L

T:is is a petition for revie seekin8 t:e reversal of t:e e6ision of t:e Court of Appeals ateKune 29! "990 :i6: affirme t:e e6ision of t:e Re8ional Trial Court of RiJal ate )6to er 20!"9>I or erin8 t:e efen ants C:ristiansen an t:e petitioner! to pay various sums torespon ent illaluJ! Mointly an severally.

T:e fa6ts of t:e 6ase are as follo sL

)n Kune ! "9?"! Bernar o $. illaluJ a8ree to sell to t:e t:en efen ant A el C:ristiansen2!000 6u i6 meters of lauan lo8s at 2?.00 per 6u i6 meter F)B.

After inspe6tin8 t:e lo8s! C:ristiansen issue pur6:ase or er No. ?I"?".

)n t:e arran8ements ma e an upon t:e instru6tions of t:e 6onsi8nee! anmi Tra e3evelopment! 1t .! e (anta Ana! California! t:e (e6urity +a6ifi6 National Bank of 1os An8eles!California issue %rrevo6a le 1etter of Cre it No. %C=4I2I> availa le at si8:t in favor of illaluJfor t:e sum of H4!000.00! t:e total pur6:ase pri6e of t:e lauan lo8s.

T:e letter of 6re it as maile to t:e Feati Bank an Trust Company -no Citytrust/ it: t:einstru6tion to t:e latter t:at it for ar t:e en6lose letter of 6re it to t:e enefi6iary.E -Re6or s!ol. %! p. ""/

T:e letter of 6re it furt:er provi e t:at t:e raft to e ra n is on (e6urity +a6ifi6 NationalBank an t:at it e a66ompanie y t:e follo in8 o6umentsL

". (i8ne Commer6ial %nvoi6e in four 6opies s:o in8 t:e num er of t:e pur6:ase or er an6ertifyin8 t:at;

a. All terms an 6on itions of t:e pur6:ase or er :ave een 6omplie it: an t:at all lo8s arefres: 6ut an


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an +arties to e a vise y ans=A el C:ristiansen! (:ip an *er6:an ise Broker.

2. Tally s:eets in ate Kune ?! "9?"

an *i Tra e 3evelopment Company! 1t .! +.). Bo "04>0! (anta Ana! California 92?"" anan *i Tra e 3evelopment Company! 1t .! (eoul! orea.

4. Certifi6ation from an=A el C:ristiansen! (:ip an *er6:an ise Broker! statin8 t:at lo8s:ave een approve prior to s:ipment in a66or an6e it: terms an 6on itions of6orrespon in8 pur6:ase )r er. -Re6or ! ol. " pp. ""="2/

Also in6orporate y referen6e in t:e letter of 6re it is t:e 'niform Customs an +ra6ti6e for3o6umentary Cre its -"9I2 Revision/.

T:e lo8s ere t:ereafter loa e on t:e vessel 5enlin GloryE :i6: as 6:artere yC:ristiansen. Before its loa in8! t:e lo8s ere inspe6te y 6ustom inspe6tors Nelo 1aurente!AleMan ro Ca iao! $stanislao $ era from t:e Bureau of Customs -Re6or s! ol. %! p. "24/ anrepresentatives Ro8elio Cantu a an Kesus Ta ena of t:e Bureau of Forestry -Re6or s! ol. %!pp. "I="?/ all of :om 6ertifie to t:e 8oo 6on ition an e porta ility of t:e lo8s.

After t:e loa in8 of t:e lo8s as 6omplete ! t:e C:ief *ate! (:ao (:u Dan8 issue a matere6eipt of t:e 6ar8o :i6: state t:e same are in 8oo 6on ition -Re6or s! ol. %! p. I /.o ever! C:ristiansen refuse to issue t:e 6ertifi6ation as re


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tion prompte t:e private respon ent to rin8 t:e matter efore t:e Central Bank. %n amemoran um ate Au8ust "I! "9?"! t:e Central Bank rule t:atL

pursuant to t:e *onetary Boar Resolution No. "2 0 ate Au8ust ! "9?"! in all lo8e ports! t:e 6ertifi6ation of t:e lum er inspe6tors of t:e Bureau of Forestry s:all e6onsi ere final for purposes of ne8otiatin8 o6uments. Any provision in any letter of 6re it6overin8 lo8 e ports re"

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make t:e petitioner soli arily lia le it: C:ristiansen.

T:e trial 6ourt! in its or er ate Au8ust 29! "9?9! a mitte t:e amen e 6omplaint.


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After trial! t:e lo er 6ourt foun L

T:e lia ility of t:e efen ant C R%(T%AN($N is eyon ispute! an t:e plaintiff s ri8:t toeman payment is a solute. 3efen ant C R%(T%AN($N :avin8 a66epte elivery of t:e lo8sy :avin8 t:em loa e in :is 6:artere vessel t:e 5enlin Glory an s:ippin8 t:em to t:e6onsi8nee! :is uyer an *i Tra e in %n6:on! (out: orea -Art. "H>H! Civil Co e/! :is o li8ationto pay t:e pur6:ase or er :a 6learly arisen an t:e plaintiff may sue an re6over t:e pri6e oft:e 8oo s -Art. "H9H! i /.

T:e Court elieves t:at t:e efen ant C R%(T%AN($N a6te in a fait: an e6eit an it:intent to efrau t:e plaintiff! refle6te in an a88ravate y! not only :is refusal to issue t:e6ertifi6ation t:at oul :ave ena le it:out 2



o li8ation.


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Furt:ermore! :en t:e efen ant BAN assume t:e role of a notifyin8 an ne8otiatin8 BANit in effe6t represente to t:e plaintiff t:at! if t:e plaintiff 6omplie it: t:e terms an 6on itionsof t:e letter of 6re it an presents t:e same to t:e BAN to8et:er it: t:e o6umentsmentione t:erein t:e sai BAN ill pay t:e plaintiff t:e amount of t:e letter of 6re it. T:eCourt is 6onvin6e t:at it as upon t:e stren8t: of t:is letter of 6re it an t:is implie

representation of t:e efen ant BAN t:at t:e plaintiff elivere t:e lo8s to efen antC R%(T%AN($N! 6onsi erin8 t:at t:e issuin8 ank is a forei8n ank it: :om plaintiff :a nousiness 6onne6tions an C R%(T%AN($N :a not offere any ot:er (e6urity for t:e paymentof t:e lo8s. 3efen ant BAN 6annot no e allo e to eny its 6ommitment an lia ility un ert:e letter of 6re itL

A :ol er of a promissory note 8iven e6ause of 8am lin8 :o in orses t:e same to aninno6ent :ol er for value an :o assures sai party t:at t:e note :as no le8al efe6t! is inestoppel from assertin8 t:at t:ere :a een an ille8al 6onsi eration for t:e note! an so! :e :asto pay its value. -Ro ri8ueJ v. *artineJ! H +:il. I?/.

T:e efen ant BAN ! in insistin8 upon t:e 6ertifi6ation of efen ant C R%(T%AN($N as a6on ition pre6e ent to ne8otiatin8 t:e letter of 6re it! like ise in t:e Court s opinion a6te in afait:! not only e6ause of t:e 6lear e6laration of t:e Central Bank t:at su6: a re2! Civil Co e/E -Rollo! pp. 29= "/

)n t:e asis of t:e fore8oin8 t:e trial 6ourt on )6to er 20! "9>I! rule in favor of t:e privaterespon ent. T:e ispositive portion of its e6ision rea sL

D $R$F)R$! Mu 8ment is :ere y ren ere for t:e plaintiff! or erin8 t:e efen ants to pay t:eplaintiff! Mointly an severally! t:e follo in8 sumsL

a/ H4!000.00 -'(/! or its peso e


6/ +"0!000.00 as temperate ama8es -for trips ma e to Ba6olo an orea/.


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All t:ree fore8oin8 sums s:all e it: interest t:ereon at "2S per annum from (eptem er "!"9?"! :en t:e 6omplaint as file ! until fully pai L

/ +?0!000.00 as moral ama8es7

e/ + 0!000.00 as e emplary ama8es7 an

f/ + 0!000.00 as attorney s fees an liti8ation e pense.E -Rollo! p. 2>/

T:e petitioner re6eive a 6opy of t:e e6ision on Novem er ! "9>I. T o ays t:ereafter! or onNovem er H! "9>I! it file a noti6e of appeal.

)n Novem er "0! "9>I! t:e private respon ent file a motion for t:e imme iate e e6ution of t:e Mu 8ment on t:e 8roun t:at t:e appeal of t:e petitioner as frivolous an ilatory.

T:e trial 6ourt or ere t:e imme iate e e6ution of its Mu 8ment upon t:e private respon ent sfilin8 of a on .

T:e petitioner t:en file a motion for re6onsi eration an a motion to suspen t:eimplementation of t:e rit of e e6ution. Bot: motions ere! :o ever! enie . T:us! petitionerfile efore t:e Court of Appeals a petition for 6ertiorari an pro:i ition it: preliminaryinMun6tion to enMoin t:e imme iate e e6ution of t:e Mu 8ment.

T:e Court of Appeals in a e6ision ate April 9! "9>? 8rante t:e petition an nullifie t:eor er of e e6ution! t:e ispositive portion of t:e e6ision statesL

D $R$F)R$! t:e petition for 6ertiorari is 8rante . Respon ent Ku 8e s or er of e e6utionate 3e6em er 29! "9>I! as ell as :is or er ate Kanuary "4! "9>? enyin8 t:e petitioner sur8ent motion to suspen t:e rit of e e6ution a8ainst its properties are :ere y annulle an

set asi e insofar as t:ey are sou8:t to e enfor6e an implemente a8ainst t:e petitioner FeatiBank & Trust Company! no Citytrust Bankin8 Corporation! urin8 t:e pen en6y of its appealfrom t:e a verse e6ision in Civil Case No. "H"2". o ever! t:e e e6ution of t:e samee6ision a8ainst efen ant A el C:ristiansen :o i not appeal sai e6ision may pro6eeunimpe e . T:e (:eriff s levy on t:e petitioner s properties! an t:e noti6e of sale ateKanuary " ! "9>? -Anne */! are :ere y annulle an set asi e. -Rollo! p. 44/

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A motion for re6onsi eration as t:ereafter file y t:e private respon ent. T:e Court ofAppeals! in a resolution ate Kune 29! "9>? enie t:e motion for re6onsi eration.


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%n t:e meantime! t:e appeal file y t:e petitioner efore t:e Court of Appeals as 8iven ue6ourse. %n its e6ision ate Kune 29! "990! t:e Court of Appeals affirme t:e e6ision of t:elo er 6ourt ate )6to er 20! "9>I an rule t:atL

". Feati Bank a mitte in t:e spe6ial an ne8ative efensesE se6tion of its ans er t:at it ast:e ank to ne8otiate t:e letter of 6re it issue y t:e (e6urity +a6ifi6 National Bank of 1osAn8eles! California. -Re6or ! pp. "HI! "H?/. Feati Bank i notify illaluJ of su6: letter of 6re it.%n fa6t! as su6: ne8otiatin8 ank! even efore t:e letter of 6re it as presente for payment!Feati Bank :a alrea y ma e an a van6e payment of +?H!000.00 to illaluJ in anti6ipation ofsu6: presentment. As t:e ne8otiatin8 ank! Feati Bank! y notifyin8 illaluJ of t:e letter of 6re itin e:alf of t:e issuin8 ank -(e6urity +a6ifi6/! 6onfirme su6: letter of 6re it an ma e t:esame also its o n o li8ation. T:is rulin8 fin s support in t:e aut:ority 6ite y illaluJL

A 6onfirme letter of 6re it is one in :i6: t:e notifyin8 ank 8ives its assuran6e also t:at t:eopenin8 ank s o li8ation ill e performe . %n su6: a 6ase! t:e notifyin8 ank ill not simplytransmit ut ill 6onfirm t:e openin8 ank s o li8ation y makin8 it also its o n un ertakin8! or

6ommitment! or 8uaranty or o li8ation.E -Dar & arfiel ! 2>=29! 6ite in A8 ayani! Commer6ial1a s! "9?> e ition! p. ??/.

Feati Bank ar8ues furt:er t:at it oul e 6onsi ere as t:e ne8otiatin8 ank only uponne8otiation of t:e letter of 6re it. T:is stan6e is untena le. Assuran6e! 6ommitments or8uaranties suppose to e ma e y notifyin8 anks to t:e enefi6iary of a letter of 6re it! asefine a ove! 6an e relevant or meanin8ful only it: respe6t to a future transa6tion! t:at is!ne8otiation. en6e! even efore a6tual ne8otiation! t:e notifyin8 ank! y t:e mere a6t ofnotifyin8 t:e enefi6iary of t:e letter of 6re it! assumes as of t:at moment t:e o li8ation of t:eissuin8 ank.

2. (in6e Feati Bank a6te as 8uarantor of t:e issuin8 ank! an in effe6t also of t:e latter sprin6ipal or 6lient! i.e. ans A el=C:ristiansen. -si6/ (u6: ein8 t:e 6ase! :en C:ristiansenrefuse to issue t:e 6ertifi6ation! it as as t:ou8: refusal as ma e y Feati Bank itself. FeatiBank s:oul :ave taken steps to se6ure t:e 6ertifi6ation from C:ristiansen7 an ! if t:e latters:oul still refuse to 6omply! to :ale :im to 6ourt. %n s:ort! Feati Bank s:oul :ave :onoreillaluJ s

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eman for payment of :is lo8s y virtue of t:e irrevo6a le letter of 6re it issue in illaluJ sfavor an 8uarantee y Feati Bank.


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. T:e e6ision promul8ate y t:is Court in CA=G.R. (p No. ""0H"! :i6: 6ontaine t:estatement (in6e illaluJ raft as not ra n stri6tly in 6omplian6e it: t:e terms of t:e letterof 6re it! Feati Bank s refusal to ne8otiate it as Mustifie !E i not ispose of t:is


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AT$ R$(+)N3$NT )F T $ 1$TT$R )F CR$3%T! C)NF%R*$3 ('C CR$3%T AN3*A3$ T $ (A*$ A1() %T( )B1%GAT%)N A( G'ARANT)R )F T $ %(('%NG BAN .

T:ir Reason

T $ R$(+)N3$NT C)'RT 1% $D%($ C)**%TT$3 AN $RR)R )F 1AD D $N %TAFF%R*$3 T $ TR%A1 C)'RT ( 3$C%(%)N. -Rollo! p. "2/

T:e prin6ipal issue in t:is 6ase is :et:er or not a 6orrespon ent ank is to e :el lia le un ert:e letter of 6re it espite non=6omplian6e y t:e enefi6iary it: t:e terms t:ereof

T:e petition is impresse it: merit.

%t is a settle rule in 6ommer6ial transa6tions involvin8 letters of 6re it t:at t:e o6umentsten ere must stri6tly 6onform to t:e terms of t:e letter of 6re it. T:e ten er of o6uments yt:e enefi6iary -seller/ must in6lu e all o6uments re?



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o6uments may e 6onsi ere immaterial or superfluous! t:is t:eory 6oul lea to an8erouspre6e ents. (in6e a ank eals only it: o6uments! it is not in a position to etermine :et:eror not t:e o6uments re

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Arti6le ?. Banks must e amine all o6uments it: reasona le 6are to as6ertain t:at t:eyappear on t:eir fa6e to e in a66or an6e it: t:e terms an 6on itions of t:e 6re it.E

Arti6le >.

+ayment! a66eptan6e or ne8otiation a8ainst o6uments :i6: appear on t:eir fa6e to e ina66or an6e it: t:e terms an 6on itions of a 6re it y a ank aut:oriJe to o so! in s t:eparty 8ivin8 t:e aut:oriJation to take up o6uments an reim urse t:e ank :i6: :as effe6tet:e payment! a66eptan6e or ne8otiation.E -$mp:asis (upplie /

'n er t:e fore8oin8 provisions of t:e '.C.+.! t:e ank may only ne8otiate! a66ept or pay! if t:eo6uments ten ere to it are on t:eir fa6e in a66or an6e it: t:e terms an 6on itions of t:eo6umentary 6re it. An sin6e a 6orrespon ent ank! like t:e petitioner! prin6ipally eals only

it: o6uments! t:e a sen6e of any o6ument re9

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it:out t:e 6onsent of t:e enefi6iary -seller/ an t:e appli6ant - uyer/ revoke :is un ertakin8un er t:e letter. T:e issuin8 ank oes not reserve t:e ri8:t to revoke t:e 6re it. )n t:e ot:er:an ! a 6onfirme letter of 6re it pertains to t:e kin of o li8ation assume y t:e6orrespon ent ank. %n t:is 6ase! t:e 6orrespon ent ank 8ives an a solute assuran6e to t:e


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6re it. D:at as simply state t:erein as t:e instru6tion t:at t:e petitioner for ar t:e ori8inalletter of 6re it to t:e enefi6iary.

(in6e t:e petitioner as only a notifyin8 ank! its responsi ility as solely to notify an Qortransmit t:e o6umentary of 6re it to t:e private respon ent an its o li8ation en s t:ere.

T:e notifyin8 ank may su88est to t:e seller its illin8ness to ne8otiate! ut t:is fa6t alone oesnot imply t:at t:e notifyin8 ank promises to a66ept t:e raft ra n un er t:e o6umentary6re it.

A notifyin8 ank is not a privy to t:e 6ontra6t of sale et een t:e uyer an t:e seller! itsrelations:ip is only it: t:at of t:e issuin8 ank an not it: t:e enefi6iary to :om :eassumes no lia ility. %t follo s t:erefore t:at :en t:e petitioner refuse to ne8otiate it: t:eprivate respon ent! t:e latter :as no 6ause of a6tion a8ainst t:e petitioner for t:e enfor6ementof :is ri8:ts un er t:e letter. -(ee ronman an Co.! %n6. v. +u li6 National Bank of Ne ,ork!supra/

%n or er t:at t:e petitioner may e :el lia le un er t:e letter! t:ere s:oul e proof t:at t:epetitioner 6onfirme t:e letter of 6re it.

T:e re6or s are! :o ever! ereft of any evi en6e :i6: ill is6lose t:at t:e petitioner :as6onfirme t:e letter of 6re it. T:e only evi en6e in t:is 6ase! an upon :i6: t:e privaterespon ent premise :is ar8ument! is t:e +?H!000.00 loan e ten e y t:e petitioner to :im.

T:e private respon ent relies on t:is loan to a van6e :is 6ontention t:at t:e letter of 6re it as6onfirme y t:e petitioner. e 6laims t:at t:e loan as 8rante y t:e petitioner to :im! inanti6ipation of t:e presentment of t:e letter of 6re it.E

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T:e proposition a van6e y t:e private respon ent :as no asis in fa6t or la . T:at t:e loana8reement et een t:em e 6onstrue as an a6t of 6onfirmation is rat:er far=fet6:e ! for itepen s prin6ipally on spe6ulative reasonin8.

As earlier state ! t:ere must :ave een an a solute assuran6e on t:e part of t:e petitioner t:atit ill un ertake t:e issuin8 ank s o li8ation as its o n. erily! t:e loan a8reement it entereinto 6annot e 6ate8oriJe as an emp:ati6 assuran6e t:at it ill 6arry out t:e issuin8 ank so li8ation as its o n.

T:e loan a8reement is more reasona ly 6lassifie as an isolate transa6tion in epen ent of t:eo6umentary 6re it.


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)f 6ourse! it may e presume t:at t:e petitioner loane t:e money to t:e private respon ent inanti6ipation t:at it oul later e pai y t:e latter upon t:e re6eipt of t:e letter. ,et! e oul:ave no asis to rule efinitively t:at su6: a6tE s:oul e 6onstrue as an a6t of 6onfirmation.

T:e private respon ent no ou t as in nee of money in loa in8 t:e lo8s on t:e s:ip 5enlinGloryE an t:e only ay to satisfy t:is nee as to orro money from t:e petitioner :i6: t:elatter 8rante . From t:ese 6ir6umstan6es! a lo8i6al 6on6lusion t:at 6an e 8at:ere is t:at t:eletter of 6re it as merely to serve as a 6ollateral.

At t:e most! :en t:e petitioner e ten e t:e loan to t:e private respon ent! it assume t:e6:ara6ter of a ne8otiatin8 ank. $ven t:en! t:e petitioner ill still not e lia le! for a ne8otiatin8ank efore ne8otiation :as no 6ontra6tual relations:ip it: t:e seller.

T:e 6ase of (6anlon v. First National Bank -supra/ perspi6uously e plaine t:e relations:ipet een t:e seller an t:e ne8otiatin8 ank! viJL

%t may uy or refuse to uy as it 6:ooses. $/

D:et:er t:erefore t:e petitioner is a notifyin8 ank or a ne8otiatin8 ank! it 6annot e :ellia le. A sent any efinitive

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proof t:at it :as 6onfirme t:e letter of 6re it or :as a6tually ne8otiate it: t:e privaterespon ent! t:e refusal y t:e petitioner to a66ept t:e ten er of t:e private respon ent is

Mustifie .

%n re8ar to t:e fin in8 t:at t:e petitioner e6ame a trustee in relation to t:e plaintiff -privaterespon ent/ as t:e enefi6iary of t:e letter of 6re it!E t:e same :as no le8al asis.

A trust :as een efine as t:e ri8:t! enfor6ea le solely in e9 C.K.(. ?"2/

T:e 6on6ept of a trust presupposes t:e e isten6e of a spe6ifi6 property :i6: :as een6onferre upon t:e person for t:e enefit of anot:er. %n or er t:erefore for t:e trust t:eory of t:eprivate respon ent to e sustaine ! t:e petitioner s:oul :ave :a in its possession a sum ofmoney as spe6ifi6 fun a van6e to it y t:e issuin8 ank an to e :el in trust y it in favor oft:e private respon ent. T:is oes not o tain in t:is 6ase.


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T:e mere openin8 of a letter of 6re it! it is to e note ! oes not involve a spe6ifi6 appropriationof a sum of money in favor of t:e enefi6iary. %t only si8nifies t:at t:e enefi6iary may e a le tora fun s upon t:e letter of 6re it up to t:e esi8nate amount spe6ifie in t:e letter. %t oesnot 6onvey t:e notion t:at a parti6ular sum of money :as een spe6ifi6ally reserve or :as een:el in trust.

D:at a6tually transpires in an irrevo6a le 6re it is t:at t:e 6orrespon ent ank oes not re6eivein a van6e t:e sum of money from t:e uyer or t:e issuin8 ank. )n t:e 6ontrary! :en t:e6orrespon ent ank a66epts t:e ten er an pays t:e amount state in t:e letter! t:e money t:atit oles out 6omes not from any parti6ular fun t:at :as een a van6e y t:e issuin8 ank!rat:er it 8ets t:e money from its o n fun s an t:en later seeks reim ursement from t:e issuin8ank.

Grantin8 t:at a trust :as een 6reate ! still! t:e petitioner may not e 6onsi ere a trustee. Ast:e petitioner is only a notifyin8 ank! its a66eptan6e of t:e instru6tions of t:e issuin8 ank illnot 6reate estoppel on its part resultin8 in t:e a66eptan6e of t:e trust. +re6isely! as a notifyin8

ank! its only o li8ation is to notify t:e private respon ent of t:e e isten6e of t:e letter of 6re it.o t:en 6an su6: 6reate estoppel :en t:at is its only uty un er t:e la

H9

)1. "9I! A+R%1 0! "99"

H9


De also fin erroneous t:e statement of t:e Court of Appeals t:at t:e petitioner a6te as a8uarantor of t:e issuin8 ank an in effe6t also of t:e latter s prin6ipal or 6lient! i.e.! ans A elC:ristiansen.E

%t is a fun amental rule t:at an irrevo6a le 6re it is in epen ent not only of t:e 6ontra6tet een t:e uyer an t:e seller ut also of t:e 6re it a8reement et een t:e issuin8 ank ant:e uyer. -(ee in8 om of ( e en v. Ne ,ork Trust Co.! 9I N.,.(. 2 ??9 @"949 / T:erelations:ip et een t:e uyer -C:ristiansen/ an t:e issuin8 ank -(e6urity +a6ifi6 NationalBank/ is entirely in epen ent from t:e letter of 6re it issue y t:e latter.

T:e 6ontra6t et een t:e t o :as no earin8 as to t:e non6omplian6e y t:e uyer it: t:ea8reement et een t:e latter an t:e seller. T:eir 6ontra6t is similar to t:at of a 6ontra6t ofservi6es -to open t:e letter of 6re it/ an not t:at of a8en6y as as intimate y t:e Court ofAppeals. T:e unMustifie refusal t:erefore y C:ristiansen to issue t:e 6ertifi6ation un er t:eletter of 6re it s:oul not like ise e 6:ar8e to t:e issuin8 ank.

As a mere notifyin8 ank! not only oes t:e petitioner not :ave any 6ontra6tual relations:ip it:t:e uyer! it :as also not:in8 to o it: t:e 6ontra6t et een t:e issuin8 ank an t:e uyerre8ar in8 t:e issuan6e of t:e letter of 6re it.


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T:e t:eory of 8uarantee relie upon y t:e Court of Appeals :as to ne6essarily fail. T:e 6on6eptof 8uarantee vis=a=vis t:e 6on6ept of an irrevo6a le 6re it are in6onsistent it: ea6: ot:er.

%n t:e first pla6e! t:e 8uarantee t:eory estroys t:e in epen en6e of t:e ank s responsi ilityfrom t:e 6ontra6t upon :i6: it as opene . %n t:e se6on pla6e! t:e nature of ot: 6ontra6ts ismutually in 6onfli6t it: ea6: ot:er. %n 6ontra6ts of 8uarantee! t:e 8uarantor s o li8ation ismerely 6ollateral an it arises only upon t:e efault of t:e person primarily lia le. )n t:e ot:er:an ! in an irrevo6a le 6re it t:e ank un ertakes a primary o li8ation. -(ee National Bank of$a8le +ass! Te v. Ameri6an National Bank of (an Fran6is6o! 2>2 F. ? @"922 /

T:e relations:ip et een t:e issuin8 ank an t:e notifyin8 ank! on t:e 6ontrary! is moresimilar to t:at of an a8en6y an not t:at of a 8uarantee. %t may e o serve t:at t:e notifyin8

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ank is merely to follo t:e instru6tions of t:e issuin8 ank :i6: is to notify or to transmit t:eletter of 6re it to t:e enefi6iary. -(ee ronman v. +u li6 National Bank of Ne ,ork! supra/. %ts6ommitment is only to notify t:e enefi6iary. %t oes not un ertake any assuran6e t:at t:eissuin8 ank ill perform :at :as een man ate to or e pe6te of it. As an a8ent of t:eissuin8 ank! it :as only to follo t:e instru6tions of t:e issuin8 ank an to it alone is ito li8ate an not to uyer it: :om it :as no 6ontra6tual relations:ip.

%n fa6t t:e notifyin8 ank! even if t:e seller ten ers all t:e o6uments re


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6ommitment is to all an not to a sin8le in ivi ual. T:e fait: of t:e people in our Musti6e systemmay e ero e if e are to e6i e not :at t:e la states ut :at e elieve it s:oul e6lare.3ura le se le .

Consi erin8 t:e fore8oin8! t:e materiality of rulin8 upon t:e vali ity of t:e 6ertifi6ate of approvalre? in re8ar tot:e petition efore it for 6ertiorari an pro:i ition it: preliminary inMun6tion! to itL

T:ere is no merit in t:e respon ent s 6ontention t:at t:e 6ertifi6ation re


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;;o0o;; @Feati Bank & Trust Company vs. Court of Appeals! "9I (CRA H?I-"99"/

feati v ca

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