Transfield Philippines v. Luzon Hydro Corporation, G.R. No. 146717, November 22, 2004

FACTS:

Petitioner and respondent Luzon Hydro Corporation entered into a Turnkey Contract whereby petitioner undertook to construct a hydro-electric power station at the Bakun River.

To secure performance of petitioner's obligation on time, petitioner opened in favor of LHC two standby letters of credit.

In the course of the construction of the project, petitioner sought various extensions of time to complete the Project. LHC denied the requests, however. This gave rise to a series of legal actions between the parties which culminated in the instant petition.

As petitioner had anticipated the LHC sent notice to petitioner that pursuant to the contract, it failed to comply with its obligation to complete the Project. Both banks informed petitioner that they would pay on the Securities if and when LHC calls on them.

LHC asserted that additional extension of time would not be warranted. At the same time, LHC served notice that it would call on the securities for the payment of liquidated damages for the delay.

Petitioner as plaintiff sought a restraining order from the RTC, which was denied.

Petitioner elevated the case to the Court of Appeals. Petitioner submitted to the appellate court that LHC's call on the Securities was premature considering that the issue of its default had not yet been resolved with finality by the CIAC and/or the ICC.

Upon the expiration of the temporary restraining order issued by the CA, the LHC trooped to ANZ Bank and withdrew the total amount of US$4,950,000.

On 2 February 2001, the appellate court dismissed the petition for certiorari.

 

ISSUE:

Whether LHC has the right to call and draw on the securities before the resolution of petitioner's and LHC’s disputes by the appropriate tribunal

 

RULING:

YES. The LHC has the right rooted in the Contract to call on the Securities.

Of course, prudence should have impelled LHC to await resolution of the pending issues before the arbitral tribunals prior to taking action to enforce the Securities. But, as earlier stated, the Turnkey Contract did not require LHC to do so and, therefore, it was merely enforcing its rights in accordance with the tenor thereof. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. More importantly, pursuant to the principle of autonomy of contracts embodied petitioner could have incorporated in its Contract with LHC, a proviso that only the final determination by the arbitral tribunals that default had occurred would justify the enforcement of the Securities. However, the fact is petitioner did not do so.

With respect to the issue of whether the respondent banks were justified in releasing the amounts due under the Securities, this Court reiterates that pursuant to the independence principle the banks were under no obligation to determine the veracity of LHC's certification that default has occurred. Neither were they bound by petitioner's declaration that LHC's call thereon was wrongful. To repeat, respondent banks' undertaking was simply to pay once the required documents are presented by the beneficiary.

Comments

Post a Comment

Popular posts from this blog

Eddie Dizon and Bryan Dizon v. Yolanda Vida Beltran, G.R. No. 221071, January 18, 2017

FACTS: Eddie, married to Verona, started working as a seafarer in the 1980s. He has two children, namely, Bryan and James Christopher Dizon. Verona was a housewife. She and her mother, together with Bryan and James, resided in the house on the disputed property located in Davao City. The registered owners were "Verona, married to Eddie." In 2008, Verona filed before the RTC a petition for the issuance of Temporary and Permanent Protection Orders against Eddie and James. On April 9, 2008, the Spouses Dizon entered into a Compromise Agreement, whereby they contemplated selling the disputed property in the amount of not less than ₱4,000,000, which price shall be increased by ₱100,000 for every succeeding year until the same is finally sold. They would thereafter equally divide the proceeds from the sale. On September 27, 2009, Eddie left for abroad. Verona died on December 8, 2009. On December 9, 2009, Eddie’s brother Jun Dizon informed him about Verona's death. ...
Read more

Karen Nuñez Vito v. Norma Moises-Palma, G.R. No. 224466, March 27, 2019

FACTS: Petitioners' father, Vicentico Nufiez, was the original owner of Lot No. 2159-A located in Capiz with TCT No. T-16612. In May 1992, Vicentico borrowed P30,000 from Rosita Moises and as security, executed a real estate mortgage over his property. Since Rosita had no money, the funds came from Norma Moises-Palma, Rosita's daughter. According to petitioners, the loan was subsequently paid as evidenced by an Affidavit Authorizing Release of Mortgage. Upon Vicentico's and Placida's deaths, the subject lot was transmitted to their heirs. On June 28, 1995, Norma was able to have all petitioners, except Alden, sign a   Deed of Adjudication and Sale wherein petitioners purportedly sold to Norma their in the subject lot for P50,000. After the execution of the DAS, Norma immediately took possession of the subject lot. Instead of paying cash, Norma executed a Promissory Note on July 1, 1995. Upon prodding of petitioners, Norma executed an Acknowledgment of Debt. De...
Read more

Rodolfo Valencia v. The Sandiganbayan, G.R. No. 165996, October 17, 2005

FACTS: On February 10, 1999, petitioner Rodolfo Valencia was charged before the Sandiganbayan with violation of Section 3(e) of the Anti-graft and Corrupt Practices Act. Upon arraignment on April 13, 1999, petitioner pleaded not guilty. On March 24, 2003, the parties submitted a Joint Stipulation of Facts, to wit: 1. Valencia, had been the Governor of the Province of Oriental Mindoro, for having won in the gobernatorial race in the May 1992 local and provincial election; 2. During the 1992 election, Mr. Cresente Umbao of Pola, Oriental, Mindoro also ran for the position of councilor in the Municipality of Pola, Oriental Mindoro but he lost; 3. On October 17, 1992, Councilor Antonio Mercene, Jr. of Pola, Oriental, Mindoro died thus creating a permanent vacancy in the membership position of Sanguniang Bayan of Pola, Oriental Mindoro. 4. On December 1, 1992 then Governor Rodolfo G. Valencia of Oriental, Mindoro, appointed Cresente Umbao to the position of a councilor in the ...
Read more