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Bank of America NT & SA v Court of Appeals The IR contended that Bank of America should

and Francisco et. al G.R. No. 105395 December have first checked the authenticity of the letter of
10, 1993 credit with bank of Ayudhya
(read the originals pa rin, medyo confusing na rin
ang LOC) On 28 June 1989, the trial court ruled for Inter-
Resin, 4 holding that:
Facts :
(a) Bank of America made assurances that enticed
Bank of America received an Irrevocable Letter of Inter-Resin to send the merchandise to Thailand;
Credit issued by Bank of Ayudhya for the Account (b) the telex declaring the letter of credit fraudulent
of General Chemicals Ltd., Inc. for the sale of was unverified and self-serving, hence, hearsay,
plastic ropes and agricultural files. Under the letter but even assuming that the letter of credit was fake,
of credit, Bank of America acted as an advising "the fault should be borne by the BA which was
bank and Inter-Resin Industrial Corp. (IR) acted as careless and negligent" 5 for failing to utilize its
the beneficiary. Upon receipt of the letter advice, modern means of communication to verify with
Inter- Resin told Bank of America to confirm the Bank of Ayudhya in Thailand the authenticity of
letter of credit. Bank of America wrote Inter-Resin the letter of credit before sending the same to Inter-
informing the latter of the foregoing and Resin; (c) the loading of plastic products into the
transmitting, along with the bank's vans were under strict supervision, inspection and
communication, the letter of credit. verification of government officers who have in
their favor the presumption of regularity in the
Upon receipt of the letter-advice with the letter of performance of official functions; and (d) Bank of
credit, Inter-Resin sent Atty. Emiliano Tanay to America failed to prove the participation of Inter-
Bank of America to have the letter of credit Resin or its employees in the alleged fraud as, in
confirmed. The bank did not. Reynaldo Dueñas, fact, the complaint for estafa through falsification
bank employee in charge of letters of credit, of documents was dismissed by the Provincial
however, explained to Atty. Tanay that there was Fiscal of Rizal.6
no need for confirmation because the letter of
credit would not have been transmitted if it were COURT OF APPEALS
not genuine.
Affirmed the RTC.
Notwithstanding such instruction, Bank of
America failed to confirm the letter of credit. Inter- ISSUES:
Resin made a partial availment of the Letter of
Credit after presentment of the required documents The following issues are raised by Bank of
to Bank of America. After confirmation of all the America: (YUNG NUMBER 3 LANG ANG
documents Bank of America issued a check in RELEVANT, CURSORY ANG ANALYSIS
favor of IR. BA advised Bank of Ayudhya of IR’s NUNG 1 and 2)
availment under the letter of credit and asked for
the corresponding reimbursement. IR presented (1) whether it has warranted the genuineness and
documents for the second availment under the authenticity of the letter of credit and, corollarily,
same letter of credit. whether it has acted merely as an advising bank or
as a confirming bank;
However, BA stopped the processing of such after
they received a telex from Bank of Ayudhya (2) whether Inter-Resin has actually shipped the
delaring that the LC fraudulent. BA sued IR for the ropes specified by the letter of credit; and
recovery of the first LC payment.
(3) following the dishonor of the letter of credit by
Bank of Ayudhya, whether Bank of America may
recover against Inter-Resin under the draft
executed in its partial availment of the letter of America should have first checked the authenticity
credit. of the letter of credit with bank of Ayudhya, by
using advanced mode of business communications,
In rebuttal, Inter-Resin holds that: (a) Bank of before dispatching the same to Inter-Resin finds no
America cannot, on appeal, belatedly raise the real support.
issue of being only an advising bank; (b) the
findings of the trial court that the ropes have The other issues raised in then instant petition, for
actually been shipped is binding on the Court; and, instance, whether or not Bank of Ayudhya did
(c) Bank of America cannot recover from Inter- issue the letter of credit and whether or not the
Resin because the drawer of the letter of credit is main contract of sale that has given rise to the letter
the Bank of Ayudhya and not Inter-Resin. of credit has been breached, are not relevant to this
controversy. They are matters, instead, that can
Held : only be of concern to the herein parties in an
appropriate recourse against those, who,
3. (IMPORTANT) There would at least be three unfortunately, are not impleaded in these
(3) parties: (a) the buyer, who procures the letter of proceedings.
credit and obliges himself to reimburse the issuing
bank upon receipts of the documents of title; (b) In fine, we hold that —
the bank issuing the letter of credit, which
undertakes to pay the seller upon receipt of the First, given the factual findings of the courts
draft and proper document of titles and to surrender below, we conclude that petitioner Bank of
the documents to the buyer upon reimbursement; America has acted merely as a notifying bank and
and, (c) the seller, who in compliance with the did not assume the responsibility of a confirming
contract of sale ships the goods to the buyer and bank; (referencing to the 1st issue) and
delivers the documents of title and draft to the
issuing bank to recover payment. The additional ground raised by the petitioner, i.e.,
that Inter-Resin sent waste instead of its products,
The services of an advising (notifying) bank may is really of no consequence. In the operation of a
be utilized to convey to the seller the existence of letter of credit, the involved banks deal only with
the credit; or, of a confirming bank 16 which will documents and not on goods described in those
lend credence to the letter of credit issued by a documents. (referencing to 2nd Issue)
lesser known issuing bank; or, of a paying
bank, which undertakes to encash the drafts drawn Petitioner bank, as a negotiating bank, is entitled to
by the exporter. Further, instead of going to the recover on Inter-Resin's partial availment as
place of the issuing bank to claim payment, the beneficiary of the letter of credit which has been
buyer may approach another bank, termed the disowned by the alleged issuer bank.
negotiating bank, 18 to have the draft discounted.
No judgment of civil liability against the other
Bank of America has acted independently as a defendants, Francisco Trajano and other
negotiating bank, thus saving Inter-Resin from the unidentified parties, can be made, in this instance,
hardship of presenting the documents directly to there being no sufficient evidence to warrant any
Bank of Ayudhya to recover payment. As a such finding.
negotiating bank, Bank of America has a right to
recourse against the issuer bank and until
reimbursement is obtained, Inter-Resin, as the
drawer of the draft, continues to assume a
contingent liability thereon.

Furthermore, bringing the letter of credit to the

attention of the seller is the primordial obligation
of an advising bank. The view that Bank of