G.R. No. 74886.december 8, 1992. Prudential Bank, Petitioner, vs. Intermediate Appellate Court, Philippine Rayon Mills Inc. and ANACLETO R. CHI, Respondents

2/1/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 216
VOL. 216, DECEMBER 8, 1992 257

Prudential Bank vs. Intermediate Appellate Court
*
G.R. No. 74886.December 8, 1992.
PRUDENTIAL BANK, petitioner, vs. INTERMEDIATE

APPELLATE COURT, PHILIPPINE RAYON MILLS INC. and
ANACLETO R. CHI, respondents.
Commercial Law; Negotiable Instruments Law; Letters of Credit;

Presentment for acceptance not required for sight drafts.—A letter of credit
is defined as 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 the promise
to pay of 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. In the instant case then, the drawee was
necessarily the herein petitioner. It was to the latter that the drafts were
presented for payment. In fact, there was no need for acceptance as the
issued drafts are sight drafts. Presentment for acceptance is necessary only
in the cases expressly provided for in Section 143 of the Negotiable
Instruments Law (NIL). The said section reads: “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
_________________
* THIRD DIVISION.
258
258 SUPREME COURT REPORTS ANNOTATED
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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.” Obviously then, sight drafts do not require
presentment for acceptance.
Same; Trust Receipts Law; Violation of duty to account for goods

constitutes crime of estafa.—It is alleged in the complaint that private
respondents “not only have presumably put said machinery to good use and
have profited by its operation and/or disposition but very recent information
that (sic) reached plaintiff bank that defendants already sold the machinery
covered by the trust receipt to Yupangco Cotton Mills,” and that “as trustees
of the property covered by the trust receipt, x x x and therefore acting in
fiduciary (sic) capacity, defendants have wilfully violated their duty to
account for the whereabouts of the machinery covered by the trust receipt or
for the proceeds of any lease, sale or other disposition of the same that they
may have made, notwithstanding demands therefor; defendants have
fraudulently misapplied or converted to their own use any money realized
from the lease, sale, and other disposition of said machinery.” While there is
no specific prayer for the delivery to the petitioner by Philippine Rayon of
the proceeds of the sale of the machinery covered by the trust receipt, such
relief is covered by the general prayer for “such further and other relief as
may be just and equitable on the premises.” And although it is true that the
petitioner commenced a criminal action for the violation of the Trust
Receipts Law, no legal obstacle prevented it from enforcing the civil
liability arising out of the trust receipt in a separate civil action. Under
Section 13 of the Trust Receipts Law, the failure of an entrustee to turn over
the proceeds of the sale of goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to the entruster or as appears
in the trust receipt or to return said goods, documents or instruments if they
were not sold or disposed of in accordance with the terms of the trust receipt
shall constitute the crime of estafa, punishable under the provisions of
Article 315, paragraph 1(b) of the Revised Penal Code. Under Article 33 of
the Civil Code, a civil action for damages, entirely separate and distinct
from the criminal action, may be brought by the injured party in cases of
defamation, fraud and physical injuries. Estafa falls under fraud.
Contracts; Solidary guaranty clause; Requisites of defense of

exhaustion (excussion); Contracts of adhesion; Ambiguity strictly construed
against party who drafted the form.—Our own reading of the
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VOL. 216, DECEMBER 8, 1992 259

questioned solidary guaranty clause yields no other conclusion than that the
obligation of Chi is only that of a guarantor. This is further bolstered by the
last sentence which speaks of waiver of exhaustion, which, nevertheless, is
ineffective in this case because the space therein for the party whose
property may not be exhausted was not filled up. Under Article 2058 of the
Civil Code, the defense of exhaustion (excussion) may be raised by a
guarantor before he may be held liable for the obligation. Petitioner likewise
admits that the questioned provision is a solidary guaranty clause, thereby
clearly distinguishing it from a contract of surety. It, however, described the
guaranty as solidary between the guarantors; this would have been correct if
two (2) guarantors had signed it. The clause “we jointly and severally agree
and undertake” refers to the undertaking of the two (2) parties who are to
sign it or to the liability existing between themselves. It does not refer to the
undertaking between either one or both of them on the one hand and the
petitioner on the other with respect to the liability described under the trust
receipt. Elsewise stated, their liability is not divisible as between them, i.e.,
it can be enforced to its full extent against any one of them. Furthermore,
any doubt as to the import or true intent of the solidary guaranty clause
should be resolved against the petitioner. The trust receipt, together with the
questioned solidary guaranty clause, is on a form drafted and prepared
solely by the petitioner; Chi’s participation therein is limited to the affixing
of his signature thereon. It is, therefore, a contract of adhesion; as such, it
must be strictly construed against the party responsible for its preparation.
Same; Same; Contract of guaranty does not have to appear in a public

instrument.—Neither can We agree with the reasoning of the public
respondent that this solidary guaranty clause was effectively disregarded
simply because it was not signed and witnessed by two (2) persons and
acknowledged before a notary public. While indeed, the clause ought to
have been signed by two (2) guarantors, the fact that it was only Chi who
signed the same did not make his act an idle ceremony or render the clause
totally meaningless. By his signing, Chi became the sole guarantor. The
attestation by witnesses and the acknowledgment before a notary public are
not required by law to make a party liable on the instrument. The rule is that
contracts shall be obligatory in whatever form they may have been entered
into, provided all the essential requisites for their validity are present;
however, when the law requires that a contract be in some form in order that
it may be valid or enforceable, or that it be proved in a certain way, that
requirement is absolute and indispensable. With respect to a guaranty, which
is a promise to answer for the debt or
260
default of another, the law merely requires that it, or some note or
memorandum thereof, be in writing. Otherwise, it would be unenforceable
unless ratified.While the acknowledgment of a surety before a notary public
is required to make the same a public document, under Article 1358 of the
Civil Code, a contract of guaranty does not have to appear in a public
document.
Criminal Law; Violation of Trust Receipts Law committed by a

corporation, partnership, association or other juridical entities.—It is clear
that if the violation or offense is committed by a corporation, partnership,
association or other juridical entities, the penalty shall be imposed upon the
directors, officers, employees or other officials or persons therein
responsible for the offense. The penalty referred to is imprisonment, the
duration of which would depend on the amount of the fraud as provided for
in Article 315 of the Revised Penal Code. The reason for this is obvious:
corporations, partnerships, associations and other juridical entities cannot be
put in jail. However, it is these entities which are made liable for the civil
liability arising from the criminal offense. This is the import of the clause
“without prejudice to the civil liabilities arising from the criminal offense.”
And, as We stated earlier, since that violation of a trust receipt constitutes
fraud under Article 33 of the Civil Code, petitioner was acting well within
its rights in filing an independent civil action to enforce the civil liability
arising therefrom against Philippine Rayon.
Civil Procedure; Joinder of parties; Excussion not condition sine

Prudential Bank vs. Intermediate Appellate Court qua non for institution of
action against guarantor.—Excussion is not a condition sine qua non for the
institution of an action against a guarantor. In Southern Motors, Inc. vs.
Barbosa, this Court stated: “4. Although an ordinary personal guarantor—
not a mortgagor or pledgor—may demand the aforementioned exhaustion,
the creditor may, prior thereto, secure a judgment against said guarantor,
who shall be entitled, however, to a deferment of the execution of said
judgment against him until after the properties of the principal debtor shall
have been exhausted to satisfy the obligation involved in the case.” There
was then nothing procedurally objectionable in impleading private
respondent Chi as a co-defendant in Civil Case No. Q-19312 before the trial
court. As a matter of fact, Section 6, Rule 3 of the Rules of Court on
permissive joinder of parties explicitly allows it. xxx xxx. This is the equity
rule relating to multifariousness. It is based on trial convenience and is
designed to permit the joinder of plaintiffs or defendants whenever there is a
common question of law or fact. It will save the parties unnecessary work,
trouble and expense.
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VOL. 216, DECEMBER 8, 1992 261

PETITION for review from the decision of the then Intermediate

Appellate Court.
The facts are stated in the opinion of the Court.
DAVIDE, JR., J.:

1
Petitioner seeks to review and set aside the decision of public
respondent Intermediate Appellate Court (now Court of Appeals),
dated 10 March 1986, in AC-G.R. No. 66733 which affirmedin toto
the 15 June 1978 decision of Branch 9 (Quezon City) of the then
Court of First Instance (now Regional Trial Court) of Rizal in Civil
Case No. Q-19312. The latter involved an action instituted by the
petitioner for the recovery of a sum of money representing the
amount paid by it to the Nissho Company Ltd. of Japan for textile
machinery imported by the defendant, now private respondent,
Philippine Rayon Mills, Inc. (hereinafter Philippine Rayon),
represented by co-defendant Anacleto R. Chi.
The facts which gave rise to the instant controversy are
summarized by the public respondent as follows:
“On August 8, 1962, defendant-appellant Philippine Rayon Mills, Inc.

entered into a contract with Nissho Co., Ltd. of Japan for the importation of
textile machineries under a five-year deferred payment plan (Exhibit B,
Plaintiff’s Folder of Exhibits, p. 2). To effect payment for said machineries,
the defendant-appellant applied for a commercial letter of credit with the
Prudential Bank and Trust Company in favor of Nissho. By virtue of said
application, the Prudential Bank opened Letter of Credit No. DPP-63762 for
$128,548.78 (Exhibit A, Ibid., p. 1). Against this letter of credit, drafts were
drawn and issued by Nissho (Exhibits X, X-1 to X-11, Ibid., pp. 65, 66 to
76), which were all paid by the Prudential Bank through its correspondent in
Japan, the Bank of Tokyo, Ltd. As indicated on their faces, two of these
drafts (Exhibits X and X-1, Ibid., pp. 65-66) were accepted by the
defendantappellant through its president, Anacleto R. Chi, while the others
were not (Exhibits X-2 to X-11, Ibid., pp. 66 to 76).
Upon the arrival of the machineries, the Prudential Bank in-
______________
1 Rollo, 39-47, per Associate Justice Crisolito Pascual, concurred in by Associate Justices
Jose C. Campos, Jr, and Serafin E. Camilon.
262

dorsed the shipping documents to the defendant-appellant which accepted

delivery of the same. To enable the defendant-appellant 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 (sic) of defendant-appellant company (Exhibit C, Ibid., p. 13).
At the back of the trust receipt is a printed form to be accomplished by
two sureties who, by the very terms and conditions thereof, were to be
jointly and severally liable to the Prudential Bank should the defendant-
appellant fail to pay the total amount or any portion of the drafts issued by
Nissho and paid for by Prudential Bank. The defendant-appellant was able
to take delivery of the textile machineries and installed the same at its
factory site at 69 Obudan Street, Quezon City.
Sometime in 1967, the defendant-appellant ceased business operation
(sic). On December 29, 1969, defendant appellant’s factory was leased by
Yupangco Cotton Mills for an annual rental of P200,000.00 (Exhibit I, Ibid.,
p. 22). The lease was renewed on January 3, 1973 (Exhibit J., Ibid., p. 26).
On January 5, 1974, all the textile machineries in the defendant-appellant’s
factory were sold to AIC Development Corporation for P300,000.00
(Exhibit K, Ibid., p. 29)
The obligation of the defendant-appellant arising from the letter of credit
and the trust receipt remained unpaid and unliquidated. Repeated formal
demands (Exhibits U, V, and W, Ibid., pp. 62, 63, 64) for the payment of the
said trust receipt yielded no result. Hence, the present action for the
collection of the principal amount of P956,384.95 was filed on October 3,
1974 against the defendant-appellant and Anacleto R. Chi. In their
respective answers, the defendants interposed identical special defenses,
viz., the complaint states no cause of action; if there is, the same has
2
prescribed; and the plaintiff is guilty of laches.”
On 15 June 1978, the trial court rendered its decision the dispositive
portion of which reads:
“WHEREFORE, judgment is hereby rendered sentencing the defendant

Philippine Rayon Mills, Inc. to pay plaintiff the sum of P153,645.22, the
amounts due under Exhibits “X” & “X-1”, with interest at 6% per annum
beginning September 15, 1974 until fully paid.
_______________
2 Rollo, 39-41.
263
VOL. 216, DECEMBER 8, 1992 263

Insofar as the amounts involved in drafts Exhs. “X” (sic) to “X-11”,

inclusive, the same not having been accepted by defendant Philippine Rayon
Mills, Inc., plaintiff’s cause of action thereon has not accrued, hence, the
instant case is premature.
Insofar as defendant Anacleto R. Chi is concerned, the case is dismissed.

Plaintiff is ordered to pay defendant Anacleto R. Chi the sum of P20,000.00
as attorney’s fees.
With costs against defendant Philippine Rayon Mills, Inc.
3
SO ORDERED.”
Petitioner appealed the decision to the then Intermediate Appellate

Court. In urging the said court to reverse or modify the decision,
petitioner alleged in its Brief that the trial court erred in (a)
disregarding its right to reimbursement from the private respondents
for the entire unpaid balance of the imported machines, the total
amount of which was paid to the Nissho Company Ltd., thereby
violating the principle of the third party payor’s right to
reimbursement provided for in the second paragraph of Article 1236
of the Civil Code and under the rule against unjust enrichment; (b)
refusing to hold Anacleto R. Chi, as the responsible officer of
defendant corporation, liable under Section 13 of P.D. No. 115 for
the entire unpaid balance of the imported machines covered by the
bank’s trust receipt (Exhibit “C”); (c) finding that the solidary
guaranty clause signed by Anacleto R. Chi is not a guaranty at all;
(d) controverting the judicial admissions of Anacleto R. Chi that he
is at least a simple guarantor of the said trust receipt obligation; (e)
contravening, based on the assumption that Chi is a simple
guarantor, Articles 2059, 2060 and 2062 of the Civil Code and the
related evidence and jurisprudence which provide that such liability
had already attached; (f) contravening the judicial admissions of
Philippine Rayon with respect to its liability to pay the petitioner the
amounts involved in the drafts (Exhibits “X”, “X-1” to “X-11”); and
(g) interpreting “sight” drafts as requiring acceptance
4
by Philippine
Rayon before the latter could be held liable thereon.
________________
3 Rollo, 81-83.
4 Brief for Appellant, 1-4; Rollo, 85, et. seq.
264

In its decision, public respondent sustained the trial court in all

respects. As to the first and last assigned errors, it ruled that the
provision on unjust enrichment, Article 2142 of the Civil Code,
applies only if there is no express contract between the parties and
there is a clear showing that the payment is justified. In the instant
case, the relationship existing between the petitioner and Philippine
Rayon is governed by specific contracts, namely the application for
letters of credit, the promissory note, the drafts and the trust receipt.
With respect to the last ten (10) drafts (Exhibits “X-2” to “X-11”)
which had not been presented to and were not accepted by
Philippine Rayon, petitioner was not justified in unilaterally paying
the amounts stated therein. The public respondent did not agree with
the petitioner’s claim that the drafts were sight drafts which did not
require presentment for acceptance to Philippine Rayon because
paragraph 8 of the trust receipt presupposes prior acceptance of the
drafts. Since the ten (10) drafts were not presented and accepted, no
valid demand for payment can be made.
Public respondent also disagreed with the petitioner’s contention
that private respondent Chi is solidarily liable with Philippine Rayon
pursuant to Section 13 of P.D. No. 115 and based on his signature on
the solidary guaranty clause at the dorsal side of the trust receipt. As
to the first contention, the public respondent ruled that the civil
liability provided for in said Section 13 attaches only after
conviction. As to the second, it expressed misgivings as to whether
Chi’s signature on the trust receipt made the latter automatically
liable thereon because the so-called solidary guaranty clause at the
dorsal portion of the trust receipt is to be signed not by one (1)
person alone, but by two (2) persons; the last sentence of the same is
incomplete and unsigned by witnesses; and it is not acknowledged
before a notary public. Besides, even granting that it was executed
and acknowledged before a notary public, Chi cannot be held liable
therefor because the records fail to show that petitioner had either
exhausted the properties of Philippine Rayon or had resorted to all
legal remedies as required in Article 2058 of the Civil Code. As
provided for under Articles 2052 and 2054 of the Civil Code, the
obligation of a guarantor is merely accessory and subsidiary,
respectively. Chi’s liability would therefore arise only when the
principal debtor fails to
265
VOL. 216, DECEMBER 8, 1992 265

5
comply with his obligation.
Its motion to reconsider the decision having been denied by the
6
public respondent in its Resolution of 11 June 1986, petitioner filed
the instant petition on 31 July 1986 submitting the following legal
issues:
“I. WHETHER OR NOT THE RESPONDENT APPELLATE

COURT GRIEVOUSLY ERRED IN DENYING
PETITIONER’S CLAIM FOR FULL REIMBURSEMENT
AGAINST THE PRIVATE RESPONDENTS FOR THE
PAYMENT PETITIONER MADE TO NISSHO CO. LTD.
FOR THE BENEFIT OF PRIVATE RESPONDENT

UNDER ART. 1283 OF THE NEW CIVIL CODE OF THE
PHILIPPINES AND UNDER THE GENERAL
PRINCIPLE AGAINST UNJUST ENRICHMENT;
II. WHETHER OR NOT RESPONDENT CHI IS
SOLIDARILY LIABLE UNDER THE TRUST RECEIPT
(EXH. C);
III. WHETHER OR NOT ON THE BASIS OF THE
JUDICIAL ADMISSIONS OF RESPONDENT CHI HE IS
LIABLE THEREON AND TO WHAT EXTENT;
IV. WHETHER OR NOT RESPONDENT CHI IS MERELY A
SIMPLE GUARANTOR; AND IF SO, HAS HIS
LIABILITY AS SUCH ALREADY ATTACHED;
V. WHETHER OR NOT AS THE SIGNATORY AND
RESPONSIBLE OFFICER OF RESPONDENT PHIL.
RAYON RESPONDENT CHI IS PERSONALLY LIABLE
PURSUANT TO THE PROVISION OF SECTION 13, P.D.
115;
VI. WHETHER OR NOT RESPONDENT PHIL. RAYON IS
LIABLE TO THE PETITIONER UNDER THE TRUST
RECEIPT (EXH. C);
VII. WHETHER OR NOT ON THE BASIS OF THE
JUDICIAL ADMISSIONS RESPONDENT PHIL. RAYON
IS LIABLE TO THE PETITIONER UNDER THE
DRAFTS (EXHS. X, X-1 TO X-11) AND TO WHAT
EXTENT;
VIII. WHETHER OR NOT SIGHT DRAFTS REQUIRE PRIOR
ACCEPTANCE FROM RESPONDENT PHIL. RAYON
BEFORE THE LATTER BECOMES LIABLE TO
7
PETITIONER.”
________________
5 Rollo, 45-46.
6 Id., 48.
7 Rollo, 16.
266

8
In the Resolution of 12 March 1990, this Court gave due course to
the petition after the filing of the Comment thereto by private
respondent Anacleto Chi and of the Reply to the latter by the
petitioner; both parties were also required to submit their respective

memoranda which they subsequently complied with.
As We see it, the issues may be reduced as follows:
1. Whether presentment for acceptance of the drafts was

indispensable to make Philippine Rayon liable thereon;
2. Whether Philippine Rayon is liable on the basis of the trust
receipt;
3. Whether private respondent Chi is jointly and severally
liable with Philippine Rayon for the obligation sought to be
enforced and if not, whether he may be considered a
guarantor; in the latter situation, whether the case should
have been dismissed on the ground of lack of cause of
action as there was no prior exhaustion of Philippine
Rayon’s properties.
Both the trial court and the public respondent ruled that Philippine
Rayon could be held liable for the two (2) drafts, Exhibits “X” and
“X-1”, because only these appear to have been accepted by the latter
after due presentment. The liability for the remaining ten (10) drafts
(Exhibits “X-2” to “X-11” inclusive) did not arise because the same
were not presented for acceptance. In short, both courts concluded
that acceptance of the drafts by Philippine Rayon was indispensable
to make the latter liable thereon. We are unable to agree with this
proposition. The transaction in the case at bar stemmed from
Philippine Rayon’s application for a commercial letter of credit with
the petitioner in the amount of $128,548.78 to cover the former’s
contract to purchase and import loom and textile machinery from
Nissho Company, Ltd. of Japan under a five-year deferred payment
plan. Petitioner approved the application.9
As correctly ruled by the
trial court in its Order of 6 March 1975:
______________
8 Id., 131.
9 Record on Appeal, 123.
267
VOL. 216, DECEMBER 8, 1992 267

“x x x By virtue of said Application and Agreement for Commercial Letter

10
of Credit, plaintiff bank was under obligation to pay through its
correspondent bank in Japan the drafts that Nisso (sic) Company, Ltd.,
periodically drew against said letter of credit from 1963 to 1968, pursuant to
plaintiff’s contract with the defendant Philippine Rayon Mills, Inc. In turn,
defendant Philippine Rayon Mills, Inc., was obligated to pay plaintiff bank
the amounts of the drafts drawn by Nisso (sic) Company, Ltd. against said
plaintiff bank together with any accruing commercial charges, interest, etc.
pursuant to the terms and conditions stipulated in the Application and
Agreement of Commercial Letter of Credit Annex “A”.”
A letter of credit is defined as 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
11
conditions specified in the credit. Through a letter of credit, the
bank merely substitutes its own promise to pay for the promise to
pay of one of its customers who in return promises to pay the bank
the amount of funds mentioned in the letter
12
of credit plus credit or
commitment fees mutually agreed upon. In the instant case then,
the drawee was necessarily the herein petitioner. It was to the latter
that the drafts were presented for payment. In fact, there was no
need for acceptance as the issued drafts are sight drafts. Presentment
for acceptance is necessary only in the cases expressly provided for
13
in Section 143 of the Negotiable Instruments Law (NIL). The said
section reads:
“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
________________
10 Herein petitioner.
11 Black’s Law Dictionary, Fifth ed., 813; DAVIDSON, KNOWLES, FORSYTHE
AND JESPERSEN, Business Law, Principles and Cases, 1984 ed., 390.
12 ROSE, Money and Capital Markets, 1983 ed., 692.
13 Act No. 2031.
268

(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.”
Obviously then, sight drafts do not require presentment for

acceptance.
The acceptance of a bill is the signification by the drawee of his
14
assent to the order of the drawer; this may be done 15in writing by
the drawee in the bill itself, or in a separate instrument.
The parties herein agree, and the trial court explicitly ruled, that
the subject drafts are sight drafts. Said the latter:
“x x x In the instant case that drafts being at sight, they are supposed to be
payable upon acceptance unless plaintiff bank has given the Philippine
Rayon Mills Inc. time within which to pay the same. The first two drafts
(Annexes C & D, Exh. X & X-1) were duly accepted as indicated on their
face (sic), and upon such acceptance should have been paid forthwith. These
two drafts were not paid and although Philippine Rayon Mills ought to have
16
paid the same, the fact remains that until now they are still unpaid.”
Corollarily, they are, pursuant to Section 7 of the NIL, payable on

demand. Section 7 provides:
“SEC. 7. When payable on demand.—An instrument is payable on demand

—
(a) When so it is expressed to be payable on demand, or at sight, or on

presentation; or
(b) In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when overdue, it is,

as regards the person so issuing, accepting, or indorsing it, payable on
demand.” (italics supplied)
________________
14 Section 132, NIL.

15 Sections 133 and 134, Id.
16 Rollo, 66.
269
VOL. 216, DECEMBER 8, 1992 269

Paragraph 8 of the Trust Receipt which reads: “My/our liability for

payment at maturity of any accepted draft, bill of exchange or
17
indebtedness shall not be extinguished or modified” does not,
contrary to the holding of the public respondent, contemplate prior
acceptance by Philippine Rayon, but by the petitioner. Acceptance,
however, was not even necessary in the first place because the drafts
which were eventually issued were sight drafts. And even if these
were not sight drafts, thereby necessitating acceptance, it would be
the petitioner—and not Philippine Rayon—which had to accept the

same for the latter was not the drawee. Presentment for acceptance is
defined as the production of a bill of exchange to a drawee for
18
acceptance. The trial court and the public respondent, therefore,
erred in ruling that presentment for acceptance was an indispensable
requisite for Philippine Rayon’s liability on the drafts to attach.
Contrary to both courts’ pronouncements, Philippine Rayon
immediately became liable thereon upon petitioner’s payment
thereof. Such is the essence of the letter of credit issued by the
petitioner. A different conclusion would violate the principle upon
which commercial letters of credit are founded because in such a
case, both the beneficiary and the issuer, Nissho Company Ltd. and
the petitioner, respectively, would be placed at the mercy of
Philippine Rayon even if the latter had already received the imported
machinery and the petitioner had fully paid for it. The typical setting
and purpose of a letter of credit are
19
described in Hibernia Bank and
Trust Co. vs. J. Aron & Co., Inc., thus:
“Commercial letters of credit have come into general use in international

sales transactions where much time necessarily elapses between the sale and
the receipt by a purchaser of the merchandise, during which interval great
price changes may occur. Buyers and
_________________
17 Id., 17.
18 AGBAYANI, A.F., Commercial Laws of the Philippines, 1987 ed., vol. 1, 409 citing
Windham Bank vs. Norton, 22 Conn. 213, 56 Am. Dec. 397.
19 134 Misc. 18, 21-22, 233 N.Y.S. 486, 490-491, cited in Johnston vs. State Bank, 195
N.W. 2d 126, 130-131 (Iowa 1972), and excerpted in CORMAN, Commercial Law, Cases and
Materials, 1976 ed., 622.
270

sellers struggle for the advantage of position. The seller is desirous of being
paid as surely and as soon as possible, realizing that the vendee at a distant
point has it in his power to reject on trivial grounds merchandise on arrival,
and cause considerable hardship to the shipper. Letters of credit meet this
condition by affording celerity and certainty of payment. Their purpose is to
insure to a seller payment of a definite amount upon presentation of
documents. The bank deals only with documents. It has nothing to do with
the quality of the merchandise. Disputes as to the merchandise shipped may
arise and be litigated later between vendor and vendee, but they may not
impede acceptance of drafts and payment by the issuing bank when the
proper documents are presented.”
The trial court and the public respondent likewise erred in

disregarding the trust receipt and in not holding that Philippine
20
Rayon was liable thereon. In People vs. Yu Chai Ho, this Court
explains the nature of a trust receipt by quoting In re Dunlap Carpet
21
Co., thus:
“By this arrangement a banker advances money to an intending importer,

and thereby lends the aid of capital, of credit, or of business facilities and
agencies abroad, to the enterprise of foreign commerce. Much of this trade
could hardly be carried on by any other means, and therefore it is of the first
importance that the fundamental factor in the transaction, the banker’s
advance of money and credit, should receive the amplest protection.
Accordingly, in order to secure that the banker shall be repaid at the critical
point—that is, when the imported goods finally reach the hands of the
intended vendee—the banker takes the full title to the goods at the very
beginning; he takes it as soon as the goods are bought and settled for by his
payments or acceptances in the foreign country, and he continues to hold
that title as his indispensable security until the goods are sold in the United
States and the vendee is called upon to pay for them. This security is not an
ordinary pledge by the importer to the banker, for the importer has never
owned the goods, and moreover he is not able to deliver the possession; but
the security is the complete title vested originally in the bankers, and this
characteristic of the transaction has again and again been recognized and
protected by the courts. Of course, the title
__________________
20 53 Phil. 874, 876-877 [1928]; see also, Samo vs. People, 115 Phil. 346 [1962].
21 206 Fed., 726.
271
VOL. 216, DECEMBER 8, 1992 271

is at bottom a security title, as it has sometimes been called, and the banker
is always under the obligation to reconvey; but only after his advances have
been fully repaid and after the importer has fulfilled the other terms of the
contract.”
22
As further stated in National Bank vs. Viuda e Hijos de Angel Jose,
trust receipts:
“x x x [I]n a certain manner, x x x partake of the nature of a conditional sale

as provided by the Chattel Mortgage Law, that is, the importer becomes
absolute owner of the imported mechandise as soon as he has paid its price.
The ownership of the merchandise continues to be vested in the owner
thereof or in the person who has advanced payment, until he has been paid
in full, or if the merchandise has already been sold, the proceeds of the sale
should be turned over to him by the importer or by his representative or

successor in interest.”
Under P.D. No. 115, otherwise known as the Trust Receipts Law,
which took effect on 29 January 1973, a trust receipt transaction is
defined as “any transaction by and between a person referred to in
this Decree as the entruster, and another person referred to in this
Decree as the 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 trust
receipt, or for other purposes substantially equivalent to any one of
the following: x x x.”
It is alleged in the complaint that private respondents “not only
have presumably put said machinery to good use and have
________________
22 63 Phil. 814, 821 [1936].
272

profited by its operation and/or disposition but very recent

information that (sic) reached plaintiff bank that defendants already
sold the machinery covered by the trust receipt to Yupangco Cotton
Mills,” and that “as trustees of the property covered by the trust
receipt, x x x and therefore acting in fiduciary (sic) capacity,
defendants have wilfully violated their duty to account for the
whereabouts of the machinery covered by the trust receipt or for the
proceeds of any lease, sale or other disposition of the same that they
may have made, notwithstanding demands therefor; defendants have
fraudulently misapplied or converted to their own use any money
realized from
23
the lease, sale, and other disposition of said
machinery.” While there is no specific prayer for the delivery to the
petitioner by Philippine Rayon of the proceeds of the sale of the
machinery covered by the trust receipt, such relief is covered by the
general prayer for “such further and other relief as may be just and
24
24
equitable on the premises.” And although it is true that the
petitioner commenced a criminal action for the violation of the Trust
Receipts Law, no legal obstacle prevented it from enforcing the civil
liability arising out of the trust receipt in a separate civil action.
Under Section 13 of the Trust Receipts Law, the failure of an
entrustee to turn over the proceeds of the sale of goods, documents
or instruments covered by a trust receipt to the extent of the amount
owing to the entruster or as appear in the trust receipt or to return
said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall
constitute the crime of estafa, punishable under the provisions of
25
Article 315, paragraph 1(b) of the Revised Penal Code. Under
Article 33 of the Civil Code, a civil action for damages, entirely
separate and distinct from the criminal action, may be brought by the
injured party in cases of defamation, fraud and physical injuries.
Estafa
_________________
23 Record on Appeal, 6-7.

24 Id., 9.
25 Even before P.D. No. 115, these acts covered by Section 13 were already
considered as estafa; see People vs. Yu Chai Ho, supra,; Samo vs. People, supra,;
Robles vs. Court of Appeals, 199 SCRA 195 [1991].
273
VOL. 216, DECEMBER 8, 1992 273

falls under fraud.

We also conclude, for the reason hereinafter discussed, and not
for that adduced by the public respondent, that private respondent
Chi’s signature in the dorsal portion of the trust receipt did not bind
him solidarily with Philippine Rayon. The statement at the dorsal
portion of the said trust receipt, which petitioner describes as a
“solidary guaranty clause”, reads:
“In consideration of the PRUDENTIAL BANK AND TRUST COMPANY

complying with the foregoing, we jointly and severally agree and undertake
to pay on demand to the PRUDENTIAL BANK AND TRUST COMPANY
all sums of money which the said PRUDENTIAL BANK AND TRUST
COMPANY may call upon us to pay arising out of or pertaining to, and/or
in any event connected with the default of and/or non-fulfillment in any
respect of the undertaking of the aforesaid:
PHILIPPINE RAYON MILLS, INC.
We further agree that the PRUDENTIAL BANK AND TRUST

COMPANY does not have to take any steps or exhaust its remedy against
aforesaid:
before making demand on me/us.
(Sgd.) Anacleto R. Chi
26
ANACLETO R. CHI”
Petitioner insists that by virtue of the clear wording of the statement,

specifically the clause “x x x we jointly and severally agree and
undertake x x x,” and the concluding sentence on exhaustion, Chi’s
liability therein is solidary.
In holding otherwise, the public respondent ratiocinates as
follows:
“With respect to the second argument, we have our misgivings as to whether

the mere signature of defendant-appellee Chi of (sic) the guaranty
agreement, Exhibit “C-1”, will make it an actionable document. It should be
noted that Exhibit “C-1” was prepared and printed
_________________
26 Record on Appeal, 43.
274

by the plaintiff-appellant. A perusal of Exhibit “C-1” shows that it was to be

signed and executed by two persons. It was signed only by defendant-
appellee Chi. Exhibit “C-1” was to be witnessed by two persons, but no one
signed in that capacity. The last sentence of the guaranty clause is
incomplete. Furthermore, the plaintiff-appellant also failed to have the
purported guarantee clause acknowledged before a notary public. All these
show that the alleged guaranty provision was disregarded and, therefore, not
consummated.
But granting arguendo that the guaranty provision in Exhibit “C-1” was
fully executed and acknowledged still defendant-appellee Chi cannot be
held liable thereunder because the records show that the plaintiff-appellant
had neither exhausted the property of the defendant-appellant nor had it
resorted to all legal remedies against the said defendant-appellant as
provided in Article 2058 of the Civil Code. The obligation of a guarantor is
merely accessory under Article 2052 of the Civil Code and subsidiary under
Article 2054 of the Civil Code. Therefore, the liability of the defendant-
appellee arises only when the principal debtor fails to comply with his
27
obligation.”
Our own reading of the questioned solidary guaranty clause yields

no other conclusion than that the obligation of Chi is only that of a
guarantor. This is further bolstered by the last sentence which

speaks of waiver of exhaustion, which, nevertheless, is ineffective in
this case because the space therein for the party whose property may
not be exhausted was not filled up. Under Article 2058 of the Civil
Code, the defense of exhaustion (excussion) may be raised by a
guarantor before he may be held liable for the obligation. Petitioner
likewise admits that the questioned provision is a solidary guaranty
clause, thereby clearly distinguishing it from a contract of surety. It,
however, described the guaranty as solidary between the guarantors;
this would have been correct if two (2) guarantors had signed it. The
clause “we jointly and severally agree and undertake” refers to the
undertaking of the two (2) parties who are to sign it or to the liability
existing between themselves. It does not refer to the undertaking
between either one or both of them on the one hand and the
petitioner on the other with respect to the liability described under
the trust receipt. Elsewise stated,
________________
27 Rollo, 45-46.
275
VOL. 216, DECEMBER 8, 1992 275

their liability is not divisible as between them, i.e., it can be enforced

to its full extent against any one of them.
Furthermore, any doubt as to the import or true intent of the
solidary guaranty clause should be resolved against the petitioner.
The trust receipt, together with the questioned solidary guaranty
clause, is on a form drafted and prepared solely by the petitioner;
Chi’s participation therein is limited to the affixing of his signature
28
thereon. It is, therefore, a contract of adhesion; as such, it must be
29
strictly construed against the party responsible for its preparation.
Neither can We agree with the reasoning of the public respondent
that this solidary guaranty clause was effectively disregarded simply
because it was not signed and witnessed by two (2) persons and
acknowledged before a notary public. While indeed, the clause
ought to have been signed by two (2) guarantors, the fact that it was
only Chi who signed the same did not make his act an idle ceremony
or render the clause totally meaningless. By his signing, Chi became
the sole guarantor. The attestation by witnesses and the
acknowledgment before a notary public are not required by law to
make a party liable on the instrument. The rule is that contracts shall
be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present;
however, when the law requires that a contract be in some form in
order that it may be valid or enforceable, or that it be proved in a

30
certain way, that requirement is absolute and indispensable. With
31
respect to a guaranty, which is a promise to answer for the debt or
default of another, the law merely requires that it, or some note or
memorandum thereof, be in writing. Otherwise, it
_________________
28 Sweet Lines, Inc. vs. Teves, 83 SCRA 361 [1978]; Angeles vs. Calasanz, 135
SCRA 323 [1985].
29 Western Guaranty Corp. vs. Court of Appeals, 187 SCRA 652 [1990]; BPI
Credit Corp. vs. Court of Appeals, 204 SCRA 601 [1991].
30 Article 1356, Civil Code.
31 Article 2047 of the Civil Code defines it as follows: “By guaranty a person,
called the guarantor, binds himself to the creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so.”
276

32
would be unenforceable unless ratified. While the acknowledgment
of a surety before a notary public is required to make the same a
public document, under Article 1358 of the Civil Code, a contract of
guaranty does not have to appear in a public document.
And now to the other ground relied upon by the petitioner as
basis for the solidary liability of Chi, namely the criminal
proceedings against the latter for the violation of P.D. No. 115.
Petitioner claims that because of the said criminal proceedings, Chi
would be answerable for the civil liability arising therefrom pursuant
to Section 13 of P.D. No. 115. Public respondent rejected this claim
because such civil liability presupposes prior conviction as can be
gleaned from the phrase “without prejudice to the civil liability
arising from the criminal offense.” Both are wrong. The said section
reads:
“SEC. 13. Penalty Clause.—The failure of an entrustee to turn over the

proceeds of the sale of the goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to the entruster or as appears
in the trust receipt or to return said goods, documents or instruments if they
were not sold or disposed of in accordance with the terms of the trust receipt
shall constitute the crime of estafa, punishable under the provisions of
Article Three hundred and fifteen, paragraph one (b) of Act Numbered
Three thousand eight hundred and fifteen, as amended, otherwise known as
the Revised Penal Code. If the violation or offense is committed by a
corporation, partnership, association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon the directors, officers,
employees or other officials or persons therein responsible for the offense,

without prejudice to the civil liabilities arising from the criminal offense.”
A close examination of the quoted provision reveals that it is the last

sentence which provides for the correct solution. It is clear that if the
violation or offense is committed by a corporation, partnership,
association or other juridical entities, the penalty shall be imposed
upon the directors, officers, employees or other officials or persons
therein responsible for the offense.
__________________
32 Article 1403 (2) (b), Civil Code.
277
VOL. 216, DECEMBER 8, 1992 277

The penalty referred to is imprisonment, the duration of which

would depend on the amount of the fraud as provided for in Article
315 of the Revised Penal Code. The reason for this is obvious:
corporations, partnerships, associations and other juridical entities
cannot be put in jail. However, it is these entities which are made
liable for the civil liability arising from the criminal offense. This is
the import of the clause “without prejudice to the civil liabilities
arising from the criminal offense.” And, as We stated earlier, since
that violation of a trust receipt constitutes fraud under Article 33 of
the Civil Code, petitioner was acting well within its rights in filing
an independent civil action to enforce the civil liability arising
therefrom against Philippine Rayon.
The remaining issue to be resolved concerns the propriety of the
dismissal of the case against private respondent Chi. The trial court
based the dismissal, and the respondent Court its affirmance thereof,
on the theory that Chi is not liable on the guarantor—because his
signature at the dorsal portion thereof trust receipt in any capacity—
either as surety or as was useless; and even if he could be bound by
such signature as a simple guarantor, he cannot, pursuant to Article
2058 of the Civil Code, be compelled to pay until after petitioner has
exhausted and resorted to all legal remedies against the principal
debtor, Philippine Rayon. The records fail to show that petitioner
33
had done so. Reliance is thus placed on Article 2058 of the Civil
Code which provides:
“ART.2058.The guarantor cannot be compelled to pay the creditor unless

the latter has exhausted all the property of the debtor, and has resorted to all
the legal remedies against the debtor.”
Simply stated, there is as yet no cause of action against Chi.

We are not persuaded. Excussion is not a condition sine qua non

for the institution of an action against a guarantor. In Southern
34
Motors, Inc. vs. Barbosa, this Court stated:
_________________
33 Rollo, 75.
34 99 Phil. 263, 268 [1956].
278

“4. Although an ordinary personal guarantor—not a mortgagor or pledgor—

may demand the aforementioned exhaustion, the creditor may, prior thereto,
secure a judgment against said guarantor, who shall be entitled, however, to
a deferment of the execution of said judgment against him until after the
properties of the principal debtor shall have been exhausted to satisfy the
obligation involved in the case.”
There was then nothing procedurally objectionable in impleading

private respondent Chi as a co-defendant in Civil Case No. Q-19312
before the trial court. As a matter of fact, Section 6, Rule 3 of the
Rules of Court on permissive joinder of parties explicitly allows it. It
reads:
“SEC. 6. Permissive joinder of parties.—All persons in whom or against

whom any right to relief in respect to or arising out of the same transaction
or series of transactions is alleged to exist, whether jointly, severally, or in
the alternative, may, except as otherwise provided in these rules, join as
plaintiffs or be joined as defendants in one complaint, where any question of
law or fact common to all such plaintiffs or to all such defendants may arise
in the action; but the court may make such orders as may be just to prevent
any plaintiff or defendant from being embarrassed or put to expense in
connection with any proceedings in which he may have no interest.”
This is the equity rule relating to multifariousness. It is based on trial

convenience and is designed to permit the joinder of plaintiffs or
defendants whenever there is a common question of law or fact. It
35
will save the parties unnecessary work, trouble and expense.
However, Chi’s liability is limited to the principal obligation in
the trust receipt plus all the accessories thereof including judicial
costs; with respect to the latter, he shall only be liable for those costs
36
incurred after being judicially required to pay. Interest and
damages, being accessories of the principal obliga-
______________
35 FRANCISCO, V.J., The Revised Rules of Court, vol. I, 1973 ed., 258.
36 Second paragraph, Article 2055, Civil Code; see National Marketing Corp. vs.
Marquez, 26 SCRA 722 [1969]; Republic vs. Pal-Fox Lumber Co., Inc., 43 SCRA
365 [1972].
279
VOL. 216, DECEMBER 8, 1992 279

tion, should also be paid; these, however, shall run only from the
date of the filing of the complaint. Attorney’s fees may even be
37
allowed in appropriate cases.
In the instant case, the attorney’s fees to be paid by Chi cannot be
the same as that to be paid by Philippine Rayon since it is only the
trust receipt that is covered by the guaranty and not the full extent of
the latter’s liability. All things considered, he can be held liable for
the sum of P10,000.00 as attorney’s fees in favor of the petitioner.
Thus, the trial court committed grave abuse of discretion in
dismissing the complaint as against private respondent Chi and
condemning petitioner to pay him P20,000.00 as attorney’s fees. In
the light of the foregoing, it would no longer be necessary to discuss
the other issues raised by the petitioner.
WHEREFORE, the instant Petition is hereby GRANTED. The
appealed Decision of 10 March 1986 of the public respondent in
AC-G.R. CV No. 66733 and, necessarily, that of Branch 9 (Quezon
City) of the then Court of First Instance of Rizal in Civil Case No.
Q-19312 are hereby REVERSED and SET ASIDE and another is
hereby entered:
1. Declaring private respondent Philippine Rayon Mills, Inc.

liable on the twelve drafts in question (Exhibits “X”, “X-1”
to “X-11”, inclusive) and on the trust receipt (Exhibit “C”),
and ordering it to pay petitioner: (a) the amounts due
thereon in the total sum of P956,384.95 as of 15 September
1974, with interest thereon at six percent (6%) per annum
from 16 September 1974 until it is fully paid, less whatever
may have been applied thereto by virtue of foreclosure of
mortgages, if any; (b) a sum equal to ten percent (10%) of
the aforesaid amount as attorney’s fees; and (c) the costs.
2. Declaring private respondent Anacleto R. Chi secondarily
liable on the trust receipt and ordering him to pay the face
value thereof, with interest at the legal rate,
______________
37 Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc., 100
Phil. 679 [1957]; Philippine National Bank vs. Luzon Surety Co., Inc., 68 SCRA 207
[1975].
280

Canlubang Security Agency Corp. vs. NLRC
commencing from the date of the filing of the complaint in

Civil Case No. Q-19312 until the same is fully paid as well
as the costs and attorney’s fees in the sum of P10,000.00 if
the writ of execution for the enforcement of the above
awards against Philippine Rayon Mills, Inc. is returned
unsatisfied.
Costs against private respondents.

SO ORDERED.
Gutierrez, Jr., Bidin, Romero and Melo, JJ., concur.
Petition granted.
Note.—The failure of the accused to turnover to the entruster the

proceeds of the sale of goods covered by the delivery trust receipt
and to return the said goods, constituted estafa punishable under
Article 315 (1) (b) of the Revised Penal Code (Robles vs. Court of
Appeals, 199 SCRA 195).
——o0o——
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G.R. No. 74886.december 8, 1992. Prudential Bank, Petitioner, vs. Intermediate Appellate Court, Philippine Rayon Mills Inc. and ANACLETO R. CHI, Respondents

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2/1/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 216

VOL. 216, DECEMBER 8, 1992 257

PRUDENTIAL BANK, petitioner, vs. INTERMEDIATE

Commercial Law; Negotiable Instruments Law; Letters of Credit;

258 SUPREME COURT REPORTS ANNOTATED

Prudential Bank vs. Intermediate Appellate Court

Same; Trust Receipts Law; Violation of duty to account for goods

Contracts; Solidary guaranty clause; Requisites of defense of

VOL. 216, DECEMBER 8, 1992 259

Prudential Bank vs. Intermediate Appellate Court

Same; Same; Contract of guaranty does not have to appear in a public

260 SUPREME COURT REPORTS ANNOTATED

Prudential Bank vs. Intermediate Appellate Court

Criminal Law; Violation of Trust Receipts Law committed by a

Civil Procedure; Joinder of parties; Excussion not condition sine

VOL. 216, DECEMBER 8, 1992 261

PETITION for review from the decision of the then Intermediate

The facts are stated in the opinion of the Court.

DAVIDE, JR., J.:

“On August 8, 1962, defendant-appellant Philippine Rayon Mills, Inc.

262 SUPREME COURT REPORTS ANNOTATED

dorsed the shipping documents to the defendant-appellant which accepted

the machineries, it executed, by prior arrangement with the Prudential Bank,

“WHEREFORE, judgment is hereby rendered sentencing the defendant

VOL. 216, DECEMBER 8, 1992 263

Insofar as the amounts involved in drafts Exhs. “X” (sic) to “X-11”,

Insofar as defendant Anacleto R. Chi is concerned, the case is dismissed.

Petitioner appealed the decision to the then Intermediate Appellate

264 SUPREME COURT REPORTS ANNOTATED

In its decision, public respondent sustained the trial court in all

VOL. 216, DECEMBER 8, 1992 265

“I. WHETHER OR NOT THE RESPONDENT APPELLATE

FOR THE BENEFIT OF PRIVATE RESPONDENT

266 SUPREME COURT REPORTS ANNOTATED

petitioner; both parties were also required to submit their respective

1. Whether presentment for acceptance of the drafts was

VOL. 216, DECEMBER 8, 1992 267

“x x x By virtue of said Application and Agreement for Commercial Letter

A letter of credit is deﬁned as an engagement by a bank or other

“SEC. 143. When presentment for acceptance must be made.—Presentment

268 SUPREME COURT REPORTS ANNOTATED

In no other case is presentment for acceptance necessary in order to render

Obviously then, sight drafts do not require presentment for

Corollarily, they are, pursuant to Section 7 of the NIL, payable on

“SEC. 7. When payable on demand.—An instrument is payable on demand

(a) When so it is expressed to be payable on demand, or at sight, or on

Where an instrument is issued, accepted, or indorsed when overdue, it is,

14 Section 132, NIL.

VOL. 216, DECEMBER 8, 1992 269

Paragraph 8 of the Trust Receipt which reads: “My/our liability for

the petitioner—and not Philippine Rayon—which had to accept the

“Commercial letters of credit have come into general use in international

270 SUPREME COURT REPORTS ANNOTATED

The trial court and the public respondent likewise erred in

“By this arrangement a banker advances money to an intending importer,

VOL. 216, DECEMBER 8, 1992 271

“x x x [I]n a certain manner, x x x partake of the nature of a conditional sale

should be turned over to him by the importer or by his representative or