Author: Patrick V.

Arcellana

Velasquez v Solidbank Corp

Petition: Petition for review on certiorari
Petitioner: Velasquez
Respondent: Solidbank Corporation
Ponencia: Reyes, RT, J

DOCTRINE: When a foreign bill is dishonored for non-acceptance or non-
payment, protest is necessary to hold the drawer and indorsers liable.

FACTS:
1. Velasquez as Wilderness trading engaging in export business sold dried
sea cucumber to Goldwell Trading in South Korea. To facilitate the
payments, Goldwell open a LOC in favor of Wilderness with the Bank of
Seoul.

2. Velasquez applied for a credit accomodation with Solidbank for pre-
shipment financing. The first 2 transactions were successful but the third was
with problems

3. Velasquez negotiated for a sight draft to be drawn on the LOC against the
Bank of Seoul for advanced payment with Solidbank. Velasquez also
executed a letter of undertaking for the issuance of the draft. Velasquez
promised to pay should the draft be unaccepted.

4. Solidbank advanced the value of the shipment to Velasquez. Solidbank
then sent the documents for export to the Bank of Seoul. Solidbank failed to
collect the sight draft as it was dishonored for non-acceptance by Bank of
Seoul. (late shipment, forged certificate, absence of countersignature of nego
bank)

5. Goldwell also issued a stop payment order because the delivery contained
soil instead of sea cucumber. Due to these events, Solidbank demanded
restitution of payment.

6. Velasquez argues that his liability under the sight draft is extinguished by
failure to protest and the letter of undertaking is not binding because it is a
superfluous document. He did not also violate any provision of the LOC.

7. RTC and CA both rendered judgment against Velasquez, saying that he is
still liable for the letter of undertaking.

ISSUE: WON Petitioner Velasquez should be liable for the sight draft or
letter of undertaking.


PROVISIONS: Section 152 of NIL
In what cases protest necessary. Where a foreign bill appearing on its face
to be such is dishonored by nonacceptance, it must be duly protested for
nonacceptance, by nonacceptance is dishonored and where such a bill which
has not previously been dishonored by nonpayment, it must be duly
protested for nonpayment. If it is not so protested, the drawer and indorsers
are discharged. Where a bill does not appear on its face to be a foreign bill,
protest thereof in case of dishonor is unnecessary

RULING + RATIO: Yes for the letter of undertaking, not for the sight
draft.

Petitioner's liability for the letter of undertaking is independent from
his liability under the sight draft.

A sight draft made payable outside Phils is a foreign bill and when it
is dishonored for non-acceptance, protest must be made. The failure of
protest discharged petitioner from his liability under the sight draft. However,
he is still liable for the letter of undertaking because it is a separate contract.
His liability there is direct and primary. Solidbank agreed to purchase the
draft because of the undertaking. This was the consideration in the
acceptance of Solidbank.

Velasquez' contention that as a mere guarantor and the letter of
undertaking as an accessory contract, the discharge of his liability in the sight
draft also discharged his liability in the letter of undertaking, should fail. He
cannot be the debtor and guarantor of his own debt because it is inconsistent
with the purpose of a guarantee. The non-acceptance of the draft triggered
his liability for the undertaking.

Even though there is no proof of the facts of violations of the LOCs,
Velasquez is still liable. Parties are bound to fulfill what has been expressly
stipulated in the contract. The contract is clear in that he is liable if the sight
draft is not accepted. Mere non-acceptance is sufficient to hold him liable.



DISPOSITION: WHEREFORE the petition is denied for lack of merit.