Transfield Philippines, Inc.

, petitioner vs Luzon Hydro Corporation, respondent (443 SCRA 316, 22

November 2004)
Type of Appeal or Action: Petitioner Transfield Philippines appealed from the decision of the Court of
Appeals in CA G.R. S.P. 61901. The appellate court dismissed its petition for certiorari and expressed
conformity with the RTC Makati Br. 148s order that: (1) Luzon Hydro Corporation could call on the
securities pursuant to the first principle in credit law that the credit itself is independent of the
underlying transaction and that as long as the beneficiary complied with the credit, it was no moment
that he had not complied with the underlying contract. (2) Even assuming that the trial courts denial of
Transfields application for a writ of prel. injunction was erroneous, it constituted only an error of
judgment which is not correctible by certiorari, unlike error of jurisdiction.
Facts: Transfield Philippines (referred afterwards as Transfield) entered into a Turnkey Contract with
Luzon Hydro Corporation (referred afterwards as LHC) on 26 March 1997 where Transfield undertook
the project of constructing on a turnkey basis a seventy-megawatt (70 MW) hydroelectric power station
at Bakun River in the provinces of Ilocos Sur and Benguet. Transfield was given the sole responsibility
for the projects design, construction, commissioning, testing and completion.
Their Turnkey Contract provided (1) Transfield is entitled to claim extensions of time (EOT) for
reasons like force majeure and delays caused by LHC itself; (2) the targeted completion of the Project
shall be on 1 June 2000, or on such later date as may be agreed by LHC and Transfield in accordance
with the contract; (3) In case of dispute, the parties are bound to settle differences through mediation,
conciliation and such other means enumerated under the Turnkey Contract.
Transfield opened two standby letters of credit in favor of LHC as security for its performance of the
obligations on or before the target completion date (or on such later date as may be agreed by them),
where each standby letter amounted to US$8,988,907.00: (1) Standby Letter of Credit E001126/8400
with the local branch of ANZ Bank and (2) Standby Letter of Credit No. IBDIDSB-00/4 with Security
Bank Corporation (SBC).
Transfield sought various EOTs for completion while constructing the said plant, and the extensions
requested were due to several factors such as force majeure due to typhoon Zeb, barricades, and
demonstrations, which prevented completion of the project on target date. LHC denied these requests
and thus, the two parties commenced series of legal action against each other.
Issue: W/N Transfield will suffer grave and irreparable damage if LHC will not be restrained by a writ
of preliminary injunction from calling and drawing on the securities issued by ANZ and Security Bank?
Held: The Supreme Court DENIED the instant petition of Transfield. It was also required by the Court
to answer the charge of forum-shopping within 15 days from notice.
The Court stated the writ of preliminary injunction is a preservative remedy for the protection of one's
substantive right or interest; it is not a cause of action in itself but merely a provisional remedy, an
adjunct to a main suit. The issuance of the writ as preservative or ancillary remedy securing rights of a
party in a pending case entirely within the discretion of the court taking cognizance of the case, subject
to grounds and in the manner provided by law.
/archie.manansala
Archibald Jose T. Manansala
CEU School of Law, A.Y. 2015-2016

It also held that before the writ of preliminary injunction be issued, the party must show: (1) clear
showing by the complaint that there exists a right to be protected and that the acts against which the
writ is to be directed are violative of the said right; (2) The invasion of the right sought to be protected
is material and substantial, that the right of complainant is clear and unmistakable, and (3)There is an
urgent and paramount necessity for the writ to prevent serious damage.
In the present case, Transfield failed to show it has a clear and unmistakable right to restrain LHC to
call and draw the securities it has opened. Transfield itself admitted that LHC has a right to call and
draw on the letters of credit contractually rooted from and subject to the express stipulations in the
Turnkey Contract. Also, Transfield did not also raise in its complaint before the trial court or the
appellate the fraud exception rule as justification for the issuance of the writ of preliminary injunction.

/archie.manansala
Archibald Jose T. Manansala
CEU School of Law, A.Y. 2015-2016