8/12/2019 Rodzssen Supply v. Far East

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Rodzssen Supply v. Far East Recit ready digest:

Petitioner opened with respondent a domestic letter of credit (LOC) in favor of Ekmanand Company, Inc. (Ekman) for the purchase of five hydraulic loaders. The first threehydraulic loaders were received by the petitioner before the expiry of LOC andrespondent paid Ekman. The remaining two hydraulic loaders were received by the

petitioner after the expiry of LOC/contract but respondent still paid Ekman. Petitionerrefused to pay respondent.

Petitioner should pay respondent bank the amount the latter expended for the equipment belatedly delivered by Ekman and voluntarily received and kept by petitioner. When both parties to a transaction are mutually negligent in the performance of theirobligations, the fault of one cancels the negligence of the other and, as in this case, theirrights and obligations may be determined equitably under the law proscribing unjustenrichment.

Petition:

Petition for certiorari for the decision of CA

Factual Antecedents: Petitioner opened with respondent a domestic letter of credit (LOC) in favor of Ekman

and Company, Inc. (Ekman) for the purchase of five hydraulic loaders. The first three hydraulic loaders were received by the petitioner before the expiry of LOC

and respondent paid Ekman. The remaining two hydraulic loaders were received by the petitioner after the expiry of LOC/contract but respondent still paid Ekman.

Petitioner refused to pay respondent. Respondent filed a case.Ruling of the lower court/s:

The RTC rendered judgment in favor of herein respondent, stating that upon delivery byEkman of the loaders, Rodzssen became liable for the payment of the units. In the honest

belief that it was still under obligation to, and upon presentation of necessary documents by Ekman, FEBTC was in good faith in paying Ekman. The RTC further noted thatRodzssens offer to return the 2 units to FEBTC was made only 3 years after it receivedthe goods and when FEBTC pressed for the payments.

CA affirmed

Position of Petitioner:

FEBTC had no cause of action since there was a breach of contract on the part of FEBTCwho in bad faith paid Ekman, knowing that the 2 units of hydraulic loaders had beendelivered to Rodzssen after the expiry date of the LC

ISSUE: Whether or not the respondent is entitled of reimbursement from petitioner for its

payment out of mutual negligence.

8/12/2019 Rodzssen Supply v. Far East

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HELD/RATIO: YES Petitioner should pay respondent bank the amount the latter expended for the equipment

belatedly delivered by Ekman and voluntarily received and kept by petitioner. Respondent banks right to seek recovery from petitioner is anchored, not upon the

inefficacious Letter of Credit, but on Article 2142 of the Civil Code which reads:Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quas i-contract to the end that no one shall be unjustly enriched or benefited at the expense ofanother.

When both parties to a transaction are mutually negligent in the performance of theirobligations, the fault of one cancels the negligence of the other and, as in this case, theirrights and obligations may be determined equitably under the law proscribing unjustenrichment.