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SALES (Digest) : Philippine Virginia Tobacco Administration V Judge Delos Santos G.R. No. L-27829 August 19, 1988

1. Timoteo Sevilla had a contract with the Philippine Virginia Tobacco Administration (PVTA) to import and export tobacco. Sevilla exported some tobacco but owed PVTA a balance. 2. To secure the balance, Sevilla opened an irrevocable letter of credit with Prudential Bank in PVTA's favor. Sevilla then tried to negotiate reducing costs but PVTA and the President denied this. 3. PVTA tried to collect from the letter of credit but Sevilla obtained an injunction from Judge Delos Santos stopping this. The Supreme Court ruled the Judge acted with grave abuse of discretion by overriding the irrevocable letter of credit.

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57 views1 page

SALES (Digest) : Philippine Virginia Tobacco Administration V Judge Delos Santos G.R. No. L-27829 August 19, 1988

1. Timoteo Sevilla had a contract with the Philippine Virginia Tobacco Administration (PVTA) to import and export tobacco. Sevilla exported some tobacco but owed PVTA a balance. 2. To secure the balance, Sevilla opened an irrevocable letter of credit with Prudential Bank in PVTA's favor. Sevilla then tried to negotiate reducing costs but PVTA and the President denied this. 3. PVTA tried to collect from the letter of credit but Sevilla obtained an injunction from Judge Delos Santos stopping this. The Supreme Court ruled the Judge acted with grave abuse of discretion by overriding the irrevocable letter of credit.

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Sasha Braus
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© © All Rights Reserved
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and Trust Co.

(Prudential) in favor of the PVTA to secure the payment of said


balance, drawable upon the release from the Bureau of Customs of the
SALES (Digest) imported Virginia blending tobacco. While Sevilla was trying to negotiate the
reduction of the procurement cost of the 2,101.479 kilos of PVTA tobacco
already exported which attempt was denied by PVTA and also by the Office of
1.
the President. PVTA attempted to collect from the letter of Credit with
Prudential. Sevilla filed an injunction for the release of funds with Prudential
3. Philippine Virginia Tobacco Administration v Judge
in the sala of Judge Delos Santos. Judge Delos Santos issued the injunction
Delos Santos G.R. No. L-27829 August 19, 1988 order and in a subsequent petition, ordered the funds of the letter of credit
Doctrine: An irrevocable letter of credit cannot, during its lifetime, be
released to Sevilla.
cancelled or modified without the express permission of the beneficiary.
Issue: Whether or not Judge Sevilla acted with grave abuse of discretion in
Facts: Timoteo Sevilla, proprietor and General Manager of the Philippine
releasing the funds to the applicant of the letter of credit.
Associated Resources (PAR) was awarded in a public bidding the right to
import Virginia leaf tobacco. Subsequently, the Philippine Virginia Tobacco Held: Judge Delos Santos violated the irrevocability of the letter of credit
Administration (PVTA) and Sevilla entered into a contract for the importation issued by respondent Bank in favor of petitioner. An irrevocable letter of
of 85 million kilos of Virginia leaf tobacco and a counterpart exportation of credit cannot, during its lifetime, be cancelled or modified Without the
2.53 million kilos of tobacco and 5.1 million kilos of farmer’s and tobacco at express permission of the beneficiary. Consequently, if the finding the trial on
P3.00 a kilo. In accordance with their contract Sevilla purchased from PVZTA the merits is that respondent Sevilla has ailieged unpaid balance due the
and exported 2,101.470 kilos of tobacco, paying the PVTA the sum of petitioner, such unpaid obligation would be unsecured.
P2,482,938.50 and leaving a balance of P3,713,908.91. Before respondent
Sevilla could import the counterpart blending Virginia tobacco, amounting to
525,560 kilos, Republic Act No. 4155 was passed and took effect on June 20, 1
964, authorizing the PVTA to grant import privileges at the ratio of 4 to 1
instead of 9 to 1 and to dispose of all its tobacco stock at the best price
available.

Because of the prevailing export or world market price under which Sevilla
will be exporting at a loss, the agreement was further amended to require
Sevilla would open an irrevocable letter of credit with the Prudential Bank

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