Tang vs. Subic Bay Distribution,inc.; G.R. No. 162575

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 162575               December 15, 2010

BEATRIZ SIOK PING TANG, Petitioner,
vs.
SUBIC BAY DISTRIBUTION, INC., Respondent.

D E C I S I O N

PERALTA, J.:

Before us is a petition for review on certiorari filed by petitioner Beatriz Siok Ping Tang seeking to annul and set aside the Decision¹ dated October 17, 2003 and the Resolution² dated March 5, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 74629.

The antecedent facts are as follows:

Petitioner is doing business under the name and style of Able Transport. Respondent Subic Bay Distribution, Inc. (SBDI) entered in two Distributorship Agreements with petitioner and Able Transport in April 2002. Under the Agreements, respondent, as seller, will sell, deliver or procure to be delivered petroleum products, and petitioner, as distributor, will purchase, receive and pay for its purchases from respondent. The two Agreements had a period of one year, commencing on October 2001 to October 2002, which shall continue on an annual basis unless terminated by either party upon thirty days written notice to the other prior to the expiration of the original term or any extension thereof.

Section 6.3 of the Distributorship Agreement provides that respondent may require petitioner to put up securities, real or personal, or to furnish respondent a performance bond issued by a bonding company chosen by the latter to secure and answer for petitioner's outstanding account, and or faithful performance of her obligations as contained or arising out of the Agreement. Thus, petitioner applied for and was granted a credit line by the United Coconut Planters Bank (UCPB), International Exchange Bank (IEBank), and Security Bank Corporation (SBC). Petitioner also applied with the Asia United Bank (AUB) an irrevocable domestic standby letter of credit in favor of respondent. All these banks separately executed several undertakings setting the terms and conditions governing the drawing of money by respondent from these banks.

Petitioner allegedly failed to pay her obligations to respondent despite demand, thus, respondent tried to withdraw from these bank undertakings.

Petitioner then filed with the Regional Trial Court (RTC) of Quezon City separate petitions³ against the banks for declaration of nullity of the several bank undertakings and domestic letter of credit which they issued with the application for the issuance of a temporary restraining order (TRO) and writ of preliminary injunction. The cases were later consolidated and were assigned to Branch 101. Petitioner asked for the annulment of the bank undertakings/letter of credit which she signed on the ground that the prevailing market rate at the time of respondent's intended drawings with which petitioner will be charged of as interests and penalties is oppressive, exorbitant, unreasonable and unconscionable rendering it against public morals and policy; and that to make her automatically liable for millions of pesos on the bank undertakings, these banks merely required the submission of a mere certification from the company (respondent) that the customer (petitioner) has not paid its account (and its statement of account of the client) without first verifying the truthfulness of the alleged petitioner's total liability to the drawer thereon. Therefore, such contracts are oppressive, unreasonable and unconscionable as they would result in her obtaining several millions of liability.

On November 28, 2002, a hearing was conducted for the issuance of the TRO and the writ of preliminary injunction wherein the petitioner and the bank representatives were present. On query of the respondent Judge Normandie Pizarro (Judge Pizarro) to the bank representatives with regard to the eventual issuance of the TRO, the latter all replied that they will abide by the sound judgment of the court. The court then issued an Order⁴granting the TRO and requiring petitioner to implead respondent as an indispensable party and for the latter to submit its position paper on the matter of the issuance of the injunction. Petitioner and respondent submitted their respective position papers.

On December 17, 2002, the RTC rendered an Order,⁵ the dispositive portion of which reads:

ACCORDINGLY, let a Writ of Preliminary Injunction be issued restraining and enjoining herein Respondent UCPB, IEB, SB and AUB from releasing any funds to SBDI, pursuant to the Bank Undertakings and/or Domestic Standby Letter of Credit until further orders from this Court. Consequently, Petitioner is hereby DIRECTED to post a bond in the amount of TEN MILLION PESOS (P10,000,000.00), to answer for whatever damages respondent banks and SBDI may suffer should this Court finally decide that petitioner was not entitled thereto. ⁶

The RTC found that both respondent and petitioner have reasons for the enforcement or non-enforcement of the bank undertakings, however, as to whether said reasons were justifiable or not, in view of the attending circumstances, the RTC said that these can only be determined after a full blown trial. It ruled that the outright denial of petitioner's prayer for the issuance of injunction, even if the evidence warranted the reasonable probability that real injury will occur if the relief for shall not be granted in favor of petitioner, will not serve the ends of justice.

Respondent filed with the CA a petition for certiorari with prayer for the issuance of a TRO and writ of preliminary injunction against respondent Judge Pizarro and petitioner. Subsequently, petitioner filed her Comment and respondent filed its Reply.

On July 4, 2003, the CA issued a Resolution⁷