LEGAL NOTE 0067: INTERPRETATION  OF AN INSTRUMENT.

 SOURCE: BANK OF COMMERCE VS. GOODMAN  FIELDER INTERNATIONAL PHILIPPINES, INC. (G.R. NO. 191561, 7 MARCH 2011, CARPIO MORALES, J.) SUBJECT: INTERPRETATION OF AN INSTRUMENT. (BRIEF TITLE: BANK OF COMMERCE VS. GOODMAN).

  

CASE DIGEST:

 KERAJ MARKETING REQUESTED FOR A CERTIFICATION FROM BANK OF COMMERCE THAT IT IS ARRANGING FOR A CREDIT LINE. IT INTENDS TO SUBMIT SUCH CERTIFICATION TO GOODMAN FIELDER AS A REQUIREMENT FOR A DISTRIBUTORSHIP AGREEMENT. THE CREDIT LINE WILL ANSWER FOR LIABILITIES OF KERAJ. BANK OF COMMERCE ISSUED A CERTIFICATION THAT KERAJ MARKETING HAS ARRANGED FOR A CREDIT LINE. WHEN KERAJ DEFAULTED, GOODMAN FIELDER FILED COLLECTION CASE AGAINST BANK OF COMMERCE. RTC AND CA RULED AGAINST BANK OF COMMERCE: THAT IT IS LIABLE IN VIEW OF ITS CERTIFICATION.

 IS BANK OF COMMERCE LIABLE?

 NO. IN INTERPRETING THE CERTIFICATION THAT KERAJ MARKETING HAS ARRANGED FOR A CREDIT LINE,  THE CIRCUMSTANCES WHEN IT WAS ISSUED MUST BE CONSIDERED. KERAJ’S LETTER-REQUEST OF AUGUST 21, 2000 FOR A CONDITIONAL CERTIFICATION FROM ARAGON WAS GRANTED TWO DAYS LATER WHENARAGON ISSUED THE LETTER-CERTIFICATION ADDRESSED TO RESPONDENT.   WITHIN THAT PERIOD, IT COULD NOT HAVE BEEN POSSIBLE FOR PETITIONER TO EVEN PROCESS  THE APPLICATION, GIVEN THAT AMARNANI HAD NOT EVEN COMPLIED WITH THE REQUIREMENTS AS HE, HIMSELF, INDICATED IN HIS LETTER-REQUEST TO ARAGON TO “PLEASE TELL [HIM] THE REQUIREMENTS FOR THE CREDIT LINE SO [HE] C[OULD] APPLY.”

 ALSO, GOODMAN FIELDER SHOULD HAVE VERIFIED THE ISSUANCE OF SUCH CREDIT LINE. THE DISTRIBUTORSHIP AGREEMENT BETWEEN RESPONDENT AND KERAJ WAS FORGED ON OCTOBER 2, 2000 OR 39 DAYS AFTER THE ISSUANCE OF THE LETTER-CERTIFICATION, LONG ENOUGH FOR RESPONDENT TO VERIFY IF INDEED A BANK GUARANTY WAS, TO ITS IMPRESSION, GRANTED.  

 

 WHAT IS THE RULE ON INTERPRETATION OF AN INSTRUMENT?

 THE CIRCUMSTANCES UNDER WHICH IT WAS MADE MUST BE CONSIDERED.

           The resolution of the case hinges on what Aragon’s statement in the letters sent to respondent that “… we are pleased to inform you that said Corporation has arranged for a credit line ” conveys.

 Section 13, Rule 130, Rules of Court  on interpretation of an instrument provides:

 SEC. 13. Interpretation according to circumstances – For the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown so that the judge may be placed in the position of those whose language he is to interpret.   (underscoring supplied)

          A consideration of the circumstances under which Aragon’s letter-certifications were issued is thus in order.

Amarnani’s letter-request of August 21, 2000 for a conditional certification from Aragon was granted two days later whenAragon issued the letter-certification addressed to respondent.   Within that period, it could not have been possible for petitioner to even process  the application, given that Amarnani had not even complied with the requirements as he, himself, indicated in his letter-request to Aragon to “please tell [him] the requirements for the credit line so [he] c[ould] apply.”
          The Distributorship Agreement between respondent and Keraj was forged on October 2, 2000 or 39 days after the issuance of the letter-certification, long enough for respondent to verify if indeed a bank guaranty was, to its impression, granted.  

By respondent’s finance manager Leonora Armi Salvador’s testimony, upon receipt of the two letter-certifications,[11] she concluded that they were bank guarantees considering their similarity with other bank guarantees in favor of respondent by other distributors; and she made  inquiries with petitioner only after Keraj defaulted in the payment of its obligation to respondent.[12]

In light of the foregoing circumstances, petitioner could not have conveyed that it was issuing a bank guaranty in favor of Amarnani.   

          Respondent’s reliance on Aragon’s use of a “check writer,” a machine used to input a numerical or written value impression in the “payment amount field” of a check that is very difficult to alter, on the left side of each letter- certification, was misplaced, what prevails being the wordings of the letter-certifications.[13]  

*               Designated member per Special Order No. 940 dated February 7, 2011 in lieu of Associate Justice Arturo D. Brion.

[1]               Records, Vol. 3, TSN taken on March 3, 2004, p. 553.

[2]               Rollo, p. 74.

[3]               Id. at  75.

[4]               Id. at 78.

[5]               Id. at 79.

[6]               Id. at 80.

[7]               Id. at 121.

[8]               Id. at 120.

[9]               Penned by Associate Justice Jose L. Sabio, Jr., with the concurrence of Associate Justices Vicente S.E. Veloso and Ricardo R. Rosario, id. at 43-62.

[10]             Id. at 54.

[11]             Records, Vol. 3, TSN of March 3, 2004, pp. 583-584.

[12]             Id. at 644.

[13]             http://en.wikipedia.org/wiki/Checkwriter citing http://www.google.com/search?q=history+of+paymaster+ribbon+writer&hl=en&tbs=tl:1&tbo=u&ei=e1JkS665K46H8QaOstyaAw&sa=X&oi=timeline_result&ct=title&resnum=11&ved=0CDEQ5wIwCg (visited February 24, 2011).