Andres Villalon v. Court of Appeals

Summary

Petitioner Villalon entered into a business partnership with Benjamin Gogo Jr. for manufacturing door jambs for export, investing P207,500. Gogo executed a Deed of Assignment of Letter of Credit proceeds worth $46,500 in Villalon's favor. However, Gogo secretly obtained packing credit lines from IBAA using the same letter of credit as security, resulting in the proceeds being released to Gogo instead of Villalon. Villalon sued IBAA claiming it received notice of his assignment and conspired with Gogo. The trial court, Court of Appeals, and Supreme Court all ruled in favor of IBAA, finding no proof that the bank received notice of Villalon's assignment and that under Article 1311 of the Civil Code, contracts affect only the parties thereto. Since IBAA was not a party to the assignment between Villalon and Gogo, it had no obligation to Villalon and was justified in releasing proceeds to Gogo as the designated beneficiary of the letter of credit.