- Petitioner
- National Sugar Trading And/Or the Sugar Regulatory Administration
- Respondent
- Philippine National Bank
- Citation
- G.R. No. 151218
- Court
- Supreme Court
- Division
- First Division
- Ponente
- Ynares-Santiago, J.
- Decided
- January 28, 2003
Summary
This case arose from PNB's application of P696 million in foreign remittances from sugar exports to outstanding obligations of NASUTRA and related entities. NASUTRA and SRA challenged this application, claiming no creditor-debtor relationship existed and that PNB acted as trustee. The Supreme Court upheld PNB's actions, ruling that the promissory notes executed by NASUTRA contained attorney-in-fact provisions expressly authorizing PNB to apply any moneys in its hands to loan payments. The Court found this created an irrevocable agency coupled with interest, not a simple trustee relationship. NASUTRA's subsequent claim for refund violated the good faith covenant in contracts. The decision validates the application of proceeds to loan obligations under contractual authorization, emphasizing the binding nature of commercial agreements between parties even when government entities are involved.