Marphil Export Corporation v. Allied Banking Corporation Substituted By Philippine National Bank

Summary

This commercial banking dispute arose from export financing arrangements between Marphil Export Corporation and Allied Banking Corporation. When letters of credit L/C No. 21970 for cashew nut exports to Hong Kong was dishonored due to document discrepancies, Allied Bank debited Marphil's account for P1,913,763.45. The Supreme Court held that Allied Bank, as negotiating bank rather than confirming bank, had valid right to debit the account based on independent Letter Agreement obligating Marphil to reimburse dishonored drafts. The Court applied legal compensation principles, declared certain promissory notes void or paid, but maintained Marphil's liability for the reversed credit amount. The Court also dissolved an improperly issued writ of preliminary attachment against the surety for insufficient fraud allegations, while ruling no forum shopping occurred due to different parties and causes of action. The decision clarifies bank obligations in letter of credit transactions and emphasizes strict requirements for provisional remedies.