Richardson Steel Corporation v. Union Bank of the Philippines

Summary

This case involves a contractual dispute between corporate borrowers and Union Bank regarding the interpretation and performance of credit line agreements. Petitioner corporations sought working capital financing but UBP automatically applied the credit line proceeds to service interest on previously restructured loans. The Supreme Court held that the credit line agreements and restructuring agreements are independent contracts with distinct purposes, rejecting the Court of Appeals' complementary-contracts doctrine. The Court ruled that UBP breached its obligation by not releasing funds for working capital as agreed, making the foreclosure proceedings premature. The decision emphasizes strict interpretation of banking contracts according to their express terms and upholds the principle that banks must comply with their contractual obligations in good faith, awarding exemplary damages to set an example for banking institutions.