Commercial Law, 2013 Bar — Question MC-XIV

MULTIPLE CHOICE

Muebles Classico, Inc. (MC), a Manila-based furniture shop, purchased hardwood lumber from Surigao Timber, Inc. (STI), a Mindanao-based logging company. MC was to pay STI the amount of P5.0 million for 50 tons of lumber. To pay STI, MC opened a letter of credit with Banco de Plata (BDP). BDP duly informed STI of the opening of a letter of credit in its favor. In the meantime, MC — which had been undergoing financial reverses — filed a petition for corporate rehabilitation. The rehabilitation court issued a Stay Order to stay the enforcement of all claims against MC. After shipping the lumber, STI went to BDP, presented the shipping documents, and demanded payment of the letter of credit opened in its favor. MC, on the other hand, informed the bank of the Stay Order and instructed it to deny payment to STI because of the Stay Order. BDP comes to you for advice. Your best advice is to ___. (1%) A) grant STI's claim. Under the "Independence Principle," the bank deals only with the documents and not the underlying circumstances; hence, the presentation of the letter of credit is sufficient; B) deny STI's claim. The Stay Order covers all claims against the debtor and binds all its creditors. The letter of credit is a claim against the debtor that is covered by the Stay Order; C) grant STI's claim. The letter of credit is not a claim against the debtor under rehabilitation, but against the bank which has assumed a solidary obligation; D) deny STI's claim. If the bank disregards the Stay Order, it may be subject to contempt by the rehabilitation court. STI should file its claim with the rehabilitation court; E) file an action for interpleader to resolve the parties' competing claims.

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