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Philippine Virginia Tobacco Administration v Judge Delos Santos G.R. No.

L-27829 August 19, 1988

Facts: Timoteo Sevilla, proprietor and General Manager of the Philippine Associated Resources (PAR)
was awarded in a public bidding the right to import Virginia leaf tobacco. Subsequently, the Philippine
Virginia Tobacco Administration (PVTA) and Sevilla entered into a contract for the importation of 85
million kilos of Virginia leaf tobacco and a counterpart exportation of 2.53 million kilos of tobacco and
5.1 million kilos of farmer’s and tobacco at P3.00 a kilo. In accordance with their contract Sevilla
purchased from PVZTA and exported 2,101.470 kilos of tobacco, paying the PVTA the sum of
P2,482,938.50 and leaving a balance of P3,713,908.91. Before respondent Sevilla could import the
counterpart blending Virginia tobacco, amounting to 525,560 kilos, Republic Act No. 4155 was passed
and took effect on June 20, 1 964, authorizing the PVTA to grant import privileges at the ratio of 4 to 1
instead of 9 to 1 and to dispose of all its tobacco stock at the best price available.

Because of the prevailing export or world market price under which Sevilla will be exporting at a loss, the
agreement was further amended to require Sevilla would open an irrevocable letter of credit with the
Prudential Bank and Trust Co. (Prudential) in favor of the PVTA to secure the payment of said balance,
drawable upon the release from the Bureau of Customs of the imported Virginia blending tobacco. While
Sevilla was trying to negotiate the reduction of the procurement cost of the 2,101.479 kilos of PVTA
tobacco already exported which attempt was denied by PVTA and also by the Office of the President.
PVTA attempted to collect from the letter of Credit with Prudential. Sevilla filed an injunction for the
release of funds with Prudential in the sala of Judge Delos Santos. Judge Delos Santos issued the
injunction order and in a subsequent petition, ordered the funds of the letter of credit released to
Sevilla.

Issue: Whether or not Judge Sevilla acted with grave abuse of discretion in releasing the funds to the
applicant of the letter of credit.

Held: Judge Delos Santos violated the irrevocability of the letter of credit issued by respondent Bank in
favor of petitioner. An irrevocable letter of credit cannot, during its lifetime, be cancelled or modified
Without the express permission of the beneficiary. Consequently, if the finding the trial on the merits is
that respondent Sevilla has ailieged unpaid balance due the petitioner, such unpaid obligation would be
unsecured.