RAMON L. ABAD V. HON.

COURT OF APPEALS &

THE PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK
G.R. No. 42735, January 22, 1990

FACTS: The Philippine Commercial and Industrial Bank (PCIB) granted TOMCO, Inc. a
domestic letter of credit for Php80,000.00 in favor of its supplier, Oregon Industries, to pay
for one Skagit Yarder with accessories. After making a marginal deposit of Php28,000.00,
TOMCO signed and delivered to PCIB a trust receipt with the obligation to hold the
merchandise for PCIB, and a right to sell the same for cash and to turn over the proceeds to
the latter. Meanwhile, petitioner Abad signed an undertaking at the back of the trust receipt
promising to pay the obligation jointly and severally with TOMCO. As no payment was made
to PCIB by either TOMCO or its surety Abad on the letter of credit except for TOMCO’s
marginal deposit, PCIB sued TOMCO and Abad. While TOMCO did not deny its liability under
the letter of credit, it argued that the marginal deposit should have been deducted from its
principal obligation and the bank should have computed the interest, bank charges and
attorney’s fees on the balance. The trial court rendered judgment in favor of PCIB which was
affirmed by the Court of Appeals in toto. Abad contends that in not deducting the marginal
deposit from TOMCO’s indebtedness, PCIB unjustly enriched itself at the expense of TOMCO
and its surety.

ISSUE: Whether or not TOMCO’s marginal deposit with PCIB should first be deducted from its
principal indebtedness before computing the interest and other charges due

HELD: Yes. A trust receipt is a security agreement pursuant to which a bank acquires a
“security interest” in the goods. Under a letter of credit-trust receipt setup, a bank extends a
loan covered by the letter of credit, with the trust receipt as a security for the loan. The
marginal deposit requirement is a collateral security given by the debtor and is supposed to
be returned to him upon compliance with his secured obligation. Consequently, the bank pays
no interest on the marginal deposit. It would be erroneous to compute interest and other
charges on the face value of the letter of credit which the bank issued, without first crediting
or setting off the marginal deposit which the importer paid to the bank. Requiring the
importer to pay interest on the entire letter of credit without deducting the marginal deposit
would be a clear case of unjust enrichment by the bank.