In case the buyer was not able to pay its obligation under the letter of credit, can the bank take possession over the goods covered by the said letter of credit?
No. The opening of a Letter of Credit did not vest ownership of the goods in the bank in the absence of a trust receipt agreement. A letter of credit is a mere financial device developed by merchants as a convenient and relatively safe mode of dealing with the sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying. (Transfield Philippines, Inc. v. Luzon Hydro Corporation, G.R. No. 146717, Nov. 22, 2004)