SECOND DIVISION
[G.R. NO.
117913.
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
[G.R. NO.
117914.
MICO METALS CORPORATION, petitioner, vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
D E C I S I O N
DE LEON, JR., J:
Before us is the joint and consolidated petition for review of
the Decision[1] dated June 15, 1994 of the Court of Appeals
in CA-G.R. CV No. 27480 entitled, “Philippine Bank of Communications vs. Mico Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co,” which
reversed the decision of the Regional Trial Court (RTC) of Manila, Branch 55
dismissing the complaint for a sum of money filed by private respondent
Philippine Bank of Communications against herein petitioners, Mico Metals Corporation (MICO, for brevity), Charles Lee,
Chua Siok Suy,[2] Mariano Sio,
Alfonso Yap, Richard Velasco and Alfonso Co.[3] The dispositive portion of the said Decision of the Court of Appeals, reads:
WHEREFORE, the decision of the Regional Trial Court is hereby reversed and in lieu thereof, a new one is entered:
a) Ordering the
defendants-appellees jointly and severally to pay
plaintiff PBCom the sum of Five million four hundred
fifty-one thousand six hundred sixty-three pesos and ninety centavos (P5,451,663.90)
representing defendants-appellees unpaid obligations
arising from ordinary loans granted by the plaintiff plus legal interest until
fully paid.
b) Ordering defendants-appellees jointly and severally to pay PBCom
the sum of Four hundred sixty-one thousand six hundred pesos and sixty-six
centavos (P46 1,600.66) representing defendants-appellees
unpaid obligations arising from their letters of credit and trust receipt
transactions with plaintiff PBCom plus legal interest
until fully paid.
c) Ordering defendants-appellees jointly and severally to pay PBCom
the sum of P50,000.00 as attorney’s fees.
No pronouncement as to costs.
The facts of the case are as follows:
On March 2, 1979, Charles Lee, as President of MICO wrote private
respondent Philippine Bank of Communications (PBCom)
requesting for a grant of a discounting loan/credit line in the sum of Three
Million Pesos (P3,000,000.00) for the purpose of carrying out MICO’s line of business as well as to maintain its volume
of business.
On the same day, Charles Lee requested for another discounting
loan/credit line of Three Million Pesos (P3,000,000.00)
from PBCom for the purpose of opening letters of
credit and trust receipts.
In connection with the requests for discounting loan/credit lines, PBCom was furnished by MICO the following resolution which was adopted unanimously by MICO’s Board of Directors:
RESOLVED, that the President, Mr. Charles Lee, and the
Vice-President and General Manager, Mr. Mariano A. Sio,
singly or jointly, be and they are duly authorized and empowered for and in
behalf of this Corporation to apply for, negotiate and secure the approval of
commercial loans and other banking facilities and accommodations, such as, but
not limited to discount loans, letters of credit, trust receipts, lines for
marginal deposits on foreign and domestic letters of credit, negotiate
out-of-town checks, etc. from the Philippine Bank of Communications, 216 Juan
Luna, Manila in such sums as they shall deem advantageous, the principal of all
of which shall not exceed the total amount of TEN MILLION PESOS (P10,000,000.00),
Philippine Currency, plus any interests that may be agreed upon with said Bank
in such loans and other credit lines of the same kind and such further terms
and conditions as may, upon granting of said loans and other banking
facilities, be imposed by the Bank; and to make, execute, sign and deliver any
contracts of mortgage, pledge or sale of one, some or all of the properties of
the Company, or any other agreements or documents of whatever nature or kind,
including the signing, indorsing, cashing, negotiation and execution of
promissory notes, checks, money orders or other negotiable instruments, which
may be necessary and proper in connection with said loans and other banking
facilities, or with their amendments, renewals and extensions of payment of the
whole or any part thereof.[4]
On P1,000,000.00) from PBCom. Upon
maturity of the loan, MICO caused the same to be renewed, the last renewal of
which was made on
Another loan of One Million Pesos (P1,000,000.00)
was availed of by MICO from PBCom which was likewise
later on renewed, the last renewal of which was made on P3,000,000.00) discounting loan/credit line with PBCom, MICO availed of another loan from PBCom in the sum of One Million Pesos (P1,000,000.00)
on
As security for the loans, MICO through its Vice-President and
General Manager, Mariano Sio, executed on
On March 26, 1979 Charles Lee, Chua Siok
Suy, Mariano Sio, Alfonso
Yap and Richard Velasco, in their personal capacities executed a Surety
Agreement[8] in favor of PBCom
whereby the petitioners jointly and severally, guaranteed the prompt payment on
due dates or at maturity of overdrafts, promissory notes, discounts, drafts,
letters of credit, bills of exchange, trust receipts, and other obligations of
every kind and nature, for which MICO may be held accountable by PBCom. It was provided, however, that the liability of the
sureties shall not at any one time exceed the principal amount of Three Million
Pesos (P3,000,000.00) plus interest, costs, losses, charges and expenses
including attorney’s fees incurred by PBCom in
connection therewith.
On P4,000,000.00). The loan was intended
for the expansion and modernization of the company’s machineries. Upon approval
of the said application for loan, MICO availed of the additional loan of Four
Million Pesos (P4,000,000.00) as evidenced by
Promissory Note TA No. 094.[9]
As per agreement, the proceeds of all the loan availments were credited to MICO’s
current checking account with PBCom. To induce the PBCom to increase the credit line of MICO, Charles Lee,
Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co
(hereinafter referred to as petitioners-sureties), executed another surety
agreement[10] in favor of PBCom
on July 28, 1980, whereby they jointly and severally guaranteed the prompt
payment on due dates or at maturity of overdrafts, promissory notes, discounts,
drafts, letters of credit, bills of exchange, trust receipts and all other
obligations of any kind and nature for which MICO may be held accountable by PBCom. It was provided, however, that their liability shall
not at any one time exceed the sum of Seven Million Five Hundred Thousand Pesos
(P7,500,000.00) including interest, costs, charges, expenses and
attorney’s fees incurred by MICO in connection therewith.
On
RESOLVED, AS IT IS HEREBY RESOLVED, That Mr. Chua Siok Suy be, as he is hereby
authorized and empowered, on behalf of MICO METALS CORPORATION from time to
time, to borrow money and obtain other credit facilities, with or without
security, from the PHILIPPINE BANK OF COMMUNICATIONS in such amount(s) and
under such terms and conditions as he may determine, with full power and
authority to execute, sign and deliver such contracts, instruments and papers
in connection therewith, including real estate and chattel mortgages, pledges
and assignments over the properties of the Corporation; and to renew and/or
extend and/or roll-over and/or reavail of the credit
facilities granted thereunder, either for lesser or
for greater amount(s), the intention being that such credit facilities and all
securities of whatever kind given as collaterals therefor
shall be a continuing security.
RESOLVED FURTHER, That said bank is hereby authorized, empowered
and directed to rely on the authority given hereunder, the same to continue in
full force and effect until written notice of its revocation shall be received
by said Bank.[11]
On P348,000.00).[12] The corresponding irrevocable letter of
credit was approved and opened under LC No. L-16060.[13] Thereafter, the domestic letter of credit
was negotiated and accepted by MICO as evidenced by the corresponding bank
draft issued for the purpose.[14] After the supplier of the merchandise was
paid, a trust receipt upon MICO’s own initiative, was executed in favor of PBCom.[15]
On P290,000.00).[16] The corresponding irrevocable letter of
credit was issued on
On November 10, 1981, MICO applied for authority to open a
foreign letter of credit in favor of Ta Jih
Enterprises Co., Ltd.,[19] and thus, the corresponding letter of credit[20] was then issued by PBCom
with a cable sent to the beneficiary, Ta Jih
Enterprises Co., Ltd. advising that said beneficiary may draw funds from the
account of PBCom in its correspondent bank’s New York
Office.[21] PBCom also
informed its corresponding bank in
On
In all the transactions involving foreign letters of credit, PBCom turned over to MICO the necessary documents such as
the bills of lading and commercial invoices to enable the latter to withdraw
the goods from the
On P377,000.00)
covered by Promissory Note BA No. 7458.[29]
Upon maturity of all credit availments
obtained by MICO from PBCom, the latter made a demand
for payment.[30] For failure of petitioner MICO to pay the
obligations incurred despite repeated demands, private respondent PBCom extrajudicially foreclosed MICO’s real estate mortgage and sold the said mortgaged
properties in a public auction sale held on P3,000,000.00) to the expenses of the foreclosure, interest
and charges and part of the principal of the loans, leaving an unpaid balance
of Five Million Four Hundred Forty-One Thousand Six Hundred Sixty-Three Pesos
and Ninety Centavos (P5,441,663.90) exclusive of penalty and interest
charges. Aside from the unpaid balance of Five Million Four Hundred Forty-One
Thousand Six Hundred Sixty-Three Pesos and Ninety Centavos (P5,441,663.90),
MICO likewise had another standing obligation in the sum of Four Hundred
Sixty-One Thousand Six Hundred Pesos and Six Centavos (P461,600.06)
representing its trust receipts liabilities to private respondent. PBCom then demanded
the settlement of the aforesaid obligations from herein petitioners-sureties
who, however, refused to acknowledge their obligations to PBCom
under the surety agreements. Hence, PBCom filed a
complaint with prayer for writ of preliminary attachment before the Regional
Trial Court of Manila, which was raffled to Branch 55, alleging that MICO was
no longer in operation and had no properties to answer for its obligations. PBCom further alleged that petitioner Charles Lee has
disposed or concealed his properties with intent to defraud his creditors.
Except for MICO and Charles Lee, the sheriff of the RTC failed to serve the
summons on herein petitioners-sureties since they were all reportedly abroad at
the time. An alias summons was later issued but the sheriff was not able to
serve the same to petitioners Alfonso Co and Chua Siok
Suy who was already sickly at the time and reportedly
in
Petitioners (MICO and herein petitioners-sureties) denied all the allegations of the complaint filed by respondent PBCom, and alleged that: a) MICO was not granted the alleged loans and neither did it receive the proceeds of the aforesaid loans; b) Chua Siok Suy was never granted any valid Board Resolution to sign for and in behalf of MICO; c) PBCom acted in bad faith in granting the alleged loans and in releasing the proceeds thereof; d) petitioners were never advised of the alleged grant of loans and the subsequent releases therefor, if any; e) since no loan was ever released to or received by MICO, the corresponding real estate mortgage and the surety agreements signed concededly by the petitioners-sureties are null and void.
The trial court gave credence to the testimonies of herein
petitioners and dismissed the complaint filed by PBCom.
The trial court likewise declared the real estate mortgage and its foreclosure
null and void. In ruling for herein petitioners, the trial court said that PBCom failed to adequately prove that the proceeds of the
loans were ever delivered to MICO. The trial court pointed out, among others,
that while PBCom claimed that the proceeds of the
Four Million Pesos (P4,000,000.00) loan covered
by promissory note TA 094 were deposited to the current account of petitioner
MICO, PBCom failed to produce the ledger account
showing such deposit. The trial court added that while PBCom
may have loaned to MICO the other sums of Three Hundred Forty-Eight Thousand
Pesos (P348,000.00) and Two Hundred Ninety
Thousand Pesos (P290,000.00), no proof has been adduced as to the
existence of the goods covered and paid by the said amounts. Hence, inasmuch as
no consideration ever passed from PBCom to MICO, all
the documents involved therein, such as the promissory notes, real estate
mortgage including the surety agreements were all void or nonexistent for lack
of cause or consideration. The trial court said that the lack of proof as
regards the existence of the merchandise covered by the letters of credit
bolstered the claim of herein petitioners that no purchases of the goods were
really made and that the letters of credit transactions were simply resorted to
by the PBCom and Chua Siok Suy to accommodate the latter in his financial
requirements.
The Court of Appeals reversed the ruling of the trial court,
saying that the latter committed an erroneous application and appreciation of
the rules governing the burden of proof. Citing Section 24 of the Negotiable
Instruments Law which provides that “Every negotiable instrument is deemed prima
facie to have been issued for valuable consideration and every person whose
signature appears thereon to have become a party thereto for value”, the Court
of Appeals said that while the subject promissory notes and letters of credit
issued by the PBCom made no mention of delivery of
cash, it is presumed that said negotiable instruments were issued for valuable
consideration. The Court of Appeals also cited the case of Gatmaitan
vs. Court of Appeals[31]
which holds that "there is
a presumption that an instrument sets out the true agreement of the parties
thereto and that it was executed for valuable consideration”. The appellate
court noted and found that a notarized Certification was issued by MICO’s corporate secretary, P.B. Barrera, that Chua Siok Suy, was duly authorized by the Board of Directors of MICO to
borrow money and obtain credit facilities from PBCom.
Petitioners filed a motion for reconsideration of the challenged
decision of the Court of Appeals but this was denied in a Resolution dated
Petitioners contend that there was no proof that the proceeds of the loans or the goods under the trust receipts were ever delivered to and received by MICO. But the record shows otherwise. Petitioners-sureties further contend that assuming that there was delivery by PBCom of the proceeds of the loans and the goods, the contracts were executed by an unauthorized person, more specifically Chua Siok Suy who acted fraudulently and in collusion with PBCom to defraud MICO.
The pertinent issues raised in the consolidated cases at bar are: a) whether or not the proceeds of the loans and letters of credit transactions were ever delivered to MICO, and b) whether or not the individual petitioners, as sureties, may be held liable under the two (2) Surety Agreements executed on March 26, 1979 and July 28, 1980.
In civil cases, the party having the burden of proof must
establish his case by preponderance of evidence.[33] Preponderance of evidence means evidence
which is more convincing to the court as worthy of belief than that which is
offered in opposition thereto. Petitioners contend that the alleged promissory
notes, trust receipts and surety agreements attached to the complaint filed by PBCom did not ripen into valid and binding contracts
inasmuch as there is no evidence of the delivery of money or loan proceeds to
MICO or to any of the petitioners-sureties. Petitioners claim that under normal
banking practice, borrowers are required to accomplish promissory notes in
blank even before the grant of the loans applied for and such documents become
valid written contracts only when the loans are actually released to the
borrower.
We are not convinced.
During the trial of an action, the party who has the burden of proof upon an issue may be aided in establishing his claim or defense by the operation of a presumption, or, expressed differently, by the probative value which the law attaches to a specific state of facts. A presumption may operate against his adversary who has not introduced proof to rebut the presumption. The effect of a legal presumption upon a burden of proof is to create the necessity of presenting evidence to meet the legal presumption or the prima facie case created thereby, and which if no proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is, but by the presumption the one who has that burden is relieved for the time being from introducing evidence in support of his averment, because the presumption stands in the place of evidence unless rebutted.
Under Section 3, Rule 131 of the Rules of Court the following presumptions, among others, are satisfactory if uncontradicted: a) That there was a sufficient consideration for a contract and b) That a negotiable instrument was given or indorsed for sufficient consideration. As observed by the Court of Appeals, a similar presumption is found in Section 24 of the Negotiable Instruments Law which provides that every negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose signature appears thereon to have become a party for value. Negotiable instruments which are meant to be substitutes for money, must conform to the following requisites to be considered as such a) it must be in writing; b) it must be signed by the maker or drawer; c) it must contain an unconditional promise or order to pay a sum certain in money; d) it must be payable on demand or at a fixed or determinable future time; e) it must be payable to order or bearer; and f) where it is a bill of exchange, the drawee must be named or otherwise indicated with reasonable certainty. Negotiable instruments include promissory notes, bills of exchange and checks. Letters of credit and trust receipts are, however, not negotiable instruments. But drafts issued in connection with letters of credit are negotiable instruments.
Private respondent PBCom presented the following documentary evidence to prove petitioners’ credit availments and liabilities:
1) Promissory Note No.
BNA —26218 dated May 21, 1982 in the sum of P1,000,000.00
executed by MICO in favor of PBCom.
2) Promissory Note No.
BNA —26219 dated May 21, 1982 in the sum of P1,000,000.00
executed by MICO in favor of PBCom.
3) Promissory Note No. BNA
—26253 dated May 25, 1982 in the sum of P1,000,000.00
executed by MICO in favor of PBCom.
4) Promissory Note No.
BNA —7458 dated May 21, 1982 in the sum of P377,000.00
executed by MICO in favor of PBCom.
5) Promissory Note No. TA
— 094 dated P4,000.000.00 executed by MICO in
favor of PBCom.
6) Irrevocable letter of
credit No. L-16060 dated July 2,1981 issued in favor
of
7) Draft dated July 2,
1981 in the sum of P348,000.00 issued by Perez Battery Center,
beneficiary of irrevocable Letter of Credit No. No. L-16060 and accepted by
MICO Metals corporation.
8) Letter dated
9) Trust receipt dated
July 2, 1981 executed by MICO in favor of PBCom
covering the merchandise purchased under Letter of Credit No. 16060.
10) Irrevocable
letter of credit No. L-16334 dated September 22, 1981 issued in favor of Perez
Battery Center for account of MICO Metals Corp.
11) Draft dated
P290,000.00 issued by
12) Letter
dated
13) Trust Receipt
dated
14) Irrevocable
Letter of Credit no. 61873 dated
15) Trust
Receipt dated December 15, 9181 executed by MICO in favor of PBCom showing that possession of the merchandise covered by
Irrevocable Letter of Credit no. 61873 was released by PBCom
to MICO.
16) Letters
dated P7,500,000.00.
17) Letter
dated P4,000,000.00.
18) Board
resolution dated
19) Duly
notarized Deed of Mortgage dated
20) Duly
notarized Surety Agreement dated March 26, 1979 executed by herein petitioners
Charles Lee, Mariano Sio, Alfonso Yap, Richard
Velasco and Chua Siok Suy
in favor of PBCom.
21) Duly
notarized Surety Agreement dated July 28, 1980 executed by herein petitioners
Charles Lee, Mariano Sio, Alfonso Yap, Richard
Velasco and Chua Siok Suy
in favor of PBCom.
22) Duly
notarized certification dated July 28, 1980 issued by MICO ‘s corporate
secretary, Mr. P.B. Barrera, attesting to the adoption of a board resolution
authorizing Chua Siok Suy
to sign, for and in behalf of MICO, all the necessary documents including
contracts, loan instruments and mortgages relative to the obtention
of various credit facilities from PBCom.
The above-cited documents presented have not merely created a prima facie case but have actually proved the solidary obligation of MICO and the petitioners, as sureties of MICO, in favor of respondent PBCom. While the presumption found under the Negotiable Instruments Law may not necessarily be applicable to trust receipts and letters of credit, the presumption that the drafts drawn in connection with the letters of credit have sufficient consideration. Under Section 3(r), Rule 131 of the Rules of Court there is also a presumption that sufficient consideration was given in a contract. Hence, petitioners should have presented credible evidence to rebut that presumption as well as the evidence presented by private respondent PBCom. The letters of credit show that the pertinent materials/merchandise have been received by MICO. The drafts signed by the beneficiary/suppliers in connection with the corresponding letters of credit proved that said suppliers were paid by PBCom for the account of MICO. On the other hand, aside from their bare denials petitioners did not present sufficient and competent evidence to rebut the evidence of private respondent PBCom. Petitioner MICO did not proffer a single piece of evidence, apart from its bare denials, to support its allegation that the loan transactions, real estate mortgage, letters of credit and trust receipts were issued allegedly without any consideration.
Petitioners-sureties, for their part, presented the By-Laws[34]
of Mico
Metals Corporation (MICO) to prove that only the president of MICO is
authorized to borrow money, arrange letters of credit, execute trust receipts,
and promissory notes and consequently, that the loan transactions, letters of
credit, promissory notes and trust receipts, most of which were executed by
Chua Siok Suy in
representation of MICO were not allegedly authorized and hence, are not binding
upon MICO. A perusal of the By-Laws of MICO, however, shows that the power to
borrow money for the company and issue mortgages, bonds, deeds of trust and
negotiable instruments or securities, secured by mortgages or pledges of
property belonging to the company is not confined solely to the president of
the corporation. The Board of Directors of MICO can also borrow money, arrange
letters of credit, execute trust receipts and
promissory notes on behalf of the corporation.[35] Significantly, this power of the Board of
Directors according to the by-laws of MICO, may be
delegated to any of its standing committee, officer or agent.[36] Hence, PBCom had
every right to rely on the Certification issued by MICO's
corporate secretary, P.B. Barrera, that Chua Siok Suy was duly authorized by its Board of Directors to borrow
money and obtain credit facilities in behalf of MICO from PBCom.
Petitioners-sureties also presented a letter of their counsel
dated
In addition to the foregoing, MICO and petitioners-sureties cited the decision of the trial court which stated that there was no proof that the proceeds of the loans were ever delivered to MICO. Although the private respondent’s witness, Mr. Gardiola, testified that the proceeds of the loans were deposited in MICO’s current account with PBCom, his testimony was allegedly not supported by any bank record, note or memorandum. A careful scrutiny of the record including the transcript of stenographic notes reveals, however, that although private respondent PBCom was willing to produce the corresponding account ledger showing that the proceeds of the loans were credited to MICO’s current account with PBCom, MICO in fact vigorously objected to the presentation of said document. That point is shown in the testimony of PBCom’s witness, Gardiola, thus:
Q: Now, all of these promissory note Exhibits “I” and “J” which as you have said previously (sic) availed originally by defendant Mico Metals Corp. sometime in 1979, my question now is, do you know what happened to the proceeds of the original availment?
A: Well, it was credited to the current account of Mico Metals Corp.
Q: Why did it was credited to the proceeds to the account of Mico Metals Corp? (sic)
A: Well, that is our understanding.
ATTY. DURAN:
Your honor, may we be given a chance to object, the best evidence is the so-called current account...
COURT:
Can you produce the ledger account?
A: Yes, Your Honor, I will bring.
COURT:
The ledger or record of the current account of Mico Metals Corp.
A: Yes, Your Honor.
ATTY. ACEJAS:
Your Honor, these are a confidential record, and they might not be disclosed without the consent of the person concerned. (sic)
ATTY.
Well, you are the one who is asking that.
ATTY. DURAN:
Your Honor, I’m precisely want to show for the ... (sic)
COURT:
But the amount covered by the current account of defendant Mico Metals Corp. is the subject matter of this case.
xxx xxx xxx
Q: Are those availments were release? (sic)
A: Yes, Your Honor, to the defendant corporation.
Q: By what means?
A: By the credit to their current account.
ATTY. ACEJAS:
We object to that, your Honor, because the disclose is the secrecy of the bank deposit. (sic)
xxx xxx xxx
Q: Before the recess Mr. Gardiola, you stated that the proceeds of the three (3) promissory notes were credited to the accounts of Mico Metals Corporation, now do you know what kind of current account was that which you are referring to?
ATTY. ACEJAS:
Objection your Honor, that is the disclose
of the deposit of defendant Mico Metals Corporation
and it cannot disclosed without the authority of the depositor. (sic)[37]
That proceeds of the loans which were originally availed of in
1979 were delivered to MICO is bolstered by the fact that more than a year
later, specifically on P4,000,000.00)
from PBCom. The fact that MICO was requesting for an
additional loan implied that it has already availed of earlier loans from PBCom.
Petitioners allege that PBCom presented no evidence that it remitted payments to cover the domestic and foreign letters of credit. Petitioners placed much reliance on the erroneous decision of the trial court which stated that private respondent PBCom allegedly failed to prove that it actually made payments under the letters of credit since the bank drafts presented as evidence show that they were made in favor of the Bank of Taiwan and First Commercial Bank.
Petitioners’ allegations are untenable.
Modern letters of credit are usually not made between natural
persons. They involve bank to bank transactions. Historically, the letter of
credit was developed to facilitate the sale of goods between, distant and
unfamiliar buyers and sellers. It was an arrangement under which a bank, whose
credit was acceptable to the seller, would at the instance of the buyer agree
to pay drafts drawn on it by the seller, provided that certain documents are presented
such as bills of lading accompanied the corresponding drafts. Expansion in the
use of letters of credit was a natural development in commercial banking.[38] Parties to a commercial letter of credit
include (a) the buyer or the importer, (b) the seller, also referred to as
beneficiary, (c) the opening bank which is usually the buyer’s bank which
actually issues the letter of credit, (d) the notifying bank which is the
correspondent bank of the opening bank through which it advises the beneficiary
of the letter of credit, (e) negotiating bank which is usually any bank in the
city of the beneficiary. The services of the notifying bank must always be
utilized if the letter of credit is to be advised to the beneficiary through
cable, (f) the paying bank which buys or discounts the drafts contemplated by
the letter of credit, if such draft is to be drawn on the opening bank or on
another designated bank not in the city of the beneficiary. As a rule, whenever
the facilities of the opening bank are used, the beneficiary is supposed to
present his drafts to the notifying bank for negotiation and (g) the confirming bank which, upon the request of the
beneficiary, confirms the letter of credit issued by the opening bank.
From the foregoing, it is clear that letters of credit, being
usually bank to bank transactions, involve more than just one bank.
Consequently, there is nothing unusual in the fact that the drafts presented in
evidence by respondent bank were not made payable to PBCom.
As explained by respondent bank, a draft was drawn on the Bank of Taiwan by Ta Jih Enterprises Co., Ltd. of
Petitioners further aver that MICO never requested that legal possession of the merchandise be transferred to PBCom by way of trust receipts. Petitioners insist that assuming that MICO transferred possession of the merchandise to PBCom by way of trust receipts, the same would be illegal since PBCom, being a banking institution, is not authorized by law to engage in the business of importing and selling goods.
A trust receipt is considered as a security transaction intended
to aid in financing importers and retail dealers who do not have sufficient
funds or resources to finance the importation or purchase of merchandise, and
who may not be able to acquire credit except through utilization, as collateral
of the merchandise imported or purchased.[39] A trust receipt, therefor,
is a document of security pursuant to which a bank acquires a “security
interest” in the goods under trust receipt. Under a letter of credit-trust
receipt arrangement, a bank extends a loan covered by a letter of credit, with
the trust receipt as a security for the loan. The transaction involves a loan
feature represented by a letter of credit, and a security feature which is in
the covering trust receipt which secures an indebtedness.
Petitioners’ averments with regard to the second issue are no less incredulous. Petitioners’ contend that the letters of credit, surety agreements and loan transactions did not ripen into valid and binding contracts since no part of the proceeds of the loan transactions were delivered to MICO or to any of the petitioners-sureties. Petitioners-sureties allege that Chua Siok Suy was the beneficiary of the proceeds of the loans and that the latter made them sign the surety agreements in blank. Thus, they maintain that they should not be held accountable for any liability that might arise therefrom.
It has not escaped our notice that it was petitioner-surety
Charles Lee, as president of MICO Metals Corporation, who first requested for a
discounting loan of Three Million Pesos (P3,000,000.00)
from PBCom as evidenced by his letter dated P3,000,000.00).[41] Still, on the same day, Charles Lee again as
President of MICO, wrote another letter to PBCOM requesting for a financing
line in the sum of One Million Five Hundred Thousand Pesos (P1,500,000.00)
to be used exclusively as marginal deposit for the opening of MICO’s foreign and local letters of credit with PBCom.[42] More than a year later, it was also Charles
Lee, again in his capacity as president of MICO, who asked for an additional
loan in the sum of Four Million Pesos (P4,000,000.00).
The claim therefore of petitioners that it was Chua Siok
Suy, in connivance with the respondent PBCom, who applied for and obtained the loan transactions
and letters of credit strains credulity considering that even the Deed of the
Real Estate Mortgage in favor of PBCom was executed
by petitioner-surety Mariano Sio in his capacity as
general manager of MICO[43] to secure the loan accommodations obtained
by MICO from PBCom.
Petitioners-sureties allege that they were made to sign the
surety agreements in blank by Chua Siok Suy. Petitioner Alfonso Yap, the corporate treasurer, for
his part testified that he signed booklets of checks, surety agreements and
promissory notes in blank; that he signed the documents in blank despite his misgivings
since Chua Siok Suy assured
him that the transaction can easily be taken cared of since Chua Siok Suy personally knew the
Chairman of the Board of PBCom; that he was not
receiving salary as treasurer of Mico Metals and
since Chua Siok Suy had a direct
hand in the management of Malayan Sales Corporation, of which Yap is an
employee, he (Yap) signed the documents in blank as consideration for his
continued employment in Malayan Sales Corporation. Petitioner Antonio Co
testified that he worked as office manager for MICO from 1978-1982. As office
manager, he was the one in charge of transacting business like purchasing,
selling and paying the salary of the employees. He was also in charge of the
handling of documents pertaining to surety agreements, trust receipts and
promissory notes;[44] that when he first joined MICO Metals
Corporation, he was able to read the by-laws of the corporation and he came to
know that only the chairman and the president can borrow money in behalf of the
corporation; that Chua Siok Suy
once called him up and told him to secure an invoice so that a credit line can
be opened in the bank with a local letter of credit; that when the invoice was
secured, he (Co) brought it together with the application for a credit line to
Chua Siok Suy, and that he
questioned the authority of Chua Siok Suy pointing out that he (Co) is not empowered to sign the
document inasmuch as only the latter, as president, was authorized to do so.
However, Chua Siok Suy
allegedly just said that he had already talked with the Chairman of the Board
of PBCom; and that Chua Siok
Suy reportedly said that he needed the money to
finance a project that he had with the P348,000.00); and
that a certain Moises Rosete
was authorized to claim the check covering the Three Hundred Forty-Eight
Thousand Pesos (P348,000.00) from PBCom; and
that after claiming the check Rosete brought it to
Perez Battery Center for indorsement after which the
same was deposited to the personal account of Chua Siok
Suy.[45]
We consider as incredible and unacceptable the claim of petitioners-sureties that the Board of Directors of MICO was so careless about the business affairs of MICO as well as about their own personal reputation and money that they simply relied on the say so of Chua Siok Suy on matters involving millions of pesos. Under Section 3 (d), Rule 131 of the Rules of Court, it is presumed that a person takes ordinary care of his concerns. Hence, the natural presumption is that one does not sign a document without first informing himself of its contents and consequences. Said presumption acquires greater force in the case at bar where not only one but several documents were executed at different times and at different places by the petitioner sureties and Chua Siok Suy as president of MICO.
MICO and herein petitioners-sureties insist that Chua Siok Suy was not duly authorized to negotiate for loans in behalf of MICO from PBCom. Petitioners’ allegation, however, is belied by the July 28, 1980 Certification issued by the corporate secretary of PBCom, Atty. P.B. Barrera, that MICO's Board of Directors gave Chua Siok Suy full authority to negotiate for loans in behalf of MICO with PBCom. In fact, the Certification even provided that Chua Siok Suy’s authority continues until and unless PBCom is notified in writing of the withdrawal thereof by the said Board. Notably, petitioners failed to contest the genuineness of the said Certification which is notarized and to show any written proof of any alleged withdrawal of the said authority given by the Board of Directors to Chua Siok Suy to negotiate for loans in behalf of MICO.
There was no need for PBCom to personally inform the petitioners-sureties individually about the terms of the loans, letters of credit and other loan documents. The petitioners-sureties themselves happen to comprise the Board of Directors of MICO, which gave full authority to Chua Siok Suy to negotiate for loans in behalf of MICO. Notice to MICO’s authorized representative, Chua Siok Suy, was notice to MICO. The Certification issued by PBCom’s corporate secretary, Atty. P.B. Barrera, indicated that Chua Siok Suy had full authority to negotiate and sign the necessary documents, in behalf of MICO for loans from PBCom. Respondent PBCom therefore had the right to rely on the said notarized Certification of MICO’s Corporate Secretary.
Anent petitioners-sureties contention that they obtained no
consideration whatsoever on the surety agreements, we need only point out that
the consideration for the sureties is the very consideration for the principal
obligor, MICO, in the contracts of loan. In the case of Willex
Plastic Industries Corporation vs. Court of Appeals,[46] we ruled that the consideration necessary to support a surety
obligation need not pass directly to the surety, a consideration moving to the
principal alone being sufficient. For a guarantor or surety
is bound by the same consideration that makes the contract effective between
the parties thereto. It is not necessary that a guarantor or surety
should receive any part or benefit, if such there be, accruing to his
principal.
Petitioners placed too much reliance on the rule in evidence that
the burden of proof does not shift whereas the burden of going forward with the
evidence does pass from party to party. It is true that said rule is not
changed by the fact that the party having the burden of proof has introduced
evidence which established prima facie his assertion because such
evidence does not shift the burden of proof; it merely puts the adversary to
the necessity of producing evidence to meet the prima facie case. Where
the defendant merely denies, either generally or otherwise, the allegations of
the plaintiff’s pleadings, the burden of proof continues to rest on the
plaintiff throughout the trial and does not shift to the defendant until the
plaintiff’s evidence has been presented and duly offered. The defendant has then
no burden except to produce evidence sufficient to create a state of equipoise
between his proof and that of the plaintiff to defeat the latter, whereas the
plaintiff has the burden, as in the beginning, of establishing his case by a
preponderance of evidence.[47] But where the defendant has failed to
present and
In the case at bar, respondent PBCom, as plaintiff in the trial court, has in fact presented sufficient documentary and testimonial evidence that proved by preponderance of evidence its subject collection case against the defendants who are the petitioners herein. In view of all the foregoing, the Court of Appeals committed no reversible error in its appealed Decision.
WHEREFORE, the assailed Decision of the Court of Appeals
in CA-G.R. CV No. 27480 entitled, “Philippine Bank of Communications vs. Mico Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co,” is
AFFIRMED in toto.
Costs against the petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena,
JJ., concur.
[1] Penned by Associate Justice
Corona Ibay-Somera and concurred in by Associate
Justices Fidel P. Purisima and Asaali
S. Isnani, Second Division; Rollo,
G.R. No. 117913, pp. 57-84.
[2] Should not have been
included as petitioner since the RTC granted the motion of private respondent
to drop his name as one of the defendants inasmuch as he was in
[3] Should not have been
included as petitioner since the RTC granted the motion of private respondent
to drop his name as one of the defendants, without prejudice, since the summons
and the alias service of summons could not be served on him inasmuch as his
whereabouts are unknown.
[4] Exhibit “E”,
Records, p. 372.
[5] Exhibit “I”, Records,
p. 383.
[6] Exhibit “J”,
Records, p. 384.
[7] Exhibit “K”,
Records, p. 385.
[8] Exhibit “G”,
Records, pp. 377-378.
[9] Exhibit “N”,
Records, pp. 389-390.
[10] Exhibit “H”,
Records, p. 380-381.
[11] Exhibit “L”,
Records, p. 386.
[12] Exhibit
“O”, Records, p.391.
[13] Exhibit “O-1”,
Records, p. 392.
[14] Exhibit “O-2”,
Records, p. 393.
[15] Exhibit “O-4”,
Records, p. 395.
[16] Exhibit “P”,
Records, p. 396.
[17] Exhibit “P-1”,
Records, p. 397.
[18] Exhibit “P-4”,
Records, p. 400
[19] Exhibit “Q”, Records,
p. 401
[20] Exhibit “Q-1”,
Records, p. 405.
[21] Exhibit “Q-2”,
Records, p. 406.
[22] Exhibit “Q-3”,
Records, p. 407.
[23] Exhibit “Q-4”,
Records, p. 408.
[24] Exhibit
“Q-7”, Records, p.411.
[25] Exhibit “R”,
Records, p. 412.
[26] Exhibit “R-1”,
Records, p. 416.
[27] Exhibit “R-3”,
Records, p. 418.
[28] Exhibit “R-5”, Records,
p. 420.
[29] Records, p. 440.
[30] Exhibit “T”,
Records, p. 422.
[31] 200 SCRA 37,44 [1991].
[32] G.R. No. 117913, Rollo, p.9.
[33] Section
1, Rule 133 Rules of Court.
[34] Exhibit
"1", Records, p. 641.
[35] By-Laws, Article II
(d), Records, p. 642.
[36] By-Laws, Article
11(e), Records, p. 642.
[37] TSN,
[38] 50 AM JUR 2d,
Letters of Credit §1.
[39] Vintola v. Insular Bank of
[40] Exhibit “A”, Records,
p. 368.
[41] Exhibit “B”,
Records, p. 369.
[42] Exhibit “C”,
Records, p. 370.
[43] Exhibit “F”,
Records, pp. 373-376.
[44] TSN,
[45] TSN,
[46] 256
SCRA 478,486 [1996].
[47] I.B.
JONES, THE LAW OF EVIDENCE IN CIVIL CASES 313-314 §178 (4TH ed., 1938).