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ALLIED
BANKING CORPORATION, Petitioner, - versus - |
G.R. No. 125851 Present: QUISUMBING,
J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ. |
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COURT OF APPEALS, G.G. SPORTSWEAR MANUFACTURING
CORPORATION, NARI GIDWANI, SPOUSES LETICIA AND Respondents. |
Promulgated: July 11, 2006 |
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DECISION
QUISUMBING, J.:
This petition
for review on certiorari assails (a) the July 31, 1996 Decision[1] of
the Court of Appeals, ordering respondent G.G. Sportswear Manufacturing Corp.
to reimburse petitioner US $20,085; and exonerating the guarantors from
liability; and (b) the January 17, 1997 Resolution[2]
denying the motion for reconsideration.
The facts are undisputed.
On P151,474.52 and the receipt of which was acknowledged by
the latter in its letter dated
On the same date, respondents Nari
Gidwani and Alcron International Ltd. (Alcron) executed their respective
Letters of Guaranty, holding themselves liable on the export bill if it should
be dishonored or retired by the drawee for any reason.
Subsequently, the spouses Leon and
Leticia de Villa and Nari Gidwani also executed a Continuing Guaranty/Comprehensive
Surety (surety, for brevity), guaranteeing payment of any and all such credit
accommodations which ALLIED may extend to GGS.
When ALLIED negotiated the export bill to
In their joint answer, respondents GGS
and Nari Gidwani admitted the due execution of the export bill and the Letters
of Guaranty in favor of ALLIED, but claimed that they signed blank forms of the
Letters of Guaranty and the Surety, and the blanks were only filled up by
ALLIED after they had affixed their signatures.
They also added that the documents did not cover the transaction involving
the subject export bill.
On the
other hand, the respondents, spouses de Villa, claimed that they were not aware
of the existence of the export bill; they signed blank forms of the surety; and
averred that the guaranty was not meant to secure the export bill.
Respondent Alcron, for its part,
alleged that as a foreign corporation doing business in the Philippines, its
branch in the Philippines is merely a liaison office confined to the following
duties and responsibilities, to wit:
acting as a message center between its office in Hongkong and its
clients in the Philippines; conducting credit investigations on Filipino
clients; and providing its office in Hongkong with
shipping arrangements and other details in connection with its office in
Hongkong. Respondent Alcron further
alleged that neither its liaison office in the Philippines nor its then
representative, Hans-Joachim Schloer, had the authority to issue Letters of
Guaranty for and in behalf of local entities and persons. It also invoked laches against petitioner
ALLIED.
GGS
and Nari Gidwani filed a Motion for Summary Judgment
on the ground that since the plaintiff admitted not having protested the
dishonor of the export bill, it thereby discharged GGS from liability. But the trial court denied the motion. After the presentation of evidence by the
petitioner, only the spouses de Villa presented their evidence. The other respondents did not. The trial court dismissed the complaint.
On
appeal, the Court of Appeals modified the ruling of the trial court holding
respondent GGS liable to reimburse petitioner ALLIED the peso equivalent of the
export bill, but it exonerated the guarantors from their liabilities under the
Letters of Guaranty. The CA decision
reads as follows:
For the foregoing considerations,
appellee GGS is obliged to reimburse appellant Allied Bank the amount of P151,474.52 which was the equivalent of GGS’s contracted
obligation of US$20,085.00.
The lower court however correctly exonerated the guarantors from their liability under their Letters of Guaranty. A guaranty is an accessory contract. What the guarantors guaranteed in the instant case was the bill which had been discharged. Consequently, the guarantors should be correspondingly released.
WHEREFORE, judgment is hereby
rendered ordering defendant-appellee G.G. Sportswear Mfg. Corporation to pay
appellant the sum of P151,474.52 with interest thereon at the legal rate
from the filing of the complaint, and the costs.
SO ORDERED.[3]
The petitioner
filed a Motion for Reconsideration, but to no avail. Hence, this appeal, raising a single issue:
Whether or not respondents
The main
issue raised before us is: Can
respondents, in their capacity as guarantors and surety, be held jointly and
severally liable under the Letters of Guaranty and Continuing Guaranty/Comprehensive
Surety, in the absence of protest on the bill in accordance with Section 152 of
the Negotiable Instruments Law?[5]
The
petitioner contends that part of the Court of Appeals’ decision exonerating
respondents Nari Gidwani, Alcron International Ltd., and spouses Leon and
Leticia de Villa as guarantors and/or sureties.
Respondents rely on Section 152 of the Negotiable Instruments Law to
support their contention.
Our
review of the records shows that what transpired in this case is a discounting
arrangement of the subject export bill, between petitioner ALLIED and respondent
GGS. Previously, we ruled that in a
letter of credit transaction, once the credit is established, the seller ships
the goods to the buyer and in the process secures the required shipping
documents of title. To get paid, the
seller executes a draft and presents it together with the required documents to
the issuing bank. The issuing bank
redeems the draft and pays cash to the seller if it finds that the documents
submitted by the seller conform with what the letter of credit requires. The bank then obtains possession of the
documents upon paying the seller. The
transaction is completed when the buyer reimburses the issuing bank and
acquires the documents entitling him to the goods.[6] However, in most cases, instead of going to
the issuing bank to claim payment, the buyer (or the beneficiary of the draft)
may approach another bank, termed the negotiating bank, to have the draft
discounted.[7] While the negotiating bank owes no
contractual duty toward the beneficiary of the draft to discount or purchase
it, it may still do so. Nothing can
prevent the negotiating bank from requiring additional requirements, like
contracts of guaranty and surety, in consideration of the discounting
arrangement.
In
this case, respondent GGS, as the beneficiary of the export bill, instead of
going to Chekiang First Bank Ltd. (issuing bank), went to petitioner ALLIED, to
have the export bill purchased or discounted.
Before ALLIED agreed to purchase the subject export bill, it required
respondents Nari Gidwani and Alcron to
execute Letters of Guaranty, holding them liable on demand, in case the
subject export bill was dishonored or retired for any reason.[8]
Likewise,
respondents Nari Gidwani and spouses Leon and Leticia de Villa executed
Continuing Guaranty/Comprehensive Surety, holding themselves jointly and
severally liable on any and all credit accommodations, instruments, loans,
advances, credits and/or other obligation that may be granted by the petitioner
ALLIED to respondent GGS.[9] The surety also contained a clause whereby
said sureties waive protest and notice of dishonor of any and all such
instruments, loans, advances, credits and/or obligations.[10] These letters of guaranty and surety are now
the basis of the petitioner’s action.
At this juncture, we must stress that
obligations arising from contracts have the force of law between the parties
and should be complied with in good faith.[11] Nothing can
stop the parties from establishing stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.[12]
Here,
Art. 2047 of the New Civil Code is pertinent.
Art. 2047 states,
Art.
2047. By guaranty a person, called the
guarantor, binds himself to the creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so.
If
a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a
suretyship.
In this case, the Letters of Guaranty and Surety
clearly show that respondents undertook and bound themselves as guarantors and
surety to pay the full amount of the export bill.
Respondents claim that the petitioner
did not protest[13]
upon dishonor of the export bill by Chekiang First
Bank, Ltd. According to respondents,
since there was no protest made upon dishonor of the export bill, all of them,
as indorsers were discharged under Section 152 of the Negotiable Instruments
Law.
Section
152 of the Negotiable Instruments Law pertaining to indorsers, relied on by
respondents, is not pertinent to this case. There are well-defined distinctions between
the contract of an indorser and that of a guarantor/surety of a commercial
paper, which is what is involved in this case.
The contract of indorsement is primarily that of transfer, while the
contract of guaranty is that of personal security.[14] The liability of a guarantor/surety is
broader than that of an indorser. Unless
the bill is promptly presented for payment at maturity and due notice of
dishonor given to the indorser within a reasonable time, he will be discharged
from liability thereon.[15] On the other hand, except where required by
the provisions of the contract of suretyship, a demand or notice of default is
not required to fix the surety’s liability.[16] He cannot complain that the creditor has not
notified him in the absence of a special agreement to that effect in the
contract of suretyship.[17] Therefore, no protest on the export bill is
necessary to charge all the respondents jointly and severally liable with G.G.
Sportswear since the respondents held themselves liable upon demand in case the
instrument was dishonored and on the surety, they even waived notice of
dishonor as stipulated in their Letters of Guarantee.
As to respondent Alcron, it is bound by the Letter of
Guaranty executed by its representative Hans-Joachim Schloer. As to the other respondents, not to be
overlooked is the fact that, the “Suretyship
Agreement” they executed, expressly contemplated a solidary obligation,
providing as it did that “… the sureties hereby guarantee jointly and severally the
punctual payment of any and all such credit accommodations, instruments, loans,
… which is/are now or may hereafter become due or owing … by the
borrower”.[18] It is a cardinal rule that if the terms of a
contract are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of its stipulation shall control.[19] In the present case, there can be no
mistaking about respondents’ intent, as sureties, to be jointly and severally
obligated with respondent G.G. Sportswear.
Respondents also aver that, (1) they
only signed said documents in blank; (2) they were never made aware that said
documents will cover the payment of the export bill; and (3) laches have set in.
Respondents’ stance lacks merit. 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 document but several
documents were executed at different times and at different places by the herein
respondent guarantors and sureties.[20]
In this case, having affixed their consenting signatures in several
documents executed at different times, it is safe to presume that they had full
knowledge of its terms and conditions, hence, they are precluded from asserting
ignorance of the legal effects of the undertaking they assumed thereunder. It is also presumed that private transactions
have been fair and regular[21]
and that he who alleges has the burden of proving his allegation with the
requisite quantum of evidence.[22] But here the
records of this case do not support their claims.
Last,
we find the defense of laches unavailing.
The question of laches is addressed to the sound discretion of the court
and since laches is an equitable doctrine, its application is controlled by
equitable considerations.[23] Respondents, however, failed to show that the
collection suit against them as sureties was inequitable. Remedies in equity
address only situations tainted with inequity, not those expressly governed by
statutes.[24]
After considering the facts of this
case vis-à-vis the pertinent laws, we are constrained to rule for the petitioner.
WHEREFORE,
the instant petition is GRANTED. The assailed Decision of the
Court of Appeals is hereby MODIFIED, and we hold that respondent Alcron International Ltd. is subsidiarily
liable, while respondents Nari Gidwani, and Spouses
Leon and Leticia de Villa are jointly and severally liable together with G.G.
Sportswear, to pay petitioner Bank the sum of P151,474.52
with interest at the legal rate from the filing of the complaint, and the
costs.
SO ORDERED.
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LEONARDO A. QUISUMBING Associate Justice |
WE CONCUR:
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ANTONIO T. CARPIO Associate Justice |
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CONCHITA CARPIO MORALES Associate Justice |
DANTE O. TINGA Associate Justice |
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PRESBITERO J. VELASCO,
JR. Associate Justice |
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A T T E S T A T I O N
I attest that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.
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LEONARDO A. QUISUMBING Associate Justice Chairperson |
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
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ARTEMIO V. PANGANIBAN Chief Justice |
[1] Rollo, pp. 31-37. Penned by Associate Justice Alfredo L. Benipayo, with Associate Justices Buenaventura J. Guerrero, and Romeo A. Brawner concurring.
[2]
[3] Rollo, p. 36.
[4]
[5] Sec. 152 – In what cases protest necessary – Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it must be duly protested for non-acceptance, and where such a bill which has not been previously been dishonored by non-acceptance is dishonored by non-payment, it must be duly protested for non-payment. If it is not so protested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary.
[6] Bank of
[7]
[8] Records, p. 12. The Letters of Guaranty provides that,
x x x x
If for any reason, my/our draft is not finally honored or retired by the drawee, I/We hereby further undertake and bind myself/ourselves to refund to you, on demand, the full amount of this negotiation, together with the corresponding interest thereon as well as your correspondent’s charges and expenses thereon, if any; and to compensate you fully for any damages that you might incur arising out of any suit, action or proceedings, whether judicial or extra-judicial that might be instituted by the buyer or importer on the ground of lack of faithful performance of the contract between said buyer or importer and myself/ourselves. . . (Emphasis supplied.)
[9]
I. For and in
consideration of any accommodation which you have extended and/or will extend
to G.G. Sportswear Manufacturing
Corporation (hereinafter called the “Borrower”) with or without
security, singularly or jointly and severally with others, . . . the
undersigned agree(s) to guarantee, and does hereby guarantee jointly and
severally the punctual payment at maturity to you of any and all such
credit accommodations, instruments, loans, advances, credits and/or other
obligations, hereinbefore referred to, which is/are now or may hereafter become
due or owing to you by the Borrower . . .
[10]
VIII. The undersigned hereby waives . . . protest and notice of dishonor of any and all such instruments, loans, advances, credits or other indebtedness or obligation herein-before referred to, . . .
[11] New Civil Code, Art. 1159.
[12]
[13] Rollo, p. 158.
[14] Acme Shoe, Rubber & Plastic Corp. v. Court of Appeals, G.R. No. 103576, August 22, 1996, 260 SCRA 714, 719.
[15] Supra note 5.
[16] Umali v. Court of Appeals, G.R. No.
89561,
[17] Palmares v. Court of Appeals, G.R.
No. 126490, March 31, 1998, 288 SCRA 422, 439.
[18] Records, p. 14.
[19] new
civil code, Art. 1370.
[20] Lee v. Court
of Appeals, G.R. No. 117913, February 1, 2002, 375 SCRA 579, 601.
[21] Revised Rules of Court, Rule 131, Sec. 3 (p).
[22] Heirs of Basanes v. Cortes, OCA IPI No. 01-1065-P, March 31, 2003 citing People v. Topaguen, G.R. Nos. 116596-98, March 31, 1997, 269 SCRA 601, 614.
[23]
[24]