Mico Metals v. Court of Appeals Mico Metals v. Court of Appeals G.R. No. 117914. 1 February 2002.
G.R. No. 117914. 1 February 2002. FACTS:
FACTS: Mico Metals Corporation (MCC) applied or t!o do"estic letters o credit (#$C) !it% t%e &%ilippine Mico Metals Corporation (MCC) applied or t!o do"estic letters o credit (#$C) !it% t%e &%ilippine 'an o Co""unications (&'C) !%ic% applications !ere e*entually +ranted. ,%ereater- t%e do"estic #$Cs 'an o Co""unications (&'C) !%ic% applications !ere e*entually +ranted. ,%ereater- t%e do"estic #$Cs !ere ne+otiated and accepted by MCC as e*idenced by t%e correspondin+ ban drat issued or t%e purpose. !ere ne+otiated and accepted by MCC as e*idenced by t%e correspondin+ ban drat issued or t%e purpose. ter MCC/s supplier !as paid- a trust receipt (,$R)- upon MCC/s o!n initiati*e- !as eecuted in a*or o ter MCC/s supplier !as paid- a trust receipt (,$R)- upon MCC/s o!n initiati*e- !as eecuted in a*or o &'C.
&'C.
e! "ont%s later- MCC applied or aut%ority to open orei+n #$Cs !it% &'C !%ic% applications !ere e! "ont%s later- MCC applied or aut%ority to open orei+n #$Cs !it% &'C !%ic% applications !ere e*e
e*entuntuallally y apprappro*edo*ed. . Ne+Ne+otiotiatiation on and proper acceptand proper acceptance ance o o t%e #$C t%e #$C !er!ere e t%et%en n "ad"ade e by by MCCMCC. . ++ainain- - aa correspondin+ ,$R !as eecuted by MCC in a*or
correspondin+ ,$R !as eecuted by MCC in a*or o &'C.o &'C.
n all t%e transactions in*ol*in+ orei+n #$C- &'C turned o*er to MCC t%e necessary docu"ents suc% as t%e n all t%e transactions in*ol*in+ orei+n #$C- &'C turned o*er to MCC t%e necessary docu"ents suc% as t%e bills o ladin+ and co""ercial in*oices to enable t%e latter to !it%dra! t%e +oods ro" t%e port o Mani
bills o ladin+ and co""ercial in*oices to enable t%e latter to !it%dra! t%e +oods ro" t%e port o Manila.la. bout i*e "ont%s later- MCC obtained ro" &'C a loan
bout i*e "ont%s later- MCC obtained ro" &'C a loan co*ered by a co*ered by a pro"issory note (&$N). pon "aturity o pro"issory note (&$N). pon "aturity o all credit a*ail"ents obtained by MCC ro" &'C- t%e latter "ade a de"and or pay"ent !%ic% de"and !as all credit a*ail"ents obtained by MCC ro" &'C- t%e latter "ade a de"and or pay"ent !%ic% de"and !as let un%eeded
let un%eeded
ISSUE:
ISSUE: 3%et%er or not &'C ailed to pro*e t%at it actually "ade pay"ents under t%e #$C since t%e ban drats 3%et%er or not &'C ailed to pro*e t%at it actually "ade pay"ents under t%e #$C since t%e ban drats presented as
presented as e*idence e*idence s%o! t%at s%o! t%at t%ey !ere t%ey !ere "ade "ade in a*or in a*or o t!o o t!o correspondin+ bans- correspondin+ bans- and aand as suc% s suc% it (&'C) it (&'C) isis not entitled to rei"burse"ent
not entitled to rei"burse"ent
HELD:
HELD: NoNo. . MoModedern rn #$#$Cs Cs arare e ususuaualllly y not not "a"ade de betbet!e!een en nanatuturaral l perpersosonsns. . ,%,%ey ey inin*o*ol*l*e e baban n to to baban n transactions. 5istorically- #$Cs !as de*eloped to acilitate t%e sale o +oods bet!een- distant and una"iliar transactions. 5istorically- #$Cs !as de*eloped to acilitate t%e sale o +oods bet!een- distant and una"iliar buyers and
buyers and sellers. t !as an sellers. t !as an arran+e"ent under arran+e"ent under !%ic% a !%ic% a ban- !%ose ban- !%ose credit !as acceptabcredit !as acceptable to le to t%e seller- !ouldt%e seller- !ould at t%e instance o t%e buyer a+ree to pay drats dra!n on it by t%e seller- pro*ided t%at certain docu"ents are at t%e instance o t%e buyer a+ree to pay drats dra!n on it by t%e seller- pro*ided t%at certain docu"ents are presented suc% as bills o ladin+ acco"panyin+ t%e correspondin+ drats. Conse6uently- t%ere is not%in+ unusual presented suc% as bills o ladin+ acco"panyin+ t%e correspondin+ drats. Conse6uently- t%ere is not%in+ unusual
in t%e act t%at t%e drats presented in e*idence
in t%e act t%at t%e drats presented in e*idence by &'C !ere not "ade by &'C !ere not "ade payable to it (&'C).payable to it (&'C).
24 o t%e Ne+otiable nstru"ents #a! (N#) pro*ides t%at e*ery ne+otiable instru"ent is dee"ed pri"a acie 24 o t%e Ne+otiable nstru"ents #a! (N#) pro*ides t%at e*ery ne+otiable instru"ent is dee"ed pri"a acie to %a*e been issued or *aluable consideration and e*ery person !%ose si+nature appears t%ereon to %a*e to %a*e been issued or *aluable consideration and e*ery person !%ose si+nature appears t%ereon to %a*e beco"e
beco"e a a party party or or *alue. *alue. Ne*ert%eless- Ne*ert%eless- !%ile !%ile t%at t%at presu"ption presu"ption ound ound under under t%e t%e N# N# "ay "ay not not necessarily necessarily bebe applicable to ,$R and #$C- t%e presu"ption t%at t%e drats dra!n in connection !it% t%e #$C %a*e suicient applicable to ,$R and #$C- t%e presu"ption t%at t%e drats dra!n in connection !it% t%e #$C %a*e suicient con
considsideraeratition on prepre*ai*ails. More ls. More i"pi"portortantantlyly- - undunder er 8(r8(r)- )- RulRule e 181 181 o o t%e Rules o t%e Rules o CouCourt rt t%et%ere re is is alsalso o aa presu"ption t%at suici
presu"ption t%at suicient consideration !as +i*en in a contract.ent consideration !as +i*en in a contract.
5ence- MCC s%ould %a*e presented credible e*idence to rebut t%at presu"ption as !ell as t%e e*idence 5ence- MCC s%ould %a*e presented credible e*idence to rebut t%at presu"ption as !ell as t%e e*idence presented
presented by by &'C. &'C. ,%e ,%e #$C #$C s%o! s%o! t%at t%at t%e t%e pertinent pertinent "aterials$"erc%andise "aterials$"erc%andise %as %as been been recei*ed recei*ed by by MCC. MCC. ,%e,%e drats si+ned by t%e beneiciary$suppliers in connection !it% t%e correspondin+ #$C pro*ed t%at said suppliers drats si+ned by t%e beneiciary$suppliers in connection !it% t%e correspondin+ #$C pro*ed t%at said suppliers !ere paid by &'C or t%e account o MCC. n t%e ot%er %and- aside ro" its bare denials MCC did not present !ere paid by &'C or t%e account o MCC. n t%e ot%er %and- aside ro" its bare denials MCC did not present suicient and co"petent e*idence to rebut t%e e*idence o &'C. MCC did not proer a sin+le piece o suicient and co"petent e*idence to rebut t%e e*idence o &'C. MCC did not proer a sin+le piece o e*idence- apart ro" its bare denial- to support its alle+ation t%at t%e loan transactions- #$Cs and ,$Rs !ere e*idence- apart ro" its bare denial- to support its alle+ation t%at t%e loan transactions- #$Cs and ,$Rs !ere issued alle+edly !it%out any consideration.
:G.R. N. 117918. February 1- 2002; :G.R. N. 117918. February 1- 2002;
C5R#<= #<<- C5 => =?- MRN =- #FN= ?&- RC5R@ A<#=C and C5R#<= #<<- C5 => =?- MRN =- #FN= ?&- RC5R@ A<#=C and #FN=
C-#FN= C- petitione petitioners, vsrs, vs. CR, F &&<#= and . CR, F &&<#= and &5#&&N< 'N> F &5#&&N< 'N> F CMMNCCMMNC,,N=- N=-respondents
respondents..
:G.R. N. 117914. February 1- 2002; :G.R. N. 117914. February 1- 2002; MICO METALS CORPORATIO
MICO METALS CORPORATIO-- petitio petitionerner,,vsvs. COURT OF APPEALS. COURT OF APPEALS and &5#&&N< 'N> F and &5#&&N< 'N> F CMMNC,N=-CMMNC,N=- respondents.respondents. @ < C = @ < C = NN @< #<N- BR.-@< #<N- BR.- J: J:
'eore us is t%e oint and consolidated petition or re*ie! o t%e @ecision 'eore us is t%e oint and consolidated petition or re*ie! o t%e @ecisionii
:1;
:1; dated Bune 1D- 1994 o t%e Court o dated Bune 1D- 1994 o t%e Court o
ppeals in CEG.R. CA No. 2740 entitled- &%ilippine 'an o Co""unications *s. Mico Metals ppeals in CEG.R. CA No. 2740 entitled- &%ilippine 'an o Co""unications *s. Mico Metals Corporation-C%arles #ee- C%ua =io =uy- Mariano =io- lonso ?ap- Ric%ard Aelasco and lonso Co- !%ic% re*ersed t%e C%arles #ee- C%ua =io =uy- Mariano =io- lonso ?ap- Ric%ard Aelasco and lonso Co- !%ic% re*ersed t%e decision o t%e Re+ional ,rial Court (R,C) o Manila- 'ranc% DD dis"issin+ t%e co"plaint or a
decision o t%e Re+ional ,rial Court (R,C) o Manila- 'ranc% DD dis"issin+ t%e co"plaint or a sum sum o "oneyo "oney i
iled led by by pripri*at*ate e resrespondpondent ent &%i&%iliplippinpine e 'an'an o o Co"Co""un"unicaicatiotions ns a+aia+ainst nst %er%erein ein petpetitiitioneroners- s- MicMico o MetMetalsals Corpor
Corporation (MC- or ation (MC- or bre*ibre*ity)ty)- - C%arlC%arles es #ee- C%ua #ee- C%ua =io =uy-=io =uy-iiii
:2;
:2; Mariano =io- lonso ?ap- Ric%ard Aelasco Mariano =io- lonso ?ap- Ric%ard Aelasco
and lonso Co.
and lonso Co.iiiiii:8;:8; ,%e dispositi*e portion o t%e said @ecision o t%e Court o ppeals- reads ,%e dispositi*e portion o t%e said @ecision o t%e Court o ppeals- reads
35<R<FR<- t%e decision o t%e Re+ional ,rial Court is %ereby re*ersed and in lieu t%ereo- a ne! one is 35<R<FR<- t%e decision o t%e Re+ional ,rial Court is %ereby re*ersed and in lieu t%ereo- a ne! one is entered
entered
a) rderin+ t%e deendantsEappellees ointly and se*erally to pay plainti &'Co" t%e su" o Fi*e "illion our a) rderin+ t%e deendantsEappellees ointly and se*erally to pay plainti &'Co" t%e su" o Fi*e "illion our %undred ityEone t%ousand si %undred sityEt%ree pesos and ninety centa*os (&D-4D1-HH8.90) representin+ %undred ityEone t%ousand si %undred sityEt%ree pesos and ninety centa*os (&D-4D1-HH8.90) representin+ deendantsEappellees unpaid obli+ations arisin+ ro" ordinary loans +ranted by t%e plainti plus le+al interest deendantsEappellees unpaid obli+ations arisin+ ro" ordinary loans +ranted by t%e plainti plus le+al interest until ully paid.
until ully paid. b)
b) rderin+ rderin+ deendantsEappellees deendantsEappellees ointly ointly and and se*erally se*erally to to pay pay &'Co" &'Co" t%e t%e su" su" o o Four Four %undred %undred sityEonesityEone t%ousand si %undred pesos and sityEsi centa*os (&4H 1-H00.HH) representin+ deendantsEappellees unpaid t%ousand si %undred pesos and sityEsi centa*os (&4H 1-H00.HH) representin+ deendantsEappellees unpaid obli+ations arisin+ ro" t%eir letters o credit and trust receipt transactions !it% plainti &'Co" plus le+al obli+ations arisin+ ro" t%eir letters o credit and trust receipt transactions !it% plainti &'Co" plus le+al interest until ully paid.
interest until ully paid.
c) rderin+ deendantsEappellees ointly and se*erally to pay
c) rderin+ deendantsEappellees ointly and se*erally to pay &'Co" t%e su" o &D0-000&'Co" t%e su" o &D0-000.00 as attorneys ees..00 as attorneys ees. No pronounce"ent as to costs.
No pronounce"ent as to costs. ,%e acts o t%e case are as ollo!s ,%e acts o t%e case are as ollo!s n
n MaMarcrc% % 2- 2- 1971979- 9- C%aC%arlrles es #e#ee- e- as as &r&resesididenent t o o MMC C !r!rotote e prpri*i*atate e rerespsponondendent t &%i&%ililippppinine e 'a'an n o o Co""unications (&'Co") re6uestin+ or a +rant o a discountin+ loan$credit line in t%e su" o ,%ree Million Co""unications (&'Co") re6uestin+ or a +rant o a discountin+ loan$credit line in t%e su" o ,%ree Million &esos (&8-000-000.00) or t%e purpose o carryin+ out MCs line o business as !ell as to "aintain its *olu"e &esos (&8-000-000.00) or t%e purpose o carryin+ out MCs line o business as !ell as to "aintain its *olu"e o business.
o business.
n t%e sa"e day- C%arles #ee re6uested or anot%er discountin+ loan$credit line o ,%ree Million &esos n t%e sa"e day- C%arles #ee re6uested or anot%er discountin+ loan$credit line o ,%ree Million &esos (&8-000-000.00) ro" &'Co" or t%e purpose
n connection !it% t%e re6uests or discountin+ loan$credit lines- &'Co" !as urnis%ed by MC t%e ollo!in+ resolution !%ic% !as adopted unani"ously by MCs 'oard o @irectors
RESOLVED, that the President, Mr. Charles Lee, and the VicePresident and !eneral Mana"er, Mr. Mariano #. Sio, sin"l$ or %ointl$, &e and the$ are dul$ authori'ed and empo(ered )or and in &ehal) o) this Corporation to appl$ )or, ne"otiate and secure the approval o) commercial loans and other &an*in" )acilities and accommodations, such as, &ut not limited to discount loans, letters o) credit, trust receipts, lines )or mar"inal deposits on )orei"n and domestic letters o) credit, ne"otiate outo)to(n chec*s, etc. )rom the Philippine +an* o) Communications, - Juan Luna, Manila in such sums as the$ shall deem advanta"eous, the principal o) all o) (hich shall not e/ceed the total amount o) 0E1 M2LL2O1 PESOS 3P-4,444,444.445, Philippine Currenc$, plus an$ interests that ma$ &e a"reed upon (ith said +an* in such loans and other credit lines o) the same *ind and such )urther terms and conditions as ma$, upon "rantin" o) said loans and other &an*in" )acilities, &e imposed
&$ the +an*6 and to ma*e, e/ecute, si"n and deliver an$ contracts o) mort"a"e, pled"e or sale o) one, some or all o) the properties o) the Compan$, or an$ other a"reements or documents o) (hatever nature or *ind, includin" the si"nin", indorsin", cashin", ne"otiation and e/ecution o) promissor$ notes, chec*s, mone$ orders or other ne"otia&le instruments, (hich ma$ &e necessar$ and proper in connection (ith said loans and other &an*in" )acilities, or (ith their amendments, rene(als and e/tensions o) pa$ment o) the (hole or an$ part thereo).i*:4;
n Marc% 2H- 1979- MC a*ailed o t%e irst loan o ne Million &esos (&1-000-000.00) ro" &'Co". pon "aturity o t%e loan- MC caused t%e sa"e to be rene!ed- t%e last rene!al o !%ic% !as "ade on May 21-192 under &ro"issory Note 'N No. 2H21.*:D;
not%er loan o ne Million &esos (&1-000-000.00) !as a*ailed o by MC ro" &'Co" !%ic% !as lie!ise later on rene!ed- t%e last rene!al o !%ic% !as "ade on May 21- 192 under &ro"issory Note 'N No. 2H219.*i:H; ,o co"plete MCs a*ail"ent o ,%ree Million &esos (&8-000-000.00) discountin+ loan$credit line
!it% &'Co"- MC a*ailed o anot%er loan ro" &'Co" in t%e su" o ne Million &esos (&1-000-000.00) on May 24- 1979. s in pre*ious loans- t%is !as rolled o*er or rene!ed- t%e last rene!al o !%ic% !as "ade on May 2D- 192 under &ro"issory Note 'N No. 2H2D8.*ii:7;
s security or t%e loans- MC t%rou+% its AiceE&resident and General Mana+er- Mariano =io- eecuted on May 1H- 1979 a @eed o Real <state Mort+a+e o*er its properties situated in &asi+- Metro Manila co*ered by ,ranser Certiicates o ,itle (,C,) Nos. 1124 and 112D0.
n Marc% 2H- 1979 C%arles #ee- C%ua =io =uy- Mariano =io- lonso ?ap and Ric%ard Aelasco- in t%eir personal capacities eecuted a =urety +ree"ent*iii
:; in a*or o &'Co" !%ereby t%e petitioners ointly and
se*erally- +uaranteed t%e pro"pt pay"ent on due dates or at "aturity o o*erdrats- pro"issory notes- discounts-drats- letters o credit- bills o ec%an+e- trust receipts- and ot%er obli+ations o e*ery ind and nature- or !%ic% MC "ay be %eld accountable by &'Co". t !as pro*ided- %o!e*er- t%at t%e liability o t%e sureties s%all not at any one ti"e eceed t%e principal a"ount o ,%ree Million &esos (&8-000-000.00) plus interest-costs- losses- c%ar+es and epenses includin+ attorneys ees incurred by &'Co" in connection t%ere!it%.
n Buly 14- 190- petitioner C%arles #ee- in %is capacity as president o MC- !rote &'Co" and applied or an additional loan in t%e su" o Four Million &esos (&4-000-000.00). ,%e loan !as intended or t%e epansion and "oderniIation o t%e co"panys "ac%ineries. pon appro*al o t%e said application or loan- MC a*ailed o t%e additional loan o Four Million &esos (&4-000-000.00) as e*idenced by &ro"issory Note , No. 094.i
:9;
s per a+ree"ent- t%e proceeds o all t%e loan a*ail"ents !ere credited to MCs current c%ecin+ account !it% &'Co". ,o induce t%e &'Co" to increase t%e credit line o MC- C%arles #ee- C%ua =io =uy- Mariano =io- lonso ?ap- Ric%ard Aelasco and lonso Co (%ereinater reerred to as petitionersEsureties)- eecuted anot%er surety a+ree"ent:10; in a*or o &'Co" on Buly 2- 190- !%ereby t%ey ointly and se*erally
drats-letters o credit- bills o ec%an+e- trust receipts and all ot%er obli+ations o any ind and nature or !%ic% MC "ay be %eld accountable by &'Co". t !as pro*ided- %o!e*er- t%at t%eir liability s%all not at any one ti"e eceed t%e su" o =e*en Million Fi*e 5undred ,%ousand &esos (&7-D00-000.00) includin+ interest- costs-c%ar+es- epenses and attorneys ees incurred by MC in connection t%ere!it%.
n Buly 29- 190- MC urnis%ed &'Co" !it% a notariIed certiication issued by its corporate secretary- tty. &.'. 'arrera- t%at C%ua =io =uy !as duly aut%oriIed by t%e 'oard o @irectors to ne+otiate on be%al o MC or loans and ot%er credit a*ail"ents ro" &'Co". ndicated in t%e certiication !as t%e ollo!in+ resolution unani"ously appro*ed by t%e 'oard o @irectors
RESOLVED, #S 20 2S 7ERE+8 RESOLVED, 0hat Mr. Chua Sio* Su$ &e, as he is here&$ authori'ed and
empo(ered, on &ehal) o) M2CO ME0#LS CORPOR#02O1 )rom time to time, to &orro( mone$ and o&tain other credit )acilities, (ith or (ithout securit$, )rom the P72L2PP21E +#19 O COMM;12C#02O1S in such
amount3s5 and under such terms and conditions as he ma$ determine, (ith )ull po(er and authorit$ to e/ecute, si"n and deliver such contracts, instruments and papers in connection there(ith, includin" real estate and
chattel mort"a"es, pled"es and assi"nments over the properties o) the Corporation6 and to rene( and<or e/tend and<or rollover and<or reavail o) the credit )acilities "ranted thereunder, either )or lesser or )or "reater
amount3s5, the intention &ein" that such credit )acilities and all securities o) (hatever *ind "iven as collaterals there)or shall &e a continuin" securit$.
RESOLVED ;R07ER, 0hat said &an* is here&$ authori'ed, empo(ered and directed to rel$ on the authorit$ "iven hereunder, the same to continue in )ull )orce and e))ect until (ritten notice o) its revocation shall &e
received &$ said +an*.i:11;
n Buly 2- 191- MC iled !it% &'Co" an application or a do"estic letter o credit in t%e su" o ,%ree 5undred FortyE<i+%t ,%ousand &esos (&84-000.00).ii:12; ,%e correspondin+ irre*ocable letter o credit !as
appro*ed and opened under #C No. #E1H0H0.iii
:18; ,%ereater- t%e do"estic letter o credit !as ne+otiated and
accepted by MC as e*idenced by t%e correspondin+ ban drat issued or t%e purpose.i*:14; ter t%e supplier
o t%e "erc%andise !as paid- a trust receipt upon MCs o!n initiati*e- !as eecuted in a*or o &'Co".*
:1D;
n =epte"ber 14- 191- MC applied or anot%er do"estic letter o credit !it% &'Co" in t%e su" o ,!o 5undred Ninety ,%ousand &esos (&290-000.00).*i:1H; ,%e correspondin+ irre*ocable letter o credit !as issued
on =epte"ber 22- 191 under #C No. #E1H884.*ii
:17; ter t%e beneiciary o t%e said letter o credit !as paid by
&'Co" or t%e price o t%e "erc%andise- t%e +oods !ere deli*ered to MC !%ic% eecuted a correspondin+ trust receipt*iii:1; in a*or o &'Co".
n No*e"ber 10- 191- MC applied or aut%ority to open a orei+n letter o credit in a*or o ,a Bi% <nterprises Co.- #td.-i
:19; and t%us- t%e correspondin+ letter o credit
:20; !as t%en issued by &'Co" !it% a
cable sent to t%e beneiciary- ,a Bi% <nterprises Co.- #td. ad*isin+ t%at said beneiciary "ay dra! unds ro" t%e account o &'Co" in its correspondent bans Ne! ?or ice.i:21; &'Co" also inor"ed its correspondin+
ban in ,ai!an- t%e r*in+ ,rust Co"pany- o t%e appro*ed letter o credit. ,%e correspondent ban acno!led+ed &'Co"s ad*ice t%rou+% a conir"ation letter ii:22; and by debitin+ ro" &'Co"s account !it%
t%e said correspondent ban t%e su" o <le*en ,%ousand Nine 5undred =ity = @ollars (J11 -9H0.00).iii
:28; s
in past transactions- MC eecuted in a*or o &'Co" a correspondin+ trust receipt.i*:24;
n Banuary 4- 192- MC applied- or aut%ority to open a orei+n letter o credit in t%e su" o ne ,%ousand Nine 5undred = @ollars (J1-900.00)- !it% &'Co".*:2D; pon appro*al- t%e correspondin+ letter o credit
deno"inated as #C No. H2298*i
:2H; !as issued !%ereupon &'Co" ad*ised its correspondent ban and
MC*ii:27; o t%e sa"e. Ne+otiation and proper acceptance o t%e letter o credit !ere t%en "ade by MC.
n all t%e transactions in*ol*in+ orei+n letters o credit- &'Co" turned o*er to MC t%e necessary docu"ents suc% as t%e bills o ladin+ and co""ercial in*oices to enable t%e latter to !it%dra! t%e +oods ro" t%e port o Manila.
n May 21- 192 MC obtained ro" &'Co" anot%er loan in t%e su" o ,%ree 5undred =e*entyE=e*en ,%ousand &esos (&877-000.00) co*ered by &ro"issory Note ' No. 74D.i:29;
pon "aturity o all credit a*ail"ents obtained by MC ro" &'Co"- t%e latter "ade a de"and or pay"ent.
:80; For ailure o petitioner MC to pay t%e obli+ations incurred despite repeated de"ands- pri*ate
respondent &'Co" etraudicially oreclosed MCs real estate "ort+a+e and sold t%e said "ort+a+ed properties in a public auction sale %eld on No*e"ber 28- 192. &ri*ate respondent &'Co" !%ic% e"er+ed as t%e %i+%est bidder in t%e auction sale- applied t%e proceeds o t%e purc%ase price at public auction o ,%ree Million &esos (&8-000-000.00) to t%e epenses o t%e oreclosure- interest and c%ar+es and part o t%e principal o t%e loans- lea*in+ an unpaid balance o Fi*e Million Four 5undred FortyEne ,%ousand =i 5undred =ityE ,%ree &esos and Ninety Centa*os (&D-441-HH8.90) eclusi*e o penalty and interest c%ar+es. side ro" t%e unpaid balance o Fi*e Million Four 5undred FortyEne ,%ousand =i 5undred =ityE,%ree &esos and Ninety Centa*os (&D-441-HH8.90)- MC lie!ise %ad anot%er standin+ obli+ation in t%e su" o Four 5undred =ityE ne ,%ousand =i 5undred &esos and =i Centa*os (&4H1-H00.0H) representin+ its trust receipts liabilities to pri*ate respondent. &'Co" t%en de"anded t%e settle"ent o t%e aoresaid obli+ations ro" %erein petitionersE sureties !%o- %o!e*er- reused to acno!led+e t%eir obli+ations to &'Co" under t%e surety a+ree"ents. 5ence-&'Co" iled a co"plaint !it% prayer or !rit o preli"inary attac%"ent beore t%e Re+ional ,rial Court o Manila- !%ic% !as raled to 'ranc% DD- alle+in+ t%at MC !as no lon+er in operation and %ad no properties to ans!er or its obli+ations. &'Co" urt%er alle+ed t%at petitioner C%arles #ee %as disposed or concealed %is properties !it% intent to deraud %is creditors. <cept or MC and C%arles #ee- t%e s%eri o t%e R,C ailed to ser*e t%e su""ons on %erein petitionersEsureties since t%ey !ere all reportedly abroad at t%e ti"e. n alias su""ons !as later issued but t%e s%eri !as not able to ser*e t%e sa"e to petitioners lonso Co and C%ua =io =uy !%o !as already sicly at t%e ti"e and reportedly in ,ai!an !%ere %e later died.
&etitioners (MC and %erein petitionersEsureties) denied all t%e alle+ations o t%e co"plaint iled by respondent &'Co"- and alle+ed t%at a) MC !as not +ranted t%e alle+ed loans and neit%er did it recei*e t%e proceeds o t%e aoresaid loansK b) C%ua =io =uy !as ne*er +ranted any *alid 'oard Resolution to si+n or and in be%al o MCK c) &'Co" acted in bad ait% in +rantin+ t%e alle+ed loans and in releasin+ t%e proceeds t%ereoK d) petitioners !ere ne*er ad*ised o t%e alle+ed +rant o loans and t%e subse6uent releases t%ereor- i anyK e) since no loan !as e*er released to or recei*ed by MC- t%e correspondin+ real estate "ort+a+e and t%e surety a+ree"ents si+ned concededly by t%e petitionersEsureties are null and *oid.
,%e trial court +a*e credence to t%e testi"onies o %erein petitioners and dis"issed t%e co"plaint iled by &'Co". ,%e trial court lie!ise declared t%e real estate "ort+a+e and its oreclosure null and *oid. n rulin+ or %erein petitioners- t%e trial court said t%at &'Co" ailed to ade6uately pro*e t%at t%e proceeds o t%e loans !ere e*er deli*ered to MC. ,%e trial court pointed out- a"on+ ot%ers- t%at !%ile &'Co" clai"ed t%at t%e proceeds o t%e Four Million &esos (&4-000-000.00) loan co*ered by pro"issory note , 094 !ere deposited to t%e current account o petitioner MC- &'Co" ailed to produce t%e led+er account s%o!in+ suc% deposit. ,%e trial court added t%at !%ile &'Co" "ay %a*e loaned to MC t%e ot%er su"s o ,%ree 5undred FortyE<i+%t ,%ousand &esos (&84-000.00) and ,!o 5undred Ninety ,%ousand &esos (&290-000.00)- no proo %as been adduced as to t%e eistence o t%e +oods co*ered and paid by t%e said a"ounts. 5ence- inas"uc% as no consideration e*er passed ro" &'Co" to MC- all t%e docu"ents in*ol*ed t%erein- suc% as t%e pro"issory notes- real estate "ort+a+e includin+ t%e surety a+ree"ents !ere all *oid or noneistent or lac o cause or consideration. ,%e trial court said t%at t%e lac o proo as re+ards t%e eistence o t%e "erc%andise co*ered by t%e letters o credit bolstered t%e clai" o %erein petitioners t%at no purc%ases o t%e +oods !ere really "ade and t%at t%e letters o credit transactions !ere si"ply resorted to by t%e &'Co" and C%ua =io =uy to acco""odate t%e latter in %is inancial re6uire"ents.
,%e Court o ppeals re*ersed t%e rulin+ o t%e trial court- sayin+ t%at t%e latter co""itted an erroneous application and appreciation o t%e rules +o*ernin+ t%e burden o proo. Citin+ =ection 24 o t%e Ne+otiable nstru"ents #a! !%ic% pro*ides t%at Ever! "e#otia$le i"stru%e"t is &ee%e& prima facie to 'ave $ee" issue& for valua$le co"si&eratio" a"& ever! perso" ('ose si#"ature appears t'ereo" to 'ave $eco%e a part! t'ereto for value- t%e Court o ppeals said t%at !%ile t%e subect pro"issory notes and letters o credit issued by t%e &'Co" "ade no "ention o deli*ery o cas%- it is presu"ed t%at said ne+otiable instru"ents !ere issued or *aluable consideration. ,%e Court o ppeals also cited t%e case o !atmaitan vs. Court o) #ppealsi
:81; !%ic% %olds t%at Lt'ere is a presu%ptio" t'at a" i"stru%e"t sets out t'e true a#ree%e"t of t'e
parties t'ereto a"& t'at it (as e)ecute& for valua$le co"si&eratio". ,%e appellate court noted and ound t%at a notariIed Certiication !as issued by MCs corporate secretary- &.'. 'arrera- t%at C%ua =io =uy- !as duly aut%oriIed by t%e 'oard o @irectors o MC to borro! "oney and obtain credit acilities ro" &'Co".
&etitioners iled a "otion or reconsideration o t%e c%allen+ed decision o t%e Court o ppeals but t%is !as denied in a Resolution dated No*e"ber 7- 1994 issued by its For"er =econd @i*ision. &etitionersEsureties t%en iled a petition or re*ie! on certiorari !it% t%is Court- doceted as G.R. No. 117918- assailin+ t%e decision o t%e Court o ppeals. MC lie!ise iled a separate petition or re*ie! on certiorari- doceted as G.R. No. 117914- !it% t%is Court assailin+ t%e sa"e decision rendered by t%e Court o ppeals. pon "otion iled by petitioners- t%e t!o (2) petitions !ere consolidated on Banuary 11- 199D.ii:82;
&etitioners contend t%at t%ere !as no proo t%at t%e proceeds o t%e loans or t%e +oods under t%e trust receipts !ere e*er deli*ered to and recei*ed by MC. 'ut t%e record s%o!s ot%er!ise. &etitionersEsureties urt%er contend t%at assu"in+ t%at t%ere !as deli*ery by &'Co" o t%e proceeds o t%e loans and t%e +oods- t%e contracts !ere eecuted by an unaut%oriIed person- "ore speciically C%ua =io =uy !%o acted raudulently and in collusion !it% &'Co" to deraud MC.
,%e pertinent issues raised in t%e consolidated cases at bar are a) !%et%er or not t%e proceeds o t%e loans and letters o credit transactions !ere e*er deli*ered to MC- and b) !%et%er or not t%e indi*idual petitioners- as sureties- "ay be %eld liable under t%e t!o (2) =urety +ree"ents eecuted on Marc% 2H- 1979 and Buly 2-190.
n ci*il cases- t%e party %a*in+ t%e burden o proo "ust establis% %is case by preponderance o e*idence.iii:88;
&reponderance o e*idence "eans e*idence !%ic% is "ore con*incin+ to t%e court as !ort%y o belie t%an t%at !%ic% is oered in opposition t%ereto. &etitioners contend t%at t%e alle+ed pro"issory notes- trust receipts and surety a+ree"ents attac%ed to t%e co"plaint iled by &'Co" did not ripen into *alid and bindin+ contracts inas"uc% as t%ere is no e*idence o t%e deli*ery o "oney or loan proceeds to MC or to any o t%e petitionersEsureties. &etitioners clai" t%at under nor"al banin+ practice- borro!ers are re6uired to acco"plis% pro"issory notes in blan e*en beore t%e +rant o t%e loans applied or and suc% docu"ents beco"e *alid
!ritten contracts only !%en t%e loans are actually released to t%e borro!er. 3e are not con*inced.
@urin+ t%e trial o an action- t%e party !%o %as t%e burden o proo upon an issue "ay be aided in establis%in+ %is clai" or deense by t%e operation o a presu"ption- or- epressed dierently- by t%e probati*e *alue !%ic% t%e la! attac%es to a speciic state o acts. presu"ption "ay operate a+ainst %is ad*ersary !%o %as not introduced proo to rebut t%e presu"ption. ,%e eect o a le+al presu"ption upon a burden o proo is to create t%e necessity o presentin+ e*idence to "eet t%e le+al presu"ption or t%e prima )acie case created t%ereby- and !%ic% i no proo to t%e contrary is presented and oered- !ill pre*ail. ,%e burden o proo re"ains !%ere it is- but by t%e presu"ption t%e one !%o %as t%at burden is relie*ed or t%e ti"e bein+ ro" introducin+ e*idence in
support o %is a*er"ent- because t%e presu"ption stands in t%e place o e*idence unless rebutted.
nder =ection 8- Rule 181 o t%e Rules o Court t%e ollo!in+ presu"ptions- a"on+ ot%ers- are satisactory i uncontradicted a) ,%at t%ere !as a suicient consideration or a contract and b) ,%at a ne+otiable instru"ent
!as +i*en or indorsed or suicient consideration. s obser*ed by t%e Court o ppeals- a si"ilar presu"ption is ound in =ection 24 o t%e Ne+otiable nstru"ents #a! !%ic% pro*ides t%at e*ery ne+otiable instru"ent is dee"ed prima )acie to %a*e been issued or *aluable consideration and e*ery person !%ose si+nature appears t%ereon to %a*e beco"e a party or *alue. Ne+otiable instru"ents !%ic% are "eant to be substitutes or "oney-"ust conor" to t%e ollo!in+ re6uisites to be considered as suc% a) it "oney-"ust be in !ritin+K b) it "oney-"ust be si+ned by t%e "aer or dra!erK c) it "ust contain an unconditional pro"ise or order to pay a su" certain in "oneyK d)
it "ust be payable on de"and or at a ied or deter"inable uture ti"eK e) it "ust be payable to order or bearerK and ) !%ere it is a bill o ec%an+e- t%e dra!ee "ust be na"ed or ot%er!ise indicated !it% reasonable certainty. Ne+otiable instru"ents include pro"issory notes- bills o ec%an+e and c%ecs. #etters o credit and trust receipts are- %o!e*er- not ne+otiable instru"ents. 'ut drats issued in connection !it% letters o credit are ne+otiable instru"ents.
&ri*ate respondent &'Co" presented t%e ollo!in+ docu"entary e*idence to pro*e petitioners credit a*ail"ents and liabilities
-5 Promissor$ 1ote 1o. +1# -= dated Ma$ -, ->= in the sum o) P-,444,444.44 e/ecuted &$ M2CO in )avor o) P+Com.
5 Promissor$ 1ote 1o. +1# -> dated Ma$ -, ->= in the sum o) P-,444,444.44 e/ecuted &$ M2CO in )avor o) P+Com.
?5 Promissor$ 1ote 1o. +1# @? dated Ma$ @, ->= in the sum o) P-,444,444.44 e/ecuted &$ M2CO in )avor o) P+Com.
A5 Promissor$ 1ote 1o. +1# BA@= dated Ma$ -, ->= in the sum o) P?BB,444.44 e/ecuted &$ M2CO in )avor o) P+Com.
@5 Promissor$ 1ote 1o. 0# 4>A dated Jul$ >, ->=4 in the sum o) PA,444.444.44 e/ecuted &$ M2CO in )avor o) P+Com.
5 2rrevoca&le letter o) credit 1o. L-44 dated Jul$ ,->=- issued in )avor o) Pere' +atter$ Center )or account o) Mico Metals Corp.
B5 Dra)t dated Jul$ , ->=- in the sum o) P?A=,444.44 issued &$ Pere' +atter$ Center, &ene)iciar$ o) irrevoca&le Letter o) Credit 1o. 1o. L-44 and accepted &$ M2CO Metals corporation.
=5 Letter dated Jul$ , ->=- )rom Pere' +atter$ Center addressed to private respondent P+Com sho(in" that proceeds o) the irrevoca&le letter o) credit 1o. L -44 (as received &$ Mr. Moises Rosete, representative o) Pere' +atter$ Center.
>5 0rust receipt dated Jul$ , ->=- e/ecuted &$ M2CO in )avor o) P+Com coverin" the merchandise purchased under Letter o) Credit 1o. -44.
-45 2rrevoca&le letter o) credit 1o. L-??A dated Septem&er , ->=- issued in )avor o) Pere' +atter$ Center )or account o) M2CO Metals Corp.
--5 Dra)t dated Septem&er , ->=- in the sum o) P>4,444.44 issued &$ Pere' +atter$ Center and accepted &$ M2CO.
-5 Letter dated Septem&er -B, ->=- )rom Pere' +atter$ addressed to P+Com sho(in" that the proceeds o) credit no. L-?AA (as received &$ Mr. Moises Rosete, a representative o) Pere' +atter$ Center.
-?5 0rust Receipt dated Septem&er , ->=- e/ecuted &$ M2CO in )avor o) P+Com coverin" the merchandise under Letter o) Credit 1o. L-??A.
-A5 2rrevoca&le Letter o) Credit no. -=B? dated 1ovem&er -4, ->=- )or ;S--,>4.44 issued &$ P+Com in )avor o) 0# J27 Enterprises Co. Ltd., throu"h its correspondent &an*, 2rvin" 0rust Compan$ o) 0aipei, 0ai(an.
-@5 0rust Receipt dated Decem&er -@, >-=- e/ecuted &$ M2CO in )avor o) P+Com sho(in" that possession o) the merchandise covered &$ 2rrevoca&le Letter o) Credit no. -=B? (as released &$ P+Com to M2CO.
-5 Letters dated March , ->B> )rom M2CO si"ned &$ its president, Charles Lee, sho(in" that M2CO sou"ht credit line )rom P+Com in the )orm o) loans, letters o) credit and trust receipt in the sum o) PB,@44,444.44.
-B5 Letter dated Jul$ -A, ->=4 )rom M2CO si"ned &$ its president, Charles Lee, sho(in" that M2CO reuested )or additional )inancial assistance in the sum o) PA,444,444.44.
-=5 +oard resolution dated March , ->B> o) M2CO authori'in" Charles Lee and Mariano Sio sin"l$ or %ointl$ to act and si"n )or and in &ehal) o) M2CO relative to the o&tention o) credit )acilities )rom P+Com.
->5 Dul$ notari'ed Deed o) Mort"a"e dated Ma$ -, ->B> e/ecuted &$ M2CO in )avor o) P+Com over M2CO s real properties covered &$ 0C0 1os. --A= and --@4 located in Pasi".
45 Dul$ notari'ed Suret$ #"reement dated March , ->B> e/ecuted &$ herein petitioners Charles Lee, Mariano Sio, #l)onso 8ap, Richard Velasco and Chua Sio* Su$ in )avor o) P+Com.
-5 Dul$ notari'ed Suret$ #"reement dated Jul$ =, ->=4 e/ecuted &$ herein petitioners Charles Lee, Mariano Sio, #l)onso 8ap, Richard Velasco and Chua Sio* Su$ in )avor o) P+Com.
5 Dul$ notari'ed certi)ication dated Jul$ =, ->=4 issued &$ M2CO s corporate secretar$, Mr. P.+. +arrera, attestin" to the adoption o) a &oard resolution authori'in" Chua Sio* Su$ to si"n, )or and in &ehal) o) M2CO, all the necessar$ documents includin" contracts, loan instruments and mort"a"es relative to the
o&tention o) various credit )acilities )rom P+Com.
,%e abo*eEcited docu"ents presented %a*e not "erely created a prima )acie case but %a*e actually pro*ed t%e solidary obli+ation o MC and t%e petitioners- as sureties o MC- in a*or o responde nt &'Co". 3%ile t%e presu"ption ound under t%e Ne+otiable nstru"ents #a! "ay not necessarily be applicable to trust receipts
and letters o credit- t%e presu"ption t%at t%e drats dra!n in connection !it% t%e letters o credit %a*e suicient consideration. nder =ection 8(r)- Rule 181 o t%e Rules o Court t%ere is also a presu"ption t%at suicient consideration !as +i*en in a contract. 5ence- petitioners s%ould %a*e presented credible e*idence to rebut t%at presu"ption as !ell as t%e e*idence presented by pri*ate respondent &'Co". ,%e letters o credit s%o! t%at t%e pertinent "aterials$"erc%andise %a*e been recei*ed by MC. ,%e drats si+ned by t%e beneiciary$suppliers in
connection !it% t%e correspondin+ letters o credit pro*ed t%at said suppliers !ere paid by &'Co" or t%e account o MC. n t%e ot%er %and- aside ro" t%eir bare denials petitioners did not present suicient and co"petent e*idence to rebut t%e e*idence o pri*ate respondent &'Co". &etitioner MC did not proer a sin+le piece o e*idence- apart ro" its bare denials- to support its alle+ation t%at t%e loan transactions- real estate "ort+a+e- letters o credit and trust receipts !ere issued alle+edly !it%out any consideration.
&etitionersEsureties- or t%eir part- presented t%e 'yE#a!si*:84; o Mico Metals Corporation (MC) to pro*e
t%at only t%e president o MC is aut%oriIed to borro! "oney- arran+e letters o credit- eecute trust receipts-and pro"issory notes receipts-and conse6uently- t%at t%e loan transactions- letters o credit- pro"issory notes receipts-and trust receipts- "ost o !%ic% !ere eecuted by C%ua =io =uy in representation o MC !ere not alle+edly aut%oriIed and %ence- are not bindin+ upon MC. perusal o t%e 'yE#a!s o MC- %o!e*er- s%o!s t%at t%e
po!er to borro! "oney or t%e co"pany and issue "ort+a+es- bonds- deeds o trust and ne+otiable instru"ents or securities- secured by "ort+a+es or pled+es o property belon+in+ to t%e co"pany is not conined solely to t%e president o t%e corporation. ,%e 'oard o @irectors o MC can also borro! "oney- arran+e letters o credit- eecute trust receipts and pro"issory notes on be%al o t%e corporation.*:8D; =i+niicantly- t%is po!er o
t%e 'oard o @irectors accordin+ to t%e byEla!s o MC- "ay be dele+ated to any o its standin+ co""ittee-oicer or a+ent.*i
:8H; 5ence- &'Co" %ad e*ery ri+%t to rely on t%e Certiication issued by MCs corporate
secretary- &.'. 'arrera- t%at C%ua =io =uy !as duly aut%oriIed by its 'oard o @irectors to borro! "oney and obtain credit acilities in be%al o MC ro" &'Co".
&etitionersEsureties also presented a letter o t%eir counsel dated ctober 9- 192- addressed to pri*ate respondent &'Co" purportedly to s%o! t%at &'Co" ne! t%at C%ua =io =uy alle+edly used t%e credit and +ood na"es o t%e petitionerEsureties or %is beneit- and t%at petitionerEsureties !ere "ade to si+n blan docu"ents and !ere urnis%ed copies o t%e sa"e. ,%e letter- %o!e*er- is in act "erely a reply o petitionersE sureties counsel to &'Co"s de"and or pay"ent o MCs obli+ations- and appears to be an inconse6uential piece o selEser*in+ e*idence.
n addition to t%e ore+oin+- MC and petitionersEsureties cited t%e decision o t%e trial court !%ic% stated t%at t%ere !as no proo t%at t%e proceeds o t%e loans !ere e*er deli*ered to MC. lt%ou+% t%e pri*ate respondents !itness- Mr. Gardiola- testiied t%at t%e proceeds o t%e loans !ere deposited in MCs current account !it% &'Co"- %is testi"ony !as alle+edly not supported by any ban record- note or "e"orandu". careul scrutiny o t%e record includin+ t%e transcript o steno+rap%ic notes re*eals- %o!e*er- t%at alt%ou+% pri*ate respondent &'Co" !as !illin+ to produce t%e correspondin+ account led+er s%o!in+ t%at t%e proceeds o t%e loans !ere credited to MCs current account !it% &'Co"- MC in act *i+orously obected to t%e presentation o said docu"ent. ,%at point is s%o!n in t%e testi"ony o &'Co"s !itness- Gardiola- t%us
No!- all o t%ese pro"issory note <%ibits and B !%ic% as you %a*e said pre*iously (sic) a*ailed ori+inally by deendant Mico Metals Corp. so"eti"e in 1979- "y 6uestion no! is- do you no! !%at %appened to t%e proceeds o t%e ori+inal a*ail"ent
3ell- it !as credited to t%e current account o Mico Metals Corp.
3%y did it !as credited to t%e proceeds to t%e account o Mico Metals Corp (sic) 3ell- t%at is our understandin+.
,,?. @RN
?our %onor- "ay !e be +i*en a c%ance to obect- t%e best e*idence is t%e soEcalled current account... CR,
Can you produce t%e led+er account ?es- ?our 5onor- !ill brin+. CR,
,%e led+er or record o t%e current account o Mico Metals Corp. ?es- ?our 5onor.
,,?. C<B=
?our 5onor- t%ese are a conidential record- and t%ey "i+%t not be disclosed !it%out t%e consent o t%e person concerned. (sic)
,,?. =N,=
3ell- you are t%e one !%o is asin+ t%at. ,,?. @RN
?our 5onor- " precisely !ant to s%o! or t%e ... (sic) CR,
'ut t%e a"ount co*ered by t%e current account o deendant Mico Metals Corp. is t%e subect "atter o t%is case.
re t%ose a*ail"ents !ere release (sic)
?es- ?our 5onor- to t%e deendant corporation. 'y !%at "eans
'y t%e credit to t%eir current account. ,,?. C<B=
3e obect to t%at- your 5onor- because t%e disclose is t%e secrecy o t%e ban deposit. (sic)
'eore t%e recess Mr. Gardiola- you stated t%at t%e proceeds o t%e t%ree (8) pro"issory notes !ere credited to t%e accounts o Mico Metals Corporation- no! do you no! !%at ind o current account !as t%at !%ic% you are reerrin+ to
,,?. C<B=
bection your 5onor- t%at is t%e disclose o t%e deposit o deendant Mico Metals Corporation and it cannot disclosed !it%out t%e aut%ority o t%e depositor. (sic)*ii
:87;
,%at proceeds o t%e loans !%ic% !ere ori+inally a*ailed o in 1979 !ere deli*ered to MC is bolstered by t%e act t%at "ore t%an a year later- speciically on Buly 14- 190- MC t%rou+% its president- petitionerEsurety C%arles #ee- re6uested or an additional loan o Four Million &esos (&4-000-000.00) ro" &'Co". ,%e act t%at MC !as re6uestin+ or an additional loan i"plied t%at it %as already a*ailed o earlier loans ro" &'Co". &etitioners alle+e t%at &'Co" presented no e*idence t%at it re"itted pay"ents to co*er t%e do"estic and orei+n letters o credit. &etitioners placed "uc% reliance on t%e erroneous decision o t%e trial court !%ic% stated t%at pri*ate respondent &'Co" alle+edly ailed to pro*e t%at it actually "ade pay"ents under t%e letters
o credit since t%e ban drats presented as e*idence s%o! t%at t%ey !ere "ade in a*or o t%e 'an o ,ai!an and First Co""ercial 'an.
&etitioners alle+ations are untenable.
Modern letters o credit are usually not "ade bet!een natural persons. ,%ey in*ol*e ban to ban transactions. 5istorically- t%e letter o credit !as de*eloped to acilitate t%e sale o +oods bet!een- distant and una"iliar buyers and sellers. t !as an arran+e"ent under !%ic% a ban- !%ose credit !as acceptable to t%e seller- !ould at t%e instance o t%e buyer a+ree to pay drats dra!n on it by t%e seller- pro*ided t%at certain docu"ents are presented suc% as bills o ladin+ acco"panied t%e correspondin+ drats. <pansion in t%e use o letters o credit
!as a natural de*elop"ent in co""ercial banin+.*iii:8; &arties to a co""ercial letter o credit include (a) t%e
buyer or t%e i"porter- (b) t%e seller- also reerred to as beneiciary- (c) t%e openin+ ban !%ic% is usually t%e buyers ban !%ic% actually issues t%e letter o credit- (d) t%e notiyin+ ban !%ic% is t%e correspondent ban o
t%e openin+ ban t%rou+% !%ic% it ad*ises t%e beneiciary o t%e letter o credit- (e) ne+otiatin+ ban !%ic% is usually any ban in t%e city o t%e beneiciary. ,%e ser*ices o t%e notiyin+ ban "ust al!ays be utiliIed i t%e letter o credit is to be ad*ised to t%e beneiciary t%rou+% cable- () t%e payin+ ban !%ic% buys or discounts t%e drats conte"plated by t%e letter o credit- i suc% drat is to be dra!n on t%e openin+ ban or on anot%er desi+nated ban not in t%e city o t%e beneiciary. s a rule- !%ene*er t%e acilities o t%e openin+ ban are used- t%e beneiciary is supposed to present %is drats to t%e notiyin+ ban or ne+otiation and (+) t%e conir"in+ ban !%ic%- upon t%e re6uest o t%e beneiciary- conir"s t%e letter o credit issued by t%e openin+ ban.
Fro" t%e ore+oin+- it is clear t%at letters o credit- bein+ usually ban to ban transactions- in*ol*e "ore t%an ust one ban. Conse6uently- t%ere is not%in+ unusual in t%e act t%at t%e drats presented in e*idence by
respondent ban !ere not "ade payable to &'Co". s eplained by respondent ban- a drat !as dra!n on t%e 'an o ,ai!an by ,a Bi% <nterprises Co.- #td. o ,ai!an- supplier o t%e +oods co*ered by t%e orei+n letter o credit. 5a*in+ paid t%e supplier- t%e 'an o ,ai!an t%en presented t%e ban drat or rei"burse"ent by &'Co"s correspondent ban in ,ai!an- t%e r*in+ ,rust Co"pany !%ic% eplains t%e reason !%y on its ace-t%e drat !as "ade payable to ace-t%e 'an o ,ai!an. r*in+ ,rust Co"pany accepted and endorsed ace-t%e drat to &'Co". ,%e drat !as later trans"itted to &'Co" to support t%e latters clai" or pay"ent ro" MC. MC accepted t%e drat upon present"ent and ne+otiated it to &'Co".
&etitioners urt%er a*er t%at MC ne*er re6uested t%at le+al possession o t%e "erc%andise b e transerred to &'Co" by !ay o trust receipts. &etitioners insist t%at assu"in+ t%at MC transerred possession o t%e "erc%andise to &'Co" by !ay o trust receipts- t%e sa"e !ould be ille+al since &'Co"- bein+ a banin+ institution- is not aut%oriIed by la! to en+a+e in t%e business o i"portin+ and sellin+ +oods.
trust receipt is considered as a security transaction intended to aid in inancin+ i"porters and retail dealers !%o do not %a*e suicient unds or resources to inance t%e i"portation or purc%ase o "erc%andise- and !%o "ay not be able to ac6uire credit ecept t%rou+% utiliIation- as collateral o t%e "erc%andise i"ported or purc%ased.i:89; trust receipt- t%ereor- is a docu"ent o security pursuant to !%ic% a ban ac6uires a security
interest in t%e +oods under trust receipt. nder a letter o creditEtrust receipt arran+e"ent- a ban etends a loan co*ered by a letter o credit- !it% t%e trust receipt as a security or t%e loan. ,%e transaction in*ol*es a loan eature represented by a letter o credit- and a security eature !%ic% is in t%e co*erin+ trust receipt !%ic% secures an indebtedness.
&etitioners a*er"ents !it% re+ard to t%e second issue are no less incredulous. &etitioners contend t%at t%e letters o credit- surety a+ree"ents and loan transactions did not ripen into *alid and bindin+ contracts since no part o t%e proceeds o t%e loan transactions !ere deli*ered to MC or to any o t%e petitionersEsureties. &etitionersE sureties alle+e t%at C%ua =io =uy !as t%e beneiciary o t%e proceeds o t%e loans and t%at t%e latter "ade t%e" si+n t%e surety a+ree"ents in blan. ,%us- t%ey "aintain t%at t%ey s%ould not be %eld accountable or any liability t%at "i+%t arise t%erero".
t %as not escaped our notice t%at it !as petitionerEsurety C%arles #ee- as president o MC Metals Corporation- !%o irst re6uested or a discountin+ loan o ,%ree Million &esos (&8-000-000.00) ro" &'Co" as e*idenced by %is letter dated Marc% 2- 1979.l
:40; n t%e sa"e day- C%arles #ee- as &resident o MC- re6uested
or a #etter o Credit and ,rust Receipt line in t%e su" o ,%ree Million &esos (&8-000-000.00).li:41; =till- on t%e
sa"e day- C%arles #ee a+ain as &resident o MC- !rote anot%er letter to &'CM re6uestin+ or a inancin+ line in t%e su" o ne Million Fi*e 5undred ,%ousand &esos (&1-D00-000.00) to be used eclusi*ely as "ar+inal deposit or t%e openin+ o MCs orei+n and local letters o credit !it% &'Co".lii:42; More t%an a
year later- it !as also C%arles #ee- a+ain in %is capacity as president o MC- !%o ased or an additional loan in t%e su" o Four Million &esos (&4-000-000.00). ,%e clai" t%ereore o petitioners t%at it !as C%ua =io =uy-in conni*ance !it% t%e respondent &'Co"- !%o applied or and obta=uy-ined t%e loan transactions and letters o credit strains credulity considerin+ t%at e*en t%e @eed o t%e Real <state Mort+a+e in a*or o &'Co" !as eecuted by petitionerEsurety Mariano =io in %is capacity as +eneral "ana+er o MCliii:48; to secure t%e loan
acco""odations obtained by MC ro" &'Co".
&etitionersEsureties alle+e t%at t%ey !ere "ade to si+n t%e surety a+ree"ents in blan by C%ua =io =uy. &etitioner lonso ?ap- t%e corporate treasurer- or %is part testiied t%at %e si+ned boolets o c%ecs- surety a+ree"ents and pro"issory notes in blanK t%at %e si+ned t%e docu"ents in blan despite %is "is+i*in+s since C%ua =io =uy assured %i" t%at t%e transaction can easily be taen cared o since C%ua =io =uy personally ne! t%e C%air"an o t%e 'oard o &'Co"K t%at %e !as not recei*in+ salary as treasurer o Mico Metals and since C%ua =io =uy %ad a direct %and in t%e "ana+e"ent o Malayan =ales Corporation- o !%ic% ?ap is an e"ployee- %e (?ap) si+ned t%e docu"ents in blan as consideration or %is continued e"ploy"ent in Malayan =ales Corporation. &etitioner ntonio Co testiied t%at %e !ored as oice "ana+er or MC ro" 197E192. s oice "ana+er- %e !as t%e one in c%ar+e o transactin+ business lie purc%asin+- sellin+ and payin+ t%e salary o t%e e"ployees. 5e !as also in c%ar+e o t%e %andlin+ o docu"ents pertainin+ to surety a+ree"ents-trust receipts and pro"issory notesKli*:44; t%at !%en %e irst oined MC Metals Corporation- %e !as able to read
t%e byEla!s o t%e corporation and %e ca"e to no! t%at only t%e c%air"an and t%e president can borro! "oney in be%al o t%e corporationK t%at C%ua =io =uy once called %i" up and told %i" to secure an in*oice so t%at a credit line can be opened in t%e ban !it% a local letter o creditK t%at !%en t%e in*oice !as secured- %e (Co) brou+%t it to+et%er !it% t%e application or a credit line to C%ua =io =uy- and t%at %e 6uestioned t%e aut%ority
o C%ua =io =uy pointin+ out t%at %e (Co) is not e"po!ered to si+n t%e docu"ent inas"uc% as only t%e latter-as president- !latter-as aut%oriIed to do so. 5o!e*er- C%ua =io =uy alle+edly ust said t%at %e %ad already taled !it% t%e C%air"an o t%e 'oard o &'Co"K and t%at C%ua =io =uy reportedly said t%at %e needed t%e "oney to inance a proect t%at %e %ad !it% t%e ,aipei +o*ern"ent. Co also testiied t%at %e ne! o t%e application or do"estic letter o credit in t%e su" o ,%ree 5undred FortyE<i+%t ,%ousand &esos (&84-000.00)K and t%at a certain Moises Rosete !as aut%oriIed to clai" t%e c%ec co*erin+ t%e ,%ree 5undred FortyE<i+%t ,%ousand &esos (&84-000.00) ro" &'Co"K and t%at ater clai"in+ t%e c%ec Rosete brou+%t it to &ereI 'attery Center or indorse"ent ater !%ic% t%e sa"e !as deposited to t%e personal account o C%ua =io =uy.l*
:4D;
3e consider as incredible and unacceptable t%e clai" o petitionersEsureties t%at t%e 'oard o @irectors o MC !as so careless about t%e business aairs o MC as !ell as about t%eir o!n personal reputation and "oney t%at t%ey si"ply relied on t%e say so o C%ua =io =uy on "atters in*ol*in+ "illions o pesos. nder =ection 8 (d)- Rule 181 o t%e Rules o Court- it is presu"ed t%at a person taes ordinary care o %is concerns. 5ence- t%e natural presu"ption is t%at one does not si+n a docu"ent !it%out irst inor"in+ %i"sel o its contents and conse6uences. =aid presu"ption ac6uires +reater orce in t%e case at bar !%ere not only one but se*eral docu"ents !ere eecuted at dierent ti"es and at dierent places by t%e petitioner sureties and C%ua =io =uy as president o MC.
MC and %erein petitionersEsureties insist t%at C%ua =io =uy !as not duly aut%oriIed to ne+otiate or loans in be%al o MC ro" &'Co". &etitioners alle+ation- %o!e*er- is belied by t%e Buly 2- 190 Certiication
issued by t%e corporate secretary o &'Co"- tty. &.'. 'arrera- t%at MCs 'oard o @irectors +a*e C%ua =io =uy ull aut%ority to ne+otiate or loans in be%al o MC !it% &'Co". n act- t%e Certiication e*en pro*ided t%at C%ua =io =uys aut%ority continues until and unless &'Co" is notiied in !ritin+ o t%e !it%dra!al t%ereo
by t%e said 'oard. Notably- petitioners ailed to contest t%e +enuineness o t%e said Certiication !%ic% is notariIed and to s%o! any !ritten proo o any alle+ed !it%dra!al o t%e said aut%ority +i*en by t%e 'oard o @irectors to C%ua =io =uy to ne+otiate or loans in be%al o MC.
,%ere !as no need or &'Co" to personally inor" t%e petitionersEsureties indi*idually about t%e ter"s o t%e loans- letters o credit and ot%er loan docu"ents. ,%e petitionersEsureties t%e"sel*es %appen to co"prise t%e 'oard o @irectors o MC- !%ic% +a*e ull aut%ority to C%ua =io =uy to ne+otiate or loans in be%al o MC. Notice to MCs aut%oriIed representati*e- C%ua =io =uy- !as notice to MC. ,%e Certiication issued by &'Co"s corporate secretary- tty. &.'. 'arrera- indicated t%at C%ua =io =uy %ad ull aut%ority to ne+otiate and si+n t%e necessary docu"ents- in be%al o MC or loans ro" &'Co". Respondent &'Co" t%ereore %ad t%e ri+%t to rely on t%e said notariIed Certiication o MCs Corporate =ecretary.
nent petitionersEsureties contention t%at t%ey obtained no consideration !%atsoe*er on t%e surety a+ree"ents-!e need only point out t%at t%e consideration or t%e sureties is t%e *ery consideration or t%e principal obli+or-MC- in t%e contracts o loan. n t%e case o ille/ Plastic 2ndustries Corporation vs. Court o) #ppeals,l*i
:4H;
!e ruled t%at t%e consideration necessary to support a surety obli+ation need not pass directly to t%e surety- a consideration "o*in+ to t%e principal alone bein+ suicient. For a +uarantor or surety is bound by t%e sa"e consideration t%at "aes t%e contract eecti*e bet!een t%e parties t%ereto. t is not necessary t%at a +uarantor or surety s%ould recei*e any part or beneit- i suc% t%ere be- accruin+ to %is principal.
&etitioners placed too "uc% reliance on t%e rule in e*idence t%at t%e burden o proo does not s%it !%ereas t%e burden o +oin+ or!ard !it% t%e e*idence does pass ro" party to party. t is true t%at said rule is not c%an+ed by t%e act t%at t%e party %a*in+ t%e burden o proo %as introduced e*idence !%ic% establis%ed prima )acie %is assertion because suc% e*idence does not s%it t%e burden o prooK it "erely puts t%e ad*ersary to t%e necessity o producin+ e*idence to "eet t%e prima )acie case. 3%ere t%e deendant "erely denies- eit%er +enerally or ot%er!ise- t%e alle+ations o t%e plaintis pleadin+s- t%e burden o proo continues to rest on t%e plainti t%rou+%out t%e trial and does not s%it to t%e deendant until t%e plaintis e*idence %as been presented and duly oered. ,%e deendant %as t%en no burden ecept to produce e*idence suicient to create a state o e6uipoise bet!een %is proo and t%at o t%e plainti to deeat t%e latter- !%ereas t%e plainti %as t%e burden- as in t%e be+innin+- o establis%in+ %is case by a preponderance o e*idence.l*ii
:47; 'ut !%ere t%e deendant %as ailed to
present and "ars%all e*idence suicient to create a state o e6uipoise bet!een %is proo and t%at o plainti- t%e prima )acie case presented by t%e plainti !ill pre*ail.
n t%e case at bar- respondent &'Co"- as plainti in t%e trial court- %as in act presented suicient docu"entary and testi"onial e*idence t%at pro*ed by preponderance o e*idence its subect collection case a+ainst t%e
deendants !%o are t%e petitioners %erein. n *ie! o all t%e ore+oin+- t%e Court o ppeals co""itted no re*ersible error in its appealed @ecision.
*HEREFORE- t%e assailed @ecision o t%e Court o ppeals in CEG.R. CA No. 2740 entitled- &%ilippine 'an o Co""unications *s. Mico Metals Corporation- C%arles #ee- C%ua =io =uy- Mariano =io- lonso ?ap-Ric%ard Aelasco and lonso Co- is FFRM<@ in toto.
Costs a+ainst t%e petitioners. = R@<R<@.
i ii
iiiTRASFIELD PHILIPPIES+ IC.- petitioner,vs. LU,O H-DRO CORPORATIO -=,R#
=ubect o t%is case is t%e letter o credit !%ic% %as e*ol*ed as t%e ubi6uitous and "ost i"portant de*ice in international trade. creation o co""erce and business"en- t%e letter o credit is also uni6ue in t%e nu"ber o parties in*ol*ed and its supranational c%aracter.
&etitioner %as appealed ro" t%e Decision[1] o t%e Court o ppeals in CEG.R. =& No. H1901 entitled 0rans)ield Philippines, 2nc. v. 7on. Oscar Pimentel, et al .- pro"ul+ated on 81 Banuary 2001.[2]
n 2H Marc% 1997- petitioner and respondent #uIon 5ydro Corporation (%ereinater- #5C) entered into a ,urney Contract[3] !%ereby petitioner- as ,urney Contractor- undertoo to construct- on a turney basis- a se*enty (70)EMe+a!att %ydroEelectric po!er station at t%e 'aun Ri*er in t%e pro*inces o 'en+uet and locos =ur (%ereinater- t%e &roect). &etitioner !as +i*en t%e sole
responsibility or t%e desi+n- construction- co""issionin+- testin+ and co"pletion o t%e &roect.[4] ,%e ,urney Contract pro*ides t%at (1) t%e tar+et co"pletion date o t%e &roect s%all be on 1 Bune 2000- or suc% later date as "ay be a+reed upon bet!een petitioner and respondent #5C or ot%er!ise deter"ined in accordance !it% t%e ,urney ContractK and (2) petitioner is entitled to clai" etensions o ti"e (<,) or reasons enu"erated in t%e ,urney Contract- a"on+ !%ic% are *ariations- )orce ma%eure- and delays caused by #5C itsel.[5] Furt%er- in case o dispute- t%e parties are bound to settle t%eir dierences t%rou+% "ediation- conciliation and suc% ot%er "eans enu"erated under Clause 20.8 o t%e ,urney Contract.[6]
,o secure peror"ance o petitioners obli+ation on or beore t%e tar+et co"pletion date- or suc% ti"e or co"pletion as "ay be deter"ined by t%e parties a+ree"ent- petitioner opened in a*or o #5C t!o (2) standby letters o credit bot% dated 20 Marc% 2000 (%ereinater reerred to as t%e =ecurities)- to !it =tandby #etter o Credit No. <00112H$400 !it% t%e local branc% o respondent ustralia and Ne! Oealand 'anin+ Group #i"ited (NO 'an)[7] and =tandby #etter o Credit No. '@@='E00$4 !it% respondent =ecurity 'an Corporation (='C)[8] eac% in t%e a"ount o =J-9-907.00.[9]
n t%e course o t%e construction o t%e proect- petitioner sou+%t *arious <, to co"plete t%e &roect. ,%e etensions !ere re6uested alle+edly due to se*eral actors !%ic% pre*ented t%e co"pletion o t%e &roect on tar+et date- suc% as )orce ma%eure occasioned by typ%oon Fe&- barricades and de"onstrations. #5C denied t%e re6uests- %o!e*er. ,%is +a*e rise to a series o le+al actions bet!een t%e parties !%ic% cul"inated in t%e instant petition.
,%e irst o t%e actions !as a Re6uest or rbitration !%ic% #5C iled beore t%e Construction ndustry rbitration Co""ission (CC) on 1 Bune 1999.[10] ,%is !as ollo!ed by anot%er Re6uest or rbitration- t%is ti"e iled by petitioner beore t%e nternational C%a"ber o Co""erce (CC) [11] on 8 No*e"ber 2000. n bot% arbitration proceedin+s- t%e co""on issues presented !ere :1) !%et%er
typ%oon Fe& and any o its associated e*ents constituted )orce ma%eure to ustiy t%e etension o ti"e sou+%t by petitionerK and :2) !%et%er #5C %ad t%e ri+%t to ter"inate t%e ,urney Contract or ailure o petitioner to co"plete t%e &roect on tar+et date.
Mean!%ile- oreseein+ t%at #5C !ould call on t%e =ecurities pursuant to t%e pertinent pro*isions o t%e ,urney Contract-[12] petitionerin t!o separate letters[13] bot% dated 10 u+ust 2000ad*ised respondent bans o t%e arbitration proceedin+s already pendin+ beore t%e CC and CC in connection !it% its alle+ed deault in t%e peror"ance o its obli+ations. ssertin+ t%at #5C %ad no ri+%t to call on t%e =ecurities until t%e resolution o disputes beore t%e arbitral tribunals- petitioner !arned respondent bans t%at any transer- release- or disposition o t%e =ecurities in a*or o #5C or any person clai"in+ under #5C !ould constrain it to %old respondent bans liable or li6uidated da"a+es.
s petitioner %ad anticipated- on 27 Bune 2000- #5C sent notice to petitioner t%at pursuant to Clause .2[14] o t%e ,urney Contract- it ailed to co"ply !it% its obli+ation to co"plete t%e &roect. @espite t%e letters o petitioner- %o!e*er- bot% bans inor"ed petitioner t%at t%ey !ould pay on t%e =ecurities i and !%en #5C calls on t%e".[15]
#5C asserted t%at additional etension o ti"e !ould not be !arrantedK accordin+ly it declared petitioner in deault$delay in t%e peror"ance o its obli+ations under t%e ,urney Contract and de"anded ro" petitioner t%e pay"ent o =J7D-000.00 or eac% day o delay be+innin+ 2 Bune 2000 until actual co"pletion o t%e &roect pursuant to Clause .7.1 o t%e ,urney Contract. t t%e sa"e ti"e- #5C ser*ed notice t%at it !ould call on t%e securities or t%e pay"ent o li6uidated da"a+es or t%e delay.[16]
n D No*e"ber 2000- petitioner as plainti iled a Complaint )or 2n%unction- !it% prayer or te"porary restrainin+ order and !rit o preli"inary inunction- a+ainst %erein respondents as deendants beore t%e Re+ional ,rial Court (R,C) o Maati.[17] &etitioner sou+%t to restrain respondent #5C ro" callin+ on t%e =ecurities and respondent bans ro" transerrin+- payin+ on- or in any "anner disposin+ o t%e =ecurities or any rene!als or substitutes t%ereo. ,%e R,C issued a se*entyEt!o (72)E%our te"porary restrainin+ order on t%e sa"e day. ,%e case !as doceted as Ci*il Case No. 00E1812 and raled to 'ranc% 14 o t%e R,C o Maati.
ter appropriate proceedin+s- t%e trial court issued an Order on 9 No*e"ber 2000- etendin+ t%e te"porary restrainin+ order or a period o se*enteen (17) days or until 2H No*e"ber 2000.[18]
,%e R,C- in its Order [19] dated 24 No*e"ber 2000- denied petitioners application or a !rit o preli"inary inunction. t ruled t%at petitioner %ad no le+al ri+%t and suered no irreparable inury to ustiy t%e issuance o t%e !rit. <"ployin+ t%e principle o independent contract in letters o credit- t%e trial court ruled t%at #5C s%ould be allo!ed to dra! on t%e =ecurities or li6uidated da"a+es. t debuned petitioners contention t%at t%e principle o independent contract could be in*oed only by respondent bans since accordin+ to it respondent #5C is t%e ulti"ate beneiciary o t%e =ecurities. ,%e trial court urt%er ruled t%at t%e bans !ere "ere custodians o t%e unds and as suc% t%ey !ere obli+ated to transer t%e sa"e to t%e beneiciary or as lon+ as t%e latter could sub"it t%e re6uired certiication o its clai"s.
@issatisied !it% t%e trial courts denial o its application or a !rit o preli"inary inunction- petitioner ele*ated t%e case to t%e Court o ppeals via a Petition )or Certiorari under Rule HD- !it% prayer or t%e issuance o a te"porary restrainin+ order and !rit o preli"inary inunction.[20] &etitioner sub"itted to t%e appellate court t%at #5Cs call on t%e =ecurities !as pre"ature considerin+ t%at t%e issue o its deault %ad not yet been resol*ed !it% inality by t%e CC and$or t%e CC. t asserted t%at until t%e act o delay could be establis%ed- #5C %ad no ri+%t to dra! on t%e =ecurities or li6uidated
