123 Charles Lee, et al vs CA Phil Bank of Communications, GR 117913, Feb 1, 2002
Facts : MICO Metals Corporation, through its President, Chares Lee requested from Philippine Bank of Communication a
discounting loan/credit line in the amount of P3,000,000.000 for the purpose of carrying out MICO’s line of business as
well as to maintain its volume of business, and another discounting loan/credit line for the purpose of opening letters of
credit and trust receipts.Both requests were supported by a resolution that the President, Charles Lee, and the
VicePresident and General Manager, Mr. Mariano Sio, are authorized and empowered to apply for,negotiate and secure
the approval of commercial loans x x x x x but not limited to discount loans,letters of credit, trust receipts, lines for
marginal deposits on foreign and domestic letters of credit x x x x for a total amount of not to exceed P10,000,000.00.The
request was approved by the Bank PBCom, and first availment in the amount of P1,000,000.00 was made on March 26,
1979. Total availment has reached P3,000,000.00, whichupon maturity, were rolled-over or renewed.
As security to the loan, a Real Estate Mortgage over MICO’s properties was executed by its VPMariano Sio. Further,
Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap and RichardVelasco, executed in their personal capacity a Surety
Agreement in favor of PBCom in theamount of P3,000,000.00.Another P4,0000,000.00 was requested by the President
Charles Lee from PBCom for thepurpose of expansion and modernization of the companies machineries. The request
wasconsequently approved and availed in full. Another surety agreement was executed by the sameset of officers-persons
in favor of PBCom and their liability shall not at any one time exceed thesum of P7,500,000.00/ Later, MICO furnished
PBCom a copy of its notarized certification issued by its corporatesecretary stating therein that Chio Siok Suy was the
duly authorized person, unanimouslyapproved by the Board of Directors, to negotiate with PBCom on behalf of MICO for
loans andother credit availments. After the receipt of this secretary’s certificate, foreign letters of credits, domestic letter
of credits and loans were further requested, approved and availed. Upon maturity of all the creditavailments, PBCom
demanded for payment but MICO failed to settle despite repeated demands,reason for the Bank to foreclose
extrajudicially the properties, and later sold them in public auction. The price however, was not sufficient to fully pay the
total outstanding. PBComdemanded from the petitioners-sureties the deficiency, which the latter refused to
acknowledge.Thus, the filing with the court of the complaint and for attachment on the properties of thepetitioners-
sureties contending that MICO is no longer in operation and it has no other propertiesto settle for the deficiency. The trial
court denied the complaint for failure on the part of theBank to prove that the proceeds of the loans were ever delivered to
MICO, which the Court of Appeals reversed, hence this petition.
ISSUE: 1. Whether or not the proceeds of the loans and letters of credit transactions were everdelivered to MICO; and
2) Whether or not the individual petitioners, as sureties, may be held liable under the 2 SuretyAgreements executed.
Ruling: The SC AFFIRMED in toto the decision of the Court Appeals.In civil cases, the party having the burden of proof
must establish his case by preponderance of evidence, which can be established by the operation of presumption or by the
probative value,which the law attaches to a specific state of facts, thereby creating a prima facie case. If there isno proof to
the contrary, the prima facie case or evidence will prevail.The Negotiable Instruments Law clearly provides that every
negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose
signatureappears thereon are also presumed to have become a party for value. Negotiable instrumentsinclude promissory
notes, bills of exchange and checks. Letters of credit and trust receipts arehowever, not negotiable instruments, but drafts
issued in connection with letters of credit arenegotiable instruments.All documents presented by PBCom have not merely
created a prima facie case but have actuallyproved the solidary obligation of MICO and the petitioners-sureties. While the
presumption found under the Negotiable Instruments Law may not necessarily be applicable to trust receiptsand letters of
credit, the presumption that the drafts drawn in connection with the letters of credithave sufficient consideration. The fact
that the letters of credit show that the pertinentmaterials/merchandise have been received by MICO and with drafts signed
by thebeneficiary/suppliers proved that there was a consideration for value.Therefore, the contention of the petitioner that
the contracts on loans and letters of credits werenot binding on the premise that there were no consideration for value and
if there was, the Bank failed to present evidence as to the crediting of the proceeds to its account is untenable. It wasthe
petitioner who has been preventing the Bank in presenting the evidence. But from the fact itself that MICO has requested
for an additional loan of P4M, impliedly, is a prima facie casewhich showed that the proceeds of the earlier loans were
delivered to MICO. The court also found no merits on the latter’s contention that the contracts were executed fraudulent
ly by theunauthorized person Chua Siok Suy. The fact that it was MICO which furnished PBCom the Secretary’s
Certificate, notarized by its own corporate secretary suffices for the PBCom tobelieve that it was valid and binding, hence
the granting of the request for further availments.Anent petitioners-sureties contention that they obtained no consideration
whatsoever on thesurety agreements, the Court pointed out that the consideration for the surety is the veryconsideration
Alan A Gultia
for the principal obligor, MICO, in the contracts of loan. In the case of WillexPlastic Industries Corporation vs. CA, it
ruled that the consideration necessary to support a suretyobligation need not pass directly to the surety, a consideration
moving to the principal alonebeing sufficient. For a guarantor or surety is bound by the same consideration that makes
thecontract effective between the parties thereto. It is not necessary that a guarantor or suretyshould receive any part or
benefit, if such there be, accruing to his principal.
Alan A Gultia
