Lee v. Court of Appeals
REITERATIONFacts
The Antecedents: Mico Metals Corporation (MICO), through its President Charles Lee, requested credit facilities from Philippine Bank of Communications (PBCom) for loans, letters of credit, and trust receipts. MICO's Board of Directors passed resolutions authorizing certain officers, including Charles Lee and Mariano Sio, and later Chua Siok Suy, to negotiate and secure these facilities. MICO availed of several loans, including a ₱3,000,000.00 discounting loan/credit line and a ₱4,000,000.00 loan for machinery expansion. MICO also obtained domestic and foreign letters of credit, executing trust receipts for the goods. As security, MICO executed a Deed of Real Estate Mortgage over its properties. Additionally, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, and Richard Velasco executed Surety Agreements, personally guaranteeing MICO's obligations up to specified principal amounts plus interest and charges. Upon MICO's failure to pay its obligations after demand, PBCom foreclosed the real estate mortgage. The proceeds were insufficient, leaving a balance. PBCom then filed a complaint for a sum of money against MICO and the individual petitioners-sureties. Procedural History: The Regional Trial Court (RTC) of Manila, Branch 55, dismissed PBCom's complaint, finding that PBCom failed to adequately prove the delivery of loan proceeds to MICO and declaring the real estate mortgage and foreclosure void for lack of consideration. The Court of Appeals (CA) reversed the RTC's decision, holding that the RTC erred in its application of the rules on burden of proof and that promissory notes and letters of credit are presumed to be issued for valuable consideration. The CA ordered the defendants jointly and severally to pay PBCom the outstanding obligations, plus legal interest and attorney's fees. The Petition: Petitioners (MICO and the sureties) filed a petition for review on certiorari, arguing that there was no proof of delivery of loan proceeds or goods under trust receipts to MICO, and that the contracts were executed by unauthorized persons or without valid consideration. They also contended that the surety agreements were void.
Issue(s)
Whether the proceeds of the loans and letters of credit transactions were delivered to MICO. Whether the individual petitioners, as sureties, may be held liable under the Surety Agreements. Whether the contracts (loan, mortgage, surety agreements) were valid and binding for lack of consideration or due authorization.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals in toto, holding the petitioners jointly and severally liable for the unpaid obligations. The Court found that PBCom had established its case by a preponderance of evidence, and the petitioners failed to present sufficient evidence to rebut the presumptions of valuable consideration and due authorization.
Ratio Decidendi
On the issue of delivery of loan proceeds and goods: The Court held that PBCom presented sufficient documentary and testimonial evidence to prove the credit availments and liabilities of MICO and the petitioners. The existence of promissory notes, letters of credit, and trust receipts, coupled with the presumption of valuable consideration under Section 24 of the Negotiable Instruments Law and Section 3(r) of Rule 131 of the Rules of Court, established a prima facie case. The Court noted that MICO's request for an additional loan a year after the initial availments implied prior successful transactions. Furthermore, the Court found that MICO's objection to the presentation of its bank ledger account, which PBCom was willing to produce, indicated an attempt to conceal the actual transactions. The Court also clarified that the drafts presented in relation to letters of credit were not necessarily payable to PBCom directly due to the nature of international banking transactions involving correspondent banks. On the issue of the liability of individual petitioners as sureties: The Court found the petitioners-sureties liable under the two Surety Agreements. The consideration for the sureties is the same consideration that makes the contract effective between the principal obligor (MICO) and the creditor (PBCom). The Court reiterated the principle that consideration need not move directly to the surety; consideration moving to the principal alone is sufficient. The Court found that the petitioners, as directors of MICO, were aware of the business dealings and the need for financing, and their claim of signing documents in blank was incredible, especially given the presumption of ordinary care for one's concerns. The Court emphasized that PBCom had the right to rely on the notarized Certification issued by MICO's corporate secretary, which authorized Chua Siok Suy to negotiate and sign loan documents. On the issue of validity of contracts for lack of consideration or due authorization: The Court found that the contracts were valid and binding. The presumption of valuable consideration applied to the negotiable instruments. For letters of credit and trust receipts, the Court cited the presumption of sufficient consideration under Section 3(r), Rule 131 of the Rules of Court. The Court also found that the petitioners' claim of lack of authorization for Chua Siok Suy was belied by the notarized Certification from MICO's corporate secretary, which granted him broad authority to negotiate and secure credit facilities. The Court noted that the petitioners failed to present any written proof of revocation of this authority. The Court concluded that notice to Chua Siok Suy, as MICO's authorized representative, was notice to MICO itself, and PBCom was justified in relying on the corporate secretary's certification.
Main Doctrine
The existence of promissory notes and other credit instruments, coupled with the presumption of valuable consideration under the Negotiable Instruments Law and the Rules of Court, establishes a prima facie case that shifts the burden of proof to the obligor to present credible evidence to rebut such presumption. A bank is entitled to rely on a notarized certification from a corporate secretary regarding the authority of an individual to enter into loan agreements on behalf of the corporation.