Lee v. CA

G.R. No.
117913 February 1, 2002 HELD:
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD 1. During the trial of an action, the party who has the burden of proof upon an issue
VELASCO and ALFONSO CO,petitioners, may be aided in establishing his claim or defense by the operation of a
vs. presumption, or, expressed differently, by the probative value which the law
COURT OF APPEALS and PHILIPPINE BANK OF attaches to a specific state of facts. A presumption may operate against his
COMMUNICATIONS, respondents. 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
FACTS: 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
Charles Lee, as President of MICO wrote PBCom requesting for a grant of a discounting burden of proof remains where it is, but by the presumption the one who has that
loan/credit line for purpose of carrying out MICO’s line of business as well as to maintain burden is relieved for the time being from introducing evidence in support of his
its volume of business. On the same day, Charles Lee requested for another discounting averment, because the presumption stands in the place of evidence unless
loan/credit line from PBCom for the purpose of opening letters of credit and trust receipts. rebutted.
Another loan was availed of by MICO from PBCom which was likewise later on renewed.
Lee, et al. in their personal capacities executed a Surety Agreement in favor of PBCom
whereby Lee, at al. jointly and severally, guaranteed the prompt payment on due dates or
at maturity of overdrafts, promissory notes, discounts, drafts, letters of credit, bills of 2. YES.
exchange, trust receipts, and other obligations of every kind and nature, for which MICO
may be held accountable by PBCom. Lee, in his capacity as president of MICO,
Under Section 3, Rule 131 of the Rules of Court the following presumptions,
wrote PBCom and applied for an additional loan intended for the expansion and
among others, are satisfactory if uncontradicted: a) That there was a sufficient
modernization of the company’s machineries.
consideration for a contract and b) That a negotiable instrument was given or
indorsed for sufficient consideration. A similar presumption is found in Section
To secure the trust receipts transactions, MICO and Lee executed a real estate mortgage in 24 of the Negotiable Instruments Law which provides that every negotiable
favor of PBCOM over several properties it owns. Upon maturity of all instrument is deemed prima facie to have been issued for valuable consideration
credit availments obtained by MICO from PBCom, the latter made a demand for payment. and every person whose signature appears thereon to have become a party for
For failure of petitioner MICO to pay the obligations incurred despite repeated demands, value. Negotiable instruments which are meant to be substitutes for money, must
PBCom extrajudicially foreclosed MICO’s real estate mortgage and sold the said conform to the following requisites to be considered as such a) it must be in
mortgaged properties in a public auction sale. Lee contends that the letters of credit, writing; b) it must be signed by the maker or drawer; c) it must contain an
surety agreements and loan transactions did not ripen into valid and binding contracts unconditional promise or order to pay a sum certain in money; d) it must be
since no part of the proceeds of the loan transactions were delivered to MICO or to any of payable on demand or at a fixed or determinable future time; e) it must be
the petitioners-sureties. Petitioners-sureties allege that Chua Siok Suy was the beneficiary payable to order or bearer; and f) where it is a bill of exchange, the drawee must
of the proceeds of the loans and that the latter made them sign the surety agreements in be named or otherwise indicated with reasonable certainty. Negotiable
blank. Thus, they maintain that they should not be held accountable for any liability that instruments include promissory notes, bills of exchange and checks. Letters of
might arise therefrom. credit and trust receipts are, however, not negotiable instruments. But drafts
issued in connection with letters of credit are negotiable instruments.
ISSUES:
3. Letters of credit are usually not made between natural persons. They involve
bank to bank transactions. Historically, the letter of credit was developed to
1. What is the legal presumption upon burden of proof?
facilitate the sale of goods between, distant and unfamiliar buyers and sellers. It
2. WON the presumption under the Rules of Court is similar under the NIL.
was an arrangement under which a bank, whose credit was acceptable to the
3. What is a letter of credit?
seller, would at the instance of the buyer agree to pay drafts drawn on it by the
4. What is a trust receipt?
seller, provided that certain documents are presented such as bills of lading
5. WON PBCOM is obliged to inform Lee, et al. about the terms of the loan, etc.
accompanied the corresponding drafts. Expansion in the use of letters of credit
was a natural development in commercial banking. 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.
4. 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. 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.
5. NO.
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.

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G.R. No.

117913 February 1, 2002 HELD:

4. A trust receipt is considered as a security transaction intended to aid in financing

There was no need for PBCom to personally inform the petitioners-sureties

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