Lee Vs CA

CASE NO.
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP,

RICHARD VELASCO and ALFONSO CO, petitioners,
vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
FACTS:
Charles Lee, as President of MICO wrote private respondent Philippine Bank of Communications (PBCom)
requesting for a grant of a discounting loan/credit line in the sum of Three Million Pesos (P3,000,000.00) for
the purpose of carrying out MICO’s line of business as well as to maintain its volume of business.
On the same day, Charles Lee requested for another discounting loan/credit line of Three Million Pesos
(P3,000,000.00) from PBCom for the purpose of opening letters of credit and trust receipts.
Another loan of One Million Pesos (P1,000,000.00) was availed of by MICO from PBCom which was likewise
later on renewed.
Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap and Richard Velasco, in their personal capacities
executed a Surety Agreement in favor of PBCom whereby the petitioners jointly and severally, guaranteed the
prompt payment on due dates or at maturity of overdrafts, promissory notes, discounts, drafts, letters of credit,
bills of exchange, trust receipts, and other obligations of every kind and nature, for which MICO may be held
accountable by PBCom.
Charles Lee, in his capacity as president of MICO, wrote PBCom and applied for an additional loan in the sum
of Four Million Pesos (P4,000,000.00). The loan was intended for the expansion and modernization of the
company’s machineries. Upon approval of the said application for loan, MICO availed of the additional loan of
Four Million Pesos (P4,000,000.00).
To secure the trust receipts transactions, MICO and Lee executed a real estate mortgage in favor of PBCOM
over several properties it owns.
Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand for payment.
For failure of petitioner MICO to pay the obligations incurred despite repeated demands,
PBCom extrajudicially foreclosed MICO’s real estate mortgage and sold the said mortgaged properties in a
public auction sale.
Lee contends that the letters of credit, surety agreements and loan transactions did not ripen into valid and
binding contracts since no part of the proceeds of the loan transactions were delivered to MICO or to any of the
petitioners-sureties.
Petitioners-sureties allege that Chua Siok Suy was the beneficiary of the proceeds of the loans and that the latter
made them sign the surety agreements in blank. Thus, they maintain that they should not be held accountable
for any liability that might arise therefrom.
ISSUE:
1) Whether or not the proceeds of the loans and letters of credit transactions were ever delivered to MICO.
2) Whether or not the individual petitioners, as sureties, may be held liable under the two (2) Surety
Agreements.
HELD:
1) YES.
The letter of credits, as well as the security agreements, have not merely created a prima facie case but have
actually proved the solidary obligation of MICO and the petitioners, as sureties of MICO, in favor of respondent
PBCom.
While the presumption found under the Negotiable Instruments Law may not necessarily be applicable to
trust receipts and letters of credit, the presumption that the drafts drawn in connection with the letters of
credit have sufficient consideration. Under Section 3(r), Rule 131 of the Rules of Court there is also a
presumption that sufficient consideration was given in a contract.
Hence, petitioners should have presented credible evidence to rebut that presumption as well as the
evidence presented by private respondent PBCom. The letters of credit show that the pertinent
materials/merchandise have been received by MICO. The drafts signed by the beneficiary/suppliers in
connection with the corresponding letters of credit proved that said suppliers were paid by PBCom for the
account of MICO. On the other hand, aside from their bare denials petitioners did not present sufficient and
competent evidence to rebut the evidence of private respondent PBCom.
2) YES.
A perusal of the By-Laws of MICO, however, shows that the power to borrow money for the company and
issue mortgages, bonds, deeds of trust and negotiable instruments or securities, secured by mortgages or pledges
of property belonging to the company is not confined solely to the president of the corporation.
The Board of Directors of MICO can also borrow money, arrange letters of credit, execute trust receipts and
promissory notes on behalf of the corporation. Significantly, this power of the Board of Directors according to
the by-laws of MICO, may be delegated to any of its standing committee, officer or agent.
Hence, PBCom had every right to rely on the Certification issued by MICO’s corporate secretary, P.B. Barrera,
that Chua Siok Suy was duly authorized by its Board of Directors to borrow money and obtain credit facilities
in behalf of MICO from PBCom.

Lee Vs CA

Uploaded by

Copyright:

Available Formats

Lee Vs CA

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lee Vs CA

Uploaded by

Copyright:

Available Formats

CASE NO.

CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP,

You might also like