G.R. No. 185590, December 03, 2014
METROPOLITAN BANK AND TRUST COMPANY, Petitioner, v. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION AND SPOUSES MANUEL LEY AND JANET LEY, Respondents.
D E C I S I O N
LEONARDO-DE CASTRO, J.:
This is an action for recovery of a sum of money and damages with a prayer for the issuance of writ of preliminary attachment filed by the plaintiff Philippine Banking Corporation4 against the defendants, namely: Ley Construction and Development Corporation (hereafter “LCDC”) and Spouses Manuel and Janet C. Ley (hereafter “[defendant]-spouses”).
The complaint alleges that: Defendant LCDC, a general contracting firm, through the oral representations of defendant-spouses, applied with plaintiff, a commercial bank, for the opening of a Letter of Credit. Plaintiff issued, on April 26, 1990, Letter of Credit DC 90[-]303-C in favor of the supplier-beneficiary Global Enterprises Limited, in the amount of Eight Hundred Two Thousand Five Hundred U.S. Dollars (USD 802,500.00). The letter of credit covered the importation by defendant LCDC of Fifteen Thousand (15,000) metric tons of Iraqi cement from Iraq. Defendant applied for and filed with plaintiff two (2) Applications for Amendment of Letter of Credit on May 3, 1990 and May 11, 1990, respectively.
Thereafter, the supplier-beneficiary Global Enterprises, Inc. negotiated its Letter of Credit with the negotiating bank Credit Suisse of Zurich, Switzerland. Credit Suisse then sent a reimbursement claim by telex to American Express Bank Ltd., New York on July 25, 1990 for the amount of Seven Hundred Sixty[-]Six Thousand Seven Hundred Eight U.S. Dollars (USD 766,708.00) with a certification that all terms and conditions of the credit were complied with. Accordingly, on July 30, 1990, American Express Bank debited plaintiff’s account Seven Hundred Seventy Thousand Six Hundred Ninety[-]One U.S. Dollars and Thirty Cents (USD 770,691.30) and credited Credit Suisse Zurich Account with American Express Bank, Ltd., New York for the negotiation of Letter of Credit. On August 6, 1990, plaintiff received from Credit Suisse the necessary shipping documents pertaining to Letter of Credit DC 90-303-C that were in turn delivered to the defendant. Upon receipt of the aforesaid documents, defendants executed a trust receipt. However, the cement that was to be imported through the opening of the subject Letter of Credit never arrived in the Philippines.
The prompt payment of the obligation of the defendant LCDC was guaranteed by [defendant]-spouses under the Continuing Surety Agreement executed by the latter in favor of the defendant.
The obligation covered by the subject Letter of Credit in the amount of USD 802,500.00 has long been overdue and unpaid, notwithstanding repeated demands for payment thereof. Plaintiff, therefore, instituted the instant complaint for recovery of the following amounts: Twenty[-]Three [M]illion Two Hundred [F]ifty[-]Nine Thousand One Hundred Twenty[-]Four Pesos and Fourteen Centavos (PHP23,259,124.14) as of June 15, 1991, inclusive of interest and penalty, plus additional interest thereon of Thirty percent (30%) per annum; attorney’s fees equivalent to Twenty[-]Five percent [25%] of the total obligation; and costs of suit.
In support of its cause of action against defendant, plaintiff presented the testimony of Mr. Fenelito Cabrera, Head of the Foreign Department of plaintiff’s Head Office. (T.S.N. dated June 16, 1995, p. 4) There being no other witness to be presented by the plaintiff (Order dated June 27, 1997), the plaintiff filed its formal offer of exhibits dated July 18, 1997 to which defendant filed its comments/objections to formal offer of evidence dated February 23, 1998. In an order dated March 4, 1998, Exhibits “A” to “N” to “N-4” including [their] sub-markings were admitted for the purposes they were respectively offered. However, on defendants’ motion for reconsideration dated [March 30,] 1998 that was duly opposed by the plaintiff in its opposition dated June 3, 1998, this Court partially granted defendants’ motion for reconsideration. Consequently, Exhibits “D”, “E”, “H”, “I”, “J”, “K”, “L”, and “M” and their sub-markings were not admitted for not being properly identified and authenticated by a competent witness. Only Exhibits “A”, “B”, “C”, “C-1”, and “N”, “N-1” to “N-4” remain admitted in evidence. (Order dated September 9, 1998)
Defendant filed a motion to dismiss by way of demurrer to evidence on the ground that plaintiff’s witness Mr. Fenelito Cabrera was incompetent to testify with respect to the transaction between the plaintiff and the defendant and that the plaintiff’s documentary exhibits were not properly identified and authenticated.5
Exhibit Document “A” Continuing Surety Agreement dated July 25, 1989 “B” Application and Agreement for Commercial Letter of Credit “C” and “C-1” Letter of Credit No. DC 90-303-C “N” and “N-1” to “N-4” Statement of Outstanding Obligations
WHEREFORE, the demurrer to evidence is granted. The case is dismissed.8
Exhibit Document “F” Register Copy or Memorandum on the Letter of Credit “G” Trust Receipt No. TRI432/90 dated August 16, 1990 “G-1” Bank Draft “G-2” Bill of Exchange
(a) On August 16, 1990, LCDC and the spouses Ley received from the Bank the necessary shipping documents relative to the Letter of Credit evidencing title to the goods subject matter of the importation which the Bank had previously received from Credit Suisse;
(b) Upon receipt of the shipping documents, LCDC and the spouses Ley executed a trust receipt, Trust Receipt No. TRI432/90, in favor of the Bank covering the importation of cement under Letter of Credit No. DC 90-303-C;
(c) The issuance of the trust receipt was an acknowledgement by LCDC and the spouses Ley of their receipt of the shipping documents and of their liability to the Bank;
(d) By signing the trust receipt, constituted an admission by LCDC and the spouses Ley that the Letter of Credit was in order, including the Bank’s payment of the amount of US$766,708.00 under the Letter of Credit.10
III. DOCUMENTARY EXHIBITS
Defendants shall adopt the documents submitted by plaintiff and marked as Annexes “A”, “B”, “C”, “D”, “E”, “E-1”, “F”, “G”, “G-1”, “H” and “H-1” in the plaintiff’s complaint.
Defendants reserve the right to mark or adopt such other documentary evidence as may be discovered or warranted to support its claim in the course of the trial. x x x.11
Exhibit Document “A” Continuing Surety Agreement dated July 25, 1989 “B” Application and Agreement for Commercial Letter of Credit “C” and “C-1” Letter of Credit No. DC 90-303-C “F” Register Copy or Memorandum on the Letter of Credit “G” Trust Receipt No. TRI432/90 dated August 16, 1990 “N” and “N-1” to “N-4” Statement of Outstanding Obligations
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED and the assailed decision of the RTC, National Capital Judicial Region, Branch 56, Makati City in Civil Case No. 91-1878 is AFFIRMED.15
There is a “question of law” when the doubt or difference arises as to what the law is on a certain state of facts, and which does not call for an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a “question of fact” when the doubt or controversy arises as to the truth or falsity of the alleged facts. x x x.21
Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term “greater weight of evidence” or “greater weight of the credible evidence.” Preponderance of evidence is a phrase which, in the last analysis, means probability to truth. It is evidence which is more convincing to the court as worthier of belief than that which is offered in opposition thereto.23 (Emphasis supplied, citation omitted.)
1.2 The defendants:a. Ley Construction and Development Corporation (LCDC) is a general contracting firm engaged in the construction of buildings, infrastructures, and other civil works with principal office at Mapulang Lupa St., Malinta, Valenzuela, Metro Manila where it [may be] served with summons and other processes of this Court.2. STATEMENT OF CAUSE OF ACTION AGAINST DEFENDANT LCDC AND SPOUSES MANUEL AND JANET LEY
b. Sps. Manuel and Janet C. Ley, the major stockholders of defendant (LCDC) with business address at 23rd Floor Pacific Star Bldg., Makati Avenue, Makati, Metro Manila where the processes of this Honorable Court [may be] served upon them are impleaded herein in their capacity as Surety for the obligation incurred by defendant LCDC with the herein plaintiff by virtue of a Continuing Surety Agreement they executed in favor of the plaintiff, a copy of which is hereto attached as Annex “A”;
2.1 In conjunction with its business, defendant LCDC sought to import “Iraqi Cement” from Iraq thru its supplier “Global Enterprises, Limited” with address at 15 A. Tuckeys Lane, Gibraltar.
2.2 To finance this importation, defendant LCDC applied with the plaintiff for the opening of Letter of Credit as evidenced by the Application and Agreement for Commercial Letter of Credit, copy of which is marked as Annex “B” and made integral part hereof.
2.3 Acting on defendant[’]s oral representation and those stated in its application (Annex “B”), plaintiff issued on April 26, 1990 its Letter of Credit No. DC 90[-]303-C in favor of the supplier Global Enterprises Limited, as beneficiary in the amount of U.S. Dollars: EIGHT HUNDRED TWO THOUSAND FIVE HUNDRED (US $802,500) for the account of defendant, covering the importation of 15,000 metric tons of Iraqi Cement from Iraq, copy of the Letter of Credit is marked as Annex “C” and made integral part hereof;
2.4 On May 3, 1990, defendant applied for and filed with plaintiff an Application for Amendment of Letter of Credit, copy of which is attached as Annex “D” hereof, and another application for amendment was filed on May 11, 1990 copy of which is marked as Annexes “E” and “E-1” hereof;
2.5 After these amendments were communicated to the negotiating bank, Credit Suisse of Zurich, Switzerland, the beneficiary negotiated its Letter of Credit therewith. Thereafter, Credit Suisse sent a reimbursement claim by telex to American Express Bank Ltd., New York on July 25, 1990 for the amount of US$766,708.00 with a Certification that all terms and conditions of the credit were complied with;
2.6 Accordingly, on July 30, 1990, American Express Bank debited plaintiff’s account US$770,691.30 and credited Credit Suisse Zurich Account with American Express Bank Ltd., New York for the negotiation of Letter of Credit;
2.7 On August 6, 1990, plaintiff received from Credit Suisse the necessary shipping documents pertaining to Letter of Credit DC 90-303-C all of which were in turn delivered and received by the defendant on August 16, 1990 as evidenced by their acknowledgment appearing on the plaintiff’s register copy, a copy of which is hereto attached as Annex “F”;
2.8 Upon defendant’s receipt of the shipping documents and other documents of title to the imported goods, defendant signed a trust receipt manifesting its acceptance/conformity that the negotiation of the LC is in order. A copy of the TR and the draft issued by the defendant as a means of paying its LC obligation to the plaintiff are hereto attached and marked as Annexes “G” and “G-1” hereof;
2.9 Sometime during the 3rd week of August, defendant LCDC informed the plaintiff that the expected shipment of cement subject matter of the LC was allegedly held up in Iraq purportedly on account of the trade embargo imposed against it by the United Nation[s] and sought assistance from the plaintiff to secure no-dollar import permit from the Central Bank as defendant was negotiating with its supplier Global Enterprises Limited, Inc. for an alternate shipment of Syrian Cement.
2.10 Plaintiff acceded to the request of the defendant and conformably secured the requested approval from Central Bank to allow the defendant to import cement on a no-dollar basis, a copy of the defendant’s request as well as the Central Bank approval are hereto attached as Annexes “H” and “H-1”.
2.11 About two months after the plaintiff has obtained the requested Central Bank approval (Annex “H-1”)[,] plaintiff was again advised by the defendant that the alternate shipment of Syrian Cement is no longer forthcoming and that defendant LCDC after a series of negotiation with its supplier has agreed with the latter for a reimbursement of the value of the negotiated Letter of Credit.
2.12 While defendant was negotiating with its supplier for that replacement of Syrian cement, defendant advised plaintiff not to initiate any move as it might jeopardize defendant’s negotiation with its supplier.
2.13 In December 1990, four (4) months from defendant’s receipt of the shipping and export documents from plaintiff, as it became perceptible that defendant’s negotiation with its supplier for reimbursement or replacement would fail[,] defendant for the first time asked for copies of the beneficiary’s draft, the Charter Party Agreement even as it contested the validity of defendant’s obligation to plaintiff.
2.14 For the first time, defendant also began to assail the validity of the payment made by the plaintiff to the supplier (Global Enterprises Ltd.) through Credit Suisse, with the intention of avoiding the payment of its lawful obligation to reimburse the plaintiff the amount of US $802,500 which obligation is now long overdue and unpaid notwithstanding repeated demands.
2.15 The obligation covered by the aforesaid Letter of Credit bears interest and charges at the rate of 30% per annum which rate [may be] increased or decreased within the limits allowed by the law.
2.16 The prompt payment of the obligations contracted by defendant LCDC from the plaintiff inclusive of the subject Letter of Credit is guaranteed by defendant Sps. Manuel and Janet Ley by making themselves jointly and severally liable with the defendant LCDC in accordance with the terms of a Continuing Surety Agreement which they executed in favor of the plaintiff (Annex “A”).31 (Emphases supplied.)
Section 7. Action or defense based on document. – Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.
(1) by setting forth the substance of such document in the pleading and attaching the document thereto as an annex, or
(2) by setting forth said document verbatim in the pleading.35
In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. x x x.
“In consideration of your arranging, at my/o[u]r request[,] for the establishment of this commercial letter of credit (thereinafter referred to as the [“]Credit[”]) substantially in accordance with the foregoing, I/we hereby covenant and agree to each and all of [the] provisions and conditions stipulated on the reverse side hereof.”40
IMPORTANT: PLEASE READ PROVISIONS AND CONDITIONS ON REVERSE SIDE HEREOF BEFORE SIGNING ABOVE.41
(1) the existence of a legal right in favor of the plaintiff; (2) a correlative legal duty of the defendant to respect such right; and (3) an act or omission by such defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff for which the latter may maintain an action for the recovery of relief from the defendant.45
1Rollo, pp. 27-42; penned by Associate Justice Marlene Gonzales-Sison with Associate Justices Juan Q. Enriquez, Jr. and Isaias P. Dicdican, concurring.
2 Id. at 43-44.
3 Id. at 121-124.
4 Id. at 4. The Philippine Banking Corporation is now the Metropolitan Bank and Trust Corporation, petitioner in this case.
5 Id. at 121-123.
6 Id. at 30-31.
7 Id. at 31.
8 Id. at 124.
9 Id. at 137-139.
10 Id. at 139.
11 Id. at 144.
12 Id. at 35-37.
13 Id. at 38-40.
14 Id. at 40.
15 Id. at 41.
16 Id. at 241-255.
17 See RULES OF COURT, Rule 45, Section 1.
18Eterton Multi-Resources Corporation v. Filipino Pipe and Foundry Corporation, G.R. No. 179812, July 6, 2010, 624 SCRA 148, 152.
In particular, the Court said:An inquiry into the veracity of the CA’s factual findings and conclusions is not the function of the Supreme Court, for this Court is not a trier of facts. Neither is it our function to reexamine and weigh anew the respective evidence of the parties. (Citation omitted.)19Development Bank of the Philippines v. Traders Royal Bank, G.R. No. 171982, August 18, 2010, 628 SCRA 404, 413.
In particular, the Court stated:Factual findings of the trial court which are adopted and confirmed by the Court of Appeals are final and conclusive on the Court unless the findings are not supported by the evidence on record x x x. (Citation omitted.)20 The exceptions are: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, will justify a different conclusion. (Development Bank of the Philippines v. Licuanan, 545 Phil. 544, 553 ).
21Republic v. Medida, G.R. No. 195097, August 13, 2012, 678 SCRA 317, 324.
22 Section 1, Rule 131 of the Rules of Court defines “burden of proof” as follows:
Section 1. Burden of proof. – Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense by the amount of evidence required by law.
On the other hand, Section 1, Rule 133 describes preponderance of evidence as follows:
Section 1. Preponderance of evidence, how determined. – In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses’ manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number.
23 Magdiwang Realty Corporation v. Manila Banking Corporation, G.R. No. 195592, September 5, 2012, 680 SCRA 251, 265.
24 RULES OF COURT, Rule 128, Section 1.
25Development Bank of the Philippines v. Licuanan, supra note 20. See exception No. 4.
26Rollo, pp. 20-21.
27 Id. at 245.
28Heirs of Abadilla v. Galarosa, 527 Phil. 264, 277 (2006).
29 De la Cruz v. Court of Appeals, 539 Phil. 158, 172 (2006).
30 Records, pp. 1-23.
31 Id. at 1-6.
32 Id. at 4.
33 Id. at 5.
34 Id. at 1 and 6.
35 Regalado, Florenz, Remedial Law Compendium (10th Edition), Vol. I, p. 177.
36 Records, p. 4.
37 Id. at 2.
38 349 Phil. 925, 939 (1998).
39Rollo, pp. 14 and 243, respectively.
41 Records, p. 533.
43 Id. at 12.
44 RULES OF COURT, Rule 2, Section 2.
45Turner v. Lorenzo Shipping Corporation, G.R. No. 157479, November 24, 2010, 636 SCRA 13, 30.