G.R. No. 94209             April 30, 1991FEATI BANK & TRUST COMPANY (now CITYTRUST BANKING CORPORATION), petitioner, vs.THE COURT OF APPEALS, and BERNARDO E. VILLALUZ, respondents.Pelaez, Adriano & Gregorio for petitioner.Ezequiel S. Consulta for private respondent.

GUTIERREZ, JR., J.:This is a petition for review seeking the reversal of the decision of the Court of Appeals dated June 29, 1990 which affirmed the decision of the Regional Trial Court of Rizal dated October 20, 1986 ordering the defendants Christiansen and the petitioner, to pay various sums to respondent Villaluz, jointly and severally.

The facts of the case are as follows:

On June 3, 1971, Bernardo E. Villaluz agreed to sell to the then defendant Axel Christiansen 2,000 cubic meters of lauan logs at $27.00 per cubic meter FOB.

After inspecting the logs, Christiansen issued purchase order No. 76171.

On the arrangements made and upon the instructions of the consignee, Hanmi Trade Development, Ltd., de Santa Ana, California, the Security Pacific National Bank of Los Angeles, California issued Irrevocable Letter of Credit No. IC-46268 available at sight in favor of Villaluz for the sum of $54,000.00, the total purchase price of the lauan logs.The letter of credit was mailed to the Feati Bank and Trust Company (now Citytrust) with the instruction to the latter that it "forward the enclosed letter of credit to the beneficiary." (Records, Vol. I, p. 11)

The letter of credit further provided that the draft to be drawn is on Security Pacific National Bank and that it be accompanied by the following documents:

1. Signed Commercial Invoice in four copies showing the number of the purchase order and certifying that —a. All terms and conditions of the purchase order have been complied with and that all logs are fresh cut and quality equal to or better than that described in H.A. Christiansen's telex #201 of May 1, 1970, and that all logs have been marked "BEV-EX."b. One complete set of documents, including 1/3 original bills of lading was airmailed to Consignee and Parties to be advised by Hans-Axel Christiansen, Ship and Merchandise Broker.c. One set of non-negotiable documents was airmailed to Han Mi Trade Development Company and one set to Consignee and Parties to be advised by Hans-Axel Christiansen, Ship and Merchandise Broker.2. Tally sheets in quadruplicate.3. 2/3 Original Clean on Board Ocean Bills of Lading with Consignee and Parties to be advised by Hans Axel Christiansen, showing Freight Prepaid and marked Notify:Han Mi Trade Development Company, Ltd., Santa Ana, California.Letter of Credit No. 46268 dated June 7, 1971Han Mi Trade Development Company, Ltd., P.O. Box 10480, Santa Ana, California 92711 and Han Mi Trade Development Company, Ltd., Seoul, Korea.4. Certification from Han-Axel Christiansen, Ship and Merchandise Broker, stating that logs have been approved prior to shipment in accordance with terms and conditions of corresponding purchase Order. (Record, Vol. 1 pp. 11-12)Also incorporated by reference in the letter of credit is the Uniform Customs and Practice for Documentary Credits (1962 Revision).

The logs were thereafter loaded on the vessel "Zenlin Glory" which was chartered by Christiansen. Before its loading, the logs were inspected by custom inspectors Nelo Laurente, Alejandro Cabiao, Estanislao Edera from the Bureau of Customs (Records, Vol. I, p. 124) and representatives Rogelio Cantuba and Jesus Tadena of the Bureau of Forestry (Records, Vol. I, pp. 16-17) all of whom certified to the good condition and exportability of the logs.

After the loading of the logs was completed, the Chief Mate, Shao Shu Wang issued a mate receipt of the cargo which stated the same are in good condition (Records, Vol. I, p. 363). However, Christiansen refused to issue the certification as required in paragraph 4 of the letter of credit, despite several requests made by the private respondent.

Because of the absence of the certification by Christiansen, the Feati Bank and Trust Company refused to advance the payment on the letter of credit.The letter of credit lapsed on June 30, 1971, (extended, however up to July 31, 1971) without the private respondent receiving any certification from Christiansen.The persistent refusal of Christiansen to issue the certification prompted the private respondent to bring the matter before the Central Bank. In a memorandum dated August 16, 1971, the Central Bank ruled that:. . . pursuant to the Monetary Board Resolution No. 1230 dated August 3, 1971, in all log exports, the certification of the lumber inspectors of the Bureau of Forestry . . . shall be considered final for purposes of negotiating documents. Any provision in any letter of credit covering log exports requiring certification of buyer's agent or representative that said logs have been approved for shipment as a condition precedent to negotiation of shipping documents shall not be allowed. (Records, Vol. I, p. 367)

Meanwhile, the logs arrived at Inchon, Korea and were received by the consignee, Hanmi Trade Development Company, to whom Christiansen sold the logs for the amount of $37.50 per cubic meter, for a net profit of $10 per cubic meter. Hanmi Trade Development Company, on the other hand sold the logs to Taisung Lumber Company at Inchon, Korea. (Rollo, p. 39)

Since the demands by the private respondent for Christiansen to execute the certification proved futile, Villaluz, on September 1, 1971, instituted an action for mandamus and specific performance against Christiansen and the Feati Bank and Trust Company (now Citytrust) before the then Court of First Instance of Rizal. The petitioner was impleaded as defendant before the lower court only to afford complete relief should the court a quo order

Christiansen to execute the required certification.The complaint prayed for the following:1. Christiansen be ordered to issue the certification required of him under the Letter of Credit;2. Upon issuance of such certification, or, if the court should find it unnecessary, FEATI BANK be ordered to accept negotiation of the Letter of Credit and make payment thereon to Villaluz;3. Order Christiansen to pay damages to the plaintiff. (Rollo, p. 39)On or about 1979, while the case was still pending trial, Christiansen left the Philippines without informing the Court and his counsel. Hence, Villaluz, filed an amended complaint to make the petitioner solidarily liable with Christiansen.The trial court, in its order dated August 29, 1979, admitted the amended complaint.After trial, the lower court found:The liability of the defendant CHRISTIANSEN is beyond dispute, and the plaintiffs right to demand payment is absolute. Defendant CHRISTIANSEN having accepted delivery of the logs by having them loaded in his chartered vessel the "Zenlin Glory" and shipping them to the consignee, his buyer Han Mi Trade in Inchon, South Korea (Art. 1585, Civil Code), his obligation to pay the purchase order had clearly arisen and the plaintiff may sue and recover the price of the goods (Art. 1595, Id).The Court believes that the defendant CHRISTIANSEN acted in bad faith and deceit and with intent to defraud the plaintiff, reflected in and aggravated by, not only his refusal to issue the certification that would have enabled without question the plaintiff to negotiate the letter of credit, but his accusing the plaintiff in his answer of fraud, intimidation, violence and deceit. These accusations said defendant did not attempt to prove, as in fact he left the country without even notifying his own lawyer. It was to the Court's mind a pure swindle.The defendant Feati Bank and Trust Company, on the other hand, must be held liable together with his (sic) co-defendant for having, by its wrongful act, i.e., its refusal to negotiate the letter of credit in the absence of CHRISTIANSEN's certification (in spite of the Central Bank's ruling that the requirement was illegal), prevented payment to the plaintiff. The said letter of credit, as may be seen on its face, is irrevocable and the issuing bank, the Security Pacific National Bank in Los Angeles, California, undertook by its terms that the same shall be honored upon its presentment. On the other hand, the notifying bank, the defendant Feati Bank and Trust Company, by accepting the instructions from the issuing bank, itself assumed the very same undertaking as the issuing bank under the terms of the letter of credit.x x x           x x x          x x xThe Court likewise agrees with the plaintiff that the defendant BANK may also be held liable under the principles and laws on both trust and estoppel. When the defendant BANK accepted its role as the notifying and negotiating bank for and in behalf of the issuing bank, it in effect accepted a trust reposed on it, and became a trustee in relation to plaintiff as the beneficiary of the letter of credit. As trustee, it was then duty bound to protect the interests of the plaintiff under the terms of the letter of credit, and must be held liable for damages and loss resulting to the plaintiff from its failure to perform that obligation.Furthermore, when the defendant BANK assumed the role of a notifying and negotiating BANK it in effect represented to the plaintiff that, if the plaintiff complied with the terms and conditions of the letter of credit and presents the same to the BANK together with the documents mentioned therein the said BANK will pay the plaintiff the amount of the letter of credit. The Court is convinced that it was upon the strength of this letter of credit and this implied representation of the defendant BANK that the plaintiff delivered the logs to defendant CHRISTIANSEN, considering that the issuing bank is a foreign bank with whom plaintiff had no business connections and CHRISTIANSEN had not offered any other Security for the payment of the logs. Defendant BANK cannot now be allowed to deny its commitment and liability under the letter of credit:A holder of a promissory note given because of gambling who indorses the same to an innocent holder for value and who assures said party that the note has no legal defect, is in estoppel from asserting that there had been an illegal consideration for the note, and so, he has to pay its value. (Rodriguez v. Martinez, 5 Phil. 67).The defendant BANK, in insisting upon the certification of defendant CHRISTIANSEN as a condition precedent to negotiating the letter of credit, likewise in the Court's opinion acted in bad faith, not only because of the clear declaration of the Central Bank that such a requirement was illegal, but because the BANK, with all the legal counsel available to it must have known that the condition was void since it depended on the sole will of the debtor, the defendant CHRISTIANSEN. (Art. 1182, Civil Code) (Rollo, pp. 29-31)On the basis of the foregoing the trial court on October 20, 1986, ruled in favor of the private respondent. The dispositive portion of its decision reads:WHEREFORE, judgment is hereby rendered for the plaintiff, ordering the defendants to pay the plaintiff, jointly and severally, the following sums:a) $54,000.00 (US), or its peso equivalent at the prevailing rate as of the time payment is actually made, representing the purchase price of the logs;b) P17,340.00, representing government fees and charges paid by plaintiff in connection with the logs shipment in question;c) P10,000.00 as temperate damages (for trips made to Bacolod and Korea).All three foregoing sums shall be with interest thereon at 12% per annum from September 1, 1971, when the complaint was filed, until fully paid:d) P70,000.00 as moral damages;e) P30,000.00 as exemplary damages; andf) P30,000.00 as attorney's fees and litigation expense.(Rollo, p. 28)The petitioner received a copy of the decision on November 3, 1986. Two days thereafter, or on November 5, 1986, it filed a notice of appeal.On November 10, 1986, the private respondent filed a motion for the immediate execution of the judgment on the ground that the appeal of the petitioner was frivolous and dilatory.The trial court ordered the immediate execution of its judgment upon the private respondent's filing of a bond.The petitioner then filed a motion for reconsideration and a motion to suspend the implementation of the writ of execution. Both motions were, however, denied. Thus, petitioner filed before the Court of Appeals a petition for certiorari and prohibition with preliminary injunction to enjoin the immediate execution of the judgment.The Court of Appeals in a decision dated April 9, 1987 granted the petition and nullified the order of execution, the dispositive portion of the decision states:WHEREFORE, the petition for certiorari is granted. Respondent Judge's order of execution dated December 29, 1986, as well as his order dated January 14, 1987 denying the petitioner's urgent motion to suspend the writ of

execution against its properties are hereby annulled and set aside insofar as they are sought to be enforced and implemented against the petitioner Feati Bank & Trust Company, now Citytrust Banking Corporation, during the pendency of its appeal from the adverse decision in Civil Case No. 15121. However, the execution of the same decision against defendant Axel Christiansen did not appeal said decision may proceed unimpeded. The Sheriff s levy on the petitioner's properties, and the notice of sale dated January 13, 1987 (Annex M), are hereby annulled and set aside. Rollo p. 44)

A motion for reconsideration was thereafter filed by the private respondent. The Court of Appeals, in a resolution dated June 29, 1987 denied the motion for reconsideration.

In the meantime, the appeal filed by the petitioner before the Court of Appeals was given due course. In its decision dated June 29, 1990, the Court of Appeals affirmed the decision of the lower court dated October 20, 1986 and ruled that:1. Feati Bank admitted in the "special and negative defenses" section of its answer that it was the bank to negotiate the letter of credit issued by the Security Pacific National Bank of Los Angeles, California. (Record, pp. 156, 157). Feati Bank did notify Villaluz of such letter of credit. In fact, as such negotiating bank, even before the letter of credit was presented for payment, Feati Bank had already made an advance payment of P75,000.00 to Villaluz in anticipation of such presentment. As the negotiating bank, Feati Bank, by notifying Villaluz of the letter of credit in behalf of the issuing bank (Security Pacific), confirmed such letter of credit and made the same also its own obligation. This ruling finds support in the authority cited by Villaluz:

A confirmed letter of credit is one in which the notifying bank gives its assurance also that the opening bank's obligation will be performed. In such a case, the notifying bank will not simply transmit but will confirm the opening bank's obligation by making it also its own undertaking, or commitment, or guaranty or obligation. (Ward & Hatfield, 28-29, cited in Agbayani, Commercial Laws, 1978 edition, p. 77).

Feati Bank argues further that it would be considered as the negotiating bank only upon negotiation of the letter of credit. This stance is untenable. Assurance, commitments or guaranties supposed to be made by notifying banks to the beneficiary of a letter of credit, as defined above, can be relevant or meaningful only with respect to a future transaction, that is, negotiation. Hence, even before actual negotiation, the notifying bank, by the mere act of notifying the beneficiary of the letter of credit, assumes as of that moment the obligation of the issuing bank.2. Since Feati Bank acted as guarantor of the issuing bank, and in effect also of the latter's principal or client, i.e. Hans Axel-Christiansen. (sic) Such being the case, when Christiansen refused to issue the certification, it was as though refusal was made by Feati Bank itself. Feati Bank should have taken steps to secure the certification from Christiansen; and, if the latter should still refuse to comply, to hale him to court. In short, Feati Bank should have honored Villaluz's demand for payment of his logs by virtue of the irrevocable letter of credit issued in Villaluz's favor and guaranteed by Feati Bank.3. The decision promulgated by this Court in CA-G.R. Sp No. 11051, which contained the statement "Since Villaluz" draft was not drawn strictly in compliance with the terms of the letter of credit, Feati Bank's refusal to negotiate it was justified," did not dispose of this question on the merits. In that case, the question involved was jurisdiction or discretion, and not judgment. The quoted pronouncement should not be taken as a preemptive judgment on the merits of the present case on appeal.4. The original action was for "Mandamus and/or specific performance." Feati Bank may not be a party to the transaction between Christiansen and Security Pacific National Bank on the one hand, and Villaluz on the other hand; still, being guarantor or agent of Christiansen and/or Security Pacific National Bank which had directly dealt with Villaluz, Feati Bank may be sued properly on specific performance as a procedural means by which the relief sought by Villaluz may be entertained. (Rollo, pp. 32-33)The dispositive portion of the decision of the Court of Appeals reads:WHEREFORE, the decision appealed from is affirmed; and accordingly, the appeal is hereby dismissed. Costs against the petitioner. (Rollo, p. 33)Hence, this petition for review.The petitioner interposes the following reasons for the allowance of the petition.First ReasonTHE RESPONDENT COURT ERRONEOUSLY CONCLUDED FROM THE ESTABLISHED FACTS AND INDEED, WENT AGAINST THE EVIDENCE AND DECISION OF THIS HONORABLE COURT, THAT PETITIONER BANK IS LIABLE ON THE LETTER OF CREDIT DESPITE PRIVATE RESPONDENTS NON-COMPLIANCE WITH THE TERMS THEREOF,Second ReasonTHE RESPONDENT COURT COMMITTED AN ERROR OF LAW WHEN IT HELD THAT PETITIONER BANK, BY NOTIFYING PRIVATE RESPONDENT OF THE LETTER OF CREDIT, CONFIRMED SUCH CREDIT AND MADE THE SAME ALSO ITS OBLIGATION AS GUARANTOR OF THE ISSUING BANK.Third ReasonTHE RESPONDENT COURT LIKEWISE COMMITTED AN ERROR OF LAW WHEN IT AFFIRMED THE TRIAL COURT'S DECISION. (Rollo, p. 12)The principal issue in this case is whether or not a correspondent bank is to be held liable under the letter of credit despite non-compliance by the beneficiary with the terms thereof?The petition is impressed with merit.It is a settled rule in commercial transactions involving letters of credit that the documents tendered must strictly conform to the terms of the letter of credit. The tender of documents by the beneficiary (seller) must include all documents required by the letter. A correspondent bank which departs from what has been stipulated under the letter of credit, as when it accepts a faulty tender, acts on its own risks and it may not thereafter be able to recover from the buyer or the issuing bank, as the case may be, the money thus paid to the beneficiary Thus the rule of strict compliance.In the United States, commercial transactions involving letters of credit are governed by the rule of strict compliance. In the Philippines, the same holds true. The same rule must also be followed.The case of Anglo-South America Trust Co. v. Uhe et al. (184 N.E. 741 [1933]) expounded clearly on the rule of strict compliance.We have heretofore held that these letters of credit are to be strictly complied with which documents, and shipping documents must be followed as stated in the letter. There is no discretion in the bank or trust company to waive any

requirements. The terms of the letter constitutes an agreement between the purchaser and the bank. (p. 743)Although in some American decisions, banks are granted a little discretion to accept a faulty tender as when the other documents may be considered immaterial or superfluous, this theory could lead to dangerous precedents. Since a bank deals only with documents, it is not in a position to determine whether or not the documents required by the letter of credit are material or superfluous. The mere fact that the document was specified therein readily means that the document is of vital importance to the buyer.Moreover, the incorporation of the Uniform Customs and Practice for Documentary Credit (U.C.P. for short) in the letter of credit resulted in the applicability of the said rules in the governance of the relations between the parties.And even if the U.C.P. was not incorporated in the letter of credit, we have already ruled in the affirmative as to the applicability of the U.C.P. in cases before us.In Bank of P.I. v. De Nery (35 SCRA 256 [1970]), we pronounced that the observance of the U.C.P. in this jurisdiction is justified by Article 2 of the Code of Commerce. Article 2 of the Code of Commerce enunciates that in the absence of any particular provision in the Code of Commerce, commercial transactions shall be governed by the usages and customs generally observed.There being no specific provision which governs the legal complexities arising from transactions involving letters of credit not only between the banks themselves but also between banks and seller and/or buyer, the applicability of the U.C.P. is undeniable.The pertinent provisions of the U.C.P. (1962 Revision) are:Article 3.An irrevocable credit is a definite undertaking on the part of the issuing bank and constitutes the engagement of that bank to the beneficiary and bona fide holders of drafts drawn and/or documents presented thereunder, that the provisions for payment, acceptance or negotiation contained in the credit will be duly fulfilled, provided that all the terms and conditions of the credit are complied with.An irrevocable credit may be advised to a beneficiary through another bank (the advising bank) without engagement on the part of that bank, but when an issuing bank authorizes or requests another bank to confirm its irrevocable credit and the latter does so, such confirmation constitutes a definite undertaking of the confirming bank. . . .Article 7.Banks must examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit,"Article 8.Payment, acceptance or negotiation against documents which appear on their face to be in accordance with the terms and conditions of a credit by a bank authorized to do so, binds the party giving the authorization to take up documents and reimburse the bank which has effected the payment, acceptance or negotiation. (Emphasis Supplied)Under the foregoing provisions of the U.C.P., the bank may only negotiate, accept or pay, if the documents tendered to it are on their face in accordance with the terms and conditions of the documentary credit. And since a correspondent bank, like the petitioner, principally deals only with documents, the absence of any document required in the documentary credit justifies the refusal by the correspondent bank to negotiate, accept or pay the beneficiary, as it is not its obligation to look beyond the documents. It merely has to rely on the completeness of the documents tendered by the beneficiary.In regard to the ruling of the lower court and affirmed by the Court of Appeals that the petitioner is not a notifying bank but a confirming bank, we find the same erroneous.The trial court wrongly mixed up the meaning of an irrevocable credit with that of a confirmed credit. In its decision, the trial court ruled that the petitioner, in accepting the obligation to notify the respondent that the irrevocable credit has been transmitted to the petitioner on behalf of the private respondent, has confirmed the letter.The trial court appears to have overlooked the fact that an irrevocable credit is not synonymous with a confirmed credit. These types of letters have different meanings and the legal relations arising from there varies. A credit may be an irrevocable credit and at the same time a confirmed credit or vice-versa.An irrevocable credit refers to the duration of the letter of credit. What is simply means is that the issuing bank may not without the consent of the beneficiary (seller) and the applicant (buyer) revoke his undertaking under the letter. The issuing bank does not reserve the right to revoke the credit. On the other hand, a confirmed letter of credit pertains to the kind of obligation assumed by the correspondent bank. In this case, the correspondent bank gives an absolute assurance to the beneficiary that it will undertake the issuing bank's obligation as its own according to the terms and conditions of the credit. (Agbayani, Commercial Laws of the Philippines, Vol. 1, pp. 81-83)Hence, the mere fact that a letter of credit is irrevocable does not necessarily imply that the correspondent bank in accepting the instructions of the issuing bank has also confirmed the letter of credit. Another error which the lower court and the Court of Appeals made was to confuse the obligation assumed by the petitioner.In commercial transactions involving letters of credit, the functions assumed by a correspondent bank are classified according to the obligations taken up by it. The correspondent bank may be called a notifying bank, a negotiating bank, or a confirming bank.In case of a notifying bank, the correspondent bank assumes no liability except to notify and/or transmit to the beneficiary the existence of the letter of credit. (Kronman and Co., Inc. v. Public National Bank of New York, 218 N.Y.S. 616 [1926]; Shaterian, Export-Import Banking, p. 292, cited in Agbayani, Commercial Laws of the Philippines, Vol. 1, p. 76). A negotiating bank, on the other hand, is a correspondent bank which buys or discounts a draft under the letter of credit. Its liability is dependent upon the stage of the negotiation. If before negotiation, it has no liability with respect to the seller but after negotiation, a contractual relationship will then prevail between the negotiating bank and the seller. (Scanlon v. First National Bank of Mexico, 162 N.E. 567 [1928]; Shaterian, Export-Import Banking, p. 293, cited in Agbayani, Commercial Laws of the Philippines, Vol. 1, p. 76)In the case of a confirming bank, the correspondent bank assumes a direct obligation to the seller and its liability is a primary one as if the correspondent bank itself had issued the letter of credit. (Shaterian, Export-Import Banking, p. 294, cited in Agbayani Commercial Laws of the Philippines, Vol. 1, p. 77)In this case, the letter merely provided that the petitioner "forward the enclosed original credit to the beneficiary." (Records, Vol. I, p. 11) Considering the aforesaid instruction to the petitioner by the issuing bank, the Security Pacific National Bank, it is indubitable that the petitioner is only a notifying bank and not a confirming bank as ruled by the courts below.If the petitioner was a confirming bank, then a categorical declaration should have been stated in the letter of credit that the petitioner is to honor all drafts drawn in conformity with the letter of credit. What was simply stated therein was the instruction that the petitioner forward the original letter of credit to the beneficiary.Since the petitioner was only a notifying bank, its responsibility was solely to notify and/or transmit the documentary

of credit to the private respondent and its obligation ends there.The notifying bank may suggest to the seller its willingness to negotiate, but this fact alone does not imply that the notifying bank promises to accept the draft drawn under the documentary credit.A notifying bank is not a privy to the contract of sale between the buyer and the seller, its relationship is only with that of the issuing bank and not with the beneficiary to whom he assumes no liability. It follows therefore that when the petitioner refused to negotiate with the private respondent, the latter has no cause of action against the petitioner for the enforcement of his rights under the letter. (See Kronman and Co., Inc. v. Public National Bank of New York, supra)In order that the petitioner may be held liable under the letter, there should be proof that the petitioner confirmed the letter of credit.The records are, however, bereft of any evidence which will disclose that the petitioner has confirmed the letter of credit. The only evidence in this case, and upon which the private respondent premised his argument, is the P75,000.00 loan extended by the petitioner to him.The private respondent relies on this loan to advance his contention that the letter of credit was confirmed by the petitioner. He claims that the loan was granted by the petitioner to him, "in anticipation of the presentment of the letter of credit."The proposition advanced by the private respondent has no basis in fact or law. That the loan agreement between them be construed as an act of confirmation is rather far-fetched, for it depends principally on speculative reasoning.As earlier stated, there must have been an absolute assurance on the part of the petitioner that it will undertake the issuing bank's obligation as its own. Verily, the loan agreement it entered into cannot be categorized as an emphatic assurance that it will carry out the issuing bank's obligation as its own.The loan agreement is more reasonably classified as an isolated transaction independent of the documentary credit.Of course, it may be presumed that the petitioner loaned the money to the private respondent in anticipation that it would later be paid by the latter upon the receipt of the letter. Yet, we would have no basis to rule definitively that such "act" should be construed as an act of confirmation.The private respondent no doubt was in need of money in loading the logs on the ship "Zenlin Glory" and the only way to satisfy this need was to borrow money from the petitioner which the latter granted. From these circumstances, a logical conclusion that can be gathered is that the letter of credit was merely to serve as a collateral.At the most, when the petitioner extended the loan to the private respondent, it assumed the character of a negotiating bank. Even then, the petitioner will still not be liable, for a negotiating bank before negotiation has no contractual relationship with the seller.The case of Scanlon v. First National Bank (supra) perspicuously explained the relationship between the seller and the negotiating bank, viz:It may buy or refuse to buy as it chooses. Equally, it must be true that it owes no contractual duty toward the person for whose benefit the letter is written to discount or purchase any draft drawn against the credit. No relationship of agent and principal, or of trustee and cestui, between the receiving bank and the beneficiary of the letter is established. (P.568)Whether therefore the petitioner is a notifying bank or a negotiating bank, it cannot be held liable. Absent any definitive proof that it has confirmed the letter of credit or has actually negotiated with the private respondent, the refusal by the petitioner to accept the tender of the private respondent is justified.In regard to the finding that the petitioner became a "trustee in relation to the plaintiff (private respondent) as the beneficiary of the letter of credit," the same has no legal basis.A trust has been defined as the "right, enforceable solely in equity, to the beneficial enjoyment of property the legal title to which is vested to another." (89 C.J.S. 712)The concept of a trust presupposes the existence of a specific property which has been conferred upon the person for the benefit of another. In order therefore for the trust theory of the private respondent to be sustained, the petitioner should have had in its possession a sum of money as specific fund advanced to it by the issuing bank and to be held in trust by it in favor of the private respondent. This does not obtain in this case.The mere opening of a letter of credit, it is to be noted, does not involve a specific appropriation of a sum of money in favor of the beneficiary. It only signifies that the beneficiary may be able to draw funds upon the letter of credit up to the designated amount specified in the letter. It does not convey the notion that a particular sum of money has been specifically reserved or has been held in trust.What actually transpires in an irrevocable credit is that the correspondent bank does not receive in advance the sum of money from the buyer or the issuing bank. On the contrary, when the correspondent bank accepts the tender and pays the amount stated in the letter, the money that it doles out comes not from any particular fund that has been advanced by the issuing bank, rather it gets the money from its own funds and then later seeks reimbursement from the issuing bank.Granting that a trust has been created, still, the petitioner may not be considered a trustee. As the petitioner is only a notifying bank, its acceptance of the instructions of the issuing bank will not create estoppel on its part resulting in the acceptance of the trust. Precisely, as a notifying bank, its only obligation is to notify the private respondent of the existence of the letter of credit. How then can such create estoppel when that is its only duty under the law?We also find erroneous the statement of the Court of Appeals that the petitioner "acted as a guarantor of the issuing bank and in effect also of the latter's principal or client, i.e., Hans Axel Christiansen."It is a fundamental rule that an irrevocable credit is independent not only of the contract between the buyer and the seller but also of the credit agreement between the issuing bank and the buyer. (See Kingdom of Sweden v. New York Trust Co., 96 N.Y.S. 2d 779 [1949]). The relationship between the buyer (Christiansen) and the issuing bank (Security Pacific National Bank) is entirely independent from the letter of credit issued by the latter.The contract between the two has no bearing as to the non-compliance by the buyer with the agreement between the latter and the seller. Their contract is similar to that of a contract of services (to open the letter of credit) and not that of agency as was intimated by the Court of Appeals. The unjustified refusal therefore by Christiansen to issue the certification under the letter of credit should not likewise be charged to the issuing bank.As a mere notifying bank, not only does the petitioner not have any contractual relationship with the buyer, it has also nothing to do with the contract between the issuing bank and the buyer regarding the issuance of the letter of credit.The theory of guarantee relied upon by the Court of Appeals has to necessarily fail. The concept of guarantee vis-a-vis the concept of an irrevocable credit are inconsistent with each other.

In the first place, the guarantee theory destroys the independence of the bank's responsibility from the contract upon which it was opened. In the second place, the nature of both contracts is mutually in conflict with each other. In contracts of guarantee, the guarantor's obligation is merely collateral and it arises only upon the default of the person primarily liable. On the other hand, in an irrevocable credit the bank undertakes a primary obligation. (See National Bank of Eagle Pass, Tex v. American National Bank of San Francisco, 282 F. 73 [1922])The relationship between the issuing bank and the notifying bank, on the contrary, is more similar to that of an agency and not that of a guarantee. It may be observed that the notifying bank is merely to follow the instructions of the issuing bank which is to notify or to transmit the letter of credit to the beneficiary. ( See Kronman v. Public National Bank of New York, supra). Its commitment is only to notify the beneficiary. It does not undertake any assurance that the issuing bank will perform what has been mandated to or expected of it. As an agent of the issuing bank, it has only to follow the instructions of the issuing bank and to it alone is it obligated and not to buyer with whom it has no contractual relationship.In fact the notifying bank, even if the seller tenders all the documents required under the letter of credit, may refuse to negotiate or accept the drafts drawn thereunder and it will still not be held liable for its only engagement is to notify and/or transmit to the seller the letter of credit.Finally, even if we assume that the petitioner is a confirming bank, the petitioner cannot be forced to pay the amount under the letter. As we have previously explained, there was a failure on the part of the private respondent to comply with the terms of the letter of credit.The failure by him to submit the certification was fatal to his case.1âwphi1 The U.C.P. which is incorporated in the letter of credit ordains that the bank may only pay the amount specified under the letter if all the documents tendered are on their face in compliance with the credit. It is not tasked with the duty of ascertaining the reason or reasons why certain documents have not been submitted, as it is only concerned with the documents. Thus, whether or not the buyer has performed his responsibility towards the seller is not the bank's problem.We are aware of the injustice committed by Christiansen on the private respondent but we are deciding the controversy on the basis of what the law is, for the law is not meant to favor only those who have been oppressed, the law is to govern future relations among people as well. Its commitment is to all and not to a single individual. The faith of the people in our justice system may be eroded if we are to decide not what the law states but what we believe it should declare. Dura lex sed lex.Considering the foregoing, the materiality of ruling upon the validity of the certificate of approval required of the private respondent to submit under the letter of credit, has become insignificant.In any event, we affirm the earlier ruling of the Court of Appeals dated April 9, 1987 in regard to the petition before it for certiorari and prohibition with preliminary injunction, to wit:There is no merit in the respondent's contention that the certification required in condition No. 4 of the letter of credit was "patently illegal." At the time the letter of credit was issued there was no Central Bank regulation prohibiting such a condition in the letter of credit. The letter of credit (Exh. C) was issued on June 7, 1971, more than two months before the issuance of the Central Bank Memorandum on August 16, 1971 disallowing such a condition in a letter of credit. In fact the letter of credit had already expired on July 30, 1971 when the Central Bank memorandum was issued. In any event, it is difficult to see how such a condition could be categorized as illegal or unreasonable since all that plaintiff Villaluz, as seller of the logs, could and should have done was to refuse to load the logs on the vessel "Zenlin Glory", unless Christiansen first issued the required certification that the logs had been approved by him to be in accordance with the terms and conditions of his purchase order. Apparently, Villaluz was in too much haste to ship his logs without taking all due precautions to assure that all the terms and conditions of the letter of credit had been strictly complied with, so that there would be no hitch in its negotiation. (Rollo, p. 8)WHEREFORE, the COURT RESOLVED to GRANT the petition and hereby NULLIFIES and SETS ASIDE the decision of the Court of Appeals dated June 29, 1990. The amended complaint in Civil Case No. 15121 is DISMISSED.SO ORDERED.

RICARDO B. BANGAYAN, G.R. No. 149193

Petitioner,

- versus

Present:

CARPIO,*

CARPIO MORALES, J.,Chairperson,BERSAMIN,VILLARAMA, JR., andSERENO, JJ.

RIZAL COMMERCIAL BANKING CORPORATION AND PHILIP SARIA,

Promulgated:

April 4, 2011

Respondents, 

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xD E C I S I O NSERENO, J.: Before this Court is a Rule 45 Petition[if !supportFootnotes][1][endif] questioning the Court of Appeals affirmance of a trial courts dismissal of a complaint for damages filed by a depositor against a bank for the dishonor of seven checks and for the wrongful disclosure of information regarding the depositors account contrary to the Bank Secrecy Act (Republic Act No. 1405).[if !supportFootnotes][2][endif]

The FactsPetitioner Ricardo Bangayan had a savings account and a current account with one of the branches of respondent Rizal Commercial Banking Corporation (RCBC).[if !supportFootnotes][3][endif] These two accounts had an automatic transfer condition wherein checks issued by the depositor may be funded by any of the two accounts.[if !supportFootnotes][4][endif]

On 26 June 1992, petitioner Bangayan purportedly signed a Comprehensive Surety Agreement (the Surety Agreement)[if !supportFootnotes][5][endif] with respondent RCBC in favor of nine corporations.[if !supportFootnotes][6][endif] Under the Surety Agreement, the funds in petitioner Bangayans accounts with respondent RCBC would be used as security to guarantee any existing and future loan obligations, advances, credits/increases and other obligations, including any and all expenses that these corporations may incur with respondent bank.Petitioner Bangayan contests the veracity and due authenticity of the Surety Agreement on the ground that his signature thereon was not genuine, and that the agreement was not notarized. [if !supportFootnotes][7][endif] Respondent RCBC refutes this claim, although it admitted that it was exceptional for a perfected Surety Agreement of the bank to be without a signature of the witness and to remain unnotarized. Mr. Eli Lao, respondent banks Group Head of Account Management, however, explained that the bank was still in the process of completing the Surety Agreement at that time.[if !supportFootnotes][8][endif]

The following are the transactions of respondent RCBC in relation to the Surety Agreement vis--vis the petitioner Bangayan.On 26 June 1992 (the same day that the Surety Agreement was allegedly signed), two of the corporations whose performance were guaranteed therein LBZ Commercial and Peaks Marketing were issued separate commercial letters of credit[if !supportFootnotes][9][endif] by respondent RCBC for the importation of PVC resin from Korea. Three days later or on 29 June 1992, respondent RCBC issued a third letter of credit [if !supportFootnotes][10][endif] in favor of another corporation, Final Sales Enterprise, whose obligations to respondent bank were likewise secured by petitioner Bangayan under the Surety Agreement. Mr. Lao claimed that respondent bank would not have extended the letters of credit in favor of the three corporations without petitioner Bangayan acting as surety. [if !supportFootnotes][11][endif]

On 26 August 1992, a fourth letter of credit[if !supportFootnotes][12][endif] was issued by respondent RCBC for the importation of materials from Korea, this time by Lotec Marketing, another corporation enumerated in the Surety Agreement. The Korea Exchange Bank was designated as the advising bank for Lotec Marketings letter of credit. [if !supportFootnotes][13][endif]

On 15 September 1992, after the arrival of the shipments of the first three corporations from Korea, the Bureau of Customs (BOC) demanded via letter of the same date from respondent RCBC, which facilitated the three letters of credit, the remittance of import duties in the amount of thirteen million two hundred sixty-five thousand two hundred twenty-five pesos (PhP13,265,225).[if !supportFootnotes][14][endif]

Mr. Lao of respondent RCBC allegedly called petitioner Bangayan and informed him of the BOCs demand for payment of import duties.[if !supportFootnotes][15][endif] According to Mr. Lao, petitioner allegedly replied that he understood the situation and assured Mr. Lao that he was doing everything he could to solve the problem. [if !supportFootnotes][16][endif]

Considering the BOCs demand, respondent RCBC decided to put on hold the funds in petitioner Bangayans accounts by virtue of the authority given to it by petitioner under the Surety Agreement. [if !supportFootnotes][17]

[endif] Respondent RCBC reasoned that as the collecting agent, it had to earmark sufficient funds in the account of petitioner Bangayan (the surety) to satisfy the tax obligations of the three corporations, in the event that they would fail to pay the same.[if !supportFootnotes][18][endif] Thus, respondent bank refused payments drawn from petitioner Bangayans deposits, unless there was an order from the BOC.[if !supportFootnotes][19][endif] Petitioner Bangayan, however, contests this action since respondent bank did not present any writ of garnishment that would authorize the freezing of his funds.[if !supportFootnotes][20][endif]

On 18 September 1992, two of the seven checks that were drawn against petitioner Bangayans Current Account No. 0109-8232-5 were presented for payment to respondent RCBC, namely:

RCBC Check No. Date of Presentment Paid To Amount

98799[if !supportFootnotes][21][endif] 18 Sept 1992 United Pacific Enterprises PhP3,650,000

938000[if !supportFootnotes][22][endif] 18 Sept 1992 United Pacific Enterprises PhP4,500,000

TOTAL PhP8,150,000 

On the same day, the amounts of three million six hundred fifty thousand pesos (PhP3,650,000) and four million five hundred thousand pesos (PhP4,500,000)[if !supportFootnotes][23][endif] were successively debited from the said current account, as shown in petitioner Bangayans passbook for the current account. [if !supportFootnotes][24][endif] Alongside these two debit entries in the passbook was the transaction reference code DFT, which apparently stands for debit fund transfer.[if !supportFootnotes][25][endif]

On 21 September 1992, the same amounts in the two checks were credited to petitioner Bangayans current account, under the transaction reference code CM, that stands for credit memo. [if !supportFootnotes][26][endif]

Moreover, petitioner Bangayans Checks Nos. 93799 and 93800 issued in favor of United Pacific Enterprises were also returned by respondent RCBC with the notation REFER TO DRAWER.[if !supportFootnotes][27][endif]

On the same day that the checks were referred to petitioner Bangayan by respondent RCBC, United Pacific Enterprises, through Mr. Manuel Dente, demanded from petitioner Bangayan the payment of eight million one hundred fifty thousand pesos (PhP8,150,000), which corresponded to the amounts of the two dishonored checks that were issued to it. [if !supportFootnotes][28][endif] Nothing more has been alleged by petitioner on this particular matter.On 24 September 1992, the Korea Exchange Bank (the advising bank) informed respondent RCBC through a telex that it had already negotiated the fourth letter of credit for Lotec Marketings shipment, which amounted to seven hundred twelve thousand eight hundred U.S. dollars (US$712,800) and, thereafter, claimed reimbursement from respondent RCBC.[if !supportFootnotes][29][endif]

This particular shipment by Lotec Marketing became the subject matter of an investigation conducted by the Customs Intelligence & Investigation Service of the BOC, according to respondent bank. [if !supportFootnotes][30][endif] Both parties agreed that the BOC likewise conducted an investigation covering the importation of the three corporations LBZ Commercial, Peaks Marketing and Final Sales Enterprise - that were opened through the letters of credit issued by respondent RCBC.[if !supportFootnotes][31][endif]

On 09 October 1992, respondent Philip Saria, who was an Account Officer of respondent banks Binondo Branch, signed and executed a Statement before the BOC, with the assistance of Atty. Arnel Z. Dolendo of respondent RCBC, on the banks letters of credit issued in favor of the three corporations. [if !supportFootnotes][32][endif]

Petitioner Bangayan cited this incident as the basis for the allegation in the Complaint he subsequently filed that respondent RCBC had disclosed to a third party (the BOC) information concerning the identity, nature, transaction and deposits including details of transaction related to and pertaining to his deposits with the said bank, in violation of the Bank Secrecy Act.[if !supportFootnotes][33][endif] It must be pointed out that the trial court found that no evidence was introduced by (petitioner Bangayan) to substantiate his claim that (respondent RCBC) gave any classified information in violation of the Bank Secrecy Law.[if !supportFootnotes][34][endif] Thus, the trial court considered the alleged disclosure of confidential bank information by respondent RCBC as a non-issue.[if !supportFootnotes][35][endif]

On the same date, when Lotec Marketings loan obligation under the fourth letter of credit became due and demandable,[if !supportFootnotes][36][endif] respondent RCBC issued an advice that it would debit the amount of twelve million seven hundred sixty-two thousand six hundred pesos (PhP12,762,600) from petitioner Bangayans current account to partially satisfy the guaranteed corporations loan. [if !supportFootnotes][37][endif] At that time, petitioner Bangayans passbook for his current account showed that it had funds of twelve million seven hundred sixty-two thousand six hundred forty-five and 64/100 pesos (PhP12,762,645.64).[if !supportFootnotes][38][endif]

On 12 October 1992, the amount of twelve million seven hundred sixty-two thousand and six hundred pesos (PhP12,762,600) was debited from petitioner Bangayans current account, consequently reducing the funds to forty-five and 64/100 pesos (PhP45.64). [if !supportFootnotes][39][endif] Respondent RCBC claimed that the former amount was debited from petitioners account to partially pay Lotec Marketings outstanding obligation which stood at eighteen million forty-seven thousand thirty-three and 60/100 pesos (PhP18,047,033.60). [if !supportFootnotes][40][endif] Lotec Marketing, thereafter, paid the balance of its obligation to respondent RCBC in the amount of five million three hundred thirty-eight thousand eight hundred nineteen and 20/100 pesos (PhP5,338,819.20) [if !supportFootnotes][41][endif] under the fourth letter of credit.On 13 October 2010, the three corporations earlier adverted to paid the corresponding customs duties demanded by the BOC.[if !supportFootnotes][42][endif] Receipts were subsequently issued by the BOC for the corporations payments, copies of which were received by Atty. Nelson Loyola, counsel of petitioner Bangayan in this case. [if !supportFootnotes][43]

[endif] The trial court considered this as payment by petitioner of the three corporations obligations for custom duties. [if !

supportFootnotes][44][endif] Thereafter, respondent RCBC released to the corporations the necessary papers for their PVC resin shipments which were imported through the banks letters of credit.[if !supportFootnotes][45][endif]

On 15 October 2010, five other checks of petitioner Bangayan were presented for payment to respondent RCBC, namely:

RCBC Check No.

Date of Presentment

Paid To Amount

938011 15 Oct 1992 Simplex Merchandising PhP1,200,000

938012 15 Oct 1992 Simplex Merchandising PhP1,260,000

938013 15 Oct 1992 Simplex Merchandising PhP1,180,000

938014 15 Oct 1992 Hinomoto Trading Company PhP1,052,000

938015 15 Oct 1992 Hinomoto Trading Company PhP982,000

TOTAL AMOUNT PhP5,674,000 

On 16 October 1992, these five checks were also dishonored by respondent RCBC on the ground that they had been drawn against insufficient funds (DAIF) and were subsequently returned.[if !supportFootnotes][51][endif]

On 20 October 1992, Hinomoto Trading Company, one of the payees for two of the dishonored checks, [if !

supportFootnotes][52][endif] demanded that petitioner Bangayan make good on his payments.[if !supportFootnotes][53][endif] On 21 October 1992, the other payee of the three other dishonored checks, [if !supportFootnotes][54][endif] Simplex Merchandising, likewise made a final demand on petitioner to replace the dishonored instruments.[if !supportFootnotes][55][endif]

On 23 October 1992, petitioner Bangayan, through counsel, demanded that respondent bank restore all the funds to his account and indemnify him for damages.[if !supportFootnotes][56][endif]

On 30 October 1992, nineteen thousand four hundred twenty-seven and 15/100 pesos (PhP19,427.15) was credited in petitioner Bangayans current account, with the transaction reference code INT referring to interest. [if !

supportFootnotes][57][endif] Petitioner explains that even if the outstanding balance at that time was reduced, this interest was earned based on the average daily balance of the account for the quarter and not just on the balance at that time, which was forty-five and 64/100 pesos (PhP45.64).[if !supportFootnotes][58][endif]

The Case in the Trial CourtOn 09 November 1992, petitioner Bangayan filed a complaint for damages against respondent RCBC. [if !

supportFootnotes][59][endif] Subsequently, respondent RCBC filed an Answer dated 02 December 1992 with compulsory counter-claims.[if !supportFootnotes][60][endif] On 12 January 1993, respondent RCBC filed a Motion for Leave to File Attached Amended Answer and Amended Answer.[if !supportFootnotes][61][endif]

Petitioner Bangayan argues that at the time the dishonored checks were issued, there were sufficient funds in his accounts to cover them;[if !supportFootnotes][62][endif] that he was informed by personnel of respondent RCBC that his accounts were garnished, but no notice or writ of garnishment was ever shown to him; [if !supportFootnotes][63][endif] and that his name and reputation were tarnished because of the dishonor of checks that were issued in relation to his automotive business.[if !supportFootnotes][64][endif]

In its defense, respondent RCBC claims that petitioner Bangayan signed a Surety Agreement in favor of several companies that defaulted in their payment of customs duties that resulted in the imposition of a lien over the accounts, particularly for the payment of customs duties assessed by the Bureau of Customs. [if !supportFootnotes][65][endif]

Respondent bank further claimed that it had funded the letter of credit [if !supportFootnotes][66][endif] availed of by Lotec Marketing to finance the latters importation with the account of petitioner Bangayan, who agreed to guarantee Lotec Marketings obligations under the Surety Agreement; and, that respondent bank applied petitioner Bangayans deposits to satisfy part of Lotec Marketings obligation in the amount of twelve million seven hundred sixty-two thousand and six hundred pesos (PhP12,762,600), which resulted in the depletion of the bank accounts. [if !

supportFootnotes][67][endif]

Petitioner Bangayan also alleged that respondent RCBC disclosed to a third party (the BOC) classified information about the identity and nature of the transactions and deposits, in violation of the Bank Secrecy Act. Respondent RCBC counters that no confidential information on petitioners bank accounts was disclosed.Availing himself of discovery proceedings in the lower court, petitioner Bangayan filed a Request for Admission [if !

supportFootnotes][68][endif] and Request for Answer to Written Interrogatories, [if !supportFootnotes][69][endif] to which respondent RCBC filed the corresponding Answers and Objections to Interrogatories [if !supportFootnotes][70][endif] and Response to Request for Admission.[if !supportFootnotes][71][endif]

During the presentation of complainants evidence, petitioner Bangayan, Atty. Randy Rutaquio, respondent Saria and Manuel Dantes testified in open court. Petitioner Bangayan thereafter filed a Formal Offer of Evidence.[if !supportFootnotes][72][endif]

On the other hand, respondent RCBC presented Mr. Lao as its lone defense witness. Before the termination of Mr. Laos direct examination, respondent RCBC filed a Motion to Inhibit Presiding Judge Pedro Santiago,[if !supportFootnotes][73][endif] who subsequently denied the motion.[if !supportFootnotes][74][endif] The Order denying the Motion to Inhibit was the subject matter of petitions filed by respondent RCBC in the Court of Appeals [if !supportFootnotes][75][endif]

and subsequently in this Court, which were all dismissed.In the meantime, when respondent RCBCs witness (Mr. Lao) failed to appear at the hearing, Judge

Santiago ordered that Mr. Laos testimony be stricken off the record despite respondent banks motion to have the case reset.[if !supportFootnotes][76][endif] After the appellate proceedings for respondent RCBCs Petition as regards the Motion to Inhibit, however, Judge Santiago set aside his earlier Order and reinstated the testimony of Mr. Lao, subject to cross-examination.[if !supportFootnotes][77][endif] Petitioner Bangayan took exception to the Order reinstating Mr. Laos testimony, but continued to conduct his cross examination with a reservation to raise the Order in the appellate courts.[if !supportFootnotes][78][endif]

Respondent RCBC thereafter filed its Formal Offer of Exhibits.[if !supportFootnotes][79][endif]

On 17 October 1994, the trial court rendered a Decision, the dispositive portion of which reads: 

WHEREFORE, premises above considered, plaintiff not having proved that defendant RCBC acted wrongly, maliciously and negligently in dishonoring his 7 checks, nor has the bank given any confidential informations against the plaintiff in violation of R.A. 1405 and the defendant bank having established on the contrary that plaintiff has no sufficient funds for his said checks, the instant complaint is hereby DISMISSED. [if !

supportFootnotes][80][endif] (Emphasis supplied) 

When his omnibus motion[if !supportFootnotes][81][endif] to have the Decision reconsidered was denied,[if !supportFootnotes]

[82][endif] petitioner Bangayan filed a notice of appeal.[if !supportFootnotes][83][endif]

The Ruling of the Court of AppealsAfter petitioner Bangayan[if !supportFootnotes][84][endif] and respondent RCBC[if !supportFootnotes][85][endif] filed their

respective appeal briefs, the Court of Appeals affirmed the trial courts decision in toto.[if !supportFootnotes][86][endif] The appellate court found that the dishonor of the checks by respondent RCBC was not without good reason, considering that petitioner Bangayans account had been debited owing to his obligations as a surety in favor of several corporations. Thus, the Court Appeals found there was no dishonest purpose, or some moral obliquity, or conscious doing of wrong, or breach of a known duty, or some motive or interest, or ill will that partakes (sic) nature of fraud that can be attributed to respondent RCBC. [if !supportFootnotes][87][endif] It likewise ruled that petitioner Bangayan cannot raise the question as to the genuineness, authenticity and due execution of the Surety Agreement for the first time on appeal.[if !supportFootnotes][88][endif]

This Decision of the appellate court is the subject of the instant Petition for Review on Certiorari filed by petitioner Bangayan under Rule 45 of the Rules of Court.[if !supportFootnotes][89][endif]

Assignment of ErrorsPetitioner Bangayan makes the following assignment of errors:A. THE COURT OF APPEALS ACTED WITH GROSS ARBITRARINESS AND IN BLATANT VIOLATION

OF THE CONSTITUTIONAL RIGHTS OF THE PETITITONER TO DUE PROCESS, AND A FAIR TRIAL:(1) WHEN IT REINSTATED THE TESTIMONY OF ELI LAO ALREADY STRICKEN OFF THE

RECORDS UPON PRIOR ORDER OF THE RTC AFFIRMED BY THE COURT OFAPPEALS AND CONFIRMED BY THE SUPREME COURT;

(2) WHEN IT SANCTIONED THE CAVALIER ACT OF RESPONDENTS IN DEMEANING THE RULES ON DISCOVERY PROCEDURE;

(3) WHEN IT RENDERED A DECISION WHICH IS CONTRARY TO THE FACTS AND THE EVIDENCE PRESENTED AT THE TRIAL; and

(4) WHEN IT REFUSED TO APPLY THE LAWS SQUARELY IN POINT ON THE MATTER IN CONTROVERSY.

B. THE HONORABLE COURT OF APPEALS DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE HONORABLE SUPREME COURT;

C. THERE ARE SPECIAL AND IMPORTANT REASONS THAT REQUIRE A REVIEW OF THE CA DECISION;

D. THE DECISION OF THE COURT OF APPEALS IS NEITHER JUST NOR IN ACCORD WITH THE RULES OF LAW AND JURISPRUDENCE NOR IS IT EQUITABLE AND IT IGNORES THE PREVIOUS RULINGS OF THE SUPREME COURT IN EARLIER PRECEDENT CASES.[if !

supportFootnotes][90][endif]

The IssuesA. Whether respondent RCBC was justified in dishonoring the checks, and, consequently, whether

petitioner Bangayan is entitled to damages arising from the dishonor.B. Whether there was reversible error on the part of the lower court in allowing the testimony of Mr. Lao,

despite its earlier Order to strike off the testimony.C. Whether respondent RCBC violated the Bank Secrecy Act.

The Ruling of the Court 

Preliminarily, petitioner Bangayan raises questions of fact [if !supportFootnotes][91][endif] regarding the authenticity of the Surety Agreement and the events leading up to the dishonor of the seven checks. However, petitions for review on certiorari under Rule 45 are limited only to pure questions of law [if !supportFootnotes][92][endif] and, generally, questions of fact are not reviewable[if !supportFootnotes][93][endif] since this Court is not a trier of facts.[if !supportFootnotes][94][endif] Although respondent RCBC briefly treated this procedural matter,[if !supportFootnotes][95][endif] the Court finds that the instant Petition is indeed subject to dismissal because the determination of questions of fact is improper in a Rule 45 proceeding. [if !

supportFootnotes][96][endif] In any case, even if procedural rules were to be relaxed at this instance, the substantial merits of petitioner Bangayans cause is nonetheless insufficient to reverse the decisions of the trial and appellate courts, as will be discussed in detail below.A. There was no malice or bad faith on the part of respondent RCBC in the dishonor of the checks, since its actions were justified by petitioner Bangayans obligations under the Surety Agreement. The Court is unconvinced by petitioner Bangayans arguments that respondent RCBC acted with malice or bad faith in dishonoring the seven checks, which would entitle him to an award of damages.At the heart of the controversy is the Surety Agreement that secured the obligations of the nine corporations in favor of respondent RCBC.

Petitioner Bangayan denies the genuineness, authenticity and due execution of the alleged agreement on the following grounds: (a) his signature on the document is not genuine; (b) the Surety Agreement was never notarized; and (c) the alleged accounts, being guaranteed, appear in a separate piece of paper that does not bear his signature or conformity.[if !supportFootnotes][97][endif]

Both the trial and the appellate courts gave credence to the Surety Agreement, which categorically guaranteed the four corporations obligations to respondent RCBC under the letters of credit. Petitioner Bangayan did not provide sufficient reason for the Court to reverse these findings. The evidence on record supports the conclusion arrived at by the lower court and the Court of Appeals.First, aside from his bare allegations, petitioner Bangayan failed to establish how his signature in the Surety Agreement was forged and therefore, not genuine.

Before a private document is offered as authentic, its due execution and authenticity must be proved: (a) either by anyone who has seen the document executed or written; or (b) by evidence of the genuineness of the signature or handwriting of the maker.[if !supportFootnotes][98][endif] As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing evidence.[if !supportFootnotes][99][endif] The burden of proof rests on the party alleging forgery.[if !supportFootnotes][100][endif] Mere allegation of forgery is not evidence.[if !supportFootnotes][101][endif]

Mr. Lao, witness for respondent RCBC, identified the Surety Agreement [if !supportFootnotes][102][endif] as well as the genuineness of petitioner Bangayans signature therein using petitioners signature cards in his bank accounts. [if !

supportFootnotes][103][endif] The trial and the appellate courts gave due credence to the identification and authentication of the Surety Agreement made by Mr. Lao.[if !supportFootnotes][104][endif]

In Deheza-Inamarga v. Alano,[if !supportFootnotes][105][endif] the Court ruled that:The question of forgery is one of fact. It is well-settled that when supported by substantial evidence or borne out by the records, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court.

It is a hornbook doctrine that the findings of fact of trial courts are entitled to great weight on appeal and should not be disturbed except for strong and valid reasons. It is not a function of this Court to analyze and weigh evidence by the parties all over again. Our jurisdiction is limited to reviewing errors of law that might have been committed by the Court of Appeals. Where the factual findings of the trial court are affirmed in toto by the Court of Appeals as in this case, there is great reason for not disturbing such findings and for regarding them as not reviewable by this Court. (Emphasis supplied)

 Furthermore, petitioner Bangayan did not adduce any evidence to support his claim of forgery, despite the opportunity to do so. Considering that there was evidence on record of his genuine signature and handwriting (the signature card and the dishonored checks themselves), nothing should have prevented petitioner Bangayan from submitting the Surety Agreement for examination or comparison by a handwriting expert.

Even respondent RCBC did not interpose any objection when the possibility of forwarding the signature card and Surety Agreement forwarded to the National Bureau of Investigation for examination was raised during the testimony of Mr. Lao:ATTY. LOYOLA

Considering the delicate nature or the significance of the signatures in the signature cards and the risk of my admitting the authenticity of a mere xerox copies [sic] and considering further that it is our position that the surety agreement as well as specimen signatures on the signature cards must be submitted to the Court and later forwarded to the NBI, Question Document Section, for examination, I am in no position to admit now that the machine copies in the signature cards are faithful reproduction. Accordingly, I am hoping at this stage that the surety agreement and the signature cards be forwarded to the NBI later on for examination and in the mean time, the questioned documents be entrusted to the custody of the Honorable Court.

ATTY. POBLADOR

With respect to the manifestation of counsel that the documents with the signatures should be submitted to the NBI, we have no objection, but at this juncture, we are only asking, Your Honor, if the xerox copies are faithful reproduction of the original.[if !supportFootnotes][106][endif] (Emphasis supplied) Despite his intention to have the signatures in the Surety Agreement compared with those in the signature cards, petitioner Bangayan did not have the questioned document examined by a handwriting expert in rebuttal and simply relied on his bare allegations. There is no clear, positive and convincing evidence to show that his signature in the Surety Agreement was indeed forged. As petitioner failed to discharge his burden of demonstrating that his signature was forged, there is no reason to overturn the factual findings of the lower courts with respect to the genuineness and due execution of the Surety Agreement.Second, the mere absence of notarization does not necessarily render the Surety Agreement invalid.

Notarization of a private document converts the document into a public one, renders it admissible in court without further proof of its authenticity, and is entitled to full faith and credit upon its face. [if !supportFootnotes][107][endif]

However, the irregular notarization or, for that matter, the lack of notarization does not necessarily affect the validity of the contract reflected in the document.[if !supportFootnotes][108][endif]

On its face, the Surety Agreement is not notarized, even if respondent RCBCs standard form for that agreement makes provisions for it. The non-completion of the notarization form, however, does not detract from the validity of the agreement, especially in this case where the genuineness and due authenticity of petitioner Bangayans signature in the contract was not successfully assailed.

The failure to notarize the Surety Agreement does not invalidate petitioner Bangayans consent to act as surety for the nine corporations obligations to respondent RCBC. Contracts are obligatory in whatever form they may have been entered into, provided all essential requisites are present [if !supportFootnotes][109][endif] and the notarization is not an essential requisite for the validity of a Surety Agreement.[if !supportFootnotes][110][endif]

Third, that the annex of the Surety Agreement does not bear petitioner Bangayans signature is not a sufficient ground to invalidate the main agreement altogether. As the records will bear out, the Surety Agreement enumerated the names of the corporation whose obligations petitioner Bangayan are securing. The annex to the Surety Agreement enumerated not only the names of the corporations but their respective addresses as well. [if !supportFootnotes]

[111][endif] The corporations enumerated in the annex correspond to the nine corporations enumerated in the main body of the Surety Agreement. Ordinarily, the name and address of the principal borrower whose obligation is sought to be assured by the surety is placed in the body of the agreement, but in this case the addresses could not all fit in the body of the document, thus, requiring that the address be written in an annex. The Surety Agreement itself noted that the principal places of business and postal addresses of the nine corporations were to be found in an attached document.Fourth, petitioner Bangayan never contested the existence of the Surety Agreement prior to the filing of the Complaint. When Mr. Lao informed him of the letter from the BOC regarding the failure of the three corporations to pay the customs duties under the letters of credit, the petitioner assured respondent bank that he is doing everything he can to solve the problem.[if !supportFootnotes][112][endif] If petitioner Bangayan purportedly never signed the Surety Agreement, he would have been surprised or at least perplexed that respondent RCBC would contact him regarding the three corporations letters of credit, when, as he claims, he never agreed to act as their surety. Instead, he acknowledged the situation and even offered to solve the predicament of these borrower corporations. In fact, Atty. Loyola, petitioners counsel in this case, even obtained copies of the BOC receipts after the three corporations paid the customs duties for their importation under the letters of credit giving a possible interpretation that petitioner was himself answering the obligations of the three corporations for the unpaid customs duties.It must be emphasized that petitioner Bangayan did not complain against the four corporations which had benefitted from his bank account. He claims to have no reasonable connection to these borrower corporations and denies having signed the Surety Agreement. If true, nothing should have stopped him from taking these corporations to court and demanding compensation as well as damages for their unauthorized use of his bank account. Yet, these bank accounts were put on hold and/or depleted by the letters of credit issued to the four entities. That petitioner did not include them in the present suit strengthens the finding that he had indeed consented to act as surety for those entities, and that there seems to be no arms length relationship between petitioner and the three entities.

Whatever damage to petitioner Bangayans interest or reputation from the dishonor of the seven checks was a consequence of his agreement to act as surety for the corporations and their failure to pay their loan obligations, advances and other expenses.

With respect to the first two dishonored checks, respondent RCBC had already put on hold petitioner Bangayans account to answer for the customs duties being demanded from the bank by the BOC. In fact, the trial court considered the referral of these checks to petitioner Bangayan as an effort by respondent RCBC to allow its depositor an opportunity to arrange his accounts and provide funds for his checks. [if !supportFootnotes][113][endif] It likewise appeared to the appellate court that the funds in petitioners account served as the lien of the custom duties assessed; thus, the funds cannot be considered as sufficient to cover future transactions.[if !supportFootnotes][114][endif]

On the other hand, the five other checks were subsequently dishonored because petitioner Bangayans account was by that time already depleted due to the partial payment of Lotec Marketings loan obligation. [if !supportFootnotes][115][endif]

Although the lien earlier imposed on petitioners account was lifted when the three corporations paid the customs duties,[if !supportFootnotes][116][endif] the account was almost completely depleted when the funds were subsequently used to

partially pay Lotec Marketings outstanding obligation under the fourth letter of credit. [if !supportFootnotes][117][endif] Respondent RCBC was compelled to fully debit the funds to satisfy the main loan obligation of Lotec Marketing, which petitioner had guaranteed in joint and several capacity.

What must be underscored in respondent RCBCs immediate action of applying petitioner Bangayans account to the Lotec Marketing is the nature of the loan instrument used in this case a letter of credit. In a letter of credit, the engagement of the issuing bank (respondent RCBC in this instance) is to pay the seller or beneficiary of the credit (or the advising bank, Korean Exchange Bank, in this instance) once the draft and the required documents are presented to it.[if !supportFootnotes][118][endif] This independence principle in letters of credit assures the seller or the beneficiary of prompt payment independent of any breach of the main contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not.[if !supportFootnotes][119][endif]

In this case, respondent RCBC, as the issuing bank for Lotec Marketings letter of credit had to make prompt payment to Korea Exchange Bank (the advising bank) when the obligation became due and demandable. Precisely because of the independence principle in letters of credit and the need for prompt payment, [if !supportFootnotes]

[120][endif] respondent RCBC required a Surety Agreement from petitioner Bangayan before issuing the letters of credit in favor of the four corporations, including Lotec Marketing.

Under Articles 2199[if !supportFootnotes][121][endif] and 2200[if !supportFootnotes][122][endif] of the Civil Code, actual or compensatory damages are those awarded in satisfaction of or in recompense for loss or injury sustained. [if !

supportFootnotes][123][endif] They proceed from a sense of natural justice and are designed to repair the wrong that has been done.[if !supportFootnotes][124][endif]

In all seven dishonored checks, respondent RCBC properly exercised its right as a creditor under the Surety Agreement to apply the petitioner Bangayans funds in his accounts as security for the obligations of the four corporations under the letters of credit. Thus, petitioner Bangayan cannot attribute any wrong or misconduct to respondent RCBC since there was no malice or bad faith on the part of respondent in dishonoring the checks. Any damage to petitioner arising from the dishonor of those checks was brought about, not by the banks actions, but by the corporations that defaulted on their obligations that petitioner had guaranteed to pay. The trial and the appellate courts, therefore, committed no reversible error in disallowing the award of damages to petitioner.B. The trial court did not commit reversible error when it reinstated the testimony of Mr. Lao and allowed petitioner Bangayan to cross-examine him.Petitioner Bangayan also assails the lower courts order that reinstated the direct testimony of Mr. Lao, respondent RCBCs lone witness. Petitioner claims that Judge Santiago acted with partiality by reinstating Mr. Laos testimony, because this Court in another case had already sustained the lower courts earlier Order striking out the testimony. Hence, petitioner says that the judges reinstatement of Mr. Laos testimony was in violation of petitioners right to due process.Petitioner Bangayans arguments are unmeritorious.

Discretionary power is generally exercised by trial judges in furtherance of the convenience of the courts and the litigants, the expedition of business, and in the decision of interlocutory matters on conflicting facts where one tribunal could not easily prescribe to another the appropriate rule of procedure. [if !supportFootnotes][125][endif] Thus, the Court ruled:

In its very nature, the discretionary control conferred upon the trial judge over the proceedings had before him implies the absence of any hard-and-fast rule by which it is to be exercised, and in accordance with which it may be reviewed. But the discretion conferred upon the courts is not a willful, arbitrary, capricious and uncontrolled discretion. It is a sound, judicial discretion which should always be exercised with due regard to the rights of the parties and the demands of equity and justice. As was said in the case of The Styria vs. Morgan (186 U.S., 1, 9): The establishment of a clearly defined rule of action would be the end of discretion, and yet discretion should not be a word for arbitrary will or inconsiderate action. So in the case of Goodwin vs. Prime (92 Me., 355), it was said that discretion implies that in the absence of positive law or fixed rule the judge is to decide by his view of expediency or by the demands of equity and justice.

There being no positive law or fixed rule to guide the judge in the court below in such cases, there is no positive law or fixed rule to guide a court of appeals in reviewing his action in the premises, and such courts will not therefore attempt to control the exercise of discretion by the court below unless it plainly appears that there was inconsiderate action or the exercise of mere arbitrary will, or in other words that his action in the premises amounted to an abuse of discretion. But the right of an appellate court to review judicial acts which lie in the discretion of inferior courts may properly be invoked upon a showing of a strong and clear case of abuse of power to the prejudice of the appellant, or that the ruling objected to rested on an erroneous principle of law not vested in discretion. [if !

supportFootnotes][126][endif] (Emphasis supplied)  Prior to a final judgment, trial courts have plenary control over the proceedings including the judgment, and in the exercise of a sound judicial discretion, may take such proper action in this regard as truth and justice may require. [if !

supportFootnotes][127][endif]

In the instant case, the trial court was within the exercise of its discretionary and plenary control of the proceedings when it reconsidered motu propio its earlier order striking out the testimony of Mr. Lao [if !supportFootnotes][128][endif] and ordered it reinstated.[if !supportFootnotes][129][endif] The order of the judge cannot be considered as willful, arbitrary, capricious and uncontrolled discretion, since his action allowed respondent bank to present its case fully, especially considering that Mr. Lao was the sole witness for the defense.Petitioner Bangayans reliance[if !supportFootnotes][130][endif] on the Decisions of the Court of Appeals (CA-G.R. SP No. 31865) and this Court (G.R. No. 115922) with respect to respondent RCBCs Petition is misplaced. Contrary to his claim, what respondent RCBC questioned in those cases was the denial by Judge Santiago of its Motion for Inhibition. [if !

supportFootnotes][131][endif] As respondent pointed out, its Petitions to the Court of Appeals and the Court simply prayed for the reversal of the denial of the Motion for Inhibition and did not include the Order striking out the testimony of Mr. Lao. Even the appellate court (CA-G.R. CV No. 48479) noted that what was resolved by the High Court was the issue of Inhibition of the Judge and not the striking out of the testimony of Mr. Eli Lao. [if !supportFootnotes][132][endif]

Neither can petitioner Bangayan claim any deprivation of due process when the trial court ordered the reinstatement of Mr. Laos testimony without any motion or prayer from respondent RCBC. The right of a party to confront and cross-examine opposing witnesses in a judicial litigation, be it criminal or civil in nature, or in proceedings before

administrative tribunals with quasi-judicial powers, is a fundamental right which is part of due process. [if !supportFootnotes]

[133][endif] This right, however, has always been understood as requiring not necessarily an actual cross-examination but merely an opportunity to exercise the right to cross-examine if desired. [if !supportFootnotes][134][endif] What is proscribed by statutory norm and jurisprudential precept is the absence of the opportunity to cross-examine. [if !supportFootnotes][135][endif]

In this case, petitioner Bangayans right to due process was not violated, as he was given the freedom and opportunity to cross-examine and confront Mr. Lao on the latters testimony. Even if respondent RCBC had not filed any motion, it was well within the courts discretion to have Mr. Laos testimony reinstated in the interest of substantial justice. The proceedings in the trial court in this civil case were adversarial in nature insofar as the parties, in the process of attaining justice, were made to advocate their respective positions in order to ascertain the truth.[if !supportFootnotes][136][endif] The truth-seeking function of the judicial system is best served by giving an opportunity to all parties to fully present their case, subject to procedural and evidentiary rules. Absent any blatant neglect or willful delay, both parties should be afforded equal latitude in presenting the evidence and the testimonies of their witnesses in favor of their respective positions, as well as in testing the credibility and the veracity of the opposing partys claims through cross-examination.

The Court finds no reversible error on the part of the trial court in allowing the full presentation of the reinstated testimony of respondent RCBCs lone witness, especially since the other party was afforded the occasion to cross-examine the witness and in fact availed himself of the opportunity. Although he expressly reserved his right to question the courts reinstatement of the testimony of the witness, petitioner Bangayan did not satisfactorily offer convincing arguments to overturn the trial courts order. That the court gave petitioner the opportunity to cross-examine Mr. Lao a remedy that petitioner even fully availed himself of negates the allegation of bias against the Judge.The timing of petitioner Bangayans allegations of prejudice on the part of Judge Santiago is suspect, since the latter had already rendered a Decision unfavorable to petitioners cause.

A motion to inhibit shall be denied if filed after a member of the court has already given an opinion on the merits of the case, the rationale being that a litigant cannot be permitted to speculate on the action of the court . . . (only to) raise an objection of this sort after the decision has been rendered.[if !supportFootnotes][137][endif]

When respondent RCBC moved for Judge Santiagos inhibition, petitioner even interposed an objection and characterized as unfounded respondent banks charge of partiality. [if !supportFootnotes][138][endif] It is now too late in the day to suddenly accuse Judge Santiago of prejudice in the proceedings below, after he has already rendered an unfavorable judgment against petitioner. If at all, the latters claim that Judge Santiago was biased in favoring respondent RCBC is a mere afterthought that fails to support a reversal by the Court.C. Respondent RCBC did not violate the Bank Secrecy Act.The Court affirms the trial courts findings which were likewise concurred with by the Court of Appeals that the alleged violation of the Bank Secrecy Act was not substantiated:The Customss investigation with a subpoena/duces tecum sent to witness Mr. Lao on the three

companies, Final Sales Enterprises, Peak Marketing and LBZ Commercial, guaranteed by plaintiff naturally raised an alarm. Mr. Lao was asked to bring documents on the questioned importations. The witness denied having given any statement in connection therewith. No evidence was introduced by plaintiff to substantiate his claim that defendant bank gave any classified information in violation of Republic Act No. 1405. On this score, plaintiff has no cause of action for damages against said defendant RCBC.[if !supportFootnotes][139][endif]

 In his Memorandum, petitioner Bangayan argues that there was a wrongful disclosure by respondents

RCBC and Philip Saria of confidential information regarding his bank accounts in violation of the Bank Secrecy Act. [if

!supportFootnotes][140][endif] However, petitioner failed to identify which confidential information respondents divulged before the BOC that would make them liable under the said law.Section 2 of the Bank Secrecy Act provides:

All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

  Petitioner Bangayan claims that respondent Saria divulged confidential information through the Affidavit he submitted to the BOC.[if !supportFootnotes][141][endif] However, nothing in respondent Sarias Affidavit before the BOC showed that details of petitioner Bangayans bank accounts with respondent bank was disclosed. If at all, respondent Saria merely discussed his functions as an account officer in respondent bank and identified petitioner as the one who had guaranteed the payment or obligations of the importers under the Surety Agreement.According to petitioner Bangayan, the responses of respondent RCBCs officers in relation to the BOCs actions led to unsavory news reports that disparaged petitioners good character and reputation and exposed him to public ridicule and contempt.[if !supportFootnotes][142][endif] However, as the appellate court correctly found, the humiliation and embarrassment that petitioner Bangayan suffered in the business community was not brought about by the alleged violation of the Bank Secrecy Act; it was due to the smuggling charges filed by the Bureau of Customs which found their way in the headlines of newspapers.[if !supportFootnotes][143][endif]

Both the trial and appellate courts correctly found that petitioner Bangayan did not satisfactorily introduce evidence to substantiate his claim that defendant bank gave any classified information in violation of the Bank Secrecy Act. Failing to adduce further evidence in the instant Petition with respect to the banks purported disclosure of confidential information as regards his accounts, petitioner cannot be awarded any damages arising from an unsubstantiated and unproved violation of the Bank Secrecy Act.Rules of DiscoveryThe Court finds that petitioner Bangayans argument as regards the banks purported failure to comply with the rules of discovery is not substantive enough to warrant further discussion by this Court. Petitioner has not alleged any different outcome that would be generated if we were to agree with him on this point. If petitioner is unsatisfied with respondent RCBCs responses, then his remedy is to expose the falsity (if any) of the banks responses in the various modes of discovery during the trial proper. He could have confronted respondent with contradictory statements, testimonies or other countervailing evidence. The Court affirms the findings of the appellate court that

the rules of discovery were not treated lightly by respondent RCBC.[if !supportFootnotes][144][endif]

In summary, petitioner Bangayan failed to establish that the dishonor of the seven checks by respondent RCBC entitled him to damages, since the dishonor arose from his own voluntary agreement to act as surety for the four corporations letters of credit. There was no bad faith or malice on the part of respondent bank, as it merely acted within its rights as a creditor under the Surety Agreement.IN VIEW OF THE FOREGOING, the instant Petition for Review on Certiorari filed by Ricardo B. Bangayan is DENIED. The Decisions of the trial court and appellate court dismissing the Complaint for damages filed by Bangayan against respondents Rizal Commercial Banking Corporation and Philip Saria are hereby AFFIRMED.SO ORDERED.

[G.R. NO. 117914. February 1, 2002]MICO METALS CORPORATION, petitioner, vs. COURT OF APPEALS and PHILIPPINE BANK OF

COMMUNICATIONS, respondents.D E C I S I O NDE LEON, JR., J:Before us is the joint and consolidated petition for review of the Decision[if !supportFootnotes][1][endif] dated June 15, 1994 of the Court of Appeals in CA-G.R. CV No. 27480 entitled, Philippine Bank of Communications vs. Mico Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co, which reversed the decision of the Regional Trial Court (RTC) of Manila, Branch 55 dismissing the complaint for a sum of money filed by private respondent Philippine Bank of Communications against herein petitioners, Mico Metals Corporation (MICO, for brevity), Charles Lee, Chua Siok Suy,[if !supportFootnotes][2][endif] Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co.[if !supportFootnotes][3][endif] The dispositive portion of the said Decision of the Court of Appeals, reads:WHEREFORE, the decision of the Regional Trial Court is hereby reversed and in lieu thereof, a new one is entered:a) Ordering the defendants-appellees jointly and severally to pay plaintiff PBCom the sum of Five million four hundred fifty-one thousand six hundred sixty-three pesos and ninety centavos (P5,451,663.90) representing defendants-appellees unpaid obligations arising from ordinary loans granted by the plaintiff plus legal interest until fully paid.b) Ordering defendants-appellees jointly and severally to pay PBCom the sum of Four hundred sixty-one thousand six hundred pesos and sixty-six centavos (P46 1,600.66) representing defendants-appellees unpaid obligations arising from their letters of credit and trust receipt transactions with plaintiff PBCom plus legal interest until fully paid.c) Ordering defendants-appellees jointly and severally to pay PBCom the sum of P50,000.00 as attorneys fees.No pronouncement as to costs.The facts of the case are as follows:On March 2, 1979, 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 MICOs 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.In connection with the requests for discounting loan/credit lines, PBCom was furnished by MICO the following resolution which was adopted unanimously by MICOs Board of Directors:RESOLVED, that the President, Mr. Charles Lee, and the Vice-President and General Manager, Mr. Mariano A. Sio, singly or jointly, be and they are duly authorized and empowered for and in behalf of this Corporation to apply for, negotiate and secure the approval of commercial loans and other banking facilities and accommodations, such as, but not limited to discount loans, letters of credit, trust receipts, lines for marginal deposits on foreign and domestic letters of credit, negotiate out-of-town checks, etc. from the Philippine Bank of Communications, 216 Juan Luna, Manila in such sums as they shall deem advantageous, the principal of all of which shall not exceed the total amount of TEN MILLION PESOS (P10,000,000.00), Philippine Currency, plus any interests that may be agreed upon with said Bank in such loans and other credit lines of the same kind and such further terms and conditions as may, upon granting of said loans and other banking facilities, be imposed by the Bank; and to make, execute, sign and deliver any contracts of mortgage, pledge or sale of one, some or all of the properties of the Company, or any other agreements or documents of whatever nature or kind, including the signing, indorsing, cashing, negotiation and execution of promissory notes, checks, money orders or other negotiable instruments, which may be necessary and proper in connection with said loans and other banking facilities, or with their amendments, renewals and extensions of payment of the whole or any part thereof.[if !supportFootnotes][4][endif]

On March 26, 1979, MICO availed of the first loan of One Million Pesos (P1,000,000.00) from PBCom. Upon maturity of the loan, MICO caused the same to be renewed, the last renewal of which was made on May 21, 1982 under Promissory Note BNA No. 26218.[if !supportFootnotes][5][endif]

Another loan of One Million Pesos (P1,000,000.00) was availed of by MICO from PBCom which was likewise later on renewed, the last renewal of which was made on May 21, 1982 under Promissory Note BNA No. 26219. [if !

supportFootnotes][6][endif] To complete MICOs availment of Three Million Pesos (P3,000,000.00) discounting loan/credit line with PBCom, MICO availed of another loan from PBCom in the sum of One Million Pesos (P1,000,000.00) on May 24, 1979. As in previous loans, this was rolled over or renewed, the last renewal of which was made on May 25, 1982 under Promissory Note BNA No. 26253.[if !supportFootnotes][7][endif]

As security for the loans, MICO through its Vice-President and General Manager, Mariano Sio, executed on May 16, 1979 a Deed of Real Estate Mortgage over its properties situated in Pasig, Metro Manila covered by Transfer Certificates of Title (TCT) Nos. 11248 and 11250.On March 26, 1979 Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap and Richard Velasco, in their personal capacities executed a Surety Agreement[if !supportFootnotes][8][endif] 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. It was provided, however, that the liability of the sureties shall not at any one time exceed the principal amount of Three Million Pesos (P3,000,000.00) plus interest, costs, losses,

charges and expenses including attorneys fees incurred by PBCom in connection therewith.On July 14, 1980, petitioner 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 companys machineries. Upon approval of the said application for loan, MICO availed of the additional loan of Four Million Pesos (P4,000,000.00) as evidenced by Promissory Note TA No. 094.[if !supportFootnotes][9]

[endif]

As per agreement, the proceeds of all the loan availments were credited to MICOs current checking account with PBCom. To induce the PBCom to increase the credit line of MICO, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co (hereinafter referred to as petitioners-sureties), executed another surety agreement[if !supportFootnotes][10][endif] in favor of PBCom on July 28, 1980, whereby they 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 all other obligations of any kind and nature for which MICO may be held accountable by PBCom. It was provided, however, that their liability shall not at any one time exceed the sum of Seven Million Five Hundred Thousand Pesos (P7,500,000.00) including interest, costs, charges, expenses and attorneys fees incurred by MICO in connection therewith.On July 29, 1980, MICO furnished PBCom with a notarized certification issued by its corporate secretary, Atty. P.B. Barrera, that Chua Siok Suy was duly authorized by the Board of Directors to negotiate on behalf of MICO for loans and other credit availments from PBCom. Indicated in the certification was the following resolution unanimously approved by the Board of Directors:RESOLVED, AS IT IS HEREBY RESOLVED, That Mr. Chua Siok Suy be, as he is hereby authorized and empowered, on behalf of MICO METALS CORPORATION from time to time, to borrow money and obtain other credit facilities, with or without security, from the PHILIPPINE BANK OF COMMUNICATIONS in such amount(s) and under such terms and conditions as he may determine, with full power and authority to execute, sign and deliver such contracts, instruments and papers in connection therewith, including real estate and chattel mortgages, pledges and assignments over the properties of the Corporation; and to renew and/or extend and/or roll-over and/or reavail of the credit facilities granted thereunder, either for lesser or for greater amount(s), the intention being that such credit facilities and all securities of whatever kind given as collaterals therefor shall be a continuing security.RESOLVED FURTHER, That said bank is hereby authorized, empowered and directed to rely on the authority given hereunder, the same to continue in full force and effect until written notice of its revocation shall be received by said Bank.[if !supportFootnotes][11][endif]

On July 2, 1981, MICO filed with PBCom an application for a domestic letter of credit in the sum of Three Hundred Forty-Eight Thousand Pesos (P348,000.00).[if !supportFootnotes][12][endif] The corresponding irrevocable letter of credit was approved and opened under LC No. L-16060.[if !supportFootnotes][13][endif] Thereafter, the domestic letter of credit was negotiated and accepted by MICO as evidenced by the corresponding bank draft issued for the purpose. [if !

supportFootnotes][14][endif] After the supplier of the merchandise was paid, a trust receipt upon MICOs own initiative, was executed in favor of PBCom.[if !supportFootnotes][15][endif]

On September 14, 1981, MICO applied for another domestic letter of credit with PBCom in the sum of Two Hundred Ninety Thousand Pesos (P290,000.00).[if !supportFootnotes][16][endif] The corresponding irrevocable letter of credit was issued on September 22, 1981 under LC No. L-16334.[if !supportFootnotes][17][endif] After the beneficiary of the said letter of credit was paid by PBCom for the price of the merchandise, the goods were delivered to MICO which executed a corresponding trust receipt[if !supportFootnotes][18][endif] in favor of PBCom.On November 10, 1981, MICO applied for authority to open a foreign letter of credit in favor of Ta Jih Enterprises Co., Ltd.,[if !supportFootnotes][19][endif] and thus, the corresponding letter of credit[if !supportFootnotes][20][endif] was then issued by PBCom with a cable sent to the beneficiary, Ta Jih Enterprises Co., Ltd. advising that said beneficiary may draw funds from the account of PBCom in its correspondent banks New York Office.[if !supportFootnotes][21][endif] PBCom also informed its corresponding bank in Taiwan, the Irving Trust Company, of the approved letter of credit. The correspondent bank acknowledged PBComs advice through a confirmation letter[if !supportFootnotes][22][endif] and by debiting from PBComs account with the said correspondent bank the sum of Eleven Thousand Nine Hundred Sixty US Dollars ($11 ,960.00).[if !supportFootnotes][23][endif] As in past transactions, MICO executed in favor of PBCom a corresponding trust receipt.[if !supportFootnotes][24][endif]

On January 4, 1982, MICO applied, for authority to open a foreign letter of credit in the sum of One Thousand Nine Hundred US Dollars ($1,900.00), with PBCom.[if !supportFootnotes][25][endif] Upon approval, the corresponding letter of credit denominated as LC No. 62293[if !supportFootnotes][26][endif] was issued whereupon PBCom advised its correspondent bank and MICO[if !supportFootnotes][27][endif] of the same. Negotiation and proper acceptance of the letter of credit were then made by MICO. Again, a corresponding trust receipt[if !supportFootnotes][28][endif] was executed by MICO in favor of PBCom.In all the transactions involving foreign letters of credit, PBCom turned over to MICO the necessary documents such as the bills of lading and commercial invoices to enable the latter to withdraw the goods from the port of Manila.On May 21, 1982 MICO obtained from PBCom another loan in the sum of Three Hundred Seventy-Seven Thousand Pesos (P377,000.00) covered by Promissory Note BA No. 7458.[if !supportFootnotes][29][endif]

Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand for payment. [if !

supportFootnotes][30][endif] For failure of petitioner MICO to pay the obligations incurred despite repeated demands, private respondent PBCom extrajudicially foreclosed MICOs real estate mortgage and sold the said mortgaged properties in a public auction sale held on November 23, 1982. Private respondent PBCom which emerged as the highest bidder in the auction sale, applied the proceeds of the purchase price at public auction of Three Million Pesos (P3,000,000.00) to the expenses of the foreclosure, interest and charges and part of the principal of the loans, leaving an unpaid balance of Five Million Four Hundred Forty-One Thousand Six Hundred Sixty-Three Pesos and Ninety Centavos (P5,441,663.90) exclusive of penalty and interest charges. Aside from the unpaid balance of Five Million Four Hundred Forty-One Thousand Six Hundred Sixty-Three Pesos and Ninety Centavos (P5,441,663.90), MICO likewise had another standing obligation in the sum of Four Hundred Sixty-One Thousand Six Hundred Pesos and Six Centavos (P461,600.06) representing its trust receipts liabilities to private respondent. PBCom then demanded the settlement of the aforesaid obligations from herein petitioners-sureties who, however, refused to acknowledge their obligations to PBCom under the surety agreements. Hence, PBCom filed a complaint with prayer for writ of preliminary attachment before the Regional Trial Court of Manila, which was raffled to Branch 55, alleging that MICO was no longer in operation and had no properties to answer for its obligations. PBCom further alleged that petitioner Charles Lee has disposed or concealed his properties with intent to defraud his creditors. Except for MICO and Charles Lee, the sheriff of the RTC failed to serve the summons on herein petitioners-sureties since they were all reportedly abroad at the time. An alias summons was later issued but the sheriff was not able to serve the same to petitioners Alfonso Co and Chua Siok Suy who was already sickly at the time and reportedly in Taiwan where he later died.

Petitioners (MICO and herein petitioners-sureties) denied all the allegations of the complaint filed by respondent PBCom, and alleged that: a) MICO was not granted the alleged loans and neither did it receive the proceeds of the aforesaid loans; b) Chua Siok Suy was never granted any valid Board Resolution to sign for and in behalf of MICO; c) PBCom acted in bad faith in granting the alleged loans and in releasing the proceeds thereof; d) petitioners were never advised of the alleged grant of loans and the subsequent releases therefor, if any; e) since no loan was ever released to or received by MICO, the corresponding real estate mortgage and the surety agreements signed concededly by the petitioners-sureties are null and void.The trial court gave credence to the testimonies of herein petitioners and dismissed the complaint filed by PBCom. The trial court likewise declared the real estate mortgage and its foreclosure null and void. In ruling for herein petitioners, the trial court said that PBCom failed to adequately prove that the proceeds of the loans were ever delivered to MICO. The trial court pointed out, among others, that while PBCom claimed that the proceeds of the Four Million Pesos (P4,000,000.00) loan covered by promissory note TA 094 were deposited to the current account of petitioner MICO, PBCom failed to produce the ledger account showing such deposit. The trial court added that while PBCom may have loaned to MICO the other sums of Three Hundred Forty-Eight Thousand Pesos (P348,000.00) and Two Hundred Ninety Thousand Pesos (P290,000.00), no proof has been adduced as to the existence of the goods covered and paid by the said amounts. Hence, inasmuch as no consideration ever passed from PBCom to MICO, all the documents involved therein, such as the promissory notes, real estate mortgage including the surety agreements were all void or nonexistent for lack of cause or consideration. The trial court said that the lack of proof as regards the existence of the merchandise covered by the letters of credit bolstered the claim of herein petitioners that no purchases of the goods were really made and that the letters of credit transactions were simply resorted to by the PBCom and Chua Siok Suy to accommodate the latter in his financial requirements.The Court of Appeals reversed the ruling of the trial court, saying that the latter committed an erroneous application and appreciation of the rules governing the burden of proof. Citing Section 24 of the Negotiable Instruments Law which provides that Every negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose signature appears thereon to have become a party thereto for value, the Court of Appeals said that while the subject promissory notes and letters of credit issued by the PBCom made no mention of delivery of cash, it is presumed that said negotiable instruments were issued for valuable consideration. The Court of Appeals also cited the case of Gatmaitan vs. Court of Appeals[if !supportFootnotes][31][endif] which holds that "there is a presumption that an instrument sets out the true agreement of the parties thereto and that it was executed for valuable consideration. The appellate court noted and found that a notarized Certification was issued by MICOs corporate secretary, P.B. Barrera, that Chua Siok Suy, was duly authorized by the Board of Directors of MICO to borrow money and obtain credit facilities from PBCom.Petitioners filed a motion for reconsideration of the challenged decision of the Court of Appeals but this was denied in a Resolution dated November 7, 1994 issued by its Former Second Division. Petitioners-sureties then filed a petition for review on certiorari with this Court, docketed as G.R. No. 117913, assailing the decision of the Court of Appeals. MICO likewise filed a separate petition for review on certiorari, docketed as G.R. No. 117914, with this Court assailing the same decision rendered by the Court of Appeals. Upon motion filed by petitioners, the two (2) petitions were consolidated on January 11, 1995.[if !supportFootnotes][32][endif]

Petitioners contend that there was no proof that the proceeds of the loans or the goods under the trust receipts were ever delivered to and received by MICO. But the record shows otherwise. Petitioners-sureties further contend that assuming that there was delivery by PBCom of the proceeds of the loans and the goods, the contracts were executed by an unauthorized person, more specifically Chua Siok Suy who acted fraudulently and in collusion with PBCom to defraud MICO.The pertinent issues raised in the consolidated cases at bar are: a) whether or not the proceeds of the loans and letters of credit transactions were ever delivered to MICO, and b) whether or not the individual petitioners, as sureties, may be held liable under the two (2) Surety Agreements executed on March 26, 1979 and July 28, 1980.In civil cases, the party having the burden of proof must establish his case by preponderance of evidence. [if !

supportFootnotes][33][endif] Preponderance of evidence means evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. Petitioners contend that the alleged promissory notes, trust receipts and surety agreements attached to the complaint filed by PBCom did not ripen into valid and binding contracts inasmuch as there is no evidence of the delivery of money or loan proceeds to MICO or to any of the petitioners-sureties. Petitioners claim that under normal banking practice, borrowers are required to accomplish promissory notes in blank even before the grant of the loans applied for and such documents become valid written contracts only when the loans are actually released to the borrower.We are not convinced.During the trial of an action, the party who has the burden of proof upon an issue may be aided in establishing his claim or defense by the operation of a presumption, or, expressed differently, by the probative value which the law attaches to a specific state of facts. A presumption may operate against his 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 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 burden of proof remains where it is, but by the presumption the one who has that burden is relieved for the time being from introducing evidence in support of his averment, because the presumption stands in the place of evidence unless rebutted.Under Section 3, Rule 131 of the Rules of Court the following presumptions, among others, are satisfactory if uncontradicted: a) That there was a sufficient consideration for a contract and b) That a negotiable instrument was given or indorsed for sufficient consideration. As observed by the Court of Appeals, a similar presumption is found in Section 24 of the Negotiable Instruments Law which provides that every negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose signature appears thereon to have become a party for value. Negotiable instruments which are meant to be substitutes for money, must conform to the following requisites to be considered as such a) it must be in writing; b) it must be signed by the maker or drawer; c) it must contain an unconditional promise or order to pay a sum certain in money; d) it must be payable on demand or at a fixed or determinable future time; e) it must be payable to order or bearer; and f) where it is a bill of exchange, the drawee must be named or otherwise indicated with reasonable certainty. Negotiable instruments include promissory notes, bills of exchange and checks. Letters of credit and trust receipts are, however, not negotiable instruments. But drafts issued in connection with letters of credit are negotiable instruments.Private respondent PBCom presented the following documentary evidence to prove petitioners credit availments and liabilities:1) Promissory Note No. BNA 26218 dated May 21, 1982 in the sum of P1,000,000.00 executed by MICO in

favor of PBCom.2) Promissory Note No. BNA 26219 dated May 21, 1982 in the sum of P1,000,000.00 executed by MICO in

favor of PBCom.3) Promissory Note No. BNA 26253 dated May 25, 1982 in the sum of P1,000,000.00 executed by MICO in

favor of PBCom.4) Promissory Note No. BNA 7458 dated May 21, 1982 in the sum of P377,000.00 executed by MICO in

favor of PBCom.5) Promissory Note No. TA 094 dated July 29, 1980 in the sum of P4,000.000.00 executed by MICO in favor

of PBCom.6) Irrevocable letter of credit No. L-16060 dated July 2,1981 issued in favor of Perez Battery Center for

account of Mico Metals Corp.7) Draft dated July 2, 1981 in the sum of P348,000.00 issued by Perez Battery Center, beneficiary of

irrevocable Letter of Credit No. No. L-16060 and accepted by MICO Metals corporation.8) Letter dated July 2, 1981 from Perez Battery Center addressed to private respondent PBCom showing that

proceeds of the irrevocable letter of credit No. L- 16060 was received by Mr. Moises Rosete, representative of Perez Battery Center.

9) Trust receipt dated July 2, 1981 executed by MICO in favor of PBCom covering the merchandise purchased under Letter of Credit No. 16060.

10) Irrevocable letter of credit No. L-16334 dated September 22, 1981 issued in favor of Perez Battery Center for account of MICO Metals Corp.

11) Draft dated September 22, 1981 in the sum of P290,000.00 issued by Perez Battery Center and accepted by MICO.

12) Letter dated September 17, 1981 from Perez Battery addressed to PBCom showing that the proceeds of credit no. L-16344 was received by Mr. Moises Rosete, a representative of Perez Battery Center.

13) Trust Receipt dated September 22, 1981 executed by MICO in favor of PBCom covering the merchandise under Letter of Credit No. L-16334.

14) Irrevocable Letter of Credit no. 61873 dated November 10, 1981 for US$11,960.00 issued by PBCom in favor of TA JIH Enterprises Co. Ltd., through its correspondent bank, Irving Trust Company of Taipei, Taiwan.

15) Trust Receipt dated December 15, 9181 executed by MICO in favor of PBCom showing that possession of the merchandise covered by Irrevocable Letter of Credit no. 61873 was released by PBCom to MICO.

16) Letters dated March 2, 1979 from MICO signed by its president, Charles Lee, showing that MICO sought credit line from PBCom in the form of loans, letters of credit and trust receipt in the sum of P7,500,000.00.

17) Letter dated July 14, 1980 from MICO signed by its president, Charles Lee, showing that MICO requested for additional financial assistance in the sum of P4,000,000.00.

18) Board resolution dated March 6, 1979 of MICO authorizing Charles Lee and Mariano Sio singly or jointly to act and sign for and in behalf of MICO relative to the obtention of credit facilities from PBCom.

19) Duly notarized Deed of Mortgage dated May 16, 1979 executed by MICO in favor of PBCom over MICO s real properties covered by TCT Nos. 11248 and 11250 located in Pasig.

20) Duly notarized Surety Agreement dated March 26, 1979 executed by herein petitioners Charles Lee, Mariano Sio, Alfonso Yap, Richard Velasco and Chua Siok Suy in favor of PBCom.

21) Duly notarized Surety Agreement dated July 28, 1980 executed by herein petitioners Charles Lee, Mariano Sio, Alfonso Yap, Richard Velasco and Chua Siok Suy in favor of PBCom.

22) Duly notarized certification dated July 28, 1980 issued by MICO s corporate secretary, Mr. P.B. Barrera, attesting to the adoption of a board resolution authorizing Chua Siok Suy to sign, for and in behalf of MICO, all the necessary documents including contracts, loan instruments and mortgages relative to the obtention of various credit facilities from PBCom.

The above-cited documents presented 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. Petitioner MICO did not proffer a single piece of evidence, apart from its bare denials, to support its allegation that the loan transactions, real estate mortgage, letters of credit and trust receipts were issued allegedly without any consideration.Petitioners-sureties, for their part, presented the By-Laws[if !supportFootnotes][34][endif] of Mico Metals Corporation (MICO) to prove that only the president of MICO is authorized to borrow money, arrange letters of credit, execute trust receipts, and promissory notes and consequently, that the loan transactions, letters of credit, promissory notes and trust receipts, most of which were executed by Chua Siok Suy in representation of MICO were not allegedly authorized and hence, are not binding upon MICO. 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.[if !supportFootnotes][35][endif] 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.[if !supportFootnotes][36][endif] 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.Petitioners-sureties also presented a letter of their counsel dated October 9, 1982, addressed to private respondent PBCom purportedly to show that PBCom knew that Chua Siok Suy allegedly used the credit and good names of the petitioner-sureties for his benefit, and that petitioner-sureties were made to sign blank documents and were furnished copies of the same. The letter, however, is in fact merely a reply of petitioners-sureties counsel to

PBComs demand for payment of MICOs obligations, and appears to be an inconsequential piece of self-serving evidence.In addition to the foregoing, MICO and petitioners-sureties cited the decision of the trial court which stated that there was no proof that the proceeds of the loans were ever delivered to MICO. Although the private respondents witness, Mr. Gardiola, testified that the proceeds of the loans were deposited in MICOs current account with PBCom, his testimony was allegedly not supported by any bank record, note or memorandum. A careful scrutiny of the record including the transcript of stenographic notes reveals, however, that although private respondent PBCom was willing to produce the corresponding account ledger showing that the proceeds of the loans were credited to MICOs current account with PBCom, MICO in fact vigorously objected to the presentation of said document. That point is shown in the testimony of PBComs witness, Gardiola, thus:Q: Now, all of these promissory note Exhibits I and J which as you have said previously (sic) availed originally by defendant Mico Metals Corp. sometime in 1979, my question now is, do you know what happened to the proceeds of the original availment?A: Well, it was credited to the current account of Mico Metals Corp.Q: Why did it was credited to the proceeds to the account of Mico Metals Corp? (sic)A: Well, that is our understanding.ATTY. DURAN:Your honor, may we be given a chance to object, the best evidence is the so-called current account...COURT:Can you produce the ledger account?A: Yes, Your Honor, I will bring.COURT:The ledger or record of the current account of Mico Metals Corp.A: Yes, Your Honor.ATTY. ACEJAS:Your Honor, these are a confidential record, and they might not be disclosed without the consent of the

person concerned. (sic)ATTY. SANTOS:Well, you are the one who is asking that.ATTY. DURAN:Your Honor, Im precisely want to show for the ... (sic)COURT:But the amount covered by the current account of defendant Mico Metals Corp. is the subject matter of this

case.xxx xxx xxxQ: Are those availments were release? (sic)A: Yes, Your Honor, to the defendant corporation.Q: By what means?A: By the credit to their current account.ATTY. ACEJAS:We object to that, your Honor, because the disclose is the secrecy of the bank deposit. (sic)xxx xxx xxxQ: Before the recess Mr. Gardiola, you stated that the proceeds of the three (3) promissory notes were credited to the accounts of Mico Metals Corporation, now do you know what kind of current account was that which you are referring to?ATTY. ACEJAS:Objection your Honor, that is the disclose of the deposit of defendant Mico Metals Corporation and it cannot disclosed without the authority of the depositor. (sic)[if !supportFootnotes][37][endif]

That proceeds of the loans which were originally availed of in 1979 were delivered to MICO is bolstered by the fact that more than a year later, specifically on July 14, 1980, MICO through its president, petitioner-surety Charles Lee, requested for an additional loan of Four Million Pesos (P4,000,000.00) from PBCom. The fact that MICO was requesting for an additional loan implied that it has already availed of earlier loans from PBCom.Petitioners allege that PBCom presented no evidence that it remitted payments to cover the domestic and foreign letters of credit. Petitioners placed much reliance on the erroneous decision of the trial court which stated that private respondent PBCom allegedly failed to prove that it actually made payments under the letters of credit since the bank drafts presented as evidence show that they were made in favor of the Bank of Taiwan and First Commercial Bank.Petitioners allegations are untenable.Modern letters of credit are usually not made between natural persons. They involve bank to bank transactions. Historically, the letter of credit was developed to facilitate the sale of goods between, distant and unfamiliar buyers and sellers. It was an arrangement under which a bank, whose credit was acceptable to the seller, would at the instance of the buyer agree to pay drafts drawn on it by the seller, provided that certain documents are presented such as bills of lading accompanied the corresponding drafts. Expansion in the use of letters of credit was a natural development in commercial banking.[if !supportFootnotes][38][endif] 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 buyers 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.From the foregoing, it is clear that letters of credit, being usually bank to bank transactions, involve more than just one bank. Consequently, there is nothing unusual in the fact that the drafts presented in evidence by respondent bank were not made payable to PBCom. As explained by respondent bank, a draft was drawn on the Bank of Taiwan by Ta Jih Enterprises Co., Ltd. of Taiwan, supplier of the goods covered by the foreign letter of credit. Having paid the supplier, the Bank of Taiwan then presented the bank draft for reimbursement by PBComs correspondent bank in Taiwan, the Irving Trust Company which explains the reason why on its face, the draft was

made payable to the Bank of Taiwan. Irving Trust Company accepted and endorsed the draft to PBCom. The draft was later transmitted to PBCom to support the latters claim for payment from MICO. MICO accepted the draft upon presentment and negotiated it to PBCom.Petitioners further aver that MICO never requested that legal possession of the merchandise be transferred to PBCom by way of trust receipts. Petitioners insist that assuming that MICO transferred possession of the merchandise to PBCom by way of trust receipts, the same would be illegal since PBCom, being a banking institution, is not authorized by law to engage in the business of importing and selling goods.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. [if !

supportFootnotes][39][endif] 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.Petitioners averments with regard to the second issue are no less incredulous. Petitioners contend 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.It has not escaped our notice that it was petitioner-surety Charles Lee, as president of MICO Metals Corporation, who first requested for a discounting loan of Three Million Pesos (P3,000,000.00) from PBCom as evidenced by his letter dated March 2, 1979.[if !supportFootnotes][40][endif] On the same day, Charles Lee, as President of MICO, requested for a Letter of Credit and Trust Receipt line in the sum of Three Million Pesos (P3,000,000.00).[if !supportFootnotes][41][endif] Still, on the same day, Charles Lee again as President of MICO, wrote another letter to PBCOM requesting for a financing line in the sum of One Million Five Hundred Thousand Pesos (P1,500,000.00) to be used exclusively as marginal deposit for the opening of MICOs foreign and local letters of credit with PBCom.[if !supportFootnotes][42][endif] More than a year later, it was also Charles Lee, again in his capacity as president of MICO, who asked for an additional loan in the sum of Four Million Pesos (P4,000,000.00). The claim therefore of petitioners that it was Chua Siok Suy, in connivance with the respondent PBCom, who applied for and obtained the loan transactions and letters of credit strains credulity considering that even the Deed of the Real Estate Mortgage in favor of PBCom was executed by petitioner-surety Mariano Sio in his capacity as general manager of MICO[if !supportFootnotes][43][endif] to secure the loan accommodations obtained by MICO from PBCom.Petitioners-sureties allege that they were made to sign the surety agreements in blank by Chua Siok Suy. Petitioner Alfonso Yap, the corporate treasurer, for his part testified that he signed booklets of checks, surety agreements and promissory notes in blank; that he signed the documents in blank despite his misgivings since Chua Siok Suy assured him that the transaction can easily be taken cared of since Chua Siok Suy personally knew the Chairman of the Board of PBCom; that he was not receiving salary as treasurer of Mico Metals and since Chua Siok Suy had a direct hand in the management of Malayan Sales Corporation, of which Yap is an employee, he (Yap) signed the documents in blank as consideration for his continued employment in Malayan Sales Corporation. Petitioner Antonio Co testified that he worked as office manager for MICO from 1978-1982. As office manager, he was the one in charge of transacting business like purchasing, selling and paying the salary of the employees. He was also in charge of the handling of documents pertaining to surety agreements, trust receipts and promissory notes; [if !

supportFootnotes][44][endif] that when he first joined MICO Metals Corporation, he was able to read the by-laws of the corporation and he came to know that only the chairman and the president can borrow money in behalf of the corporation; that Chua Siok Suy once called him up and told him to secure an invoice so that a credit line can be opened in the bank with a local letter of credit; that when the invoice was secured, he (Co) brought it together with the application for a credit line to Chua Siok Suy, and that he questioned the authority of Chua Siok Suy pointing out that he (Co) is not empowered to sign the document inasmuch as only the latter, as president, was authorized to do so. However, Chua Siok Suy allegedly just said that he had already talked with the Chairman of the Board of PBCom; and that Chua Siok Suy reportedly said that he needed the money to finance a project that he had with the Taipei government. Co also testified that he knew of the application for domestic letter of credit in the sum of Three Hundred Forty-Eight Thousand Pesos (P348,000.00); and that a certain Moises Rosete was authorized to claim the check covering the Three Hundred Forty-Eight Thousand Pesos (P348,000.00) from PBCom; and that after claiming the check Rosete brought it to Perez Battery Center for indorsement after which the same was deposited to the personal account of Chua Siok Suy.[if !supportFootnotes][45][endif]

We consider as incredible and unacceptable the claim of petitioners-sureties that the Board of Directors of MICO was so careless about the business affairs of MICO as well as about their own personal reputation and money that they simply relied on the say so of Chua Siok Suy on matters involving millions of pesos. Under Section 3 (d), Rule 131 of the Rules of Court, it is presumed that a person takes ordinary care of his concerns. Hence, the natural presumption is that one does not sign a document without first informing himself of its contents and consequences. Said presumption acquires greater force in the case at bar where not only one but several documents were executed at different times and at different places by the petitioner sureties and Chua Siok Suy as president of MICO.MICO and herein petitioners-sureties insist that Chua Siok Suy was not duly authorized to negotiate for loans in behalf of MICO from PBCom. Petitioners allegation, however, is belied by the July 28, 1980 Certification issued by the corporate secretary of PBCom, Atty. P.B. Barrera, that MICO's Board of Directors gave Chua Siok Suy full authority to negotiate for loans in behalf of MICO with PBCom. In fact, the Certification even provided that Chua Siok Suys authority continues until and unless PBCom is notified in writing of the withdrawal thereof by the said Board. Notably, petitioners failed to contest the genuineness of the said Certification which is notarized and to show any written proof of any alleged withdrawal of the said authority given by the Board of Directors to Chua Siok Suy to negotiate for loans in behalf of MICO.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 MICOs authorized representative, Chua Siok Suy, was notice to MICO. The Certification issued by PBComs 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 MICOs Corporate Secretary.Anent petitioners-sureties contention that they obtained no consideration whatsoever on the surety agreements, we need only point out that the consideration for the sureties is the very consideration for the principal obligor, MICO, in the contracts of loan. In the case of Willex Plastic Industries Corporation vs. Court of Appeals,[if !supportFootnotes][46][endif] we ruled that the consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone being sufficient. For a guarantor or surety is bound by the same consideration that makes the contract effective between the parties thereto. It is not necessary that a guarantor or surety should receive any part or benefit, if such there be, accruing to his principal.Petitioners placed too much reliance on the rule in evidence that the burden of proof does not shift whereas the burden of going forward with the evidence does pass from party to party. It is true that said rule is not changed by the fact that the party having the burden of proof has introduced evidence which established prima facie his assertion because such evidence does not shift the burden of proof; it merely puts the adversary to the necessity of producing evidence to meet the prima facie case. Where the defendant merely denies, either generally or otherwise, the allegations of the plaintiffs pleadings, the burden of proof continues to rest on the plaintiff throughout the trial and does not shift to the defendant until the plaintiffs evidence has been presented and duly offered. The defendant has then no burden except to produce evidence sufficient to create a state of equipoise between his proof and that of the plaintiff to defeat the latter, whereas the plaintiff has the burden, as in the beginning, of establishing his case by a preponderance of evidence.[if !supportFootnotes][47][endif] But where the defendant has failed to present and marshall evidence sufficient to create a state of equipoise between his proof and that of plaintiff, the prima facie case presented by the plaintiff will prevail.In the case at bar, respondent PBCom, as plaintiff in the trial court, has in fact presented sufficient documentary and testimonial evidence that proved by preponderance of evidence its subject collection case against the defendants who are the petitioners herein. In view of all the foregoing, the Court of Appeals committed no reversible error in its appealed Decision.

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 27480 entitled, Philippine Bank of Communications vs. Mico Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co, is AFFIRMED in toto.

Costs against the petitioners.SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION, respondents.D E C I S I O NTINGA, J.:Subject of this case is the letter of credit which has evolved as the ubiquitous and most important device in international trade. A creation of commerce and businessmen, the letter of credit is also unique in the number of parties involved and its supranational character.Petitioner has appealed from the Decision[1] of the Court of Appeals in CA-G.R. SP No. 61901 entitled Transfield Philippines, Inc. v. Hon. Oscar Pimentel, et al., promulgated on 31 January 2001.[2]

On 26 March 1997, petitioner and respondent Luzon Hydro Corporation (hereinafter, LHC) entered into a Turnkey Contract[3] whereby petitioner, as Turnkey Contractor, undertook to construct, on a turnkey basis, a seventy (70)-Megawatt hydro-electric power station at the Bakun River in the provinces of Benguet and Ilocos Sur (hereinafter, the Project). Petitioner was given the sole responsibility for the design, construction, commissioning, testing and completion of the Project.[4]

The Turnkey Contract provides that: (1) the target completion date of the Project shall be on 1 June 2000, or such later date as may be agreed upon between petitioner and respondent LHC or otherwise determined in accordance with the Turnkey Contract; and (2) petitioner is entitled to claim extensions of time (EOT) for reasons enumerated in the Turnkey Contract, among which are variations, force majeure, and delays caused by LHC itself.[5] Further, in case of dispute, the parties are bound to settle their differences through mediation, conciliation and such other means enumerated under Clause 20.3 of the Turnkey Contract.[6]

To secure performance of petitioners obligation on or before the target completion date, or such time for completion as may be determined by the parties agreement, petitioner opened in favor of LHC two (2) standby letters of credit both dated 20 March 2000 (hereinafter referred to as the Securities), to wit: Standby Letter of Credit No. E001126/8400 with the local branch of respondent Australia and New Zealand Banking Group Limited (ANZ Bank) [7]

and Standby Letter of Credit No. IBDIDSB-00/4 with respondent Security Bank Corporation (SBC) [8] each in the amount of US$8,988,907.00.[9]

In the course of the construction of the project, petitioner sought various EOT to complete the Project. The extensions were requested allegedly due to several factors which prevented the completion of the Project on target date, such as force majeure occasioned by typhoon Zeb, barricades and demonstrations. LHC denied the requests, however. This gave rise to a series of legal actions between the parties which culminated in the instant petition.The first of the actions was a Request for Arbitration which LHC filed before the Construction Industry Arbitration Commission (CIAC) on 1 June 1999.[10] This was followed by another Request for Arbitration, this time filed by petitioner before the International Chamber of Commerce (ICC)[11] on 3 November 2000. In both arbitration proceedings, the common issues presented were: [1) whether typhoon Zeb and any of its associated events constituted force majeure to justify the extension of time sought by petitioner; and [2) whether LHC had the right to terminate the Turnkey Contract for failure of petitioner to complete the Project on target date.Meanwhile, foreseeing that LHC would call on the Securities pursuant to the pertinent provisions of the Turnkey Contract,[12] petitionerin two separate letters[13] both dated 10 August 2000advised respondent banks of the arbitration proceedings already pending before the CIAC and ICC in connection with its alleged default in the performance of its obligations. Asserting that LHC had no right to call on the Securities until the resolution of disputes before the arbitral tribunals, petitioner warned respondent banks that any transfer, release, or disposition of the Securities in favor of LHC or any person claiming under LHC would constrain it to hold respondent banks liable for liquidated damages.As petitioner had anticipated, on 27 June 2000, LHC sent notice to petitioner that pursuant to Clause 8.2 [14] of the Turnkey Contract, it failed to comply with its obligation to complete the Project. Despite the letters of petitioner, however, both banks informed petitioner that they would pay on the Securities if and when LHC calls on them. [15]

LHC asserted that additional extension of time would not be warranted; accordingly it declared petitioner in default/delay in the performance of its obligations under the Turnkey Contract and demanded from petitioner the payment of US$75,000.00 for each day of delay beginning 28 June 2000 until actual completion of the Project pursuant to Clause 8.7.1 of the Turnkey Contract. At the same time, LHC served notice that it would call on the securities for the payment of liquidated damages for the delay.[16]

On 5 November 2000, petitioner as plaintiff filed a Complaint for Injunction, with prayer for temporary restraining order and writ of preliminary injunction, against herein respondents as defendants before the Regional Trial Court (RTC) of Makati.[17] Petitioner sought to restrain respondent LHC from calling on the Securities and respondent banks from transferring, paying on, or in any manner disposing of the Securities or any renewals or substitutes thereof. The RTC issued a seventy-two (72)-hour temporary restraining order on the same day. The case was docketed as Civil Case No. 00-1312 and raffled to Branch 148 of the RTC of Makati.After appropriate proceedings, the trial court issued an Order on 9 November 2000, extending the temporary restraining order for a period of seventeen (17) days or until 26 November 2000.[18]

The RTC, in its Order[19] dated 24 November 2000, denied petitioners application for a writ of preliminary injunction. It ruled that petitioner had no legal right and suffered no irreparable injury to justify the issuance of the writ. Employing the principle of independent contract in letters of credit, the trial court ruled that LHC should be allowed to draw on the Securities for liquidated damages. It debunked petitioners contention that the principle of independent contract could be invoked only by respondent banks since according to it respondent LHC is the ultimate beneficiary of the Securities. The trial court further ruled that the banks were mere custodians of the funds and as such they were obligated to transfer the same to the beneficiary for as long as the latter could submit the

required certification of its claims.Dissatisfied with the trial courts denial of its application for a writ of preliminary injunction, petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65, with prayer for the issuance of a temporary restraining order and writ of preliminary injunction.[20] Petitioner submitted to the appellate court that LHCs call on the Securities was premature considering that the issue of its default had not yet been resolved with finality by the CIAC and/or the ICC. It asserted that until the fact of delay could be established, LHC had no right to draw on the Securities for liquidated damages.Refuting petitioners contentions, LHC claimed that petitioner had no right to restrain its call on and use of the Securities as payment for liquidated damages. It averred that the Securities are independent of the main contract between them as shown on the face of the two Standby Letters of Credit which both provide that the banks have no responsibility to investigate the authenticity or accuracy of the certificates or the declarants capacity or entitlement to so certify.In its Resolution dated 28 November 2000, the Court of Appeals issued a temporary restraining order, enjoining LHC from calling on the Securities or any renewals or substitutes thereof and ordering respondent banks to cease and desist from transferring, paying or in any manner disposing of the Securities.However, the appellate court failed to act on the application for preliminary injunction until the temporary restraining order expired on 27 January 2001. Immediately thereafter, representatives of LHC trooped to ANZ Bank and withdrew the total amount of US$4,950,000.00, thereby reducing the balance in ANZ Bank to US$1,852,814.00.On 2 February 2001, the appellate court dismissed the petition for certiorari. The appellate court expressed conformity with the trial courts decision that LHC could call on the Securities pursuant to the first principle in credit law that the credit itself is independent of the underlying transaction and that as long as the beneficiary complied with the credit, it was of no moment that he had not complied with the underlying contract. Further, the appellate court held that even assuming that the trial courts denial of petitioners application for a writ of preliminary injunction was erroneous, it constituted only an error of judgment which is not correctible by certiorari, unlike error of jurisdiction.Undaunted, petitioner filed the instant Petition for Review raising the following issues for resolution:WHETHER THE INDEPENDENCE PRINCIPLE ON LETTERS OF CREDIT MAY BE INVOKED BY A BENEFICIARY THEREOF WHERE THE BENEFICIARYS CALL THEREON IS WRONGFUL OR FRAUDULENT.WHETHER LHC HAS THE RIGHT TO CALL AND DRAW ON THE SECURITIES BEFORE THE RESOLUTION OF PETITIONERS AND LHCS DISPUTES BY THE APPROPRIATE TRIBUNAL.WHETHER ANZ BANK AND SECURITY BANK ARE JUSTIFIED IN RELEASING THE AMOUNTS DUE UNDER THE SECURITIES DESPITE BEING NOTIFIED THAT LHCS CALL THEREON IS WRONGFUL.WHETHER OR NOT PETITIONER WILL SUFFER GRAVE AND IRREPARABLE DAMAGE IN THE EVENT THAT:A. LHC IS ALLOWED TO CALL AND DRAW ON, AND ANZ BANK AND SECURITY BANK ARE ALLOWED TO RELEASE, THE REMAINING BALANCE OF THE SECURITIES PRIOR TO THE RESOLUTION OF THE DISPUTES BETWEEN PETITIONER AND LHC.B. LHC DOES NOT RETURN THE AMOUNTS IT HAD WRONGFULLY DRAWN FROM THE SECURITIES.[21]

Petitioner contends that the courts below improperly relied on the independence principle on letters of credit when this case falls squarely within the fraud exception rule. Respondent LHC deliberately misrepresented the supposed existence of delay despite its knowledge that the issue was still pending arbitration, petitioner continues.Petitioner asserts that LHC should be ordered to return the proceeds of the Securities pursuant to the principle against unjust enrichment and that, under the premises, injunction was the appropriate remedy obtainable from the competent local courts.On 25 August 2003, petitioner filed a Supplement to the Petition[22] and Supplemental Memorandum,[23] alleging that in the course of the proceedings in the ICC Arbitration, a number of documentary and testimonial evidence came out through the use of different modes of discovery available in the ICC Arbitration. It contends that after the filing of the petition facts and admissions were discovered which demonstrate that LHC knowingly misrepresented that petitioner had incurred delays notwithstanding its knowledge and admission that delays were excused under the Turnkey Contractto be able to draw against the Securities. Reiterating that fraud constitutes an exception to the independence principle, petitioner urges that this warrants a ruling from this Court that the call on the Securities was wrongful, as well as contrary to law and basic principles of equity. It avers that it would suffer grave irreparable damage if LHC would be allowed to use the proceeds of the Securities and not ordered to return the amounts it had wrongfully drawn thereon.In its Manifestation dated 8 September 2003,[24] LHC contends that the supplemental pleadings filed by petitioner present erroneous and misleading information which would change petitioners theory on appeal.In yet another Manifestation dated 12 April 2004,[25] petitioner alleges that on 18 February 2004, the ICC handed down its Third Partial Award, declaring that LHC wrongfully drew upon the Securities and that petitioner was entitled to the return of the sums wrongfully taken by LHC for liquidated damages.LHC filed a Counter-Manifestation dated 29 June 2004,[26] stating that petitioners Manifestation dated 12 April 2004 enlarges the scope of its Petition for Review of the 31 January 2001 Decision of the Court of Appeals. LHC notes that the Petition for Review essentially dealt only with the issue of whether injunction could issue to restrain the beneficiary of an irrevocable letter of credit from drawing thereon. It adds that petitioner has filed two other proceedings, to wit: (1) ICC Case No. 11264/TE/MW, entitled Transfield Philippines Inc. v. Luzon Hydro Corporation, in which the parties made claims and counterclaims arising from petitioners performance/misperformance of its obligations as contractor for LHC; and (2) Civil Case No. 04-332, entitled Transfield Philippines, Inc. v. Luzon Hydro Corporation before Branch 56 of the RTC of Makati, which is an action to enforce and obtain execution of the ICCs partial award mentioned in petitioners Manifestation of 12 April 2004.In its Comment to petitioners Motion for Leave to File Addendum to Petitioners Memorandum, LHC stresses that the question of whether the funds it drew on the subject letters of credit should be returned is outside the issue in this appeal. At any rate, LHC adds that the action to enforce the ICCs partial award is now fully within the Makati RTCs jurisdiction in Civil Case No. 04-332. LHC asserts that petitioner is engaged in forum-shopping by keeping this appeal and at the same time seeking the suit for enforcement of the arbitral award before the Makati court.Respondent SBC in its Memorandum, dated 10 March 2003[27] contends that the Court of Appeals correctly dismissed the petition for certiorari. Invoking the independence principle, SBC argues that it was under no obligation to look into the validity or accuracy of the certification submitted by respondent LHC or into the latters capacity or entitlement to so certify. It adds that the act sought to be enjoined by petitioner was already fait accompli and the present petition would no longer serve any remedial purpose.In a similar fashion, respondent ANZ Bank in its Memorandum dated 13 March 2003[28] posits that its actions could not be regarded as unjustified in view of the prevailing independence principle under which it had no obligation to

ascertain the truth of LHCs allegations that petitioner defaulted in its obligations. Moreover, it points out that since the Standby Letter of Credit No. E001126/8400 had been fully drawn, petitioners prayer for preliminary injunction had been rendered moot and academic.At the core of the present controversy is the applicability of the independence principle and fraud exception rule in letters of credit. Thus, a discussion of the nature and use of letters of credit, also referred to simply as credits, would provide a better perspective of the case.The letter of credit evolved as a mercantile specialty, and the only way to understand all its facets is to recognize that it is an entity unto itself. The relationship between the beneficiary and the issuer of a letter of credit is not strictly contractual, because both privity and a meeting of the minds are lacking, yet strict compliance with its terms is an enforceable right. Nor is it a third-party beneficiary contract, because the issuer must honor drafts drawn against a letter regardless of problems subsequently arising in the underlying contract. Since the banks customer cannot draw on the letter, it does not function as an assignment by the customer to the beneficiary. Nor, if properly used, is it a contract of suretyship or guarantee, because it entails a primary liability following a default. Finally, it is not in itself a negotiable instrument, because it is not payable to order or bearer and is generally conditional, yet the draft presented under it is often negotiable.[29]

In commercial transactions, a letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying.[30] The use of credits in commercial transactions serves to reduce the risk of nonpayment of the purchase price under the contract for the sale of goods. However, credits are also used in non-sale settings where they serve to reduce the risk of nonperformance. Generally, credits in the non-sale settings have come to be known as standby credits.[31]

There are three significant differences between commercial and standby credits. First, commercial credits involve the payment of money under a contract of sale. Such credits become payable upon the presentation by the seller-beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement. In the standby type, the credit is payable upon certification of a party's nonperformance of the agreement. The documents that accompany the beneficiary's draft tend to show that the applicant has not performed. The beneficiary of a commercial credit must demonstrate by documents that he has performed his contract. The beneficiary of the standby credit must certify that his obligor has not performed the contract.[32]

By definition, a letter of credit is a written instrument whereby the writer requests or authorizes the addressee to pay money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee.[33] A letter of credit, however, changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto.[34]

Since letters of credit have gained general acceptability in international trade transactions, the ICC has published from time to time updates on the Uniform Customs and Practice (UCP) for Documentary Credits to standardize practices in the letter of credit area. The vast majority of letters of credit incorporate the UCP. [35] First published in 1933, the UCP for Documentary Credits has undergone several revisions, the latest of which was in 1993.[36]

In Bank of the Philippine Islands v. De Reny Fabric Industries, Inc.,[37] this Court ruled that the observance of the UCP is justified by Article 2 of the Code of Commerce which provides that in the absence of any particular provision in the Code of Commerce, commercial transactions shall be governed by usages and customs generally observed. More recently, in Bank of America, NT & SA v. Court of Appeals,[38] this Court ruled that there being no specific provisions which govern the legal complexities arising from transactions involving letters of credit, not only between or among banks themselves but also between banks and the seller or the buyer, as the case may be, the applicability of the UCP is undeniable.

Article 3 of the UCP provides that credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the credit. Consequently, the undertaking of a bank to pay, accept and pay draft(s) or negotiate and/or fulfill any other obligation under the credit is not subject to claims or defenses by the applicant resulting from his relationships with the issuing bank or the beneficiary. A beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the applicant and the issuing bank.

Thus, the engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft and the required documents are presented to it. The so-called independence principle assures the seller or the beneficiary of prompt payment independent of any breach of the main contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not. Under this principle, banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever.[39]

The independent nature of the letter of credit may be: (a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying agreement like for instance a typical standby; or (b) independence may be only as to the justification aspect like in a commercial letter of credit or repayment standby, which is identical with the same obligations under the underlying agreement. In both cases the payment may be enjoined if in the light of the purpose of the credit the payment of the credit would constitute fraudulent abuse of the credit.[40]

Can the beneficiary invoke the independence principle?Petitioner insists that the independence principle does not apply to the instant case and assuming it is so, it is

a defense available only to respondent banks. LHC, on the other hand, contends that it would be contrary to common sense to deny the benefit of an independent contract to the very party for whom the benefit is intended. As beneficiary of the letter of credit, LHC asserts it is entitled to invoke the principle.

As discussed above, in a letter of credit transaction, such as in this case, where the credit is stipulated as irrevocable, there is a definite undertaking by the issuing bank to pay the beneficiary provided that the stipulated documents are presented and the conditions of the credit are complied with. [41] Precisely, the independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract. As the principles nomenclature clearly suggests, the obligation under the letter of credit is independent of the related

and originating contract. In brief, the letter of credit is separate and distinct from the underlying transaction.Given the nature of letters of credit, petitioners argumentthat it is only the issuing bank that may invoke the

independence principle on letters of creditdoes not impress this Court. To say that the independence principle may only be invoked by the issuing banks would render nugatory the purpose for which the letters of credit are used in commercial transactions. As it is, the independence doctrine works to the benefit of both the issuing bank and the beneficiary.

Letters of credit are employed by the parties desiring to enter into commercial transactions, not for the benefit of the issuing bank but mainly for the benefit of the parties to the original transactions. With the letter of credit from the issuing bank, the party who applied for and obtained it may confidently present the letter of credit to the beneficiary as a security to convince the beneficiary to enter into the business transaction. On the other hand, the other party to the business transaction, i.e., the beneficiary of the letter of credit, can be rest assured of being empowered to call on the letter of credit as a security in case the commercial transaction does not push through, or the applicant fails to perform his part of the transaction. It is for this reason that the party who is entitled to the proceeds of the letter of credit is appropriately called beneficiary.

Petitioners argument that any dispute must first be resolved by the parties, whether through negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in essence would convert the letter of credit into a mere guarantee. Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that the settlement of a dispute between the parties is not a pre-requisite for the release of funds under a letter of credit. In other words, the argument is incompatible with the very nature of the letter of credit. If a letter of credit is drawable only after settlement of the dispute on the contract entered into by the applicant and the beneficiary, there would be no practical and beneficial use for letters of credit in commercial transactions.

Professor John F. Dolan, the noted authority on letters of credit, sheds more light on the issue:The standby credit is an attractive commercial device for many of the same reasons that commercial credits are attractive. Essentially, these credits are inexpensive and efficient. Often they replace surety contracts, which tend to generate higher costs than credits do and are usually triggered by a factual determination rather than by the examination of documents.Because parties and courts should not confuse the different functions of the surety contract on the one hand and the standby credit on the other, the distinction between surety contracts and credits merits some reflection. The two commercial devices share a common purpose. Both ensure against the obligors nonperformance. They function, however, in distinctly different ways.Traditionally, upon the obligors default, the surety undertakes to complete the obligors performance, usually by hiring someone to complete that performance. Surety contracts, then, often involve costs of determining whether the obligor defaulted (a matter over which the surety and the beneficiary often litigate) plus the cost of performance. The benefit of the surety contract to the beneficiary is obvious. He knows that the surety, often an insurance company, is a strong financial institution that will perform if the obligor does not. The beneficiary also should understand that such performance must await the sometimes lengthy and costly determination that the obligor has defaulted. In addition, the suretys performance takes time.The standby credit has different expectations. He reasonably expects that he will receive cash in the event of nonperformance, that he will receive it promptly, and that he will receive it before any litigation with the obligor (the applicant) over the nature of the applicants performance takes place. The standby credit has this opposite effect of the surety contract: it reverses the financial burden of parties during litigation.In the surety contract setting, there is no duty to indemnify the beneficiary until the beneficiary establishes the fact of the obligors performance. The beneficiary may have to establish that fact in litigation. During the litigation, the surety holds the money and the beneficiary bears most of the cost of delay in performance.In the standby credit case, however, the beneficiary avoids that litigation burden and receives his money promptly upon presentation of the required documents. It may be that the applicant has, in fact, performed and that the beneficiarys presentation of those documents is not rightful. In that case, the applicant may sue the beneficiary in tort, in contract, or in breach of warranty; but, during the litigation to determine whether the applicant has in fact breached the obligation to perform, the beneficiary, not the applicant, holds the money. Parties that use a standby credit and courts construing such a credit should understand this allocation of burdens. There is a tendency in some quarters to overlook this distinction between surety contracts and standby credits and to reallocate burdens by permitting the obligor or the issuer to litigate the performance question before payment to the beneficiary. [42]

While it is the bank which is bound to honor the credit, it is the beneficiary who has the right to ask the bank to honor the credit by allowing him to draw thereon. The situation itself emasculates petitioners posture that LHC cannot invoke the independence principle and highlights its puerility, more so in this case where the banks concerned were impleaded as parties by petitioner itself.Respondent banks had squarely raised the independence principle to justify their releases of the amounts due under the Securities. Owing to the nature and purpose of the standby letters of credit, this Court rules that the respondent banks were left with little or no alternative but to honor the credit and both of them in fact submitted that it was ministerial for them to honor the call for payment.[43]

Furthermore, LHC has a right rooted in the Contract to call on the Securities. The relevant provisions of the Contract read, thus:4.2.1. In order to secure the performance of its obligations under this Contract, the Contractor at its cost shall on the Commencement Date provide security to the Employer in the form of two irrevocable and confirmed standby letters of credit (the Securities), each in the amount of US$8,988,907, issued and confirmed by banks or financial institutions acceptable to the Employer. Each of the Securities must be in form and substance acceptable to the Employer and may be provided on an annually renewable basis.[44]

8.7.1 If the Contractor fails to comply with Clause 8.2, the Contractor shall pay to the Employer by way of liquidated damages (Liquidated Damages for Delay) the amount of US$75,000 for each and every day or part of a day that shall elapse between the Target Completion Date and the Completion Date, provided that Liquidated Damages for Delay payable by the Contractor shall in the aggregate not exceed 20% of the Contract Price. The Contractor shall pay Liquidated Damages for Delay for each day of the delay on the following day without need of demand from the Employer.8.7.2 The Employer may, without prejudice to any other method of recovery, deduct the amount of such damages from any monies due, or to become due to the Contractor and/or by drawing on the Security. [45] A contract once perfected, binds the parties not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature, may be in keeping with good faith, usage, and law. [46] A careful perusal of the Turnkey Contract reveals the intention of the parties to make the Securities answerable for the liquidated damages occasioned by any delay on the part of petitioner. The call upon the Securities, while not an

exclusive remedy on the part of LHC, is certainly an alternative recourse available to it upon the happening of the contingency for which the Securities have been proffered. Thus, even without the use of the independence principle, the Turnkey Contract itself bestows upon LHC the right to call on the Securities in the event of default.Next, petitioner invokes the fraud exception principle. It avers that LHCs call on the Securities is wrongful because it fraudulently misrepresented to ANZ Bank and SBC that there is already a breach in the Turnkey Contract knowing fully well that this is yet to be determined by the arbitral tribunals. It asserts that the fraud exception exists when the beneficiary, for the purpose of drawing on the credit, fraudulently presents to the confirming bank, documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue. In such a situation, petitioner insists, injunction is recognized as a remedy available to it.Citing Dolans treatise on letters of credit, petitioner argues that the independence principle is not without limits and it is important to fashion those limits in light of the principles purpose, which is to serve the commercial function of the credit. If it does not serve those functions, application of the principle is not warranted, and the commonlaw principles of contract should apply.It is worthy of note that the propriety of LHCs call on the Securities is largely intertwined with the fact of default which is the self-same issue pending resolution before the arbitral tribunals. To be able to declare the call on the Securities wrongful or fraudulent, it is imperative to resolve, among others, whether petitioner was in fact guilty of delay in the performance of its obligation. Unfortunately for petitioner, this Court is not called upon to rule upon the issue of defaultsuch issue having been submitted by the parties to the jurisdiction of the arbitral tribunals pursuant to the terms embodied in their agreement.[47]

Would injunction then be the proper remedy to restrain the alleged wrongful draws on the Securities?Most writers agree that fraud is an exception to the independence principle. Professor Dolan opines that the untruthfulness of a certificate accompanying a demand for payment under a standby credit may qualify as fraud sufficient to support an injunction against payment.[48] The remedy for fraudulent abuse is an injunction. However, injunction should not be granted unless: (a) there is clear proof of fraud; (b) the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud under the main agreement; and (c) irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously damaged. [49]

In its complaint for injunction before the trial court, petitioner alleged that it is entitled to a total extension of two hundred fifty-three (253) days which would move the target completion date. It argued that if its claims for extension would be found meritorious by the ICC, then LHC would not be entitled to any liquidated damages. [50]

Generally, injunction is a preservative remedy for the protection of ones substantive right or interest; it is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law.[51]

Before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right.[52] It must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage.[53] Moreover, an injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. [54]

In the instant case, petitioner failed to show that it has a clear and unmistakable right to restrain LHCs call on the Securities which would justify the issuance of preliminary injunction. By petitioners own admission, the right of LHC to call on the Securities was contractually rooted and subject to the express stipulations in the Turnkey Contract. [55] Indeed, the Turnkey Contract is plain and unequivocal in that it conferred upon LHC the right to draw upon the Securities in case of default, as provided in Clause 4.2.5, in relation to Clause 8.7.2, thus:4.2.5 The Employer shall give the Contractor seven days notice of calling upon any of the Securities, stating the nature of the default for which the claim on any of the Securities is to be made, provided that no notice will be required if the Employer calls upon any of the Securities for the payment of Liquidated Damages for Delay or for failure by the Contractor to renew or extend the Securities within 14 days of their expiration in accordance with Clause 4.2.2.[56]

8.7.2 The Employer may, without prejudice to any other method of recovery, deduct the amount of such damages from any monies due, or to become due, to the Contractor and/or by drawing on the Security. [57]

The pendency of the arbitration proceedings would not per se make LHCs draws on the Securities wrongful or fraudulent for there was nothing in the Contract which would indicate that the parties intended that all disputes regarding delay should first be settled through arbitration before LHC would be allowed to call upon the Securities. It is therefore premature and absurd to conclude that the draws on the Securities were outright fraudulent given the fact that the ICC and CIAC have not ruled with finality on the existence of default.Nowhere in its complaint before the trial court or in its pleadings filed before the appellate court, did petitioner invoke the fraud exception rule as a ground to justify the issuance of an injunction. [58] What petitioner did assert before the courts below was the fact that LHCs draws on the Securities would be premature and without basis in view of the pending disputes between them. Petitioner should not be allowed in this instance to bring into play the fraud exception rule to sustain its claim for the issuance of an injunctive relief. Matters, theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for the first time on appeal.[59] The lower courts could thus not be faulted for not applying the fraud exception rule not only because the existence of fraud was fundamentally interwoven with the issue of default still pending before the arbitral tribunals, but more so, because petitioner never raised it as an issue in its pleadings filed in the courts below. At any rate, petitioner utterly failed to show that it had a clear and unmistakable right to prevent LHCs call upon the Securities.Of course, prudence should have impelled LHC to await resolution of the pending issues before the arbitral tribunals prior to taking action to enforce the Securities. But, as earlier stated, the Turnkey Contract did not require LHC to do so and, therefore, it was merely enforcing its rights in accordance with the tenor thereof. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. [60] More importantly, pursuant to the principle of autonomy of contracts embodied in Article 1306 of the Civil Code, [61] petitioner could have incorporated in its Contract with LHC, a proviso that only the final determination by the arbitral tribunals that default had occurred would justify the enforcement of the Securities. However, the fact is petitioner did not do so; hence, it would have to live with its inaction.With respect to the issue of whether the respondent banks were justified in releasing the amounts due under the Securities, this Court reiterates that pursuant to the independence principle the banks were under no obligation to determine the veracity of LHCs certification that default has occurred. Neither were they bound by petitioners

declaration that LHCs call thereon was wrongful. To repeat, respondent banks undertaking was simply to pay once the required documents are presented by the beneficiary.At any rate, should petitioner finally prove in the pending arbitration proceedings that LHCs draws upon the Securities were wrongful due to the non-existence of the fact of default, its right to seek indemnification for damages it suffered would not normally be foreclosed pursuant to general principles of law.Moreover, in a Manifestation,[62] dated 30 March 2001, LHC informed this Court that the subject letters of credit had been fully drawn. This fact alone would have been sufficient reason to dismiss the instant petition.Settled is the rule that injunction would not lie where the acts sought to be enjoined have already become fait accompli or an accomplished or consummated act.[63] In Ticzon v. Video Post Manila, Inc.[64] this Court ruled that where the period within which the former employees were prohibited from engaging in or working for an enterprise that competed with their former employerthe very purpose of the preliminary injunction has expired, any declaration upholding the propriety of the writ would be entirely useless as there would be no actual case or controversy between the parties insofar as the preliminary injunction is concerned.In the instant case, the consummation of the act sought to be restrained had rendered the instant petition mootfor any declaration by this Court as to propriety or impropriety of the non-issuance of injunctive relief could have no practical effect on the existing controversy.[65] The other issues raised by petitioner particularly with respect to its right to recover the amounts wrongfully drawn on the Securities, according to it, could properly be threshed out in a separate proceeding.One final point. LHC has charged petitioner of forum-shopping. It raised the charge on two occasions. First, in its Counter-Manifestation dated 29 June 2004[66] LHC alleges that petitioner presented before this Court the same claim for money which it has filed in two other proceedings, to wit: ICC Case No. 11264/TE/MW and Civil Case No. 04-332 before the RTC of Makati. LHC argues that petitioners acts constitutes forum-shopping which should be punished by the dismissal of the claim in both forums. Second, in its Comment to Petitioners Motion for Leave to File Addendum to Petitioners Memorandum dated 8 October 2004, LHC alleges that by maintaining the present appeal and at the same time pursuing Civil Case No. 04-332wherein petitioner pressed for judgment on the issue of whether the funds LHC drew on the Securities should be returnedpetitioner resorted to forum-shopping. In both instances, however, petitioner has apparently opted not to respond to the charge.Forum-shopping is a very serious charge. It exists when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely, by some other court.[67] It may also consist in the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another and possibly favorable opinion in another forum other than by appeal or special civil action of certiorari, or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court might look with favor upon the other party. [68] To determine whether a party violated the rule against forum-shopping, the test applied is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another.[69] Forum-shopping constitutes improper conduct and may be punished with summary dismissal of the multiple petitions and direct contempt of court.[70]

Considering the seriousness of the charge of forum-shopping and the severity of the sanctions for its violation, the Court will refrain from making any definitive ruling on this issue until after petitioner has been given ample opportunity to respond to the charge.

WHEREFORE, the instant petition is DENIED, with costs against petitioner.Petitioner is hereby required to answer the charge of forum-shopping within fifteen (15) days from notice.

SO ORDERED.Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.