METROPOLITAN BANK AND TRUST COMPANY, Petitioner, v. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION AND SPOUSES MANUEL LEY AND JANET LEY, Respondents. G.R. No. 185590, December 03, 2014

METROPOLITAN BANK AND TRUST COMPANY, Petitioner, v. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION AND SPOUSES MANUEL LEY AND JANET LEY, Respondents.
G.R. No. 185590, December 03, 2014
LEONARDO-DE CASTRO, J.:
 

Facts:  This is an action for recovery of a sum of money and damages with a prayer for the issuance of writ of preliminary attachment filed by the plaintiff Philippine Banking Corporation⁴ against the defendants, namely: Ley Construction and Development Corporation (hereafter “LCDC”) and Spouses Manuel and Janet C. Ley (hereafter “[defendant]-spouses”).

 

Defendant LCDC, a general contracting firm, through the oral representations of defendant-spouses, applied with plaintiff, a commercial bank, for the opening of a Letter of Credit. Plaintiff issued, on April 26, 1990, Letter of Credit DC 90[-]303-C in favor of the supplier-beneficiary Global Enterprises Limited, in the amount of Eight Hundred Two Thousand Five Hundred U.S. Dollars (USD 802,500.00). The letter of credit covered the importation by defendant LCDC of Fifteen Thousand (15,000) metric tons of Iraqi cement from Iraq. Defendant applied for and filed with plaintiff two (2) Applications for Amendment of Letter of Credit on May 3, 1990 and May 11, 1990, respectively.

 

Thereafter, the supplier-beneficiary Global Enterprises, Inc. negotiated its Letter of Credit with the negotiating bank Credit Suisse of Zurich, Switzerland. Credit Suisse then sent a reimbursement claim by telex to American Express Bank Ltd., New York on July 25, 1990 for the amount of Seven Hundred Sixty[-]Six Thousand Seven Hundred Eight U.S. Dollars (USD 766,708.00) with a certification that all terms and conditions of the credit were complied with. Accordingly, on July 30, 1990, American Express Bank debited plaintiff’s account Seven Hundred Seventy Thousand Six Hundred Ninety[-]One U.S. Dollars and Thirty Cents (USD 770,691.30) and credited Credit Suisse Zurich Account with American Express Bank, Ltd., New York for the negotiation of Letter of Credit. On August 6, 1990, plaintiff received from Credit Suisse the necessary shipping documents pertaining to Letter of Credit DC 90-303-C that were in turn delivered to the defendant. Upon receipt of the aforesaid documents, defendants executed a trust receipt. However, the cement that was to be imported through the opening of the subject Letter of Credit never arrived in the Philippines.

 

The prompt payment of the obligation of the defendant LCDC was guaranteed by [defendant]-spouses under the Continuing Surety Agreement executed by the latter in favor of the defendant.

 

The obligation covered by the subject Letter of Credit in the amount of USD 802,500.00 has long been overdue and unpaid, notwithstanding repeated demands for payment thereof.

 

Plaintiff instituted a complaint for recovery.

 

RTC: Trial court found that the Bank’s only witness, Fenelito Cabrera, was incompetent to testify on the documents presented by the Bank during the trial. 

trial court further ruled that only the following documents remained admitted in evidence:

Exhibit	Document
“A”	Continuing Surety Agreement dated July 25, 1989
“B”	Application and Agreement for Commercial Letter of Credit
“C” and “C-1”	Letter of Credit No. DC 90-303-C
“N” and “N-1” to “N-4”	Statement of Outstanding Obligations

 

For the trial court, these were insufficient to show that LCDC and the spouses Ley were responsible for the improper negotiation of the letter of credit.  Bank failed to establish its cause of action and to make a sufficient or preponderant case

 

Court of Appeals:

The Bank appealed to the Court of Appeals.  It claimed that the trial court erred in granting the demurrer to evidence of LCDC and the spouses Ley on the ground that the Bank failed to establish its cause of action.  The Bank insisted that, even without considering the exhibits excluded in evidence by the trial court, the Bank was able to prove by preponderant evidence that it had a right and that right was violated by LCDC and the spouses Ley.  It explained that the trial court was wrong in considering only Exhibits “A,” “B,” “C,” “C-1,” “N” and “N-1” to “N-4” as the following documents were also admitted in evidence and should have been considered in the resolution of the demurrer to evidence.⁹

Exhibit	Document
“F”	Register Copy or Memorandum on the Letter of Credit
“G”	Trust Receipt No. TRI432/90 dated August 16, 1990
“G-1”	Bank Draft
“G-2”	Bill of Exchange

 

The Court of Appeals found no merit in the Bank’s appeal.  It observed that Cabrera, the Bank’s only witness, prepared and properly identified Exhibits “F,” “G,” “N” and “N-1” to “N-4” only.  The Bank’s counsel even admitted in open court during Cabrera’s direct examination that Cabrera was incompetent to testify on the rest of the Exhibits.  The trial court was therefore correct in not giving any evidentiary weight to those Exhibits not properly identified by Cabrera.

 

Nevertheless, the Court of Appeals ruled that the following Exhibits of the Bank were admitted in evidence:

Exhibit	Document
“A”	Continuing Surety Agreement dated July 25, 1989
“B”	Application and Agreement for Commercial Letter of Credit
“C” and “C-1”	Letter of Credit No. DC 90-303-C
“F”	Register Copy or Memorandum on the Letter of Credit
“G”	Trust Receipt No. TRI432/90 dated August 16, 1990
“N” and “N-1” to “N-4”	Statement of Outstanding Obligations

 

The Bank insists that it has been able to establish its cause of action not only through preponderance of evidence but even by the admissions of LCDC and the spouses Ley.  It maintains that its cause of action is not predicated on the improper negotiation of the letter of credit but on the breach of the terms and conditions of the trust receipt

 

Issue: The issue of whether or not the Bank was able to establish its cause of action by preponderant evidence is essentially a question of fact.  Stated in another way, the issue which the Bank raises in this petition is whether the evidence it presented during the trial was preponderant enough to hold LCDC and the spouses Ley liable.

 

Ruling: No.

First. The conceptual distinction between a question of law and a question of fact is well-settled in case law:

There is a “question of law” when the doubt or difference arises as to what the law is on a certain state of facts, and which does not call for an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a “question of fact” when the doubt or controversy arises as to the truth or falsity of the alleged facts. x x x.²¹

x x x x x x

The required burden of proof, or that amount of evidence necessary and sufficient to establish one’s claim or defense, in civil cases is preponderance of evidence.²²  Preponderance of evidence is defined as follows:

Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term “greater weight of evidence” or “greater weight of the credible evidence.” Preponderance of evidence is a phrase which, in the last analysis, means probability to truth. It is evidence which is more convincing to the court as worthier of belief than that which is offered in opposition thereto.²³ (Emphasis supplied, citation omitted.)

 

As preponderance of evidence refers to the probability to truth of the matters intended to be proven as facts, it concerns a determination of the truth or falsity of the alleged facts based on the evidence presented.  Thus, a review of the respective findings of the trial and the appellate courts as to the preponderance of a party’s evidence requires that the reviewing court address a question of fact.

 

Moreover, a demurrer to evidence is a motion to dismiss on the ground of insufficiency of evidence.  Evidence is the means, sanctioned by the Rules of Court, of ascertaining in a judicial proceeding the truth respecting a matter of fact.²⁴  As such, the question of sufficiency or insufficiency of evidence, the basic issue presented by the Bank, pertains to the question of whether the factual matters alleged by the Bank are true.  Plainly, it is a question of fact and, as such, not proper subject of a petition for review on certiorari under Rule 45 of the Rules of Court. It was incumbent upon the Bank to demonstrate that this case fell under any of the exceptions to this rule but it failed to do so.

 

Second. Another significant factor that contradicts the Bank’s assertion that its “primary actionable document” is the Trust Receipt is the manner it pleaded the Letter of Credit and the Trust Receipt, respectively.

The relevant rule on actionable documents is Section 7, Rule 8 of the Rules of Court which provides:

Section 7. Action or defense based on document. – Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

An “actionable document” is a written instrument or document on which an action or defense is founded.  It may be pleaded in either of two ways:

(1) by setting forth the substance of such document in the pleading and attaching the document thereto as an annex, or

(2) by setting forth said document verbatim in the pleading.

A look at the allegations in the Complaint quoted above will show that the Bank did not set forth the contents of the Trust Receipt verbatim in the pleading.  The Bank did not also set forth the substance of the Trust Receipt in the Complaint but simply attached a copy thereof as an annex.  Rather than setting forth the substance of the Trust Receipt, paragraph 2.8 of the Complaint shows that the Bank simply described the Trust Receipt as LCDC’s manifestation of “its acceptance/conformity that the negotiation of the [Letter of Credit] is in order.”

 

Third. a look at the Letter of Credit, the actionable document on which the Bank relied in its case against LCDC and the spouses Ley, confirms the identical findings of the Regional Trial Court and the Court of Appeals.