Mico Metals v. Court of Appeals G.R. No. 117914. 1 February 2002. De Leon, J.

FACTS: Mico Metals Corporation (MCC) applied for two domestic letters of credit (L/C) with the Philippine Bank of Communications (PBC) which applications were eventually granted. Thereafter, the domestic L/Cs were negotiated and accepted by MCC as evidenced by the corresponding bank draft issued for the purpose. After MCCs supplier was paid, a trust receipt (T/R), upon MCCs own initiative, was executed in favor of PBC. A few months later, MCC applied for authority to open foreign L/Cs with PBC which applications were eventually approved. Negotiation and proper acceptance of the L/C were then made by MCC. Again, a corresponding T/R was executed by MCC in favor of PBC. In all the transactions involving foreign L/C, PBC turned over to MCC 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. About five months later, MCC obtained from PBC a loan covered by a promissory note (P/N). Upon maturity of all credit availments obtained by MCC from PBC, the latter made a demand for payment which demand was left unheeded. ISSUE: Whether or not PBC failed to prove that it actually made payments under the L/C since the bank drafts presented as evidence show that they were made in favor of two corresponding banks, and as such it (PBC) is not entitled to reimbursement? HELD: No. Modern L/Cs are usually not made between natural persons. They involve bank to bank transactions. Historically, L/Cs 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 accompanying the corresponding drafts. Consequently, there is nothing unusual in the fact that the drafts presented in evidence by PBC were not made payable to it (PBC). 24 of the Negotiable Instruments Law (NIL) 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. Nevertheless, while that presumption found under the NIL may not necessarily be applicable to T/R and L/C, the presumption that the drafts drawn in connection with the L/C have sufficient consideration prevails. More importantly, under 3(r), Rule 131 of the Rules of Court there is also a presumption that sufficient consideration was given in a contract. Hence, MCC should have presented credible evidence to rebut that presumption as well as the evidence presented by PBC. The L/C show that the pertinent materials/merchandise have been received by MCC. The drafts signed by the beneficiary/suppliers in connection with the corresponding L/C proved that said suppliers were paid by PBC for the account of MCC. On the other hand, aside from its bare denials MCC did not present sufficient and

competent evidence to rebut the evidence of PBC. MCC did not proffer a single piece of evidence, apart from its bare denial, to support its allegation that the loan transactions, L/Cs and T/Rs were issued allegedly without any consideration.