G.R. No. 187922. September 21, 2016.
MARPHIL EXPORT CORPORATION AND IRENEO LIM, PETITIONERS, VS. ALLIED BANKING CORPORATION, SUBSTITUTED BY PHILIPPINE NATIONAL BANK, RESPONDENT.
FACTS
Marphil Export Corporation, financed by Allied Bank, exported cashew nuts to a Hong Kong buyer. The transaction was covered by an irrevocable letter of credit (L/C No. 21970) issued by Nanyang Bank. Upon presentation of export documents, Allied Bank credited Marphil’s account with the peso equivalent. However, Nanyang Bank later refused reimbursement, citing discrepancies in the documents and the buyer’s refusal to accept them. Allied Bank consequently debited Marphil’s account and required its surety, Ireneo Lim, to sign a blank promissory note (PN No. 4202), which the bank later filled in for the amount.
Marphil filed a declaratory relief action, seeking to void PN No. 4202 for lack of consideration and to declare its obligations paid, alleging Allied Bank acted in bad faith by not protecting its interests under the irrevocable letter of credit. Allied Bank filed a collection case against Lim as surety. The RTC consolidated the cases and ruled partially for both parties, declaring PN No. 4202 void but holding Lim liable as surety for two earlier promissory notes. The Court of Appeals modified this, upholding the validity of PN No. 4202 and affirming Lim’s surety liability for all three notes.
ISSUE
The core issues were: (1) Whether Promissory Note No. 4202 is valid and supported by consideration; and (2) Whether Ireneo Lim is liable as a surety for Marphil’s obligations.
RULING
The Supreme Court denied the petition, affirming the CA with modification on the interest rate. PN No. 4202 was valid. The consideration was the pre-existing credit accommodation extended by Allied Bank. The bank’s act of crediting Marphil’s account upon presentation of documents, pursuant to their agreement, constituted an advance that was later invalidated by the foreign bank’s dishonor. This created an obligation for Marphil to return the amount, for which PN No. 4202 was issued. The note was not void for lack of consideration.
Lim was solidarily liable as a surety. The Continuing Guaranty agreements he signed were valid and constituted a continuing security for Marphil’s obligations. His defense of not remembering his signature was unavailing, as he failed to present clear and convincing evidence of forgery. His liability was not extinguished by the alleged invalidity of PN No. 4202, as the guaranty covered all of Marphil’s indebtedness. The nature of a continuing guaranty is that it secures a series of transactions, not just a single one. The Court also found that Allied Bank, as a correspondent bank, acted within its role by crediting the account upon document presentation; its duty was to examine the documents on their face, not to ensure the buyer’s acceptance. The legal interest rate was adjusted to 6% per annum from finality until full payment.