CASE TITLE: G.R. No.
142381 October 15, 2003
PHILIPPINE BLOOMING MILLS, INC., and ALFREDO CHING, petitioners,
vs.
COURT OF APPEALS and TRADERS ROYAL BANK, respondents.
FACTS: Ching was the Senior Vice President of PHILIPPINE BLOOMING MILLS, INC. In his
personal capacity and not as a corporate officer; Ching signed a Deed of Suretyship dated 21
July 1977 binding himself. On 24 March and 6 August 1980, TRB granted PBM letters of
credit on application of Ching in his capacity as Senior Vice President of PBM. Ching later
accomplished and delivered to TRB trust receipts, which acknowledged receipt in trust for
TRB of the merchandise subject of the letters of credit.
Under the trust receipts, PBM had the right to sell the merchandise for cash with the
obligation to turn over the entire proceeds of the sale to TRB as payment of PBM’s
indebtedness.
On 27 April 1981, PBM obtained a ₱3,500,000 trust loan from TRB. Ching signed as co-maker
in the notarized Promissory Note evidencing this trust loan.
PBM defaulted in its payment of Trust Receipt No. 106 for ₱959,611.96, and of Trust Receipt
No. 113 for ₱1,191,137.13. PBM also defaulted on its ₱3,500,000 trust loan.
On 1 April 1982, PBM and Ching filed a petition for suspension of payments with the
Securities and Exchange Commission "SEC". The petition sought to suspend payment of
PBM’s obligations and prayed that the SEC allow PBM to continue its normal business
operations free from the interference of its creditors. One of the listed creditors of PBM was
TRB.
On 9 July 1982, the SEC placed all of PBM’s assets, liabilities, and obligations under the
rehabilitation receivership of Kalaw, Escaler and Associates.
On 13 May 1983, ten months after the SEC placed PBM under rehabilitation receivership,
TRB filed with the trial court a complaint for collection against PBM and Ching.
On 25 May 1983, TRB moved to withdraw the complaint against PBM on the ground that
the SEC had already placed PBM under receivership. The trial court thus dismissed the
complaint against PBM.
The trial court found Ching liable to TRB for ₱19,333,558.16 under the Deed of Suretyship.
The Court of Appeals resolved the questions in favor of TRB.
The Court of Appeals denied Ching’s Motion for Reconsideration for lack of merit.
Hence, this petition.
ISSUE:
WON THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT RULED THAT THE
PETITIONERS WERE LIABLE FOR THE TRUST RECEIPTS DESPITE THE FACT THAT PRIVATE
RESPONDENT HAD PREVENTED THEIR FULFILLMENT.
WON THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT FOUND PETITIONER
ALFREDO CHING LIABLE FOR P15,773,708.78 WITH LEGAL INTEREST AT 12% PER ANNUM
UNTIL FULLY PAID DESPITE THE FACT THAT UNDER THE REHABILITATION PLAN OF
PETITIONER PBM.
HELD: The petition has no merit.
Ching can be sued separately to enforce his liability as surety for PBM, as expressly provided
by Article 1216 of the New Civil Code.
It is elementary that a corporation has a personality distinct and separate from its individual
stockholders and members. Being an officer or stockholder of a corporation does not make
one's property the property also of the corporation, for they are separate entities.
Ching's act of joining as a co-petitioner with PBM in SEC Case No. 2250 did not vest in the
SEC jurisdiction over his person or property, for jurisdiction does not depend on the consent
or acts of the parties but upon express provision of law
Traders Royal Bank has fully resolved the issue regarding Ching's liability as a surety of the
credit accommodations TRB extended to PBM.
Ching is liable for credit obligations contracted by PBM against TRB before and after the
execution of the 21 July 1977 Deed of Suretyship.
The law expressly allows a suretyship for "future debts". Article 2053 of the Civil Code
provides:
A guaranty may also be given as security for future debts, the amount of which is not yet
known; there can be no claim against the guarantor until the debt is liquidated. A
conditional obligation may also be secured.
Ching would like this Court to rule that his liability is limited, at most, to the amount stated
in PBM's rehabilitation plan.
In granting the loan to PBM, TRB required Ching's surety precisely to insure full recovery of
the loan in case PBM becomes insolvent or fails to pay in full. This was the very purpose of
the surety. Thus, Ching cannot use PBM's failure to pay in full as justification for his own...
reduced liability to TRB. As surety, Ching agreed to pay in full PBM's loan in case PBM fails to
pay in full for any reason, including its insolvency.
TRB, as creditor, has the right under the surety to proceed against Ching for the entire
amount of PBM's loan. This is clear from Article 1216 of the Civil Code:
ART. 1216. The creditor may proceed against any one of the solidary debtors or some or all
of them simultaneously. The demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so long as the debt has not
been fully collected.
Ching's attempts to have this Court review the factual issues of the case are improper. It is
not a function of the Supreme Court to assess and evaluate again the evidence, testimonial
and evidentiary, adduced by the parties particularly where the findings of both the trial
court and the appellate court coincide on the matter.
Ching is still liable for the amounts stated in the letters of credit covered by the trust
receipts. Other than his bare allegations, Ching has not shown proof of payment or
settlement with TRB. Atty. Vicente Aranda, TRB's corporate secretary and First Vice
President of its Human Resource Management Department, testified that the conditions in
the TRB board resolution presented by Ching were not met or implemented.
The trial court found and the appellate court affirmed that the outstanding principal
amounts as of the filing of the complaint with the trial court on 13 May 1983.
WHEREFORE, we AFFIRM the decision of the Court of Appeals with MODIFICATION.
