Shifting burdens

If a plaintiff or party having the burden of proof introduces evidence establishing a presumption that his assertions by themselves are true and correct, the burden of proof is still not shifted to the defendant or his adversary; it merely places on the defendant the burden of producing evidence to rebut that presumption and create a state of equipoise between the proof of both parties so that the burden to establish the case by preponderance of evidence remains with the plaintiff. If the defendant fails to do so, then the presumption prevails and plaintiff is dispensed from his burden of proof. In other words, the burden of proof does not shift but the burden of going forward with the evidence passes from party to party. This rule once more shows the distinction between proof and evidence in that proof is the conclusion drawn from the evidence while evidence is the medium to establish proof so that without evidence there is no proof although there may be evidence which does not amount to proof because it is false and of no probative value. It is illustrated in this case between a bank (PBC) and the members of the board of directors of a metal manufacturing corporation ( MICO).

The case arose from several loans granted by the bank to MICO totaling P8,441,663.90 and letters of credit amounting to P461,600.06. The loans were evidenced by several promissory notes signed by the duly authorized officers of the company, while the letters of credits were evidenced by the bank drafts issued in connection therewith. Both credit accommodations were secured by the real estate mortgage over the two properties of the company located in Metro Manila as well as the trust receipts of the goods covered by the letter of credits. Aside from these collaterals, five directors of the company led by its President, Mr. Ayco signed a surety agreement wherein they jointly and severally guaranteed the prompt payment of all the credit accommodations on their due dates.

On due dates, MICO failed to pay its obligations despite repeated demands. Thus PBC extrajudicially foreclosed MICO’s real estate properties, sold them at public auction and applied the proceeds of the auction price of P3 million to the outstanding obligations of the company. After application, MICO still had an outstanding balance of P5,441,663.90 on the PNs and P 461,606.60 on the trust receipts. So PBC sued the five directors led by Mr. Ayco to recover the said unpaid amounts.

In answer to the complaint, Mr. Ayco and the other sureties-board members denied all the allegations. They claimed in their testimonies that no loans or credit accommodations were ever released to or received by MICO. Apart from their bare denials, they did not present any single piece of evidence to support their allegations that the loan transactions, the real estate mortgage, letters of credit and trust receipts were issued allegedly without any consideration. PBC on the other hand presented the PNs, letters of credit, bank drafts, trust receipts, surety agreements, and board resolutions evidencing the transactions.

But the lower court gave credence to the mere testimonies of the sureties. The court said that PBC should have presented proof that the proceeds of loan or the goods under the trust receipts were delivered to MICO such as the ledger accounts showing the release of the proceeds of loan or documents proving the existence and the purchase of the merchandise covered by the letters of credit. So the lower court declared that the real estate mortgage and the surety agreement were null and void for lack of consideration.

Was the lower court correct?

No.

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 by the probative value which the law or rule attaches to a specific statement of facts. A presumption may operate against his adversary who has not introduced evidence to rebut it. The effect of a legal presumption on the burden of proof is to bring about the necessity of presenting evidence to meet the prima facie case created thereby, which will prevail if no proof to the contrary is presented and offered. The burden of proof remains as it is, but because of the presumption, the one who has the burden is relieved for the time being from introducing evidence in support of his averment, because the presumption stands in the place of the evidence unless rebutted.-

Under the Negotiable Instruments Law (Section 24) every negotiable instrument such as promissory notes, checks, or drafts drawn on a letter of credit is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party for value. The Rules of Court (Section 3, Rule 131) also presumes that every negotiable instrument was given or endorsed for sufficient consideration. In this case PBC presented all the necessary negotiable instruments evidencing the loan and the credit accommodations thus creating that presumption. Hence, Mr. Ayco and the other sureties should have presented evidence to rebut that presumption. But apart from their bare denials, they did not proffer any single piece of evidence to support their contention. So the presumption created by the documents presented by PBC prevails and constitutes a preponderance of evidence proving the solidary obligation of MICO and its sureties. Mr Ayco and the board members are therefore liable to pay the outstanding obligations of MICO. ( Lee vs. Court of Appeals 375 SCRA 579)

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