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    The court ruled that there was insufficient evidence of fraud presented by Allied Banking Corporation to justify issuing a writ of preliminary attachment against South Pacific Sugar Corporation and its guarantors. [Allied Bank claimed South Pacific misrepresented how loan funds would be used and did not pay back a $90 million loan. However, the court found that South Pacific had an ongoing business relationship with Allied Bank since 1995, had paid back $210 million of $300 million in loans, and Allied Bank did not present sufficient evidence the inability to pay was due to fraudulent intent rather than financial difficulties.] The court held that fraud must be proven by the party alleging it and is never presumed, and the loan transactions between the parties did not initially show signs

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    The court ruled that there was insufficient evidence of fraud presented by Allied Banking Corporation to justify issuing a writ of preliminary attachment against South Pacific Sugar Corporation and its guarantors. [Allied Bank claimed South Pacific misrepresented how loan funds would be used and did not pay back a $90 million loan. However, the court found that South Pacific had an ongoing business relationship with Allied Bank since 1995, had paid back $210 million of $300 million in loans, and Allied Bank did not present sufficient evidence the inability to pay was due to fraudulent intent rather than financial difficulties.] The court held that fraud must be proven by the party alleging it and is never presumed, and the loan transactions between the parties did not initially show signs

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    39 views2 pages

    Safs

    Uploaded by

    Kris Alarin
    The court ruled that there was insufficient evidence of fraud presented by Allied Banking Corporation to justify issuing a writ of preliminary attachment against South Pacific Sugar Corporation and its guarantors. [Allied Bank claimed South Pacific misrepresented how loan funds would be used and did not pay back a $90 million loan. However, the court found that South Pacific had an ongoing business relationship with Allied Bank since 1995, had paid back $210 million of $300 million in loans, and Allied Bank did not present sufficient evidence the inability to pay was due to fraudulent intent rather than financial difficulties.] The court held that fraud must be proven by the party alleging it and is never presumed, and the loan transactions between the parties did not initially show signs

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    of 2

    G. R. NO.

    163692 February 4, 2008

    ALLIED BANKING CORPORATION, Petitioner, v. SOUTH PACIFIC SUGAR


    CORPORATION, MARGARITA CHUA SIA, AGOSTO SIA, LIN FAR CHUA, GERRY
    CHUA, SIU DY CHUA, and ANTONIO CHUA, Respondents.

    Quisombing, J

    FACTS:

    On March 23, 1999, South Pacific Sugar Corporation (South Pacific) issued three
    promissory notes totaling P96,000,000 to the petitioner, Allied Banking Corporation (hereafter
    Allied Bank), to secure payment of loans contracted during the same period. Respondents
    Margarita Chua Sia, Agosto Sia, Lin Far Chua, Gerry Chua, Siu Dy Chua, and Antonio Chua
    (guarantors) executed continuing guaranty/comprehensive surety agreements binding
    themselves solidarily with the corporation. On maturity, South Pacific and its guarantors failed
    to honor their respective covenants.

    On January 26, 2001, Allied Bank filed a complaint for collection of a sum of money with
    a prayer for the issuance of a writ of preliminary attachment against respondents. Allied Bank
    prayed in its complaint (1) that upon its filing, a writ of preliminary attachment be issued ex
    parte against all leviable properties of the respondents as may be sufficient to satisfy
    petitioner's claim; and (2) that the respondents be ordered to pay petitioner P90,000,000 plus
    interest and charges, as well as attorney's fees and costs of suit.

    During the ex parte hearing for the issuance of a writ of preliminary attachment, Allied
    Bank's lone witness, Account Officer Marilou T. Go, testified that Allied Bank approved the
    corporation's application for credit facilities on the latter's representation. Go further testified
    that Allied Bank discovered soon after that these representations were false; that the loans were
    allegedly "diverted to illegitimate purposes;" that as of January 2001, the loan amounted to P90
    million; that based on a project study by a consulting company, Seed Capital Ventures, Inc.,
    South Pacific was suffering losses and incurring debts in the millions; that there had been no
    credit investigation to appraise the corporation's business operations; and that Allied Bank
    relied on the financial statements of the corporation.

    The respondents filed a motion to discharge the attachment with an urgent motion to defer
    further the implementation of the writ, grounded upon the arguments that (1) the evidence of
    fraud was insufficient and self-serving; and (2) there was no evidence that South Pacific used
    the loan for other purposes. The respondents pointed out that they have been dealing with
    Allied Bank since 1995, and had paid a total of P210 million out of a maximum exposure of
    about P300 million, and that the P90 million subject of the pending suit constitutes merely the
    balance of their loan.5

    On the issue of discharge of the writ notwithstanding fraud, the Court of Appeals held that
    the inability of respondents to pay does not amount to a fraudulent intent. The Court of Appeals
    stated that Allied Bank failed to justify the grant of a writ of attachment. Essentially, it found
    wanting such evidence as would establish fraud as required before a writ of attachment may be
    granted under Section 1, Rule 57 of the 1997 Rules of Civil Procedure.

    ISSUE:

    Whether or not there was fraud committed by respondents against petitioner bank such that a
    writ of attachment may be issued against respondents.

    RULING:
    Yes, the decision of the RTC-Davao, Br. 17, in Civil Case No. 23, 531 may be validly
    used as the basis by respondents for the award of the contracts for security services in favor of
    Metroguard and DASIA, notwithstanding the pendency of the appeal of the decision with the
    Court of Appeals, and despite the opinion of the OGCC that Metroguard and DASIA must be
    disqualified from the public bidding on the ground of collusion between them.

    Written contracts are presumed to have been entered into voluntarily and for a sufficient
    consideration. Section 1,[15] Rule 131 of the Rules of Court instructs that each party must
    prove his own affirmative allegations. To repeat, in this jurisdiction, fraud is never presumed.
    Moreover, written contracts such as the documents executed by the parties in the present case,
    are presumed to have been entered into for a sufficient consideration.

    In this case, the transaction between the bank and its client appears to have commenced
    rather regularly and aboveboard. The parties have been transacting business with each other
    since 1995. Up until the present case, it appears Allied Bank had not complained of any
    wrongdoing by this client. It also appears that South Pacific had availed of a total of P300
    million in credit accommodations from Allied Bank, P210 million of which has already been
    paid a fact Allied Bank did not deny nor object to. Allied Bank even admitted that of the
    outstanding loan of P96 million, P6 million had been paid. These facts hardly point to the
    direction of fraud. Allied Bank claims repeatedly that the fact that P210 million out of P300
    million has been paid does not discount the possibility that respondents indeed committed
    fraud in their assumption and/or the performance of their obligations. Yet, it never denied
    such fact of payment of the P210 million.

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