THIRD DIVISION
|
SOLIDBANK CORPORATION, NOW
KNOWN AS METROPOLITAN BANK AND TRUST COMPANY, Petitioner, - versus - GATEWAY ELECTRONICS
CORPORATION, JAIME M. HIDALGO AND Respondents. |
G.R.
No. 164805
Present: YNARES-SANTIAGO, J.,
Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: April 30,
2008 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari[1]
assailing the Decision dated
The Facts
In
May and June 1997, Gateway Electronics Corporation (Gateway) obtained from
Solidbank Corporation (Solidbank) four (4) foreign currency denominated loans
to be used as working capital for its manufacturing operations.[2]
The loans were covered by promissory notes[3]
(PNs) which provided an interest of eight and 75/100 percent (8.75%), but was
allegedly increased to ten percent (10%) per annum, and a penalty of two percent (2%) per month based on the total
amount due computed from the date of default until full payment of the total
amount due.[4] The
particulars of the loans are:
|
Promissory Note
No. |
|
Date
of Loan |
|
Amount
of Loan |
|
Date
Due |
|
|
|
|
|
|
|
|
|
a) PN 97-375 |
|
20 May 1997 |
|
US$ 190,000.00 |
|
|
|
|
|
|
|
|
|
|
|
b) PN 97-408 |
|
29 May 1997 |
|
US$ 570,000.00 |
|
|
|
|
|
|
|
|
|
|
|
c) PN 97-435 |
|
|
|
US$1,150,000.00 |
|
|
|
|
|
|
|
|
|
|
|
d) PN 97-458 |
|
|
|
US$ 130,000.00 |
|
|
To
secure the loans covered by PN 97-375[5]
and PN 97-408,[6] Gateway assigned to Solidbank the proceeds of its Back-end Services
Agreement[7]
dated
3. This
Note or Loan shall be paid from the foreign exchange proceeds of Our/My
Letter(s) of Credit, Purchase Order or Sales Contract described as follows: ***
Back-end Services Agreement dated 06-25-96 by and between Gateway Electronics
Corporation and Alliance Semiconductor Corporation.
4. We/I
assign, transfer and convey to Solidbank all title and interest to the proceeds
of the foregoing Letter(s) of Credit to the extent necessary to satisfy all
amounts and obligations due or which may arise under this Note or Loan, and to
any extension, renewal, or amendments of this Note or Loan. We/I agree that in case the proceeds of the
foregoing Letter(s) of Credit prove insufficient to pay Our/My outstanding
liabilities under this Note or Loan, We/I shall continue to be liable for the
deficiency.
5. We/I
irrevocably undertake to course the foreign exchange proceeds of the Letter(s)
of Credit directly with Solidbank.
Our/My failure to comply with the above would render Us or Me in default
of the loan or credit facility without need of demand.[8]
Gateway
failed to comply with its loan obligations. By
On
Earlier,
on
8. Therefore, plaintiffs request that this Honorable Court issue an Order requiring defendant GEC, through its Treasurer/Chief Financial Officer, Chief Accountant, Comptroller or any such officer, to bring before this Honorable Court for inspection and copying the following documents:
a) The originals, duplicate originals and copies of all documents pertaining to, arising from, in connection with or involving the Back-end Services Agreement of defendant GEC and Alliance Semiconductors;
b) The originals, duplicate originals and copies of all books of account, financial statements, receipts, checks, vouchers, invoices, ledgers and other financial/accounting records and documents pertaining to or evidencing financial and money transactions arising from, in connection with or involving the Back-end Services Agreement of defendant GEC and Alliance Semiconductors; and
c) The originals, duplicate originals and copies of all documents from whatever source pertaining to the proceeds/payments received by GEC from Alliance Semiconductors.
d) Documents, as used in this section, means all writings of any kind, including the originals and all non-identical copies, whether different from the originals by reason of any notation made on such copies or otherwise, including without limitation, correspondence, memoranda, notes diaries, statistics, letters, telegrams, minutes, contracts, reports, studies, checks, statements, receipts, returns, summaries, pamphlets, books, inter-office and intra-office communications, notations of any sort of conversations, telephone calls, meetings or other communications, bulletins, printed matter, computer records, diskettes or print-outs, teletypes, telefax, e-mail, invoices, worksheets, all drafts, alterations, modifications, changes and amendments of any of the foregoing, graphic or oral records or representations of any kind (including, without limitation, photographs, charts, graphs, microfiche, microfilm, videotapes, recordings, motion pictures, CD-ROM’s), and any electronic, mechanical or electric records or representations (including, without limitation, tapes, cassettes, discs, recordings and computer or computer-related memories).
9. Furthermore,
plaintiffs request that said Order to
the Treasurer/Chief Financial Officer, Chief Accountant, Comptroller of
defendant GEC include the following instructions:
a. If the response is that the documents are not in defendant GEC’s or the officers’ possession or custody, said officer should describe in detail the efforts made to locate said records or documents;
b. If the documents are not in defendant GEC’s or the officer’s possession and control, said officer should identify who has control and the location of said documents or records;
c. If the request for production seeks a specific document or itemized category that is not in defendant GEC’s or the officer’s possession, control or custody, the officer should provide any documents he has that contain all or part of the information contained in the requested document or category;
d. If the officer cannot furnish the originals of the documents requested, he should explain in detail the reasons therefore; and
e. The officer should identify the source within or outside GEC of each of the documents he produces.[13]
On
WHEREFORE, the defendant GEC is hereby ordered to bring all the records and documents, not privileged, arising from, in connection with and/or involving the Back-end Services Agreement between defendant GEC and Alliance Semiconductor Corporation, particularly to those pertaining to all payments made by Alliance Semiconductor Corporation to GEC pursuant to said Agreement, incorporating the instructions enumerated in par. 9 of the instant motion, for inspection and copying by the plaintiff, the same to be made before the Officer-In-Charge, Office of the Branch Clerk of Court on February 27, 2001 at 9:00 a.m.
SO ORDERED.[15]
Gateway
filed a motion to reset the production and inspection of documents to
On
On
Solidbank was not satisfied with the
documents produced by Gateway. Thus, on
On
Before this Court is a Motion to Cite Defendant GEC In Contempt For Refusing To Produce Documents Pursuant to the Order Dated 30 January 2001 filed by plaintiff dated December 12, 2001, together with defendant GEC’s Opposition thereto dated January 14, 2002, as well as plaintiff’s Reply dated February 6, 2002 and GEC’s Rejoinder dated February 27, 2002.
As Courts are cautioned to utilize the power to punish for contempt on the preservative and not on the vindictive, contempt being drastic and extraordinary in nature (Wicker vs. Arcangel, 252 SCRA 444; Paredes-Garcia vs. CA, 261 SCRA 693), this Court is inclined to DENY the present motion.
However, as no diligent effort was shown to have been exerted by defendant GEC to produce the documents enumerated in the Order dated January 30, 2001, this Court hereby orders, in accordance with Sec. 3(a), Rule 29 of the Rules of Court, that the matters regarding the contents of the documents sought to be produced but which were not otherwise produced by GEC, shall be taken to be established in accordance with plaintiff’s claim, but only for the purpose of this action.
SO ORDERED.[24]
Gateway
filed a partial motion for reconsideration of the
On
On
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed portion of the Order dated April 15, 2002 and Order dated August 27, 2002, both issued by public respondent, are hereby NULLIFIED and SET ASIDE without prejudice to the filing by private respondent of a new Motion for Production and Inspection of Documents in accordance with the requirements of the Rules.
SO
ORDERED.[28]
Solidbank
filed a motion for reconsideration of the Decision of the CA. On
The Issues
I.
Whether Solidbank’s motion for
production and inspection of documents and the Order of the trial court dated
January 30, 2001 failed to comply with Section 1, Rule 27 of the Rules of
Court; and
II.
Whether the trial court
committed grave abuse of discretion in holding that the matters subject of the
documents sought to be produced but which were not produced by Gateway shall be
deemed established in accordance with Solidbank’s claim.
The Ruling of the Court
We resolve to deny the petition.
I
Section
1, Rule 27 of the Rules of Court provides:
SECTION 1. Motion
for production or inspection; order. – Upon motion of any party showing
good cause therefor, the court in which an action is pending may (a) order any
party to produce and permit the inspection and copying or photographing, by or
on behalf of the moving party, of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, not privileged,
which constitute or contain evidence material to any matter involved in the
action and which are in his possession, custody or control; or (b) order any
party or permit entry upon designated land or other property in his possession
or control for the purpose of inspecting, measuring, surveying, or
photographing the property or any designated relevant object or operation
thereon. The order shall specify the
time, place and manner of making the inspection and taking copies and
photographs, and may prescribe such terms and conditions as are just.
The aforecited rule provides the mechanics for the production of
documents and the inspection of things during the pendency of a case. It also deals
with the inspection of sources of evidence other than documents, such as land
or other property in the possession or control of the other party.[30] This remedial measure is intended to assist in the
administration of justice by
facilitating and expediting the preparation of cases for trial and guarding
against undesirable surprise and delay; and it is designed to simplify
procedure and obtain admissions of facts and evidence, thereby shortening
costly and time-consuming trials. It is based on ancient principles of equity. More specifically, the purpose
of the statute is to enable a party-litigant to discover material information
which, by reason of an opponent's control, would otherwise be unavailable for
judicial scrutiny, and to
provide a convenient and summary method of obtaining material and competent
documentary evidence in the custody or under the control of an adversary. It is
a further extension of the concept of pretrial.[31]
The modes of discovery are accorded a
broad and liberal treatment.[32] Rule
27 of the Revised Rules of Court permits “fishing” for evidence, the only
limitation being that the documents, papers, etc., sought to be produced are
not privileged, that they are in the possession of the party ordered to produce
them and that they are material to any matter involved in the action.[33] The
lament against a fishing expedition no longer precludes a party from prying
into the facts underlying his opponent’s case. Mutual knowledge of all relevant
facts gathered by both parties is essential to proper litigation. To that end,
either party may compel the other to disgorge whatever facts he has in his
possession.[34]
However, fishing for evidence that is allowed under the rules is not without
limitations. In Security Bank Corporation v. Court of Appeals, the Court enumerated
the requisites in order
that a party may compel the other party to produce or allow the inspection of
documents or things, viz.:
(a) The
party must file a motion for the production or inspection of documents or
things, showing good cause therefor;
(b) Notice of
the motion must be served to all other parties of the case;
(c) The
motion must designate the documents, papers, books, accounts, letters,
photographs, objects or tangible things which the party wishes to be produced
and inspected;
(d) Such documents, etc., are not privileged;
(e) Such
documents, etc., constitute or contain evidence material to any matter involved
in the action, and
(f) Such
documents, etc., are in the possession, custody or control of the other party.[35]
In the case at bench, Gateway
assigned to Solidbank the proceeds of its Back-end Services Agreement with
Solidbank was able to show good cause
for the production of the documents. It had also shown that the said documents
are material or contain evidence relevant to an issue involved in the action.
However, Solidbank’s motion was fatally defective and must be struck down because
of its failure to specify with particularity the documents it required Gateway
to produce. Solidbank’s motion for production and inspection of documents
called for a blanket inspection. Solidbank’s request for inspection of “all
documents pertaining to, arising from, in connection with or involving the Back-end Services Agreement”[36]
was simply too broad and too generalized in scope.
A motion for production and
inspection of documents should not demand a roving inspection of a promiscuous
mass of documents. The inspection should be limited to those documents
designated with sufficient particularity in the motion, such that the adverse
party can easily identify the
documents he is required to produce.[37]
Furthermore,
Solidbank, being the one who asserts that the proceeds of the Back-end Services
Agreement were already received by Gateway, has the burden of proof in the
instant case. Burden of proof is the duty of a party to present evidence on the
facts in issue necessary to establish his claim or defense by the amount of
evidence required by law.[38] Throughout the trial, the burden of proof
remains with the party upon whom it is imposed,[39] until he shall have discharged the same.
II
The
trial court held that as a consequence of Gateway’s failure to exert diligent
effort in producing the documents subject of the Order dated January 30, 2001, in
accordance with Section 3(a), Rule 29[40]
of the Rules of Court, the matters regarding the contents of the documents
sought to be produced but which were not produced by Gateway, shall be considered
as having been established in accordance with Solidbank’s claim.
We hold that the trial court
committed grave abuse of discretion in issuing the aforesaid Order. It is not
fair to penalize Gateway for not complying with the request of Solidbank for the
production and inspection of documents, considering that the documents sought
were not particularly described. Gateway and its officers can only be held liable
for unjust refusal to comply with the modes of discovery if it is shown that the
documents sought to be produced were specifically described, material to the
action and in the possession, custody or control of Gateway.
Neither can it be said that Gateway
did not exert effort in complying with the order for production and inspection
of documents since it presented the invoices representing the billings sent by
Gateway to
One final note. The CA decision
nullifying the orders of the trial court was without prejudice to the filing by
herein petitioner of a new motion for Production and Inspection of Documents in
accordance with the Rules. It would have been in the best interest of the
parties, and it would have saved valuable time and effort, if the petitioner
simply heeded the advice of the CA.
WHEREFORE, in view of the foregoing, the instant petition is DENIED for lack of merit.
SO ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MA. ALICIA
AUSTRIA-MARTINEZ Associate Justice |
MINITA V. CHICO-NAZARIO Associate Justice |
RUBEN T. REYES
Associate
Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate
Justice
Chairperson,
Third Division
C E R T I F I C A T I O
N
Pursuant to Section 13, Article
VIII of the Constitution and the Division Chairperson's Attestation, I certify
that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
REYNATO
S. PUNO
Chief
Justice
[1] RULES
OF COURT, Rule 45.
[2] Rollo, pp. 117-136.
[3]
[4]
[5]
[6]
[7] The Back-end Services Agreement is
a business venture entered into by Gateway and
[8] Rollo, pp. 208-209.
[9]
[10]
[11]
[12]
[13]
[14] Penned by Judge Renato G. Quilala of
the
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26] RULES OF COURT, Rule 65.
[27] Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Roberto A. Barrios and Magdangal M. De Leon concurring; rollo, pp. 6- 26.
[28] Rollo, p. 26.
[29]
[30] Regalado, Florenz D., Remedial Law Compendium, Vol. II, 8th ed., p. 650.
[31] 27 C.J.S. Discovery § 71 (2008).
[32] Rosseau
v.
[33] Supra note 30.
[34] Security Bank Corporation v. Court of Appeals, G.R. No. 135874, January 25, 2000, 323 SCRA 330.
[35]
[36] Supra note 12.
[37] In Archer v. Cornillaud [41 F.Supp. 435(1941)], an action was filed to recover wages
allegedly due from employer under Fair Labor Standards Act of 1938, plaintiff's
motion to require defendant to produce and to permit plaintiff to inspect, copy
and photograph all records, papers, books, etc., pertaining to nature and
extent of defendant's business and his wholesale and retail transactions and
interstate and intrastate transactions, and names and addresses of those with
whom the transactions were had was too broad. The plaintiff's motion does not
ask for designated documents but demands “all records, papers, books,” etc. The
motion goes far beyond the scope and purpose of the rule on discovery. It is
well settled by numerous decisions that the rule was never intended to permit a
party to engage in a “fishing expedition” among the books and papers of the
adverse party.
In Dickie v.
[38] RULES OF COURT, Rule 131, Sec. 1.
[39] Bautista v. Sarmiento, No. L-45137, September 23, 1985.
[40]
SEC.
3. Other
consequences. – If any party or an officer or managing agent of a party
refuses to obey an order made under section 1 of this Rule requiring him to
answer designated questions, or an order under Rule 27 to produce any document
or other thing for inspection copying or photographing or to permit it to be
done, or to permit entry upon land or other property, or an order made under
Rule 28 requiring him to submit to a physical or mental examination, the court
may make such orders in regard to the refusal as are just, and among others the
following:
(a) An order that the matters regarding which the questions
were asked, or the character or description of the thing or land, or the
contents of the paper, or the physical or mental condition of the party, or any
other designated facts shall be taken to be established for the purposes of the
action in accordance with the claim of the party obtaining the order;
(b) An order refusing to allow the disobedient party to
support or oppose designated claims or defenses or prohibiting him from
introducing in evidence designated documents or things or items of testimony,
or from introducing evidence of physical or mental condition;
(c) An order striking out pleadings or parts thereof, or
staying further proceedings until the order is obeyed, or dismissing the action
or proceeding or any part thereof, or rendering a judgment by default against
the disobedient party; and
(d) In lieu of any of the foregoing orders or in addition thereto, an order directing the arrest of any party or agent of a party for disobeying any of such orders except an order to submit to a physical or mental examination.
[41]
GOOD-FAITH
EFFORT
“We do not, however, completely rest our holding on
this factor of ‘control.’ We find instead that the primary dispositive issue is
whether Stripling made a good faith effort to obtain the documents over which
he may have indicated he had ‘control’ in whatever sense, and whether after
making such a good faith effort he was unable to obtain and thus produce them.
… There is no evidence Stripling acted willfully, in bad faith or was at fault
in failing to produce the documents which he attempted and was unable to
obtain. Since Stripling’s noncompliance with the production order was due to
his inability, after a good faith effort, to obtain these documents, the
district court abused its discretion in dismissing his counterclaim.” Federal
Practice and Procedure, 8A FPF § 2210, citing Searock v. Stripling,