Facts:

The case at hand is G.R. No. L-9139, decided on September 27, 1957, involving the Philippine Bank of Communications as the plaintiff-appellee and the Guitar Match Manufacturing Company, Inc., along with its vice president and manager Ong Hing Lian, as the defendants-appellants. The dispute arose from an overdraft agreement entered into on October 10, 1950, wherein the Company was permitted to overdraw its account with the Bank up to P100,000.00 for a period of one year. To secure this overdraft, the Company executed a chattel and real estate mortgage on its properties located in Butuan City, and Ong Hing Lian signed a security agreement, binding himself jointly and severally with the Company for the payment of the overdraft.

On April 15, 1953, the Bank initiated a special civil action against the defendants for the payment of P117,321, plus liquidated damages and interest, and sought foreclosure of the mortgage. The trial court issued a writ of attachment on the same day. T...

Facts:

Background of the Case

• The Guitar Match Manufacturing Company (Company) and its vice president and manager, Ong Hing Lian, entered into an Overdraft Agreement with the Philippine Bank of Communications (Bank) on October 10, 1950. The agreement allowed the Company to overdraw its account with the Bank up to P100,000.00 for one year, ending on October 10, 1951.
• To secure the overdraft, the Company executed a chattel and real estate mortgage on its personal and real properties in Butuan City. Ong Hing Lian also signed a security agreement, binding himself jointly and severally with the Company for the payment of the overdraft.

Default and Legal Action

• On April 15, 1953, the Bank filed a special civil action against the Company and Ong Hing Lian for the payment of P117,321.49, plus 15% liquidated damages, interest, and foreclosure of the mortgage. The trial court issued a writ of attachment on the same day.
• On April 20, 1953, the defendants, represented by Atty. Pedro C. Navarro, filed an answer admitting delay in fulfilling their obligation. They cited reasons such as the suspension of operations due to difficulties in securing import licenses and the impact of the Minimum Wage Law, which doubled operational costs. They also mentioned that Ong Hing Lian had left for Manila to compute the exact amount owed and sought an amicable settlement.

Procedural Developments

• On April 27, 1953, new lawyers for the defendants, Attys. Bausa and Ampil, filed an urgent ex parte petition for extension to file a responsive pleading. However, they failed to file the pleading within the extended period.
• On April 2, 1954, the Bank filed a motion for summary judgment, which the defendants did not oppose. Instead, on May 24, 1954, the defendants filed a motion to admit an amended answer, claiming novation of the contract due to a one-year extension granted by the Bank. They also included a counterclaim for P50,000.00 in damages and P10,000.00 in attorney’s fees, alleging that the Bank’s premature filing of the complaint and attachment caused the Company’s business to stop.

Intervention by Butuan City

• On August 4, 1954, the City Attorney of Butuan City filed a motion for intervention, claiming the city had a legal interest in the mortgaged properties due to unpaid taxes from 1951 to 1954, amounting to P5,412.56.

Trial Court’s Decision

• On August 7, 1954, the trial court issued an order:
  • Granting the Bank’s motion for the sale of attached properties and summary judgment.
  • Denying the defendants’ motion to admit the amended answer.
  • Allowing the City of Butuan’s intervention and directing that the city’s tax claim be withheld from the sale proceeds.
  • Ordering the defendants to pay the Bank P777,321.49, plus 15% liquidated damages, interest, and costs.

Issue:

• (Unlock)

Ruling:

• (Unlock)

Ratio:

1. Amended Answer as Sham and Frivolous: The proposed amended answer, which alleged novation and included counterclaims, was deemed frivolous because:

   • The one-year extension, even if granted, would not have extended the maturity date beyond October 10, 1952, making the complaint filed on April 16, 1953 timely.
   • The counterclaims were inconsistent with the defendants’ original admissions and lacked merit.
   • The defendants failed to explain why the new defenses were not raised earlier, indicating an intent to delay the proceedings.

2. Summary Judgment Proper: The trial court correctly granted summary judgment because:

   • The defendants’ original answer admitted most of the Bank’s allegations, leaving no genuine issue of material fact.
   • The defendants failed to oppose the motion for summary judgment or present counter-affidavits to dispute the Bank’s claims.
   • The Bank’s evidence, including the overdraft agreement, mortgage, and surety agreement, sufficiently proved the defendants’ liability.

3. Judgment in Favor of the Bank: The trial court’s judgment was justified because:

   • The defendants admitted their default and inability to pay, citing business difficulties.
   • The Bank’s claim was supported by documentary evidence, and the defendants failed to present any valid defense or counterclaim.

Conclusion:

The Supreme Court upheld the trial court’s decision, emphasizing that the defendants’ amended answer was a delay tactic and that the Bank was entitled to summary judgment based on the defendants’ admissions and the lack of genuine issues of material fact. The Court also affirmed the trial court’s handling of the City of Butuan’s intervention and the distribution of the sale proceeds.