Case Summary (G.R. No. 175514)
Material Facts
On September 30, 1999 Jose C. Go obtained two loans from PBCom evidenced by two promissory notes: P17,982,222.22 (first loan) and P80,000,000 (second loan), both payable over ten years to September 30, 2009. To secure the loans Go executed two pledge agreements (dated September 29, 1999) covering Ever Gotesco Resources and Holdings, Inc. shares: the first pledge valued at P27,827,122.22 and the second at P70,155,100.00. By June 15, 2001 PBCom renounced the pledges after the market value of the shares plunged. PBCom alleged the Gos defaulted after paying only three interest installments (Sept., Nov., Dec. 1999), made repeated demands for payment, and filed suit for sum of money with prayer for preliminary attachment (Civil Case No. 01-101190).
Respondents’ Answer and Defenses
Spouses Go filed an Answer with Counterclaim denying material allegations and asserting: (1) the promissory notes matured only on September 30, 2009 so obligations were not yet due; (2) substantial monthly payments had been made and an accounting and reconciliation were necessary; (3) plaintiff did not make the requisite demand to declare default; (4) the pledges initially secured the loans and any decline in share value was speculative and insufficient to justify renunciation; and (5) there was no awareness of termination of the pledge agreements by PBCom. The Answer also contained special and affirmative defenses challenging default, amount of indebtedness, and existence of demand.
PBCom’s Motion for Summary Judgment and RTC Ruling
PBCom filed a verified motion for summary judgment arguing that defendants had admitted material averments in the complaint, tendered no real defenses, and that plaintiff’s claims were supported by authentic documents and voluntary admissions. The RTC granted summary judgment on January 25, 2002, ordering the spouses to pay P117,567,779.75 plus interests, penalties, attorney’s fees and costs. The RTC denied the spouses’ motion for reconsideration on March 20, 2002.
Court of Appeals Decision
On July 28, 2006 the CA reversed and set aside the RTC judgment, denied PBCom’s motion for summary judgment, and remanded the case for trial on the merits. The CA concluded that the alleged admissions in the Answer (paragraphs 3, 4, and 7 of the complaint) were insufficient because other allegations and defenses in the Answer raised genuine issues of material fact—specifically, whether there was default, the amount outstanding, and whether prior demand had been made.
Issues before the Supreme Court
The Supreme Court framed the issues as: (I) whether the CA erred or acted in grave abuse of discretion by finding genuine issues of material fact despite alleged unequivocal admissions in the pleadings; and (II) whether the CA erred in holding issues were raised concerning default, amount of obligation, and existence of prior demand when the pleadings allegedly indicated otherwise.
Parties’ Contentions at the Supreme Court
PBCom maintained that summary judgment was proper because defendants admitted essential allegations (existence and terms of promissory notes and acceleration clauses) and failed to specifically deny the schedules of payment; PBCom relied on attached documents (letters and statements of account) and prior admissions to show default and demand. Spouses Go contended that their admissions were limited to the existence and terms of contracts, not the fact of default, outstanding balance, or prior demand; their special and affirmative defenses raised genuine factual issues requiring a full trial. They also argued that the payment schedules were not sufficiently pleaded to create implied admissions.
Supreme Court Analysis on Standard for Summary Judgment
The Court reiterated the legal standard: summary judgment under Rule 35 is permissible only if, after hearing, the pleadings and evidentiary materials show there is no genuine issue as to any material fact (except amount of damages) and the mover is entitled to judgment as a matter of law. Summary judgment is an accelerated procedure to dispose of sham or unsubstantial claims; when facts are disputed, summary judgment cannot replace trial. The moving party bears the burden to clearly demonstrate absence of any genuine issue of fact.
Supreme Court Analysis on Admissions and Specific Denials
The Court examined the pleadings contextually, emphasizing that admissions must be read together with the entire Answer, including special and affirmative defenses. It applied Rule 8’s requirement for specific denial (Section 10) and the purpose of compelling parties to disclose the matters they intend to controvert. The Court distinguished situations where a defendant disclaims knowledge of facts plainly within his knowledge (cases cited by PBCom) from the present case where defendants did not disclaim execution of the core documents but denied default, contested the amount allegedly outstanding, and asserted lack of notice/demand. The Court found that Spouses Go’s denials and defenses, though perhaps inartfully phrased, did raise bona fide issues as to default, amount, and demand.
Treatment of Documentary Evidence and Admissions
The Court scrutinized PBCom’s reliance on defendants’ letters (March 3 and April 7, 2000) and the statement of account. It agreed with the CA that the March 3, 2000 letter was equivocal and subject to different interpretations and that the April 7, 2000 letter could not be considered against the spouses because it was unsigned by Jose Go. The RTC itself had recognized that the substance of the statement of account was not set forth verbatim in the complaint and that attaching it did not automatically invoke the rule on implied admission. The Court concluded that the documents and alleged admissions did not conclusively establish PBCom’s cause of action.
Precedents Considered and Di
...continue readingCase Syllabus (G.R. No. 175514)
Case Caption, Citation and Ponente
- Reported at 658 Phil. 43, Second Division, G.R. No. 175514, February 14, 2011.
- Parties: Philippine Bank of Communications (PBCom), petitioner; Spouses Jose C. Go and Elvy T. Go (Spouses Go), respondents.
- Opinion penned by Justice Mendoza (MENDOZA, J.).
- Petition for review on certiorari under Rule 45 seeking to set aside the Court of Appeals (CA) Decision dated July 28, 2006 and CA Resolution dated November 27, 2006 in CA G.R. CV No. 77714.
Procedural History
- September 30, 1999: Respondent Jose C. Go executed two promissory notes for loans from PBCom (first for P17,982,222.22; second for P80,000,000), payable within ten years (to September 30, 2009).
- September 29, 1999: Two pledge agreements executed as security for the loans, covering shares of Ever Gotesco Resources and Holdings, Inc.; first pledge valued at P27,827,122.22 securing the first loan; second pledge valued at P70,155,100.00 securing the second loan.
- June 15, 2001: PBCom notified Go that it was renouncing the pledge agreements after the market value of the pledged shares plunged to less than P0.04 per share.
- PBCom filed a complaint for sum of money with prayer for writ of preliminary attachment before the Regional Trial Court (RTC), docketed Civil Case No. 01-101190, alleging default and attaching various documents.
- Spouses Go filed Answer with Counterclaim denying material allegations and asserting special and affirmative defenses.
- September 28, 2001: PBCom filed verified motion for summary judgment before the RTC.
- January 25, 2002: RTC, Branch 42 Manila, granted PBCom’s motion for summary judgment and rendered judgment for P117,567,779.75 plus interest, 10% attorney’s fees, and costs of suit.
- March 20, 2002: RTC denied Spouses Go’s motion for reconsideration.
- CA Decision dated July 28, 2006: Reversed and set aside RTC judgment, denied PBCom’s motion for summary judgment, and remanded case for trial on the merits.
- CA Resolution dated November 27, 2006: Denied PBCom’s motion for reconsideration of the CA decision.
- Supreme Court: Petition for review filed by PBCom under Rule 45; Supreme Court DENIED the petition on February 14, 2011.
Factual Background (as alleged in the pleadings and record)
- Two loans were made to Jose C. Go on September 30, 1999, evidenced by two promissory notes with a ten-year term ending September 30, 2009.
- Pledged collateral comprised shares of Ever Gotesco Resources and Holdings, Inc., pledged under two agreements dated September 29, 1999, with stated valuations sufficient at execution to secure the loans.
- Two years later (circa 2001) the market value of pledged shares substantially declined to less than P0.04 per share.
- PBCom, as pledgee, renounced the pledge agreements by written notice dated June 15, 2001.
- PBCom alleged Spouses Go defaulted, having paid only three interest installments (September, November and December 1999), which, per PBCom, caused acceleration and made the entire balance immediately due and demandable.
- PBCom alleged it made repeated demands for payment and attached communications, including defendant’s communications dated March 3 and April 7, 2000, and a demand dated April 18, 2000 (Annexes F, G, H).
- Spouses Go alleged in their Answer that the promissory notes were payable within ten years (due September 30, 2009), that substantial monthly payments had been made, that no prior demand was known to them, that pledges were initially adequate and that market fluctuations made any depreciation speculative and not permanent.
Pleadings — Complaint and Answer (key allegations and denials)
- Complaint:
- Alleges existence of two promissory notes and pledge agreements (paras. 3, 4, 7).
- Alleges default by Jose C. Go for payment of installments (para. 8), rendering the entire balance due and demandable.
- Alleges outstanding balances as of May 31, 2001: P21,576,668.64 (first loan) and P95,991,111.11 (second loan), totaling P117,567,779.75 (para. 9); attached Statement of Account (Annex E).
- Alleges PBCom made repeated demands and attaches communications (para. 10; Annexes F, G, H).
- Answer and Counterclaim (Spouses Go):
- Denied allegations in paragraphs 8, 9, 10 and 11 of the Complaint (Answer para. 6).
- Asserted promissory notes are payable in ten years; maturity not until September 30, 2009 (Answer para. 8), citing Article 1181 (conditional obligations) as support.
- Alledged substantial monthly payments had been made; requested accounting/reconciliation (Answer para. 9).
- Denied knowledge of any demand that would render them in default (Answer para. 10).
- Asserted pledges were at least equal to loan amounts at execution and that decline in market value is speculative and not permanent; argued renunciation of pledge agreements unfair (Answer paras. 11–13).
- Included special and affirmative defenses raising factual contests.
PBCom’s Motion for Summary Judgment (grounds and evidence)
- Verified motion filed September 28, 2001 based on:
- I. Material averments of the complaint admitted by defendants obviate necessity of trial.
- II. No real defenses and no genuine issues as to any material fact were tendered by defendants.
- III. PBCom’s causes of action are supported by voluntary admissions and authentic documents which may not be contradicted.
- PBCom argued that Spouses Go’s Answer admitted paragraphs 3, 4 and 7 (existence and terms of contracts and pledges), and that paragraph 5 denial was not a specific denial; relied on defendants’ alleged admissions and attached documents (including March 3 and April 7, 2000 letters) to prove default and prior demand and to trigger acceleration and loss of the creditor-granted period under Article 1198.
RTC Ruling on Motion for Summary Judgment
- January 25, 2002 Judgment: RTC granted PBCom’s motion for summary judgment and ordered Spouses Go to pay jointly and severally the total amount of P117,567,779.75, plus interests and penalties as stipulated in the promissory notes; awarded attorney’s fees (10% of amount) and costs of suit.
- March 20, 2002: RTC denied Spouses Go’s motion for reconsideration.
Court of Appeals Decision (July 28, 2006) — holdings and rationale
- CA reversed and set aside the RTC judgment and denied PBCom’s motion for summary judgment; remanded the records to the RTC for trial on the merits.
- CA found that the supposed admissions by Spouses Go (paras. 3, 4 and 7) were insufficient to justify summary judgment because other allegations and defenses in the Answer raised genuine issues as to material facts.
- Identified three material factual issues requiring trial:
- (