MANUFACTURERS BANK AND TRUST CO., PLAINTIFF-APPELLEE, VS. WOODWORKS, INC., DEFENDANT-APPELLANT.

This appeal from the decision of the Court of First Instance of Manila
(Civil Case No. 52195) was endorsed to this Court by the Court of Appeals
(CA-G. R. No. 34989) on the ground that the question involved
is purely of law.

The only error assigned by defendant-appellant is whether the
deci­sion appealed from is illegal, immoral and was promulgated without due
process of law.

The appealed decision was rendered by the lower court when the parties failed
to submit a stipulation of facts after the trial of the case was postponed five
(5) times.  The said court found as well-taken
plaintiff’s Manifestation of 30 April
1964, invoking its Order of 7
February 1964
giving the parties thirty (30) days from said date within which to submit a stipulation of facts, otherwise
“the defendant shall be deemed to have confessed judgment”.  It is the lower court’s position that
defendant-appellant has no valid and, meritorious defense and that, not having
taken exception to the undertaking (to confess judgment) in the said Order of 7
February 1964, received by defendant itself, it can not now complain against
it.

It also considered the reception of plaintiff’s evidence
unnecessary.  Instead, it proceeded to
decide the case in favor of plaintiff on the basis of the pleadings submitted.

It appears in the complaint that plaintiff-appellee
issued for the accommodation of defendant-appellant four (4) letters of credit,
Nos. 59/2373, 60/048, 60/1401 and 59/2655^[1]
applied for in 1959 and 1960, for the purchase of certain equipment and
flour.  Covering sight drafts in dollars
were converted into pesos at the pre­vailing Central Bank rate totalling P66,682.43.  The above-mentioned goods were released to
defendant under corresponding trust receipts. 
Having defaulted in the payment of P72,894.33
as of 6 November 1962,
plaintiff sought to recover from defendant the said amount plus interest of 7% and attorney’s fees equivalent
to 10% of the amount due, and the cost of suit.

In its answer, defendant-appellant admits having applied for the
letters of credit, but denies responsibility for the goods allegedly released
to it under the said documents, related drafts and trust receipts because (a)
the signatures were not authorized so as to bind appellant; (b) copies of some
documents are not legible, thus, the terms and genuiness
or authority to sign can not be verified; (c) the goods still belong to or are
under the disposition of the appellee even if the
docu­ments are genuine; and (d) appellant has not been benefited by the
machineries either because they were lost on deposit by force majeure or that they have not been received.  Appellant prayed for the dis­missal of the
complaint.

The lower court approved 5 postponements in all, on the ground
that the possibility of an amicable settlement was being considered or that the
parties desired to submit a stipulation of facts.  The first and second postponements were at
the instance of the defendant.  The third
was with the concurrence of counsel for plaintiff, and the fourth was upon motion
of parties.  The last and fifth
postponement on 7 February 1964
was at the instance of defendant’s counsel, on the basis of which the court
gave the parties additional time within which to submit the stipulation
of facts, at the same time setting the case for a pre-trial conference on 27 April 1964.

Defendant-appellant later submitted to the court Annex
“A”, an undated and unsigned draft of the proposed Deed of Assignment
between defendant and Sta. Cecilia Sawmill, Inc., which was also for the
conformity of the plaintiff.  Sta. Cecilia
Sawmill, Inc., was to assume defendant’s obligation in favor of plaintiff for a
considera­tion of P120,000.  This contract was to be the basis of an
amicable settlement and stipulation of facts, but the same was never
finalized.  However, instead of resetting
the case for a pre-trial conference or trial on the merits, the court decided
the same based on the pleadings filed by the parties.  Hence, this appeal.

We agree with appellant that the decision of the court below can
not stand, and must be reversed.

The foundation upon which the trial
court based its action of ren­dering judgment against the herein defendant–appellant, without setting the case
for trial or receiving any evidence whatever, was the order of 7 February 1964.  Its dispositive
part is as follows (Record on Appeal, page 15) –

“WHEREFORE, it appearing that this has been postponed for the
5th time in this instance, on the same ground of formulating a stipulation of
facts, as prayed for, the parties are
granted 30 days from today within which to submit a stipulation of facts, but
upon failure to do so, the defendant shall be deemed to have confessed judgment
in this case.

“Let this case be set
for pretrial con­ference on April 27, 1964, at 8:30 am.”

The injustice and inequity of the sanction thus imposed upon the
failure to submit a stipulation of facts is readily apparent.  Under it, a judgment for the plaintiff was a
foregone conclusion:  all it had to do
was to refuse to agree to any stipulation. 
To place defendant under
such an alternative, to stipulate or lose the case, amounted to a refusal to
hear its side, and to deny it due process. 
The order was thus unwarranted and illegal, hence it was not binding;
and defendant-appellant’ s failure to except thereto
did not validate it.

Judgment upon confession is one which is rendered against a party
upon his petition or consent.  It usually
happens when the de­fendant appears in court and confesses the right of the
plaintiff to judgment or files a pleading expressly agreeing to the plaintiff’s
demand.^[2]
There is no showing on record of either. 
It has likewise been held by
this Court that a judgment upon
confession stands upon the same footing as a judgment upon agreements or
compromise.^[3] If a compromise may not be effected by counsel without special authority^[4], neither may a judgment upon con­fession be
entered against a client by mere agreement of counsel except with the knowledge
and at the instance of such client.^[5] No such authority for defendant’s counsel to
compromise the case was here proved or shown.

Neither can the questioned judgment be regarded to be valid as
-judgment on the pleadings.  It is
settled that judgment on the pleadings can only be rendered when the pleading
of the party against whom the motion is directed, be he the plaintiff or
defendant, does not render any issue, or admits all the material allegations of
the pleading of the movant.  Otherwise, judgment on the pleadings cannot
be rendered.^[6]
The complaint shows that plaintiff seeks to collect from defendant the sum of
P72,894.33 plus 7% interest and attorney’s fees.  An examina­tion of the answer readily
discloses that while defendant admits the application for the issuance of the
letters of credit, it denies responsi­bility for the goods claimed to have been
released to it for reasons already stated. 
Thus, far from admitting the material allegations in the said complaint,
the defendant alleged specific denials which raised certain is sues, some of
which are factual.  Upon these issues the
truth can be ascertained only upon adduction of proofs in a trial on the merits.  It is not shown that the necessary facts are
before the trial court to warrant a judgment. 
In fact, the pre-trial conference which was scheduled was never held.

WHEREFORE, the appealed judgment is set aside, and the
case is ordered remanded for trial and further proceedings.  No costs.

Concepcion, C.J., Dizon,
Castro, and Barredo,
JJ., no part.

Makalintal, Zaldivar,
Fernando, Teehankee, Villamor,
and Makasiar, JJ., concur.

^[1]
Exhibits “B”, “F”, “J”, and “N”.

^[2]
De Ocampo vs. Florenciano
(1960) 107 Phil. 37, Cited in 1 Moran’s Comments on the Rules of Court, page 640, 1963 Ed.; Acenas, et al. vs. Sison,
et al., G.R. No. L-17011, 30 August 1963.

^[3]
Natividad vs.
Natividad, 51 Phil. 613; Anduiza
vs. Quirona, G.R. No. L-5073, 20 May
1953.

^[4]
Monte de Piedad vs. Rodrigo, 56 Phil. 310.

^[5]
Natividad vs. Natividad
(1928), 51 Phil. 613, 619.

^[6]
Tan vs. Gua Tian Ho, G.R. No. L-18820, 29 December 1962, 6 SCRA 1031; Benavides vs. Alabastro,
G.R. No. L-19762, 23 December 1964, 12 SCRA 553; See also Section 1,
Rule 19, Revised Rules of Court.