INVESTMENT AND UNDERWRITING CORPORATION OF THE PHILIPPINES, PETITIONERS, VS. COMPTRONICS PHILIPPINES, INC. AND GENE V. TAMESIS, RESPONDENTS.

This case, filed with the Court of Appeals but certified to this
Court for disposition since it involves purely questions of law, is an appeal from the decision of the then Court of First Instance of Rizal,* Branch
XI, dated May 31, 1983, in Civil Case
No. 28210, dismissing the complaint of herein appellant.

The facts of the case are as follows:

Investment and Underwriting Corp.
(IUCP, for short) filed a complaint
against Comptronics Phils.
(Comptronics, for short) for collection of a sum of money allegedly incurred by the
latter under the following circumstances:

“4.    On November 4 and
5, 1976, defendant Corporation (Comptronics) obtained
a loan from the plaintiff (IUCP) and executed a promissory note No. MBV 1898A in favor of the plaintiff
obligating itself to pay the latter the sum of Two Million One Hundred Four
Thousand and Six Hundred and Fifty Pesos and Fifty-One Centavos
(P2,104,650.51).  A photocopy of the
promissory note is hereto attached as Annex ‘B’.

“5.     Under the Promissory
Note No. MBV 1898A (Annex ‘B’), defendant Corp. bound itself to pay
P2,104,650.51 on or before January 28, 1977 with interest at the rate of 14%
per annum to accrue immediately in case of default in payment of the note.

“6.     On October 29, 1976,
plaintiff and defendant’s Corp. entered into a ‘Guaranty Agreement’ which
states, among others, as follows:

“Upon application of Comptronics,
IUCP had arranged with financial institution(s) for the grant to Comptronics of credit line(s) in the amount of TWO MILLION
FIVE HUNDRED THOUSAND PESOS (P2,500,000) to finance the export requirements of Comptronics under the said line(s) were guaranteed and
shall continue to be guaranteed by IUCP.”

“A photocopy of the ‘Guaranty Agreement’ is hereto attached as
Annex ‘C’.

“7.     By virtue of the
abovementioned agreement, the Chartered Bank of Manila
advanced on September 16, 1977
the amount of P271,801.57 to the defendant Corporation under an availment secured and guaranteed by plaintiff herein.  The loan has already matured and is now past
due making the plaintiff liable therefor.

“8.     On November 8, 1977, plaintiff made
payment to the Chartered Bank of Manila
for P140,000.00 on another availment made by the
defendant herein, which is likewise guaranteed by the plaintiff.  Accordingly, the current account of plaintiff
with the said Bank was debited with the said amount.  A photocopy of the debit memo is hereto
attached as Annex ‘D’.

“9.     In consideration of
the loan obtained or to be obtained by defendant Comptronics
Philippines, Inc. from herein plaintiff, defendant Gene V. Tamesis
executed on October 22, 1976 a ‘Continuing Guaranty’ obligating himself, among
others, as follows:

“For and in consideration of the sum or sums obtained and/or
to be obtained by Comptronics Phil. Inc., hereinafter
referred to as the DEBTOR/S from you and/or your principal/s, as may be
evidenced by promissory note/s, checks, bills receivable/s and/or other
evidence/s of indebtedness (hereinafter referred to as the NOTE/S.  I/We hereby jointly and severally and
unconditionally guarantee unto you and/or your principal/s, successor/s and
assigns the prompt and punctual payment at maturity of the NOTE/s issued by the
debtor/s in your and/or your principal/s, successor/s and assigns favor to the
extent of the aggregate principal sum of Two Million Five Hundred Pesos
(P2,500,000.00) Philippine currency, and such interests, charges and penalties
as may hereinafter specified.

x x x       x x x     x x x

“This guaranty shall be binding upon Me/Us.  My/Our heirs, executors, administrators,
successors, and assigns and shall insure to the benefit of you and be
enforceable by you, your principal/s successor, transferees and assigns.  If this guaranty is executed by two or more
parties, they shall be jointly and severally liable hereunder x x x.

“In case of default as herein before specified, I/We agree to
pay all sums unpaid by the debtor/s (principal and accrued interest/charges)
plus interest thereon at the rate of Seventeen Percent (17%) p/a from the date
immediately following due date thereof and liquidated damages in an amount
equivalent to Seventeen Percent (17%) p/a based on the total obligation
unpaid.  If collection is effected by a
lawyer or if payment is collected by a suit or through other proceedings, I/We
furthermore agree to pay you and/or your principal/s attorney’s fees equivalent
to Twenty Percent (20%) of the unpaid obligation and costs of collection.  x x x.”

“A copy of the said ‘Continuing Guaranty’ is hereto attached
as Annex ‘E’ and made an integral part of the complaint.” (Rollo, pp. 76-A-80).

The aforesaid complaint prayed for the following:

“x x x that
after hearing, judgment be rendered in favor of plaintiff and against the
defendant ordering the latter to jointly and severally pay the plaintiff the
following:

“1.     P2,104,652.51 with
interest of 14% from and after January 28, 1977, until full satisfaction has
been made, with further interest at the rate of 6% on the accumulated interest
from the filing of the complaint.

“2.     The sum of P411,801.57
with interest at 14% from November 8, 1977,
until full satisfaction has been made, with further interest at the rate
of 6% on the accumulated interest from the date of the filing of the complaint.

“3.     The sum equivalent to
17% of the value of the promissory note as liquidated damages.

“4.     The sum equivalent to
20% per centum of the availments as liquidated
damages.

“5.     The sum equivalent to
20% of the amount due and unpaid as and for attorney’s fees.

“6.     The costs of the suit
(Ibid., p. 76).

On March 20, 1978,
Comptronics filed its answer denying the
material allegations in IUCP’s complaint concerning
the promissory note No. MBV 1898A for the reason that the party-signatory
thereto has been disauthorized to sign for and in
behalf of Comptronics; admitting the material
allegations on Comptronics’ account with the
Chartered Bank of Manila but that the remaining
balance is now purely nominal; denying the liability of Gene Tamesis for lack of consideration and due to the fact that
IUCP itself has been the controlling/comptroller of Comptronics
at the time; denying IUCP’s claim for stipulated
damages, attorney’s fees and costs of suit allegedly due; the allegations that Comptronics failed to pay the amount due on the aforesaid
promissory note, the alleged demand for payment thereof and the failure and
refusal to pay (Ibid., p. 44; Appellees’
Brief, pp. 5-6).

Thus, while Comptronics denied the
genuineness and due execution of the documents, such denials were not under
oath, hence under Section 8, Rule 8 of the Rules of Court, Comptronics
is deemed to impliedly admitted the same.

On April 20, 1978,
however, Comptronics received a request for admission
from IUCP of the genuineness and due execution of the document in which the
former objected to such request on April 22,
1987 (Appellees’ Brief, p. 7).

On February 8, 1980,
IUCP filed a motion praying that summary judgment be rendered (Rollo, p. 82).  On
February 28, 1980, the court a quo
denied said motion since ‘factual issues are involved considering
defendant’s (Comptronics) allegation in the answer
that there had been regular liquidation of their account and that the remaining
balance of their indebtedness x x x is now
purely nominal’ (Appellees‘ Brief, p. 9).

On October 30, 1980, IUCP manifested that it was resting its case
by reason of the failure of Comptronics to deny under
oath the genuineness and due execution of the actionable documents attached to
the complaint, the same are deemed admitted and a prima facie case is made in their
favor and entitles them to the
judgment prayed for, unless Comptronics, should prove payment
(Appellant’s Brief, p. 6).

On November 4, 1980,
Comptronics filed a demurrer to evidence, reiterating
their previous motion to dismiss which
the court a quo denied for lack of merit (Rollo, p. 83).

On July 16, 1981,
the date set for the reception of their evidence, Comptronics
failed to appear.  Hence, the court a quo considered
them to have waived their right to adduce evidence (Ibid.).

Upon motion for reconsideration filed by Comptronics,
the court a quo reconsidered its order on September 9, 1981 and set the case
anew for the reception of Comptronics’ evidence (Ibid.).

On July 6, 1982,
Comptronics rested its case without presenting any evidence (Ibid.).

On May 31, 1983,
the court a quo rendered judgment dismissing IUCP’s
complaint, the dispositive portion of which reads:

“WHEREFORE, the above entitled case is dismissed without
pronouncement as to costs.

SO ORDERED.” (Appellees’ Brief, p. 26).

From said decision, IUCP appealed the case to the Court of
Appeals, docketed therein as CA G.R. CV No. 01685.

After the parties had submitted their respective briefs, IUCP on
July 20, 1984 (Rollo, p. 15) and Comptronics
on June 1, 1985 (Ibid., p. 44), the case
was submitted for decision (Ibid., p. 45); and in a resolution the Court of Appeals** ordered
its Clerk of Court to forward to this Court the whole record of the case for
final determination (Ibid, p. 88).

The following issues of law were raised to this Court:

I

WHETHER OR NOT THE ACT OF REQUESTING FOR ADMISSION OF FACTS ALREADY
DEEMED ADMITTED BY FAILURE TO DENY THE SAME UNDER OATH CONSTITUTES A WAIVER OF
THAT IMPLIED ADMISSION;

II

WHETHER OR NOT IN AN ACTION
FOR A SUM OF MONEY BASED ON A PROMISSORY NOTE ATTACHED TO THE
COMPLAINT, IT IS STILL NECESSARY FOR PLAINTIFF?APPELLANT TO PROVE
NON-PAYMENT BY THE DEFENDANT-APPELLEES EVEN IF THE LATTER HAD FAILED TO DENY
UNDER OATH THE GENUINENESS AND DUE EXECUTION OF THE PROMISSORY NOTE.

As to the first issue, the answer is in the negative.

While the act of IUCP in requesting for admission the genuineness
and due execution of the documents
after having obtained from Comptronics an implied
admission thereof may at best be considered as improper (see Francisco, Civil Procedure,
Vol. II, p. 235, 1966 ed.), the same cannot be considered as having waived such
implied admission.

As this Court ruled in the case of Sardane
vs. Court of Appeals (167 SCRA
524, 533 [1988]), stating thus:

“Petitioners’ invocation of the doctrine in Yu Chuck, et al.
vs. Kong Li Po, which was reiterated in Central Surety and Insu.
Co. v. Hodges, et al. does not sustain his thesis that
the herein private respondents had ‘waived the mantle of protection given him
by Rule 8, Section 8.’ It is true that such implied admission maybe waived by a party but only if
he acts in a manner indicative of
either an express or tacit waiver thereof.  Petitioner, however, either overlooked
or ignored the fact that, as
held in Yu Chuck, and the same is true in other cases of identical factual
settings, such a finding of waiver is
proper where a case has been tried
in complete disregard of the rule and
the plaintiff having pleaded a document by copy, presents
oral evidence to prove the due execution
of the document and no objections are made to the
defendants’ evidence
in refutation.  This
situation does not obtain in the present case hence said doctrine is obviously
inapplicable.” (Underlining supplied).

In the case of Yu Chuck (supra), the plaintiff was considered
to have waived the implied admission when he presented, at the beginning of the
trial, a number of witnesses and made no objections to the defendant’s evidence
in refutation; and in the case of Central Surety (supra).  Hodges did not object to the evidence
introduced by petitioner in order to prove that one of its agent (petitioner)
had no authority to issue a surety bond, even after petitioner failed to deny
under oath the genuineness and due execution of the bond.  Hence, this Court considered the rule (Rule
8, Section 8, Rules of Court) in above cases, to have been waived.  In the instant case, IUCP did neither of these.  Hence, IUCP’s
request for admission cannot be taken as indicative of either an express or
tacit waiver thereof.  It can, at best,
be considered as a mere ‘superfluity’, to borrow the words of the lower court
viewed in another angle, but should not be considered as a waiver of the
implied admission.

II

Anent the second issue, IUCP asserts that Comptronics,
having admitted the genuineness and due execution of the documents, there was no need
for them to present evidence nor prove non-­payment by Comptronics
inasmuch as the facts alleged in the complaint constituted a prima facie
case in their favor and the burden is shifted to Comptronics
to prove payment (Appellant’s Brief, pp. 12-14).  Comptronics, on the
other hand, contends that the implied admission of the genuineness
and due execution of the documents does not necessarily mean that IUCP would be
automatically entitled to the money claimed without proof that said amounts are
due and unpaid by them (Appellees Brief, p. 14).

It is true that the failure of Comptronics
to deny, under oath, the genuineness and due execution of the documents does
not carry with it the admission
of payment as such is a defense of new matter that maybe alleged in a proper
plea to that effect (Hibberd v. Rohde and McMillian, 32 Phil. 476 [1915]).  They are not estopped
from controverting it by evidence of fraud, mistake,
compromise, payment, statute of limitations, estoppel
annd want of consideration (Bough and Bough v. Cantiveros, 40 Phil. 209 [1919]).  Considering that what is deemed admitted are
defenses relating only to the genuineness and due execution of the documents, Comptronics could neither put up the defense that the
documents were not signed knowingly and voluntarily nor that they are spurious
(Kalilid Wood Industries Corp. v. IAC, 155 SCRA 594
[1987]).  However, by reason of their
failure to deny the execution of the documents, under oath, a prima facie case is made out for IUCP without adducing any
proof whatever necessary on the part of
the latter to show that Comptronics owed the amount
claimed Chamber of Commerce v. Pua Te Ching, 14 Phil. 22 [1909], citing several cases).

Except for the self-serving allegations in the answer denying the
claims of IUCP, nowhere in the records show that Comptronics
proved payment thereof.  As a matter of fact, Comptronics
rested its case in the court a quo without adducing any evidence.  Hence, Comptronics
should be held liable to their obligation with IUCP.

As this Court held in the case of Philippine Commercial and
Industrial Bank v. ELRO Development Corp. (29 SCRA 38 [1969]) –

“The promissory note sued upon was
not denied by the defendant under oath but
there was a denial of the
outstanding balance alleged in the complaint. 
x x x.  If no partial payment had been made and no
amount was admitted as due the plaintiff, the thrust of the averments would
seem to be that there was no initial obligation incurred at all; and yet the
promissory note was not denied under oath x x x.  On the other
hand, if payments had been
made, either partial or total, they should have been alleged with
definiteness and evidence thereof duly presented.  Neither was done by the defendant, hence, the defendant was held
liable.” (Underscoring supplied)

PREMISES CONSIDERED, the judgment appealed from is
hereby REVERSED and a judgment is hereby RENDERED ordering Comptronics,
defendant-appellee herein, to PAY IUCP in accordance
with the prayer in the complaint.

SO ORDERED.

Melencio-Herrera, (Chairman),
Padilla, Sarmiento, and
Regalado, JJ., concur.

* Penned by Judge Ricardo L. Pronove

** Twelfth Division; penned by
Associate Justice Pedro A. Ramirez and concurred in by Associate Justices Luis Javellana and Minerva P.G. Reyes.