R and B Surety & Insurance Co., Inc. v. Savellano
REITERATIONFacts
The Antecedents: Investors' Finance Corporation (FNCB) filed an action for a sum of money against Rassagi Transport Corporation (Rassagi) as principal debtor, and R and B Surety & Insurance Co., Inc. (R&B) and Towers Assurance Corporation (Towers) as sureties. FNCB alleged that Rassagi obtained credit facilities evidenced by promissory notes totaling P2,970,077.76, which were endorsed to FNCB. R&B and Towers issued surety bonds as security, which were also assigned to FNCB. Rassagi defaulted, owing P2,842,676.14 plus interest. Rassagi claimed it obtained a direct loan from FNCB for P1,960,000.00 for the purchase of 14 PUB bus trucks from Citiwide Motors, Inc. (Citiwide), and that Citiwide was paid directly by FNCB. Rassagi alleged it signed blank forms, made partial payments, and requested restructuring of its amortization, but FNCB attempted to collect the entire obligation. Rassagi also alleged usury. R&B and Towers adopted Rassagi's defenses, denying the genuineness of the promissory notes and alleging usurious interest charges. Procedural History: The trial court issued an order warning that it might issue a summary judgment due to a manifestation by Rassagi's counsel regarding settlement possibilities. FNCB filed a motion for summary judgment, which was opposed by the defendants. Subsequently, R&B and Towers filed a motion for leave to admit an amended answer, alleging they discovered that the 20 units of new buses, subject of the promissory notes and surety bonds, were never sold or delivered to Rassagi. The trial court denied this motion, stating the amended answer would alter the defense and delay proceedings. On May 24, 1976, the court rendered a partial summary judgment ordering defendants to pay FNCB specific amounts, deducting payments already made. A motion for reconsideration was denied, leading to the instant petition. The Petition: Petitioners R&B and Towers sought to set aside the partial summary judgment and compel the respondent court to allow their amended answer. They contended that the trial court erred in denying their motion to admit the amended answer and in rendering partial summary judgment, as their original answer and that of Rassagi raised genuine issues. They argued that due to the non-delivery of the trucks, the promissory notes lacked consideration and were null and void. They also claimed the amendment would not delay proceedings and was filed before the termination of pre-trial.
Issue(s)
Whether the trial court erred in denying the petitioners' motion to admit their amended answer. Whether the trial court erred in rendering a partial summary judgment despite the existence of genuine issues raised in the pleadings.
Ruling
The petition is GRANTED. The partial summary judgment and the order denying the motion for reconsideration are REVERSED and SET ASIDE. The Regional Trial Court of Manila is directed to admit the petitioners' Amended Answer with Affirmative and Special Defenses with Compulsory Counterclaim.
Ratio Decidendi
On the denial of the motion to admit amended answer: The Supreme Court found the contentions of the petitioners impressed with merit and granted the petition. While the amended answer sought to alter an admission in the original answer by alleging non-delivery of the trucks, the Court held that this did not fundamentally alter the theory of defense, which was non-liability. In their original answer, petitioners and Rassagi denied obtaining credit facilities from Citiwide and alleged a direct loan from FNCB. This already raised the defense of non-liability, not based on non-delivery but on the nature of the transaction. The amended answer, by stating non-delivery, still aimed to establish non-liability under the surety contract with Citiwide. The Court emphasized that an answer is a statement of fact expected to be proven, not conclusive evidence, and cited Gardner v. Court of Appeals to support the principle that allegations in a pleading are not absolute admissions. The Supreme Court cited Sedeco v. Court of Appeals and Paman v. Diaz, emphasizing the liberal policy in allowing amendments to pleadings to avoid multiplicity of suits and to ensure that the real controversies are presented and decided on the merits. The Court stated that anything precluding a party from fully presenting the facts of their case should be brushed aside if done without unfairness to the other party and within the Rules of Court. The Court found no substantial change in the gist of the petitioners' defense and concluded that admitting the amended answer would serve the ends of justice by allowing a full hearing on the merits. On the rendition of partial summary judgment: The Court reiterated that Rule 34 of the Rules of Court authorizes summary judgment only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Conversely, summary judgment is not justified when the defending party tenders vital issues requiring presentation of evidence, as held in Guevarra v. Court of Appeals. The Court found that the original answer filed by the petitioners already tendered a genuine issue, making the partial summary judgment improper. Even if the amendment altered the defense theory, the Court stressed that justice and equity dictate allowing such amendments, especially when they could negate liability. The right of petitioners to prove their non-liability was deemed more important than the potential for delay, particularly since the case was still in the pre-trial stage.
Main Doctrine
The trial court erred in rendering a partial summary judgment and denying the motion to admit an amended answer when the amended answer, though potentially altering the theory of defense, raised a genuine issue regarding the consideration for the promissory notes, which, if proven, would negate the petitioners' liability. The right to a full hearing on the merits outweighs the possibility of delay, especially at the pre-trial stage.