Kalilid Wood Industries Corporation v. Honorable Intermediate Appellate Court
REITERATIONFacts
The Antecedents: On November 17, 1976, Joaquin Miguel de Jesus and Alfredo T. Salonga, officers of P.B. De Jesus and Company, Inc., executed a P600,000.00 promissory note (PBC No. 1202-76) in favor of Philippine Banking Corporation (PBC), due December 29, 1976. On December 2, 1976, they executed a second promissory note (PBC No. 1255-76) for P300,000.00, due on or before January 3, 1977. Both notes were signed by de Jesus and Salonga for P.B. De Jesus & Co., Inc. and in their personal capacities. Subsequently, P.B. De Jesus and Company, Inc. changed its name to Kalilid Wood Industries Corporation (Kalilid). PBC sent demand letters to Kalilid for the unsettled obligations. Procedural History: On May 15, 1981, PBC filed a collection case against Kalilid and Messrs. de Jesus and Salonga with the Court of First Instance (CFI) of Rizal. PBC alleged Kalilid's solidary liability under the promissory notes, with the total indebtedness amounting to P1,780,253.08 as of April 30, 1981. The promissory notes and statements of account were attached as annexes to the complaint. Kalilid, in its unverified Answer, claimed lack of knowledge and asserted that de Jesus and Salonga lacked authority to borrow on its behalf, making them solely liable. The complaint was dismissed without prejudice as to de Jesus and Salonga. PBC filed a motion for summary judgment, to which Kalilid did not object. The CFI rendered a decision on October 12, 1983, finding Kalilid liable for the P1,780,253.08 plus interest, attorney's fees, and costs. The trial judge based this on Kalilid's failure to verify its answer, deemed an admission of the notes' genuineness and due execution, and the fact that the notes were signed for the corporation and personally. The Intermediate Appellate Court (IAC) affirmed the CFI decision in toto on November 8, 1985, holding that the statements of account explained the increase in the amount due and that the genuineness and due execution of the notes and statements were deemed admitted by failure to deny under oath. Kalilid's motion for reconsideration was denied. The Petition: Kalilid filed a Petition for Review, no longer denying its liability under the promissory notes but contesting the aggregate amount of indebtedness. Kalilid argued that its implied admission of the notes' genuineness and due execution did not extend to the statements of account, as it was not privy to their preparation. It also claimed that service charges, penalty charges, and interest on past due interest were included in the computations, which were not part of its undertakings.
Issue(s)
Whether petitioner Kalilid Wood Industries Corporation, by failing to verify its Answer, impliedly admitted the genuineness and due execution of the promissory notes and the statements of account annexed to the complaint, and whether such admission extends to the amounts claimed in the statements of account, including service charges, penalty charges, and interest on past due interest. Whether, given the implied admission of the promissory notes, a genuine issue of material fact remained regarding the computation of the total indebtedness, specifically concerning service charges, penalty charges, and interest on past due interest. Whether summary judgment was properly rendered, considering the implied admission of the promissory notes and the need for further determination of specific charges.
Ruling
The Supreme Court affirmed the decisions of the trial court and the appellate court regarding Kalilid's liability for the principal amounts and stipulated interest due under the promissory notes, as well as attorney's fees. However, the case was remanded to the trial court for the determination of whether service charges, penalty charges, and interest on past due interest were due and the amounts thereof.
Ratio Decidendi
On the implied admission of genuineness and due execution of the promissory notes and the statements of account: The Court affirmed that Kalilid, by failing to verify its Answer, is deemed to have admitted the authenticity and due execution of the promissory notes. However, the Court found it erroneous to extend this implied admission to the Statements of Account, as Kalilid was not a party to their preparation. Therefore, Kalilid is not conclusively bound by the charges or computations therein. The aggregate amount of Kalilid's monetary obligations should be determined from the promissory notes themselves, which stipulated payment of the principal, interest at fourteen percent (14%) per annum, compounded monthly if unpaid, and attorney's fees of ten percent (10%) of the total amount due. The promissory notes did not explicitly contain undertakings to pay service charges and penalty charges in case of late payment, nor interest on past due interest. Since such undertakings cannot be presumed, evidence must be adduced by both parties to prove or disprove the basis and propriety of including these additional charges in Kalilid's liabilities. On the computation of the total indebtedness and the existence of a genuine issue of material fact: The Court held that the aggregate amount of Kalilid's monetary obligations should be determined from the promissory notes themselves. These notes stipulated payment of the principal, interest at fourteen percent (14%) per annum, compounded monthly if unpaid, and attorney's fees of ten percent (10%) of the total amount due. The Court noted that the promissory notes did not explicitly contain undertakings to pay service charges and penalty charges in case of late payment, nor interest on past due interest. Since such undertakings cannot be presumed, evidence must be adduced by both parties to prove or disprove the basis and propriety of including these additional charges in Kalilid's liabilities. The case was remanded to the trial court for the specific purpose of determining whether service charges and penalty charges for late payment are due from Kalilid, and if so, the amounts thereof. Additionally, the trial court is tasked with determining the amount of interest on past due interest that is due and payable by Kalilid to PBC. On the propriety of summary judgment: Given that Kalilid did not raise a genuine issue regarding the existence and validity of its liabilities under the promissory notes, the Court initially concluded that summary judgment was properly and appropriately rendered by the trial court. However, because the determination of specific charges (service charges, penalty charges, and interest on past due interest) required further evidentiary presentation, the case was remanded to the trial court for this purpose. The failure to verify the answer effectively admitted the core obligation represented by the promissory notes, but the final amount due required further clarification.
Main Doctrine
A party's failure to specifically deny under oath the genuineness and due execution of a written instrument attached to a pleading constitutes an implied admission thereof, precluding defenses related to its authenticity and validity. However, this implied admission does not extend to documents prepared exclusively by the adverse party, such as statements of account, unless the adverse party was privy to their preparation.