Manufacturer's Bank & Trust Co. v. Diversified Industries, Inc., and Alfonso Tan
REITERATIONFacts
The Antecedents: Petitioner Manufacturers Bank & Trust Co. (MBTC) filed a complaint against respondents Diversified Industries, Inc. and Alfonso Tan for the recovery of a sum of money. The complaint alleged that on December 17, 1963, respondents were granted a loan of P125,000.00 under an Agreement for Credit in Current Account with 10% annual interest. The loan was allegedly due and payable on February 26, 1965, but respondents failed to liquidate their obligation, leaving an outstanding balance of P100,119.21 as of June 25, 1965. MBTC also claimed attorney's fees equivalent to 10% of the total sum due, as agreed upon. Procedural History: Respondents, in their Answer, admitted the loan agreement but claimed "sufficient knowledge or information to form a belief" as to the allegations regarding the due date, outstanding balance, and attorney's fees, and therefore denied them. MBTC moved for judgment on the pleadings, arguing that the denial was insufficient and that respondents' letter requesting installment payments implicitly admitted the obligation. Respondents opposed the motion and filed a motion to amend their answer, asserting that Alfonso Tan was merely a guarantor, that the loan term was extended, that there was no demand for payment, and that the complaint failed to state a cause of action. The trial court denied the motion to amend and rendered judgment on the pleadings in favor of MBTC. Respondents appealed. The Petition: Both parties appealed the trial court's decision. MBTC faulted the court for not declaring the liability of respondents as joint and several and for awarding only the legal rate of interest instead of the stipulated rate. Respondents ascribed error to the court for refusing to admit their amended answer, not dismissing the complaint for failure to state a cause of action, and rendering judgment on the pleadings.
Issue(s)
Whether the trial court erred in denying the motion for leave to amend the answer. Whether the trial court erred in rendering judgment on the pleadings. Whether the respondents' answer failed to tender an issue or admitted the material allegations of the complaint. Whether the respondents' liability is joint and several. Whether the interest rate should be the stipulated rate or the legal rate.
Ruling
The Supreme Court affirmed the trial court's judgment with modification. The Court ruled that the trial court did not err in denying the motion to amend the answer and in rendering judgment on the pleadings. The Court modified the judgment to declare the liability of Diversified Industries, Inc. and Alfonso Tan as joint and several, and to fix the interest payable at the stipulated rate of 10% per annum.
Ratio Decidendi
On the denial of the motion to amend the answer: The Court held that the amendment of an answer in substantial aspects is a matter of discretion, not of right, especially when the motion is filed late and after a motion for judgment on the pleadings has been presented. The defendants failed to provide a reasonable ground for their delay in amending their answer, which had been filed two years prior. Their motion merely declared a failure to include certain allegations and defenses without explanation. Furthermore, their written request to pay the obligation by installments, as evidenced by Alfonso Tan's letter, constituted an implicit admission of liability, contradicting their claim of no knowledge. The Court found that the motion to amend was likely made with intent to delay the action, as it sought to relieve them from the effects of their judicial admissions without showing palpable mistake or other acceptable cause. On the propriety of judgment on the pleadings: The Court reiterated that judgment on the pleadings is proper under Rule 19, Section 1 of the Rules of Court, where an answer fails to tender an issue or admits the material allegations of the adverse party's pleading. The defendants' original answer, by professing "sufficient knowledge or information to form a belief" as to facts clearly within their knowledge (such as the loan's due date and outstanding balance), did not constitute a specific denial. Such a disclaimer is not a denial in contemplation of the rules and may be treated as an admission. The Court found that the defendants' denials were sham and that their original answer failed to tender any issue, thus justifying the judgment on the pleadings. On whether the respondents' answer failed to tender an issue or admitted the material allegations of the complaint: As explained in the ruling on the propriety of the judgment on the pleadings, the Court found that the defendants' denials were sham and that their original answer failed to tender any issue, thus justifying the judgment on the pleadings. On the respondents' liability and interest rate: The Court found that the Agreement for Credit in Current Account clearly and categorically expressed the solidary character of the obligations of Diversified Industries and Alfonso Tan, referring to them jointly as the "First Party" who "agree to be jointly and severally bound." On whether the interest rate should be the stipulated rate or the legal rate: The agreement also stipulated that the principal and interest shall be due and payable on demand, but in any case, automatically due and payable on February 26, 1965. The Court noted that the trial court erred in not holding them jointly and severally liable for both principal and interest and in setting the interest at the legal rate instead of the stipulated 10% per annum. The Court emphasized that the contract explicitly stated the solidary liability and the stipulated interest rate, which should be upheld.
Main Doctrine
A motion for judgment on the pleadings is proper when the answer fails to tender an issue or admits the material allegations of the adverse party's pleading. A claim of "sufficient knowledge or information to form a belief" regarding facts clearly within the defendant's knowledge is not a specific denial and may be considered an admission. Amendments to pleadings are generally discretionary, especially when filed late and after a motion for judgment on the pleadings has been made, and require a reasonable ground for the amendment.