Imperial Textile Mills, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent International Corporate Bank, Inc. (ICB) filed an action for collection of a sum of money against petitioner Imperial Textile Mills, Inc. (ITM). ICB alleged that ITM executed a Promissory Note No. TL-0532-80 on August 18, 1980, for valuable consideration, obligating ITM to pay ICB P12,000,000.00 on November 16, 1980, with 16% per annum interest. The note also stipulated liquidated damages of 3% per month and attorney's fees of 10% in case of non-payment. Procedural History: A copy of the promissory note was attached as Annex "A" to the complaint. ITM filed an Answer denying liability and alleging that one Julio Tan had no authority to negotiate and obtain the loan on its behalf. However, ITM's Answer was not verified. Consequently, the Regional Trial Court (RTC) rendered a decision in favor of ICB, ordering ITM to pay P40,486,229.16 with interest, P40,000.00 as attorney's fees, and P47,470.00 as costs. ITM appealed to the Court of Appeals (CA), which affirmed the RTC decision. A motion for reconsideration was denied by the CA. The Petition: ITM filed a petition for review with the Supreme Court.
Issue(s)
Whether the failure of the petitioner to specifically deny under oath the genuineness and due execution of the promissory note attached to the complaint constitutes an admission thereof, precluding defenses inconsistent with the instrument. Whether the petitioner can still raise the defense of lack of authority of Julio Tan to sign the promissory note despite not specifically denying its genuineness and due execution under oath, considering the implications of such failure.
Ruling
The petition is devoid of merit and is hereby dismissed.
Ratio Decidendi
On the issue of admission of the promissory note: The Court reiterated the settled rule that in an action based on a written instrument attached to the complaint, the genuineness and due execution of the instrument are deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts, pursuant to Sections 7 and 8 of Rule 8 of the Rules of Court. The complaint complied with Section 7 by alleging the substance of the promissory note and attaching a copy. The petitioner failed to specifically deny under oath the genuineness and due execution of the promissory note. By this omission, the petitioner clearly admitted the genuineness and due execution of the document, meaning that the party whose signature appears thereon had indeed signed it and had the authority to do so, and that the agreement is as stated in the document. Defenses inconsistent with the due execution and genuineness of the written instrument are cut off by such admission. On the issue of raising the defense of lack of authority: The Court held that the petitioner's claim that failure to specifically deny under oath does not prevent it from showing lack of authority of Julio Tan to sign the promissory note is untenable. Precisely because the petitioner is a party to the instrument, represented by Julio Tan, it cannot now deny the authority of Julio Tan to so represent it. The due execution and genuineness of the document having been conclusively established by the failure to deny under oath, the defense of lack of authority is deemed waived or barred. The judgment appealed from was supported by the evidence, and the petition was considered dilatory.
Main Doctrine
In an action based on a written instrument attached to the complaint, failure to specifically deny under oath the genuineness and due execution of the instrument results in its admission, precluding defenses inconsistent with its due execution and genuineness.