Interlining Corporation v. Philippine Trust Company
REITERATIONFacts
The Antecedents: Respondent Philippine Trust Company (Philtrust) granted a P0.5 million packing credit line and a P1.5 million domestic letter of credit and trust receipt to petitioner Interlining Corporation for the importation of raw materials. Individual petitioners executed an Undertaking of Suretyship, jointly and severally guaranteeing the obligations of Interlining Corporation. Interlining Corporation availed of the credit facilities, made partial payments, but failed to pay its outstanding obligation, which exceeded P2 million by June 1984, despite repeated demands. Procedural History: Respondent filed a complaint for collection of a sum of money against petitioner corporation and the individual petitioners. The Regional Trial Court (RTC) issued a Pre-Trial Conference Order on April 7, 1989, stating in paragraph 5 that the individual defendants were relieved from their obligations due to an arrangement between the plaintiff and the defendant corporation. Subsequently, on December 14, 1990, the parties' counsels submitted a Joint Stipulation of Facts and Motion for Summary Judgment, posing two issues: (a) whether the defendants could be made jointly or severally liable, and (b) whether novation released the individual defendants. On April 8, 1991, the RTC issued a 1st Supplemental Pre-Trial Order, reiterating these two issues for resolution. The RTC, in its Decision dated July 9, 1982, found for the respondent but ordered only petitioner corporation to pay its obligation, absolving the individual petitioners based on the alleged stipulation in the pre-trial order, despite no novation. Respondent moved for reconsideration, which was denied. The Court of Appeals (CA) reversed the RTC, holding that the Deed of Undertaking of Suretyship remained in full force and effect and that the individual petitioners were solidarily liable. The Petition: Petitioners seek to set aside the CA Decision and Resolution, arguing that the CA erred in disregarding the stipulations agreed upon in the Pre-Trial Conference Order of March 6, 1989, the affirmation of this order by respondent's counsel, and the failure of respondent's counsel to controvert the stipulation until the RTC decision.
Issue(s)
Whether the Court of Appeals erred in disregarding the stipulations agreed upon in the Pre-Trial Conference Order dated March 6, 1989 regarding the solidary obligation of the individual petitioners. Whether the Court of Appeals erred in disregarding the affirmation of the Pre-Trial Order dated March 6, 1989 made by respondent’s counsel, considering his subsequent actions and the inclusion of the solidary liability issue in later proceedings. Whether the Court of Appeals erred in disregarding the failure of respondent’s counsel to controvert the Pre-Trial Order dated March 6, 1989, given the subsequent inclusion of the solidary liability issue in the Joint Stipulation of Facts and supplemental pre-trial order up to the time that the case was finally decided by the Regional Trial Court of Manila.
Ruling
The petition is DISMISSED, and the assailed Decision of the Court of Appeals, dated May 12, 2000, is affirmed in toto. Costs against petitioners.
Ratio Decidendi
On the issue of disregarding stipulations in the Pre-Trial Conference Order: The Supreme Court held that while parties are generally bound by their stipulations during pre-trial, a careful review of the records revealed that the respondent's counsel did not actually agree to relieve the individual petitioners of their solidary obligation. The transcript of the March 6, 1989 pre-trial conference showed only proposed stipulations, not a finalized agreement. The Court emphasized that the subsequent 1st Supplemental Pre-Trial Order, dated April 8, 1991, explicitly included the solidary liability of the individual petitioners as an issue to be resolved, and this same issue was repeatedly raised by both parties in subsequent proceedings and pleadings. Therefore, the CA did not err in disregarding the alleged stipulation that purportedly released the individual petitioners. On the issue of affirmation by respondent's counsel: The Court found that the affirmation of the pre-trial order by respondent's counsel was not absolute. The records indicated that at a continuation of the pre-trial conference, the respondent's counsel declared that he would not agree to stipulate on the release of the individual petitioners from their solidary liability. This subsequent declaration, coupled with the inclusion of the issue in the supplemental pre-trial order and subsequent pleadings, demonstrated that the initial proposed stipulation was not definitively accepted or affirmed in a manner that would bind the respondent. On the issue of failure to controvert the Pre-Trial Order: The Supreme Court ruled that the respondent could not be faulted for failing to question paragraph 5 of the first pre-trial Order, dated March 6, 1989, because the subsequent proceedings and pleadings filed by both parties clearly included the issue of solidary liability for resolution by the trial court. The inclusion of this issue in the Joint Stipulation of Facts, signed by both counsels, and in the supplemental pre-trial order indicated that the matter was still open for determination. Thus, it was not erroneous for the respondent to expect the trial court to rule on the solidary liability, and the CA's decision to hold the individual petitioners liable was consistent with these subsequent actions.
Main Doctrine
A stipulation made during pre-trial, if not subsequently controverted or clarified, binds the parties. However, subsequent proceedings and pleadings that clearly include an issue for resolution by the court supersede any prior stipulation that might have seemingly excluded it.