Filipinas Textile Mills, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: State Investment House, Inc. (SIHI) filed a complaint against Filipinas Textile Mills, Inc. (Filtex) and Bernardino Villanueva for the collection of a debt amounting to P3,118,949.75, plus interest, penalties, damages, and attorney's fees. The debt arose from domestic letters of credit issued by SIHI to finance Filtex's purchase of raw materials from various suppliers. Filtex accepted sight drafts drawn by these suppliers, payable to SIHI, for the value of the merchandise. Villanueva executed a comprehensive surety agreement, guaranteeing Filtex's obligations to SIHI jointly and severally. Filtex also issued trust receipts to SIHI, holding the merchandise in trust for sale and applying the proceeds to its indebtedness, with stipulated interest and penalties. Procedural History: SIHI initiated the collection case on December 6, 1985, in the Regional Trial Court (RTC). Filtex and Villanueva raised defenses including the alleged lack of true intent in the agreements, full payment, and lack of cause of action, with Villanueva additionally claiming the surety agreement was void. The RTC ruled in favor of SIHI on July 23, 1990, finding Filtex and Villanueva jointly and severally liable. The petitioners appealed to the Court of Appeals (CA), arguing the underlying documents were inadmissible due to non-payment of documentary stamp taxes and asserting full payment. The CA affirmed the RTC's decision on June 16, 1994, ruling the documents were admissible due to the implied admission of their genuineness and due execution, and finding an unpaid balance. A subsequent resolution on April 19, 1995, corrected the unpaid balance to P7,868,881.11. The Petition: Filtex and Villanueva filed a Petition for Review on Certiorari with the Supreme Court, seeking to reverse the CA's decision. Their primary arguments were that the letters of credit, sight drafts, trust receipts, and surety agreement should have been excluded as evidence due to missing documentary stamps. They contended that an implied admission of genuineness and due execution, stemming from their failure to specifically deny the documents under oath, should not equate to an admission of the obligation itself. They reiterated their claim of full payment, even alleging overpayment. Villanueva also argued his surety agreement was void and materially altered. SIHI, in its comment, countered that the petitioners' arguments were inconsistent and that the admissibility and validity of the documents, as well as the issue of payment, had already been resolved by the lower courts.
Issue(s)
Whether the letters of credit, sight drafts, trust receipts, and comprehensive surety agreement are admissible in evidence despite the absence of documentary stamps. Whether petitioners have fully paid their obligation to SIHI. Whether the comprehensive surety agreement executed by Villanueva is null and void or if he is released from his obligation due to alleged material alterations.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, holding Filtex and Villanueva jointly and severally liable for the unpaid obligation.
Ratio Decidendi
On the admissibility of documents: The Court ruled in the affirmative. Petitioners failed to specifically deny under oath the genuineness and due execution of the actionable documents, leading to an implied admission under Section 8, Rule 8 of the Rules of Court. This implied admission means petitioners waived any formalities, including the requirement of revenue stamps. Furthermore, as parties who made, signed, issued, or accepted the documents, petitioners were among those liable for the documentary stamp taxes under Section 173 of the Internal Revenue Code. Therefore, they are estopped from claiming inadmissibility due to non-payment of these taxes. The Court also noted that this issue was raised belatedly at the appeal stage, which is generally not allowed. On the issue of payment: The Court held that the claim of full payment and overpayment is a purely factual issue. The Court reiterated its limited jurisdiction under Rule 45 to review errors of law, not to re-weigh evidence. Since the Court of Appeals affirmed the trial court's findings on the unpaid balance after exhaustively detailing payments and balances, and petitioners failed to satisfactorily refute these findings, the Court will not depart from these factual conclusions. The appellate court's finding of an unpaid balance of ₱7,868,881.11 as of January 31, 1989, was upheld. On the validity and enforceability of the surety agreement: The Court found Villanueva's contentions specious. The consent of Filtex to the surety was implied by Villanueva's actions as signatory for Filtex and Filtex's own admission of the agreement's execution in its answer, albeit with a qualification. SIHI's consent was evident from its demand for payment from both Filtex and Villanueva. Regarding the alleged material alteration due to an extension of payment time, the Court held that leniency or delay by the creditor in demanding payment does not release the surety unless it is pursuant to an enforceable agreement for a definite period made without the surety's consent, which would preclude the creditor from enforcing the contract. The Court found no such enforceable agreement here. Lastly, Villanueva's claim of lack of knowledge and consent regarding the 25% annual interest was deemed contrived, as the trust receipts bearing this stipulation were countersigned by him.
Main Doctrine
Failure to specifically deny under oath the genuineness and due execution of actionable documents results in an implied admission thereof, precluding the party from later questioning their admissibility due to lack of documentary stamps, especially when they are among the parties liable for the tax.