Source: http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/45088
Timestamp: 2019-04-19 17:08:19+00:00

Document:
SOLIDBANK CORPORATION, NOW KNOWN AS METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, VS. GATEWAY ELECTRONICS CORPORATION, JAIME M. HIDALGO AND ISRAEL MADUCDOC, RESPONDENTS.
Before the Court is a petition for review on certiorari assailing the Decision dated June 2, 2004 and the Resolution dated July 29, 2004 of the Court of Appeals in CA-G.R. SP No. 73684.
This Note or Loan shall be paid from the foreign exchange proceeds of Our/My Letter(s) of Credit, Purchase Order or Sales Contract described as follows: *** Back-end Services Agreement dated 06-25-96 by and between Gateway Electronics Corporation and Alliance Semiconductor Corporation.
We/I assign, transfer and convey to Solidbank all title and interest to the proceeds of the foregoing Letter(s) of Credit to the extent necessary to satisfy all amounts and obligations due or which may arise under this Note or Loan, and to any extension, renewal, or amendments of this Note or Loan. We/I agree that in case the proceeds of the foregoing Letter(s) of Credit prove insufficient to pay Our/My outstanding liabilities under this Note or Loan, We/I shall continue to be liable for the deficiency.
We/I irrevocably undertake to course the foreign exchange proceeds of the Letter(s) of Credit directly with Solidbank. Our/My failure to comply with the above would render Us or Me in default of the loan or credit facility without need of demand.
Gateway failed to comply with its loan obligations. By January 31, 2000, Gateway's outstanding debt amounted to US$1,975,835.58. Solidbank's numerous demands to pay were not heeded by Gateway. Thus, on February 21, 2000, Solidbank filed a Complaint for collection of sum of money against Gateway.
On June 16, 2002, Solidbank filed an Amended Complaint to implead the officers/stockholders of Gateway, namely, Nand K. Prasad, Andrew S. Delos Reyes, Israel F. Maducdoc, Jaime M. Hidalgo and Alejandro S. Calderon - who signed in their personal capacity a Continuing Guaranty to become sureties for any and all existing indebtedness of Gateway to Solidbank. On June 20, 2002, the trial court admitted the amended complaint and impleaded the additional defendants.
c) The originals, duplicate originals and copies of all documents from whatever source pertaining to the proceeds/payments received by GEC from Alliance Semiconductors.
d) Documents, as used in this section, means all writings of any kind, including the originals and all non-identical copies, whether different from the originals by reason of any notation made on such copies or otherwise, including without limitation, correspondence, memoranda, notes diaries, statistics, letters, telegrams, minutes, contracts, reports, studies, checks, statements, receipts, returns, summaries, pamphlets, books, inter-office and intra-office communications, notations of any sort of conversations, telephone calls, meetings or other communications, bulletins, printed matter, computer records, diskettes or print-outs, teletypes, telefax, e-mail, invoices, worksheets, all drafts, alterations, modifications, changes and amendments of any of the foregoing, graphic or oral records or representations of any kind (including, without limitation, photographs, charts, graphs, microfiche, microfilm, videotapes, recordings, motion pictures, CD-ROM's), and any electronic, mechanical or electric records or representations (including, without limitation, tapes, cassettes, discs, recordings and computer or computer-related memories).
The officer should identify the source within or outside GEC of each of the documents he produces.
WHEREFORE, the defendant GEC is hereby ordered to bring all the records and documents, not privileged, arising from, in connection with and/or involving the Back-end Services Agreement between defendant GEC and Alliance Semiconductor Corporation, particularly to those pertaining to all payments made by Alliance Semiconductor Corporation to GEC pursuant to said Agreement, incorporating the instructions enumerated in par. 9 of the instant motion, for inspection and copying by the plaintiff, the same to be made before the Officer-In-Charge, Office of the Branch Clerk of Court on February 27, 2001 at 9:00 a.m.
Gateway filed a motion to reset the production and inspection of documents to March 29, 2001 in order to give them enough time to gather and collate the documents in their possession. The trial court granted the motion.
On April 30, 2001, Solidbank filed a motion for issuance of a show cause order for Gateway's failure to comply with the January 30, 2001 Order of the trial court. In response, Gateway filed a manifestation that they appeared before the trial court on March 29, 2001 to present the documents in their possession, however, Solidbank's counsel failed to appear on the said date. In the manifestation, Gateway also expressed their willingness to make available for inspection at Gateway's offices any requested document.
On May 31, 2001, the trial court issued an Order setting the production and inspection of documents on June 7, 2001 in the premises of Gateway. It was subsequently moved to July 24, 2001. On the said date, Gateway presented the invoices representing the billings sent by Gateway to Alliance in relation to the Back-end Services Agreement.
Solidbank was not satisfied with the documents produced by Gateway. Thus, on December 13, 2001, Solidbank filed a motion to cite Gateway and its responsible officers in contempt for their refusal to produce the documents subject of the January 30, 2001 Order. In opposition thereto, Gateway claimed that they had complied with the January 30, 2001 Order and that the billings sent to Alliance are the only documents that they have pertaining to the Back-end Services Agreement.
Before this Court is a Motion to Cite Defendant GEC In Contempt For Refusing To Produce Documents Pursuant to the Order Dated 30 January 2001 filed by plaintiff dated December 12, 2001, together with defendant GEC's Opposition thereto dated January 14, 2002, as well as plaintiff's Reply dated February 6, 2002 and GEC's Rejoinder dated February 27, 2002.
As Courts are cautioned to utilize the power to punish for contempt on the preservative and not on the vindictive, contempt being drastic and extraordinary in nature (Wicker vs. Arcangel, 252 SCRA 444; Paredes-Garcia vs. CA, 261 SCRA 693), this Court is inclined to DENY the present motion.
However, as no diligent effort was shown to have been exerted by defendant GEC to produce the documents enumerated in the Order dated January 30, 2001, this Court hereby orders, in accordance with Sec. 3(a), Rule 29 of the Rules of Court, that the matters regarding the contents of the documents sought to be produced but which were not otherwise produced by GEC, shall be taken to be established in accordance with plaintiff's claim, but only for the purpose of this action.
Gateway filed a partial motion for reconsideration of the April 15, 2002 Order. However, the same was denied in an Order dated August 27, 2002.
On November 5, 2002, Gateway filed a petition for certiorari before the Court of Appeals (CA) seeking to nullify the Orders of the trial court dated April 15, 2002 and August 27, 2002.
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed portion of the Order dated April 15, 2002 and Order dated August 27, 2002, both issued by public respondent, are hereby NULLIFIED and SET ASIDE without prejudice to the filing by private respondent of a new Motion for Production and Inspection of Documents in accordance with the requirements of the Rules.
Solidbank filed a motion for reconsideration of the Decision of the CA. On July 29, 2004, the CA rendered a Resolution denying the same. Thus, this petition.
Whether the trial court committed grave abuse of discretion in holding that the matters subject of the documents sought to be produced but which were not produced by Gateway shall be deemed established in accordance with Solidbank's claim.
SECTION 1. Motion for production or inspection; order. - Upon motion of any party showing good cause therefor, the court in which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to any matter involved in the action and which are in his possession, custody or control; or (b) order any party or permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and conditions as are just.
The aforecited rule provides the mechanics for the production of documents and the inspection of things during the pendency of a case. It also deals with the inspection of sources of evidence other than documents, such as land or other property in the possession or control of the other party. This remedial measure is intended to assist in the administration of justice by facilitating and expediting the preparation of cases for trial and guarding against undesirable surprise and delay; and it is designed to simplify procedure and obtain admissions of facts and evidence, thereby shortening costly and time-consuming trials. It is based on ancient principles of equity. More specifically, the purpose of the statute is to enable a party-litigant to discover material information which, by reason of an opponent's control, would otherwise be unavailable for judicial scrutiny, and to provide a convenient and summary method of obtaining material and competent documentary evidence in the custody or under the control of an adversary. It is a further extension of the concept of pretrial.
(f) Such documents, etc., are in the possession, custody or control of the other party.
In the case at bench, Gateway assigned to Solidbank the proceeds of its Back-end Services Agreement with Alliance in PN Nos. 97-375 and 97-408. By virtue of the assignment, Gateway was obligated to remit to Solidbank all payments received from Alliance under the agreement. In this regard, Solidbank claims that they have received information from the Chief Financial Officer of Alliance that Gateway had already received payments under the agreement. In order to ascertain the veracity of the information, Solidbank availed of the discovery procedure under Rule 27. The purpose of Solidbank's motion is to compel Gateway to produce the documents evidencing payments received from Alliance in connection with the Back-end Services Agreement.
Solidbank was able to show good cause for the production of the documents. It had also shown that the said documents are material or contain evidence relevant to an issue involved in the action. However, Solidbank's motion was fatally defective and must be struck down because of its failure to specify with particularity the documents it required Gateway to produce. Solidbank's motion for production and inspection of documents called for a blanket inspection. Solidbank's request for inspection of "all documents pertaining to, arising from, in connection with or involving the Back-end Services Agreement" was simply too broad and too generalized in scope.
documents he is required to produce.
Furthermore, Solidbank, being the one who asserts that the proceeds of the Back-end Services Agreement were already received by Gateway, has the burden of proof in the instant case. Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense by the amount of evidence required by law. Throughout the trial, the burden of proof remains with the party upon whom it is imposed, until he shall have discharged the same.
The trial court held that as a consequence of Gateway's failure to exert diligent effort in producing the documents subject of the Order dated January 30, 2001, in accordance with Section 3(a), Rule 29 of the Rules of Court, the matters regarding the contents of the documents sought to be produced but which were not produced by Gateway, shall be considered as having been established in accordance with Solidbank's claim.
We hold that the trial court committed grave abuse of discretion in issuing the aforesaid Order. It is not fair to penalize Gateway for not complying with the request of Solidbank for the production and inspection of documents, considering that the documents sought were not particularly described. Gateway and its officers can only be held liable for unjust refusal to comply with the modes of discovery if it is shown that the documents sought to be produced were specifically described, material to the action and in the possession, custody or control of Gateway.
Neither can it be said that Gateway did not exert effort in complying with the order for production and inspection of documents since it presented the invoices representing the billings sent by Gateway to Alliance in relation to the Back-end Services Agreement. Good faith effort to produce the required documents must be accorded to Gateway, absent a finding that it acted willfully, in bad faith or was at fault in failing to produce the documents sought to be produced.
One final note. The CA decision nullifying the orders of the trial court was without prejudice to the filing by herein petitioner of a new motion for Production and Inspection of Documents in accordance with the Rules. It would have been in the best interest of the parties, and it would have saved valuable time and effort, if the petitioner simply heeded the advice of the CA.
WHEREFORE, in view of the foregoing, the instant petition is DENIED for lack of merit.
 RULES OF COURT, Rule 45.
 The Back-end Services Agreement is a business venture entered into by Gateway and Alliance wherein Gateway for consideration, agreed to perform services on integrated circuit devices owned by Alliance. It contains provisions on wafer sort, burn-in, test, engineering, marking, assembly, packaging and associated services on integrated circuit devices; rollo, pp. 212-227.
 Penned by Judge Renato G. Quilala of the Regional Trial Court of Makati City, Branch 57; rollo, p. 133.
 RULES OF COURT, Rule 65.
 Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Roberto A. Barrios and Magdangal M. De Leon concurring; rollo, pp. 6- 26.
 Regalado, Florenz D., Remedial Law Compendium, Vol. II, 8th ed., p. 650.
 27 C.J.S. Discovery § 71 (2008).
 Rosseau v. Langley, 7 F.R.D. 170 (1945).
 Security Bank Corporation v. Court of Appeals, G.R. No. 135874, January 25, 2000, 323 SCRA 330.
 In Archer v. Cornillaud [41 F.Supp. 435(1941)], an action was filed to recover wages allegedly due from employer under Fair Labor Standards Act of 1938, plaintiff's motion to require defendant to produce and to permit plaintiff to inspect, copy and photograph all records, papers, books, etc., pertaining to nature and extent of defendant's business and his wholesale and retail transactions and interstate and intrastate transactions, and names and addresses of those with whom the transactions were had was too broad. The plaintiff's motion does not ask for designated documents but demands "all records, papers, books," etc. The motion goes far beyond the scope and purpose of the rule on discovery. It is well settled by numerous decisions that the rule was never intended to permit a party to engage in a "fishing expedition" among the books and papers of the adverse party.
In Dickie v. Austin [4 N.Y.Civ.Proc.R. 123, 65 How. Pr. 420 (1883)], plaintiff claimed that he was to receive one-third of the gross profits on certain sales made by him for the defendants; that settlements were had from time to time on statements furnished by the defendants, and defendants unlawfully deducted from the plaintiff's share of the profits "certain sums," amounting in the aggregate to $2,000, for which action was brought; that plaintiff was "unable to name specifically all the books which would be necessary," and desired an inspection of any books which defendants might have relating to the transactions in which plaintiff was interested. Held that, the discovery sought being unusually broad and sweeping, and not such as courts are in the habit of granting in aid of common-law actions for the recovery of a specific sum of money, the application should be refused.
 Bautista v. Sarmiento, No. L-45137, September 23, 1985.
"We do not, however, completely rest our holding on this factor of `control.' We find instead that the primary dispositive issue is whether Stripling made a good faith effort to obtain the documents over which he may have indicated he had `control' in whatever sense, and whether after making such a good faith effort he was unable to obtain and thus produce them. ... There is no evidence Stripling acted willfully, in bad faith or was at fault in failing to produce the documents which he attempted and was unable to obtain. Since Stripling's noncompliance with the production order was due to his inability, after a good faith effort, to obtain these documents, the district court abused its discretion in dismissing his counterclaim." Federal Practice and Procedure, 8A FPF § 2210, citing Searock v. Stripling, C.A. 11th, 1984, 736 F.2d 650, 654.

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