RULE 25
claim, which was ₱1,927,729.50 as of 30
RULE 26
G.R. No. 153034 September 20, 2005
DEVELOPMENT BANK OF THE
PHILIPPINES, Petitioners,
vs.
HONORABLE COURT OF APPEALS and
ROSALINDA CANADALLA-GO, represented
by her Attorney-in-fact BENITO A.
CANADALLA, Respondent.
DECISION
DAVIDE, JR., CJ.:
Once again, we are confronted with the issue of
whether matters requested to be admitted under
Rule 26 of the Rules of Court – which are mere
reiterations of the allegations in the complaint
and are specifically denied in the answer – may
be deemed impliedly admitted on the ground that
the response thereto is not under oath.
The controversy stemmed in January 1977 when
Irene Canadalla obtained a loan of ₱100,000
from petitioner Development Bank of the
Philippines (DBP) for purposes of financing her
piggery business. As security, Canadalla
executed on 19 January 1977 a Deed of Real
Estate Mortgage over two parcels of land
covered by TCT No. T-7609 and OCT No.
P-4226 of the Registry of Deeds of Infanta,
Quezon. On 10 August 1979, Canadalla
procured another loan in the amount of
₱150,000, which was secured by a mortgage
over the same two parcels of land and a third
parcel covered by OCT No. P-6679 of the
Registry of Deeds of the Province of Quezon.
Since the piggery business allegedly suffered
strong reverses, compounded by devastating
typhoons, the prevalence of diseases, and
destruction of her store by fire, Canadalla failed
to comply with her obligations to the DBP.
Subsequently, the DBP extrajudicially foreclosed
the mortgages. On 5 September 1989, the
mortgaged properties were sold at public auction
to the DBP, which emerged as the only bidder.
The sale was evidenced by a Certificate of Sale
and registered on 17 January 1990.
Canadalla was able to redeem the foreclosed
property covered by TCT No. T-7609 within the
redemption period of one year from 17 January
1990. As to the properties covered by OCT Nos.
P-4226 and P-6679, she had six years from 17
January 1990 to redeem the same, they being
free patent titles. On 5 October 1995, she
offered to redeem the properties for a
redemption price of ₱1.5 million. But the DBP
countered that the redemption price under its
1986 Revised Chapter must be based on its total
September 1995. Subsequently, she allegedly
assigned her right to redeem her properties to
her daughter, herein private respondent
Rosalinda A. Canadalla-Go.
In January 1996, Go offered to redeem the
properties for ₱526,882.40. In response, the
DBP advised Go that the acceptable redemption
price was ₱1,814,700.58 representing its total
claim as of 17 January 1996. When Go failed to
redeem the properties, the DBP consolidated its
titles over the subject properties and new
certificates of title were issued in its name.
On 8 July 1996, Go filed with the Regional Trial
Court (RTC) of Makati City a Supplemental
Complaint1 for the "Exercise of Right of
Redemption and Determination of Redemption
Price, Nullification of Consolidation, Annulment
of Titles, with Damages, Plus Injunction and
Temporary Restraining Order." The case was
docketed as Civil Case No. 96-483 in Branch
148 of said court. After the DBP filed its
Answer2 but before the parties could proceed to
trial, Go filed a Request for Admission by
Adverse Party.3 Thereafter, the DBP filed its
Comment.4
During the hearing on 20 May 1997, Go objected
to the Comment reasoning that it was not under
oath as required by Section 2, Rule 26 of the
Rules of Court, and that it failed to state the
reasons for the admission or denial of matters for
which an admission was requested. For its part,
the DBP manifested that, first, the statements,
allegations, and documents contained in the
Request for Admission are substantially the
same as those in the Supplemental Complaint;
second, they had already been either specifically
denied or admitted by the DBP in its Answer;
and third, the reasons for the denial or admission
had already been specifically stated therein.
On 22 May 1997, the DBP filed a
manifestation5 incorporating its response to Go’s
objections during the 20 May 1997 hearing,
attaching therewith an affidavit6 executed by its
officer and counsel Atty. Perla Melanie Caraan.
On 9 June 1997, the RTC issued an
Order7 granting the motion of Go to consider as
impliedly admitted the matters sought to be
admitted in the Request for Admission and all
those denied by the DBP in its Comment.
Its motion for reconsideration8 having been
denied,9 the DBP filed with the Court of Appeals
a petition for certiorari,10 docketed as CA-G.R.
SP No. 62142, attributing to the court a
quo grave abuse of discretion in granting the
Request for Admission despite the fact that (1)
some of the matters assigned in the Request for
Admission had already been specifically denied
in its Answer to the Supplemental Complaint; (2)
the sworn statement of Atty. Caraan had
sufficiently cured the alleged defect of the
Comment; and (3) some of the matters in the
Request for Admission involved questions of law,
conclusions of facts, and matters of opinion
which are improper subjects of such a request.
On 6 August 2001, the Court of Appeals
dismissed the petition for lack of merit.11 It held
that since DBP’s answer was not under oath, it
could not be considered as having substantially
complied with the requirements of Section 2 of
Rule 26 of the Rules of Court. The affidavit of
Atty. Caraan, one of the legal counsels of the
DBP, failed to cure the defect because it was
submitted after the motion for the declaration of
implied admission had been made and the
hearing of the same had been terminated.
Moreover, in the hearing of 20 May 1997, the
DBP only made a manifestation that the matters
sought for admission had already been covered
in the Answer without objecting to the propriety
of some of the matters sought to be admitted.
Thus, the DBP failed to timely raise its objections
on the ground of impropriety.
The DBP’s Motion for Reconsideration12 was
denied by the Court of Appeals in a
Resolution13 dated 16 April 2002. Hence, the
DBP is now before this Court by way of certiorari
under Rule 45 of the Rules of Court challenging
the Decision and Resolution of the Court of
Appeals.
We find for petitioner DBP.
Indeed, as pointed out by the DBP, the matters
stated in Go’s Request for Admission are the
same as those alleged in her Supplemental
Complaint. Besides, they had already been
either specifically denied or admitted in DBP’s
Answer to the Supplemental Complaint. To
require the DBP to admit these matters under
Rule 26 of the Rules of Court would be pointless
and superfluous. Sections 1 and 2 of Rule 26,
before their amendment took effect on 1 July
1997, read:
SECTION 1. Request for admission. — At any
time after issues have been joined, a party may
file and serve upon any other party a written
request for the admission by the latter of the
genuineness of any relevant documents
described in and exhibited with the request or of
the truth of any relevant matter of fact set forth in
the request. Copies of the documents shall be
delivered with the request unless copies have
already been furnished.
SEC. 2. Implied admission. – Each of the
matters of which an admission is requested shall
be deemed admitted unless, within a period
designated in the request, which shall not be
less than ten (10) days after service thereof, or
within such further time as the court may allow
on motion and notice, the party to whom the
request is directed serves upon the party
requesting the admission a sworn statement
either denying specifically the matters of which
an admission is requested or setting forth in
detail the reasons why he cannot truthfully either
admit or deny those matters.
Objections on the ground of irrelevancy or
impropriety of the matter requested shall be
promptly submitted to the court for resolution.
We have held in Po v. Court of Appeals14 that "[a]
party should not be compelled to admit matters
of fact already admitted by his pleading and … to
make a second denial of those already denied in
his answer to the complaint."
The Po doctrine was brought a step further
in Concrete Aggregates Co. v. Court of
Appeals,15 where we ruled that if the factual
allegations in the complaint are the very same
allegations set forth in the request for admission
and have already been specifically denied or
otherwise dealt with in the answer, a response to
the request is no longer required. It becomes,
therefore, unnecessary to dwell on the issue of
the propriety of an unsworn response to the
request for admission. The reason is obvious. A
request for admission that merely reiterates the
allegations in an earlier pleading is inappropriate
under Rule 26 of the Rules of Court, which, as a
mode of discovery, contemplates of
interrogatories that would clarify and tend to
shed light on the truth or falsity of the allegations
in the pleading. Rule 26 does not refer to a mere
reiteration of what has already been alleged in
the pleadings.16
Hence, the DBP did not even have to file its
Comment on Go’s Request for Admission, which
merely reproduced the allegations in her
complaint. DBP’s Answer itself controverts the
averments in the complaint and those recopied
in the request for admission.
Even assuming that a reply to the request is
needed, it is undisputed that the DBP filed its
Comment either admitting or specifically denying
again the matters sought to be admitted and
stating the reasons therefor. That the Comment
was not under oath is not a substantive, but
merely a formal, defect which can be excused in
the interest of justice conformably to the
well-entrenched doctrine that all pleadings
should be liberally construed as to do substantial
justice.17 The filing of such Comment
substantially complied with Rule 26.
Consequently, the DBP cannot be deemed to
have impliedly admitted the matters set forth in
the Request for Admission for the mere reason
that its Comment was not under oath.
At any rate, the petitioner submitted a
Manifestation, together with an affidavit
incorporating its specific denials of Go’s factual
allegations, immediately after it filed its
Comment on the Request for Admission and
before the RTC issued the questioned 9 June
1997 Order, with a view "to avoid any
technicalities" on the matter. The filing of the
affidavit amounted also to a substantial
compliance with the requirements of Rule 26 of
the Rules of Court.
Moreover, some of the matters sought to be
admitted in the Request for Admission were
matters of law or opinions, to wit:
20. Section 6 of Act No. 3135, as amended,
recognizes the right of redemption, just as it
provides the amount to be paid by a
redemptioner. On the other hand, Section 30,
Rule 39, Revised Rules of Court specifically
defines the amount which a redemptioner must
pay.
21. Accordingly, plaintiff’s offer to redeem two
subject properties[,] as earlier mentioned, were
in accord with the said provisions of Act No.
3135, as amended, and Rule 39 of the Revised
R[u]les of Court and such offer to redeem should
be well-placed in law and procedure.
22. Plaintiff exercised the right of redemption on
January 11, 1996, within the prescribed period of
six (6) years, two subject properties being
redeemed are covered by Free Patent titles. She
made a tender of the offer. A substantial
compliance with the requisites in law was met.
admitting or specifically denying them. Moreover,
during the 20 May 1997 hearing, the counsel for
DBP manifested the foregoing in open court. In
so doing, the DBP, in effect, argued that the
matters in question are redundant and, therefore,
improper subjects for admission.
It must be stressed that the rule on admission as
a mode of discovery is intended "to expedite trial
and to relieve parties of the costs of proving facts
which will not be disputed on trial and the truth of
which can be ascertained by reasonable
inquiry."22 Thus, if a request for admission would
only serve to delay the proceedings by abetting
redundancy in the pleadings, the intended
purpose for the rule would certainly be
defeated.23 After all, rules of procedures are
intended to promote, not to defeat, substantial
justice and should not therefore be applied in a
very rigid and technical sense.24
WHEREFORE, in view of all the foregoing, the
instant petition is GRANTED and the questioned
Decision of the Court of Appeals dated 6 August
2001 and its Resolution dated 16 April 2002 in
CA-G.R. SP No. 62142
are REVERSED and SET ASIDE. The Regional
Trial Court of Makati City, Branch 148, is
directed to proceed with reasonable dispatch
with the trial of Civil Case No. 96-483.

Under Section 1 of Rule 26 of the Rules of Court, Costs against the private respondent.
the scope of matters that a party may request
the adversary to admit are (1) the genuineness SO ORDERED.
of any material and relevant document described
in and exhibited with the request; and (2) the
truth of any material and relevant matter of fact
set forth in the request. The rule authorizing a
party to call on the other party to make an
admission implies the making of demands for
admission of relevant and material matters of
facts18 – and not for admission of matters of
law,19 conclusions,20 or opinions.21

Since the afore-quoted allegations are matters of

law or opinion, they are improper matters and
cannot therefore be deemed impliedly admitted
under Rule 26.

Finally, the Court of Appeals erred in ruling that

the DBP failed to timely raise its objections to the
impropriety of the matters requested for
admission.

At the time Go made use of discovery

proceedings under Rule 26, the governing rule
before its amendment took effect on 1 July 1997
read: "Objections on the ground of irrelevancy or
impropriety of the matter requested shall be
promptly submitted to the court for resolution."

Petitioner DBP’s objection to the impropriety of

some of the matters requested was promptly
made as early as the filing of its comment on the
request for admission. DBP’s comment
consistently averred that it had already dealt with
the matters in question in its answer, either
RULE 27
G.R. No. 164805 April 30, 2008
SOLIDBANK CORPORATION, NOW KNOWN
AS METROPOLITAN BANK AND TRUST
COMPANY, petitioner,
vs.
GATEWAY ELECTRONICS CORPORATION,
JAIME M. HIDALGO AND ISRAEL
MADUCDOC, respondents.
DECISION
NACHURA, J.:
Before the Court is a petition for review on
certiorari1 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.
The Facts
In May and June 1997, Gateway Electronics
Corporation (Gateway) obtained from Solidbank
Corporation (Solidbank) four (4) foreign currency
denominated loans to be used as working capital
for its manufacturing operations.2 The loans
were covered by promissory notes3 (PNs) which
provided an interest of eight and 75/100 percent
(8.75%), but was allegedly increased to ten
percent (10%) per annum, and a penalty of two
percent (2%) per month based on the total
amount due computed from the date of default
until full payment of the total amount due.4 The
particulars of the loans are:
Promissory Date of Loan Amount of LoanreceivedDate
Note No.
a) PN 97-375 20 May 1997 US$ 190,000.00
b) PN 97-408 29 May 1997
US$ 570,000.00
c) PN 97-435 09 June 1997 US$1,150,000.00
d) PN 97-458 15 June 1997 US$ 130,000.00 15 June 1998
To secure the loans covered by PN 97-3755 and
PN 97-408,6 Gateway assigned to Solidbank the
proceeds of its Back-end Services
Agreement7 dated June 25, 2000 with Alliance
Semiconductor Corporation (Alliance). The
following stipulations are common in both PNs:
3. 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.
4. 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.
5. 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.8
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 Complaint9 for collection
of sum of money against Gateway.
On June 16, 2002, Solidbank filed an Amended
Complaint10 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
Guaranty11 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.
Earlier, on October 11, 2000, Solidbank filed a
Motion for Production and Inspection of
Documents12 on the basis of an information
fromDue
Mr. David Eichler, Chief Financial
Officer of Alliance, that Gateway has already
received from Alliance the proceeds/payment of
11 Nov. 1998
the Back-end Services Agreement. The pertinent
portions
of the
11 Nov. motion read:
1998
8. 04 June 1998plaintiffs request that this
Therefore,
Honorable Court issue an Order requiring
defendant GEC, through its Treasurer/Chief
Financial Officer, Chief Accountant, Comptroller
or any such officer, to bring before this
Honorable Court for inspection and copying the
following documents:
a) The originals, duplicate originals and copies
of all documents pertaining to, arising from, in
connection with or involving the Back-end
Services Agreement of defendant GEC and
Alliance Semiconductors;
b) The originals, duplicate
originals and copies of all books of account,
financial statements, receipts, checks,
vouchers, invoices, ledgers and other
financial/accounting records and
documents pertaining to or evidencing financial
and money transactions arising from, in
connection with or involving the Back-end
Services Agreement of defendant GEC and
Alliance Semiconductors; and
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).
9. Furthermore, plaintiffs request that
said Order to the Treasurer/Chief Financial
Officer, Chief Accountant, Comptroller of
defendant GEC include the following
instructions:
a. If the response is that the documents are not
in defendant GEC’s or the officers’ possession or
custody, said officer should describe in detail the
efforts made to locate said records or
documents;
b. If the documents are not in defendant GEC’s
or the officer’s possession and control, said
officer should identify who has control and the
location of said documents or records;
c. If the request for production seeks a specific
document or itemized category that is not in
defendant GEC’s or the officer’s possession,
control or custody, the officer should provide any
documents he has that contain all or part of the
information contained in the requested
document or category;
d. If the officer cannot furnish the originals of the
documents requested, he should explain in
detail the reasons therefore; and
e. The officer should identify the source within or
outside GEC of each of the documents he
produces.13
On January 30, 2001, the trial court issued an
Order14 granting the motion for production and
inspection of documents, viz.:
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.
SO ORDERED.15
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.16
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.17 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.18 In the manifestation, Gateway also
expressed their willingness to make available for
inspection at Gateway’s offices any requested
document.19
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.20 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.21
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.22
On April 15, 2002, the trial court issued an
Order23 denying the motion to cite Gateway for
contempt. However, the trial court chastised
Gateway for exerting no diligent efforts to
produce the documents evidencing the
payments received by Gateway from Alliance in
relation to the Back-end Services Agreement,
viz.:
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.
SO ORDERED.24
Gateway filed a partial motion for
reconsideration of the April 15, 2002 Order.
However, the same was denied in an
Order25 dated August 27, 2002.
On November 5, 2002, Gateway filed a petition
for certiorari26 before the Court of Appeals (CA)
seeking to nullify the Orders of the trial court
dated April 15, 2002 and August 27, 2002.
On June 2, 2004, the CA rendered a
Decision27 nullifying the Orders of the trial court
dated April 15, 2002 and August 27, 2002. The
CA ruled that both the Motion for Production of
Documents and the January 30, 2001 Order of
the trial court failed to comply with the provisions
of Section 1, Rule 27 of the Rules of Court. It
further held that the trial court committed grave
abuse of discretion in ruling that the matters
regarding the contents of the documents sought
to be produced but which were not produced by
Gateway shall be deemed established in
accordance with Solidbank’s claim. The fallo of
the Decision reads:
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.
SO ORDERED.28
Solidbank filed a motion for reconsideration of
the Decision of the CA. On July 29, 2004, the CA
rendered a Resolution29 denying the same. Thus,
this petition.
The Issues
I. Whether Solidbank’s motion for production and
inspection of documents and the Order of the
trial court dated January 30, 2001 failed to
comply with Section 1, Rule 27 of the Rules of
Court; and
II. 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.
The Ruling of the Court
We resolve to deny the petition.
I
Section 1, Rule 27 of the Rules of Court
provides:
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.30 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.31
The modes of discovery are accorded a broad
and liberal treatment.32 Rule 27 of the Revised
Rules of Court permits "fishing" for evidence, the
only limitation being that the documents, papers,
etc., sought to be produced are not privileged,
that they are in the possession of the party
ordered to produce them and that they are
material to any matter involved in the
action.33 The lament against a fishing expedition
no longer precludes a party from prying into the
facts underlying his opponent’s case. Mutual
knowledge of all relevant facts gathered by both
parties is essential to proper litigation. To that
end, either party may compel the other to
disgorge whatever facts he has in his
possession.34 However, fishing for evidence that
is allowed under the rules is not without
limitations. In Security Bank Corporation v. Court
of Appeals, the Court enumerated the requisites
in order that a party may compel the other party
to produce or allow the inspection of documents
or things, viz.:
(a) The party must file a motion for the
production or inspection of documents or things,
showing good cause therefor;
(b) Notice of the motion must be served to all
other parties of the case;
(c) The motion must designate the documents,
papers, books, accounts, letters, photographs,
objects or tangible things which the party wishes
to be produced and inspected;
(d) Such documents, etc., are not privileged;
(e) Such documents, etc., constitute or contain
evidence material to any matter involved in the
action, and
(f) Such documents, etc., are in the possession,
custody or control of the other party.35
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"36 was simply too broad
and too generalized in scope.
A motion for production and inspection of
documents should not demand a roving
inspection of a promiscuous mass of documents.
The inspection should be limited to those
documents designated with sufficient
particularity in the motion, such that the adverse
party can easily identify the documents he is
required to produce.37
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.38 Throughout the
trial, the burden of proof remains with the party
upon whom it is imposed,39 until he shall have
discharged the same.
II
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 2940 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.41
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.
SO ORDERED.
G.R. No. 204700 November 24,
2014
EAGLERIDGE DEVELOPMENT
CORPORATION, MARCELO N. NAVAL and
CRISPIN I. OBEN, Petitioners,
vs.
CAMERON GRANVILLE 3 ASSET
MANAGEMENT, INC., Respondent.
RESOLUTION
LEONEN, J.:
For resolution is respondent Cameron Granville
3 Asset Management, Inc. 's motion for
reconsideration1 of our April 10, 2013
decision,2 which reversed and set aside the
Court of Appeals' resolutions3 and ordered
respondent to produce the Loan Sale and
Purchase Agreement (LSPA) dated April 7, 2006,
including its annexes and/or attachments, if any,
in order that petitioners may inspect or
photocopy the same.
Petitioners Eagleridge Development Corporation,
Marcelo N. Naval, and Crispin I. Oben filed on
June 7, 2013 their motion to ad.mit attached
opposition.4 Subsequently, respondent filed its
reply5 and petitioners their motion to admit
attached rejoinder.6
The motion for reconsideration raises the
following points:
(1) The motion for production was filed out of
time;7
(2) The production of the LSPA would violate the
parol evidence rule; and8
(3) The LSPA is a privileged and confidential
document.9
Respondent asserts that there was no "insistent
refusal" on its part to present the LSPA, but that
petitioners filed their motion for production way
out of time, even beyond the protracted pre-trial
period from September 2005 to 2011.10 Hence,
petitioners had no oneto blame but themselves
when the trial court denied their motion as it was
filed only during the trial proper.11
Respondent further submits that "Article 1634 [of
the] Civil Code had been inappropriately cited by
[p]etitioners"12inasmuch as it is Republic Act No.
9182 (Special Purpose Vehicle Act) that is
applicable.13 Nonetheless, even assuming that
Article 1634 is applicable, respondent argued
that petitioners are: 1) still liable to pay the whole
of petitioner Eagleridge Development
Corporation’s (EDC) loanobligation, i.e.,
₱10,232,998.00 exclusive of interests and/or
damages;14 and 2) seven (7) years late in
extinguishing petitioner EDC’s loan obligation
because pursuant to Article 1634, they should
have exercised their right of extinguishment
within 30 days from the substitution of Export
and Industry Bank or EIB (the original creditor)
by respondent in December 2006.15 According to
respondent, the trial court order "granting the
substitution constituted sufficient judicial demand
as contemplated under Article 1634."16 Also,
maintaining that the LSPA is immaterial or
irrelevant to the case, respondent contends that
the "[o]rder of substitution settled the issue of
[respondent’s] standing before the [c]ourt and its
right to fill in the shoes of [EIB]."17 It argues that
the production of the LSPA will neither prevent
respondent from pursuing its claim of
10,232,998.00, exclusive of interests and
penalties, from petitioner EDC, nor write off
petitioner EDC’s liability to respondent.18 The
primordial issue of whether petitioners owe
respondent a sum of money via the deed of
assignment can allegedly "be readily resolved by
application of Civil Code provisions and/or
applicable jurisprudence and not by the
production/inspection of the
LSPA[.]"19 Respondent also argues that "a
consideration is not always a requisite [in
assignment of credits, and] an assignee may
maintain an action based on his title and it is
immaterial whether ornot he paid any
consideration [therefor][.]"20
Respondent also contends that: (1) the
production of the LSPA will violate the parol
evidence rule21 under Rule 130, Section 9 of the
Rules of Court; (2) the LSPA is a
privileged/confidential bank document;22 and (3)
under the Special Purpose Vehicle Act, "the only
obligation of both the assignor (bank) and the
assignee (the SPV; respondent Cameron) is to
give notice to the debtor (Eagleridge, Naval,and
Oben) that its account has been
assigned/transferred to a special purpose
vehicle (Sec. 12, R.A. 9182) [and] [i]t does not
require of the special purpose vehicle or the
bank to disclose all financial documents included
in the assignment/sale/transfer[.]"23
Finally, respondent points out that the deed of
assignment is a contested document. "Fair play
would be violated if the LSPA is produced
without [p]etitioners acknowledging that
respondent Cameron Granville 3 Asset
Management, Inc. is the real party-in-interest
because petitioners . . . would [thereafter] use . . .
the contents of a document (LSPA) to its benefit
while at the same time"24 refuting the integrity of
the deed and the legal personality of respondent
to sue petitioners.25
For their part, petitioners counter that their
motion for production was not filed out of time,
and "[t]here is no proscription, under Rule 27 or
any provision of the Rules of Court, from filing
motions for production, beyond the pre-trial."26
Further, assuming that there was a valid transfer
of the loan obligation of petitioner EDC, Article
1634 is applicable and, therefore, petitioners
must be informed of the actual transfer price,
which information may only be supplied by the
LSPA.27 Petitioners argue that the substitution of
respondent in the case a quowas "not sufficient
‘demand’as contemplated under Article 1634 of
the Civil Code inasmuch asrespondent Cameron
failed . . . to inform petitioner EDC of the price it
paid for the [transfer of the] loan
28
obligation," which made it "impossible for
petitioners to reimburse what was paid for the
acquisition of the . . . loan obligation [of
EDC]."29 Additionally, petitioners contend that
respondent was not a party to the deed of
assignment, but Cameron Granville Asset
Management (SPV-AMC), Inc., hence, "as [to]
the actual parties to the Deed of Assignment are
concerned, no such demand has yet been
made."30
Petitioners add that the amount of their liability to
respondent is one of the factual issues to be
resolved as stated in the November 21, 2011
pretrial order of the Regional Trial Court, which
makes the LSPA clearly relevant and material to
the disposition of the case.31
Petitioners next argue that the parol evidence
rule is not applicable to them because they were
not parties tothe deed of assignment, and "they
cannot be prevented from seeking evidence to
determine the complete terms of the Deed of
Assignment."32 Besides, the deedof assignment
made express reference to the LSPA, hence,the
latter cannot be considered as extrinsic to it.33
As to respondent’s invocation that the LSPA is
privileged/confidential, petitioners counter that "it
has not been shown that the parties fall under . . .
or, at the very least . . . analogous to [any of the
relationships enumerated in Rule 130, Section
124] that would exempt [respondent] from
disclosing information as to their transaction."34
In reply, respondent argues that "[petitioners]
cannot accept and reject the same instrument at
the same time."35According to respondent, by
allegedly "uphold[ing] the truth of the contents as
well as the validity of [the] Deed of Assignment
[in] seeking the production of the
36
[LSPA]," petitioners could no longer be allowed
to impugn the validity of the same deed.37
In their rejoinder, petitioners clarified that their
consistent position was always to assail the
validity of the deed of assignment; that
alternatively, they invoked the application of
Article 1634 should the court uphold the validity
of the transfer of their alleged loan obligation;
and that Rule 8, Section 2 of the Rules of Court
"permits parties to set forth alternative causes of
action or defenses."38
We deny the motion for reconsideration.
Discovery mode of
production/inspection of
document may be availed of
even beyond pre-trial upon a
showing of good cause
The availment of a motion for production, as one
of the modes of discovery, is not limited to the
pre-trial stage. Rule 27 does not provide for any
time frame within which the discovery mode of
production or inspection of documents can be
utilized. The rule only requires leave of court
"upon due application and a showing of due
cause."39 Rule 27, Section 1 of the 1997 Rules of
Court, states:
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[.] (Emphasis
supplied)
In Producers Bank of the Philippines v. Court of
Appeals,40 this court held that since the rules are
silent asto the period within which modes of
discovery (in that case, written interrogatories)
may still be requested, it is necessary to
determine: (1) the purposeof discovery; (2)
whether, based on the stage of the proceedings
and evidence presented thus far, allowing it is
proper and would facilitate the disposition of the
case; and (3) whether substantial rights of
parties would be unduly prejudiced.41 This court
further held that "[t]he use of discovery is
encouraged, for it operates with desirable
flexibility under the discretionary control of the
trial court."42
In Dasmariñas Garments, Inc. v. Reyes,43
this
court declared that depositions, as a mode
ofdiscovery, "may be taken at any time after the
institution of any action [as there is] no
prohibition against the taking of depositions after
pre-trial."44 Thus:
Dasmariñas also contends that the "taking of
deposition is a mode of pretrial discovery to be
availed of before the action comes to trial." Not
so. Depositions may be taken at any time after
the institution of any action, whenever necessary
or convenient. There is no rule that limits
deposition-taking only to the period of pre-trial or
before it; no prohibition against the taking of
depositions after pre-trial. Indeed, the law
authorizes the taking of depositions of witnesses
before or after an appeal is taken from the
judgment of a Regional Trial Court "to
perpetuate their testimony for use in the event of
further proceedings in the said court" (Rule 134,
Rules of Court), and even during the process of
execution of a final and executory judgment
(East Asiatic Co. v. C.I.R., 40 SCRA 521, 544).45
"The modes of discovery are accorded a broad
and liberal treatment."46 The evident purpose of
discovery procedures is "to enable the parties,
consistent with recognized privileges, to obtain
the fullest possible knowledge of the issues and
facts before civil trials"47 and, thus, facilitating an
amicable settlement or expediting the trial of the
case.48
Technicalities in pleading should be avoided in
order to obtain substantial justice. In Mutuc v.
Judge Agloro,49 this court directed the bank to
give Mutuc a complete statement asto how his
debt was computed, and should he be
dissatisfied with that statement, pursuant to Rule
27 of the Rules of Court, to allow him to inspect
and copy bank records supporting the items in
that statement.50 This was held to be "in
consonance with the rules on discovery and the
avowed policy of the Rules of Court . . . to
require the parties to lay their cards on the table
to facilitate a settlement of the case before the
trial."51
We have determined that the LSPA isrelevant
and material to the issue on the validity of the
deed of assignment raised by petitioners in the
court a quo, and allowing its production and
inspection by petitioners would be more in
keeping with the objectives of the discovery rules.
We find no great practical difficulty, and
respondent continuously fails to allege any, in
presenting the document for inspection and
copying of petitioners. On the other hand, to
deny petitioners the opportunity to inquire into
the LSPA would bar their access to relevant
evidence and impair their fundamental right to
due process.52
Article 1634 of the New Civil Code is applicable
Contrary to respondent’s stance, Article 1634 of
the Civil Code on assignment of credit in
litigation is applicable.
Section 13 of the Special Purpose Vehicle Act
clearly provides that in the transfer of the
non-performing loans to a special purpose
vehicle, "the provisions on subrogation and
assignment of credits under the New Civil Code
shall apply." Thus:
Sec. 13. Nature of Transfer. – All sales or
transfers of NPAs to an SPV shall be in the
nature of a true sale after proper notice in
accordance with the procedures asprovided for
in Section 12: Provided, That GFIs and GOCCs
shall be subject to existing law on the disposition
of assets: Provided, further, That in the transfer
of the NPLs, the provisions on subrogation and
assignment of credits under the New Civil Code
shall apply.
Furthermore, Section 19 of the Special Purpose
Vehicle Act expressly states that redemption
periods allowed to borrowers under the banking
law, the Rules of Court, and/or other laws are
applicable. Hence, the right of redemption
allowed to a debtor under Article 1634 of the
Civil Code is applicable to the case a quo.
Accordingly, petitioners may extinguish their
debt by paying the assignee-special purpose
vehicle the transfer price plus the cost of money
up to the time of redemption and the judicial
costs.
Petitioners’ right to
extinguish their debt has not
yet lapsed
Petitioners’ right to extinguish their debt under
Article 1634 on assignment of credits has not yet
lapsed. The pertinent provision is reproduced
here:
Art. 1634. When a credit or other incorporeal
right in litigation is sold, the debtor shall have a
right to extinguish it by reimbursing the assignee
for the price the latter paid therefor, the judicial
costs incurred by him, and the interest on the
price from the day on which the same was paid.
A credit or other incorporeal right shall be
considered in litigation from the time the
complaint concerning the same is answered.
The debtor may exercise his right within thirty
days from the date the assignee demands
payment from him. (Emphasis supplied)
Under the last paragraph of Article 1634, the
debtor may extinguish his or her debt within 30
days from the date the assignee demands
payment. In this case, insofar as the actual
parties to the deed of assignment are concerned,
no demand has yet been made, and the 30-day
period did not begin to run. Indeed, petitioners
assailed before the trial court the validity of the
deed of assignment on the groundsthat it did not
comply with the mandatory requirements of the
Special Purpose Vehicle Act,53 and it referred to
Cameron Granville Asset Management
(SPV-AMC), Inc., as the assignee, and not
respondent Cameron Granville 3 Asset
Management, Inc.54 The law requires that
payment should be made only "to the person in
whose favor the obligation has been constituted,
or his [or her] successor in interest, or any
person authorized to receive it."55 It was held
that payment made to a person who is not the
creditor, his or her successor-in-interest, or a
person who is authorized to receive payment,
even through error or good faith, is not effective
payment which will bind the creditor or release
the debtor from the obligation to pay.56 Therefore,
it was important for petitioners to determine for
sure the proper assignee of the EIB credit or who
to pay, in order to effectively extinguish their
debt.
Moreover, even assuming that respondent is the
proper assignee of the EIB credit, petitioners
could not exercise their right of extinguishment
because they were not informed of the
consideration paid for the assignment.57
Respondent must, pursuant to Article 1634 of
the Civil Code, disclose how much it paid to
acquire the EIB credit, so that petitioners could
make the corresponding offer to pay, by way of
redemption, the same amount in final settlement
of their obligation.
Respondent insists that the transfer price of the
EIB credit is ₱10,232,998.00 (the actual amount
and value of the credit), and that petitioners
should have paid the said amount within 30 days
from the December 8, 2006 order of the
Regional Trial Court approving its substitution of
EIB.58 Petitioners believe otherwise, and as the
deed of assignment was silent on the matter, it
becomes necessary to verify the amount of the
consideration from the LSPA.
Assuming indeed that respondent acquired the
EIB credit for a lesser consideration, it cannot
compel petitioners to pay or answer for the entire
original EIB credit, or more thanwhat it paid for
the assignment.
Under the circumstances of this case, the 30-day
period under Article 1634 within which
petitioners could exercise their right to extinguish
their debt should begin to run only from the time
they were informed of the actual price paid by
the assignee for the transfer of their debt. Parol
evidence rule is not applicable
Claiming further the impropriety of allowing the
production of the LSPA, respondent contends
that the presentation of the document and its
annexes would violate the parol evidence rule in
Rule 130, Section 9:
SEC. 9. Evidence of written agreements.—When
the terms of an agreement have been reduced to
writing, it is considered as containing all the
terms agreed upon and there can be, between
the parties and their successors in interest, no
evidence of such terms other than the contents
of the written agreement.
However, a party may present evidence to
modify, explain or add to the terms of the written
agreement ifhe puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or
imperfection in the written agreement;
(b) The failure of the written agreement to
express the true intent and agreement of the
parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the
parties or their successors in interest after the
execution of the written agreement.
The term "agreement" includes wills.
We disagree.
The parol evidence rule does notapply to
petitioners who are not parties to the deed of
assignment and do not base a claim on
it.59 Hence, they cannot be prevented from
seeking evidence to determine the complete
terms of the deed of assignment.
Even assuming that Rule 130, Section 9 is
applicable, an exception to the rule under the
second paragraph iswhen the party puts in issue
the validity of the written agreement, as in the
case a quo.
Besides, what is forbidden under the parol
evidence rule is the presentation of oral or
extrinsic evidence, not those expressly referred
to in the written agreement. "[D]ocuments canbe
read together when one refers to the other."60 By
the express terms of the deed of assignment, it
is clear that the deed of assignment was meant
to be read in conjunction with the LSPA.
As we have stated in our decision, Rule 132,
Section 1761 of the Rules of Court allows a party
to inquire into the whole of the writing or record
when a part of it is given in evidence by the other
party. Since the deed of assignment was
produced in court by respondent and marked as
one of its documentary exhibits, the LSPA which
was made a part thereof by explicit reference
and which is necessary for its understanding
may also be inquired into by petitioners.
The LSPA is not privileged
and confidential in nature
Respondent’s contention that the LSPAis
privileged and confidential is likewise untenable.
Indeed, Rule 27 contains the proviso that the
documents sought to be produced and inspected
must not be privileged against disclosure. Rule
130, Section 24 describes the types of privileged
communication. These are communication
between or involving the following: (a) between
husband and wife; (b) between attorney and
client; (c) between physician and patient; (d)
between priest and penitent; and (e) public
officers and public interest.
Privileged communications under the rules of
evidence is premised on an accepted need to
protect a trust relationship. It has not been
shown that the parties to the deed of assignment
fall under any of the foregoing categories.
This court has previously cited other privileged
matters such as the following: "(a) editors may
not be compelled to disclose the source of
published news; (b) voters may not be
compelled to disclose for whom they voted; (c)
trade secrets; (d) information contained in tax
census returns; . . . (d) bank
deposits"62 (pursuant to the Secrecy of Bank
Deposits Act); (e) national security matters and
intelligence information;63 and (f) criminal
matters.64 Nonetheless, the LSPA does not fall
within any of these classes of information.
Moreover, the privilegeis not absolute, and the
court may compel disclosure where it is
indispensable for doing justice.
At any rate, respondent failed to discharge the
burden of showing that the LSPA is a privileged
document.1âwphi1Respondent did not present
any law or regulation that considers bank
documents such as the LSPA as classified
information. Its contention that the Special
Purpose Vehicle Act65 only requires the
creditor-bank to give notice to the debtor of the
transfer of his or her account to a special
purpose vehicle, and that the assignee-special
purpose vehicle has no obligation to disclose
other financial documents related to the sale, is
untenable. The Special Purpose Vehicle Act
does not explicitly declare these financial
documents as privileged matters. Further, as
discussed, petitioners are not precluded from
inquiring as to the true consideration of the
assignment, precisely because the same law in
relation to Article 1634 allows the debtor to
extinguish its debt by reimbursing the
assignee-special purpose vehicle of the actual
price the latter paid for the assignment.
An assignment of a credit "produce[s] no effect
as against third persons, unless it appears ina
public instrument[.]"66It strains reason why the
LSPA, which by law must be a publicinstrument
to be binding against third persons such as
petitioners-debtors, is privileged and
confidential.
Alternative defenses are
allowed under the Rules
Finally, respondent’s contention that petitioners
cannot claim the validity and invalidity of the
deed ofassignment at the same time is
untenable.
The invocation by petitioners of Article 1634,
which presupposes the validity of the deed of
assignment orthe transfer of the EIB credit to
respondent, even if it would run counter to their
defense on the invalidity of the deed of
assignment, is proper and sanctioned by Rule 8,
Section 2 of the Rules of Court, which reads:
SEC. 2. Alternative causes of action or defenses.
— A party may set forth two or more statements
of a claim or defense alternatively or
hypothetically, either in one causeof action or
defense or in separate causes of action or
defenses. When two or more statements are
made in the alternative and one of them if made
independently would be sufficient, the pleading
is not made insufficient by the insufficiency of
one or more of the alternative statements.
(Emphasis supplied)
All told, respondent failed to allege sufficient
reasons for us to reconsider our decision. Verily,
the production and inspection of the LSPA and
its annexes fulfill the discovery-procedures
objective of making the trial "less a game of blind
man’s buff and morea fair contest with the basic
issues and facts disclosed to the fullest
practicable extent."67
WHEREFORE, the motion for reconsideration is
DENIED WITH FINALITY.
SO ORDERED.
G.R. No. 172835 December 13,
2007
AIR PHILIPPINES CORPORATION, Petitioner,
vs.
PENNSWELL, INC. Respondent.
DECISION
CHICO-NAZARIO, J.:
Petitioner Air Philippines Corporation seeks, via
the instant Petition for Review under Rule 45 of
the Rules of Court, the nullification of the 16
February 2006 Decision1 and the 25 May 2006
Resolution2 of the Court of Appeals in CA-G.R.
SP No. 86329, which affirmed the Order3 dated
30 June 2004 of the Regional Trial Court (RTC),
Makati City, Branch 64, in Civil Case No. 00-561.
Petitioner Air Philippines Corporation is a
domestic corporation engaged in the business of
air transportation services. On the other hand,
respondent Pennswell, Inc. was organized to
engage in the business of manufacturing and
selling industrial chemicals, solvents, and
special lubricants.
On various dates, respondent delivered and sold (fake)
to petitioner sundry goods in trade, covered by
Sales Invoices No. 8846,4 9105,5 8962,6 and
8963,7 which correspond to Purchase Orders No. 1. a. Dry
6433, 6684, 6634 and 6633, respectively. Under Lubrica
the contracts, petitioner’s total outstanding nt 571 05/20/
obligation amounted to ₱449,864.98 with b. ASC-E 87,346.5 2 99
interest at 14% per annum until the amount Anti-Sei P 2 476 02/16/
would be fully paid. For failure of the petitioner to ze ASC-E 124,108. 3 & 99 &
comply with its obligation under said contracts, Compo P 2000 10 589 06/24/
respondent filed a Complaint8 for a Sum of und 0 99
Money on 28 April 2000 with the RTC. (fake)

In its Answer,9 petitioner contended that its

refusal to pay was not without valid and
According to petitioner, respondent’s products,
justifiable reasons. In particular, petitioner namely Excellent Rust Corrosion, Connector
alleged that it was defrauded in the amount of Grease, Electric Strength Protective Coating,
₱592,000.00 by respondent for its previous sale and Anti-Seize Compound, are identical with its
of four items, covered by Purchase Order No. Anti-Friction Fluid, Contact Grease, Thixohtropic
6626. Said items were misrepresented by
Grease, and Dry Lubricant, respectively.
respondent as belonging to a new line, but were
Petitioner asseverated that had respondent been
in truth and in fact, identical with products
forthright about the identical character of the
petitioner had previously purchased from
products, it would not have purchased the items
respondent. Petitioner asserted that it was
complained of. Moreover, petitioner alleged that
deceived by respondent which merely altered
when the purported fraud was discovered, a
the names and labels of such goods. Petitioner
conference was held between petitioner and
specifically identified the items in question, as
respondent on 13 January 2000, whereby the
follows:
parties agreed that respondent would return to
petitioner the amount it previously paid. However,
Label/Descript Item P.O petitioner was surprised when it received a letter
Amount Date
ion No. . from the respondent, demanding payment of the
amount of ₱449,864.94, which later became the
1. a. subject of respondent’s Complaint for Collection
Anti-Fri of a Sum of Money against petitioner.
ction
Fluid MPL-8 153,941. 571 05/20/ During the pendency of the trial, petitioner filed a
b. 00 40 4 99 Motion to Compel10 respondent to give a
Excelle MPL-0 155,496. 588 06/20/ detailed list of the ingredients and chemical
nt Rust 08 00 8 99 components of the following products, to wit: (a)
Corrosi Contact Grease and Connector Grease; (b)
on Thixohtropic Grease and Di-Electric Strength
(fake) Protective Coating; and (c) Dry Lubricant and
Anti-Seize Compound.11 It appears that
petitioner had earlier requested the Philippine
1. a. Institute of Pure and Applied Chemistry (PIPAC)
Contact for the latter to conduct a comparison of
Grease 115,236. 554 04/26/ respondent’s goods.
b. COG
00 0 99
Connec #2
230,519. 632 08/05/ On 15 March 2004, the RTC rendered an Order
tor CG
52 7 99 granting the petitioner’s motion. It disposed,
Grease thus:
(fake)
The Court directs [herein respondent] Pennswell,
Inc. to give [herein petitioner] Air Philippines
1. a.
Corporation[,] a detailed list of the ingredients or
Trixohtr
chemical components of the following chemical
opic
products:
Grease
b. 81,876.9 458 01/29/
a. Contact Grease to be compared with
Di-Elect EPC 6 2 99
EPC#2 81,876.9 544 04/21/ Connector Grease;
ric
Strengt 6 6 99
b. Thixohtropic Grease to be compared with
h
Di-Electric Strength Protective Coating; and
Protecti
ve
c. Dry Lubricant to be compared with Anti-Seize
Coating
Compound[.]
[Respondent] Pennswell, Inc. is given fifteen (15)
days from receipt of this Order to submit to
[petitioner] Air Philippines Corporation the
chemical components of all the
above-mentioned products for chemical
comparison/analysis.12
Respondent sought reconsideration of the
foregoing Order, contending that it cannot be
compelled to disclose the chemical components
sought because the matter is confidential. It
argued that what petitioner endeavored to
inquire upon constituted a trade secret which
respondent cannot be forced to divulge.
Respondent maintained that its products are
specialized lubricants, and if their components
were revealed, its business competitors may
easily imitate and market the same types of
products, in violation of its proprietary rights and
to its serious damage and prejudice.
The RTC gave credence to respondent’s
reasoning, and reversed itself. It issued an Order
dated 30 June 2004, finding that the chemical
components are respondent’s trade secrets and
are privileged in character. A priori, it
rationalized:
The Supreme Court held in the case of Chavez
vs. Presidential Commission on Good
Government, 299 SCRA 744, p. 764, that "the
drafters of the Constitution also unequivocally
affirmed that aside from national security matters
and intelligence information, trade or industrial
secrets (pursuant to the Intellectual Property
Code and other related laws) as well as banking
transactions (pursuant to the Secrecy of Bank
Deposit Act) are also exempted from compulsory
disclosure."
Trade secrets may not be the subject of
compulsory disclosure. By reason of [their]
confidential and privileged character, ingredients
or chemical components of the products ordered
by this Court to be disclosed constitute trade
secrets lest [herein respondent] would eventually
be exposed to unwarranted business
competition with others who may imitate and
market the same kinds of products in violation of
[respondent’s] proprietary rights. Being
privileged, the detailed list of ingredients or
chemical components may not be the subject of
mode of discovery under Rule 27, Section 1 of
the Rules of Court, which expressly makes
privileged information an exception from its
coverage.13
Alleging grave abuse of discretion on the part of
the RTC, petitioner filed a Petition for Certiorari
under Rule 65 of the Rules of Court with the
Court of Appeals, which denied the Petition and
affirmed the Order dated 30 June 2004 of the
RTC.
The Court of Appeals ruled that to compel
respondent to reveal in detail the list of
ingredients of its lubricants is to disregard
respondent’s rights over its trade secrets. It was
categorical in declaring that the chemical
formulation of respondent’s products and their
ingredients are embraced within the meaning of
"trade secrets." In disallowing the disclosure, the
Court of Appeals expounded, thus:
The Supreme Court in Garcia v. Board of
Investments (177 SCRA 374 [1989]) held that
trade secrets and confidential, commercial and
financial information are exempt from public
scrutiny. This is reiterated in Chavez v.
Presidential Commission on Good Government
(299 SCRA 744 [1998]) where the Supreme
Court enumerated the kinds of information and
transactions that are recognized as restrictions
on or privileges against compulsory disclosure.
There, the Supreme Court explicitly stated that:
"The drafters of the Constitution also
unequivocally affirmed that, aside from national
security matters and intelligence
information, trade or industrial secrets (pursuant
to the Intellectual Property Code and other
related laws) as well as banking transactions
(pursuant to the Secrecy of Bank Deposits Act)
re also exempt from compulsory disclosure."
It is thus clear from the foregoing that a party
cannot be compelled to produce, release or
disclose documents, papers, or any object which
are considered trade secrets.
In the instant case, petitioner [Air Philippines
Corporation] would have [respondent] Pennswell
produce a detailed list of ingredients or
composition of the latter’s lubricant products so
that a chemical comparison and analysis thereof
can be obtained. On this note, We believe and
so hold that the ingredients or composition of
[respondent] Pennswell’s lubricants are trade
secrets which it cannot be compelled to disclose.
[Respondent] Pennswell has a proprietary or
economic right over the ingredients or
components of its lubricant products. The
formulation thereof is not known to the general
public and is peculiar only to [respondent]
Pennswell. The legitimate and economic
interests of business enterprises in protecting
their manufacturing and business secrets are
well-recognized in our system.
[Respondent] Pennswell has a right to guard its
trade secrets, manufacturing formulas,
marketing strategies and other confidential
programs and information against the public.
Otherwise, such information can be illegally and
unfairly utilized by business competitors who,
through their access to [respondent] Pennswell’s
business secrets, may use the same for their
own private gain and to the irreparable prejudice
of the latter.
xxxx
In the case before Us, the alleged trade secrets
have a factual basis, i.e., it comprises of the
ingredients and formulation of [respondent]
Pennswell’s lubricant products which are
unknown to the public and peculiar only to
Pennswell.
All told, We find no grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of public respondent Judge in finding that
the detailed list of ingredients or composition of
the subject lubricant products which petitioner
[Air Philippines Corporation] seeks to be
disclosed are trade secrets of [respondent]
Pennswell; hence, privileged against compulsory
disclosure.14
Petitioner’s Motion for Reconsideration was
denied.
Unyielding, petitioner brought the instant Petition
before us, on the sole issue of:
WHETHER THE COURT OF
APPEALS RULED IN
ACCORDANCE WITH
PREVAILING LAWS AND
JURISPRUDENCE WHEN IT
UPHELD THE RULING OF THE
TRIAL COURT THAT THE
CHEMICAL COMPONENTS OR
INGREDIENTS OF
RESPONDENT’S PRODUCTS
ARE TRADE SECRETS OR
INDUSTRIAL SECRETS THAT
ARE NOT SUBJECT TO
COMPULSORY DISCLOSURE.15
Petitioner seeks to convince this Court that it has
a right to obtain the chemical composition and
ingredients of respondent’s products to conduct
a comparative analysis of its products. Petitioner
assails the conclusion reached by the Court of
Appeals that the matters are trade secrets which
are protected by law and beyond public scrutiny.
Relying on Section 1, Rule 27 of the Rules of
Court, petitioner argues that the use of modes of
discovery operates with desirable flexibility
under the discretionary control of the trial court.
Furthermore, petitioner posits that its request is
not done in bad faith or in any manner as to
annoy, embarrass, or oppress respondent.
A trade secret is defined as a plan or process,
tool, mechanism or compound known only to its
owner and those of his employees to whom it is
necessary to confide it.16 The definition also
extends to a secret formula or process not
patented, but known only to certain individuals
using it in compounding some article of trade
having a commercial value.17 A trade secret may
consist of any formula, pattern, device, or
compilation of information that: (1) is used in
one's business; and (2) gives the employer an
opportunity to obtain an advantage over
competitors who do not possess the
information.18 Generally, a trade secret is a
process or device intended for continuous use in
the operation of the business, for example, a
machine or formula, but can be a price list or
catalogue or specialized customer list.19 It is
indubitable that trade secrets constitute
proprietary rights. The inventor, discoverer, or
possessor of a trade secret or similar innovation
has rights therein which may be treated as
property, and ordinarily an injunction will be
granted to prevent the disclosure of the trade
secret by one who obtained the information "in
confidence" or through a "confidential
20
relationship." American jurisprudence has
utilized the following factors21 to determine if an
information is a trade secret, to wit:
(1) the extent to which the information is known
outside of the employer's business;
(2) the extent to which the information is known
by employees and others involved in the
business;
(3) the extent of measures taken by the
employer to guard the secrecy of the
information;
(4) the value of the information to the employer
and to competitors;
(5) the amount of effort or money expended by
the company in developing the information; and
(6) the extent to which the information could be
easily or readily obtained through an
independent source.22
In Cocoland Development Corporation v.
National Labor Relations Commission,23 the
issue was the legality of an employee’s
termination on the ground of unauthorized
disclosure of trade secrets. The Court laid down
the rule that any determination by management
as to the confidential nature of technologies,
processes, formulae or other so-called trade
secrets must have a substantial factual basis
which can pass judicial scrutiny. The Court
rejected the employer’s naked contention that its
own determination as to what constitutes a trade
secret should be binding and conclusive upon
the NLRC. As a caveat, the Court said that to
rule otherwise would be to permit an employer to
label almost anything a trade secret, and thereby
create a weapon with which he/it may arbitrarily
dismiss an employee on the pretext that the
latter somehow disclosed a trade secret, even if
in fact there be none at all to speak of.24 Hence,
in Cocoland, the parameters in the determination
of trade secrets were set to be such substantial
factual basis that can withstand judicial scrutiny.
The chemical composition, formulation, and
ingredients of respondent’s special lubricants
are trade secrets within the contemplation of the
law. Respondent was established to engage in
the business of general manufacturing and
selling of, and to deal in, distribute, sell or
otherwise dispose of goods, wares, merchandise,
products, including but not limited to industrial
chemicals, solvents, lubricants, acids, alkalies,
salts, paints, oils, varnishes, colors, pigments
and similar preparations, among others. It is
unmistakable to our minds that the manufacture
and production of respondent’s products
proceed from a formulation of a secret list of
ingredients. In the creation of its lubricants,
respondent expended efforts, skills, research,
and resources. What it had achieved by virtue of
its investments may not be wrested from
respondent on the mere pretext that it is
necessary for petitioner’s defense against a
collection for a sum of money. By and large, the
value of the information to respondent is crystal
clear. The ingredients constitute the very fabric
of respondent’s production and business. No
doubt, the information is also valuable to
respondent’s competitors. To compel its
disclosure is to cripple respondent’s business,
and to place it at an undue disadvantage. If the
chemical composition of respondent’s lubricants
are opened to public scrutiny, it will stand to lose
the backbone on which its business is founded.
This would result in nothing less than the
probable demise of respondent’s business.
Respondent’s proprietary interest over the
ingredients which it had developed and
expended money and effort on is incontrovertible.
Our conclusion is that the detailed ingredients
sought to be revealed have a commercial value
to respondent. Not only do we acknowledge the
fact that the information grants it a competitive
advantage; we also find that there is clearly a
glaring intent on the part of respondent to keep
the information confidential and not available to
the prying public.
We now take a look at Section 1, Rule 27 of the
Rules of Court, which permits parties to inspect
documents or things upon a showing of good
cause before the court in which an action is
pending. Its entire provision reads:
SECTION 1. Motion for production or inspection
order. – Upon motion of any party showing good
cause therefore, 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 to 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.
A more than cursory glance at the above text
would show that the production or inspection of
documents or things as a mode of discovery
sanctioned by the Rules of Court may be availed
of by any party upon a showing of good cause
therefor before the court in which an action is
pending. The court may order any party: a) to
produce and permit the inspection and copying
or photographing of any designated documents,
papers, books, accounts, letters, photographs,
objects or tangible things, which are not
privileged;25 which constitute or contain
evidence material to any matter involved in the
action; and which are in his possession, custody
or control; or b) to 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.
Rule 27 sets an unequivocal proviso that the
documents, papers, books, accounts, letters,
photographs, objects or tangible things that may
be produced and inspected should not be
privileged.26 The documents must not be
privileged against disclosure.27 On the ground of
public policy, the rules providing for production
and inspection of books and papers do not
authorize the production or inspection of
privileged matter; that is, books and papers
which, because of their confidential and
privileged character, could not be received in
evidence.28 Such a condition is in addition to the
requisite that the items be specifically described,
and must constitute or contain evidence material
to any matter involved in the action and which
are in the party’s possession, custody or control.
Section 2429 of Rule 130 draws the types of
disqualification by reason of privileged
communication, to wit: (a) communication
between husband and wife; (b) communication
between attorney and client; (c) communication
between physician and patient; (d)
communication between priest and penitent; and
(e) public officers and public interest. There are,
however, other privileged matters that are not
mentioned by Rule 130. Among them are the
following: (a) editors may not be compelled to
disclose the source of published news; (b) voters
may not be compelled to disclose for whom they
voted; (c) trade secrets; (d) information
contained in tax census returns; and (d) bank
deposits. 30
We, thus, rule against the petitioner. We affirm
the ruling of the Court of Appeals which upheld
the finding of the RTC that there is substantial
basis for respondent to seek protection of the
law for its proprietary rights over the detailed
chemical composition of its products.
That trade secrets are of a privileged nature is
beyond quibble. The protection that this
jurisdiction affords to trade secrets is evident in
our laws. The Interim Rules of Procedure on
Government Rehabilitation, effective 15
December 2000, which applies to: (1) petitions
for rehabilitation filed by corporations,
partnerships, and associations pursuant to
Presidential Decree No. 902-A,31 as amended;
and (2) cases for rehabilitation transferred from
the Securities and Exchange Commission to the
RTCs pursuant to Republic Act No. 8799,
otherwise known as The Securities Regulation
Code, expressly provides that the court may
issue an order to protect trade secrets or other
confidential research, development, or
commercial information belonging to the
debtor.32 Moreover, the Securities Regulation
Code is explicit that the Securities and Exchange
Commission is not required or authorized to
require the revelation of trade secrets or
processes in any application, report or document
filed with the Commission.33 This confidentiality
is made paramount as a limitation to the right of
any member of the general public, upon request,
to have access to all information filed with the
Commission.34
Furthermore, the Revised Penal Code endows a
cloak of protection to trade secrets under the
following articles:
Art. 291. Revealing secrets with abuse of office.
— The penalty of arresto mayor and a fine not
exceeding 500 pesos shall be imposed upon any
manager, employee or servant who, in such
capacity, shall learn the secrets of his principal
or master and shall reveal such secrets.
Art. 292. Revelation of industrial secrets. — The
penalty of prision correccional in its minimum
and medium periods and a fine not exceeding
500 pesos shall be imposed upon the person in
charge, employee or workman of any
manufacturing or industrial establishment who,
to the prejudice of the owner thereof, shall reveal
the secrets of the industry of
the latter.
Similarly, Republic Act No. 8424, otherwise
known as the National Internal Revenue Code of
1997, has a restrictive provision on trade secrets,
penalizing the revelation thereof by internal
revenue officers or employees, to wit:
SECTION 278. Procuring Unlawful Divulgence
of Trade Secrets. - Any person who causes or
procures an officer or employee of the Bureau of
Internal Revenue to divulge any confidential
information regarding the business, income or
inheritance of any taxpayer, knowledge of which
was acquired by him in the discharge of his
official duties, and which it is unlawful for him to
reveal, and any person who publishes or prints in
any manner whatever, not provided by law, any
income, profit, loss or expenditure appearing in
any income tax return, shall be punished by a
fine of not more than two thousand pesos
(₱2,000), or suffer imprisonment of not less than
six (6) months nor more than five (5) years, or
both.
Republic Act No. 6969, or the Toxic Substances
and Hazardous and Nuclear Wastes Control Act
of 1990, enacted to implement the policy of the
state to regulate, restrict or prohibit the
importation, manufacture, processing, sale,
distribution, use and disposal of chemical
substances and mixtures that present
unreasonable risk and/or injury to health or the
environment, also contains a provision that
limits the right of the public to have access to
records, reports or information concerning
chemical substances and mixtures including
safety data submitted and data on emission
or discharge into the environment, if the
matter is confidential such that it would
divulge trade secrets, production or sales
figures; or methods, production or
processes unique to such manufacturer,
processor or distributor; or would otherwise
tend to affect adversely the competitive
position of such manufacturer, processor or
distributor.35
Clearly, in accordance with our statutory laws,
this Court has declared that intellectual and
industrial property rights cases are not simple
property cases.36 Without limiting such industrial
property rights to trademarks and trade names,
this Court has ruled that all agreements
concerning intellectual property are intimately
connected with economic development.37 The
protection of industrial property encourages
investments in new ideas and inventions and
stimulates creative efforts for the satisfaction of
human needs. It speeds up transfer of
technology and industrialization, and thereby
bring about social and economic
progress.38 Verily, the protection of industrial
secrets is inextricably linked to the advancement
of our economy and fosters healthy competition
in trade.
Jurisprudence has consistently acknowledged
the private character of trade
secrets.1âwphi1 There is a privilege not to
disclose one’s trade secrets.39 Foremost, this
Court has declared that trade secrets and
banking transactions are among the recognized
restrictions to the right of the people to
information as embodied in the
40
Constitution. We said that the drafters of the
Constitution also unequivocally affirmed that,
aside from national security matters and
intelligence information, trade or industrial
secrets (pursuant to the Intellectual Property
Code and other related laws) as well as banking
transactions (pursuant to the Secrecy of Bank
Deposits Act), are also exempted from
compulsory disclosure.41
Significantly, our cases on labor are replete with
examples of a protectionist stance towards the
trade secrets of employers. For instance, this
Court upheld the validity of the policy of a
pharmaceutical company prohibiting its
employees from marrying employees of any
competitor company, on the rationalization that
the company has a right to guard its trade
secrets, manufacturing formulas, marketing
strategies and other confidential programs and
information from competitors.42 Notably, it was in
a labor-related case that this Court made a stark
ruling on the proper determination of trade
secrets.
In the case at bar, petitioner cannot rely on
Section 7743 of Republic Act 7394, or the
Consumer Act of the Philippines, in order to
compel respondent to reveal the chemical
components of its products. While it is true that
all consumer products domestically sold,
whether manufactured locally or imported, shall
indicate their general make or active ingredients
in their respective labels of packaging, the law
does not apply to respondent. Respondent’s
specialized lubricants -- namely, Contact Grease,
Connector Grease, Thixohtropic Grease,
Di-Electric Strength Protective Coating, Dry
Lubricant and Anti-Seize Compound -- are not
consumer products. "Consumer products," as it
is defined in Article 4(q),44 refers to goods,
services and credits, debts or obligations which
are primarily for personal, family, household or
agricultural purposes, which shall include, but
not be limited to, food, drugs, cosmetics, and
devices. This is not the nature of respondent’s
products. Its products are not intended for
personal, family, household or agricultural
purposes. Rather, they are for industrial use,
specifically for the use of aircraft propellers and
engines.
Petitioner’s argument that Republic Act No. 8203,
or the Special Law on Counterfeit Drugs,
requires the disclosure of the active ingredients
of a drug is also on faulty
ground. Respondent’s products are outside the
45
scope of the cited law. They do not come within
the purview of a drug46 which, as defined therein,
refers to any chemical compound or biological
substance, other than food, that is intended for
use in the treatment, prevention or diagnosis of
disease in man or animals. Again, such are not
the characteristics of respondent’s products.
What is clear from the factual findings of the
RTC and the Court of Appeals is that the
chemical formulation of respondent’s products is
not known to the general public and is unique
only to it. Both courts uniformly ruled that these
ingredients are not within the knowledge of the
public. Since such factual findings are generally
not reviewable by this Court, it is not duty-bound
to analyze and weigh all over again the evidence
already considered in the proceedings
below.47 We need not delve into the factual
bases of such findings as questions of fact are
beyond the pale of Rule 45 of the Rules of Court.
Factual findings of the trial court when affirmed
by the Court of Appeals, are binding and
conclusive on the Supreme Court.48
We do not find merit or applicability in petitioner’s
invocation of Section 1249 of the Toxic
Substances and Hazardous and Nuclear Wastes
Control Act of 1990, which grants the public
access to records, reports or information
concerning chemical substances and mixtures,
including safety data submitted, and data on
emission or discharge into the environment. To
reiterate, Section 1250 of said Act deems as
confidential matters, which may not be made
public, those that would divulge trade secrets,
including production or sales figures or methods;
production or processes unique to such
manufacturer, processor or distributor, or would
otherwise tend to affect adversely the
competitive position of such manufacturer,
processor or distributor. It is true that under the
same Act, the Department of Environment and
Natural Resources may release information;
however, the clear import of the law is that said
authority is limited by the right to confidentiality
of the manufacturer, processor or distributor,
which information may be released only to a
medical research or scientific institution where
the information is needed for the purpose of
medical diagnosis or treatment of a person
exposed to the chemical substance or mixture.
The right to confidentiality is recognized by said
Act as primordial. Petitioner has not made the
slightest attempt to show that these
circumstances are availing in the case at bar.
Indeed, the privilege is not absolute; the trial
court may compel disclosure where it is
indispensable for doing justice.51 We do not,
however, find reason to except respondent’s
trade secrets from the application of the rule on
privilege. The revelation of respondent’s trade
secrets serves no better purpose to the
disposition of the main case pending with the
RTC, which is on the collection of a sum of
money. As can be gleaned from the facts,
petitioner received respondent’s goods in trade
in the normal course of business. To be sure,
there are defenses under the laws of contracts
and sales available to petitioner. On the other
hand, the greater interest of justice ought to
favor respondent as the holder of trade secrets.
If we were to weigh the conflicting interests
between the parties, we rule in favor of the
greater interest of respondent. Trade secrets
should receive greater protection from discovery,
because they derive economic value from being
generally unknown and not readily ascertainable
by the public.52 To the mind of this Court,
petitioner was not able to show a compelling
reason for us to lift the veil of confidentiality
which shields respondent’s trade secrets.
WHEREFORE, the Petition is DENIED. The
Decision dated 16 February 2006, and the
Resolution dated 25 May 2006, of the Court of
Appeals in CA-G.R. SP No. 86329 are
AFFIRMED. No costs.
SO ORDERED.