Thursday, March 15, 2012

Solidbank vs. Gateway Electronics

Facts: Gateway Electronics Corporation obtained from Solidbank Corporation four foreign currency denominated loans to be used as working capital for its manufacturing operations. To secure the loans covered by PN 97-375 and PN 97-408, Gateway assigned to Solidbank the proceeds of its Back-end Services Agreement dated June 25, 2000 with Alliance Semiconductor Corporation (Alliance). 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. 

Solidbank filed a Motion for Production and Inspection of Documents on the basis of an information received from Mr. David Eichler, Chief Financial Officer of Alliance, that Gateway has already received from Alliance the proceeds/payment of the Back-end Services Agreement. On January 30, 2001, the trial court issued an Order granting the motion for production and inspection of documents. 

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, 2001Order. 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. 

On April 15, 2002, the trial court issued an Order 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. 

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. 

Issue: Whether Solidbank’s motion for production and inspection of documents should be struck down for being fatally defective 

Held: 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. 

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. 

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. 

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