Trans Industrial Utilities, Inc., Spouses Rodolfo and Victoria Tiu, and Juanita T. Tiu vs. Metropolitan Bank & Trust Company

A Rule 45 petition is limited to errors of law, and factual findings of a trial court that the Court of Appeals affirms are final and conclusive unless a recognized exception applies; a party who fails to deny under oath a written instrument on which the adverse party’s action is founded admits its genuineness and due execution.

Trans Industrial Utilities, Inc., a domestic corporation in Mandaue City, Cebu, maintained a borrowing relationship with Metropolitan Bank & Trust Company, a universal banking institution, through loans obtained by its president, Rodolfo T. Tiu, under board resolutions. The credit accommodations were secured by an assignment of corporate property and by continuing surety agreements executed by Trans Industrial, Spouses Rodolfo and Victoria Tiu, and Juanita T. Tiu; Metrobank was later substituted in the proceedings by Meridian (SPV-AMC) Corporation.

Trans Industrial Utilities, Inc., a domestic corporation located at P. Burgos Street, Mandaue City, Cebu, obtained loans from Metropolitan Bank & Trust Company on several occasions through its president, Rodolfo T. Tiu, who acted by virtue of board resolutions. As security for the loans, Trans Industrial, through its authorized officers and with the consent of Mandaue Realty and Resources Corporation, assigned its rights and title over a parcel of land covered by Transfer Certificate of Title No. 38486. Because that property was insufficient to secure the obligations, Trans Industrial, Spouses Rodolfo and Victoria N. Tiu, and Juanita T. Tiu executed a Continuing Surety Agreement dated July 8, 1997 to secure the Philippine peso loan of ₱16,343,800.00 plus interest and charges. They likewise executed another Continuing Surety Agreement dated July 3, 1998 to secure the US dollar loan of US$626,000.00.

Petitioners defaulted in the payment of the obligations at their respective maturity dates. Metrobank made a demand, but they still failed to pay. Petitioners then requested restructuring of the loan obligations, which Metrobank approved on condition that petitioners would partially settle the loans. The parties executed a Debt Settlement Agreement on September 25, 2000. In compliance with its terms, Trans Industrial executed a Deed of Dacion En Pago on September 26, 2000 over its parcel of land covered by Transfer Certificate of Title No. 45993 with all its improvements. To secure the restructured obligation, petitioners executed a continuing surety agreement on September 28, 2000, undertaking to secure and pay the loan of ₱34,565,524.98 plus interest and charges.

Petitioners again failed to pay the monthly amortizations beginning November 30, 2001 and continuing thereafter. When they did not pay despite demand, Metrobank filed an action for collection of a sum of money against them.

In their Amended Answer with Counterclaim dated November 17, 2003, petitioners claimed that the board resolutions authorized borrowing only up to ₱10,000,000.00 in 1995 and ₱15,000,000.00 in 1996; that the loans were denominated in US dollars but were actually released in Philippine pesos; that the Debt Settlement Agreement made it appear that US dollars had been loaned and then converted into pesos; that the assigned property valued at ₱27,500,000.00 was more than sufficient; and that loans exceeding the authorized amounts were null and void. They also alleged payments of ₱6,056,466.65 as of September 7, 1998 and additional interest of ₱4,885,734.67 from August 30, 2000 to October 31, 2001, resulting in an overpayment of ₱12,210,091.32.

After the presentation of Metrobank’s evidence, petitioners filed a demurrer to evidence dated April 8, 2008, arguing that the authorized borrowing was only ₱15,000,000.00 and that Rodolfo had exceeded his authority because the loans were denominated in US dollars. The pre-trial order dated January 19, 2004 noted that petitioners’ Amended Answer was not verified. The Secretary’s Certificate confirming the July 24, 2000 stockholders’ resolution recited that the resolution was “unanimously approved, a legal quorum being present and voting.” The Deed of Dacion En Pago and the Debt Settlement Agreement stated that the property would partially settle the obligation only to the extent of ₱22,000,000.00, net of taxes, fees, and other expenses. The RTC and the Court of Appeals found no proof of fraud in the execution of the Debt Settlement Agreement and no evidence substantiating the claimed overpayment.

• Validity of the Board Resolution and Effect of Admission: Petitioners argued that the resolution passed by Trans Industrial’s Board of Directors was null and void because no quorum existed at the meeting. According to them, admission of genuineness and due execution merely admits the document as evidence and does not make it valid; therefore, the Debt Settlement Agreement had no effect.
• Borrowing Authority and Currency: Petitioners maintained that Rodolfo exceeded his authority because his board authorization was limited to contracting loans in Philippine pesos, not US dollars, and that Metrobank was estopped from converting the dollar loans into pesos for a second time at a higher rate of exchange.
• Overpayment: Petitioners contended that the property subject of the dacion en pago was valued at ₱27,500,000.00, more than sufficient to pay the obligations, and that their payments and the property transfer resulted in an overpayment of ₱12,210,091.32.

• Admission of Actionable Documents: Respondent countered that petitioners admitted the genuineness and due execution of the Secretary’s Certificate, which was the foundation of the board resolution authorizing Rodolfo to enter into loan contracts with Metrobank, and of the Debt Settlement Agreement.
• Validity of the Debt Settlement Agreement: Respondent argued that the Debt Settlement Agreement was freely and voluntarily executed and served as evidence that petitioners recognized their outstanding loan obligations.
• Separate Corporate Authorizations: Respondent maintained that the Secretary’s Certificates dated July 24, 1996 and August 16, 1995 validly authorized the procurement of two separate amounts of ₱10,000,000.00 and ₱15,000,000.00 from Metrobank.
• Overpayment: Respondent argued that petitioners’ claim of overpayment was not supported by evidence.

• Scope of Review: Whether the issues raised in the petition are questions of law reviewable under Rule 45, or questions of fact already foreclosed by the concurring factual findings of the RTC and the Court of Appeals.
• Admission of Actionable Documents: Whether the Secretary’s Certificate and the Debt Settlement Agreement were deemed admitted as to genuineness and due execution because petitioners failed to deny them specifically under oath.
• Validity of the Debt Settlement Agreement: Whether the Debt Settlement Agreement was valid and binding notwithstanding petitioners’ claim that the underlying board resolution lacked quorum and that the president had no authority to borrow in US dollars.
• Borrowing Authority and Currency Conversion: Whether the Secretary’s Certificates dated July 24, 1996 and August 16, 1995 authorized two separate borrowing amounts or only an increase, and whether Metrobank was estopped from converting the dollar loans into pesos.
• Overpayment: Whether petitioners substantiated their claim of overpayment through the Deed of Dacion En Pago and prior payments.

• Scope of Review: No. The assigned errors required reexamination of evidence and raised questions of fact; none of the recognized exceptions to the Rule 45 limitation applied, and the Court of Appeals’ findings affirmed the RTC.
• Admission of Actionable Documents: Yes. Under Section 8, Rule 8, petitioners’ failure to deny the Secretary’s Certificate and Debt Settlement Agreement under oath, their Amended Answer being unverified, deemed their genuineness and due execution admitted.
• Validity of the Debt Settlement Agreement: Yes. The Debt Settlement Agreement was freely and voluntarily executed with no proof of fraud; its genuineness and due execution were admitted, and its terms established the restructured obligations.
• Borrowing Authority and Currency Conversion: Two separate amounts were authorized, and no estoppel lay. The Secretary’s Certificates authorized ₱10,000,000.00 and ₱15,000,000.00 separately, and the Debt Settlement Agreement recorded the agreed conversion of the dollar-denominated loan into pesos.
• Overpayment: No. The documents stated that the dacion en pago partially settled only ₱22,000,000.00, not ₱27,500,000.00; petitioners presented no evidence supporting overpayment.

• Scope of Review: Section 1, Rule 45 limits a petition for review on certiorari to questions of law. A question of law arises when there is doubt as to what the law is on a certain state of facts, while a question of fact arises when the doubt concerns the truth or falsity of the alleged facts; resolution must not require an examination of the probative value of evidence. The issues of genuineness and due execution, the limitations of Rodolfo’s authority, and overpayment all invited review of evidence and were therefore factual. Factual findings of the trial court, when affirmed by the Court of Appeals, are final and conclusive and generally will not be disturbed. None of the recognized exceptions applied, and the Court was not a trier of facts.

• Admission of Actionable Documents: Section 7, Rule 8 requires the substance of a written instrument on which an action or defense is based to be set forth in the pleading, with the original or copy attached. Section 8, Rule 8 provides that the genuineness and due execution of such a document are deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts. The records showed that petitioners failed to deny the documents under oath; their Amended Answer was not verified, as noted in the Pre-Trial Order dated January 19, 2004. Failure to verify is tantamount to failure to specifically deny under oath. This admission covers the signature, authority, contents, delivery, and formal requisites, and cuts off defenses such as lack of authority. Petitioners could not therefore rely on the Corporate Secretary’s statement that no quorum existed, especially because the Secretary’s Certificate itself recited that the resolution was “unanimously approved, a legal quorum being present and voting.”

• Validity of the Debt Settlement Agreement: No evidence of fraud or circumstances vitiating consent was shown. The Debt Settlement Agreement reflected that Trans Industrial acknowledged the credit accommodations; the obligations had become due and demandable; petitioners requested deferment of legal action and settlement; and Metrobank agreed to a new principal balance after waiver of penalty charges, adjustment of interest rates, conversion of the US dollar-denominated loan into Philippine pesos, and partial payment of ₱22,000,000.00 by way of dacion en pago. Petitioners initiated the restructuring, were aware of the terms, and voluntarily performed corporate acts to authorize it. Because they had claimed payment and overpayment, they admitted the existence and enforceability of the loan obligations and were estopped from later attacking the validity of the agreement.

• Borrowing Authority and Currency Conversion: A scrutiny of the Secretary’s Certificate dated July 24, 1996 showed that it confirmed a board resolution authorizing the loan of ₱15,000,000.00. There was no indication that the amount was only an increase or a ceiling on the previous ₱10,000,000.00 authorization. Petitioners failed to prove that the resolution merely increased the amount. The subsequent Debt Settlement Agreement, which acknowledged the loan obligations and was voluntarily executed, settled the issue and superseded all previous incidents, agreements, and terms between the parties. The Debt Settlement Agreement also recorded the parties’ actual agreement to convert the US dollar-denominated loan into pesos.

• Overpayment: Petitioners presented no evidence supporting their claim that the property subject of the dacion en pago was worth ₱27,500,000.00. The Deed of Dacion En Pago dated September 26, 2000 expressly stated that the transfer was to partially settle the obligation to the extent of ₱22,000,000.00. The Secretary’s Certificate dated September 25, 2000 and clause 4 of the Debt Settlement Agreement likewise stated that the dacion en pago was up to ₱22,000,000.00, net of taxes, fees, and expenses. These documents negated the claim of overpayment.

• Rule 45 Review and Conclusiveness of Concurrent Factual Findings — A petition for review on certiorari under Rule 45 raises only questions of law. A question of law exists where there is doubt as to what the law is on a given set of facts; a question of fact exists where the doubt concerns the truth or falsity of alleged facts or requires weighing evidence. Factual findings of the trial court, when affirmed by the Court of Appeals, are final and conclusive and are generally not disturbed. The recognized exceptions are when the findings are grounded entirely on speculation, surmises or conjectures; when the inference is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion; when the judgment is based on misapprehension of facts; when the findings are conflicting; when the Court of Appeals went beyond the issues or its findings are contrary to admissions of both parties; when the findings are contrary to those of the trial court; when the findings are conclusions without citation of specific evidence; when the facts in the petition and briefs are undisputed by respondent; when the findings are premised on the supposed absence of evidence contradicted by the record; and when the Court of Appeals overlooked relevant undisputed facts that would justify a different conclusion. Here, the assigned errors were factual, and none of the exceptions applied.

• Admission by Failure to Deny an Actionable Document Under Oath — Under Sections 7 and 8, Rule 8, when an action or defense is founded on a written instrument, the substance of the instrument must be set forth in the pleading and the original or a copy attached. The genuineness and due execution of the instrument are deemed admitted unless the adverse party, under oath, specifically denies them and sets forth the facts relied upon. The admission covers the signature, authority to sign, exact contents, delivery, and formal requisites, and cuts off defenses such as forgery, lack of authority, or non-delivery. Here, petitioners’ unverified Amended Answer failed to deny the Secretary’s Certificate and Debt Settlement Agreement under oath, so their genuineness and due execution stood admitted.

• Estoppel from Claiming Payment or Overpayment — A party who claims payment or overpayment thereby admits the existence and enforceability of the loan obligation. Such a party cannot later argue that the contract embodying the obligation is null and void or that its stipulations differ from the written terms.

• Superseding Effect of a Valid Debt Settlement Agreement — A validly and voluntarily executed Debt Settlement Agreement supersedes prior incidents, agreements, and terms between the parties. Its acknowledgment of the restructured obligation settles prior disputes over the scope of the borrower’s authority and the amount owed.

• "A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them." — This formulation controlled the threshold determination that petitioners’ assigned errors were factual and therefore not reviewable under Rule 45.

• "By the admission of the genuineness and due execution (of such document) is meant that the party whose signature it bears admits that he signed it or that it was signed by another for him with his authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of the party relying upon it; that the document was delivered; and that any formal requisites required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him." — This passage defines the scope of the admission that precluded petitioners from raising lack of authority and lack of quorum.

• "Logically, it would be incredible for petitioners to pay the interest and claim overpayment and later on argue that the contract embodying the obligation is null and void." — This grounds the estoppel reasoning: petitioners’ own allegations of payment and overpayment were inconsistent with their attack on the validity of the obligation.

• "There is no need for proof of execution and authenticity with respect to documents the genuineness and due execution of which are admitted by the adverse party." — This explains why the admitted Secretary’s Certificate and Debt Settlement Agreement sufficed without further authentication.

• Sps. Santos vs. Alcazar, 729 Phil. 277 (2014) — Followed and quoted extensively; it defined the effect of a party’s failure to specifically deny under oath the genuineness and due execution of a written instrument.
• Tamblot Security & General Services, Inc. vs. Item, et al., 774 Phil. 312 (2015) — Cited for the rule that a Rule 45 petition is generally limited to reviewing errors of law.
• Clemente vs. Court of Appeals, et al., 771 Phil. 113 (2015) — Cited for the distinction between questions of law and questions of fact.
• Travel & Tours Advisers, Inc. vs. Cruz, et al., 783 Phil. 257 (2016) — Cited for the conclusiveness of factual findings affirmed by the Court of Appeals.
• The Insular Life Assurance Co., Ltd. vs. Court of Appeals, 472 Phil. 11 (2004) — Cited for the principle that the Supreme Court is not a trier of facts and for the recognized exceptions to Rule 45 review.

• Section 1, Rule 45, Rules of Court — Applied to limit the petition to questions of law. The Court ruled that the issues of genuineness, authority, and overpayment were factual and therefore beyond the ordinary scope of Rule 45 review.
• Section 7, Rule 8, Rules of Court — Applied to identify the Secretary’s Certificate and Debt Settlement Agreement as actionable documents that had to be set forth in and attached to the pleading.
• Section 8, Rule 8, Rules of Court — Applied to deem the genuineness and due execution of those documents admitted because petitioners’ Amended Answer was unverified and did not specifically deny them under oath.

Leonen, J., Hernando, Inting, and Delos Santos, JJ., concurred. Rosario, J., was on official leave.