SOLIDBANK CORPORATION VS.
GATEWAY ELECTRONICS CORPORATION the documents evidencing the payments received by Gateway from Alliance in relation
(G.R. No. 164805| April 30, 2008)
DOCTRINE/S:
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
FACTS:
Gateway Electronics Corporation obtained from Solidbank Corporation 4 foreign
currency denominated loans to be used as working capital for its manufacturing
operations.
The loans were covered by promissory notes 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.
To secure the loans covered by 2 promissory notes , Gateway assigned to Solidbank
the proceeds of its Back-end Services Agreement with Alliance Semiconductor
Corporation (Alliance). The following stipulations are common in both PNs:
Gateway failed to comply with its loan obligations. Gateways outstanding debt
amounted to US$1,975,835.58. Solidbanks numerous demands to pay were not
heeded by Gateway. Thus, Solidbank filed a Complaint for collection of sum of money
against Gateway.
Solidbank filed an Amended Complaint to implead the officers/stockholders of
Gateway, namely, Nand K. Prasad, Andrew S. Delos Reyes, Israel F. Maducdoc,
Jaime M. Hidalgo and Alejandro S. Calderon who signed in their personal capacity a
Continuing Guaranty to become sureties for any and all existing indebtedness of
Gateway to Solidbank. The trial court admitted the amended complaint and impleaded
the additional defendants.
Earlier, 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.
The trial court issued an Order granting the motion for production and inspection of
documents
Gateway filed a motion to reset the production and inspection of documents in order to
give them enough time to gather and collate the documents in their possession. The
trial court granted the motion
Months after, Solidbank filed a motion for issuance of a show cause order for
Gateways failure to comply with the Order of the trial court. In response, Gateway
filed a manifestation that they appeared before the trial court to present the documents
in their possession, however, Solidbanks counsel failed to appear. In the
manifestation, Gateway also expressed their willingness to make available for
inspection at Gateways offices any requested document.
The trial court issued an Order setting the production and inspection of documents
on another date and in the premises of Gateway. 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, they
filed a motion to cite Gateway and its responsible officers in contempt for their refusal
to produce the documents subject
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
to the Back-end Services Agreement
Gateway filed a partial motion for reconsideration. However, the same was denied.
Gateway filed a petition for certiorari before the Court of Appeals (CA). The
CA nullifIED the Orders of the trial court, it ruled that both the Motion for Production of
Documents and the 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 Solidbanks claim.
Solidbank filed a motion for reconsideration, which was denied. Thus, this petition.
ISSUE/S:
1. Whether or not Solidbanks motion for production and inspection of documents and the
Order of the trial court failed to comply with Section 1, Rule 27 of the Rules of Court;
and
2. Whether or not 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 Solidbanks claim.
HELD:
ISSUE #1
Section 1, Rule 27 of the Rules of Court provides the mechanics for the production of documents
and the inspection of things during the pendency of a case. It also deals with the inspection of
sources of evidence other than documents, such as land or other property in the possession or
control of the other party. This remedial measure is intended to assist in the administration of
justice by facilitating and expediting the preparation of cases for trial and guarding against
undesirable surprise and delay; and it is designed to simplify procedure and obtain admissions
of facts and evidence, thereby shortening costly and time-consuming trials. It is based on
ancient principles of equity. More specifically, the purpose of the statute is to enable a party-
litigant to discover material information which, by reason of an opponent's control, would
otherwise be unavailable for judicial scrutiny, and to provide a convenient and summary method
of obtaining material and competent documentary evidence in the custody or under the control of
an adversary. It is a further extension of the concept of pretrial
The modes of discovery are accorded a broad and liberal treatment. 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. The
lament against a fishing expedition no longer precludes a party from prying into the facts
underlying his opponents 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 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.

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, Solidbanks motion was fatally defective and must be struck down because of
its failure to specify with particularity the documents it required Gateway to produce. Solidbanks
motion for production and inspection of documents called for a blanket inspection. Solidbanks
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.

ISSUE #2

The trial court held that as a consequence of Gateways failure to exert diligent effort in
producing the documents subject of the Order in accordance with Section 3(a), Rule 29 of the
Rules of Court, the matters regarding the contents of the documents sought to be produced but
which were not produced by Gateway, shall be considered as having been established in
accordance with Solidbanks 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.

WHEREFORE, in view of the foregoing, the instant petition is DENIED for lack of merit.