G.R. No. L-45234. May 8, 1985.
R and B SURETY & INSURANCE CO., INC., and TOWERS ASSURANCE CORPORATION, petitioners, vs. HON. VICTORINO A. SAVELLANO, as Presiding Judge, Branch XIX, Court of First Instance of Manila, and INVESTORS’ FINANCE CORPORATION, doing business under the name and style “FNCB FINANCE”, respondents.

FACTS

Private respondent FNCB Finance filed a collection suit against Rassagi Transport Corporation as principal debtor and petitioners R & B Surety and Towers Assurance as sureties. The complaint alleged Rassagi obtained credit facilities from Citiwide Motors, evidenced by promissory notes later assigned to FNCB, and that the petitioners issued surety bonds for the obligation. It was averred that Rassagi defaulted on installment payments, making the entire sum immediately due.
In their separate answers, Rassagi and the petitioner sureties raised specific defenses. They claimed Rassagi had applied for and obtained a direct loan from FNCB, not credit facilities from Citiwide. They alleged Rassagi was made to sign blank documents, that the interest charges were usurious, and that FNCB refused to accept further payments or restructure the loan after a single default. During pre-trial, however, Rassagi’s counsel stated his client did not deny the obligation and sought to settle. Based largely on this manifestation, the trial court rendered a partial summary judgment against all defendants, holding them liable for the principal sum.

ISSUE

Whether the trial court erred in rendering a partial summary judgment against the petitioner sureties.

RULING

Yes. The Supreme Court reversed the partial summary judgment. The ruling hinged on the proper application of summary judgment under Rule 34 of the Rules of Court. A summary judgment is only warranted when, upon the pleadings and admissions, no genuine issue as to any material fact exists, and the moving party is entitled to judgment as a matter of law. Conversely, it is improper when the defending party tenders vital issues requiring the presentation of evidence.
The Court found that the petitioners’ original answer indeed raised genuine issues of fact that precluded summary adjudication. Their defenses—questioning the genuineness and due execution of the promissory notes by alleging the signing of blank forms, asserting the existence of a direct loan arrangement distinct from the alleged credit facility, and charging usury—were material to their liability. These assertions, if proven, could negate their obligation under the instruments sued upon. The manifestation of Rassagi’s counsel during pre-trial, which suggested an admission, could not be automatically imputed to the sureties, who had filed a separate answer maintaining distinct defenses. The trial court therefore erred in disregarding the issues tendered by the petitioners.
Furthermore, the Court held that the trial court should have liberally allowed the petitioners to file an amended answer. Amendments to pleadings are favored to ensure that the real controversies between parties are fully presented and decided on the merits. Any concern about a change in the theory of defense or potential delay was outweighed by the paramount need to afford the petitioners their day in court to prove their allegations, especially since the case was still at the pre-trial stage. The order denying the amendment was thus also set aside.