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SOLIDBANK CORPORATION v. GATEWAY ELECTRONICS CORPORATION

FACTS:

Petitioner, Gateway Electronics Corporation (Gateway), obtained foreign currency denominated loans from Solidbank Corporation (Solidbank) in 1997 for its manufacturing operations. The loans were covered by promissory notes (PNs) with an alleged interest rate increase to 10% per annum and a penalty of 2% per month for defaulting on payment. To secure two of the loans, Gateway assigned the proceeds of its agreement with Alliance Semiconductor Corporation (Alliance) to Solidbank. However, Gateway failed to fulfill its loan obligations, resulting in a debt of US$1,975,835.58 by January 31, 2000. Subsequently, Solidbank filed a Complaint for collection of sum of money against Gateway and later amended it to include Gateway's officers and stockholders as defendants. Solidbank also filed a Motion for Production and Inspection of Documents to obtain records related to the agreement with Alliance. The trial court granted the motion, but Gateway claimed to have already complied. Solidbank then filed a motion to cite Gateway and its officers in contempt for alleged non-compliance, which the trial court denied.

ISSUES:

  1. 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.

  2. 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.

RULING:

We resolve to deny the petition.

  1. Solidbank's motion for production and inspection of documents is fatally defective because it failed to specify with particularity the documents it required Gateway to produce, and thus does not comply with Section 1, Rule 27 of the Rules of Court.

  2. The trial court committed grave abuse of discretion in penalizing Gateway for not complying with the request to produce documents since the documents sought were not particularly described, and Gateway did not willfully or in bad faith fail to comply.

PRINCIPLES:

  1. A motion for production and inspection of documents must designate the documents with sufficient particularity.

  2. Burden of proof is on the party asserting receipt of payments or obligations fulfilled.

  3. Section 1, Rule 27 of the Rules of Court requires that documents sought to be produced must be material to the action, not privileged, and sufficiently described.

  4. Good faith effort in compliance with discovery orders must be acknowledged.

  5. Grave abuse of discretion occurs when a court acts in a capricious or whimsical exercise of judgment.