BDO Strategic Holdings, Inc. vs. Asia Amalgamated Holdings Corporation

A trial court’s discretion to allow or disallow a deposition by written interrogatories will not be overturned on appeal absent a showing of arbitrary or oppressive exercise of that discretion; good cause for disallowance may be found where the interrogatories would no longer facilitate but would delay the proceedings, as when the case is already in the cross-examination stage and the interrogatories are unduly extensive.

Respondent Asia Amalgamated Holdings Corporation, a publicly listed holding company majority-owned by Jimmy Gow, filed a complaint for declaration of nullity of contract and damages against petitioners BDO Strategic Holdings, Inc. and Banco De Oro Unibank, Inc. The trial court set the case for trial, and Jimmy Gow was presented as the plaintiff’s first witness. Cross-examination of Gow commenced on January 24, 2012 and proceeded over several hearing dates. On December 10, 2012, cross-examination was suspended after petitioners requested and obtained a subpoena duces tecum and ad testificandum. Petitioners insisted that respondent comply with the subpoena before cross-examination could resume; respondent manifested its intention to move to quash. While the motion to quash remained pending, petitioner BDO Strategic Holdings, Inc. served written interrogatories on respondent on February 1, 2013.

• Nature of the Underlying Case: Respondent Asia Amalgamated Holdings Corporation, a holding company whose majority shares are owned by Jimmy Gow, filed a complaint for declaration of nullity of contract and damages against petitioners BDO Strategic Holdings, Inc. and Banco De Oro Unibank, Inc. Trial ensued with Jimmy Gow as respondent’s first witness. His cross-examination began on January 24, 2012 and continued on April 17, 2012, September 12, 2012, and November 19, 2012.

• Suspension and the Subpoena Duces Tecum: On December 10, 2012, cross-examination was suspended because petitioners obtained a subpoena duces tecum and ad testificandum. Petitioners insisted the subpoena be complied with before cross-examination could resume; respondent manifested it would file an opposition and motion to quash.

• The Written Interrogatories: While the motion to quash the subpoena remained pending, petitioner BDO Strategic Holdings, Inc. served on respondent on February 1, 2013 written interrogatories that spanned a total of 561 questions grouped into 16 sets, from A to Q.

• The RTC’s Resolution: In its Order of April 29, 2013, the trial court quashed the subpoena duces tecum and ad testificandum on the ground that the subpoena would effectively convert Jimmy Gow into a witness for the adverse party. The same Order denied the taking of the written interrogatories, holding that the interrogatories would not facilitate the disposition of the case. Petitioners’ motions for reconsideration were denied for lack of merit on August 22, 2013.

• Proceedings before the Court of Appeals: Petitioners assailed the RTC’s Orders before the CA via a petition for certiorari. The CA reversed the quashal of the subpoena and ordered the re-issuance of a subpoena duces tecum and ad testificandum for the specified documents. However, it affirmed the disallowance of the written interrogatories, ruling that considering the case was already at the cross-examination stage, the written interrogatories could no longer serve their purpose and would instead cause further delay. The CA subsequently denied petitioners’ motion for partial reconsideration.

• Purpose of Discovery: Petitioners maintained that depositions, including written interrogatories, are legal instruments designed to promote the just, speedy, and inexpensive disposition of actions, and that their use is highly encouraged by the Rules of Court.

• Relevance and Good Faith: Petitioners argued that the subjects of the written interrogatories were relevant to the case and that the questions were not propounded in bad faith or in a manner intended to annoy, embarrass, or oppress the deponent. They insisted the courts below erred in concluding otherwise, and that the disallowance constituted an abuse of discretion warranting reversal.

• Good Cause Based on Delay: Respondent countered that the written interrogatories, given their sheer volume of 561 questions and the fact that the trial was already at the cross-examination stage, would no longer assist in the just and speedy determination of the case but would only engender further delay.

• Trial Court’s Discretion: Respondent argued that the trial court acted within the bounds of its judicial discretion in disallowing the interrogatories upon a finding of good cause, and that its factual determinations — including that the interrogatories were framed to annoy, embarrass, or oppress — are entitled to great weight on appeal.

• Disallowance of Written Interrogatories: Whether the Court of Appeals committed reversible error in affirming the trial court’s order that disallowed the written interrogatories served by petitioner BDO Strategic Holdings, Inc. on respondent.

• Disallowance of Written Interrogatories: The disallowance was proper, and the CA did not commit any reversible error. Under statutes and procedural rules, the trial court enjoys considerable leeway in matters pertaining to discovery. Section 16, Rule 23 of the Rules of Court expressly permits a court, upon notice and for good cause, to order that a deposition not be taken. Good cause means a substantial reason — one that affords a legal excuse — and it is for the trial court to determine whether such cause exists. The grounds for disallowing a written interrogatory are not restricted to the specific limitations in Rule 23; a court may disallow discovery for reasons beyond bad faith, irrelevance, or privilege. The trial court’s exercise of discretion in discovery will not be set aside in the absence of a showing that the disposition was arbitrary, capricious, oppressive, or otherwise affected the substantial rights of the parties.

Petitioners failed to make that showing. On the contrary, respondent established good cause: because the case had already reached the cross-examination stage, the written interrogatories comprising 561 questions would no longer serve the purpose of facilitating preparation or speeding the disposition of the case, but would only cause further delay. The facts sought to be elicited could be obtained through the continuation of cross-examination. The Court further declined to disturb the trial court’s factual finding that the interrogatories were framed in a manner to annoy, embarrass, or oppress; such findings are entitled to great weight and are binding on appeal unless strong and cogent reasons exist to overturn them. Petitioners’ bare allegations of relevance and good faith were insufficient to justify reversal.

• Judicial Discretion in Discovery Matters — Trial courts enjoy broad discretion in allowing or disallowing modes of discovery. The court’s disposition of discovery issues will not be overturned on appeal unless it is shown that the discretion was exercised arbitrarily or oppressively, or that the ruling was improvident and affected the substantial rights of the parties.

• Good Cause under Section 16, Rule 23 — Section 16, Rule 23 empowers a court to order that a deposition not be taken upon a showing of good cause. Good cause is a substantial reason that affords a legal excuse. The determination of good cause rests in the sound judicial discretion of the trial court. The grounds for disallowing a deposition under this provision are not limited to those specifically enumerated in Rule 23 (such as bad faith, annoyance, embarrassment, oppression, irrelevance, or privilege); a deposition may be disallowed whenever a substantial reason justifies its denial.

• Limitations on Depositions — The right to take depositions, whether oral or upon written interrogatories, is not absolute. Depositions are limited when the examination is conducted in bad faith or in such a manner as to annoy, embarrass, or oppress the deponent (Rule 23, Section 18), when the inquiry touches upon irrelevant matters, or when it encroaches upon recognized domains of privilege. Additional limitations may be imposed by the court for other good cause.

• Weight of Trial Court’s Factual Findings — Factual findings of trial courts, particularly those involving the demeanor of witnesses or the conduct of parties, are accorded great weight and respect on appeal. They will not be disturbed unless strong and cogent reasons demand reversal.

• “The Rules of Court expressly provides for limitations to deposition when the examination is being conducted in bad faith or in such a manner as to annoy, embarrass, or oppress the person subject to the inquiry. Depositions are also limited when the inquiry touches upon the irrelevant or encroaches upon the recognized domains of privilege.” — Articulates the principal statutory boundaries of deposition-taking.

• “Under statutes and procedural rules, the court enjoys considerable leeway in matters pertaining to discovery. … [T]he court’s exercise of such discretion will not be set aside in the absence of abuse, or unless the court’s disposition of matters of discovery was improvident and affected the substantial rights of the parties.” — States the controlling standard of appellate review over discovery rulings.

• “Good cause means a substantial reason — one that affords a legal excuse. … [I]t is for the court to determine whether there is a substantial reason to disallow a deposition, as in this case. Thus, the grounds for disallowing a written interrogatory are not restricted to those expressly mentioned under the Rules of Court and existing jurisprudence.” — Clarifies the open-textured nature of “good cause” and rejects a restrictive reading of the allowable grounds.

• “As correctly ruled by the CA, considering that the case is in the cross-examination stage already, the use of written interrogatories will not serve its purpose anymore. It cannot aid in the preparation and speedy disposition of the pending case. Instead, it will only cause further delay in the proceedings.” — Identifies the particular good cause that justified disallowance.

• “It is a fundamental and settled dictum that conclusions and findings of fact by the trial court are entitled to great weight and should not be disturbed on appeal, unless strong and cogent reasons dictate otherwise. This is because the trial court is in a better position to examine the real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.” — Reiterates the rationale for deferential review of trial court factual findings.

• San Luis v. Hon. Judge Rojas, et al., 571 Phil. 51 (2008) — Cited for the principle that depositions are consistent with just, speedy, and inexpensive disposition, but that depositions are limited when the inquiry is irrelevant or encroaches upon privilege, and that inquiry in written interrogatories must be relevant and made in good faith within the bounds of law. Followed.

• Producers Bank v. CA, 349 Phil. 310 (1998) — Relied upon for the rule that courts enjoy considerable leeway in discovery matters and that the trial court’s discretion will not be set aside absent abuse or affectation of substantial rights; also for the principle that trial court factual findings are entitled to great weight. Followed.

• Fortune Corporation v. Court of Appeals, 299 Phil. 356 (1994) — Cited for the definition of “good cause” as a substantial reason that affords a legal excuse, and for the rule that the court exercises judicial discretion to determine the existence of good cause. Followed.

• Section 16, Rule 23, 1997 Rules of Court — Provides that upon notice and for good cause, the court may order that a deposition not be taken. Applied as the source of the trial court’s authority to disallow the written interrogatories upon a finding that good cause existed.

• Section 18, Rule 23, 1997 Rules of Court — Empowers the court to order the cessation of a deposition upon a showing that the examination is being conducted in bad faith or in a manner that annoys, embarrasses, or oppresses the deponent. Mentioned to illustrate an express limitation on depositions, but the Court clarified that the permissible grounds for disallowance under Section 16 are broader.

Perlas-Bernabe, Senior Associate Justice (Chairperson), Hernando, and Zalameda, JJ., concurred. Inting, J., was on official leave.