A.

Affirmative and Negative Defenses

1. Villanueva vs. Court of Appeals

[G.R. No. 117108. November 5, 1997]

DANIEL C. VILLANUEVA, petitioner, vs. COURT OF APPEALS, LAND

REGISTRATION AUTHORITY and OO KIAN TIOK, respondents.
DECISION
PANGANIBAN, J.:

May the Register of Deeds refuse to register an application for a notice of lis
pendens on the ground that the applicant does not have any title or right of possession
over the subject properties?

The Case
Petitioner seeks reversal of the Decision[1] of Respondent Court of
Appeals[2] promulgated on August 31, 1994 in CA-G.R. SP No. 34449, which answered
the foregoing question in the affirmative:

In view of the foregoing, the Lis Pendens in question is not registrable since it
seeks to affect property not belonging to the defendant [petitioner herein], and the
action of the Register of Deeds in denying the registration of the same is hereby
sustained."
[3]

The lis pendens sought to be registered is Civil Case No. 92-2358 pending before
Branch 74 of the Regional Trial Court of Antipolo, Rizal.[4]

The Facts
The assailed Decision fairly narrates the facts as follows:

[5]

Records show that TCT Nos. 262631; 273873 and 2777938 [sic] were issued in the
name of Valiant Realty and Development Corporation and Filipinas Textile Mills,
Inc. and the same were mortgaged in favor of Equitable Banking Corp. Upon
failure of the mortgagors to comply with the terms and conditions of the mortgage,
the bank foreclosed the mortgaged properties [and] sold the same to the Equitable
Banking Corp. as the highest bidder at public auction sale. After the expiration of
the redemption period, mortgagors did not exercise the right of redemption and as

a consequence thereof, the mortgagee sold all its rights, interests and participation
of said properties to the herein oppositor, Oo Kian Tiok.
Immediately after acquiring the rights, titles and interests of the bank in said
properties, Oo Kian Tiok took possession up to the present time, except for a brief
period of time when his possession was interrupted by the herein petitioner [who]
together with armed goons, [and] without [any] court order swooped down on the
properties and disarmed the security guards assigned therein and forcibly removed
the 30 workers therefrom, which prompted Oo Kian Tiok to file Civil Case No. 922358 against Filipinas Textile Mills, Inc., [and] Daniel Villanueva, et als. for
Recovery of Possession and Damages with Prayers for Writ of Preliminary
Mandatory Injunction and/or Temporary Order.
As a consequence, the herein petitioner, being one of the defendants of the abovementioned case, filed a formal request with the Office of the Register of Deeds to
annotate a corresponding Notice of Lis Pendens of Civil Case No. 92-2358 in the
respective Memorandum of Encumbrances of TCT Nos. 262631; 273873 and
277938 but the same was denied registration based on the following grounds, to
wit:
....that Mr. Villanueva is merely asserting possession of the property not on the title
or right over the property. While it appears that Mr. Villanueva is an officer of the
owner-corporation, Filipinas Textile Mills, Inc., the latter is no longer the owner
thereof but plaintiff Oo Tian [sic] Tiok. Moreover, no Board Resolution has been
submitted indicating that said Villanueva has been duly authorized by the former
owner to file the notice of lis pendens.
Hence, the petitioner elevated the matter on consulta [to Respondent Land
Registration Authority] pursuant to Section 117 of P.D. 1529 on the grounds that
the herein petitioner, together with his sister Terry Villanueva-Yap, Eden
Villanueva, Susan Villanueva and his brother Frank Villanueva are the lawful
owners of the 63% of the beneficial shares of Filipinas Textile Mills, Inc. and are
not merely asserting possession but also ownership over the subject properties
contrary to the conclusion submitted by the Register of Deeds. (Resolution, pp. 12)
The consulta was decided against petitioner by Respondent Land Registration
Authority and later, on appeal, by Respondent Court. Hence, this petition for review
under Rule 45 of the Rules of Court.[6]

The Issues
Petitioner assigns the following errors to Respondent Court: [7]

"A. Not appreciating petitioners compliance with all the requirements set forth
under the Land Registration Act and the Rules of Court;
B. Not finding that the petitioner duly raised the affirmative defense of ownership
over the properties subject of Civil Case No. 92-2358;
C. Not finding that the Respondent Land Registration Authority erred in assuming
jurisdiction to determine the issue of ownership over the properties subject of civil
case no. 92-2358;
D. In affirming the resolution of the Respondent Land Registration Authority in
Consulta No. 2131.
The Solicitor General, as counsel for Respondent Land Registration Authority,
summarizes the issue:[8]

Whether or not the notice of lis pendens requested by petitioner to be annotated in

the respective memorandum of encumbrances at the back of TCT Nos. 262631,
273873 and 277938 is registrable.
Stated simply, the issue is whether petitioners application for registration of the
notice of lis pendens should be rejected on the ground that it affects a property which
does not belong to him personally, but is merely claimed by a corporation, the majority
(63%) of which is owned by him and his brothers and sisters.

Respondent Courts Ruling

In dismissing petitioners appeal, Respondent Court ruled:[9]

Even if the petitioner were able to comply with all the requirements (referring to
the formalities) for the annotation of a notice of lis pendens, it does not necessarily
follow that he would ipso facto be entitled to such annotation. There is need for
him to show that he owns the subject property or that he has right or interest vis-vis its possession. The mere possession of a property does not give rise to the right
to annotate. Without such title or interest, whence would his right to annotate come
from?
The petitioner contends that the determination of registrability of a notice of lis
pendens is ministerial as far as the Register of Deeds is concerned. On the basis of
the evidence on record, this is exactly what the Register of Deeds of Rizal did - he
refused to annotate because it clearly appears from the documents submitted
(specifically, T.C.T. Nos. 262631, 273873 and 277938) that the subject parcels of
land are registered not in the name of Villanueva but in the name of Valiant Realty
and Development Corporation and co-defendant Filipinas Textile Mills, Inc. The
Register of Deeds did not attempt to go beyond what clearly appears in the

aforementioned Transfer Certificates of Title. He did not attempt, as the petitioner

would imply, to inquire into and try to resolve conflicting allegations of the
claimants of the aforesaid property.
The Land Registration Authority in its assailed resolution had aptly pointed out
that petitioner Villanueva had not produced a board resolution of Filipinas Textile
Mills, Inc. authorizing him to take possession of the litigated property. Hence,
although it may be conceded that Villanueva is in possession thereof, it would
appear that his possession is illegal which would not result in vesting in him any
right or interest over the above-cited property. As far as the said property is
concerned, Villanueva is a third person, a stranger. There could be no dispute as to
the fact that Filipinas Textile Mills, Inc. (in the name of which the contested
parcels of land are registered) and Villanueva are, before the law, two separate and
distinct persons. Indubitably Villanueva is not Filipinas Textiles Mills, Inc.
The Courts Ruling
The petition is meritorious.

Sole Issue: Registration of Lis Pendens

Who May Register Notice of Lis Pendens?
Petitioner contends that a notice of lis pendens may be filed in relation to actions
affecting the title to or possession of real property. In the instant petition, defendants
in Civil Case No. 92-2358, among whom is petitioner, repeatedly and emphatically
allege that it is Filipinas Textile Mills, Inc. (FTMI), of which petitioner is a stockholder,
which owns the properties in question. Thus, an affirmative relief of ownership is
prayed for in the answer which sanctions registration of the notice of lis pendens.[10]
Private Respondent Oo Kian Tiok counters10 that the errors and arguments raised
in the petition at bar are mere repetitions of those already discussed in [the] petition
for review submitted before Respondent Court, which the latter had already
considered, weighed and resolved adversely to the herein petitioner. [11]
The Solicitor General, on the other hand, asserts:[12]

Based on the incontrovertible facts, the notice of lis pendens requested by

petitioner to be annotated on the back of the aforesaid certificates of title is not
registrable, because the registration will affect the property obviously not
belonging to petitioner, who is one of the defendants in Civil Case No. 92-2358
filed before the Regional Trial Court of Antipolo, Branch 74. It has been
consistently held by public respondent LRA, as in Consulta No. 430, Pedro del
Rosario, petitioner versus the Register of Deeds of Quezon City, respondent, and in
Consulta No. 146, the Register of Deeds of Sorsogon, petitioner, that a notice of lis

pendens is not registrable if it seeks to affect property not belonging to the

defendant.
The notice of lis pendens is an announcement to the whole world that a particular
real property is in litigation, and serves as a warning that one who acquires an interest
over said property does so at his own risk, or that he gambles on the result of the
litigation over said property.[13] The registration of a notice of lis pendens is governed
by Section 24, Rule 14 of the Rules of Court:[14]

Sec. 24. Notice of lis pendens. In an action affecting the title or the right of
possession of real property, the plaintiff, at the time of filing the complaint, and the
defendant, at the time of filing his answer, when affirmative relief is claimed
in such answer, or at any time afterwards, may record in the office of the registrar
of deeds of province in which the property is situated a notice of the pendency of
the action, containing the names of the parties and the object of the action or
defense, and a description of the property in that province affected thereby. From
the time only of filing such notice for record shall a purchaser, or incumbrancer of
the property affected thereby, be deemed to have constructive notice of the
pendency of the action, and only of its pendency against parties designated by their
real names.
The notice of lis pendens hereinabove mentioned may be cancelled only upon
order of the court, after proper showing that the notice is for the purpose of
molesting the adverse party, or that it is not necessary to protect the rights of the
party who caused it to be recorded.
In Magdalena Homeowners Association, Inc. vs. Court of Appeals,[15] this Court
enumerated the cases where a notice of lis pendens is proper:

According to Section 24, Rule 14 of the Rules of Court and Section 76 of

Presidential Decree No. 1529, a notice of lis pendens is proper in the following
cases, viz.:
a) An action to recover possession of real estate;
b) An action to quiet title thereto;
c) An action to remove clouds thereon;
d) An action for partition; and
e) Any other proceedings of any kind in Court directly affecting the title to the land
or the use or occupation thereof or the buildings thereon.
The notice of lis pendens--i.e., that real property is involved in an action--is
ordinarily recorded without the intervention of the court where the action is

pending. The notice is but an incident in an action, an extrajudicial one, to be

sure. It does not affect the merits thereof. It is intended merely to constructively
advise, or warn, all people who deal with the property that they so deal with it at
their own risk, and whatever rights they may acquire in the property in any
voluntary action transaction are subject to the results of the action, and may well be
inferior and subordinate to those which may finally be determined and laid down
therein. The cancellation of such a precautionary notice is therefore also a mere
incident in the action, and may be ordered by the Court having jurisdiction of it at
any given time. And its continuance or removal--like the continuance or removal
of a preliminary attachment or injunction--is not contingent on the existence of a
final judgment in the action, and ordinarily has no effect on the merits thereof.
To annotate a notice of lis pendens, the following elements must be present: (a)
the property must be of such character as to be subject to the rule; (b) the court must
have jurisdiction both over the person and the res; and (c) the property or res involved
must be sufficiently described in the pleadings.[16]
Only the first requisite is at issue in this case; the second and the third requisites
are not. In explaining the first requirement, former Senator Vicente J. Francisco
wrote:[17]

x x x to all suits or actions which directly affect real property and not only those
which involve the question of title, but also those which are brought to establish an
equitable estate, interest, or right, in specific real property or to enforce any lien,
charge, or encumbrance against it, there being in some cases a lis pendens,
although at the commencement of the suit there is no present vested interest, claim,
or lien in or on the property which it seeks to charge. It has also been held to apply
in the case of a proceeding to declare an absolute deed a mortgage, or to redeem
from a foreclosure sale, or to establish a trust, or to suits for the settlement and
adjustment of partnership interests. [fn: 54 C.J.S., 577-578]
It is not sufficient that the title or right of possession may be incidentally
affected. Thus a proceeding to forfeit the charter of a corporation does not deprive
it of the power to dispose of its property, nor does it place such property within the
rule of lis pendens, so that purchasers thereof may lose the property or right to the
possession through the appointment of a receiver. [fn: Havemeyer vs. Superior
Court, 84 Cal. 327, 18 Am. St. Rep. 192, 24 Pac. 121, 10 L.R.A. 627 x x x]
In order that the doctrine of lis pendens may apply, so that purchaser of property
may be bound by the judgment or decree rendered, it is essential that there be in
existence a pending action, suit or proceeding, and there can be no lis pendens
because of the fact that an action or suit is contemplated. [fn: 54 C.J.S., 583]
Civil Case No. 92-2358, which petitioner sought to annotate, is an action for
recovery of possession and damages with prayer for writ of preliminary mandatory
injunction and/or temporary restraining order. That civil case is an accion publiciana or
a plenary action in an ordinary civil proceeding to determine the better and legal right

to possess (independently of title).19 What private respondent sought to recover was

not just possession de facto but possession de jure.20 On the other hand, the
defendants in Civil Case No. 92-2358 alleged in their answer that there was fraud
committed among Bernardino Villanueva, Equitable Banking Corporation and
Respondent Oo Kian Tiok, such that the real estate mortgage was invalid. Hence, the
subsequent auction of the mortgaged property transferred no right, title and interest
whatsoever to Equitable Bank as the highest bidder and thence to private respondent
as buyer. In effect, the defendants in the civil case directly opposed the recovery of
possession prayed for by the plaintiff and in fact challenged the very validity of the title
of private respondent. Both contentions of the parties thus directly put the properties
under the coverage of the rule, thereby sufficiently satisfying the first requisite and
placing the case squarely within the parameters set by Magdalena.21
In our jurisdiction, the following may file a notice of lis pendens:22

(a) The plaintiff -- at the time of filing the complaint.

(b) The defendant -1) at the time of filing his answer (when affirmative relief is claimed in
such answer)
2) or at any time afterwards (See Sec. 24, Rule 14)
Petitioner is one of the defendants in Civil Case No. 92-2358.23 Now, is it necessary
for him to prove to the Register of Deeds that the properties to which he seeks
annotation of the notice of lis pendens belong to him as required by Respondent
Court? We do not believe so. The law does not require such proof from the
defendant. We cannot find any valid reason why we should add to the requirements
set in the Rules. The settled doctrine in statutory construction is that legal intent is
determined principally from the language of the statute. Where the language of a
statute is clear and unambiguous, the law is applied according to its express terms,
and interpretation would be resorted to only where a literal interpretation would be
either impossible or absurd or would lead to an injustice.24
We stress that although it is not necessary for the applicant to prove his
ownership or interest over the property sought to be affected by lis pendens, the
applicant must, in the complaint or answer filed in the subject litigation, assert a claim
of possession or title over the subject property in order to give due course to his
application. As settled, lis pendens may be annotated only where there is an action or
proceeding in court, which affects the title to, or possession of, real property.25
Be it remembered that a notation of lis pendens does not create a nonexistent
right or lien. It serves merely as a warning to a person who purchases or contracts on
the subject property that he does so at his peril and subject to the result of the pending
litigation.26 The registration of the notice of lis pendens is done without leave of
court. The Rule merely requires an affirmative relief to be claimed in the answer to
enable a defendant to apply for the annotation of the notice.27 There is no requirement
that the applying defendant must prove his right or interest over the property sought
to be annotated. In deciding the issue of whether the application by petitioner is
registerable, Respondent Court concluded: it would appear that his possession is

illegal which would not result in vesting in him any right or interest over the above-cited
properties.28 This conclusion of Respondent Court was premature, as it preempted the
trial on the merits of the main case sought to be registered.
On the other hand, an affirmative relief or defense is an allegation of a new matter
which, while admitting, expressly or impliedly, the material allegations of the complaint
would nevertheless prevent or bar recovery by the plaintiff. Affirmative defenses
include fraud, statute of limitations, release, payment, illegality, statute of frauds,
estoppel, former recovery, discharge in bankruptcy, and other matters alleged by way
of confession and avoidance.29 An affirmative defense may be an allegation of new
matters -- that is, facts different from those averred by the plaintiff which, if true,
destroys or negates the plaintiffs right of action. An affirmative defense admits the
facts alleged by the plaintiff, or at least those not necessarily denied by the
interposition of the affirmative defense itself. Even though an affirmative defense
contains allegations inconsistent with those of the complaint, the latter must, in the
absence of denials, nevertheless be taken as admitted in the defense.30 In the case at
bar, the defendants in Civil Case No. 92-2358 insist that fraud attended the agreement
among Bernardino Villanueva, Equitable Banking Corporation and Respondent Oo
Kian Tiok. Such fraud, if proven true, will defeat or bar the claim of said respondent
and benefit the defendants.
Petitioner in this case was impleaded by private respondent as one of the
defendants in the trial court; thus, he falls under the definition of the Rules as a party
claiming affirmative relief. His status as a mere stockholder can no longer be
questioned in this case, much less his capacity to sue on the mere pretext that he was
not authorized by the corporation to litigate on its behalf. We emphasize that the issue
at bar is the right to annotate the pendency of Civil Case No. 92-2358, not the legal
standing of petitioner to represent the corporation in the said case.
Wary that the properties which were mortgaged and auctioned would be
dissipated and/or passed to innocent purchasers for value, petitioner initiated the
move to annotate the lis pendens to protect the corporations right. He correctly acted,
considering that there was, as alleged by private respondent, an intra-corporate
controversy which effectively barred a common action by the management of the
corporation.31
In any event, a reading of the allegations in the answer will readily show that
defendants (herein petitioner included) were not merely asserting a right of possession
over the disputed properties. Rather, they were insisting on their ownership over the
said real estate, claiming that plaintiff (herein private respondent) was not entitled at
all to their possession, because he did not have any right, title or interest whatsoever
over them.32 The following allegations in the answer illustrate the claim of petitioner for
affirmative relief:33

Answering Defendants, for the reasons and facts stated herein and in their
Affirmative Allegations and Affirmative Defenses, specifically deny the following
allegations in the original Complaint dated 08 May 1992:
xxxxxxxxx

3.3.1. The compound located on Amang E. Rodriguez Avenue, Barangay San

Roque, Cainta, Rizal is owned by
plaintiff, the truth being that such compound is owned by defendant FTMI being
covered by the titles of the Subject Properties which are registered in the name of
defendant FTMI;
xxxxxxxxx

3.3.4. The compound located on Amang E. Rodriguez Avenue, Barangay San

Roque, Cainta, Rizal was being unlawfully occupied by defendants Daniel
Villanueva, Terry Villanueva-Yu, Susan Villanueva, Eden Villanueva, Frankie
Villanueva, Artemio Tuquero, Mel P. Dimat and Bienvenido Bulaong, the truth
being that the occupation of the compound by said defendants was lawful because
they are duly elected and authorized directors, officers and/or representatives of
defendant FTMI which is the registered owner thereof;
3.4 Paragraph 5, insofar as it is alleged that:
3.4.1. Plaintiff is the lawful owner of three (3) parcels of land together with the
properties and improvements that may be found therein, situated in Barangay San
Roque, Cainta, Rizal, the truth being that plaintiff has no right, title and interest
whatsoever in the said properties; and
3.4.2. The Certification dated 06 April 1992 of Mr. Vicente A. Garcia, Register of
Deeds of Pasig, attached as Annex B to the Complaint proves that plaintiff Oo
Kian Tiok purchased the rights and interests over the titles of defendant FTMI
from EBC, the truth being that such a Certification merely shows that defendant
Bernardino Villanueva connived and colluded with EBC and plaintiff whereby the
Subject Properties were illegally mortgaged, and then sold at public auction
auction [sic] in favor of EBC, and thereafter allegedly purchased by Oo Kian Tiok
through a Redemption Contract;
3.5 Paragraph 6, in so far as it is made to appear that defendant FTMI is the
former-owner of the three (3) lots covered by T.C.T. Nos. 262631, 273873, and
277938 of the Registry of Deeds for the Province of Rizal, the truth being that
defendant FTMI remains as the registered owner of the aforementioned three (3)
lots;
3.6 Paragraph 7, insofar as it is alleged, that:
3.6.1 Defendant FTMI obtained a loan of Twenty Five Million Pesos
(P25,000,000.00) from EBC, the truth being that the loan purportedly obtained by
defendant Bernardino Villanueva ostensibly on behalf of defendant FTMI was not
duly authorized by defendant FTMIs board of directors, and thus not binding upon
defendant FTMI;

3.6.2 Defendant FTMI mortgaged the Subject Properties, with all the buildings,
improvements, machineries and equipment thereon, to EBC on 14 July 1982, the
truth being that the alleged mortgage was never authorized by defendant FTMIs
board of directors and therefore, not binding upon defendant FTMI;
xxxxxxxxx

3.8 Paragraph 10, insofar as it is stated that defendant FTMI had one (1) year from
01 August 1988, or until 01 August 1989, to redeem the Subject Properties, the
truth being that since the Subject Properties were never validly mortgaged nor
foreclosed, there was, in reality, no period within which to redeem the Subject
Properties.
xxxxxxxxx

3.12. Paragraph 15, insofar as it is made to appear that:

3.12.1. The action taken on 04 April 1992 is merely an offshoot of an intracorporate controversy between the owners and stockholders of defendant FTMI,
the truth being that the action taken on 04 April 1992 was a valid exercise by
defendant FTMI and/or its authorized representatives of its power of
administration over its own properties;
3.12.2. Plaintiff is an innocent bystander and is allegedly being helplessly dragged
into the controversy, the truth being that plaintiff is conniving and colluding with
defendant Bernardino Villanueva in order to wrest ownership and possession of the
Subject Properties from its registered owner, defendant FTMI, in order to favor
defendant Bernardino Villanueva;
To require that an applicant must prove his ownership or his interest over the
property sought to be affected with the notice of lis pendens will unduly restrict the
scope of the rule. In such case, a party questioning the ownership of the registered
owner will litigate his or her case without an assurance that the property will be
protected from unwanted alienation during the pendency of the action, thereby
defeating the very purpose and rationale of the registration.
WHEREFORE, the petition is hereby GRANTED. The assailed Decision
is REVERSED and SET ASIDE. The
Land
Registration
Authority
is
hereby ORDERED to annotate the application for a notice of lis pendens in TCT Nos.
262631, 273873 and 277938. No costs.
SO ORDERED.
Romero, Melo, and Francisco, JJ., concur.
Narvasa, C.J., (Chairman), on official leave.

2. Equitable Card Network vs. Capistrano

EQUITABLE CARDNETWORK, INC., G.R. No. 180157

Petitioner,
Present:
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
JOSEFA BORROMEO CAPISTRANO,
Respondent. Promulgated:
February 8, 2012
x --------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:

This case is about the sufficiency of the defendants allegations in the answer
denying the due execution and genuineness of the plaintiffs actionable documents
and the kind of evidence needed to prove forgery of signature.
The Facts and the Case
Petitioner Equitable Cardnetwork, Inc. (ECI) alleged in its complaint that in
September 1997 respondent Josefa B. Capistrano (Mrs. Capistrano) applied for
membership at the Manila Yacht Club (MYC) under the latters widowmembership program. Since the MYC and ECI had a credit card sponsorship
agreement in which the Club would solicit for ECI credit card enrollment among
its members and dependents, Mrs. Capistrano allegedly applied for and was
granted a Visa Credit Card by ECI.
ECI further alleged that Mrs. Capistrano authorized her daughter, Valentina C.
Redulla (Mrs. Redulla), to claim from ECI her credit card and ATM application
form.[1] Mrs. Redulla signed the acknowledgment receipt[2] on behalf of her

mother, Mrs. Capistrano. After Mrs. Capistrano got hold of the card, she
supposedly started using it. On November 24, 1997 Mrs. Redulla personally
issued a P45,000.00 check as partial payment of Mrs. Capistranos account with
ECI. But Mrs. Redullas check bounced upon deposit.
Because Mrs. Capistrano was unable to settle her P217,235.36 bill, ECI
demanded payment from her. But she refused to pay, prompting ECI to file on
February 30, 1998 a collection suit against her before the Regional Trial Court
(RTC) of Cebu City.
Answering the complaint, Mrs. Capistrano denied ever applying for MYC
membership and ECI credit card; that Mrs. Redulla was not her daughter; and that
she never authorized her or anyone to claim a credit card for her. Assuming she
applied for such a card, she never used it. Mrs. Redulla posed as Mrs. Capistrano
and fooled ECI into issuing the card to her. Consequently, the action should have
been brought against Mrs. Redulla. Mrs. Capistrano asked the court to hold ECI
liable to her for moral and exemplary damages, attorneys fees, and litigation
expenses.
After trial, the RTC[3] ruled that, having failed to deny under oath the genuineness
and due execution of ECIs actionable documents that were attached to the
complaint, Mrs. Capistrano impliedly admitted the genuineness and due
execution of those documents. In effect she admitted: 1) applying for
membership at the MYC;[4] 2) accomplishing the MYC membership information
sheet[5] which contained a request for an ECI Visa card; 3) holding herself liable
for all obligations incurred in the use of such card; 4)authorizing Mrs. Redulla to
receive the Visa card issued in her name;[6] 5) applying for an ATM Card with
ECI; [7] and 6) using the credit card in buying merchandise worthP217,235.36 as
indicated in the sales slips.
The RTC said that when an action is founded upon written documents, their
genuineness and due execution shall be deemed admitted unless the defendant
specifically denies them under oath and states what he claims to be the facts.[8] A

mere statement that the documents were procured by fraudulent representation

does not raise any issue as to their genuineness and due execution. [9] The RTC
rejected Mrs. Capistranos argument that, having verified her answer, she should
be deemed to have denied those documents under oath. The RTC reasoned that
she did not, in her verification, deny signing those documents or state that they
were false or fabricated.
The RTC added that respondent Mrs. Capistrano could no longer raise the defense
of forgery since this had been cut-off by her failure to make a specific
denial. Besides, said the RTC, Mrs. Capistrano failed to present strong and
convincing evidence that her signatures on the document had been forged. She
did not present a handwriting expert who could attest to the forgery. The trial
court ordered Mrs. Capistrano to pay ECIs claim of P217,235.36 plus interests,
attorneys fees and litigation expenses. Mrs. Capistrano appealed the decision to
the Court of Appeals (CA).
On May 10, 2007 the CA reversed the trial courts decision and dismissed ECIs
complaint.[10] The CA ruled that, although Mrs. Capistranos answer was
somewhat infirm, still she raised the issue of the genuineness and due execution
of ECIs documents during trial by presenting evidence that she never signed any
of them. Since ECI failed to make a timely objection to its admission, such
evidence cured the vagueness in her answer. Further, the CA ruled that Mrs.
Capistrano sufficiently proved by evidence that her signatures had been forged.
The Issues Presented
The issues presented are:
1. Whether or not the CA correctly ruled that, although Mrs. Capistrano failed to
make an effective specific denial of the actionable documents attached to the
complaint, she overcame this omission by presenting parol evidence to which ECI
failed to object; and

2. Whether or not the CA correctly ruled that Mrs. Capistrano presented clear and
convincing evidence that her signatures on the actionable documents had been
forged.
Ruling of the Court
One. An answer to the complaint may raise a negative defense which consists in
defendants specific denial of the material fact that plaintiff alleges in his
complaint, which fact is essential to the latters cause of action.[11] Specific denial
has three modes. Thus:
1) The defendant must specify each material allegation of fact the
truth of which he does not admit and whenever practicable set forth
the substance of the matters on which he will rely to support his
denial;
2) When the defendant wants to deny only a part or a qualification
of an averment in the complaint, he must specify so much of the
averment as is true and material and deny the remainder; and
3) When the defendant is without knowledge and information
sufficient to form a belief as to the truth of a material averment made
in the complaint, he shall so state and this shall have the effect of a
denial.
But the rule that applies when the defendant wants to contest the documents
attached to the claimants complaint which are essential to his cause of action is
found in Section 8, Rule 8 of the Rules of Court, which provides:
SECTION 8. How to contest such documents. When an action or defense is
founded upon a written instrument, copied in or attached to the corresponding
pleading as provided in the preceding Section, the genuineness and due
execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denies them, and sets forth what he claims to be the
facts; but the requirement of an oath does not apply when the adverse party does
not appear to be a party to the instrument or when compliance with an order for
an inspection of the original instrument is refused.

To determine whether or not respondent Mrs. Capistrano effectively denied the

genuineness and due execution of ECIs actionable documents as provided above,
the pertinent averments of the complaint and defendant Capistranos answer are
here reproduced.
ECIs complaint:
3. That sometime in 1997, defendant applied for membership, as widow of a
deceased member of the Manila Yacht Club;
4. That in connection with her application for membership in the Manila Yacht
Club, defendant applied for and was granted a Manila Yacht Club Visa Card in
accordance with Credit Card Sponsorship Agreement entered into between the
plaintiff and the Manila Yacht Club wherein Manila Yacht Club shall solicit
applications for the Manila Yacht Club Visa Cards from Manila Yacht Club
members and dependents. Copy of the Manila Yacht Club Information Sheet is
hereto attached as Annex A;

Mrs. Capistranos answer:

3. She specifically denies paragraph[s] 3 and 4 of the complaint for want of
sufficient knowledge to form a belief as to the veracity of the allegations
contained therein and for the reasons stated in her special and affirmative
defenses.
xxxx
ECIs complaint:
5. That defendant authorized her daughter, Mrs. Valentina Redulla to get the
said credit card including her ATM application form from the plaintiff which
enabled the defendant to avail of the cash advance facility with the use of said
card; Copy of the authorization letter, application form and acknowledgment
receipt showing that Valentina C. Redulla received the said credit card are
hereto attached as Annexes B, C, and D, respectively;
Mrs. Capistranos answer:
4. She specifically denies paragraph 5 of the complaint for want of sufficient
knowledge to form a belief as to the allegations contained therein. She never
authorized any person to get her card.Valentina Redulla is not her daughter.
xxxx
ECIs complaint:
6. That with the use of the said Manila Yacht Club Visa Card, defendant could
purchase goods and services from local and accredited stores and
establishments on credit and could make cash advances from ATM machines
since it is the plaintiff who pays first the said obligations and later at a stated
period every month, the plaintiff will send a statement of account to defendant

showing how much she owes the plaintiff for the payments it previously made
on her behalf. Copy of the monthly statement of accounts for the months of
November and December 1997 are hereto attached as Annexes E and F,
respectively;
Mrs. Capistranos answer:
5. She specifically denies paragraph 6 of the complaint for want of sufficient
knowledge to form a belief as to the veracity of the allegations contained therein
and for the reasons as stated in her special and affirmative defenses.
xxxx
ECIs complaint:
7. That it is the agreement of the parties that in the event that an account is
overdue, interest at 1.75% per month and service charge at 1.25% will be
charged to the defendant;
Mrs. Capistranos answer:
6. She specifically denies paragraph 7 of the complaint for want of sufficient
knowledge to form a belief as to the veracity of the allegations contained
therein.
xxxx
ECIs complaint:
8. That on November 24, 1997, defendants daughter, Mrs. Valentina C. Redulla
issued Solidbank Check No. 0127617 dated November 24, 1997 in the amount
of P45,000.00 in partial payment of defendants account with the plaintiff;
9. That when the said check was deposited in the bank, the same was dishonored
for the reason Account Closed. Copy of said said check is hereto attached as
Annex G;
Mrs. Capistranos answer:
7. She denies paragraph[s] 8 and 9 for want of sufficient knowledge to form a
belief as to the veracity of the allegations contained therein and for the reasons
aforestated. It is quite peculiar that herein defendants alleged account would be
paid with a personal check of somebody not related to her.
xxxx
ECIs complaint:
10. That defendant has an unpaid principal obligation to the plaintiff in the
amount of P217,235.326;
Mrs. Capistranos answer:
8. She denies paragraph 10 for want of sufficient knowledge as to the veracity
of the allegations contained therein and for the reasons stated in her special and
affirmative defenses. Granting ex gratia argumenti that defendant did indeed

apply for a card, still, she vehemently denies using the same to purchase goods
from any establishment on credit.
xxxx
ECIs complaint
11. That plaintiff made demands on the defendant to pay her obligation but
despite said demands, defendant has failed and refused to pay her obligation
and still fails and refuses to pay her obligation to the plaintiff and settle her
obligation, thus, compelling the plaintiff to file the present action and hire the
services of counsel for the amount of P53,998.84 and incur litigation expenses
in the amount of P30,000.00;
12. That it is further provided as one of the terms and conditions in the issuance
of the Manila Yacht Club Card that in the event that collection is enforced
through court action, 25% of the amount due of P53,998.84 will be charged as
attorneys fees and P53,998.84 will be charged as liquidated damages;
Mrs. Capistranos answer
9. She denies paragraph[s] 11 and 12 for want of sufficient knowledge to form
a belief as to the veracity of the allegations therein. If ever there was any
demand sent to herein defendant the same would have been rejected on valid
and lawful grounds. Therefore, any damage or expense, real or imaginary,
incurred or sustained by the plaintiff should be for its sole and exclusive
account.
xxxx

Further, Mrs. Capistranos special and affirmative defenses read as follows:

10. Defendant repleads by reference all the foregoing allegations which are
relevant and material hereto.
11. Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.
12. She has never authorized anyone to get her alleged card for the preceding
reason. Therefore, being not a member, she has no obligation, monetary or
otherwise to herein plaintiff.
13. Plaintiff has no cause of action against herein answering defendant.
14. This Valentina C. Redulla is not her daughter. In all modesty, defendant
being a member of one of the prominent families of Cebu and being a board
member of the Borromeo Brothers Estate whose holdings include Honda Cars
Cebu as well as other prestigious establishments, it would be totally uncalled
for if she would not honor a valid obligation towards any person or entity.

15. She surmises that this Valentina Redulla has been posing as Josefa
Capistrano. Therefore, plaintiffs cause of action should have been directed
towards this Redulla.
16. Even granting for the sake of argument that herein answering defendant did
indeed authorized somebody to pick up her card, still, she never made any
purchases with the use thereof. She, therefore, vehemently denies having used
the card to purchase any merchandise on credit.

In substance, ECIs allegations, supported by the attached documents, are that

Mrs. Capistrano applied through Mrs. Redulla for a credit card and that the former
used it to purchase goods on credit yet Mrs. Capistrano refused to pay ECI for
them. On the other hand, Mrs. Capistrano denied these allegations for lack of
knowledge as to their truth.[12]This mode of denial is by itself obviously
ineffectual since a person must surely know if he applied for a credit card or not,
like a person must know if he is married or not. He must also know if he used the
card and if he did not pay the card company for his purchases. A persons denial
for lack of knowledge of things that by their nature he ought to know is not an
acceptable denial.
In any event, the CA ruled that, since ECI did not object on time to Mrs.
Capistranos evidence that her signatures on the subject documents were forged,
such omission cured her defective denial of their genuineness and due
execution. The CAs ruling on this point is quite incorrect.
True, issues not raised by the pleadings may be tried with the implied consent of
the parties as when one of them fails to object to the evidence adduced by the
other concerning such unimpleaded issues.[13] But the CA fails to reckon with the
rule that a partys admissions in the course of the proceedings, like an admission
in the answer of the genuineness and true execution of the plaintiffs actionable
documents, can only be contradicted by showing that defendant made such
admission through palpable mistake.[14]Here, Mrs. Capistrano never claimed
palpable mistake in the answer she filed.

It is of no moment that plaintiff ECI failed to object to Mrs. Capistranos evidence

at the trial that the subject documents were forgeries. As the Court ruled in Elayda
v. Court of Appeals,[15] the trial court may reject evidence that a party adduces to
contradict a judicial admission he made in his pleading since such admission is
conclusive as to him. It does not matter that the other party failed to object to the
contradictory evidence so adduced.
Notwithstanding the above, the Court holds that the CA correctly ordered the
dismissal of ECIs action since, contrary to the RTCs finding, Mrs. Capistrano
effectively denied the genuineness and due execution of ECIs actionable
documents. True, Mrs. Capistrano denied ECIs actionable documents merely for
lack of knowledge which denial, as pointed out above, is inadequate since by their
nature she ought to know the truth of the allegations regarding those
documents. But this inadequacy was cured by her quick assertion that she was
also denying the allegations regarding those actionable documents for the reasons
as stated in her special and affirmative defenses.
In the Special and Affirmative Defenses section of her answer, Mrs. Capistrano
in fact denied ECIs documented allegations that she applied for a credit card, was
given one, and used it. She said:
11. Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.
12. She has never authorized anyone to get her alleged card for the preceding
reason. Therefore, being not a member, she has no obligation, monetary or
otherwise to herein plaintiff.

Neither the RTC nor the CA can ignore Mrs. Capistranos above additional
reasons denying ECIs allegations regarding its actionable documents. Such
reasons form part of her answer. Parenthetically, it seems that, when Mrs.
Capistrano denied the transactions with ECI for lack of knowledge, it was her
way of saying that such transactions took place without her knowing. And, since
Mrs. Capistrano in fact verified her claim that she had no part in those
transactions, she in effect denied under oath the genuineness and due execution

of the documents supporting them. For this reason, she is not barred from
introducing evidence that those documents were forged.
Two. Here, apart from presenting an officer who identified its documents, ECI
presented no other evidence to support its claim that Mrs. Capistrano did business
with it. On the other hand, the evidence for the defense shows that it was not
likely for Mrs. Capistrano to have applied for a credit card since she was already
81 years old, weak, bedridden, and suffering from senility at the time in
question.[16] What is more, she had been staying in Cagayan de Oro under the care
of his son Mario; whereas she made the alleged cash advances and purchases
using the credit card in different malls in Cebu City, Bohol,
and Muntinlupa City.[17]
Further, as the CA found, Mrs. Capistranos specimen signatures on a Deed of
Sale,[18] an Extra-judicial Settlement of Estate of Deceased Person,[19] a Waiver
of Rights,[20]and a handwritten note,[21] executed at about the time in question,
clearly varied from the signatures found on ECIs documents.[22] The testimony of
a handwriting expert, while useful, is not indispensable in examining or
comparing handwritings or signatures.[23] The matter here is not too technical as
to preclude the CA from examining the signatures and ruling on whether or not
they are forgeries. The Court finds no reason to take exception from the CAs
finding.
WHEREFORE, the Court DISMISSES the petition and AFFIRMS the order
of the Court of Appeals in CA-G.R. CV 79424 dated May 10, 2007 that directed
the dismissal of the complaint against respondent Josefa B. Capistrano.
SO ORDERED.

B. Specific Denials
3. Warner Barnes vs. Reyes

G.R. No. L-9531

May 14, 1958

WARNER BARNES and CO., LTD., plaintiff-appellee,

vs.
GUILLERMO C. REYES, ET AL., defendants-appellants.
Ozaeta, Lichauco and Picazo for appellee.
Mariano M. de Joya for appellants.
PARAS, C.J.:
The plaintiff-appellee filed against the defendants-appellants an action for foreclosure of
mortgage on August 20, 1954. The deed of mortgage sued upon was attached to the complaint
as Annex "A". After having been granted an extension, the appellants filed an answer on
September 30, 1954, alleging:
1. That they admit paragraph 1 of the complaint;
2. That the defendants are without knowledge or information sufficient to form a belief as
to the truth of the material averments of the remainder of the complaint; and
3. That they hereby reserve the right to present an amended answer with special
defenses and counterclaim.
As the appellants did not file any amended answer, the appellee moved on November 15, 1954
for judgment on the pleadings on the ground that the answer failed to tender an issue. The lower
court granted appellee's motion in the order dated December 28, 1954 and thereafter (on
December 29, 1954) rendered judgment in favor of the appellee. In granting the motion for
judgment on the pleadings, the lower court held "that the denial by the defendants of the material
allegations of the complaint under the guise of lack of knowledge is a general denial so as to
entitle the plaintiff to judgment on the pleadings."
In the present appeal taken by the defendants, the question raised is whether the allegation of
want of knowledge or information as to the truth of the material averments of the complaint
amounts to a mere general denial warranting judgment on the pleadings or is sufficient to tender
a triable issue.
Section 7 of Rule 9 of the Rules of court, in allowing the defendant to controvert material
averments not within his knowledge or information, provides that "where the defendant is without
knowledge or information sufficient to form a belief as to the truth of material averment, he shall
so state and this shall have the effect of a denial. This form of denial was explained in one case
as follows:
Just as the explicit denials of an answer should be either general or specific, so all
denials of knowledge or information sufficient to form a belief should refer either generally
to all the averments of the complain" thus intended to be denied, or specifically to such
as are to be denied by that particular form of plea. The would be so definite and certain in
its allegation that the pleaders' adversary should not be left in doubt as to what is
admitted, what is denied, and what is covered by denials of knowledge or information

sufficient to form a belief. Under this form of denial employed by the defendant, it would
be difficult, if not impossible to convict him of perjury if it should transpire that some of his
denials of knowledge, etc., were false, for he could meet the charge by saying that his
denials referred only to matters of which he had in fact no knowledge or information.
(Kirachbaum Eschmann, 98 NE 328, 329-330.).
This is a foreclosure suit. It is alleged that the severally indebted in the sum of P9,906.88,
secured by a mortgage. A copy of the mortgaged deed was attached and made a part of the
complaint. There are also allegations of partial payments, defaults in the payment of outstanding
balance, and a covenant to pay interest and attorney's fees. It is hard to believe that the
appellants could not have had knowledge or information as to the truth or falsity of any of said
allegations. As a copy of the deed of mortgage formed part of the complaint, it was easy for and
within the power of the appellants, for instance, to determine and so specifically allege in their
answer whether or not they had executed the alleged mortgage. The appellants could be aided in
the matter by an inquiry or verification as to its registration in the Registry of Deeds. "An
unexplained denial of information and belief of a matter of records, the means of information
concerning which are within the control of the pleader, on are readily accessible to him, is
evasive and is insufficient to constitute an effective denial. (41 Am. Juris., 399, citing
Dahlstrom vs. Gemunder, 92, NE 106.)
It is noteworthy that the answer was filed after an extension granted by the lower court, and that
while a reservation was made to file an amended answer, no such pleading was presented. If
these show anything, it is that the appellants obviously did not have any defense or wanted to
delay the proceedings.
The form of denial adopted by the appellants, although allowed by the Rules of Court, must be
availed of with sincerity and in good faith,certainly neither for the purpose of confusing the
adverse party as to what allegations of the complaint are really put in issue nor for, the purpose
of delay.
. . . no court will permit its process to be trifled with and its intelligence affronted by the
offer of pleadings which any reasoning person knows can not possibly be true. . . ."The
general rule that the Court is not bound to accept statements in pleadings which are, to
the common knowledge of all intelligent persons, untrue, applies just as well to the
provisions of Rule 8(b), 28 U.S.C.A. following section 723c, as to pleadings under the,
State statute." (Nieman vs. Long, 51 F. Supp. 30, 31.)
This rule, specifically authorizing an answer that defendant has no knowledge or
information sufficient to form a belief his to the truth of an averment and giving such
answer is not the effect of a denial, does not apply where the fact as to which want of
knowledge is asserted is to the knowledge of the court as plainly and necessarily within
the defendants knowledge that his averment of ignorance must be palpably untrue. (Icle
Plant Equipment Co. vs. Martocello, D.C. Pa. 1941, 43 F. Supp. 281.)
Wherefore, the decision appealed from is hereby affirmed with costs against the appellants. So
ordered.
Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Endencia, and Felix, JJ., concur.

4. PNB vs. Court of Appeals

PHILIPPINE NATIONAL BANK petitioner, vs. HONORABLE COURT

OF APPEALS, and ATTY. MORDENO CUA, respondents.
DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of

Court, as amended, filed by petitioner Philippine National Bank (PNB), of the
Decision dated July 22, 1996 of the Court of Appeals which reversed and
set aside the Decision of the Regional Trial Court, Cagayan de Oro City,
Branch 24 in Civil Case No. 90-423, an action for a sum of money filed
against the private respondent Atty. Mordeno Cua.
[1]

[2]

On September 6, 1990, the petitioner filed a complaint against the private

respondent with the Regional Trial Court, Cagayan de Oro City, Branch 24,
wherein it alleged, inter alia, that:
...
2. Sometime on December 18, 1985, the PNB thru its Cable Division received a
tested message from Manufacturers Hanover Trust Co., New York (Mantrust) to
remit proceeds in the amount $14,056.25 to Philippine National Bank, Cagayan de
Oro Branch under Account No. 16087. This message was implemented
on December 20, 1985 in the Peso Conversion rate of P262,793.04.
3. On December 26, 1985, after a thorough but futile search for Cagayan de Oro
Branch for Account No. 16087, PNB Manila was notified that the account was not
carried or maintained by Cagayan de Oro.With this Notice, it was later discovered
that said Account No. 16087 was carried with PCI Bank Cagayan de Oro in the
name of CENTER FOR ECONOMIC AND SOCIAL STUDIES with the
Defendant Mordeno Cua as the sole signatory.
4. With the discovery mentioned in the preceding paragraph, the PNB Cagayan de
Oro Branch transferred and delivered the amount of $14,056.25 to Account No.
16087 with the PCI Bank, Cagayan de Oro Branch and funds were withdrawn by
the defendant Mordeno Cua.
5. About the same time when the PNB Cagayan de Oro Branch transferred and
delivered the amount of $14,056.25 to the PCI Bank Cagayan de Oro Branch,
Mantrust rectified their tested message and recalled the fund stating that the money
was not intended for PNB. This recall Order was complied by PNB on January 21,
1986 thru telex message sent to Mantrust, New York.
6. Upon request for PCI Bank Cagayan de Oro to return the amount thus
transferred and delivered, the PNB was informed that the whole amount was

already withdrawn by Mordeno Cua, the sole signatory for the Center for
Economic and Social Studies.
7. Thereafter, requests both verbal and written were made upon the defendant
Mordeno Cua to restitute the amount of $14,056.25 but all efforts failed as
Mordeno Cua refused and continue to refuse to restitute or make necessary
arrangement for the restitution.
[3]

The petitioner, as plaintiff, prayed that after due proceedings, judgment

be rendered in its favor, thus:
WHEREFORE, premises considered, it is respectfully prayed that after due
hearing, the defendant be adjudged liable with PNB for:
1. The amount of P262,793.04 with interest until full payment;
2. Moral damages and legal fees in the amount as may be proven during
the trial;
3. Such other remedies as may be available under the premises.

[4]

In his Answer to the complaint, the private respondent, as defendant,

admitted to being the sole signatory to the account of the Center for
Economic and Social Studies (CESS) with Philippine Commercial Industrial
Bank (PCIB), Cagayan de Oro Branch. He, however, alleged that the
petitioner had no causes of action against him, and that he had no knowledge
sufficient to form a belief as to the truth of the allegations alleged in
paragraphs 2, 3, 5, 7, 8, and 9 of the complaint, the truth being that with
reference to paragraph 4 thereof, he never withdrew money from PCIB from
the fund transfer of the petitioner nor was he notified of the said fund transfer
to the account of CESS with the PCIB. The private respondent interposed
counterclaims for damages against the petitioner.
[5]

The petitioner adduced evidence that on December 18, 1985, the Head
Office of the Philippine National Bank (PNB) in Manila received a secret
coded message thru its Cable Division from Manufacturers Hanover Trust
Co., New York (Mantrust) directing the petitioner bank to remit the proceeds
in the amount of US$14,056.25 to PNB Cagayan de Oro Branch under
Account No. 16085 of CESS. The petitioner implemented the message
on December 20, 1985 at the prevailing peso conversion rate in the amount
of P262,793.04.
[6]

However, after thorough verification, it turned out that Account No. 16087
was not maintained with the PNB, Cagayan de Oro Branch. The latter
forthwith informed the petitioner of the said fact. Upon further verification, it
was found that the said account was maintained by the PCIB, Cagayan de
[7]

Oro Branch under the name of CESS, with private respondent Mordeno Cua
as sole signatory. At about the same time, Mantrust rectified its secret coded
message and recalled the fund, stating that the money was not intended for
PNB. This recall message was complied with by the petitioner on January
21, 1986 thru a telex message sent to Mantrust, New York. Written
demands were then sent to respondent Cua to return or restitute the amount,
but the latter failed to do so. After the petitioner rested its case, the private
respondent opted not to adduce evidence in his behalf. After due hearing,
the RTC rendered judgment in favor of the petitioner, the dispositive portion
of which reads:
[8]

[9]

WHEREFORE, premises considered, judgment is hereby rendered in favor of

plaintiff and against the defendant ordering the latter to pay the former the
following sums:
(a) P262,793.04 pesos equivalent of $14,056.25; and
(b) P662.00 for docketing fees.
[10]

The trial court ruled that the petitioner adduced the requisite quantum of
evidence to prove its claim against the private respondent.
On appeal, the Court of Appeals reversed the decision of the trial court,
holding that the petitioner failed to prove that the private respondent withdrew
the money remitted to the account of CESS with the PCIB, Cagayan de Oro
Branch by the PNB, Cagayan de Oro City Branch.
[11]

The petitioner avers in this case that the Court of Appeals erred in
reversing the decision of the trial court, and insists that:
THE CA CONCLUSION THAT THE TESTIMONIES AND EVIDENCE ON
RECORD ARE INSUFFICIENT TO PROVE THAT THE AMOUNT OF
REMITTANCE EQUIVALENT TO US$14,056.25 (P260,793.04) WAS INDEED
RECEIVED BY THE APPELLANT IS ERRONEOUS CONSIDERING THAT
THE PRIVATE RESPONDENTS FAILURE TO SPECIFICALLY DENY THE
ALLEGATION OF PETITIONER UNDER PARAGRAPH 6 OF THE
COMPLAINT CONSTITUTES A JUDICIAL ADMISSION BY PRIVATE
RESPONDENT THAT HE WITHDREW THE WHOLE AMOUNT OF
REMITTANCE TRANSFERRED BY PETITIONER TO PCIB FOR CREDIT TO
CESS ACCOUNT.
EVEN ASSUMING ARGUENDO THAT PARAGRAPH 6 OF THE
COMPLAINT CANNOT BE CONSIDERED JUDICIALLY ADMITTED BY
PRIVATE RESPONDENT, THE CA CONCLUSION THAT THE
TESTIMONIES AND EVIDENCE ON RECORD ARE INSUFFICIENT TO
PROVE THAT THE AMOUNT OF REMITTANCE WAS IN FACT CREDITED
INTO THE ACCOUNT OF CESS WITH PCIB IS ERRONEOUS

CONSIDERING THAT THE TESTIMONIES AND EVIDENCES ON RECORD

PARTICULARLY THE LETTER OF PETITIONER DATED AUGUST 10, 1988
ADDRESSED TO PRIVATE RESPONDENT, WHICH LETTER WAS
ADMITTED BY THE LOWER COURT AS EXHIBIT D, CLEARLY
ESTABLISHED THAT PCIB MANILA CREDITED TO FCDU ACCOUNT NO.
16087 OF CESS WITH THEIR CAGAYAN DE ORO BRANCH THE AMOUNT
OF US$14,114.33 (US$14,056.25).
[12]

Since the issues raised by the petitioner are interrelated, we shall delve
into and resolve them simultaneously.
The petitioner avers that the ruling of the CA, that it failed to adduce
sufficient evidence to prove the material allegations in its complaint, is
erroneous. According to the petitioner, the private respondent failed to
specifically deny the material allegations in paragraph 6 of the complaint,
and that the private respondents denial in paragraph E of his Answer to the
Complaint was an ineffective denial. Thus, the private respondent is deemed
to have admitted that he withdrew the amount for the account of CESS with
the PCIB. The reason for this, the petitioner contends, is that:
... [T]he information on whether Mordeno Cua actually withdrew the whole
amount of remittance from CESS account with PCIBank Cagayan de Oro is within
the knowledge or control of Mordeno Cua being the sole signatory to the said
CESS Account.
[13]

The private respondent, for his part, avers that he specifically denied
having withdrawn or received remittances by the petitioner to the account of
CESS with the PCIB, Cagayan de Oro Branch. The petitioner was burdened
to prove that (a) it remitted the amount of US$14,056.25 to the PCIB,
Cagayan de Oro Branch for the account of CESS; and that (b) the private
respondent withdrew the said amount. He asserts that while the petitioner
proved that the said amount was remitted to the account of CESS with the
PCIB, it failed to prove that he withdrew the said amount from the bank.
The petitioners contention has no merit.
Rule 8, Section 10 of the Rules of Court, as amended, require a
defendant to specify each material allegations of fact, the truth of which he
does not admit, and whenever practicable, to set forth the substance of the
matters upon which he relies to support his denial. Where a defendant
desires to deny part of an averment for a qualification thereof, he is
mandated to specify so much of the averment as true and material and shall
deny the remainder. If a defendant is without knowledge or information
sufficient to form a belief as to the truth of a material averment in the
complaint, he is bound to so state and this shall have the effect of a denial. In
such a case, it is indispensable that the matter regarding where lack of
[14]

knowledge is alleged be clearly set forth so that the adverse party is informed
of what is denied. The purpose of requiring the defendant to make a specific
denial is to make him disclose the matters alleged in the complaint which he
succinctly intends to disprove at the trial, together with the matter which he
relied upon to support the denial. The parties are compelled to lay their
cards on the table.
[15]

A denial is not specific simply because it is so qualified by the defendant.

A general denial does not become specific by the use of the word specifically.
When the matters of whether the defendant alleges having no knowledge or
information sufficient to form a belief, are plainly and necessarily within the
defendants knowledge, his alleged ignorance or lack of information will not
be considered as a specific denial. Section 11, Rule 8 of the said
Rule, provides that material averments in the complaint other than those as
to the amount of unliquidated damages shall be deemed admitted when not
specifically denied.
[16]

[17]

In his Answer to the complaint, the respondent alleged inter alia that:
A. Paragraph 1 of the complaint is ADMITTED.
B. Paragraphs 2 and 3 is (sic) DENIED, defendant has no knowledge sufficient to
form a belief as to the truth thereof except the averment that defendant is a
signatory for CENTER FOR ECONOMIC AND SOCIAL STUDIES for the bank
account of the latter at PCIBank.
C. Paragraph 4 is DENIED, the truth being that defendant never withdrew money
from PCIBank, from the funds transfer of plaintiff-bank nor notified of the fund
transfer thereof by plaintiff-bank.
D. For reason stated above, paragraph 5 is DENIED, defendant never knew of the
transaction between PCIBank and the plaintiff and the consequent rectification of
the so-called tested message from Mantrust Bank that the money was not intended
for the plaintiff.
E. Paragraph 6 is again DENIED, defendant has no business interfering bank-tobank transactions, that whether the Center for Economic and Social Studies
withdrew an amount at PCIBank is purely an exercise of a bank-to-client
relationship.
F. Paragraphs 7, 8 and 9 are DENIED, defendant has no knowledge sufficient to
form a belief as to the truth thereof; and as AFFIRMATIVE/SPECIAL
DEFENSES, defendant repleads the above statements and further aver;
G. That plaintiff has no cause of action against therein defendant.

H. Granting that there is a cause of action, the same is barred by prescription

and/or laches and/or estoppel; as COUNTERCLAIM, paragraph A to H are
repleaded and furthermore aver;
I. That this suit could have been avoided by the plaintiff had it exercise (sic) sound
banking practices and without being arrogant, reckless, grossly negligent, baseless
and irresolute which gravely caused irreparable injury to the rights of the defendant
as the latter is suffering untold misery, wounded feelings, moral shock, besmirched
reputation, sleepless nights, fright, serious anxiety and social humiliation, by
reason of this suit, which plaintiff be condemned to pay ONE MILLION PESOS as
moral damage and to caution other banking institution not to repeat this totally
erroneous case, the plaintiff be imposed and made to pay defendant exemplary
damage of the same amount, reasonable attorneys fees and costs of the suit.
[18]

Thus, in paragraph B, the private respondent denied the averments in

paragraph 3 of the complaint, including the averment that Account No. 16087
was carried with the PCIB, Cagayan de Oro Branch in the name of
CESS. Nevertheless, this denial was ineffective because such fact was
within the knowledge of the private respondent, being the signatory
thereto. The
defendants
denial
is,
thus,
equivalent
to
an
admission. Likewise, the private respondents failure to specifically deny, in
paragraph C of his Answer, the allegation in paragraph 4 of the complaint
that the PNB, Cagayan de Oro Branch transferred and delivered the amount
of US$14,056.25 to Account No. 16087 carried by the PCIB, Cagayan de
Oro Branch was equivalent to his admission of the truth thereof.
Undeniably, the private respondent did not specifically deny in paragraph
E of his Answer the material averment in paragraph 6 of the complaint, that
is, that the petitioner received information that the entire remittance of
US$14,056.25 had already been withdrawn by the private
respondent. However, such failure did not constitute as an admission that
the said amount was withdrawn by the private respondent. In Paragraph C
of his Answer to the averment in paragraph 4 of the complaint, the private
respondent specifically alleged that he never withdrew from the fund transfer
of the petitioner-Bank and that he was not notified of the fund transfer by the
petitioner to the PCIB, Cagayan de Oro Branch. The private respondents
admissions/denials in his Answer to the complaint should be considered in
their entirety and not truncated parts. In sum then, the petitioner was able to
prove that, indeed, the US$14,056.25 was remitted to PCIB Account No.
16087 under the name of CESS with the private respondent as the
depositors sole signatory. However, the petitioner failed to prove that the
private respondent withdrew the amount from the said account. We agree
with the private respondents contention that the petitioner was burdened to
prove not only that the amount was remitted to Account No. 16087, but also

that the private respondent withdrew the same in his capacity as the sole
signatory of the owner of the account.
The petitioners reliance on the letters is misplaced. The Letter
dated August 10, 1988 is merely a request for the private respondent to
furnish the petitioner with a copy of the request for funds from Mr. Konrad
Adenaver made by CESS. The Letter dated March 8, 1989 merely warned
the private respondent that he had thirty (30) days from receipt of the letter
within which to submit an acceptable proposal regarding the amount of
US$14,056.25, otherwise, the petitioner will initiate legal action. The
petitioner never claimed in the said letters that the private respondent had
withdrawn the amount, nor did it demand that the private respondent remit
the said amount to it. The petitioner even failed to adduce evidence that the
private respondent actually received the said letters.
[19]

IN THE LIGHT OF THE FOREGOING, the petition is DENIED. Costs

against the petitioner.
SO ORDERED.
Puno,
JJ., concur.

(Chairman), Quisumbing, Austria-Martinez, and Tinga,

5. Spouses Gaza vs. Lim

SPOUSES NAPOLEON L. GAZA and EVELYN GAZA, SPOUSES

RENATO PETIL and MELY PETIL, BRGY. SEC. VICTORIO A.
CONDUCTO and BRGY. TANOD ARTURO ALAON, petitioners,
vs. RAMON J. LIM and AGNES J. LIM, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:

The present petition for review on certiorari seeks to set aside the
Decision dated April 29, 1995 and the Resolution dated October 10, 1996 of
the Court of Appeals in CA-G.R. SP No. 36997 reversing the Decision of
the Regional Trial Court, Branch 63, Calauag, Quezon in Civil Case No. C1031 for forcible entry.
[1]

[2]

The factual milieu of this case is as follows:

On February 20, 1961, Napoleon Gaza purchased a parcel of land with
an area of 5,270 square meters located in Barangay Sta. Maria, Calauag,
Quezon, from Angeles Vda. de Urrutia. The Register of Deeds of Lucena

City then cancelled the latters title and issued Transfer Certificate of Title
(TCT) No. T-47263 in the name of Napoleon Gaza.
Thereafter, Napoleon Gaza and his wife Evelyn engaged in the lumber
and copra business. They constructed a huge lumber shed on the property
and installed engines, machinery and tools for a lumber mill. They also
utilized a portion of the property as storage for copra. In 1975, they ceased
engaging in business. They padlocked the gates of the property, leaving it to
the care of Numeriano Ernesto. When he died in 1991, spouses Gaza
designated Renato Petil as the new caretaker of the land.
On the other hand, Ramon and Agnes Lim, both half-siblings of Napoleon
Gaza, claimed that they have used the same lot for their lumber and copra
business since 1975, as shown by Lumber Certificate of Registration No.
2490, PCA Copra Business Registration No. 6265/76 and Mayor's Permit
dated December 31, 1976. Sometime in November 1993, they designated
Emilio Herrera as caretaker of the property.
On November 28, 1993, the padlock of the main gate was
destroyed. According to Napoleon Gaza, the siblings Ramon and Agnes Lim
and Emilio Herrera, entered the property by breaking the lock of the main
gate. Thereafter, they occupied a room on the second floor of the warehouse
without the consent of Renato Petil who was then outside the premises.
For their part, Ramon and Agnes Lim maintain that on November 28,
1993, spouses Gaza detained Emilio Herrera and his daughter inside the
compound and destroyed the padlocks of the gates. Thereafter, said
spouses forcibly opened Agnes Lim's quarters at the second floor of the
warehouse and occupied it.
On December 13, 1993, Ramon and Agnes Lim filed with the Municipal
Trial Court (MTC) of Calauag, Quezon an action for forcible entry against
spouses Napoleon and Evelyn Gaza, docketed as Special Civil Action No.
845.
On December 21, 1993, spouses Gaza filed with the same court their
answer with compulsory counterclaim.
On June 1, 1994, the MTC dismissed the complaint and counterclaim.
On appeal, the Regional Trial Court (RTC), Branch 63, Calauag, Quezon,
affirmed the MTC Decision with modification, thus:
"WHEREFORE, in the light of the foregoing considerations the judgment of the
lower court is hereby AFFIRMED and the appeal is DENIED with the
modification that the plaintiffs are ordered to pay the amount of P5,000.00 as
moral damages and P5,000.00 by way of exemplary damages to the defendants
spouses Napoleon Gaza and Evelyn Gaza.

"SO ORDERED."

[3]

On April 29, 1995, Ramon and Agnes Lim filed with the Court of Appeals
a petition for review, docketed therein as CA-G. R. SP No. 36997. In its
Decision, the Court of Appeals reversed and set aside the Decision of the
RTC, thus:
[4]

"WHEREFORE, premises considered, the petition is hereby GIVEN DUE

COURSE. The decision of the Regional Trial Court of Calauag, Quezon, Branch
63, affirming the decision of the Municipal Trial Court, is hereby REVERSED and
SET ASIDE and a new one is rendered ordering the private respondents and all
persons claiming rights under them to vacate the premises in question and
surrender its possession to the petitioners.
"SO ORDERED."
Spouses Gaza filed a motion for reconsideration but was denied. Hence,
they filed with this Court the present petition for review on certiorari ascribing
to the Court of Appeals the following errors:
"I. THE COURT OF APPEALS ERRED IN FAILING TO RULE THAT THERE WAS
NO IMPLIED ADMISSION ON THE PART OF PETITIONERS THAT PRIVATE
RESPONDENTS HAD BEEN IN PRIOR AND ACTUAL PHYSICAL
POSSESSION OF SUBJECT PROPERTY SINCE 1975.
"II. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
RESOLVING THE INSTANT CASE ON MERE TECHNICALITIES AND IN
APPLYING THE RULES OF PROCEDURE IN A VERY RIGID MANNER,
THEREBY DENYING PETITIONERS SUBSTANTIAL JUSTICE.
"III. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
IGNORING THE VOLUMINOUS EVIDENCE ADDUCED BY THE PETITIONERS
IN SUBSTANTIATING THEIR PRIORITY IN POSSESSION OF SUBJECT
PROPERTY, SAID ERROR BECOMING EVEN MORE MANIFEST IN THE LIGHT
OF THE GLARING PAUCITY OF EVIDENCE OF PRIVATE RESPONDENTS TO
SUPPORT THEIR ALLEGED POSSESSION.
"IV. THE COURT OF APPEALS ERRED IN FAILING TO TAKE INTO ACCOUNT
THE FINAL AND EXECUTORY JUDGMENT OF CONVICTION OF
RESPONDENT AGNES LIM FOR TRESPASSING INTO SUBJECT PROPERTY,
CLEARLY EVIDENCING PETITIONERS' PRIOR AND ACTUAL MATERIAL
POSSESSION AND PRIVATE RESPONDENTS' PREDISPOSITION FOR
FALSEHOOD, THE TRUTH OF THE MATTER BEING OF SAID PROPERTY
AND THAT IT IS PRIVATE RESPONDENTS WHO HAVE FORCIBLY ENTERED
THE PROPERTY IN DISPUTE
"V. THE COURT OF APPEALS ERRED IN RESOLVING THE ISSUE OF IMPLIED
ADMISSION, NOT BEING ONE OF THE ISSUES DELIMITED IN THE PRETRIAL ORDER OF 17 FEBRUARY 1994."[5]

We resolve the issues jointly.

Section 11, Rule 8 of the 1997 Rules of Civil Procedure, as amended,

provides that material averments in the complaint, other than those as to the
amount of unliquidated damages, shall be deemed admitted when not
specifically denied. Section 10 of the same Rule provides the manner in
which specific denial must be made:
"Section 10. Specific Denial. A defendant must specify each material allegation of
fact the truth of which he does not admit and, whenever practicable, shall set forth
the substance of the matters upon which he relies to support his denial. Where a
defendant desires to deny only a part of an averment, he shall specify so much of it
as is true and material and shall deny only the remainder. Where a defendant is
without knowledge or information sufficient to form a belief as to the truth of a
material averment made in the complaint, he shall so state, and this shall have the
effect of a denial."
Three (3) modes of specific denial are contemplated by the above
provisions, namely: (1) by specifying each material allegation of the fact in
the complaint, the truth of which the defendant does not admit, and whenever
practicable, setting forth the substance of the matters which he will rely upon
to support his denial; (2) by specifying so much of an averment in the
complaint as is true and material and denying only the remainder; (3) by
stating that the defendant is without knowledge or information sufficient to
form a belief as to the truth of a material averment in the complaint, which
has the effect of a denial.
[6]

The Court of Appeals held that spouses Gaza, petitioners, failed to deny
specifically, in their answer, paragraphs 2, 3 and 5 of the complaint for
forcible entry quoted as follows:
xxx
"2. That plaintiffs are the actual and joint occupants and in prior continuous
physical possession since 1975 up to Nov. 28, 1993 of a certain commercial
compound described as follows:
A certain parcel of land situated in Bo. Sta. Maria, Calauag, Quezon. Bounded on
the N., & E., by Julian de Claro; on the W., by Luis Urrutia. Containing an area of
5,270 square meters, more or less.Declared under Ramon J. Lims Tax Dec. No.
4576 with an Ass. Value of P26,100.00
3. That plaintiffs have been using the premises mentioned for combined lumber
and copra business. Copies of plaintiffs Lumber Certificate of Registration No.
2490 and PCA Copra Business Registration No. 6265/76 are hereto attached as
Annexes A and B respectively; the Mayors unnumbered copra dealers permit dated
Dec. 31, 1976 hereto attached as Annex C;

xxx
5. That defendants invasion of plaintiffs premises was accomplished by illegally
detaining plaintiffs caretaker Emilio Herrera and his daughter inside the
compound, then proceeded to saw the chain that held plaintiffs padlock on the
main gate of the compound and then busted or destroyed the padlock that closes
the backyard gate or exit. Later, they forcibly opened the lock in the upstairs room
of plaintiff Agnes J. Lims quarters and defendants immediately filled it with other
occupants now. Copy of the caretakers (Emilio Herrera) statement describing in
detail is hereto attached as Annex D;
x x x.

[7]

The Court of Appeals then concluded that since petitioners did not deny
specifically in their answer the above-quoted allegations in the complaint,
they judicially admitted that Ramon and Agnes Lim, respondents, were in
prior physical possession of the subject property, and the action for forcible
entry which they filed against private respondents (spouses Gaza) must be
decided in their favor. The defense of private respondents that they are the
registered owners of the subject property is unavailing.
We observe that the Court of Appeals failed to consider paragraph 2 of
petitioners answer quoted as follows:
"2. That defendants specifically deny the allegations in paragraph 2 and 3 of the
complaint for want of knowledge or information sufficient to form a belief as to
the truth thereof, the truth of the matter being those alleged in the special and
affirmative defenses of the defendants;"
[8]

Clearly, petitioners specifically denied the allegations contained in

paragraphs 2 and 3 of the complaint that respondents have prior and
continuous possession of the disputed property which they used for their
lumber and copra business. Petitioners did not merely allege they have no
knowledge or information sufficient to form a belief as to truth of those
allegations in the complaint, but added the following:
"SPECIAL AND AFFIRMATIVE DEFENSES
"That defendants hereby reiterate, incorporate and restate the foregoing and further
allege:
"5. That the complaint states no cause of action;
"From the allegations of plaintiffs, it appears that their possession of the subject
property was not supported by any concrete title or right, nowhere in the complaint
that they alleged either as an owner or lessee, hence, the alleged possession of

plaintiffs is questionable from all aspects. Defendants Sps. Napoleon Gaza and
Evelyn Gaza being the registered owner of the subject property has all the right to
enjoy the same, to use it, as an owner and in support thereof, a copy of the transfer
certificate of title No. T-47263 is hereto attached and marked as Annex "A- Gaza"
and a copy of the Declaration of Real Property is likewise attached and marked as
Annex "B- Gaza" to form an integral part hereof;
"6. That considering that the above-entitled case is an ejectment case, and
considering further that the complaint did not state or there is no showing that the
matter was referred to a Lupon for conciliation under the provisions of P.D. No.
1508, the Revised Rule on Summary Procedure of 1991, particularly Section 18
thereof provides that such a failure is jurisdictional, hence, subject to dismissal;
"7. That the Honorable Court has no jurisdiction over the subject of the action or
suit;
"The complaint is for forcible entry and the plaintiffs were praying for
indemnification in the sum of P350,000.00 for those copra, lumber, tools, and
machinery listed in par. 4 of the complaint andP100,000.00 for unrealized income
in the use of the establishment, considering the foregoing amounts not to be
rentals, Section 1 A (1) and (2) of the Revised Rule on Summary Procedure
prohibits recovery of the same, hence, the Honorable Court can not acquire
jurisdiction over the same. Besides, the defendants Napoleon Gaza and Evelyn
Gaza being the owners of those properties cited in par. 4 of the complaint except
for those copra and two (2) live carabaos outside of the subject premises, plaintiffs
have no rights whatsoever in claiming damages that it may suffer, as and by way of
proof of ownership of said properties cited in paragraph 4 of the complaint
attached herewith are bunched of documents to form an integral part hereof;
"8. That plaintiffs' allegation that Emilio Herrera was illegally detained together
with his daughter was not true and in support thereof, attached herewith is a copy
of said Emilio Herrera's statement and marked as Annex "C-Gaza."
x x x x x x x x x."

[9]

The above-quoted paragraph 2 and Special and Affirmative Defenses

contained in petitioners answer glaringly show that petitioners did not admit
impliedly that respondents have been in prior and actual physical possession
of the property. Actually, petitioners are repudiating vehemently respondents
possession, stressing that they (petitioners) are the registered owners and
lawful occupants thereof.
Respondents' reliance on Warner Barnes and Co., Ltd. vs. Reyes in
maintaining that petitioners made an implied admission in their answer is
misplaced. In the cited case, the defendants' answer merely alleged that they
were "without knowledge or information sufficient to form a belief as to the
[10]

truth of the material averments of the remainder of the complaint" and "that
they hereby reserve the right to present an amended answer with special
defenses and counterclaim." In the instant case, petitioners enumerated
their special and affirmative defenses in their answer. They also specified
therein each allegation in the complaint being denied by them. They
particularly alleged they are the registered owners and lawful possessors of
the land and denied having wrested possession of the premises from the
respondents through force, intimidation, threat, strategy and stealth. They
asserted that respondents' purported possession is "questionable from all
aspects." They also averred that they own all the personal properties
enumerated in respondents' complaint, except the two carabaos. Indeed,
nowhere in the answer can we discern an implied admission of the
allegations of the complaint, specifically the allegation that petitioners have
priority of possession.
[11]

Thus, the Court of Appeals erred in declaring that herein petitioners

impliedly admitted respondents' allegation that they have prior and
continuous possession of the property.
We now resolve the basic substantial issue. In an action for forcible entry,
the plaintiff must prove that he was in prior possession of the land or building
and that he was deprived thereof by means of force, intimidation, threat,
strategy or stealth. It must be stressed, though, that he cannot succeed
where it appears that, as between himself and the defendant, the latter had
a possession antedating his own. To ascertain this, it is proper to look at
the situation as it existed before the first act of spoliation occurred. Such
determination in this case requires a review of factual evidence, generally
proscribed in a petition like this. Considering, however, the conflicting
factual findings of the MTC and RTC on one hand, and the Court of Appeals
on the other, this Court takes exception to the general rule in order to resolve
the factual issues raised by the parties.
[12]

[13]

[14]

[15]

Petitioners possession of the property has been sufficiently established

by evidence. The title to the property (TCT No. T-47263) is in the name of
petitioner Napoleon Gaza. On record is a deed of sale showing that he
bought the land in 1961 from Angeles Vda. de Urrutia. Petitioner also
presented receipts of payment of realty taxes.
A disinterested witness, Barangay Secretary Victorio Conducto of Sta.
Maria, Calauag, Quezon, in his Affidavit attached to the instant
petition, stated that since 1968, spouses Gaza have been in possession of
the property and that respondents never occupied the property even for
business purposes. Upon the closure of their business, petitioners
designated Numeriano Ernesto and Renato Petil as caretakers of the
lot. Upon the other hand, respondents' allegation of prior possession of the
premises is anchored on spurious documents. The Lumber Certificate of
Registration of Business Name No. 78-2490, for one, does not specifically
[16]

refer to the disputed property. It was issued to them at a different

address. Tax Declaration No. 35-81-220 in the name of R. J. Lim is not a
certified true copy of the original. Also, respondents' purported PCA
Certificate of Registration No. 6265/76 as copra dealer and the Mayor's
Permit are expired documents. Not even their supposed caretaker, Emilio
Herrera, submitted an affidavit confirming that they are the lawful possessors
of the property.
[17]

[18]

[19]

Furthermore, respondent Agnes Lim was later convicted by the MTC of

Calauag, Quezon in Criminal Case No. 7405 for trespassing into the subject
property. The MTC Decision confirms the falsity of respondents' claim of
prior possession. It bears emphasis that the MTC Decision was affirmed in
toto by the RTC of Calauag, Quezon, Branch 63 in Criminal Case No. 2725C.
[20]

[21]

Where a dispute over possession arises between two persons, the

person first having actual possession is the one who is entitled to maintain
the action granted by law; otherwise, a mere usurper without any right
whatever, might enter upon the property of another and, by allowing himself
to be ordered off, could acquire the right to maintain the action of forcible
entry and detainer, however momentary his intrusion might have been.
[22]

In this case, evidence clearly shows that the petitioners are the true
owners and, therefore, the lawful possessors of the land. Verily, respondents
allegation of actual possession and that petitioners deprived them of such
possession by means of force, intimidation and threat are clearly untenable.
WHEREFORE, the petition is GRANTED and the assailed Decision of
the Court of Appeals in CA-G. R. SP No. 36997 dated March 12, 1996
is REVERSED and SET ASIDE. The Decision of the RTC, Branch 63,
Calauag, Quezon in Civil Case No. C-1031 affirming the MTC Decision
dismissing respondents complaint is REINSTATED, with modification in the
sense that the award of moral and exemplary damages in favor of petitioners
is deleted.
SO ORDERED.
6. PBCOM vs. Spouses Go

C. Effect of Failure to Plead

7. Licomcen vs. Engr. Abainza

G.R. No. 199781 : February 18, 2013

LICOMCEN, INC., Petitioner, v.ENGR. SALVADOR ABAINZA, doing business under the name
and style "ADS INDUSTRIAL EQUIPMENT", Respondent.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 21 September 2011 Decision2 and the 6 December 2011
Resolution3 of the Court of Appeals in CA-G.R. CV No. 86296. The Court of Appeal affirmed the 7
November 2005 Decision4 of the Regional Trial Court, Branch 8, Legazpi City, in Civil Case No.
9919, which ordered petitioner LICOMCEN, Inc. (petitioner) to pay respondent Engr. Salvador
Abainza (respondent) the sum of P1,777,202.80 plus 12% interest per annum, P50,000 attorneys
fees, and P20,000 litigation and incidental expenses.
The Facts
Respondent filed an action for sum of money and damages against Liberty Commercial Center,
Inc. (Liberty). Respondent alleged that in 1997 and 1998, he was hired by Liberty to do various
projects in their commercial centers, mainly at the LCC Central Mall, Naga City, for the supply,
fabrication, and installation of air-conditioning ductworks. Respondent completed the project,
which included some changes and revisions of the original plan at the behest of Liberty. However,
despite several demands by respondent, Liberty failed to pay the remaining balance due on the
project in the sum of P1,777,202.80.
Liberty denied the material allegations of the complaint and countered that the collection suit was
not filed against the real party-in-interest. Thus, respondent amended his complaint to include
petitioner as defendant.5 The HRD Administrative Manager of Liberty testified that petitioner
LICOMCEN, Inc. is a sister company of Liberty and that the incorporators and directors of both
companies are the same.
The Ruling of the Trial Court
The trial court found that petitioners claim that it has fully paid respondent the total cost of the
project in the sum of P6,700,000 pertains only to the cost of the original plan of the project.
However, the additional costs of P1,777,202.80 incurred for labor, materials, and equipment on
the revised plan were not paid by petitioner.
As found by the trial court, petitioner (then defendant) ordered and approved the revisions in the
original plan, thus:

c ralawl ibra ry

During the awarding of the work, defendants wanted the aircon duct[s] changed from rectangular
to round ducts because Ronald Tan, one of the LCC owners who came from abroad, suggested
round aircon ducts he saw abroad were preferable. Plaintiff prepared a plan corresponding to the
changes desired by the defendants (Exhibits "D", "D-1", "D-2").
The changing of the rectangular ducts to round ducts entailed additional cost in labor and
materials. Plaintiff had to remove the rectangular ducts installed, resize it to round ducts and reinstall again. More G.I. Sheets were needed and new fittings as well, because the fittings for the
rectangular ducts cannot be used in the round duct. There were movements of the equipment. In
the original plan, the air handling unit (AHU) was [o]n the ground floor. It was relocated to the
second floor. There were additional air ducting in the two big comfort rooms for customers, an
exhaust blower to the dondon and discaminos, fresh air blower and lock machine at the food court
were installed.
Because of the changes, defendants wanted the tonnage of the refrigeration (TR) to be increased
to cool up the space. The 855 tons capacity was increased to 900 [sic] tons. These changes
entailed additional expense for labor and materials in the sum of Php1,805,355.62 (Exhibits "F" to
"F-26").
Plaintiffs work was being monitored by Es De Castro and Associates (ESCA), defendants
engineering consultant. Paper works for the approval of ESCA are signed by Michal Cruz, an
electrical engineer, and Jake Ozaeta, mechanical engineer, both employees of the defendants and
a certain Mr. Tan, a representative of defendants who actually supervises the construction. Plaintiff
presented the cost changes on the rework and change to 960 ton capacity. The total balance
payable to plaintiff by defendant is Php 1,777.202.80 (Exhibit "G-42"). Accomplishment report had
been submitted by plaintiff and approved by ESCA, project was turned over in 1988 but plaintiff
was not paid the balance corresponding to the changed plan of work and additional work
performed by plaintiff. Series of communications demanding payment (Exhibits "G-3" to "G-11",
"G-13", "G-17" to "G-18", "G-23", "G- 24", "G-25", "G-26", "G-35 to 42") were made but plaintiff
[sic] refused to pay.6

rl 1

On 7 November 2005, the trial court rendered its Decision, the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, decision is hereby rendered in favor of the plaintiff and
against defendant LICOMCEN, Inc. ordering the latter to pay the plaintiff the sum of
Php1,777,202.80 as its principal obligation with interest at 12% per annum until the amount is
fully paid, the sum of Php50,000.00 as attorneys fess [sic] and Php20,000.00 as litigation and
incidental expenses. Costs against defendant LICOMCEN, Inc.
The case against Liberty Commercial Center, Inc. is hereby ordered DISMISSED.
SO ORDERED.7

r l1

The Ruling of the Court of Appeals

c ralawl ibra ry

Petitioner appealed the trial courts Decision to the Court of Appeals, invoking Article 1724 of the
Civil Code which provides:

crala wlibra ry

Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated
price, in conformity with plans and specifications agreed upon with the landowner, can neither
withdraw from the contract nor demand an increase in the price on account of the higher cost of
labor or materials, save when there has been a change in the plans and specifications, provided:

cralawlib rary

(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by both
parties.
The Court of Appeals stated that petitioner never raised Article 1724 of the Civil Code as a defense
in the trial court. Citing Section 1, Rule 9 of the Rules of Court 8 and the case of Bank of the
Philippine Islands v. Leobrera,9 the Court of Appeals ruled that petitioner cannot be allowed to
change its theory on appeal since the adverse party would then be deprived of the opportunity to
present further evidence on the new theory. Besides, the Court of Appeals held that Article 1724 of
the Civil Code is not even applicable to the case because the Contract of Agreement was never
signed by the parties considering that there were substantial changes to the original plan as the
work progressed. Thus, the Court of Appeals affirmed the trial courts Decision, finding petitioner
liable to respondent for the additional costs in labor and materials due to the revisions in the
original project.
Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in its Resolution
dated 6 December 2011. Hence, this petition.
The Issue
The issue in this case is whether petitioner is liable for the additional costs incurred for labor,
materials, and equipment on the revised project.
The Ruling of the Court
We find the petition without merit.
In this case, petitioner invoked Article 1724 of the Civil Code as a defense against respondents
claim. Petitioner alleged that respondent cannot recover additional costs since the agreement in
the change of plans and specifications of the project, the pricing and cost of materials and labor
was not in writing.
The Court of Appeals mistakenly stated that petitioner only raised Article 1724 of the Civil Code as
a defense on appeal. A perusal of the records reveals that, although petitioner did not invoke
Article 1724 of the Civil Code as a defense in its answer10 or in its pre-trial brief,11 petitioner
belatedly asserted such defense in its Memorandum12 filed before the trial court. Thus, from its
previous defense that it has fully paid its obligations to respondent, petitioner changed its theory

by adding that since the additional work done by respondent was not authorized in writing, then
respondent cannot recover additional costs. In effect, petitioner does not deny that additional
costs were incurred due to the change of plans in the original project, but justifies not paying for
such expense by invoking Article 1724 of the Civil Code.
Under Section 1, Rule 9 of the Rules of Court, defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived, with the following exceptions: (1) lack of
jurisdiction over the subject matter; (2) litis pendentia; (3) res judicata; and (4) prescription of
the action. Clearly, petitioner cannot change its defense after the termination of the period of
testimony and after the exhibits of both parties have already been admitted by the court. The noninclusion of this belated defense in the pre-trial order barred its consideration during the trial. To
rule otherwise would put the adverse party at a disadvantage since he could no longer offer
evidence to rebut the new theory. Indeed, parties are bound by the delimitation of issues during
the pre-trial.13 As held in Villanueva v. Court of Appeals:14

rl1

Pre-trial is primarily intended to insure that the parties properly raise all issues necessary to
dispose of a case. The parties must disclose during pre-trial all issues they intend to raise during
the trial, except those involving privileged or impeaching matters. Although a pre-trial order is not
meant to catalogue each issue that the parties may take up during the trial, issues not included in
the pre-trial order may be considered only if they are impliedly included in the issues raised or
inferable from the issues raised by necessary implication. The basis of the rule is simple.
Petitioners are bound by the delimitation of the issues during the pre-trial because they
themselves agreed to the same.15

rl1 rbl rl l lb r r

Besides, Article 1724 of the Civil Code is not even applicable to this case. It is evident from the
records that the original contract agreement,16 submitted by respondent as evidence, which stated
a total contract price of P5,300,000, was never signed by the parties considering that there were
substantial changes in the plan imposed by petitioner in the course of the work on the
project.17 Petitioner admitted paying P6,700,000 to respondent which was allegedly the agreed
cost of the project. However, petitioner did not submit any written contract signed by both parties
which would substantiate its claim that the agreed cost of the project was only P6,700,000.
Clearly, petitioner cannot invoke Article 1724 of the Civil Code to avoid paying its obligation
considering that the alleged original contract was never even signed by both parties because of the
various changes imposed by petitioner on the original plan. The fact that petitioner paid
P1,400,00018 more than the amount stated in the unsigned contract agreement clearly indicates
that there were indeed additional costs during the course of the work on the project. It is just
unfortunate that petitioner is now invoking Article 1724 of the Civil Cide to avoid further payment
of the additional costs incurred on the project.
What was established in the trial court was that petitioner ordered the changes in the original plan
which entailed additional costs in labor and materials. The work done by respondent was closely
monitored and supervised by petitioners engineering consultant and all the paperworks relating to
the project were approved by petitioner through its representatives. We find no justifiable reason
to deviate from the findings and ruling of the trial court, which were also upheld by the Court of

Appeals. Thus, petitioner should be held liable for the additional costs incurred for labor, materials,
and equipment on the revised project.
WHEREFORE, we DENY the petition. We AFFIRM the 21 September 2011 Decision and the 6
December 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 86296.
SO ORDERED.

8. PNB vs. Court of Appeals

9. Kho vs. Court of Appeals

ELIDAD C. KHO, doing business under the name and style of KEC
COSMETICS LABORATORY, petitioner, vs. HON. COURT OF
APPEALS, SUMMERVILLE GENERAL MERCHANDISING and
COMPANY, and ANG TIAM CHAY, respondents.
DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] dated May 24,
1993 of the Court of Appeals setting aside and declaring as null and void the
Orders[2] dated February 10, 1992 and March 19, 1992 of the Regional Trial Court,
Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction.
The facts of the case are as follows:
On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction
and damages with a prayer for the issuance of a writ of preliminary injunction,
docketed as Civil Case No. Q-91-10926, against the respondents Summerville
General Merchandising and Company (Summerville, for brevity) and Ang Tiam
Chay.
The petitioners complaint alleges that petitioner, doing business under the name
and style of KEC Cosmetics Laboratory, is the registered owner of the
copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by
Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she also has
patent rights on Chin Chun Su & Device and Chin Chun Su for medicated cream
after purchasing the same from Quintin Cheng, the registered owner thereof in the
Supplemental Register of the Philippine Patent Office on February 7, 1980 under
Registration Certificate No. 4529; that respondent Summerville advertised and sold
petitioners cream products under the brand name Chin Chun Su, in similar containers
that petitioner uses, thereby misleading the public, and resulting in the decline in the

petitioners business sales and income; and, that the respondents should be enjoined
from allegedly infringing on the copyrights and patents of the petitioner.
The respondents, on the other hand, alleged as their defense that Summerville is
the exclusive and authorized importer, re-packer and distributor of Chin Chun
Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese
manufacturing company authorized Summerville to register its trade name Chin
Chun Su Medicated Cream with the Philippine Patent Office and other appropriate
governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained
the copyrights through misrepresentation and falsification; and, that the authority of
Quintin Cheng, assignee of the patent registration certificate, to distribute and
market Chin Chun Su products in the Philippines had already been terminated by the
said Taiwanese Manufacturing Company.
After due hearing on the application for preliminary injunction, the trial court
granted the same in an Order dated February 10, 1992, the dispositive portion of
which reads:
ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under
the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby
granted. Consequentially, plaintiff is required to file with the Court a bond
executed to defendants in the amount of five hundred thousand pesos
(P500,000.00) to the effect that plaintiff will pay to defendants all damages which
defendants may sustain by reason of the injunction if the Court should finally
decide that plaintiff is not entitled thereto.
SO ORDERED.[3]
The respondents moved for reconsideration but their motion for reconsideration was
denied by the trial court in an Order dated March 19, 1992.[4]
On April 24, 1992, the respondents filed a petition for certiorari with the Court
of Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the
said writ of preliminary injunction issued by the trial court. After the respondents
filed their reply and almost a month after petitioner submitted her comment, or on
August 14 1992, the latter moved to dismiss the petition for violation of Supreme
Court Circular No. 28-91, a circular prohibiting forum shopping. According to the
petitioner, the respondents did not state the docket number of the civil case in the
caption of their petition and, more significantly, they did not include therein a
certificate of non-forum shopping. The respondents opposed the petition and
submitted to the appellate court a certificate of non-forum shopping for their petition.
On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No.
27803 ruling in favor of the respondents, the dispositive portion of which reads:
WHEREFORE, the petition is hereby given due course and the orders of
respondent court dated February 10, 1992 and March 19, 1992 granting the writ of

preliminary injunction and denying petitioners motion for reconsideration are

hereby set aside and declared null and void. Respondent court is directed to
forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the
issue raised by the parties on the merits.
SO ORDERED.[5]
In granting the petition, the appellate court ruled that:
The registration of the trademark or brandname Chin Chun Su by KEC with the
supplemental register of the Bureau of Patents, Trademarks and Technology
Transfer cannot be equated with registration in the principal register, which is duly
protected by the Trademark Law.
xxx xxx xxx
As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393:
Registration in the Supplemental Register, therefore, serves as notice that the
registrant is using or has appropriated the trademark. By the very fact that the
trademark cannot as yet be on guard and there are certain defects, some obstacles
which the use must still overcome before he can claim legal ownership of the mark
or ask the courts to vindicate his claims of an exclusive right to the use of the
same. It would be deceptive for a party with nothing more than a registration in the
Supplemental Register to posture before courts of justice as if the registration is in
the Principal Register.
The reliance of the private respondent on the last sentence of the Patent office
action on application Serial No. 30954 that registrants is presumed to be the owner
of the mark until after the registration is declared cancelled is, therefore, misplaced
and grounded on shaky foundation. The supposed presumption not only runs
counter to the precept embodied in Rule 124 of the Revised Rules of Practice
before the Philippine Patent Office in Trademark Cases but considering all the
facts ventilated before us in the four interrelated petitions involving the petitioner
and the respondent, it is devoid of factual basis. As even in cases where
presumption and precept may factually be reconciled, we have held that the
presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612,
May 30, 1958, Unreported). One may be declared an unfair competitor even if his
competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60
Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534).[6]
The petitioner filed a motion for reconsideration. This she followed with several
motions to declare respondents in contempt of court for publishing advertisements
notifying the public of the promulgation of the assailed decision of the appellate

court and stating that genuine Chin Chun Su products could be obtained only from
Summerville General Merchandising and Co.
In the meantime, the trial court went on to hear petitioners complaint for final
injunction and damages. On October 22, 1993, the trial court rendered a
Decision[7] barring the petitioner from using the trademark Chin Chun Su and
upholding the right of the respondents to use the same, but recognizing the copyright
of the petitioner over the oval shaped container of her beauty cream. The trial court
did not award damages and costs to any of the parties but to their respective counsels
were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorneys fees.
The petitioner duly appealed the said decision to the Court of Appeals.
On June 3, 1994, the Court of Appeals promulgated a Resolution [8] denying the
petitioners motions for reconsideration and for contempt of court in CA-G.R. SP No.
27803.
Hence, this petition anchored on the following assignment of errors:
I

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN FAILING TO RULE ON PETITIONERS MOTION
TO DISMISS.
II

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN REFUSING TO PROMPTLY RESOLVE
PETITIONERS MOTION FOR RECONSIDERATION.
III

IN DELAYING THE RESOLUTION OF PETITIONERS MOTION FOR

RECONSIDERATION, THE HONORABLE COURT OF APPEALS
DENIED PETITIONERS RIGHT TO SEEK TIMELY APPELLATE
RELIEF AND VIOLATED PETITIONERS RIGHT TO DUE PROCESS.
IV

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN FAILING TO CITE THE PRIVATE
RESPONDENTS IN CONTEMPT.[9]
The petitioner faults the appellate court for not dismissing the petition on the
ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner

contends that the appellate court violated Section 6, Rule 9 of the Revised Internal
Rules of the Court of Appeals when it failed to rule on her motion for reconsideration
within ninety (90) days from the time it is submitted for resolution. The appellate
court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3,
1994. In delaying the resolution thereof, the appellate court denied the petitioners
right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the
denial of her motions for contempt of court against the respondents.
We rule in favor of the respondents.
Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of
the grounds for the issuance of a writ of preliminary injunction is a proof that the
applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained
of, either for a limited period or perpetually. Thus, a preliminary injunction order
may be granted only when the application for the issuance of the same shows facts
entitling the applicant to the relief demanded.[10] This is the reason why we have ruled
that it must be shown that the invasion of the right sought to be protected is material
and substantial, that the right of complainant is clear and unmistakable, and, that
there is an urgent and paramount necessity for the writ to prevent serious damage.[11]
In the case at bar, the petitioner applied for the issuance of a preliminary
injunctive order on the ground that she is entitled to the use of the trademark on Chin
Chun Su and its container based on her copyright and patent over the same. We first
find it appropriate to rule on whether the copyright and patent over the name and
container of a beauty cream product would entitle the registrant to the use and
ownership over the same to the exclusion of others.
Trademark, copyright and patents are different intellectual property rights that
cannot be interchanged with one another. A trademark is any visible sign capable of
distinguishing the goods (trademark) or services (service mark) of an enterprise and
shall include a stamped or marked container of goods.[12] In relation thereto, a trade
name means the name or designation identifying or distinguishing an
enterprise.[13] Meanwhile, the scope of a copyright is confined to literary and artistic
works which are original intellectual creations in the literary and artistic domain
protected from the moment of their creation.[14] Patentable inventions, on the other
hand, refer to any technical solution of a problem in any field of human activity
which is new, involves an inventive step and is industrially applicable.[15]
Petitioner has no right to support her claim for the exclusive use of the subject
trade name and its container. The name and container of a beauty cream product are
proper subjects of a trademark inasmuch as the same falls squarely within its
definition. In order to be entitled to exclusively use the same in the sale of the beauty
cream product, the user must sufficiently prove that she registered or used it before
anybody else did. The petitioners copyright and patent registration of the name and
container would not guarantee her the right to the exclusive use of the same for the
reason that they are not appropriate subjects of the said intellectual rights.

Consequently, a preliminary injunction order cannot be issued for the reason that the
petitioner has not proven that she has a clear right over the said name and container
to the exclusion of others, not having proven that she has registered a trademark
thereto or used the same before anyone did.
We cannot likewise overlook the decision of the trial court in the case for final
injunction and damages. The dispositive portion of said decision held that the
petitioner does not have trademark rights on the name and container of the beauty
cream product. The said decision on the merits of the trial court rendered the issuance
of the writ of a preliminary injunction moot and academic notwithstanding the fact
that the same has been appealed in the Court of Appeals. This is supported by our
ruling in La Vista Association, Inc. v. Court of Appeals[16], to wit:
Considering that preliminary injunction is a provisional remedy which may be
granted at any time after the commencement of the action and before judgment
when it is established that the plaintiff is entitled to the relief demanded and only
when his complaint shows facts entitling such reliefs xxx and it appearing that the
trial court had already granted the issuance of a final injunction in favor of
petitioner in its decision rendered after trial on the merits xxx the Court resolved
to Dismiss the instant petition having been rendered moot and academic. An
injunction issued by the trial court after it has already made a clear
pronouncement as to the plaintiffs right thereto, that is, after the same issue has
been decided on the merits, the trial court having appreciated the evidence
presented, is proper, notwithstanding the fact that the decision rendered is not yet
final xxx. Being an ancillary remedy, the proceedings for preliminary injunction
cannot stand separately or proceed independently of the decision rendered on the
merit of the main case for injunction. The merit of the main case having been
already determined in favor of the applicant, the preliminary determination of its
non-existence ceases to have any force and effect. (italics supplied)
La Vista categorically pronounced that the issuance of a final injunction renders any
question on the preliminary injunctive order moot and academic despite the fact that
the decision granting a final injunction is pending appeal. Conversely, a decision
denying the applicant-plaintiffs right to a final injunction, although appealed, renders
moot and academic any objection to the prior dissolution of a writ of preliminary
injunction.
The petitioner argues that the appellate court erred in not dismissing the petition
for certiorari for non-compliance with the rule on forum shopping. We disagree.
First, the petitioner improperly raised the technical objection of non-compliance
with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for
certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the
Revised Rules of Civil Procedure which provides that (I)n petitions
for certiorari before the Supreme Court and the Court of Appeals, the provisions of
Section 2, Rule 56, shall be observed. Before giving due course thereto, the court
may require the respondents to file their comment to, and not a motion to dismiss,

the petition xxx (italics supplied). Secondly, the issue was raised one month after
petitioner had filed her answer/comment and after private respondent had replied
thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion
to dismiss shall be filed within the time for but before filing the answer to the
complaint or pleading asserting a claim. She therefore could no longer submit a
motion to dismiss nor raise defenses and objections not included in the
answer/comment she had earlier tendered. Thirdly, substantial justice and equity
require this Court not to revive a dissolved writ of injunction in favor of a party
without any legal right thereto merely on a technical infirmity. The granting of an
injunctive writ based on a technical ground rather than compliance with the
requisites for the issuance of the same is contrary to the primary objective of legal
procedure which is to serve as a means to dispense justice to the deserving party.
The petitioner likewise contends that the appellate court unduly delayed the
resolution of her motion for reconsideration. But we find that petitioner contributed
to this delay when she filed successive contentious motions in the same proceeding,
the last of which was on October 27, 1993, necessitating counter-manifestations
from private respondents with the last one being filed on November 9, 1993.
Nonetheless, it is well-settled that non-observance of the period for deciding cases
or their incidents does not render such judgments ineffective or void.[17] With respect
to the purported damages she suffered due to the alleged delay in resolving her
motion for reconsideration, we find that the said issue has likewise been rendered
moot and academic by our ruling that she has no right over the trademark and,
consequently, to the issuance of a writ of preliminary injunction.
Finally, we rule that the Court of Appeals correctly denied the petitioners several
motions for contempt of court. There is nothing contemptuous about the
advertisements complained of which, as regards the proceedings in CA-G.R. SP No.
27803 merely announced in plain and straightforward language the promulgation of
the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule
39 of the Revised Rules of Civil Procedure, the said decision nullifying the
injunctive writ was immediately executory.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the
Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby
AFFIRMED. With costs against the petitioner.
SO ORDERED.
10. Dino vs. Court of Appeals

INOCENCIA YU DINO and her HUSBAND doing business under the trade
name "CANDY CLAIRE FASHION GARMENTS", petitioners,
vs. COURT OF APPEALS and ROMAN SIO, doing business under

the
name
"UNIVERSAL
MANUFACTURING", respondents.

TOY

MASTER

D E C I S I O N*
PUNO, J.:

Though people say, "better late than never", the law frowns upon those who
assert their rights past the eleventh hour. For failing to timely institute their action,
the petitioners are forever barred from claiming a sum of money from the
respondent.
This is a petition for review on certiorari to annul and set aside the amended
decision of the respondent court dated January 24, 1994 reversing its April 30, 1993
decision and dismissing the plaintiff-petitioners' Complaint on the ground of
prescription.
The following undisputed facts gave rise to the case at bar:
Petitioners spouses Dino, doing business under the trade name "Candy Claire
Fashion Garment" are engaged in the business of manufacturing and selling
shirts.[1] Respondent Sio is part owner and general manager of a manufacturing
corporation doing business under the trade name "Universal Toy Master
Manufacturing."[2]
Petitioners and respondent Sio entered into a contract whereby the latter would
manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of
vinyl mooseheads at P7.00 per piece in accordance with the sample approved by the
petitioners. These frogs and mooseheads were to be attached to the shirts petitioners
would manufacture and sell.[3]
Respondent Sio delivered in several installments the 40,000 pieces of frogs and
mooseheads. The last delivery was made on September 28, 1988. Petitioner fully
paid the agreed price.[4] Subsequently, petitioners returned to respondent 29,772
pieces of frogs and mooseheads for failing to comply with the approved
sample.[5] The return was made on different dates: the initial one on December 12,
1988 consisting of 1,720 pieces,[6] the second on January 11, 1989,[7] and the last on
January 17, 1989.[8]
Petitioners then demanded from the respondent a refund of the purchase price of
the returned goods in the amount of P208,404.00. As respondent Sio refused to
pay,[9] petitioners filed on July 24, 1989 an action for collection of a sum of money
in the Regional Trial Court of Manila, Branch 38.
The trial court ruled in favor of the petitioners, viz:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Vicente and
Inocencia Dino and against defendant Toy Master Manufacturing, Inc. ordering the
latter to pay the former:

1. The amount of Two Hundred Eight Thousand Four Hundred Four (P208,404.00)
Pesos with legal interest thereon from July 5, 1989, until fully paid; and
2. The amount of Twenty Thousand (P20,000.00) Pesos as attorney's fees and the
costs of this suit.
The counterclaim on the other hand is hereby dismissed for lack of merit."[10]
Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993
decision, the appellate court affirmed the trial court decision. Respondent then filed
a Motion for Reconsideration and a Supplemental Motion for Reconsideration
alleging therein that the petitioners' action for collection of sum of money based on
a breach of warranty had already prescribed. On January 24, 1994, the respondent
court reversed its decision and dismissed petitioners' Complaint for having been filed
beyond the prescriptive period. The amended decision read in part, viz:
"Even if there is failure to raise the affirmative defense of prescription in a motion
to dismiss or in an appropriate pleading (answer, amended or supplemental
answer) and an amendment would no longer be feasible, still prescription, if
apparent on the face of the complaint may be favorably considered (Spouses
Matias B. Aznar, III, et al. vs. Hon. Juanito A. Bernad, etc., supra, G.R. 81190,
May 9, 1988). The rule in Gicano vs. Gegato (supra) was reiterated in Severo v.
Court of Appeals, (G.R. No. 84051, May 19, 1989).
WHEREFORE the Motion For Reconsideration is granted. The judgment of this
Court is set aside and judgment is hereby rendered REVERSING the judgment of
the trial court and dismissing plaintiff's complaint."[11]
Hence, this petition with the following assignment of errors:
I.

The respondent Court of Appeals seriously erred in dismissing the complaint

of the Petitioners on the ground that the action had prescribed.
II.

The respondent Court of Appeals seriously erred in holding that the defense of
prescription would still be considered despite the fact that it was not raised in
the answer, if apparent on the face of the complaint.
We first determine the nature of the action filed in the trial court to resolve the
issue of prescription. Petitioners claim that the Complaint they filed in the trial court
on July 24, 1989 was one for the collection of a sum of money. Respondent contends
that it was an action for breach of warranty as the sum of money petitioners sought

to collect was actually a refund of the purchase price they paid for the alleged
defective goods they bought from the respondent.
We uphold the respondent's contention.
The following provisions of the New Civil Code are apropos:
"Art. 1467. A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not, is a contract of sale,
but if the goods are to be manufactured specially for the customer and upon his
special order, and not for the general market, it is a contract for a piece of work."
"Art. 1713. By the contract for a piece of work the contractor binds himself to
execute a piece of work for the employer, in consideration of a certain price or
compensation. The contractor may either employ only his labor or skill, or also
furnish the material."
As this Court ruled in Engineering & Machinery Corporation v. Court of
Appeals, et al.,[12] "a contract for a piece of work, labor and materials may be
distinguished from a contract of sale by the inquiry as to whether the thing
transferred is one not in existence and which would never have existed but for the
order of the person desiring it. In such case, the contract is one for a piece of work,
not a sale.On the other hand, if the thing subject of the contract would have existed
and been the subject of a sale to some other person even if the order had not been
given then the contract is one of sale."[13] The contract between the petitioners and
respondent stipulated that respondent would manufacture upon order of the
petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads
according to the samples specified and approved by the petitioners. Respondent Sio
did not ordinarily manufacture these products, but only upon order of the petitioners
and at the price agreed upon.[14] Clearly, the contract executed by and between the
petitioners and the respondent was a contract for a piece of work. At any rate,
whether the agreement between the parties was one of a contract of sale or a piece
of work, the provisions on warranty of title against hidden defects in a contract of
sale apply to the case at bar, viz:
"Art. 1714. If the contractor agrees to produce the work from material furnished by
him, he shall deliver the thing produced to the employer and transfer dominion
over the thing. This contract shall be governed by the following articles as well as
by the pertinent provisions on warranty of title and against hidden defects and the
payment of price in a contract of sale."
"Art. 1561. The vendor shall be responsible for warranty against the hidden defects
which the thing sold may have, should they render it unfit for the use for which it
is intended, or should they diminish its fitness for such use to such an extent that,
had the vendee been aware thereof, he would not have acquired it or would have

given a lower price for it; but said vendor shall not be answerable for patent defects
or those which may be visible, or for those which are not visible if the vendee is an
expert who, by reason of his trade or profession, should have known them."
Petitioners aver that they discovered the defects in respondent's products when
customers in their (petitioners') shirt business came back to them complaining that
the frog and moosehead figures attached to the shirts they bought were
torn. Petitioners allege that they did not readily see these hidden defects upon their
acceptance. A hidden defect is one which is unknown or could not have been known
to the vendee.[15] Petitioners then returned to the respondent 29,772 defective pieces
of vinyl products and demanded a refund of their purchase price in the amount
of P208,404.00. Having failed to collect this amount, they filed an action for
collection of a sum of money.
Article 1567 provides for the remedies available to the vendee in case of hidden
defects, viz:
"Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee
may elect between withdrawing from the contract and demanding a proportionate
reduction of the price, with damages in either case."
By returning the 29,772 pieces of vinyl products to respondent and asking for a
return of their purchase price, petitioners were in effect "withdrawing from the
contract" as provided in Art. 1567. The prescriptive period for this kind of action is
provided in Art. 1571 of the New Civil Code, viz:
"Art. 1571. Actions arising from the provisions of the preceding ten articles shall
be barred after six months from the delivery of the thing sold." (Emphasis
supplied)
There is no dispute that respondent made the last delivery of the vinyl products
to petitioners on September 28, 1988. It is also settled that the action to recover the
purchase price of the goods petitioners returned to the respondent was filed on July
24, 1989,[16] more than nine months from the date of last delivery. Petitioners having
filed the action three months after the six-month period for filing actions for breach
of warranty against hidden defects stated in Art. 1571,[17] the appellate court
dismissed the action.
Petitioners fault the ruling on the ground that it was too late in the day for
respondent to raise the defense of prescription. The law then applicable to the case
at bar, Rule 9, Sec. 2 of the Rules of Court, provides:
"Defenses and objections not pleaded either in a motion to dismiss or in the
answer are deemed waived; except the failure to state a cause of action . . . "

Thus, they claim that since the respondent failed to raise the defense of prescription
in a motion to dismiss or in its answer, it is deemed waived and cannot be raised for
the first time on appeal in a motion for reconsideration of the appellate court's
decision.
As a rule, the defense of prescription cannot be raised for the first time on
appeal. Thus, we held in Ramos v. Osorio,[18] viz:
"It is settled law in this jurisdiction that the defense of prescription is waivable, and
that if it was not raised as a defense in the trial court, it cannot be considered on
appeal, the general rule being that the appellate court is not authorized to consider
and resolve any question not properly raised in the lower court (Subido vs. Lacson,
55 O.G. 8281, 8285; Moran, Comments on the Rules of Court, Vol. I, p. 784, 1947
Edition)."
However, this is not a hard and fast rule. In Gicano v. Gegato,[19] we held:
". . .(T)rial courts have authority and discretion to dimiss an action on the ground
of prescription when the parties' pleadings or other facts on record show it to be
indeed time-barred; (Francisco v. Robles, Feb, 15, 1954; Sison v. McQuaid, 50
O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958;
Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136
SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule
16, Rules of Court), or an answer which sets up such ground as an affirmative
defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the
merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or
even if the defense has not been asserted at all, as where no statement thereof
is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific
Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil.
821); or where a defendant has been declared in default (PNB v. Perez, 16 SCRA
270). What is essential only, to repeat, is that the facts demonstrating the lapse
of the prescriptive period be otherwise sufficiently and satisfactorily apparent
on the record; either in the averments of the plaintiff's complaint, or
otherwise established by the evidence." (emphasis supplied)
In Aldovino, et al. v. Alunan, et al.,[20] the Court en banc reiterated the Garcia
v. Mathis doctrine cited in the Gicano case that when the plaintiff's own complaint
shows clearly that the action has prescribed, the action may be dismissed even if the
defense of prescription was not invoked by the defendant.
It is apparent in the records that respondent made the last delivery of vinyl
products to the petitioners on September 28, 1988. Petitioners admit this in their
Memorandum submitted to the trial court and reiterate it in their Petition for
Review.[21] It is also apparent in the Complaint that petitioners instituted their action
on July 24, 1989. The issue for resolution is whether or not the respondent Court of

Appeals could dismiss the petitioners' action if the defense of prescription was raised
for the first time on appeal but is apparent in the records.
Following the Gicano doctrine that allows dismissal of an action on the ground
of prescription even after judgment on the merits, or even if the defense was not
raised at all so long as the relevant dates are clear on the record, we rule that the
action filed by the petitioners has prescribed. The dates of delivery and institution of
the action are undisputed. There are no new issues of fact arising in connection with
the question of prescription, thus carving out the case at bar as an exception from the
general rule that prescription if not impleaded in the answer is deemed waived. [22]
Even if the defense of prescription was raised for the first time on appeal in
respondent's Supplemental Motion for Reconsideration of the appellate court's
decision, this does not militate against the due process right of the petitioners. On
appeal, there was no new issue of fact that arose in connection with the question of
prescription, thus it cannot be said that petitioners were not given the opportunity to
present evidence in the trial court to meet a factual issue. Equally important,
petitioners had the opportunity to oppose the defense of prescription in their
Opposition to the Supplemental Motion for Reconsideration filed in the appellate
court and in their Petition for Review in this Court.
This Court's application of the Osorio and Gicano doctrines to the case at bar is
confirmed and now enshrined in Rule 9, Sec. 1 of the 1997 Rules of Civil
Procedure, viz:
"Section 1. Defense and objections not pleaded. - Defenses and objections not
pleaded whether in a motion to dismiss or in the answer are deemed
waived. However, when it appears from the pleadings that the court has no
jurisdiction over the subject matter, that there is another action pending between
the same parties for the same cause, or that the action is barred by a prior judgment
or by statute of limitations, the court shall dismiss the claim." (Emphasis
supplied)
WHEREFORE, the petition is DENIED and the impugned decision of the
Court of Appeals dated January 24, 1994 is AFFIRMED. No costs.
SO ORDERED.

11. Barnes vs. Reyes (repeat)

12. PNB vs. Court of Appeals (repeat

D. Defense based on Document

13. Toribio vs. Hon. Bidin

G.R. No. L-57821 January 17, 1985

SEGUNDINO TORIBIO, EUSEBIA TORIBIO, and the HEIRS OF OLEGARIO TORIBIO,
represented by his widow, ADELA DE LOS REYES, petitioners,
vs.
THE HON. JUDGE ABDULWAHID A. BIDIN, in his capacity as Presiding Judge, Branch I,
Court of First Instance, City of Zamboanga, DALMACIO RAMOS, and JUANITO
CAMACHO, respondents.

GUTIERREZ, J.:
This petition is premised on the interpretation and application of Sections 7 and 8, Rule 8 of the
Revised Rules of Court on actionable documents, which state:
SEC. 7. Action or defense based on document. Whenever an action or
defense is based upon a written instrument or document, the substance of such
instrument or document shall be set forth in the pleading, and the original or a
copy thereof shall be attached to the pleading as an exhibit, which shall be
deemed to be a part of the pleading, or said copy may with like effect be set forth
in the pleading.
SEC. 8. How to contest genuineness of such documents. When an action or
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as provided in the preceding section, the genuineness
and due execution of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and sets forth what he claims
to be the facts; but this provision does not apply when the adverse party does not
appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused.
The present controversy stems from a complaint filed by the petitioners against private
respondents Dalmacio Ramos and Juanita Camacho.
Engracio Francisco and Juliana Esteban were the registered owners of the parcel of land
Zamboanga. At the death of said spouses, they were survived by their ten (10) children who
inherited their state in equal pro indiviso shares. Subsequently, the property was subdivided
among the heirs and a portion designated as Lot No. 1943-B was allotted to the Justa Francisco.
Justa died and was survived among by eight (8) children namely: Dionoso, Eufremia, Alfonso,
Rafael, Petrona, Olegario, Segundino and Eusebia, all surnamed Toribio, who eight heirs,
Eufremia, Alfonso and Petrona, sold their in the property to Ramon Ledesma. Rafael also sold
his share to Dinisio who, in turn, sold the same to Ramon Ledesma. Thus, the latter acquired
four (4) shares out of eight (8) shares, or a pro indiviso share of Lot 1943-B.
Subsequently, Dionisio sold his own hereditary share in the aforesaid estate of his mother to
Juanito Camacho, who by said sale acquired a 1/8 pro indiviso share of the property.
The three other heirs, petitioners Segundino Eusebia and Olegario alleging that their shares had
never been sold nor in any wise transferred or disposed to others filed a case against herein

private respondents for recovery of hereditary rights. How Juanito Camacho, who was entitled to
only a total area of 931 square meters, nor, how one Dalmacio Ramos, Jr., acquired share of
the property was allegedly not known to them.
In their answer, the defendants-respondents alleged that the shares of plaintiffs-petitioners had
likewise been sold to Dionisio Toribio, their brother, who, in turn, sold the same to Juanito
Camacho and Dalmacio Ramos. The alleged sale from petitioners to Dionisio and the sale from
Dionisio to the respondents were evidenced by deeds of sale, xerox copies of which were
appended to and made an integral part of the respondents' partition agreement between the
respondents and also a xerox copy of the respondents' transfer certificates of title.
While testifying during the trial, Eusebia Toribio was asked whether she executed any sale of her
share in the parcel of land in litigation. The counsel for private respondents objected, raising the
proper mode of contesting the genuineness of an actionable document pursuant to Sections 7
and 8, Rule 8 of the Revised Rules of Court. The trial court sustained the objection.
Petitioners, thereupon, filed a constancia with a motion for reconsideration stating that the
documents submitted by the respondents were merely evidentiary in nature, not a cause of
action or defense, the due execution and genuineness of which they had to prove. They alleged
that the subject of litigation was the hereditary shares of plaintiffs-petitioners, not any document.
They stated that the defense consisting mainly of transfer certificates of titles in the respondents'
names originating from the sale from petitioners to Dionisio and from the latter to the
respondents were merely evidentiary in nature. They argued that a simple specific denial without
oath is sufficient. The court denied the motion for reconsideration. The documents attached to
the respondents' answer and made an integral part thereof were declared to be the very
foundation or basis of the respondents' defense and not merely evidentiary in nature. Hence, this
petition for review on certiorari.
The initial issue brought before us is whether or not the deeds of sale allegedly executed by the
petitioners in favor of their brother Dionisio Toribio and appended to the respondents' answer are
merely evidentiary in nature or the very foundation of their defense which must be denied under
oath by the petitioner.
The records show that the deeds of sale are actionable documents.
Jurisprudence has centered mainly on a discussion of actionable documents as basis of a
plaintiff's cause of action. Little has been said of actionable documents being the foundation of a
defense. The Rule, however, covers both an action or a defense based on documents.
The situation obtaining in the case at bar is not a common one. The usual case is between
plaintiff and defendant where, the latter, as his defense, would present a document to which both
parties are parties and which states that the former relinquishes his rights to the defendant. In the
case at bar, we have a situation where the defendant presented a document in his defense, a
document to which the plaintiff is a party but to which defendant is not. Thus, the question arises
as to whether or not the document is included as a necessary part of the defense so as to make
it actionable.
The petitioners alleged in their complaint that their shares in the inheritance left by their mother
were never sold nor in any wise transferred or disposed to others.
The defendants, in their answers, declare:
xxx xxx xxx
... that the hereditary shares of plaintiffs OLEGARIO TORIBIO, SEGUNDINO
TORIBIO and EUSEBIA TORIBIO were likewise sold, transferred and conveyed,

first in favor of DIONISIO TORIBIO by virtue of two (2) deeds of sale executed in
due form on October 24, 1964 and November 2, 1964, respectively, and
thereafter, by DIONISIO TORIBIO in favor of defendants JUANITO A. CAMACHO
and DALMACIO C. RAMOS, JR., on November 11, 1964 as adverted to in the
preceding paragraph, as will be discussed further in the specific and/or
affirmative defenses hereunder; ...
As heretofore alleged, the hereditary shares of all the plaintiffs herein in and over
Lot 1943-B were all sold, transferred and conveyed in favor of DIONISIO
TORIBIO plaintiffs OLEGARIO TORIBIO and SEGUNDINO TORIBIO on October
24, 1964 and that of plaintiff EUSEBIA TORIBIO on November 2, 1964, by virtue
of two (2) deeds of sale all of which were acknowledged before Notary Public for
and within the City of Zamboanga, Atty. Armando B. Torralba and entered as
Doc. No. 6, Page No. 3, Book No. IX, Series of 1964, respectively, in his notarial
register, xerox copies of which are appended hereto to form integral part hereof
as Annexes "1" & "2", respectively.
From the foregoing, it is clear that the respondents anchor their defense on the deeds of sale by
virtue of which the hereditary rights of all the petitioners over Lot 1943-B were sold, transferred,
and conveyed in favor of their brother, Dionisio Toribio, who in turn sold the same to herein
respondents. The deed of sale executed by the petitioners in favor of their brother Dionisio is an
essential and indispensable part of their defense to the allegation that the petitioners had never
disposed of their property.
The following question furnishes an absolute test as to the essentiality of any allegation: Can it
be made the subject of a material issue? In other words, if it be denied, win the failure to prove it
decide the case in whole or in part? If it will not, the fact is not essential. It is not one of those
which constitute the cause of action, defense, or reply (Sutherland's Code of Pleading, Practice
and Forms, p. 82). A fact is essential if it cannot be stricken out without leaving the statement of
the cause of action or defense insufficient.
Apart from alleging that the documents in this case are merely evidentiary, the petitioners also
point out that the deeds of sale purportedly executed by them were in favor of their brother,
Dionisio, who in turn executed deeds of sale in favor of the respondents. Under this
circumstance, does the genuineness and due execution of the deeds evidencing the two
transactions have to be denied under oath?
The deed of sale executed by Dionisio Toribio in favor of the respondents, by itself, would be
insufficient to establish a defense against the petitioners' claims. If the petitioners deny that they
ever sold their shares in the inherited lot to their brother Dionisio, a failure to prove the sale
would be decisive. For if it can be shown that no conveyance of the property was executed by
the petitioners, then Dionisio Toribio had no right to convey what did not belong to him. The
respondents could acquire only the rights that Dionisio had over the disputed property. The
genuineness and due execution of the deed between the co-heirs is also elemental to the
defense of the respondents. The first deeds of sale, to which the respondents were not parties
but which they seek to enforce against the parties are also actionable documents.
The petitioners further alleged that this case falls under the exception to Section 8, Rule 8 which
provides:
SECTION 8. ... but this provision does not apply when the adverse party does not
appear to be a party to the instrument.
As early as Lim-Chingco v. Terariray (5 Phil. 120), this Court gave the reason for the rule on
contesting actionable documents. The purpose is:

Reasonably construed, the purpose of the enactment (sec. 103) appears to have
been to relieve a party of the trouble and expense of proving in the first instance
an alleged fact, the existence or nonexistence of which is necessarily within the
knowledge of the adverse party, and of the necessity (to his opponent's case) of
establishing which such adverse party is notified by his opponent's pleading.
This being so, the documents have to be treated in like manner. The petitioners are themselves
parties to the deeds of sale which are sought to be enforced against them. The complaint was
filed by the petitioners. They filed suit to recover their hereditary properties. The new owners
introduced deeds of sale as their main defense. In other words, the petitioners brought the issue
upon themselves. They should meet it properly according to the Rules of Court.
Sections 7 and 8 of Rule 8, therefore, apply. The proper procedure was for the petitioners to
specifically deny under oath the genuineness and due execution of the questioned deeds of sale
and to set forth what they claim to be the facts. However, the oversight or negligence of
petitioners' counsel in not properly drafting a reply to the answer and an answer to the counter
claim is not necessarily fatal to their cause.
The facts of the case and equitable considerations constrain us to grant the petition and to set
aside the questioned order of the respondent court.
As stated earlier, the reason for the rule is to enable the adverse party to know beforehand
whether he will have to meet the issue of genuineness or due execution of the document during
trial. (In re Dick's Estate, 235 N.W. 401). While mandatory, the rule is a discovery procedure and
must be reasonably construed to attain its purpose, and in a way as not to effect a denial of
substantial justice. The interpretation should be one which assist the parties in obtaining a
speedy, inexpensive, and most important, a just determination of the disputed issues.
Paragraphs 11 and 13 of the petitioners' complaint reads:
xxx xxx xxx
11. That the share of herein Plaintiffs were never sold or in any wise transferred
or disposed to others;
xxx xxx xxx
13. That just how and by what means Defendant, JUANITO CAMACHO was able
to acquire the total area of 931 square meters, is not known; however, the
acquisition might have been effected, the same was in fraud of herein plaintiffs;
and so with the share of Defendant, DALMACIO C. RAMOS, Jr., herein Plaintiffs,
jointly and/or severally, do not know the person; and, however he might have
acquired the said share of ONE FOURTH () of the property, was not from
either, much less all of the Plaintiffs;
xxx xxx xxx
The complaint was verified under oath by the petitioners.
The petitioners' counsel was obviously lulled into complacency by two factors. First, the plaintiffs,
now petitioners, had already stated under oath that they never sold, transferred, or disposed of
their shares in the inheritance to others. Second, the usual procedure is for a defendant to
specifically deny under oath the genuineness and due execution of documents set forth in and
annexed to the complaint. Somehow, it skipped counsel's attention that the rule refers to either

an action or a defense based upon a written instrument or document. It applies to both plaintiffs
and defendants.
Under the facts of this case, the private respondents were placed on adequate notice by
Paragraph 11 of the verified complaint that they would be caned upon during trial to prove the
genuineness or due execution of the disputed deeds of sale.
Moreover, the heirs of Olegario Toribio, his widow and minor children represented by their
mother, are among the plaintiffs-petitioners. They are not parties to the deeds of sale allegedly
executed by their father, aunt, and uncle. They are not required to deny the deeds of sale under
oath. The private respondents will still have to introduce evidence to establish that the deeds of
sale are genuine and that they were truly executed by the parties with authority to dispose of the
disputed property.
It bears repeating that rules of procedure should be liberally construed to the end that substantial
justice may be served. As stated in Pongasi v. Court of Appeals (71 SCRA 614):
We repeat what We said in Obut v. Court of Appeals, et al., supra, that 'what
should guide judicial action is the principle that a party-litigant is to be given the
fullest opportunity to establish the merits of his complaint or defense rather than
for him to lose life, liberty, honor or property on technicalities.
In dispensing justice Our action must reflect a deep insight into the failings of
human nature, a capability for making allowances for human error and/or
negligence, and the ability to maintain the scales of justice happily well-balanced
between these virtues and the application of the law.
An interpretation of a rule of procedure which would not deny to the petitioners their rights to their
inheritance is warranted by the circumstances of this case.
WHEREFORE, the order of the respondent court dated July 20, 1981 is hereby REVERSED and
SET ASIDE. The Regional Trial Court which took over the cases of the respondent court is
ordered to receive the petitioners' evidence regarding the genuineness and due execution of the
disputed deeds of sale.
SO ORDERED.
Teehankee, Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.

14. Imperial Textile vs. Court of Appeals

G.R. No. 86568 March 22, 1990

IMPERIAL TEXTILE MILLS, INC., petitioner,
vs.
COURT OF APPEALS and THE INTERNATIONAL CORPORATE BANK, INC., respondents.
Batino, Angala, Salud & Fabia Law Offices for petitioner.
A.M. Perez & Associates for private respondent.

GANCAYCO, J.:
This case involves the application of Sections 7 and 8 of Rule 8 of the Rules of Court when the
action or defense is based on a written document.
The facts are undisputed. In an action for the collection of a sum of money that was filed by the
private respondent against petitioner in the Regional Trial Court of Makati, Metro Manila, it was
alleged, among others, as follows:
3. On August 18, 1980, for valuable consideration, defendant executed in favor
of, and delivered to plaintiff Promissory Note No. TL-0532-80, copy of which is
hereto attached as Annex "A", whereby defendant obligated itself to pay plaintiff
on November 16, 1980 the sum of Twelve Million Pesos (P12,000,000.00) and
with interest thereon at the rate of 16% per annum.
4. The promissory note, Annex "A", expressly stipulates that in case of nonpayment when due, defendant shall pay plaintiff an additional amount equal to
3% per month of the amount due as liquidated damages and a further sum equal
to 10% thereof as attorney's fees. 1
Attached to the complaint as Annex A was the Promissory Note. 2
An answer to the complaint was filed by petitioner. The petitioner denied liability and alleged that
one Julio Tan had no authority to negotiate and obtain a loan on its behalf. While defendant
specifically denied the aforestated promissory note alleged in the complaint, the answer was not
verified. For this reason, in due course, a decision was rendered by the trial court on December
1, 1986, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff International
Corporate Bank, Inc. and against the defendant Imperial Textile Mills, Inc. as
follows:
1. Ordering the defendant to pay plaintiff the total sum of P40,486,229.16, with
interest thereon at the rate of 16% per annum from 17 June 1985 until fully paid
(Cf. Exhibit B Statement of Account, p. 35, Id.);
2. Ordering the defendant to pay plaintiff the sum of P40,000.00 as and for
attorney's fees, plus the sum of P47,470.00 as costs. (Cf. Exhibits E, F and G).
SO ORDERED. 3
Petitioner brought an appeal to the Court of Appeals. In a decision dated October 17, 1988, the
Court of Appeals affirmed the judgment appealed from with costs against petitioner. 4
A motion for reconsideration of said decision was likewise denied by the appellate court.
Hence, this petition.
The petition is devoid of merit. Sections 7 and 8 of Rule 8 of the Rules of Court provide as
follows:
Sec. 7. Action or defense based on document. Whenever an action or defense
is based upon a written instrument or document, the substance of such

instrument or document shall be set forth in the pleading, and the original or a
copy thereof shall be attached to the pleading as an exhibit, which shall be
deemed to be a part of the pleading, or said copy may with like effect be set forth
in the pleading.
Sec. 8. How to contest genuineness of such documents. When an action or
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as provided in the preceding section, the genuineness
and due execution of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and sets forth what he claims
to be the facts; but this provision does not apply when the adverse party does not
appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused.
No rule is more settled than that in an action based on a written instrument attached to the
complaint, if the defendant fails to specifically deny under oath the genuineness and due
execution of the instrument, the same is deemed admitted. 5
Section 7, Rule 8 of the Rules of Court is explicit in that there are two ways of pleading an
actionable document, namely:
(a) by alleging the substance of such written instrument in the pleading and
attaching a copy thereof to the pleading; and
(b) by copying the instrument in the pleading.
The complaint in the present case complied with the first situation under paragraph (a). The
complaint alleged the substance of the promissory note subject of the litigation and a copy of the
promissory note was attached.
There is no question likewise that the petitioner failed to specifically deny under oath the
genuineness and due execution of the promissory note subject of the complaint. By its omission,
petitioner clearly admitted the genuineness and due execution of the document and that the party
whose signature appears thereon had indeed signed the same and that he has the authority to
sign the same and that the agreement between the parties is what was in words and figures in
the document. Defenses which are inconsistent with the due execution and genuineness of the
written instrument are cut-off by such admission. 6
The claim of petitioner is that its failure to specifically deny under oath the actionable document
does not prevent it from showing that one Julio Tan was not authorized to enter into the
transaction and to sign the promissory note for and in behalf of the petitioner. But precisely, the
petitioner is a party to the instrument represented by Julio Tan so that it may not now deny the
authority of Julio Tan to so represent it. 7 The due execution and genuineness of the document have
thereby been conclusively established.

Moreover, in this case the judgment appealed from is supported by the evidence. This petition is
at best dilatory.
WHEREFORE, the petition is DISMISSED, with costs against petitioner.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

15. PNB vs. Court of Appeals (repeat)