G.R. No.

209324, December 09, 2015

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE BUREAU OF CUSTOMS, Petitioner, v.

PILIPINAS SHELL PETROLEUM CORPORATION, Respondent.

assailed in this petition for review under Rule 45 are the Decision 1 dated February 13, 2013 and
Resolution2 dated June 3, 2013 of the Court of Appeals (CA) in CA-G.R. CV No. 95436 which affirmed the
Orders3 dated April 28, 2010 and July 2, 2010 of the Regional Trial Court (RTC) of Manila, Branch 49 in
Civil Case No. 02-103191.

Factual Antecedents

Pilipinas Shell Petroleum Corporation (PSPC), a domestic corporation registered with the Board of
Investments (BOI), is engaged in the importation, refining and sale of petroleum products in the country.
For its importations, PSPC was assessed and required to pay customs duties and internal revenue taxes.

Under Deed of Assignment4 dated May 7, 1997, Filipino Way Industries (FWI) assigned the following Tax
Credit Certificates5 (TCCs) to PSPC:
TCC# 006889 P 2,542,918.00
TCC # 006977 2,573,422.00
TCC# 006978 2,559,493.00
TCC # 006979 2,413,079.00
TOTAL P10,088,912.006
On the belief that the TCCs were actually good and valid, the Bureau of Customs (BOC) accepted and
allowed PSPC to use the above TCCs to pay the customs duties and taxes due on its oil importations.

The One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center 7 ("center") undertakes the
processing of TCCs and approval of their transfers. It is composed of a representative from the
Department of Finance (DOF) as its chairperson; and the members thereof are representatives of the
BOI, BOC and Bureau of Internal Revenue (BIR).

On November 3, 1999 the Center, through then Finance Secretary Edgardo B. Espiritu, informed BIR
Commissioner Beethoven L. Rualo that pursuant to EXCOM Resolution No. 03-05-99, it has cancelled
various Tax Debit Memos (TDMs) issued to PSPC and Petron Corporation against their TCCs which were
found to have been fraudulently issued and transferred. These include the subject TCCs sold by FWI to
PSPC. The Center thus advised that it will be demanding from the said oil companies payment
corresponding to the amount of the TCCs as evidenced by the TDMs, and accordingly directed the BIR to
collect the amount utilized on the TCCs, including the related penalties, surcharges and interests. 8 A
similar letter was sent to Customs Commissioner Nelson Tan regarding the cancellation of TDMs issued
to PSPC based on the Center's finding that the TCCs utilized by PSPC have been fraudulently issued and
transferred.9

On April 3, 2002, the Republic of the Philippines represented by the BOC filed the present collection suit
in the RTC (Civil Case No. 02-103191) for the payment of P10,088,912.00 still owed by PSPC after the
invalidation of the subject TCCs.

Meanwhile, PSPC filed with the Court of Tax Appeals (CTA Case No. 6484) a petition for review
questioning the factual and legal bases of BOC's collection efforts.

Subsequently, PSPC moved to dismiss Civil Case No. 02-103191 on the ground that the RTC had no
jurisdiction over the subject matter and that the complaint for collection was prematurely filed in view of its
pending petition for review in the CTA. The RTC denied the motion to dismiss and PSPC eventually filed
its answer questioning the RTC's jurisdiction. When the RTC issued a notice of pre-trial, PSPC moved for
reconsideration of the order denying its motion to dismiss. The RTC denied the motion for
reconsideration, prompting PSPC to elevate the matter to the CA via a petition for certiorari (CA-G.R. SP
No. 71756). On October 23, 2003, the CA rendered decision denying PSPC's petition. With the denial of
its motion for reconsideration, PSPC sought recourse from this Court in a petition for review on certiorari
(G.R. No. 161953). In a Decision10 dated March 6, 2008, this Court denied PSPC's petition, viz.:
Inasmuch as the present case did not involve a decision of the Commissioner of Customs in any of the
instances enumerated in Section 7(2) of RA 1125, the CTA had no jurisdiction over the subject
matter. It was the RTC that had jurisdiction under Section 19(6) of the Judiciary Reorganization
Act of 1980, as amended:chanRoblesvirtualLawlibrary

xxxx

In view of the foregoing, the RFC should forthwith proceed with Civil Case No. 02-103191 and determine
the extent of petitioner's liability.

We are not unmindful of petitioner's pending petition for review in the CTA where it is questioning the
validity of the cancellation of the TCCs. However, respondent cannot and should not await the resolution
of that case before it collects petitioner's outstanding customs duties and taxes for such delay will unduly
restrain the performance of its functions. Moreover, if the ultimate outcome of the CTA case turns out to
be favorable to petitioner, the law affords it the adequate remedy of seeking a refund.

WHEREFORE, this petition is hereby DENIED. The Regional Trial Court of Manila, Branch 19 is ordered
to proceed expeditiously with the pre-trial conference and trial of Civil Case No. 02-103191.

Costs against petitioner.

SO ORDERED.11 (Emphasis supplied)

As to CTA Case No. 6484, the CTA denied BOC's motion to dismiss on the ground of prescription. When
the CTA denied the BOC's motion for reconsideration, the BOC appealed to the CA, which reversed the
questioned CTA resolutions. PSPC again sought recourse from this Court via a petition for review on
certiorari (G.R. No. 176380). By Decision12 dated June 18, 2009, we denied the petition and held that the
present case does not involve a tax protest case within the jurisdiction of the CTA to resolve. Citing our
previous ruling in Pilipinas Shell Petroleum Corporation v. Republic13 we ruled that the appropriate forum
to resolve the issues raised by PSPC before the CTA, which were all related to the fact and efficacy of the
payments made, should be the collection case before the RTC where PSPC can put up the fact of its
payment as a defense.

With the resumption of proceedings in the RTC, the BOC filed an Amended Complaint, to which PSPC
filed a Second Amended Answer. Pre-trial was terminated and the RTC summarized the issues in its Pre-
Trial Order14 dated September 9, 2009, to wit:
The following issues raised by the plaintiffs:

a. Whether or not plaintiff Republic has cause of action against defendants;

b. Whether or not defendant Pilipinas Shell is [a] transferee in good faith [of] Tax Credit
Certificates;

c. Whether or not defendants are liable to pay the Republic the amount of Phpl0,088,912.00
represents unpaid taxes;

d. Whether or not the Tax Credit Certificate was spurious and fraudulent.
The following issues raised by the defendant Pilipinas Shell:

a. Whether the defendants PSPC is liable for the amount of Php10,088,912.00 in customs
duties and taxes covered by cancelled subject Tax Credit Certificates, However, there
are sub-issues. These are include[d] in our pre-trial brief;

b. Whether or not plaintiff is liable for moral and exemplary and Attorney's fees; and

c. Whether or not defendant Filipino Way is liable to defendant PSPC in case of successful
collection of customs taxes against PSPC.15

On November 16, 2009, PSPC filed a motion for summary judgment arguing that there is no basis for the
Republic's claims considering that the subject TCCs were already fully utilized for the payment of PSPC's
customs duties and taxes, and that EXCOM Resolution No. 03-05-99, the basis of the cancellation of the
TCCs, was declared void and invalid in Pilipinas Shell Petroleum Corporation v. CIR,16 where this Court
likewise ruled that the subject TCCs cannot be cancelled on the basis of post-audit since a post-audit is
not allowed and not a suspensive condition. PSPC further contended that the Republic's cause of action
had already prescribed when it attempted to collect PSPC's customs duties and taxes only four years
later, beyond the one-year prescriptive period to file a collection case. Lastly, PSPC asserted that even
assuming the TCCs were fraudulently obtained by FWI, an innocent purchaser for value like PSPC
cannot be prejudiced as held in the aforementioned case.

In its Comment/Opposition, BOC argued that rendition of summary judgment is inappropriate in this case
in view of disputed facts that necessitate a full-blown trial where both parties can present evidence on
their respective claims. BOC pointed out that PSPC cannot rely on the Deed of Assignment as proof that
it had no participation in the issuance of the TCCs. PSPC should prove at the trial that there was a valid
transfer in good faith and for value of the subject TCCs. As to the rulings in the case of Pilipinas Shell
Petroleum Corporation v. CIR,17 these are inapplicable here because first, what is involved therein are
taxes owed to the BIR and there was no finding of fraud against PSPC whereas in the present case the
BOC can readily prove during trial that PSPC committed fraud.

On February 22, 2010, the RTC denied the motion for summary judgment in view of factual disputes
which can only be resolved by trial on the merits. Specifically, it stated that presentation of evidence is
necessary to determine if PSPC is a mere transferee in good faith and for value of the subject TCCs and
that there was a valid transfer/assignment between PSPC and FWI. 18

However, on motion for reconsideration by PSPC, the RTC reversed its earlier ruling and granted the
motion for summary judgment under its Order19 dated April 28, 2010. The RTC cited Pilipinas Shell
Corporation v. Republic20 which supposedly settled factual and legal issues raised by BOC in its
pleadings and arguments, specifically PSPC's not having committed fraud. As there are no more disputed
matters, the RTC held that there is no more need for a trial to prove that the subject TCCs have been fully
utilized by PSPC and that they were cancelled due to an invalid post-audit under the authority of EXCOM
Resolution No. 03-05-99.

The RTC thus decreed:

WHEREFORE, premises considered, the Order dated February 22, 2010 is hereby REVERSED and SET
ASIDE. The instant case against defendant PSPC is DISMISSED. However, the case against defendant
Filipino Way still SUBSISTS.

Let the trial of this case continue against the other Defendant namely, Filipino Way Industries, as
previously scheduled on May 19, 2010 at 1:00 o'clock in the afternoon.

SO ORDERED.21ChanRoblesVirtualawlibrary
With the denial of its motion for reconsideration, BOC appealed to the CA. By Decision dated February
13, 2013, the CA denied the appeal and affirmed the questioned orders of the RTC. BOC's motion for
reconsideration was likewise denied by the CA.

According to the CA, BOC adopted a wrong mode of appeal because whether the RTC erred in rendering
summary judgment is purely a legal issue, jurisdiction over which is vested only in this Court. Even
assuming that the CA can entertain BOC's appeal, the CA said it found no genuine issues raised by the
parties' pleadings and arguments that necessitate a fullblown trial. The CA further held that the rule on
stare decisis applies in the present case considering that the legal and factual issues have been
previously discussed and resolved by this Court in Pilipinas Shell Petroleum Corporation v. CIR.22

Issues

The following issues clearly emerge from the present controversy: (1) Does the Republic's (petitioner)
appeal involve purely questions of law and hence a wrong remedy from the assailed RTC orders?; (2)
Wliether or not summary judgment is proper; (3) Does the ruling in Pilipinas Shell Petroleum Corporation
v. CIR23 apply to this case under the doctrine of stare decisis; and (4) Whether or not petitioner's claim is
barred by prescription.

Petitioner's Arguments

Citing the cases of Nocom v. Camerino24 and Heirs of Baldomero Roxas v. Garcia25 petitioner argues that
since a summary judgment has the effect of adjudication on the merits, appeal under Rule 41 of the Rules
of Court is the proper remedy.

As to the propriety of summary judgment rendered by the RTC, petitioner underscores that the collection
case it filed against PSPC is founded on the fact that the latter utilized the fraudulently-secured TCCs for
payment of customs duties and taxes that arose from its various oil importations, and their cancellation
did not extinguish its liability to the government. The matter of whether or not PSPC is a transferee in
good faith and for value is a genuine issue to be resolved, and must be ventilated in a full trial. The issue
of whether or not PSPC is guilty of fraud likewise calls for the presentation of evidence at the trial.

Petitioner mentions other factual inquiries which it said arose in this case, such as the manner by which
FWI acquired the subject TCCs; the legality of their transfer to PSPC; the results of the post-audit
conducted on the subject TCCs; whether PSPC claimed a return of the consideration from FWI upon the
cancellation of the TCCs; the veracity of the letter from Equitable Banking Corporation stating that the
credit memos, supposedly used by FWI in securing the TCCs, do not conform to the bank's records; and
what are the company papers and export documents submitted for the claim of tax credits.

Petitioner also argues that Pilipinas Shell Petroleum Corporation v. CIR26 is not applicable as said case
involves the assessment of deficiency taxes which was filed before the CTA, hence a tax case, whereas
here it is a civil case for collection of sum of money which was filed in a regular court. More important, the
facts in the aforesaid case did not clearly establish the fraudulent acts committed by the original grantees
of tax credits in the procurement of TCCs from the Center, whereas in the present case, petitioner can
sufficiently prove that the documents submitted by the original grantee (FWI) for the claim of tax credits
were forgeries and the TCCs subsequently issued had absolutely no monetary value to back up their
issuance. Thus, where the facts in the two cases under consideration are different, stare decisis finds no
application.

On other legal issues that were previously settled in Pilipinas Shell Petroleum Corporation v. CIR,27
petitioner submits there is an extreme urgency to revisit this Court's ruling —
x x x because of the great danger and prejudice it had caused to the several collection cases filed by the
government which are pending before several regular courts involving TCCs in the hundreds of millions of
pesos. Most defendants in these cases assert to be "buyers or transferees in good faith" and capitalize on
the ruling of this Honorable Court in the Shell case. However, if the only basis for finding good faith on the
part of the transferee of TCCs is the mere approval of the transfer by the DOF One Stop Shop Center,
then all these pending cases, as above-mentioned, must be dismissed, since all the transfers of the TCCs
were approved by the Center. This is precisely the very reason why the government filed several cases
before the Office of the Ombudsman against the personnel and officers of the One Stop Shop Center,
including private individuals, because of the collusion and conspiracy they contrived in order to defraud
the government of several billions of pesos involving the issuance and transfers of TCCs. This is now
infamously known as the "tax credit scam" because it was committed in grandiose style by a crime
syndicate.

In the final analysis, the ultimate victim in this scheme is not the Republic but the Filipino people who did
not commit mistake or wrongdoing, but rather, its agents. Hence, the State cannot be made to bear the
loss of revenues on account of scheming individuals or entities that are out to defraud the government or
evade the payment of tax liabilities.28ChanRoblesVirtualawlibrary
Respondent's Arguments

PSPC contends that the assailed orders of the RTC granting summary judgment has already attained
finality since petitioner availed of the wrong remedy before the CA. It asserts that the CA did not err in
upholding the RTC's ruling that there exists no genuine issues of fact in the present case.

On the alleged fraudulent issuance of the subject TCCs, PSPC maintains that it cannot be prejudiced by
such fraud which, by petitioner's own admission, was committed by FWI. Being a transferee in good faith
and for value of the subject TCCs, these matters raised by petitioner are thus irrelevant. That PSPC is a
transferee in good faith and for value was admitted by petitioner during the pre-trial hearing held on
September 9, 2009.

PSPC argues that, contrary to petitioner's claims, the CA correctly applied this Court's rulings in Pilipinas
Shell Petroleum Corporation v. CIR29 under the doctrine of stare decisis. In any event, it asserts that
petitioner's cause of action had already prescribed since the subject TCCs were already fully utilized as
payment for PSPC's customs duties and taxes on November 17, 1997, while petitioner attempted to
collect only on February 15, 2002 or four years later, beyond the one year period to file the present case.

Our Ruling

The petition is meritorious.

Propriety of Summary Judgment a Question of Law, hence, the Remedy is a Petition for Review
Under Rule 45

Section 2, Rule 41 of the 1997 Rules of Civil Procedure, as amended, provides for two remedies from the
final orders or judgments of the RTC in the exercise of its original jurisdiction, viz.:
Section 2. Modes of appeal. -

(a) Ordinary appeal. - The appeal to the Court of Appeals in cases decided by the Regional Trial Court in
the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which
rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party.
No record on appeal shall be required except in special proceedings and other cases of multiple or
separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be
filed and served in like manner.

(b) Petition for review. - The appeal to the Court of Appeals in cases decided by the Regional Trial Court
in the exercise of its appellate jurisdiction shall be by petition for review in accordance with Rule 42.

(c) Appeal by certiorari. - In all cases where only questions of law are raised or involved, the appeal
shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

(Emphasis supplied)
Thus, when an appeal raises only pure questions of law, it is this Court that has the sole jurisdiction to
entertain the same. On the other hand, appeals involving both questions of law and fact fall within the
exclusive appellate jurisdiction of the CA.30

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is
a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be
one of law, the same must not involve an examination of the probative value of the evidence presented by
the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the
given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the
question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same; rather, it is whether the appellate court
can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise it is a question of fact.31

We have held that the question of whether the RTC erred in rendering summary judgment is one of law,
thus:
Any review by the appellate court of the propriety of the summary judgment rendered by the trial court
based on these pleadings would not involve an evaluation of the probative value of any evidence, but
would only limit itself to the inquiry of whether the law was properly applied given the facts and these
supporting documents. Therefore, what would inevitably arise from such a review are pure questions of
law, and not questions of fact, which are not proper in an ordinary appeal under Rule 41, but should be
raised by way of a petition for review on certiorari under Rule 45. 32ChanRoblesVirtualawlibrary
Petitioner raised as sole issue in its brief filed with the CA the RTC's erroneous grant of summary
judgment in favor of PSPC based on its finding that there exists no genuine factual issue. Obviously, it
availed of the wrong mode of appeal when it filed a notice of appeal in the RTC under Section 2(a), Rule
41, instead of a petition for review on certiorari in this Court under Rule 45.

Relaxation of the Rule on Appeal

However, despite such lapse, a relaxation of the rule on appeal is justified under the circumstances. The
CA found no reversible error in the grant of summary judgment in favor of PSPC. Accordingly, it affirmed
the assailed orders of the RTC.

Considering the Republic's stake in the outcome of the proceedings in Civil Case No. 02-103191, among
the several collection suits it has instituted in the drive to recover huge revenue losses from spurious tax
credit certificates that proliferated in the 1990s, we cannot accede to PSPC's contention that petitioner's
erroneous appeal has rendered the Orders dated April 28, 2010 and July 2, 2010 of the RTC final and
executory.

In Barangay Sangalang v. Barangay Maguihan33 we ratiocinated:

In any case, as in the past, this Court has recognized the emerging trend towards a liberal construction of
the Rules of Court. In Ong him Sing, Jr. v. FEB Leasing and Finance Corporation, this Court stated:
Courts have the prerogative to relax procedural rules of even the most mandatory character, mindful of
the duty to reconcile both the need to speedily put an end to litigation and the parties' right to due
process. In numerous cases, this Court has allowed liberal construction of the rules when to do so would
serve the demands of substantial justice and equity. In Aguam v. Court of Appeals, the Court explained:
The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a power conferred on
the court, not a duty. The "discretion must be a sound one, to be exercised in accordance with the tenets
of justice and fair play, having in mind the circumstances obtaining in each case." Technicalities,
however, must be avoided. The law abhors technicalities that impede the cause of justice. The court's
primary duty is to render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits, unlike
duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to
justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts."
Litigations must be decided on their merits and not on technicality. Every party-litigant must be afforded
the amplest opportunity for the proper and just determination of his cause, free from the unacceptable
plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought
not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not
override substantial justice. It is a far better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to attain the ends ol" justice rather
than dispose of the case on technicality and cause a grave injustice to the parties, giving a false
impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.
Thus, notwithstanding petitioner's wrong mode of appeal, the CA should not have so easily dismissed the
petition, considering that the parties involved are local government units and that what is involved is the
determination of their respective territorial jurisdictions. x x x 34ChanRoblesVirtualawlibrary
Summary Judgment Not Proper

Under Rule 35 of the 1997 Rules of Civil Procedure, as amended, except as to the amount of damages,
when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a
matter of law, summary judgment may be allowed:
Section 1. Summary Judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been
served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor
upon all or any part thereof.
Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and
useless delays. When the pleadings on file show that there are no genuine issues of fact to be tried, the
Rules allow a party to obtain immediate relief by way of summary judgment, that is, when the facts are not
in dispute, the court is allowed to decide the case summarily by applying the law to the material facts. 35
Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and admissions
show that such issues are not genuine, then summary judgment as prescribed by the Rules must ensue
as a matter of law. The determinative factor, therefore, in a motion for summary judgment, is the presence
or absence of a genuine issue as to any material fact. 36

For a full-blown trial to be dispensed with, the party who moves for summary judgment has the burden of
demonstrating clearly the absence of genuine issues of fact, or that the issue posed is patently
insubstantial as to constitute a genuine issue. Genuine issue means an issue of fact which calls for the
presentation of evidence as distinguished from an issue which is fictitious or contrived. 37

Petitioner's complaint is premised mainly on the alleged fraudulent issuance and transfer of the subject
TCCs. As stated in the pre-trial order, petitioner submitted for trial the issue of whether or not PSPC is a
transferee in good faith.

In Pilipinas Shell Petroleum Corporation v. CIR,38 we ruled that "[t]he transferee in good faith and for value
may not be unjustly prejudiced by the fraud committed by the claimant or transferor in the procurement or
issuance of the TCC from the Center."
A transferee in good faith and for value of a TCC who has relied on the Center's representation of the
genuineness and validity of the TCC transferred to it may not be legally required to pay again the tax
covered by the TCC which has been belatedly declared null and void, that is, after the TCCs have been
fully utilized through settlement of internal revenue tax liabilities. Conversely, when the transferee is party
to the fraud as when it did not obtain the TCC for value or was a party to or has knowledge of its
fraudulent issuance, said transferee is liable for the taxes and for the fraud committed as provided for by
law.39ChanRoblesVirtualawlibrary
The RTC found no genuine factual issue as far as PSPC's status as innocent purchaser in good faith and
for value, relying on the following underlined portion of this Court's decision in Pilipinas Shell Petroleum
Corporation v. Republic40 (March 6, 2008):
THE FILING OF THE COLLECTION CASE WAS A PROPER REMEDY

Assessments inform taxpayers of their tax liabilities. Under the TCCP, the assessment is in the form of a
liquidation made on the face of the import entry return and approved by the Collector of Customs.
Liquidation is the final computation and ascertainment by the Collector of Customs of the duties
due on imported merchandise based on official reports as to the quantity, character and value thereof,
and the Collector of Customs' own finding as to the applicable rate of duty. A liquidation is considered to
have been made when the entry is officially stamped "liquidated."

Petitioner claims that it paid the duties due on its importations. Section 1603 of the old TCCP stated:
Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty or final
adjustments of duties made, with subsequent delivery, such entry and passage free of duty or settlement
of duties will, after the expiration of one year from the date of the final payment of duties, in the absence
of fraud or protest, be final and conclusive upon all parties, unless the liquidation of the import entry was
merely tentative.
An assessment or liquidation by the BoC attains finality and conclusiveness one year from the date of the
final payment of duties except when:
(a) there was fraud;

(b) there is a pending protest or

(c) the liquidation of import entry was merely tentative.

None of the foregoing exceptions is present in this case. There was no fraud as petitioner claimed (and
was presumed) to be in good faith. Respondent does not, dispute this. Moreover, records show that
petitioner paid those duties without protest using its TCCs. Finally, the liquidation was not a tentative one
as the assessment had long become final and incontestable. Consequently, pursuant to Yabes and
because of the cancellation of the TCCs, respondent had the right to file a collection case. (Underscoring
supplied)
Upon reading the entire text of the above decision, it can be gleaned that PSPC (petitioner therein) had
questioned the jurisdiction of the RTC, arguing that said court has no jurisdiction over Civil Case No. 02-
103191 (collection case) in view of the pendency of PSPC's petition for review in the CTA challenging the
BOC's assessment of the customs duties and taxes covered by the same TCCs involved in this case.
Citing Yabes v. Flojo,41 PSPC contended that the RTC acquires jurisdiction over a collection case only if
an assessment made by the CIRhas become final and incontestable.

Addressing the issue of prematurity of BOC's collection case in the RTC, we cited three exceptions from
the rule that an assessment becomes final and conclusive one year from the date of final payment of
duties: among which is when there is fraud. The decision then declares that none of the cited exceptions
are present, specifically stating that there was no fraud as petitioner claimed (and was presumed) to be in
good faith, and the BOC does not dispute it. It is this statement which the RTC deemed as establishing
PSPC's status as transferee in good faith and for value of the subject TCCs. However, we find the RTC's
reliance on this statement in the earlier case involving the issue of jurisdiction of the RTC as misplaced
and erroneous. Such statement pertained to fraud in the computation or accuracy of the customs duties
and taxes due on the subject importations, which concerns the correctness of the quantity and class of
goods declared by the importer PSPC as basis for the assessment by the BOC. There may have been
preconceived courses of action purposely adopted by importers to evade the payment of the correct
customs duties. Clearly, the fraud mentioned in the said decision does not refer to the fraud in the
issuance and transfer of TCCs for which the petitioner seeks to recover unpaid customs duties and taxes,
subject matter of the present controversy. The latter has to do with presentation of spurious documents
that would render the TCCs worthless, resulting in non-payment of the assessed customs duties and
taxes.

It bears stressing also that the collection case is not based on any revised or new assessment of customs
duties and taxes on PSPC's oil importations. As we noted in Pilipinas Shell Petroleum Corporation v.
Commissioner of Customs42 BOC's demand letters to PSPC merely reissued the original assessments
that were previously settled by it with the use of the TCCs. But since the TCCs were cancelled, the tax
liabilities of PSPC under the original assessments were considered unpaid; hence, the demand letters
and actions for collection.

Moreover, it would be absurd to interpret such statement in our decision in Pilipinas Shell Petroleum
Corporation v. Republic43 (March 6, 2008) as a judicial declaration of PSPC's status as a transferee in
good faith and for value of the subject TCCs when in the same decision we ordered the case remanded to
the RTC for proceeding with the pre-trial where issues for trial still have to be determined by the parties.
Neither should such statement be regarded as an admission by petitioner because the latter's complaint
was anchored chiefly on the alleged fraud and irregularity in the issuance and transfer of the TCCs, with
both the transferee (PSPC) and transferor (FWI) impleaded as defendants.

In its Comment, PSPC claims that during the pre-trial hearing, the Solicitor General's representative
admitted that PSPC had no participation in the issuance of the subject TCCs. However, perusal of the
transcript of stenographic notes (TSN) reveals that what was admitted by petitioner was only the fact of
issuance and eventual transfer/assignment to PSPC of the TCCs. The succeeding portions of the TSN,
omitted in the Comment, clearly showed that Sr. State Solicitor Bustria repeatedly denied Atty. Lopez's
(PSPC's counsel) proposed stipulations on the valuable consideration for the TCCs, the approval by the
concerned agencies of the deed of the said assignment/transfer and related matters. 44

Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly
reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is
taken of another. It is a question of fact and the circumstances constituting it must be alleged and proved
in the court below.45 Petitioner's allegations of fraud and irregularity in the issuance to FWI and eventual
transfer to PSPC of the subject TCCs require presentation of evidence in a full-blown trial. PSPC, in turn,
can present its own evidence to prove the status of a purchaser or transferee in good faith and for value.
The solidary liability of PSPC and FWI for the amount covered by the TCCs depends on the good faith or
lack of it on the part of PSPC.

In ascertaining good faith, or the lack of it, which is a question of intention, courts are necessarily
controlled by the evidence as to the conduct and outward acts by which alone the inward motive may,
with safety, be determined.46 Good faith connotes an honest intention to abstain from taking undue
advantage of another, even though the forms and technicalities of law, together with the absence of all
information or belief of facts, would render the transaction unconscientious. 47 The ascertainment of good
faith, or lack of it, and the determination of whether due diligence and prudence were exercised or not,
are questions of fact.48

Trial courts have limited authority to render summary judgments and may do so only when there is clearly
no genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or
contested, proceedings for summary judgment cannot take the place of trial. 49 As certain facts pleaded
are contested by the parties in this case, rendition of summary judgment is not proper.

Prescription

As already mentioned, BOC's collection suit is not based on any new or revised assessment because the
original assessments which had long become final and uncontestable, were already settled by PSPC with
the use of the subject TCCs.

With the cancellation of the TCCs, the tax liabilities of PSPC under the original assessments were
considered unpaid, hence BOC's demand letters and the action for collection in the RTC. To repeat,
these assessed customs duties and taxes were previously assessed and paid by the taxpayer, only that
the TCCs turned out to be spurious and hence worthless certificates that did not extinguish PSPC's tax
liabilities.

The applicable provision is Section 1204 of the Tariff and Customs Code, which states:
Section 1204. Liability of Importer for Duties. — Unless relieved by laws or regulations, the liability for
duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the
importer to the government which can be discharged only by payment in full of all duties, taxes,
fees and other charges legally accruing. It also constitutes a lien upon the articles imported which may be
enforced while such articles are in the custody or subject to the control of the government. (Emphasis
supplied)
As we held in Pilipinas Shell Petroleum Corporation v. Republic50:
Under this provision, import duties constitute a personal debt of the importer that must be paid in full. The
importer's liability therefore constitutes a lien on the article which the government may choose to enforce
while the imported articles are either in its custody or under its control.

When respondent released petitioner's goods, its (respondent's) lien over the imported goods was
extinguished. Consequently, respondent could only enforce the payment of petitioner's import duties in
full by filing a case for collection against petitioner. 51ChanRoblesVirtualawlibrary
Stare Decisis

The doctrine of stare decisis is based on the principle that once a question of law has been examined and
decided, it should be deemed settled and closed to further argument. 52 Accordingly, when a court has laid
down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it
to all future cases in which the facts are substantially the same. Thus, where the same questions relating
to the same event have been put forward by the parties similarly situated as in a previous case litigated
and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same
issue.53

The RTC and CA both ruled that Pilipinas Shell Petroleum Corporation v. CIR54 applies to the present
case, stating that the legal issues have already been settled by this Court such as the ineffective
cancellation by the Center of TCCs which have been fully utilized by the importer/taxpayer and the sole
responsibility under the Liability Clause in the TCC of the original grantee for its fraudulent issuance by
the Center.

We disagree.

Pilipinas Shell Petroleum Corporation v. CIR55 involved TCCs used by PSPC that were also cancelled for
alleged fraud in their issuance and transfer. However, in the said case, there was a finding, on the basis
of evidence presented before the CTA, that PSPC is a transferee in good faith and for value and that no
evidence was adduced that it participated in any way in the issuance of the TCCs to the corporations who
in turn conveyed the same to PSPC.

PSPC's status as transferee in good faith of the TCCs assigned to it by FWI is yet to be established or
proven at the trial. In fact, this Court in upholding the jurisdiction of the RTC directed it to proceed with the
pre-trial and trial proper. Petitioner should be given the opportunity to substantiate its allegations of fraud
in the issuance and transfer of the TCCs which PSPC used to pay for the customs duties and taxes due
on its oil importations. Whether Pilipinas Shell Petroleum Corporation v. CIR56 applies squarely to the
present case may be determined only after such trial. If it is shown that PSPC was a party to the fraud as
when it did not obtain the TCC for value or has knowledge of its fraudulent issuance, it will be liable for
the taxes and for the fraud committed as provided for by law.

As to the full utilization of the TCCs being claimed by PSPC, our ruling in Pilipinas Shell Petroleum
Corporation v. CIR is clear that the taxpayer must have no participation in the fraud, viz.:
Sec. 3, letter 1. of AO 266, in relation to letters a. and g., does give ample authority to the Center to
cancel the TCCs it issued. Evidently, the Center cannot carry out its mandate if it cannot cancel the TCCs
it may have erroneously issued or those that were fraudulently issued. It is axiomatic that when the law
and its implementing rules are silent on the matter of cancellation while granting explicit authority to issue,
an inherent and incidental power resides on the issuing authority to cancel that which was issued. A
caveat however is required in that while the Center has authority to do so, it must bear in mind the nature
of the TCCs immediate effectiveness and validity for which cancellation may only be exercised before
a transferred TCC has been fully utilized or cancelled by the BIR after due application of the available
tax credit to the internal revenue tax liabilities of an innocent transferee for value, unless of course the
claimant or transferee was involved in the perpetration of the fraud in the TCCs issuance, transfer,
or utilization. The utilization of the TCC will not shield a guilty party from the consequences of the
fraud committed.57 (Emphasis supplied)
In sum, the CA erred in affirming the RTC orders granting summary judgment in favor of PSPC
considering that there exists a genuine issue of fact and that stare decisis finds no application in this
case.

WHEREFORE, the petition is GRANTED. The Decision dated February 13, 2013 and Resolution dated
June 3, 2013 of the Court of Appeals in CA-G.R. CV No. 95436 are REVERSED and SET ASIDE.

The case is hereby REMANDED to the Regional Trial Court of Manila, Branch 49 for the conduct of trial
proceedings in Civil Case No. 02-103191 with utmost DELIBERATE DISPATCH.

No pronouncement as to costs.

SO ORDERED.chanroblesvirtuallawlibrary

Velasco, Jr., (Chairperson), Peralta, Bersamin,* and Reyes, JJ., concur.

 G.R. No. 202989, March 25, 2015

COMGLASCO CORPORATION/AGUILA GLASS, Petitioner, v. SANTOS CAR CHECK CENTER

CORPORATION, Respondent.

DECISION

REYES, J.:

On August 16, 2000, respondent Santos Car Check Center Corporation (Santos), owner of a showroom
located at 75 Delgado Street, in Iloilo City, leased out the said space to petitioner Comglasco Corporation
(Comglasco), an entity engaged in the sale, replacement and repair of automobile windshields, for a
period of five years at a monthly rental of P60,000.00 for the first year, P66,000.00 on the second year,
and P72,600.00 on the third through fifth years.1

On October 4, 2001, Comglasco advised Santos through a letter 2 that it was pre-terminating their lease
contract effective December 1, 2001.  Santos refused to accede to the pre-termination, reminding
Comglasco that their contract was for five years.  On January 15, 2002, Comglasco vacated the leased
premises and stopped paying any further rentals.  Santos sent several demand letters, which Comglasco
completely ignored.  On September 15, 2003, Santos sent its final demand letter, 3 which Comglasco
again ignored.  On October 20, 2003, Santos filed suit for breach of contract. 4

Summons and a copy of the complaint, along with the annexes, were served on Comglasco on January
21, 2004, but it moved to dismiss the complaint for improper service.  The Regional Trial Court (RTC) of
Iloilo City, Branch 37, dismissed the motion and ordered the summons served anew.  On June 28, 2004,
Comglasco filed its Answer.5  Santos moved for a judgment on the pleadings, which the RTC granted.  On
August 18, 2004, the trial court rendered its judgment, 6 the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of [Santos] and against [Comglasco]:

1. Ordering [Comglasco] to faithfully comply with [its] obligation under the Contract of Lease and pay its
unpaid rentals starting January 16, 2002 to August 15, 2003 in the total amount of Php1,333,200.00, plus
12% interest per annum until fully paid;

2. To pay [Santos]:
a) Php200,000.00 as attorney’s fees;
b) [Php]50,000.00 as litigation expenses;
c) [Php]400,000.00 as exemplary damages.
3. Costs of the suit.

SO ORDERED.7

On February 14, 2005, Santos moved for execution pending Comglasco’s appeal, which the trial court
granted on May 12, 2005.  In its appeal, Comglasco interposed the following issues for resolution:

1. Whether or not judgment on the pleadings was properly invoked by the trial court as 
basis for rendering its decision;
2. Whether or not material issues were raised in [Comglasco’s] Answer;
3. Whether or not damages may be granted by the trial court without proof and legal basis. 8

In its Decision9 dated August 10, 2011, the Court of Appeals (CA) affirmed the judgment of the RTC but
reduced the award of attorney’s fees to P100,000.00 and deleted the award of litigation expenses and
exemplary damages.

Petition for Review to the Supreme Court

In this petition, Comglasco raises the following issues:

1. Whether or not judgment on the pleadings was properly invoked by the trial court as
basis for rendering its decision?
2. Whether or not material issues were raised in [Comglasco’s] answer?
3. Whether or not summary judgment or judgment on the pleadings is the proper remedy for
[Santos] under the circumstances of the present case?
4. Whether or not the amount deposited for advance rental and deposit should be credited
to [Comglasco’s] account?
5. Whether or not attorney’s fees may be granted by the trial court without proof and legal
basis?10

Paragraph 15 of the parties’ lease contract11 permits pre-termination with cause in the first three years
and without cause after the third year. Citing business reverses which it ascribed to the 1997 Asian
financial crisis, Comglasco insists that under Article 1267 of the Civil Code it is exempted from its
obligation under the contract, because its business setback is the “cause” contemplated in their lease
which authorized it to pre-terminate the same.  Article 1267 provides:

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or in part.

Comglasco argues that it cannot be said to have admitted in its Answer the material allegations of the
complaint precisely because it invoked therein a valid cause for its decision to pre-terminate the lease
before the lapse of three years; that therefore, in view of its pleaded “cause” for reneging on its rentals
(the 1997 Asian financial crisis), the RTC should have ordered the reception of evidence for this purpose,
after which a summary judgment would then have been proper, not a judgment on the pleadings.  After
all, Santos has claimed in its Motion for Summary Judgment that Comglasco’s cited “cause” for pre-
termination was fictitious or a sham, whereas in truth the prevailing business climate which ensued after
the 1997 currency crisis resulted in great difficulty on its part to comply with the terms of the lease “as to
be manifestly beyond the contemplation of the parties”; thus, Comglasco should be deemed released
from the lease.

Next, Comglasco insists that its advance rentals and deposit totaling P309,000.00 should be deducted
from any sum awarded to Santos while it also insists that there is no factual and legal basis for the award
of damages.

Ruling of the Court

The petition is denied.

The first three issues being related will be discussed together.

Comglasco maintains that the RTC was wrong to rule that its answer to Santos’ complaint tendered no
issue, or admitted the material allegations therein; that the court should have heard it out on the reason it
invoked to justify its action to pre-terminate the parties’ lease; that therefore a summary judgment would
have been the proper recourse, after a hearing.

In Philippine National Construction Corporation v. CA 12 (PNCC), which also involves the termination of a
lease of property by the lessee “due to financial, as well as technical, difficulties,” 13 the Court ruled:
The obligation to pay rentals or deliver the thing in a contract of lease falls within the prestation “to give”;
hence, it is not covered within the scope of Article 1266.  At any rate, the unforeseen event and causes
mentioned by petitioner are not the legal or physical impossibilities contemplated in said article.  Besides,
petitioner failed to state specifically the circumstances brought about by “the abrupt change in the political
climate in the country” except the alleged prevailing uncertainties in government policies on infrastructure
projects.

The principle of rebus sic stantibus neither fits in with the facts of the case.  Under this theory, the parties
stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract
also ceases to exist.  This theory is said to be the basis of Article 1267 of the Civil Code, which provides:
Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or in part.
This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application
of the principle of rebus sic stantibus, which would endanger the security of contractual relations.  The
parties to the contract must be presumed to have assumed the risks of unfavorable developments.  It is
therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the
debtor.

In this case, petitioner wants this Court to believe that the abrupt change in the political climate of the
country after the EDSA Revolution and its poor financial condition “rendered the performance of the lease
contract impractical and inimical to the corporate survival of the petitioner.”

This Court cannot subscribe to this argument.  As pointed out by private respondents:

xxxx

Anent petitioner’s alleged poor financial condition, the same will neither release petitioner from the binding
effect of the contract of lease. As held in Central Bank v. Court of Appeals, cited by private respondents,
mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation, nor does it
constitute a defense to an action for specific performance. 14

Relying  on  Article  1267  of  the  Civil  Code  to  justify  its  decision to pre-terminate its lease with
Santos, Comglasco invokes the 1997 Asian currency crisis as causing it much difficulty in meeting its
obligations.  But in PNCC,15 the Court held that the payment of lease rentals does not involve a prestation
“to do” envisaged in Articles 1266 and 1267 which has been rendered  legally  or  physically  impossible 
without  the  fault  of  the obligor-lessor.  Article 1267 speaks of a prestation involving service which has
been rendered so difficult by unforeseen subsequent events as to be manifestly beyond the
contemplation of the parties.  To be sure, the Asian currency crisis befell the region from July 1997 and
for sometime thereafter, but Comglasco cannot be permitted to blame its difficulties on the said regional
economic phenomenon because it entered into the subject lease only on August 16, 2000, more than
three years after it began, and by then Comglasco had known what business risks it assumed when it
opened a new shop in Iloilo City.

This situation is no different from the Court’s finding in PNCC wherein PNCC cited the assassination of
Senator Benigno Aquino Jr. (Senator Aquino) on August 21, 1983 and the ensuing national political and
economic crises as putting it in such a difficult business climate that it should be deemed released from its
lease contract.  The Court held that the political upheavals, turmoils, almost daily mass demonstrations,
unprecedented inflation, and peace and order deterioration which followed Senator Aquino’s death were a
matter of judicial notice, yet despite this business climate, PNCC knowingly entered into a lease with
therein respondents on November 18, 1985, doing so with open eyes of the deteriorating conditions of the
country.  The Court rules now, as in PNCC, that there are no “absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.” 16

As found by the CA, Comglasco’s Answer admitted the material allegations in the complaint, to wit: a) that
Santos holds absolute title to a showroom space; b) that Comglasco leased the said showroom from
Santos; c) that after a little over a year, Comglasco pre-terminated the lease; d) that, disregarding Santos’
rejection of the pre-termination of their lease, Comglasco vacated the leased premises on January 15,
2002; e) that Comglasco never denied the existence and validity of the parties’ lease contract. 
Specifically, the CA noted that Paragraph 2 of the Answer admitted the allegations in Paragraphs 2, 3 and
4 of the complaint that the lease was for five years, starting on August 16, 2000 and to expire on August
15, 2005, at a monthly rental of P60,000.00 on the first year, P66,000.00 on the second year, and
P72,600.00 on the third up to the fifth year.

The RTC acted correctly in resorting to Section 1 of Rule 34, on Judgment on the Pleadings, to cut short
a needless trial.  This Court agrees with the CA that Comglasco cannot cite Article 1267 of the Civil Code,
and that it must be deemed to have admitted the material allegations in the complaint. Section 1, Rule 34
reads:

Sec. 1. Judgment on the pleadings. - Where an answer fails to tender an issue, or otherwise admits the
material allegations of the adverse party’s pleading, the court may, on motion of that party, direct
judgment on such pleading.  However, in actions for declaration of nullity or annulment of marriage or for
legal separation, the material facts alleged in the complaint shall always be proved.

A judgment on the pleadings is a judgment on the facts as pleaded, 17 and is based exclusively upon the
allegations appearing in the pleadings of the parties and the accompanying annexes. 18  It is settled that
the trial court has the discretion to grant a motion for judgment on the pleadings filed by a party if there is
no controverted matter in the case after the answer is filed. 19 A genuine issue of fact is that which requires
the presentation of evidence, as distinguished from a sham, fictitious, contrived or false issue. 20  Come to
think of it, under Rule 35, on Summary Judgments, Comglasco had recourse to move for summary
judgment, wherein it could have adduced supporting evidence to justify its action on the parties’ lease, but
it did not do so.  Section 2 of Rule 35 provides:

Sec. 2. Summary judgment for defending party. - A party against whom a claim, counterclaim, or cross-
claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor as to all or any part thereof.

Concerning, now, whether Comglasco’s alleged rental deposit and advance rentals of P309,000.00
should be credited to Comglasco’s account, let it suffice to state that it never raised this matter in its
answer to the complaint, nor in its appeal to the CA.  Certainly, it cannot do so now.

Finally, as to whether attorney’s fees may be recovered by Santos, Article 2208(2) of the Civil Code
justifies the award thereof, in the absence of stipulation, where the defendant’s act or omission has
compelled the plaintiff to incur expenses to protect his interest.  The pre-termination of the lease by
Comglasco was not due to any fault of Santos, and Comglasco completely ignored all four demands of
Santos to pay the rentals due from January 16, 2002 to August 15, 2003, thereby compelling Santos to
sue to obtain relief.  It is true that the policy of the Court is that no premium should be placed on the right
to litigate,21 but it is also true that attorney’s fees are in the nature of actual damages, the reason being
that litigation costs money.22  But the Court agrees with the CA that the lesser amount of P100,000.00 it
awarded to Santos instead of P200,000.00 adjudged by the RTC, is more reasonable.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

SO ORDERED.
 SECOND DIVISION

PHILIPPINE BANK OF COMMUNICATIONS,   G.R. No. 175514

Petitioner,  

  Present:

- versus - Promulgated:

   

  February 14, 2011

SPOUSES JOSE C. GO

and ELVY T. GO,

Respondents.
     

x ---------------------------------------------------------------------------------------- x

DECISION

MENDOZA, J.:

 
 This is a petition for review on certiorari under Rule 45 filed by petitioner Philippine Bank of
Communications (PBCom) seeking to set aside the July 28, 2006 Decision, 1[1] and the November 27,
2006 Resolution2[2] of the Court of Appeals (CA) in CA G.R. CV No. 77714. The CA decision reversed
and set aside the January 25, 2002 Decision of the Regional Trial Court, Branch 42, Manila (RTC), which
granted the motion for summary judgment and rendered judgment on the basis of the pleadings and
attached documents.

THE FACTS

On September 30, 1999, respondent Jose C. Go (Go) obtained two loans from PBCom,
evidenced by two promissory notes, embodying his commitment to pay P17,982,222.22 for the first loan,
and P80 million for the second loan, within a ten-year period from September 30, 1999 to September 30,
2009.3[3]

To secure the two loans, Go executed two (2) pledge agreements, both dated September 29,
1999, covering shares of stock in Ever Gotesco Resources and Holdings, Inc. The first pledge, valued at
P27,827,122.22, was to secure payment of the first loan, while the second pledge, valued at
P70,155,100.00, was to secure the second loan.4[4]

Two years later, however, the market value of the said shares of stock plunged to less than P0.04
per share. Thus, PBCom, as pledgee, notified Go in writing on June 15, 2001, that it was renouncing the
pledge agreements.5[5]

1[1] Rollo, pp. 33-42.

2[2] Id. at 44-45.

3[3] Id. at 34.

4[4] Id.

5[5] Id.
  

Later, PBCom filed before the RTC a complaint 6[6] for sum of money with prayer for a writ of
preliminary attachment against Go and his wife, Elvy T. Go (Spouses Go), docketed as Civil Case No. 01-
101190. PBCom alleged that Spouses Go defaulted on the two (2) promissory notes, having paid only
three (3) installments on interest paymentscovering the months of September, November and December
1999. Consequently, the entire balance of the obligations of Go became immediately due and
demandable. PBCom made repeated demands upon Spouses Go for the payment of said obligations, but
the couple imposed conditions on the payment, such as the lifting of garnishment effected by the Bangko
Sentral ng Pilipinas (BSP) on Gos accounts.7[7]

Spouses Go filed their Answer with Counterclaim 8[8] denying the material allegations in the
complaint and stating, among other matters, that:

8.                  The promissory note referred to in the complaint expressly state that
the loan obligation is payable within the period of ten (10) years. Thus, from the
execution date of September 30, 1999, its due date falls on September 30, 2009 (and
not 2001 as erroneously stated in the complaint). Thus, prior to September 30, 2009, the
loan obligations cannot be deemed due and demandable.
 
In conditional obligations, the acquisition of rights, as well as the extinguishment
or loss of those already acquired, shall depend upon the happening of the event which
constitutes the condition. (Article 1181, New Civil Code)
 
9.                  Contrary to the plaintiffs proferrence, defendant Jose C. Go had
made substantial payments in terms of his monthly payments. There is, therefore, a
need to do some accounting works (sic) to reconcile the records of both parties.
 
10.              While demand is a necessary requirement to consider the defendant
to be in delay/default, such has not been complied with by the plaintiff since the former is
not aware of any demand made to him by the latter for the settlement of the whole
obligation.

6[6] Id. at 46-56.

7[7] Id. at 35.

8[8] Id. at 35-36.

 11.                Undeniably, at the time the pledge of the shares of stock were
executed, their total value is more than the amount of the loan or at the very least, equal
to it. Thus, plaintiff was fully secured insofar as its exposure is concerned.

12.               And even assuming without conceding, that the present value of said
shares x x x went down, it cannot be considered as something permanent since the
prices of stocks in the market either increases (sic) or decreases (sic) depending on the
market forces. Thus, it is highly speculative for the plaintiff to consider said shares to
have suffered tremendous decrease in its value. More so, it is unfair for the plaintiff to
renounce or abandon the pledge agreements.

On September 28, 2001, PBCom filed a verified motion for summary judgment 9[9] anchored on
the following grounds:

I.                    MATERIAL AVERMENTS OF THE COMPLAINT ADMITTED BY

DEFENDANT-SPOUSES IN THEIR ANSWER TO OBVIATE THE NECESSITY OF
TRIAL
 
II.                 NO REAL DEFENSES AND NO GENUINE ISSUES AS TO ANY
MATERIAL FACT WERE TENDERED BY THE DEFENDANT-SPOUSES IN THEIR
ANSWER

III.              PLANTIFFS CAUSES OF ACTIONS ARE SUPPORTED BY

VOLUNTARY ADMISSIONS AND AUTHENTIC DOCUMENTS WHICH MAY NOT BE
CONTRADICTED.10[10]

PBCom contended that the Answer interposed no specific denials on the material averments in
paragraphs 8 to 11 of the complaint such as the fact of default, the entire amount being already due and
demandable by reason of default, and the fact that the bank had made repeated demands for the
payment of the obligations.11[11]

9[9] Id. at 64.

10[10] Id.
 

Spouses Go opposed the motion for summary judgment arguing that they had tendered genuine
factual issues calling for the presentation of evidence. 12[12]

The RTC granted PBComs motion in its Judgment 13[13] dated January 25, 2002, the dispositive
portion of which states:

WHEREFORE, in view of all the foregoing, judgment is rendered for the plaintiff
and against the defendants ordering them to pay plaintiff jointly and severally the
following:
 
1.      The total amount of P117,567,779.75, plus interests and penalties
as stipulated in the two promissory notes;
 
2.     A sum equivalent to 10% of the amount involved in this case, by
way of attorneys fees; and
 
3.     The costs of suit.
 
SO ORDERED.14[14]
 
 

Spouses Go moved for a reconsideration but the motion was denied in an order 15[15] dated
March 20, 2002.

RULING OF THE COURT OF APPEALS

11[11] Id. at 36.

12[12] Id.

13[13] Id. at 80-86.

14[14] Id. at 86.

15[15] Id. at 37.

 In its Decision dated July 28, 2006, the CA reversed and set aside the assailed judgment of the
RTC, denied PBComs motion for summary judgment, and ordered the remand of the records to the court
of origin for trial on the merits. The dispositive portion of the decision states:

WHEREFORE, premises considered, the assailed judgment of the Regional Trial

Court, Branch 42 of Manila in Civil Case No. 01-101190 is hereby REVERSED and SET
ASIDE, and a new one entered denying plaintiff-appellees motion for summary
judgment. Accordingly, the records of the case are hereby remanded to the court of
origin for trial on the merits.
 
SO ORDERED.16[16]

The CA could not agree with the conclusion of the RTC that Spouses Go admitted paragraphs 3,
4 and 7 of the complaint. It found the supposed admission to be insufficient to justify a rendition of
summary judgment in the case for sum of money, since there were other allegations and defenses put up
by Spouses Go in their Answer which raised genuine issues on the material facts in the action. 17[17]

The CA agreed with Spouses Go that paragraphs 3 and 4 of the complaint merely dwelt on the
fact that a contract of loan was entered into by the parties, while paragraph 7 simply emphasized the
terms of the promissory notes executed by Go in favor of PBCom. The fact of default, the amount of the
outstanding obligation, and the existence of a prior demand, which were all material to PBComs claim,
were hardly admitted18[18] by Spouses Go in their Answer and were, in fact, effectively questioned in the
other allegations in the Answer.19[19]

16[16] Id. at 41.

17[17] Id. at 39.

18[18] Id.

19[19] Id. at 39-40.

 PBComs motion for reconsideration was denied in a resolution 20[20] dated November 27, 2006.

Thus, this petition for review.

THE ISSUES

WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK, OR EXCESS OF JURISDICTION IN RULING
THAT THERE EXISTS A GENUINE ISSUE AS TO MATERIAL FACTS IN THE ACTION
IN SPITE OF THE UNEQUIVOCAL ADMISSIONS MADE IN THE PLEADINGS BY
RESPONDENTS; AND
 

 
 
II
 
WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE ABUSE OF
JURISDICTION [DISCRETION] IN HOLDING THAT ISSUES WERE RAISED ABOUT
THE FACT OF DEFAULT, THE AMOUNT OF THE OBLIGATION, AND THE
EXISTENCE OF PRIOR DEMAND, EVEN WHEN THE PLEADING CLEARLY POINTS
TO THE CONTRARY.

20[20] Id. at 44-45. Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices Edgardo F. Sundiam
and Apolinario D. Bruselas, Jr. (in lieu of Associate Justice Japar B. Dimaampao who was on leave per Office Order
No. 300-06-RTR dated November 14, 2006), concurring.
Petitioner PBComs Position: Summary
judgment was proper, as there were no
genuine issues raised as to any material fact.

PBCom argues that the material averments in the complaint categorically admitted by Spouses
Go obviated the necessity of trial. In their Answer, Spouses Go admitted the allegations in paragraphs 3
and 4 of the Complaint pertaining to the security for the loans and the due execution of the promissory
notes,21[21] and those in paragraph 7 which set forth the acceleration clauses in the promissory note.
Their denial of paragraph 5 of the Complaint pertaining to the Schedules of Payment for the liquidation of
the two promissory notes did not constitute a specific denial required by the Rules. 22[22]

Even in the Comment23[23] of Spouses Go, the clear, categorical and unequivocal admission of
paragraphs 3, 4, and 7 of the Complaint had been conceded. 24[24]

PBCom faults the CA for having formulated non-existent issues pertaining to the fact of default,
the amount of outstanding obligation and the existence of prior demand, none of which is borne by the
pleadings or the records.25[25]

21[21] Id. at 236.

22[22] Id. at 237

23[23] Id. at 174.

24[24] Id. at 240.

25[25] Id. at 241.

 The Spouses Go, PBCom argues, cannot negate or override the legal effect of the acceleration
clauses embodied in each of the two promissory notes executed by Go. Moreover, the non-payment of
arrearages constituting default was admitted by Go in his letters to PBCom dated March 3 and April 7,
2000, respectively.26[26] Therefore, by such default, they have lost the benefit of the period in their favor,
pursuant to Article 119827[27] of the Civil Code.

Further, PBCom claims that its causes of action are supported by authentic documents and
voluntary admissions which cannot be contradicted. It cites the March 3 and April 7, 2000 letters of Go
requesting deferment of interest payments on his past due loan obligations to PBCom, as his assets had
been placed under attachment in a case filed by the BSP. 28[28] PBCom emphasizes that the said letters,
in addition to its letters of demand duly acknowledged and received by Go, negated their claim that they
were not aware of any demand having been made.29[29]

Respondent spouses position: Summary

judgment was not proper.

26[26] Id. at 242.

27[27] Article 1198 of the Civil Code provides: The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for
the debt;

(2) When he does not furnish to the creditor the guaranties or securities which he has promised;

(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;

(5) When the debtor attempts to abscond.

28[28] Rollo, pp. 242-243.

29[29] Id. at 244.

 The core contention of Spouses Go is that summary judgment was not proper under the
attendant circumstances, as there exist genuine issues with respect to the fact of default, the amount of
the outstanding obligation, and the existence of prior demand, which were duly questioned in the special
and affirmative defenses set forth in the Answer. Spouses Go agree with the CA that the admissions in the
pleadings pertained to the highlight of the terms of the contract. Such admissions merely recognized the
existence of the contract of loan and emphasized its terms and conditions. 30[30] Moreover, although they
admitted paragraphs 3, 4, and 7, the special and affirmative defenses contained in the Answer tendered
genuine issues which could only be resolved in a full-blown trial. 31[31]

On the matter of specific denial, Spouses Go posit that the Court decisions cited by PBCom 32[32]
do not apply on all fours in this case. Moreover, the substance of the repayment schedule was not set
forth in the complaint. It, therefore, follows that the act of attaching copies to the complaint is insufficient to
secure an implied admission. Assuming arguendo that it was impliedly admitted, the existence of said
schedule and the promissory notes would not immediately make private respondents liable for the amount
claimed by PBCom.33[33] Before respondents may be held liable, it must be established, first, that they
indeed defaulted; and second, that the obligations has remained outstanding. 34[34]

Spouses Go also state that although they admitted paragraphs 3, 4 and 7 of the Complaint, the
fact of default, the amount of outstanding obligation and the existence of prior demand were fully
questioned in the special and affirmative defenses. 35[35]

RULING OF THE COURT

30[30] Id. at 210.

31[31] Id. at 211.

32[32] Philippine Bank of Communications v. Court of Appeals, G.R. No. 92067, March 22, 1991, 195 SCRA 567
and Morales v. Court of Appeals, 274 Phil.674 (1991).

33[33] Rollo, p. 215.

34[34] Id.

35[35] Id. at 213.

  
The Court agrees with the CA that [t]he supposed admission of defendants-appellants on the x x x
allegations in the complaint is clearly not sufficient to justify the rendition of summary judgment in the case
for sum of money, considering that there are other allegations embodied and defenses raised by the
defendants-appellants in their answer which raise a genuine issue as to the material facts in the action. 36
[36]

The CA correctly ruled that there exist genuine issues as to three material facts, which have to be
addressed during trial: first, the fact of default; second, the amount of the outstanding obligation, and third,
the existence of prior demand.

Under the Rules, following the filing of pleadings, if, on motion of a party and after hearing, the
pleadings, supporting affidavits, depositions and admissions on file show that, except as to the amount of
damages, there is no genuine issue as to any material fact, and that the moving party is entitled to a
judgment as a matter of law,37[37] summary judgment may be rendered. This rule was expounded in
Asian Construction and Development Corporation v. Philippine Commercial International Bank,38[38]
where it was written:

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the

amount of damages, when there is no genuine issue as to any material fact and the
moving party is entitled to a judgment as a matter of law, summary judgment may be
allowed.39[39] Summary or accelerated judgment is a procedural technique aimed at
weeding out sham claims or defenses at an early stage of litigation thereby avoiding the
expense and loss of time involved in a trial.40[40]

Under the Rules, summary judgment is appropriate when there are no genuine
issues of fact which call for the presentation of evidence in a full-blown trial. Even if on

36[36] Id. at 39.

37[37] Rule 35, Rules of Civil Procedure.

38[38] G.R. No. 153827, April 25, 2006, 488 SCRA 192.

39[39] Citing Northwest Airlines v. CA, 348 Phil. 438, 449 (1998).

40[40] Citing Excelsa Industries, Inc, v. CA, 317 Phil. 664, 671 (1995).
 their face the pleadings appear to raise issues, when the affidavits, depositions and
admissions show that such issues are not genuine, then summary judgment as
prescribed by the Rules must ensue as a matter of law. The determinative factor,
therefore, in a motion for summary judgment, is the presence or absence of a genuine
issue as to any material fact.

 A genuine issue is an issue of fact which requires the presentation of evidence

as distinguished from a sham, fictitious, contrived or false claim. When the facts as
pleaded appear uncontested or undisputed, then there is no real or genuine issue or
question as to the facts, and summary judgment is called for. The party who moves for
summary judgment has the burden of demonstrating clearly the absence of any genuine
issue of fact, or that the issue posed in the complaint is patently unsubstantial so as not
to constitute a genuine issue for trial. Trial courts have limited authority to render
summary judgments and may do so only when there is clearly no genuine issue as to
any material fact. When the facts as pleaded by the parties are disputed or contested,
proceedings for summary judgment cannot take the place of trial. 41[41] (Underscoring
supplied.)

Juxtaposing the Complaint and the Answer discloses that the material facts here are not
undisputed so as to call for the rendition of a summary judgment. While the denials of Spouses Go could
have been phrased more strongly or more emphatically, and the Answer more coherently and logically
structured in order to overthrow any shadow of doubt that such denials were indeed made, the pleadings
show that they did in fact raise material issues that have to be addressed and threshed out in a full-blown
trial.

PBCom anchors its arguments on the alleged implied admission by Spouses Go resulting from
their failure to specifically deny the material allegations in the Complaint, citing as precedent Philippine
Bank of Communications v. Court of Appeals,42[42] and Morales v. Court of Appeals. Spouses Go, on the
other hand, argue that although admissions were made in the Answer, the special and affirmative
defenses contained therein tendered genuine issues.

41[41] Supra note 38 at 202-203, citing Evadel Realty and Development Corporation v. Soriano, 409 Phil. 450, 461
(2001).

42[42] G.R. No. 92067, March 22, 1991, 195 SCRA 567.
 Under the Rules, every pleading must contain, in a methodical and logical form, a plain, concise
and direct statement of the ultimate facts on which the party pleading relies for his claim or defense, as the
case may be, omitting the statement of mere evidentiary facts. 43[43]

To specifically deny a material allegation, 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. 44[44]

Rule 8, Section 10 of the Rules of Civil Procedure contemplates three (3) modes of specific
denial, 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.45[45]

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.46[46]

43[43] Section 1, Rule 8, Rules of Civil Procedure.

44[44] Section 10, Rule 8, Rules of Civil Procedure.

45[45] Spouses Gaza. v. Ramon J. Lim and Agnes J. Lim, 443 Phil. 337, 345 (2003).

46[46] Aquintey v. Tibong, G.R. No. 166704, December 20, 2006, 511 SCRA 414, 432.
 Again, in drafting pleadings, members of the bar are enjoined to be clear and concise in their
language, and to be organized and logical in their composition and structure in order to set forth their
statements of fact and arguments of law in the most readily comprehensible manner possible. Failing such
standard, allegations made in pleadings are not to be taken as stand-alone catchphrases in the interest of
accuracy. They must be contextualized and interpreted in relation to the rest of the statements in the
pleading.

In Spouses Gaza v. Lim, the Court ruled that the CA erred in declaring that the petitioners therein
impliedly admitted respondents' allegation that they had prior and continuous possession of the property,
as petitioners did in fact enumerate their special and affirmative defenses in their Answer. They also
specified therein each allegation in the complaint being denied by them. The Court therein stated:

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           xxx           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. Lim's 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 Mayor's unnumbered copra dealer's permit dated Dec.
31, 1976 hereto attached as Annex "C";
xxx           xxx           xxx
5. That defendants' invasion of plaintiffs' premises was
accomplished illegally by 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. Lim's quarters and defendants immediately filled it with other
occupants now. Copy of the caretaker's (Emilio Herrera) statement
describing in detail is hereto attached as Annex "D";
xxx           xxx           xxx.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 and P100,000.00 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 bunche[s] 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 Herrera's statement and marked as
Annex "C-Gaza."
xxx           xxx           xxx.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. v. Reyes 10 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 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." 11 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.
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.47[47] (Underscoring supplied.)

In this case, as in Gaza, the admissions made by Spouses Go are to be read and taken together
with the rest of the allegations made in the Answer, including the special and affirmative defenses.

For instance, on the fact of default, PBCom alleges in paragraph 8 of the Complaint that Go
defaulted in the payment for both promissory notes, having paid only three interest installments covering
the months of September, November, and December 1999.

47[47] Supra note 45.

 In paragraph 6 of the Answer, Spouses Go denied the said allegation, and further alleged in
paragraphs 8 to 13 that Go made substantial payments on his monthly loan amortizations.
The portions of the pleadings referred to are juxtaposed below:
Complaint
8. The defendant defaulted in the payment of the
obligations on the two (2) promissory notes
(Annexes A and B hereof) as he has paid only
three (3) installments on interests (sic) payments
covering the months of September, November
and December, 1999, on both promissory notes,
respectively. As a consequence of the default, the
entire balance due on the obligations of the
defendant to plaintiff on both promissory notes
immediately became due and demandable
pursuant to the terms and conditions embodied in
the two (2) promissory notes;48[48]
 
48[48] Rollo, p. 50.
Answer
6. Defendants deny the allegations in paragraphs
8, 9, 10 and 11 of the Complaint;
xxx
8. The promissory notes referred to in the
complaint expressly state that the loan obligation
is payable within the period of ten (10) years.
Thus, from the execution date of September 30,
1999, its due date falls on September 3o, 2009
(and not 2001 as erroneously stated in the
complaint). Thus, prior to September 30, 2009,
the loan obligations cannot be deemed due and
demandable.
In conditional obligations, the acquisition of rights,
as well as the extinguishment or loss of those
already acquired, shall depend upon the
happening of the event which constitutes the
condition. (Article 1181, New Civil Code)
9. Contrary to the plaintiffs preference, defendant
Jose C. Go has made substantial payments in
terms of his monthly payments. There is therefore,
a need to do some accounting works (sic) just to
reconcile the records of both parties.
10. While demand is a necessary requirement to
consider the defendant to be in delay/default,
such has not been complied with by the plaintiff
since the former is not aware of any demand
made to him by the latter for the settlement of the
whole obligation.
11. Undeniably, at the time the pledge of the
shares of stocks were executed, their total value
is more than the amount of the loan, or at the very
least, equal to it. Thus, plaintiff was fully secured
 insofar as its exposure is concerned.49[49]

12. And even assuming without conceding, that

the present value of said shares has went (sic)
down, it cannot be considered as something
permanent since, the prices of stocks in the
market either increases (sic) or (sic) decreases
depending on the market forces. Thus, it is highly
speculative for the plaintiff to consider said shares
to have suffered tremendous decrease in its
value. Moreso (sic), it is unfair for the plaintiff to
renounce or abandon the pledge agreements.

13. As aptly stated, it is not aware of any

termination of the pledge agreement initiated by
the plaintiff.

Moreover, in paragraph 10 of the Answer, Spouses Go also denied the existence of prior demand
alleged by PBCom in paragraph 10 of the Complaint. They stated therein that they were not aware of any
demand made by PBCom for the settlement of the whole obligation. Both sections are quoted below:

Complaint Answer
10. Plaintiff made repeated demands from (sic) 10. While demand is a necessary requirement to
defendant for the payment of the obligations consider the defendant to be in delay/default,
which the latter acknowledged to have incurred such has not been complied with by the plaintiff
however, defendant imposed conditions such as since the former is not aware of any demand
[that] his [effecting] payments shall depend upon made to him by the latter for the settlement of the
the lifting of garnishment effected by the Bangko whole obligation.
Sentral on his accounts. Photocopies of
defendants communication dated March 3, 2000  
and April 7, 2000, with plaintiff are hereto attached
as Annexes F and G hereof, as well as its
demand to pay dated April 18, 2000. Demand by
plaintiff is hereto attached as Annex H hereof.50
[50] [Emphases supplied]

49[49] Id. at 59.

50[50] Id. at 50.

 Finally, as to the amount of the outstanding obligation, PBCom alleged in paragraph 9 of the
Complaint that the outstanding balance on the couples obligations as of May 31, 2001 was
P21,576,668.64 for the first loan and P95,991,111.11, for the second loan or a total of P117,567,779.75.

In paragraph 9 of the Answer, however, Spouses Go, without stating any specific amount,
averred that substantial monthly payments had been made, and there was a need to reconcile the
accounting records of the parties.

Complaint Answer

9. Defendants outstanding obligations under the
two (2) promissory notes as of May 31, 2001 are:
P21,576,668.64 (Annex A) and P95,991,111.11
(Annex B), or a total of P117,567,779.75. Copy of
the Statement of Account is hereto attached as
Annex E hereof.51[51]
9. Contrary to the plaintiffs preference, defendant
Jose C. Go has made substantial payments in
terms of his monthly payments. There is therefore,
a need to do some accounting works just to
reconcile the records of both parties.52[52]

Clearly then, when taken within the context of the entirety of the pleading, it becomes apparent
that there was no implied admission and that there were indeed genuine issues to be addressed.

As to the attached March 3, 2000 letter, the Court is in accord with the CA when it wrote:

The letter dated March 3, 2000 is insufficient to support the material averments in
PBComs complaint for being equivocal and capable of different interpretations. The
contents of the letter do not address all the issues material to the banks claim and thus
do not conclusively establish the cause of action of PBCom against the spouses Go. As
regards the letter dated April 7, 2000, the trial court itself ruled that such letter addressed
to PBCom could not be considered against the defendants-appellants simply because it
was not signed by defendant-appellant Jose Go.
 
Notably, the trial court even agreed with the defendant-appellants on the
following points:
 
The alleged default and outstanding obligations are based on the
Statement of Account. This Court agrees with the defendants that since
the substance of the document was not set forth in the complaint although
a copy thereof was attached thereto, or the said document was not set

51[51] Id.

52[52] Id. at 59.

 forth verbatim in the pleading, the rule on implied admission does not
apply.53[53]
It must also be pointed out that the cases cited by PBCom do not apply to this case. Those two
cases involve denial of lack of knowledge of facts so plainly and necessarily within [the knowledge of the
party making such denial] that such averment of ignorance must be palpably untrue. 54[54] Also, in both
cases, the documents denied were the same documents or deeds sued upon or made the basis of, and
attached to, the complaint.

In Philippine Bank of Communications v. Court of Appeals,55[55] the Court ruled that the
defendants contention that it had no truth or information sufficient to form a belief as to the truth of the
deed of exchange was an invalid or ineffectual denial pursuant to the Rules of Court, 56[56] as it could have
easily asserted whether or not it had executed the deed of exchange attached to the petition. Citing
Capitol Motors Corporations v. Yabut,57[57] the Court stated that:

x x x The rule authorizing an answer to the effect that the defendant has no
knowledge or information sufficient to form a belief as to the truth of an averment and
giving such answer the effect of a denial, does not apply where the fact as to which want
of knowledge is asserted, is so plainly and necessarily within the defendants knowledge
that his averment of ignorance must be palpably untrue. 58[58]
 

The Warner Barnes case cited above sprung from a suit for foreclosure of mortgage, where the
document that defendant denied was the deed of mortgage sued upon and attached to the complaint. The
Court then ruled that it would have been easy for the defendants to specifically allege in their answer
whether or not they had executed the alleged mortgage.

53[53] Id. at 40.

54[54] Warner Barnes & Co., Ltd. v. Reyes, 103 Phil. 662, 665 (1958), citing Icle Plant Equipment Co. v. Marcello,
D.C. Pa. 1941, 43 F. Supp. 281.

55[55] Philippine Bank of Communications v. Court of Appeals, supra note 32.

56[56] Id. at 574.

57[57] Id.

58[58] Id., citing Warner Barnes & Co., Ltd. v. Reyes, 103 Phil. 662 (1958).
 Similarly, in Capitol Motors, the document denied was the promissory note sued upon and
attached to the complaint. In said case, the Court ruled that although a statement of lack of knowledge or
information sufficient to form a belief as to the truth of a material averment in the complaint was one of the
modes of specific denial contemplated under the Rules, paragraph 2 of the Answer in the said case was
insufficient to constitute a specific denial. 59[59] Following the ruling in the Warner Barnes case, the Court
held that it would have been easy for defendant to specifically allege in the Answer whether or not it had
executed the promissory note attached to the Complaint. 60[60]

In Morales v. Court of Appeals,61[61] the matter denied was intervenors knowledge of the plaintiffs
having claimed ownership of the vehicle in contention. The Court therein stated:

Yet, despite the specific allegation as against him, petitioner, in his Answer in
Intervention with Counterclaim and Crossclaim, answered the aforesaid paragraph 11,
and other paragraphs, merely by saying that he has no knowledge or information
sufficient to form a belief as to its truth. While it may be true that under the Rules one
could avail of this statement as a means of a specific denial, nevertheless, if an
allegation directly and specifically charges a party to have done, performed or committed
a particular act, but the latter had not in fact done, performed or committed it, a
categorical and express denial must be made. In such a case, the occurrence or non-
occurrence of the facts alleged may be said to be within the partys knowledge. In short,
the petitioner herein could have simply expressly and in no uncertain terms denied the
allegation if it were untrue. It has been held that when the matters of which a defendant
alleges of having no knowledge or information sufficient to form a belief, are plainly and
necessarily within his knowledge, his alleged ignorance or lack of information will not be
considered as specific denial. His denial lacks the element of sincerity and good faith,
hence, insufficient.62[62]

Borrowing the phraseology of the Court in the Capitol Motors case, clearly, the fact of the parties
having executed the very documents sued upon, that is, the deed of exchange, deed or mortgage or

59[59] Id.

60[60] Id.

61[61] 274 Phil. 674, 686 (1991).

62[62] Id. at 674, citing Gutierrez v. Court of Appeals, 165 Phil. 752 (1976) and Warner Barnes & Co. v. Reyes,
103 Phil. 662 (1958).
promissory note, is so plainly and necessarily within the knowledge of the denying parties that any
averment of ignorance as to such fact must be palpably untrue.

In this case, however, Spouses Go are not disclaiming knowledge of the transaction or the
execution of the promissory notes or the pledge agreements sued upon. The matters in contention are, as
the CA stated, whether or not respondents were in default, whether there was prior demand, and the
amount of the outstanding loan. These are the matters that the parties disagree on and by which reason
they set forth vastly different allegations in their pleadings which each will have to prove by presenting
relevant and admissible evidence during trial.

Furthermore, in stark contrast to the cited cases where one of the parties disclaimed knowledge
of something so patently within his knowledge, in this case, respondents Spouses Go categorically stated
in the Answer that there was no prior demand, that they were not in default, and that the amount of the
outstanding loan would have to be ascertained based on official records.

WHEREFORE, the petition is DENIED.

SO ORDERED.

 
 SECOND DIVISION

G.R. No. 201427, March 18, 2015

TEOFILO B. ADOLFO, Petitioner, v. FE. T. ADOLFO, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 seeks to set aside: 1) the October 6, 2009 Decision2 of
the Court of Appeals (CA) in CA-G.R. CV No. 01783 reversing the October 2, 2006 Order3 of
the Regional Trial Court, 7th Judicial Region, Mandaue City (RTC Mandaue), Branch 55 in Civil
Case No. MAN-4821; as well as 2) the CA’s March 2, 2012 Resolution4 denying petitioner’s
Motion for Reconsideration5 and Supplement6 thereto.

Civil Case No. MAN-4821

On April 14, 2004, petitioner Teofilo B. Adolfo filed with the RTC Mandaue a Petition 7 for
judicial separation of property against his estranged wife, respondent Fe Adolfo, nee Tudtud. 
Docketed as Civil Case No. MAN-4821 and assigned to Branch 55, the petition alleged that the
parties were married on November 26, 1966; that the union bore one child; that during the
marriage, they acquired through conjugal funds Lot 1087-A-2-E, a 3,652-square meter property
in Brgy. Cabancalan, Mandaue City, Cebu (the subject property) covered by Transfer Certificate
of Title No. (TCT) 18368; that later on, the parties separated due to irreconcilable differences;
that since reunion was no longer feasible, petitioner suggested a separation of the conjugal
property, but respondent adamantly refused; that respondent denied petitioner’s co-ownership of
the subject property, claiming the same as her paraphernal property; that several earnest efforts
to amicably settle the matter between them proved unavailing; and that a judicial separation of
property is proper under the circumstances and pursuant to Article 135(6) of the Family Code.8 
Petitioner thus prayed that judgment be rendered decreeing a separation of the conjugal property
and the subdivision or sale thereof, to the end of dividing the same or the proceeds thereof; and
ordering respondent to pay petitioner P50,000.00 as attorney’s fees, appearance fees (P2,000.00
per hearing), and P20,000.00 litigation costs.

In her Answer9 with counterclaim, respondent contended that while she remained married to
petitioner, she is the sole owner of the subject property, the same being her paraphernal property
which she inherited from her mother; that petitioner is a lazy bum, gambler, drunkard, wife
abuser, and neglectful father; that respondent found all means to support the family even as
petitioner neglected it; that respondent bought on installment a tricycle for the petitioner’s use in
business, but he kept the proceeds thereof to himself and used the same in his gambling and
drinking sprees; that respondent alone took the initiative to support the family and found ways to
take care of the daily needs of her child; that she caused to be built on a portion of her mother’s
land a house even while petitioner was bumming around; that one day, petitioner destroyed the
roof of the house that was then being built; that petitioner subsequently abandoned her and their
child in 1968, and transferred to Davao City where he took a mistress and begot four children by
her; that in 1986, petitioner returned to Cebu City seeking reconciliation with respondent; that
respondent took petitioner back, but in 1987 they once more separated; that thereafter,
respondent never again saw or heard from petitioner.

Respondent claimed in her Answer that the subject property was a portion of a bigger lot (mother
lot) owned by her mother Petronila Tudtud which was covered by TCT T-15941.  On October
11, 1967, her mother executed a quitclaim deed transferring a portion of the mother lot – the
subject property – to respondent.  The mother title TCT T-15941 was then cancelled and a new
one, TCT (17216)-5415, was issued in respondent’s name.  Respondent then sold the subject
property to her brother on January 19, 1968, and a new TCT (17833)-5515 was issued in her
brother’s name.  Her brother then mortgaged the property to Development Bank of the
Philippines (DBP), which foreclosed on the same.  TCT 18231 was issued in DBP’s name.  DBP
then sold the property to the spouses Antonio and Lucy Garcia (the Garcias), and TCT 18266
was in turn issued in their name.  Finally, on May 25, 1983, the Garcias sold back the subject
property to respondent, and a new title – TCT 1836810 – was then issued in the name of
respondent “FE M. TUDTUD, x x x married to Teofilo Adolfo.”

Respondent argued that she is the sole owner of the subject property, the same being her
paraphernal property which she alone redeemed from the Garcias; that the inclusion of
petitioner’s name in TCT 18368 does not make him a co-owner of the property, but was merely
necessary to describe respondent’s civil status; and that under Article 13511 of the Civil Code, all
property brought by the wife to the marriage as well as all property she acquires during the
marriage in accordance with Article 14812 of the same Code constitutes paraphernal property.

Respondent thus prayed that the petition be dismissed.  By way of counterclaim, she sought the
payment of moral, exemplary, and nominal damages, attorney’s fees, and litigation expenses.

Civil Case No. MAN-2683

In 1996, respondent’s sister Florencia Tudtud and her husband Juanito Gingoyon (the
Gingoyons) filed a case for partition with damages against respondent.  The case was docketed
as Civil Case No. MAN-2683 and raffled to Branch 55 of the RTC Mandaue.  The Complaint13
therein alleged that in 1988, respondent executed a deed of sale in favor of the Gingoyons over a
300-square meter portion of the subject property, but that respondent refused to
partition/subdivide the same even after the Gingoyons paid the taxes, fees and expenses of the
sale.  For her defense, respondent claimed in her Answer14 that when the sale to the Gingoyons
was made, the subject property constituted conjugal property of her marriage with petitioner; that
as early as 1983, or when the Garcias executed the deed of sale in her favor, the subject property
became a conjugal asset; since petitioner did not sign the deed of sale in favor of the Gingoyons
as he was in Davao at the time and knew nothing about the sale, the sale was null and void.

On May 15, 2002, the trial court rendered its Decision15 in Civil Case No. MAN-2683, declaring
that the subject property constituted conjugal property of the marriage.  It thus nullified the 1988
deed of sale executed by respondent in favor of the Gingoyons for lack of consent on the part of
petitioner, citing Article 124 of the Family Code.16  The trial court likewise awarded moral and
exemplary damages, attorney's fees and litigation expenses in favor of the respondent in the total
amount of P107,000.00.

The Gingoyons filed an appeal with the CA, which was docketed as CA-G.R. CV No. 78971.

Motion for Judgment Based on the Pleadings in Civil Case No. MAN-4821

Meanwhile, during the pre-trial conference in Civil Case No. MAN-4821, petitioner submitted as
part of his evidence and for marking certified true copies of the Gingoyons’ Complaint in Civil
Case No. MAN-2683, respondent’s Answer thereto, and the trial court’s May 15, 2002 Decision
in said case.

On August 1, 2005, petitioner filed a Request for Admission17 of 1) the genuineness of the duly
marked certified true copies of the Complaint, Answer, and Decision in Civil Case No. MAN-
2683 (Exhibits “F,” “G” and “H,” respectively); 2) respondent’s declaration in said Answer that
the subject property constituted conjugal property of the marriage; and 3) the trial court’s
pronouncement in said case that the subject property forms part of the conjugal estate.

Respondent failed to file her answer or response to the request for admission.

On September 5, 2005, petitioner filed a Motion for Judgment Based on the Pleadings,18 stating
that since respondent failed to answer his request for admission, the matters contained in the
request are deemed admitted pursuant to Rule 26, Section 2 of the 1997 Rules of Civil
Procedure19 (1997 Rules); that as a consequence of the application of the rule, respondent is in
effect considered to have admitted that the subject property is a conjugal asset of their subsisting
marriage which may thus be the subject of his petition for judicial separation of property; and
that on account of said admission, a hearing on the merits becomes unnecessary and, instead,
Rule 3420 of the 1997 Rules on judgments on the pleadings should apply.  Petitioner thus prayed
that the trial court render judgment in his favor based on the pleadings.

Respondent filed an Opposition.21  In her Opposition to Plaintiff’s Memorandum,22 respondent

argued among others that the request for admission was premature considering that the decision
in Civil Case No. MAN-2683 was the subject of an appeal, and thus not yet final.

In an October 11, 2005 Order,23 the trial court directed the transfer of Civil Case No. MAN-4821
to Branch 55 of the RTC Mandaue, since it is said court which decided the closely related Civil
Case No. MAN-2683.

On October 2, 2006, Branch 55 issued an Order24 granting petitioner’s motion for judgment on
the pleadings.  It held as follows:
chanRoblesvirtualLawlibrary

This court has painstakingly exerted effort in going over the record and took serious note of all
the pleadings, documents and others on file.  After serious consideration, the court believes and
so holds that there is basis in rendering judgment.  The Motion for Judgment Based on the
Pleadings though denominated as such but [sic] shall be treated as a move to seek summary
judgment. x x x
xxxx

The court in arriving at this resolution was guided by the following pronouncements by the
Supreme Court in the case of Diman vs. Alumbres, G.R. No. 131466, November 27, 1998, 299
SCRA 459 x x x:
xxxx

In the same case, it was held –

“It is also the law which determines when a summary judgment is proper.  It declares that
although the pleadings on their face appear to raise issues of fact – e.g., there are denials of, or a
conflict in, factual allegations – if it is shown by admissions, depositions or affidavits, that those
issues are sham, fictitious, or not genuine, or, in the language of the Rules, that ‘except as to the
amount of damages, there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law, the Court shall render a summary judgment for the
plaintiff or the defendant, as the case may be. (Italics and underscoring supplied)

On the other hand, in the case of a summary judgment[,] issues apparently exist – i.e.. facts are
asserted in the complaint regarding which there is as yet no admission, disavowal or
qualification; or specific denials or affirmative defenses are in truth set out in the answer – but
the issues thus arising from the pleadings are sham, fictitious, not genuine, as shown by
[affidavits], depositions or admissions.  In other words, as a noted authority remarks, a judgment
on the pleadings is a judgment on the facts as pleaded, while a summary judgment is a judgment
on the facts as summarily proven by affidavits, depositions or admissions.” (Italics and
underscoring supplied)

xxxx cralawl awlibrary

Defendant25 did not file any verified answer or a pleading denying under oath the genuineness
and authenticity of the documents attached to the Request for Admission and of the other matters
therein set forth.  This failure has far reaching implications in that the following are deemed
admitted: a) the genuineness of Exhibits F, G and H, all attached to the Request for Admission;
b) that she admitted in paragraph 10 in her Answer to Civil Case No. MAN-2683 that Lot 1087-
A-2-E was no longer paraphernal property but rather a conjugal property of Spouses Teofilo and
Fe Adolfo and; c) that RTC, Branch 55, Mandaue City, sustained and/or held the view of
defendant (Fe Tudtud) that Lot 1087-A-2-E is a conjugal property of Spouses Teofilo and Fe
Adolfo, thus, dismissed Civil Case No. MAN-2683 and awarded damages to the defendant.

Judicial admissions may be made in (a) the pleadings filed by the parties, (b) in the course of the
trial either by verbal or written manifestations or stipulations, or (c) in other stages of the judicial
proceeding, as in the pre-trial of the case.  Admissions obtained through depositions, written
interrogatories or requests for admission are also considered judicial admissions.” Page 686,
Remedial Law Compendium, Vol. II, 9th Rev. Ed., Regalado

With the admission that Lot 1087-A-2-E is a conjugal property, it follows as its necessary and
logical consequence, that plaintiff26 is entitled to the relief demanded. chanrobleslaw
xxxx

A DECISION in Civil Case No. MAN-2683 had already been rendered by RTC, Branch 55, on
the 15th day of May 2002 with the court finding that Lot 1087-A-2-E is a conjugal property x x x
–

xxxx

For reason[s] of expediency and convenience, the court may even take judicial notice of its
earlier decision finding Lot 1087-A-2-E as a conjugal property.27 cralawred

xxxx

Under the circumstances, judicial separation of property is proper.  Aware that the separation has
the effect of a dissolution of the conjugal partnership property regime, the presumptive legitime
of Nilo Adolfo (the only common child of the spouses) has to be delivered in accordance with
Article 51 in relation to paragraph (8) Article 127 and Article 137 of the Family Code of the
Philippines.

WHEREFORE, premises considered, judgment is hereby rendered directing the partition of Lot
1087-A-2-E between the plaintiff and the defendant in equal share of what remains after
allocating to Nilo Adolfo a portion of Nine hundred thirteen (913) square meters representing his
presumptive legitime.

The plaintiff is directed to submit to this court the proposed subdivision plan for its consideration
before submitting the same for approval to the Bureau of Lands.

In case of disagreement as to their respective location, the same shall be done through raffle to be
conducted by the sheriff who shall see to it that judgment in this case shall be fully implemented.

SO ORDERED.28 cralawlawlibrary

Respondent instituted an appeal with the CA, which was docketed as CA-G.R. CV No. 01783.

Court of Appeals Decision in CA-G.R. CV No. 78971

Meanwhile, on May 30, 2007, the CA rendered its Decision29 in CA-G.R. CV No. 78971.  It
reversed the May 15, 2002 Decision of the trial court in Civil Case No. MAN-2683.  It declared,
among others, that the subject property was respondent’s paraphernal property.  Thus, it held: chanRoblesvirtualLawlibrary

Proceeding from the foregoing consideration, the finding that Lot No. 1087-A-2-E is a conjugal
property does not have any basis, hence, does not have any merit at all.  On the contrary,
plaintiffs-appellants30 sufficiently proved that the aforesaid lot was defendant-appellee’s31
paraphernal property as the latter even admitted that she inherited the same from her mother
although she claimed it as a conjugal property based on the TCT’s attached to her answer. 
Another strong indication that Lot No. 1087-A-2-E is solely owned by defendant-appellee is the
fact that in another case (Civil Case No. MAN-2008) involving the same property and the same
parties but for a different issue (road right of way), defendant-appellee alone signed the
compromise agreement ceding a portion of the subject lot as a right of way perpetually open and
unobstructed for the benefit of plaintiffs-appellants, defendant-appellee, their respective heirs,
assigns and transferees and guests.  The same compromise agreement which became the decision
of the case attained finality without defendant-appellee questioning the absence of her husband’s
signature. chanrobleslaw

xxxx

WHEREFORE, prescinding from the foregoing premises, the appeal is hereby GRANTED and
the Decision of the Regional Trial Court of Mandaue City, Branch 55, dated 15 May 2002, in
Civil Case No. MAN-2683 is REVERSED and SET ASIDE.

Let the partition of Lot No. 1087-A-2-E consisting of 300 square meters bought by plaintiffs-
appellants from defendant-appellee be done in accordance to [sic] the sketch plan executed for
that purpose.

SO ORDERED.32
cralawl awlibrary
cralawred

On June 23, 2007, the above CA decision became final and executory.33 cralawred

Ruling of the Court of Appeals in CA-G.R. CV No. 01783

In CA-G.R. CV No. 01783, respondent filed her Appellant’s Brief,34 where she argued that the
trial court erred in issuing its October 2, 2006 Order directing the partition or sale of the subject
property; that it was error for the trial court to take judicial notice of its own judgment in Civil
Case No. MAN-2683 and thus declare that the subject property is conjugal, since the issue of
whether it constitutes conjugal or paraphernal property was still pending in the appeal in CA-
G.R. CV No. 78971; that since the proceedings in Civil Case No. MAN-2683 have not been
terminated and the issue regarding the character of the subject property has not been resolved
with finality, then petitioner’s resort to a request for admission and motion for judgment on the
pleadings was premature; and that with the May 30, 2007 Decision in CA-G.R. CV No. 78971,
petitioner and the trial court should submit to the finding therein that the subject property is her
paraphernal property.

In his Appellee’s Brief,35 petitioner insisted that the trial court did not err in treating his motion
for judgment on the pleadings as one for summary judgment; that respondent’s Answer in Civil
Case No. MAN-2683 constituted a judicial admission that the subject property was a conjugal
asset, which required no further proof; that respondent’s failure to reply to his written request for
admission also resulted in the acknowledgment that the subject property is a conjugal asset; that
the trial court correctly took judicial notice of the proceedings in Civil Case No. MAN-2683, as
they were relevant and material to the resolution of Civil Case No. MAN-4821; that since it was
not respondent who appealed the May 15, 2002 decision in Civil Case No. MAN-2683, then the
finding therein that the subject property is conjugal should bind her; and that the CA’s eventual
finding in CA-G.R. CV No. 78971 that the subject lot was respondent’s paraphernal property
cannot bind him because he was not a party to Civil Case No. MAN-2683.

On October 6, 2009, the CA issued the assailed Decision containing the following decretal
portion:chanRoblesvirtualLawlibrary

WHEREFORE, based from the foregoing premises, the Order of the Regional Trial Court,
Branch 55, Mandaue City, in Civil Case No. MAN-4821, is hereby REVERSED and SET
ASIDE and the records of this case are remanded to RTC (Branch 55), Mandaue City, for further
proceedings.

SO ORDERED.36 cralawlawlibrary

In arriving at the above conclusion, the CA held that the trial court cannot treat petitioner’s
motion for judgment on the pleadings as one for summary judgment.  It stated that in a proper
case for judgment on the pleadings, there are no ostensible issues at all on account of the
defending party’s failure to raise an issue in his answer, while in a proper case for summary
judgment, such issues exist, although they are sham, fictitious, or not genuine as shown by
affidavits, depositions or admissions.  In other words, a judgment on the pleadings is a judgment
on the facts as pleaded, while a summary judgment is a judgment on the facts as summarily
proved by affidavits, depositions, or admissions.37 It added that respondent’s Answer appeared
on its face to tender an issue; it disputed petitioner’s claim that the subject property is their
conjugal property.  The next thing to be determined is whether this issue is fictitious or sham as
to justify a summary judgment.

The CA added that although respondent was bound by the resulting admission prompted by her
failure to reply to petitioner’s request for admission, her claims and documentary exhibits clearly
contradict what petitioner sought to be admitted in his request; that the trial court disregarded the
fact that the issue of whether the subject property is conjugal was still unresolved as CA-G.R.
CV No. 78971 was still pending; and that finally, the trial court should have been guided by the
principles that trial courts have but limited authority to render summary judgments and that
summary judgments should not be rendered hastily.38 cralawred

Petitioner moved to reconsider, but in a March 2, 2012 Resolution, he was rebuffed.  Hence, the
present Petition was filed on April 30, 2012.

In a March 20, 2013 Resolution,39 the Court resolved to give due course to the instant Petition. chanroblesvirtuallawlibrary

Issue

Petitioner now claims that the Court of Appeals erred in deciding the case on a question of
substance not in accord with law, Rule 26 of the 1997 Rules, and applicable jurisprudence.40 cralawred

Petitioner’s Arguments

In his Petition seeking to reverse and set aside the assailed CA dispositions and thus reinstate the
October 2, 2006 Order of the trial court, petitioner insists that respondent’s failure to reply to his
written request for admission resulted in her admitting that the subject property is a conjugal
asset, applying Rule 26, Section 2 of the 1997 Rules; that the CA grossly erred in disregarding
the rule; that with the resulting admission, there remains no genuine issue to be resolved in Civil
Case No. MAN-4821, such that judgment based on the pleadings is proper.  Finally, petitioner
adds that respondent’s trifling with the law and rules of procedure – by conveniently claiming in
one case that the subject property is conjugal, and then in another that it is paraphernal – should
not be countenanced; she should be held to her original declaration that the subject property is
conjugal.

Respondent’s Arguments

In her Comment,41 respondent counters that, as correctly ruled by the CA, petitioner elected the
wrong remedy in filing a motion for judgment on the pleadings when he should have moved for
summary judgment; that in a motion for judgment on the pleadings, the movant is deemed to
admit the truth of all of the opposing party’s material and relevant allegations, and rest his
motion on those allegations taken together with that of his own as are admitted in the pleadings;42
that the effect of this is that petitioner is deemed to have admitted that the subject property is
paraphernal, as claimed in her Answer; that with the final and executory May 30, 2007 Decision
of the CA in CA-G.R. CV No. 78971, the subject property should now be considered as her
paraphernal property, and petitioner’s case for partition on the claim that the subject property is
conjugal should be dismissed for being moot and academic.

Our Ruling

The Court denies the Petition.

Judgment on the pleadings is proper “where an answer fails to tender an issue, or otherwise
admits the material allegations of the adverse party’s pleading.”43  Summary judgment, on the
other hand, will be granted “if the pleadings, supporting affidavits, depositions, and admissions
on file, show that, except as to the amount of damages, there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.”44 cralawred

We have elaborated on the basic distinction between summary judgment and judgment on the
pleadings, thus:chanRoblesvirtualLawlibrary

The existence or appearance of ostensible issues in the pleadings, on the one hand, and their
sham or fictitious character, on the other, are what distinguish a proper case for summary
judgment from one for a judgment on the pleadings.  In a proper case for judgment on the
pleadings, there is no ostensible issue at all because of the failure of the defending party’s answer
to raise an issue.  On the other hand, in the case of a summary judgment, issues apparently exist ?
i.e. facts are asserted in the complaint regarding which there is as yet no admission, disavowal or
qualification; or specific denials or affirmative defenses are in truth set out in the answer?but the
issues thus arising from the pleadings are sham, fictitious or not genuine, as shown by affidavits,
depositions, or admissions.45 cralawlawlibrary
An answer would “fail to tender an issue” if it “does not deny the material allegations in the
complaint or admits said material allegations of the adverse party’s pleadings by confessing the
truthfulness thereof and/or omitting to deal with them at all. Now, if an answer does in fact
specifically deny the material averments of the complaint and/or asserts affirmative defenses
(allegations of new matter which, while admitting the material allegations of the complaint
expressly or impliedly, would nevertheless prevent or bar recovery by the plaintiff), a judgment
on the pleadings would naturally be improper.”46 cralawred

On the other hand, “whether x x x the issues raised by the Answer are genuine is not the crux of
inquiry in a motion for judgment on the pleadings.  It is so only in a motion for summary
judgment.  In a case for judgment on the pleadings, the Answer is such that no issue is raised at
all.  The essential question in such a case is whether there are issues generated by the
pleadings.”47  “A ‘genuine issue’ is an issue of fact which requires the presentation of evidence
as distinguished from a sham, fictitious, contrived or false claim.  When the facts as pleaded
appear uncontested or undisputed, then there is no real or genuine issue or question as to the
facts, and summary judgment is called for.”48 cralawred

In rendering summary judgment, the trial court relied on respondent’s failure to reply to
petitioner’s request for admission, her admission in Civil Case No. MAN-2683, as well as its
May 15, 2002 Decision declaring that the subject property is a conjugal asset.  It took judicial
notice of the proceedings in said case.  While there is nothing irregular with this – as courts may
“take judicial notice of a decision or the facts prevailing in another case sitting in the same court
if (1) the parties present them in evidence, absent any opposition from the other party; or (2) the
court, in its discretion, resolves to do so”49 – the trial court however disregarded the fact that its
decision was then the subject of a pending appeal in CA-G.R. CV No. 78971.  It should have
known that until the appeal is resolved by the appellate court, it would be premature to render
judgment on petitioner’s motion for judgment on the pleadings; that it would be presumptuous to
assume that its own decision would be affirmed on appeal.  One of the issues raised in the appeal
is precisely whether the subject property is conjugal, or a paraphernal asset of the respondent. 
Thus, instead of resolving petitioner’s motion for judgment on the pleadings, the trial court
should have denied it or held it in abeyance.  It should have guided petitioner to this end, instead
of aiding in the hasty resolution of his case.  In the first place, Civil Case No. MAN-4821 was
transferred to it from Branch 56 precisely for the reason that it was the court which tried the
closely related Civil Case No. MAN-2683.

Even if respondent is deemed to have admitted the matters contained in petitioner’s request for
admission by her failure to reply thereto, the trial court should have considered the pending
appeal in CA-G.R. CV No. 78971.  It cannot take judicial notice solely of the proceedings in
Civil Case No. MAN-2683, and ignore the appeal in CA-G.R. CV No. 78971.  After all, CA-
G.R. CV No. 78971 is merely a continuation of Civil Case No. MAN-2683; an appeal is deemed
a continuation of the same case commenced in the lower court.50 cralawred

On the part of petitioner, it must be said that he could not have validly resorted to a motion for
judgment on the pleadings or summary judgment.  While it may appear that under Rules 34 and
35 of the 1997 Rules, he may file a motion for judgment on the pleadings or summary judgment
as a result of the consequent admission by respondent that the subject property is conjugal, this is
not actually the case.  Quite the contrary, by invoking the proceedings and decision in Civil Case
No. MAN-2683, petitioner is precluded from obtaining judgment while the appeal in said case is
pending, because the result thereof determines whether the subject property is indeed conjugal or
paraphernal.  He may not preempt the appeal in CA-G.R. CV No. 78971.

While it is true that a judgment cannot bind persons who are not parties to the action,51 petitioner
cannot, after invoking the proceedings in Civil Case No. MAN-2683 to secure affirmative relief
against respondent and thereafter failing to obtain such relief, be allowed to repudiate or question
the CA’s ruling in CA-G.R. CV No. 78971.  The principle of estoppel bars him from denying the
resultant pronouncement by the appellate court, which became final and executory, that the
subject property is respondent’s paraphernal property.  “In estoppel, a person, who by his deed or
conduct has induced another to act in a particular manner, is barred from adopting an
inconsistent position, attitude or course of conduct that thereby causes loss or injury to another. 
It further bars him from denying the truth of a fact which has, in the contemplation of law,
become settled by the acts and proceeding of judicial or legislative officers or by the act of the
party himself, either by conventional writing or by representations, express or implied or in
pais.”52
cralawred

Finally, the Court notes that the appellate court overlooked the May 30, 2007 Decision in CA-
G.R. CV No. 78971, which became final and executory on June 23, 2007.  The respondent
included this development in her appellee’s brief, but the CA did not take it into account.  As an
unfortunate consequence, the case was not appreciated and resolved completely.

Thus, with the development in Civil Case No. MAN-2683 brought upon by the final and
executory decision in CA-G.R. CV No. 78971, petitioner’s case is left with no leg to stand on. 
There being no conjugal property to be divided between the parties, Civil Case No. MAN-4821
must be dismissed.

WHEREFORE, the Petition is DENIED.  The October 6, 2009 Decision and March 2, 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 01783 are AFFIRMED WITH
MODIFICATION in that Civil Case No. MAN-4821 is ordered DISMISSED.

SO ORDERED. cralawl awlibrary