CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
G.R. No. L-57821 January 17, 1985
SEGUNDINO TORIBIO, EUSEBIA TORIBIO, and the HEIRS OF OLEGARIO TORIBIO,
represented by his widow, ADELA DE LOS REYES, petitioners, vs. THE HON.
JUDGE ABDULWAHID A. BIDIN, in his capacity as Presiding Judge, Branch I, Court
of First Instance, City of Zamboanga, DALMACIO RAMOS, and JUANITO
CAMACHO, respondents.
This petition is premised on the interpretation and application of Sections 7 and 8, Rule 8
of the Revised Rules of Court on actionable documents, which state:
SEC. 7. Action or defense based on document. Whenever an action or
defense is based upon a written instrument or document, the substance of such
instrument or document shall be set forth in the pleading, and the original or a
copy thereof shall be attached to the pleading as an exhibit, which shall be
deemed to be a part of the pleading, or said copy may with like effect be set forth
in the pleading.
SEC. 8. How to contest genuineness of such documents. When an action or
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as provided in the preceding section, the genuineness
and due execution of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and sets forth what he claims
to be the facts; but this provision does not apply when the adverse party does not
appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused.
The present controversy stems from a complaint filed by the petitioners against private
respondents Dalmacio Ramos and Juanita Camacho.
Engracio Francisco and Juliana Esteban were the registered owners of the parcel of land
Zamboanga. At the death of said spouses, they were survived by their ten (10) children
who inherited their state in equal pro indiviso shares. Subsequently, the property was
subdivided among the heirs and a portion designated as Lot No. 1943-B was allotted to
the Justa Francisco. Justa died and was survived among by eight (8) children namely:
Dionoso, Eufremia, Alfonso, Rafael, Petrona, Olegario, Segundino and Eusebia, all
surnamed Toribio, who eight heirs, Eufremia, Alfonso and Petrona, sold their in the
property to Ramon Ledesma. Rafael also sold his share to Dinisio who, in turn, sold the
same to Ramon Ledesma. Thus, the latter acquired four (4) shares out of eight (8)
shares, or a pro indiviso share of Lot 1943-B.
Subsequently, Dionisio sold his own hereditary share in the aforesaid estate of his
mother to Juanito Camacho, who by said sale acquired a 1/8 pro indiviso share of the
property.
The three other heirs, petitioners Segundino Eusebia and Olegario alleging that their
shares had never been sold nor in any wise transferred or disposed to others filed a case
against herein private respondents for recovery of hereditary rights. How Juanito
Camacho, who was entitled to only a total area of 931 square meters, nor, how one
Dalmacio Ramos, Jr., acquired share of the property was allegedly not known to them.
In their answer, the defendants-respondents alleged that the shares of plaintiffs-
petitioners had likewise been sold to Dionisio Toribio, their brother, who, in turn, sold the
same to Juanito Camacho and Dalmacio Ramos. The alleged sale from petitioners to
Dionisio and the sale from Dionisio to the respondents were evidenced by deeds of sale,
xerox copies of which were appended to and made an integral part of the respondents'
partition agreement between the respondents and also a xerox copy of the respondents'
transfer certificates of title.
While testifying during the trial, Eusebia Toribio was asked whether she executed any
sale of her share in the parcel of land in litigation. The counsel for private respondents
objected, raising the proper mode of contesting the genuineness of an actionable
document pursuant to Sections 7 and 8, Rule 8 of the Revised Rules of Court. The trial
court sustained the objection.
Petitioners, thereupon, filed a constancia with a motion for reconsideration stating that
the documents submitted by the respondents were merely evidentiary in nature, not a
cause of action or defense, the due execution and genuineness of which they had to
prove. They alleged that the subject of litigation was the hereditary shares of plaintiffs-
petitioners, not any document. They stated that the defense consisting mainly of transfer
certificates of titles in the respondents' names originating from the sale from petitioners
to Dionisio and from the latter to the respondents were merely evidentiary in nature. They
argued that a simple specific denial without oath is sufficient. The court denied the
motion for reconsideration. The documents attached to the respondents' answer and
made an integral part thereof were declared to be the very foundation or basis of the
respondents' defense and not merely evidentiary in nature. Hence, this petition for review
on certiorari.
The initial issue brought before us is whether or not the deeds of sale allegedly executed
by the petitioners in favor of their brother Dionisio Toribio and appended to the
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respondents' answer are merely evidentiary in nature or the very foundation of their
defense which must be denied under oath by the petitioner.
The records show that the deeds of sale are actionable documents.
Jurisprudence has centered mainly on a discussion of actionable documents as basis of
a plaintiff's cause of action. Little has been said of actionable documents being the
foundation of a defense. The Rule, however, covers both an action or a defense based
on documents.
The situation obtaining in the case at bar is not a common one. The usual case is
between plaintiff and defendant where, the latter, as his defense, would present a
document to which both parties are parties and which states that the former relinquishes
his rights to the defendant. In the case at bar, we have a situation where the defendant
presented a document in his defense, a document to which the plaintiff is a party but to
which defendant is not. Thus, the question arises as to whether or not the document is
included as a necessary part of the defense so as to make it actionable.
The petitioners alleged in their complaint that their shares in the inheritance left by their
mother were never sold nor in any wise transferred or disposed to others.
The defendants, in their answers, declare:
xxx xxx xxx
... that the hereditary shares of plaintiffs OLEGARIO TORIBIO, SEGUNDINO
TORIBIO and EUSEBIA TORIBIO were likewise sold, transferred and conveyed,
first in favor of DIONISIO TORIBIO by virtue of two (2) deeds of sale executed in
due form on October 24, 1964 and November 2, 1964, respectively, and
thereafter, by DIONISIO TORIBIO in favor of defendants JUANITO A. CAMACHO
and DALMACIO C. RAMOS, JR., on November 11, 1964 as adverted to in the
preceding paragraph, as will be discussed further in the specific and/or
affirmative defenses hereunder; ...
As heretofore alleged, the hereditary shares of all the plaintiffs herein in and over
Lot 1943-B were all sold, transferred and conveyed in favor of DIONISIO
TORIBIO plaintiffs OLEGARIO TORIBIO and SEGUNDINO TORIBIO on October
24, 1964 and that of plaintiff EUSEBIA TORIBIO on November 2, 1964, by virtue
of two (2) deeds of sale all of which were acknowledged before Notary Public for
and within the City of Zamboanga, Atty. Armando B. Torralba and entered as Doc.
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
No. 6, Page No. 3, Book No. IX, Series of 1964, respectively, in his notarial
register, xerox copies of which are appended hereto to form integral part hereof
as Annexes "1" & "2", respectively.
From the foregoing, it is clear that the respondents anchor their defense on the deeds of
sale by virtue of which the hereditary rights of all the petitioners over Lot 1943-B were
sold, transferred, and conveyed in favor of their brother, Dionisio Toribio, who in turn sold
the same to herein respondents. The deed of sale executed by the petitioners in favor of
their brother Dionisio is an essential and indispensable part of their defense to the
allegation that the petitioners had never disposed of their property.
The following question furnishes an absolute test as to the essentiality of any allegation:
Can it be made the subject of a material issue? In other words, if it be denied, win the
failure to prove it decide the case in whole or in part? If it will not, the fact is not essential.
It is not one of those which constitute the cause of action, defense, or reply (Sutherland's
Code of Pleading, Practice and Forms, p. 82). A fact is essential if it cannot be stricken
out without leaving the statement of the cause of action or defense insufficient.
Apart from alleging that the documents in this case are merely evidentiary, the petitioners
also point out that the deeds of sale purportedly executed by them were in favor of their
brother, Dionisio, who in turn executed deeds of sale in favor of the respondents. Under
this circumstance, does the genuineness and due execution of the deeds evidencing the
two transactions have to be denied under oath?
The deed of sale executed by Dionisio Toribio in favor of the respondents, by itself, would
be insufficient to establish a defense against the petitioners' claims. If the petitioners
deny that they ever sold their shares in the inherited lot to their brother Dionisio, a failure
to prove the sale would be decisive. For if it can be shown that no conveyance of the
property was executed by the petitioners, then Dionisio Toribio had no right to convey
what did not belong to him. The respondents could acquire only the rights that Dionisio
had over the disputed property. The genuineness and due execution of the deed
between the co-heirs is also elemental to the defense of the respondents. The first deeds
of sale, to which the respondents were not parties but which they seek to enforce against
the parties are also actionable documents.
The petitioners further alleged that this case falls under the exception to Section 8, Rule
8 which provides:
SECTION 8. ... but this provision does not apply when the adverse party does
not appear to be a party to the instrument.
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As early as Lim-Chingco v. Terariray (5 Phil. 120), this Court gave the reason for the rule
on contesting actionable documents. The purpose is:
Reasonably construed, the purpose of the enactment (sec. 103) appears to have
been to relieve a party of the trouble and expense of proving in the first instance
an alleged fact, the existence or nonexistence of which is necessarily within the
knowledge of the adverse party, and of the necessity (to his opponent's case) of
establishing which such adverse party is notified by his opponent's pleading.
This being so, the documents have to be treated in like manner. The petitioners are
themselves parties to the deeds of sale which are sought to be enforced against them.
The complaint was filed by the petitioners. They filed suit to recover their hereditary
properties. The new owners introduced deeds of sale as their main defense. In other
words, the petitioners brought the issue upon themselves. They should meet it properly
according to the Rules of Court.
Sections 7 and 8 of Rule 8, therefore, apply. The proper procedure was for the
petitioners to specifically deny under oath the genuineness and due execution of the
questioned deeds of sale and to set forth what they claim to be the facts. However, the
oversight or negligence of petitioners' counsel in not properly drafting a reply to the
answer and an answer to the counter claim is not necessarily fatal to their cause.
The facts of the case and equitable considerations constrain us to grant the petition and
to set aside the questioned order of the respondent court.
As stated earlier, the reason for the rule is to enable the adverse party to know
beforehand whether he will have to meet the issue of genuineness or due execution of
the document during trial. (In re Dick's Estate, 235 N.W. 401). While mandatory, the rule
is a discovery procedure and must be reasonably construed to attain its purpose, and in
a way as not to effect a denial of substantial justice. The interpretation should be one
which assist the parties in obtaining a speedy, inexpensive, and most important,
a just determination of the disputed issues.
Paragraphs 11 and 13 of the petitioners' complaint reads:
xxx xxx xxx
11. That the share of herein Plaintiffs were never sold or in any wise transferred
or disposed to others;
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
xxx xxx xxx
13. That just how and by what means Defendant, JUANITO CAMACHO was able
to acquire the total area of 931 square meters, is not known; however, the
acquisition might have been effected, the same was in fraud of herein plaintiffs;
and so with the share of Defendant, DALMACIO C. RAMOS, Jr., herein Plaintiffs,
jointly and/or severally, do not know the person; and, however he might have
acquired the said share of ONE FOURTH () of the property, was not from
either, much less all of the Plaintiffs;
xxx xxx xxx
The complaint was verified under oath by the petitioners.
The petitioners' counsel was obviously lulled into complacency by two factors. First, the
plaintiffs, now petitioners, had already stated under oath that they never sold,
transferred, or disposed of their shares in the inheritance to others. Second, the usual
procedure is for a defendant to specifically deny under oath the genuineness and due
execution of documents set forth in and annexed to the complaint. Somehow, it skipped
counsel's attention that the rule refers to either an action or a defense based upon a
written instrument or document. It applies to both plaintiffs and defendants.
Under the facts of this case, the private respondents were placed on adequate notice by
Paragraph 11 of the verified complaint that they would be caned upon during trial to
prove the genuineness or due execution of the disputed deeds of sale.
Moreover, the heirs of Olegario Toribio, his widow and minor children represented by
their mother, are among the plaintiffs-petitioners. They are not parties to the deeds of
sale allegedly executed by their father, aunt, and uncle. They are not required to deny
the deeds of sale under oath. The private respondents will still have to introduce
evidence to establish that the deeds of sale are genuine and that they were truly
executed by the parties with authority to dispose of the disputed property.
It bears repeating that rules of procedure should be liberally construed to the end that
substantial justice may be served. As stated in Pongasi v. Court of Appeals (71 SCRA
614):
We repeat what We said in Obut v. Court of Appeals, et al., supra, that 'what
should guide judicial action is the principle that a party-litigant is to be given the
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fullest opportunity to establish the merits of his complaint or defense rather than
for him to lose life, liberty, honor or property on technicalities.
In dispensing justice Our action must reflect a deep insight into the failings of
human nature, a capability for making allowances for human error and/or
negligence, and the ability to maintain the scales of justice happily well-balanced
between these virtues and the application of the law.
An interpretation of a rule of procedure which would not deny to the petitioners their
rights to their inheritance is warranted by the circumstances of this case.
WHEREFORE, the order of the respondent court dated July 20, 1981 is hereby
REVERSED and SET ASIDE. The Regional Trial Court which took over the cases of the
respondent court is ordered to receive the petitioners' evidence regarding the
genuineness and due execution of the disputed deeds of sale.
SO ORDERED.
G.R. No. 13300 September 29, 1919
BASILIA BOUGH and GUSTAVUS BOUGH, plaintiffs-appellants, vs. MATILDE
CANTIVEROS and PRESBITERA HANOPOL, defendants-appellees.
This action was begun in the Court of First Instance of Leyte, pursuant to a complaint by
means of which the plaintiffs Basilia Bough and Gustavus Bough sought to have
themselves put in possession of the property covered by the deed of sale quoted in the
complaint, and to require the defendant Matilde Cantiveros to pay the plaintiffs the sum
of five hundreds pesos by way of damages, and to pay the costs. Matilde Cantiveros
answered with a general denial and a special defense, not sworn to, in which she asked
that judgment be rendered declaring the contract of sale theretofore made between
herself and Basilia Bough null. The plaintiffs, thereupon, denied under oath the
genuineness and due execution of the so-called donation intervivos set forth in the
answer. Presbitera Hanopol was permitted to intervene as a defendant. After trial,
judgment was rendered by the Honorable W. E. McMahon, judge of first instance, in
favor of the defendants, declaring the deed of sale, Exhibit A, fictitious, null, and without
effect, and absolving the defendants from the complaint, with costs against the plaintiffs.
It is from this judgment through the ordinary means of perfection of a bill of exceptions
that the case is brought to this court for decision.
The facts are these: Matilde Cantiveros is reputed to be the richest resident of the
municipality of Carigara, Leyte. In the latter part of the year 1913, she was the owner of
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
various parcels of realty of the value of thirty thousand pesos or more. On December 24,
1912, Matilde Cantiveros and her husband Jose Vasquez, signed a marital contract of
separation. At this time there lived with Matilde Cantiveros, Basilia Hanopol, a cousin and
protege since childhood, who was married to Gustavus Bough. For this reason,
Gustavus Bough was regarded by Matilde Cantiveros with great confidence, even as her
child. Through the influence of Gustavus Bough, who brought a story to Matilde
Cantiveros that her husband Jose Vasquez was in town and might contest the contract
for the separation of the conjugal property, Matilde Cantiveros was induced to sign a
fictitious contract of sale of all her property to Basilia Bough. This document, introduced
in evidence as Exhibit A, was prepared in due from and acknowledged before a notary
public, the amount of the consideration, ten thousand pesos, being last inserted with a
pen. By this deed, Matilde Cantiveros purported to convey sixty-three parcels of land, the
real value of which was over thirty thousand pesos, for ten thousand pesos, although no
evidence that any such sum ever passed between the parties was introduced, to her
cousin, Basilia Bough. In order to reassure Matilde Cantiveros that they would not take
advantage of the fictitious sale, Gustavus Bough and Basilia Bough prepared and signed
another document, introduced in evidence as Exhibit 1, which is a donation by them to
Matilde Cantiveros of all the property mentioned in Exhibit A, to be effective in case of
the death of themselves and their children before the death of Matilde Cantiveros. The
defendant, Matilde Cantiveros, has remained in possession of the property.
These facts, which, it may be said, are mainly derived from the findings of the trial court,
merely repeat the threadbare story of a conveyance of property entered into with a
fraudulent intention and for a fraudulent purpose, in order to defeat recovery in a suit at
law by a third party.
Plaintiffs and appellants assign six errors of the trial court. In so far as these assignments
concern the facts, they need no discussion. Plaintiff's declarations have not been
corroborated, while defendant's story has been corroborated by reliable witnesses. All
the reason all the equity of the case, is in favor of the defendants. As far as
necessary for the disposition of the appeal, we resolve plaintiff's points in order.
1. The first assignment of error reads: "The lower Court erred in permitting the
defendants to present evidence, over the objections of the plaintiff, tending to impugn the
genuineness and due execution of the document, Exhibit A, and in admitting them to
show the circumstances under which it was executed.
It is undeniable that this was an action brought upon a written instrument, and that the
complaint contained a copy of the instrument, but that its genuineness and due execution
were not specifically denied under oath in the answer. Is this fatal to the defense?
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Section 103 of the Philippine Code of Civil Procedure provides:
When an action is brought upon a written instrument and the complaint contains
or has annexed a copy of such instrument, the genuineness and due execution
of the instrument shall be deemed admitted, unless specifically denied under
oath in the answer; and when the defense to an action, or a counterclaim stated
in an answer, is founded upon a written instrument and the copy thereof is
contained in or annexed to the answer, the genuineness and due execution of
such instrument shall be deemed admitted, unless specifically denied under oath
by the plaintiff in his pleadings.
This section is derived from sections 448 and 449 of the Code of Civil Procedure of
California, and is to be found in varying form in the statutes of practically all the states of
the American Union. The meaning of this portion of the Code, and the intention of the
Legislature in enacting it, are easily found. The law says that the genuineness and due
execution of a written instrument properly pleaded shall be deemed admitted unless the
plaintiff or defendant, as the case may be, shall specifically deny the same under oath.
When the law makes use of the phrase "genuineness and due execution of the
instrument" it means nothing more than that the instrument is not spurious, counterfeit, or
of different import on its face from the one executed. As an example, where the name of
a corporation is signed to the document which is the basis of an action, the failure of the
defendant corporation to put in issue, by denial under oath, the due execution of the
instrument, as required in section 103 of the Code of Civil Procedure, operates as an
admission of the authority of the officer to execute the contract, since the authority of the
officer to bind the company is essential to the due execution of its contract. (Ramirez vs.
Orientalist Co. and Fernandez [1918], 38 Phil., 634.) But the failure of the party to file an
affidavit denying the genuineness and due execution of the document does not estop
him from controverting it by evidence of fraud, mistake, compromise, payment, statute of
limitations, estoppel, and want of consideration. As section 285 of our Code of Civil
Procedure permits a writing to be impeached because of its illegality or fraud, such a
defense would not be barred by the provisions of section 103. (Moore vs. Copp [1897],
119 Cal., 429 Brooks vs. Johnson [1898], 122 Cal., 569; Hibberd vs. Rohde and
McMillian [1915], 32 Phil., 476.)
We hold that although the defendants did not deny the genuineness and due execution
of the contract of sale of December 9, 1913, under oath, yet the defendants could
properly set up the defenses of fraud and want of consideration.
2. The second assignment of error reads: "The lower Court erred in finding that the
plaintiff Gustavus Bough, having prepared a contract of separation between the
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
defendant Matilde Cantiveros and her husband, Jose Vasquez, sought to cause her to
believe that she exposed herself to a suit by her husband regarding her property,
notwithstanding the contract of separation, and for that reason and for the purpose of
shielding herself from the consequences of the apprehended suit, that she and her
mother executed the document Exhibit A."
Counsel relies on the provisions of article 1218 of the Civil Code, which provides that
"Public instruments are evidence, even against a third person, of the fact which gave rise
to their execution and of the date of the latter." The effect of this article has been
announced in numerous decisions of the Supreme Court of Spain and of this Court.
(See Hijos de I. de la Rama vs. Robles and Robles [1907], 8 Phil., 712.) But in
conjunction with article 1218 of the Civil Code, there should always be read section 285
of the Code of Civil Procedure which provides that:
When the terms of an agreement have been reduced to writing by the parties, it
is to be considered as containing all those terms, and therefore there can be,
between the parties and their representatives or successors in interest, no
evidence of the terms of agreement other than contents of the writing, except in
the following cases:
1. Where a mistake or imperfection of the writing, or its failure to express the true
intent and agreement of the parties, is put in issue by the pleadings;
2. Where the validity of the agreement is the fact in dispute. But this section does
not exclude other evidence of the circumstances under which the agreement was
made, or to which it relates, or to explain an intrinsic ambiguity, or to establish its
illegality or fraud. The term `agreement' includes deeds and intruments
conveying real estate, and wills as well as contracts between parties.
While thus as the law well says "public instruments are evidence of the fact which gave
rise to their execution" and are to be considered as containing all the terms of the
agreement, yet, if the validity of the agreement is the issue, parole evidence may be
introduced to establish illegality or fraud. Evidence to establish illegality or fraud, is
expressly permitted under section 285 of the Code of Civil Procedure, and may be
proved by circumstantial evidence, aided by legitimate inferences from the direct facts.
(Camacho vs. Municipality of Baliuag [1914], 28 Phil., 466; Maulini vs. Serrano [1914], 28
Phil., 640; Union Mut. Life Insurance Co. vs. Wilkinson [1872], 13 Wall, 222; Maxon vs.
Llewelyn [1898], 122 Cal., 195, construing section 1856 of the Code of Civil Procedrue of
California, identical with section 285 of the Code of Civil Procedure of the Philippines.)
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We hold that parole evidence was properly admitted to show the illegality of the contract
of sale introduced as Exhibit A.
3. The third point raised by appellant is, that the defendant, having accepted the donation
expressed in the instrument Exhibit 1, is now estopped from denying the consideration
set forth therein. A sufficient answer is, that it having been established that Exhibit A is
invalid, such an instrument cannot be made the basis of an estoppel.
We hold that the so-called donation in favor of Matilde Cantiveros did not operate to
create an estoppel.
4. The last question which is propounded by appellant relates to the effect of the illegality
of the instant contract.
It is rudimentary that contracting parties may not establish pacts, clauses, and
conditions, which conflict with the laws, morals, or public order; "public order" signifies
"the public weal" public policy (Article 1255, Civil Code; Manresa, Comentarios al
Codigo Civil, Vol. 8, p. 574.) It is further well settled, that a party to an illegal contract
cannot come into a court of law and ask to have his illegal objects carried out. The rule is
expressed in the maxims: "Ex dolo malo non oritur actio," and "In pari delicto potior est
conditio defendentis." The law will not aid either party to an illegal agreement; it leaves
the parties where it finds them. (Article 1306, Civil Code; Perez vs. Herranz [1907], 7
Phil., 693.) Where, however, the parties to an illegal contract are not equally guilty, and
where public policy is considered as advanced by allowing the more excusable of the two
to sue for relief against the transaction, relief is given to him. Cases of this character are,
where they conveyance was wrongfully induced by the grantee through imposition or
overreaching, or by false representations, especially by one in a confidential relation. (13
C. J., 497-499; Pride vs. Andrew [1894], 51 Ohio State, 405.)
As corroborative examples of these principles, we may cite the following:
Where a husband falsely represented to his wife that she was liable for certain
debts, and that the creditors would take her property and influenced by this, and
intending to defraud such creditors, she transferred her property to him, it was
held that the deed would be set aside. (Boyd vs. De la Montagnie [1878], 73 N.Y.,
498.)
Where a party has given a conveyance of his property with intent to defraud a
creditor, the law will allow him no relief against such conveyance, but will leave
him in the situation in which he has placed himself. But where there is no creditor
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
in fact, but only an imaginary one, through fear of whom the grantor, encouraged
by the grantee, makes the conveyance, a fraudulent intent will not be imputed to
the grantor, and where the conveyance of the property has been without
consideration, he may recover the same or its value. (Kervick vs. Mitchell [1885],
68 Iowa, 273.)
Where a son falsely represented to his mother that a suit was about to be
brought against her for slander which would result in her losing all her property,
and thereby induced her to convey all her property to him, it was held that the
conveyance would be set aside at her suit. (Harper vs. Harper & Co. [1887], 85
Ky., 160.)
Where a woman seventy years of age and illiterate was induced by her son-in-
law and the sureties on his bond to execute a mortgage to the sureties to
indemnify them on a defalcation by the son-in-law, by holding out to her the
anticipated punishment of the latter, without allowing her a chance to consult any
disinterested friend, it was held that the mortgage would be set aside. (Bell vs.
Campbell [1894], 123 Mo., 1.)
One who executes a bill of sale at the instance of the grantee for the purpose of
putting his property beyond the reach of a third person whom the grantee
represented was about to institute suit against the grantor, is entitled to recover
the value of the property, where such third person had no valid claim against the
grantor, but had been settled with in full, and his receipt taken. (Kervick vs.
Mitchell [1885], 68 Iowa, 273.)
A brother who conveyed property to his sister on a secret trust for his benefit, to
defeat any claim for alimony which his wife, who had instituted a suit for divorce,
might make against him, is entitled to enforce the trust upon which the
conveyance was made, where it does not appear that any claim for alimony was
ever set up by his wife, or allowed, or that facts existed entitling her to such an
allowance. The court said: `It does not appear that there was any creditor whose
rights or interests could be prejudiced by the conveyance, and the question is
whether or not the mere motive which impelled the party to make the deed will
preclude him from enforcing the trust upon which it was executed. We think that
where there is no creditor, there is no fraud, and therefore no policy of the law to
prevent the enforcement of the trust. (Rivera vs. White [1901], 94 Tex., 538.)
A conveyance made by a mother to a daughter in consequence of false
representations that her property might otherwise be taken from her to satisfy a
6
 CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
claim for alimony arising from a suit for divorce about to be brought against her
son by his wife will be cancelled. The Court said: "If the conveyance was made
for the purpose of protecting the property from such claim, such representations
being untrue, and such apprehensions in fact groundless, then she is entitled to
have the deeds set aside." (Kleeman vs. Peltzer [1885], 17 Neb., 381.)

In this instance, the grantor, reposing faith in the integrity of the grantee, and relying on a
suggested occurrence, which did not in fact take place, was made the dupe of the
grantee, and led into an agreement against public policy. The party asking to be relieved
from the agreement which she was induced to enter into by means of fraud, was thus in
delicto, but not in pari delicto with the other party. The deed was procured by
misrepresentation and fraud sufficient to vitiate the transaction. The rights of creditors
are not affected. We feel that justice will be done if we place the grantor in the position in
which she was before these transactions were entered into.

The facts of this case are not greatly dissimilar from those to be found in Hibberd vs.
Rohde and McMillian ([1915], 32 Phil., 476), relating to the defenses permissible where
an instrument was submitted by the plaintiff, and not denied under oath by the defendant,
and to the subject of contracts against public policy. The doctrine there announced need
not be incorporated in this decision.

We resolve each assignment of error against the appellants, and having done so, affirm
the judgment of the trial court, with costs of this instance against the appellants. So
ordered.

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G.R. No. L-8418 December 9, 1915
L.O. HIBBERD, plaintiff-appellant, vs. WM. J. ROHDE and D.J.
MCMILLIAN, defendants-appellees.
This is a suit on a promissory note against the makers. Only one of them, the defendant
Rohde, appeared and answered. He not having entered a verified specific denial of the
genuineness and due execution of the note, the plaintiff claims that his special defense
of illegality of consideration is cut off by section 103 of the Code of Civil Procedure,
which reads as follows: "Actions and defenses based upon a written instruments.
When an action is brought upon a written instrument and the complaint contains or has
annexed a copy of such instrument, the genuineness and due execution of the
instrument shall be deemed admitted, unless specifically denied under oath in the
answer; and when the defense to an action, or a counterclaim stated in an answer, is
founded upon a written instrument and the copy thereof is contained in or annexed to the
answer, the genuineness and due execution of such instrument shall be deemed
admitted, unless specifically denied under oath by the plaintiff in his pleadings."
By the admission of the genuineness and due execution of an instrument, as provided in
this section, is meant that the party whose signature it bears admits that he signed it or
that it was signed by another for him with his authority; that at the time it was signed it
was in words and figures exactly as set out in the pleadings of the party relying upon it;
that the documents was delivered; and that any formal requisites required by law, such
as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him.
Hence, such defense as that the signature is a forgery (Puritan Mfg. Co. vs. Toti & Gradi,
14 N. M., 425; Cox vs. Northwestern Stage Co., 1 Idaho, 376; Woolen vs. Whitacre, 73
Ind., 198; Smith vs. Ehnert, 47 Wis., 479; Faelnar vs. Escao, 11 Phil. Rep., 92); or that it
was unauthorized, as in the case of an agent signing for his principal, or one signing in
behalf of a partnership (County Bank vs. Greenberg, 127 Cal., 26; Henshaw vs. Root, 60
Ind., 220; Naftzker vs. Lantz, 137 Mich., 441), or of a corporation
(Merchant vs. International Banking Corporation, 6 Phil. Rep., 314; Wanita vs. Rollins, 75
Miss., 253; Barnes vs. Spencer & Barnes Co., 162 Mich., 509); or that, in the case of the
latter, that the corporation was not authorized under its charter to sign the instrument
(Merchant vs. International Banking Corporation, supra); or that the party charged signed
the instrument in some other capacity than that alleged in the pleading setting it out
(Payne vs. National Bank, 16 Kan., 147); or that it was never delivered (Hunt vs. Weir, 29
Ill., 83; Elbring vs. Mullen, 4 Idaho, 199; Thorp vs. Keokuk Coal Co., 48 N.Y. 253; Fire
Association of Philadelphia vs. Ruby, 60 Neb., 216) are cut off by the admission of its
genuineness and due execution.
The effect of the admission is such that in the case of a promissory note a prima
facie case is made for the plaintiff which dispenses with the necessity of evidence on his
part and entitles him to a judgment on the pleadings unless a special defense of new
matter, such as payment, is interposed by the defendant. (Papa vs. Martinez, 12 Phil.
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
Rep., 613; Chinese Chamber of Commerce vs. Pua To Ching, 14 Phil. Rep., 222; Banco
Espaol-Filipino vs. McKay & Zoeller, 27 Phil. Rep., 183.) But we have held that the
section is not applicable to the indorsement on a promissory note in a suit against the
maker (Heinszen & Co. vs. Jones, 5 Phil. Rep., 27); nor against the heirs of decedent
who signed a document declared upon (Nery Lim-Chingco vs. Terariray, 5 Phil. Rep.,
120). Under statutes similar to our own it has been held that the admission of the
1awphil.net
genuineness and due execution of the instrument does not bar the defense of want of
consideration. (Farmers & Merchants Bank vs. Copsey, 134 Ill. [Cal.], 287;
Barnes vs. Scott, 29 Fla., 285; Booco vs. Mansfield, 66 Ohio, 121; Holt vs. Robinson, 21
Ala., 106.) And in Kentucky in actions based upon promissory notes the consideration for
which were gambling debts, it has been held that such an admission does not prevent
the defense of illegality of consideration. (Burton vs. Emerine, 10 Ky., 499;
Arnold vs. Trundle, 30 Ky., 115.) In Freeman vs. Ellison (37 Mich., 458), it was said: "It is
now claimed for plaintiff below that this (rule) precludes any inquiry into the date of
delivery or the circumstances of the signing as bearing on any defenses dependent on
time in any way.
There is no authority that we know of or any such construction of the rule.
Undoubtedly when a plaintiff produces in court an instrument corresponding to
the one set forth he is exempted from proving its execution. But the actual time of
delivery may involve questions which it would be absurd to hold foreclosed by
any such assumption, If a note is dated back in order to include usurious interest,
and that defense is set up, it would hardly be regarded as bearing on the
question of execution. Execution can only refer to the actual making and delivery,
but it cannot involved other matters without enlarging its meaning beyond reason.
The only object of the rule was to enable a plaintiff to make out a prima facie, not
a conclusive case, and it cannot preclude a defendant from introducing any
defense on the merits which does not contradict the execution of the instrument
introduced in evidence.
To so interpret section 103 as to prohibit such a defense as illegality of consideration,
which is clearly a defense of new matter, would pro tanto repeal the second paragraph of
section 94, which permits a defendant to answer by "A statement of any new matter
constituting a defense or counterclaim." Likewise, section 285 provides that the terms of
a writing may be impeached by reason of its illegality or fraud. We do not understand that
such defenses are barred by the provisions of section 103. We accordingly hold that the
special defense interposed by the defendant of illegality of consideration is not barred by
his failure to enter a verified denial of the genuineness and due execution of the note set
out in the complaint. Hence, the evidence in support of that plea was competent. The
note reads as follows: itc-a1f
BAGUIO, BENGUET, April 27th, 1911.
8

For value received, we the undersigned parties, jointly and severally agree to pay
to the firm of Brand & Hibberd, of the city of Baguio, P. I., twelve hundred pesos,
Philippine currency, in monthly installments of one hundred pesos per month,
beginning with the first day of June, 1911. (Not transferable, excepting to Jos. C.
Brand or L.O. Hibberd.)
WM. J. ROHDE.
D. J. MCMILLIAN.
According to the testimony of the defendant Rohde, McMillian was in the retail liquor
business and secured a stock of merchandise valued at P1,200 from Brand & Hibberd
and sold it. Alleging that they delivered the merchandise to him on deposit only, Brand &
Hibberd filed a complaint of estafa against McMillian. McMillian was arrested and
released on bond pending the preliminary hearing before the justice of the peace. The
defendant Rohde was a practicing attorney and undertook McMillian's defense in the
estafa case. Rohde testified that he was well acquainted with the nature of the
transaction between the firm of Brand & Hibberd and McMillian; that the merchandise
was sold outright to McMillian; that he know the estafa complaint was absolutely without
foundation; and that McMillian could not possibly be convicted; but that one Sullivan
informed him after the preliminary hearing was held that he knew positively that
McMillian would be bound over for trial in the Court of First Instance. In rebuttal, Sullivan
testified that what he told Rohde was that he was satisfied from the evidence introduced
at the hearing that McMillian would be held for trial in the Court of First Instance. Upon
the strength of Sullivan's statement, Rohde agreed to sign the note reproduced above if
Brand & Hibberd would withdraw the estafa complaint. He did this because he did not
want his client to remain in confinement pending his trial in the Court of First Instance,
which would not have occurred for three months. His client was sick at the time and
Rohde was afraid that confinement in the jail for such a period of time would seriously
endanger his health. After the execution of the note, Brand & Hibberd moved in the
justice court that the estafa complaint be dismissed and this motion was granted by the
presiding justice. In the order dismissing the complaint, the justice stated that, from the
evidence introduced at the hearing he was convinced that there was no sufficient basis
for a criminal action, but that the controversy was of a civil character. Rohde
subsequently paid two hundred pesos on the note. The note was assigned to the plaintiff
L.O. Hibberd, on June 10, 1911.
Any agreement which has for its purpose the concealment of a public offense, the
suppression of evidence thereof, or the stifling of a criminal prosecution already
commenced is contra bonos mores and against public policy. Every successful attempt
to shield persons guilty of such offenses adds impetus to crime by encouraging the
culprits and all others of criminal tendencies who may learn of such perversions of
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
justice, to commit further offenses. A person suffering pecuniary from the commission of
such a crime may not barter away the benefits of public order and the personal safety
and security of the people by representing to the culprit that he will actively aid in the task
of securing immunity from the public prosecution if his civil damages are made good.
Courts are charged with the duty of administering the law, and they should not lend their
aid to the enforcement of any contract which looks to its perversion. (Wever vs. Shay, 56
Ohio, 116; 60 Am. St. Rep., 743; Ormerod vs. Dearman, 100 Pa., 561; 45 Am. Rep., 391;
Partridge vs. Hood, 120 Mass., 403; 21 Am. Rep., 524; Gardner vs. Maxey, 9 B. Mon. [48
Ky.], 90; Goodrum vs. Merchants & Planters Bank, 102 Ark., 326; Ann. Cas., 1914A;
Nickelson vs. Wilson, 60 N.Y., 362.) Nor is it important that the shielding of the guilty
party was a minor consideration of the agreement, or necessary that a crime shall have
been in fact committed. The intention of the parties to obstruct criminal justice to
whatever extent taints the entire contract and makes it unenforcible. (United States
Fidelity & guaranty Co. vs. Charles (Ala.), 57 L.R.A., 212; W.T. Joyce Co. vs. Rohan, 134
Iowa, 12; 120 Am. St. Rep., 410; Crowder vs. Reed, 80 Ind., 1.) The courts will not
interfere either to rescind an executed contract or to enforce an executory contract of
such character. The parties are left just where they are found. Perez vs. Herranz, 7 Phil.
Rep., 693; Rohdes vs. Neal, 64 Ga., 704; 37 Am. Rep., 93; Bowman vs. Phillips, 41
Kan., 364; 13 Am. St. Rep., 292; Atwood vs. Fisk, 101 Mass., 363; 100 Am. Dec., 124;
Case vs. Smith, 107 Mich., 416; 61 Am. St. Rep., 341; 31 L.R.A., 282.)
A very large number of public offenses, however, inflict pecuniary damage on private
persons. The Penal Code recognizes the civil liability of offenders (arts. 119, et seq). In
this civil liability the State has no interest other than its undertaking to aid the injure
person in securing compensation for his injuries, and it cannot be doubted that if the
injured person so desires he may privately negotiate with the criminals or with persons
interested in the latter for the settlement of his private damages. Article 1813 of the Civil
Code provides that a civil action arising from a crime may be compromised, but the
public action for the imposition of the legal penalty shall not be extinguished thereby. So
long as the right of the State to exact the penalty for the public offense is not trenched
upon, there is nothing unlawful or immoral in such a contract. (Schirm vs. Wieman, 103
Md., 541; 7 Ann. Cas., 1008; Atwood vs. Fisk, 101 Mass., 363; 100 Am. Dec., 124;
Goddrum vs. Merchants & Planters Bank, 102 Ark., 326; Ann. Cas., 1914A;
Lomax vs. Colo. Nat. Bank, 46 Colo., 229.) And mere threats of prosecution will not
vitiate an instrument given for an amount embezzled or for the value of property
feloniously taken, unless coupled with an agreement not to prosecute if the instrument be
given. (Wolf vs. Troxell Estate, 94 Mich., 573; Portner vs. Kirscher, 169 Pa., 472; 47 Am.
St. Rep., 925; Goodwin vs. Crowell, 56 Ga., 567; Thorn vs. Pinkham, 84 Me., 101; 30
Am. St. Rep., 335.) A mere expectation of the one of the parties that the settlement of the
civil injuries will stop the public prosecution is not sufficient to make such a contract void
as against public morals or public policy. (Phillips vs. Pullen, 45 N.J. Eq., 830.) As was
said in Moog vs. Strang (69 Ala., 98), the law does not "seek to control the hope or
expectation of the offender. He may very reasonably, in many cases, expect that the
9

prompt settlement of a discovered default may tend to paralyze the energy of an incipient
prosecution, and however reprehensible the motives of the parties, they are not
cognizable by the courts so long as their minds falls short of concurring in an agreement,
express or implied, to compound or not to prosecute as the consideration in part or in
whole of the payment of the debt or damages resulting from the crime committed."
In this country a personal is not an accessory to a public offense except in the cases
expressly provided by law. (Penal Code, art. 15; Act No. 292; U.S. vs. Caballeros, 4 Phil.
Rep., 350.) In Goodrum vs. Merchants & Planters Bank (102 Ark., 326; Ann. Cas.,
1914A), it appears that Goodrum was manager of bank and that one Eagle held the
majority of the bank's capital stock and controlled its policies. Goodrum defaulted, and to
settle his shortage executed a trust deed which was to be surrendered to the bank in
case an examination shows that he was criminally liable. In a suit by the bank to compel
the conveyance, Goodrum sought to show the illegality of the contract by evidence that
he had been promised immunity from criminal prosecution if he would make good the
shortage. Eagle testified that he promised that, if the conveyance were made, "We won't
lie around the courthouse and try to prosecute him: but if the grand jury calls on me and
asks me to explain these books and asks me if the shortage occurred upon the expert's
report, I will tell them everything I know about it." The court said: "We do not think that
this statement of Mr. eagle in effect that he would not go before the grand jury until
summoned to appear was an implied agreement either to withhold testimony, conceal the
crime, or to stifle the prosecution under the facts and circumstances of this case. The
charges made against Goodrum that he was short in his accounts with the bank, and
criminally so, were not only known to all the directors and persons present at the
conference, but they had been published to the world, and the knowledge thereof rife
amongst the people of that community, if not also amongst the people of the country.
This is not a case where the charges were only known by a few persons, and upon their
failure to divulge them they would not come to the notice or knowledge of the public or to
those to whom the prosecution of crime is entrusted by the law. ... At the most, Eagle
only stated that he would not instigate a prosecution. ... Because he would remain
passive relative to matters of which the public authorities had full knowledge, it can not
be said that he thereby agreed to shield Goodrum from any public prosecution."
In Nickelson vs. Wilson (60 N.Y., 362), it was said: "But an agreement to lay the whole
facts before the court, and to leave it to the free exercise of the discretionary powers
vested in it by law, is not in itself wrong, and is not rendered illegal even by a stipulation
on the part of a prosecutor to exert such legitimate influence as his position gives him in
favor of the extension of mercy to a guilty party."
Whether the tendency of an agreement is to interfere with the due enforcement of
criminal law is always a question of fact. (Martin vs. Tucker, 35 Ark., 279;
Goodwin vs. Crowell, 56 Ga., 567; Beath vs. Chapoton, 115 Mich., 506; 69 Am. St. Rep.,
589; Goodrum vs. Merchants & Planters Bank, supra.)
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
In the case at bar, the finding of fact made by the court below have been duly submitted
to us for review. The trial court found as a fact that the consideration of the note was the
compromise of a public offense. We do not think that the evidence justifies this
conclusion. It is true that the defendant Rohde testified that the consideration of the note
was "the withdrawal of the false charge against him (McMillian) and to get him out of jail."
But it is also in evidence that McMillian owed Brand & Hibberd the full amount of the note
and Rohde knew this fact before he signed the note. There is no charge that Brand &
Hibberd file the criminal complaint with a view of extorting a settlement of their claim
against McMillian. The hearing at the preliminary investigation was duly had and all the
evidence was before the justice of the peace before the agreement represented by the
note was made. It is not shown that Brand & Hibberd agreed not to testify in any further
criminal proceedings against McMillian, or that they would suppress any evidence in their
possession, or that they would solicit the State's prosecutor or any other Government
official whose authority extend to the criminal case, to not hold the defendant for trial.
What they actually did was to move in open court for a dismissal of the complaint. This is
all they did so far as the record shows, and that it was satisfactory to the defendant
Rohde is apparent from the fact that he subsequently made partial payments on the
note.
There can be no doubt that the agreement which resulted in the execution of the note
was entered into by Brand & Hibberd with an eye to the satisfaction of their pecuniary
claim against McMillian. From the testimony of Rohde himself it appears that he strongly
insisted that McMillian was not guilty of the crime charged, and no doubt his ability as a
lawyer tended to convince the complainants that the criminal charge was unjustified. If
they became converted to this view of the matter, they no doubt more readily consented
not to actively assist in the further prosecution of the criminal complaint. We do not think
the record justifies a more radical conclusion as to what Brand & Hibberd agreed to do
with reference to the criminal phase of the transaction than that they promised not to
further actively participate in the case. The record does not justify the conclusion that
they went further and agreed to actively assist in preventing the due investigation of the
criminal charge by suppressing evidence, by declining to appear against McMillian if duly
subpoenaed as witnesses, or by other means. In our opinion, the case is similar in many
aspects to Goodrum vs. Merchants & Planters Bank (102 Ark., 326), to which we have
referred above. The record indicates the same passivity on the part of the injured party
and the same publicity of the criminal charge. There having been no agreement to
interfere with the due administration of the criminal law, we are constrained to hold that
no part of the consideration of the note declared upon his illegal or against public policy.
The plaintiff is therefore entitled to judgment. The judgment appealed from is reversed
and judgment is decreed against the defendant Rohde for the sum of one thousand
pesos, the amount remaining unpaid on the note, together with legal interest from the
date of the institution of this action. Without costs. So ordered.
10

G.R. No. L-18401 April 27, 1963
PERFECTO JABALDE, plaintiff-appellant, vs. PHILIPPINE NATIONAL
BANK, defendant-appellee.
Appeal from a decision of the Court of First Instance of Cebu to the Court of Appeals,
elevated by the latter to the Supreme Court as a case involving a constitutional question
under Section 17 of the Judiciary Act of 1948.
Plaintiff-appellant Perfecto Jabalde seeks recovery of P10,000.00 allegedly deposited by
him with the defendant-appellee Philippine National Bank, P5,000.00 in genuine
Philippine currency on 21 July 1941 and another P5,000.00 on 30 August 1943 in mixed
genuine Philippine currency and Japanese military notes. The complaint recites the
printed wording of plaintiff's passbook, and allegedly reproduces page one thereof,
reciting it to be as follows:
Philippine National Bank Manila, Philippines in account with
July 21, 1941 P5,000.00
AUG. 30, 1943 5,000.00
The defendant's answer was not under oath, and admits the making of the foregoing
deposits, but denies the dates of deposit, alleging as the true dates 21 July 1944 and 30
August 1944, and avers that the entries in the passbook as to the deposit dates were
"knowingly, unlawfully and maliciously" altered by the plaintiff; and that the deposits were
all in Japanese military notes.
Both parties adduced evidence in support of their allegations, and after trial, the Court of
First Instance of Cebu dismissed the case.
Appellant insists that the dates of deposit were really 21 July 1941 and 30 August 1943,
and were made in Philippine money and mixed Philippine money and Japanese military
notes, respectively. The evidence preponderantly militates against the contention. That
the date entries in the passbook, Exhibit "A", were tampered with is clear to the naked
eyed. The years of both entries are obscured with a blot of black ink. Photographic
enlargements (Exhibits 3-A and 3-B), however, discernibly show that the year of the first
entry is "1944", and not "1941". While the year of the second entry is badly obliterated,
for obvious reasons it could not be earlier than the first entry. The testimony of the expert
witness as to the last two numerals of the first date year, that it is "1944", is logical, and
eliminates whatever doubt exists by means of enlarged photographs. He explained how
both the slant (diagonal) and the vertical lines in both figures are parallel to each other,
and the angles created by the slant and horizontal lines are congruent; the bases of the
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
two "4's" are on the same plane. Therefore, we agree that no other conclusion is possible
than that the two last digits are both "4".
Plaintiff's counsel avers that if there was any tampering, it should be attributed to the
bank that issued the passbook. On this point, the trial court correctly observed that it
would be puerile for any of the bank's officials to do this since the act would be against
the bank's interest.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts.1wph1.t
Defendant's witnesses have also shown, by their testimonies and business sheets of
account during the war years (Exhibits 5, 6, and 7), that appellant Perfecto Jabalde did
not have a pre-war, or "controlled", account with the defendant bank, although he did
open a wartime, or "free", account. The passbook states on its face that it is a "Free
Account". The difference between the two kinds of accounts, as instituted by the bank,
has been well explained. The business sheets of war-time accounts in the Cebu bank
branch also show that Perfecto Jabalde, along with several clients, deposited money in
Japanese military notes only and on the dates alleged by the bank. The conclusion
drawn from this array of evidence is inevitably that the deposits were made on 21 July
1944 and on 30 August 1944, and all in military notes.
The first legal issue is whether the bank's failure to deny under oath the entries in the
passbook as "copied" in the complaint constitutes an admission of the genuineness and
due execution of the document. Ordinarily, such failure is an admission. However, this
rule cannot apply in the present case because the plaintiff introduced evidence
purporting to support his allegations of deposit on the dates he wanted the court to
believe, and offered no objection during the trial to the testimonies of defendant's
witnesses and documentary evidence showing different dates of deposit. 1 By these acts,
the plaintiff waived the defendant's technical admission through failure to deny under
oath the genuineness and due execution of the document (Cf. Legarda Koh vs.
Ongsiako, 36 Phil. 185; Yu Chuck vs. Kong Li Po, 46 Phil. 608, both cited in 1 Moran
232, 233, 1957 ed.). It has, likewise, been ruled that
Where written instrument set forth in answer is not denied by affidavit, yet if
evidence in respect to that matter, and tending to show that instrument is not
genuine, or was not delivered, is introduced by plaintiff without objection on part
of defendant, or motion to strike out, and is met by counter-evidence on part of
defendant, the latter ought not to be permitted to claim that genuineness and due
11

execution of instrument are admitted. (Francisco, Rules of Court, Anno. &
Commented, Vol. I, Part I, Rev. Ed., pp. 734-735, citing the case of Clark v. Child,
66 Cal. 87)
The court of first instance held that the appellant's wartime deposits were not
reimbursable under Executive Order No. 49, Series of 1945, issued by President
Osmea in the exercise of the authority conferred by the Emergency Powers Act (Comm.
Act No. 671). The Executive Order provides that:.
All deposits made with banking institutions during enemy occupation, and all
deposit liabilities incurred by banking the same period are declared null and void,
except as provided in this section.
The appellant does not contest that under said Executive Order his wartime deposits are
void; but he vigorously assails the validity and constitutionality of the order as impairing
the obligation of contracts and depriving him of property without due process of law.
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
The argument that the rule of Hilado vs. De la Costa, supra, should not apply because
the complaint herein was filed in 1956 when there was no more emergency is
impertinent, since Executive Order No. 49 is clearly intended for permanent application,
and its operation was not limited to the period of emergency.
Assuming, arguendo, that the bank promised later to pay the plaintiff-depositor when it
would be indemnified by either the United States or the Japanese government, said
promise could not be considered a novation of the contract of deposit, because there
was no contract to novate in the first place, for lack of one of the essential elements of a
contract: object. The object of the supposed contract (in this case the deposited military
notes) was declared null and void, and, therefore, non-existing.
FOR THE FOREGOING REASONS, the decision appealed from is hereby affirmed, with
costs against the appellant. Let the case be referred to the City Fiscal, through the
Department of Justice, for investigation and prosecution as the facts may warrant.

This is no longer an open issue. It was passed upon and decided in Hilado vs. De la
Costa, 83 Phil. 471, wherein it was ruled:

We are of the considered opinion, and therefore hold, that the provisions of
Executive Order No. 49, do not deprive the plaintiff of his property without due
process of law or impair the obligation of contract entered into between him and
the defendant bank; because they are but the logical corollary and application to
bank deposits in Japanese war notes of Executive Order No. 25, in so far as it
declares that said notes are not legal tender in territories of the Philippines
liberated from Japanese occupation, the validity of which is not, and cannot
seriously be, questioned.

The promulgation of Executive Order No. 49 was a valid exercise of the extraordinary
powers invested by the legislature unto the President by Commonwealth Act No. 671.
This Act, enacted pursuant to Article VI, Section 16 of the Constitution, after declaring the
necessity for granting extraordinary powers to the President in Section 1 thereof, granted
him in Section 2 the power

to promulgate such rules and regulations as he may deem necessary to carry out
the national policy declared in Section 1 hereof. Accordingly, he is, among other
things, empowered (a) ...; (i) to exercise such other powers as he may deem
necessary to enable the Government to fulfill its responsibilities and to maintain
and enforce its authority. (Emphasis supplied)

12

G.R. No. L-28633 March 30, 1971
CENTRAL SURETY and INSURANCE COMPANY, petitioner, vs. C. N. HODGES and
THE COURT OF APPEALS, respondents.
Appeal by certiorari from a decision of the Court of Appeals, the dispositive part of which
reads as follows:
WHEREFORE, in view of the foregoing considerations, the decision appealed from is
modified and judgment is hereby rendered against Central Surety & Insurance Company:
(a) To pay plaintiff C. N. Hodges the sum of P17,826.08 with interest thereon at the rate
of 12% per annum from October 24, 1955 until fully paid;
(b) To pay plaintiff C. N. Hodges the sum of P1,551.60 as attorney's fees; and
(c) To pay the costs.
The main facts are not disputed. Prior to January 15, 1954, lots Nos. 1226 and 1182 of
the Cadastral Survey of Talisay, Negros Occidental, had been sold by C. N. Hodges to
Vicente M. Layson, for the sum of P43,000.90, payable on installments. As of January
15, 1954, the outstanding balance of Layson's debt, after deducting the installments paid
by him prior thereto, amounted to P15,516.00. In order that he could use said lots as
security for a loan he intended to apply from a bank, Layson persuaded Hodges to
execute in his (Layson's) favor a deed of absolute sale over the properties, with the
understanding that he would put up a surety bond to guarantee the payment of said
balance. Accordingly, on the date above-mentioned, Layson executed, in favor of
Hodges, a promissory note for P15,516.00, with interest thereon at the rate of 1% per
month, and the sum of P1,551.60, for attorney's fees and costs, in case of default in the
payment of the principal or interest of said note. To guarantee the same, on January 23,
1954, the Central Surety and Insurance Company hereinafter referred to as petitioner
through the manager of its branch office in Iloilo, Mrs. Rosita Mesa, executed in favor
of Hodges the surety bond Annex B, which was good for twelve (12) months from the
date thereof.
When Layson defaulted in the discharge of his aforesaid obligation, Hodges demanded
payment from the petitioner, which, despite repeated extensions of time granted thereto,
at its request, failed to honor its commitments under the surety bond. On October 24,
1955, Hodges commenced, therefore. the present action, in the Court of First Instance of
Iloilo, against Layson and petitioner herein, to recover from them, jointly and severally,
the sums of P17,826.08, representing the principal and interest due up to said date, and
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
P1,551.60, as attorney's fees. In his answer to the complaint, Layson admitted the formal
allegations and denied the other allegations thereof.
Having failed to file its answer within the reglementary period, the petitioner was, on
January 18, 1956, declared in default. When the case was called for trial, insofar as
Layson was concerned, the latter did not appear, and Hodges was allowed to introduce
his evidence. Then the trial court rendered a partial decision against Layson, petitioner
having, in the meantime, filed a motion to set aside the order of default, which motion
was still pending resolution. Thereafter, said motion was denied, and upon presentation
lwph1.t
of the evidence of Hodges against herein petitioner, judgment was rendered against the
latter as prayed for in the complaint. Thereupon, petitioner filled a motion for
reconsideration and a motion for relief under Rule 38. Acting thereon, His Honor, the trial
Judge, later set aside its decision against the petitioner and admitted its answer,
attached to the motion to set aside the order of default.
In its answer, petitioner disclaimed liability under the surety bond in question, upon the
ground (a) that the same is null and void, it having been issued by Mrs. Rosita Mesa
after her authority therefor had been withdrawn on March 15, 1952; (b) that even under
her original authority Mrs. Mesa could not issue surety bonds in excess of P8,000.00
without the approval of petitioner's main office which was not given to the surety bond in
favor of Hodges; and (c) that the present action is barred by the provision in the surety
bond to the effect that all claims and actions thereon should be filed within three (3)
months from the date of its expiration on January 23, 1955. Petitioner, moreover, set up a
counterclaim for damages.
In due course, thereafter, the trial court rendered a decision:
a) Condenando a la demandada Central Surety & Insurance Co. que pague al
demandante la desde la P8,000.00 con intereses legales a contar desde la fecha de la
demanda 24 de Octubre de 1955;
b) Condenando a la misma demandada que pague al de mindante la suma de P600.00
en concepto de honorarios de abogado; y
c) Condenindo ademas a la misma demandada que pague las costas del juicio.
Hodges appealed to the Court of Appeals (CA-G.R. No. L-24684-R) from this decision,
insofar as it limited petitioners liability to P8,000.00. Petitioner, also, appealed to said
Court upon the ground that the trial court had erred: (a) in holding petitioner liable under
a contract entered into by its agent in excess of her authority; (b) in sentencing petitioner
13

to pay Hodges the sum of P8,000.00 with interest thereon, in addition to attorney's fees
and the costs; and (c) in "not awarding" petitioner's counterclaim.
After appropriate proceedings, the Court of Appeals rendered the decision above
referred to, from which petitioner has appealed to this Court, alleging that the Court of
Appeals has erred: (1) in finding that petitioner "was liable on a bond issued by an agent
whose authority ... had already been withdrawn and revoked"; (2) "in applying the rule on
implied admission by reason of failure to deny under oath the authenticity of a pleaded
document"; and (3) "in not considering the legal effect of the waiver contained in the
disputed bond and in not disposing of this case under the light of such waiver."
The first assignment of error is predicated upon the fact that prior to January 23, 1954,
when the surety bond involved in this case was executed, or on March 15, 1952,
petitioner herein had withdrawn the authority of its branch manager in the City of Iloilo,
Mrs. Rosita Mesa, to issue, inter alia, surety bonds and that, accordingly, the surety
bond, copy of which was attached to the complaint as Annex B, is null and void. On this
point, the Court of Appeals had the following to say:
... we are of the opinion that said surety bond is valid. In the first place, there
appears to be no showing that the revocation of authority was made known to the
public in general by publication, nor was Hodges notified of such revocation
despite the fact that he was a regular client of the firm. And even if Hodges would
have inquired from Mrs. Mesa as to her authority to issue said bond, we doubt if
she would disclose the contents of the letter of March 15, 1952 in view of Central
Surety's claim that she was committing irregularities in her remittances to the
main office. Secondly, some surety bonds issued by Mrs. Mesa in favor of
Hodges after her authority had allegedly been curtailed, were honored by the
Central Surety despite the fact that these were not reported to the main office at
the time of their issuance. These accounts were paid on January 31, 1957, to wit:
Felicito and Libertad Parra issued on August 16, 1952; Estrella Auayan issued on
November 16, 1953; Dominador Jordan issued on August 26, 1953; and Ladislao
Lachica issued on February 28, 1953. (Exhs. F, G, H, I and J). By these acts
Central Surety ratified Mrs. Mesa's unauthorized acts and as such it is now
estopped from setting forth Mrs. Mesa's lack of authority to issue surety bonds
after March 15, 1952. It has been held that although the agent may have acted
beyond the scope of his authority, or may have acted without authority at all, the
principal may yet subsequently see fit to recognize and adopt the act as his own.
Ratification being a matter of assent to and approval of the act as done on
account of the person ratifying any words or acts which show such assent and
approval are ordinarily sufficient. (Sta. Catalina vs. Espitero, CA-G.R. No. 27075-
R, April 28, 1964, citing IV Padilla, CIVIL CODE. 1959 ed., pp. 478-479; Roxas
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
vs. Villanueva, CA-G.R. No. 18928-R, June 20, 1958). Moreover, the relocation
of agency does not prejudice third persons who acted in good faith without
knowledge of the revocation. (Joson vs. Garcia, CA-G.R. No. 29336-R. Nov. 19,
1962).
Indeed, Article 1922 of our Civil Code provides:
If the agent had general powers, revocation of the agency does not prejudice
third persons who acted in good faith and without knowledge of the revocation.
Notice of the revocation in a newspaper of general circulation is a sufficient
warning to third persons.
It is not disputed that petitioner has not caused to be published any notice of the
revocation of Mrs. Mesa's authority to issue surety bonds on its behalf, notwithstanding
the fact that the powers of Mrs. Mesa, as its branch manager in Iloilo, were of a general
nature, for she had exclusive authority, in the City of Iloilo, to represent petitioner herein,
not with a particular person, but with the public in general, "in all the negotiations,
transactions, and business in wherein the Company may lawfully transact or engage on
subject only to the restrictions specified in their agreement, copy of which was attached
to petitioner's answer as Annex 3. 1 Contrary to petitioner's claim, Article 1922 applies
whenever an agent has general powers, not merely when the principal has published the
same, apart from the fact that the opening of petitioner's branch office amounted to a
publication of the grant of powers to the manager of said office. Then, again, by honoring
several surety bonds issued in its behalf by Mrs. Mesa subsequently to March 15, 1952,
petitioner induced the public to believe that she had authority to issue such bonds. As a
consequence, petitioner is now estopped from pleading, particularly against a regular
customer thereof, like Hodges, the absence of said authority.
Let us now take up the third assignment of error and defer, until after the same has been
disposed of, the consideration of the second assignment of error. Under the third
assignment of error, petitioner maintains that, having been instituted on October 24, 1955
or nine (9) months after the expiration of petitioner's surety bond on January 23, 1955
the present action is barred by the provision in said bond to the effect that it:
...will not be liable for any claim not discovered and presented to the Company
within three (3) months from the expiration of this bond and that the obligee
hereby waives his right to file any court action against the surety after the
termination of the period of three months above-mentioned.
Interpreting an identical provision, 2 court has, however, held "that the three-month period"
prescribed therein "established only a condition precedent, not a limitation of action," and
14
 CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
that, when a claim has been presented within said period, the action to enforce the claim may The reason for such view was explained by this Court as follows:
be "filed within the statutory time of prescription." This view was clarified in a subsequent
case, 3 in the sense that the above-quoted provision was "... merely interpreted to mean that Before entering upon a discussion of the questions raised by the assignments of
presentation of the claim within three months was a condition precedent to the filing of a court error, we may draw attention to a matter which has not been mentioned either by
action. Since the obligee in said case presented his claim seasonably although it did not file counsel or by the court below, but which, to prevent misunderstanding, should be
the action within the same period, this Court ruled that the stipulation in the bond concerning briefly explained: It is averred in the complaint that it is accompanied by a copy of
the limitation being ambiguous, the ambiguity should be resolved against the surety, which
the contract between the parties (Exhibit A) which copy, by the terms of the
drafted the agreement, and that the action could be filed within the statutory period of
complaint, is made a part thereof. The copy is not set forth in the bill of
prescription." 4
exceptions and aside from said averment, there is no indication that the copy
actually accompanied the complaint, but an examination of the record of the case
In the case at bar, it is not contended that Hodges had not presented his claim within
in the Court of First Instance shows that a translation of the contract was
three (3) months from January 23, 1955. In fact, he had repeatedly demanded from
attached to the complaint and served upon the defendant. As this translation may
petitioner herein compliance with its obligations under the surety bond in question, and,
be considered a copy and as the defendant failed to deny its authenticity under
in reply to such demands, petitioner asked extensions of time, on January 29, February
oath, it will perhaps be said that under section 103 of the Code of Civil Procedure
16, March 15, May 3, June 16, July 1 and 15, and October 15, 1955. 5 After thus securing
the omission to so deny it constitutes an admission of the genuineness and due
extensions of time, even beyond three (3) months from January 23, 1955, petitioner cannot
execution of the document as well as of the agent's authority to bind the
plead the lapse of said period to bar the present action.
defendant. (Merchant vs. International Banking Corporation, 6 Phil. 314.)
The second assignment of error assails the finding of the Court of Appeals to the effect
In ordinary circumstances that would be true. But this case appears to
that the petitioner is liable for the full amount of surety bond despite the fact that it
have been tried upon the theory that the rule did not apply; at least, it was
exceeded the sum of P8,000.00 and hence, required, for its validity and binding effect as
wholly overlooked or disregarded by both parties. The plaintiffs at the
against petitioner herein, the express approval and confirmation of its Manila office,
lwph1.t

beginning of the trial presented a number of witnesses to prove the due

which were not secured in view of petitioner's failure to deny under oath the
execution of the document as well as the agent's authority; no objection
genuineness and due execution of said bond, copy of which was attached to the
were made to the defendant's evidence in refutation; all no exceptions
complaint. It is true that, pursuant to section 8 of Rule 8 of the Rules of Court:
taken; and the matter is not mentioned in the decision of the trial court.
When an action or defense is founded upon a written instrument, copied in or
The object of the rule is 'to relieve a party of the trouble and expense of
attached to the corresponding pleading as provided in the preceding section, the
proving in the first instance an alleged fact, the existence or nonexistence
genuineness and due execution of the instrument shall be deemed admitted
of which is necessarily within the knowledge of the adverse party, and of
unless the adverse party, under oath, specifically denies them, and sets forth
the necessity (to his opponent's case) of establishing which such adverse
what he claims to be the facts; but this provision does not apply when the
party is notified by his opponent's pleading.' (Nery Lim-Chingco vs.
adverse party does not appear to be a party to the instrument or when
Terariray, 5 Phil., at p. 124.)
compliance with an order for an inspection of the original instrument is refused.
The plaintiff may, of course, waive the rule and that is what he must be
We have however, held that:
considered to have done in the present case by introducing evidence as
to the execution of the document and failing to object to the defendant's
... where a case has been tried in complete disregard of the rule and the plaintiff
evidence in refutation; all this evidence is now competent and the case
having pleaded a document by copy, presents oral evidence to prove the due
must be decided thereupon. .... Nothing of what has here been said is in
execution of the document as well as the agent's authority and no objections are
conflict with former decisions of this court; it will be found upon
made to the defendant's evidence in refutation, the rule will be considered
examination that in all cases where the applicability of the rule has been
waived. 6
15
 CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
sustained the party invoking it has relied on it in the court below and
conducted his case accordingly." 7

In the case at bar, the parties acted in complete disregard of or wholly overlooked the
rule above-quoted. Hodges had neither objected to the evidence introduced by petitioner
herein in order to prove that Mrs. Mesa had no authority to issue a surety bond, much
less one in excess of P8,000.00, and took no exception to the admission of said
evidence. Hence, Hodges must be deemed to have waived the benefits of said rule and
petitioner herein cannot be held liable in excess of the sum of P8,000.00.

WHEREFORE, with the modification that petitioner's liability to Hodges is limited to said
sum of P8,000.00 the period, the petitioner was, on January 18, 1956, declared it is
hereby affirmed in all other respects, without costs. It is so ordered.

16

G.R. No. L-28140 March 19, 1970
CAPITOL MOTORS CORPORATIONS, plaintiff-appellee, vs. NEMESIO I.
YABUT, defendant-appellant.
Appeal on a question of law from the judgment of the Court of First Instance of Rizal in
its Civil Case. No. Q-9869.
On March 1, 1966, Capitol Motors Corporations filed a complaint against Nemesio I.
Yabut. It was therein averred that on April 24, 1965, the defendant executed in favor of
the plaintiff a promissory note (copy of which was attached to the complaint) for the sum
of P30,134.25, payable in eighteen (18) equal monthly installments with interest at
12% per annum, the first installment to become due on June 10, 1965, that it was
stipulated in the promissory note that should the defendant fail to pay two (2) successive
installments, the principal sum remaining unpaid would immediately become due and
demandable and the defendant would, by way of attorney's fees and costs of collection,
be obligated to the plaintiff for an additional sum equivalent to 25% of the principal and
interest due; that as of February 23, 1966, the sum remaining unpaid on the promissory
note was P30,754.79, including accrued interest; that the defendant defaulted in the
payment of two (2) successive installments, and likewise failed to pay the interest due on
the promissory note; and that in spite of demands by the plaintiff, the defendant failed
and refused to pay the said principal sum and interest due. Prayer was made that the
defendant be ordered to pay the plaintiff the sum of P30,754.79, as well as the interest
due thereon from February 23, 1966, and an additional sum equivalent to 25% of the
amount due, plus costs.
On April 27, 1966, and within the reglementary period, the defendant, through his
counsel, filed an answer which reads:
DEFENDANT through counsel alleges:
1. Paragraph 1 of the complaint is admitted.
2. Paragraphs 2, 3, 4, 5, 6 and 7 of the complaint are specifically denied for lack
of knowledge sufficient to form a belief as to the truth thereof.
WHEREFORE, it is respectfully prayed that the Complaint be dismissed with
costs against the plaintiff.
On June 16, 1966, the plaintiff filed a motion for judgment on the pleadings, on the
ground that the defendant, not having set forth in his answer the substance of the
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
matters relied upon by him to support his denial, had failed to deny specifically the
material allegations of the complaint, hence, must be deemed to have admitted them.
The defendant did not file an opposition to the motion. On September 13, 1966, after
hearing on the motion, the court issued an order granting the said motion and
considering the case submitted for decision on the basis of the pleadings; and on
January 9, 1967, the court rendered judgment granting in toto the plaintiff's prayer in its
complaint.
In this appeal, defendant-appellant contends that the court a quo erred in considering
him as having failed to deny specifically the material allegations of the complaint, and,
consequently, in deciding the case on the basis of the pleadings. Citing Moran,
Comments on the Rules of Court, Vol. I, 1963 Ed., p. 281, he argues that since Section
10, Rule 8 of the Revised Rules of Court, recognizes three (3) modes of specific denial,
namely: (1) by specifying each material allegation of 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 or (2) by specifying
so much of an averment in the complaint as is true and material and denying only the
remainder or (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, and he has adopted the third mode of specific denial, his
answer tendered an issue, and, consequently the court a quo could not render a valid
judgment on the pleadings.
This appeal is without merit.
We agree with defendant-appellant that one of the modes of specific denial contemplated
in Section 10, Rule 8, is a denial 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. The question, however, is whether paragraph 2 of defendant-appellant's
answer constitutes a specific denial under the said rule. We do not think so. In Warner
Barnes & Co., Ltd. vs. Reyes, et al., G.R. No. L-9531, May 14, 1958 (103 Phil., 662), this
Court said that 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 defendant's knowledge
that his averment of ignorance must be palpably untrue. In said case the suit was one for
foreclosure of mortgage, and a copy of the deed of mortgage was attached to the
complaint; thus, according to this Court, it would have been easy for the defendants to
specifically allege in their answer whether or not they had executed the alleged
mortgage. The same thing can be said in the present case, where a copy of the
promissory note sued upon was attached to the complaint. The doctrine in Warner
17

Barnes & Co., Ltd. was reiterated in J. P. Juan & Sons, Inc. vs. Lianga Industries,
Inc., G.R. No. L-25137, July 28, 1969 (28 SCRA 807). And in Sy-quia vs. Marsman, G.R.
No. L-23426, March 1, 1968 (22 SCRA 927), this Court said:
With regard to the plea of lack of knowledge or information set up in paragraph 3
of the answer, this Court's decision in Warner Barnes vs. Reyes, 103 Phil. 662,
665, is authority for the proposition that this form of denial must be availed of with
sincerity and good faith, not for the purpose of confusing the other party, nor for
purposes of delay. Yet, so lacking in sincerity and good faith is this part of the
answer that defendants-appellants go to the limit of denying knowledge or
information as to whether they (defendants) were in the premises (Marsman
Bldg.) on January 4, 1961, as averred in paragraph 4 of the complaint. Yet
whether such a fact was or was not true could not be unknown to these
defendants.
In National Marketing Corporation vs. De Castro, 106 Phil. 803 (1959), this Court held:
Furthermore, in his answer to the appellee's complaint, he merely alleged that 'he
has no knowledge or information sufficient to form a belief as to the truth of the
matters contained in paragraphs 3, 4, 5 and 6 so much so that he denies
specifically said allegations.' A denial is not specific simply because it is so
qualified. (Sections 6 and 7, Rule 9; El Hogar Filipino vs. Santos Investments,
Inc., 74 Phil. 79; Baetamo vs. Amador, 74 Phil. 735; Dacanay vs. Lucero, 76 Phil.
139; Lagrimas vs. Lagrimas, 95 Phil. 113). Material averments in a complaint,
other than those as to the amount of damage, are deemed admitted when not
specifically denied. (Section 8, Rule 9,) The court may render judgment upon the
pleadings if material averments in the complaint are admitted. (Section 10, Rule
35; Baetamo vs. Amador, supra, Lichauco vs. Guash, 76 Phil. 5; Lati vs.
Valmores, G.R. No. L-6877, 30 March 1954.)
It becomes evident from all the above doctrines that a mere allegation of ignorance of the
facts alleged in the complaint, is insufficient to raise an issue; the defendant must aver
positively or state how it is that he is ignorant of the facts so alleged. (Francisco, The
Revised Rules of Court in the Philippines, Vol. I, p. 417, citing Wood vs. Staniels, 3 Code
Rep. 152 and Vassalt vs. Austin, 32 Cal. 597.)
Thus, in at least two (2) cases where this Court ruled that judgment on the pleadings was
not proper, it will be seen that the reason was that in each case the defendants did
something more than merely alleging lack of knowledge or information sufficient to form
a belief. In Arrojo vs. Caldoza, et al., G.R. No. L-17454, July 31, 1963 (8 SCRA 547), the
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
defendants, in their answer to the complaint for recovery of possession of a parcel of
land, did not merely allege that they had no knowledge or information sufficient to form a
belief as to the truth of the material allegations in the complaint, but added the following:
"The truth of the matter is that the defendants have not occupied or taken any property
belonging to the plaintiff. They took possession and ownership only of the land belonging
to them, which properties were possessed and owned originally by their predecessors-in-
interest, who were the parents of the defendants ...." In Benavides vs. Alabastro, G.R.
No. L-19762, December 23, 1964 (12 SCRA 553), the defendant's answer did not only
deny the material allegations of the complaints but also set up certain special and
affirmative defenses the nature of which called for presentation of evidence.
There are two other reasons why the present appeal must fail. First. The present action
is founded upon a written instrument attached to the complaint, but defendant-appellant
failed to deny under oath the genuineness and due execution of the instrument; hence,
the same are deemed admitted. (Section 8, Rule 8 of the Revised Rules of Court; Songo
vs. Sellner, 37 Phil. 254; Philippine Commercial & Industrial Bank vs. ELRO
Development Corporation, et al., G.R. No. L-30830, August 22, 1969 [29, SCRA 38]; J. P.
Juan & Sons, Inc. vs. Lianga Industries, Inc., supra.) Second. Defendant-appellant did
not oppose the motion for judgment on the pleadings filed by plaintiff appellee; neither
has he filed a motion for reconsideration of the order of September 13, 1966, which
deemed the case submitted for decision on the pleadings, or of the decision rendered on
January 9, 1967. In Santiago vs. Basilan Lumber Company, G.R. No. L-15532, October
31, 1963 (9 SCRA 349), this Court said:
It appears that when the plaintiff moved to have the case decided on the
pleadings, the defendant interposed no objection and has practically assented
thereto. The defendant, therefore, is deemed to have admitted the allegations of
the complaint, so that there was no necessity for the plaintiff to submit evidence
of his claim.
PREMISES CONSIDERED, the judgment appealed from is affirmed, with cost against
defendant-appellant.
18
 CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
G.R. No. 159648 July 27, 2007
FLUOR DANIEL, INC.-PHILIPPINES, Petitioner, vs. E.B. VILLAROSA & PARTNERS
CO., LTD., Respondent.

1. Remedial Law; Actions; Causes of Action; Essential Elements of a Cause of Action;

The test of sufficiency of facts alleged in the complaint as constituting a cause of action
is whether or not admitting the facts alleged, the court could render a valid verdict in
accordance with the prayer of the complaint.-

The essential elements of a cause of action are as follows: 1) A right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; 2) An
obligation on the part of the defendant not to violate such right; and 3) An act or omission
on the part of the defendant in violation of the right of the plaintiff or constituting a breach
of the obligation of the defendant to the plaintiff for which the latter may maintain an
action for recovery of damages or other relief. It is, thus, only upon the occurrence of the
last element that a cause of action arises, giving the plaintiff a right to file an action in
court for recovery of damages or other relief. The test of sufficiency of facts alleged in the
complaint as constituting a cause of action is whether or not admit- ting the facts alleged,
the court could render a valid verdict in accordance with the prayer of the complaint. That
in determining sufficiency of cause of action, the court takes into account only the
material allegations of the complaint and no other, is not a hard and fast rule. In some
cases, the court considers the documents attached to the complaint to truly determine
sufficiency of cause of action.

2. Remedial Law; Actions; Causes of Action; A complaint should not be dismissed for
insufficiency of cause of action if it appears clearly from the complaint and its
attachments that the plaintiff is entitled to relief.-

We have ruled that a complaint should not be dismissed for insufficiency of cause of
action if it appears clearly from the complaint and its attachments that the plaintiff is
entitled to relief. The converse is also true. The complaint may be dismissed for lack of
cause of action if it is obvious from the complaint and its annexes that the plaintiff is not
entitled to any relief.

For review on certiorari are the Decision1 dated October 24, 2002 and the
Resolution2 dated August 25, 2003 of the Court of Appeals in CA-G.R. SP No. 52897,
which had affirmed the November 19, 1998 3 and March 24, 19994Orders of the Regional
Trial Court of Makati City, Branch 58, in Civil Case No. 98-1342.

The pertinent facts, borne by the records, are as follows.

19

Petitioner Fluor Daniel, Inc.-Philippines is a domestic corporation providing construction
and program management services. Sometime in 1996, petitioner entered into an
agreement with Fil-Estate Properties, Inc. (Fil-Estate) for the construction of the Fairways
& Bluewater, Newcoast Island Resort in Boracay Island. Respondent E.B. Villarosa &
Partners Co., Ltd. was one of the contractors engaged by petitioner to provide services
for the said project.
On May 6, 1997, petitioner and respondent executed a separate contract for civil
structure and architecture, for plumbing and fire protection, and for millworks. However,
Fil-Estate failed to satisfy petitioners monthly progress billing. Hence, petitioner did not
pay respondent.
Petitioner apprised Fil-Estate that the project would have to be suspended. Petitioner
likewise issued a notice of suspension of work to all its contractors, including respondent.
In response, respondent informed petitioner that it deemed the contracts between them
good as terminated. Thus, respondent demanded payment for suspension cost and for
work so far performed.
Believing that petitioner was in bad faith, respondent also filed with the Regional Trial
Court of Makati City, Branch 58, a complaint 5 for a sum of money and damages,
docketed as Civil Case No. 98-1342.
Petitioner filed a motion to dismiss 6 on the ground that the complaint failed to state a
cause of action. The trial court denied the motion in its first assailed Order, to wit:
WHEREFORE, foregoing considered, defendants motion to dismiss is hereby DENIED.
Pursuant to Section 4 of Rule 16, 1997 Rules of Civil Procedure, defendant-movant shall
file its answer within the balance of the period prescribed by Rule 11, same Rules, to
which defendant was entitled at the time of serving its motion, but not less than five (5)
days in any event, computed from receipt of this order.
SO ORDERED.7
Petitioners motion for reconsideration was likewise denied in the trial courts second
impugned Order, thus:
WHEREFORE, foregoing considered, defendants Motion for Reconsideration is hereby
DENIED.
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
The filing of the last pleading and the consequent joinder of issues has ripened this case
for pre-trial which is hereby set
Let notices of pre-trial be sent to the parties and their counsel.
SO ORDERED.8
Respondent subsequently filed a motion to amend its complaint followed by its amended
complaint. Petitioner, on the other hand, filed a motion to suspend proceedings. The trial
court granted respondents, but denied petitioners motion, to wit:
WHEREFORE, in view of the foregoing:
1) Plaintiffs Urgent Motion to Amend Complaint With Leave of Court is hereby
GRANTED. Accordingly, plaintiffs Amended Complaint filed on May 07, 1999 is
hereby admitted in lieu of the original complaint which is hereby deemed
withdrawn for all intents and purposes. Consequently, defendant is given fifteen
(15) days after receipt of this Order within which to file its Amended Answer to
plaintiffs Amended Complaint.
2) Defendants Motion to Suspend Proceedings is hereby DENIED.
SO ORDERED.9
Petitioner filed with the Court of Appeals a special civil action for certiorari assailing the
November 19, 1998 and March 24, 1999 Orders of the court a quo and praying for a
temporary restraining order and/or writ of preliminary injunction. The appellate court
decreed:
WHEREFORE, the Order dated 19 November 1998 issued by the Regional Trial Court of
Makati, Branch 58 in Civil Case No. 98-1342 entitled "E.B. Villarosa & Partners Co., Inc.
vs. Fluor Daniel, Inc. Philippines" denying petitioners Motion To Dismiss as well as its
order of 24 March 1999 denying reconsideration thereof, are both affirmed.
Accordingly, the temporary restraining order issued by the Ninth Division of this Court as
contained in Resolution dated 25 May 2000 is hereby lifted.
Costs against petitioner.
SO ORDERED.10
20

Hence, the instant petition, raising the following issues:
I.
Whether or not the Complaint sufficiently states a cause of action against FDIP
[PETITIONER] in light of the jurisprudential tests and guidelines laid down by this
Honorable Court.
II.
Whether or not the annexes attached to the Complaint should be considered in
determining whether or not VILLAROSAs [RESPONDENTS] Complaint sufficiently
stated a cause of action against FDIP in light of jurisprudential tests and guidelines laid
down by this Honorable Court.
III.
Whether or not the Court of Appeals, in refusing to consider the annexes to the
Complaint, erred in failing to appreciate the clear admission of VILLAROSA
[RESPONDENT] that payment of its billings was subject to the condition of timely receipt
of similar payments from FIL-ESTATE.
IV.
Whether or not the Court of Appeals, in refusing to consider the annexes to the
Complaint, failed to appreciate the significance of VILLAROSAs [RESPONDENTS]
failure to satisfy the required criteria to justify payment under its monthly progress
billings.11
Petitioner contends that the complaint utterly and miserably failed to state the operative
facts which would give rise to a cause of action against it. Petitioner insists that the
annexes attached to respondents complaint and other pleadings should be considered
in determining respondents cause of action, or lack of it, against petitioner. Petitioner
maintains that the Court of Appeals committed manifest error when it refused to consider
the annexes to the complaint, showing respondents admission that payment of its
billings was subject to the condition of timely receipt of similar payments from petitioner.
Respondent, however, counters that its complaint sufficiently stated a cause of action
against petitioner and that the annexes attached to the complaint bear no relevance, not
having been admitted by stipulation. Respondent asserts that the three elements of a
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
cause of action are all present in this case, namely: (i) legal right of respondent to
demand payment from petitioner; (ii) obligation of petitioner to pay respondent; and (iii)
failure of petitioner to pay respondent. Respondent stresses that petitioner cannot evade
its liability to pay by claiming that payments to respondent are subject to timely receipt of
similar payments from Fil-Estate.
The petition is impressed with merit.
Section 2, Rule 2 of the Rules of Civil Procedure provides:
SEC. 2. Cause of action, defined. A cause of action is the act or omission by which a
party violates a right of another.
The essential elements of a cause of action are as follows: 1) A right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; 2) An
obligation on the part of the defendant not to violate such right; and 3) An act or omission
on the part of the defendant in violation of the right of the plaintiff or constituting a breach
of the obligation of the defendant to the plaintiff for which the latter may maintain an
action for recovery of damages or other relief.12
It is, thus, only upon the occurrence of the last element that a cause of action arises,
giving the plaintiff a right to file an action in court for recovery of damages or other
relief.13 The test of sufficiency of facts alleged in the complaint as constituting a cause of
action is whether or not admitting the facts alleged, the court could render a valid verdict
in accordance with the prayer of the complaint. 14 That in determining sufficiency of cause
of action, the court takes into account only the material allegations of the complaint and
no other, is not a hard and fast rule. In some cases, the court considers the documents
attached to the complaint to truly determine sufficiency of cause of action. 15
We have ruled that a complaint should not be dismissed for insufficiency of cause of
action if it appears clearly from the complaint and its attachments that the plaintiff is
entitled to relief.16 The converse is also true. The complaint may be dismissed for lack of
cause of action if it is obvious from the complaint and its annexes that the plaintiff is not
entitled to any relief.
In this case, we note that annexed to the subject complaint are the three contracts
governing the rights and obligations between petitioner and respondent, namely the
contract for civil structure and architecture, the contract for plumbing and fire protection,
and the contract for millworks. Records show that recurring in each of the said contracts
is the provision that payment by petitioner shall be subject to its timely receipt of similar
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payments from Fil-Estate. The said provision, found in each of the aforesaid contracts, is
quoted below:
2.0 PRICING BASIS
The Contract Price set forth herein is firm for the duration of the Work and includes all
Contractors costs, expenses, overhead and profit for complete performance of the Work.
CIVIL PROCEDURE CASES Allegations in a Pleading (Rule 8)
WHEREFORE, the petition is GRANTED. The assailed Decision dated October 24, 2002
and the Resolution dated August 25, 2003 of the Court of Appeals in CA-G.R. SP No.
52897, which affirmed the November 19, 1998 and March 24, 1999 Orders of the
Regional Trial Court of Makati City, Branch 58 in Civil Case No. 98-1342,
are REVERSED AND SET ASIDE.
Costs against respondent.

xxxx SO ORDERED.

Payment of the billings shall be subject to the timely receipt of similar payments
from the client by Fluor Daniel. Any prolonged delay in payment by Fluor Daniel is
subject to a suspension of activities by EBV within five (5) work days after proper written
notice is provided by contractor to Fluor Daniel.17 (Emphasis supplied.)

On their face, the said attached contracts, which define and delimit the rights and
obligations of the parties, clearly require a specific condition before petitioner may be
held liable for payment. The complaint, however, failed to state that the said condition
had been fulfilled. Without the said condition having taken place, petitioner cannot be
said to have breached its obligation to pay.

We thus hold that respondents complaint, taken with the contracts annexed to it, failed
to pass the test of sufficiency of cause of action. Thus, the said complaint should have
been dismissed on the ground of failure to state a cause of action.

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