CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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
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.
1äw phï1.ñët
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. LegardaKoh 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 —
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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 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 Osmeña 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.
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,
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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)
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.
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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
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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 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
lâwphî1.ñèt
upon presentation 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 intereseslegales a
contardesde la fecha de la demanda — 24 de Octubre de 1955;
b) Condenando a la mismademandada que pague al de mindante la
suma de P600.00 enconcepto de honorarios de abogado; y
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c) Condenindoademas a la mismademandada que pague las
costasdeljuicio.
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 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
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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 LadislaoLachica 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 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
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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 that, when a claim has been
presented within said period, the action to enforce the claim may 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 presentation of the claim within three months
was a condition precedent to the filing of a court action. Since the obligee in
said case presented his claim seasonably although it did not file the action
within the same period, this Court ruled that the stipulation in the bond
concerning the limitation being ambiguous, the ambiguity should be resolved
against the surety, which drafted the agreement, and that the action could be
filed within the statutory period of prescription." 4
In the case at bar, it is not contended that Hodges had not presented his
claim within three (3) months from January 23, 1955. In fact, he had
repeatedly demanded from petitioner herein compliance with its
obligations under the surety bond in question, and, in reply to such
demands, petitioner asked extensions of time, on January 29, February
16, March 15, May 3, June 16, July 1 and 15, and October 15,
1955. 5 After thus securing extensions of time, even beyond three (3) months
from January 23, 1955, petitioner cannot plead the lapse of said period to bar
the present action.
The second assignment of error assails the finding of the Court of
Appeals to the effect that the petitioner is liable for the full amount of
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
surety bond — despite the fact that it exceeded the sum of P8,000.00
and hence, required, for its validity and binding effect as against
petitioner herein, the express approval and confirmation of its Manila
office, which were not secured — in view of petitioner's failure to deny
under oath the genuineness and due execution of said bond, copy of
which was attached to the complaint. It is true that, pursuant to section 8
of Rule 8 of the Rules of Court:
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.
We have however, held that:
... where a case has been tried in complete disregard of the rule
and the plaintiff having pleaded a document by copy, presents
oral evidence to prove the due execution of the document as well
as the agent's authority and no objections are made to the
defendant's evidence in refutation, the rule will be considered
waived. 6
The reason for such view was explained by this Court as follows:
Before entering upon a discussion of the questions raised by the
assignments of error, we may draw attention to a matter which
has not been mentioned either by counsel or by the court below,
but which, to prevent misunderstanding, should be briefly
explained: It is averred in the complaint that it is accompanied by
a copy of the contract between the parties (Exhibit A) which copy,
by the terms of the complaint, is made a part thereof. The copy is
not set forth in the bill of 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 Court of First Instance shows that a translation of
the contract was attached to the complaint and served upon the
defendant. As this translation may be considered a copy and as
the defendant failed to deny its authenticity under oath, it will
5

perhaps be said that under section 103 of the Code of Civil
Procedure the omission to so deny it constitutes an admission of
the genuineness and due execution of the document as well as of
the agent's authority to bind the defendant. (Merchant vs.
International Banking Corporation, 6 Phil. 314.)
In ordinary circumstances that would be true. But this
case appears to have been tried upon the theory that the
rule did not apply; at least, it was wholly overlooked or
disregarded by both parties. The plaintiffs at the
lâwphî1.ñèt
beginning of the trial presented a number of witnesses to
prove the due execution of the document as well as the
agent's authority; no objection were made to the
defendant's evidence in refutation; all no exceptions
taken; and the matter is not mentioned in the decision of
the trial court.
The object of the rule is '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.'
(Nery Lim-Chingco vs. Terariray, 5 Phil., at p. 124.)
The plaintiff may, of course, waive the rule and that is
what he must be 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
evidence in refutation; all this evidence is now competent
and the case must be decided thereupon. .... Nothing of
what has here been said is in conflict with former
decisions of this court; it will be found upon examination
that in all cases where the applicability of the rule has
been 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
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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.
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.
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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 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.
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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 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
7
 CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
to the amount of damage, are deemed admitted when not motion for reconsideration of the order of September 13, 1966, which
specifically denied. (Section 8, Rule 9,) The court may render deemed the case submitted for decision on the pleadings, or of the
judgment upon the pleadings if material averments in the decision rendered on January 9, 1967. In Santiago vs. Basilan Lumber
complaint are admitted. (Section 10, Rule 35; Baetamo vs. Company, G.R. No. L-15532, October 31, 1963 (9 SCRA 349), this Court
Amador, supra, Lichauco vs. Guash, 76 Phil. 5; Lati vs. Valmores, said:
G.R. No. L-6877, 30 March 1954.)
It appears that when the plaintiff moved to have the case decided
It becomes evident from all the above doctrines that a mere allegation of on the pleadings, the defendant interposed no objection and has
ignorance of the facts alleged in the complaint, is insufficient to raise an practically assented thereto. The defendant, therefore, is deemed
issue; the defendant must aver positively or state how it is that he is to have admitted the allegations of the complaint, so that there
ignorant of the facts so alleged. (Francisco, The Revised Rules of Court was no necessity for the plaintiff to submit evidence of his claim.
in the Philippines, Vol. I, p. 417, citing Wood vs. Staniels, 3 Code Rep.
152 and Vassalt vs. Austin, 32 Cal. 597.) PREMISES CONSIDERED, the judgment appealed from is affirmed, with
cost against defendant-appellant.
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
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
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, 19983 and March
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
24, 1999 Orders of the Regional Trial Court of Makati City, Branch 58, in
4
Civil Case No. 98-1342.
The pertinent facts, borne by the records, are as follows.
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 petitioner’s 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 complaint5 for a sum of
money and damages, docketed as Civil Case No. 98-1342.
Petitioner filed a motion to dismiss6 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, defendant’s 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.
9

SO ORDERED. 7 entitled "E.B. Villarosa& Partners Co., Inc. vs. Fluor Daniel, Inc. –
Petitioner’s motion for reconsideration was likewise denied in the trial
court’s second impugned Order, thus:
WHEREFORE, foregoing considered, defendant’s Motion for
Reconsideration is hereby DENIED.
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 respondent’s, but denied
petitioner’s motion, to wit:
WHEREFORE, in view of the foregoing:
1) Plaintiff’s Urgent Motion to Amend Complaint With Leave of
Court is hereby GRANTED. Accordingly, plaintiff’s 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 plaintiff’s Amended Complaint.
2) Defendant’s 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
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
Philippines" denying petitioner’s 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
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 VILLAROSA’s
[RESPONDENT’S] 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 VILLAROSA’s
[RESPONDENT’S] failure to satisfy the required criteria to justify payment
under its monthly progress billings.11
10

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 respondent’s complaint
and other pleadings should be considered in determining respondent’s
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 respondent’s 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 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
CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
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
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 Contractor’s costs, expenses, overhead and profit for
complete performance of the Work.
x xxx
…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.
11
 CIVIL PROCEDURE CASES – Allegations in a Pleading (Rule 8)
We thus hold that respondent’s 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.

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.

SO ORDERED.

12