Civpro_rule8_digests.docx

GO TONG ELECTRICAL SUPPLY CO., INC. vs. BPI FAMILY SAVINGS BANK, INC G.R. No. 187487 Action in the Pleadings; Actionable Documents; Specific Denial (Rule 8) Facts: Respondent filed a complaint5against petitioners Go Tong Electrical Supply Co., Inc. (Go Tong Electrical) and it’s President, George C. Go (Go; collectively petitioners), seeking that the latter be held jointly and severally liable to it for the payment of their loan obligation in the aggregate amount, inclusive of the principal sum, interests, and penalties, attorney’s fees, litigation expenses, and costs of suit. As alleged by respondent as early as 1996, Go Tong Electrical had applied for and was granted financial assistance by the then Bank of South East Asia (BSA). Subsequently, DBS Bank of the Philippines, Inc. (DBS) became the successor in interest of BSA. The application for financial assistance was renewed through a Credit Agreement. On even date, Go Tong Electrical, represented by Go, among others, obtained a loan from DBS for which Go Tong Electrical executed Promissory Note for the same amount in favor of DBS, maturing on February 5, 2000. Under the PN’s terms, Go Tong Electrical bound itself to pay a default penalty interest at the rate of one percent (1%) per month in addition to the current interest rate,11 as well as attorney’s fees equivalent to twenty-five percent (25%) of the amount sought to be recovered. As additional security, Go executed a Comprehensive Surety Agreement13 (CSA) covering any and all obligations undertaken by Go Tong Electrical, including the aforesaid loan. Upon default of petitioners, DBS – and later, its successor-in-interest, herein respondent – demanded payment from petitioners, but to no avail. Hence the respondent filed a complaint. In their Answer with Counterclaim18 (Answer), petitioners merely stated that they "specifically deny" the allegations under the complaint. Of particular note is their denial of the execution of the loan agreement, the PN, and the CSA "for being self-serving and pure conclusions intended to suit [respondent's] purposes." By way of special and affirmative defenses, petitioners argued, among others, that: (a) the real party-in-interest should be DBS and not respondent; (b) no demand was made upon them; and (c) Go cannot be held liable under the CSA since there was supposedly no solidarity of debtors. Petitioners further interposed counterclaims for the payment of moral and exemplary damages, as well as litigation and attorney's fees RTC ruled in favor of respondent, thereby ordering petitioners to jointly and severally pay the former: (a) the principal sum with legal interest to be reckoned from the filing of the Complaint; ( b) penalty interest of one percent (1 %) per month until the obligation is fully paid; and (c) attorney's Unconvinced, petitioners appealed to the CA. In a Decision, the CA sustained the RTC's ruling in toto, Petitioners filed a motion for reconsideration, which was, however, denied Ruling: The Court concurs with the CA Decision holding that the genuineness and due execution of the loan documents in this case were deemed admitted by petitioners under the parameters of Section 8, Rule 8 of the Rules which provides: SEC. 8. How to contest such documents. - When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding Section, the genuineness and due execution of the

instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. A reading of the Answer shows that petitioners failed to specifically deny the execution of the Credit Agreement, PN, and CSA under the auspices of the above-quoted rule. The mere statement in paragraph 4 of their Answer, i.e., that they "specifically deny" the pertinent allegations of the Complaint "for being self-serving and pure conclusions intended to suit plaintiffs purposes," does not constitute an effective specific denial as contemplated by law. Verily, a denial is not specific simply because it is so qualified by the defendant. Stated otherwise, a general denial does not become specific by the use of the word "specifically." Neither does it become so by the simple expedient of coupling the same with a broad conclusion of law that the allegations contested are "selfserving" or are intended "to suit plaintiff’s purposes." In Permanent Savings & Loan Bank v. Velarde47 (Permanent Savings & Loan Bank), citing the earlier case of Songco v. Sellner,48 the Court expounded on how to deny the genuineness and due execution of an actionable document, viz.:

This means that the defendant must declare under oath that he did not sign the document or that it is otherwise false or fabricated. Neither does the statement of the answer to the effect that the instrument was procured by fraudulent representation raise any issue as to its genuineness or due execution. On the contrary such a plea is an- admission both of the genuineness and due execution thereof, since it seeks to avoid the instrument upon a ground not affecting either.49

To add, Section 8, Rule 8 of the Rules further requires that the defendant "sets forth what he claims to be the facts," which requirement, likewise, remains absent from the Answer in this case.

Thus, with said pleading failing to comply with the "specific denial under oath" requirement under Section 8, Rule 8 of the Rules, the proper conclusion, as arrived at by the CA, is that petitioners had impliedly admitted the due execution and genuineness of the documents evidencing their loan obligation to respondent.

To this, case law enlightens that "[t]he admission of the genuineness and due execution of a document means that the party whose signature it bears admits that he voluntarily signed the document or it was signed by another for him and with his authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of the party relying upon it; that the document was delivered; and that any formalities required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him. Also, it effectively eliminated any defense relating to the authenticity and due execution of the document, e.g., that the document was spurious, counterfeit, or of different import on its face as the one executed by the parties; or that the signatures appearing thereon were forgeries; or that the signatures were unauthorized." 9 G.R. No. 129017

August 20, 2002

CONCEPCION V. VDA, DE DAFFON, petitioner, vs. THE HONORABLE COURT OF APPEALS, LOURDES OSMEÑA VDA, DE DAFFON, AILEEN DAFFON, JOSELITO DAFFON, JR., ANA VANESA DAFFON, LEILA DAFFON and SUZETTE DAFFON, respondents. YNARES-SANTIAGO, J.:

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There is no merit in the petition.

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It should be stressed that in the determination of whether a complaint fails to state a cause of action, only the statements in the complaint may be properly considered.9

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Moreover, a defendant who moves to dismiss the complaint on the ground of lack of cause of action hypothetically admits all the averments thereof.

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In the case at bar, the complaint sufficiently alleged that "defendant (i.e., petitioner herein) was married to Amado Quiros Daffon" and that "they begot an only son in Joselito Daffon."11 The complaint further alleged that "Joselito Daffon later got married to herein plaintiff Lourdes Osmeña and before the former died on October 25, 1990 he sired the six (6) children who are now plaintiffs with their mother."12

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This, to our mind, was sufficient allegation that Joselito Daffon was a legitimate son of the spouses Amado and Concepcion Daffon; and that plaintiffs (i.e., respondents herein) were likewise legitimate heirs of Joselito Daffon. Admitting the truth of these averments, there was, therefore, no need to inquire whether respondent minor children were duly acknowledged by the deceased Amado Daffon.

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RE PARTITION:

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Contrary to petitioner's contention, the fact that she repudiated the co-ownership between her and respondents did not deprive the trial court of jurisdiction to take cognizance of the action for partition.

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In a complaint for partition, the plaintiff seeks, first, a declaration that he is a co-owner of the subject properties; and second, the conveyance of his lawful shares.16 As the Court of Appeals correctly held, an action for partition is at once an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the properties involved.

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If the defendant asserts exclusive title over the property, the action for partition should not be dismissed. Rather, the court should resolve the case and if the plaintiff is unable to sustain his claimed status as a coowner, the court should dismiss the action, not because the wrong remedy was availed of, but because no basis exists for requiring the defendant to submit to partition. If, on the other hand, the court after trial should find the existence of co-ownership among the parties, the court may and should order the partition of the properties in the same action.17

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Petitioner was married to the late Amado Daffon and they had one son (Joselito)

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Joselito married Respondent Lourdes Osmena and they bore six children. Amado passed away on January 21, 1982 while his son Joselito died on October 25, 1990.

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On January 21, 1994, respondents Lourdes Osmeña Vda. De Daffon, together with her six minor children, instituted an action for partition against petitioner Concepcion Villamor Vda. de Daffon, before the RTC Danao City Br 25. Respondents alleged that: o

Amado left several real and personal properties which formed part of his conjugal partnership with petitioner.

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Joselito being a forced heir of Amado was entitled to at least one half of Amado's estate, consisting of his share in the said conjugal properties but the same were never partitioned.

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Petitioner filed a Motion to Dismiss on the grounds of (1) lack of jurisdiction over the subject matter of the case; (2) failure of the complaint to state a cause of action; and (3) waiver, abandonment and extinguishment of the obligation.2 o

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Thus, respondents prayed that the conjugal properties of Amado Daffon and petitioner be partitioned and that the one-half share of Amado be further partitioned between petitioner, on one hand, and the respondents as heirs of Joselito Daffon, on the other hand.

She argued that the trial court cannot take cognizance of the action for partition considering her claim of absolute ownership over the properties; and that respondents themselves admitted that petitioner has repudiated the co-ownership.

RTC: denied the Motion to Dismiss. Thereafter, Petitioner filed an MR which was also denied. Petitioner filed a petition for certiorari with the CA. CA: rendered the assailed decision denying due course and dismissing the petition for certiorari. Hence, the present case. I

NOTE: 2 PHASES OF PARTITION 

An action for partition is comprised of two phases: first, an order for partition which determines whether a co-ownership in fact exists, and whether partition is proper; and, second, a decision confirming the sketch or subdivision submitted by the parties or the commissioners appointed by the court, as the case may be.

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The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a co-ownership in fact exists, (i.e., not otherwise legally proscribed) and may be made by voluntary agreement of all the parties interested in the property. This phase may end with a declaration that plaintiff is not entitled to have a partition either because a co-ownership

ISSUE: WON petitioner’s contention, that her repudiation of the co-ownership deprived the TC to take cognizance of the partition case, is meritorious. HELD: No.

does not exist, or partition is legally prohibited. It may end, upon the other hand, with an adjudgment that a co-ownership does in truth exist, partition is proper in the premises and an accounting of rents and profits received by the defendant from the real estate in question is in order. 

In the latter case, the parties may, if they are able to agree, make partition among themselves by proper instruments of conveyance, and the court shall confirm the partition so agreed upon.18

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DISPOSITIVE: WHEREFORE, in view of the foregoing, the instant petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 35536 is AFFIRMED.

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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.

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Facts: 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 ½ 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 SegundinoEusebia 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 ¼ 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 DionisioToribio, 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, EusebiaToribio 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

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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. Issue: Whether or not the deeds of sale allegedly executed by the petitioners in favor of their brother DionisioToribio and appended to the respondents' answer are merely evidentiary in nature or the very foundation of their defense which must be denied under oath by the petitioner. Held: 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, DionisioToribio, 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 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 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 OlegarioToribio, his widow and minor children represented by their mother, are among the plaintiffspetitioners. 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. 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. 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.

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Facts: 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 ½ 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 SegundinoEusebia 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 ¼ 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 DionisioToribio, 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, EusebiaToribio 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. Issue: Whether or not the deeds of sale allegedly executed by the petitioners in favor of their brother DionisioToribio and appended to the respondents' answer are merely evidentiary in nature or the very foundation of their defense which must be denied under oath by the petitioner. Held: 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, DionisioToribio, 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

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and indispensable part of their defense to the allegation that the petitioners had never disposed of their property. 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 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 OlegarioToribio, his widow and minor children represented by their mother, are among the plaintiffspetitioners. 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. 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.

BASILIA BOUGH and GUSTAVUS BOUGH, plaintiffs-appellants, vs. MATILDE CANTIVEROS and PRESBITERA HANOPOL, defendants-appellees

FACTS:

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, 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

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 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

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 THE SUPREME COURT.

ISSUE: (In this case there was no specific denial of the genuineness and due execution of the documents by Matilde Cantiveros.) SO the issue is: Whether or not the failure to specifically deny the genuineness and the due execution of the instruments is fatal to the defense of Matilde Cantiveros.

HELD:

The Supreme Court held 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.

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 HIBBERD V. ROHDE DOCTRINE: • Rhiano: Meaning of admission, waived defenses & not waived o By the admission of the genuineness and due execution of an instrument, 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. o When a party is deemed to have admitted the genuineness and due execution of an actionable document, defenses that are implied from said admission are necessarily waived like the defenses of forgery of the document, lack of authority to execute the document, that the party charged signed the document in some other capacity than that alleged in the pleading, or that the was no delivery. (NOT waived: defense of want/illegality of consideration, exact time of delivery, payment/nonpayment, usury, and fraud) • Basically, the genuineness and execution of a written instrument or document set in a pleading with the original attached is deemed admitted UNLESS the adverse party under oath denies them. Failure to deny would be a WAIVER on the part of the adverse party on certain defenses, those that concern the genuineness or the execution. • HOWEVER, it is not a waiver to introduce any other DEFENSE ON THE MERITS which does not contradict the execution/genuineness of the instrument introduced in evidence. • In case: though there was no verified denial of the written instrument, the defense of illegality of consideration was still allowed to be raised. However, plaintiff (Hibberd) still won because there was no illegality of consideration. EMERGENCY RECIT: McMillian secured merchandise from Brand and Hibberd and sold it. Brand and Hibberd claimed it was only a deposit and therefore filed an estafa case. Rohde is the defense counsel of Mcmillian. Rhode was able to strike an agreement for Brand and Hibberd to withdraw the case, in turn he will execute a promissory note together with Mcmillian to pay the sum owed to them for the value of the merchandise. Rhode only gave a partial payment of 200 of the 1200, which prompted Hibberd to file suit on the Promissory Note. Only Rhode appeared and answered BUT did NOT enter a denial on the genuineness and the execution of the note and Raises only the Special Defense of Illegality of Consideration. Hibberd, on his part claims that Rohde’s special defense of illegality of consideration is cut off by section 103 of the Code of Civil Procedure (Sec 8 Rule 8 now). The SC ruled that Rohde may still interpose the defense despite the failure to enter a verified denial of the genuineness and due execution of the note set out in the complaint because Rule 103 cannot preclude a defendant from introducing any defense on the merits which does

not contradict the execution of the instrument introduced in evidence. However Hibberd still wins because there was no illegality of consideration. FACTS: • McMillian was in the retail liquor business and secured a stock of merchandise valued at P1,200 from Brand & Hibberd and sold it. • Brand and Hibberd argue it was only given as a DEPOSIT and filed a case of Estafa agains Mcmillian. • Mcmillian got an attorney, named Rhode for his defense in the estafa case. • According to the SC, it appears that Rhode 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. • The parties made an agreement: 1) IF Brand & Hibberd would withdraw the estaf complaint. 2) Rohde agreed to be a jointly and severally liable with Mcmillian to pay tothe firm of Brand and Hibberd, of the city of Baguio, 1,200 pesos in monthly installments of 100. • Rhode paid 200. • Not stated in case but it appears there were no further payments, hence this case, a suit on the Promissory Note. • Only Rhode appeared and answered BUT did NOT enter a denial on the genuineness and the execution of the note. o Raises only the Special Defense of Illegality of Consideration. • Hibberd argues 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. (Identical to Rule 8 Section 8 of 1997 Rules/Current Rules) • Trial Court o In-favor of Rohde, since the consideration of the promissory note was the compromise of a public offense. • Submitted for review with the SC ISSUE 1. WON the defense of illegality of consideration may still be raised despite the failure to enter a denial on the genuineness of the note. 2. (Not related but substantive part ) WON there was an illegal consideration HELD/RATIO: 1. YES, it may still be raised. • 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. • Rule 103 cannot preclude a defendant from introducing any defense on the merits which does not contradict the execution of the instrument introduced in evidence. o SECTION 103 (of the old rules) DOES NOT PROHIBIT SUCH A DEFENSE AS ILLEGALITY OF CONTRACT. To 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. • The Court has held before that Sec. 103 is not applicable to an indorser in a promissory note in a suit against the maker. It has been held that the admission of the genuineness and due execution of the instrument does not bar the defense of want of consideration. The only object of the rule was to enable a plaintiff to make out a prima facie, not a conclusive case. 2. No, there was no illegal consideration. • There is no charge that Brand & Hibberd file the criminal complaint with a view of extorting a settlement of their claim against McMillian. There can be no doubt that the agreement which resulted in the execution of the note and withdrawal of

the case was entered into by Brand & Hibberd with an eye to the satisfaction of their pecuniary claim against McMillian. • 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 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.

PERFECTO JABALDE, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK, defendant-appellee. Facts: -

Plaintiff-appellant deposited a sum of money with defendant-appellee Philippine National Bank (PNB)

-

Plaintiff filed this complaint, seeking the recovery of said amount (P10,000. First P5,000 – Phil currency; Second 5000 – Phil currency and Japanese military notes) o

-

Basis: a passbook

Defendant filed an answer which was not under oath and admitting the making of the foregoing deposits, but denying the dates indicated in the passbook, o

PNB alleged that there were discrepancies in said passbook, likely due to tampering on the part of plaintiff

Issue: W/N defendant PNB'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 Held: NO -

General rule: such failure is tantamount to such an admission

-

But this rule is inapplicable in the case at bar because the plaintiff submitted evidence indicating what was allegedly the dates of deposit, but did not raise an objection when witnesses testified on different dates of deposit

-

By this omission, the plaintiff waived the defendant's failure to deny under oath the genuineness and execution of the passbook entries

-

Hence, PNB may interpose a defense assailing the genuineness and due execution of the passbook entries

-

5. Jabalde vs PNBFacts:Jabalde seeks for reimbursement allegedly deposited by him with PNBon 1941 and 1943 in mixed Philippines currency and Japanese militarynoted. Defendants answer was not under oath, it admits making thedeposit but denies the dates on it. PNB allege that 1944 were the trueand actual dates of deposits and that the plaintiff altered themmaliciously and these were all military noted. Defendant presentedexpert hand writing witness. The case was dismissed in favor of PNBJabalde averred that if there was tampering, it should be attributed tothe personnel of PNB.Issue: Whether the Banks failure to deny under oath the entries in the

-

-

passbook as “copied” in the complaint constitutes an admission and dueexecution of the document.Ruling:Such rule cannot apply to the present case because plaintiff offered noobjection during the trial to the testimonies of defendants witnesses anddocumentary evidence showing different dates of deposit. 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.

Mahilum vs Sps Ilano RUBY RUTH S. SERRANO MAHILUM vs. SPOUSES EDILBERTO ILANO and LOURDES ILANO G.R. No. 197923, June 22, 2015 FACTS: Petitioner Ruby Ruth S. Serrano Mahilum is the registered owner of a parcel of land covered by a transfer certificate of title. She entrusted the original owner’s duplicate copy of TCT to Teresa Perez (Perez) – a purported real estate broker – who claimed that she can assist petitioner in obtaining a loan with the TCT as collateral. After several months, petitioner demanded the return of the title, but Perez failed to produce the same; after much prodding, Perez admitted that the title was lost. In June 2004, petitioner executed an Affidavit of Loss and caused the same to be annotated upon the original registry copy of the transfer certificate of title. Petitioner was informed however that her TCT was not lost, but that it was presented to the registry by respondents, spouses Edilberto and Lourdes Ilano, who claimed that the property covered by the title was sold to them. The respondents however did not register the alleged sale. Petitioner confronted respondents, who showed her a notarized Agreement with right of repurchase and an unnotarized and undated Deed of Absolute Sale on which documents petitioner’s purported signatures were affixed. Petitioner denied having executed said document and claimed that her purported signatures therein were in fact falsified and forged. She demanded the return of her TCT which respondents refused. Thereafter the petitioner filed an action for “annulment of agreement and deed of absolute sale. On appeal the CA dismissed the petitioner’s case for failure to state a cause of action – for failure of the complaint to allege that respondents were purchasers in bad faith.

Indeed, if the agreement and deed of sale are forgeries, then they are a nullity and convey no title.38 The underlying principle is that no one can give what one does not have. Nemo dat quod non habet. In this case, it is petitioner who must be protected under the Torrens system – as the registered owner of the subject property. “A certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. The real puipose of the Torrens system of land registration is to quiet title to land and put a stop forever to any question as to the legality of the title.” RUBY RUTH S. SERRANO MAHILUM vs. SPOUSES EDILBERTO ILANO and LOURDES ILANO G.R. No. 197923, June 22, 2015 DEL CASTILLO, J. FACTS: Petitioner Ruby Ruth S. Serrano Mahilum is the registered owner of a parcel of land covered by a transfer certificate of title. She entrusted the original owner's duplicate copy of TCT to Teresa Perez (Perez) - a purported real estate broker - who claimed that she can assist petitioner in obtaining a loan with the TCT as collateral. After several months, petitioner demanded the return of the title, but Perez failed to produce the same; after much prodding, Perez admitted that the title was lost. In June 2004, petitioner executed an Affidavit of Loss and caused the same to be annotated upon the original registry copy of the transfer certificate of title. Petitioner was informed however that her TCT was not lost, but that it was presented to the registry by respondents, spouses Edilberto and Lourdes Ilano, who claimed that the property covered by the title was sold to them. The respondents however did not register the alleged sale. Petitioner confronted respondents, who showed her a notarized Agreement with right of repurchase and an unnotarized and undated Deed of Absolute Sale on which documents petitioner's purported signatures were affixed. Petitioner denied having executed said document and claimed that her purported signatures therein were in fact falsified and forged. She demanded the return of her TCT which respondents refused. Thereafter the petitioner filed an action for "annulment of agreement and deed of absolute sale. On appeal the CA dismissed the petitioner’s case for failure to state a cause of action – for failure of the complaint to allege that respondents were purchasers in bad faith. Hence this petition.

Hence this petition. ISSUE: Whether or not respondents can interpose the defense of being innocent purchasers for value HELD: NO. Since a new title was never issued in respondents’ favor and, instead, title remained in petitioner’s name, the former never came within the coverage and protection of the Torrens system, where the issue of good or bad faith becomes relevant. Since respondents never acquired a new certificate of title in their name, the issue of their good or bad faith which is central in an annulment of title case is of no consequence; petitioner’s case is for annulment of the Agreement and Deed of Absolute Sale, and not one to annul title since the certificate of title is still in her name. The jurisprudential bases for the CA’s pronouncement that there is a failure to state a cause of action if there is no allegation in the complaint that respondents were purchasers in bad faith – Castillo v. Heirs of Vicente Madrigal36 and Heirs of Julian Tiro v. Philippine Estates Corporation – involved complaints for annulment of new titles issued to the buyers; they cannot apply to petitioner’s case where title remains in her name. Petitioner’s case is to annul the agreement and deed of sale based on the allegation that they are forgeries, and that respondents were parties to the fraud; since no new title was issued in respondents’ favor, there is no new title to annul.

ISSUE: Whether or not respondents can interpose the defense of being innocent purchasers for value HELD: NO. Since a new title was never issued in respondents' favor and, instead, title remained in petitioner's name, the former never came within the coverage and protection of the Torrens system, where the issue of good or bad faith becomes relevant. Since respondents never acquired a new certificate of title in their name, the issue of their good or bad faith which is central in an annulment of title case is of no consequence; petitioner's case is for annulment of the Agreement and Deed of Absolute Sale, and not one to annul title since the certificate of title is still in her name. The jurisprudential bases for the CA's pronouncement that there is a failure to state a cause of action if there is no allegation in the complaint that respondents were purchasers in bad faith Castillo v. Heirs of Vicente Madrigal36 and Heirs of Julian Tiro v. Philippine Estates Corporation - involved complaints for annulment of new titles issued to the buyers; they cannot apply to petitioner's case where title remains in her name. Petitioner's case is to annul the agreement and deed of sale based on the allegation that they are forgeries, and that respondents were parties to the fraud; since no new title was issued in respondents' favor, there is no new title to annul.

Indeed, if the agreement and deed of sale are forgeries, then they are a nullity and convey no title.38 The underlying principle is that no one can give what one does not have. Nemo dat quod non habet. In this case, it is petitioner who must be protected under the Torrens system as the registered owner of the subject property. "A certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. The real puipose of the Torrens system of land registration is to quiet title to land and put a stop forever to any question as to the legality of the title."

G.R. No. 169548

March 15, 2010

TITAN CONSTRUCTION CORPORATION, Petitioner, vs. MANUEL A. DAVID, SR. and MARTHA S. DAVID, Respondents. FACTS: -

Manuel and Martha David were spouses who owned lots registered in the latter's name. The spouses separated de facto

-

Manuel discovered that Martha had sold the property to petitioner Titan Construction Corp. for P1.5M through a Deed of Sale

-

Manuel filed a complaint for annulment of contract and reconveyance against petitioner Titan Construction before the RTC-QC o

-

Titan’s counterclaim stated that it was a buyer in good faith and for value because it relied on a Special Power of Attorney (SPA) signed by Manuel which authorized Maria to dispose of the property on behalf of the spouses o

-

The SPA authorizing Maria to dispose of the property was void ab initio

CA: affirmed the lower court's decision o

-

Titan prayed for the dismissal of the complaint

RTC: declared the deed of sale void ab initio o

-

The ground was, the sale executed by Martha in favor of titan was made without his knowledge/consent

MfR denied

Hence the instant PfRC R45 o

Titan contended that the lower court erred in declaring the SPA (and in turn, the deed of sale) void ab initio 

Ground: Rule 8, which states that when an action/defense is based on a written instrument or document, the genuineness and due execution thereof is deemed admitted unless the adverse party specifically denies them under oath



Manuel filed a reply alleging that the SPA was a forgery, but the same was not made under oath



Therefore, Manuel cannot assail the genuineness and due execution of the SPA

ISSUE: Whether the lower court erred in declaring the deed of sale as void ab initio RULING:

NO!!! It is true that the reply filed by Manuel alleging that the special power of attorney is a forgery was not made under oath. However, the complaint, which was verified by Manuel under oath, alleged that the sale of the subject property executed by his wife, Martha, in favor of Titan was without his knowledge, consent, and approval, express or implied; and that there is nothing on the face of the deed of sale that would show that he gave his consent thereto. While Section 8, Rule 8 is mandatory, it 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 assists the parties in obtaining a speedy, inexpensive, and most important, a just determination of the disputed issues. CIVIL LAW TITAN CONSTRUCTION CORPORATION v. SPS. MANUEL DAVID, SR. and MARTHA DAVID G.R. No. 169548, March 15, 2010

SUBJECT/ TOPIC: Conjugal Partnership Property THESIS STATEMENT: Titan Construction Corporation filed a Petition for Review on Certiorari assailing the Decision of the Court of Appeals which affirmed with modification the Decision of the Regional Trial Court which invalidate both the Deed of Sale and Transfer Certificate of Title, ordered to reconvey the property, directed the Quezon City Register of Deeds to issue a new title, and ordered to pay damages, all in favor of Sps. Manuel and Martha David and its Resolution denying Motion for Reconsideration. FACTS: Manuel and Martha David were married on March 25, 1957 and sometime in 1970, the spouses acquired a parcel of land (602 sq. m.) at White Plains, Quezon City and the same was registered in the name of the wife, Martha David and covered by Transfer Certificate of Title (TCT) No. 156043 which was registered by the Register of Deeds of Quezon City. The spouses separated de facto and no longer communicated with each other in 1976. Later in 1995, the husband, Manuel David discovered that Martha had sold a property to Titan Construction Corp. through a Deed of Sale for Php 1,500,000.00 which transferred the title in the name of Titan, cancelling and replacing the TCT No. 156043 to TCT No. 130129. Aggrieved, Manuel filed a Complaint for Annulment of Contract and Reconveyance against Titan before the RTC of Quezon City alleging that said Deed of Sale was void for the contract was executed without his knowledge and consent. Hence, he prayed that both the Deed of Sale and TCT No. 130129 be invalidated, property be reconveyed to the spouses, and a new title be issued in the spouses’ names. Through the Answer with Counterclaim, Titan prayed for the dismissal of the complaint insisting that it bought the property in good faith and that the Special Power of Attorney (SPA) which was allegedly signed by Manuel authorized Martha to dispose the property on behalf of the spouses. However, in Manuel’s unverified Reply, he claimed that the SPA was spurious and the signature purporting to be his was a forgery. Hence, Martha had no authority to dispose the property on behalf of the spouses as claimed by Titan. The RTC ruled

in favor of Manuel stating that since the spouses purchased the property with conjugal funds during their marriage, the property is conjugal by nature and even if the title was registered in the name of Martha, it didn’t negate that the property is conjugal. Titan also failed to rebut the expert’s testimony stating that the signature was not genuine and that even though SPA was notarized it was doubtful for it didn’t contain Manuel’s residence certificate and not presented for registration with the QC Register of Deeds in violation of Sec 64 of P.D. No. 1529. Lastly, the RTC noted that Titan should have put on notice the SPA’s doubtful veracity with its transaction with Martha. With these in mind, the RTC granted the invalidation of both the Deed of Sale and the TCT No. 130129, the reconveyance of the property to the spouses, the issuance of a new title in the name of the spouses directing the QC Register of Deeds, and compelling Titan to pay Php 200,000.00 plus Php 1,000.00 per appearance as attorney’s fees, and Php 50,000.00 as cost of suit. The CA affirmed the decision of the RTC with modification deleting the award of attorney’s fees and cost of suit. Hence, this Petition for Review on Certiorari.

Certificate of Manuel and not presented for registration with the QC Register of Deeds violating the Sec. 64 of P.D. No. 1592. It is also noted by the Court that Titan withdraws its Motion for Re-examination of Another Document/ Handwriting Expert because the PNP and NBI might come out with two conflicting opinions and conclusions and may cause a waste of time and resources. However, the Court ruled that factual findings of the trial court when affirmed by CA are binding and conclusive and will not be reviewed on appeal and that only errors of law are reviewable by the SC and not errors of fact. Hence, the Court will not depart on the rulings of the RTC as affirmed by the CA. 4.

NO. The failure of Manuel to specifically deny the genuineness and due execution of the notarized SPA is NOT an implied agreement to the veracity of the document. Although, Manuel failed to specifically deny the genuineness and due execution of the notarized SPA in his Reply and not made under oath, his Complaint, under oath, that a contract of a Deed of Sale between Martha and Titan executed without his consent, and approval , express or implied, amounts great weight. The Court concurred with the ruling of the CA that as Titan did not object to the presentation of Manuel’s witness, Atty. Paqui, nor object to the introduction and admission of evidence questioning the genuineness and due execution of the document, Titan had been deemed to waived its protection provided by Rule 8, Sec. 7 and 8 of the Rules of Court. In addition, although, a notarized document has a prima facie presumption of authenticity and due execution unless with clear and convincing evidence that will proved otherwise, in this case, where Manuel’s Community Tax Certificate was absent while Martha’s are complete, supports Manuel’s claim that the signature purportedly his is a forgery, therefore, the Court concludes that this notarization has defects.

5.

NO. Titan CANNOT claim belatedly that the RTC should have ordered Martha to reimburse. The Court ruled that it cannot order the return of the amounts paid by Titan to Martha for ordering such would deny due process to Martha. The party must be duly apprised of a claim against her before judgment maybe rendered. If the Court ruled to hold Martha liable to Titan for the reimbursement of money paid for the property, without any claim being filed against her by Titan, would violate her right to due process. However, The Court is not prohibiting Titan to file an appropriate case against Martha before the proper court.

ISSUE/S: 1. 2. 3. 4. 5.

WON the property was Martha’s exclusive property. WON the Deed of Sale in valid even without Manuel’s consent. WON the Special Power of Attorney (SPA) allegedly signed by Manuel is spurious and void. WON the failure of Manuel to specifically deny the genuineness and due execution of the notarized SPA as his implied agreement to the veracity of the document. WON Titan can claim belatedly that the RTC should have ordered Martha to reimburse.

HELD: 1.

2.

3.

NO. The property is NOT the exclusive property of Martha alone but part of the conjugal partnership property of the spouses. Since the marriage of the spouses is in 1957, the marriage is governed by the Civil Code of the Philippines which provides in Art. 160 that “All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife” and in Art. 153 which defines a conjugal property to be those that are “acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses.” Hence, even if Manuel failed to present any proof of his income in 1970, assuming that Manuel could not have the financial capacity to contribute to the purchase as claimed by Titan, the court ruled that Manuel was not required to prove that the said property was acquired with conjugal funds (Sps. Castro v. Miat). Since the spouses bought the property during their marriage, the presumption can be applied to the case that if said property, when purchased during the marriage, was part of a conjugal partnership as provided by Art. 160 and 153. Therefore, the property was owned not only by Martha but the property was also owned by her husband, Manuel.

Petition DENIED. The Decision of the RTC as affirmed by the CA with modification and its Resolution to deny Motion for Reconsideration are AFFIRMED. Submitted by: Jenova Jireh C. Arsua

NO. The Deed of Sale is NOT valid without Manuel’s consent. Since the property is part of the spouses’ conjugal property, the Deed of Sale required both the consent of the spouses. The Civil Code provides in Art. 165, husband is the administrator of the conjugal partnership and also in Art. 172 provides that the wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by law. Therefore, the Deed of Sale required also the consent of Manuel not only Martha’s.

JD1-M1

YES. The Special Power of Attorney allegedly signed by Manuel was spurious and void. Titan claimed that the RTC gave an undue weight to the testimony of Manuel’s witness, Atty. Desiderio Paqui, which states that the signature found on the SPA was not genuine. The Court, however, ruled that the ruling of the RTC was not only based on the testimony of the expert witness of Manuel but also Manuel’s categorical denial of signing the SPA. The Court concur to the findings of the RTC that said SPA was dubious for the SPA does not contain the Residence

THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), Petitioners, vs. DEL MONTE MOTOR WORKS, INC., NARCISO G. MORALES, AND SPOUSE, Respondents.

G.R. No. 143338 July 29, 2005

Facts:

This is a petition for review on certiorari of the Decision2 of the Court of Appeals in CA-G.R. CV No. 16886 entitled, "The Consolidated Bank & Trust Corporation (SOLIDBANK) v. Del Monte Motor Works, Inc., Narciso O. Morales and Spouse" promulgated on 25 November 1999 and of the Resolution of the appellate court dated 11 May 2000 denying petitioner’s motion for reconsideration. Said decision and resolution affirmed the order dated 28 December 1987 of the Regional Trial Court (RTC), Branch 27, Manila.

ISSUE: WON CA gravely erred when it upheld the exclusion of exhibit ‘E’, the second original copy of the promissory note, despite the fact that the original of exhibit ‘A’ (xerox copy of the duplicate original of the promissory note) was actually in the possession of private respondents, thus warranting the admission of secondary evidence.

In a promissory note, respondent Del Monte Motor Works, Inc. (respondent corporation) and Morales bound themselves jointly and severally to pay petitioner for the P1M granted to them by the latter. Respondent defaulted and failed to pay.

Respondents were able to generally and specifically deny under oath the genuineness and due execution of the promissory note, thus:



RTC  Petitioner filed before the RTC of Manila a complaint for recovery of sum of money against respondents, impleading the spouse of respondent Narciso O. Morales (respondent Morales) in order to bind their conjugal partnership of gains.  Petitioner filed an Ex-Parte Motion to Declare the Defendants in Default  opposed by the defendants upon the ground that they were never served with copies of the summons and of petitioner’s complaint.  Respondent corporation filed a manifestation attaching `its answer to petitioner’s complaint which states the following:  TC - denied petitioner’s motion to declare respondents in default and admitted their respective answers  Respondents filed their respective defenses independently  During the trial on the merits of this case, petitioner presented as its sole witness, Liberato A. Lavarino (Lavarino), then the manager of its Collection Department.  Petitioner made its formal offer of evidence. However, as the original copy of Exhibit "A" (the promissory note) could no longer be found, petitioner instead sought the admission of the duplicate original of the promissory note which was identified and marked as Exhibit "E."  TC initially admitted into evidence Exhibit "E" and granted respondents motion that they be allowed to amend their respective answers to conform with this new evidence.  Respondent corporation filed a manifestation and motion for reconsideration of the trial court’s order admitting into evidence petitioner’s Exhibit "E." Respondent corporation claims that Exhibit "E" should not have been admitted as it was immaterial, irrelevant, was not properly identified and hearsay evidence. Respondent corporation insists that Exhibit "E" was not properly identified by Lavarino who testified that he had nothing to do in the preparation and execution of petitioner’s exhibits, one of which was Exhibit "E." Further, as there were markings in Exhibit "A" which were not contained in Exhibit "E," the latter could not possibly be considered an original copy of Exhibit "A." Lastly, respondent corporation claims that the exhibit in question had no bearing on the complaint as Lavarino admitted that Exhibit "E" was not the original of Exhibit "A" which was the foundation of the complaint and upon which respondent corporation based its own answer.  Respondent Morales similarly filed a manifestation with motion to reconsider order admitting as evidence Exhibit "E” insisting that the due execution and genuineness of the promissory note were NOT established as far as he was concerned.  TC - granted respondents’ motions for reconsideration with regard to the admission of Exhibit "E”.  Petitioners’ MFR –denied  Respondents separately filed their motions to dismiss on the similar ground that with the exclusion of Exhibits "A" and "E," petitioner no longer possessed any proof of respondents’ alleged indebtedness.  TC – dismissed the case  CA – affirmed TC –MFR denied

HELD: YES.

There can be no dispute to the fact that the allegations in the answer (Record, p. 20, 26-27), of both defendants, they denied generally and specifically under oath the genuineness and due execution of the promissory note and by way of special and affirmative defenses herein states that he (MORALES) never signed the promissory note attached to the complaint (Exh. A) in his personal and/or individual capacity. Moreover, what appears in the record (Record, p. 20) was an admission of paragraphs 1 & 2 but they deny generally and specifically the rest of the allegations. It would be considered that there is a sufficient compliance of the requirement of the law for specific denial. The pertinent portion of the Rules of Court on the matter provides: SEC. 8. How to contest such documents. – When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. Respondent’s denials do not constitute an effective specific denial as contemplated by law. In the early case ofSongco vs. Sellner,26 the Court expounded on how to deny the genuineness and due execution of an actionable document, viz.: . . . This means that the defendant must declare under oath that he did not sign the document or that it is otherwise false or fabricated. Neither does the statement of the answer to the effect that the instrument was procured by fraudulent representation raise any issue as to its genuineness or due execution. On the contrary such a plea is an admission both of the genuineness and due execution thereof, since it seeks to avoid the instrument upon a ground not affecting either.27 TC and CA erred in ruling that respondents were able to specifically deny the allegations in petitioner’s complaint in the manner specifically required by the rules. In effect, respondents had, to all intents and purposes, admitted the genuineness and due execution of the subject promissory note and recognized their obligation to petitioner. (sec 11 Rule 8) Significantly, and as discussed earlier, respondents failed to deny specifically the execution of the promissory note. This being the case, there was no need for petitioner to present the original of the promissory note in question. Their judicial admission with respect to the genuineness and execution of the promissory note sufficiently established their liability to petitioner regardless of the fact that petitioner failed to present the original of said note. REVERSED and SET ASIDE. Respondents are ordered to pay One Million Pesos to petitioner.

G.R. No. 158819

April 16, 2009

ANTERO LUISTRO, Petitioner, vs. COURT OF APPEALS and FIRST GAS POWER CORPORATION, Respondents.

o

 

RESPONDENT: MOTION TO DISMISS. GROUND: FAILURE TO STATE A CAUSE OF ACTION. o Respondent filed a Motion to Dismiss on the ground that petitioner failed to state a cause of action in his complaint.

  

RTC: DENIED MOTION TO DISMISS. M.R. DENIED. CA: RESPONDENT: CERTITIORARI. o Respondent filed a petition for certiorari before the CA.

 

CA: SET ASIDE RTC’S ORDERS. GROUND: PETITIONER FAILED TO STATE WITH PARTICULARITY THE CIRCUMSTACES CONSTITUTING THE ALLEGED FRAUD. M.R. DENIED. HENCE, THIS PETITION FOR REVIEW.

RULING: PETITIONER FAILED TO STATE WITH PARTICULARITY THE CIRCUMSTANCES CONSTITUTING THE ALLEGED FRAUD. Facts: 



First Gas Power Corporation (respondent) operates a gas-fired power generating facility by virtue of a Power Purchase Agreement (PPA) with the Manila Electric Company (Meralco). Respondent sells the electric power generated by its facility to Meralco. Respondent entered into a Substation Interconnection Agreement (SIA) with Meralco and the National Power Corporation (NPC). o The SIA required respondent to design, finance, construct, commission, and energize a 230-kilovolt electric power transmission line, approximately 25 km. in length from its power plant site in Sta. Rita, Batangas City to Calaca, Batangas. o Respondent’s obligation under the SIA entailed the acquisition of easements of right-of-way over affected lands located along the designated route of the transmission line.

Petitioner alleged that the powerful 230 kilovolts passing the transmission wire/line continuously endanger the lives, limbs, and properties of petitioner and his family.

 

ISSUES: Whether the complaint alleges fraud with particularity as required under Section 5, Rule 8 of the 1997 Rules of Civil Procedure. HELD: NO. Allegation of Fraud



 

  

Respondent entered into a Contract of Easement of Right-of-Way (Contract) with Antero Luistro (petitioner), owner of a parcel of land. o Under the Contract, petitioner granted respondent perpetual easement over a 100-sq. m. portion of his property for the erection of the transmission line tower and a 25-year easement over 2,453.60 sq. m. portion of the property for the right to pass overhead line cables. The Contract covered a total area of 2,553.60 sq. m. for a consideration of P88,608 to cover the easement fee, tower pole, guy occupancy fees and improvements. Respondent then commenced the construction of the transmission line tower and the stringing of overhead transmission line cables above petitioner’s property covered by the Contract. After a several months, petitioner’s counsel wrote a letter to respondent’s president asking for a temporary stoppage of all kinds of work within the vicinity of petitioner’s residential house pending settlement of petitioner’s grievance that the house and other improvements lay underneath the transmission wire/line being constructed and would endanger the life and health of the persons in the vicinity. Petitioner also referred the concerns to the NPC in a letter dated 19 April 1999. However, the NPC set aside petitioner’s concerns and considered the matter closed. RTC: PETITIONER: RESCISSION/AMENDMENT OF CONTRACT WITH DAMAGES. ALLEGATION: BY MEANS OF FRAUD, WAS ABLE TO CONVINCE HIM TO INTO THE CONTRACT. o Subsequently, petitioner filed a complaint for "Rescission/Amendment And Or Modification of Contract Of Easement With Damages," against respondent and First Balfour Beatty Realty, Inc. (defendants). o Petitioner alleged that respondent, by means of fraud and machinations of words, was able to convince him to enter into the Contract. o Petitioner alleged that while his house was supposed to be 20 to 25 meters away from the transmission wire/line, it turned out after the installation of Posts 97 and 98 that his house was only 7.23 meters directly underneath the transmission wire/line.



Section 5, Rule 8 of the 1997 Rules of Civil Procedure states:

Section 5. Fraud, mistake, condition of the mind. - In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity. Malice, intent, knowledge or other condition of the mind of a person may be averred generally. 

Again, the complaint falls short of the requirement that fraud must be stated with particularity. The complaint merely states: 4. That sometime in the year of 1997, the consolidator-facilitator of the Defendants FGPC and Balfour by means of fraud and machinations of words were able to convince[] the plaintiff to enter into ‘CONTRACT OF EASEMENT OF RIGHT OF WAY’ wherein the latter granted in favor of the defendant FGPC the right to erect [its] Tower No. 98 on the land of the plaintiff situated at Barangay Maigsing Dahilig, Lemery 4209 Batangas including the right to Install Transmission Lines over a portion of the same property for a consideration therein stated, a xerox copy of said contract is hereto attached as [] ANNEXES "A" up to "A-4" of the complaint; 5. That the said contract, (Annexes "A" up to "A-4") was entered into by the plaintiff under the "MISREPRESENTATION, PROMISES, FALSE AND FRAUDULENT ASSURANCES AND TRICKS" of the defendants[.]



Not only did petitioner fail to allege with particularity the fraud allegedly committed by respondent. A review of the Contract shows that its contents were explained to petitioner. The Contract states:

Bago ko/namin nilagdaan ang kasulatang ito ay ipinaliwanag muna sa akin/amin sa wikang Tagalog/ o sa wikang aking/aming naiintindihan. Ang nilalaman nito’y lubusan ko/naming nauunawaan kaya’t lumagda kami rito ng kusang loob, walang sinumang pumilit o tumakot sa akin/amin.



There is clearly no basis for the allegation that petitioner only signed the Contract because of fraud perpetrated by respondent.

 Sufficiency of Cause of Action      



In a motion to dismiss based on lack of cause of action, the question posed to the court for determination is the sufficiency of the allegation of facts made in the complaint to constitute a cause of action. To sustain a motion to dismiss for lack of cause of action, it must be shown that the claim for relief does not exist, rather than that a claim has been defectively stated, or is ambiguous, indefinite or uncertain. In this case, we agree with the Court of Appeals that the complaint lacked sufficient cause of action. The complaint was based on the alleged breach of the Contract and violation of the undertaking that petitioner’s house was supposed to be 20 to 25 meters away from the transmission wire/line. Petitioner alleged in the complaint that contrary to what had been "assured and promised," his house turned out to be only 7.23 meters directly underneath the transmission wire/line. As pointed out by the Court of Appeals, there was no such undertaking in the Contract. o The Contract only granted respondent a perpetual easement over 100 sq. m. portion of petitioner’s property, as well as 25 years easement of right-of-way over the property or portions thereof, as indicated in the sketch plan, for the installation and maintenance of wooden poles, steel towers, tower footings, and electric and guy wires. Therefore, the alleged right of petitioner, which respondent supposed to have violated, did not exist in the Contract.

G.R. No. L-61523 July 31, 1986 ANTAM CONSOLIDATED, INC., TAMBUNTING TRADING CORPORATION and AURORA CONSOLIDATED SECURITIES and INVESTMENT CORPORATION, petitioners, vs. THE COURT OF APPEALS, THE HONORABLE MAXIMIANO C. ASUNCION (Court of First Instance of Laguna, Branch II [Sta. Cruz]) and STOKELY VAN CAMP, INC., respondents. This is a Petition for certiorari and prohibition.



 

The trial court ordered the issuance of a writ of attachment in favor of the respondent upon the latter's deposit of a bond. The respondent filed a motion for reconsideration to reduce the attachment bond. Attached to this motion is an affidavit by the assistant attorney of the respondent's counsel stating that he has verified with the records of Comphil and the SEC the facts he alleged in the prayer for the attachment order. The petitioners filed a motion to dismiss the complaint on the ground that the respondent, being a foreign corporation not licensed to do business in the Philippines, has no personality to maintain the instant suit. The Trial Court ruled to reduce the attachment bond and denied the motion to dismiss by the petitioners. CA upheld the decision of TC. o The appellate court dismissed the petition stating that the respondent judge did not commit any grave abuse of discretion in deferring the petitioners' motion to dismiss because the said judge is not yet satisfied that he has the necessary facts which would permit him to make a judicious resolution.

ISSUE: Whether the trial court should not have issued the order of attachment and the appellate court should not have affirmed the same because the verification in support of the prayer for attachment is insufficient? RULING: No. We rule that the defect in the original verification was cured when Renato Calma, the counsel for respondents, subsequently executed an affidavit to the effect that the allegations he made in support of the prayer for attachment were verified by him from the records of Comphil and the Securities and Exchange Commission. Moreover, petitioner had the opportunity to oppose the issuance of the writ. As to the merit of the attachment order itself, we find that the allegations in the respondent's complaint satisfactorily justify the issuance of said order.

Steelcase, Inc. v. Design International Selections, Inc.

FACTS: 

 

Respondent Stokely Van Camp. Inc. (Stokely) filed a complaint against Banahaw Milling Corporation (Banahaw), Antam Consolidated, Inc., Tambunting Trading Corporation (Tambunting), Aurora Consolidated Securities and Investment Corporation, and United Coconut Oil Mills, Inc. (Unicom) for collection of sum of money. o In its complaint, Stokely alleged that Comphil undertook to sell and deliver and Capital City agreed to buy 500 long tons of crude coconut oil to be delivered in October/November 1978 at the c.i.f. price of US$0.30/1b. but Comphil failed to deliver the coconut oil so that Capital City covered its coconut oil needs in the open market at a price substantially in excess of the contract and sustained a loss. o On that transaction, Capital city sustained damages. After repeated demands from Comphil to pay the said amount, it still refuses to pay the same. Respondent Stokely further prayed that a writ of attachment be issued against any and all the properties of the petitioners in an amount sufficient to satisfy any lien of judgment that the respondent may obtain in its action.

G.R. No. 171995 April 18, 2012 Facts:

Steelcase is a foreign corporation engaged in office furniture manufacture, who distributes the same worldwide. To distribute in the Philippines, it entered into a dealership agreement with Design International Selections, Inc. (DISI) where it had the right to market, sell, distribute, install, and service its products to end-user customers within the Philippines. The relationship later on terminated, with DISI having an unpaid account to Steelcase. To recover the amount, Steelcase sued DISI in the Philippine Courts for a collection of sum of money with damages. As defense, DISI argues that Steelcase have no capacity to sue in the Philippines due to lack of license to engage in business in the Philippines, during the time it engaged business with DISI. Hence, this petition.

Issue: Whether or not Steelcase was doing business in the Philippines without a license.

Ruling: No. It is an unlicensed foreign corporation not doing business in the Philippines.

Both from the the Foreign Investments Act of 1991, and its Implementing Rules and Regulations, the appointment of a distributor in the Philippines is not sufficient to constitute "doing business" unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an independent entity which buys and distributes products, other than those of the foreign corporation, for its own name and its own account, the latter cannot be considered to be doing business in the Philippines. It should be kept in mind that the determination of whether a foreign corporation is doing business in the Philippines must be judged in light of the attendant circumstances. All things considered, it has been sufficiently demonstrated that DISI was an independent contractor which sold Steelcase products in its own name and for its own account. As a result, Steelcase cannot be considered to be doing business in the Philippines by its act of appointing a distributor as it falls under one of the exceptions under R.A. No. 7042.

STEELCASE, INC., Petitioner,

This is a petition for review on certiorari under Rule 45 assailing the March 31, 2005 Decision[1] of the Court of Appeals (CA) which affirmed the May 29, 2000 Order[2]of the Regional Trial Court, Branch 60, Makati City (RTC), dismissing the complaint for sum of money in Civil Case No. 99-122 entitled Steelcase, Inc. v. Design International Selections, Inc.

The Facts

Petitioner Steelcase, Inc. (Steelcase) is a foreign corporation existing under the laws of Michigan, United States of America (U.S.A.), and engaged in the manufacture of office furniture with dealers worldwide.[3] Respondent Design International Selections, Inc. (DISI) is a corporation existing under Philippine Laws and engaged in the furniture business, including the distribution of furniture.[4]

G.R. No. 171995 Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership agreement whereby Steelcase granted DISI the right to market, sell, distribute, install, and service its products to end-user customers within the Philippines. The business relationship continued smoothly until it was terminated sometime in Present: January 1999 after the agreement was breached with neither party admitting any fault.[5]

VELASCO, JR., J., Chairperson, On January 18, 1999, Steelcase filed a complaint[6] for sum of money against DISI alleging, among others, that DISI had an unpaid account of PERALTA, US$600,000.00. Steelcase prayed that DISI be ordered to pay actual or compensatory damages, exemplary damages, attorneys fees, and costs of suit. ABAD,

- versus -

MENDOZA, and

In its Answer with Compulsory Counterclaims[7] dated February 4, 1999, DISI sought the following: (1) the issuance of a temporary restraining PERLAS-BERNABE, JJ. and a writ of preliminary injunction to enjoin Steelcase from selling order (TRO) its products in the Philippines except through DISI; (2) the dismissal of the complaint for lack of merit; and (3) the payment of actual, moral and exemplary damages together with attorneys fees and expenses of litigation. DISI alleged that the complaint failed to state a cause of action and to contain the required allegations on Steelcases capacity to sue in the Philippines despite the fact that it (Steelcase) was doing business in the Philippines without the required license Promulgated: to do so. Consequently, it posited that the complaint should be dismissed because of Steelcases lack of legal capacity to sue in Philippine courts.

DESIGN INTERNATIONAL SELECTIONS, INC., Respondent.

April 18, 2012

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

DECISION

MENDOZA, J.:

On March 3, 1999, Steelcase filed its Motion to Admit Amended Complaint[8] which was granted by the RTC, through then Acting Presiding Judge Roberto C. Diokno, in its Order[9] dated April 26, 1999. However, Steelcase sought to further amend its complaint by filing a Motion to Admit Second Amended Complaint[10] on March 13, 1999.

In his Order[11] dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda dismissed the complaint, granted the TRO prayed for by DISI, set aside the April 26, 1999 Order of the RTC admitting the Amended Complaint, and denied Steelcases Motion to Admit Second Amended Complaint. The RTC stated that in requiring DISI to meet the Dealer Performance Expectation and in terminating the dealership agreement with DISI based on its failure to improve its performance in the areas of business planning,

organizational structure, operational effectiveness, and efficiency, Steelcase unwittingly revealed that it participated in the operations of DISI. It then concluded that Steelcase was doing business in the Philippines, as contemplated by Republic Act (R.A.) No. 7042 (The Foreign Investments Act of 1991), and since it did not have the license to do business in the country, it was barred from seeking redress from our courts until it obtained the requisite license to do so. Its determination was further bolstered by the appointment by Steelcase of a representative in the Philippines. Finally, despite a showing that DISI transacted with the local customers in its own name and for its own account, it was of the opinion that any doubt in the factual environment should be resolved in favor of a pronouncement that a foreign corporation was doing business in the Philippines, considering the twelve-year period that DISI had been distributing Steelcase products in the Philippines.

Steelcase moved for the reconsideration of the questioned Order but the motion was denied by the RTC in its May 29, 2000 Order.[12]

Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the November 15, 1999 and May 29, 2000 Orders of the RTC. On March 31, 2005, the CA rendered its Decision affirming the RTC orders, ruling that Steelcase was a foreign corporation doing or transacting business in the Philippines without a license. The CA stated that the following acts of Steelcase showed its intention to pursue and continue the conduct of its business in the Philippines: (1) sending a letter to Phinma, informing the latter that the distribution rights for its products would be established in the near future and directing other questions about orders for Steelcase products to Steelcase International; (2) cancelling orders from DISIs customers, particularly Visteon, Phils., Inc. (Visteon); (3) continuing to send its products to the Philippines through Modernform Group Company Limited (Modernform), as evidenced by an Ocean Bill of Lading; and (4) going beyond the mere appointment of DISI as a dealer by making several impositions on management and operations of DISI. Thus, the CA ruled that Steelcase was barred from access to our courts for being a foreign corporation doing business here without the requisite license to do so.

Steelcase filed a motion for reconsideration but it was denied by the CA in its Resolution dated March 23, 2006.[13]

Hence, this petition.

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENT WAS ESTOPPED FROM CHALLENGING STEELCASES LEGAL CAPACITY TO SUE, AS AN AFFIRMATIVE DEFENSE IN ITS ANSWER.

The issues to be resolved in this case are:

(1) Whether or not the Philippines without a license; and

Steelcase

is

doing

business

in

(2) Whether or not DISI is estopped from challenging the Steelcases legal capacity to sue.

The Courts Ruling The Court rules in favor of the petitioner.

Steelcase is an unlicensed foreign corporation NOT doing business in the Philippines

The Issues

Steelcase filed the present petition relying on the following grounds:

I THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FOUND THAT STEELCASE HAD BEEN DOING BUSINESS IN THE PHILIPPINES WITHOUT A LICENSE.

Anent the first issue, Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign Investments Act of 1991 (FIA) expressly states that the phrase doing business excludes the appointment by a foreign corporation of a local distributor domiciled in the Philippines which transacts business in its own name and for its own account. Steelcase claims that it was not doing business in the Philippines when it entered into a dealership agreement with DISI where the latter, acting as the formers appointed local distributor, transacted business in its own name and for its own account. Specifically, Steelcase contends that it was DISI that sold Steelcases furniture directly to the end-users or customers who, in turn, directly paid DISI for the furniture they bought. Steelcase further claims that DISI, as a non-exclusive dealer in the Philippines, had the right to market, sell, distribute and service Steelcase products in its own name and for its own

account. Hence, DISI was an independent distributor of Steelcase products, and not a mere agent or conduit of Steelcase.

On the other hand, DISI argues that it was appointed by Steelcase as the latters exclusive distributor of Steelcase products. DISI likewise asserts that it was not allowed by Steelcase to transact business in its own name and for its own account as Steelcase dictated the manner by which it was to conduct its business, including the management and solicitation of orders from customers, thereby assuming control of its operations. DISI further insists that Steelcase treated and considered DISI as a mere conduit, as evidenced by the fact that Steelcase itself directly sold its products to customers located in the Philippines who were classified as part of their global accounts. DISI cited other established circumstances which prove that Steelcase was doing business in the Philippines including the following: (1) the sale and delivery by Steelcase of furniture to Regus, a Philippine client, through Modernform, a Thai corporation allegedly controlled by Steelcase; (2) the imposition by Steelcase of certain requirements over the management and operations of DISI; (3) the representations made by Steven Husak as Country Manager of Steelcase; (4) the cancellation by Steelcase of orders placed by Philippine clients; and (5) the expression by Steelcase of its desire to maintain its business in the Philippines. Thus, Steelcase has no legal capacity to sue in Philippine Courts because it was doing business in the Philippines without a license to do so.

The Court agrees with the petitioner.

The rule that an unlicensed foreign corporations doing business in the Philippine do not have the capacity to sue before the local courts is well-established. Section 133 of the Corporation Code of the Philippines explicitly states:

deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account; (Emphases supplied)

This definition is supplemented by its Implementing Rules and Regulations, Rule I, Section 1(f) which elaborates on the meaning of the same phrase:

f. Doing business shall include soliciting orders, service contracts, opening offices, whether liaison offices or branches; appointing representatives or distributors, operating under full control of the foreign corporation, domiciled in the Philippines or who in any calendar year stay in the country for a period totalling one hundred eighty [180] days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the business organization.

The following acts shall not be deemed doing business in the Philippines: Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

The phrase doing business is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign Investments Act of 1991), to wit:

d) The phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase doing business shall not be

1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor;

2. Having a nominee director or officer to represent its interest in such corporation;

3. Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative's or distributor's own name and account;

4. The publication of a general advertisement through any print or broadcast media;

5. Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines;

6. Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;

result of these communications. Had Steelcase indeed been doing business in the Philippines, it would have readily accepted and serviced the orders from the abovementioned Philippine companies. Its decision to voluntarily cease to sell its products in the absence of a local distributor indicates its refusal to engage in activities which might be construed as doing business.

7. Collecting information in the Philippines; and

8. Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. (Emphases supplied)

From the preceding citations, the appointment of a distributor in the Philippines is not sufficient to constitute doing business unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an independent entity which buys and distributes products, other than those of the foreign corporation, for its own name and its own account, the latter cannot be considered to be doing business in the Philippines.[14] It should be kept in mind that the determination of whether a foreign corporation is doing business in the Philippines must be judged in light of the attendant circumstances.[15]

In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and managed by the spouses Leandro and Josephine Bantug.[16] In addition to Steelcase products, DISI also distributed products of other companies including carpet tiles, relocatable walls and theater settings.[17] The dealership agreement between Steelcase and DISI had been described by the owner himself as:

xxx basically a buy and sell arrangement whereby we would inform Steelcase of the volume of the products needed for a particular project and Steelcase would, in turn, give special quotations or discounts after considering the value of the entire package. In making the bid of the project, we would then add out profit margin over Steelcases prices.After the approval of the bid by the client, we would thereafter place the orders to Steelcase. The latter, upon our payment, would then ship the goods to the Philippines, with us shouldering the freight charges and taxes.[18] [Emphasis supplied]

This clearly belies DISIs assertion that it was a mere conduit through which Steelcase conducted its business in the country. From the preceding facts, the only reasonable conclusion that can be reached is that DISI was an independent contractor, distributing various products of Steelcase and of other companies, acting in its own name and for its own account. The CA, in finding Steelcase to be unlawfully engaged in business in the Philippines, took into consideration the delivery by Steelcase of a letter to Phinma informing the latter that the distribution rights for its products would be established in the near future, and also its cancellation of orders placed by Visteon. The foregoing acts were apparently misinterpreted by the CA. Instead of supporting the claim that Steelcase was doing business in the country, the said acts prove otherwise. It should be pointed out that no sale was concluded as a

Another point being raised by DISI is the delivery and sale of Steelcase products to a Philippine client by Modernform allegedly an agent of Steelcase. Basic is the rule in corporation law that a corporation has a separate and distinct personality from its stockholders and from other corporations with which it may be connected.[19] Thus, despite the admission by Steelcase that it owns 25% of Modernform, with the remaining 75% being owned and controlled by Thai stockholders,[20] it is grossly insufficient to justify piercing the veil of corporate fiction and declare that Modernform acted as the alter ego of Steelcase to enable it to improperly conduct business in the Philippines. The records are bereft of any evidence which might lend even a hint of credence to DISIs assertions. As such, Steelcase cannot be deemed to have been doing business in the Philippinesthrough Modernform.

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its distributors to prove that DISI was not functioning independently from Steelcase because the same imposed certain conditions pertaining to business planning, organizational structure, operational effectiveness and efficiency, and financial stability. It is actually logical to expect that Steelcase, being one of the major manufacturers of office systems furniture, would require its dealers to meet several conditions for the grant and continuation of a distributorship agreement. The imposition of minimum standards concerning sales, marketing, finance and operations is nothing more than an exercise of sound business practice to increase sales and maximize profits for the benefit of both Steelcase and its distributors. For as long as these requirements do not impinge on a distributors independence, then there is nothing wrong with placing reasonable expectations on them. All things considered, it has been sufficiently demonstrated that DISI was an independent contractor which sold Steelcase products in its own name and for its own account. As a result, Steelcase cannot be considered to be doing business in the Philippines by its act of appointing a distributor as it falls under one of the exceptions under R.A. No. 7042.

DI SI is es to pp ed fr o m ch all en gi ng St ee lc as es le ga

l ca pa cit y to su e

Regarding the second issue, Steelcase argues that assuming arguendo that it had been doing business in the Philippines without a license, DISI was nonetheless estopped from challenging Steelcases capacity to sue in the Philippines. Steelcase claims that since DISI was aware that it was doing business in the Philippines without a license and had benefited from such business, then DISI should be estopped from raising the defense that Steelcase lacks the capacity to sue in the Philippines by reason of its doing business without a license.

On the other hand, DISI argues that the doctrine of estoppel cannot give Steelcase the license to do business in the Philippines or permission to file suit in the Philippines. DISI claims that when Steelcase entered into a dealership agreement with DISI in 1986, it was not doing business in the Philippines. It was after such dealership was put in place that it started to do business without first obtaining the necessary license. Hence, estoppel cannot work against it. Moreover, DISI claims that it suffered as a result of Steelcases doing business and that it never benefited from the dealership and, as such, it cannot be estopped from raising the issue of lack of capacity to sue on the part of Steelcase.

The argument of Steelcase is meritorious.

If indeed Steelcase had been doing business in the Philippines without a license, DISI would nonetheless be estopped from challenging the formers legal capacity to sue.

It cannot be denied that DISI entered into a dealership agreement with Steelcase and profited from it for 12 years from 1987 until 1999. DISI admits that it complied with its obligations under the dealership agreement by exerting more effort and making substantial investments in the promotion of Steelcase products. It also claims that it was able to establish a very good reputation and goodwill for Steelcase and its products, resulting in the establishment and development of a strong market for Steelcase products in the Philippines. Because of this, DISI was very proud to be awarded the Steelcase International Performance Award for meeting sales objectives, satisfying customer needs, managing an effective company and making a profit.[21]

Unquestionably, entering into a dealership agreement with Steelcase charged DISI with the knowledge that Steelcase was not licensed to engage in business activities in the Philippines. This Court has carefully combed the records and found no proof that, from the inception of the dealership agreement in 1986 until September 1998, DISI even brought to Steelcases attention that it was improperly doing business in the Philippines without a license. It was only towards the latter part of 1998 that DISI deemed it necessary to inform Steelcase of the impropriety of the conduct of its business without the requisite Philippine license. It should, however, be noted that DISI only raised the issue of the absence of a license with Steelcase after it was informed that it owed the latter US$600,000.00 for the sale and delivery of its products under their special credit arrangement.

By acknowledging the corporate entity of Steelcase and entering into a dealership agreement with it and even benefiting from it, DISI is estopped from questioning Steelcases existence and capacity to sue. This is consistent with the Courts ruling in Communication Materials and Design, Inc. v. Court of Appeals[22] where it was written:

Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from raising this fact to bar ITEC from instituting this injunction case against it.

A foreign corporation doing business in the Philippines may sue in Philippine Courts although not authorized to do business here against a Philippine citizen or entity who had contracted with and benefited by said corporation. To put it in another way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic corporations. One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity: The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract.

The rule is deeply rooted in the timehonored axiom of Commodum ex injuria sua non habere debet no person ought to derive any advantage of his own wrong. This is as it should be for as mandated by law, every person must in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

Concededly, corporations act through agents, like directors and officers. Corporate dealings must be characterized by utmost good faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they are manned by sophisticated officers with tried management skills and legal experts with practiced eye on legal problems. Each party to a corporate transaction is expected to act with utmost candor and fairness and, thereby allow a reasonable proportion between benefits and expected burdens. This is a norm which should be observed where one or the other is a foreign entity venturing in a global market.

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By entering into the "Representative Agreement" with ITEC, petitioner is charged with knowledge that ITEC was not licensed to engage in business activities in the country, and is thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore or even presumptively take advantage of the same.[23] (Emphases supplied)

The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation[24] is likewise instructive:

Respondents unequivocal admission of the transaction which gave rise to the complaint establishes the applicability of estoppel against it. Rule 129, Section 4 of the Rules on Evidence provides that a written admission made by a party in the course of the proceedings in the same case does not require proof. We held in the case of Elayda v. Court of Appeals, that an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to him. Thus, our consistent pronouncement, as held in cases such as Merril Lynch Futures v. Court of Appeals, is apropos:

The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to foreign as well as to domestic corporations; one who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its existence and capacity. The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract . . .

All things considered, respondent can no longer invoke petitioners lack of capacity to sue in this jurisdiction. Considerations of fair play dictate that after having contracted and benefitted from its business transaction with Rimbunan, respondent should be barred from questioning the latters lack of license to transact business in the Philippines.

In the case of Antam Consolidated, Inc. v. CA, this Court noted that it is a common ploy of defaulting local companies which are sued by unlicensed foreign corporations not engaged in business in the Philippines to invoke the latters lack of capacity to sue. This practice of domestic corporations is particularly reprehensible considering that in requiring a license, the law never

intended to prevent foreign corporations from performing single or isolated acts in this country, or to favor domestic corporations who renege on their obligations to foreign firms unwary enough to engage in solitary transactions with them. Rather, the law was intended to bar foreign corporations from acquiring a domicile for the purpose of business without first taking the steps necessary to render them amenable to suits in the local courts. It was to prevent the foreign companies from enjoying the good while disregarding the bad.

As a matter of principle, this Court will not step in to shield defaulting local companies from the repercussions of their business dealings. While the doctrine of lack of capacity to sue based on failure to first acquire a local license may be resorted to in meritorious cases, it is not a magic incantation. It cannot be called upon when no evidence exists to support its invocation or the facts do not warrant its application. In this case, that the respondent is estopped from challenging the petitioners capacity to sue has been conclusively established, and the forthcoming trial before the lower court should weigh instead on the other defenses raised by the respondent.[25] (Emphases supplied)

As shown in the previously cited cases, this Court has time and again upheld the principle that a foreign corporation doing business in the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine entity that had derived some benefit from their contractual arrangement because the latter is considered to be estopped from challenging the personality of a corporation after it had acknowledged the said corporation by entering into a contract with it.[26]

In Antam Consolidated, Inc. v. Court of Appeals,[27] this Court had the occasion to draw attention to the common ploy of invoking the incapacity to sue of an unlicensed foreign corporation utilized by defaulting domestic companies which seek to avoid the suit by the former. The Court cannot allow this to continue by always ruling in favor of local companies, despite the injustice to the overseas corporation which is left with no available remedy.

During this period of financial difficulty, our nation greatly needs to attract more foreign investments and encourage trade between the Philippines and other countries in order to rebuild and strengthen our economy. While it is essential to uphold the sound public policy behind the rule that denies unlicensed foreign corporations doing business in the Philippines access to our courts, it must never be used to frustrate the ends of justice by becoming an all-encompassing shield to protect unscrupulous domestic enterprises from foreign entities seeking redress in our country. To do otherwise could seriously jeopardize the desirability of the Philippines as an investment site and would possibly have the deleterious effect of hindering trade between Philippine companies and international corporations.

WHEREFORE, the March 31, 2005 Decision of the Court of Appeals and its March 23, 2006 Resolution are hereby REVERSED and SET ASIDE. The dismissal order of the Regional Trial Court dated November 15, 1999 is hereby set aside. Steelcases Amended Complaint is hereby ordered REINSTATED and the case is REMANDED to the RTC for appropriate action. SO ORDERED.