Abad vs. Heirs of Jose Eusebio Abad Gallardo

Res judicata does not attach where the prior case was dismissed without a judgment on the merits, and judgment on the pleadings is improper where the answer tenders factual issues; the oath requirement for contesting a written instrument does not apply when the adverse party is not a party to the instrument.

Petitioners are the heirs of Enrique Abad, while respondents are the heirs of Jose Eusebio Abad Gallardo, the son of Enrique's sister Isabel. The dispute concerns Lot 5826-B, a 5,000-square-meter portion of the family land originally registered under Spouses Miguel Abad and Agueda de Leon and later covered by TCT No. T-131684 in Enrique's name.

Lot 5826-B, a 5,000-square-meter parcel in Capiddigan, Cordon, Isabela, is a portion of a 22,618-square-meter parcel originally covered by OCT No. P-2769 in the names of Spouses Miguel Abad and Agueda de Leon. OCT No. P-2769 was later cancelled and TCT No. T-131684 was issued in the name of Enrique Abad. Upon the death of Spouses Miguel and Agueda, the land was inherited by their three children Dionisio, Isabel, and Enrique, who all took possession of the land as co-owners. On January 15, 1988, Dionisio and Isabel filed Civil Case No. 0591 before RTC Branch 21 in Santiago City, entitled Dionisio Abad and Isabel Abad vs. Enrique Abad, for annulment of deed and TCT No. T-131684 with damages. They alleged that an Extrajudicial Settlement and Waiver of Rights was executed adjudicating the land to Enrique, and that by virtue thereof OCT No. P-2769 was cancelled and TCT No. T-131684 was issued in Enrique's name.

On May 17, 1988, Enrique manifested before RTC Branch 21 that he had entered into a compromise agreement with his siblings Dionisio and Isabel. RTC Branch 21 gave Enrique a period to file an answer, pending approval of the compromise agreement. Since no answer was received from Enrique within the period granted, RTC Branch 21 concluded that a compromise agreement was forged among the parties and dismissed Civil Case No. 0591 on December 27, 1988. On February 3, 1989, the case was reinstated upon motion for reconsideration filed by Dionisio and Isabel on the ground that there had yet been no compromise agreement. On August 25, 1989, Civil Case No. 0591 was finally dismissed on the manifestation of Dionisio and Isabel that a compromise agreement had been forged between them and Enrique. A deed of partition was notarized and executed whereby the land was divided into the share of Dionisio, the western portion of 7,500 square meters; the share of Isabel, the middle portion of 5,000 square meters; and the share of Enrique, the eastern portion of 10,000 square meters. The portions were never actually segregated nor partitioned, leaving TCT No. T-131684 registered in Enrique's name intact. On May 15, 2003, an approved subdivision plan reflecting the partition agreement identified the 5,000-square-meter portion as Lot 5826-B.

On July 4, 2004, Isabel died leaving Lot 5826-B to her son Jose Eusebio Abad Gallardo, married to Dolores Lolita Gallardo, by virtue of a Deed of Donation earlier executed by Isabel in favor of Jose Eusebio. The subject lot was tenanted by Furtunato Abad, who on April 30, 2008 relinquished tenancy over the same in exchange for ₱50,000.00. On the same date, Dolores Lolita, then widowed, obtained a ₱75,000.00 loan from Eufemia Abad, secured by Lot 5826-B; the transaction was evidenced by a Kasunduan dated April 30, 2008. On November 15, 2015, Jonah Gallardo, one of respondents, caused the recording of a blotter at the Philippine National Police, Cordon Police Station, stating that his uncle Pollie Cezar entered and cultivated the subject lot.

The complaint further alleged that Eufemia, an heir of Enrique, was in possession of TCT No. T-131684; that out of the ₱75,000.00 loan obtained by Dolores Lolita from Eufemia, ₱25,000.00 was incurred for the payment of the processing fee for the segregation of the title of the subject lot; that Eufemia processed the segregation of the respective titles; that upon demand, Eufemia refused to give the title of the subject lot unless the loan was paid; that sometime in February 2015, Eufemia refused to receive payment of the loan and demanded instead ₱350,000.00, and would return only one-fourth of the subject lot; that Spouses Larry and Evelyn Gallardo claimed the subject lot; and that Spouses Flordeliza Abad Cezar and Pollie Cezar continuously disturbed the peaceful possession and control of the Heirs of Jose Eusebio over the subject lot.

In the answer submitted by the Heirs of Enrique dated January 15, 2016, they admitted that TCT No. T-131684 was registered in the name of Enrique and averred that the subject lot is exclusively owned by them through hereditary succession. They denied the rest of the allegations in the complaint for want of knowledge sufficient to form a belief with respect to the truth or falsity thereof. As to Spouses Larry and Evelyn Abad, they averred that no cause of action was alleged against the former because they are not heirs of Enrique. On January 26, 2016, respondents filed a motion for judgment on the pleadings, which was heard by the RTC on March 1, 2016. At the hearing, counsel for petitioners interposed no opposition to the motion, and the parties thereafter submitted their respective memoranda.

• Judgment on the Pleadings: Petitioners argued that the RTC erred in granting respondents' motion for judgment on the pleadings because their answer raised the genuine issue of the exclusive ownership of the subject lot, which they claim as theirs by virtue of TCT No. T-131684 registered in the name of Enrique, their predecessor-in-interest.
• Specific Denials: Petitioners contended that their answer contained numerous specific denials of respondents' causes of action.
• Deed of Donation and Deed of Partition: Petitioners maintained that the due execution, genuineness, and authenticity of the Deed of Donation executed by Isabel and attached to the complaint as Annex "I," and the Deed of Partition executed by Dionisio, Isabel, and Enrique pursuant to the amicable settlement dated May 17, 1988 relative to Civil Case No. 0591 and attached to the complaint as Annex "L," had to be proved before being given legal effect, and that petitioners were never privies to those documents.
• Res Judicata: Petitioners argued that the RTC erred in applying res judicata or bar by prior judgment because there was no final decision on the merits in Civil Case No. 0591, the amicable settlement not having been submitted to RTC Branch 21.

• Specific Denial Under Oath: Respondents argued for the denial of the Petition on the ground that their complaint contained allegations of several documents — the Amicable Settlement executed by Enrique Abad, Dionisio Abad, and Isabel Abad; the Deed of Partition executed by Enrique Abad, Dionisio Abad, and Isabel Abad; the subdivision plan of the subject land; and the Kasunduan dated April 30, 2008 executed by Eufemia Abad and Dolores Lolita J. Gallardo — and petitioners did not specifically deny under oath the genuineness and authenticity of these documents. Respondents maintained that the answer thus failed to tender an issue and admitted the material allegations of the complaint.
• Direct Recourse to the SC: Respondents objected to petitioners' direct recourse to the SC.

• Res Judicata: Whether the RTC correctly applied res judicata or bar by prior judgment based on Civil Case No. 0591 despite the absence of a judgment on the merits in that case.
• Judgment on the Pleadings: Whether the RTC properly granted respondents' motion for judgment on the pleadings where petitioners' answer allegedly failed to tender an issue or admitted the material allegations of the complaint.
• Specific Denial Under Oath: Whether petitioners were required to specifically deny under oath the genuineness and due execution of the Amicable Settlement, Deed of Partition, subdivision plan, and Kasunduan, and whether their answer tendered factual issues.

• Res Judicata: No. Res judicata did not attach because Civil Case No. 0591 had no final judgment on the merits; no compromise agreement was submitted to or judicially approved by RTC Branch 21, and there was no identity of causes of action.
• Judgment on the Pleadings: No. Judgment on the pleadings was improper because petitioners' answer tendered factual issues by denying material allegations; the RTC's grant cannot be upheld.
• Specific Denial Under Oath: No. Petitioners were not required to deny the documents under oath because they were not parties to the instruments; the Kasunduan was between only one plaintiff and one defendant, and the Deed of Donation did not involve petitioners or Enrique. Respondents must prove genuineness and due execution.

• Res Judicata: The SC applied Section 47, Rule 39 of the Rules of Court, which treats paragraph (a) as the rule on res judicata in judgments in rem, paragraph (b) as the rule on res judicata in judgments in personam or bar by prior judgment, and paragraph (c) as the rule on conclusiveness of judgment. It cited Bardillon vs. Barangay Masili of Calamba, Laguna for the requisites of res judicata: (1) the former judgment must be final; (2) the tribunal that rendered it had jurisdiction over the subject matter and the parties; (3) it is a judgment on the merits; and (4) there is identity of parties, subject matter, and cause of action between the first and second actions. The RTC erred because there was no judgment on the merits in Civil Case No. 0591. The prior case was dismissed twice: first on December 27, 1988 on the assumption that a compromise agreement had been forged; that dismissal was reconsidered on February 3, 1989 because no compromise agreement had been entered into; and the second dismissal on August 25, 1989 noted that no answer was filed and that a manifestation submitting an amicable settlement was filed but the settlement was not attached and was never submitted. Since no compromise agreement was filed with RTC Branch 21 and formed part of the records of the prior case, no compromise agreement was ever judicially approved and no judgment thereon was entered in the prior case. There was also no identity of causes of action: the prior case concerned ownership of the subject lot, while the present case involved not only that cause of action but also possession and consignation.

• Judgment on the Pleadings: The SC applied Section 1, Rule 34 of the 1997 Rules of Civil Procedure, which allows judgment on the pleadings where an answer fails to tender an issue or otherwise admits the material allegations of the adverse party's pleading. It cited Asian Construction and Development Corporation vs. Sannaedle Co., Ltd. for the rule that an answer fails to tender an issue if it does not comply with the requirements of a specific denial under Sections 8 and 10, Rule 8, resulting in the admission of the material allegations of the adverse party's pleadings. Mongao vs. Pryce Properties Corporation was cited for the rule that an answer fails to tender an issue if it does not deny the material allegations or admits them by confessing their truthfulness or omitting to deal with them at all. First Leverage and Services Group, Inc. vs. Solid Builders, Inc. was cited for the rule that the essential question in judgment on the pleadings is whether there are issues generated by the pleadings, and that in a proper case there is no ostensible issue because the answer failed to raise one. Here, petitioners' answer denied the allegations for lack of knowledge and asserted exclusive ownership through TCT No. T-131684; it therefore tendered factual issues. The SC also noted that under Section 2, Rule 34 of the 2019 Amendments, any action on a motion for judgment on the pleadings is not subject to appeal, but Rule 144 provides that the 2019 Amendments govern cases filed after May 1, 2020 and pending proceedings except when application would not be feasible or would work injustice; because application would work injustice, the 2019 Amendments were not applied. The RTC's grant of judgment on the pleadings was therefore improper.

• Specific Denial Under Oath: The SC examined Sections 7, 8, 10, and 11 of Rule 8. Section 8 provides that when an action or defense is founded on a written instrument copied in or attached to the pleading, the genuineness and due execution of the instrument are deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts, but the oath requirement does not apply when the adverse party does not appear to be a party to the instrument. The SC cited Toribio vs. Bidin, where heirs who were not parties to deeds of sale were not required to deny the deeds under oath, and the private respondents still had to introduce evidence to establish that the deeds were genuine and truly executed by the parties with authority to dispose of the disputed property. Here, the Amicable Settlement and Deed of Partition were executed by petitioners' father Enrique, aunt Isabel, and uncle Dionisio; the Kasunduan was only between one of the plaintiffs and one of the defendants, the other parties not being privies thereto; and the Deed of Donation did not at all involve petitioners or their predecessor-in-interest Enrique. Section 8 therefore did not apply, and respondents had to introduce evidence to establish that the documents were genuine and truly executed by the parties thereto. With the allegations in the complaint having been denied, the answer tendered factual issues, and the RTC's judgment on the pleadings could not be upheld. The SC also reiterated that justice is best served by a judgment based on a trial on the merits and not on technicalities, citing Pongasi vs. Court of Appeals, and that an interpretation of a rule of procedure which would deny petitioners their rights to their inheritance was not warranted.

• Res judicata — A final judgment on the merits by a tribunal of competent jurisdiction is conclusive on the rights of the parties and their privies and constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of action. The requisites are: (1) the former judgment must be final; (2) the tribunal that rendered it had jurisdiction over the subject matter and the parties; (3) it is a judgment on the merits; and (4) there is identity of parties, subject matter, and cause of action between the first and second actions. The SC applied this rule and held that res judicata did not attach because Civil Case No. 0591 had no judgment on the merits and there was no identity of causes of action.
• Judgment on the pleadings — Proper when an answer fails to tender an issue or otherwise admits the material allegations of the adverse party's pleading. An answer fails to tender an issue if it does not comply with the requirements of a specific denial under Sections 8 and 10, Rule 8, resulting in the admission of the material allegations. The essential question is whether the pleadings generate issues. The SC applied this rule and held that petitioners' answer, which denied allegations and asserted exclusive ownership, tendered factual issues.
• Specific denial under oath for written instruments — When an action or defense is founded on a written instrument copied in or attached to the pleading, the genuineness and due execution of the instrument are deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts. The oath requirement does not apply when the adverse party does not appear to be a party to the instrument. The SC applied this to the Amicable Settlement, Deed of Partition, Deed of Donation, and Kasunduan, holding that petitioners were not required to deny them under oath and that respondents must prove their genuineness and due execution.
• Liberal construction of procedural rules — Rules of procedure should be liberally construed to serve substantial justice, and a party-litigant should be given the fullest opportunity to establish the merits of his complaint or defense rather than lose property on technicalities. The SC applied this in directing the RTC to hear and decide the case on the merits.

• "Judgment on the pleadings is proper when an answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading. An answer fails to tender an issue if it does not comply with the requirements of a specific denial as set out in Sections 8 and 10, Rule 8 of the 1997 Rules of Civil Procedure, resulting in the admission of the material allegations of the adverse party's pleadings." — The SC used this formulation to test whether the RTC properly granted judgment on the pleadings.
• "the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument." — This is the Section 8 exception the SC applied to excuse petitioners from denying the documents under oath.
• "Since no compromise agreement was filed with the RTC Branch 21 and formed part of the records of the prior case, there was no compromise agreement that was ever judicially approved and no judgment thereon was entered in the prior case." — This is the core reason res judicata did not attach: there was no judgment on the merits in Civil Case No. 0591.
• "justice is best served with a judgment based on a trial on the merits and not on technicalities" — The SC invoked this principle in directing the RTC to hear and decide the case on the merits.

• Bardillon vs. Barangay Masili of Calamba, Laguna, 450 Phil. 521 (2003) — Cited and followed for the requisites of res judicata; the SC used it to test whether the RTC properly applied bar by prior judgment.
• Asian Construction and Development Corporation vs. Sannaedle Co., Ltd., 736 Phil. 200 (2014) — Cited and followed for the rule that judgment on the pleadings is proper only when the answer fails to tender an issue or admits the material allegations.
• Mongao vs. Pryce Properties Corporation — Cited within the Asian Construction discussion for the rule that an answer fails to tender an issue if it does not comply with the specific denial requirements or admits material allegations by confession or omission.
• First Leverage and Services Group, Inc. vs. Solid Builders, Inc. — Cited for the rule that the essential question in judgment on the pleadings is whether the pleadings generate issues.
• Toribio vs. Bidin, 219 Phil. 139 (1985) — Cited and followed for the rule that heirs who are not parties to deeds of sale are not required to deny the deeds under oath, and the proponent must still prove their genuineness and due execution.
• Pongasi vs. Court of Appeals, 71 SCRA 614 — Cited for the principle that rules of procedure should be liberally construed to serve substantial justice and that a litigant should be given the fullest opportunity to establish the merits of his defense.

• Section 47, Rule 39, Rules of Court — Governs the effect of judgments or final orders; paragraphs (a), (b), and (c) cover res judicata in judgments in rem, bar by prior judgment in judgments in personam, and conclusiveness of judgment. The SC applied it and held that res judicata did not attach because there was no judgment on the merits in Civil Case No. 0591.
• Section 1, Rule 34, 1997 Rules of Civil Procedure — Allows judgment on the pleadings where an answer fails to tender an issue or otherwise admits the material allegations of the adverse party's pleading. The SC applied it and held that the RTC improperly granted the motion because petitioners' answer tendered factual issues.
• Section 2, Rule 34, 2019 Proposed Amendments to the 1997 Rules of Civil Procedure (A.M. No. 19-10-20-SC) — Provides that any action of the tribunal on a motion for judgment on the pleadings shall not be subject of an appeal or petition for certiorari, prohibition, or mandamus. The SC noted it but did not apply it because its application would work injustice.
• Rule 144, 2019 Amendments — Provides that the 2019 Amendments govern all cases filed after their effectivity on May 1, 2020, and also all pending proceedings, except when application would not be feasible or would work injustice. The SC applied the exception and used the procedure under which the case was filed.
• Sections 7, 8, 10, and 11, Rule 8, Rules of Court — Govern actions or defenses based on documents, how to contest such documents, specific denial, and allegations not specifically denied deemed admitted. The SC applied Section 8's exception and held that the oath requirement did not apply because petitioners were not parties to the instruments.
• Rule 45, Rules of Court — Governs the petition for review on certiorari filed by petitioners. The SC resolved the case through this petition.