Casent Realty Development Corp. vs. Philbanking Corporation

Judicial admissions, including actionable documents not specifically denied under oath, must be considered in resolving a demurrer to evidence; however, the admission of the genuineness and due execution of a document does not constitute an admission of the pleader's conclusions or defenses regarding the document's scope and coverage.

In 1984, Casent Realty Development Corporation executed two promissory notes in favor of Rare Realty Corporation. On August 8, 1986, Rare Realty assigned these notes to Philbanking Corporation as security for Rare Realty's own loan from the bank. Separately, on August 27, 1986, Casent executed a dacion en pago with Philbanking, conveying an Iloilo City property in full satisfaction of Casent's direct indebtedness of PhP 3,921,750 to the bank. Philbanking subsequently issued a confirmation statement that Casent had no unpaid obligations as of December 31, 1988. In 1989, Rare Realty defaulted on its loan, prompting Philbanking to enforce the assigned promissory notes against Casent.

• Promissory Notes and Assignment: In 1984, Casent Realty Development Corporation executed Promissory Note No. 84-04 (PhP 300,000, 36% interest, 12% penalty) and Promissory Note No. 84-05 (PhP 681,500, 18% interest, 12% penalty) in favor of Rare Realty Corporation. On August 8, 1986, Rare Realty assigned these notes to Philbanking Corporation through a Deed of Assignment as security for Rare Realty's own loan from Philbanking.
• Dacion en Pago and Confirmation Statement: On August 27, 1986, Casent executed a dacion en pago with Philbanking, conveying an Iloilo City property in full satisfaction of Casent's outstanding indebtedness of PhP 3,921,750 to the bank. On April 3, 1989, Philbanking issued a Confirmation Statement stating Casent had no loans with the bank as of December 31, 1988.
• Demand and Trial Court Proceedings: In 1989, Rare Realty defaulted on its obligation to Philbanking, prompting Philbanking to enforce the security by collecting from Casent under the promissory notes. Philbanking filed a collection suit on July 20, 1993. In its Answer, Casent raised the dacion and confirmation statement as defenses. Philbanking did not file a Reply specifically denying these documents under oath. After Philbanking presented its evidence, Casent filed a demurrer to evidence, arguing the obligation was extinguished. The RTC granted the demurrer and dismissed the complaint.

• Judicial Admission: Petitioner argued that respondent's failure to file a Reply specifically denying under oath the dacion and confirmation statement resulted in a judicial admission of their genuineness and due execution, thereby extinguishing the loan.
• Demurrer Scope: Petitioner maintained that the trial court correctly considered these judicial admissions in resolving the demurrer to evidence, which warranted dismissal of the complaint.
• Extinguishment of Obligation: Petitioner asserted that the dacion en pago covered all conceivable amounts, including the promissory notes, thus extinguishing the obligation.

• Procedural Grounds: Respondent countered that the grounds for demurrer involved defenses rather than insufficiency of evidence, the documents had not been formally offered, and failure to file a Reply deems all new matters controverted under Rule 6, Section 10.
• Scope of Dacion: Respondent argued that the dacion only covered Casent's direct loan of PhP 3,921,750, not the promissory notes assigned by Rare Realty, which only became Casent's direct liability to Philbanking in 1989 upon Rare Realty's default.

• Judicial Admissions in Demurrer: Whether a demurrer to evidence must consider judicial admissions, such as actionable documents not specifically denied under oath.
• Scope of Admission: Whether the admission of the genuineness and due execution of a dacion en pago and confirmation statement constitutes an admission of the conclusion that the promissory notes were extinguished.

• Judicial Admissions in Demurrer: Judicial admissions must be considered in resolving a demurrer to evidence. The "facts" under Rule 33, Section 1 include all means sanctioned by the Rules of Court to ascertain matters in judicial proceedings, such as judicial admissions, matters of judicial notice, and stipulations. Furthermore, Rule 8, Section 8, which requires a specific denial under oath of actionable documents, prevails over Rule 6, Section 10, which merely provides the effect of failure to file a Reply. Failure to deny under oath admits the genuineness and due execution of the document.
• Scope of Admission: The admission of the genuineness and due execution of a document does not admit the pleader's conclusions or defenses regarding its scope. The dacion en pago unequivocally stated it was in full satisfaction of Casent's outstanding indebtedness of PhP 3,921,750 to the bank. It did not cover the promissory notes, which were assigned by Rare Realty as security for Rare Realty's own loan. Petitioner should have presented evidence that the dacion included the promissory notes, which it could not do after the demurrer was granted.

• Demurrer to Evidence — Defined as an objection that the evidence produced by the adversary is insufficient in point of law to make out a case or sustain the issue. Resolved based on facts and law, which include judicial admissions, matters of judicial notice, stipulations, and presumptions, excluding only the defendant's evidence.
• Specific Denial of Actionable Documents — When a defense is founded upon a written instrument, the adverse party must specifically deny its genuineness and due execution under oath; otherwise, it is deemed admitted. This specific rule (Rule 8, Sec 8) prevails over the general rule on failure to file a reply (Rule 6, Sec 10).
• Scope of Judicial Admissions — An admission of the genuineness and due execution of a document does not prevent the introduction of evidence showing that the document excludes certain claims or does not cover the conclusions asserted by the pleader.

• "However, the plaintiff’s evidence should not be the only basis in resolving a demurrer to evidence. The 'facts' referred to in Section 8 should include all the means sanctioned by the Rules of Court in ascertaining matters in judicial proceedings. These include judicial admissions, matters of judicial notice, stipulations made during the pre-trial and trial, admissions, and presumptions, the only exclusion being the defendant’s evidence." — Establishes that a demurrer to evidence is resolved not just on plaintiff's evidence but on all facts including judicial admissions.
• "Rule 8, Section 8 specifically applies to actions or defenses founded upon a written instrument and provides the manner of denying it. It is more controlling than Rule 6, Section 10 which merely provides the effect of failure to file a Reply." — Resolves the conflict between the specific rule on actionable documents and the general rule on failure to file a reply.
• "Admission of the genuineness and due execution of the Dacion and Confirmation Statement does not prevent the introduction of evidence showing that the Dacion excludes the promissory notes." — Clarifies the limited effect of admitting genuineness and due execution, distinguishing it from admitting the pleader's conclusions.

• Gutib v. Court of Appeals, G.R. No. 131209 (Aug 13, 1999) — Followed. Defined a demurrer to evidence as an objection that the adversary's evidence is insufficient in point of law to make out a case or sustain the issue.
• Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., G.R. No. 87434 (Aug 5, 1992) — Followed. Held that when the due execution and genuineness of an instrument are deemed admitted due to the adverse party's failure to make a specific verified denial, the instrument need not be formally presented in evidence.
• Toribio v. Bidin, No. L-57821 (Jan 17, 1985) — Followed. Cited for the rule that where a defense is based on an actionable document, a reply specifically denying it under oath must be made; otherwise, genuineness and due execution are deemed admitted.

• Rule 33, Section 1, 1997 Rules of Civil Procedure — Governs demurrer to evidence, allowing dismissal after the plaintiff completes evidence presentation if the plaintiff has shown no right to relief based on facts and law.
• Rule 8, Section 8, Rules of Court — Requires a party to specifically deny under oath the genuineness and due execution of an actionable document; otherwise, they are deemed admitted. Applied to hold that respondent's failure to file a verified denial of the dacion and confirmation statement admitted their genuineness and due execution.
• Rule 129, Section 4, Rules of Court — Provides that judicial admissions do not require proof and can only be contradicted by showing palpable mistake or that no such admission was made. Applied to establish that the admitted documents must be considered in resolving the demurrer.
• Rule 6, Section 10, Rules of Court — Provides that failure to file a reply deems all new matters alleged in the answer controverted. Subordinated to Rule 8, Section 8 regarding actionable documents.

Quisumbing, Carpio, Carpio-Morales, Velasco, Jr.