Fernando Medical Enterprises, Inc. vs. Wesleyan University Philippines, Inc.

A motion for judgment on the pleadings should be granted where the defending party's answer expressly admits the material allegations of the complaint, including the genuineness and due execution of the actionable document upon which the action is based, and any denials are ineffective sham denials of matters clearly within the pleader's knowledge; the trial court may consider only the pleadings in the instant action and may not look to allegations in separate proceedings to find issues of fact.

Fernando Medical Enterprises, Inc., a domestic corporation engaged in medical equipment supply, entered into multiple contracts with Wesleyan University Philippines, Inc. for the delivery and installation of hospital equipment and supplies from January 2006 to February 2007. Following a dispute over outstanding payments, the parties executed a compromise agreement on February 11, 2009, reducing the claimed balance and providing for installment payments. When the respondent ceased payments and questioned the validity of the contracts, the petitioner initiated a collection suit in the Regional Trial Court of Manila.

• Nature of the Transaction: From January 9, 2006 to February 2, 2007, the petitioner delivered and installed medical equipment and supplies at the respondent's hospital under four contracts: (a) Memorandum of Agreement dated January 9, 2006 for P18,625,000.00; (b) Deed of Undertaking dated July 5, 2006 for P8,500,000.00; (c) Deed of Undertaking dated July 27, 2006 for P65,000,000.00; and (d) Deed of Undertaking dated February 2, 2007 for P32,926,650.00.
• Outstanding Obligation and Settlement: The petitioner alleged that the respondent's total obligation was P123,901,650.00, of which only P67,357,683.23 had been paid, leaving a balance of P54,654,195.54. On February 11, 2009, the parties executed an agreement reducing the claim to P50,400,000.00, payable in 36 monthly installments of P1,400,000.00 each through postdated checks.
• Default and Repudiation: After honoring four checks totaling P5,600,000.00, the respondent stopped payment. In a letter dated May 27, 2009, the respondent notified the petitioner that its new administration had reviewed the contracts and found them defective and rescissible due to economic prejudice, and declined to recognize the February 11, 2009 agreement for lack of Board of Trustees approval and because the signatory's term had expired.
• Commencement of Action: Following a demand letter dated June 24, 2009, the petitioner filed a complaint for sum of money in the RTC of Manila, alleging that the respondent's failure to pay rendered the entire obligation due and demandable.
• Procedural Posture in the Trial Court: The respondent moved to dismiss the complaint on grounds of lack of jurisdiction over the person, improper venue, litis pendentia, and forum shopping, citing a pending complaint for rescission it had filed in the RTC of Cabanatuan City. The trial court denied the motion to dismiss. The respondent subsequently filed an answer (ad cautelam) admitting paragraphs 2, 3, 4, 5, 9, and 10 of the complaint (regarding the existence of contracts, the total obligation, payments made, the balance due, and the execution of the February 11, 2009 agreement), but denying paragraphs 6, 7, and 8 for lack of knowledge or information sufficient to form a belief, and denying paragraphs 11 and 12 as conclusions of law, subject to special and affirmative defenses.
• Separate Rescission Case: In its complaint for rescission filed in Cabanatuan City, the respondent alleged that it had paid P78,401,650.00 to the petitioner, a figure different from the petitioner's computation of P67,357,683.23.

• Scope of Inquiry for Judgment on the Pleadings: Petitioner argued that the Court of Appeals erred in going outside the respondent's answer in Civil Case No. 09-122116 by relying on allegations contained in the respondent's complaint for rescission in a separate proceeding; the court should have confined itself to the pleadings in the instant action to resolve the motion for judgment on the pleadings.
• Effect of Admission of Actionable Document: Petitioner maintained that the respondent's express admission of the genuineness and due execution of the February 11, 2009 agreement—which constituted the actionable document upon which the complaint was based—rendered judgment on the pleadings proper, dispensing with the necessity of proof.
• Ineffectiveness of Sham Denials: Petitioner contended that the respondent's denial of material allegations regarding the outstanding balance and the installment agreement for lack of knowledge constituted ineffective sham denials, as such matters were plainly within the respondent's knowledge and could not logically be denied.

• Specific Denial of Material Allegations: Respondent countered that it had specifically denied the material allegations of the complaint, including the amount claimed, through its answer that disavowed knowledge of the transactions undertaken during the term of past officers.
• Existence of Factual Issue: Respondent argued that the Court of Appeals correctly affirmed the RTC's ruling that the pleadings tendered an issue as to the balance owing to the petitioner, noting the discrepancy between the petitioner's claim of P67,357,683.23 in payments received and the respondent's allegation in the rescission case of P78,401,650.00 paid.

• Proper Basis for Judgment on the Pleadings: Whether the Court of Appeals erred in affirming the RTC's denial of the motion for judgment on the pleadings by considering allegations in the respondent's separate complaint for rescission rather than confining the inquiry to the answer filed in the instant case.
• Effectiveness of Denials: Whether the respondent's answer effectively tendered issues of fact where it expressly admitted the material allegations regarding the contracts and the February 11, 2009 agreement, but denied other material allegations for lack of knowledge.

• Confined Scope of Review: The appeal was meritorious. Under Section 1, Rule 34 of the Rules of Court, the trial court may render judgment on the pleadings only upon the pleadings of the parties in the action; it is error to deny the motion because the defending party's pleading in another case supposedly tendered an issue of fact. The respondent's averments in its complaint for rescission regarding the total amount paid had no relevance to the resolution of the motion for judgment on the pleadings in Civil Case No. 09-122116.
• Admission of Material Allegations: Judgment on the pleadings was proper because the respondent's answer expressly admitted paragraphs 2, 3, 4, 5, 9, and 10 of the complaint, which admitted the existence of the four transactions, the total liability, the payments made, the balance still due, and the execution of the February 11, 2009 agreement. The admission of the various agreements, particularly the February 11, 2009 agreement which was the actionable document, significantly admitted the petitioner's cause of action.
• Ineffective Denials: The respondent's denial of paragraphs 6, 7, and 8 for lack of knowledge or information was ineffective and constituted sham denials because the matters averred therein—the total obligation, the agreement to reduce the balance, and the issuance of postdated checks—were matters that the respondent ought to know or could have easily known. Denials based on lack of knowledge of matters clearly known to the pleader, or which ought to be known, are insufficient.
• Affirmative Defenses Do Not Tender Issues: The respondent's qualification of its admissions and denials by subjecting them to special and affirmative defenses of lack of jurisdiction, improper venue, litis pendentia, and forum shopping was of no consequence because such defenses, by their nature, involved matters extrinsic to the merits of the claim and did not negate the material averments of the complaint.

• Judgment on the Pleadings (Rule 34) — A judgment on the pleadings is proper when the defending party's answer fails to tender an issue or otherwise admits the material allegations of the adverse party's pleading. The essential query is whether issues of fact are generated by the pleadings, which depends on how the answer has dealt with the ultimate facts alleged in the complaint.
• Modes of Specific Denial (Rule 8, Section 10) — An answer raises an issue of fact only through: (1) specifying each material allegation of fact the truth of which is not admitted and setting forth the substance of matters relied upon to support the denial; (2) specifying so much of an averment as is true and material and denying only the remainder; or (3) stating lack of knowledge or information sufficient to form a belief as to the truth of a material averment. Any material averment not specifically denied is deemed admitted, except for unliquidated damages.
• Sham Denials — Denials based on lack of knowledge or information of matters clearly known to the pleader, or which ought to be known, or could have easily been known, are insufficient and constitute ineffective or sham denials that do not tender genuine issues of fact.
• Admission of Actionable Documents — Where the adverse party admits the genuineness and due execution of a written instrument or document upon which the action is based, judgment may be had solely on the document, and there is no need for further evidence of the transactions or indebtedness. The admission creates a prima facie case for the plaintiff which dispenses with the necessity of evidence and entitles the plaintiff to judgment on the pleadings unless a special defense of new matter is interposed.

• "The trial court may render a judgment on the pleadings upon motion of the claiming party when the defending party's answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading. For that purpose, only the pleadings of the parties in the action are considered. It is error for the trial court to deny the motion for judgment on the pleadings because the defending party's pleading in another case supposedly tendered an issue of fact."
• "The essential query in resolving a motion for judgment on the pleadings is whether or not there are issues of fact generated by the pleadings."
• "It is settled that denials based on lack of knowledge or information of matters clearly known to the pleader, or ought to be known to it, or could have easily been known by it are insufficient, and constitute ineffective or sham denials."
• "Lastly, we should emphasize that in order to resolve the petitioner's Motion for Judgment Based on the Pleadings, the trial court could rely only on the answer of the respondent filed in Civil Case No. 09-122116. Under Section 1, Rule 34 of the Rules of Court, the answer was the sole basis for ascertaining whether the complaint's material allegations were admitted or properly denied."

• Santos v. Alcazar, G.R. No. 183034, March 12, 2014, 718 SCRA 636 — Cited for the principle that where the adverse party admits the genuineness and due execution of an actionable document, judgment may be had solely on the document, creating a prima facie case that dispenses with the necessity of further evidence.
• Wood Technology Corporation v. Equitable Banking Corporation, G.R. No. 153867, February 17, 2005, 451 SCRA 724 — Cited for the definition of the essential query in resolving motions for judgment on the pleadings.
• Mongao v. Pryce Properties Corporation, G.R. No. 156474, August 16, 2005, 467 SCRA 201 — Cited regarding the treatment of admissions in pleadings.
• Dino v. Valencia, G.R. No. 43886, July 19, 1989, 175 SCRA 406 — Cited regarding the admission of actionable documents.
• J.P. Juan & Sons, Inc. v. Lianga Industries, Inc., G.R. No. L-25137, July 28, 1969, 28 SCRA 807 — Cited regarding ineffective denials based on lack of knowledge.
• Manufacturer's Bank & Trust Co. v. Diversified Industries, Inc., G.R. No. 33695, May 15, 1989, 173 SCRA 357 — Cited regarding sham denials.

• Section 1, Rule 34, Rules of Court — Governs judgment on the pleadings, allowing the court to direct judgment when the answer fails to tender an issue or admits material allegations.
• Section 10, Rule 8, Rules of Court — Enumerates the three modes by which a denial in the answer raises an issue of fact.
• Section 11, Rule 8, Rules of Court — Provides that material averments not specifically denied are deemed admitted, except for unliquidated damages.
• Section 7, Rule 8, Rules of Court — Requires the pleader of an actionable document to set forth its substance or attach a copy.
• Section 8, Rule 8, Rules of Court — Governs the admission or specific denial under oath of actionable documents.

Maria Lourdes P.A. Sereno, Chief Justice; Teresita J. Leonardo-De Castro, Associate Justice; Estela M. Perlas-Bernabe, Associate Justice; Francis H. Jardeleza, Associate Justice.