JUDICIAL ADMISSION

CASENT REALTY DEVELOPMENT vs PHILBANKING CORPORATION

G.R. No. 150731
September 14, 2007

FACTS:

1. Petitioner executed two promissory notes in favor of Rare Realty. These PNs were used by Rare Realty as a security for a
loan that the latter obtained from respondent PhilBanking wherein a Deed of Assignment was executed.
2. When Rare Realty failed to pay its debt, the bank went after the security of the loan. The bank demanded payment based
on the PNs issued by petitioner to Rare Realty by virtue of the deed of assignment.
3. On a separate loan with Philbanking, petitioner satisfied its obligation by executing a Dacion en Pago. And a confirmation
statement was then issued by the bank stating that petitioner had no loans with the bank
4. Philbanking filed for a complaint for the collection of payment against petitioner based on the PNs. In its answer, it raised
that a Dacion was already executed which extinguishes its obligation. Philbanking failed to file its reply.
5. Petitioner filed a motion for judgment on demurrer to evidence pointing out that Philbanking's failure to reply to the answer
which raised the Dacion and Confirmation Statement constituted an admission of the genuineness and due execution of
said documents.
6. Philbanking claimed that even though it failed to file a Reply, all the new matters alleged in the Answer are deemed
controverted anyway.

RTC – granted the motion for judgment on demurrer to the evidence.

 Basis – obligation to the defendant to the herein respondent was extinguished by the Dacion en Pago
CA – reversed RTC
 Basis
a. the only issue to be resolved in a demurrer is whether the plaintiff has shown any right to relief under the facts presented
and the law.
b. Thus, it held that the trial court erred when it considered the Answer which alleged the Dacion, and that
its genuineness and due execution were not at issue.
c. It added that the court a quo should have resolved whether the two promissory notes were covered by the Dacion, and
that since petitioner's demurrer was granted, it had already lost its right to present its evidence.
 The CA found that under the Deed of Assignment, respondent clearly had the right to proceed against the
promissory notes assigned by Rare Realty.

ISSUES:

1. Whether or not respondent's failure to file a reply and deny the Dacion and Confirmation Statement under oath constitute
a judicial admission of the genuineness and due execution of these documents?
2. Whether or not judicial admission be considered in resolving a demurrer to evidence? If yes, are the judicial admissions in
this case sufficient to warrant the dismissal of the complaint?

RULING:

1. We agree with petitioner.

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. Thus,
where the defense in the Answer is based on an actionable document, a Reply specifically denying it under oath must be
made; otherwise, the genuineness and due execution of the document will be deemed admitted. Since respondent failed to
deny the genuineness and due execution of the Dacion and Confirmation Statement under oath, then these are deemed
admitted and must be considered by the court in resolving the demurrer to evidence. We held in Philippine American
General Insurance Co., Inc. v. Sweet Lines, Inc. that [w]hen the due execution and genuineness of an instrument are
deemed admitted because of the adverse partys failure to make a specific verified denial thereof, the instrument need not
be presented formally in evidence for it may be considered an admitted fact.
 2. Respondent asserts that the admission of the genuineness and due execution of the documents in question is not all
encompassing as to include admission of the allegations and defenses pleaded in petitioners Answer. In executing
the Dacion, the intention of the parties was to settle only the loans of petitioner with respondent, not the obligation
of petitioner arising from the promissory notes that were assigned by Rare Realty to respondent.

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. Petitioner, by way of defense, should have presented evidence to
show that the Dacion includes the promissory notes.

It is clear from the foregoing deed that the promissory notes were given as security for the loan granted by respondent to Rare
Realty. Through the Deed of Assignment, respondent stepped into the shoes of Rare Realty as petitioners creditor.

Respondent alleged that petitioner obtained a separate loan of PhP 3,921,750. Thus,
when petitioner and respondent executed the Dacion on August 27, 1986, what was then covered was petitioners loan from the
bank. The Dacion provides, thus:

NOW, THEREFORE, in consideration of the foregoing premises, the DEBTOR hereby transfers and conveys in
favor of the BANK by way of Dacion en Pago, the above-described property in full satisfaction of its outstanding
indebtedness in the amount of P3,921,750.00 to the BANK, subject to x x x terms and
conditions. (Emphasis supplied.)

The language of the Dacion is unequivocalthe property serves in full satisfaction of petitioners own indebtedness
to respondent, referring to the loan of PhP 3,921,750. For this reason, the bank issued a Confirmation Statement saying that
petitioner has no unpaid obligations with the bank as of December 31, 1988.

In 1989, however, Rare Realty defaulted in its payment to respondent. Thus, respondent proceeded against the security
assigned to it, that is, the promissory notes issued by the petitioner. Under these promissory notes, petitioner is liable for the amount
of PhP 300,000 with an interest of 36% per annum and a penalty of 12% for failure to pay on the maturity date, June 27, 1985; and
for the amount of PhP 681,500 with an interest of 18% per annum and a penalty of 12% for failure to pay on the maturity date, June
25, 1985.