CASENT REALTY DEVELOPMENT CORP. vs.

PHILBANKING CORP By: Bries

GR No. 150731 Topic: Demurrer to Evidence
Date: SEPT 14, 2007

FACTS
CASENT REALTY DEVELOPMENT CORPORATION (CASENT) executed 2 promissory notes in favor of RARE
REALTY CORPORATION (RARE REALTY) as security for a loan that RARE REALTY obtained from
PHILBANKING CORPORATION (PHILBANKING), wherein a Deed of Assignment was executed. The following
are the PNs:
PN No. 84-04: P300,000 with 36% interest per annum and a penalty of 12% in case of non- payment on 27
June 1985
PN No. 84-05: P681,500 with 18% interest per annum and a penalty of 12% in case of non- payment by 25
June 1985
When RARE REALTY failed to pay its debt against PHILBANKING, the latter went after the security of the loan,
which were the said 2 notes. PHILBANKING demanded payment based on the terms of the 2 notes by virtue of the
deed of assignment to CASENT
Meanwhile, on a separate loan of CASENT with PHILBANKING, CASENT satisfied its obligation by executing a
Dacion en pago
PHILBANKING filed a complaint for the collection of payment against CASENT based on the promissory notes
issued by the latter
In CASENTs answer, it raised this special/affirmative defense that the Dacion en pago executed by CASENT is to
cover its separate obligation with PHILBANKING and the 2 promissory notes it issued as security for RARE
REALTYs obligation with PHILBANKING
PHILBANKING failed to file a reply to CASENTs answer
CASENT alleges that the defense of Dacion and Confirmation Statement should have been specifically denied under
oath by PHILBANKING in accordance with Rule 8, Section 8 of the Rules of Court. PHILBANKINGs failure
constituted an admission.
PHILBANKING alleges: That even though it failed to file a reply, all the new matters alleged in the Answer are
deemed controverted anyway, in accordance to Rule 6, Section 10 of the Rules of Court

ISSUE/S
WON to file a Reply and deny the Dacion en pago and Confirmation Statements under oath constitute a judicial admission of
the genuineness and due execution of these documents? YES

RULING

Since PHILBANKING failed to file a Reply, in effect, PHILBANKING admitted the genuineness and due execution of said
documents. This judicial admission should have been considered by the appellate court in resolving the demurrer to evidence, in
accordance with Rule 129, Section 4 of the Rules of Court.2

Rule 8, Section 83 specifically applies to actions or defenses founded upon a written instrument and provide 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 PHILBANKING 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.

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