G.R. No.

181676               June 11, 2014

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,

DECISION

PERALTA, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal of the Decision  and Resolution,  dated April 25, 2006 and February 6, 2008,
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respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 71916.

The facts follow.

This case stemmed from a Complaint  for Sum of Money filed by respondent against petitioner. The
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complaint alleged that petitioner and respondent executed a Memorandum of Agreement wherein
respondent was engaged to supply and erect insulated panel systems at various pavilions at the
Philippine Centennial Exposition Theme Park, specifically for the Phase I Project, for an agreed
amount of US$3,745,287.94.

Pursuant to the Memorandum of Agreement, petitioner made various payments amounting to

Thereafter, petitioner filed its Answer with Counterclaim. 4

Respondent then moved for judgment on the pleadings on the ground that the Answer admitted all
material allegations of the Complaint and, therefore, failed to tender an issue. Thus, respondent
deems that petitioner’s Answer, in effect, admitted the existence of the Memorandum of Agreement
and its failure to pay the balance despite repeated demands.

In a Judgment  dated October 6, 2000, the Regional Trial Court (RTC) of Makati City rendered
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judgment in favor of respondent. Pertinent portions of said decision read:

In claiming that the Answer of the [petitioner] failed to tender an issue, [respondent] argued that the
present action is for collection of the amount of US$615,620.33 with interest at the rate of 12% per
annum, which amount represents the balance of the payment under the Memorandum of
Agreement, Annex B of the Complaint entered into between [respondent] and [petitioner] which was
not denied in the Answer. [Respondent] further claimed that in a letter dated February 2, 2000,
Annex C of the Complaint, it demanded payment of the said amount of US$615,620.33 and in reply
thereto, [petitioner] stated in part –

"We refer to your letter dated February 2, 2000 regarding the US$2,635,333.00 balance unpaid
claim of SANNAEDLE.

x x x           x x x          x x x

2. Phase I Contract

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While we recognize being obligated to this amount, we do not have at the moment the capability to
pay it. This is because our financial position has been severely affected by the freezing of the
government of all our collectibles on EXPO projects including the ₱80M (approx. US$2.0M) from
DPWH intended to pay the cost increment of reverting back the use of Sannaedle in Phase I.

x x x           x x x          x x x

The partial amount of about US$1.4M paid by ASIAKONSTRUKT to Sannaedle in excess of its
allocated budget of US$1.745M actually came from its own source and initiatives. This effort made
by ASIAKONSTRUKT significantly reduced the balance due Sannaedle to only US$615,620.33.

x x x           x x x          x x x

The Court notes that in the Answer with Counterclaim of the [petitioner], the execution of the
Memorandum of Agreement, Annex B of the Complaint was admitted (paragraph 13, Answer).
Further, it did not deny specifically the claim of the [respondent] of being entitled to collect the said
amount of US$615,620.33. 6

xxxx

WHEREFORE, judgment is rendered in favor [of] the [respondent] and [petitioner] is ordered to pay
[respondent] the amount of US $615,620.33 with interest thereon at the rate of 12% per annum from
February 2, 2000 until fully paid.

No pronouncement as to costs.

SO ORDERED. 7

Petitioner filed a motion for reconsideration against said decision. However, the same was denied in
an Order  dated December 13, 2000.
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Thus, petitioner filed an appeal before the CA.

On April 25, 2006, the CA rendered its assailed Decision which disposed as follows:

WHEREFORE, the instant appeal is DISMISSED. The judgment of the Regional Trial Court of
Makati City, Branch 138, dated October 6, 2000, is hereby AFFIRMED.

Costs against the [petitioner].

SO ORDERED. 9

Petitioner filed a motion for reconsideration, but the CA denied it in a Resolution dated February 6,
2008.

Hence, the present petition wherein petitioner raises this sole issue for our resolution: whether or not
judgment on the pleadings is proper.

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Petitioner contends that the judgment on the pleadings is not proper, because it raised special and
affirmative defenses in its Answer. It asserts that with this specific denial, a genuine issue of fact had
been joined to the extent that a judgment on the pleadings could not be made.

For its part, respondent counters that petitioner’s Answer admitted the material allegations of its
complaint regarding the cause of action, which is collection of sum of money. Respondent
emphasizes that assuming petitioner’s defense of respondent’s lack of capacity to sue has a leg to
stand on, still, the same cannot prevent respondent from seeking the collection of petitioner’s unpaid
balance.

The Court finds the petition bereft of merit.

Judgment on the pleadings is governed by Section 1, Rule 34 of the 1997 Rules of Civil Procedure
which reads:

Sec. 1. 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 court may, on motion of that party, direct
judgment on such pleading. However, in actions for declaration of nullity or annulment of marriage or
for legal separation, the material facts alleged in the complaint shall always be proved. 10

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
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1997 Rules of Civil Procedure, resulting in the admission of the material allegations of the adverse
party’s pleadings.13

This rule is supported by the Court’s ruling in Mongao v. Pryce Properties Corporation  wherein it
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was held that "judgment on the pleadings is governed by Section 1,Rule 34 of the 1997 Rules of
Civil Procedure, essentially a restatement of Section 1, Rule 19 of the 1964 Rules of Court then
applicable to the proceedings before the trial court. Section 1, Rule 19 of the Rules of Court provides
that where an answer fails to tender an issue, or otherwise admits the material allegations of the
adverse party’s pleading, the court may, on motion of that party, direct judgment on such pleading.
The answer would fail to tender an issue, of course, if it does not comply with the requirements for a
specific denial set out in Section 10 (or Section 8) of Rule 8; and it would admit the material
allegations of the adverse party’s pleadings not only where it expressly confesses the truthfulness
thereof but also if it omits to deal with them at all."
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Further, in First Leverage and Services Group, Inc. v. Solid Builders, Inc.,  this Court held that where
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a motion for judgment on the pleadings is filed, the essential question is whether there are issues
generated by the pleadings. In a proper case for judgment on the pleadings, there is no ostensible
issue at all because of the failure of the defending party’s answer to raise an issue. The answer
would fail to tender an issue, of course, if it does not deny the material allegations in the complaint or
admits said material allegations of the adverse party’s pleadings by confessing the truthfulness
thereof and/or omitting to deal with them at all.
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Here, it is irrefutable that petitioner acknowledged having entered into a Memorandum of Agreement
with respondent and that it still has an unpaid balance of US$615,620.33.

We note that respondent’s complaint for a sum of money is based mainly on the alleged failure of
petitioner to pay the balance of US$615,620.33 under the Memorandum of Agreement. Quoting
petitioner’s Answer, it is obvious that it admitted the foregoing material allegations in paragraphs 3, 4
and 5 of the complaint, which states as follows:

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 3. The [Petitioner] ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION
("ASIAKONSTRUKT" for brevity), is a corporation duly incorporated under the laws of the
Philippines, with capacity to sue and be sued, and with business address at the Second
Floor, Union Ajinomoto Building, Sen. Gil Puyat Avenue, Makati City, and within the
jurisdiction of this Honorable Court; and where it may be served with summons and other
court processes of this Honorable Court,

4. That the [respondent] and the [petitioner] entered into a Memorandum of Agreement in
Makati City, within the jurisdiction of this Honorable Court, dated February 17, 1998, wherein
the [Petitioner] corporation agreed with and ordered the herein [Respondent], as Contractor,
to design and install INSUPANEL SYSTEMS at various pavilions, etc. at expo projects site;
and specifically for the Phase I project at an agreed amount of US$3,745,287.94(Par. 2.1). A
xerox copy of this Memorandum of Agreement dated February 17, 1998 between
[Respondent] and [Petitioner] consisting of six (6) pages, is attached hereto as Annex B and
made an integral part hereof.

5. That pursuant to this Memorandum of Agreement (Exhibit B)and contract price of

While petitioner allegedly raised affirmative defenses, i.e., defect in the certification of non-forum
shopping, no legal capacity to sue and fortuitous event, the same cannot still bar respondent from
seeking the collection of the unpaid balance. Other than these affirmative defenses, petitioner’s
denial neither made a specific denial that a Memorandum of Agreement was perfected nor did it
contest the genuineness and due execution of said agreement.

We, therefore, sustain the CA and quote with approval the well-reasoned findings and conclusions of
the appellate court contained in its Decision, to wit:

The [respondent’s] cause of action for collection of Sum of Money is founded mainly on the
Memorandum of Agreement validly executed by both parties.

First, the allegations in the [petitioner’s] Answer do not make out a specific denial that a
Memorandum of Agreement was perfected between the parties. Second, the [respondent] does not
contest the due execution and/or genuineness of said Memorandum of Agreement. In fact,
paragraph 13 of the Answer categorically admits paragraphs 4 and 5 of the Complaint.

In its Answer, the [petitioner] offered the following defenses, to wit:

19. The complaint should be dismissed on the ground that [respondent's J certification of
non-forum shopping is defective.  Rule 7, Section 5 of the 1997 Revised Rules of Civil
1âwphi1

Procedure ... xxx xxx xxx

22. [Respondent] has no legal capacity to sue, as it is a foreign corporation doing business in
the Philippines without a valid license. xxx xxx xxx

27. The unexpected default of FCCC on its obligations to [petitioner} on account of the
Senate Blue Ribbon Committee investigation was a fortuitous event which suspended, if not
extinguished [petitioner's} obligation to FCCC.

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In essence, the [petitioner] justifies its refusal to tender payment of the balance of US$615,620.33 to
the [respondent], to the failure of the First Centennial Clark Corporation (FCCC) to comply with its
obligations to ASIAKONSTRUKT which [it] characterizes as a fortuitous event.

The defenses raised by [petitioner] cannot prevent the [respondent] from seeking the collection of
the amount of US$615,620.33. The express terms of the Memorandum of Agreement, the
genuineness and due execution of which are not denied by the [petitioner]. It cannot assert the said
defenses in order to resist the [respondent's] claim for the aforesaid sum of money, especially where
it has been sufficiently shown by the allegations of the Complaint and the Answer that the [petitioner]
is clearly liable for the payment thereof.
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WHEREFORE, the instant petition is DENIED. The Decision dated April 25, 2006 and Resolution
dated February 6, 2008 of the Court of Appeals are hereby AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR: