Case No.

11
FELICIDAD L. ORONCE and ROSITA L. FLAMINIANO
vs.
HON. COURT OF APPEALS and PRICILIANO B. GONZALES DEVELOPMENT
CORPORATION
G.R. No. 125766 October 19, 1998

FACTS:
Priciliano B. Gonzales Development Corporation (PBGDC) was the registered owner
of a titled parcel of land located at Gilmore St., Quezon City. It mortgaged the property to
China Banking Corp. for a four million peso loan. However, it accumulated penalties and
interest due to irregular payments.
In April 13, 1992, the PBGDC executed a Deed of Sale with Assumption of Mortgage
over the Gilmore property in favor of Oronce and Flaminiano (petitioners). The deed stated
conditions that the petitioners should pay the debt of PBDGC to China Bank and the
possession of the property shall be delivered by PBGDC after one (1) year from the
execution of the deed to them.
Petitioners paid the debt, caused the registration of the deed to the Registry of Deed,
and able to obtain new title under their names. However, after a year, when they sent
demand letters to vacate the premises, it was unclaimed prompting them to file a complaint
before MTC Branch 41 of Quezon City for unlawful detainer, attaching a copy of the deed
and cited the section of the conditions of delivery after a year.
The PBGDC filed its answer alleging that when the deed was executed, its real
intention was to forge an equitable mortgage and not a sale. Hence, it raised the issue of
ownership alleging that the petitioners had no cause of action against it because it was
merely a mortgagee.
The MTC decided the case in favor of the petitioner. On appeal, the RTC affirmed in
toto the decision of the MTC. However, upon appeal to the CA, the court set aside the
decisions of the lower courts.
The CA cited that the other conditions stated in the deed which were not met, such
as: the price was inadequate; it has retained part of the purchase price; it remained in
possession of the premises; and the intention of the parties was to secure payment of the
loan; were the circumstances warranting contract to be presumed as an equitable
mortgage. Also, the court stated that no derogatory inference can arise from petitioner's
admission of the existence of the deed of sale with assumption of mortgage.
ISSUE:
Whether or not the contract is an equitable mortgage and the documents attached
to the complaint are deemed admitted when not denied under oath.

HELD:
Yes, the contract is an equitable mortgage and the documents attached to the
complaint are deemed admitted when not denied under oath.
The court ruled that in quoting paragraph (c) of the Deed of Sale with Assumption
of Mortgage, “the possession of the Gilmore property shall remain with the vendor that was
obliged to transfer possession only after the expiration of one year”, MTC Branch 41
apparently did not examine the terms of the deed of sale. Instead, it erroneously held that
the issue of whether or not the document was in fact an equitable mortgage "should not be
properly raised in this case." Had it examined the terms of the deed of sale, which, after all
is considered part of the allegations of the complaint having been annexed thereto, that
court would have found that, even on its face, the document was actually one of equitable
mortgage and not of sale. The inferior court appears to have forgotten that all documents
attached to a complaint, the due execution and genuineness of which are not denied under
oath by the defendant, must be considered as part of the complaint without need of
introducing evidence thereon.
 Case No. 12
CAPITOL MOTORS CORPORATIONS
vs.
NEMESIO I. YABUT

G.R. No. L-28140 March 19, 1970

FACTS:
On March 1, 1966, Capitol Motors Corporations filed a complaint against Nemesio I.
Yabut alleging that Yabut executed on April 1965 a promissory note (copy of which was
attached to the complaint) in favor of the plaintiff, payable in installments with interest at
12% per annum, and that should the defendant fail to pay two (2) successive installments,
the principal sum remaining unpaid would immediately become due and demandable and
the defendant be obligated to an additional sum equivalent to 25% of the principal and
interest due; that as of February 23, 1966, the sum remaining unpaid on the promissory
note was P30,754.79, including accrued interest; that the defendant defaulted in the
payment of two (2) successive installments, and likewise failed to pay the interest due on
the promissory note; and that in spite of demands by the plaintiff, the defendant failed and
refused to pay the said principal sum and interest due.
Yabut filed an answer which reads:
“2. Paragraphs 2, 3, 4, 5, 6 and 7 of the complaint are specifically
denied for lack of knowledge sufficient to form a belief as to the truth
thereof.”
Capitol filed a motion for judgment on the pleadings. Yabut did not opposed the
motion. The court granted the motion, hence this appeal.
ISSUE:
1. Whether or not the answer of Yabut constitutes a specific denial under the Rule
of Courts.
2. Whether or not the allegations of Capitol Motors would be considered admitted.
HELD:
1. No, the answer of Yabut does not constitutes a specific denial under the Rule of
Courts.
The court ruled that one of the modes of specific denial contemplated in Section 10,
Rule 8, is a denial by stating that the defendant is without knowledge or information
sufficient to form a belief as to the truth of a material averment in the complaint . However,
as to the doctrine of Warner Barnes & Co., Ltd. vs. Reyes, et al., this mode does not apply
where the fact as to which want of knowledge is asserted, is so plainly and necessarily
within the defendant's knowledge that his averment of ignorance must be palpably untrue.
Thus, a mere allegation of ignorance of the facts alleged in the complaint, is
insufficient to raise an issue; the defendant must aver positively or state how it is that he is
ignorant of the facts so alleged.

2. Yes, the allegations of Capitol Motors would be considered admitted.

In National Marketing Corporation vs. De Castro, the court held that material
averments in a complaint, other than those as to the amount of damage, are deemed
admitted when not specifically denied. The court may render judgment upon the pleadings
if material averments in the complaint are admitted.
Moreover, the court present two reasons why the present appeal must fail. First.
The present action is founded upon a written instrument attached to the complaint, but
defendant-appellant failed to deny under oath the genuineness and due execution of the
instrument; hence, the same are deemed admitted. (Section 8, Rule 8 of the Revised Rules
of Court). Second. Defendant-appellant did not oppose the motion for judgment on the
pleadings filed by plaintiff appellee, which deemed the case submitted for decision on the
pleadings.
In Santiago vs. Basilan Lumber Company, the Court stated that when the defendant
interposed no objection and has practically assented thereto, he is deemed to have
admitted the allegations of the complaint, so that there was no necessity for the plaintiff to
submit evidence of his claim.