SPOUSES FEDERICO AND ROSAMYRNA CARANDANG AND F.V. CARANDANG, PETITIONERS, VS. THE HON. COURT OF APPEALS AND PUZON INDUSTRIAL DEVELOPMENT CORPORATION, RESPONDENTS.

Carandang versus Puzon Industrial Development Corporation

The Case

This is a petition for review brought by the spouses Federico and Rosamyrna Carandang, together with F.V. Carandang Construction, Incorporated, against Puzon Industrial Development Corporation. Puzon had built sixteen housing units for the Carandangs under a construction contract, and when it was not fully paid, it sued. The case matters because it is the Supreme Court's clean statement on when a trial court may properly render a summary judgment, and on the binding effect of a party's failure to deny the genuineness and due execution of actionable documents attached to a complaint.

Procedural History

Puzon filed a complaint for collection against the Carandang spouses and F.V. Carandang Construction before the Regional Trial Court. The complaint was amended twice: first to implead Royal Monarch Real Estate Corporation, and again to implead State Investment House, Incorporated. After pre-trial, the parties agreed to limit the issues to the deductions the Carandangs were claiming and whether Puzon was entitled to share in the amortizations received by State Investment House. Puzon then moved for summary judgment. The motion was set for hearing and copies were served on all the defendants, but none opposed it and none appeared. The trial court rendered a summary judgment in favor of Puzon.

The Carandangs, Carandang Construction, and State Investment House appealed to the Court of Appeals. The Court of Appeals affirmed as to the Carandang spouses and Carandang Construction, holding them jointly and severally liable, but absolved State Investment House from any liability. The petitioners moved for reconsideration, which the Court of Appeals denied. Hence, the petition for review under Rule 45 of the Rules of Court.

Facts

In February 1982, the Carandang spouses, who were the controlling stockholders of F.V. Carandang Construction, Incorporated, entered into a Land Purchase Agreement with Royal Monarch Real Estate Corporation. They bought one hundred residential lots in the Greenfields Subdivision in Novaliches, Quezon City, for eight million three hundred fifty five thousand four hundred forty one pesos and twenty five centavos.

In April and May 1982, F.V. Carandang Construction contracted Puzon to build sixteen housing units in the subdivision at one thousand two hundred pesos per square meter. It was agreed that Puzon would be paid by assigning to it the sales collections from the housing units it constructed. Puzon completed the units in August 1982, at a cost of nine hundred seventy one thousand fifty pesos and seventeen centavos, but received only sixty one thousand two hundred ninety two pesos and ninety five centavos.

Meanwhile, the Carandangs executed in December 1982 a General Assignment of Collectible Accounts in favor of Royal Monarch. Later, the Carandangs and Royal Monarch assigned their receivables from the subdivision, including the sixteen houses Puzon had built, to State Investment House under a Memorandum of Agreement. Puzon alleged that these assignments were made without its knowledge and in derogation of the undertaking to apply the sales proceeds to its credit, and that State Investment House received the proceeds, leaving nothing for Puzon.

Issues

• Whether or not the trial court and the Court of Appeals could validly decide the case by summary judgment.
• Whether or not the trial court and the Court of Appeals could validly award damages in a summary judgment proceeding on the basis of mere allegations in the pleadings.
• Whether or not the trial court and the Court of Appeals could validly hold the Carandangs liable under Job Orders Numbers 3 and 4.

Applicable Provisions

Section 3 of Rule 34 of the Rules of Court provides:

At any time after the pleading in answer to a claim has been served, a party may move with supporting affidavits, depositions and admissions for a summary judgment in his favor as to all or any part of the claim, upon a showing that except as to the amount of damages there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.

This is the rule the Court applied in holding that the summary judgment was proper, because the pleadings and admissions on file showed no genuine issue as to any material fact.

Section 8 of Rule 8 of the Rules of Court, on the denial of actionable documents, provides:

When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts.

This is the provision behind the Court's holding that the petitioners' failure to deny the documents amounted to a judicial admission.

Ruling

On the first issue, the Court held that the summary judgment was proper. It was rendered in accordance with the Rules of Court and applicable jurisprudence, since the pleadings and admissions on file showed that there existed no genuine issue as to any material fact and that the movant was entitled to a judgment as a matter of law. The Court rejected the claim that the petitioners were deprived of their day in court, because copies of the motion were served, it was set for hearing, no opposition was filed, and no defendant appeared.

On the second issue, the Court held that damages could be awarded. The petitioners' failure to deny the genuineness and due execution of the actionable documents appended to the complaint was tantamount to a judicial admission of their genuineness and due execution. Judicial admissions do not require proof and may not be contradicted absent a prior showing that they were made through palpable mistake. The Court also noted that the so-called legal questions were sham, because in reality they presented factual issues.

On the third issue, the Court held that the Carandangs could be held liable under Job Orders Numbers 3 and 4. The appellate court found Puzon's causes of action, for damages and for specific performance of the Carandangs' obligations under those job orders, to have been duly established by the pleadings and other papers on record. Hence, a summary judgment for Puzon was correctly rendered.

Doctrine

A summary judgment is proper when the pleadings, admissions, and supporting papers show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law, as Section 3 of Rule 34 requires. A party who fails to deny under oath the genuineness and due execution of an actionable document copied in or attached to a pleading is deemed to have admitted it, and such a judicial admission requires no proof and cannot be contradicted absent a showing of palpable mistake. A motion for summary judgment served on all parties and set for hearing, which no one opposes and at which no one appears, does not deprive anyone of the day in court.

Disposition

The petition for review was dismissed for lack of merit, with costs against the petitioners, leaving the Court of Appeals decision holding the Carandang spouses and F.V. Carandang Construction, Incorporated jointly and severally liable to Puzon standing.

Remember This

The one line to memorize: failure to deny under oath the genuineness and due execution of an actionable document is a judicial admission that needs no proof and clears the way for summary judgment. Examiners use this case to test the requisites of summary judgment under Rule 34 and the rule on actionable documents under Rule 8.