Iloilo Jar Corporation v. Comglasco Corporation Aguila Glass, G.R. No.

219509, January 18,

FACTS: On August 16, 2000, petitioner Iloilo Jar Corporation (Iloilo Jar), as lessor, and
respondent Comglasco Corporation/Aguila Glass (Comglasco), as lessee, entered into a lease
contract over a portion of a warehouse building. The term of the lease was for a period of 3
years.

However, on December 1, 2001, Comglasco requested for the pre-termination of the lease
effective on the same date. Petitioner Iloilo Jar rejected said request on the ground that pre-
termination was not stipulated in the lease contract. Still, despite petitioner’s refusal, Comglasco
removed all its stocks, merchandise and equipment in the leased premises on January 15, 2002
and also stopped paying its rentals from said date.

This prompted petitioner Iloilo Jar, with its final demand letter unheeded, to file a civil action for
breach of contract before the RTC.

Comglasco filed its Answer and raised an affirmative defense invoking Article 1267 of the Civil
Code arguing that it was already released from its obligation from the lease contract, i.e. to pay
rent. “It explained that the consideration thereof had become so difficult due to the global and
regional economic crisis that had plagued the economy. Likewise, Comglasco admitted that it
had removed its stocks and merchandise but it did not refuse to pay the rentals because the lease
contract was already deemed terminated. Further, it averred that though it received the demand
letter, it did not amount to a refusal to pay the rent because the lease contract had been pre-
terminated in the first place.”

Thereafter, petitioner “Iloilo Jar filed its Motion for Judgement on the Pleadings arguing that
Comglasco admitted all the material allegations in the complaint. It insisted that Comglasco’s
answer failed to tender an issue because its affirmative defense was unavailing.”

Later, the RTC granted said motion. It ruled that Comglasco’s Answer admitted the material
allegations of the complaint and that its affirmative defense was unavailing because Article 1267
was inapplicable to lease contracts. Comglasco moved for reconsideration but was denied. Later,
the RTC Amended its Order modifying amounts awarded.

Comglasco appealed before the CA which reversed the Amended Order of the RTC. It ruled that
the judgment on the pleadings was improper as Comglasco’s answer tendered an issue
considering that Iloilo Jar’s material allegations were specifically denied therein. It further ruled
that even if the material allegation were not specifically denied, the answer raised an affirmative
issue which was factual in nature. Hence, the CA granted the appeal and REMANDED the case
to the RTC for further proceedings.

Petitioner Iloilo Jar moved for reconsideration but was denied. Hence, this petition.
ISSUE: Whether the Answer of respondent Comglasco did not tender an issue warranting
judgment on the pleadings?

HELD: No, the Supreme Court ruled that the judgment on the pleadings was improper
considering that Comglasco’s Answer raised an affirmative defense. The Supreme Court ruled
thus:

The SC quoted Section 1, Rule 34 governing motions for judgment on the pleadings and cited
Rule 35 of the Rules of Court governing summary judgment. It then gave a distinction between
the two citing Basbas v. Sayson, to wit: judgment on the pleadings is appropriate if the answer
failed to tender an issue while summary judgment may be resorted to if there are no genuine
issues raised –
“Simply stated, what distinguishes a judgment on the pleadings from a summary
judgment is the presence of issues in the Answer to the Complaint. When the Answer fails
to tender any issue, that is, [1] if it does not deny the material allegations in the complaint
or [2] admits said material allegations of the adverse party’s pleadings by admitting the
truthfulness thereof and/or [3] omitting to deal with them at all, a judgment on the
pleadings is appropriate. On the other hand, when the Answer specifically denies the
material averments of the complaint or asserts affirmative defenses, or in other words
raises an issue, a summary judgment is proper provided that the issue raised is not
genuine. ‘A “genuine issue” means an issue of fact which calls for the presentation of
evidence, as distinguished from an issue which is fictitious or contrived or which does
not constitute a genuine issue for trial.

In this case, we note that while petitioners’ Answer to respondents’ Complaint practically
admitted all the material allegations therein, it nevertheless asserts the affirmative
defenses that the action for revival of judgment is not the proper action and that
petitioners are not the proper parties. As issues obviously arise from these affirmative
defenses, a judgment on the pleadings is clearly improper in this case.”

“In the case at bench, Comglasco interposed an affirmative defense in its answer. While it
admitted that it had removed its stocks from the leased premises and had received the demand
letter for rental payments, it argued that the lease contract had been pre-terminated because the
consideration thereof had become so difficult to comply in light of the economic crisis then
existing. Thus, judgment on the pleadings was improper considering that Comglasco’s Answer
raised an affirmative defense.”

“Although resort to judgment on the pleadings might have been improper, there was still no need
to remand the case to the RTC for further proceedings. In Wood Technology Corporation v.
Equitable Banking Corporation, the Court rule that summary judgment may be availed if no
genuine issue for trial is raised, viz:
“Summary judgment is a procedure aimed at weeding out sham claims or defenses at an
early stage of the litigation. The proper inquiry in this regard would be whether the
affirmative defenses offered by petitioners constitute genuine issues of fact requiring a
full-blown trial. In a summary judgment, the crucial question is: are the issues raised by
petitioners not genuine so as to justify a summary judgment? A ‘genuine issue’ means an
 issue of fact which calls for the presentation of evidence, as distinguished from an issue
which is fictitious or contrived, an issue that does not constitute a genuine issue for trial.”

“It bears noting that in Wood Technology, the RTC originally rendered a judgment on the
pleadings but was corrected by the Court to be a summary judgment because of the issue
presented by the affirmative defense raised therein. In the said case, the Court, nonetheless, ruled
in favor of the complainant therein because there was no genuine issue raised.”

“Similar to Wood Technology, the judgment rendered by the RTC in this case was a summary
judgment, not a judgment on the pleadings, because Comglasco’s answer raised an affirmative
defense. Nevertheless, no genuine issue was raised because there is no issue of fact which
needs presentation of evidence, and the affirmative defense Comglasco invoked is inapplicable
in the case at bench.”

“A full blown trial would needlessly prolong the proceedings where a summary judgment would
suffice. It is undisputed that Comglasco removed its merchandise from the leased premises and
stopped paying rentals thereafter. Thus, there remains no question of fact which must be
resolved in trial. What is to be resolved is whether Comglasco was justified in treating the lease
contract terminated due to the economic circumstances then prevalent.”

Comglasco invoked as affirmative defense Article 1267 of the Civil Code as its main ground in
arguing that it was released from the lease contract. It particularly cited the 1997 Asian financial
crisis which led to its inability to comply with its obligation. However, in PNCC v. CA, the
Supreme Court ruled that Article 1267 applied only to obligations to do and not to obligations to
give. Comglasco’s obligation to pay rent or deliver the thing in a contract of lease falls within the
prestation “to give.”

“Considering that Comglasco’s obligation of paying rent is not an obligation to do, it could not
rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without merit as
financial struggles due to an economic crisis is not enough reason for the courts to grant
reprieve from contractual obligations.”

“In COMGLASCO Corporation/Aguila Glass v. Santos Car Check Center Corporation, the
Court ruled that the economic crisis which may have caused therein petitioner’s financial
problems is not an absolute exceptional change of circumstances that equity demands assistance
for the debtor. It is noteworthy that Comglasco was also the petitioner in the abovementioned
case, where it also involved Article 1267 to pre-terminate the lease contract.”

WHEREFORE, the Decision and Resolution of the CA are REVERSED and SET ASIDE. The
Amended Order of the RTC-Iloilo is AFFIRMED WITH MODIFICATION x x x