Contents
Best Evidence Rule
A. Best Evidence Rule ......................................................................... 1
REPUBLIC v MUPAS ........................................................................ 1
EDSA SHANGRILA v BF CORPORATION ........................................ 12
CHUA GAW v CHUA...................................................................... 21
EBREO v EBREO ............................................................................ 29
CONSOLIDATED BANK v DEL MONTE MOTOR WORKS ................ 39
CITIBANK v SABENIANO ............................................................... 48
ATIENZA v BOARD OF MEDICINE ................................................. 98
SASAN v NLRC ............................................................................ 104
DECS v DEL ROSARIO .................................................................. 118
B. Parol Evidence Rule.................................................................... 127
CARGANILLO v PEOPLE............................................................... 127
ACI PHILS. V COCQUIA................................................................ 130
SEAOIL PETROLEUM v AUTOCORP ............................................. 137
MARQUEZ v ESPEJO ................................................................... 144
LEQUIN v SPS. VIZCONDE ........................................................... 156
SALIMBANGON v TAN ................................................................ 165
EVIDENCE (Rule 130 Documentary Evidence Cases)
A.
REPUBLIC v MUPAS
Facts:
Asia’s Emerging Dragon Corp. (AEDC) submitted an unsolicited
proposal to the Government – through the Department of
Transportation and Communications (DOTC) and the Manila
International Airport Authority (MIAA) – for the construction and
development of the NAIA-IPT III under a build-operate-and-
transfer (BOT) arrangement.
On the other hand, Paircargo Consortium – composed of People’s
Air Cargo and Warehousing Co., Inc. (Paircargo), Philippine Air and
Grounds Services, Inc. (PAGS), and Security Bank Corporation
(Security Bank) – submitted its competitive proposal to the
Prequalification Bids and Awards Committee (PBAC).Paircargo
Consortium offered to pay the Government a total of P17.75 billion
as guaranteed payment for 27 years while AEDC offered to pay the
Government a total of P135 million for the same period. Hence,
DOTC awarded the project to Paircargo Consortium (that later
organized itself as PIATCO). A Concession Agreement with PIATCO
for the construction, development, and operation of the NAIA-IPT III
under a build-operate-transfer scheme was made to authorized
PIATCO to build, operate, and maintain the NAIA-IPT III during the
concession period of twenty-five (25) years.
On March 31, 2000, PIATCO engaged the services of Takenaka and
Asahikosan to aid in constructing the project. However, PIATCO
defaulted on its obligation to pay Takenaka and
Asahikosan pursuant to their respective contracts. Takenaka and
Asahikosan agreed to defer PIATCO’s payments until June 2003. In
2002, President Gloria Macapagal Arroyo declared in her speech
that the Government would not honor the PIATCO contracts. On
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the same day, Takenaka and Asahikosan notified PIATCO that they
were suspending the construction of the NAIA-IPT III for PIATCO’s
failure to provide adequate security. September 17, 2002,
petitioners Demosthenes Agan, et al., asked the Court to nullify the
PIATCO contracts, and to prohibit the DOTC and the MIAA from
implementing these contracts for being contrary to law. The case,
entitled Agan v. PIATCO, was docketed as G.R. No. 15500.
May 5, 2003, the Court nullified the PIATCO contracts after finding
that Paircargo Consortium (that later incorporated
into PIATCO) was not a duly pre-qualified bidder for failure to meet
the minimum equity requirements for the NAIA-IPT III project.
Security Bank (member of the Paircargo Consortium) invested its
entire net worth in a single undertaking or enterprise in
gross violation of Section 21-B of the General Banking Act (which
limits a commercial bank’s equity investment, whether allied or
non-allied, to fifteen percent (15%) of its net worth).
PIATCO contracts contained provisions that substantially departed
from the draft Concession Agreement
December 21, 2004, the Government filed a complaint for
expropriation of the NAIA-IPT III before the RTC of Pasay, Branch 11
RTC issued a writ of possession in favor of the Government.
Citing City of Manila v. Serrano,23 the RTC held that that it had the
ministerial duty to issue a writ of possession upon: (1) the filing of
the complaint for expropriation sufficient in form and substance,
and (2) the Government’s deposit of the amount equivalent to the
property’s assessed value, pursuant to Rule 67 of the Rules of Court
January 4, 2005, the RTC modified its December 21, 2004 order and
directed: (1) the Land Bank to immediately release to PIATCO the
amount of US$62,343,175.7725cralawred that would be deducted
from the just compensation; (2) the Government to submit to the
EVIDENCE (Rule 130 Documentary Evidence Cases)
RTC a Certificate of Availability of Funds for the payment of just
compensation; and (3) the Government to maintain and preserve
the NAIA-IPT III pending the expropriation proceedings and the full
payment of just compensation. The RTC likewise prohibited the
Government from performing acts of ownership over the NAIA-IPT
III such as awarding concessions or leasing any part of the NAIA-IPT
III to other parties
RTC appointed three Commissioners28 to determine just
compensation without consulting the Government and PIATCO
Republic v. Gingoyon Case, G.R. No. 166429
Government, et al., filed a petition for certiorari with the Court
assailing the validity of the January 4, 7, and 10, 2005 orders of the
RTC in the expropriation case
, the Court did not recognize the London awards in favor of
Takenaka and Asahikosan. Under Section 48, Rule 39 of the Rules of
Court, a foreign judgment would not bind Philippine courts unless
the judgment is recognized and enforced in this jurisdiction.
Philippine courts may annul a foreign judgment for lack of
jurisdiction, lack of notice to the party, collusion, fraud, clear
mistake of law or fact, or when the foreign judgment is contrary to
public policy
PIATCO, as builder of the NAIA-IPT III, must first receive just
compensation in accordance with law and equity before the
Government may take over the NAIA-IPT
Government should not pay for the portions of the NAIA-IPT III that
were defective – as per rtc
 (a) failed structural elements in the NAIA-IPT III;
(b) inferior quality of material works;
(c) constructed areas that are unnecessary to the use of an
international airport terminal;
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 (d) cost of seismic and gravity load structural retrofits for
the failed elements;
(e) cost of completing the items listed in the JAC project
status summary report of February 28, 2003; and
(f) cost of seismic and gravity load structural retrofits for the
failed elements in the elevated roadway structures.
RTC stated that just compensation is limited to the value of the
improvement at the time of the filing of the expropriation
complaint. The payment of just compensation does not include the
right to be compensated of the franchise to operate the airport, and
the increased value of improvements due to inflation rate.
PIATCO, Takenaka, and Asahikosan sought to nullify the RTC
decision for alleged violation of their right to due process. They
complained that they were only furnished copies of the BOC Final
Report only after the promulgation of the May 23, 2011
decision.103 They averred that the RTC violated Sections 7 and 8,
Rule 67 of the Rules of Court which provide that the clerk of court
shall serve copies of the commissioners’ report on all interested
parties, with notice that they be allowed ten days within which to
file objections to the findings of the report, if they so desire
the offer to pay through an escrow account is not equivalent to
direct payment. PIATCO further denied the Government’s
allegations that there were several claimants on the just
compensation
RTC ruled that it has residual jurisdiction to adjudicate the
Government’s Manifestation and Motion considering that the
EVIDENCE (Rule 130 Documentary Evidence Cases)
motion was filed prior to the parties’ filing of the Notice of Appeal.
The RTC opined that the Manifestation and Motion was akin to a
motion for execution pending appeal. The Manifestation and
Motion showed the Government’s intent to voluntarily comply with
the May 23, 2011 decision which was pending appeal before the CA.
Under Section 9, Rule 41 of the Rules of Court, the RTC has the
residual power to issue orders for the protection and preservation
of the parties’ rights, and to order the execution of a decision
pending appeal. Furthermore, Section 6, Rule 136 of the Rules of
Court provides that courts have incidental power to issue orders
that are necessary to effectuate their judgments.
The CA Rulings
CA upheld the validity of the RTC’s May 23, 2011 decision. The CA
ruled that the parties did not need to be furnished the BOC Final
Report since RA 8974 is silent on the appointment of the BOC, as
held in Gingoyon.
However, the CA modified the RTC rulings and arrived at its own
formula of the NAIA-IPT III’s replacement cost
The CA likewise observed that PIATCO’s summarized computation of
attendant costs was self-serving and unsubstantiated by relevant
evidence.
CA further ordered Takenaka and Asahikosan to share in the
expenses of the BOC. Since Takenaka and Asahikosan’s inputs on
the construction costs of the NAIA-IPT III were heard by the RTC,
they should share in the expenses of the BOC.
Upon finality of judgment, interest on the sum due by then shall be
at 6% per annum until fully paid pursuant to BSP Circular No. 799,
series of 2013 which took effect on 01 July 2013, and which
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effectively modified the interest rate rulings in Eastern Shipping
Lines, Inc. v. Court of Appeals. Eastern Shipping was the basis of
the Court’s earlier imposition of a 12% interest from finality of
judgment.
The Action to Enforce the London Awards, Civil Case No. 06-171
In a decision dated September 6, 2010, the RTC recognized the
validity of the London awards in Claim Nos. HT-04-248 and HT-05-
269 and declared these awards as enforceable in the Philippine
jurisdiction. The RTC thus ordered PIATCO to pay Takenaka and
Asahikosan the sum of $85.7 million.124cralawrednad
G.R. No. 209917 is the Government’s petition for review
on certiorari128 to partially reverse the CA’s August 22, 2013
Amended Decision129 and its October 29, 2013 Resolution130 in CA-
G.R. CV No. 98029.
G.R. No. 209696 is a petition for review on certiorari filed by
Takenaka and Asahikosan to partially reverse the CA’s August 22,
2013 Amended Decision and its October 29, 2013 Resolution in CA-
G.R. CV No. 98029.131cralawrednad
G.R. No. 209731 is PIATCO’s petition for review on certiorari to
reverse the CA’s August 22, 2013 Amended Decision, and October
29, 2013 Resolution in CA-G.R. CV No. 98029.132cralawrednad
G.R. Nos. 209917, 209696 & 209731 originally arose from the
Government’s complaint for expropriation of the NAIA-IPT III filed
with the RTC of Pasay, Branch 117 in Civil Case No. 04-0876. The
EVIDENCE (Rule 130 Documentary Evidence Cases)
main issue before the Court in these petitions is the valuation of the
just compensation due for the Government’s expropriation of the
NAIA-IPT III.
G.R. No. 181892 is the Government’s petition for certiorari with
prayer for the issuance of a temporary restraining order,133 assailing
the May 3, 2007, May 18, 2008; and January 7, 2008 orders of the
RTC of Pasay City, Branch 117 in Civil Case No. 04-
0876.134cralawrednad
This petition likewise arose from the Government’s complaint for
expropriation of the NAIA-IPT III. The main issue in this petition is
the propriety of the appointment of DG Jones and Partners as an
independent appraiser of the NAIA-IPT III.
G.R. No. 202166 is PIATCO’s petition for review on certiorari135 to
assail the CA’s March 13, 2012 decision136 and May 31, 2012
Resolution137 in CA-G.R. CV No. 96502. The petition arose from
Takenaka and Asahikosan’s action to enforce the London awards
before the RTC of Makati, Branch 143 in Civil Case No. 06-171. As
previously mentioned, this case was not consolidated with the four
(4) cases above and shall thus be separately ruled upon by the
Court.
The Government’s Position (G.R. Nos. 209917, 209731, and
209696)
partially reverse the CA rulings and to deduct from the replacement
cost of US$300,206,693.00 the following items: (a) depreciation in
the amount of US$36,814,612.00; and (b) PIATCO’s non-compliance
with contract specifications in the amount of US$113,944,044.0
Page 4
Whether the Government may take property for public purpose or (together with the pleadings, evidence of the parties, and the entire
public use upon the issuance and the effectivity of the writ of record of the case) are reviewed and considered by the
possession expropriation court. It is the parties’ total failure to present
Held: evidence on just compensation that renders the trial court’s ruling
The parties were afforded procedural void. The opportunity to present evidence during the trial remains
due process despite their non-receipt to be the vital requirement in the observance of due process
of the BOC Final Report prior to The mere failure of the RTC’s clerk of court to send the parties
the promulgation of the RTC’s copies of the BOC Final Report is not substantial enough under the
May 23, 2011 Decision. attendant circumstances to affect and nullify the whole
proceedings. Litigation is not a game of technicalities
Rule 67 of the Rules of Court provides that the clerk of court shall The power of eminent domain is
serve copies of the commissioners’ final report on all interested a fundamental state power that is
parties upon the filing of the report. Each party shall have ten days inseparable from sovereignty.Eminent domain is a fundamental
within which to file their objections to the report’s findings state power that is inseparable from sovereignty. It is the power of a
Upon the expiration of the ten-day period or after all the parties sovereign state to appropriate private property within its territorial
have filed their objections and after hearing, the trial court may: (a) sovereignty to promote public welfare. The exercise of this power is
accept the report and render judgment in accordance therewith; (b) based on the State’s primary duty to serve the common need and
for cause shown, recommit the report to the commissioners for advance the general welfare.174 It is an inherent power and is not
further report of facts; (c) set aside the report and appoint new conferred by the Constitution.175 It is inalienable and no legislative
commissioners; (d) partially accept the report; and (e) make such act or agreement can serve to abrogate the power of eminent
order or render such judgment as shall secure to the plaintiff the domain when public necessity and convenience require its
property essential to the exercise of his right of expropriation; and exercise.176cralawrednad
to the defendant, the just compensation for the property so taken.
We rule that the parties’ failure to receive the Final Report did not The decision to exercise the power of eminent domain rests with
render the May 23, 2011 Decision null and void. the legislature which has the exclusive power to prescribe how and
by whom the power of eminent domain is to be exercised. Thus, the
The essence of procedural due process is the right to be Executive Department cannot condemn properties for its own use
heard.172 The procedural due process requirements in an eminent without direct authority from the Congress.
domain case are satisfied if the parties are given the opportunity to
present their evidence before the commissioners whose findings

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 5

Just compensation is the full and (a) In actions falling within its original jurisdiction, such as (1)
fair equivalent of the property taken from the certiorari, prohibition and mandamus, (2) annulment of judgment or
owner by the condemnor. final order, (3) quo warranto, (4) habeas corpus, (5) amparo, (6)
habeas data, (7) anti-money laundering, and (8) application for
In cases where the fair market value of the property is difficult to judicial authorization under the Human Security Act of 2007;
ascertain, the court may use other just and equitable market
methods of valuation in order to estimate the fair market value of (b) In appeals in civil cases where the Court grants a new trial on
a property the ground of newly discovered evidence, pursuant to Sec. 12,
The Court cannot consider Rule 53 of the Rules of Court;
the additional evidence submitted by Takenaka
and Asahikosan before the Court of Appeals (c) In appeals in criminal cases where the Court grants a new trial on
the ground of newly discovered evidence, pursuant to Sec. 12, Rule
At the outset, we rule that we cannot consider Takenaka and 124 of the rules of Court; and
Asahikosan’s attachments in their (1) Motion for Submission of
Additional Documents dated July 30, 2013;260 (2) Supplemental (d) In appeals involving claims for damages arising from provisional
Motion for Submission of Additional Documents dated October 3, remedies. (Emphasis supplied)
2012;261 and (3) Second Supplemental Motion for Submission of
Additional Documents dated April 11, 2013 in CA G.R. No. CV- This provision qualifies the CA’s power to receive evidence in the
98029.262 These attachments sought to refute the Government’s exercise of its original and appellate jurisdiction under Section 9 of
position that the NAIA-IPT III suffered from massive structural BP 129, as amended:ChanRoblesvirtualLawlibrary
defects. Sec. 9. Jurisdiction. — The Court of Appeals shall
exercise:ChanRoblesvirtualLawlibrary
Takenaka and Asahikosan posit that they could have submitted xxxx
reports before the trial court to show that the design of the NAIA-
IPT III was structurally sound if the RTC had only furnished the The Court of Appeals shall have the power to try cases and conduct
parties copies of the BOC Final Report and afforded them the hearings, receive evidence, and perform any and all acts necessary
opportunity to file a Comment on the Final Report. to resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new
Under Section 3, Rule 6 of the Internal Rules of the CA, the CA may trials or further proceedings. Trials or hearings in the Court of
receive evidence in the following cases:ChanRoblesvirtualLawlibrary

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 6

Appeals must be continuous and must be completed within three Under Section 3, Rule 131 of the Rules of Court, it is presumed that
(3) months, unless extended by the Chief Justice. a person is innocent of wrong;265 that a person takes ordinary care
of his concerns;266that private transactions have been fair and
Since Takenaka and Asahikosan filed an ordinary appeal pursuant to regular;267 and that the ordinary course of business has been
Rule 41 in relation to Rule 44 of the Rules of Court, the CA could only followed.268cralawrednad
have admitted newly discovered evidence. Contrary to Takenaka and
Asahikosan’s claim, the attachments to the motions are not newly Based on these presumptions, we presume that Takenaka and
discovered evidence. Newly discovered evidence is evidence that Asahikosan built the NAIA-IPT III in accordance with the
could not, with reasonable diligence, have been discovered and specifications required under the Onshore Construction Contract
produced at the trial, and which, if presented, would probably alter and Offshore Procurement Contract. We also presume that the
the result.263cralawrednad NAIA-IPT III is structurally sound and compliant with the applicable
building codes and other laws at the time it was designed and built.
We find it hard to believe that Takenaka and Asahikosan could only
have possibly secured the attachments after the trial court had However, these presumptions are merely disputable
rendered its decision. With the exercise of reasonable diligence, presumptions and may be overcome by contradicting evidence.
Takenaka and Asahikosan could have produced these documents The burden of proof lies with the Government to prove by
before the BOC since they were fully aware that the Government preponderance of evidence that the NAIA-IPT III suffered from
presented evidence on the alleged structural defects of the NAIA- structural defects. “Preponderance of evidence” is the weight,
IPT III. credit, and value of the aggregate evidence on either side and is
usually considered to be synonymous with the term “greater weight
Equiponderance of evidence on of evidence” or “greater weight of credible
269
the alleged structural defects of the NAIA-IPT evidence.” cralawrednad
III favors PIATCO, Takenaka and Asahikosan.
In determining where the preponderance of evidence or superior
Nonetheless, even without considering and/or giving probative weight of evidence on the issues involved lies, the court may
value to the additional evidence presented by Takenaka and consider all the facts and circumstances of the case, the witness’
Asahikosan before the CA, this Court finds that the Government manner of testifying, their intelligence, their means and opportunity
failed to establish by preponderance of evidence that the NAIA-IPT of knowing the facts to which they are testifying, the nature of the
III suffered from structural defects. facts to which they testify, the probability of their testimony, their
interest or want of interest, and also their personal credibility in so

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 7

far as the same may legitimately appear during trial. The court may
also consider the number of witnesses, although preponderance
does not necessarily lie with the greater number.270cralawrednad
The Government’s burden of proof to show that the NAIA-IPT III is
indeed defective does not shift to its adverse parties. The burden of
proof remains throughout the trial with the party upon whom it is
imposed.
It is the burden of evidence that shifts from party to party during
trial.271 This means that the burden of going forward with the
evidence is met by the countervailing evidence of PIATCO, Takenaka
and Asahikosan which, in turn, balances the evidence introduced by
the Government. Thereafter, the burden of evidence shifts back to
the Government.
In the present case, the experts and consultants of the Government,
PIATCO, Takenaka and Asahikosa arrived at conflicting findings
regarding the structural integrity of the NAIA-IPT III. The
Government’s experts detailed with particularity the alleged defects
of the NAIA-IPT III, which allegations the experts of PIATCO,
Takenaka and Asahikosan refuted with particularity.
Under the equiponderance of evidence rule, when the scale of
justice shall stand on equipoise and nothing in the evidence inclines
a conclusion to one side or the other, the court will find for the
defendant. 272cralawrednad
If the facts and circumstances are capable of two or more
explanations, one of which is consistent with the allegations of the
EVIDENCE (Rule 130 Documentary Evidence Cases)
plaintiff and the other consistent with the defense of the defendant,
the evidence does not fulfill the requirement of preponderance of
evidence. When the evidence of the parties is in equipoise, or when
there is a doubt as to where the preponderance of evidence lies, the
party with the burden of proof fails. 273cralawrednad
The reason for this rule is that the plaintiff must rely on the strength
of his evidence and not on the weakness of the defendant's claim.
Thus, even if the evidence of the plaintiff may be stronger than that
of the defendant, there is no preponderance of evidence on his side
when this evidence is insufficient in itself to establish his cause of
action.274cralawrednad
In the present case, PIATCO, Takenaka and Asahikosan, met the
Government’s allegations regarding the structural integrity of the
NAIA-IPT III.
A reading of the reports of the parties’ respective experts shows
that each party presented an equally persuasive case regarding the
structural soundness or defect of the NAIA-IPT III. The Government’s
case on the alleged structural defect of the NAIA-IPT III has been
met by equally persuasive refutations by the experts of PIATCO,
Takenaka and Asahikosan.
As a matter of law and evidence, the Government’s case regarding
this matter must fail. Since PIATCO, Takenaka and Asahikosan
presented equally relevant and sufficient countervailing evidence on
the structural soundness of the NAIA-IPT III, the scales of justice tilt
in their favor. Neither party successfully established a case by
preponderance of evidence in its favor; neither side was able to
Page 8
establish its cause of action and prevail with the evidence it had. As
a consequence, we can only leave them as they are.275cralawrednad
PIATCO’s attendant costs
Under the best evidence rule, when the subject of inquiry relates to
the contents of a document, no evidence shall be admissible other
than the original document itself. In proving the terms of a written
document, the original of the document must be produced in court.
The best evidence rule ensures that the exact contents of a
document are brought before the court. In deeds, wills, and
contracts, a slight variation in words may mean a great difference in
the rights and obligations of the parties. A substantial hazard of
inaccuracy exists in the human process of making a copy by
handwriting or typewriting. Moreover, with respect to oral
testimony purporting to give the terms of a document from
memory, a special risk of error is present, greater than in the case of
attempts at describing other situations generally.286cralawrednad
The best evidence rule likewise acts as an insurance against fraud. If
a party is in the possession of the best evidence and withholds it,
and seeks to substitute inferior evidence in its place, the
presumption naturally arises that the better evidence is withheld for
fraudulent purposes that its production would expose and defeat.
The rule likewise protects against misleading inferences resulting
from the intentional or unintentional introduction of selected
portions of a larger set of writings.287cralawrednad
As exceptions to the best evidence rule, Section 3, Rule 130 of the
EVIDENCE (Rule 130 Documentary Evidence Cases)
Rules of Court provides that non-original documents may be
produced in court in the following
cases:ChanRoblesvirtualLawlibrary
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b)When the original is in the custody or under control of the party
against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
(c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss
of time and the fact sought to be established from them is only
the general result of the whole; and
(d)When the original is a public record in the custody of a public
officer or is recorded in a public office. (Emphasis supplied)
Secondary evidence of the contents of writings is admitted on the
theory that the original cannot be produced by the party who offers
the evidence within a reasonable time by the exercise of reasonable
diligence.288cralawrednad
PIATCO argues that its non-submission of original documents before
the trial court is justified under Section 3 (c), Rule 130 of the Rules
of Court. It points out that a party need not submit the original
when it consists of numerous accounts or other documents which
cannot be examined in court without great loss of time and the fact
sought to be established from them is only the general result of the
whole. PIATCO insists that the lower courts erred in not giving
probative value to the report prepared by Reyes Tacandong & Co.,
an auditing firm, validating PIATCO’s computation of attendant
costs. Significantly, Reyes Tacandong & Co. failed to state that it
Page 9
examined the original documents in validating PIATCO’s
computation of attendant costs.
We agree with PIATCO that it need not submit numerous and
voluminous invoices, official receipts, and other relevant documents
before the trial court to prove the attendant costs that it incurred in
the construction of the NAIA-IPT III. The trial court may admit
a summary of voluminous original documents, in lieu of original
documents, if the party has shown that the underlying writings are
numerous and that an in-court examination of these documents
would be inconvenient. In other words, Section 3 (c), Rule 130 of
the Rules of Court does away with the item-by-item court
identification and authentication of voluminous exhibits which
would only be burdensome and tedious for the parties and the
court.
However, as a condition precedent to the admission of a summary
of numerous documents, the proponent must lay a proper
foundation for the admission of the original documents on which
the summary is based. The proponent must prove that the source
documents being summarized are also admissible if presented in
court.289cralawrednad
In concrete terms, the source documents must be shown to be
original, and not secondary. Furthermore, the source documents
must likewise be accessible to the opposing party so that the
correctness of the summary of the voluminous records may be
tested on cross-examination and/or may be refuted in pleadings. In
ordinary trial-type proceedings, a proper foundation for the
introduction of a summary may be established through the
EVIDENCE (Rule 130 Documentary Evidence Cases)
“testimony of the person who is responsible for the summary's
preparation, or the person who supervised the preparation of the
summary.”290cralawrednad
The primary reason for these procedural foundations is that the
summary of numerous documents is, in strict terms, hearsay
evidence. The trial court should not haphazardly allow a party to
present a summary of numerous documents and immediately admit
and give probative value to such summary without sufficiently
laying these foundations. If the source documents of the summary
are non-original, the trial court would commit a grave error in
admitting and/or giving probative value to the summary of non-
original documents; the evidence admitted would be double
hearsay.291cralawrednad
Furthermore, when a party invokes Section 3 (c), Rule 130 of the
Rules of Court, he does not similarly invoke Section 3 (a), (b), and/or
(d), Rule 130 of the Rules of Court. He does not likewise claim that
the original documents have been lost or destroyed. The party
merely asserts that the numerous documents cannot be examined in
court without great loss of time and that the fact sought to be
established from these documents is only the general result of the
whole.
Whenever a party seeks an exemption under the best evidence rule
pursuant to Section 3 (c), Rule 130 of the Rules of Court, he asks
permission from the trial court to produce a summary of numerous
documents, whose originals are available to the adverse party for
inspection. He does not ask permission from the trial court to
present in evidence the numerous non-original documents.
Page 10
Otherwise, the very purpose of Section 3 (c), Rule 130 of the Rules
of Court would be defeated. In that case, every exhibit of non-
original documents would be identified, authenticated, and cross-
examined, leading to a tedious and protracted litigation.
Thus, if a party desires to present photocopies of the original
documents, he must first establish that the presentation of
photocopies is justified under Section 3 (a), (b), and/or (d), Rule
130 of the Rules of Court. He must establish the presence of all the
elements under these provisions.
In the case of lost or destroyed documents, the offeror of non-
original documents must first prove the following elements before
secondary evidence is admitted before the court: (a) the existence
or due execution of the original; (b) the loss and destruction of the
original, or the reason for its non-production in court; and (c) the
absence of bad faith on the part of the offeror to which the
unavailability of the original can be attributed. To conclude
otherwise is to allow the party to circumvent the best evidence rule
and the requirements under Section 3 (a), (b), and (d), Rule 130 of
the Rules of Court by merely invoking Section 3 (c), Rule 130 of the
Rules of Court.
In the present case, PIATCO attached to its Compliance dated
December 14, 2010, the photocopies of numerous documents, and
the validation of PIATCO’s computation of attendant costs prepared
by Reyes Tacandong & Co., among others. PIATCO justifies the non-
presentment of original documents pursuant to Section 3 (c), Rule
130 of the Rules of Court.
EVIDENCE (Rule 130 Documentary Evidence Cases)
We affirm the lower courts’ uniform findings that PIATCO failed to
establish its attendant costs. PIATCO failed to establish that the
photocopied documents fall under Section 3 (a), (b), and/or (d), Rule
130 of the Rules of Court. These photocopied documents are
hearsay evidence. They are mere scraps of paper and have no
weight as basis for the attendant costs of the NAIA-IPT III.
We likewise cannot give weight to the summary prepared by
Reyes Tacandong & Co. for being double hearsay. Reyes Tacandong
& Co., whose letter was addressed to PIATCO and not to the trial
court, did not state in its report that it examined the original
documents allegedly proving attendant costs. Moreover, in a letter
dated December 14, 2010, Reyes Tacandong & Co stated it does not
“express any assurance on the attendant costs:”
We have performed the procedures agreed with Philippine
International Air Terminals, Co., (“the Company”) with respect to
the Company’s attendant costs incurred in building NAIA Terminal 3
from 1997 to 2004. Our engagement was undertaken in accordance
with the Philippine Standard on Related Services applicable to
agreed-upon procedures engagements.
xxxx
The sufficiency of the procedures is solely the responsibility of the
specified users of the report. Consequently, we make no
representation regarding the sufficiency of the procedures either
for the purpose for which this report has been requested or for any
other purpose.
Because the procedures do not constitute either an audit or a
review of financial statements made in accordance with Philippine
Page 11
Standards on Auditing, we do not express any assurance on the
attendant costs. (Emphasis supplied)
EDSA SHANGRILA v BF CORPORATION
DECISION
VELASCO, JR., J.:
Before us are these two (2) consolidated petitions for review under
Rule 45 to nullify certain issuances of the Court of Appeals (CA).
In the first petition, docketed as G.R. No. 145842, petitioners Edsa
Shangri-la Hotel and Resort, Inc. (ESHRI), Rufo B. Colayco, Rufino L.
Samaniego, Kuok Khoon Chen, and Kuok Khoon Tsen assail the
Decision[1]dated November 12, 1999 of the CA in CA-G.R. CV No.
57399, affirming the Decision[2] dated September 23, 1996 of the
Regional Trial Court (RTC), Branch 162 in Pasig City in Civil Case No.
63435 that ordered them to pay jointly and severally respondent BF
Corporation (BF) a sum of money with interests and damages. They
also assail the CA Resolution dated October 25, 2000 which, apart
from setting aside an earlier Resolution[3]of August 13, 1999
granting ESHRIs application for restitution and damages against
bond, affirmed the aforesaid September 23, 1996 RTC Decision.
In the second petition, docketed as G.R. No. 145873, petitioner
Cynthia Roxas-del Castillo also assails the aforementioned CA
Decision of November 12, 1999 insofar at it adjudged her jointly and
severally liable with ESHRI, et al. to pay the monetary award
decreed in the RTC Decision.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Both petitions stemmed from a construction contract denominated
as Agreement for the Execution of Builders Work for the EDSA
Shangri-la Hotel Project[4] that ESHRI and BF executed for the
construction of the EDSA Shangri-la Hotel starting May 1, 1991.
Among other things, the contract stipulated for the payment of the
contract price on the basis of the work accomplished as described in
the monthly progress billings. Under this arrangement, BF shall
submit a monthly progress billing to ESHRI which would then re-
measure the work accomplished and prepare a Progress Payment
Certificate for that months progress billing.[5]
In a memorandum-letter dated August 16, 1991 to BF, ESHRI laid
out the collection procedure BF was to follow, to wit: (1) submission
of the progress billing to ESHRIs Engineering Department; (2)
following-up of the preparation of the Progress Payment Certificate
with the Head of the Quantity Surveying Department; and (3)
following-up of the release of the payment with one Evelyn San
Pascual. BF adhered to the procedures agreed upon in all its billings
for the period from May 1, 1991 to June 30, 1992, submitting for
the purpose the required Builders Work Summary, the monthly
progress billings, including an evaluation of the work in accordance
with the Project Managers Instructions (PMIs) and the detailed
valuations contained in the Work Variation Orders (WVOs) for final
re-measurement under the PMIs. BF said that the values of the
WVOs were contained in the progress billings under the section
Change Orders.[6]
Page 12
From May 1, 1991 to June 30, 1992, BF submitted a total of 19
progress billings following the procedure agreed upon. Based on
Progress Billing Nos. 1 to 13, ESHRI paid BF PhP 86,501,834.05.[7]
According to BF, however, ESHRI, for Progress Billing Nos. 14 to 19,
did not re-measure the work done, did not prepare the Progress
Payment Certificates, let alone remit payment for the inclusive
periods covered. In this regard, BF claimed having been misled into
working continuously on the project by ESHRI which gave the
assurance about the Progress Payment Certificates already being
processed.
After several futile attempts to collect the unpaid billings, BF filed,
on July 26, 1993, before the RTC a suit for a sum of money and
damages.
In its defense, ESHRI claimed having overpaid BF for Progress Billing
Nos. 1 to 13 and, by way of counterclaim with damages, asked that
BF be ordered to refund the excess payments. ESHRI also charged
BF with incurring delay and turning up with inferior work
accomplishment.
The RTC found for BF
On September 23, 1996, the RTC, on the main finding that BF, as
plaintiff a quo, is entitled to the payment of its claim covered by
Progress Billing Nos. 14 to 19 and to the retention money
corresponding to Progress Billing Nos. 1 to 11, with interest in both
instances, rendered judgment for BF. The fallo of the RTC Decision
reads:
EVIDENCE (Rule 130 Documentary Evidence Cases)
WHEREFORE, defendants [EHSRI], Ru[f]o B. Colayco, Rufino L.
Samaniego, Cynthia del Castillo, Kuok Khoon Chen, and Kuok Khoon
Tsen, are jointly and severally hereby ordered to:
1. Pay plaintiff the sum of P24,780,490.00 representing unpaid
construction work accomplishments under plaintiffs Progress
Billings Nos. 14-19;
2. Return to plaintiff the retention sum of P5,810,000.00;
3. Pay legal interest on the amount of P24,780,490.80
representing the construction work accomplishments under
Progress Billings Nos. 14-19 and on the amount of P5,810,000.00
representing the retention sum from date of demand until their full
Payment;
4. Pay plaintiff P1,000,000.00 as moral damages, P1,000,000.00
as exemplary damages, P1,000,000.00 as attorneys fees, and cost of
the suit.[8]
According to the RTC, ESHRIs refusal to pay BFs valid claims
constituted evident bad faith entitling BF to moral damages and
attorneys fees.
ESHRI subsequently moved for reconsideration, but the motion was
denied by the RTC, prompting ESHRI to appeal to the CA in CA-G.R.
CV No. 57399.
Page 13
Pending the resolution of CA-G.R. CV No. 57399, the following
events and/or incidents transpired:
(1) The trial court, by Order dated January 21, 1997, granted BFs
motion for execution pending appeal. ESHRI assailed this order
before the CA via a petition for certiorari, docketed as CA-G.R. SP
No. 43187.[9]Meanwhile, the branch sheriff garnished from ESHRIs
bank account in the Philippine National Bank (PNB) the amount of
PhP 35 million.
(2) On March 7, 1997, the CA issued in CA-G.R. SP No. 43187 a writ
of preliminary injunction enjoining the trial court from carrying out
its January 21, 1997 Order upon ESHRIs posting of a PhP 1 million
bond. In a supplemental resolution issued on the same day, the CA
issued a writ of preliminary mandatory injunction directing the trial
court judge and/or his branch sheriff acting under him (a) to lift all
the garnishments and levy made under the enjoined order of
execution pending appeal; (b) to immediately return the garnished
deposits to PNB instead of delivering the same to ESHRI; and (c) if
the garnished deposits have been delivered to BF, the latter shall
return the same to ESHRIs deposit account.
(3) By a Decision dated June 30, 1997 in CA-G.R. SP No. 43187, the
CA set aside the trial courts January 21, 1997 Order. The CA would
later deny BFs motion for reconsideration.
(4) Aggrieved, BF filed before this Court a petition for review of the
CA Decision, docketed as G.R. No. 132655.[10] On August 11, 1998,
the Court affirmed the assailed decision of the CA with the
modification that the recovery of ESHRIs garnished deposits shall be
against BFs bond.[11]
EVIDENCE (Rule 130 Documentary Evidence Cases)
We denied the motions for reconsideration of ESHRI and BF.
(5) Forthwith, ESHRI filed, and the CA by Resolution of August 13,
1999 granted, an application for restitution or damages against BFs
bond. Consequently, BF and Stronghold Insurance Co., Inc., the
bonding company, filed separate motions for reconsideration.
On November 12, 1999, in CA-G.R. CV No. 57399, the CA rendered a
Decision resolving (1) the aforesaid motions of BF and its surety and
(2) herein petitioners appeal from the trial courts Decision dated
September 23, 1996. This November 12, 1999 Decision, finding for
BF and now assailed in these separate recourses, dispositively reads:
WHEREFORE, premises considered, the decision appealed from is
AFFIRMED in toto. This Courts Resolution dated 13 August 1999 is
reconsidered and set aside, and defendants-appellants application
for restitution is denied for lack of merit.
SO ORDERED.[12]
The CA predicated its ruling on the interplay of two main reasons.
First, the issues the parties raised in their respective briefs were, for
the most part, factual and evidentiary. Thus, there is no reason to
disturb the case disposition of the RTC, inclusive of its award of
damages and attorneys fees and the reasons underpinning the
award. Second, BF had sufficiently established its case by
preponderance of evidence. Part of what it had sufficiently proven
relates to ESHRI being remiss in its obligation to re-measure BFs
Page 14
later work accomplishments and pay the same. On the other hand,
ESHRI had failed to prove the basis of its disclaimer from liability,
such as its allegation on the defective work accomplished by BF.
Apropos ESHRIs entitlement to the remedy of restitution or
reparation arising from the execution of the RTC Decision pending
appeal, the CA held that such remedy may peremptorily be allowed
only if the executed judgment is reversed, a situation not obtaining
in this case.
Following the denial by the CA, per its Resolution[13] dated October
25, 2000, of their motion for reconsideration, petitioners are now
before the Court, petitioner del Castillo opting, however, to file a
separate recourse.
G.R. No. 145842
In G.R. No. 145842, petitioners ESHRI, et al. raise the following
issues for our consideration:
I. Whether or not the [CA] committed grave abuse of discretion in
disregarding issues of law raised by petitioners in their appeal
[particularly in admitting in evidence photocopies of Progress Billing
Nos. 14 to 19, PMIs and WVOs].
II. Whether or not the [CA] committed grave abuse of discretion in
not holding respondent guilty of delay in the performance of its
obligations and, hence, liable for liquidated damages [in view that
respondent is guilty of delay and that its works were defective].
EVIDENCE (Rule 130 Documentary Evidence Cases)
III. Whether or not the [CA] committed grave abuse of discretion in
finding petitioners guilty of malice and evidence bad faith, and in
awarding moral and exemplary damages and attorneys fees to
respondent.
IV. Whether or not the [CA] erred in setting aside its Resolution
dated August 13, 2000.[14]
The petition has no merit.
Prefatorily, it should be stressed that the second and third issues
tendered relate to the correctness of the CAs factual
determinations, specifically on whether or not BF was in delay and
had come up with defective works, and whether or not petitioners
were guilty of malice and bad faith. It is basic that in an appeal by
certiorari under Rule 45, only questions of law may be presented by
the parties and reviewed by the Court.[15] Just as basic is the rule
that factual findings of the CA, affirmatory of that of the trial court,
are final and conclusive on the Court and may not be reviewed on
appeal, except for the most compelling of reasons, such as when:
(1) the conclusion is grounded on speculations, surmises, or
conjectures; (2) the inference is manifestly mistaken, absurd, or
impossible; (3) there is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the findings of fact are
conflicting; (6) such findings are contrary to the admissions of both
parties; and (7) the CA manifestly overlooked certain relevant
evidence and undisputed facts, that, if properly considered, would
justify a different conclusion.[16]
Page 15

In our review of this case, we find that none of the above exceptions
obtains. Accordingly, the factual findings of the trial court, as
affirmed by the CA, that there was delay on the part of ESHRI, that
there was no proof that BFs work was defective, and that
petitioners were guilty of malice and bad faith, ought to be
affirmed.
Admissibility of Photocopies of Progress Billing Nos. 14 to 19,
PMIs and WVOs
Petitioners fault the CA, and necessarily the trial court, on the
matter of the admission in evidence of the photocopies of Progress
Billing Nos. 14 to 19 and the complementing PMIs and the WVOs.
According to petitioners, BF, before being allowed to adduce in
evidence the photocopies adverted to, ought to have laid the basis
for the presentation of the photocopies as secondary evidence,
conformably to the best evidence rule.
Respondent BF, on the other hand, avers having complied with the
laying-the-basis requirement. Defending the action of the courts
below in admitting into evidence the photocopies of the documents
aforementioned, BF explained that it could not present the original
of the documents since they were in the possession of ESHRI which
refused to hand them over to BF despite requests.
We agree with BF. The only actual rule that the term best evidence
denotes is the rule requiring that the original of a writing must, as a
general proposition, be produced[17] and secondary evidence of its
contents is not admissible except where the original cannot be had.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Rule 130, Section 3 of the Rules of Court enunciates the best
evidence rule:
SEC. 3. Original document must be produced; exceptions. When the
subject of inquiry is the contents of a document, no evidence shall
be admissible other than the original document itself, except in the
following cases:
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the
party against whom the evidence is offered, and the latter fails to
produce it after reasonable notice; (Emphasis added.)
Complementing the above provision is Sec. 6 of Rule 130, which
reads:
SEC. 6. When original document is in adverse partys custody or
control. If the document is in the custody or under control of the
adverse party, he must have reasonable notice to produce it. If after
such notice and after satisfactory proof of its existence, he fails to
produce the document, secondary evidence may be presented as in
the case of loss.
Secondary evidence of the contents of a written instrument or
document refers to evidence other than the original instrument or
document itself.[18] A party may present secondary evidence of the
contents of a writing not only when the original is lost or destroyed,
Page 16
but also when it is in the custody or under the control of the
adverse party. In either instance, however, certain explanations
must be given before a party can resort to secondary evidence.
In our view, the trial court correctly allowed the presentation of the
photocopied documents in question as secondary evidence. Any
suggestion that BF failed to lay the required basis for presenting the
photocopies of Progress Billing Nos. 14 to 19 instead of their
originals has to be dismissed. The stenographic notes of the
following exchanges between Atty. Andres and Atty. Autea, counsel
for BF and ESHRI, respectively, reveal that BF had complied with the
requirements:
ATTY. ANDRES:
During the previous hearing of this case, your Honor, likewise, the
witness testified that certain exhibits namely, the Progress Payment
Certificates and the Progress Billings the originals of these
documents were transmitted to ESHRI, all the originals are in the
possession of ESHRI since these are internal documents and I am
referring specifically to the Progress Payment Certificates. We
requested your Honor, that in order that plaintiff [BF] be allowed to
present secondary original, that opposing counsel first be given
opportunity to present the originals which are in their possession.
May we know if they have brought the originals and whether they
will present the originals in court, Your Honor. (Emphasis added.)
ATTY. AUTEA:
We have already informed our client about the situation, your
Honor, that it has been claimed by plaintiff that some of the
originals are in their possession and our client assured that, they will
EVIDENCE (Rule 130 Documentary Evidence Cases)
try to check. Unfortunately, we have not heard from our client, Your
Honor.
Four factual premises are readily deducible from the above
exchanges, to wit: (1) the existence of the original documents which
ESHRI had possession of; (2) a request was made on ESHRI to
produce the documents; (3) ESHRI was afforded sufficient time to
produce them; and (4) ESHRI was not inclined to produce them.
Clearly, the circumstances obtaining in this case fall under the
exception under Sec. 3(b) of Rule 130. In other words, the
conditions sine qua non for the presentation and reception of the
photocopies of the original document as secondary evidence have
been met. These are: (1) there is proof of the original documents
execution or existence; (2) there is proof of the cause of the original
documents unavailability; and (3) the offeror is in good faith.[19]
While perhaps not on all fours because it involved a check, what the
Court said in Magdayao v. People, is very much apt, thus:
x x x To warrant the admissibility of secondary evidence when the
original of a writing is in the custody or control of the adverse party,
Section 6 of Rule 130 provides that the adverse party must be given
reasonable notice, that he fails or refuses to produce the same in
court and that the offeror offers satisfactory proof of its existence.
xxxx
Page 17
The mere fact that the original of the writing is in the custody or
control of the party against whom it is offered does not warrant the
admission of secondary evidence. The offeror must prove that he
has done all in his power to secure the best evidence by giving
notice to the said party to produce the document. The notice may
be in the form of a motion for the production of the original or
made in open court in the presence of the adverse party or via a
subpoena duces tecum, provided that the party in custody of the
original has sufficient time to produce the same. When such party
has the original of the writing and does not voluntarily offer to
produce it or refuses to produce it, secondary evidence may be
admitted.[20] (Emphasis supplied.)
On the Restitution of the Garnished Funds
We now come to the propriety of the restitution of the garnished
funds. As petitioners maintain, the CA effectively, but erroneously,
prevented restitution of ESHRIs improperly garnished funds when it
nullified its own August 13, 1999 Resolution in CA-G.R. SP No.
43187. In this regard, petitioners invite attention to the fact that the
restitution of the funds was in accordance with this Courts final and
already executory decision in G.R. No. 132655, implying that ESHRI
should be restored to its own funds without awaiting the final
outcome of the main case. For ease of reference, we reproduce
what the appellate court pertinently wrote in its Resolution of
August 13, 1999:
EVIDENCE (Rule 130 Documentary Evidence Cases)
BASED ON THE FOREGOING, the Application (for
Restitution/Damages against Bond for Execution Pending Appeal)
dated May 12, 1999 filed by [ESHRI] is GRANTED. Accordingly, the
surety of [BF], STRONGHOLD Insurance Co., Inc., is ORDERED to PAY
the sum of [PhP 35 million] to [ESHRI] under its SICI Bond. x x x In
the event that the bond shall turn out to be insufficient or the
surety (STRONGHOLD) cannot be made liable under its bond, [BF],
being jointly and severally liable under the bond is ORDERED to
RETURN the amount of [PhP 35 million] representing the garnished
deposits of the bank account maintained by [ESHRI] with the [PNB]
Shangri-la Plaza Branch, Mandaluyong City. Otherwise, this Court
shall cause the implementation of the Writ of Execution dated April
24, 1998 issued in Civil Case No. 63435 against both [BF], and/or its
surety, STRONGHOLD, in case they should fail to comply with these
directives.
SO ORDERED.[21]
Petitioners contention on the restitution angle has no merit, for, as
may be recalled, the CA, simultaneously with the nullification and
setting aside of its August 13, 1999 Resolution, affirmed, via its
assailed November 12, 1999 Decision, the RTC Decision of
September 23, 1996, the execution pending appeal of which
spawned another dispute between the parties. And as may be
recalled further, the appellate court nullified its August 13,
1999Resolution on the basis of Sec. 5, Rule 39, which provides:
Sec. 5. Effect of reversal of executed judgment. Where the executed
judgment is reversed totally or partially, or annulled, on appeal or
otherwise, the trial court may, on motion, issue such orders of
Page 18
restitution or reparation of damages as equity and justice may
warrant under the circumstances.
On the strength of the aforequoted provision, the appellate court
correctly dismissed ESHRIs claim for restitution of its garnished
deposits, the executed appealed RTC Decision in Civil Case No.
63435 having in fact been upheld in toto.
It is true that the Courts Decision of August 11, 1998 in G.R. No.
132655 recognized the validity of the issuance of the desired
restitution order. It bears to emphasize, however, that the CA had
since then decided CA-G.R. CV No. 57399, the main case, on the
merits when it affirmed the underlying RTC Decision in Civil Case
No. 63435. This CA Decision on the original and main case
effectively rendered our decision on the incidental procedural
matter on restitution moot and academic. Allowing restitution at
this point would not serve any purpose, but only prolong an already
protracted litigation.
G.R. No. 145873
Petitioner Roxas-del Castillo, in her separate petition, excepts from
the CA Decision affirming, in its entirety, the RTC Decision holding
her, with the other individual petitioners in G.R. No. 145842, who
were members of the Board of Directors of ESHRI, jointly and
severally liable with ESHRI for the judgment award. She presently
contends:
I. THE [CA] ERRED IN NOT DECLARING THAT THE
DECISION OF THE TRIAL COURT ADJUDGING PETITIONER
EVIDENCE (Rule 130 Documentary Evidence Cases)
PERSONALLY LIABLE TO RESPONDENT VOID FOR NOT STATING THE
FACTUAL AND LEGAL BASIS FOR SUCH AWARD.
II. THE [CA] ERRED IN NOT RULING THAT AS FORMER
DIRECTOR, PETITIONER CANNOT BE HELD PERSONALLY LIABLE FOR
ANY ALLEGED BREACH OF A CONTRACT ENTERED INTO BY THE
CORPORATION.
III. THE [CA] ERRED IN NOT RULING THAT RESPONDENT IS
NOT ENTITLED TO AN AWARD OF MORAL DAMAGES.
IV. THE [CA] ERRED IN HOLDING PETITIONER PERSONALLY
LIABLE TO RESPONDENT FOR EXEMPLARY DAMAGES.
V. THE [CA] ERRED IN NOT RULING THAT RESPONDENT IS
NOT ENTITLED TO ANY AWARD OF ATTORNEYS FEES.[22]
First off, Roxas-del Castillo submits that the RTC decision in question
violated the requirements of due process and of Sec. 14, Article VII
of the Constitution that states, No decision shall be rendered by any
court without expressing therein clearly and distinctly the facts and
the law on which it is based.
Roxas-del Castillos threshold posture is correct. Indeed, the RTC
decision in question, as couched, does not provide the factual or
legal basis for holding her personally liable under the premises. In
fact, only in the dispositive portion of the decision did her solidary
liability crop up. And save for her inclusion as party defendant in the
Page 19
underlying complaint, no reference is made in other pleadings thus
filed as to her liability.
The Court notes that the appellate court, by its affirmatory ruling,
effectively recognized the applicability of the doctrine on piercing
the veil of the separate corporate identity. Under the circumstances
of this case, we cannot allow such application. A corporation, upon
coming to existence, is invested by law with a personality separate
and distinct from those of the persons composing it. Ownership by a
single or a small group of stockholders of nearly all of the capital
stock of the corporation is not, without more, sufficient to disregard
the fiction of separate corporate personality.[23] Thus, obligations
incurred by corporate officers, acting as corporate agents, are not
theirs but direct accountabilities of the corporation they represent.
Solidary liability on the part of corporate officers may at times
attach, but only under exceptional circumstances, such as when
they act with malice or in bad faith.[24] Also, in appropriate cases,
the veil of corporate fiction shall be disregarded when the separate
juridical personality of a corporation is abused or used to commit
fraud and perpetrate a social injustice, or used as a vehicle to evade
obligations.[25] In this case, no act of malice or like dishonest
purpose is ascribed on petitioner Roxas-del Castillo as to warrant
the lifting of the corporate veil.
The above conclusion would still hold even if petitioner Roxas-del
Castillo, at the time ESHRI defaulted in paying BFs monthly progress
bill, was still a director, for, before she could be held personally
liable as corporate director, it must be shown that she acted in a
manner and under the circumstances contemplated in Sec. 31 of the
Corporation Code, which reads:
EVIDENCE (Rule 130 Documentary Evidence Cases)
Section 31. Directors or trustees who willfully or knowingly vote for
or assent to patently unlawful acts of the corporation or acquire any
pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members
and other persons. (Emphasis ours.)
We do not find anything in the testimony of one Crispin Balingit to
indicate that Roxas-del Castillo made any misrepresentation
respecting the payment of the bills in question. Balingit, in fact,
testified that the submitted but unpaid billings were still being
evaluated. Further, in the said testimony, in no instance was bad
faith imputed on Roxas-del Castillo.
Not lost on the Court are some material dates. As it were, the
controversy between the principal parties started in July 1992 when
Roxas-del Castillo no longer sat in the ESHRI Board, a reality BF does
not appear to dispute. In fine, she no longer had any participation in
ESHRIs corporate affairs when what basically is the ESHRI-BF dispute
erupted. Familiar and fundamental is the rule that contracts are
binding only among parties to an agreement. Art. 1311 of the Civil
Code is clear on this point:
Article 1311. Contracts take effect only between the parties, their
assigns and heirs, except in cases where the rights and obligations
are not transmissible by their nature, or by stipulation or by
provision of law.
Page 20
In the instant case, Roxas-del Castillo could not plausibly be held
liable for breaches of contract committed by ESHRI nor for the
alleged wrongdoings of its governing board or corporate officers
occurring after she severed official ties with the hotel management.
Given the foregoing perspective, the other issues raised by Roxas-
del Castillo as to her liability for moral and exemplary damages and
attorneys fees are now moot and academic.
And her other arguments insofar they indirectly impact on the
liability of ESHRI need not detain us any longer for we have
sufficiently passed upon those concerns in our review of G.R. No.
145842.
WHEREFORE, the petition in G.R. No. 145842 is DISMISSED, while
the petition in G.R. No. 145873 is GRANTED. Accordingly, the
appealed Decision dated November 12, 1999 of the CA in CA-G.R.
CV No. 57399 is AFFIRMED with MODIFICATION that the petitioner
in G.R. No. 145873, Cynthia Roxas-del Castillo, is absolved from any
liability decreed in the RTC Decision dated September 23, 1996 in
Civil Case No. 63435, as affirmed by the CA.
SO ORDERED.
CHUA GAW v CHUA
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari from the Decision[1] of the
Court of Appeals (CA) in CA-G.R. CV No. 66790 and Resolution[2]
EVIDENCE (Rule 130 Documentary Evidence Cases)
denying the motion for reconsideration. The assailed decision
affirmed the ruling of the Regional Trial Court (RTC) in a Complaint
for Sum of Money in favor of the plaintiff.
The antecedents are as follows:
Spouses Chua Chin and Chan Chi were the founders of three
business enterprises[3] namely: Hagonoy Lumber, Capitol Sawmill
Corporation, and Columbia Wood Industries. The couple had seven
children, namely, Santos Chua; Concepcion Chua; Suy Ben Chua;
Chua Suy Phen; Chua Sioc Huan; Chua Suy Lu; and Julita Chua. On
June 19, 1986, Chua Chin died, leaving his wife Chan Chi and his
seven children as his only surviving heirs. At the time of Chua Chins
death, the net worth of Hagonoy Lumber was P415,487.20.[4]
On December 8, 1986, his surviving heirs executed a Deed of Extra-
Judicial Partition and Renunciation of Hereditary Rights in Favor of a
Co-Heir[5] (Deed of Partition, for brevity), wherein the heirs settled
their interest in Hagonoy Lumber as follows: one-half (1/2) thereof
will pertain to the surviving spouse, Chan Chi, as her share in the
conjugal partnership; and the other half, equivalent to P207,743.60,
will be divided among Chan Chi and the seven children in equal pro
indiviso shares equivalent to P25,967.00 each.[6] In said document,
Chan Chi and the six children likewise agreed to voluntarily
renounce and waive their shares over Hagonoy Lumber in favor of
their co-heir, Chua Sioc Huan.
In May 1988, petitioner Concepcion Chua Gaw and her husband,
Antonio Gaw, asked respondent, Suy Ben Chua, to lend them
Page 21
P200,000.00 which they will use for the construction of their house
in Marilao, Bulacan.The parties agreed that the loan will be payable
within six (6) months without interest.[7] On June 7, 1988,
respondent issued in their favor China Banking Corporation Check
No. 240810[8] for P200,000.00 which he delivered to the couples
house in Marilao, Bulacan. Antonio later encashed the check.
On August 1, 1990, their sister, Chua Sioc Huan, executed a Deed of
Sale over all her rights and interests in Hagonoy Lumber for a
consideration of P255,000.00 in favor of respondent.[9]
Meantime, the spouses Gaw failed to pay the amount they
borrowed from respondent within the designated period.
Respondent sent the couple a demand letter,[10] dated March 25,
1991, requesting them to settle their obligation with the warning
that he will be constrained to take the appropriate legal action if
they fail to do so.
Failing to heed his demand, respondent filed a Complaint for Sum of
Money against the spouses Gaw with the RTC. The complaint
alleged that on June 7, 1988, he extended a loan to the spouses
Gaw for P200,000.00, payable within six months without interest,
but despite several demands, the couple failed to pay their
obligation.[11]
In their Answer (with Compulsory Counterclaim), the spouses Gaw
contended that the P200,000.00 was not a loan but petitioners
share in the profits of Hagonoy Lumber, one of her familys
businesses. According to the spouses, when they transferred
residence to Marilao, Bulacan, petitioner asked respondent for an
EVIDENCE (Rule 130 Documentary Evidence Cases)
accounting, and payment of her share in the profits, of Capital
Sawmills Corporation, Columbia Wood Industries Corporation, and
Hagonoy Lumber. They claimed that respondent persuaded
petitioner to temporarily forego her demand as it would offend
their mother who still wanted to remain in control of the family
businesses. To insure that she will defer her demand, respondent
allegedly gave her P200,000.00 as her share in the profits of
Hagonoy Lumber.[12]
In his Reply, respondent averred that the spouses Gaw did not
demand from him an accounting of Capitol Sawmills Corporation,
Columbia Wood Industries, and Hagonoy Lumber. He asserted that
the spouses Gaw, in fact, have no right whatsoever in these
businesses that would entitle them to an accounting thereof.
Respondent insisted that the P200,000.00 was given to and
accepted by them as a loan and not as their share in Hagonoy
Lumber.[13]
With leave of court, the spouses Gaw filed an Answer (with
Amended Compulsory Counterclaim) wherein they insisted that
petitioner, as one of the compulsory heirs, is entitled to one-sixth
(1/6) of Hagonoy Lumber, which the respondent has arrogated to
himself. They claimed that, despite repeated demands, respondent
has failed and refused to account for the operations of Hagonoy
Lumber and to deliver her share therein. They then prayed that
respondent make an accounting of the operations of Hagonoy
Lumber and to deliver to petitioner her one-sixth (1/6) share
thereof, which was estimated to be worth not less than
P500,000.00.[14]
Page 22
In his Answer to Amended Counterclaim, respondent explained that
his sister, Chua Sioc Huan, became the sole owner of Hagonoy
Lumber when the heirs executed the Deed of Partition on December
8, 1986. In turn, he became the sole owner of Hagonoy Lumber
when he bought it from Chua Sioc Huan, as evidenced by the Deed
of Sale dated August 1, 1990.[15]
Defendants, in their reply,[16] countered that the documents on
which plaintiff anchors his claim of ownership over Hagonoy Lumber
were not true and valid agreements and do not express the real
intention of the parties. They claimed that these documents are
mere paper arrangements which were prepared only upon the
advice of a counsel until all the heirs could reach and sign a final and
binding agreement, which, up to such time, has not been executed
by the heirs.[17]
During trial, the spouses Gaw called the respondent to testify as
adverse witness under Section 10, Rule 132. On direct examination,
respondent testified that Hagonoy Lumber was the conjugal
property of his parents Chua Chin and Chan Chi, who were both
Chinese citizens. He narrated that, initially, his father leased the lots
where Hagonoy Lumber is presently located from his godfather, Lu
Pieng, and that his father constructed the two-storey concrete
building standing thereon. According to respondent, when he was in
high school, it was his father who managed the business but he and
his other siblings were helping him. Later, his sister, Chua Sioc Huan,
managed Hogonoy Lumber together with their other brothers and
sisters. He stated that he also managed Hagonoy Lumber when he
was in high school, but he stopped when he got married and found
EVIDENCE (Rule 130 Documentary Evidence Cases)
another job. He said that he now owns the lots where Hagonoy
Lumber is operating.[18]
On cross-examination, respondent explained that he ceased to be a
stockholder of Capitol Sawmill when he sold his shares of stock to
the other stockholders on January 1, 1991. He further testified that
Chua Sioc Huan acquired Hagonoy Lumber by virtue of a Deed of
Partition, executed by the heirs of Chua Chin. He, in turn, became
the owner of Hagonoy Lumber when he bought the same from Chua
Sioc Huan through a Deed of Sale dated August 1, 1990. [19]
On re-direct examination, respondent stated that he sold his shares
of stock in Capitol Sawmill for P254,000.00, which payment he
received in cash. He also paid the purchase price of P255,000.00 for
Hagonoy Lumber in cash, which payment was not covered by a
separate receipt as he merely delivered the same to Chua Sioc Huan
at her house in Paso de Blas, Valenzuela. Although he maintains
several accounts at Planters Bank, Paluwagan ng Bayan, and China
Bank, the amount he paid to Chua Sioc Huan was not taken from
any of them. He kept the amount in the house because he was
engaged in rediscounting checks of people from the public market.
[20]
On December 10, 1998, Antonio Gaw died due to cardio vascular
and respiratory failure.[21]
On February 11, 2000, the RTC rendered a Decision in favor of the
respondent, thus:
Page 23
WHEREFORE, in the light of all the foregoing, the Court hereby
renders judgement ordering defendant Concepcion Chua Gaw to
pay the [respondent] the following:
1. P200,000.00 representing the principal obligation with legal
interest from judicial demand or the institution of the complaint on
November 19, 1991;
2. P50,000.00 as attorneys fees; and
3. Costs of suit.
The defendants counterclaim is hereby dismissed for being devoid
of merit.
SO ORDERED.[22]
The RTC held that respondent is entitled to the payment of the
amount of P200,000.00 with interest. It noted that respondent
personally issued Check No. 240810 to petitioner and her husband
upon their request to lend them the aforesaid amount. The trial
court concluded that the P200,000.00 was a loan advanced by the
respondent from his own funds and not remunerations for services
rendered to Hagonoy Lumber nor petitioners advance share in the
profits of their parents businesses.
The trial court further held that the validity and due execution of
the Deed of Partition and the Deed of Sale, evidencing transfer of
ownership of Hagonoy Lumber from Chua Sioc Huan to respondent,
was never impugned. Although respondent failed to produce the
originals of the documents, petitioner judicially admitted the due
execution of the Deed of Partition, and even acknowledged her
EVIDENCE (Rule 130 Documentary Evidence Cases)
signature thereon, thus constitutes an exception to the best
evidence rule. As for the Deed of Sale, since the contents thereof
have not been put in issue, the non-presentation of the original
document is not fatal so as to affect its authenticity as well as the
truth of its contents. Also, the parties to the documents themselves
do not contest their validity. Ultimately, petitioner failed to
establish her right to demand an accounting of the operations of
Hagonoy Lumber nor the delivery of her 1/6 share therein.
As for petitioners claim that an accounting be done on Capitol
Sawmill Corporation and Columbia Wood Industries, the trial court
held that respondent is under no obligation to make such an
accounting since he is not charged with operating these
enterprises.[23]
Aggrieved, petitioner appealed to the CA, alleging that the trial
court erred (1) when it considered the amount of P200,000.00 as a
loan obligation and not Concepcions share in the profits of Hagonoy
Lumber; (2) when it considered as evidence for the defendant,
plaintiffs testimony when he was called to testify as an adverse
party under Section 10 (e), Rule 132 of the Rules of Court; and (3)
when it considered admissible mere copies of the Deed of Partition
and Deed of Sale to prove that respondent is now the owner of
Hagonoy Lumber.[24]
On May 23, 2003, the CA affirmed the Decision of the RTC. [25] The
appellate court found baseless the petitioners argument that the
RTC should not have included respondents testimony as part of
petitioners evidence. The CA noted that the petitioner went on a
fishing expedition, the taking of respondents testimony having
Page 24
taken up a total of eleven hearings, and upon failing to obtain
favorable information from the respondent, she now disclaims the
same. Moreover, the CA held that the petitioner failed to show that
the inclusion of respondents testimony in the statement of facts in
the assailed decision unduly prejudiced her defense and
counterclaims. In fact, the CA noted that the facts testified to by
respondent were deducible from the totality of the evidence
presented.
The CA likewise found untenable petitioners claim that Exhibits H
(Deed of Sale) and Exhibit I (Deed of Partition) were merely
temporary paper arrangements. The CA agreed with the RTC that
the testimony of petitioner regarding the matter was
uncorroborated she should have presented the other heirs to attest
to the truth of her allegation. Instead, petitioner admitted the due
execution of the said documents. Since petitioner did not dispute
the due execution and existence of Exhibits H and I, there was no
need to produce the originals of the documents in accordance with
the best evidence rule.[26]
On December 2, 2003, the CA denied the petitioners motion for
reconsideration for lack of merit.[27]
Petitioner is before this Court in this petition for review on
certiorari, raising the following errors:
I. THAT ON THE PRELIMINARY IMPORTANT RELATED
ISSUE, CLEAR AND PALPABLE LEGAL ERROR HAS BEEN COMMITTED
IN THE APPLICATION AND LEGAL SIGNIFICANCE OF THE RULE ON
EVIDENCE (Rule 130 Documentary Evidence Cases)
EXAMINATION OF ADVERSE PARTY OR HOSTILE WITNESS UNDER
SECTION 10 (d) AND (e) OF RULE 132, CAUSING SERIOUS DOUBT ON
THE LOWER COURTS APPEALED DECISIONS OBJECTIVITY, ANNEX C.
II. THAT ON THE IMPORTANT LEGAL ISSUE RELATIVE TO
THE AFORESAID TWO OPPOSING CLAIMS OF RESPONDENT AND
PETITIONER, CLEAR AND PALPABLE LEGAL ERROR HAS BEEN
COMMITTED UNDER THE LOWER COURTS DECISION ANNEX C AND
THE QUESTIONED DECISION OF MAY 23, 2003 (ANNEX A) AND THE
RESOLUTION OF DECEMBER 2, 2003, (ANNEX B) IN DEVIATING
FROM AND DISREGARDING ESTABLISHED SUPREME COURT
DECISIONS ENJOINING COURTS NOT TO OVERLOOK OR
MISINTERPRET IMPORTANT FACTS AND CIRCUMSTANCES,
SUPPORTED BY CLEAR AND CONVINCING EVIDENCE ON RECORD,
AND WHICH ARE OF GREAT WEIGHT AND VALUE, WHICH WOULD
CHANGE THE RESULT OF THE CASE AND ARRIVE AT A JUST, FAIR
AND OBJECTIVE DECISION. (Citations omitted)
III. THAT FINALLY, AS TO THE OTHER LEGAL IMPORTANT
ISSUE RELATIVE TO CLAIM OR OWNERSHIP OF THE HAGONOY
LUMBER FAMILY BUSINESS, CLEAR AND PALPABLE LEGAL ERROR
HAS BEEN COMMITTED ON THE REQUIREMENTS AND CORRECT
APPLICATION OF THE BEST EVIDENCE RULE UNDER SECTION 3, RULE
130 OF THE REVISED RULES OF COURT.[28]
The petition is without merit.
Petitioner contends that her case was unduly prejudiced by the
RTCs treatment of the respondents testimony as adverse witness
Page 25
during cross-examination by his own counsel as part of her
evidence. Petitioner argues that the adverse witness testimony
elicited during cross-examination should not be considered as
evidence of the calling party. She contends that the examination of
respondent as adverse witness did not make him her witness and
she is not bound by his testimony, particularly during cross-
examination by his own counsel.[29] In particular, the petitioner
avers that the following testimony of the respondent as adverse
witness should not be considered as her evidence:
(11.a) That RESPONDENT-Appellee became owner of the HAGONOY
LUMBER business when he bought the same from Chua Sioc Huan
through a Deed of Sale dated August 1, 1990 (EXH.H);
(11.b) That the HAGONOY LUMBER, on the other hand, was
acquired by the sister Chua Sioc Huan, by virtue of Extrajudicial
Partition and Renunciation of Hereditary Rights in favor of a Co-Heir
(EXH. I);
(11.c) That the 3 lots on which the HAGONOY LUMBER business is
located were acquired by Lu Pieng from the Santos family under the
Deed of Absolute Sale (EXH. J); that Lu Pieng sold the Lots to Chua
Suy Lu in 1976 (EXHS. K, L, & M.); that Chua Siok Huan eventually
became owner of the 3 Lots; and in 1989 Chua Sioc Huan sold them
to RESPONDENT-Appellee (EXHS. Q and P); that after he acquired
the 3 Lots, he has not sold them to anyone and he is the owner of
the lots.[30]
EVIDENCE (Rule 130 Documentary Evidence Cases)
We do not agree that petitioners case was prejudiced by the RTCs
treatment of the respondents testimony during cross-examination
as her evidence.
If there was an error committed by the RTC in ascribing to the
petitioner the respondents testimony as adverse witness during
cross-examination by his own counsel, it constitute a harmless error
which would not, in any way, change the result of the case.
In the first place, the delineation of a piece of evidence as part of
the evidence of one party or the other is only significant in
determining whether the party on whose shoulders lies the burden
of proof was able to meet the quantum of evidence needed to
discharge the burden. In civil cases, that burden devolves upon the
plaintiff who must establish her case by preponderance of evidence.
The rule is that the plaintiff must rely on the strength of his own
evidence and not upon the weakness of the defendants evidence.
Thus, it barely matters who with a piece of evidence is credited. In
the end, the court will have to consider the entirety of the evidence
presented by both parties. Preponderance of evidence is then
determined by considering all the facts and circumstances of the
case, culled from the evidence, regardless of who actually presented
it.[31]
That the witness is the adverse party does not necessarily mean that
the calling party will not be bound by the formers testimony. The
fact remains that it was at his instance that his adversary was put on
the witness stand. Unlike an ordinary witness, the calling party may
impeach an adverse witness in all respects as if he had been called
by the adverse party,[32] except by evidence of his bad
Page 26
character.[33] Under a rule permitting the impeachment of an
adverse witness, although the calling party does not vouch for the
witness veracity, he is nonetheless bound by his testimony if it is not
contradicted or remains unrebutted.[34]
A party who calls his adversary as a witness is, therefore, not bound
by the latters testimony only in the sense that he may contradict
him by introducing other evidence to prove a state of facts contrary
to what the witness testifies on.[35] A rule that provides that the
party calling an adverse witness shall not be bound by his testimony
does not mean that such testimony may not be given its proper
weight, but merely that the calling party shall not be precluded from
rebutting his testimony or from impeaching him.[36] This, the
petitioner failed to do.
In the present case, the petitioner, by her own testimony, failed to
discredit the respondents testimony on how Hagonoy Lumber
became his sole property. The petitioner admitted having signed the
Deed of Partition but she insisted that the transfer of the property
to Chua Siok Huan was only temporary. On cross-examination, she
confessed that no other document was executed to indicate that
the transfer of the business to Chua Siok Huan was a temporary
arrangement. She declared that, after their mother died in 1993,
she did not initiate any action concerning Hagonoy Lumber, and it
was only in her counterclaim in the instant that, for the first time,
she raised a claim over the business.
Due process requires that in reaching a decision, a tribunal must
consider the entire evidence presented.[37] All the parties to the
case, therefore, are considered bound by the favorable or
EVIDENCE (Rule 130 Documentary Evidence Cases)
unfavorable effects resulting from the evidence.[38] As already
mentioned, in arriving at a decision, the entirety of the evidence
presented will be considered, regardless of the party who offered
them in evidence. In this light, the more vital consideration is not
whether a piece of evidence was properly attributed to one party,
but whether it was accorded the apposite probative weight by the
court. The testimony of an adverse witness is evidence in the case
and should be given its proper weight, and such evidence becomes
weightier if the other party fails to impeach the witness or
contradict his testimony.
Significantly, the RTCs finding that the P200,000.00 was given to the
petitioner and her husband as a loan is supported by the evidence
on record. Hence, we do not agree with the petitioners contention
that the RTC has overlooked certain facts of great weight and value
in arriving at its decision. The RTC merely took into consideration
evidence which it found to be more credible than the self-serving
and uncorroborated testimony of the petitioner.
At this juncture, we reiterate the well-entrenched doctrine that the
findings of fact of the CA affirming those of the trial court are
accorded great respect, even finality, by this Court. Only errors of
law, not of fact, may be reviewed by this Court in petitions for
review on certiorari under Rule 45.[39] A departure from the
general rule may be warranted where the findings of fact of the CA
are contrary to the findings and conclusions of the trial court, or
when the same is unsupported by the evidence on record.[40]
There is no reason to apply the exception in the instant case
because the findings and conclusions of the CA are in full accord
with those of the trial court. These findings are buttressed by the
evidence on record. Moreover, the issues and errors alleged in this
Page 27
petition are substantially the very same questions of fact raised by
petitioner in the appellate court.
On the issue of whether the P200,000.00 was really a loan, it is well
to remember that a check may be evidence of indebtedness.[41] A
check, the entries of which are in writing, could prove a loan
transaction.[42] It is pure naivet to insist that an entrepreneur who
has several sources of income and has access to considerable bank
credit, no longer has any reason to borrow any amount.
The petitioners allegation that the P200,000.00 was advance on her
share in the profits of Hagonoy Lumber is implausible. It is true that
Hagonoy Lumber was originally owned by the parents of petitioner
and respondent. However, on December 8, 1986, the heirs freely
renounced and waived in favor of their sister Chua Sioc Huan all
their hereditary shares and interest therein, as shown by the Deed
of Partition which the petitioner herself signed. By virtue of this
deed, Chua Sioc Huan became the sole owner and proprietor of
Hagonoy Lumber. Thus, when the respondent delivered the check
for P200,000.00 to the petitioner on June 7, 1988, Chua Sioc Huan
was already the sole owner of Hagonoy Lumber. At that time, both
petitioner and respondent no longer had any interest in the
business enterprise; neither had a right to demand a share in the
profits of the business. Respondent became the sole owner of
Hagonoy Lumber only after Chua Sioc Huan sold it to him on August
1, 1990. So, when the respondent delivered to the petitioner the
P200,000.00 check on June 7, 1988, it could not have been given as
an advance on petitioners share in the business, because at that
moment in time both of them had no participation, interest or share
in Hagonoy Lumber. Even assuming, arguendo, that the check was
EVIDENCE (Rule 130 Documentary Evidence Cases)
an advance on the petitioners share in the profits of the business, it
was highly unlikely that the respondent would deliver a check
drawn against his personal, and not against the business enterprises
account.
It is also worthy to note that both the Deed of Partition and the
Deed of Sale were acknowledged before a Notary Public. The
notarization of a private document converts it into a public
document, and makes it admissible in court without further proof of
its authenticity.[43] It is entitled to full faith and credit upon its
face.[44] A notarized document carries evidentiary weight as to its
due execution, and documents acknowledged before a notary
public have in their favor the presumption of regularity. Such a
document must be given full force and effect absent a strong,
complete and conclusive proof of its falsity or nullity on account of
some flaws or defects recognized by law.[45] A public document
executed and attested through the intervention of a notary public
is, generally, evidence of the facts therein express in clear
unequivocal manner.[46]
Petitioner, however, maintains that the RTC erred in admitting in
evidence a mere copy of the Deed of Partition and the Deed of Sale
in violation of the best evidence rule. In addition, petitioner insists
that the Deed of Sale was not the result of bona fide negotiations
between a true seller and buyer.
The best evidence rule as encapsulated in Rule 130, Section 3,[47] of
the Revised Rules of Civil Procedure applies only when the content
of such document is the subject of the inquiry. Where the issue is
only as to whether such document was actually executed, or exists,
Page 28
or on the circumstances relevant to or surrounding its execution,
the best evidence rule does not apply and testimonial evidence is
admissible. Any other substitutionary evidence is likewise
admissible without need to account for the original.[48] Moreover,
production of the original may be dispensed with, in the trial courts
discretion, whenever the opponent does not bona fide dispute the
contents of the document and no other useful purpose will be
served by requiring production.[49]
Accordingly, we find that the best evidence rule is not applicable to
the instant case. Here, there was no dispute as to the terms of
either deed; hence, the RTC correctly admitted in evidence mere
copies of the two deeds. The petitioner never even denied their due
execution and admitted that she signed the Deed of Partition.[50]
As for the Deed of Sale, petitioner had, in effect, admitted its
genuineness and due execution when she failed to specifically deny
it in the manner required by the rules.[51] The petitioner merely
claimed that said documents do not express the true agreement
and intention of the parties since they were only provisional paper
arrangements made upon the advice of counsel.[52] Apparently, the
petitioner does not contest the contents of these deeds but alleges
that there was a contemporaneous agreement that the transfer of
Hagonoy Lumber to Chua Sioc Huan was only temporary.
An agreement or the contract between the parties is the formal
expression of the parties rights, duties and obligations. It is the best
evidence of the intention of the parties.[53] The parties intention is
to be deciphered from the language used in the contract, not from
the unilateral post facto assertions of one of the parties, or of third
parties who are strangers to the contract.[54] Thus, when the terms
EVIDENCE (Rule 130 Documentary Evidence Cases)
of an agreement have been reduced to writing, it is deemed to
contain all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.[55]
WHEREFORE, premises considered, the petition is DENIED. The
Decision of the Court of Appeals in CA-G.R. CV No. 66790 dated May
23, 2003 and Resolution dated December 2, 2003 are AFFIRMED.
SO ORDERED.
EBREO v EBREO
DECISION
CHICO-NAZARIO, J.:
Does an annotation in a tax declaration of an alleged Deed of Sale
sufficiently prove conveyance of title to a property? This is the issue
presented to Us in the present petition.
The factual antecedents of this case are narrated herein:
A Complaint dated 04 January 1994, docketed as Civil Case No. 4132
for Partition, Reconveyance, Accounting and Damages, was filed by
Gil Ebreo, represented by his Attorney-in-Fact Felixberto Ebreo,
Flaviano Ebreoand Homobono Cueto against petitioners Felino
Ebreo, Spouses Antonio Ebreo and Evelyn P. Beraa-Ebreo, Ignacio
Ebreo and Eleuteria Cueto before the Regional Trial Court (RTC) of
Batangas City, Branch 7.
Page 29

From plaintiffs account in their complaint, Felipe Ebreo died
intestate in 1926 leaving behind as heirs his five children, Gil,
Flaviano, Felino, Ignacio, and Felipa.[1] Subsequently, Felipa died
leaving behind her heirs, Genoveva, Homobono and Eleuteria all
surnamed Cueto. Genoveva died in 1991 without any issue.
Defendants-spouses Antonio Ebreo and Evelyn Beraa are the son
and daughter-in-law, respectively, of defendant Felino, one of the
five children of Felipe Ebreo.
Felipe Ebreo left to his children an untitled parcel of land situated in
Barangay Sampaga, Batangas City, more particularly described as
follows:
Isang palagay na lupang palayanin o linangin ipinamumuwis sa ilalim
ng Tax Declaration No. 39949 S-1953, na ang mga karatig sa Ilaya ay
Prudencia Coz, sa Silangan ay Pablo Cantro at Santiago Banaag, sa
ibaba ay Ilat (Creek) at sa Kanluranay Marcos at Fortunato Banaag
may luwang na 31,781 metros kuwadrados humigit kumulang at
may balor amiliorada na halagang P950.00, lalong kilala sa Lote
9046 ng sukat katastro dito sa Batangas.[2]
Pursuant to the subdivision made by their father Felipe, Lot No.
9046 was subdivided into six lots identified as Lots A, B, C, D, E and
F.[3]
On 11 September 1967, the five heirs of Felipe Ebreo, through
themselves and their representatives, executed and signed a
document entitled, Kasulatan ng Pagbabahagi ng Lupa[4] where
EVIDENCE (Rule 130 Documentary Evidence Cases)
they extrajudicially partitioned the above-described property except
the portion known as Lot No. 9046-F. As agreed upon by these heirs,
Lot No. 9046-F, with an area of 13,799 square meters, shall remain
under the co-ownership of Gil, Flaviano, Felino, Ignacio and the
heirs of Felipa Ebreo. However, plaintiffs were surprised to discover
that Lot 9046-F was declared for taxation purposes in the name of
defendant Antonio Ebreo. Based on plaintiffs recitals, they alleged
that they never sold, ceded, conveyed or transferred their rights,
share and co-ownership over Lot 9046- F.
Answering the complaint, the defendants countered that after the
execution of the Kasulatan ng Pagbabahagi ng Lupa, by and among
the heirs of the late Felipe Ebreo, Lot 9046-F was sold by the heirs
to Santiago Puyo. By virtue of this sale, the corresponding Real
Property Tax Declaration was transferred in the name of Santiago
Puyo as owner. However, the deed of sale evidencing this
transaction was never presented.
As narrated by the defendants, Tax Declaration No. 39241,[5]
beginning in the year 1969 covering Lot 9046-F was under the
names of the heirs of Felipe Ebreo. Thereafter, upon the sale of the
lot by the heirs of Felipe Ebreo to Santiago Puyo, Tax Declaration
No. 39241 was cancelled and a new one, Tax Declaration No.
48221[6] dated 15 January 1973, was issued in the name of Santiago
Puyo. On this tax declaration, the alleged sale of Lot 9046-F by the
Heirs of Felipe Ebreo to Santiago Puyo was annotated. Soon, Tax
Declaration No. 48221 was cancelled by Tax Declaration No. 4042[7]
for the year 1974, still in the name of Santiago Puyo. Upon the sale
by Santiago Puyo of Lot 9046- F to Antonio Ebreo on 23 July 1976,
Tax Declaration No. 4042 was cancelled and a new one, Tax
Declaration No. 50669,[8] for the year 1977, was issued in the name
Page 30
of Antonio Ebreo. This Tax Declaration was later on revised and
cancelled by Tax Declaration No. 075-534 upon the marriage of
defendant Antonio Ebreo to defendant Evelyn Beraa. From 1977 up
to 1994, defendants-spouses Antonio Ebreo and Evelyn Beraa
religiously paid the taxes due on the land.[9]
Defendants further alleged that the Deed of Absolute Sale of Lot No.
9046-F by the heirs of Felipe Ebreo to Santiago Puyo was executed
and ratified sometime in 1968 before Attorney Doroteo M. Chavez
of BatangasCity. From 1968 to 1976, Mr. Santiago Puyo possessed
said lot peacefully, continuously, publicly and in the concept of
owner. As stated earlier, on 23 July 1976, Lot No. 9046-F was sold by
Santiago Puyo by way of Absolute Sale, to defendant Antonio Ebreo.
The Deed of Absolute Sale or Ganap na Bilihan ng Lupa[10] was duly
executed and ratified before one Attorney Meynardo L. Atienza.
After due proceedings, a decision[11] dated 18 August 1997, was
rendered by the RTC which disposed:
WHEREFORE, in view of the foregoing, judgment is rendered as
follows:
(1) Ordering the parties-in-interest (heirs of Felipe Ebreo and/or
their representatives) to partition Lot No. 9046-F among themselves
by proper instruments of conveyance under Sec. 2, Rule 69 of the
1997 Rules of Civil Procedure, and in default thereof, the partition
shall be conducted in accordance with Sec. 3, et. seq., of the same
Rule.
(2) Ordering the dismissal of the Counterclaim of the defendants.
EVIDENCE (Rule 130 Documentary Evidence Cases)
(3) Ordering the defendants, jointly and severally, to pay the
plaintiffs the sum of TWENTY THOUSAND PESOS (P20,000.00),
Philippine Currency, for and as attorneys fee.
(4) Ordering the defendants, jointly and severally, to pay the costs
of suit.[12]
Defendants- appellants appealed the decision of the RTC to the
Court of Appeals. In a decision[13] dated 27 February 2003, the
Court of Appeals denied the appeal for lack of merit and affirmed in
toto the decision of the trial court. The Court of Appeals held:
The main issue in this case is whether or not a valid transfer of Lot
No. 9046-F was effected which conveyed ownership of the property
to Santiago Puyo. The defendant-appellants rely on the Deed of Sale
supposedly executed by the heirs of Felipe Ebreo in favor of
Santiago Puyo. However, defendant-appellants failed to produce
the alleged Deed of Sale in violation of the Best Evidence Rule.
xxxx
The best evidence rule, applied to documentary evidence, operates
as a rule of exclusion, that is, secondary (or substitutionary)
evidence cannot inceptively be introduced as the original writing
itself must be produced in court, except in the four instances
mentioned in Section 3. (Regalado, Remedial Law Compendium,
Volume II, Seventh Revised Edition, p. 555). Defendant-appellants
miserably failed to prove that their case is included among the
exceptions to the Rule.
Page 31

The testimony of Felino Ebreo regarding the execution of the Deed
of Sale cannot be given credence. In fact, it was contradicted by his
supposed co-sellers and co-owners. His claim that it was borrowed
by Eleuteria Cueto and never returned to him was also refuted by
Eleuteria Cueto. Not only are the testimonies of Felino Ebreo and his
son Antonio Ebreo self-serving, they are also uncorroborated by
independent witnesses. Defendant-appellants did not even look for
a copy of the deed of sale on the notarial registry of Atty. Chavez,
the notary public who allegedly notarized the deed of sale. Neither
did they look for a copy in the archives of the Court where it should
have been submitted as required by the notarial law. In the words
of the trial court, the decisive documentary evidence remains an
elusive phantom and conspicuously unproven. The controversial
deed of sale not having been produced as required by the rules of
evidence, the trial court was correct in ruling that Santiago Puyo
acquired no rights whatsoever to Lot No. 9046-F.
Since there was no valid transfer of the ownership of the subject lot
from the heirs of Felipe Ebreo to Santiago Puyo, the subsequent
transfer thereof to Antonio Ebreo is ineffectual. It is essential that
the seller is the owner of the property he is selling (Noel vs. Court of
Appeals, 240 SCRA 78). Moreover, the fact that the tax declarations
for said lot were issued in the name of Antonio Ebreo is of no
moment for they are not conclusive proof of ownership. It must be
remembered that a tax declaration may be issued to any claimant
even if it is not supported by any deed.
Neither can defendant-appellants open, adverse, notorious and
continuous possession of the land for several years amount to
EVIDENCE (Rule 130 Documentary Evidence Cases)
ownership for they are co-owners of the land as evidenced by the
Kasulatan ng Pagbabahagi Ng Lupa. A co-owner cannot acquire by
prescription the share of the other co-owners absent a clear
repudiation of co-ownership duly communicated to the other co-
owners. (Trinidad v. Court of Appeals, 289 SCRA 188).[14]
The motion for reconsideration of the defendants-appellants was
denied in the resolution of the Court of Appeals dated 22
September 2003.[15]
Hence this petition for review on certiorari.
The following issues are submitted for resolution in this petition:
1) Whether or not the annotation of the Deed of Sale appearing in
Tax Declaration No. 48221 is a sufficient proof of transfer in line
with the doctrine of presumption of regularity of performance of
official duty.
2) Whether or not entries in official records are admissible
in evidence to establish the fact of valid transfer of Lot No. 9046-F
that effectively conveyed ownership of the property from the heirs
of Felipe Ebreo to Santiago Puyo.[16]
After a painstaking review of the records, we find the petition bereft
of merit. First, it is important to re-state the general rule that the
findings of the trial court which are factual in nature, especially
when affirmed by the Court of Appeals deserve to be respected and
Page 32
affirmed by this court provided they are supported by substantial
evidence on record, as in the case at bench.[17] Deed of sale
D.V. P2,500.00
As recounted by defendants, now petitioners, Antonio and Evelyn Doc. on file
Ebreo, Lot 9046-F was sold by the heirs of Felipe Ebreo initially to Doc. No. 312
Santiago Puyo sometime in 1967 or 1968 as evidenced by a deed of Page No. 17
sale executed and ratified before Atty. Doroteo Chavez in Batangas Book No. VI
City. Santiago Puyo caused the transfer of the tax declaration in his Series of 1967[18]
name and caused the sale to be annotated therein. Only this
annotation in the tax declaration was offered as proof of the sale.
Santiago Puyo took possession, cultivated the land, exercised The testimony of Pajilan went on as follows:
uninterrupted ownership and paid real estate taxes thereon for a
period of eight years. Q I am showing to you a tax declaration No. 32941 in the name of
Gil Flaviano, Felino, Ignacio, Genoveva, Eleuteria Cueto which is
Petitioners went on further to state that the Deed of Sale from the already marked as Exhibit 10 for the defendants in this case and
heirs of Felipe Ebreo to Santiago Puyo could not be presented Exhibit F for the plaintiff, will you please examine the same and
because the copy on file with the Office of the City Assessor was lost identify it?
in the fire which occurred in 23 May 1979 that gutted the building
housing their office. From then on, petitioners advance that they A Witness is examining the document. I think this tax declaration is
have paid the real estate taxes on the land and were in open, an owners copy, Sir.
continous and uninterrupted possession until the Complaint for
Partition, Reconveyance and Damages was filed by the respondents. Q But this tax declaration was issued by your office, the City
Assessor of Batangas?
On the basis of the above narrations, petitioners insist that there
was a valid transfer of the lot from the heirs of Felipe Ebreo to A Yes, Sir.
Santiago Puyo, and thereafter from Santiago Puyo to them. To
buttress this claim of sale by the heirs to Santiago Puyo, petitioners Q Can you inform before this Honorable Court, if this tax declaration
presented the testimony of Antonio Pajilan of the City Assessors was still existing in your office or a copy thereof?
Office of Batangas City who testified on the annotation in Tax
Declaration No. 48221. The annotation reads:

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 33

A This tax declaration could not be found because our office was
burned on May 29, 1979, it could not be found anymore, Sir.
Q You are also required by this Honorable Court to bring a copy of
the tax declaration No. 48221, do you have copy of the same?
A I have copy of that tax declaration, Sir.
Q Will you please produce the same?
Witness is producing a copy of tax declaration No. 32941 in the
name of Santiago Puyo.
A Can you explain how this tax declaration was placed in the name
of Santiago Puyo?
Q Previously this tax declaration was owned by Gil, Flaviano, Felino,
Ignacio Ebreo and Genoveva, Eleuteria and Homobono Cueto under
PD 32941 this tax declaration is under 48221 in the name of
Santiago Puyo and this was transferred by a virtue of Deed of Sale
annotated in the tax declaration and in the Deed of Sale and
purchase value was there: 2,500.00 document docketed No. 312,
Page 17, Book No. 6, Series of 1967, Doroteo de Chavez, the Notary
Public, Sir.
Q Can you explain why this annotation was placed or written in this
tax declaration No. 48221?
A This was placed under Tax Declaration No. 48221 because the
office of the City Assessor transferred the tax declaration and
EVIDENCE (Rule 130 Documentary Evidence Cases)
annotated the instrument used in the transfer of the tax
declaration, Sir.
Q Do you have copy of that document which is the basis of the
transfer?
A We could not be located (sic) because as I have said earlier our
office was burned on May 23, 1979, Sir.
Q So what does this phrase Deed of Sale, what do you mean by
that?
A I placed that, that is the title of the instrument used in the
transfer of this tax declaration, Sir.[19]
It is worth noting that Antonio Pajilan, an employee of the City
Assessors Office of Batangas City[20] who testified regarding Tax
Declaration No. 48221 dated 15 January 1973 on which was
annotated the alleged sale between the heirs of Felipe Ebreo to
Santiago Puyo, was employed in the said office only in the year
1978. Thus, he did not make nor did he witness the causing of the
annotation as he was not yet employed in the said office at that
time. Likewise, he was neither present when the deed of sale was
executed nor did he personally see the said deed of sale. For these
reasons, the testimony of Pajilan is inconclusive.
Petitioners next argue that Tax Declaration No. 48221 in the name
of Santiago Puyo enjoys the presumption of regularity in its
issuance. It is a good time as any to re-state that this rule is a mere
presumption, not absolute nor inflexible and applies only in the
Page 34
absence of proof to the contrary.[21] Besides, the mere fact that the
disputed property may have been declared for taxation purposes in
the name of the petitioners does not necessarily prove ownership.
In the same manner, neither does the payment of taxes conclusively
prove ownership of the land paid for.[22] It is merely an indicium of
a claim of ownership.[23]
Petitioners also presented the testimony of Felino Ebreo, father of
petitioner Antonio Ebreo, who testified that the heirs of Felipe
Ebreo sold Lot 9046 F to Santiago Puyo.[24] When queried on the
whereabouts of the document of sale, Felino alleged that it was
borrowed by his niece Eleuteria Cueto who is the daughter of one of
the heirs, Felipa Ebreo.[25] According to Felino, Eleuteria refused to
return the document and even got angry when he tried to demand
its return.[26] From Felinos account,[27] there are three copies of
the missing deed of sale. Lamentably, petitioners failed to present
any one of them.
Finally, petitioners presented Asuncion Aguado, step-daughter of
Santiago Puyo, who testified that her stepfather Santiago Puyo
bought the subject lot from the Ebreo heirs.[28] Similar to Pajilans
testimony, Aguadostestimony cannot be given much weight in view
of the fact that save for her bare allegations that Lot 9046-F was
purchased by her stepfather Santiago Puyo, she was not likewise
present when the deed was executed. In her testimony she merely
stated that her stepfather paid taxes for his real estate properties
but could not state with specificity if the payment was made for Lot
9056-F.[29]
EVIDENCE (Rule 130 Documentary Evidence Cases)
To summarize, the testimonies of Pajilan, Felino Ebreo and Asuncion
Aguado are at most secondary evidence; hence, they are
inadmissible considering that the petitioners, as offerors of the
Deed of Sale, thereof failed to prove any of the exceptions provided
in Section 3, Rule 130 of the Rules of Court and to establish
conditions for their admissibility.[30] Even if they are admitted, they
have no probative value.[31] This rule provides:
SEC. 3. Original document must be produced; exceptions. When the
subject of inquiry is the contents of a document, no evidence shall
be admissible other than the original document itself except in the
following cases:
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the
party against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
(c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss of
time and the fact sought to be established from them is only the
general result of the whole; and
(d) When the original is a public record in the custody of a public
officer or is recorded in a public office.
Under this rule, it is axiomatic that before a party is allowed to
adduce secondary evidence to prove the contents of the original of
Page 35
a deed or document, the party has to prove with the requisite
quantum of evidence, the loss or destruction or unavailability of all
the copies of the original of the said deed or document. As former
Supreme Court Chief Justice Manuel V. Moran declared:
Where there are two or more originals, it must appear that all of
them have been lost, destroyed or cannot be produced before
secondary evidence can be given of any one. For example, a lease
was executed in duplicate, one being retained by the lessor and the
other by the lessee. Either copy was, therefore, an original, and
could have been introduced as evidence of the contract without the
production of the other. One of these originals could not be
found.The non-production of the other was not accounted for it was
held that under these circumstances, the rule is that no secondary
evidence of the contents of either is admissible until it is shown that
originals must be accounted for before secondary evidence can be
given of any one.
Indeed, before a party is allowed to adduce secondary evidence to
prove the contents of the original of the deed, the offeror is
mandated to prove the following:
(a) the execution and existence of the original (b) the loss and
destruction of the original or its non-production in court; and (c)
unavailability of the original is not due to bad faith on the part of
the offeror.[32]
On this score, the factual findings of the trial court are worth
repeating. It held:
EVIDENCE (Rule 130 Documentary Evidence Cases)
The pivotal document of sale allegedly executed by the heirs of
Felipe Ebreo in favor of Santiago Puyo and chiefly relied upon by
defendant Antonio Ebreo as the derivative basis of his ownership is
sadly missing and remains a phantom in the dark. The testimonies
of Felino Ebreo, Asuncion Aguado and Antonio Ebreo to prove by
way of recollection of witnesses that Lot 9046-F was sold to
Santiago Puyo sometime in 1967 for P2,500.00 by virtue of a deed
notarized before deceased Atty. Doroteo Chavez merits scant
consideration. They were the verbal say-so of interested parties and
attributed acts to a party whose lips had been sealed by death.
Quite evidently, their testimony should be taken cum grano salis
with a grain of salt.
Both the testimonies of Asuncion Aguado and Antonio Ebreo lacked
the legal underpinning needed to prove the deed of sale. Their
testimonies were not recollection of witnesses who saw the
execution and delivery of the document. According to Sec. 4, Rule
130, the contents of the lost writing may be proved, inter alia, by
the recollection of witnesses. As matters stand, however, Aguados
testimony relates not to the execution of the document but to what
her father (Santiago Puyo) did with the property after it was already
acquired. (t.s.n. pp. 4-7, Direct, May 17, 1995) Similarly, Antonio
Ebreos testimony does not refer to the execution and delivery of
the deed of sale but of having allegedly seen said document when
he purchased the lot from Santiago Puyo. He testified that when I
bought it from Santiago Puyo, he brought with him the Tax
Declaration in the name of Santiago Puyo as well as the deed of sale
between my father and his brothers and SantiagoPuyo. (t.s.n. pp.
13-14, Direct, Aug. 16, 1995). In fine, they were not witnesses to the
Page 36
execution and delivery of the document of sale to qualify their
testimonies under the phrase recollection of witnesses.
Neither does the testimony of Felino Ebreo evoke faith and
confidence. His salutary recollection of the missing document failed
to instill credulity. For one, it was uncorroborated by any of the
parties to the alleged deed of sale. In fact, such sale was directly
controverted by his supposed co-sellers and co-owners Gil and
Flaviano. (t.s.n. pp. 7-8, Direct, July 18, 1994; t.s.n. pp. 22-23, Cross,
Sept. 29, 1994) Then too, it appears rather unusual for the heirs to
retain Lot 9046-F in co-ownership in their partition agreement of
1967 and sell the said Lot that very same year (1967) if not on the
same occasion. Felino Ebreo did not give the exact date of the
supposed sale to Santiago Puyo except to say that it was sold in
1967. The Court got the impression, though, that it was on the same
occasion as the partition agreement. (t.s.n. pp. 6-7, 14-16, Direct,
Feb. 28, 1995) More important, his humanistic bias to favor his son
Antonio Ebreo and his natural interest to defend his actuations
leading to the issuance of the Tax Decl. 50669 (Exh. 2) which he
signed caution us to accept his testimony with great care. He does
not have the cold neutrality of a disinterested party. He was
covetous of gain. The Tax Decl. No. 50669 that transferred in 1976
the property in the name of Antonio Ebreo was signed by Felino
Ebreo himself (Exh. 2). This illustrated a dialectical connection
between him and his favored son Antonio Ebreo. Finally, Felino
Ebreos claim that he could not produce it because it was borrowed
by his niece Eleuteria Cueto and never returned to him was squarely
refuted by said Eleuteria Cueto when she testified in rebuttal for the
plaintiffs. (t.s.n. pp. 9, 12-13, Direct, Feb. 28, 1995) (See testimony
of Eleuteria Cueto in rebuttal on July 17, 1997)
EVIDENCE (Rule 130 Documentary Evidence Cases)
While many things have been said about the crucial deed of sale,
the decisive documentary evidence remains an elusive phantom and
conspicuously unproven. The ownership of Santiago Puyo becomes
moreover doubtful because while the alleged sale was executed by
the heirs of Felipe Ebreo in 1967 yet the earliest Tax Declaration in
the name of Santiago Puyo was issued only in 1973 (Exh. 9) or 1974
(Exh. 4) as far as the record of this case can reveal. The issuance of a
new tax declaration in the name of the sunrise owner (Puyo) which
was late by six (6) or seven (7) years naturally cast a slur on the
veracity of the sale.
The typewritten entry on Tax Decl. No. 48221 (Exhs. 9 and 9-A)
detailing the particulars of the alleged deed of sale in favor of
Santiago Puyo is patently suspicious and a very very poor ersatz for
the primary document. While the sale allegedly took place in 1967,
said deed was annotated on Exh. 9 which however only begins with
the year 1973. Moreover, while the alleged sale took place in 1967,
yet Tax. Decl. No. 32941 (Exh. 10) that was issued on Feb. 7, 1968
still carried the names of Gil, Flaviano, Felino and Ignacio, all EBREO
and Genoveva, Eleuteria and Homobono, all CUETO and not the
name of Santiago Puyo. There even appears thereon the annotation
that the 1968 tax was paid on Jan. 29, 1968 with no mention of
Santiago Puyo despite his having allegedly acquired the property the
year before (1967).
Riveting further its attention to the typewritten entry on Exh. 9, the
Court finds it rather strange that such an entry appears on the Tax
Declaration. Firstly, it is not a widely accepted practice to make such
annotation. Secondly, there is more than meets the eye in the
Page 37
conspicuous presence of this annotation only on this particular Tax
Declaration (Exh. 9). All other tax declarations in this case do not
have similar entry to identify the documentary basis for the
issuance of the latest tax declaration. Thirdly, not even Tax Decl.
Nos. 50669 and 075-534 (Exhs. 2 and 3) of Antonio Ebreo carry such
annotation to indicate that he acquired the property by virtue of
Doc. No. 70, Page No. 15, Book No. I, Series of 1976 of the
NotarialRegister of Atty. Meynardo L. Atienza. The pregnant
suspicion lurks that the alleged particulars of the document of sale
from Santiago Puyo to Antonio Ebreo were belatedly annotated.
As icing on the cake, Gil Ebreo categorically stated it was Felino
Ebreo who authored the transfer. He testified on cross-examination
that it was his eldest brother Felino Ebreo who was the caretaker of
the lot and in-charge of the payment of taxes. It was his brother
Felino who sold the subject lot known as Lot No. 9046-F in favor of
his son Antonio Ebreo. (t.s.n. pp. 16-17, Cross, July 18, 1994) The
evidence tended to show that indeed it was Felino Ebreo who had
the opportunity to cause the transfer as it was he (Felino) who took
possession of the lot and acted as its overseer. (t.s.n. pp. 3-4, Direct,
Nov. 17, 1994)
The alleged document of sale executed between Santiago Puyo and
Antonio Ebreo denominated as Ganap na Bilihan ng Lupa (Exh. 1),
was ineffectual for the purpose of transferring ownership of
disputed Lot No. 9046-F to said Antonio Ebreobecause the alleged
vendor Santiago Puyo has not, as heretofore explained, acquired it
from the heirs of Felipe Ebreo as the transaction has no supporting
document of sale. It is self-evident that the seller cannot transfer
more than what he has or as oftenly stated hyperbolically, the river
EVIDENCE (Rule 130 Documentary Evidence Cases)
cannot rise above its source. Moreover, Clerk of Court Jose C.
Corales certified that the Ganap na Bilihan ng Lupa (Doc. No. 70,
Page No. 15, Book No. I, Series of 1976) despite diligent efforts
could not be found in the old CFI vault located at the Capitol
Building, Batangas City. (Exh. E Rebuttal)
The fact that tax declarations for Lot [No.] 9046-F were issued in the
name of defendant Antonio Ebreo (Exhs. 2 and 3) and that he paid
the taxes for the land (Exh. 8) provides no evidentiary value that he
was the owner thereof. The existence of the tax declarations and
payment of taxes did not transmogrify his possession into
ownership. Tax declarations are not sufficient evidence to prove
possession in the concept of owners. (Martinez, D., Summary of
1990 Supreme Court Rulings, Part. II, p. 734) Tax receipts are not
conclusive evidence of ownership.[33]
In sum, considering that the annotation of the disputed Deed of Sale
in a tax declaration is not sufficient proof of the transfer of property
and inasmuch as the subject of inquiry is the Deed of Sale, it was
incumbent on the petitioners to adduce in evidence the original or a
copy of the deed consistent with Section 3, Rule 130 of the Rules of
Court. In the absence of the said document, the exhortations of
petitioners regarding the existence of said deed of sale must fail.
WHEREFORE, premises considered, the instant petition is DENIED
for lack of merit and the decision of the Court of Appeals dated 27
February 2003 affirming in toto the decision of the trial court dated
18 August 1997 is likewise AFFIRMED. Costs against petitioners.
Page 38
SO ORDERED. the loan through twenty-five monthly installments of P40,000.00 a
CONSOLIDATED BANK v DEL MONTE MOTOR month with interest pegged at 23% per annum. The note was to be
paid in full by 23 May 1984. As respondents defaulted on their
WORKS
monthly installments, the full amount of the loan became due and
DECISION
demandable pursuant to the terms of the promissory note.
Petitioner likewise alleges that it made oral and written demands
upon respondents to settle their obligation but notwithstanding
CHICO-NAZARIO, J.:
these demands, respondents still failed to pay their indebtedness
which, as of 09 March 1984, stood at P1,332,474.55. Petitioner
This is a petition for review on certiorari of the Decision[2] of the
attached to its complaint as Annexes A, B, and C, respectively, a
Court of Appeals in CA-G.R. CV No. 16886 entitled, The Consolidated
photocopy of the promissory note supposedly executed by
Bank & Trust Corporation (SOLIDBANK) v. Del Monte Motor Works,
respondents, a copy of the demand letter it sent respondents dated
Inc., Narciso O. Morales and Spouse promulgated on 25 November
20 January 1983, and statement of account pertaining to
1999 and of the Resolution of the appellate court dated 11 May
respondents loan.
2000 denying petitioners motion for reconsideration. Said decision
and resolution affirmed the order dated 28 December 1987 of the
On 31 October 1984, petitioner filed an Ex-Parte Motion to Declare
Regional Trial Court (RTC), Branch 27, Manila.
the Defendants in Default which was opposed by the defendants
upon the ground that they were never served with copies of the
The facts of the case are as follows:
summons and of petitioners complaint.
On 13 June 1984, petitioner filed before the RTC of Manila a
On 23 November 1984, respondent corporation filed before the trial
complaint[3] for recovery of sum of money against respondents,
court a manifestation attaching thereto its answer to petitioners
impleading the spouse of respondent Narciso O. Morales
complaint which states the following:
(respondent Morales) in order to bind their conjugal partnership of
gains. Petitioner, a domestic banking and trust corporation, alleges
2- That it denies generally and specifically the allegations contained
therein that on 23 April 1982, it extended in favor of respondents a
in paragraphs 3, 4, 5, 6, 7 and 8 thereof for lack of knowledge and
loan in the amount of One Million Pesos (P1,000,000.00) as
information sufficient to form a belief as to the truth of the matters
evidenced by a promissory note executed by respondents on the
therein alleged, the truth being those alleged in the Special and
same date. Under the promissory note, respondents Del Monte
Affirmative Defenses hereinbelow contained;
Motor Works, Inc. (respondent corporation) and Morales bound
themselves jointly and severally to pay petitioner the full amount of

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 39

3- ANSWERING FURTHER, and by way of a first special and
affirmative defense, defendant herein states that the promissory
note in question is void for want of valid consideration and/or there
was no valuable consideration involved as defendant herein did not
receive any consideration at all;
4- ANSWERING FURTHER, and by way of a second special affirmative
defense, defendant herein alleges that no demand has ever been
sent to nor received by herein defendant and if ever demands were
made, denies any liability as averred therein.
5- ANSWERING FURTHER, and by way of a third special and
affirmative defense, defendant herein avers that the complaint
states no cause of action and has no basis either in fact or in law;
VERIFICATION
I, JEANETTE D. TOLENTINO, of legal age, after having been duly
sworn to in accordance with law, depose and state:
That I am the Controller of Del Monte Motor Works, Inc., one of the
defendants in this case.
That for and in behalf of the defendant corporation, I caused the
preparation of the above-narrated answer.
That I have read the contents thereof and they are true of my own
knowledge.
(SGD) JEANNETTE D. TOLENTINO[4]
EVIDENCE (Rule 130 Documentary Evidence Cases)
On 06 December 1984, respondent Morales filed his manifestation
together with his answer wherein he likewise renounced any
liability on the promissory note, thus:
1. He ADMIT[S] paragraphs 1, 2, and 3 of the complaint with a
qualification in paragraph 3 thereof that he has long been separated
from his wife and the system governing their property relations is
that of complete separation of property and not that of conjugal
partnership of gain[s];
2. He [DENIES], generally and specifically, the allegations contained
in paragraphs 4, 5, 6, 7, and 8 thereof, for lack of knowledge and
information sufficient to form a belief and as to the truth of the
matter therein averred, the truth being those alleged in the Special
And Affirmative Defenses hereinbelow pleaded;
SPECIAL AND AFFIRMATIVE DEFENSES
4. He has never signed the promissory note attached to the
complaint in his personal and/or individual capacity as such;
5. That the said promissory note is ineffective, unenforceable and
void for lack of valid consideration;
6. That even admitting, argumenti gratia, the validity and execution
of the questioned promissory note, still, defendant herein cannot be
bound personally and individually to the said obligations as banking
Page 40
procedures requires, it being a standard operating procedure of all
known banking institution, that to hold a borrower jointly and
severally liable in his official as well as personal capacity, the
borrower must sign a Suretyship Agreement or at least, a continuing
guarranty with that of the corporation he represent(s) but which in
this case is wanting;
7. That transaction/obligation in question did not, in any way,
redound/inure to the benefit of the conjugal partnership of gain, as
there is no conjugal partnership of gain to speak with, defendant
having long been separated from his wife and their property
relation is governed by the system of complete separation of
property, and more importantly, he has never signed the said
promissory note in his personal and individual capacity as such;
VERIFICATION
That I, NARCISO MORALES, after having been duly sworn to in
accordance with law, hereby depose and declare that:
I am one of the named defendant[s] in the above-entitled case;
I have cause[d] the preparation of the foregoing Answer upon facts
and figures supplied by me to my retained counsel; have read each
and every allegations contained therein and hereby certify that the
same are true and correct of my own knowledge and information.
(SGD) NARCISO MORALES
Affiant[5]
EVIDENCE (Rule 130 Documentary Evidence Cases)
On 26 December 1984, the trial court denied petitioners motion to
declare respondents in default and admitted their respective
answers.[6]
During the trial on the merits of this case, petitioner presented as its
sole witness, Liberato A. Lavarino (Lavarino), then the manager of its
Collection Department. Substantially, Lavarino stated that
respondents obtained the loan, subject of this case, from petitioner
and due to respondents failure to pay a single monthly installment
on this loan, petitioner was constrained to send a demand letter to
respondents; that as a result of this demand letter, Jeannette
Tolentino (Tolentino), respondent corporations controller, wrote a
letter to petitioner requesting for some consideration because of
the unfavorable business atmosphere then buffeting their business
operation; that Tolentino enclosed to said letter a check with a face
value of P220,020.00 to be discounted by petitioner with the
proceeds being applied as partial payment to their companys
obligation to petitioner; that after receipt of this partial payment,
respondents obligation again became stagnant prompting petitioner
to serve respondents with another demand letter which,
unfortunately, was unheeded by respondents. Lavarino also
identified the following exhibits for petitioner: photocopy of the
duplicate original of the promissory note attached to the complaint
as Exhibit A;[7] petitioners 20 January 1983 demand letter marked
as Exhibit B;[8] Tolentinos letter to petitioner dated 10 February
1983 and marked as Exhibit C;[9] and the 09 March 1984 statement
of account sent to respondents marked as Exhibit D.[10]
Page 41
On 26 September 1985, petitioner made its formal offer of
evidence. However, as the original copy of Exhibit A could no longer
be found, petitioner instead sought the admission of the duplicate
original of the promissory note which was identified and marked as
Exhibit E.
The trial court initially admitted into evidence Exhibit E and granted
respondents motion that they be allowed to amend their respective
answers to conform with this new evidence.[11]
On 30 September 1985, respondent corporation filed a
manifestation and motion for reconsideration[12] of the trial courts
order admitting into evidence petitioners Exhibit E. Respondent
corporation claims that Exhibit E should not have been admitted as
it was immaterial, irrelevant, was not properly identified and
hearsay evidence. Respondent corporation insists that Exhibit E was
not properly identified by Lavarino who testified that he had
nothing to do in the preparation and execution of petitioners
exhibits, one of which was Exhibit E. Further, as there were
markings in Exhibit A which were not contained in Exhibit E, the
latter could not possibly be considered an original copy of Exhibit A.
Lastly, respondent corporation claims that the exhibit in question
had no bearing on the complaint as Lavarino admitted that Exhibit E
was not the original of Exhibit A which was the foundation of the
complaint and upon which respondent corporation based its own
answer.
Respondent Morales similarly filed a manifestation with motion to
reconsider order admitting as evidence Exhibit E[13] which, other
EVIDENCE (Rule 130 Documentary Evidence Cases)
than insisting that the due execution and genuineness of the
promissory note were not established as far as he was concerned,
essentially raised the same arguments contained in respondent
corporations manifestation with motion for reconsideration
referred to above.
On 06 December 1985, the trial court granted respondents motions
for reconsideration.[14] Petitioner moved for the reconsideration of
this order which was denied by the court a quo on 20 December
1985.[15]
On 26 December 1985, respondents separately filed their motions
to dismiss on the similar ground that with the exclusion of Exhibits A
and E, petitioner no longer possessed any proof of respondents
alleged indebtedness.[16]
On 08 April 1986, petitioner filed a motion[17] praying that the
presiding judge, Judge Ricardo D. Diaz, of the court a quo inhibit
himself from this case maintaining that the latter rushed into
resolving its motion for reconsideration of the trial courts order of
06 December 1985 thereby depriving it the opportunity of
presenting proof that the original of Exhibit A was delivered to
respondents as early as 02 April 1983. Such haste on the part of the
presiding judge, according to petitioner, cast doubt on his
objectivity and fairness. This motion to inhibit was denied by the
trial court on 06 August 1987.[18]
In an order dated 28 December 1987,[19] the case before the trial
court was dismissed, the dispositive portion of which reads:
Page 42
WHEREFORE, the instant case against defendants Del Monte Motor
Works, Inc. and Narciso O. Morales and spouse, is hereby
DISMISSED, with costs against the plaintiff.
The trial courts finding was affirmed by the Court of Appeals in the
assailed decision now before us. The dispositive portion of the
appellate courts decision reads:
WHEREFORE, PREMISES CONSIDERED, the decision of the Regional
Trial Court, Manila, Branch 27, dated December 28, 1987 dismissing
plaintiff-appellant['s] complaint is hereby AFFIRMED. Cost against
the plaintiff-appellant.[20]
Petitioner thereafter filed a motion for reconsideration dated 14
December 1999 which was denied for lack of merit in a resolution of
the Court of Appeals promulgated on 11 May 2000.[21]
Aggrieved by the appellate courts ruling, petitioner now seeks
redress from this Court imputing the following errors on the Court
of Appeals:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
FOUND THAT PRIVATE RESPONDENTS DENIED THE MATERIAL
ALLEGATIONS OF PETITIONER SOLIDBANKS COMPLAINT, DESPITE
EVIDENCE (Rule 130 Documentary Evidence Cases)
THE PRESENCE OF INDUBITABLE FACTS CLEARLY POINTING TO THE
FACT THAT SAID PRIVATE RESPONDENTS ADMITTED THE
GENUINENESS AND DUE EXECUTION OF THE SUBJECT PROMISSORY
NOTE.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
UPHELD THE EXCLUSION OF EXHIBIT E, THE SECOND ORIGINAL OF
THE PROMISSORY NOTE, DESPITE THE FACT THAT THE ORIGINAL OF
EXHIBIT A (XEROX COPY OF THE DUPLICATE ORIGINAL OF THE
PROMISSORY NOTE) WAS ACTUALLY IN THE POSSESSION OF
PRIVATE RESPONDENTS, THUS WARRANTING THE ADMISSION OF
SECONDARY EVIDENCE.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
HOLDING THAT THE TRIAL JUDGE SHOULD HAVE INHIBITED HIMSELF
FROM TAKING COGNIZANCE OF AND FROM TRYING AND DECIDING
THE INSTANT CASE CONSIDERING HIS PERCEIVED AND MANIFEST
BIAS AND PARTIALITY IN FAVOR OF THE PRIVATE RESPONDENTS TO
THE GRAVE PREJUDICE OF PETITIONER SOLIDBANK.[22]
The petition is meritorious.
In resolving the case against petitioner, the appellate court held that
contrary to petitioners stance, respondents were able to generally
Page 43
and specifically deny under oath the genuineness and due execution
of the promissory note, thus:
There can be no dispute to the fact that the allegations in the
answer (Record, p. 20, 26-27), of both defendants, they denied
generally and specifically under oath the genuineness and due
execution of the promissory note and by way of special and
affirmative defenses herein states that he (MORALES) never signed
the promissory note attached to the complaint (Exh. A) in his
personal and/or individual capacity. Moreover, what appears in the
record (Record, p. 20) was an admission of paragraphs 1 & 2 but
they deny generally and specifically the rest of the allegations. It
would be considered that there is a sufficient compliance of the
requirement of the law for specific denial.[23]
We hold otherwise.
The pertinent portion of the Rules of Court on the matter provides:
SEC. 8. How to contest such documents. 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; but the
requirement of an oath does not apply when the adverse party does
not appear to be a party to the instrument or when compliance with
an order for an inspection of the original instrument is refused.[24]
EVIDENCE (Rule 130 Documentary Evidence Cases)
In the case of Permanent Savings and Loan Bank v. Mariano
Velarde,[25] this Court held that
. . . Respondent also denied any liability on the promissory note as
he allegedly did not receive the amount stated therein, and the loan
documents do not express the true intention of the parties.
Respondent reiterated these allegations in his denial under oath,
stating that the promissory note sued upon, assuming that it exists
and bears the genuine signature of herein defendant, the same
does not bind him and that it did not truly express the real intention
of the parties as stated in the defenses
Respondents denials do not constitute an effective specific denial as
contemplated by law. In the early case of Songco vs. Sellner,[26] the
Court expounded on how to deny the genuineness and due
execution of an actionable document, viz.:
. . . This means that the defendant must declare under oath that he
did not sign the document or that it is otherwise false or fabricated.
Neither does the statement of the answer to the effect that the
instrument was procured by fraudulent representation raise any
issue as to its genuineness or due execution. On the contrary such a
plea is an admission both of the genuineness and due execution
thereof, since it seeks to avoid the instrument upon a ground not
affecting either.[27]
Page 44
In this case, both the court a quo and the Court of Appeals erred in
ruling that respondents were able to specifically deny the
allegations in petitioners complaint in the manner specifically
required by the rules. In effect, respondents had, to all intents and
purposes, admitted the genuineness and due execution of the
subject promissory note and recognized their obligation to
petitioner.
The appellate court likewise sustained the ruling of the trial court
that the best evidence rule or primary evidence must be applied as
the purpose of the proof is to establish the terms of the writing
meaning the alleged promissory note as it is the basis of the
recovery of the money allegedly loaned to the defendants
(respondents herein).[28]
The best evidence rule is encapsulated in Rule 130, Section 3, of the
Revised Rules of Civil Procedure which provides:
Sec. 3. Original document must be produced; exceptions. When the
subject of inquiry is the contents of a document, no evidence shall
be admissible other than the original document itself, except in the
following cases:
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the
party against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
EVIDENCE (Rule 130 Documentary Evidence Cases)
(c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss of
time and the fact sought to be established from them is only the
general result of the whole; and
(d) When the original is a public record in the custody of a public
officer or is recorded in a public office.
The best evidence rule, according to Professor Thayer, first
appeared in the year 1699-1700 when in one case involving a
goldsmith, Holt, C. J., was quoted as stating that they should take
into consideration the usages of trade and that the best proof that
the nature of the thing will afford is only required.[29] Over the
years, the phrase was used to describe rules which were already
existing such as the rule that the terms of a document must be
proved by the production of the document itself, in preference to
evidence about the document; it was also utilized to designate the
hearsay rule or the rule excluding assertions made out of court and
not subject to the rigors of cross-examination; and the phrase was
likewise used to designate the group of rules by which testimony of
particular classes of witnesses was preferred to that of others.[30]
According to McCormick, an authority on the rules of evidence, the
only actual rule that the best evidence phrase denotes today is the
rule requiring the production of the original writing[31] the
rationale being:
Page 45
(1) that precision in presenting to the court the exact words of the
writing is of more than average importance, particularly as respects
operative or dispositive instruments, such as deeds, wills and
contracts, since a slight variation in words may mean a great
difference in rights, (2) that there is a substantial hazard of
inaccuracy in the human process of making a copy by handwriting or
typewriting, and (3) as respects oral testimony purporting to give
from memory the terms of a writing, there is a special risk of error,
greater than in the case of attempts at describing other situations
generally. In the light of these dangers of mistransmission,
accompanying the use of written copies or of recollection, largely
avoided through proving the terms by presenting the writing itself,
the preference for the original writing is justified.[32]
Bearing in mind that the risk of mistransmission of the contents of a
writing is the justification for the best evidence rule, we declare that
this rule finds no application to this case. It should be noted that
respondents never disputed the terms and conditions of the
promissory note thus leaving us to conclude that as far as the
parties herein are concerned, the wording or content of said note is
clear enough and leaves no room for disagreement. In their
responsive pleadings, respondents principal defense rests on the
alleged lack of consideration of the promissory note. In addition,
respondent Morales also claims that he did not sign the note in his
personal capacity. These contentions clearly do not question the
precise wording[33] of the promissory note which should have
paved the way for the application of the best evidence rule. It was,
EVIDENCE (Rule 130 Documentary Evidence Cases)
therefore, an error for the Court of Appeals to sustain the decision
of the trial court on this point.
Besides, the best evidence rule as stated in our Revised Rules of Civil
Procedure is not absolute. As quoted earlier, the rule accepts of
exceptions one of which is when the original of the subject
document is in the possession of the adverse party. As pointed out
by petitioner in its motion to inhibit, had it been given the
opportunity by the court a quo, it would have sufficiently
established that the original of Exhibit A was in the possession of
respondents which would have called into application one of the
exceptions to the best evidence rule.
Significantly, and as discussed earlier, respondents failed to deny
specifically the execution of the promissory note. This being the
case, there was no need for petitioner to present the original of the
promissory note in question. Their judicial admission with respect to
the genuineness and execution of the promissory note sufficiently
established their liability to petitioner regardless of the fact that
petitioner failed to present the original of said note.[34]
Indeed, when the defendant fails to deny specifically and under
oath the due execution and genuineness of a document copied in a
complaint, the plaintiff need not prove that fact as it is considered
admitted by the defendant.[35] In the case of Asia Banking
Corporation v. Walter E. Olsen & Co.,[36] this Court held that
Another error assigned by the appellant is the fact that the lower
court took into consideration the documents attached to the
complaint as a part thereof, without having been expressly
Page 46
introduced in evidence. This was no error. In the answer of the
defendants there was no denial under oath of the authenticity of
these documents. Under Section 103 of the Code of Civil Procedure,
the authenticity and due execution of these documents must, in
that case, be deemed admitted. The effect of this is to relieve the
plaintiff from the duty of expressly presenting such documents as
evidence. The court, for the proper decision of the case, may and
should consider, without the introduction of evidence, the facts
admitted by the parties.[37]
Anent petitioners allegation that the presiding judge of the court a
quo should have inhibited himself from this case, we resolve this
issue against petitioner.
In order for this Court to sustain a charge of partiality and prejudice
brought against a judge, there must be convincing proof to show
that he or she is, indeed, biased and partial. Bare allegations are not
enough. Bias and prejudice are serious charges which cannot be
presumed particularly if weighed against a judges sacred obligation
under his oath of office to administer justice without respect to
person and do equal right to the poor and the rich.[38] There must
be a showing of bias and prejudice stemming from an extrajudicial
source resulting in an opinion in the merits on some basis other
than what the judge learned from his participation in the case.[39]
In this case, as petitioner failed to proffer any evidence indicating
that Judge Diaz was guilty of bias and prejudice, we affirm the Court
of Appeals holding that there was no cogent reason for him to
disqualify himself from this case.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Finally, Rule 33, Section 1, of the Revised Rules of Civil Procedure
states the rule on the effect of judgment on demurrer to evidence.
It reads:
SECTION 1. Demurrer to evidence.- After the plaintiff has completed
the presentation of his evidence, the defendant may move for
dismissal on the ground that upon the facts and the law the plaintiff
has shown no right to relief. If his motion is denied, he shall have
the right to present evidence. If the motion is granted but on appeal
the order of dismissal is reversed he shall be deemed to have
waived the right to present evidence.
A demurrer to evidence abbreviates judicial proceedings, it being an
instrument for the expeditious termination of an action. Caution,
however, must be exercised by the party seeking the dismissal of a
case upon this ground as under the rules, if the movants plea for the
dismissal on demurrer to evidence is granted and the order of
dismissal is reversed on appeal, he loses his right to adduce
evidence. If the defendants motion for judgment on demurrer to
evidence is granted and the order is subsequently reversed on
appeal, judgment is rendered in favor of the adverse party because
the movant loses his right to present evidence.[40] The reviewing
court cannot remand the case for further proceedings; rather, it
should render judgment on the basis of the evidence presented by
the plaintiff.[41]
Under the promissory note executed by respondents in this case,
they are obligated to petitioner in the amount of One Million Pesos,
Page 47
this being the amount of loan they obtained on 23 April 1982. In
addition, they also bound themselves to pay the 23% interest per
annum on the loan; and a penalty charge of 3% per annum on the
amount due until fully paid. Respondents likewise agreed to pay
attorneys fees equivalent to 10% of the total amount due, but in no
case less than P200.00, plus costs of suit with both these amounts
bearing a 1% interest per month until paid. Costs against
respondents.
WHEREFORE, premises considered, the Court of Appeals decision
dated 25 November 1999 as well as its Resolution of 11 May 2000,
affirming the order of the Regional Trial Court, Manila, Branch 27,
dated 28 December 1987, are hereby REVERSED and SET ASIDE.
Respondents are ordered to pay One Million Pesos (P1,000,000.00)
plus 23% interest per annum, penalty charge of 3% interest per
annum, and 10% of the amount due as attorneys fees together with
a 1% interest per month until fully paid. The sum of P220,020.00
which was the value of the postdated check given
by respondents to petitioner as partial payment should be deducted
from the amount due from respondents.
SO ORDERED.
CITIBANK v SABENIANO
DECISION
CHICO-NAZARIO, J.:
EVIDENCE (Rule 130 Documentary Evidence Cases)
Before this Court is a Petition for Review on Certiorari,[1] under
Rule 45 of the Revised Rules of Court, of the Decision[2] of the Court
of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, and the
Resolution,[3] dated 20 November 2002, of the same court which,
although modifying its earlier Decision, still denied for the most part
the Motion for Reconsideration of herein petitioners.
Petitioner Citibank, N.A. (formerly known as the First National City
Bank) is a banking corporation duly authorized and existing under
the laws of the United States of America and licensed to do
commercial banking activities and perform trust functions in the
Philippines.
Petitioner Investors Finance Corporation, which did business under
the name and style of FNCB Finance, was an affiliate company of
petitioner Citibank, specifically handling money market placements
for its clients.It is now, by virtue of a merger, doing business as part
of its successor-in-interest, BPI Card Finance Corporation. However,
so as to consistently establish its identity in the Petition at bar, the
said petitioner shall still be referred to herein as FNCB Finance.[4]
Respondent Modesta R. Sabeniano was a client of both petitioners
Citibank and FNCB Finance. Regrettably, the business relations
among the parties subsequently went awry.
On 8 August 1985, respondent filed a Complaint[5] against
petitioners, docketed as Civil Case No. 11336, before the Regional
Trial Court (RTC) of Makati City. Respondent claimed to have
Page 48
substantial deposits and money market placements with the
petitioners, as well as money market placements with the Ayala
Investment and Development Corporation (AIDC), the proceeds of
which were supposedly deposited automatically and directly to
respondents accounts with petitioner Citibank. Respondent alleged
that petitioners refused to return her deposits and the proceeds of
her money market placements despite her repeated demands, thus,
compelling respondent to file Civil Case No. 11336 against
petitioners for Accounting, Sum of Money and Damages.
Respondent eventually filed an Amended Complaint[6] on 9
October 1985 to include additional claims to deposits and money
market placements inadvertently left out from her original
Complaint.
In their joint Answer[7] and Answer to Amended Complaint,[8] filed
on 12 September 1985 and 6 November 1985, respectively,
petitioners admitted that respondent had deposits and money
market placements with them, including dollar accounts in the
Citibank branch in Geneva, Switzerland (Citibank-Geneva).
Petitioners further alleged that the respondent later obtained
several loans from petitioner Citibank, for which she executed
Promissory Notes (PNs), and secured by (a) a Declaration of Pledge
of her dollar accounts in Citibank-Geneva, and (b) Deeds of
Assignment of her money market placements with petitioner FNCB
Finance. When respondent failed to pay her loans despite repeated
demands by petitioner Citibank, the latter exercised its right to off-
set or compensate respondents outstanding loans with her deposits
and money market placements, pursuant to the Declaration of
Pledge and the Deeds of Assignment executed by respondent in its
favor. Petitioner Citibank supposedly informed respondent
EVIDENCE (Rule 130 Documentary Evidence Cases)
Sabeniano of the foregoing compensation through letters, dated 28
September 1979 and 31 October 1979. Petitioners were therefore
surprised when six years later, in 1985, respondent and her counsel
made repeated requests for the withdrawal of respondents deposits
and money market placements with petitioner Citibank, including
her dollar accounts with Citibank-Geneva and her money market
placements with petitioner FNCB Finance. Thus, petitioners prayed
for the dismissal of the Complaint and for the award of actual,
moral, and exemplary damages, and attorneys fees.
When the parties failed to reach a compromise during the pre-trial
hearing,[9] trial proper ensued and the parties proceeded with the
presentation of their respective evidence. Ten years after the filing
of the Complaint on 8 August 1985, a Decision[10] was finally
rendered in Civil Case No. 11336 on 24 August 1995 by the fourth
Judge[11] who handled the said case, Judge Manuel D. Victorio, the
dispositive portion of which reads
WHEREFORE, in view of all the foregoing, decision is hereby
rendered as follows:
(1) Declaring as illegal, null and void the setoff effected by the
defendant Bank [petitioner Citibank] of plaintiffs [respondent
Sabeniano] dollar deposit with Citibank, Switzerland, in the amount
of US$149,632.99, and ordering the said defendant [petitioner
Citibank] to refund the said amount to the plaintiff with legal
interest at the rate of twelve percent (12%) per annum,
compounded yearly, from 31 October 1979 until fully paid, or its
peso equivalent at the time of payment;
Page 49
(2) Declaring the plaintiff [respondent Sabeniano] indebted to the
defendant Bank [petitioner Citibank] in the amount of
P1,069,847.40 as of 5 September 1979 and ordering the plaintiff
[respondent Sabeniano] to pay said amount, however, there shall
be no interest and penalty charges from the time the illegal setoff
was effected on 31 October 1979;
(3) Dismissing all other claims and counterclaims interposed by the
parties against each other.
Costs against the defendant Bank.
All the parties appealed the foregoing Decision of the RTC to the
Court of Appeals, docketed as CA-G.R. CV No. 51930. Respondent
questioned the findings of the RTC that she was still indebted to
petitioner Citibank, as well as the failure of the RTC to order
petitioners to render an accounting of respondents deposits and
money market placements with them. On the other hand,
petitioners argued that petitioner Citibank validly compensated
respondents outstanding loans with her dollar accounts with
Citibank-Geneva, in accordance with the Declaration of Pledge she
executed in its favor. Petitioners also alleged that the RTC erred in
not declaring respondent liable for damages and interest.
On 26 March 2002, the Court of Appeals rendered its Decision[12]
affirming with modification the RTC Decision in Civil Case No. 11336,
dated 24 August 1995, and ruling entirely in favor of respondent in
this wise
EVIDENCE (Rule 130 Documentary Evidence Cases)
Wherefore, premises considered, the assailed 24 August 1995
Decision of the court a quo is hereby AFFIRMED with
MODIFICATION, as follows:
1. Declaring as illegal, null and void the set-off effected by the
defendant-appellant Bank of the plaintiff-appellants dollar deposit
with Citibank, Switzerland, in the amount of US$149,632.99, and
ordering defendant-appellant Citibank to refund the said amount to
the plaintiff-appellant with legal interest at the rate of twelve
percent (12%) per annum, compounded yearly, from 31 October
1979 until fully paid, or its peso equivalent at the time of payment;
2. As defendant-appellant Citibank failed to establish by competent
evidence the alleged indebtedness of plaintiff-appellant, the set-off
of P1,069,847.40 in the account of Ms. Sabeniano is hereby
declared as without legal and factual basis;
3. As defendants-appellants failed to account the following plaintiff-
appellants money market placements, savings account and current
accounts, the former is hereby ordered to return the same, in
accordance with the terms and conditions agreed upon by the
contending parties as evidenced by the certificates of investments,
to wit:
(i) Citibank NNPN Serial No. 023356 (Cancels and Supersedes NNPN
No. 22526) issued on 17 March 1977, P318,897.34 with 14.50%
interest p.a.;
Page 50
(ii) Citibank NNPN Serial No. 23357 (Cancels and Supersedes NNPN
No. 22528) issued on 17 March 1977, P203,150.00 with 14.50
interest p.a.;
(iii) FNCB NNPN Serial No. 05757 (Cancels and Supersedes NNPN No.
04952), issued on 02 June 1977, P500,000.00 with 17% interest p.a.;
(iv) FNCB NNPN Serial No. 05758 (Cancels and Supersedes NNPN No.
04962), issued on 02 June 1977, P500,000.00 with 17% interest per
annum;
(v) The Two Million (P2,000,000.00) money market placements of
Ms. Sabeniano with the Ayala Investment & Development
Corporation (AIDC) with legal interest at the rate of twelve percent
(12%) per annum compounded yearly, from 30 September 1976
until fully paid;
4. Ordering defendants-appellants to jointly and severally pay the
plaintiff-appellant the sum of FIVE HUNDRED THOUSAND PESOS
(P500,000.00) by way of moral damages, FIVE HUNDRED
THOUSAND PESOS (P500,000.00) as exemplary damages, and ONE
HUNDRED THOUSAND PESOS (P100,000.00) as attorneys fees.
Apparently, the parties to the case, namely, the respondent, on one
hand, and the petitioners, on the other, made separate attempts to
bring the aforementioned Decision of the Court of Appeals, dated
26 March 2002, before this Court for review.
G.R. No. 152985
EVIDENCE (Rule 130 Documentary Evidence Cases)
Respondent no longer sought a reconsideration of the Decision of
the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002,
and instead, filed immediately with this Court on 3 May 2002 a
Motion for Extension of Time to File a Petition for Review,[13]
which, after payment of the docket and other lawful fees, was
assigned the docket number G.R. No. 152985. In the said Motion,
respondent alleged that she received a copy of the assailed Court of
Appeals Decision on 18 April 2002 and, thus, had 15 days therefrom
or until 3 May 2002 within which to file her Petition for Review.
Since she informed her counsel of her desire to pursue an appeal of
the Court of Appeals Decision only on 29 April 2002, her counsel
neither had enough time to file a motion for reconsideration of the
said Decision with the Court of Appeals, nor a Petition for Certiorari
with this Court. Yet, the Motion failed to state the exact extension
period respondent was requesting for.
Since this Court did not act upon respondents Motion for Extension
of Time to file her Petition for Review, then the period for appeal
continued to run and still expired on 3 May 2002.[14] Respondent
failed to file any Petition for Review within the prescribed period for
appeal and, hence, this Court issued a Resolution,[15] dated 13
November 2002, in which it pronounced that
G.R. No. 152985 (Modesta R. Sabeniano vs. Court of Appeals, et al.).
It appearing that petitioner failed to file the intended petition for
review on certiorari within the period which expired on May 3,
2002, the Court Resolves to DECLARE THIS CASE TERMINATED and
DIRECT the Division Clerk of Court to INFORM the parties that the
judgment sought to be reviewed has become final and executory.
Page 51

The said Resolution was duly recorded in the Book of Entries of
Judgments on 3 January 2003.
G.R. No. 156132
Meanwhile, petitioners filed with the Court of Appeals a Motion for
Reconsideration of its Decision in CA-G.R. CV No. 51930, dated 26
March 2002. Acting upon the said Motion, the Court of Appeals
issued the Resolution,[16] dated 20 November 2002, modifying its
Decision of 26 March 2002, as follows
WHEREFORE, premises considered, the instant Motion for
Reconsideration is PARTIALLY GRANTED as Sub-paragraph (V)
paragraph 3 of the assailed Decisions dispositive portion is hereby
ordered DELETED.
The challenged 26 March 2002 Decision of the Court is AFFIRMED
with MODIFICATION.
Assailing the Decision and Resolution of the Court of Appeals in CA-
G.R. CV No. 51930, dated 26 March 2002 and 20 November 2002,
respectively, petitioners filed the present Petition, docketed as G.R.
No. 156132. The Petition was initially denied[17] by this Court for
failure of the petitioners to attach thereto a Certification against
Forum Shopping. However, upon petitioners Motion and
compliance with the requirements, this Court resolved[18] to
reinstate the Petition.
EVIDENCE (Rule 130 Documentary Evidence Cases)
The Petition presented fourteen (14) assignments of errors allegedly
committed by the Court of Appeals in its Decision, dated 26 March
2002, involving both questions of fact and questions of law which
this Court, for the sake of expediency, discusses jointly, whenever
possible, in the succeeding paragraphs.
I
The Resolution of this Court, dated 13 November 2002, in G.R. No.
152985, declaring the Decision of the Court of Appeals, dated 26
March 2002, final and executory, pertains to respondent Sabeniano
alone.
Before proceeding to a discussion of the merits of the instant
Petition, this Court wishes to address first the argument,
persistently advanced by respondent in her pleadings on record, as
well as her numerous personal and unofficial letters to this Court
which were no longer made part of the record, that the Decision of
the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March 2002,
had already become final and executory by virtue of the Resolution
of this Court in G.R. No. 152985, dated 13 November 2002.
G.R. No. 152985 was the docket number assigned by this Court to
respondents Motion for Extension of Time to File a Petition for
Review. Respondent, though, did not file her supposed Petition.
Thus, after the lapse of the prescribed period for the filing of the
Petition, this Court issued the Resolution, dated 13 November 2002,
declaring the Decision of the Court of Appeals, dated 26 March
2002, final and executory. It should be pointed out, however, that
the Resolution, dated 13 November 2002, referred only to G.R. No.
Page 52
152985, respondents appeal, which she failed to perfect through
the filing of a Petition for Review within the prescribed period. The
declaration of this Court in the same Resolution would bind
respondent solely, and not petitioners which filed their own
separate appeal before this Court, docketed as G.R. No. 156132, the
Petition at bar. This would mean that respondent, on her part,
should be bound by the findings of fact and law of the Court of
Appeals, including the monetary amounts consequently awarded to
her by the appellate court in its Decision, dated 26 March 2002; and
she can no longer refute or assail any part thereof. [19]
This Court already explained the matter to respondent when it
issued a Resolution[20] in G.R. No. 156132, dated 2 February 2004,
which addressed her Urgent Motion for the Release of the Decision
with the Implementation of the Entry of Judgment in the following
manner
[A]cting on Citibanks and FNCB Finances Motion for
Reconsideration, we resolved to grant the motion, reinstate the
petition and require Sabeniano to file a comment thereto in our
Resolution of June 23, 2003. Sabeniano filed a Comment dated July
17, 2003 to which Citibank and FNCB Finance filed a Reply dated
August 20, 2003.
From the foregoing, it is clear that Sabeniano had knowledge of, and
in fact participated in, the proceedings in G.R. No. 156132. She
cannot feign ignorance of the proceedings therein and claim that
the Decision of the Court of Appeals has become final and
executory. More precisely, the Decision became final and executory
only with regard to Sabeniano in view of her failure to file a petition
for review within the extended period granted by the Court, and not
EVIDENCE (Rule 130 Documentary Evidence Cases)
to Citibank and FNCB Finance whose Petition for Review was duly
reinstated and is now submitted for decision.
Accordingly, the instant Urgent Motion is hereby DENIED. (Emphasis
supplied.)
To sustain the argument of respondent would result in an unjust
and incongruous situation wherein one party may frustrate the
efforts of the opposing party to appeal the case by merely filing with
this Court a Motion for Extension of Time to File a Petition for
Review, ahead of the opposing party, then not actually filing the
intended Petition.[21] The party who fails to file its intended
Petition within the reglementary or extended period should solely
bear the consequences of such failure.
Respondent Sabeniano did not commit forum shopping.
Another issue that does not directly involve the merits of the
present Petition, but raised by petitioners, is whether respondent
should be held liable for forum shopping.
Petitioners contend that respondent committed forum shopping on
the basis of the following facts:
While petitioners Motion for Reconsideration of the Decision in CA-
G.R. CV No. 51930, dated 26 March 2002, was still pending before
the Court of Appeals, respondent already filed with this Court on 3
May 2002 her Motion for Extension of Time to File a Petition for
Page 53
Review of the same Court of Appeals Decision, docketed as G.R. No.
152985. Thereafter, respondent continued to participate in the
proceedings before the Court of Appeals in CA-G.R. CV No. 51930 by
filing her Comment, dated 17 July 2002, to petitioners Motion for
Reconsideration; and a Rejoinder, dated 23 September 2002, to
petitioners Reply. Thus, petitioners argue that by seeking relief
concurrently from this Court and the Court of Appeals, respondent
is undeniably guilty of forum shopping, if not indirect contempt.
This Court, however, finds no sufficient basis to hold respondent
liable for forum shopping.
Forum shopping has been defined as the filing of two or more suits
involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a
favorable judgment.[22] The test for determining forum shopping is
whether in the two (or more) cases pending, there is an identity of
parties, rights or causes of action, and relief sought.[23] To guard
against this deplorable practice, Rule 7, Section 5 of the revised
Rules of Court imposes the following requirement
SEC. 5. Certification against forum shopping. The plaintiff or
principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any
claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending
action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action
EVIDENCE (Rule 130 Documentary Evidence Cases)
or claim has been filed or is pending, he shall report that fact within
five (5) days therefrom to the court wherein his aforesaid complaint
or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or non-compliance
with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and
shall constitute direct contempt, as well as cause for administrative
sanctions.
Although it may seem at first glance that respondent was
simultaneously seeking recourse from the Court of Appeals and this
Court, a careful and closer scrutiny of the details of the case at bar
would reveal otherwise.
It should be recalled that respondent did nothing more in G.R. No.
152985 than to file with this Court a Motion for Extension of Time
within which to file her Petition for Review. For unexplained
reasons, respondent failed to submit to this Court her intended
Petition within the reglementary period. Consequently, this Court
was prompted to issue a Resolution, dated 13 November 2002,
declaring G.R. No. 152985 terminated, and the therein assailed
Page 54
Court of Appeals Decision final and executory. G.R. No. 152985,
therefore, did not progress and respondents appeal was
unperfected.
The Petition for Review would constitute the initiatory pleading
before this Court, upon the timely filing of which, the case before
this Court commences; much in the same way a case is initiated by
the filing of a Complaint before the trial court. The Petition for
Review establishes the identity of parties, rights or causes of action,
and relief sought from this Court, and without such a Petition, there
is technically no case before this Court. The Motion filed by
respondent seeking extension of time within which to file her
Petition for Review does not serve the same purpose as the Petition
for Review itself. Such a Motion merely presents the important
dates and the justification for the additional time requested for, but
it does not go into the details of the appealed case.
Without any particular idea as to the assignments of error or the
relief respondent intended to seek from this Court, in light of her
failure to file her Petition for Review, there is actually no second
case involving the same parties, rights or causes of action, and relief
sought, as that in CA-G.R. CV No. 51930.
It should also be noted that the Certification against Forum
Shopping is required to be attached to the initiatory pleading,
which, in G.R. No. 152985, should have been respondents Petition
for Review. It is in that Certification wherein respondent certifies,
under oath, that: (a) she has not commenced any action or filed any
claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of her knowledge, no such other
action or claim is pending therein; (b) if there is such other pending
EVIDENCE (Rule 130 Documentary Evidence Cases)
action or claim, that she is presenting a complete statement of the
present status thereof; and (c) if she should thereafter learn that
the same or similar action or claim has been filed or is pending, she
shall report that fact within five days therefrom to this Court.
Without her Petition for Review, respondent had no obligation to
execute and submit the foregoing Certification against Forum
Shopping. Thus, respondent did not violate Rule 7, Section 5 of the
Revised Rules of Court; neither did she mislead this Court as to the
pendency of another similar case.
Lastly, the fact alone that the Decision of the Court of Appeals,
dated 26 March 2002, essentially ruled in favor of respondent, does
not necessarily preclude her from appealing the same. Granted that
such a move is ostensibly irrational, nonetheless, it does not
amount to malice, bad faith or abuse of the court processes in the
absence of further proof. Again, it should be noted that the
respondent did not file her intended Petition for Review. The
Petition for Review would have presented before this Court the
grounds for respondents appeal and her arguments in support
thereof. Without said Petition, any reason attributed to the
respondent for appealing the 26 March 2002 Decision would be
grounded on mere speculations, to which this Court cannot give
credence.
II
As an exception to the general rule, this Court takes cognizance of
questions of fact raised in the Petition at bar.
It is already a well-settled rule that the jurisdiction of this Court in
cases brought before it from the Court of Appeals by virtue of Rule
Page 55
45 of the Revised Rules of Court is limited to reviewing errors of law.
Findings of fact of the Court of Appeals are conclusive upon this
Court. There are, however, recognized exceptions to the foregoing
rule, namely: (1) when the findings are grounded entirely on
speculation, surmises, or conjectures; (2) when the interference
made is manifestly mistaken, absurd, or impossible; (3) when there
is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when in making its findings, the Court of Appeals
went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee; (7) when the
findings are contrary to those of the trial court; (8) when the
findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as
well as in the petitioners main and reply briefs are not disputed by
the respondent; and (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence
on record.[24]
Several of the enumerated exceptions pertain to the Petition at bar.
It is indubitable that the Court of Appeals made factual findings that
are contrary to those of the RTC,[25] thus, resulting in its substantial
modification of the trial courts Decision, and a ruling entirely in
favor of the respondent. In addition, petitioners invoked in the
instant Petition for Review several exceptions that would justify this
Courts review of the factual findings of the Court of Appeals, i.e.,
the Court of Appeals made conflicting findings of fact; findings of
fact which went beyond the issues raised on appeal before it; as
well as findings of fact premised on the supposed absence of
evidence and contradicted by the evidence on record.
EVIDENCE (Rule 130 Documentary Evidence Cases)
On the basis of the foregoing, this Court shall proceed to reviewing
and re-evaluating the evidence on record in order to settle
questions of fact raised in the Petition at bar.
The fact that the trial judge who rendered the RTC Decision in Civil
Case No. 11336, dated 24 August 1995, was not the same judge who
heard and tried the case, does not, by itself, render the said
Decision erroneous.
The Decision in Civil Case No. 11336 was rendered more than 10
years from the institution of the said case. In the course of its trial,
the case was presided over by four (4) different RTC judges.[26] It
was Judge Victorio, the fourth judge assigned to the case, who
wrote the RTC Decision, dated 24 August 1995. In his Decision,[27]
Judge Victorio made the following findings
After carefully evaluating the mass of evidence adduced by the
parties, this Court is not inclined to believe the plaintiffs assertion
that the promissory notes as well as the deeds of assignments of her
FNCB Finance money market placements were simulated. The
evidence is overwhelming that the plaintiff received the proceeds of
the loans evidenced by the various promissory notes she had
signed. What is more, there was not an iota of proof save the
plaintiffs bare testimony that she had indeed applied for loan with
the Development Bank of the Philippines.
More importantly, the two deeds of assignment were notarized,
hence they partake the nature of a public document. It makes more
than preponderant proof to overturn the effect of a notarial
attestation. Copies of the deeds of assignments were actually filed
with the Records Management and Archives Office.
Page 56

Finally, there were sufficient evidence wherein the plaintiff had
admitted the existence of her loans with the defendant Bank in the
total amount of P1,920,000.00 exclusive of interests and penalty
charges (Exhibits 28, 31, 32, and 33).
In fine, this Court hereby finds that the defendants had established
the genuineness and due execution of the various promissory notes
heretofore identified as well as the two deeds of assignments of the
plaintiffs money market placements with defendant FNCB Finance,
on the strength of which the said money market placements were
applied to partially pay the plaintiffs past due obligation with the
defendant Bank. Thus, the total sum of P1,053,995.80 of the
plaintiffs past due obligation was partially offset by the said money
market placement leaving a balance of P1,069,847.40 as of 5
September 1979 (Exhibit 34).
Disagreeing in the foregoing findings, the Court of Appeals stressed,
in its Decision in CA-G.R. CV No. 51930, dated 26 March 2002, that
the ponente of the herein assailed Decision is not the Presiding
Judge who heard and tried the case.[28] This brings us to the
question of whether the fact alone that the RTC Decision was
rendered by a judge other than the judge who actually heard and
tried the case is sufficient justification for the appellate court to
disregard or set aside the findings in the Decision of the court a
quo?
This Court rules in the negative.
EVIDENCE (Rule 130 Documentary Evidence Cases)
What deserves stressing is that, in this jurisdiction, there exists a
disputable presumption that the RTC Decision was rendered by the
judge in the regular performance of his official duties. While the
said presumption is only disputable, it is satisfactory unless
contradicted or overcame by other evidence.[29] Encompassed in
this presumption of regularity is the presumption that the RTC
judge, in resolving the case and drafting his Decision, reviewed,
evaluated, and weighed all the evidence on record. That the said
RTC judge is not the same judge who heard the case and received
the evidence is of little consequence when the records and
transcripts of stenographic notes (TSNs) are complete and available
for consideration by the former.
In People v. Gazmen,[30] this Court already elucidated its position
on such an issue
Accused-appellant makes an issue of the fact that the judge who
penned the decision was not the judge who heard and tried the
case and concludes therefrom that the findings of the former are
erroneous. Accused-appellants argument does not merit a lengthy
discussion. It is well-settled that the decision of a judge who did not
try the case is not by that reason alone erroneous.
It is true that the judge who ultimately decided the case had not
heard the controversy at all, the trial having been conducted by
then Judge Emilio L. Polig, who was indefinitely suspended by this
Court. Nonetheless, the transcripts of stenographic notes taken
during the trial were complete and were presumably examined and
studied by Judge Baguilat before he rendered his decision. It is not
unusual for a judge who did not try a case to decide it on the basis
Page 57
of the record. The fact that he did not have the opportunity to
observe the demeanor of the witnesses during the trial but merely
relied on the transcript of their testimonies does not for that reason
alone render the judgment erroneous.
(People vs. Jaymalin, 214 SCRA 685, 692 [1992])
Although it is true that the judge who heard the witnesses testify is
in a better position to observe the witnesses on the stand and
determine by their demeanor whether they are telling the truth or
mouthing falsehood, it does not necessarily follow that a judge who
was not present during the trial cannot render a valid decision since
he can rely on the transcript of stenographic notes taken during the
trial as basis of his decision.
Accused-appellants contention that the trial judge did not have the
opportunity to observe the conduct and demeanor of the witnesses
since he was not the same judge who conducted the hearing is also
untenable. While it is true that the trial judge who conducted the
hearing would be in a better position to ascertain the truth and
falsity of the testimonies of the witnesses, it does not necessarily
follow that a judge who was not present during the trial cannot
render a valid and just decision since the latter can also rely on the
transcribed stenographic notes taken during the trial as the basis of
his decision.
(People vs. De Paz, 212 SCRA 56, 63 [1992])
At any rate, the test to determine the value of the testimony of the
witness is whether or not such is in conformity with knowledge and
EVIDENCE (Rule 130 Documentary Evidence Cases)
consistent with the experience of mankind (People vs. Morre, 217
SCRA 219 [1993]). Further, the credibility of witnesses can also be
assessed on the basis of the substance of their testimony and the
surrounding circumstances (People v. Gonzales, 210 SCRA 44
[1992]). A critical evaluation of the testimony of the prosecution
witnesses reveals that their testimony accords with the
aforementioned tests, and carries with it the ring of truth end
perforce, must be given full weight and credit.
Irrefragably, by reason alone that the judge who penned the RTC
Decision was not the same judge who heard the case and received
the evidence therein would not render the findings in the said
Decision erroneous and unreliable. While the conduct and
demeanor of witnesses may sway a trial court judge in deciding a
case, it is not, and should not be, his only consideration. Even more
vital for the trial court judges decision are the contents and
substance of the witnesses testimonies, as borne out by the TSNs,
as well as the object and documentary evidence submitted and
made part of the records of the case.
This Court proceeds to making its own findings of fact.
Since the Decision of the Court of Appeals in CA-G.R. CV No. 51930,
dated 26 March 2002, has become final and executory as to the
respondent, due to her failure to interpose an appeal therefrom
within the reglementary period, she is already bound by the factual
findings in the said Decision. Likewise, respondents failure to file,
within the reglementary period, a Motion for Reconsideration or an
appeal of the Resolution of the Court of Appeals in the same case,
dated 20 November 2002, which modified its earlier Decision by
Page 58
deleting paragraph 3(v) of its dispositive portion, ordering
petitioners to return to respondent the proceeds of her money
market placement with AIDC, shall already bar her from questioning
such modification before this Court. Thus, what is for review before
this Court is the Decision of the Court of Appeals, dated 26 March
2002, as modified by the Resolution of the same court, dated 20
November 2002.
Respondent alleged that she had several deposits and money
market placements with petitioners. These deposits and money
market placements, as determined by the Court of Appeals in its
Decision, dated 26 March 2002, and as modified by its Resolution,
dated 20 November 2002, are as follows
Deposit/Placement Amount
Dollar deposit with Citibank-Geneva $ 149,632.99
Money market placement with Citibank, evidenced by Promissory
Note (PN) No. 23356 (which cancels and supersedes PN No. 22526),
earning 14.5% interest per annum (p.a.)
P 318,897.34
Money market placement with Citibank, evidenced by PN No. 23357
(which cancels and supersedes PN No. 22528), earning 14.5%
interest p.a.
P 203,150.00
Money market placement with FNCB Finance, evidenced by PN No.
5757 (which cancels and supersedes PN No. 4952), earning 17%
interest p.a.
EVIDENCE (Rule 130 Documentary Evidence Cases)
P 500,000.00
Money market placement with FNCB Finance, evidenced by PN No.
5758 (which cancels and supersedes PN No. 2962), earning 17%
interest p.a.
P 500,000.00
This Court is tasked to determine whether petitioners are indeed
liable to return the foregoing amounts, together with the
appropriate interests and penalties, to respondent. It shall trace
respondents transactions with petitioners, from her money market
placements with petitioner Citibank and petitioner FNCB Finance, to
her savings and current accounts with petitioner Citibank, and to
her dollar accounts with Citibank-Geneva.
Money market placements with petitioner Citibank
The history of respondents money market placements with
petitioner Citibank began on 6 December 1976, when she made a
placement of P500,000.00 as principal amount, which was supposed
to earn an interest of 16% p.a. and for which PN No. 20773 was
issued. Respondent did not yet claim the proceeds of her placement
and, instead, rolled-over or re-invested the principal and proceeds
several times in the succeeding years for which new PNs were
issued by petitioner Citibank to replace the ones which matured.
Petitioner Citibank accounted for respondents original placement
and the subsequent roll-overs thereof, as follows
Date
(mm/dd/yyyy)
Page 59
PN No. that they were no longer outstanding.[31] In Hibberd v. Rohde and
Cancels PN No. Maturity Date McMillian,[32] this Court delineated the consequences of such an
(mm/dd/yyyy) admission
Amount
(P) By the admission of the genuineness and due execution of an
Interest instrument, as provided in this section, is meant that the party
(p.a.) whose signature it bears admits that he signed it or that it was
12/06/1976 20773 None 01/13/1977 500,000.00 signed by another for him with his authority; that at the time it was
16% signed it was in words and figures exactly as set out in the pleading
01/14/1977 21686 20773 02/08/1977 508,444.44 of the party relying upon it; that the document was delivered; and
15% that any formal requisites required by law, such as a seal, an
02/09/1977 22526 21686 03/16/1977 313,952.59 15- acknowledgment, or revenue stamp, which it lacks, are waived by
3/4% him. Hence, such defenses as that the signature is a forgery (Puritan
22528 21686 03/16/1977 200,000.00 15-3/4% Mfg. Co. vs. Toti & Gradi, 14 N. M., 425; Cox vs. Northwestern Stage
03/17/1977 23356 22526 04/20/1977 318,897.34 14- Co., 1 Idaho, 376; Woollen vs. Whitacre, 73 Ind., 198; Smith vs.
1/2% Ehnert, 47 Wis., 479; Faelnar vs. Escao, 11 Phil. Rep., 92); or that it
23357 22528 04/20/1977 203,150.00 14-1/2% was unauthorized, as in the case of an agent signing for his principal,
or one signing in behalf of a partnership (Country Bank vs.
Petitioner Citibank alleged that it had already paid to respondent Greenberg, 127 Cal., 26; Henshaw vs. Root, 60 Inc., 220; Naftzker vs.
the principal amounts and proceeds of PNs No. 23356 and 23357, Lantz, 137 Mich., 441) or of a corporation (Merchant vs.
upon their maturity. Petitioner Citibank further averred that International Banking Corporation, 6 Phil Rep., 314; Wanita vs.
respondent used the P500,000.00 from the payment of PNs No. Rollins, 75 Miss., 253; Barnes vs. Spencer & Barnes Co., 162 Mich.,
23356 and 23357, plus P600,000.00 sourced from her other funds, 509); or that, in the case of the latter, that the corporation was
to open two time deposit (TD) accounts with petitioner Citibank, authorized under its charter to sign the instrument (Merchant vs.
namely, TD Accounts No. 17783 and 17784. International Banking Corporation, supra); or that the party charged
signed the instrument in some other capacity than that alleged in
Petitioner Citibank did not deny the existence nor questioned the the pleading setting it out (Payne vs. National Bank, 16 Kan., 147);
authenticity of PNs No. 23356 and 23357 it issued in favor of or that it was never delivered (Hunt vs. Weir, 29 Ill., 83; Elbring vs.
respondent for her money market placements. In fact, it admitted Mullen, 4 Idaho, 199; Thorp vs. Keokuk Coal Co., 48 N.Y., 253; Fire
the genuineness and due execution of the said PNs, but qualified

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 60

Association of Philadelphia vs. Ruby, 60 Neb., 216) are cut off by the
admission of its genuineness and due execution.
The effect of the admission is such that in the case of a promissory
note a prima facie case is made for the plaintiff which dispenses
with the necessity of evidence on his part and entitles him to a
judgment on the pleadings unless a special defense of new matter,
such as payment, is interposed by the defendant (Papa vs. Martinez,
12 Phil. Rep., 613; Chinese Chamber of Commerce vs. Pua To Ching,
14 Phil. Rep., 222; Banco Espaol-Filipino vs. McKay & Zoeller, 27 Phil.
Rep., 183). x x x
Since the genuineness and due execution of PNs No. 23356 and
23357 are uncontested, respondent was able to establish prima
facie that petitioner Citibank is liable to her for the amounts stated
therein. The assertion of petitioner Citibank of payment of the said
PNs is an affirmative allegation of a new matter, the burden of proof
as to such resting on petitioner Citibank. Respondent having proved
the existence of the obligation, the burden of proof was upon
petitioner Citibank to show that it had been discharged.[33] It has
already been established by this Court that
As a general rule, one who pleads payment has the burden of
proving it. Even where the plaintiff must allege non-payment, the
general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The
debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment.
EVIDENCE (Rule 130 Documentary Evidence Cases)
When the existence of a debt is fully established by the evidence
contained in the record, the burden of proving that it has been
extinguished by payment devolves upon the debtor who offers such
defense to the claim of the creditor. Where the debtor introduces
some evidence of payment, the burden of going forward with the
evidence as distinct from the general burden of proof shifts to the
creditor, who is then under the duty of producing some evidence of
non-payment.[34]
Reviewing the evidence on record, this Court finds that petitioner
Citibank failed to satisfactorily prove that PNs No. 23356 and 23357
had already been paid, and that the amount so paid was actually
used to open one of respondents TD accounts with petitioner
Citibank.
Petitioner Citibank presented the testimonies of two witnesses to
support its contention of payment: (1) That of Mr. Herminio
Pujeda,[35] the officer-in-charge of loans and placements at the
time when the questioned transactions took place; and (2) that of
Mr. Francisco Tan,[36] the former Assistant Vice-President of
Citibank, who directly dealt with respondent with regard to her
deposits and loans.
The relevant portion[37] of Mr. Pujedas testimony as to PNs No.
23356 and 23357 (referred to therein as Exhibits No. 47 and 48,
respectively) is reproduced below
Atty. Mabasa:
Page 61
Okey [sic]. Now Mr. Witness, you were asked to testify in this case
and this case is [sic] consist [sic] of several documents involving
transactions between the plaintiff and the defendant. Now, were
you able to make your own memorandum regarding all these
transactions?
A Yes, based on my recollection of these facts, I did come up of [sic]
the outline of the chronological sequence of events.
Court:
Are you trying to say that you have personal knowledge or
participation to these transactions?
A Yes, your Honor, I was the officer-in charge of the unit that was
processing these transactions. Some of the documents bear my
signature.
Court:
And this resume or summary that you have prepared is based on
purely your recollection or documents?
A Based on documents, your Honor.
Court:
Are these documents still available now?
A Yes, your honor.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Court:
Better present the documents.
Atty. Mabasa:
Yes, your Honor, that is why your Honor.
Atty. Mabasa:
Q Now, basing on the notes that you prepared, Mr. Witness, and
according to you basing also on your personal recollection about all
the transactions involved between Modesta Sabeniano and
defendant City Bank [sic] in this case. Now, would you tell us what
happened to the money market placements of Modesta Sabeniano
that you have earlier identified in Exhs. 47 and 48?
A The transactions which I said earlier were terminated and booked
to time deposits.
Q And you are saying time deposits with what bank?
A With First National Citibank.
Q Is it the same bank as Citibank, N.A.?
A Yes, sir.
Page 62
Q And how much was the amount booked as time deposit with
defendant Citibank?
A In the amount of P500,000.00.
Q And outside this P500,000.00 which you said was booked out of
the proceeds of Exhs. 47 and 48, were there other time deposits
opened by Mrs. Modesta Sabeniano at that time.
A Yes, she also opened another time deposit for P600,000.00.
Q So all in all Mr. Witness, sometime in April of 1978 Mrs. Modesta
Sabeneano [sic] had time deposit placements with Citibank in the
amount of P500,000.00 which is the proceeds of Exh. 47 and 48 and
another P600,000.00, is it not?
A Yes, sir.
Q And would you know where did the other P600,000 placed by
Mrs. Sabeneano [sic] in a time deposit with Citibank, N.A. came [sic]
from?
A She funded it directly.
Q What are you saying Mr. Witness is that the P600,000 is a [sic]
fresh money coming from Mrs. Modesta Sabeneano [sic]?
A That is right.
EVIDENCE (Rule 130 Documentary Evidence Cases)
In his deposition in Hong Kong, Mr. Tan recounted what happened
to PNs No. 23356 and 23357 (referred to therein as Exhibits E and F,
respectively), as follows
Atty. Mabasa : Now from the Exhibits that you have identified Mr.
Tan from Exhibits A to F, which are Exhibits of the plaintiff. Now, do
I understand from you that the original amount is Five Hundred
Thousand and thereafter renewed in the succeeding exhibits?
Mr. Tan : Yes, Sir.
Atty. Mabasa : Alright, after these Exhibits E and F matured, what
happened thereafter?
Mr. Tan : Split into two time deposits.
Atty. Mabasa : Exhibits E and F?
Before anything else, it should be noted that when Mr. Pujedas
testimony before the RTC was made on 12 March 1990 and Mr.
Tans deposition in Hong Kong was conducted on 3 September 1990,
more than a decade had passed from the time the transactions they
were testifying on took place. This Court had previously recognized
the frailty and unreliability of human memory with regards to
figures after the lapse of five years.[38]Taking into consideration the
substantial length of time between the transactions and the
witnesses testimonies, as well as the undeniable fact that bank
officers deal with multiple clients and process numerous
transactions during their tenure, this Court is reluctant to give much
Page 63
weight to the testimonies of Mr. Pujeda and Mr. Tan regarding the
payment of PNs No. 23356 and 23357 and the use by respondent of
the proceeds thereof for opening TD accounts. This Court finds it
implausible that they should remember, after all these years, this
particular transaction with respondent involving her PNs No. 23356
and 23357 and TD accounts. Both witnesses did not give any reason
as to why, from among all the clients they had dealt with and all the
transactions they had processed as officers of petitioner Citibank,
they specially remembered respondent and her PNs No. 23356 and
23357.Their testimonies likewise lacked details on the
circumstances surrounding the payment of the two PNs and the
opening of the time deposit accounts by respondent, such as the
date of payment of the two PNs, mode of payment, and the manner
and context by which respondent relayed her instructions to the
officers of petitioner Citibank to use the proceeds of her two PNs in
opening the TD accounts.
Moreover, while there are documentary evidences to support and
trace respondents money market placements with petitioner
Citibank, from the original PN No. 20773, rolled-over several times
to, finally, PNs No. 23356 and 23357, there is an evident absence of
any documentary evidence on the payment of these last two PNs
and the use of the proceeds thereof by respondent for opening TD
accounts. The paper trail seems to have ended with the copies of
PNs No. 23356 and 23357. Although both Mr. Pujeda and Mr. Tan
said that they based their testimonies, not just on their memories
but also on the documents on file, the supposed documents on
which they based those portions of their testimony on the payment
of PNs No. 23356 and 23357 and the opening of the TD accounts
from the proceeds thereof, were never presented before the courts
EVIDENCE (Rule 130 Documentary Evidence Cases)
nor made part of the records of the case. Respondents money
market placements were of substantial amounts consisting of the
principal amount of P500,000.00, plus the interest it should have
earned during the years of placement and it is difficult for this Court
to believe that petitioner Citibank would not have had documented
the payment thereof.
When Mr. Pujeda testified before the RTC on 6 February 1990,[39]
petitioners counsel attempted to present in evidence a document
that would supposedly support the claim of petitioner Citibank that
the proceeds of PNs No. 23356 and 23357 were used by respondent
to open one of her two TD accounts in the amount of P500,000.00.
Respondents counsel objected to the presentation of the document
since it was a mere xerox" copy, and was blurred and hardly
readable. Petitioners counsel then asked for a continuance of the
hearing so that they can have time to produce a better document,
which was granted by the court. However, during the next hearing
and continuance of Mr. Pujedas testimony on 12 March 1990,
petitioners counsel no longer referred to the said document.
As respondent had established a prima facie case that petitioner
Citibank is obligated to her for the amounts stated in PNs No. 23356
and 23357, and as petitioner Citibank failed to present sufficient
proof of payment of the said PNs and the use by the respondent of
the proceeds thereof to open her TD accounts, this Court finds that
PNs No. 23356 and 23357 are still outstanding and petitioner
Citibank is still liable to respondent for the amounts stated therein.
The significance of this Courts declaration that PNs No. 23356 and
23357 are still outstanding becomes apparent in the light of
petitioners next contentions that respondent used the proceeds of
PNs No. 23356 and 23357, together with additional money, to open
Page 64
TD Accounts No. 17783 and 17784 with petitioner Citibank; and, similar phrase, Ref. Proceeds of TD 17784. These phrases
subsequently, respondent pre-terminated these TD accounts and purportedly established that the MCs were paid from the proceeds
transferred the proceeds thereof, amounting to P1,100,000.00, to of respondents pre-terminated TD accounts with petitioner
petitioner FNCB Finance for money market placements. While Citibank. Upon receipt of the MCs, petitioner FNCB Finance
respondents money market placements with petitioner FNCB deposited the same to its account with Feati Bank and Trust Co., as
Finance may be traced back with definiteness to TD Accounts No. evidenced by the rubber stamp mark of the latter found at the back
17783 and 17784, there is only flimsy and unsubstantiated of both MCs. In exchange, petitioner FNCB Finance booked the
connection between the said TD accounts and the supposed amounts received as money market placements, and accordingly
proceeds paid from PNs No. 23356 and 23357. With PNs No. 23356 issued PNs No. 4952 and 4962, for the amounts of P500,000.00 and
and 23357 still unpaid, then they represent an obligation of P600,000.00, respectively, payable to respondents savings account
petitioner Citibank separate and distinct from the obligation of with petitioner Citibank, S/A No. 25-13703-4, upon their maturity on
petitioner FNCB Finance arising from respondents money market 1 June 1977. Once again, respondent rolled-over several times the
placements with the latter. principal amounts of her money market placements with petitioner
FNCB Finance, as follows
Money market placements with petitioner FNCB Finance
Date
According to petitioners, respondents TD Accounts No. 17783 and (mm/dd/yyyy)
17784, in the total amount of P1,100,000.00, were supposed to PN No.
mature on 15 March 1978. However, respondent, through a letter Cancels PN No. Maturity Date
dated 28 April 1977,[40]pre-terminated the said TD accounts and (mm/dd/yyyy)
transferred all the proceeds thereof to petitioner FNCB Finance for Amount
money market placement. Pursuant to her instructions, TD Accounts (P)
No. 17783 and 17784 were pre-terminated and petitioner Citibank Interest
(then still named First National City Bank) issued Managers Checks (p.a.)
(MC) No. 199253[41] and 199251[42] for the amounts of 04/29/1977 4952 None 06/01/1977 500,000.00
P500,000.00 and P600,00.00, respectively. Both MCs were payable 17%
to Citifinance (which, according to Mr. Pujeda,[43] was one with and 4962 None 06/01/1977 600,000.00 17%
the same as petitioner FNCB Finance), with the additional notation 06/02/1977 5757 4952 08/31/1977 500,000.00
that A/C MODESTA R. SABENIANO. Typewritten on MC No. 199253 17%
is the phrase Ref. Proceeds of TD 17783, and on MC No. 199251 is a 5758 4962 08/31/1977 500,000.00 17%

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 65

08/31/1977 8167 5757 08/25/1978 500,000.00 (mm/dd/yyyy)
14% Check No. Amount
8169 5752 08/25/1978 500,000.00 14% (P)
Notation
As presented by the petitioner FNCB Finance, respondent rolled- 09/01/1978
over only the principal amounts of her money market placements as 76962 12,833.34 Interest payment on PN#08167
she chose to receive the interest income therefrom. Petitioner FNCB 09/01/1978
Finance also pointed out that when PN No. 4962, with principal 76961 12,833.34 Interest payment on PN#08169
amount of P600,000.00, matured on 1 June 1977, respondent 09/05/1978 77035 500,000.00 Full payment of principal on
received a partial payment of the principal which, together with the PN#08167 which is hereby cancelled
interest, amounted to P102,633.33;[44] thus, only the amount of 09/05/ 1978 77034 500,000.00 Full payment of principal on
P500,000.00 from PN No. 4962 was rolled-over to PN No. 5758. PN#08169 which is hereby cancelled

Based on the foregoing records, the principal amounts of PNs No.
5757 and 5758, upon their maturity, were rolled over to PNs No.
8167 and 8169, respectively. PN No. 8167[45] expressly canceled
and superseded PN No. 5757, while PN No. 8169[46] also explicitly
canceled and superseded PN No. 5758. Thus, it is patently
erroneous for the Court of Appeals to still award to respondent the
principal amounts and interests covered by PNs No. 5757 and 5758
when these were already canceled and superseded. It is now
incumbent upon this Court to determine what subsequently
happened to PNs No. 8167 and 8169.
Petitioner FNCB Finance presented four checks as proof of payment
of the principal amounts and interests of PNs No. 8167 and 8169
upon their maturity. All the checks were payable to respondents
savings account with petitioner Citibank, with the following details
Date of Issuance
Then again, Checks No. 77035 and 77034 were later returned to
petitioner FNCB Finance together with a memo,[47] dated 6
September 1978, from Mr. Tan of petitioner Citibank, to a Mr.
Bobby Mendoza of petitioner FNCB Finance. According to the
memo, the two checks, in the total amount of P1,000,000.00, were
to be returned to respondents account with instructions to book the
said amount in money market placements for one more year.
Pursuant to the said memo, Checks No. 77035 and 77034 were
invested by petitioner FNCB Finance, on behalf of respondent, in
money market placements for which it issued PNs No. 20138 and
20139. The PNs each covered P500,000.00, to earn 11% interest per
annum, and to mature on 3 September 1979.
On 3 September 1979, petitioner FNCB Finance issued Check No.
100168, pay to the order of Citibank N.A. A/C Modesta Sabeniano,
in the amount of P1,022,916.66, as full payment of the principal
amounts and interests of both PNs No. 20138 and 20139 and,

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 66

resultantly, canceling the said PNs.[48] Respondent actually
admitted the issuance and existence of Check No. 100168, but with
the qualification that the proceeds thereof were turned over to
petitioner Citibank.[49] Respondent did not clarify the
circumstances attending the supposed turn over, but on the basis of
the allegations of petitioner Citibank itself, the proceeds of PNs No.
20138 and 20139, amounting to P1,022,916.66, was used by it to
liquidate respondents outstanding loans. Therefore, the
determination of whether or not respondent is still entitled to the
return of the proceeds of PNs No. 20138 and 20139 shall be
dependent on the resolution of the issues raised as to the existence
of the loans and the authority of petitioner Citibank to use the
proceeds of the said PNs, together with respondents other deposits
and money market placements, to pay for the same.
Savings and current accounts with petitioner Citibank
Respondent presented and submitted before the RTC deposit slips
and bank statements to prove deposits made to several of her
accounts with petitioner Citibank, particularly, Accounts No.
00484202, 59091, and 472-751, which would have amounted to a
total of P3,812,712.32, had there been no withdrawals or debits
from the said accounts from the time the said deposits were made.
Although the RTC and the Court of Appeals did not make any
definitive findings as to the status of respondents savings and
current accounts with petitioner Citibank, the Decisions of both the
trial and appellate courts effectively recognized only the P31,079.14
coming from respondents savings account which was used to off-set
her alleged outstanding loans with petitioner Citibank.[50]
EVIDENCE (Rule 130 Documentary Evidence Cases)
Since both the RTC and the Court of Appeals had consistently
recognized only the P31,079.14 of respondents savings account with
petitioner Citibank, and that respondent failed to move for
reconsideration or to appeal this particular finding of fact by the
trial and appellate courts, it is already binding upon this Court.
Respondent is already precluded from claiming any greater amount
in her savings and current accounts with petitioner Citibank.Thus,
this Court shall limit itself to determining whether or not
respondent is entitled to the return of the amount of P31,079.14
should the off-set thereof by petitioner Citibank against her
supposed loans be found invalid.
Dollar accounts with Citibank-Geneva
Respondent made an effort of preparing and presenting before the
RTC her own computations of her money market placements and
dollar accounts with Citibank-Geneva, purportedly amounting to a
total of United States (US) $343,220.98, as of 23 June 1985.[51] In
her Memorandum filed with the RTC, she claimed a much bigger
amount of deposits and money market placements with Citibank-
Geneva, totaling US$1,336,638.65.[52]However, respondent herself
also submitted as part of her formal offer of evidence the
computation of her money market placements and dollar accounts
with Citibank-Geneva as determined by the latter.[53] Citibank-
Geneva accounted for respondents money market placements and
dollar accounts as follows
MODESTA SABENIANO &/OR
Page 67
================== - US$ 6998.84 Transfer to Citibank Zuerich ac no.
121359 on March
US$ 30000.-- Principal Fid. Placement 13, 1980
+ US$ 339.06 Interest at 3,875% p.a. from 12.07. 25.10.79
- US$ 95.-- Commission (minimum) US$ 310.87 various charges including closing charges
According to the foregoing computation, by 25 October 1979,
US$ 30244.06 Total proceeds on 25.10.1979 respondent had a total of US$156,942.70, from which,
US$149,632.99 was transferred by Citibank-Geneva to petitioner
Citibank in Manila, and was used by the latter to off-set respondents
US$ 114000.-- Principal Fid. Placement outstanding loans. The balance of respondents accounts with
+ US$ 1358.50 Interest at 4,125% p.a. from 12.07. Citibank-Geneva, after the remittance to petitioner Citibank in
25.10.79 Manila, amounted to US$7,309.71, which was subsequently
- US$ 41.17 Commission expended by a transfer to another account with Citibank-Zuerich, in
the amount of US$6,998.84, and by payment of various bank
US$ 115317.33 Total proceeds on 25.10.1979 charges, including closing charges, in the amount of US$310.87.
Rightly so, both the RTC and the Court of Appeals gave more
credence to the computation of Citibank-Geneva as to the status of
US$ 145561.39 Total proceeds of both placements respondents accounts with the said bank, rather than the one
on 25.10.1979 prepared by respondent herself, which was evidently self-serving.
+ US$ 11381.31 total of both current accounts Once again, this Court shall limit itself to determining whether or
not respondent is entitled to the return of the amount of
US$ 156942.70 Total funds available US$149,632.99 should the off-set thereof by petitioner Citibank
against her alleged outstanding loans be found invalid. Respondent
- US$ 149632.99 Transfer to Citibank Manila on cannot claim any greater amount since she did not perfect an
26.10.1979 appeal of the Decision of the Court of Appeals, dated 26 March
(counter value of Pesos 1102944.78) 2002, which found that she is entitled only to the return of the said
amount, as far as her accounts with Citibank-Geneva is concerned.
US$ 7309.71 Balance in current accounts
III

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 68

Petitioner Citibank was able to establish by preponderance of PNs (first set).[55] The aggregate principal amount of these loans
evidence the existence of respondents loans. was P1,920,000.00, which could be broken down as follows

Petitioners version of events PN No. Date of Issuance

(mm/dd/yyyy) Date of Maturity
In sum, the following amounts were used by petitioner Citibank to (mm/dd/yyyy)
liquidate respondents purported outstanding loans Principal
Amount Date of Release
Description Amount (mm/dd/yyyy)
Principal and interests of PNs No. 20138 and 20139 MC No.
(money market placements with petitioner FNCB Finance) P 32935 07/20/1978 09/18/1978 P 400,000.00 07/20/1978
1,022,916.66 220701
Savings account with petitioner Citibank 31,079.14 33751 10/13/1978 12/12/1978 100,000.00
Dollar remittance from Citibank-Geneva (peso equivalent Unrecovered
Of US$149,632.99) 1,102,944.78 33798 10/19/1978 11/03/1978 100,000.00 10/19/1978
226285
Total 34025 11/15/1978 01/15/1979 150,000.00 11/16/1978
P 2,156,940.58 226439
34079 11/21/1978 01/19/1979 250,000.00 11/21/1978
According to petitioner Citibank, respondent incurred her loans 226467
under the circumstances narrated below. 34192 12/04/1978 01/18/1979 100,000.00 12/05/1978
As early as 9 February 1978, respondent obtained her first loan from 228057
petitioner Citibank in the principal amount of P200,000.00, for 34402 12/26/1978 02/23/1979 300,000.00 12/26/1978
which she executed PN No. 31504.[54] Petitioner Citibank extended 228203
to her several other loans in the succeeding months. Some of these 34534 01/09/1979 03/09/1979 150,000.00 01/09/1979
loans were paid, while others were rolled-over or renewed. 228270
Significant to the Petition at bar are the loans which respondent 34609 01/17/1979 03/19/1979 150,000.00 01/17/1979
obtained from July 1978 to January 1979, appropriately covered by 228357

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 69

34740 01/30/1979 03/30/1979 220,000.00 01/30/1979 P 1,920,000.00
228400
All the PNs stated that the purpose of the loans covered thereby is
Total To liquidate existing obligation, except for PN No. 34534, which
P1,920,000.00 stated for its purpose personal investment.

When respondent was unable to pay the first set of PNs upon their Respondent secured her foregoing loans with petitioner Citibank by
maturity, these were rolled-over or renewed several times, executing Deeds of Assignment of her money market placements
necessitating the execution by respondent of new PNs in favor of with petitioner FNCB Finance. On 2 March 1978, respondent
petitioner Citibank. As of 5 April 1979, respondent had the following executed in favor of petitioner Citibank a Deed of Assignment[57] of
outstanding PNs (second set),[56] the principal amount of which PN No. 8169, which was issued by petitioner FNCB Finance, to
remained at P1,920,000.00 secure payment of the credit and banking facilities extended to her
by petitioner Citibank, in the aggregate principal amount of
P500,000.00. On 9 March 1978, respondent executed in favor of
PN No. Date of Issuance petitioner Citibank another Deed of Assignment,[58] this time, of PN
(mm/dd/yyyy) Date of Maturity No. 8167, also issued by petitioner FNCB Finance, to secure
(mm/dd/yyyy) payment of the credit and banking facilities extended to her by
Principal Amount petitioner Citibank, in the aggregate amount of P500,000.00. When
34510 01/01/1979 03/02/1979 P 400,000.00 PNs No. 8167 and 8169, representing respondents money market
34509 01/02/1979 03/02/1979 100,000.00 placements with petitioner FNCB Finance, matured and were rolled-
34534 01/09/1979 03/09/1979 150,000.00 over to PNs No. 20138 and 20139, respondent executed new Deeds
34612 01/19/1979 03/16/1979 150,000.00 of Assignment,[59] in favor of petitioner Citibank, on 25 August
34741 01/26/1979 03/12/1979 100,000.00 1978. According to the more recent Deeds, respondent assigned
35689 02/23/1979 05/29/1979 300,000.00 PNs No. 20138 and 20139, representing her rolled-over money
35694 03/19/1979 05/29/1979 150,000.00 market placements with petitioner FNCB Finance, to petitioner
35695 03/19/1979 05/29/1979 100,000.00 Citibank as security for the banking and credit facilities it extended
356946 03/20/1979 05/29/1979 250,000.00 to her, in the aggregate principal amount of P500,000.00 per Deed.
35697 03/30/1979 05/29/1979 220,000.00 In addition to the Deeds of Assignment of her money market
placements with petitioner FNCB Finance, respondent also executed
Total a Declaration of Pledge,[60] in which she supposedly pledged [a]ll

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 70

present and future fiduciary placements held in my personal and/or
joint name with Citibank, Switzerland, to secure all claims the
petitioner Citibank may have or, in the future, acquire against
respondent. The petitioners copy of the Declaration of Pledge is
undated, while that of the respondent, a copy certified by a
Citibank-Geneva officer, bore the date 24 September 1979.[61]
When respondent failed to pay the second set of PNs upon their
maturity, an exchange of letters ensued between respondent
and/or her representatives, on one hand, and the representatives of
petitioners, on the other.
The first letter[62] was dated 5 April 1979, addressed to respondent
and signed by Mr. Tan, as the manager of petitioner Citibank, which
stated, in part, that
Despite our repeated requests and follow-up, we regret you have
not granted us with any response or payment.
We, therefore, have no alternative but to call your loan of
P1,920,000.00 plus interests and other charges due and
demandable. If you still fail to settle this obligation by 4/27/79, we
shall have no other alternative but to refer your account to our
lawyers for legal action to protect the interest of the bank.
Respondent sent a reply letter[63] dated 26 April 1979, printed on
paper bearing the letterhead of respondents company, MC Adore
International Palace, the body of which reads
EVIDENCE (Rule 130 Documentary Evidence Cases)
This is in reply to your letter dated April 5, 1979 inviting my
attention to my loan which has become due. Pursuant to our
representation with you over the telephone through Mr. F. A. Tan,
you allow us to pay the interests due for the meantime.
Please accept our Comtrust Check in the amount of P62,683.33.
Please bear with us for a little while, at most ninety days. As you
know, we have a pending loan with the Development Bank of the
Philippines in the amount of P11-M. This loan has already been
recommended for approval and would be submitted to the Board of
Governors. In fact, to further facilitate the early release of this loan,
we have presented and furnished Gov. J. Tengco a xerox copy of
your letter.
You will be doing our corporation a very viable service, should you
grant us our request for a little more time.
A week later or on 3 May 1979, a certain C. N. Pugeda, designated
as Executive Secretary, sent a letter[64] to petitioner Citibank, on
behalf of respondent. The letter was again printed on paper bearing
the letterhead of MC Adore International Palace. The pertinent
paragraphs of the said letter are reproduced below
Per instructions of Mrs. Modesta R. Sabeniano, we would like to
request for a re-computation of the interest and penalty charges on
her loan in the aggregate amount of P1,920,000.00 with maturity
date of all promissory notes at June 30, 1979.As she has personally
Page 71
discussed with you yesterday, this date will more or less assure you
of early settlement.
In this regard, please entrust to bearer, our Comtrust check for
P62,683.33 to be replaced by another check with amount resulting
from the new computation. Also, to facilitate the processing of the
same, may we request for another set of promissory notes for the
signature of Mrs. Sabeniano and to cancel the previous ones she has
signed and forwarded to you.
This was followed by a telegram,[65] dated 5 June 1979, and
received by petitioner Citibank the following day. The telegram was
sent by a Dewey G. Soriano, Legal Counsel. The telegram
acknowledged receipt of the telegram sent by petitioner Citibank
regarding the re-past due obligation of McAdore International
Palace. However, it reported that respondent, the President and
Chairman of MC Adore International Palace, was presently abroad
negotiating for a big loan. Thus, he was requesting for an extension
of the due date of the obligation until respondents arrival on or
before 31 July 1979.
The next letter,[66] dated 21 June 1979, was signed by respondent
herself and addressed to Mr. Bobby Mendoza, a Manager of
petitioner FNCB Finance. Respondent wrote therein
Re: PN No. 20138 for P500,000.00 & PN No. 20139 for P500,000.00
totalling P1 Million, both PNs will mature on 9/3/1979.
EVIDENCE (Rule 130 Documentary Evidence Cases)
This is to authorize you to release the accrued quarterly interests
payment from my captioned placements and forward directly to
Citibank, Manila Attention: Mr. F. A. Tan, Manager, to apply to my
interest payable on my outstanding loan with Citibank.
Please note that the captioned two placements are continuously
pledged/hypothecated to Citibank, Manila to support my personal
outstanding loan. Therefore, please do not release the captioned
placements upon maturity until you have received the instruction
from Citibank, Manila.
On even date, respondent sent another letter[67] to Mr. Tan of
petitioner Citibank, stating that
Re: S/A No. 25-225928
and C/A No. 484-946
This letter serves as an authority to debit whatever the outstanding
balance from my captioned accounts and credit the amount to my
loan outstanding account with you.
Unlike respondents earlier letters, both letters, dated 21 June 1979,
are printed on plain paper, without the letterhead of her company,
MC Adore International Palace.
By 5 September 1979, respondents outstanding and past due
obligations to petitioner Citibank totaled P2,123,843.20,
representing the principal amounts plus interests. Relying on
respondents Deeds of Assignment, petitioner Citibank applied the
proceeds of respondents money market placements with petitioner
Page 72
FNCB Finance, as well as her deposit account with petitioner
Citibank, to partly liquidate respondents outstanding loan
balance,[68] as follows
Respondents outstanding obligation (principal and interest) P
2,123,843.20
Less: Proceeds from respondents money market placements
with petitioner FNCB Finance (principal and interest)
(1,022,916.66)
Deposits in respondents bank accounts with petitioner
Citibank (31,079.14)
Balance of respondents obligation
P 1,069,847.40
Mr. Tan of petitioner Citibank subsequently sent a letter,[69] dated
28 September 1979, notifying respondent of the status of her loans
and the foregoing compensation which petitioner Citibank effected.
In the letter, Mr. Tan informed respondent that she still had a
remaining past-due obligation in the amount of P1,069,847.40, as of
5 September 1979, and should respondent fail to pay the amount by
15 October 1979, then petitioner Citibank shall proceed to off-set
the unpaid amount with respondents other collateral, particularly, a
money market placement in Citibank-Hongkong.
On 5 October 1979, respondent wrote Mr. Tan of petitioner
Citibank, on paper bearing the letterhead of MC Adore International
Palace, as regards the P1,920,000.00 loan account supposedly of MC
Adore Finance & Investment, Inc., and requested for a statement of
account covering the principal and interest of the loan as of 31
EVIDENCE (Rule 130 Documentary Evidence Cases)
October 1979. She stated therein that the loan obligation shall be
paid within 60 days from receipt of the statement of account.
Almost three weeks later, or on 25 October 1979, a certain Atty.
Moises Tolentino dropped by the office of petitioner Citibank, with
a letter, dated 9 October 1979, and printed on paper with the
letterhead of MC Adore International Palace, which authorized the
bearer thereof to represent the respondent in settling the overdue
account, this time, purportedly, of MC Adore International Palace
Hotel. The letter was signed by respondent as the President and
Chairman of the Board.
Eventually, Atty. Antonio Agcaoili of Agcaoili & Associates, as
counsel of petitioner Citibank, sent a letter to respondent, dated 31
October 1979, informing her that petitioner Citibank had effected
an off-set using her account with Citibank-Geneva, in the amount of
US$149,632.99, against her outstanding, overdue, demandable and
unpaid obligation to petitioner Citibank. Atty. Agcaoili claimed
therein that the compensation or off-set was made pursuant to and
in accordance with the provisions of Articles 1278 through 1290 of
the Civil Code. He further declared that respondents obligation to
petitioner Citibank was now fully paid and liquidated.
Unfortunately, on 7 October 1987, a fire gutted the 7th floor of
petitioner Citibanks building at Paseo de Roxas St., Makati, Metro
Manila. Petitioners submitted a Certification[70] to this effect,
dated 17 January 1991, issued by the Chief of the Arson
Investigation Section, Fire District III, Makati Fire Station,
Metropolitan Police Force. The 7th floor of petitioner Citibanks
building housed its Control Division, which was in charge of keeping
Page 73
the necessary documents for cases in which it was involved. After
compiling the documentary evidence for the present case, Atty.
Renato J. Fernandez, internal legal counsel of petitioner Citibank,
forwarded them to the Control Division. The original copies of the
MCs, which supposedly represent the proceeds of the first set of
PNs, as well as that of other documentary evidence related to the
case, were among those burned in the said fire.[71]
Respondents version of events
Respondent disputed petitioners narration of the circumstances
surrounding her loans with petitioner Citibank and the alleged
authority she gave for the off-set or compensation of her money
market placements and deposit accounts with petitioners against
her loan obligation.
Respondent denied outright executing the first set of PNs, except
for one (PN No. 34534 in particular). Although she admitted that she
obtained several loans from petitioner Citibank, these only
amounted to P1,150,000.00, and she had already paid them. She
secured from petitioner Citibank two loans of P500,000.00 each.
She executed in favor of petitioner Citibank the corresponding PNs
for the loans and the Deeds of Assignment of her money market
placements with petitioner FNCB Finance as security.[72] To prove
payment of these loans, respondent presented two provisional
receipts of petitioner Citibank No. 19471,[73] dated 11 August 1978,
and No. 12723,[74] dated 10 November 1978 both signed by Mr.
Tan, and acknowledging receipt from respondent of several checks
in the total amount of P500,744.00 and P500,000.00, respectively,
for liquidation of loan.
EVIDENCE (Rule 130 Documentary Evidence Cases)
She borrowed another P150,000.00 from petitioner Citibank for
personal investment, and for which she executed PN No. 34534, on
9 January 1979. Thus, she admitted to receiving the proceeds of this
loan via MC No. 228270. She invested the loan amount in another
money market placement with petitioner FNCB Finance. In turn, she
used the very same money market placement with petitioner FNCB
Finance as security for her P150,000.00 loan from petitioner
Citibank. When she failed to pay the loan when it became due,
petitioner Citibank allegedly forfeited her money market placement
with petitioner FNCB Finance and, thus, the loan was already
paid.[75]
Respondent likewise questioned the MCs presented by petitioners,
except for one (MC No. 228270 in particular), as proof that she
received the proceeds of the loans covered by the first set of PNs.
As recounted in the preceding paragraph, respondent admitted to
obtaining a loan of P150,000.00, covered by PN No. 34534, and
receiving MC No. 228270 representing the proceeds thereof, but
claimed that she already paid the same. She denied ever receiving
MCs No. 220701 (for the loan of P400,000.00, covered by PN No.
33935) and No. 226467 (for the loan of P250,000.00, covered by PN
No. 34079), and pointed out that the checks did not bear her
indorsements. She did not deny receiving all other checks but she
interposed that she received these checks, not as proceeds of loans,
but as payment of the principal amounts and/or interests from her
money market placements with petitioner Citibank. She also raised
doubts as to the notation on each of the checks that reads RE:
Proceeds of PN#[corresponding PN No.], saying that such notation
did not appear on the MCs when she originally received them and
Page 74
that the notation appears to have been written by a typewriter
different from that used in writing all other information on the
checks (i.e., date, payee, and amount).[76] She even testified that
MCs were not supposed to bear notations indicating the purpose for
which they were issued.
As to the second set of PNs, respondent acknowledged having
signed them all. However, she asserted that she only executed these
PNs as part of the simulated loans she and Mr. Tan of petitioner
Citibank concocted.Respondent explained that she had a pending
loan application for a big amount with the Development Bank of the
Philippines (DBP), and when Mr. Tan found out about this, he
suggested that they could make it appear that the respondent had
outstanding loans with petitioner Citibank and the latter was
already demanding payment thereof; this might persuade DBP to
approve respondents loan application. Mr. Tan made the
respondent sign the second set of PNs, so that he may have
something to show the DBP investigator who might inquire with
petitioner Citibank as to respondents loans with the latter. On her
own copies of the said PNs, respondent wrote by hand the notation,
This isa (sic) simulated non-negotiable note, signed copy given to
Mr. Tan., (sic) per agreement to be shown to DBP representative.
itwill (sic) be returned to me if the P11=M (sic) loan for MC Adore
Palace Hotel is approved by DBP.[77]
Findings of this Court as to the existence of the loans
After going through the testimonial and documentary evidence
presented by both sides to this case, it is this Courts assessment
EVIDENCE (Rule 130 Documentary Evidence Cases)
that respondent did indeed have outstanding loans with petitioner
Citibank at the time it effected the off-set or compensation on 25
July 1979 (using respondents savings deposit with petitioner
Citibank), 5 September 1979 (using the proceeds of respondents
money market placements with petitioner FNCB Finance) and 26
October 1979 (using respondents dollar accounts remitted from
Citibank-Geneva). The totality of petitioners evidence as to the
existence of the said loans preponderates over respondents.
Preponderant evidence means that, as a whole, the evidence
adduced by one side outweighs that of the adverse party.[78]
Respondents outstanding obligation for P1,920,000.00 had been
sufficiently documented by petitioner Citibank.
The second set of PNs is a mere renewal of the prior loans originally
covered by the first set of PNs, except for PN No. 34534. The first
set of PNs is supported, in turn, by the existence of the MCs that
represent the proceeds thereof received by the respondent.
It bears to emphasize that the proceeds of the loans were paid to
respondent in MCs, with the respondent specifically named as
payee. MCs checks are drawn by the banks manager upon the bank
itself and regarded to be as good as the money it represents.[79]
Moreover, the MCs were crossed checks, with the words Payees
Account Only.
In general, a crossed check cannot be presented to the drawee bank
for payment in cash. Instead, the check can only be deposited with
the payees bank which, in turn, must present it for payment against
the drawee bank in the course of normal banking hours. The
Page 75
crossed check cannot be presented for payment, but it can only be
deposited and the drawee bank may only pay to another bank in the
payees or indorsers account.[80] The effect of crossing a check was
described by this Court in Philippine Commercial International Bank
v. Court of Appeals[81]
[T]he crossing of a check with the phrase Payees Account Only is a
warning that the check should be deposited in the account of the
payee. Thus, it is the duty of the collecting bank PCI Bank to
ascertain that the check be deposited in payees account only. It is
bound to scrutinize the check and to know its depositors before it
can make the clearing indorsement all prior indorsements and/or
lack of indorsement guaranteed.
The crossed MCs presented by petitioner Bank were indeed
deposited in several different bank accounts and cleared by the
Clearing Office of the Central Bank of the Philippines, as evidenced
by the stamp marks and notations on the said checks. The crossed
MCs are already in the possession of petitioner Citibank, the drawee
bank, which was ultimately responsible for the payment of the
amount stated in the checks. Given that a check is more than just an
instrument of credit used in commercial transactions for it also
serves as a receipt or evidence for the drawee bank of the
cancellation of the said check due to payment,[82] then, the
possession by petitioner Citibank of the said MCs, duly stamped
Paid gives rise to the presumption that the said MCs were already
paid out to the intended payee, who was in this case, the
respondent.
EVIDENCE (Rule 130 Documentary Evidence Cases)
This Court finds applicable herein the presumptions that private
transactions have been fair and regular,[83] and that the ordinary
course of business has been followed.[84] There is no question that
the loan transaction between petitioner Citibank and the
respondent is a private transaction. The transactions revolving
around the crossed MCs from their issuance by petitioner Citibank
to respondent as payment of the proceeds of her loans; to its
deposit in respondents accounts with several different banks; to the
clearing of the MCs by an independent clearing house; and finally,
to the payment of the MCs by petitioner Citibank as the drawee
bank of the said checks are all private transactions which shall be
presumed to have been fair and regular to all the parties concerned.
In addition, the banks involved in the foregoing transactions are also
presumed to have followed the ordinary course of business in the
acceptance of the crossed MCs for deposit in respondents accounts,
submitting them for clearing, and their eventual payment and
cancellation.
The afore-stated presumptions are disputable, meaning, they are
satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence.[85] Respondent, however, was unable
to present sufficient and credible evidence to dispute these
presumptions.
It should be recalled that out of the nine MCs presented by
petitioner Citibank, respondent admitted to receiving one as
proceeds of a loan (MC No. 228270), denied receiving two (MCs No.
220701 and 226467), and admitted to receiving all the rest, but not
as proceeds of her loans, but as return on the principal amounts and
interests from her money market placements.
Page 76
Respondent admitted receiving MC No. 228270 representing the
proceeds of her loan covered by PN No. 34534. Although the
principal amount of the loan is P150,000.00, respondent only
received P146,312.50, because the interest and handling fee on the
loan transaction were already deducted therefrom.[86] Stamps and
notations at the back of MC No. 228270 reveal that it was deposited
at the Bank of the Philippine Islands (BPI), Cubao Branch, in Account
No. 0123-0572-28.[87] The check also bore the signature of
respondent at the back.[88] And, although respondent would later
admit that she did sign PN No. 34534 and received MC No. 228270
as proceeds of the loan extended to her by petitioner Citibank, she
contradicted herself when, in an earlier testimony, she claimed that
PN No. 34534 was among the PNs she executed as simulated loans
with petitioner Citibank.[89]
Respondent denied ever receiving MCs No. 220701 and 226467.
However, considering that the said checks were crossed for payees
account only, and that they were actually deposited, cleared, and
paid, then the presumption would be that the said checks were
properly deposited to the account of respondent, who was clearly
named the payee in the checks. Respondents bare allegations that
she did not receive the two checks fail to convince this Court, for to
sustain her, would be for this Court to conclude that an irregularity
had occurred somewhere from the time of the issuance of the said
checks, to their deposit, clearance, and payment, and which would
have involved not only petitioner Citibank, but also BPI, which
accepted the checks for deposit, and the Central Bank of the
Philippines, which cleared the checks. It falls upon the respondent
to overcome or dispute the presumption that the crossed checks
EVIDENCE (Rule 130 Documentary Evidence Cases)
were issued, accepted for deposit, cleared, and paid for by the
banks involved following the ordinary course of their business.
The mere fact that MCs No. 220701 and 226467 do not bear
respondents signature at the back does not negate deposit thereof
in her account. The liability for the lack of indorsement on the MCs
no longer fall on petitioner Citibank, but on the bank who received
the same for deposit, in this case, BPI Cubao Branch. Once again, it
must be noted that the MCs were crossed, for payees account only,
and the payee named in both checks was none other than
respondent. The crossing of the MCs was already a warning to BPI
to receive said checks for deposit only in respondents account. It
was up to BPI to verify whether it was receiving the crossed MCs in
accordance with the instructions on the face thereof. If, indeed, the
MCs were deposited in accounts other than respondents, then the
respondent would have a cause of action against BPI.[90]
BPI further stamped its guarantee on the back of the checks to the
effect that, All prior endorsement and/or Lack of endorsement
guaranteed. Thus, BPI became the indorser of the MCs, and
assumed all the warranties of an indorser,[91] specifically, that the
checks were genuine and in all respects what they purported to be;
that it had a good title to the checks; that all prior parties had
capacity to contract; and that the checks were, at the time of their
indorsement, valid and subsisting.[92] So even if the MCs deposited
by BPI's client, whether it be by respondent herself or some other
person, lacked the necessary indorsement, BPI, as the collecting
bank, is bound by its warranties as an indorser and cannot set up
the defense of lack of indorsement as against petitioner Citibank,
the drawee bank.[93]
Page 77

Furthermore, respondents bare and unsubstantiated denial of
receipt of the MCs in question and their deposit in her account is
rendered suspect when MC No. 220701 was actually deposited in
Account No. 0123-0572-28 of BPI Cubao Branch, the very same
account in which MC No. 228270 (which respondent admitted to
receiving as proceeds of her loan from petitioner Citibank), and MCs
No. 228203, 228357, and 228400 (which respondent admitted to
receiving as proceeds from her money market placements) were
deposited. Likewise, MC No. 226467 was deposited in Account No.
0121-002-43 of BPI Cubao Branch, to which MCs No. 226285 and
226439 (which respondent admitted to receiving as proceeds from
her money market placements) were deposited. It is an apparent
contradiction for respondent to claim having received the proceeds
of checks deposited in an account, and then deny receiving the
proceeds of another check deposited in the very same account.
Another inconsistency in respondents denial of receipt of MC No.
226467 and her deposit of the same in her account, is her
presentation of Exhibit HHH, a provisional receipt which was
supposed to prove that respondent turned over P500,000.00 to Mr.
Tan of petitioner Citibank, that the said amount was split into three
money market placements, and that MC No. 226467 represented
the return on her investment from one of these placements.[94]
Because of her Exhibit HHH, respondent effectively admitted receipt
of MC No. 226467, although for reasons other than as proceeds of a
loan.
Neither can this Court give credence to respondents contention that
the notations on the MCs, stating that they were the proceeds of
EVIDENCE (Rule 130 Documentary Evidence Cases)
particular PNs, were not there when she received the checks and
that the notations appeared to be written by a typewriter different
from that used to write the other information on the checks. Once
more, respondents allegations were uncorroborated by any other
evidence. Her and her counsels observation that the notations on
the MCs appear to be written by a typewriter different from that
used to write the other information on the checks hardly convinces
this Court considering that it constitutes a mere opinion on the
appearance of the notation by a witness who does not possess the
necessary expertise on the matter. In addition, the notations on the
MCs were written using both capital and small letters, while the
other information on the checks were written using capital letters
only, such difference could easily confuse an untrained eye and lead
to a hasty conclusion that they were written by different
typewriters.
Respondents testimony, that based on her experience transacting
with banks, the MCs were not supposed to include notations on the
purpose for which the checks were issued, also deserves scant
consideration. While respondent may have extensive experience
dealing with banks, it still does not qualify her as a competent
witness on banking procedures and practices. Her testimony on this
matter is even belied by the fact that the other MCs issued by
petitioner Citibank (when it was still named First National City Bank)
and by petitioner FNCB Finance, the existence and validity of which
were not disputed by respondent, also bear similar notations that
state the reason for which they were issued.
Respondent presented several more pieces of evidence to
substantiate her claim that she received MCs No. 226285, 226439,
Page 78
226467, 226057, 228357, and 228400, not as proceeds of her loans
from petitioner Citibank, but as the return of the principal amounts
and payment of interests from her money market placements with
petitioners. Part of respondents exhibits were personal checks[95]
drawn by respondent on her account with Feati Bank & Trust Co.,
which she allegedly invested in separate money market placements
with both petitioners, the returns from which were paid to her via
MCs No. 226285 and 228400. Yet, to this Court, the personal checks
only managed to establish respondents issuance thereof, but there
was nothing on the face of the checks that would reveal the
purpose for which they were issued and that they were actually
invested in money market placements as respondent claimed.
Respondent further submitted handwritten notes that purportedly
computed and presented the returns on her money market
placements, corresponding to the amount stated in the MCs she
received from petitioner Citibank. Exhibit HHH-1[96] was a
handwritten note, which respondent attributed to Mr. Tan of
petitioner Citibank, showing the breakdown of her BPI Check for
P500,000.00 into three different money market placements with
petitioner Citibank. This Court, however, noticed several factors
which render the note highly suspect. One, it was written on the
reversed side of Provisional Receipt No. 12724 of petitioner Citibank
which bore the initials of Mr. Tan acknowledging receipt of
respondents BPI Check No. 120989 for P500,000.00; but the initials
on the handwritten note appeared to be that of Mr. Bobby
Mendoza of petitioner FNCB Finance.[97] Second, according to
Provisional Receipt No. 12724, BPI Check No. 120989 for
P500,000.00 was supposed to be invested in three money market
placements with petitioner Citibank for the period of 60 days. Since
EVIDENCE (Rule 130 Documentary Evidence Cases)
all these money market placements were made through one check
deposited on the same day, 10 November 1978, it made no sense
that the handwritten note at the back of Provisional Receipt No.
12724 provided for different dates of maturity for each of the
money market placements (i.e., 16 November 1978, 17 January
1979, and 21 November 1978), and such dates did not correspond
to the 60 day placement period stated on the face of the provisional
receipt. And third, the principal amounts of the money market
placements as stated in the handwritten note P145,000.00,
P145,000.00 and P242,000.00 totaled P532,000.00, and was
obviously in excess of the P500,000.00 acknowledged on the face of
Provisional Receipt No. 12724.
Exhibits III and III-1, the front and bank pages of a handwritten note
of Mr. Bobby Mendoza of petitioner FNCB Finance,[98] also did not
deserve much evidentiary weight, and this Court cannot rely on the
truth and accuracy of the computations presented therein. Mr.
Mendoza was not presented as a witness during the trial before the
RTC, so that the document was not properly authenticated nor its
contents sufficiently explained. No one was able to competently
identify whether the initials as appearing on the note were actually
Mr. Mendozas.
Also, going by the information on the front page of the note, this
Court observes that payment of respondents alleged money market
placements with petitioner FNCB Finance were made using Citytrust
Checks; the MCs in question, including MC No. 228057, were issued
by petitioner Citibank. Although Citytrust (formerly Feati Bank &
Trust Co.), petitioner FNCB Finance, and petitioner Citibank may be
affiliates of one another, they each remained separate and distinct
Page 79
corporations, each having its own financial system and records.
Thus, this Court cannot simply assume that one corporation, such as
petitioner Citibank or Citytrust, can issue a check to discharge an
obligation of petitioner FNCB Finance. It should be recalled that
when petitioner FNCB Finance paid for respondents money market
placements, covered by its PNs No. 8167 and 8169, as well as PNs
No. 20138 and 20139, petitioner FNCB Finance issued its own
checks.
As a last point on this matter, if respondent truly had money market
placements with petitioners, then these would have been evidenced
by PNs issued by either petitioner Citibank or petitioner FNCB
Finance, acknowledging the principal amounts of the investments,
and stating the applicable interest rates, as well as the dates of their
of issuance and maturity. After respondent had so meticulously
reconstructed her other money market placements with petitioners
and consolidated the documentary evidence thereon, she came
surprisingly short of offering similar details and substantiation for
these particular money market placements.
Since this Court is satisfied that respondent indeed received the
proceeds of the first set of PNs, then it proceeds to analyze her
evidence of payment thereof.
In support of respondents assertion that she had already paid
whatever loans she may have had with petitioner Citibank, she
presented as evidence Provisional Receipts No. 19471, dated 11
August 1978, and No. 12723, dated 10 November 1978, both of
petitioner Citibank and signed by Mr. Tan, for the amounts of
P500,744.00 and P500,000.00, respectively. While these provisional
EVIDENCE (Rule 130 Documentary Evidence Cases)
receipts did state that Mr. Tan, on behalf of petitioner Citibank,
received respondents checks as payment for her loans, they failed
to specifically identify which loans were actually paid. Petitioner
Citibank was able to present evidence that respondent had
executed several PNs in the years 1978 and 1979 to cover the loans
she secured from the said bank. Petitioner Citibank did admit that
respondent was able to pay for some of these PNs, and what it
identified as the first and second sets of PNs were only those which
remained unpaid. It thus became incumbent upon respondent to
prove that the checks received by Mr. Tan were actually applied to
the PNs in either the first or second set; a fact that, unfortunately,
cannot be determined from the provisional receipts submitted by
respondent since they only generally stated that the checks
received by Mr. Tan were payment for respondents loans.
Mr. Tan, in his deposition, further explained that provisional
receipts were issued when payment to the bank was made using
checks, since the checks would still be subject to clearing. The
purpose for the provisional receipts was merely to acknowledge the
delivery of the checks to the possession of the bank, but not yet of
payment.[99] This bank practice finds legitimacy in the
pronouncement of this Court that a check, whether an MC or an
ordinary check, is not legal tender and, therefore, cannot constitute
valid tender of payment. In Philippine Airlines, Inc. v. Court of
Appeals, [100] this Court elucidated that:
Since a negotiable instrument is only a substitute for money and not
money, the delivery of such an instrument does not, by itself,
operate as payment (Sec. 189, Act 2031 on Negs. Insts.; Art. 1249,
Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan
Page 80
Sunco, v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a
manager's check or ordinary check, is not legal tender, and an offer
of a check in payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor. Mere delivery of
checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the
payment by commercial document is actually realized (Art. 1249,
Civil Code, par. 3).
In the case at bar, the issuance of an official receipt by petitioner
Citibank would have been dependent on whether the checks
delivered by respondent were actually cleared and paid for by the
drawee banks.
As for PN No. 34534, respondent asserted payment thereof at two
separate instances by two different means. In her formal offer of
exhibits, respondent submitted a deposit slip of petitioner Citibank,
dated 11 August 1978, evidencing the deposit of BPI Check No. 5785
for P150,000.00.[101] In her Formal Offer of Documentary Exhibits,
dated 7 July 1989, respondent stated that the purpose for the
presentation of the said deposit slip was to prove that she already
paid her loan covered by PN No. 34534.[102] In her testimony
before the RTC three years later, on 28 November 1991, she
changed her story. This time she narrated that the loan covered by
PN No. 34534 was secured by her money market placement with
petitioner FNCB Finance, and when she failed to pay the said PN
when it became due, the security was applied to the loan,
therefore, the loan was considered paid.[103] Given the foregoing,
EVIDENCE (Rule 130 Documentary Evidence Cases)
respondents assertion of payment of PN No. 34534 is extremely
dubious.
According to petitioner Citibank, the PNs in the second set, except
for PN No. 34534, were mere renewals of the unpaid PNs in the first
set, which was why the PNs stated that they were for the purpose of
liquidating existing obligations. PN No. 34534, however, which was
part of the first set, was still valid and subsisting and so it was
included in the second set without need for its renewal, and it still
being the original PN for that particular loan, its stated purpose was
for personal investment.[104] Respondent essentially admitted
executing the second set of PNs, but they were only meant to cover
simulated loans. Mr. Tan supposedly convinced her that her pending
loan application with DBP would have a greater chance of being
approved if they made it appear that respondent urgently needed
the money because petitioner Citibank was already demanding
payment for her simulated loans.
Respondents defense of simulated loans to escape liability for the
second set of PNs is truly a novel one. It is regrettable, however,
that she was unable to substantiate the same. Yet again,
respondents version of events is totally based on her own
uncorroborated testimony. The notations on the second set of PNs,
that they were non-negotiable simulated notes, were admittedly
made by respondent herself and were, thus, self-serving. Equally
self-serving was respondents letter, written on 7 October 1985, or
more than six years after the execution of the second set of PNs, in
which she demanded return of the simulated or fictitious PNs,
together with the letters relating thereto, which Mr. Tan
purportedly asked her to execute. Respondent further failed to
Page 81
present any proof of her alleged loan application with the DBP, and
of any circumstance or correspondence wherein the simulated or
fictitious PNs were indeed used for their supposed purpose.
In contrast, petitioner Citibank, as supported by the testimonies of
its officers and available documentation, consistently treated the
said PNs as regular loans accepted, approved, and paid in the
ordinary course of its business.
The PNs executed by the respondent in favor of petitioner Citibank
to cover her loans were duly-filled out and signed, including the
disclosure statement found at the back of the said PNs, in
adherence to the Central Bank requirement to disclose the full
finance charges to a loan granted to borrowers.
Mr. Tan, then an account officer with the Marketing Department of
petitioner Citibank, testified that he dealt directly with respondent;
he facilitated the loans; and the PNs, at least in the second set, were
signed by respondent in his presence.[105]
Mr. Pujeda, the officer who was previously in charge of loans and
placements, confirmed that the signatures on the PNs were verified
against respondents specimen signature with the bank.[106]
Ms. Cristina Dondoyano, who worked at petitioner Citibank as a
loan processor, was responsible for booking respondents loans.
Booking the loans means recording it in the General Ledger. She
explained the procedure for booking loans, as follows: The account
officer, in the Marketing Department, deals directly with the clients
who wish to borrow money from petitioner Citibank. The Marketing
EVIDENCE (Rule 130 Documentary Evidence Cases)
Department will forward a loan booking checklist, together with the
borrowing clients PNs and other supporting documents, to the loan
pre-processor, who will check whether the details in the loan
booking checklist are the same as those in the PNs. The documents
are then sent to Signature Control for verification of the clients
signature in the PNs, after which, they are returned to the loan pre-
processor, to be forwarded finally to the loan processor. The loan
processor shall book the loan in the General Ledger, indicating
therein the client name, loan amount, interest rate, maturity date,
and the corresponding PN number. Since she booked respondents
loans personally, Ms. Dondoyano testified that she saw the original
PNs. In 1986, Atty. Fernandez of petitioner Citibank requested her
to prepare an accounting of respondents loans, which she did, and
which was presented as Exhibit 120 for the petitioners. The figures
from the said exhibit were culled from the bookings in the General
Ledger, a fact which respondents counsel was even willing to
stipulate.[107]
Ms. Teresita Glorioso was an Investigation and Reconcilement Clerk
at the Control Department of petitioner Citibank. She was
presented by petitioner Citibank to expound on the microfilming
procedure at the bank, since most of the copies of the PNs were
retrieved from microfilm. Microfilming of the documents are
actually done by people at the Operations Department. At the end
of the day or during the day, the original copies of all bank
documents, not just those pertaining to loans, are microfilmed. She
refuted the possibility that insertions could be made in the
microfilm because the microfilm is inserted in a cassette; the
cassette is placed in the microfilm machine for use; at the end of the
day, the cassette is taken out of the microfilm machine and put in a
Page 82
safe vault; and the cassette is returned to the machine only the
following day for use, until the spool is full. This is the microfilming
procedure followed everyday. When the microfilm spool is already
full, the microfilm is developed, then sent to the Control
Department, which double checks the contents of the microfilms
against the entries in the General Ledger. The Control Department
also conducts a random comparison of the contents of the
microfilms with the original documents; a random review of the
contents is done on every role of microfilm.[108]
Ms. Renee Rubio worked for petitioner Citibank for 20 years. She
rose from the ranks, initially working as a secretary in the Personnel
Group; then as a secretary to the Personnel Group Head; a Service
Assistant with the Marketing Group, in 1972 to 1974, dealing
directly with corporate and individual clients who, among other
things, secured loans from petitioner Citibank; the Head of the
Collection Group of the Foreign Department in 1974 to 1976; the
Head of the Money Transfer Unit in 1976 to 1978; the Head of the
Loans and Placements Unit up to the early 1980s; and, thereafter,
she established operations training for petitioner Citibank in the
Asia-Pacific Region responsible for the training of the officers of the
bank. She testified on the standard loan application process at
petitioner Citibank. According to Ms. Rubio, the account officer or
marketing person submits a proposal to grant a loan to an individual
or corporation. Petitioner Citibank has a worldwide policy that
requires a credit committee, composed of a minimum of three
people, which would approve the loan and amount thereof. There
can be no instance when only one officer has the power to approve
the loan application. When the loan is approved, the account officer
in charge will obtain the corresponding PNs from the client. The PNs
EVIDENCE (Rule 130 Documentary Evidence Cases)
are sent to the signature verifier who would validate the signatures
therein against those appearing in the signature cards previously
submitted by the client to the bank. The Operations Unit will check
and review the documents, including the PNs, if it is a clean loan,
and securities and deposits, if it is collateralized. The loan is then
recorded in the General Ledger. The Loans and Placements
Department will not book the loans without the PNs.When the PNs
are liquidated, whether they are paid or rolled-over, they are
returned to the client.[109] Ms. Rubio further explained that she
was familiar with respondents accounts since, while she was still the
Head of the Loan and Placements Unit, she was asked by Mr. Tan to
prepare a list of respondents outstanding obligations.[110] She thus
calculated respondents outstanding loans, which was sent as an
attachment to Mr. Tans letter to respondent, dated 28 September
1979, and presented before the RTC as Exhibits 34-B and 34-C.[111]
Lastly, the exchange of letters between petitioner Citibank and
respondent, as well as the letters sent by other people working for
respondent, had consistently recognized that respondent owed
petitioner Citibank money.
In consideration of the foregoing discussion, this Court finds that
the preponderance of evidence supports the existence of the
respondents loans, in the principal sum of P1,920,000.00, as of 5
September 1979. While it is well-settled that the term
preponderance of evidence should not be wholly dependent on the
number of witnesses, there are certain instances when the number
of witnesses become the determining factor
The preponderance of evidence may be determined, under certain
conditions, by the number of witnesses testifying to a particular fact
Page 83
or state of facts. For instance, one or two witnesses may testify to a
given state of facts, and six or seven witnesses of equal candor,
fairness, intelligence, and truthfulness, and equally well
corroborated by all the remaining evidence, who have no greater
interest in the result of the suit, testify against such state of facts.
Then the preponderance of evidence is determined by the number
of witnesses. (Wilcox vs. Hines, 100 Tenn. 524, 66 Am. St. Rep.,
761.)[112]
Best evidence rule
This Court disagrees in the pronouncement made by the Court of
Appeals summarily dismissing the documentary evidence submitted
by petitioners based on its broad and indiscriminate application of
the best evidence rule.
In general, the best evidence rule requires that the highest available
degree of proof must be produced. Accordingly, for documentary
evidence, the contents of a document are best proved by the
production of the document itself,[113] to the exclusion of any
secondary or substitutionary evidence.[114]
The best evidence rule has been made part of the revised Rules of
Court, Rule 130, Section 3, which reads
SEC. 3. Original document must be produced; exceptions. When the
subject of inquiry is the contents of a document, no evidence shall
be admissible other than the original document itself, except in the
following cases:
EVIDENCE (Rule 130 Documentary Evidence Cases)
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the
party against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
(c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss of
time and the fact sought to be established from them is only the
general result of the whole; and
(d) When the original is a public record in the custody of a public
officer or is recorded in a public office.
As the afore-quoted provision states, the best evidence rule applies
only when the subject of the inquiry is the contents of the
document. The scope of the rule is more extensively explained thus
But even with respect to documentary evidence, the best evidence
rule applies only when the content of such document is the subject
of the inquiry. Where the issue is only as to whether such document
was actually executed, or exists, or on the circumstances relevant to
or surrounding its execution, the best evidence rule does not apply
and testimonial evidence is admissible (5 Moran, op. cit., pp. 76-66;
4 Martin, op. cit., p. 78). Any other substitutionary evidence is
likewise admissible without need for accounting for the original.
Thus, when a document is presented to prove its existence or
condition it is offered not as documentary, but as real, evidence.
Parol evidence of the fact of execution of the documents is allowed
(Hernaez, et al. vs. McGrath, etc., et al., 91 Phil 565). x x x [115]
Page 84
In Estrada v. Desierto,[116] this Court had occasion to rule that
It is true that the Court relied not upon the original but only copy of
the Angara Diary as published in the Philippine Daily Inquirer on
February 4-6, 2001. In doing so, the Court, did not, however, violate
the best evidence rule. Wigmore,in his book on evidence, states
that:
Production of the original may be dispensed with, in the trial courts
discretion, whenever in the case in hand the opponent does not
bona fide dispute the contents of the document and no other useful
purpose will be served by requiring production.24
xxxx
In several Canadian provinces, the principle of unavailability has
been abandoned, for certain documents in which ordinarily no real
dispute arised. This measure is a sensible and progressive one and
deserves universal adoption (post, sec. 1233). Its essential feature
is that a copy may be used unconditionally, if the opponent has
been given an opportunity to inspect it. (Emphasis supplied.)
This Court did not violate the best evidence rule when it considered
and weighed in evidence the photocopies and microfilm copies of
the PNs, MCs, and letters submitted by the petitioners to establish
the existence of respondents loans. The terms or contents of these
documents were never the point of contention in the Petition at
bar. It was respondents position that the PNs in the first set (with
the exception of PN No. 34534) never existed, while the PNs in the
EVIDENCE (Rule 130 Documentary Evidence Cases)
second set (again, excluding PN No. 34534) were merely executed
to cover simulated loan transactions. As for the MCs representing
the proceeds of the loans, the respondent either denied receipt of
certain MCs or admitted receipt of the other MCs but for another
purpose. Respondent further admitted the letters she wrote
personally or through her representatives to Mr. Tan of petitioner
Citibank acknowledging the loans, except that she claimed that
these letters were just meant to keep up the ruse of the simulated
loans. Thus, respondent questioned the documents as to their
existence or execution, or when the former is admitted, as to the
purpose for which the documents were executed, matters which
are, undoubtedly, external to the documents, and which had
nothing to do with the contents thereof.
Alternatively, even if it is granted that the best evidence rule should
apply to the evidence presented by petitioners regarding the
existence of respondents loans, it should be borne in mind that the
rule admits of the following exceptions under Rule 130, Section 5 of
the revised Rules of Court
SEC. 5. When the original document is unavailable. When the
original document has been lost or destroyed, or cannot be
produced in court, the offeror, upon proof of its execution or
existence and the cause of its unavailability without bad faith on his
part, may prove its contents by a copy, or by a recital of its contents
in some authentic document, or by the testimony of witnesses in
the order stated.
The execution or existence of the original copies of the documents
was established through the testimonies of witnesses, such as Mr.
Page 85
Tan, before whom most of the documents were personally executed
by respondent.The original PNs also went through the whole loan
booking system of petitioner Citibank from the account officer in its
Marketing Department, to the pre-processor, to the signature
verifier, back to the pre-processor, then to the processor for
booking.[117] The original PNs were seen by Ms. Dondoyano, the
processor, who recorded them in the General Ledger. Mr. Pujeda
personally saw the original MCs, proving respondents receipt of the
proceeds of her loans from petitioner Citibank, when he helped
Attys. Cleofe and Fernandez, the banks legal counsels, to
reconstruct the records of respondents loans. The original MCs
were presented to Atty. Cleofe who used the same during the
preliminary investigation of the case, sometime in years 1986-1987.
The original MCs were subsequently turned over to the Control and
Investigation Division of petitioner Citibank.[118]
It was only petitioner FNCB Finance who claimed that they lost the
original copies of the PNs when it moved to a new office. Citibank
did not make a similar contention; instead, it explained that the
original copies of the PNs were returned to the borrower upon
liquidation of the loan, either through payment or roll-over.
Petitioner Citibank proffered the excuse that they were still looking
for the documents in their storage or warehouse to explain the
delay and difficulty in the retrieval thereof, but not their absence or
loss. The original documents in this case, such as the MCs and
letters, were destroyed and, thus, unavailable for presentation
before the RTC only on 7 October 1987, when a fire broke out on
the 7th floor of the office building of petitioner Citibank. There is no
showing that the fire was intentionally set. The fire destroyed
relevant documents, not just of the present case, but also of other
EVIDENCE (Rule 130 Documentary Evidence Cases)
cases, since the 7th floor housed the Control and Investigation
Division, in charge of keeping the necessary documents for cases in
which petitioner Citibank was involved.
The foregoing would have been sufficient to allow the presentation
of photocopies or microfilm copies of the PNs, MCs, and letters by
the petitioners as secondary evidence to establish the existence of
respondents loans, as an exception to the best evidence rule.
The impact of the Decision of the Court of Appeals in the Dy case
In its assailed Decision, the Court of Appeals made the following
pronouncement
Besides, We find the declaration and conclusions of this Court in CA-
G.R. CV No. 15934 entitled Sps. Dr. Ricardo L. Dy and Rosalind O. Dy
vs. City Bank, N.A., et al, promulgated on 15 January 1990, as
disturbing taking into consideration the similarities of the fraud,
machinations, and deceits employed by the defendant-appellant
Citibank and its Account Manager Francisco Tan.
Worthy of note is the fact that Our declarations and conclusions
against Citibank and the person of Francisco Tan in CA-G.R. CV No.
15934 were affirmed in toto by the Highest Magistrate in a Minute
Resolution dated 22 August 1990 entitled Citibank, N.A., vs. Court of
Appeals, G.R. 93350.
As the factual milieu of the present appeal created reasonable
doubts as to whether the nine (9) Promissory Notes were indeed
Page 86
executed with considerations, the doubts, coupled by the findings
and conclusions of this Court in CA-G.R. CV No. 15934 and the
Supreme Court in G.R. No. 93350. should be construed against
herein defendants-appellants Citibank and FNCB Finance.
What this Court truly finds disturbing is the significance given by the
Court of Appeals in its assailed Decision to the Decision[119] of its
Third Division in CA-G.R. CV No. 15934 (or the Dy case), when there
is an absolute lack of legal basis for doing such.
Although petitioner Citibank and its officer, Mr. Tan, were also
involved in the Dy case, that is about the only connection between
the Dy case and the one at bar. Not only did the Dy case tackle
transactions between parties other than the parties presently
before this Court, but the transactions are absolutely independent
and unrelated to those in the instant Petition.
In the Dy case, Severino Chua Caedo managed to obtain loans from
herein petitioner Citibank amounting to P7,000,000.00, secured to
the extent of P5,000,000.00 by a Third Party Real Estate Mortgage
of the properties of Caedos aunt, Rosalind Dy. It turned out that
Rosalind Dy and her husband were unaware of the said loans and
the mortgage of their properties. The transactions were carried out
exclusively between Caedo and Mr. Tan of petitioner Citibank. The
RTC found Mr. Tan guilty of fraud for his participation in the
questionable transactions, essentially because he allowed Caedo to
take out the signature cards, when these should have been signed
by the Dy spouses personally before him. Although the Dy spouses
signatures in the PNs and Third Party Real Estate Mortgage were
EVIDENCE (Rule 130 Documentary Evidence Cases)
forged, they were approved by the signature verifier since the
signature cards against which they were compared to were also
forged. Neither the RTC nor the Court of Appeals, however,
categorically declared Mr. Tan personally responsible for the
forgeries, which, in the narration of the facts, were more likely
committed by Caedo.
In the Petition at bar, respondent dealt with Mr. Tan directly, there
was no third party involved who could have perpetrated any fraud
or forgery in her loan transactions. Although respondent attempted
to raise suspicion as to the authenticity of her signatures on certain
documents, these were nothing more than naked allegations with
no corroborating evidence; worse, even her own allegations were
replete with inconsistencies. She could not even establish in what
manner or under what circumstances the fraud or forgery was
committed, or how Mr. Tan could have been directly responsible for
the same.
While the Court of Appeals can take judicial notice of the Decision of
its Third Division in the Dy case, it should not have given the said
case much weight when it rendered the assailed Decision, since the
former does not constitute a precedent. The Court of Appeals, in
the challenged Decision, did not apply any legal argument or
principle established in the Dy case but, rather, adopted the findings
therein of wrongdoing or misconduct on the part of herein
petitioner Citibank and Mr. Tan. Any finding of wrongdoing or
misconduct as against herein petitioners should be made based on
the factual background and pieces of evidence submitted in this
case, not those in another case.
Page 87
It is apparent that the Court of Appeals took judicial notice of the Dy
case not as a legal precedent for the present case, but rather as
evidence of similar acts committed by petitioner Citibank and Mr.
Tan. A basic rule of evidence, however, states that, Evidence that
one did or did not do a certain thing at one time is not admissible to
prove that he did or did not do the same or similar thing at another
time; but it may be received to prove a specific intent or knowledge,
identity, plan, system, scheme, habit, custom or usage, and the
like.[120] The rationale for the rule is explained thus
The rule is founded upon reason, public policy, justice and judicial
convenience. The fact that a person has committed the same or
similar acts at some prior time affords, as a general rule, no logical
guaranty that he committed the act in question. This is so because,
subjectively, a mans mind and even his modes of life may change;
and, objectively, the conditions under which he may find himself at
a given time may likewise change and thus induce him to act in a
different way.Besides, if evidence of similar acts are to be invariably
admitted, they will give rise to a multiplicity of collateral issues and
will subject the defendant to surprise as well as confuse the court
and prolong the trial.[121]
The factual backgrounds of the two cases are so different and
unrelated that the Dy case cannot be used to prove specific intent,
knowledge, identity, plan, system, scheme, habit, custom or usage
on the part of petitioner Citibank or its officer, Mr. Tan, to defraud
respondent in the present case.
IV
EVIDENCE (Rule 130 Documentary Evidence Cases)
The liquidation of respondents outstanding loans were valid in so
far as petitioner Citibank used respondents savings account with the
bank and her money market placements with petitioner FNCB
Finance; but illegal and void in so far as petitioner Citibank used
respondents dollar accounts with Citibank-Geneva.
Savings Account with petitioner Citibank
Compensation is a recognized mode of extinguishing obligations.
Relevant provisions of the Civil Code provides
Art. 1278. Compensation shall take place when two persons, in their
own right, are creditors and debtors of each other.
Art. 1279. In order that compensation may be proper, it is
necessary;
(1) That each one of the obligors be bound principally, and that he
be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due
are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated in
due time to the debtor.
Page 88
There is little controversy when it comes to the right of petitioner
Citibank to compensate respondents outstanding loans with her
deposit account. As already found by this Court, petitioner Citibank
was the creditor of respondent for her outstanding loans. At the
same time, respondent was the creditor of petitioner Citibank, as
far as her deposit account was concerned, since bank deposits,
whether fixed, savings, or current, should be considered as simple
loan or mutuum by the depositor to the banking institution.[122]
Both debts consist in sums of money. By June 1979, all of
respondents PNs in the second set had matured and became
demandable, while respondents savings account was demandable
anytime. Neither was there any retention or controversy over the
PNs and the deposit account commenced by a third person and
communicated in due time to the debtor concerned. Compensation
takes place by operation of law,[123] therefore, even in the absence
of an expressed authority from respondent, petitioner Citibank had
the right to effect, on 25 June 1979, the partial compensation or off-
set of respondents outstanding loans with her deposit account,
amounting to P31,079.14.
Money market placements with FNCB Finance
Things though are not as simple and as straightforward as regards to
the money market placements and bank account used by petitioner
Citibank to complete the compensation or off-set of respondents
outstanding loans, which came from persons other than petitioner
Citibank.
Respondents money market placements were with petitioner FNCB
Finance, and after several roll-overs, they were ultimately covered
EVIDENCE (Rule 130 Documentary Evidence Cases)
by PNs No. 20138 and 20139, which, by 3 September 1979, the date
the check for the proceeds of the said PNs were issued, amounted
to P1,022,916.66, inclusive of the principal amounts and interests.
As to these money market placements, respondent was the creditor
and petitioner FNCB Finance the debtor; while, as to the
outstanding loans, petitioner Citibank was the creditor and
respondent the debtor. Consequently, legal compensation, under
Article 1278 of the Civil Code, would not apply since the first
requirement for a valid compensation, that each one of the obligors
be bound principally, and that he be at the same time a principal
creditor of the other, was not met.
What petitioner Citibank actually did was to exercise its rights to the
proceeds of respondents money market placements with petitioner
FNCB Finance by virtue of the Deeds of Assignment executed by
respondent in its favor.
The Court of Appeals did not consider these Deeds of Assignment
because of petitioners failure to produce the original copies thereof
in violation of the best evidence rule. This Court again finds itself in
disagreement in the application of the best evidence rule by the
appellate court.
To recall, the best evidence rule, in so far as documentary evidence
is concerned, requires the presentation of the original copy of the
document only when the context thereof is the subject of inquiry in
the case.Respondent does not question the contents of the Deeds
of Assignment. While she admitted the existence and execution of
the Deeds of Assignment, dated 2 March 1978 and 9 March 1978,
covering PNs No. 8169 and 8167 issued by petitioner FNCB Finance,
Page 89
she claimed, as defense, that the loans for which the said Deeds
were executed as security, were already paid. She denied ever
executing both Deeds of Assignment, dated 25 August 1978,
covering PNs No. 20138 and 20139. These are again issues collateral
to the contents of the documents involved, which could be proven
by evidence other than the original copies of the said documents.
Moreover, the Deeds of Assignment of the money market
placements with petitioner FNCB Finance were notarized
documents, thus, admissible in evidence. Rule 132, Section 30 of the
Rules of Court provides that
SEC. 30. Proof of notarial documents. Every instrument duly
acknowledged or proved and certified as provided by law, may be
presented in evidence without further proof, the certificate of
acknowledgement being prima facie evidence of the execution of
the instrument or document involved.
Significant herein is this Courts elucidation in De Jesus v. Court of
Appeals,[124] which reads
On the evidentiary value of these documents, it should be recalled
that the notarization of a private document converts it into a public
one and renders it admissible in court without further proof of its
authenticity (Joson vs. Baltazar, 194 SCRA 114 [1991]). This is so
because a public document duly executed and entered in the proper
registry is presumed to be valid and genuine until the contrary is
shown by clear and convincing proof (Asido vs. Guzman, 57 Phil. 652
[1918]; U.S. vs. Enriquez, 1 Phil 241 [1902]; Favor vs. Court of
Appeals, 194 SCRA 308 [1991]). As such, the party challenging the
EVIDENCE (Rule 130 Documentary Evidence Cases)
recital of the document must prove his claim with clear and
convincing evidence (Diaz vs. Court of Appeals, 145 SCRA 346
[1986]).
The rule on the evidentiary weight that must be accorded a
notarized document is clear and unambiguous. The certificate of
acknowledgement in the notarized Deeds of Assignment constituted
prima facie evidence of the execution thereof. Thus, the burden of
refuting this presumption fell on respondent. She could have
presented evidence of any defect or irregularity in the execution of
the said documents[125] or raised questions as to the verity of the
notary publics acknowledgment and certificate in the Deeds.[126]
But again, respondent admitted executing the Deeds of Assignment,
dated 2 March 1978 and 9 March 1978, although claiming that the
loans for which they were executed as security were already paid.
And, she assailed the Deeds of Assignment, dated 25 August 1978,
with nothing more than her bare denial of execution thereof, hardly
the clear and convincing evidence required to trounce the
presumption of due execution of a notarized document.
Petitioners not only presented the notarized Deeds of Assignment,
but even secured certified literal copies thereof from the National
Archives.[127] Mr. Renato Medua, an archivist, working at the
Records Management and Archives Office of the National Library,
testified that the copies of the Deeds presented before the RTC
were certified literal copies of those contained in the Notarial
Registries of the notary publics concerned, which were already in
the possession of the National Archives. He also explained that he
could not bring to the RTC the Notarial Registries containing the
Page 90
original copies of the Deeds of Assignment, because the
Department of Justice (DOJ) Circular No. 97, dated 8 November
1968, prohibits the bringing of original documents to the courts to
prevent the loss of irreplaceable and priceless documents.[128]
Accordingly, this Court gives the Deeds of Assignment grave
importance in establishing the authority given by the respondent to
petitioner Citibank to use as security for her loans her money her
market placements with petitioner FNCB Finance, represented by
PNs No. 8167 and 8169, later to be rolled-over as PNs No. 20138
and 20139. These Deeds of Assignment constitute the law between
the parties, and the obligations arising therefrom shall have the
force of law between the parties and should be complied with in
good faith.[129] Standard clauses in all of the Deeds provide that
The ASSIGNOR and the ASSIGNEE hereby further agree as follows:
xxxx
2. In the event the OBLIGATIONS are not paid at maturity or upon
demand, as the case may be, the ASSIGNEE is fully authorized and
empowered to collect and receive the PLACEMENT (or so much
thereof as may be necessary) and apply the same in payment of the
OBLIGATIONS. Furthermore, the ASSIGNOR agrees that at any time,
and from time to time, upon request by the ASSIGNEE, the
ASSIGNOR will promptly execute and deliver any and all such further
instruments and documents as may be necessary to effectuate this
Assignment.
xxxx
EVIDENCE (Rule 130 Documentary Evidence Cases)
5. This Assignment shall be considered as sufficient authority to
FNCB Finance to pay and deliver the PLACEMENT or so much
thereof as may be necessary to liquidate the OBLIGATIONS, to the
ASSIGNEE in accordance with terms and provisions hereof.[130]
Petitioner Citibank was only acting upon the authority granted to it
under the foregoing Deeds when it finally used the proceeds of PNs
No. 20138 and 20139, paid by petitioner FNCB Finance, to partly pay
for respondents outstanding loans. Strictly speaking, it did not effect
a legal compensation or off-set under Article 1278 of the Civil Code,
but rather, it partly extinguished respondents obligations through
the application of the security given by the respondent for her
loans. Although the pertinent documents were entitled Deeds of
Assignment, they were, in reality, more of a pledge by respondent
to petitioner Citibank of her credit due from petitioner FNCB
Finance by virtue of her money market placements with the latter.
According to Article 2118 of the Civil Code
ART. 2118. If a credit has been pledged becomes due before it is
redeemed, the pledgee may collect and receive the amount due. He
shall apply the same to the payment of his claim, and deliver the
surplus, should there be any, to the pledgor.
PNs No. 20138 and 20139 matured on 3 September 1979, without
them being redeemed by respondent, so that petitioner Citibank
collected from petitioner FNCB Finance the proceeds thereof, which
included the principal amounts and interests earned by the money
Page 91
market placements, amounting to P1,022,916.66, and applied the
same against respondents outstanding loans, leaving no surplus to
be delivered to respondent.
Dollar accounts with Citibank-Geneva
Despite the legal compensation of respondents savings account and
the total application of the proceeds of PNs No. 20138 and 20139 to
respondents outstanding loans, there still remained a balance of
P1,069,847.40.Petitioner Citibank then proceeded to applying
respondents dollar accounts with Citibank-Geneva against her
remaining loan balance, pursuant to a Declaration of Pledge
supposedly executed by respondent in its favor.
Certain principles of private international law should be considered
herein because the property pledged was in the possession of an
entity in a foreign country, namely, Citibank-Geneva. In the absence
of any allegation and evidence presented by petitioners of the
specific rules and laws governing the constitution of a pledge in
Geneva, Switzerland, they will be presumed to be the same as
Philippine local or domestic laws; this is known as processual
presumption.[131]
Upon closer scrutiny of the Declaration of Pledge, this Court finds
the same exceedingly suspicious and irregular.
First of all, it escapes this Court why petitioner Citibank took care to
have the Deeds of Assignment of the PNs notarized, yet left the
Declaration of Pledge unnotarized. This Court would think that
petitioner Citibank would take greater cautionary measures with
EVIDENCE (Rule 130 Documentary Evidence Cases)
the preparation and execution of the Declaration of Pledge because
it involved respondents all present and future fiduciary placements
with a Citibank branch in another country, specifically, in Geneva,
Switzerland. While there is no express legal requirement that the
Declaration of Pledge had to be notarized to be effective, even so, it
could not enjoy the same prima facie presumption of due execution
that is extended to notarized documents, and petitioner Citibank
must discharge the burden of proving due execution and
authenticity of the Declaration of Pledge.
Second, petitioner Citibank was unable to establish the date when
the Declaration of Pledge was actually executed. The photocopy of
the Declaration of Pledge submitted by petitioner Citibank before
the RTC was undated.[132] It presented only a photocopy of the
pledge because it already forwarded the original copy thereof to
Citibank-Geneva when it requested for the remittance of
respondents dollar accounts pursuant thereto. Respondent, on the
other hand, was able to secure a copy of the Declaration of Pledge,
certified by an officer of Citibank-Geneva, which bore the date 24
September 1979.[133] Respondent, however, presented her
passport and plane tickets to prove that she was out of the country
on the said date and could not have signed the pledge. Petitioner
Citibank insisted that the pledge was signed before 24 September
1979, but could not provide an explanation as to how and why the
said date was written on the pledge. Although Mr. Tan testified that
the Declaration of Pledge was signed by respondent personally
before him, he could not give the exact date when the said signing
took place. It is important to note that the copy of the Declaration
of Pledge submitted by the respondent to the RTC was certified by
an officer of Citibank-Geneva, which had possession of the original
Page 92
copy of the pledge. It is dated 24 September 1979, and this Court
shall abide by the presumption that the written document is truly
dated.[134] Since it is undeniable that respondent was out of the
country on 24 September 1979, then she could not have executed
the pledge on the said date.
Third, the Declaration of Pledge was irregularly filled-out. The
pledge was in a standard printed form. It was constituted in favor of
Citibank, N.A., otherwise referred to therein as the Bank. It should
be noted, however, that in the space which should have named the
pledgor, the name of petitioner Citibank was typewritten, to wit
The pledge right herewith constituted shall secure all claims which
the Bank now has or in the future acquires against Citibank, N.A.,
Manila (full name and address of the Debtor), regardless of the legal
cause or the transaction (for example current account, securities
transactions, collections, credits, payments, documentary credits
and collections) which gives rise thereto, and including principal, all
contractual and penalty interest, commissions, charges, and costs.
The pledge, therefore, made no sense, the pledgor and pledgee
being the same entity. Was a mistake made by whoever filled-out
the form? Yes, it could be a possibility. Nonetheless, considering the
value of such a document, the mistake as to a significant detail in
the pledge could only be committed with gross carelessness on the
part of petitioner Citibank, and raised serious doubts as to the
authenticity and due execution of the same.The Declaration of
Pledge had passed through the hands of several bank officers in the
EVIDENCE (Rule 130 Documentary Evidence Cases)
country and abroad, yet, surprisingly and implausibly, no one
noticed such a glaring mistake.
Lastly, respondent denied that it was her signature on the
Declaration of Pledge. She claimed that the signature was a forgery.
When a document is assailed on the basis of forgery, the best
evidence rule applies
Basic is the rule of evidence that when the subject of inquiry is the
contents of a document, no evidence is admissible other than the
original document itself except in the instances mentioned in
Section 3, Rule 130 of the Revised Rules of Court. Mere photocopies
of documents are inadmissible pursuant to the best evidence rule.
This is especially true when the issue is that of forgery.
As a rule, forgery cannot be presumed and must be proved by clear,
positive and convincing evidence and the burden of proof lies on the
party alleging forgery. The best evidence of a forged signature in an
instrument is the instrument itself reflecting the alleged forged
signature. The fact of forgery can only be established by a
comparison between the alleged forged signature and the authentic
and genuine signature of the person whose signature is theorized
upon to have been forged. Without the original document
containing the alleged forged signature, one cannot make a
definitive comparison which would establish forgery. A comparison
based on a mere xerox copy or reproduction of the document under
controversy cannot produce reliable results.[135]
Respondent made several attempts to have the original copy of the
pledge produced before the RTC so as to have it examined by
Page 93
experts. Yet, despite several Orders by the RTC,[136] petitioner
Citibank failed to comply with the production of the original
Declaration of Pledge. It is admitted that Citibank-Geneva had
possession of the original copy of the pledge. While petitioner
Citibank in Manila and its branch in Geneva may be separate and
distinct entities, they are still incontestably related, and between
petitioner Citibank and respondent, the former had more influence
and resources to convince Citibank-Geneva to return, albeit
temporarily, the original Declaration of Pledge. Petitioner Citibank
did not present any evidence to convince this Court that it had
exerted diligent efforts to secure the original copy of the pledge, nor
did it proffer the reason why Citibank-Geneva obstinately refused to
give it back, when such document would have been very vital to the
case of petitioner Citibank. There is thus no justification to allow the
presentation of a mere photocopy of the Declaration of Pledge in
lieu of the original, and the photocopy of the pledge presented by
petitioner Citibank has nil probative value.[137] In addition, even if
this Court cannot make a categorical finding that respondents
signature on the original copy of the pledge was forged, it is
persuaded that petitioner Citibank willfully suppressed the
presentation of the original document, and takes into consideration
the presumption that the evidence willfully suppressed would be
adverse to petitioner Citibank if produced.[138]
Without the Declaration of Pledge, petitioner Citibank had no
authority to demand the remittance of respondents dollar accounts
with Citibank-Geneva and to apply them to her outstanding loans. It
cannot effect legal compensation under Article 1278 of the Civil
Code since, petitioner Citibank itself admitted that Citibank-Geneva
is a distinct and separate entity. As for the dollar accounts,
EVIDENCE (Rule 130 Documentary Evidence Cases)
respondent was the creditor and Citibank-Geneva is the debtor; and
as for the outstanding loans, petitioner Citibank was the creditor
and respondent was the debtor. The parties in these transactions
were evidently not the principal creditor of each other.
Therefore, this Court declares that the remittance of respondents
dollar accounts from Citibank-Geneva and the application thereof to
her outstanding loans with petitioner Citibank was illegal, and null
and void. Resultantly, petitioner Citibank is obligated to return to
respondent the amount of US$149,632,99 from her Citibank-
Geneva accounts, or its present equivalent value in Philippine
currency; and, at the same time, respondent continues to be
obligated to petitioner Citibank for the balance of her outstanding
loans which, as of 5 September 1979, amounted to P1,069,847.40.
V
The parties shall be liable for interests on their monetary obligations
to each other, as determined herein.
In summary, petitioner Citibank is ordered by this Court to pay
respondent the proceeds of her money market placements,
represented by PNs No. 23356 and 23357, amounting to
P318,897.34 and P203,150.00, respectively, earning an interest of
14.5% per annum as stipulated in the PNs,[139] beginning 17 March
1977, the date of the placements.
Petitioner Citibank is also ordered to refund to respondent the
amount of US$149,632.99, or its equivalent in Philippine currency,
which had been remitted from her Citibank-Geneva accounts. These
Page 94
dollar accounts, consisting of two fiduciary placements and current
accounts with Citibank-Geneva shall continue earning their
respective stipulated interests from 26 October 1979, the date of
their remittance by Citibank-Geneva to petitioner Citibank in Manila
and applied against respondents outstanding loans.
As for respondent, she is ordered to pay petitioner Citibank the
balance of her outstanding loans, which amounted to P1,069,847.40
as of 5 September 1979. These loans continue to earn interest, as
stipulated in the corresponding PNs, from the time of their
respective maturity dates, since the supposed payment thereof
using respondents dollar accounts from Citibank-Geneva is deemed
illegal, null and void, and, thus, ineffective.
VI
Petitioner Citibank shall be liable for damages to respondent.
Petitioners protest the award by the Court of Appeals of moral
damages, exemplary damages, and attorneys fees in favor of
respondent. They argued that the RTC did not award any damages,
and respondent, in her appeal before the Court of Appeals, did not
raise in issue the absence of such.
While it is true that the general rule is that only errors which have
been stated in the assignment of errors and properly argued in the
brief shall be considered, this Court has also recognized exceptions
to the general rule, wherein it authorized the review of matters,
even those not assigned as errors in the appeal, if the consideration
thereof is necessary in arriving at a just decision of the case, and
EVIDENCE (Rule 130 Documentary Evidence Cases)
there is a close inter-relation between the omitted assignment of
error and those actually assigned and discussed by the
appellant.[140] Thus, the Court of Appeals did not err in awarding
the damages when it already made findings that would justify and
support the said award.
Although this Court appreciates the right of petitioner Citibank to
effect legal compensation of respondents local deposits, as well as
its right to the proceeds of PNs No. 20138 and 20139 by virtue of
the notarized Deeds of Assignment, to partly extinguish
respondents outstanding loans, it finds that petitioner Citibank did
commit wrong when it failed to pay and properly account for the
proceeds of respondents money market placements, evidenced by
PNs No. 23356 and 23357, and when it sought the remittance of
respondents dollar accounts from Citibank-Geneva by virtue of a
highly-suspect Declaration of Pledge to be applied to the remaining
balance of respondents outstanding loans. It bears to emphasize
that banking is impressed with public interest and its fiduciary
character requires high standards of integrity and
performance.[141] A bank is under the obligation to treat the
accounts of its depositors with meticulous care whether such
accounts consist only of a few hundred pesos or of millions of
pesos.[142] The bank must record every single transaction
accurately, down to the last centavo, and as promptly as
possible.[143] Petitioner Citibank evidently failed to exercise the
required degree of care and transparency in its transactions with
respondent, thus, resulting in the wrongful deprivation of her
property.
Respondent had been deprived of substantial amounts of her
investments and deposits for more than two decades. During this
Page 95
span of years, respondent had found herself in desperate need of
the amounts wrongfully withheld from her. In her testimony[144]
before the RTC, respondent narrated
Q By the way Mrs. Witness will you kindly tell us again, you said
before that you are a businesswoman, will you tell us again what
are the businesses you are engaged into [sic]?
A I am engaged in real estate. I am the owner of the Modesta Village
1 and 2 in San Mateo, Rizal. I am also the President and Chairman of
the Board of Macador [sic] Co. and Business Inc. which operates the
Macador [sic] International Palace Hotel. I am also the President of
the Macador [sic] International Palace Hotel, and also the Treasures
Home Industries, Inc. which I am the Chairman and president of the
Board and also operating affiliated company in the name of
Treasures Motor Sales engaged in car dealers [sic] like Delta Motors,
we are the dealers of the whole Northern Luzon and I am the
president of the Disto Company, Ltd., based in Hongkong licensed in
Honkong [sic] and now operating in Los Angeles, California.
Q What is the business of that Disto Company Ltd.?
A Disto Company, Ltd., is engaged in real estate and construction.
Q Aside from those businesses are you a member of any national or
community organization for social and civil activities?
A Yes sir.
Q What are those?
EVIDENCE (Rule 130 Documentary Evidence Cases)
A I am the Vice-President of thes [sic] Subdivision Association of the
Philippines in 1976, I am also an officer of the Chamber of Real
Estate Business Association; I am also an officer of the Chatholic
[sic] Womens League and I am also a member of the CMLI, I forgot
the definition.
Q How about any political affiliation or government position held if
any?
A I was also a candidate for Mayo last January 30, 1980.
Q Where?
A In Dagupan City, Pangasinan.
Q What else?
A I also ran as an Assemblywoman last May, 1984, Independent
party in Regional I, Pangasinan.
Q What happened to your businesses you mentioned as a result of
your failure to recover you [sic] investments and bank deposits from
the defendants?
A They are not all operating, in short, I was hampered to push
through the businesses that I have.
A [sic] Of all the businesses and enterprises that you mentioned
what are those that are paralyzed and what remain inactive?
Page 96

A Of all the company [sic] that I have, only the Disto Company that
is now operating in California.
Q How about your candidacy as Mayor of Dagupan, [sic] City, and
later as Assemblywoman of Region I, what happened to this?
A I won by voting but when election comes on [sic] the counting I
lost and I protested this, it is still pending and because I dont have
financial resources I was not able to push through the case. I just
have it pending in the Comelec.
Q Now, do these things also affect your social and civic activities?
A Yes sir, definitely.
Q How?
A I was embarrassed because being a businesswoman I would like to
inform the Honorable Court that I was awarded as the most
outstanding businesswoman of the year in 1976 but when this
money was not given back to me I was not able to comply with the
commitments that I have promised to these associations that I am
engaged into [sic], sir.
For the mental anguish, serious anxiety, besmirched reputation,
moral shock and social humiliation suffered by the respondent, the
award of moral damages is but proper. However, this Court reduces
the amount thereof to P300,000.00, for the award of moral
EVIDENCE (Rule 130 Documentary Evidence Cases)
damages is meant to compensate for the actual injury suffered by
the respondent, not to enrich her.[145]
Having failed to exercise more care and prudence than a private
individual in its dealings with respondent, petitioner Citibank should
be liable for exemplary damages, in the amount of P250,000.00, in
accordance with Article 2229[146] and 2234[147] of the Civil Code.
With the award of exemplary damages, then respondent shall also
be entitled to an award of attorneys fees.[148] Additionally,
attorney's fees may be awarded when a party is compelled to
litigate or to incur expenses to protect his interest by reason of an
unjustified act of the other party.[149] In this case, an award of
P200,000.00 attorneys fees shall be satisfactory.
In contrast, this Court finds no sufficient basis to award damages to
petitioners. Respondent was compelled to institute the present case
in the exercise of her rights and in the protection of her interests. In
fact, although her Complaint before the RTC was not sustained in its
entirety, it did raise meritorious points and on which this Court rules
in her favor. Any injury resulting from the exercise of ones rights is
damnum absque injuria.[150]
IN VIEW OF THE FOREGOING, the instant Petition is PARTLY
GRANTED. The assailed Decision of the Court of Appeals in CA-G.R.
No. 51930, dated 26 March 2002, as already modified by its
Resolution, dated 20 November 2002, is hereby AFFIRMED WITH
MODIFICATION, as follows
Page 97
1. PNs No. 23356 and 23357 are DECLARED subsisting and
outstanding. Petitioner Citibank is ORDERED to return to
respondent the principal amounts of the said PNs, amounting to
Three Hundred Eighteen Thousand Eight Hundred Ninety-Seven
Pesos and Thirty-Four Centavos (P318,897.34) and Two Hundred
Three Thousand One Hundred Fifty Pesos (P203,150.00),
respectively, plus the stipulated interest of Fourteen and a half
percent (14.5%) per annum, beginning 17 March 1977;
2. The remittance of One Hundred Forty-Nine Thousand Six
Hundred Thirty Two US Dollars and Ninety-Nine Cents
(US$149,632.99) from respondents Citibank-Geneva accounts to
petitioner Citibank in Manila, and the application of the same
against respondents outstanding loans with the latter, is DECLARED
illegal, null and void. Petitioner Citibank is ORDERED to refund to
respondent the said amount, or its equivalent in Philippine currency
using the exchange rate at the time of payment, plus the stipulated
interest for each of the fiduciary placements and current accounts
involved, beginning 26 October 1979;
3. Petitioner Citibank is ORDERED to pay respondent moral damages
in the amount of Three Hundred Thousand Pesos (P300,000.00);
exemplary damages in the amount of Two Hundred Fifty Thousand
Pesos (P250,000.00); and attorneys fees in the amount of Two
Hundred Thousand Pesos (P200,000.00); and
4. Respondent is ORDERED to pay petitioner Citibank the balance of
her outstanding loans, which, from the respective dates of their
maturity to 5 September 1979, was computed to be in the sum of
One Million Sixty-Nine Thousand Eight Hundred Forty-Seven Pesos
EVIDENCE (Rule 130 Documentary Evidence Cases)
and Forty Centavos (P1,069,847.40), inclusive of interest. These
outstanding loans shall continue to earn interest, at the rates
stipulated in the corresponding PNs, from 5 September 1979 until
payment thereof.
SO ORDERED.
ATIENZA v BOARD OF MEDICINE
DECISION
NACHURA, J.:
Before us is a petition for review on certiorari under Rule 45 of the
Rules of Court, assailing the Decision[1] dated September 22, 2006
of the Court of Appeals (CA) in CA-G.R. SP No. 87755. The CA
dismissed the petition for certiorari filed by petitioner Rico Rommel
Atienza (Atienza), which, in turn, assailed the Orders[2] issued by
public respondent Board of Medicine (BOM) in Administrative Case
No. 1882.
The facts, fairly summarized by the appellate court, follow.
Due to her lumbar pains, private respondent Editha Sioson went to
Rizal Medical Center (RMC) for check-up on February 4, 1995.
Sometime in 1999, due to the same problem, she was referred to
Dr. Pedro Lantin III of RMC who, accordingly, ordered several
diagnostic laboratory tests. The tests revealed that her right kidney
is normal. It was ascertained, however, that her left kidney is non-
Page 98
functioning and non-visualizing. Thus, she underwent kidney
operation in September, 1999.
On February 18, 2000, private respondents husband, Romeo Sioson
(as complainant), filed a complaint for gross negligence and/or
incompetence before the [BOM] against the doctors who allegedly
participated in the fateful kidney operation, namely: Dr. Judd dela
Vega, Dr. Pedro Lantin, III, Dr. Gerardo Antonio Florendo and
petitioner Rico Rommel Atienza.
It was alleged in the complaint that the gross negligence and/or
incompetence committed by the said doctors, including petitioner,
consists of the removal of private respondents fully functional right
kidney, instead of the left non-functioning and non-visualizing
kidney.
The complaint was heard by the [BOM]. After complainant Romeo
Sioson presented his evidence, private respondent Editha Sioson,
also named as complainant there, filed her formal offer of
documentary evidence. Attached to the formal offer of
documentary evidence are her Exhibits A to D, which she offered for
the purpose of proving that her kidneys were both in their proper
anatomical locations at the time she was operated. She described
her exhibits, as follows:
EXHIBIT A the certified photocopy of the X-ray Request form dated
December 12, 1996, which is also marked as Annex 2 as it was
actually originally the Annex to x x x Dr. Pedro Lantin, IIIs counter
affidavit filed with the City Prosecutor of Pasig City in connection
with the criminal complaint filed by [Romeo Sioson] with the said
EVIDENCE (Rule 130 Documentary Evidence Cases)
office, on which are handwritten entries which are the
interpretation of the results of the ultrasound examination.
Incidentally, this exhibit happens to be the same as or identical to
the certified photocopy of the document marked as Annex 2 to the
Counter-Affidavit dated March 15, 2000, filed by x x x Dr. Pedro
Lantin, III, on May 4, 2000, with this Honorable Board in answer to
this complaint;
EXHIBIT B the certified photo copy of the X-ray request form dated
January 30, 1997, which is also marked as Annex 3 as it was actually
likewise originally an Annex to x x x Dr. Pedro Lantin, IIIs counter-
affidavit filed with the Office of the City Prosecutor of Pasig City in
connection with the criminal complaint filed by the herein
complainant with the said office, on which are handwritten entries
which are the interpretation of the results of the examination.
Incidentally, this exhibit happens to be also the same as or identical
to the certified photo copy of the document marked as Annex 3
which is likewise dated January 30, 1997, which is appended as such
Annex 3 to the counter-affidavit dated March 15, 2000, filed by x x x
Dr. Pedro Lantin, III on May 4, 2000, with this Honorable Board in
answer to this complaint.
EXHIBIT C the certified photocopy of the X-ray request form dated
March 16, 1996, which is also marked as Annex 4, on which are
handwritten entries which are the interpretation of the results of
the examination.
EXHIBIT D the certified photocopy of the X-ray request form dated
May 20, 1999, which is also marked as Annex 16, on which are
handwritten entries which are the interpretation of the results of
Page 99
the examination. Incidentally, this exhibit appears to be the draft of
the typewritten final report of the same examination which is the
document appended as Annexes 4 and 1 respectively to the
counter-affidavits filed by x x x Dr. Judd dela Vega and Dr. Pedro
Lantin, III in answer to the complaint. In the case of Dr. dela Vega
however, the document which is marked as Annex 4 is not a
certified photocopy, while in the case of Dr. Lantin, the document
marked as Annex 1 is a certified photocopy. Both documents are of
the same date and typewritten contents are the same as that which
are written on Exhibit D.
Petitioner filed his comments/objections to private respondents
[Editha Siosons] formal offer of exhibits. He alleged that said
exhibits are inadmissible because the same are mere photocopies,
not properly identified and authenticated, and intended to establish
matters which are hearsay. He added that the exhibits are
incompetent to prove the purpose for which they are offered.
Dispositions of the Board of Medicine
The formal offer of documentary exhibits of private respondent
[Editha Sioson] was admitted by the [BOM] per its Order dated May
26, 2004. It reads:
The Formal Offer of Documentary Evidence of [Romeo Sioson], the
Comments/Objections of [herein petitioner] Atienza, [therein
respondents] De la Vega and Lantin, and the Manifestation of
[therein] respondent Florendo are hereby ADMITTED by the [BOM]
for whatever purpose they may serve in the resolution of this case.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Let the hearing be set on July 19, 2004 all at 1:30 p.m. for the
reception of the evidence of the respondents.
SO ORDERED.
Petitioner moved for reconsideration of the abovementioned Order
basically on the same reasons stated in his comment/objections to
the formal offer of exhibits.
The [BOM] denied the motion for reconsideration of petitioner in its
Order dated October 8, 2004. It concluded that it should first admit
the evidence being offered so that it can determine its probative
value when it decides the case. According to the Board, it can
determine whether the evidence is relevant or not if it will take a
look at it through the process of admission. x x x.[3]
Disagreeing with the BOM, and as previously adverted to, Atienza
filed a petition for certiorari with the CA, assailing the BOMs Orders
which admitted Editha Siosons (Edithas) Formal Offer of
Documentary Evidence. The CA dismissed the petition for certiorari
for lack of merit.
Hence, this recourse positing the following issues:
I. PROCEDURAL ISSUE:
WHETHER PETITIONER ATIENZA AVAILED OF THE PROPER REMEDY
WHEN HE FILED THE PETITION FOR CERTIORARI DATED 06
DECEMBER 2004 WITH THE COURT OF APPEALS UNDER RULE 65 OF
Page 100
THE RULES OF COURT TO ASSAIL THE ORDERS DATED 26 MAY 2004
AND 08 OCTOBER 2004 OF RESPONDENT BOARD.
II. SUBSTANTIVE ISSUE:
WHETHER THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR AND DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE
HONORABLE COURT WHEN IT UPHELD THE ADMISSION OF
INCOMPETENT AND INADMISSIBLE EVIDENCE BY RESPONDENT
BOARD, WHICH CAN RESULT IN THE DEPRIVATION OF
PROFESSIONAL LICENSE A PROPERTY RIGHT OR ONES
LIVELIHOOD.[4]
We find no reason to depart from the ruling of the CA.
Petitioner is correct when he asserts that a petition for certiorari is
the proper remedy to assail the Orders of the BOM, admitting in
evidence the exhibits of Editha. As the assailed Orders were
interlocutory, these cannot be the subject of an appeal separate
from the judgment that completely or finally disposes of the
case.[5] At that stage, where there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law, the
only and remaining remedy left to petitioner is a petition for
certiorari under Rule 65 of the Rules of Court on the ground of grave
abuse of discretion amounting to lack or excess of jurisdiction.
However, the writ of certiorari will not issue absent a showing that
the BOM has acted without or in excess of jurisdiction or with grave
EVIDENCE (Rule 130 Documentary Evidence Cases)
abuse of discretion. Embedded in the CAs finding that the BOM did
not exceed its jurisdiction or act in grave abuse of discretion is the
issue of whether the exhibits of Editha contained in her Formal
Offer of Documentary Evidence are inadmissible.
Petitioner argues that the exhibits formally offered in evidence by
Editha: (1) violate the best evidence rule; (2) have not been properly
identified and authenticated; (3) are completely hearsay; and (4) are
incompetent to prove their purpose. Thus, petitioner contends that
the exhibits are inadmissible evidence.
We disagree.
To begin with, it is well-settled that the rules of evidence are not
strictly applied in proceedings before administrative bodies such as
the BOM.[6] Although trial courts are enjoined to observe strict
enforcement of the rules of evidence,[7] in connection with
evidence which may appear to be of doubtful relevancy,
incompetency, or admissibility, we have held that:
[I]t is the safest policy to be liberal, not rejecting them on doubtful
or technical grounds, but admitting them unless plainly irrelevant,
immaterial or incompetent, for the reason that their rejection
places them beyond the consideration of the court, if they are
thereafter found relevant or competent; on the other hand, their
admission, if they turn out later to be irrelevant or incompetent, can
easily be remedied by completely discarding them or ignoring
them.[8]
Page 101
From the foregoing, we emphasize the distinction between the
admissibility of evidence and the probative weight to be accorded
the same pieces of evidence. PNOC Shipping and Transport
Corporation v. Court of Appeals[9] teaches:
Admissibility of evidence refers to the question of whether or not
the circumstance (or evidence) is to be considered at all. On the
other hand, the probative value of evidence refers to the question
of whether or not it proves an issue.
Second, petitioners insistence that the admission of Edithas exhibits
violated his substantive rights leading to the loss of his medical
license is misplaced. Petitioner mistakenly relies on Section 20,
Article I of the Professional Regulation Commission Rules of
Procedure, which reads:
Section 20. Administrative investigation shall be conducted in
accordance with these Rules. The Rules of Court shall only apply in
these proceedings by analogy or on a suppletory character and
whenever practicable and convenient. Technical errors in the
admission of evidence which do not prejudice the substantive rights
of either party shall not vitiate the proceedings.[10]
As pointed out by the appellate court, the admission of the exhibits
did not prejudice the substantive rights of petitioner because, at any
rate, the fact sought to be proved thereby, that the two kidneys of
Editha were in their proper anatomical locations at the time she was
operated on, is presumed under Section 3, Rule 131 of the Rules of
Court:
EVIDENCE (Rule 130 Documentary Evidence Cases)
Sec. 3. Disputable presumptions. The following presumptions are
satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence:
xxxx
(y) That things have happened according to the ordinary course of
nature and the ordinary habits of life.
The exhibits are certified photocopies of X-ray Request Forms dated
December 12, 1996, January 30, 1997, March 16, 1996, and May 20,
1999, filed in connection with Edithas medical case. The documents
contain handwritten entries interpreting the results of the
examination. These exhibits were actually attached as annexes to
Dr. Pedro Lantin IIIs counter affidavit filed with the Office of the City
Prosecutor of Pasig City, which was investigating the criminal
complaint for negligence filed by Editha against the doctors of Rizal
Medical Center (RMC) who handled her surgical procedure. To lay
the predicate for her case, Editha offered the exhibits in evidence to
prove that her kidneys were both in their proper anatomical
locations at the time of her operation.
The fact sought to be established by the admission of Edithas
exhibits, that her kidneys were both in their proper anatomical
locations at the time of her operation, need not be proved as it is
covered by mandatory judicial notice.[11]
Page 102
Unquestionably, the rules of evidence are merely the means for
ascertaining the truth respecting a matter of fact.[12] Thus, they
likewise provide for some facts which are established and need not
be proved, such as those covered by judicial notice, both mandatory
and discretionary.[13] Laws of nature involving the physical
sciences, specifically biology,[14] include the structural make-up and
composition of living things such as human beings. In this case, we
may take judicial notice that Edithas kidneys before, and at the time
of, her operation, as with most human beings, were in their proper
anatomical locations.
Third, contrary to the assertion of petitioner, the best evidence rule
is inapplicable. Section 3 of Rule 130 provides:
1. Best Evidence Rule
Sec. 3. Original document must be produced; exceptions. When the
subject of inquiry is the contents of a document, no evidence shall
be admissible other than the original document itself, except in the
following cases:
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the
party against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
(c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss of
EVIDENCE (Rule 130 Documentary Evidence Cases)
time and the fact sought to be established from them is only the
general result of the whole; and
(d) When the original is a public record in the custody of a public
officer or is recorded in a public office.
The subject of inquiry in this case is whether respondent doctors
before the BOM are liable for gross negligence in removing the right
functioning kidney of Editha instead of the left non-functioning
kidney, not the proper anatomical locations of Edithas kidneys. As
previously discussed, the proper anatomical locations of Edithas
kidneys at the time of her operation at the RMC may be established
not only through the exhibits offered in evidence.
Finally, these exhibits do not constitute hearsay evidence of the
anatomical locations of Edithas kidneys. To further drive home the
point, the anatomical positions, whether left or right, of Edithas
kidneys, and the removal of one or both, may still be established
through a belated ultrasound or x-ray of her abdominal area.
In fact, the introduction of secondary evidence, such as copies of
the exhibits, is allowed.[15] Witness Dr. Nancy Aquino testified that
the Records Office of RMC no longer had the originals of the exhibits
because [it] transferred from the previous building, x x x to the new
building.[16] Ultimately, since the originals cannot be produced, the
BOM properly admitted Edithas formal offer of evidence and,
thereafter, the BOM shall determine the probative value thereof
when it decides the case.
Page 103
WHEREFORE, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 87755 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
SASAN v NLRC
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review under Rule 45 of the Rules of
Court are the Decision[1] dated 24 April 2006 of the Court of
Appeals in CA-G.R. SP No. 79912, which affirmed the Decision dated
22 January 2003of the National Labor Relations Commission (NLRC)
in NLRC Case No. V-000241-2002 finding that Helpmate, Inc. (HI) is a
legitimate independent job contractor and that the petitioners were
not illegally dismissed from work; and the Resolution[2] dated 31
October 2006 of the same court denying the Motion for
Reconsideration filed by the petitioners.
Respondent Equitable-PCI Bank (E-PCIBank),[3] a banking entity duly
organized and existing under and by virtue of Philippine laws,
entered into a Contract for Services[4] with HI, a domestic
corporation primarily engaged in the business of providing janitorial
and messengerial services. Pursuant to their contract, HI shall hire
and assign workers to E-PCIBank to perform janitorial/messengerial
and maintenance services. The contract was impliedly renewed year
after year. Petitioners Rolando Sasan, Sr.,[5] Leonilo Dayday,[6]
Modesto Aguirre,[7] Alejandro Ardimer,[8] Eleuterio Sacil,[9]
EVIDENCE (Rule 130 Documentary Evidence Cases)
Wilfredo Juegos,[10] Petronilo Carcedo,[11] and Cesar Peciencia[12]
were among those employed and assigned to E-PCIBank at its
branch along Gorordo Avenue, Lahug, Cebu City, as well as to its
other branches in the Visayas.[13]
O 23 July 2001, petitioners filed with the Arbitration Branch of the
NLRC in Cebu City separate complaints[14] against E-PCIBank and HI
for illegal dismissal, with claims for separation pay, service incentive
leave pay, allowances, damages, attorneys fees and costs. Their
complaints were docketed as NLRC RAB-VII Case No. 07-1381-2001
and raffled to Labor Arbiter Jose G. Gutierrez (Labor Arbiter
Gutierrez) for their proper disposition. Subsequently, on 22 August
2001, the petitioners[15] amended their complaints to include a
claim for 13th month-pay.
Several conciliation hearings were scheduled by Labor Arbiter
Gutierrez but the parties still failed to arrive at a mutually beneficial
settlement; hence, Labor Arbiter Gutierrez ordered that they submit
their respective position papers.
In their position papers, petitioners claimed that they had become
regular employees of E-PCIBank with respect to the activities for
which they were employed, having continuously rendered janitorial
and messengerial services to the bank for more than one year; that
E-PCIBank had direct control and supervision over the means and
methods by which they were to perform their jobs; and that their
dismissal by HI was null and void because the latter had no power to
do so since they had become regular employees of E-PCIBank.
Page 104
For its part, E-PCIBank averred that it entered into a Contract for
Services with HI, an independent job contractor which hired and
assigned petitioners to the bank to perform janitorial and
messengerial services thereat. It was HI that paid petitioners wages,
monitored petitioners daily time records (DTR) and uniforms, and
exercised direct control and supervision over the petitioners and
that therefore HI has every right to terminate their services legally.
E-PCIBank could not be held liable for whatever misdeed HI had
committed against its employees.
HI, on the other hand, asserted that it was an independent job
contractor engaged in the business of providing janitorial and
related services to business establishments, and E-PCIBank was one
of its clients. Petitioners were its employees, part of its pool of
janitors/messengers assigned to E-PCIBank. The Contract for
Services between HI and E-PCIBank expired on 15 July 2000. E-
PCIBank no longer renewed said contract with HI and, instead,
bidded out its janitorial requirements to two other job contractors,
Able Services and Puritan. HI designated petitioners to new work
assignments, but the latter refused to comply with the same.
Petitioners were not dismissed by HI, whether actually or
constructively, thus, petitioners complaints before the NLRC were
without basis.
Labor Arbiter Gutierrez focused on the following issues: (a) whether
petitioners were regular employees of HI; (b) whether petitioners
were illegally dismissed from their employment; and (c) whether
petitioners were entitled to their money claims.
EVIDENCE (Rule 130 Documentary Evidence Cases)
On 7 January 2002, on the basis of the parties position papers and
documentary evidence, Labor Arbiter Gutierrez rendered a Decision
finding that HI was not a legitimate job contractor on the ground
that it did not possess the required substantial capital or investment
to actually perform the job, work, or service under its own account
and responsibility as required under the Labor Code.[16] HI is
therefore a labor-only contractor and the real employer of
petitioners is E-PCIBank which is held liable to petitioners. According
to Labor Arbiter Gutierrez:
[T]he undisputed facts show that the [herein petitioners] were
made to perform not only as janitors but also as messengers, drivers
and one of them even worked as an electrician. For us, these jobs
are not only directly related to the main business of the principal
but are, likewise deemed necessary in the conduct of respondent
Equitable-PCI Banks principal business. Thus, based on the above,
we so declare that the [petitioners] are employees of respondent
Equitable-PCI Bank. And having worked with respondent Equitable-
PCI Bank for more than one (1) year, they are deemed regular
employees. They cannot, therefore, be removed from employment
without cause and without due process, which is wanting in this
case.Hence, the severance of their employment in the guise of
termination of contract is illegal.[17]
In the dispositive portion of his 7 January 2002 Decision, Labor
Arbiter Gutierrez awarded to petitioners the following amounts:
I. CESAR PACIENCIA
Page 105
a) Backwages same as Paciencia
July 15, 2001 to January 8, 2002
= P190.00 per day b) Separation Pay
= 5 months and 6 days Feb. 2, 1999 to July 15, 2001
= 136 days x P190.00 = P190.00 x 26 days x 2.5 years / 2
Total

= P25,840.00
= P25,840.00
b) Separation Pay
June 10, 1996 to July 15, 2001
= 5 years = P6,175.00
=P190.00 x 26 days x 5 years / 2 = P32,015.00

III Roland Mosquera (did not file Amended Complaint)

=P12,350.00 a) Backwages
c) 13th Month Pay (same as Paciencia)
= P190.00 x 26 days
Total b) Separation Pay
= P4,940.00 March 8, 1998 to July 15, 2001
P43,130.00 = P190.00 x 26 days x 3 yrs. / 2
Total
II Dominador Suico, Jr. (did not file Amended Complaint)

a) Backwages
July 15, 2001 to January 15, 2002 = P25,840.00

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 106

 a) Backwages
(same as Paciencia)
= P7,410.00
= P33,250.00 b) Separation Pay
October 1989 to July 15, 2001
IV Petronillo Carcedo = P190.00 x 26 days x 12 yrs. / 2

a) Backwages c) 13th Month Pay

(same as Paciencia) = P190.00 x 26 days
Total
b) Separation Pay
Sept. 16, 1984 to July 15, 2001
= P190.00 x 26 days x 17 yrs. / 2 = P25,840.00
c) 13th Month Pay
= P190.00 x 26 days
Total
= P29,640.00

= P25,840.00
= P4,940.00
= P60,420.00

= P41,990.00 VI Leonilo Dayday

a) Backwages
= P4,940.00 (same as Paciencia)
= P72,770.00
b) Separation Pay
V Rolando Sasan, Sr. Feb. 8, 1983 to July 15, 2001

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 107

= P190.00 x 26 days x 18 yrs. / 2
= P25,840.00
c) 13th Month Pay
= P190.00 x 26 days
Total
= P22,230.00

= P25,840.00
= P4,940.00
= P53,010.00

= P44,460.00 VIII Mario Juntilla

a) Backwages
= P4,940.00 (same as Pacencia)
= P75,240.00
b) Separation Pay
VII Eleuterio Sacil October 7, 1987 to July 15, 2001
= P190.00 x 26 days x 14 yrs. / 2
a) Backwages
(same as Paciencia) c) 13th Month Pay
= P190.00 x 26 days
b) Separation Pay Total
June 2, 1992 to July 15, 2001
= P190.00 x 26 days x 9 yrs. / 2
= P25,840.00
c) 13th Month Pay
= P190.00 x 26 days
Total
= P34,580.00

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 108

 a) Backwages
= P4,940.00 (same as Paciencia)
= P65,360.00
b) Separation Pay
IX Wilfredo Juegos = Jan. 5, 1992 to July 15, 2001
= P190.00 x 26 days x 9.5 yrs. / 2
a) Backwages
(same as Pacencia) c) 13th Month Pay
= P190.00 x 26 days
b) Separation Pay Total
July 23, 1990 to July 15, 2001
= P190.00 x 26 days x 11 yrs. / 2
= P25,840.00
c) 13th Month Pay
= P190.00 x 26 days
Total
= P23,465.00

= P25,840.00
= P4,940.00
= P54,245.00

= P27,170.00 XI Alejandro Ardimer

a) Backwages
= P4,840.00 (same as Paciencia)
= P57,950.00
b) Separation Pay
X Modesto Aguirre = Jan. 20, 1990 to July 15, 2001

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 109

= P190.00 x 26 days x 11.5 yrs. / 2 7. Eleuterio Sacil - 53,010.00
8. Mario Juntilla - 65,360.00
c) 13th Month Pay 9. Wilfredo Juegos - 57,950.00
= P190.00 x 26 days 10. Modesto Aguirre - 54,245.00
Total 11. Alejandro Ardimer - 59,185.00
TOTAL - P606,575.00[18]

= P25,840.00
Aggrieved by the decision of Labor Arbiter Gutierrez, respondents E-
PCIBank and HI appealed the same to the NLRC, 4th Division,
stationed in Cebu City. Their appeals were docketed as NLRC Case
= P28,405.00 No. V-000241-2002. In support of its allegation that it was a
legitimate job contractor, HI submitted before the NLRC several
documents which it did not present before Labor Arbiter Gutierrez.
= P4,940.00 These are:
= P59,185.00
1. Certificate of Filing of Certificate of Increase of Capital Stock,
xxxx Certificate of Filing Amended Articles of Incorporation, and General
Information Sheet Stock Corporation of HI showing therein that it
WHEREFORE, the foregoing premises considered, judgment is increased its authorized capital stock from P1,500,000.00 to
hereby rendered directing the respondents Equitable PCI Bank and P20,000,000.00 on 12 March 1999 with the Securities and Exchange
Helpmate, Inc. to pay jointly and solidarily the complainants as Commission;
follows:
2. Audited Financial Statement of HI showing therein that it has
1. Cesar Paciencia - P43,130.00 Total Assets of P20,939,935.72 as of 31 December 2000;
2. Dominador Suico, Jr. - 32,015.00
3. Roland Mosquera - 33,250.00 3. Transfer Certificate of Title No. 110173 and Tax Declaration No.
4. Petronilo Carceda - 72,770.00 GR2K-09-063-00582 registered under the name of HI showing that it
5. Roland Sasan, Sr. - 60,420.00 has a parcel of land with Market Value of P1,168,860.00 located
6. Leonilo Dayday - 75,240.00 along Rizal Avenue (now Bacalso Avenue), Cebu City, and

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 110


4. Tax Declaration No. GR2K-09-063-00583 registered under the
name of HI showing that it has a commercial building constructed
on the preceding lot located along Bacalso Avenue, Cebu City with
market value of P2,515,170.00.[19]
2003 Decision, the payment of the following reduced amounts to
petitioners:
WHEREFORE, premises considered, the decision of Labor Arbiter
Jose G. Gutierrez dated 7 January 2002 is MODIFIED, to wit:

Ordering respondents Helpmate, Inc. and Equitable PCI Bank to

The NLRC promulgated its Decision on 22 January 2003 modifying jointly and severally[22] pay the complainants of their 13th month
the ruling of Labor Arbiter Gutierrez. The NLRC took into pay and attorneys fees in the aggregate amount of Forty-Three
consideration the documentary evidence presented by HI for the Thousand Four Hundred Seventy-Two and 00/100 (P43,472.00),
first time on appeal and, on the basis thereof, declared HI as a broken down as follows:
highly capitalized venture with sufficient capitalization, which
cannot be considered engaged in labor-only contracting. 1. Aguirre, Modesto - P5,434.00
2. Ardimer, Alejandro - 5,434.00
On the charge of illegal dismissal, the NLRC ruled that: 3. Carcedo, Petronilo - 5,434.00
4. Dayday, Leonilo - 5,434.00
The charge of illegal dismissal was prematurely filed. The record 5. Juegos, Wilfredo - 5,434.00
shows that barely eight (8) days from 15 July 2001 when the 6. Juntilla, Mario - 5,434.00
complainants were placed on a temporary off-detail, they filed their 7. Paciencia, Cesar - 5,434.00
complaints on 23 July 2001 and amended their complaints on 22 8. Sacil, Eleuterio - 5,434.00
August 2001 against the respondents on the presumption that their TOTAL P43,472.00[23]
services were already terminated. Temporary off-detail is not
equivalent to dismissal. x x x.[20]
Petitioners Motion for Reconsideration was denied by the NLRC in
its Resolution dated 1 July 2003.[24]
The NLRC deleted Labor Arbiter Gutierrezs award of backwages and
separation pay, but affirmed his award for 13th month pay and Distressed by the decision of the NLRC, petitioners sought recourse
attorneys fees equivalent to ten percent (10%) of the 13th month with the Court of Appeals by filing a Petition for Certiorari[25] under
pay, to thepetitioners.[21] Thus, the NLRC decreed in its 22 January Rule 65 of the 1997 Rules of Civil Procedure docketed as CA-G.R. SP
No. 79912.

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 111

In its Decision dated 24 April 2006, the Court of Appeals affirmed
the findings of the NLRC that HI was a legitimate job contractor and
that it did not illegally dismiss petitioners:
As to the question of whether or not, as a legitimate independent
job contractor, respondent HI illegally dismissed the petitioners. We
rule in the negative.
It is undisputed that the contract between respondent HI and its
client E-PCIBank expired on July 15, 2000. The record shows that
after said expiration, respondent HI offered the petitioners new
work assignments to various establishments which are HIs clients.
The petitioners, therefore, were not even placed on floating status.
They simply refused, without justifiable reason, to assume their new
work assignments which refusal was tantamount to abandonment.
There being no illegal dismissal, petitioners are not entitled to
backwages or separation pay.[26]
The fallo of the 24 April 2006 Decision of the appellate court reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us DENYING the petition filed in this case and
AFFIRMING the decision of the NLRC, Fourth Division, in NLRC Case
No. V-000145-2003 promulgated on June 22, 2003.[27]
Petitioners now come before us via the instant Petition raising the
following issues:
EVIDENCE (Rule 130 Documentary Evidence Cases)
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ACTED IN
EXCESS OF THEIR JURISDICTION AND/OR COMMITTED GRAVE
ABUSE OF DISCRETION IN UPHOLDING THE NLRC 4TH DIVISIONS
DECISION AND GRAVELY ERRED IN:
I. ACCEPTING AND APPRECIATING THE PIECES OF EVIDENCE
SUBMITTED BY RESPONDENTS DURING APPEAL, ALL EXISTING
DURING THE TIME THE NLRC RAB 7S TRIAL, CONTRARY TO THIS
HONORABLE COURTS PREVIOUS ESTABLISHED DECISIONS.
II. REVERSING, WITHOUT ANY LEGAL BASIS, THE FACTUAL FINDING
OF NLRC RAB 7 THAT THE RESPONDENT HI WAS LABOR ONLY
CONTRACTOR.
III. RULING, WITHOUT ANY LEGAL BASIS, THAT THE ILLEGAL
DISMISSAL COMPLAINTS WERE PREMATURELY FILED.[28]
Before proceeding to the substantive issues, we first address the
procedural issues raised by petitioners.
Petitioners object to the acceptance and consideration by the NLRC
of the evidence presented by HI for the first time on appeal. This is
not a novel procedural issue, however, and our jurisprudence is
already replete with cases[29] allowing the NLRC to admit evidence,
not presented before the Labor Arbiter, and submitted to the NLRC
for the first time on appeal. Technical rules of evidence are not
binding in labor cases. Labor officials should use every reasonable
means to ascertain the facts in each case speedily and objectively,
Page 112
without regard to technicalities of law or procedure, all in the
interest of due process.[30]
The submission of additional evidence before the NLRC is not
prohibited by its New Rules of Procedure. After all, rules of evidence
prevailing in courts of law or equity are not controlling in labor
cases. The NLRC and labor arbiters are directed to use every and all
reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law and procedure all
in the interest of substantial justice. In keeping with this directive, it
has been held that the NLRC may consider evidence, such as
documents and affidavits, submitted by the parties for the first time
on appeal. The submission of additional evidence on appeal does
not prejudice the other party for the latter could submit counter-
evidence.[31]
In Clarion Printing House, Inc. v. National Labor Relations
Commission,[32] we again emphasized that:
[T]he NLRC is not precluded from receiving evidence, even for the
first time on appeal, because technical rules of procedure are not
binding in labor cases.
The settled rule is that the NLRC is not precluded from receiving
evidence on appeal as technical rules of evidence are not binding in
labor cases. In fact, labor officials are mandated by the Labor Code
to use every and all reasonable means to ascertain the facts in each
case speedily and objectively, without regard to technicalities of law
or procedure, all in the interest of due process. Thus, in Lawin
Security Services v. NLRC, and Bristol Laboratories Employees
EVIDENCE (Rule 130 Documentary Evidence Cases)
Association-DFA v. NLRC, we held that even if the evidence was not
submitted to the labor arbiter, the fact that it was duly introduced
on appeal to the NLRC is enough basis for the latter to be more
judicious in admitting the same, instead of falling back on the mere
technicality that said evidence can no longer be considered on
appeal. Certainly, the first course of action would be more
consistent with equity and the basic notions of fairness.
For the same reasons, we cannot find merit in petitioners
protestations against the documentary evidence submitted by HI
because they were mere photocopies. Evidently, petitioners are
invoking the best evidence rule, espoused in Section 3, Rule130 of
the Rules of Court. It provides that:
Section 3. Original document must be produced; exceptions. When
the subject of inquiry is the contents of a document, no evidence
shall be admissible other than the original document itself x x x.
The above provision explicitly mandates that when the subject of
inquiry is the contents of a document, no evidence shall be
admissible other than the original document itself. Notably, certified
true copies of these documents, acceptable under the Rules of
Court[33] were furnished to the petitioners. Even assuming that
petitioners were given mere photocopies, again, we stress that
proceedings before the NLRC are not covered by the technical rules
of evidence and procedure as observed in the regular courts.
Technical rules of evidence do not apply if the decision to grant the
petition proceeds from an examination of its sufficiency as well as a
Page 113
careful look into the arguments contained in position papers and
other documents.[34]
Petitioners had more than adequate opportunity when they filed
their motion for reconsideration before the NLRC, their Petition to
the Court of Appeals and even to this Court, to refute or present
their counter-evidence to the documentary evidence presented by
HI. Having failed in this respect, petitioners cannot now be heard to
complain about these documentary evidences presented by HI upon
which the NLRC and the Court of Appeals based its finding that HI is
a legitimate job contractor.
The essence of due process is simply an opportunity to be heard, or
as applied to administrative proceedings, a fair and reasonable
opportunity to explain one's side. It is also an opportunity to seek a
reconsideration of the action or ruling complained of. It is not the
denial of the right to be heard but denial of the opportunity to be
heard that constitutes violation of due process of law. Petitioners
herein were afforded every opportunity to be heard and to seek
reconsideration of the adverse judgment against them. They had
every opportunity to strengthen their positions by presenting their
own substantial evidence to controvert those submitted by E-
PCIBank and HI before the NLRC, and even before the Court of
Appeals. It cannot win its case by merely raising unsubstantiated
doubt or relying on the weakness of the adverse parties evidence.
We now proceed to the resolution of the substantive issues
submitted by petitioners for our consideration, particularly,
whether HI is a labor-only contactor and E-PCIBank should be
deemed petitioners principal employer; and whether petitioners
were illegally dismissed from their employment.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out to a
contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the
principal.[35] A person is considered engaged in legitimate job
contracting or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility
according to its own manner and method, and free from the control
and direction of the principal in all matters connected with the
performance of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or
investment; and
(c) The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all
labor and occupational safety and health standards, free exercise of
the right to self-organization, security of tenure, and social and
welfare benefits.[36]
In contrast, labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or
Page 114
service for a principal.[37] In labor-only contracting, the following
elements are present:
(a) The contractor or subcontractor does not have substantial
capital or investment to actually perform the job, work or service
under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related
to the main business of the principal.[38]
In distinguishing between permissible job contracting and
prohibited labor-only contracting,[39] we elucidated in Vinoya v.
National Labor Relations Commission,[40] that it is not enough to
show substantial capitalization or investment in the form of tools,
equipment, etc. Other facts that may be considered include the
following: whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to
assign the performance of specified pieces of work; the control and
supervision of the work to another; the employers power with
respect to the hiring, firing and payment of the contractors workers;
the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode and manner or terms
of payment.[41] Simply put, the totality of the facts and the
surrounding circumstances of the case are to be considered.[42]
Each case must be determined by its own facts and all the features
of the relationship are to be considered.[43]
EVIDENCE (Rule 130 Documentary Evidence Cases)
In the case at bar, we find substantial evidence to support the
finding of the NLRC, affirmed by the Court of Appeals, that HI is a
legitimate job contractor.
We take note that HI has been issued by the Department of Labor
and Employment (DOLE) Certificate of Registration[44] Numbered
VII-859-1297-048. The said certificate states among other things:
CERTIFICATE OF REGISTRATION
Numbered VII-859-1297-048
is issued to
HELPMATE, INCORPORATED
330 N. Bacalso Avenue, Cebu City
for having complied with the requirements as provided for under
the Labor Code, as amended, and its Implementing Rules and having
paid the registration fee in the amount of ONE HUNDRED PESOS
(P100.00) per Official Receipt Number 9042769, dated October 16,
1997.
In witness whereof, and by authority vested in me by the Labor
Code, as amended, and its Implementing Rules specifically
Department Order No. 10 series of 1997, I have hereunto set my
hand and affixed the Official on this 23rd day of December
1997.[45]
Having been issued by a public officer, this certification carries with
it the presumption that it was issued in the regular performance of
Page 115
official duty.[46] In the absence of proof, petitioners bare assertion
cannot prevail over this presumption. Moreover, the DOLE being
the agency primarily responsible for regulating the business of
independent job contractors, we can presume in the absence of
evidence to the contrary that it thoroughly evaluated the
requirements submitted by HI as a precondition to the issuance of
the Cerificate of Registration.
The evidence on record also shows that HI is carrying on a distinct
and independent business from E-PCIBank. The employees of HI are
assigned to clients to perform janitorial and messengerial services,
clearly distinguishable from the banking services in which E-PCIBank
is engaged.
Despite the afore-mentioned compliance by HI with the requisites
for permissible job contracting, Labor Arbiter Gutierrez still declared
that HI was engaged in prohibited labor-only contracting because it
did not possess substantial capital or investment to actually perform
the job, work or service under its own account or responsibility.
Both the NLRC and the Court of Appeals ruled to the contrary, and
we agree.
Substantial capital or investment refers to capital stocks and
subscribed capitalization in the case of corporations, tools,
equipments, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted
out.[47] An independent contractor must have either substantial
capital or investment in the form of tools, equipment, machineries,
work premises, among others. The law does not require both
substantial capital and investment in the form of tools, equipment,
EVIDENCE (Rule 130 Documentary Evidence Cases)
machineries, etc.[48] It is enough that it has substantial capital. In
the case of HI, it has proven both.
We have expostulated that once it is established that an entity such
as in this case, HI has substantial capital, it was no longer necessary
to adduce further evidence to prove that it does not fall within the
purview of labor-only contracting.[49] There is even no need for HI
to refute the contention of petitioners that some of the activities
they performed such as those of messengerial services are directly
related to the principal business of E- PCIBank.
In any event, we have earlier declared that while these services
rendered by the petitioners as janitors, messengers and drivers are
considered directly related to the principal business of a bank, in
this case E-PCIBank, nevertheless, they are not necessary in the
conduct of its (E-PCIBANKs) principal business.[50]
HI has substantial capital in the amount of P20,939,935.72. It has its
own building where it holds office and it has been engaged in
business for more than a decade now.[51] As observed by the Court
of Appeals, surely, such a well-established business entity cannot be
considered a labor-only contractor.
Etched in an unending stream of cases are four standards in
determining the existence of an employer-employee relationship,
namely: (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or
absence of power of dismissal; and, (d) the presence or absence of
control of the putative employees conduct. Most determinative
among these factors is the so-called control test.[52]
Page 116

The presence of the first requisite for the existence of an employer-
employee relationship to wit, the selection and engagement of the
employee is shown by the fact that it was HI which selected and
engaged the services of petitioners as its employees. This is fortified
by the provision in the contract of services between HI and E-
PCIBank which states:
Selection, Engagement, Discharge. [HI] shall have exclusive
discretion in the selection, engagement, investigation, discipline and
discharge of its employees.[53]
On the second requisite regarding the payment of wages, it was HI
who paid petitioners their wages and who provided their daily time
records and uniforms and other materials necessary for the work
they performed.Therefore, it is HI who is responsible for petitioners
claims for wages and other employees benefits. Precisely, the
contract of services between HI and E-PCIBank reveals the
following:
Indemnity for Salaries and Benefits, etc. [HI] shall be responsible for
the salaries, allowances, overtime and holiday pay, and other
benefits of its personnel including withholding taxes.[54]
As to the third requisite on the power to control the employees
conduct, and the fourth requisite regarding the power of dismissal,
again E-PCIBank did not have the power to control petitioners with
respect to the means and methods by which their work was to be
EVIDENCE (Rule 130 Documentary Evidence Cases)
accomplished. It likewise had no power of dismissal over the
petitioners. All that E-PCIBank could do was to report to HI any
untoward act, negligence, misconduct or malfeasance of any
employee assigned to the premises. The contract of services
between E-PCIBank and HI is noteworthy. It states:
[HI] shall have the entire charge, control and supervision over all its
employees who may be fielded to [E-PCIBank]. For this purpose, [HI]
shall assign a regular supervisor of its employees who may be
fielded to the Bank and which regular supervisor shall exclusively
supervise and control the activities and functions defined in Section
1 hereof. x x x.[55]
All these circumstances establish that HI undertook said contract on
its account, under its own responsibility, according to its own
manner and method, and free from the control and direction of E-
PCIBank. Where the control of the principal is limited only to the
result of the work, independent job contracting exists. The janitorial
service agreement between E-PCIBank and HI is definitely a case of
permissible job contracting.
Considering the foregoing, plus taking judicial notice of the general
practice in private, as well as in government institutions and
industries, of hiring an independent contractor to perform special
services,[56] ranging from janitorial, security and even technical
services, we can only conclude that HI is a legitimate job contractor.
As such legitimate job contractor, the law creates an employer-
employee relationship between HI and petitioners[57] which
renders HI liable for the latters claims.
Page 117

In view of the preceding conclusions, petitioners will never become
regular employees of E-PCIBank regardless of how long they were
working for the latter.[58]
We further rule that petitioners were not illegally dismissed by HI.
Upon the termination of the Contract of Service between HI and E-
PCIBank, petitioners cannot insist to continue to work for the latter.
Their pull-out from E-PCIBank did not constitute illegal dismissal
since, first, petitioners were not employees of E-PCIBank; and
second, they were pulled out from said assignment due to the non-
renewal of the Contract of Service between HI and E-PCIBank. At the
time they filed their complaints with the Labor Arbiter, petitioners
were not even dismissed by HI; they were only off-detail pending
their re-assignment by HI to another client. And when they were
actually given new assignments by HI with other clients,[59]
petitioners even refused the same. As the NLRC pronounced,
petitioners complaint for illegal dismissal is apparently premature.
WHEREFORE, premises considered, the Petition is DENIED for lack of
merit. The Decision dated 24 April 2006 and Resolution dated 31
October 2006 of the Court of Appeals are AFFIRMED. Costs against
petitioners.
SO ORDERED.
DECS v DEL ROSARIO
DECISION
CARPIO, J.:
The Case
EVIDENCE (Rule 130 Documentary Evidence Cases)
This is a petition for review[1] to set aside the Decision[2] dated 25
September 2000 and the Resolution dated 29 December 2000 of the
Court of Appeals in CA-G.R. CV No. 43929. The Court of Appeals
reversed the Decision[3] dated 7 July 1993 of the Regional Trial
Court of Bulacan, Branch 8, Malolos (trial court) in Civil Case No. 70-
M-92.
The Facts
On 14 February 1992, respondents Julia Del Rosario, Maria Del
Rosario, Pacencia Del Rosario and the Heirs of Santos Del Rosario
(respondents) filed before the trial court a complaint for Recovery
of Possession against petitioner Department of Education, Culture
and Sports (DECS). Respondents alleged that they own a parcel of
land with an area of 1,181 square meters (Property) situated in
Kaypombo,[4] Sta. Maria, Bulacan. The Property was registered in
1976 in the name of respondents under Transfer Certificate of Title
No. T-222432 of the Bulacan Register of Deeds. Respondents alleged
that the Kaypombo Primary School Annex (KPPS) under DECS was
occupying a portion of the Property through respondents tolerance
and that of their predecessors-in-interest. Respondents further
alleged that KPPS refused to vacate the premises despite their valid
demands to do so.
In its Answer, DECS countered that KPPSs occupation of a portion of
the Property was with the express consent and approval of
respondents father, the late Isaias Del Rosario (Isaias). DECS claimed
that some time in 1959 Isaias donated a portion (Donated Site) of
the Property to the Municipality of Sta. Maria (Municipality) for
school site purposes. Atty. Ely Natividad, now a regional trial court
judge (Judge Natividad), prepared the deed of donation and the
acceptance. KPPS started occupying the Donated Site in 1962. At
present, KPPS caters to the primary educational needs of
Page 118
approximately 60 children between the ages of 6 and 8. Because of
the donation, DECS now claims ownership of the 650 square meter
Donated Site. In fact, DECS renamed the school the Isaias Del
Rosario Primary School.
During the pre-trial conference held on 3 September 1992, DECS
admitted the existence and execution of TCT No. T-222432 (Exhibit
A), Tax Declaration No. 6310 (Exhibit B), and the tax receipts in
respondents names for the years 1991 and 1992 (Exhibits B-1 and B-
2). On the other hand, respondents admitted the existence of Judge
Natividads affidavit that he prepared the deed of donation (Exhibit
1) and the tax declaration for 1985 in the Municipalitys name
(Exhibit 2). Since there was no dispute that the Property was
registered in respondents names, the parties agreed to a reverse
trial with DECS presenting its evidence first to prove that there was
a valid donation to the Municipality.
DECS presented three witnesses: Ricardo Nicolas, Vidal De Jesus and
Judge Natividad, all residents of Kaypombo, Sta. Maria, Bulacan. The
trial court summarized the witnesses testimonies, thus:
Defendant, represented by the Office of the Solicitor General,
proceeded to present as its first witness, Ricardo Nicolas, 78 years
old, widower, housekeeper and residing at [K]aypombo, Sta. Maria,
Bulacan, since 1953 up to the present. He testified that during the
duration of his residency in [K]aypombo, he came across a public
elementary school (KPPS); that as far as he knows, the land
occupied by the primary school was formerly owned by Isaias del
Rosario who donated said land to the people of Sta. Maria, Bulacan
in 1959; that the act of donating said land was made during a
political meeting in his residence by Isaias del Rosario and in the
presence of the then incumbent mayor; he actually saw Isaias del
Rosario and Mayor Ramos sign a document which is a deed of
EVIDENCE (Rule 130 Documentary Evidence Cases)
donation in favor of the Municipality of Sta. Maria; that the signing
was made in the presence of Judge Natividad who was then a
municipal councilor; that Isaias del Rosario is now dead but his
death occurred long after the construction of the KPPS and that
Isaias del Rosario even witnessed the construction of the primary
school.
Vidal de Jesus, the second witness for the defense, 65 years old,
married, a barangay councilman of Kaypombo, Sta. Maria, Bulacan,
and presently residing at No. 437 Kaypombo, Sta. Maria, Bulacan,
testified that as barangay councilman, he was aware of the land
problem of KPPS; that in 1991, the barangay council and the
children of Isaias del Rosario had a meeting in the presence of Judge
Natividad, during which, the latter told the children of Isaias del
Rosario that the land had been donated by their father. The children
agreed but requested that the school be renamed after their fathers
name; that the barangay council tried to secure a copy of the deed
of donation from the Municipality of Sta. Maria, but according to
the people at the municipal hall, when they transferred to the new
municipal building, the deed got lost, only they were able to get a
copy of the tax declaration in the name of the municipality of Sta.
Maria, Bulacan (Exh. 2), a certification to that effect was issued by
the municipal mayor (Exh. 3). They went to the DECS office in
Malolos, but could not likewise find a copy of the deed.
The last witness for the defense was Judge Eli Natividad, 63 years
old, widower, resident of Kaypombo, Sta. Maria, Bulacan. He
testified that KPPS is very near his house; that the land occupied by
said school is formerly owned by Isaias del Rosario, a close relative;
that as far as he knows, the municipality of Sta. Maria is now the
owner of the land; that when he was still one of the incumbent
municipal councilors of Sta. Maria in 1961, his relative Isaias del
Page 119
Rosario went to his house and told him that he wanted to have a
primary school in their place as he saw the plight of small pupils in
their place; that the elementary school then existing was very far
from their place and Isaias del Rosario wanted to have a primary
school to help these pupils; that Isaias del Rosario was willing to
donate a portion of the questioned lot for school site, so that said
matter was relayed to the municipal council; he also testified that
he prepared the deed of donation which was signed by Isaias del
Rosario in his residence which was accepted by the municipality of
Sta. Maria, Bulacan through a resolution signed in the office of the
secretary and the municipal mayor; that a copy of said resolution
could not be found due to the transfer of the municipal hall from
the old to the new building.[5]
Respondents presented two witnesses: Eugenia R. Ignacio and
Maria Del Rosario-Esteban, daughters of the late Isaias. The trial
court summarized their testimonies, as follows:
For the plaintiffs, Eugenia R. Ignacio, 59, residing at Kaypombo, Sta.
Maria, Bulacan testified that she knows the plaintiffs as they are her
brothers/sisters; that their father Isaias del Rosario died on April 18,
1966 long after the construction of the school and that she does not
know everything about the donation because her father never
informed them of his dealings and she did not inquire from him
about the occupancy of the lot by the school.
Maria del Rosario-Esteban, 66, residing at Pulang-lupa, Pandi, one of
the plaintiffs herein, testified that she knows the property in
question and that they own it by virtue of succession and that she
cannot recall how the school was constructed on the land; that her
parents never donated any property because that is their only
property. Also, she stated that their father told them that he just
lent the property temporarily to the municipality and she never
EVIDENCE (Rule 130 Documentary Evidence Cases)
found any document conveying the lot in question to the
municipality of Sta. Maria, Bulacan.[6]
On 7 July 1993, the trial court rendered judgment dismissing
respondents complaint for recovery of possession as follows:
WHEREFORE, based on the foregoing premises, and for a much
greater cause, the instituted complaint, for recovery of possession
of 1,181 square meters of land in Kaypombo, Sta. Maria, Bulacan,
covered by TCT No. T-222432 against the defendant is hereby
DISMISSED without costs.[7]
The trial court explained its decision in this wise:
After a careful consideration of the facts at hand, taking into
account the credibility and reasonableness of the testimonies of the
witnesses, the court is of the opinion that the defense was able to
prove the due execution of the deed of donation and its acceptance,
as well as the loss of the same, in accordance with Rule 130[,] Sec.
4. It is recalled that Judge Eli Natividad, then a municipal councilor
of Sta. Maria, testified that he was the person who prepared the
deed of donation and later notarized the same, and that said deed
was duly executed and signed before him and in his presence.
Likewise, he affirmed that the municipal board of Sta. Maria,
Bulacan, passed a resolution accepting the deed of donation in favor
of the said municipality. Noteworthy is the rule that a
recantation/recollection of witness is a form of secondary evidence
to prove the existence/content of a document. Since the loss of the
deed subject matter of this case was likewise duly proved by the
defense, exerting the best possible efforts to locate or secure a copy
of the same and without bad faith on its part, this Court is bent to
give a greater weight to the secondary evidence adduced by the
defense vis--vis the title in the name of the plaintiff[s], most
particularly in this case, where the plaintiffs failed to make it appear
Page 120
that other and more secondary evidence is known to the defendant
and can be produced by them.
Further judging on the consistency, credibility and personality of the
witnesses of the defense, notably Judge Eli Natividad who was then
a municipal councilor of Sta. Maria at the time of the execution of
the deed of donation and who is thus in a best position to testify on
the matter, not to mention the fact that their testimonies were all
under oath, the Court cannot avoid but give weight to their
statements and declarations. The defense witnesses were not
induced by ill motive to testify in favor of the DECS, considering that
they will not derive any personal benefit, material or otherwise,
from such an act. On the contrary, such act may be considered
heroic, as it is a manifestation of a moral compulsion to help shed
light to the truth.
On the part of the plaintiffs, it was testified to by Eugenia Ignacio
that their father (donor) died on April 18, 1966, long after the
school was constructed on the subject land with the occupation of
the land by the school which continued up to the present, and even
after the land was allegedly transferred by succession to the
plaintiffs in 1976, it was only now that it comes to the mind of the
plaintiffs to seek recovery of the possession of the same. This,
among other things, may be taken to favor the stand of the defense
that the land occupied by the school was in truth, donated to the
municipality of Sta. Maria.[8]
Respondents appealed to the Court of Appeals. On 25 September
2000, the Court of Appeals rendered judgment as follows:
WHEREFORE, premises considered, the appealed decision is
REVERSED and another one entered ordering the defendant to
vacate the subject premises.[9]
EVIDENCE (Rule 130 Documentary Evidence Cases)
The appellate court denied DECS motion for reconsideration in the
Resolution dated 29 December 2000. Hence, this petition.
The Court of Appeals Ruling
The Court of Appeals held that DECS failed to prove the existence
and due execution of the deed of donation as well as the Resolution
of the municipal council accepting the donation. The Court of
Appeals was not fully satisfied that DECS or the Municipality had
made a diligent search of the alleged lost deed of donation.
Pertinent portions of the Court of Appeals Decision read:
It is unfortunate that the Deed of Donation and the Resolution were
not produced during the trial. The defendant alleged that these
were lost when the Municipality transferred to a new building. The
defendant resorted to proving the documents existence through
Sec. 5 of Rule 130 (B) of the Revised Rules on Evidence by relying on
the testimony of the witnesses who were present during the
execution of the lost documents. xxx.
xxx
The Court disagrees with the ruling of the lower court to the effect
that the defendant was able to satisfy the foregoing requisites. The
defense was not able to prove the due execution or existence of the
deed of donation and the resolution, as well as the loss of these
documents as the cause of their unavailability.
The Rule requires that the defendant must prove its contents by a
copy, or by a recital of its contents in some authentic document, or
by the testimony of the witnesses in the order stated. However, the
defendant proceeded with the last resort-testimony of the
witnesses, without even showing any diligent effort to secure a copy
of the deed of donation and the resolution. Note that Atty. Eli
Natividad, then a municipal councilor of Sta. Maria, testified that he
was the person who prepared the deed of donation and later
Page 121
notarized the same. He also affirmed that the municipal board of
Sta. Maria, Bulacan passed a Resolution as he was a municipal
councilor at that time such resolution was passed. He testified that
he furnished the municipal government, the Division Office of
Education in Bulacan, the court of Sta. Maria a copy of the deed.
However, the defendant only submitted an affidavit showing that
the deed can no longer be located in the municipal government.
There was no evidence to show that the defendant looked for a
copy from the Clerk of Court of Sta. Maria, Bulacan. If it is true that
Atty. Natividad notarized the deed, he should have a copy of it. In
fact, such act of notarizing the deed should have been in his notarial
register. This notarial register was supposed to be forwarded to the
Clerk of Court of the Court of First Instance of the province and
later, to the Chief of the National Library.
Before secondary evidence of a writing may be introduced on the
ground that the instrument has been lost there must be proof that a
diligent search has been made in the place where it is most likely to
be found and that the search has not been successful.
In the case at bar, this Court is not fully satisfied that a search was
made or that there was diligence in the search. The lower court
erred in hastily concluding that the loss of the document was
sufficiently established when in fact, the defendant did not look for
it in the office of the Clerk of Court and the National Library. Since
there was no diligent search, this Court finds it hard to believe the
defendants theory that such documents existed because, for sure, if
there really was a notarized deed or a resolution, there must be a
copy.
Secondary evidence of the contents of writings is admitted upon the
theory that the original cannot be produced by the party by whom
the evidence is offered within a reasonable time by the exercise of
EVIDENCE (Rule 130 Documentary Evidence Cases)
reasonable diligence. Until, however, the non-production of the
primary evidence has been sufficiently accounted for, secondary
evidence is not ordinarily admissible.
For this Court to affirm the ruling of the lower court based on
testimonies alone will work injustice to the plaintiffs.[10]
The Issue
In its memorandum, DECS raises the sole issue of
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT PETITIONER FAILED TO PROVE THE DUE EXECUTION OR
EXISTENCE OF THE DEED OF DONATION AND THE RESOLUTION OF
THE MUNICIPAL COUNCIL ACCEPTING THE DONATION, AS WELL AS
THE LOSS OF THE DOCUMENTS AS THE CAUSE OF THEIR
UNAVAILABILITY.[11]
The Solicitor General contends that DECS had satisfactorily proven
by secondary evidence the fact of donation, the existence and due
execution of the deed of donation as well as the municipal council
Resolution accepting the donation. DECS had also adequately
proven the loss of these documents. According to the Solicitor
General, based on the evidence presented in the trial court, DECS
established that Isaias donated a parcel of land to the Municipality
as the site of a school. Isaias executed a deed of donation, which
then Atty. Eli Natividad notarized. There was a municipal council
Resolution accepting the donation and expressing gratitude to
Isaias. There was notice of this acceptance as DECS constructed the
school on the Donated Site during the lifetime of the donor, without
objection on his part. Since all the essential formalities had been
followed, the donation made by Isaias long after the death of his
wife Nieves Gumatay is valid and proven by secondary evidence.
The Courts Ruling
The petition lacks merit.
Page 122
Formal Requisites of Donations of Real Property
The donation of real property, which is a solemn contract, is void
without the formalities stated in Article 749 of the Civil Code of the
Philippines (Civil Code). Article 749 of the Civil Code reads:
Art. 749. In order that the donation of an immovable may be valid, it
must be made in a public document, specifying therein the property
donated and the value of the charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a
separate public document, but it shall not take effect unless it is
done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall
be notified thereof in an authentic form, and this step shall be
noted in both instruments.
Article 749 of the Civil Code requires that the donation of real
property must be made in a public instrument. Otherwise, the
donation is void. A deed of donation acknowledged before a notary
public is a public document.[12] The notary public shall certify that
he knows the person acknowledging the instrument and that such
person is the same person who executed the instrument,
acknowledging that the instrument is his free act and deed. The
acceptance may be made in the same deed of donation or in a
separate instrument. An acceptance made in a separate instrument
must also be in a public document. If the acceptance is in a separate
public instrument, the donor shall be notified in writing of such fact.
Both instruments must state the fact of such notification.[13]
Best and Secondary Evidence
The best or primary evidence of a donation of real property is an
authentic copy of the deed of donation with all the formalities
required by Article 749 of the Civil Code. The duty to produce the
original document arises when the subject of the inquiry are the
EVIDENCE (Rule 130 Documentary Evidence Cases)
contents of the writing in which case there can be no evidence of
the contents of the writing other than the writing itself. Simply put,
when a party wants to prove the contents of the document, the
best evidence is the original writing itself.
A party may prove the donation by other competent or secondary
evidence under the exceptions in Section 3, Rule 130 of the Revised
Rules on Evidence. Section 3 reads:
SEC. 3. Original document must be produced; exceptions. When the
subject of inquiry is the contents of a document, no evidence shall
be admissible other than the original document itself, except in the
following cases:
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) xxx;
(c) xxx;
(d) xxx.
In relation to this, Section 5 of Rule 130 reads:
SEC. 5. When original document is unavailable. When the original
document has been lost or destroyed, or cannot be produced in
court, the offeror, upon proof of its execution or existence and the
cause of its unavailability without bad faith on his part, may prove
its contents by a copy, or by a recital of its contents in some
authentic document, or by the testimony of witnesses in the order
stated.
Secondary evidence of the contents of a document refers to
evidence other than the original document itself.[14] A party may
introduce secondary evidence of the contents of a written
instrument not only when the original is lost or destroyed, but also
when it cannot be produced in court, provided there is no bad faith
on the part of the offeror. However, a party must first satisfactorily
Page 123
explain the loss of the best or primary evidence before he can resort
to secondary evidence. A party must first present to the court proof
of loss or other satisfactory explanation for non-production of the
original instrument. The correct order of proof is as follows:
existence, execution, loss, contents, although the court in its
discretion may change this order if necessary.[15]
The testimony of Ricardo Nicolas may have established to some
extent the existence of the deed of donation since he testified that
he was present when Isaias and the mayor talked about the
donation and that he witnessed the signing of the document.
However, Ricardo Nicolas admitted during cross-examination that
he did not read and did not have personal knowledge of the
contents of the document that Isaias and the mayor supposedly
signed.[16]
In the same vein, Vidal De Jesus testimony does not help to
establish the deed of donations existence, execution and contents.
He testified that he never saw the deed of donation. On cross-
examination, Vidal De Jesus admitted that the information that
Isaias donated the lot to the Municipality was only relayed to him by
Judge Natividad himself.[17] If at all, DECS offered Vidal De Jesus
testimony to establish the loss of the deed of donation. Vidal de
Jesus testified that the barangay council tried to get a copy of the
deed but the Municipality informed the barangay council that the
deed was lost when the municipal office was transferred to a new
building. DECS also made a search in the DECS office in Malolos but
this proved futile too.
This leaves us with Judge Natividads testimony. Judge Natividad
testified that he prepared and notarized the deed of donation. He
further testified that there was a municipal council Resolution,
signed in the Office of the Secretary and of the Mayor, accepting the
EVIDENCE (Rule 130 Documentary Evidence Cases)
donation and expressing gratitude to the donor. He furnished the
municipal government, the DECS Division Office of Bulacan and the
clerk of court of Sta. Maria a copy of the deed of donation.
DECS did not introduce in evidence the municipal council Resolution
accepting the donation. There is also no proof that the donee
communicated in writing its acceptance to the donor aside from the
circumstance that DECS constructed the school during Isaias lifetime
without objection on his part. There is absolutely no showing that
these steps were noted in both instruments.
Sufficiency of Proof of Loss
What mainly militates against DECS claim is, as the Court of Appeals
found, inadequate proof that DECS or the Municipality made a
diligent search in the places where the deed of donation may likely
be found and that the search was unsuccessful. Prior to the
introduction of secondary evidence, a party must establish the
existence and due execution of the instrument. After a party
establishes the existence and due execution of the document, he
must prove that the document was lost or destroyed.[18] The
destruction of the instrument
may be proved by any person knowing the fact. The loss may be
shown by any person who knew the fact of its loss, or by any one
who had made, on the judgment of the court, a sufficient
examination in the place [or] places where the document or papers
of similar character are usually kept by the person in whose custody
the document lost was, and has been unable to find it; or who has
made any other investigation which is sufficient to satisfy the court
that the instrument is indeed lost.[19]
Here, DECS allegedly made a search in the municipal building and in
the DECS Division Office in Bulacan. The copies of the deed of
donation furnished these offices were purportedly lost when these
Page 124
offices transferred to new locations. However, as the Court of
Appeals correctly pointed out, Judge Natividad who claimed to have
notarized the deed of donation failed to account for other copies of
the deed, which the law strictly enjoins him to record, and furnish to
other designated government offices.
The Notarial Law is explicit on the obligations and duties of a notary
public. The law requires him to keep a notarial register where he
shall record all his official acts as notary public. The law specifies the
information that the notary public must enter in the notarial
register. Failure to perform this duty results in the revocation of his
commission as notary public. We quote the provisions of the
Notarial Law pertinent to the case:
SECTION 245. Notarial register. - Every notary public shall keep a
register to be known as the notarial register, wherein record shall
be made of all his official acts as notary; and he shall supply a
certified copy of such record, or any part thereof, to any person
applying for it and paying the legal fees therefor.
Such register shall be kept in books to be furnished by the Attorney-
General (Solicitor-General) to any notary public upon request and
upon payment of the actual cost thereof, but officers exercising the
functions of notaries public ex officio shall be supplied with the
register at government expense. The register shall be duly paged,
and on the first page, the Attorney-General (Solicitor-General) shall
certify the number of pages of which the book consist[s].
SECTION 246. Matters to be entered therein. - The notary public
shall enter in such register, in chronological order, the nature of
each instrument executed, sworn to, or acknowledged before him,
the person executing, swearing to, or acknowledging the
instrument, the witnesses, if any, to the signature, the date of the
execution, oath, or acknowledgment or the instrument, the fees
EVIDENCE (Rule 130 Documentary Evidence Cases)
collected by him for his services as notary in connection therewith,
and; when the instrument is contract, he shall keep a correct copy
thereof as part of his records, and shall likewise enter in said
records a brief description of the substance thereof, and shall give
to each entry a consecutive number, beginning with number one in
each calendar year. The notary shall give to each instrument
executed, sworn to, or acknowledged before him a number
corresponding to the one in his register, and shall also state on the
instrument the page or pages of his register on which the same is
recorded. No blank line shall be left between entries.
xxx
At the end of each week the notary shall certify in his register the
number of instruments executed, sworn to, acknowledged, or
protested before him; or if none, such certificate shall show this
fact.
A certified copy of each months entries as described in this section
and a certified copy of any instrument acknowledged before them
shall within the first ten days of the month next following be
forwarded by the notaries public to the clerk of the Court of First
Instance of the province and shall be filed under the responsibility
of such officer; Provided, that if there is no entry to certify for the
month, the notary shall forward a statement to this effect in lieu of
the certified copies herein required. (As amended by C.A. 72, Sec.
1.)
SECTION 247. Disposition of notarial register. - Immediately upon
his notarial register being filled, and also within fifteen days after
the expiration of his commission, unless reappointed, the notary
public shall forward his notarial register to the clerk of the Court of
First Instance of the province or of the City of Manila, as the case
may be, wherein he exercises his office, who shall examine the
Page 125
same and report thereon to the judge of the Court of First Instance.
If the judge finds that no irregularity has been committed in the
keeping of the register, he shall forward the same to the chief of the
division of archives, patents, copyrights, and trade-marks. In case
the judge finds that irregularities have been committed in the
keeping of the register, he shall refer the matter to the fiscal of the
province - and in the City of Manila, to the fiscal of the city - for
action and the sending of the register to the chief of the division of
archives, patents, copyrights, and trade-marks shall be deferred
until the termination of the case against the notary public.
(Emphasis and underscoring supplied)
The Notarial Law mandates a notary public to record in his notarial
register the necessary information regarding the instrument
acknowledged before him. The Notarial Law also mandates the
notary public to retain a copy of the instrument acknowledged
before him when it is a contract.[20] The notarial register is a record
of the notary publics official acts. Acknowledged instruments
recorded in the notarial register are public documents.[21] If the
instrument is not recorded in the notarial register and there is no
copy in the notarial records, the presumption arises that the
document was not notarized and is not a public document.[22]
DECS should have produced at the trial the notarial register where
Judge Natividad as the notary public should have recorded the deed
of donation. Alternatively, DECS should have explained the
unavailability of the notarial register. Judge Natividad could have
also explained why he did not retain a copy of the deed of donation
as required by law. As the Court of Appeals correctly observed,
there was no evidence showing that DECS looked for a copy from
the Clerk of Court concerned or from the National Archives. All told,
these circumstances preclude a finding that DECS or the
EVIDENCE (Rule 130 Documentary Evidence Cases)
Municipality made a diligent search to obtain a copy of the deed of
donation.
In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. Preponderance of evidence
means that the evidence as a whole adduced by one side is superior
to that of the other. In other words, preponderance of evidence
means the greater weight of the evidence - or evidence that
outweighs the evidence of the adverse party. This Court is not
satisfied that the evidence on the side of the party carrying the
burden of proof is of preponderating weight.
Finally, DECS raises for the first time before this Court the issue on
whether respondents claim is barred by the equitable defense of
laches. DECS did not raise this matter in the complaint or during the
trial in the court below. DECS did not also raise this matter in its
appeal to the Court of Appeals. This Court cannot entertain this
issue at this late stage, for to do so would plainly violate the basic
rule of fair play, justice and due process.[23]
Much as we sympathize with the plight of the schoolchildren, we do
not find reversible error in the Decision of the Court of Appeals. We
cannot grant the relief DECS is seeking and disregard existing laws
and jurisprudence. DECS, however, is not without remedy. The
government can expropriate at any time the Donated Site, paying
just compensation to respondents.
WHEREFORE, we DENY the petition. The Decision dated 25
September 2000 and the Resolution dated 29 December 2000 of the
Court of Appeals in CA-G.R. CV No. 43929 are AFFIRMED.
SO ORDERED.
Page 126
B. Parol Evidence Rule
CARGANILLO v PEOPLE
DECISION
BRION, J.:
Pursuant to Rule 45 of the Rules of Court, we review the decision1
and the resolution2 of the Court of Appeals (CA) in CA-G.R. CR No.
29371 which denied the appeal of Nenita Carganillo (petitioner).
The CA affirmed, with modification as to penalty, the judgment3 of
the Regional Trial Court (RTC), Branch 30, Cabanatuan City,
convicting the petitioner of the crime of estafa, defined and
penalized under Article 315, paragraph l(b) of the Revised Penal
Code, as amended.
THE CASE
On September 23, 1998, Teresita Lazaro, a rice trader in Rizal,
Nueva Ecija, gave the petitioner the amount of ₱132,000.00 for the
purpose of buying palay. The petitioner, who was alleged tobe an
"ahente" or agent in the buy-and-sell of palay, agreed to deliver the
palayto the Lazaro Palay Buying Station on or before November 28,
1998. According to the "Kasunduan" signed by the petitioner, the
parties agreed that for every kilo of palaybought the petitioner shall
earn a commission of twenty centavos (P0.20). But if no palayis
purchased and delivered on November 28, the petitioner must
return the ₱132,000.00 to Teresita within one (1) week after
November 28.
After failing to receive any palayor the ₱132,000.00 on November
28 and one (1) week thereafter, respectively, Teresita made oral
and written demands to the petitioner for the return of the
₱132,000.00 but her demands were simply ignored. She thus filed
an affidavit-complaint for estafa against the petitioner before the
EVIDENCE (Rule 130 Documentary Evidence Cases)
Fiscal’s Office. Thereafter, an Information4 for the crime of
estafawas filed in court.
The petitioner pleaded not guilty tothe crime and denied that she
entered into a "principal-agent" agreement with, and received the
₱132,000.00 from, Teresita. She alleged that she owedTeresita a
balance of ₱13,704.32 for the fertilizers and rice that she purchased
from the latter in 1995 and 1996,5 and that, in November 1996, she
was made to sign a blank "Kasunduan" that reflected no written
date and amount.6 She likewise denied personally receiving any
written demand letter from Teresita.7
In a decision dated November 19, 2004, the RTC convicted the
petitioner of the crime of estafaand sentenced her to suffer,
applying the Indeterminate Sentence Law, imprisonment ranging
from four (4) years and one (1) day of prision correccional as
minimum to twenty (20) years of reclusion temporal as maximum.8
Also, the RTC ordered the petitioner to indemnify Teresita the sum
of ₱132,000.00 representing the amount embezzled and to pay the
costs of suit.9
On appeal, the CA affirmed the petitioner’s conviction.10 The CA
held that the prosecution properly established the elements of the
crime of estafa. In debunking petitioner’s claim that her agreement
with Teresita was merely a money loan, the CA stated that:
In this case, the Kasunduan dated September 23, 1998, which-
accusedappellant admittedly signed, is clear inits tenor and the
failure to comply therewith makes out a case for estafa. Accused-
appellant’s insistence that she signed the said Kasunduan in blank is
belied by her admission of "the existence or authenticity of the
documentary exhibits x x x" during the prosecution’s formal offer of
evidence and her own testimony x x x.
Page 127
Further, the CA ruled as immaterial the petitioner’s defense that she
did not personally receive a writtenletter of demand from Teresita.
The CA held that even a verbal query as tothe whereabouts of the
money suspected to be misappropriated isalready tantamount to a
demand, and that the petitioner failed to refute Teresita’s claim
that she went to the petitioner’s house to ask for the palayand/or
the return of the ₱132,000.00.11
The CA, however, found error inthe RTC’s computation of the
penalty and imposed upon the petitioner an indeterminate penalty
of four (4) years and two (2) months of prision correccional, as
minimum, to eight (8) years of prision mayor, as maximum, plus one
(1) year for each additional ₱10,000.00 (in excess of ₱22,000.00),
equivalent to eleven (11) years, or a total of nineteen (19) years.12
The petitioner elevated her judgment of conviction to the Court by
filing a petition for review on certiorari under Rule 45.
THE PETITION
In her petition, the petitioner raisesthe sole issue of whether the CA
erred in affirming (with modification)the judgment of conviction
against her, despite the prosecution’s failure to prove her guilt of
the crime of estafa beyond reasonable doubt.
The petitioner maintains that she isnot engaged in the business of
buying and selling palayand that the "Kasunduan" between her and
Teresita does not contain their real agreement of a simple money
loan. She argues that the prosecution failed to establish all the
elements of estafa because she never received the ₱132,000.00
from Teresita; that an element of the crime is that "the offender
receives the money, or goods or other personal property in trust, or
on commission, or for administration, or under any other
obligations involving the duty to deliver, or to return, the same."
THE COURT’S RULING
EVIDENCE (Rule 130 Documentary Evidence Cases)
We deny the present petition. The CA did not commit any reversible
error in its decision of September 10, 2007.
Under Article 315, paragraph 1(b) of the Revised Penal Code, as
amended, the offense of estafacommitted with abuse of confidence
requires the following elements:
(a) that money, goods or other personal property is received by the
offender in trust or on commission, orfor administration, or under
any other obligation involving the duty to make delivery of or to
return the same[;]
(b) that there be misappropriation or conversion of such money or
property by the offender, or denial on his part of such receipt[;]
(c) that such misappropriation or conversion or denial is to the
prejudice of another; and
(d) there is demand by the offended party to the offender.13
We find that all the elements of estafa are present in this case: that
the petitioner received in trust the amount of ₱132,000.00 from
Teresita for the purpose of buying palayand misappropriated it
when she failed to return the said amount to Teresita upon
demand.
As the CA and the RTC did, we find worthy of credit and belief the
"Kasunduan" presented in evidence by the prosecution that was
admittedly signed by the petitioner and which contained the terms
of agreement between her and Teresita. This document clearly
stated that the petitioner received in trust the amount of
₱132,000.00 from Teresita for the purpose of buying palaywith the
corresponding obligationsto (1) deliver the palay to the Lazaro Palay
Buying Station on or before November 28, 1998, and (2) return the
₱132,000.00 to Teresita one week after November 28 in the event
that the petitioner failed to make palay purchases.
Page 128
It is settled that the agreement or contract between the parties is
the formal expression of the parties’ rights, duties, and obligations
and is the best evidence of the parties’ intention.Thus, when the
terms of an agreement have been reduced into writing, it is
considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written
agreement.14However, this rule, known as the Parol Evidence Rule,
admits of exceptions.
Section 9, Rule 130 of the Rules of Court provides that a party to a
written agreement may present evidence to modify, explain or add
to the terms of the agreement if he puts in issue in his pleading the
following:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
xxxx
In this case, the petitioner alleges that the subject "Kasunduan"
failed to express the real agreement between her and Teresita; that
theirs was a plain and simple loan agreement and not that of a
principal-agent relationship in the buy-and-sell of palay. The
documentary and testimonial evidence presented by the petitioner,
however, fail to support her claims.
The RTC found that the receipts presented by the petitioner to
prove her loan obligation with Teresitawere vague, undated and
unsigned.15 Also, the RTC observed that the witnesses who testified
EVIDENCE (Rule 130 Documentary Evidence Cases)
that they saw the petitioner sign the "Kasunduan" were not even
certain of the real transaction between the petitioner and
Teresita.16 These findings of fact and evidence, which were
affirmed by the CA, are accorded respect and finality by this Court.
Where the factual findings of the trial court are affirmed in toto by
the Court of Appeals, there is great reason not to disturb these
findings and to regard them not reviewable by this Court.17
Also, we cannot sustain the petitioner’s claim that she had been the
victim of a fraud becauseTeresita deceived her into signing a blank
document; that she signed the "Kasunduan," even if it had no date
and amount written on it, because Teresita led her to believe that
the document would be used merely for show purposes with the
bank.18
For fraud to vitiate consent, the deception employed must be the
causal (dolo causante) inducement to the making of the contract,19
and must be serious in character.20 It must be sufficient to impress
or lead an ordinarily prudent person into error, taking into account
the circumstances of each case.21
In this case, we find no vitiated consent on the part of the
petitioner. In her Memorandum22 to this Court, she narrated that
after she signed the "Kasunduan," Teresita subsequently made her
execute a deed of sale over her property, which deed she refused to
sign.23 This statement negates the petitioner’s self-serving
allegation that she was tricked by Teresita into signing a blank
"Kasunduan," as she was fully aware of the possible implications of
the act of signing a document.
We affirm the correctness of the penalty imposed by the CA, as it is
fully in accordance with the law.1âwphi1 We explained in People v.
Temporada24 that:
Page 129
"The prescribed penalty for estafaunder Article 315, par. 2(d) of the
RPC, when the amount defrauded exceeds ₱22,000.00, is prisión
correccional maximum to prisión mayor minimum. The minimum
term is taken from the penalty next lower or anywhere within
prisión correccional minimum and medium (i.e., from 6 months and
1 day to 4 years and 2 months). xxx
On the other hand, the maximum term is taken from the prescribed
penalty of prisión correccional maximum to prisión mayor minimum
in its maximum period, adding 1 year of imprisonment for every
₱10,000.00 in excess of ₱22,000.00, provided that the total penalty
shall not exceed 20 years. xxx To compute the maximum period of
the prescribed penalty, prisión correccional maximum to prisión
mayor minimum should be divided into three equal portions oftime
each of which portion shall be deemed to form one period in
accordance with Article 65 of the RPC. Following this procedure,the
maximum period of prisión correccional maximum to prisión mayor
minimum is from 6 years, 8 months and 21 days to 8 years. The
incremental penalty, when proper, shall thus be added to anywhere
from6 years, 8 months and 21 days to 8 years, at the discretion of
the court.
In computing the incremental penalty, the amount defrauded shall
be subtracted by ₱22,000.00, and the difference shall be divided by
₱10,000.00. Any fraction of a year shall be discarded as was done
starting with the case of People v. Pabalan in consonance with the
settled rule that penal laws shall be construed liberally in favor of
the accused. xxx"25
In the recent case of Lito Corpuz v. People of the Philippines,26 we
recognized the "perceived injustice" brought about by the range of
penalties that the courts continue to impose on crimes against
property, such as estafa, committed today based on the amount of
EVIDENCE (Rule 130 Documentary Evidence Cases)
damage measured by the value of money eight years ago in 1932.
This Court, however, cannot modify these range of penalties in our
decisions, as such action would be an impermissible encroachment
upon the power of the legislative branch of government and would
constitute proscribed judicial legislation.
WHEREFORE, premises considered, we DENY the petition for lack of
merit. We AFFIRM the decision dated September 10, 2007 and the
resolution dated March 18, 2008 of the Court of Appeals in CA-G.R.
CR No. 29371, finding petitioner Nenita Carganillo GUILTY beyond
reasonable doubt of estafa penalized under Article 315, paragraph
l(b) of the Revised Penal Code, as amended.
SO ORDERED.
ACI PHILS. V COCQUIA
DECISION
TINGA, J.:
Petitioner ACI Philippines, Inc.[1] is engaged in the business of
manufacturing fiberglass, which is used in both commercial and
industrial equipment for thermal and acoustic insulation. In 1993, it
ceased from using silica sand in the manufacture of fiberglass and
started using instead recycled broken glass or flint cullets to save on
manufacturing costs.[2]
Petitioner contracted with respondent Editha C. Coquia for the
purchase of one (1) lot of flint cullets, consisting of 2,500 to 3,000
metric tons, at a price of P4.20 per kilo under Purchase Order No.
106211[3] dated 6 October 1994. Several deliveries made by
respondent were accepted and paid for by petitioner at the unit
price of P4.20 per kilo as indicated in Purchase Order No. 106211.[4]
Page 130

However, on 28 October 1994, petitioner demanded the reduction
of the purchase price from P4.20 per kilo to P3.65 per kilo to which
respondent acceded, albeit allegedly under duress. Petitioner
accordingly issued Purchase Order No. 106373[5] explicitly
superseding Purchase Order No. 106211. Deliveries were again
made by respondent on 5, 8 and 12 November 1994 under Delivery
Receipt Nos. 901, 719 and 735,[6] respectively.Petitioner accepted
the deliveries but refused to pay for them even at the reduced price
of P3.65 per kilo, demanding instead that the unit price be further
reduced to P3.10 per kilo.[7]
Respondent then filed a Complaint[8] for specific performance and
damages against petitioner seeking payment for the deliveries made
under Delivery Receipt Nos. 901, 719 and 735, amounting to 46,390
kilos at the renegotiated price of P3.65 per kilo. Respondent further
demanded that petitioner be directed to accept and pay for the
remaining deliveries to complete the one (1) lot of flint cullets
originally contracted for.
On 26 November 1994, three (3) days after the complaint against it
was filed, petitioner paid for the flint cullets under Delivery Receipt
Nos. 901, 719 and 735 at the unit price of P3.65 per kilo.
Ruling in favor of the respondent, the trial court ordered petitioner
to accept deliveries of the flint cullets contracted for under
Purchase Order No. 106211 and to pay for the said deliveries within
ten (10) days from each delivery at the unit price of P4.20 per kilo. It
further directed petitioner to pay P2,540,300.00 in damages plus
interest at the legal rate from the time of the filing of the complaint
EVIDENCE (Rule 130 Documentary Evidence Cases)
on 23 November 1994 until fully paid. The trial court also awarded
respondent attorneys fees in the amount of P200,000.00, litigation
expenses in the amount of P20,000.00 and costs of suit.
The Court of Appeals affirmed the decision of the trial court but
deleted the award of attorneys fees, litigation expenses and costs of
suit. In its Decision[9] dated 15 September 2005, the appellate court
held that Purchase Order No. 106211 is a contract of adhesion
whose terms must be strictly construed against petitioner. It also
deemed as contrary to the original agreement, which pegged the
unit price of flint cullets at P4.20 per kilo, petitioners willful refusal
to pay for the deliveries unless the price is reduced, for which
petitioner should be held liable.
The appellate court denied petitioners Partial Motion for
Reconsideration,[10] as well as respondents Urgent Ex Parte
Application for Attachment,[11] in its Resolution[12] dated 30
August 2006.
Petitioner claims that the Court of Appeals erred in ruling that
Purchase Order No. 106211 is a contract of adhesion despite the
fact that respondent is an established businesswoman who has the
freedom to negotiate the terms and conditions of any contract she
enters into. It stresses that Purchase Order No. 106211 was
superseded by Purchase Order No. 106373 and that in both
contracts, it was made clear to respondent that her assurance of
prompt delivery of the flint cullets motivated the transaction.
Petitioner asserts that the appellate court erred in affirming the trial
courts decision which compelled it to accept and pay for the
deliveries at the price of P4.20 per kilo and at the same required it
Page 131
to pay damages representing respondents alleged unrealized
profits. It also alleges that the appellate court erroneously applied
Article 21 of the Civil Code despite the existence of purchase orders
which should govern the contractual obligations of the parties.
Apart from stating that petitioner appears to have shut down its
operations, respondents Comment[13] dated 12 January 2007
merely reiterates her position that Purchase Order No. 106373 was
a product of intimidation practiced upon her by petitioner.
In its Reply[14] dated 22 April 2007, petitioner asserts that its
juridical personality continues to subsist despite the change of its
corporate name from ACI Philippines, Inc. to Asia Pacific Insulation
Corporation. It emphasizes that Purchase Order No. 106211 is not a
contract of adhesion and should be considered valid and binding
considering that the parties voluntarily executed the same and that,
furthermore, Purchase Order No. 106211 had already been
superseded by Purchase Order No. 106373.
Petitioner maintains that it did not exercise any intimidation on
respondent to force the latter to acquiesce to the new purchase
order and that assuming that it did, the resultant voidable contract
was ratified by respondents delivery of the flint cullets and the fact
that the Statement of Account dated 28 October and 16 November
1994 sent by respondent to petitioner already reflected the reduced
unit price of P3.65 per kilo.
Petitioner also maintains that it entered into a contract with
respondent upon the latters assurance that she could promptly
deliver the 2,500-3,000 metric tons of flint cullets required by
EVIDENCE (Rule 130 Documentary Evidence Cases)
petitioner. However, it believes that the trial court and the
appellate court erroneously refused to receive evidence aliunde to
prove that time was an important element of the agreement.
The Court of Appeals identified the three issues for resolution: (1)
whether petitioner may be bound to accept the deliveries of
washed cullets from respondent; (2) what is the unit price
applicable; and (3) who is entitled to damages. Central to these
issues is the soundness of the appellate courts pronouncement that
the purchase orders in question are contracts of adhesion whose
terms must be strictly construed against petitioner.
A contract of adhesion is one wherein a party, usually a corporation,
prepares the stipulations in the contract, and the other party merely
affixes his signature or his "adhesion" thereto. Through the years,
the courts have held that in this type of contract, the parties do not
bargain on equal footing, the weaker party's participation being
reduced to the alternative to take it or leave it. Thus, adhesion
contracts are viewed as traps for the weaker party whom the courts
of justice must protect. However, we have also been steadfast in
reminding courts to be careful in their evaluation of allegations of
blind adherence to contracts.[15]
There is every indication in this case that respondent, a presumably
astute businesswoman who has dealings with big corporations such
as La Tondea as the latters sole buyer of cullets and has the financial
savvy to obtain a loan from a bank,[16] gave her assent to Purchase
Order No. 106211 with full knowledge. She was, in fact, the one
who sought a contract with petitioner upon learning of the latters
need for a supply of flint cullets.Respondent testified:
Page 132
Q: Could you tell the Court how you were able to get this PO?
A: I went to ACI, sir.
Q: You went to ACI because you have knowledge that they were in
need of flint cullets?
A: Yes, sir.
Q: And who told you that ACI is in need of flint cullets?
A: With information, I learned that ACI is in need of cullets, so I went
to ACI.
Q: You went to ACI to see a person, who is that person?
A: I went to see ACI that I will deliver cullets, and then I was ordered
to go to the purchasing department, sir.
Q: When you went to ACI, you said to deliver cullets?
A: To sell cullets, sir.[17]
We cannot, therefore, apply the rule on contracts of adhesion in
construing the provisions of the purchase orders in this case. Even
the conditions of purchase enumerated at the reverse side of the
purchase orders, which uniformly provide
1. Acknowledgement by the Vendor to the Purchaser or any
delivery made by the Vendor pursuant to this order shall constitute
acceptance by the Vendor of this order and a contract between the
Vendor and the Purchaser in terms of this order to the exclusion of
all other terms and conditions between them.
EVIDENCE (Rule 130 Documentary Evidence Cases)
2. The Vendor guarantees the goods ordered to be of
merchantable quality and condition and this condition shall apply
notwithstanding any examination of the goods by or on behalf of
the Purchaser. Any stipulation as to the quality of goods is also a
condition of any contract arising from this order. If a sample of the
goods has been made available to the Purchaser then contract
arising from this order shall have contract for sale by sample as well
as a contract for sale by descriptions.
3. The prices stated in this order are firm prices save that any
reduction in price resulting from a reduction in customs duties or
sales tax from those in force at the date hereof is to be allowed to
the Purchase in reduction of the price agreed hereunder.
4. Delivery of the goods must be made at the Purchasers address
shown on the face of this order or as otherwise directed, on a
working day between the hours of 8:00 and 3:30 p.m. Until delivery
the goods shall be at the Vendors risk. Any delivery date shown on
this order shall be of the essence of any contract arising. Delivery
must be made in strict accordance with the order or delivery
schedule and any quantities delivered in excess of that specified on
the order may be returned by the Purchaser at the Vendors risk and
expense.
5. All goods must be suitably packed or otherwise prepared for
delivery to the satisfaction of the carrier. No charges are to be made
for wrapping packing cartons boxes or crating unless authorized by
this order.
Page 133
6. The Purchaser may without prejudice to any other rights at any
time after delivery of the good reject them if on inspection the
Purchaser considers them not to be in conformity with any contract
arising from this order. Goods rejected will be held at the vendors
risk and are returnable at the Vendors risk and expense.
7. All drawings, blueprints, tools or patterns furnished in
connection with this order at any time, are confidential to the
Vendor and Purchaser and shall be used solely to complete this
contract or any other contract relating to the products between the
Vendor and the Purchaser, and for no other purpose, except with
the prior consent in writing of the Purchaser, and shall remain the
property of the Purchaser and be returned to the Purchaser on
demand. The Vendor shall not without the written prior approval of
the Purchaser furnish to any third party any goods for the
manufacture of which drawings, blueprints, tools, patterns,
specifications or samples have been supplied to the Vendor by the
Purchaser, or manufacture such articles except for the Purchaser.
This restriction shall continue notwithstanding termination of this
order.
8. The Purchaser reserves the right to cancel or suspend this
order or any part thereof, if the goods are not delivered according
to deliveries as specified, or if the Purchaser is unable to accept
delivery for any cause beyond the Purchasers control.
The Purchaser further reserves the right to cancel this order if the
goods are not in accordance with drawings, blueprints, approved
samples or specifications, or are defective in workmanship or
material or are not otherwise satisfactory to the Purchaser.
EVIDENCE (Rule 130 Documentary Evidence Cases)
9. Vendor warrants that the sale to the Purchaser and the use by
the Purchaser of the goods in any way will not infringe any patent,
[trademark], [copyright], industrial design or process of
manufacture, and covenants that Vendor will, at Vendors own
expense, upon demand of Purchaser, investigate and deal with
every claim and/or suit or action, which may be brought against
Purchaser or against those selling or using any goods or products of
Purchaser for any alleged infringement or claim of infringement of
any patent, [trademark], [copyright], industrial design, or process of
manufacture by reason of the sale or use of the goods by the
Purchaser and will pay all costs[,] damages and expenses which
Purchaser may sustain by reason of any such claim and/or suit [or]
action.
10. Invoices quoting this Order number and Vendors packing slip
numbers are required for each individual order and shipment, and
shall be mailed to the Purchaser not later than the day of despatch
of the goods. All products shall be accompanied by original packing
slips. Overseas Vendors must render an additional certified invoice
for Philippines Customs purposes. Negotiable bills of lading or
consignment notes properly signed by the Carrier must be attached
to the Vendors invoices.
11. Waiver by the Purchaser of any specific defaults by the Vendor,
or failure of the Purchaser to cancel this order or any part thereof
when such a right arises shall not constitute a waiver by the
Purchaser of any of the conditions of this order except such defaults
as are specifically waived and then only in respect of the actual
defaults.[18]
Page 134

do not reveal any hint of one-sidedness in favor of petitioner.
If anything, in fact, Condition 4 above seems to have worked to
petitioners disadvantage as it underpins the refusal of the trial court
to accept evidence aliunde to show that time was of the essence in
the transaction. The said condition specifically mentions that the
delivery date shown on (the purchase order) shall be of the essence
of any contract arising and that delivery must be made in strict
accordance with the order or delivery schedulePurchase Order No.
106211, however, is unusually silent as to the date the flint cullets
are needed.
Petitioner remedied this seeming inadvertence by squarely raising
the failure of the purchase order to express the true intent of the
parties, i.e., that petitioner entered into a contract with respondent
conditioned upon the latters prompt delivery of flint cullets, as an
issue in its Answer with Counterclaims.[19] Unfortunately, the trial
court sustained respondents objection based on the parol evidence
rule.
It is a cardinal rule of evidence, not just one of technicality but of
substance, that the written document is the best evidence of its
own contents. It is also a matter of both principle and policy that
when the written contract is established as the repository of the
parties stipulations, any other evidence is excluded and the same
cannot be used as a substitute for such contract, nor even to alter
or contradict them.[20] This rule, however, is not without exception.
Section. 9, Rule 130 of the Rules of Court states that a party may
present evidence to modify, explain or add to the terms of the
EVIDENCE (Rule 130 Documentary Evidence Cases)
agreement if he puts in issue in his pleading the failure of the
written agreement to express the true intent and agreement of the
parties. Since an exception to the parol evidence rule was squarely
raised as an issue in the answer, the trial court should not have
been so inflexible as to completely disregard petitioners evidence.
Sifting through the testimony of respondent, we find that although
she was not given definite days during which she should deliver the
flint cullets, she was indeed apprised of petitioners urgent need for
large quantities thereof.[21] Furthermore, petitioner presented the
unrebutted testimony of Ermilinda Batalon, its materials control
manager, to prove that it agreed to the P4.20 per kilo purchase
price only because respondent assured it of prompt deliveries
sufficient for petitioners production requirements.[22] These
testimonies give us a more complete picture of the transaction
between the parties and allow for a more reasoned resolution of
the issues, without over-reliance on the tenuous application of the
rule on contracts of adhesion.
Coming now to the second purchase order, we find that Purchase
Order No. 106211 had indeed been superseded by Purchase Order
No. 106373 as the latter plainly states. Respondent testified that the
deliveries of flint cullets on 28 October 1994 and on subsequent
dates were already covered by the new purchase order which did
indicate the reduced unit price but did not mention the quantity to
be delivered. She said:
Q: And of course you were told by Mrs. Batalon that the PO that will
be issued to you is an open PO?
Page 135
Atty. Tanopo: Q: Did the deliveries of invoices no. [901, 719] and 735[,] Exhibits F,
What do you mean by open PO? F1 and F2 has already been paid by the plaintiff?

Atty. Buyco: Atty. Tanopo:

It does not indicate the quantity that will deliver. Admitted, paid at the rate of P3.65.[23]

Q: There is no quantity mentioned as to how much you are going to

deliver, you deliver as they come. [I]n other words at P3.65? Clearly, respondent knew, at the time she made the deliveries on 28
A: Yes, sir. October 1994 and thereafter, that Purchase Order No. 106373
would already govern the transaction. Significantly, payments on
Q: So much so that your subsequent deliveries after October 28 is these deliveries were made by petitioner on 26 November and 8
already on the basis of this PO? December 1994, after the complaint for specific performance was
A: Yes, sir. filed and without respondent making as much as a whimper of
protest against the terms of the new purchase order or the reduced
Q: Exhibit D? purchase price indicated therein.
A: Yes, sir.
By acquiescing to the new purchase order which no longer indicated
Q: Now, your counsel earlier manifested that he filed this complaint a specific quantity of flint cullets to be delivered, respondent knew
on November 24, 1994, it was after November 23, 1994 Mrs. Coquia or should be presumed to have known that deliveries made
[sic] that there were developments that substantially affected the thereafter were no longer meant to complete the original quantity
allegations in this complaint, like substantial payments made by you contracted for under Purchase Order No. 106211.
by ACI, Philippines?
The foregoing leads us to resolve the first and second issues framed
Atty. Tanopo: by the Court of Appeals in favor of petitioner. Petitioner accepted
Counsel may show us, your Honor. deliveries under Purchase Order No. 106211 on 8, 12, 15, 18, 20 and
22 October 1994and paid for these deliveries in accordance with the
Court: terms of the purchase order, i.e., at the contract price of P4.20 per
Counsel may stipulate. kilo. However, the original contract between the parties evidenced
by Purchase Order No. 106211 was unequivocally novated by
Purchase Order No. 106373, thereby extinguishing the original

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 136

obligation of petitioner to accept deliveries from respondent until
the 2,500-3,000 metric tons of flint cullets originally contracted for
is filled.[24] Petitioner, therefore, cannot be compelled to accept
more deliveries of flint cullets from respondent to complete the
quantity originally contracted for.
By the same token, petitioner cannot be tied down to the P4.20 per
kilo unit price under Purchase Order No. 106211, nor even to the
P3.65 per kilo indicated in Purchase Order No. 106373, the latter
contract not having stated the quantity petitioner is willing to
accept delivery of and pay for under that price.
As regards damages, we find the award thereof to respondent to be
without factual basis. Respondent sought to prove the actual
damages she incurred merely through her own testimony, without
adducing any documentary evidence to substantiate her alleged
losses. While she claims that she obtained a bank loan at an interest
rate of 21%, respondent did not present any document to prove the
said loan or the use thereof to purchase flint cullets for delivery to
petitioner. Neither did respondent present documents to prove her
alleged stock of 1,000 metric tons of flint cullets for which she
allegedly invested P2,500,000.00.
The claim for actual damages in this case should be admitted with
extreme caution since it is based only on bare assertions without
support from independent evidence. In determining actual
damages, the Court cannot rely on mere assertions, speculations,
conjectures or guesswork but must depend on competent proof and
on the best evidence obtainable regarding the actual amount of
loss.[25]
EVIDENCE (Rule 130 Documentary Evidence Cases)
Finally, we find the appellate courts citation of Article 21 of the Civil
Code misplaced not only because of the pre-existing contractual
relation between the parties which bars the application of this
provision, but more importantly because we do not deem petitioner
to have acted fraudulently or in bad faith.[26]
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No.
57678 dated 15 September 2005, and its Resolution dated 30
August 2006 are REVERSED. The complaint dated 23 November
1994 filed by Editha C. Coquia against ACI Philippines, Inc. is hereby
DISMISSED. No pronouncement as to costs.
SO ORDERED.
SEAOIL PETROLEUM v AUTOCORP
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45
of the Rules of Court assailing the Decision[1] of the Court of
Appeals (CA) dated May 20, 2004 in CA-G.R. CV No. 72193, which
had affirmed in toto the Decision[2] of the Regional Trial Court (RTC)
of Pasig City, Branch 157, dated September 10, 2001 in Civil Case
No. 64943.
Page 137

The factual antecedents, as summarized by the CA, are as follows:
On September 24, 1994, defendant-appellant Seaoil Petroleum
Corporation (Seaoil, for brevity) purchased one unit of ROBEX 200
LC Excavator, Model 1994 from plaintiff-appellee Autocorp Group
(Autocorp for short). The original cost of the unit was P2,500,000.00
but was increased to P3,112,519.94 because it was paid in 12
monthly installments up to September 30, 1995. The sales
agreement was embodied in the Vehicle Sales Invoice No. A-0209
and Vehicle Sales Confirmation No. 258. Both documents were
signed by Francis Yu (Yu for short), president of Seaoil, on behalf of
said corporation. Furthermore, it was agreed that despite delivery
of the excavator, ownership thereof was to remain with Autocorp
until the obligation is fully settled. In this light, Seaoils contractor,
Romeo Valera, issued 12 postdated checks. However, Autocorp
refused to accept the checks because they were not under Seaoils
name. Hence, Yu, on behalf of Seaoil, signed and issued 12
postdated checks for P259,376.62 each with Autocorp as payee.
The excavator was subsequently delivered on September 26, 1994
by Autocorp and was received by Seaoil in its depot in Batangas.
The relationship started to turn sour when the first check bounced.
However, it was remedied when Seaoil replaced it with a good
check. The second check likewise was also good when presented for
payment. However, the remaining 10 checks were not honored by
the bank since Seaoil requested that payment be stopped. It was
downhill from thereon.
EVIDENCE (Rule 130 Documentary Evidence Cases)
Despite repeated demands, Seaoil refused to pay the remaining
balance of P2,593,766.20. Hence, on January 24, 1995, Autocorp
filed a complaint for recovery of personal property with damages
and replevin in the Regional Trial Court of Pasig. The trial court ruled
for Autocorp. Hence, this appeal.
Seaoil, on the other hand, alleges that the transaction is not as
simple as described above. It claims that Seaoil and Autocorp were
only utilized as conduits to settle the obligation of one foreign entity
named Uniline Asia (herein referred to as Uniline), in favor of
another foreign entity, Focus Point International, Incorporated
(Focus for short). Paul Rodriguez (Rodriguez for brevity) is a
stockholder and director of Autocorp. He is also the owner of
Uniline. On the other hand, Yu is the president and stockholder of
Seaoil and is at the same time owner of Focus. Allegedly, Uniline
chartered MV Asia Property (sic) in the amount of $315,711.71 from
its owner Focus. Uniline was not able to settle the said amount.
Hence, Uniline, through Rodriguez, proposed to settle the obligation
through conveyance of vehicles and heavy equipment.
Consequently, four units of Tatamobile pick-up trucks procured
from Autocorp were conveyed to Focus as partial payment. The
excavator in controversy was allegedly one part of the vehicles
conveyed to Focus. Seaoil claims that Rodriguez initially issued 12
postdated checks in favor of Autocorp as payment for the
excavator. However, due to the fact that it was company policy for
Autocorp not to honor postdated checks issued by its own directors,
Rodriguez requested Yu to issue 12 PBCOM postdated checks in
favor of Autocorp. In turn, said checks would be funded by the
corresponding 12 Monte de Piedad postdated checks issued by
Page 138
Rodriguez. These Monte de Piedad checks were postdated three
days prior to the maturity of the PBCOM checks.
Seaoil claims that Rodriguez issued a stop payment order on the ten
checks thus constraining the former to also order a stop payment
order on the PBCOM checks.
In short, Seaoil claims that the real transaction is that Uniline,
through Rodriguez, owed money to Focus. In lieu of payment,
Uniline instead agreed to convey the excavator to Focus. This was to
be paid by checks issued by Seaoil but which in turn were to be
funded by checks issued by Uniline. x x x[3]
As narrated above, respondent Autocorp filed a Complaint for
Recovery of Personal Property with Damages and Replevin[4]
against Seaoil before the RTC of Pasig City. In its September 10,
2001 Decision, the RTC ruled that the transaction between Autocorp
and Seaoil was a simple contract of sale payable in installments.[5]
It also held that the obligation to pay plaintiff the remainder of the
purchase price of the excavator solely devolves on Seaoil. Paul
Rodriguez, not being a party to the sale of the excavator, could not
be held liable therefor. The decretal portion of the trial courts
Decision reads, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff
Autocorp Group and against defendant Seaoil Petroleum
Corporation which is hereby directed to pay plaintiff:
EVIDENCE (Rule 130 Documentary Evidence Cases)
- P2,389,179.23 plus 3% interest from the time of judicial
demand until full payment; and
- 25% of the total amount due as attorneys fees and cost
of litigation.
The third-party complaint filed by defendant Seaoil Petroleum
Corporation against third-party defendant Paul Rodriguez is hereby
DISMISSED for lack of merit.
SO ORDERED.
Seaoil filed a Petition for Review before the CA. In its assailed
Decision, the CA dismissed the petition and affirmed the RTCs
Decision in toto.[6] It held that the transaction between Yu and
Rodriguez was merely verbal. This cannot alter the sales contract
between Seaoil and Autocorp as this will run counter to the parol
evidence rule which prohibits the introduction of oral and parol
evidence to modify the terms of the contract. The claim that it falls
under the exceptions to the parol evidence rule has not been
sufficiently proven. Moreover, it held that Autocorps separate
corporate personality cannot be disregarded and the veil of
corporate fiction pierced. Seaoil was not able to show that Autocorp
was merely an alter ego of Uniline or that both corporations were
utilized to perpetrate a fraud. Lastly, it held that the RTC was correct
in dismissing the third-party complaint since it did not arise out of
the same transaction on which the plaintiffs claim is based, or that
the third partys claim, although arising out of another transaction, is
Page 139
connected to the plaintiffs claim. Besides, the CA said, such claim
may be enforced in a separate action.
Seaoil now comes before this Court in a Petition for Review raising
the following issues:
I We find no fault in the trial courts appreciation of the facts of this
Whether or not the Court of Appeals erred in partially applying the
parol evidence rule to prove only some terms contained in one
portion of the document but disregarded the rule with respect to
another but substantial portion or entry also contained in the same
document which should have proven the true nature of the
transaction involved.
II
Whether or not the Court of Appeals gravely erred in its judgment
based on misapprehension of facts when it declared absence of
facts which are contradicted by presence of evidence on record.
III
Whether or not the dismissal of the third-party complaint would
have the legal effect of res judicata as would unjustly preclude
petitioner from enforcing its claim against respondent Rodriguez
(third-party defendant) in a separate action.
IV
EVIDENCE (Rule 130 Documentary Evidence Cases)
Whether or not, given the facts in evidence, the lower courts should
have pierced the corporate veil.
The Petition lacks merit. We sustain the ruling of the CA.
case. The findings of fact of the trial court are conclusive upon this
Court, especially when affirmed by the CA. None of the exceptions
to this well-settled rule has been shown to exist in this case.
Petitioner does not question the validity of the vehicle sales invoice
but merely argues that the same does not reflect the true
agreement of the parties. However, petitioner only had its bare
testimony to back up the alleged arrangement with Rodriguez.
The Monte de Piedad checks the supposedly clear and obvious
link[7] between the documentary evidence and the true transaction
between the parties are equivocal at best. There is nothing in those
checks to establish such link. Rodriguez denies that there is such an
agreement.
Unsubstantiated testimony, offered as proof of verbal agreements
which tends to vary the terms of a written agreement, is
inadmissible under the parol evidence rule.[8]
Rule 130, Section 9 of the Revised Rules on Evidence embodies the
parol evidence rule and states:
Page 140
SEC. 9. Evidence of written agreements.When the terms of an
agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the
parties and their successors-in-interest, no evidence of such terms
other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to
the terms of the written agreement if he puts in issue in his
pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors-in-interest after the execution of the written agreement.
The term "agreement" includes wills.
The parol evidence rule forbids any addition to, or contradiction of,
the terms of a written agreement by testimony or other evidence
purporting to show that different terms were agreed upon by the
parties, varying the purport of the written contract.[9]
This principle notwithstanding, petitioner would have the Court rule
that this case falls within the exceptions, particularly that the
EVIDENCE (Rule 130 Documentary Evidence Cases)
written agreement failed to express the true intent and agreement
of the parties. This argument is untenable.
Although parol evidence is admissible to explain the meaning of a
contract, it cannot serve the purpose of incorporating into the
contract additional contemporaneous conditions which are not
mentioned at all in the writing unless there has been fraud or
mistake.[10] Evidence of a prior or contemporaneous verbal
agreement is generally not admissible to vary, contradict or defeat
the operation of a valid contract.[11]
The Vehicle Sales Invoice[12] is the best evidence of the transaction.
A sales invoice is a commercial document. Commercial documents
or papers are those used by merchants or businessmen to promote
or facilitate trade or credit transactions.[13] Business forms, e.g.,
order slip, delivery charge invoice and the like, are commonly
recognized in ordinary commercial transactions as valid between
the parties and, at the very least, they serve as an acknowledgment
that a business transaction has in fact transpired.[14] These
documents are not mere scraps of paper bereft of probative value,
but vital pieces of evidence of commercial transactions. They are
written memorials of the details of the consummation of
contracts.[15]
The terms of the subject sales invoice are clear. They show that
Autocorp sold to Seaoil one unit Robex 200 LC Excavator paid for by
checks issued by one Romeo Valera. This does not, however, change
the fact that Seaoil Petroleum Corporation, as represented by Yu, is
the customer or buyer. The moment a party affixes his or her
signature thereon, he or she is bound by all the terms stipulated
Page 141
therein and is subject to all the legal obligations that may arise from
their breach.[16]
Oral testimony on the alleged conditions, coming from a party who
has an interest in the outcome of the case, depending exclusively on
human memory, is not as reliable as written or documentary
evidence.[17]
Hence, petitioners contention that the document falls within the
exception to the parol evidence rule is untenable. The exception
obtains only where the written contract is so ambiguous or obscure
in terms that the contractual intention of the parties cannot be
understood from a mere reading of the instrument. In such a case,
extrinsic evidence of the subject matter of the contract, of the
relations of the parties to each other, and of the facts and
circumstances surrounding them when they entered into the
contract may be received to enable the court to make a proper
interpretation of the instrument.[18]
Even assuming there is a shred of truth to petitioners contention,
the same cannot be made a basis for holding respondents liable
therefor.
As pointed out by the CA, Rodriguez is a person separate and
independent from Autocorp. Whatever obligations Rodriguez
contracted cannot be attributed to Autocorp[19] and vice versa. In
fact, the obligation that petitioner proffers as its defense under the
Lease Purchase Agreement was not even incurred by Rodriguez or
by Autocorp but by Uniline.
EVIDENCE (Rule 130 Documentary Evidence Cases)
The Lease Purchase Agreement[20] clearly shows that the parties
thereto are two corporations not parties to this case: Focus Point
and Uniline. Under this Lease Purchase Agreement, it is Uniline, as
lessee/purchaser, and not Rodriguez, that incurred the debt to
Focus Point. The obligation of Uniline to Focus Point arose out of a
transaction completely different from the subject of the instant
case.
It is settled that a corporation has a personality separate and
distinct from its individual stockholders or members, and is not
affected by the personal rights, obligations and transactions of the
latter.[21] The corporation may not be held liable for the obligations
of the persons composing it, and neither can its stockholders be
held liable for its obligation.[22]
Of course, this Court has recognized instances when the
corporations separate personality may be disregarded. However, we
have also held that the same may only be done in cases where the
corporate vehicle is being used to defeat public convenience, justify
wrong, protect fraud, or defend crime.[23] Moreover, the
wrongdoing must be clearly and convincingly established. It cannot
be presumed.[24]
To reiterate, the transaction under the Vehicle Sales Invoice is
separate and distinct from that under the Lease Purchase
Agreement. In the former, it is Seaoil that owes Autocorp, while in
the latter, Uniline incurred obligations to Focus. There was never
any allegation, much less any evidence, that Autocorp was merely
an alter ego of Uniline, or that the two corporations separate
Page 142
personalities were being used as a means to perpetrate fraud or
wrongdoing.
Moreover, Rodriguez, as stockholder and director of Uniline, cannot
be held personally liable for the debts of the corporation, which has
a separate legal personality of its own. While Section 31 of the
Corporation Code[25] lays down the exceptions to the rule, the
same does not apply in this case. Section 31 makes a director
personally liable for corporate debts if he willfully and knowingly
votes for or assents to patently unlawful acts of the corporation.
Section 31 also makes a director personally liable if he is guilty of
gross negligence or bad faith in directing the affairs of the
corporation.[26] The bad faith or wrongdoing of the director must
be established clearly and convincingly. Bad faith is never
presumed.[27]
The burden of proving bad faith or wrongdoing on the part of
Rodriguez was, on petitioner, a burden which it failed to discharge.
Thus, it was proper for the trial court to have dismissed the third-
party complaint against Rodriguez on the ground that he was not a
party to the sale of the excavator.
Rule 6, Section 11 of the Revised Rules on Civil Procedure defines a
third-party complaint as a claim that a defending party may, with
leave of court, file against a person not a party to the action, called
the third-party defendant, for contribution, indemnity, subrogation
or any other relief, in respect of his opponents claim.
The purpose of the rule is to permit a defendant to assert an
independent claim against a third party which he, otherwise, would
EVIDENCE (Rule 130 Documentary Evidence Cases)
assert in another action, thus preventing multiplicity of suits.[28]
Had it not been for the rule, the claim could have been filed
separately from the original complaint.[29]
Petitioners claim against Rodriguez was fully ventilated in the
proceedings before the trial court, tried and decided on its merits.
The trial courts ruling operates as res judicata against another suit
involving the same parties and same cause of action. This is rightly
so because the trial court found that Rodriguez was not a party to
the sale of the excavator. On the other hand, petitioner Seaoils
liability has been successfully established by respondent.
A last point. We reject Seaoils claim that the ownership of the
subject excavator, having been legally and completely transferred to
Focus Point International, Inc., cannot be subject of replevin and
plaintiff [herein respondent Autocorp] is not legally entitled to any
writ of replevin.[30] The claim is negated by the sales invoice which
clearly states that [u]ntil after the vehicle is fully paid inclusive of
bank clearing time, it remains the property of Autocorp Group
which reserves the right to take possession of said vehicle at any
time and place without prior notice.[31]
Considering, first, that Focus Point was not a party to the sale of the
excavator and, second, that Seaoil indeed failed to pay for the
excavator in full, the same still rightfully belongs to Autocorp.
Additionally, as the trial court found, Seaoil had already assigned
the same to its contractor for the construction of its depot in
Batangas.[32] Hence, Seaoil has already enjoyed the benefit of the
transaction even as it has not complied with its obligation. It cannot
be permitted to unjustly enrich itself at the expense of another.
Page 143

WHEREFORE, the foregoing premises considered, the Petition is
hereby DENIED. The Decision of the Court of Appeals dated May 20,
2004 in CA-G.R. CV No. 72193 is AFFIRMED.
SO ORDERED.
MARQUEZ v ESPEJO
DECISION
DEL CASTILLO, J.
When the parties admit the contents of written documents but put
in issue whether these documents adequately and correctly express
the true intention of the parties, the deciding body is authorized to
look beyond these instruments and into the contemporaneous and
subsequent actions of the parties in order to determine such intent.
Well-settled is the rule that in case of doubt, it is the intention of
the contracting parties that prevails, for the intention is the soul of a
contract, not its wording which is prone to mistakes, inadequacies,
or ambiguities. To hold otherwise would give life, validity, and
precedence to mere typographical errors and defeat the very
purpose of agreements.
This Petition for Review on Certiorari[1] assails the October 7, 2003
Decision,[2] as well as the May 11, 2005 Resolution[3] of the Court
of Appeals (CA) in CA G.R. SP No. 69981. The dispositive portion of
the appellate courts Decision reads:
EVIDENCE (Rule 130 Documentary Evidence Cases)
WHEREFORE, finding reversible error committed by the Department
of Agrarian Reform Adjudication Board, the instant petition for
review is GRANTED. The assailed Decision, dated 17 January 2001,
rendered by the Department of Agrarian Reform Adjudication Board
is hereby ANNULLED and SET ASIDE. The Decision of the
Department of Agrarian Reform Adjudication Board of
Bayombong[,] Nueva Vizcaya, dated 17 March 1998, is REINSTATED.
Costs against respondents.
SO ORDERED.[4]
The reinstated Decision of the Department of Agrarian Reform
Adjudication Board (DARAB) of Bayombong, Nueva Vizcaya, in turn,
contained the following dispositive portion:
Accordingly, judgment is rendered:
1. Finding [respondents] to be the owner by re-purchase
from RBBI [of] the Murong property covered by TCT No. [T-]62096
(formerly TCT No. 43258);
2. Ordering the cancellation of TCT with CLOA Nos. 395
and 396 in the name[s] of Salun-at Marquez and Nestor de la Cruz
respectively, as they are disqualified to become tenants of the
Lantap property;
3. Directing RBBI to sell through VOS the Lantap property
to its rightful beneficiary, herein tenant-farmer Nemi Fernandez
under reasonable terms and conditions;
Page 144
4. Ordering RBBI to return the amount paid to it by Nestor
and Salun-at; and ordering the latter to pay 20 cavans of palay per
hectare at 46 kilos per cavan unto [respondents] plus such accrued
and unpaid rentals for the past years as may be duly accounted for
with the assistance of the Municipal Agrarian Reform Officer of
Bagabag, Nueva Vizcaya who is also hereby instructed to assist the
parties execute their leasehold contracts and;
5. The order to supervise harvest dated March 11, 1998
shall be observed until otherwise modified or dissolved by the
appellate body.
SO ORDERED.[5]
Factual Antecedents
Respondents Espejos were the original registered owners of two
parcels of agricultural land, with an area of two hectares each. One
is located at Barangay Lantap, Bagabag, Nueva Vizcaya (the Lantap
property) while the other is located in Barangay Murong, Bagabag,
Nueva Vizcaya (the Murong property). There is no dispute among
the parties that the Lantap property is tenanted by respondent
Nemi Fernandez (Nemi)[6] (who is the husband[7] of respondent
Elenita Espejo (Elenita), while the Murong property is tenanted by
petitioners Salun-at Marquez (Marquez) and Nestor Dela Cruz (Dela
Cruz).[8]
EVIDENCE (Rule 130 Documentary Evidence Cases)
The respondents mortgaged both parcels of land to Rural Bank of
Bayombong, Inc. (RBBI) to secure certain loans. Upon their failure to
pay the loans, the mortgaged properties were foreclosed and sold
to RBBI. RBBI eventually consolidated title to the properties and
transfer certificates of title (TCTs) were issued in the name of RBBI.
TCT No. T-62096 dated January 14, 1985 was issued for the Murong
property. It contained the following description:
Beginning at a point marked I on plan H-176292, S. 44034 W.
1656.31 m. more or less from B.L.L.M. No 1, Bagabag Townsite, K-
27,
thence N. 28 deg. 20 E., 200.00 m. to point 2;
thence S. 61 deg. 40 E., 100.00 m. to point 3;
thence S. 28 deg. 20 W., 200.00 m. to point 4;
thence N. 61 deg. 40 W., 100.00 m. to point 1; point of beginning;
Containing an area of 2.000 hectares. Bounded on the northeast, by
Road; on the southeast, and southwest by public land; and on the
northwest by Public Land, properties claimed by Hilario Gaudia and
Santos Navarrete. Bearings true. Declination 0131 E. Points referred
to are marked on plan H-176292. Surveyed under authority of
sections 12-22 Act No. 2874 and in accordance with existing
regulations of the Bureau of Lands by H.O. Bauman Public Land
Surveyor, [in] December 1912-March 1913. Note: All corners are
Conc. Mons. 15x15x60 cm. This is Lot No. 79-A=Lot No. 159 of
Bagabag Townsite, K-27.[9]
Subsequently, TCT No. T-62836 dated June 4, 1985 was issued for
the Lantap property and contained the following description:
Page 145
Beginning at a point marked 1 on plan H-105520, N. 80 deg. 32 W.,
1150.21 m. from BLLM No. 122, Irrigation project,
thence N. 61 deg. 40E., 200.00 m. to point 2;
thence N. 28 deg. 20E, 100.00 m. to point 3;
thence S. 61 deg. 40E, 200.00 m. to point 4;
thence S. 28 deg. 20W, 100.00 m. to point 1; point of beginning;
containing an area of 2.0000 hectares. Bounded on the northeast,
southeast, and southwest by Public land; and on the northwest by
Road and public land. Bearings true. Declination 0 deg. 31E., points
referred to are marked on plan H-105520. Surveyed under authority
of Section 12-22, Act No. 2874 and in accordance with existing
regulations of the Bureau of Lands, by H.O. Bauman Public Land
Surveyor, [in] Dec. 1912-Mar. 1913 and approved on January 6,
1932. Note: This is Lot No. 119-A Lot No. 225 of Bagabag Townsite
K-27. All corners are B.I. Conc. Mons. 15x60 cm.[10]
Both TCTs describe their respective subjects as located in Bagabag
Townsite, K-27, without any reference to either Barangay Lantap or
Barangay Murong.
On February 26, 1985, respondents Espejos bought back one of
their lots from RBBI. The Deed of Sale[11] described the property
sold as follows:
x x x do hereby SELL, TRANSFER, and CONVEY, absolutely and
unconditionally x x x that certain parcel of land, situated in the
Municipality of Bagabag, Province of Nueva Vizcaya, and more
particularly bounded and described as follows, to wit:
EVIDENCE (Rule 130 Documentary Evidence Cases)
Beginning at a point marked 1 on plan x x x x Containing an area of
2.000 hectares. Bounded on the NE., by Road; on the SE., and SW by
Public Land; and on the NW., by Public Land, properties claimed by
Hilario Gaudia and Santos Navarrete. Bearing true.Declination 013
B. Points referred to are marked on plan H-176292.
of which the Rural Bank of Bayombong (NV) Inc., is the registered
owner in fee simple in accordance with the Land Registration Act, its
title thereto being evidenced by Transfer Certificate of Title No. T-
62096 issued by the Registry of Deeds of Nueva Vizcaya.
As may be seen from the foregoing, the Deed of Sale did not
mention the barangay where the property was located but
mentioned the title of the property (TCT No. T-62096), which title
corresponds to the Murong property. There is no evidence,
however, that respondents took possession of the Murong
property, or demanded lease rentals from the petitioners (who
continued to be the tenants of the Murong property), or otherwise
exercised acts of ownership over the Murong property. On the
other hand, respondent Nemi (husband of respondent Elenita and
brother-in-law of the other respondents), continued working on the
other property -- the Lantap property -- without any evidence that
he ever paid rentals to RBBI or to any landowner. The Deed of Sale
was annotated on TCT No. T-62096 almost a decade later, on July 1,
1994.[12]
Meanwhile, on June 20, 1990, RBBI, pursuant to Sections 20[13] and
21[14] of Republic Act (RA) No. 6657,[15] executed separate Deeds
of Voluntary Land Transfer (VLTs) in favor of petitioners Marquez
Page 146
and Dela Cruz, the tenants of the Murong property. Both VLTs
described the subject thereof as an agricultural land located in
Barangay Murong and covered by TCT No. T-62836 (which,
however, is the title corresponding to the Lantap property).[16]
After the petitioners completed the payment of the purchase price
of P90,000.00 to RBBI, the DAR issued the corresponding
Certificates of Land Ownership Award (CLOAs) to petitioners
Marquez[17] and Dela Cruz[18] on September 5, 1991. Both CLOAs
stated that their subjects were parcels of agricultural land situated
in Barangay Murong.[19] The CLOAs were registered in the Registry
of Deeds of Nueva Vizcaya on September 5, 1991.
On February 10, 1997 (more than 10 years after the Deed of Sale in
favor of the respondents and almost seven years after the execution
of VLTs in favor of the petitioners), respondents filed a
Complaint[20] before the Regional Agrarian Reform Adjudicator
(RARAD) of Bayombong, Nueva Vizcaya for the cancellation of
petitioners CLOAs, the deposit of leasehold rentals by petitioners in
favor of respondents, and the execution of a deed of voluntary land
transfer by RBBI in favor of respondent Nemi. The complaint was
based on respondents theory that the Murong property, occupied
by the petitioners, was owned by the respondents by virtue of the
1985 buy-back, as documented in the Deed of Sale. They based their
claim on the fact that their Deed of Sale refers to TCT No. 62096,
which pertains to the Murong property.
Petitioners filed their Answer[21] and insisted that they bought the
Murong property as farmer-beneficiaries thereof. They maintained
that they have always displayed good faith, paid lease rentals to
EVIDENCE (Rule 130 Documentary Evidence Cases)
RBBI when it became the owner of the Murong property, bought
the same from RBBI upon the honest belief that they were buying
the Murong property, and occupied and exercised acts of ownership
over the Murong property. Petitioners also argued that what
respondents Espejos repurchased from RBBI in 1985 was actually
the Lantap property, as evidenced by their continued occupation
and possession of the Lantap property through respondent Nemi.
RBBI answered[22] that it was the Lantap property which was the
subject of the buy-back transaction with respondents Espejos. It
denied committing a grave mistake in the transaction and
maintained its good faith in the disposition of its acquired assets in
conformity with the rural banking rules and regulations.
OIC-RARAD Decision[23]
The OIC-RARAD gave precedence to the TCT numbers appearing on
the Deed of Sale and the VLTs. Since TCT No. T-62096 appeared on
respondents Deed of Sale and the said title refers to the Murong
property, the OIC-RARAD concluded that the subject of sale was
indeed the Murong property. On the other hand, since the
petitioners VLTs referred to TCT No. T-62836, which corresponds to
the Lantap property, the OIC-RARAD ruled that petitioners CLOAs
necessarily refer to the Lantap property. As for the particular
description contained in the VLTs that the subject thereof is the
Murong property, the OIC-RARAD ruled that it was a mere
typographical error.
Further, since the VLTs covered the Lantap property and petitioners
are not the actual tillers thereof, the OIC-RARAD declared that they
were disqualified to become tenants of the Lantap property and
Page 147
ordered the cancellation of their CLOAs. It then ordered RBBI to
execute a leasehold contract with the real tenant of the Lantap
property, Nemi.
The OIC-RARAD recognized that petitioners only right as the actual
tillers of the Murong property is to remain as the tenants thereof
after the execution of leasehold contracts with and payment of
rentals in arrears to respondents.
DARAB Decision[24]
Upon appeal filed by petitioners, the DARAB reversed the OIC-
RARAD Decision. It ruled that in assailing the validity of the CLOAs
issued to petitioners as bona fide tenant-farmers, the burden of
proof rests on the respondents. There being no evidence that the
DAR field personnel were remiss in the performance of their official
duties when they issued the corresponding CLOAs in favor of
petitioners, the presumption of regular performance of duty
prevails. This conclusion is made more imperative by the
respondents admission that petitioners are the actual tillers of the
Murong property, hence qualified beneficiaries thereof.
As for respondents allegation that they bought back the Murong
property from RBBI, the DARAB ruled that they failed to support
their allegation with substantial evidence. It gave more credence to
RBBIs claim that respondents repurchased the Lantap property, not
the Murong property. Respondents, as owners of the Lantap
property, were ordered to enter into an agricultural leasehold
contract with their brother-in-law Nemi, who is the actual tenant of
the Lantap property.
EVIDENCE (Rule 130 Documentary Evidence Cases)
The DARAB ended its January 17, 2001 Decision in this wise:
We find no basis or justification to question the authenticity and
validity of the CLOAs issued to appellants as they are by operation
of law qualified beneficiaries over the landholdings; there is nothing
to quiet as these titles were awarded in conformity with the CARP
program implementation; and finally, the Board declares that all
controverted claims to or against the subject landholding must be
completely and finally laid to rest.
WHEREFORE, premises considered and finding reversible errors[,]
the assailed decision is ANNULLED and a new judgment is hereby
rendered, declaring:
1. Appellants Salun-at Marquez and Nestor Dela Cruz as the
bona fide tenant-tillers over the Murong property and therefore
they are the qualified beneficiaries thereof;
2. Declaring Transfer Certificate of Title (TCT) Nos. 395 and
396 issued in the name of [farmer-beneficiaries] Salun-at Marquez
and Nestor Dela Cruz respectively, covered formerly by TCT No.
62096 (TCT No. 43258) of the Murong property as valid and legal;
3. Ordering the co-[respondents] to firm-up an agricultural
leasehold contract with bona fide tenant-tiller Nemi Fernandez over
the Lantap property, [the latter] being the subject matter of the buy
back arrangement entered into between [respondents] and Rural
Bank of Bayombong, Incorporated, and other incidental matters are
deemed resolved.
Page 148

SO ORDERED.[25]
Ruling of the Court of Appeals
In appealing to the CA, the respondents insisted that the DARAB
erred in ruling that they repurchased the Lantap property, while the
petitioners were awarded the Murong property. They were
adamant that the title numbers indicated in their respective deeds
of conveyance should control in determining the subjects thereof.
Since respondents Deed of Sale expressed that its subject is the
property with TCT No. T-62096, then what was sold to them was the
Murong property. On the other hand, petitioners VLTs and CLOAs
say that they cover the property with TCT No. T-62836; thus it
should be understood that they were awarded the Lantap property.
Respondents added that since petitioners are not the actual tillers
of the Lantap property, their CLOAs should be cancelled due to their
lack of qualification.
The CA agreed with the respondents. Using the Best Evidence Rule
embodied in Rule 130, Section 3, the CA held that the Deed of Sale
is the best evidence as to its contents, particularly the description of
the land which was the object of the sale. Since the Deed of Sale
expressed that its subject is the land covered by TCT No. T-62096
the Murong property then that is the property that the respondents
repurchased.
The CA further ruled that as for petitioners VLTs, the same refer to
the property with TCT No. T-62836; thus, the subject of their CLOAs
is the Lantap property. The additional description in the VLTs that
EVIDENCE (Rule 130 Documentary Evidence Cases)
the subject thereof is located in Barangay Murong was considered
to be a mere typographical error. The CA ruled that the technical
description contained in the TCT is more accurate in identifying the
subject property since the same particularly describes the
properties metes and bounds.
Both the RBBI[26] and petitioners[27] filed their respective motions
for reconsideration, which were separately denied.[28]
On June 22, 2004, RBBI filed a separate Petition for Review on
Certiorari, docketed as G.R. No. 163320, with this Court.[29] RBBI
raised the issue that the CA failed to appreciate that respondents
did not come to court with clean hands because they misled RBBI to
believe at the time of the sale that the two lots were not tenanted.
RBBI also asked that they be declared free from any liability to the
parties as it did not enrich itself at anyones expense. RBBIs petition
was dismissed on July 26, 2004 for lack of merit. The said Resolution
reads:
Considering the allegations, issues[,] and arguments adduced in the
petition for review on certiorari, the Court Resolves to DENY the
petition for lack of sufficient showing that the Court of Appeals had
committed any reversible error in the questioned judgment to
warrant the exercise by this Court of its discretionary appellate
jurisdiction in this case.[30]
Their Motion for Reconsideration was likewise denied with
finality.[31] Entry of judgment was made in that case on December
15, 2004.[32]
Page 149

On July 27, 2005,[33] petitioners filed the instant petition.
Issues
Rephrased and consolidated, the parties present the following
issues for the Courts determination:
I speculations, surmises, or conjectures; (2) when the inference made
What is the effect of the final judgment dismissing RBBIs Petition for
Review on Certiorari, which assailed the same CA Decision
II
Whether the CA erred in utilizing the Best Evidence Rule to
determine the subject of the contracts
III
What are the subject properties of the parties respective contracts
with RBBI
Our Ruling
Propriety of the Petition
Respondents maintain that the instant petition for review raises
factual issues which are beyond the province of Rule 45.[34]
The issues involved herein are not entirely factual. Petitioners assail
the appellate courts rejection of their evidence (as to the
EVIDENCE (Rule 130 Documentary Evidence Cases)
contractual intent) as inadmissible under the Best Evidence Rule.
The question involving the admissibility of evidence is a legal
question that is within the Courts authority to review.[35]
Besides, even if it were a factual question, the Court is not
precluded to review the same. The rule that a petition for review
should raise only questions of law admits of exceptions, among
which are (1) when the findings are grounded entirely on
is manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a
misappreciation of facts; (5) when the findings of fact are
conflicting; (6) when, in making its findings, the same are contrary
to the admissions of both appellant and appellee; (7) when the
findings are contrary to those of the trial court; (8) when the
findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as
well as in the petitioner's main and reply briefs are not disputed by
the respondent; and (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence
on record.[36]
In the instant case, we find sufficient basis to apply the exceptions
to the general rule because the appellate court misappreciated the
facts of the case through its erroneous application of the Best
Evidence Rule, as will be discussed below.Moreover, the disparate
rulings of the three reviewing bodies below are sufficient for the
Court to exercise its jurisdiction under Rule 45.
First Issue
Page 150
Dismissal of RBBIs appeal
Respondents maintain that the Courts earlier dismissal of RBBIs
petition
for review of the same CA Decision is eloquent proof that there is no
reversible error in the appellate courts decision in favor of the
respondents.[37]
We are not persuaded. This Court dismissed RBBIs earlier petition in
G.R. No. 163320 because it failed to convincingly demonstrate the
alleged errors in the CA Decision. The bank did not point out the
inadequacies and errors in the appellate courts decision but simply
placed the responsibility for the confusion on the respondents for
allegedly misleading the bank as to the identity of the properties
and for misrepresenting that the two lots were not tenanted. Thus,
RBBI argued that respondents did not come to court with clean
hands.
These arguments were ineffectual in convincing the Court to review
the appellate courts Decision. It is the appellants responsibility to
point out the perceived errors in the appealed decision. When a
party merely raises equitable considerations such as the clean hands
doctrine without a clear-cut legal basis and cogent arguments to
support his claim, there should be no surprise if the Court is not
swayed to exercise its appellate jurisdiction and the appeal is
dismissed outright. The dismissal of an appeal does not always and
necessarily mean that the appealed decision is correct, for it could
simply be the result of the appellants inadequate discussion,
ineffectual arguments, or even procedural lapses.
EVIDENCE (Rule 130 Documentary Evidence Cases)
RBBIs failure to convince the Court of the merits of its appeal should
not prejudice petitioners who were not parties to RBBIs appeal,
especially because petitioners duly filed a separate appeal and were
able to articulately and effectively present their arguments. A party
cannot be deprived of his right to appeal an adverse decision just
because another party had already appealed ahead of him,[38] or
just because the other partys separate appeal had already been
dismissed.[39]
There is another reason not to bind the petitioners to the final
judgment against RBBI. RBBI executed the transfer (VLTs) in favor of
petitioners prior to the commencement of the action. Thus, when
the action for cancellation of CLOA was filed, RBBI had already
divested itself of its title to the two properties involved. Under the
rule on res judicata, a judgment (in personam) is conclusive only
between the parties and their successors-in-interest by title
subsequent to the commencement of the action.[40] Thus, when
the vendor (in this case RBBI) has already transferred his title to
third persons (petitioners), the said transferees are not bound by
any judgment which may be rendered against the vendor.[41]
Second Issue
Is it correct to apply the Best Evidence Rule?
Citing the Best Evidence Rule in Rule 130, Section 3, the CA held that
the Deed of Sale between respondents and RBBI is the best
evidence as to the property that was sold by RBBI to the
respondents. Since the Deed of Sale stated that its subject is the
Page 151
land covered by TCT No. T-62096 the title for the Murong property
then the property repurchased by the respondents was the Murong
property. Likewise, the CA held that since the VLTs between
petitioners and RBBI refer to TCT No. T-62836 the title for the
Lantap property then the property transferred to petitioners was
the Lantap property.
Petitioners argue that the appellate court erred in using the best
evidence rule to determine the subject of the Deed of Sale and the
Deeds of Voluntary Land Transfer. They maintain that the issue in
the case is not the contents of the contracts but the intention of the
parties that was not adequately expressed in their contracts.
Petitioners then argue that it is the Parol Evidence Rule that should
be applied in order to adequately resolve the dispute.
Indeed, the appellate court erred in its application of the Best
Evidence Rule. The Best Evidence Rule states that when the subject
of inquiry is the contents of a document, the best evidence is the
original document itself and no other evidence (such as a
reproduction, photocopy or oral evidence) is admissible as a general
rule. The original is preferred because it reduces the chance of
undetected tampering with the document.[42]
In the instant case, there is no room for the application of the Best
Evidence Rule because there is no dispute regarding the contents of
the documents. It is admitted by the parties that the respondents
Deed of Sale referred to TCT No. T-62096 as its subject; while the
petitioners Deeds of Voluntary Land Transfer referred to TCT No. T-
62836 as its subject, which is further described as located in
Barangay Murong.
EVIDENCE (Rule 130 Documentary Evidence Cases)
The real issue is whether the admitted contents of these documents
adequately and correctly express the true intention of the parties.
As to the Deed of Sale, petitioners (and RBBI) maintain that while it
refers to TCT No. T-62096, the parties actually intended the sale of
the Lantap property (covered by TCT No. T-62836).
As to the VLTs, respondents contend that the reference to TCT No.
T-62836 (corresponding to the Lantap property) reflects the true
intention of RBBI and the petitioners, and the reference to Barangay
Murong was a typographical error. On the other hand, petitioners
claim that the reference to Barangay Murong reflects their true
intention, while the reference to TCT No. T-62836 was a mere error.
This dispute reflects an intrinsic ambiguity in the contracts, arising
from an apparent failure of the instruments to adequately express
the true intention of the parties. To resolve the ambiguity, resort
must be had to evidence outside of the instruments.
The CA, however, refused to look beyond the literal wording of the
documents and rejected any other evidence that could shed light on
the actual intention of the contracting parties. Though the CA cited
the Best Evidence Rule, it appears that what it actually applied was
the Parol Evidence Rule instead, which provides:
When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written
agreement.[43]
Page 152
The Parol Evidence Rule excludes parol or extrinsic evidence by
which a party seeks to contradict, vary, add to or subtract from the
terms of a valid agreement or instrument. Thus, it appears that
what the CA actually applied in its assailed Decision when it refused
to look beyond the words of the contracts was the Parol Evidence
Rule, not the Best Evidence Rule. The appellate court gave primacy
to the literal terms of the two contracts and refused to admit any
other evidence that would contradict such terms.
However, even the application of the Parol Evidence Rule is
improper in the case at bar. In the first place, respondents are not
parties to the VLTs executed between RBBI and petitioners; they are
strangers to the written contracts. Rule 130, Section 9 specifically
provides that parol evidence rule is exclusive only as between the
parties and their successors-in-interest. The parol evidence rule may
not be invoked where at least one of the parties to the suit is not a
party or a privy of a party to the written document in question, and
does not base his claim on the instrument or assert a right
originating in the instrument.[44]
Moreover, the instant case falls under the exceptions to the Parol
Evidence Rule, as provided in the second paragraph of Rule 130,
Section 9:
However, a party may present evidence to modify, explain or add to
the terms of the written agreement if he puts in issue in his
pleading:
(1) An intrinsic ambiguity, mistake or imperfection in
the written agreement;
EVIDENCE (Rule 130 Documentary Evidence Cases)
(2) The failure of the written agreement to express the
true intent and agreement of the parties thereto;
x x x x (Emphasis supplied)
Here, the petitioners VLTs suffer from intrinsic ambiguity. The VLTs
described the subject property as covered by TCT No. T-62836
(Lantap property), but they also describe the subject property as
being located in Barangay Murong. Even the respondents Deed of
Sale falls under the exception to the Parol Evidence Rule. It refers to
TCT No. T-62096 (Murong property), but RBBI contended that the
true intent was to sell the Lantap property. In short, it was squarely
put in issue that the written agreement failed to express the true
intent of the parties.
Based on the foregoing, the resolution of the instant case
necessitates an examination of the parties respective parol
evidence, in order to determine the true intent of the parties. Well-
settled is the rule that in case of doubt, it is the intention of the
contracting parties that prevails, for the intention is the soul of a
contract,[45] not its wording which is prone to mistakes,
inadequacies, or ambiguities. To hold otherwise would give life,
validity, and precedence to mere typographical errors and defeat
the very purpose of agreements.
In this regard, guidance is provided by the following articles of the
Civil Code involving the interpretation of contracts:
Page 153
Article 1370. If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of
its stipulations shall control.
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
Article 1371. In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be
principally considered.
Rule 130, Section 13 which provides for the rules on the
interpretation of documents is likewise enlightening:
Section 13. Interpretation according to circumstances. For the
proper construction of an instrument, the circumstances under
which it was made, including the situation of the subject thereof
and of the parties to it, may be shown, so that the judge may be
placed in the position of those whose language he is to interpret.
Applying the foregoing guiding rules, it is clear that the Deed of Sale
was intended to transfer the Lantap property to the respondents,
while the VLTs were intended to convey the Murong property to the
petitioners. This may be seen from the contemporaneous and
subsequent acts of the parties.
Third issue
Determining the intention of the parties
EVIDENCE (Rule 130 Documentary Evidence Cases)
regarding the subjects of their contracts
We are convinced that the subject of the Deed of Sale between RBBI
and the respondents was the Lantap property, and not the Murong
property. After the execution in 1985 of the Deed of Sale, the
respondents did not exercise acts of ownership that could show that
they indeed knew and believed that they repurchased the Murong
property. They did not take possession of the Murong property. As
admitted by the parties, the Murong property was in the possession
of the petitioners, who occupied and tilled the same without any
objection from the respondents. Moreover, petitioners paid
leasehold rentals for using the Murong property to RBBI, not to the
respondents.
Aside from respondents neglect of their alleged ownership rights
over the Murong property, there is one other circumstance that
convinces us that what respondents really repurchased was the
Lantap property. Respondent Nemi (husband of respondent Elenita)
is the farmer actually tilling the Lantap property, without turning
over the supposed landowners share to RBBI. This strongly indicates
that the respondents considered themselves (and not RBBI) as the
owners of the Lantap property. For if respondents (particularly
spouses Elenita and Nemi) truly believed that RBBI retained
ownership of the Lantap property, how come they never complied
with their obligations as supposed tenants of RBBIs land? The
factual circumstances of the case simply do not support the theory
propounded by the respondents.
We are likewise convinced that the subject of the Deeds of
Voluntary Land Transfer (VLTs) in favor of petitioners was the
Page 154
Murong property, and not the Lantap property. When the VLTs
were executed in 1990, petitioners were already the tenant-farmers
of the Murong property, and had been paying rentals to RBBI
accordingly. It is therefore natural that the Murong property and no
other was the one that they had intended to acquire from RBBI with
the execution of the VLTs.Moreover, after the execution of the
VLTs, petitioners remained in possession of the Murong property,
enjoying and tilling it without any opposition from anybody.
Subsequently, after the petitioners completed their payment of the
total purchase price of P90,000.00 to RBBI, the Department of
Agrarian Reform (DAR) officials conducted their investigation of the
Murong property which, with the presumption of regularity in the
performance of official duty, did not reveal any anomaly. Petitioners
were found to be in actual possession of the Murong property and
were the qualified beneficiaries thereof. Thus, the DAR officials
issued CLOAs in petitioners favor; and these CLOAs explicitly refer to
the land in Barangay Murong. All this time, petitioners were in
possession of the Murong property, undisturbed by anyone for
several long years, until respondents started the controversy in
1997.
All of these contemporaneous and subsequent actions of RBBI and
petitioners support their position that the subject of their contract
(VLTs) is the Murong property, not the Lantap property. Conversely,
there has been no contrary evidence of the parties actuations to
indicate that they intended the sale of the Lantap property. Thus, it
appears that the reference in their VLT to TCT No. T-62836 (Lantap
property) was due to their honest but mistaken belief that the said
title covers the Murong property. Such a mistake is not farfetched
considering that TCT No. T-62836 only refers to the Municipality of
EVIDENCE (Rule 130 Documentary Evidence Cases)
Bayombong, Nueva Vizcaya, and does not indicate the particular
barangay where the property is located. Moreover, both properties
are bounded by a road and public land. Hence, were it not for the
detailed technical description, the titles for the two properties are
very similar.
The respondents attempt to discredit petitioners argument that
their VLTs were intrinsically ambiguous and failed to express their
true intention by asking why petitioners never filed an action for the
reformation of their contract.[46] A cause of action for the
reformation of a contract only arises when one of the contracting
parties manifests an intention, by overt acts, not to abide by the
true agreement of the parties.[47] It seems fairly obvious that
petitioners had no cause to reform their VLTs because the parties
thereto (RBBI and petitioners) never had any dispute as to the
interpretation and application thereof. They both understood the
VLTs to cover the Murong property (and not the Lantap property). It
was only much later, when strangers to the contracts argued for a
different interpretation, that the issue became relevant for the first
time.
All told, we rule that the Deed of Sale dated February 26, 1985
between respondents and RBBI covers the Lantap property under
TCT No. T-62836, while the Deeds of Voluntary Land Transfer and
TCT Nos. CLOA-395 and CLOA-396 of the petitioners cover the
Murong property under TCT No. T-62096. In consequence, the CAs
ruling against RBBI should not be executed as such execution would
be inconsistent with our ruling herein. Although the CAs decision
had already become final and executory as against RBBI with the
dismissal of RBBIs petition in G.R. No. 163320, our ruling herein in
Page 155
favor of petitioners is a supervening cause which renders the
execution of the CA decision against RBBI unjust and inequitable.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The
assailed October 7, 2003 Decision, as well as the May 11, 2005
Resolution of the Court of Appeals in CA-G.R. SP No. 69981 are
REVERSED and SET ASIDE.The January 17, 2001 Decision of the
DARAB Central Office is REINSTATED. The Deed of Sale dated
February 26, 1985 between respondents and Rural Bank of
Bayombong, Inc. covers the Lantap property under TCT No. T-62836,
while the Deeds of Voluntary Land Transfer and TCT Nos. CLOA-395
and CLOA-396 of the petitioners cover the Murong property under
TCT No. T-62096. The Register of Deeds of Nueva Vizcaya is directed
to make the necessary corrections to the titles of the said properties
in accordance with this Decision. Costs against respondents.
SO ORDERED.
LEQUIN v SPS. VIZCONDE
DECISION
VELASCO, JR., J.:
The Case
This is an appeal under Rule 45 from the Decision[1] dated July 20,
2006 of the Court of Appeals (CA) in CA-G.R. CV No. 83595, which
declared the Kasulatan ng Bilihang Tuluyan ng Lupa[2] (Kasulatan)
valid as between the parties, but required respondents to return the
amount of PhP 50,000 to petitioners. Also assailed is the March 30,
2007 CA Resolution[3] denying petitioners motion for
reconsideration.
EVIDENCE (Rule 130 Documentary Evidence Cases)
The Facts
Petitioner Ramon Lequin, husband of petitioner Virginia Lequin, is
the brother of respondent Salome L. Vizconde and brother-in-law of
respondent Raymundo Vizconde. With this consanguine and affinity
relation, the instant case developed as follows:
In 1995, petitioners, residents of Diamond Court, Brixton Ville
Subdivision, Camarin, Caloocan City, bought the subject lot
consisting of 10,115 square meters from one Carlito de Leon (de
Leon). The sale was negotiated by respondent Raymundo Vizconde.
The subject lot is located near the Sto. Rosario to Magsaysay road in
Aliaga, Nueva Ecija. Adjacent thereto and located in between the
subject lot and the road is a dried up canal (or sapang patay in the
native language).
In 1997, respondents represented to petitioners that they had also
bought from Carlito de Leon a 1,012-square meter lot adjacent to
petitioners property and built a house thereon. As later confirmed
by de Leon, however, the 1,012-square meter lot claimed by
respondents is part of the 10,115-square meter lot petitioners
bought from him. Petitioners believed the story of respondents,
since it was Raymundo who negotiated the sale of their lot with de
Leon. With the consent of respondents, petitioners then
constructed their house on the 500-square meter half-portion of the
1,012 square-meter lot claimed by respondents, as this was near the
road.Respondents residence is on the remaining 512 square meters
of the lot.
Page 156
Given this situation where petitioners house stood on a portion of
the lot allegedly owned by respondents, petitioners consulted a
lawyer, who advised them that the 1,012-square meter lot be
segregated from the subject lot whose title they own and to make it
appear that they are selling to respondents 512 square meters
thereof. This sale was embodied in the February 12, 2000 Kasulatan
where it was made to appear that respondents paid PhP 15,000 for
the purchase of the 512-square meter portion of the subject lot. In
reality, the consideration of PhP 15,000 was not paid to petitioners.
Actually, it was petitioners who paid respondents PhP 50,000 for
the 500-square meter portion where petitioners built their house
on, believing respondents representation that the latter own the
1,012-square meter lot.
In July 2000, petitioners tried to develop the dried up canal located
between their 500-square meter lot and the public road.
Respondents objected, claiming ownership of said dried up canal or
sapang patay.
This prompted petitioners to look into the ownership of the dried
up canal and the 1,012 square-meter lot claimed by respondents.
Carlito de Leon told petitioners that what he had sold to
respondents was the dried up canal or sapang patay and that the
1,012-square meter lot claimed by respondents really belongs to
petitioners.
Thus, on July 13, 2001, petitioners filed a Complaint[4] for
Declaration of Nullity of Contract, Sum of Money and Damages
against respondents with the Regional Trial Court (RTC), Branch 28
in Cabanatuan City, praying, among others, for the declaration of
EVIDENCE (Rule 130 Documentary Evidence Cases)
the February 12, 2000 Kasulatan as null and void ab initio, the
return of PhP 50,000 they paid to respondents, and various
damages. The case was docketed as Civil Case No. 4063.
The Ruling of the RTC
On July 5, 2004, after due trial on the merits with petitioners
presenting three witnesses and respondents only one witness, the
trial court rendered a Decision[5] in favor of petitioners. The
decretal portion reads:
WHEREFORE, viewed from the foregoing, judgment is hereby
rendered in favor of the plaintiffs and against the defendants as
follows:
1. Declaring the KASULATAN NG TULUYANG BILIHAN dated
February 12, 2000 as NULL and VOID; and
2. Ordering the defendants:
(a) to return to the plaintiffs the amount of FIFTY THOUSAND PESOS
which they have paid in the simulated deed of sale plus an interest
of 12% per annum to commence from the date of the filing of this
case;
(b) To pay the plaintiffs moral damages in the amount of
Php50,000.00;
(c) To pay exemplary damages of Php50,000.00;
Page 157

(d) To pay attorneys fees in the amount of Php10,000.00; and
(e) To pay the costs of suit.
SO ORDERED.[6]
The RTC found the Kasulatan allegedly conveying 512 square meters
to respondents to be null and void due to: (1) the vitiated consent of
petitioners in the execution of the simulated contract of sale; and
(2) lack of consideration, since it was shown that while petitioners
were ostensibly conveying to respondents 512 square meters of
their property, yet the consideration of PhP 15,000 was not paid to
them and, in fact, they were the ones who paid respondents PhP
50,000. The RTC held that respondents were guilty of fraudulent
misrepresentation.
Aggrieved, respondents appealed the above RTC Decision to the CA.
The Ruling of the CA
The appellate court viewed the case otherwise. On July 20, 2006, it
rendered the assailed Decision granting respondents appeal and
declaring as valid the Kasulatan. The fallo reads:
WHEREFORE, premises considered, the Appeal is GRANTED. The
Kasulatan ng Bilihang Tuluyan dated February 12, 2000 is declared
valid. However, Spouses Raymundo Vizconde and Salome Lequin
EVIDENCE (Rule 130 Documentary Evidence Cases)
Vizconde are hereby ordered to return to the plaintiffs the amount
of P50,000.00 without interest.
SO ORDERED.[7]
In reversing and vacating the RTC Decision, the CA found no
simulation in the contract of sale, i.e., Kasulatan. Relying on Manila
Banking Corporation v. Silverio,[8] the appellate court pointed out
that an absolutely simulated contract takes place when the parties
do not intend at all to be bound by it, and that it is characterized by
the fact that the apparent contract is not really desired or intended
to produce legal effects or in any way alter the juridical situation of
the parties. It read the sale contract (Kasulatan) as clear and
unambiguous, for respondents (spouses Vizconde) were the buyers
and petitioners (spouses Lequin) were the sellers. Such being the
case, petitioners are, to the CA, the owners of the 1,012-square
meter lot, and as owners they conveyed the 512-square meter
portion to respondents.
The CA viewed petitioners claim that they executed the sale
contract to make it appear that respondents bought the property as
mere gratuitous allegation. Besides, the sale contract was duly
notarized with respondents claiming the 512-square meter portion
they bought from petitioners and not the whole 1,012-square meter
lot as alleged by petitioners.
Moreover, the CA dismissed allegations of fraud and machinations
against respondents to induce petitioners to execute the sale
contract, there being no evidence to show how petitioners were
Page 158
defrauded and much less the machinations used by respondents. It III
ratiocinated that the allegation of respondents telling petitioners
that they own the 1,012-square meter lot and for which petitioners THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
sold them 512 square meters thereof does not fall in the concept of ERRED IN FINDING THAT THERE WAS NO FRAUD ON THE PART OF
fraud. Anent the PhP 50,000 petitioners paid to respondents for the THE RESPONDENT-VIZCONDES;
500-square meter portion of the 1,012-square meter lot claimed by
respondents, the CA ruled that the receipt spoke for itself and, thus, IV
required respondents to return the amount to petitioners.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
On March 30, 2007, the CA denied petitioners Motion for ERRED IN CONSIDERING THAT THE KASULATAN NG BILIHANG
Reconsideration of the above decision through the assailed TULUYAN IS A VALID CONTRACT OF SALE;
resolution. Hence, petitioners went to this Court.
V
The Issues
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
ERRED IN NOT CONSIDERING THAT THE RESPONDENTS DID NOT
I HAVE THE FINANCIAL CAPACITY TO PURCHASE THE SUBJECT LAND
FROM THE PETITIONERS.[9]
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
ERRED IN NOT CLEARLY STATING IN THE ASSAILED DECISION AND
RESOLUTION THE FACTS AND LAW ON WHICH THE SAME WERE
BASED;
The Courts Ruling
II
The petition is meritorious.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
ERRED IN NOT GIVING DUE CREDENCE TO THE FINDINGS OF FACTS The issues boil down to two core questions: whether or not the
OF THE TRIAL COURT AND HOW THE LATTER APPRECIATED THE Kasulatan covering the 512 square-meter lot is a valid contract of
TESTIMONIES GIVEN BY THE WITNESSES; sale; and who is the legal owner of the other 500 square-meter lot.

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 159

We find for petitioners.
The trial court found, inter alia, lack of consideration in the contract
of sale while the appellate court, in reversing the decision of the
trial court, merely ruled that the contract of sale is not simulated.
With the contrary rulings of the courts a quo, the Court is impelled
to review the records to judiciously resolve the petition.
It is true that this Court is not a trier of facts, but there are
recognized exceptions to this general rule, such as when the
appellate court had ignored, misunderstood, or misinterpreted
cogent facts and circumstances which, if considered, would change
the outcome of the case; or when its findings were totally devoid of
support; or when its judgment was based on a misapprehension of
facts.[10]
As may be noted, the CA, without going into details, ruled that the
contract of sale was not simulated, as it was duly notarized, and it
clearly showed petitioners as sellers, and respondents as buyers, of
the 512-square meter lot, subject matter of the sale. But the CA
misappreciated the evidence duly adduced during the trial on the
merits.
As established during the trial, petitioners bought the entire subject
property consisting of 10,115 square meters from Carlito de Leon.
The title of the subject property was duly transferred to petitioners
names.Respondents, on the other hand, bought the dried up canal
consisting of 1,012 square meters from de Leon. This dried up canal
EVIDENCE (Rule 130 Documentary Evidence Cases)
is adjacent to the subject property of petitioners and is the lot or
area between the subject property and the public road (Sto. Rosario
to Magsaysay).
The affidavit or Sinumpaang Salaysay[11] of de Leon attests to the
foregoing facts. Moreover, de Leons testimony in court confirmed
and established such facts. These were neither controverted nor
assailed by respondents who did not present any countervailing
evidence.
Before this factual clarification was had, respondents, however,
made a claim against petitioners in 1997when subject lot was re-
surveyed by petitionersthat respondents also bought a 1,012
square-meter lot from de Leon. Undeniably, the 1,012 square
meters was a portion of the 10,115 square meters which de Leon
sold to petitioners.
Obviously, petitioners respected respondents claimif not, to
maintain peace and harmonious relationsand segregated the
claimed portion. Whether bad faith or ill-will was involved or an
honest erroneous belief by respondents on their claim, the records
do not show. The situation was further complicated by the fact that
both parties built their respective houses on the 1,012 square-meter
portion claimed by respondents, it being situated near the public
road.
To resolve the impasse on respondents claim over 1,012 square
meters of petitioners property and the latters house built thereon,
Page 160
and to iron out their supposed respective rights, petitioners
consulted a notary public, who advised and proposed the solution of
a contract of sale which both parties consented to and is now the
object of the instant action. Thus, the contract of sale was executed
on February 12, 2000 with petitioners, being the title holders of the
subject property who were ostensibly selling to respondents 512
square meters of the subject property while at the same time
paying PhP 50,000 to respondents for the other 500 square-meter
portion.
From the above considerations, we conclude that the appellate
courts finding that there was no fraud or fraudulent machinations
employed by respondents on petitioners is bereft of factual
evidentiary support. We sustain petitioners contention that
respondents employed fraud and machinations to induce them to
enter into the contract of sale. As such, the CAs finding of fact must
give way to the finding of the trial court that the Kasulatan has to be
annulled for vitiated consent.
Anent the first main issue as to whether the Kasulatan over the 512-
square meter lot is voidable for vitiated consent, the answer is in
the affirmative.
A contract, as defined in the Civil Code, is a meeting of minds, with
respect to the other, to give something or to render some
service.[12] For a contract to be valid, it must have three essential
elements: (1) consent of the contracting parties; (2) object certain
which is the subject matter of the contract; and (3) cause of the
obligation which is established.
EVIDENCE (Rule 130 Documentary Evidence Cases)
The requisites of consent are (1) it should be intelligent or with an
exact notion of the matter to which it refers; (2) it should be free;
and (3) it should be spontaneous. In De Jesus v. Intermediate
Appellate Court,[13] it was explained that intelligence in consent is
vitiated by error, freedom by violence, intimidation or undue
influence, and spontaneity by fraud.
Article (Art.) 1330 of the Civil Code provides that when consent is
given through fraud, the contract is voidable.
Tolentino defines fraud as every kind of deception whether in the
form of insidious machinations, manipulations, concealments or
misrepresentations, for the purpose of leading another party into
error and thus execute a particular act.[14] Fraud has a determining
influence on the consent of the prejudiced party, as he is misled by
a false appearance of facts, thereby producing error on his part in
deciding whether or not to agree to the offer.
One form of fraud is misrepresentation through insidious words or
machinations. Under Art. 1338 of the Civil Code, there is fraud
when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract
which without them he would not have agreed to. Insidious words
or machinations constituting deceit are those that ensnare, entrap,
trick, or mislead the other party who was induced to give consent
which he or she would not otherwise have given.
Deceit is also present when one party, by means of concealing or
omitting to state material facts, with intent to deceive, obtains
consent of the other party without which, consent could not have
Page 161
been given. Art. 1339 of the Civil Code is explicit that failure to
disclose facts when there is a duty to reveal them, as when the
parties are bound by confidential relations, constitutes fraud.
From the factual milieu, it is clear that actual fraud is present in this
case. The sale between petitioners and de Leon over the 10,115
square-meter lot was negotiated by respondent Raymundo
Vizconde. As such, Raymundo was fully aware that what petitioners
bought was the entire 10,115 square meters and that the 1,012-
square meter lot which he claims he
also bought from de Leon actually forms part of petitioners lot. It
cannot be denied by respondents that the lot which they actually
bought, based on the unrebutted testimony and statement of de
Leon, is the dried up canal which is adjacent to petitioners 10,115-
square meter lot. Considering these factors, it is clear as day that
there was deception on the part of Raymundo when he
misrepresented to petitioners that the 1,012-square meter lot he
bought from de Leon is a separate and distinct lot from the 10,115-
square meter lot the petitioners bought from de Leon. Raymundo
concealed such material fact from petitioners, who were convinced
to sign the sale instrument in question and, worse, even pay PhP
50,000 for the 500 square-meter lot which petitioners actually own
in the first place.
There was vitiated consent on the part of petitioners. There was
fraud in the execution of the contract used on petitioners which
affected their consent. Petitioners reliance and belief on the
wrongful claim by respondents operated as a concealment of a
EVIDENCE (Rule 130 Documentary Evidence Cases)
material fact in their agreeing to and in readily executing the
contract of sale, as advised and proposed by a notary public.
Believing that Carlito de Leon indeed sold a 1,012-square meter
portion of the subject property to respondents, petitioners signed
the contract of sale based on respondents representations. Had
petitioners known, as they eventually would sometime in late 2000
or early 2001 when they made the necessary inquiry from Carlito de
Leon, they would not have entered or signed the contract of sale,
much less pay PhP 50,000 for a portion of the subject lot which they
fully own. Thus, petitioners consent was vitiated by fraud or
fraudulent machinations of Raymundo. In the eyes of the law,
petitioners are the rightful and legal owners of the subject 512
square-meter lot anchored on their purchase thereof from de Leon.
This right must be upheld and protected.
On the issue of lack of consideration, the contract of sale or
Kasulatan states that respondents paid petitioners PhP 15,000 for
the 512-square meter portion, thus:
Na kaming magasawang Ramon Lequin at Virginia R. Lequin,
nawang may sapat na gulang, pilipino at nakatira sa 9 Diamond
Court, Brixton Ville Subdivision, Camarin, Kalookan City, alang-alang
sa halagang LABINGLIMANG LIBONG PISO (P 15,000.00) salaping
pilipino na binayaran sa amin ng buong kasiyahang loob namin ng
magasawang Raymundo Vizconde at Salome Lequin, nawang may
sapat na gulang, pilipino at nakatira sa Sto. Rosario, Aliaga, Nueva
Ecija, ay amin naman ngayon inilipat, ibinigay at ipinagbili ng
bilihang tuluyan sa naulit na magasawang Raymundo Vizconde at
Salome Lequin, at sa kanilang mga tagapagmana ang x x x.[15]
Page 162
On its face, the above contract of sale appears to be supported by a
valuable consideration. We, however, agree with the trial courts
finding that this is a simulated sale and unsupported by any
consideration, for respondents never paid the PhP 15,000 purported
purchase price.
Section 9 of Rule 130 of the Revised Rules on Evidence gives both
the general rule and exception as regards written agreements, thus:
SEC. 9. Evidence of written agreements.When the terms of an
agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to
the terms of the written agreement if he puts in issue in his
pleading:
(a) An intrinsic ambiguity, mistake or imperfection in written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
The term agreement includes wills.
The second exception provided for the acceptance of parol evidence
applies to the instant case. Lack of consideration was proved by
EVIDENCE (Rule 130 Documentary Evidence Cases)
petitioners evidence aliunde showing that the Kasulatan did not
express the true intent and agreement of the parties. As explained
above, said sale contract was fraudulently entered into through the
misrepresentations of respondents causing petitioners vitiated
consent.
Moreover, the evidence of petitioners was uncontroverted as
respondents failed to adduce any proof that they indeed paid PhP
15,000 to petitioners. Indeed, having asserted their purchase of the
512-square meter portion of petitioners based on the Kasulatan, it
behooves upon respondents to prove such affirmative defense of
purchase. Unless the party asserting the affirmative defense of an
issue sustains the burden of proof, his or her cause will not succeed.
If he or she fails to establish the facts of which the matter asserted
is predicated, the complainant is entitled to a verdict or decision in
his or her favor.[16]
In the instant case, the record is bereft of any proof of payment by
respondents and, thus, their affirmative defense of the purported
purchase of the 512-square meter portion fails. Thus, the clear
finding of the trial court:
2. x x x [I]t was established by the plaintiffs [petitioners] that they
were the ones who paid the defendants the amount of FIFTY
THOUSAND PESOS (Php50,000.00) and execute a deed of sale also
in favor of the defendants. In a simple logic, where can you find a
contract that a VENDOR will convey his real property and at the
same time pay the VENDEE a certain amount of money without
receiving anything in return?[17]
Page 163

There can be no doubt that the contract of sale or Kasulatan lacked
the essential element of consideration. It is a well-entrenched rule
that where the deed of sale states that the purchase price has been
paid but in fact has never been paid, the deed of sale is null and void
ab initio for lack of consideration.[18] Moreover, Art. 1471 of the
Civil Code, which provides that if the price is simulated, the sale is
void, also applies to the instant case, since the price purportedly
paid as indicated in the contract of sale was simulated for no
payment was actually made.[19]
Consideration and consent are essential elements in a contract of
sale. Where a partys consent to a contract of sale is vitiated or
where there is lack of consideration due to a simulated price, the
contract is null and void ab initio.
Anent the second issue, the PhP 50,000 paid by petitioners to
respondents as consideration for the transfer of the 500-square
meter lot to petitioners must be restored to the latter. Otherwise,
an unjust enrichment situation ensues. The facts clearly show that
the 500-square meter lot is legally owned by petitioners as shown
by the testimony of de Leon; therefore, they have no legal
obligation to pay PhP 50,000 therefor. Art. 22 of the Civil Code
provides that every person who through an act or performance by
another, or any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground,
shall return the same to him. Considering that the 512 square-meter
lot on which respondents house is located is clearly owned by
petitioners, then the Court declares petitioners legal ownership
over said 512 square-meter lot. The amount of PhP 50,000 should
EVIDENCE (Rule 130 Documentary Evidence Cases)
only earn interest at the legal rate of 6% per annum from the date
of filing of complaint up to finality of judgment and not 12% since
such payment is neither a loan nor a forbearance of credit.[20] After
finality of decision, the amount of PhP 50,000 shall earn interest of
12% per annum until fully paid.
The award of moral and exemplary damages must be reinstated in
view of the fraud or fraudulent machinations employed by
respondents on petitioners. The grant of damages in the concept of
attorneys fees in the amount of PhP 10,000 must be maintained
considering that petitioners have to incur litigation expenses to
protect their interest in conformity to Art. 2208(2)[21] of the Civil
Code.
Considering that respondents have built their house over the 512-
square meter portion legally owned by petitioners, we leave it to
the latter what course of action they intend to pursue in relation
thereto. Such is not an issue in this petition.
WHEREFORE, the instant petition is hereby GRANTED. Accordingly,
the CA Decision dated July 20, 2006 and Resolution dated March 30,
2007 in CA-G.R. CV No. 83595 are hereby REVERSED and SET ASIDE.
The Decision of the RTC, Branch 28 in Cabanatuan City in Civil Case
No. 4063 is REINSTATED with the MODIFICATION that the amount
of fifty thousand pesos (PhP 50,000) which respondents must return
to petitioners shall earn an interest of 6% per annum from the date
of filing of the complaint up to the finality of this Decision, and 12%
from the date of finality of this Decision until fully paid.
Page 164
No pronouncement as to costs.
SO ORDERED.
SALIMBANGON v TAN
DECISION
ABAD, J.:
This case is about the admissibility of testimony that tends to
modify a written agreement among the parties and the extinction of
the easement of right of way upon consolidation in one person of
the ownership of the dominant and the servient estates.
The Facts and the Case
Guillermo Ceniza died intestate on July 11, 1951, leaving a parcel of
land at Poblacion, Mandaue City. Twenty years later on July 17,
1973 his children Benedicta, Guillermo, Jr., Victoria, Eduardo, and
Carlos executed an extrajudicial declaration of heirs and partition,
adjudicating and dividing the land among themselves as follows:
1. To Benedicta T. Cabahug, Lot A subject to a perpetual and
grat[u]itous road right of way 1.50 m. wide along its NW. boundary
in favor of Lots B, E, and D, of the subdivision;
2. To Eduardo Ceniza, Lot B subject to a perpetual and grat[u]itous
road right of way 1.50 m. wide along its SW. boundary in favor of
Lots A, D & E of the subdivision;
3. To Carlos Ceniza, Lot C;
4. To Guillermo Ceniza Jr., Lot D subject to a perpetual and
grat[u]itous road right of way 1.50 m. wide along its NE. boundary in
favor of Lot B and E of the subdivision; and
5. To Victoria Ceniza, Lot E, subject to a perpetual and grat[u]itous
road right of way 1.50 m. wide along its SW. boundary in favor of
Lot D of the subdivision.1
EVIDENCE (Rule 130 Documentary Evidence Cases)
Lots A, B, and C were adjacent to a city street. But Lots D and E were
not, they being interior lots. To give these interior lots access to the
street, the heirs established in their extrajudicial partition an
easement of right of way consisting of a 3-meter wide alley between
Lots D and E that continued on between Lots A and B and on to the
street. The partition that embodied this easement of right of way
was annotated on the individual titles issued to the heirs.
Roughly, the lots including the easement of right of way would take
the following configurations,2 not drawn here to accurate size and
proportion but illustrative of their relative locations:
But, realizing that the partition resulted in an unequal division of the
property, the heirs modified their agreement by eliminating the
easement of right of way along Lots A, D, and E, and in its place,
imposed a 3-meter wide alley, an easement of right of way, that ran
exclusively along the southwest boundary of Lot B from Lots D and E
to the street.3 Thus:
Victoria (now petitioner Victoria Salimbangon) later swapped lots
with Benedicta with the result that Victoria became the owner of
Lot A, one of the three lots adjacent to the city street. Victoria and
her husband (the Salimbangons) constructed a residential house on
this lot and built two garages on it. One garage abutted the street
while the other, located in the interior of Lot A, used the alley or
easement of right of way existing on Lot B to get to the street.
Victoria had this alley cemented and gated.
Subsequently, however, respondent spouses Santos and Erlinda Tan
(the Tans) bought Lots B, C, D, and E from all their owners. The Tans
built improvements on Lot B that spilled into the easement area.
They also closed the gate that the Salimbangons built. Unable to use
Page 165
the old right of way, the Salimbangons lodged a complaint with the
City Engineer of Mandaue against the Tans. For their part, the Tans
filed an action with the Regional Trial Court (RTC) of Mandaue
against the Salimbangons in Civil Case MAN-3223 for the
extinguishment of the easement on Lot B and damages with
application for preliminary injunction.4 The Salimbangons filed their
answer with counterclaims.
After hearing or on February 9, 2001 the RTC rendered judgment,
upholding the Salimbangons’ easement of right of way over the
alley on Lot B, the lot that belonged to the Tans. The court pointed
out that the easement in this case was established by agreement of
the parties for the benefit of Lots A, D, and E. Consequently, only by
mutual agreement of the parties could such easement be
extinguished. The RTC declined, however, to award damages to the
Salimbangons.
Both parties appealed to the Court of Appeals (CA) in CA-G.R. CV
73468. On July 27, 2007 the CA5 reversed the RTC decision,
extinguished the easement of right of way established on the alley
in Lot B of the Tans, and denied the Salimbangons’ claim for
damages. The court ruled that based on the testimony of one of the
previous owners, Eduardo Ceniza, the true intent of the parties was
to establish that easement of right of way for the benefit of the
interior lots, namely, Lots D and E. Consequently, when ownership
of Lots B, D, and E was consolidated into the Tans, the easement
ceased to have any purpose and became extinct. The Salimbangons
filed a motion for reconsideration but the CA denied the same in its
resolution of October 14, 2008. This prompted them to file the
present petition.
Questions Presented
Two questions are presented:
EVIDENCE (Rule 130 Documentary Evidence Cases)
1. Whether or not the CA erred in admitting in evidence contrary to
the parol evidence rule Eduardo Ceniza’s testimony respecting the
true intent of the heirs in establishing the easement of right of way
as against what they stated in their written agreement; and
2. Whether or not the CA erred in ruling that the easement of right
of way established by the partition agreement among the heirs for
the benefit of Lot A has been extinguished.
The Court’s Ruling
One. The Salimbangons point out that the CA ought to have rejected
Eduardo Ceniza’s testimony that the heirs had intended to establish
the easement of right of way solely for the benefit of the interior
Lots D and E which had no access to the city street. The partition
agreement also made Lot A, now owned by the Salimbangons, a
beneficiary of that easement. Thus:
2. To Eduardo Ceniza [now the Tans], Lot B subject to a perpetual
and grat[u]itous road right of way 1.50 m. wide along its SW.
boundary in favor of Lots A, D & E of the subdivision;6
(Underscoring supplied)
The parol evidence rule, said the Salimbangons, precluded the
parties from introducing testimony that tended to alter or modify
what the parties had agreed on above.
But the exclusionary provision of the parol evidence rule admits of
exceptions. Section 9, Rule 130 of the Revised Rules on Evidence
states:
Sec. 9. Evidence of written agreements. - When the terms of an
agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement. However, a party
Page 166
may present evidence to modify, explain or add to the terms of the
written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
The term "agreement" includes wills. (7a)
Here, the Tans had put in issue the true intent and agreement of the
parties to the partition when they alleged in their complaint that,
contrary to what paragraph 2 quoted above seems to imply, the
easement was actually for the benefit of Lots D and E only. The
complaint thus said:
So that in the same partition instrument, the said heirs voluntarily
agreed to establish the so-called "perpetual and gratuitous
easement of road right of way" along LOT A, with 1.50 meters wide
and along LOT B, with the same 1.50 meters wide.
Understandably, this servitude voluntarily constituted on LOTS A
and B was had for the benefit and use by the owners of LOTS D
(Guillermo Ceniza, Jr.) and E (defendant Victoria Ceniza
Salimbagon).7 (Underscoring supplied)
Consequently, with the above averment, the Tans were entitled to
introduce evidence to establish the true intent and agreement of
the parties although this may depart from what the partition
agreement literally provided.
At any rate, as the CA said, the Salimbangons did not object at the
hearing to admission of Eduardo Ceniza’s testimony even when this
seemed at variance, as far as they were concerned, with the
EVIDENCE (Rule 130 Documentary Evidence Cases)
partition agreement among the heirs. Consequently, the
Salimbangons may also be deemed to have waived their right to
now question such testimony on appeal.
Two. The Salimbangons point out that the partition agreement
among the heirs established in their favor, as owners of Lot A, an
easement of right of way on Lot B from the interior of their lot to
the city street. Since theirs was an easement established by
agreement of the parties, only by mutual agreement could the same
be extinguished.
But, firstly, as Eduardo Ceniza testified, the true agreement of the
heirs was for the establishment of an easement of right of way for
the benefit solely of the lots that did not have direct access to the
street, namely Lots D and E. His testimony made sense.1avvphi1
As originally constituted in that agreement, each of Lots A and B
was to contribute a strip of 1.5 meters between them that when
combined formed a 3-meter wide alley leading from Lots D and E to
the street. To the extent that Lots A and B retained the right to use
the 1.5-meter portion that they contributed to the establishment of
the easement, the agreement gave their owners the right to use the
common alley as well. As Eduardo testified, however, the true
intent of the heirs was to give Lots D and E access to the street. Lots
A and B did not need this alley since they were facing the
street.1avvphi1
Consequently, when the owner of Lots D and E also became the
owner of Lot B, the easement of right of way on Lot B became
extinct by operation of law.8 The existence of a dominant estate
and a servient estate is incompatible with the idea that both estates
belong to the same person.
Secondly, there is no question that when the heirs realized that it
was not fair to take strips of 1.5 meters from each of Lots A, D, and
Page 167
E for the easement of right of way when these lots were already
small, the heirs executed a "Cancellation of Annotation of Right of
Way, etc." that cancelled the easement of right of way they earlier
established on Lots A, D, and E and in its place imposed a 3-meter
wide easement of right of way solely on Lot B.
Although the "cancellation" document did not say so, it was implicit
that the changed location of the easement cancelled not only the
1.5-meter strip of easement imposed on Lot A of the Salimbangons
but also their right to use the new 3-meter easement alley that lay
entirely on Lot B. Strictly speaking, if the Salimbangons insist that
their right as dominant estate under the original partition
agreement remains, then that would be partly on a 1.5-meter strip
of their own Lot A and partly on the equivalent 1.5-meter strip on
the side of Lot B, not on the new 3-meter alley established entirely
on Lot B.
The point is that, obviously, in establishing the new easement of
right of way, the heirs intended to abandon the old one. Since this
3-meter alley on Lot B directly connected Lots D and E to the street,
it is also obvious that only the latter lots were its intended
beneficiary. And, with the ownership of Lots B, D, and E now
consolidated in a common owner, namely, the Tans, then the
easement of right of way on Lot B may be said to have been
extinguished by operation of law.9
ACCORDINGLY, this Court DENIES the petition and AFFIRMS in all
respects the decision dated July 27, 2007 and resolution dated
October 14, 2008 of the Court of Appeals in CA-G.R. CV 73468.
SO ORDERED.

EVIDENCE (Rule 130 Documentary Evidence Cases) Page 168