Case #67 Best Evidence Rule

G.R. No. 160065

February 28, 2006

FELINO
EBREO,
SPOUSES
ANTONIO
and
EVELYN
P.
BERAA,
IGNACIO
EBREO
and
ELEUTERIA
vs.
GIL EBREO, represented by His Attorney-in-Fact, FELIXBERTO EBREO, FLAVIANO EBREO and HOMOBONO CUETO, Respondents.

CUETO,Petitioners,

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 Ebreo and 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.
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 Kanluran ay 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 lawph!l.net
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 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. 482216 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. 40427 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 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 Batangas City. 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 decision11 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.
(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 decision13 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.
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. Defendantappellants 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 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 affirmed by this court
provided they are supported by substantial evidence on record, as in the case at bench. 17
As recounted by defendants, now petitioners, Antonio and Evelyn Ebreo, Lot 9046-F was sold by the heirs of Felipe Ebreo initially to Santiago Puyo
sometime in 1967 or 1968 as evidenced by a deed of sale executed and ratified before Atty. Doroteo Chavez in Batangas City. Santiago Puyo
caused the transfer of the tax declaration in his name and caused the sale to be annotated therein. Only this annotation in t he tax declaration was
offered as proof of the sale. Santiago Puyo took possession, cultivated the land, exercised uninterrupted ownership and paid real estate taxes
thereon for a period of eight years.
Petitioners went on further to state that the Deed of Sale from the heirs of Felipe Ebreo to Santiago Puyo could not be presented because the copy
on file with the Office of the City Assessor was lost in the fire which occurred in 23 May 1979 that gutted the building housing their office. From then
on, petitioners advance that they have paid the real estate taxes on the land and were in open, continous and uninterrupted possession until the
Complaint for Partition, Reconveyance and Damages was filed by the Respondents.
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 Santiago Puyo, and
thereafter from Santiago Puyo to them. To buttress this claim of sale by the heirs to Santiago Puyo, petitioners presented the testimony of Antonio
Pajilan of the City Assessors Office of Batangas City who testified on the annotation in Tax Declaration No. 48221. The annotation reads:
Deed of sale
D.V. P2,500.00
Doc. on file
Doc. No. 312
Page No. 17
Book No. VI

Series of 196718
The testimony of Pajilan went on as follows:
Q I am showing to you a tax declaration No. 32941 in the name of Gil Flaviano, Felino, Ignacio, Genoveva, Eleuteria Cueto which is already marked
as Exhibit "10" for the defendants in this case and Exhibit "F" for the plaintiff, will you please examine the same and identify it?
A Witness is examining the document. I think this tax declaration is an owners copy, Sir.
Q But this tax declaration was issued by your office, the City Assessor of Batangas?
A Yes, Sir.
Q Can you inform before this Honorable Court, if this tax declaration was still existing in your office or a copy thereof?
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 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 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, Aguados testimony 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
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 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:

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 Santiago Puyo." (t.s.n. pp. 13-14, Direct, Aug. 16, 1995). In fine,
they were not witnesses to the 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 t he 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)
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 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 Notarial
Register 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 Ebreo because 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 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.
SO ORDERED.

Case #68 Best Evidence Rule

G.R. No. 143338 July 29, 2005
THE
CONSOLIDATED
BANK
AND
TRUST
vs.
DEL MONTE MOTOR WORKS, INC., NARCISO G. MORALES,1 AND SPOUSE, Respondents.

CORPORATION

(SOLIDBANK), Petitioners,

DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari of the Decision2 of the Court of Appeals in CA-G.R. CV No. 16886 entitled, "The Consolidated Bank & Trust
Corporation (SOLIDBANK) v. Del Monte Motor Works, Inc., Narciso O. Morales and Spouse" promulgated on 25 November 1999 and of the Resolution
of the appellate court dated 11 May 2000 denying petitioners motion for reconsideration. Said decision and resolution affirmed the order dated 28
December 1987 of the Regional Trial Court (RTC), Branch 27, Manila.
The facts of the case are as follows:
On 13 June 1984, petitioner filed before the RTC of Manila a complaint 3 for recovery of sum of money against respondents, impleading the spouse of
respondent Narciso O. Morales (respondent Morales) in order to bind their conjugal partnership of gains. Petitioner, a domestic banking and trust
corporation, alleges therein that on 23 April 1982, it extended in favor of respondents a loan in the amount of One Million Pesos (P1,000,000.00) as
evidenced by a promissory note executed by respondents on the same date. Under the promissory note, respondents Del Monte Motor Works, Inc.
(respondent corporation) and Morales bound themselves jointly and severally to pay petitioner the full amount of the loan through twenty-five
monthly installments of P40,000.00 a 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 monthly installments, the full amount of the loan became due and 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 these demands,
respondents still failed to pay their indebtedness which, as of 09 March 1984, stood at P1,332,474.55. Petitioner attached to its complaint as Annexes
"A," "B," and "C," respectively, a photocopy of the promissory note supposedly executed by respondents, a copy of the demand letter it sent
respondents dated 20 January 1983, and statement of account pertaining to respondents loan.
On 31 October 1984, petitioner filed an Ex-Parte Motion to Declare the Defendants in Default which was opposed by the defendants upon the
ground that they were never served with copies of the summons and of petitioners complaint.
On 23 November 1984, respondent corporation filed before the trial court a manifestation attaching thereto its answer to petitioners complaint
which states the following:
2- That it denies generally and specifically the allegations contained in paragraphs 3, 4, 5, 6, 7 and 8 thereof for lack of knowledge and information
sufficient to form a belief as to the truth of the matters therein alleged, the truth being those alleged in the Special and Affirmative Defenses
hereinbelow contained;
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. TOLENTINO4
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 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
Affiant5
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 7 petitioners 20 January 1983 demand letter marked as
Exhibit 8 Tolentinos letter to petitioner dated 10 February 1983 and marked as Exhibit 9 and the 09 March 1984 statement of account sent to
respondents marked as Exhibit 10
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 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 motion17 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:
WHEREFORE, the instant case against defendants Del Monte Motor Works, Inc. and Narciso O. Morales and spouse, is hereby DISMI SSED, 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 plaintiffappellant['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 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 PROMISSO RY
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 FAV OR
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 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
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 ofSongco 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
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;
(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:
(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, 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 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.
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, 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.

Case #69 Best Evidence Rule

G.R. No. 156132

February 6, 2007

CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS FINANCE CORPORATION, doing business under the name and style of FNCB
Finance, Petitioners,
vs.
MODESTA R. SABENIANO, Respondent.
RESOLUTION
CHICO-NAZARIO, J.:
On 16 October 2006, this Court promulgated its Decision1 in the above-entitled case, the dispositive portion of which reads
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
1. PNs No. 23356 and 23357 are DECLARED subsisting and outstanding. Petitioner Citibank is ORDEREDto 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 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.
Subsequent thereto, respondent Modesta R. Sabeniano filed an Urgent Motion to Clarify and/or Confirm Decision with Notice of Judgment on 20
October 2006; while, petitioners Citibank, N.A. and FNCB Finance 2 filed their Motion for Partial Reconsideration of the foregoing Decision on 6
November 2006.
The facts of the case, as determined by this Court in its Decision, may be summarized as follows.
Respondent was a client of petitioners. She had several deposits and market placements with petitioners, among which were her savings account
with the local branch of petitioner Citibank (Citibank-Manila3 ); money market placements with petitioner FNCB Finance; and dollar accounts with
the Geneva branch of petitioner Citibank (Citibank-Geneva). At the same time, respondent had outstanding loans with petitioner Citibank, incurred
at Citibank-Manila, the principal amounts aggregating to P1,920,000.00, all of which had become due and demandable by May 1979. Despite
repeated demands by petitioner Citibank, respondent failed to pay her outstanding loans. Thus, petitioner Citibank used respondents deposits and
money market placements to off-set and liquidate her outstanding obligations, as follows

Respondents outstanding obligation (principal and interest as of 26

October 1979)
P 2,156,940.58
Less: Proceeds from respondents money market placements with
petitioner FNCB Finance (principal and interest as of 5
September 1979)
(1,022,916.66)
Deposits in respondents bank accounts with petitioner
Citibank
(31,079.14)
Proceeds of respondents money market placements and
dollar accounts with Citibank-Geneva (peso equivalent as of
26 October 1979)
(1,102,944.78)
Balance of respondents obligation

P 0.00

Respondent, however, denied having any outstanding loans with petitioner Citibank. She likewise denied that she was duly informed of the offsetting or compensation thereof made by petitioner Citibank using her deposits and money market placements with petitioners. Hence, respondent
sought to recover her deposits and money market placements.
Respondent instituted a complaint for "Accounting, Sum of Money and Damages" against petitioners, docketed as Civil Case No. 11336, before the
Regional Trial Court (RTC) of Makati City. After trial proper, which lasted for a decade, the RTC rendered a Decision4 on 24 August 1995, 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;
(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 afore-mentioned RTC Decision to the Court of Appeals, docketed as CA-G.R. CV No. 51930. On 26 March 2002, the
appellate court promulgated its Decision,5 ruling entirely in favor of respondent, to wit
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 plaintiffappellant 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.;
(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.
Acting on petitioners Motion for Partial Reconsideration, the Court of Appeals issued a Resolution, 6 dated 20 November 2002, modifying its earlier
Decision, thus
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.
Since the Court of Appeals Decision, dated 26 March 2002, as modified by the Resolution of the same court, dated 20 November 2002, was still
principally in favor of respondent, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. After giving
due course to the instant Petition, this Court promulgated on 16 October 2006 its Decision, now subject of petitioners Motion for Partial
Reconsideration.1awphi1.net
Among the numerous grounds raised by petitioners in their Motion for Partial Reconsideration, this Court shall address and discuss herein only
particular points that had not been considered or discussed in its Decision. Even in consideration of these points though, this Court remains
unconvinced that it should modify or reverse in any way its disposition of the case in its earlier Decision.
As to the off-setting or compensation of respondents outstanding loan balance with her dollar deposits in Citibank-Geneva

Petitioners take exception to the following findings made by this Court in its Decision, dated 16 October 2006, disallowing the off-setting or
compensation of the balance of respondents outstanding loans using her dollar deposits in Citibank-Geneva
Without the Declaration of Pledge, petitioner Citibank had no authority to demand the remittance of respondents dollar accounts with CitibankGeneva 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, respondent was the creditor and CitibankGeneva 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.
Petitioners maintain that respondents Declaration of Pledge, by virtue of which she supposedly assigned her dollar accounts with Citibank-Geneva
as security for her loans with petitioner Citibank, is authentic and, thus, valid and binding upon respondent. Alternatively, petitioners aver that even
without said Declaration of Pledge, the off-setting or compensation made by petitioner Citibank using respondents dollar accounts with CitibankGeneva to liquidate the balance of her outstanding loans with Citibank-Manila was expressly authorized by respondent herself in the promissory
notes (PNs) she signed for her loans, as well as sanctioned by Articles 1278 to 1290 of the Civil Code. This alternative argument is anchored on the
premise that all branches of petitioner Citibank in the Philippines and abroad are part of a single worldwide corporate entity and share the same
juridical personality. In connection therewith, petitioners deny that they ever admitted that Citibank-Manila and Citibank-Geneva are distinct and
separate entities.
Petitioners call the attention of this Court to the following provision found in all of the PNs 7 executed by respondent for her loans
At or after the maturity of this note, or when same becomes due under any of the provisions hereof, any money, stocks, bonds, or other property of
any kind whatsoever, on deposit or otherwise, to the credit of the undersigned on the books of CITIBANK, N.A. in transit or i n their possession, may
without notice be applied at the discretion of the said bank to the full or partial payment of this note.
It is the petitioners contention that the term "Citibank, N.A." used therein should be deemed to refer to all branches of petitioner Citibank in the
Philippines and abroad; thus, giving petitioner Citibank the authority to apply as payment for the PNs even respondents dollar accounts with
Citibank-Geneva. Still proceeding from the premise that all branches of petitioner Citibank should be considered as a single entity, then it should not
matter that the respondent obtained the loans from Citibank-Manila and her deposits were with Citibank-Geneva. Respondent should be
considered the debtor (for the loans) and creditor (for her deposits) of the same entity, petitioner Citibank. Since petitioner Citibank and respondent
were principal creditors of each other, in compliance with the requirements under Article 1279 of the Civil Code, 8 then the former could have very
well used off-setting or compensation to extinguish the parties obligations to one another. And even without the PNs, off-setting or compensation
was still authorized because according to Article 1286 of the Civil Code, "Compensation takes place by operation of law, even though the debts
may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment."
Pertinent provisions of Republic Act No. 8791, otherwise known as the General Banking Law of 2000, governing bank branches are reproduced
below
SEC. 20. Bank Branches. Universal or commercial banks may open branches or other offices within or outside the Philippines upon prior approval of
the Bangko Sentral.
Branching by all other banks shall be governed by pertinent laws.
A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as outlets for the presentation and/or sale of the financial
products of its allied undertaking or its investment house units.
A bank authorized to establish branches or other offices shall be responsible for all business conducted in such branches and offices to the same
extent and in the same manner as though such business had all been conducted in the head office. A bank and its branches and offices shall be
treated as one unit.

xxxx
SEC. 72. Transacting Business in the Philippines. The entry of foreign banks in the Philippines through the establishment of branches shall be
governed by the provisions of the Foreign Banks Liberalization Act.
The conduct of offshore banking business in the Philippines shall be governed by the provisions of Presidential Decree No. 1034, otherwise known as
the "Offshore Banking System Decree."
xxxx
SEC. 74. Local Branches of Foreign Banks. In case of a foreign bank which has more than one (1) branch in the Philippines, all such branches shall
be treated as one (1) unit for the purpose of this Act, and all references to the Philippine branches of foreign banks shall be held to refer to such
units.
SEC. 75. Head Office Guarantee. In order to provide effective protection of the interests of the depositors and other creditors of Philippine
branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch.
Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have preferential rights to the assets of
such branch in accordance with existing laws.
Republic Act No. 7721, otherwise known as the Foreign Banks Liberalization Law, lays down the policies and regulations specifically concerning the
establishment and operation of local branches of foreign banks. Relevant provisions of the said statute read
Sec. 2. Modes of Entry. - The Monetary Board may authorize foreign banks to operate in the Philippine banking system through any of the following
modes of entry: (i) by acquiring, purchasing or owning up to sixty percent (60%) of the voting stock of an existing bank; (ii) by investing in up to sixty
percent (60%) of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or (iii) by establishing branches with full
banking authority: Provided, That a foreign bank may avail itself of only one (1) mode of entry: Provided, further, That a foreign bank or a Philippine
corporation may own up to a sixty percent (60%) of the voting stock of only one (1) domestic bank or new banking subsidiary.
Sec. 5. Head Office Guarantee. - The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine
branches.
It is true that the afore-quoted Section 20 of the General Banking Law of 2000 expressly states that the bank and its branches shall be treated as one
unit. It should be pointed out, however, that the said provision applies to a universal 9 or commercial bank,10 duly established and organized as a
Philippine corporation in accordance with Section 8 of the same statute,11 and authorized to establish branches within or outside the Philippines.
The General Banking Law of 2000, however, does not make the same categorical statement as regards to foreign banks and their branches in the
Philippines. What Section 74 of the said law provides is that in case of a foreign bank with several branches in the country, all such branches shall be
treated as one unit. As to the relations between the local branches of a foreign bank and its head office, Section 75 of the General Banking Law of
2000 and Section 5 of the Foreign Banks Liberalization Law provide for a "Home Office Guarantee," in which the head office of the foreign bank shall
guarantee prompt payment of all liabilities of its Philippine branches. While the Home Office Guarantee is in accord with the principle that these
local branches, together with its head office, constitute but one legal entity, it does not necessarily support the view that said principle is true and
applicable in all circumstances.
The Home Office Guarantee is included in Philippine statutes clearly for the protection of the interests of the depositors and other creditors of the
local branches of a foreign bank.12 Since the head office of the bank is located in another country or state, such a guarantee is necessary so as to
bring the head office within Philippine jurisdiction, and to hold the same answerable for the liabilities of its Philippine branches. Hence, the principle
of the singular identity of that the local branches and the head office of a foreign bank are more often invoked by the clients in order to establish
the accountability of the head office for the liabilities of its local branches. It is under such attendant circumstances in which the American
authorities and jurisprudence presented by petitioners in their Motion for Partial Reconsideration were rendered.

Now the question that remains to be answered is whether the foreign bank can use the principle for a reverse purpose, in order to extend the liability
of a client to the foreign banks Philippine branch to its head office, as well as to its branches in other countries. Thus, if a client obtains a loan from
the foreign banks Philippine branch, does it absolutely and automatically make the client a debtor, not just of the Philippine branch, but also of the
head office and all other branches of the foreign bank around the world? This Court rules in the negative.
There being a dearth of Philippine authorities and jurisprudence on the matter, this Court, just as what petitioners have done, turns to American
authorities and jurisprudence. American authorities and jurisprudence are significant herein considering that the head office of petitioner Citibank is
located in New York, United States of America (U.S.A.).
Unlike Philippine statutes, the American legislation explicitly defines the relations among foreign branches of an American bank. Section 25 of the
United States Federal Reserve Act13 states that
Every national banking association operating foreign branches shall conduct the accounts of each foreign branch independently of the accounts
of other foreign branches established by it and of its home office, and shall at the end of each fiscal period transfer to its general ledger the profit or
loss accrued at each branch as a separate item.
Contrary to petitioners assertion that the accounts of Citibank-Manila and Citibank-Geneva should be deemed as a single account under its head
office, the foregoing provision mandates that the accounts of foreign branches of an American bank shall be conducted independently of each
other. Since the head office of petitioner Citibank is in the U.S.A., then it is bound to treat its foreign branches in accordance with the said provision. It
is only at the end of its fiscal period that the bank is required to transfer to its general ledger the profit or loss accrued at each branch, but still
reporting it as a separate item. It is by virtue of this provision that the Circuit Court of Appeals of New York declared in Pan-American Bank and Trust
Co. v. National City Bank of New York14 that a branch is not merely a tellers window; it is a separate business entity.
The circumstances in the case of McGrath v. Agency of Chartered Bank of India, Australia & China 15 are closest to the one at bar. In said case, the
Chartered Bank had branches in several countries, including one in Hamburg, Germany and another in New York, U.S.A., and yet another in London,
United Kingdom. The New York branch entered in its books credit in favor of four German firms. Said credit represents collections made from bills of
exchange delivered by the four German firms. The same four German firms subsequently became indebted to the Hamburg branch. The London
branch then requested for the transfer of the credit in the name of the German firms from the New York branch so as to be applied or setoff against
the indebtedness of the same firms to the Hamburg branch. One of the question brought before the U.S. District Court of New York was "whether or
not the debts and the alleged setoffs thereto are mutual," which could be answered by determining first whether the New York and Hamburg
branches of Chartered Bank are individual business entities or are one and the same entity. In denying the right of the Hamburg branch to setoff, the
U.S. District Court ratiocinated that
The structure of international banking houses such as Chartered bank defies one rigorous description. Suffice it to say for present analysis, branches
or agencies of an international bank have been held to be independent entities for a variety of purposes (a) deposits payable only at branch where
made; Mutaugh v. Yokohama Specie Bank, Ltd., 1933, 149 Misc. 693, 269 N.Y.S. 65; Bluebird Undergarment Corp. v. Gomez, 1931, 139 Misc. 742, 249
N.Y.S. 319; (b) checks need be honored only when drawn on branch where deposited; Chrzanowska v. Corn Exchange Bank, 1916, 173 App. Div.
285, 159 N.Y.S. 385, affirmed 1919, 225 N.Y. 728, 122 N.E. 877; subpoena duces tecum on foreign banks record barred; In re Harris, D.C.S.D.N.Y. 1939,
27 F. Supp. 480; (d) a foreign branch separate for collection of forwarded paper; Pan-American Bank and Trust Company v. National City Bank of
New York, 2 Cir., 1925, 6 F. 2d 762, certiorari denied 1925, 269 U.S. 554, 46 S. Ct. 18, 70 L. Ed. 408. Thus in law there is nothing innately unitary about the
organization of international banking institutions.
Defendant, upon its oral argument and in its brief, relies heavily on Sokoloff v. National City Bank of New York,1928, 250 N.Y. 69, 164 N.E. 745, as
authority for the proposition that Chartered Bank, not the Hamburg or New York Agency, is ultimately responsible for the amounts owing its German
customers and, conversely, it is to Chartered Bank that the German firms owe their obligations. The Sokoloff case, aside from its violently different fact
situation, is centered on the legal problem of default of payment and consequent breach of contract by a branch bank. It does not stand for the
principle that in every instance an international bank with branches is but one legal entity for all purposes. The defendant concedes in its brief (p. 15)

that there are purposes for which the various agencies and branches of Chartered Bank may be treated in law as separate ent ities. I fail to see the
applicability of Sokoloff either as a guide to or authority for the resolution of this problem. The facts before me and the cases catalogued supra lend
weight to the view that we are dealing here with Agencies independent of one another.
xxxx
I hold that for instant purposes the Hamburg Agency and defendant were independent business entities, and the attempted setoff may not be
utilized by defendant against its debt to the German firms obligated to the Hamburg Agency.
Going back to the instant Petition, although this Court concedes that all the Philippine branches of petitioner Citibank should be treated as one unit
with its head office, it cannot be persuaded to declare that these Philippine branches are likewise a single unit with the Geneva branch. It would be
stretching the principle way beyond its intended purpose.
Therefore, this Court maintains its original position in the Decision that the off-setting or compensation of respondents loans with Citibank-Manila
using her dollar accounts with Citibank-Geneva cannot be effected. The parties cannot be considered principal creditor of the other. As for the
dollar accounts, respondent was the creditor and Citibank-Geneva was the debtor; and as for the outstanding loans, petitioner Citibank, particularly
Citibank-Manila, was the creditor and respondent was the debtor. Since legal compensation was not possible, petitioner Citibank could only use
respondents dollar accounts with Citibank-Geneva to liquidate her loans if she had expressly authorized it to do so by contract.
Respondent cannot be deemed to have authorized the use of her dollar deposits with Citibank-Geneva to liquidate her loans with petitioner
Citibank when she signed the PNs16 for her loans which all contained the provision that
At or after the maturity of this note, or when same becomes due under any of the provisions hereof, any money, stocks, bonds, or other property of
any kind whatsoever, on deposit or otherwise, to the credit of the undersigned on the books of CITIBANK, N.A. in transit or in their possession, may
without notice be applied at the discretion of the said bank to the full or partial payment of this note.
As has been established in the preceding discussion, "Citibank, N.A." can only refer to the local branches of petitioner Citibank together with its head
office. Unless there is any showing that respondent understood and expressly agreed to a more far-reaching interpretation, the reference to
Citibank, N.A. cannot be extended to all other branches of petitioner Citibank all over the world. Although theoretically, books of the branches form
part of the books of the head office, operationally and practically, each branch maintains its own books which shall only be later integrated and
balanced with the books of the head office. Thus, it is very possible to identify and segregate the books of the Philippine branches of petitioner
Citibank from those of Citibank-Geneva, and to limit the authority granted for application as payment of the PNs to respondents deposits in the
books of the former.
Moreover, the PNs can be considered a contract of adhesion, the PNs being in standard printed form prepared by petitioner Citibank. Generally,
stipulations in a contract come about after deliberate drafting by the parties thereto, there are certain contracts almost all the provisions of which
have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the
party is the affixing of his signature or his "adhesion" thereto. This being the case, the terms of such contract are to be construed strictly against the
party which prepared it.17
As for the supposed Declaration of Pledge of respondents dollar accounts with Citibank-Geneva as security for the loans, this Court stands firm on its
ruling that the non-production thereof is fatal to petitioners cause in light of respondents claim that her signature on such document was a forgery.
It bears to note that the original of the Declaration of Pledge is with Citibank-Geneva, a branch of petitioner Citibank. As between respondent and
petitioner Citibank, the latter has better access to the document. The constant excuse forwarded by petitioner Citibank that Citibank-Geneva
refused to return possession of the original Declaration of Pledge to Citibank-Manila only supports this Courts finding in the preceding paragraphs
that the two branches are actually operating separately and independently of each other.
Further, petitioners keep playing up the fact that respondent, at the beginning of the trial, refused to give her specimen signatures to help establish
whether her signature on the Declaration of Pledge was indeed forged. Petitioners seem to forget that subsequently, respondent, on advice of her

new counsel, already offered to cooperate in whatever manner so as to bring the original Declaration of Pledge before the RTC for inspection. The
exchange of the counsels for the opposing sides during the hearing on 24 July 1991 before the RTC reveals the apparent willingness of respondents
counsel to undertake whatever course of action necessary for the production of the contested document, and the evasive, non-committal, and
uncooperative attitude of petitioners counsel.18
Lastly, this Courts ruling striking down the Declaration of Pledge is not entirely based on respondents allegation of forgery. In its Decision, this Court
already extensively discussed why it found the said Declaration of Pledge highly suspicious and irregular, to wit
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 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. 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. 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 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.
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 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.
Respondent made several attempts to have the original copy of the pledge produced before the RTC so as to have it examined by experts. Yet,
despite several Orders by the RTC, 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. 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.
As far as the Declaration of Pledge is concerned, petitioners failed to submit any new evidence or argument that was not already considered by this
Court when it rendered its Decision.
As to the value of the dollar deposits in Citibank-Geneva ordered refunded to respondent
In case petitioners are still ordered to refund to respondent the amount of her dollar accounts with Citibank-Geneva, petitioners beseech this Court
to adjust the nominal values of respondents dollar accounts and/or her overdue peso loans by using the values of the currencies stipulated at the
time the obligations were established in 1979, to address the alleged inequitable consequences resulting from the extreme and extraordinary
devaluation of the Philippine currency that occurred in the course of the Asian crisis of 1997. Petitioners base their request on Article 1250 of the Civil
Code which reads, "In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time
of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary."
It is well-settled that Article 1250 of the Civil Code becomes applicable only when there is extraordinary inflation or deflation of the currency. Inflation
has been defined as the sharp increase of money or credit or both without a corresponding increase in business transaction. There is inflation when
there is an increase in the volume of money and credit relative to available goods resulting in a substantial and continuing rise in the general price
level.19 In Singson v. Caltex (Philippines), Inc.,20 this Court already provided a discourse as to what constitutes as extraordinary inflation or deflation of
currency, thus
We have held extraordinary inflation to exist when there is a decrease or increase in the purchasing power of the Philippine currency which is
unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen
or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.
An example of extraordinary inflation, as cited by the Court in Filipino Pipe and Foundry Corporation vs. NAWASA,supra, is that which happened to
the deutschmark in 1920. Thus:

"More recently, in the 1920s, Germany experienced a case of hyperinflation. In early 1921, the value of the German mark was 4.2 to the U.S. dollar. By
May of the same year, it had stumbled to 62 to the U.S. dollar. And as prices went up rapidly, so that by October 1923, it had reached 4.2 trillion to
the U.S. dollar!" (Bernardo M. Villegas & Victor R. Abola, Economics, An Introduction [Third Edition]).
As reported, "prices were going up every week, then every day, then every hour. Women were paid several times a day so that they could rush out
and exchange their money for something of value before what little purchasing power was left dissolved in their hands. Some workers tried to beat
the constantly rising prices by throwing their money out of the windows to their waiting wives, who would rush to unload the nearly worthless paper. A
postage stamp cost millions of marks and a loaf of bread, billions." (Sidney Rutberg, "The Money Balloon", New York: Simon and Schuster, 1975, p. 19,
cited in "Economics, An Introduction" by Villegas & Abola, 3rd ed.)
The supervening of extraordinary inflation is never assumed. The party alleging it must lay down the factual basis for the application of Article 1250.
Thus, in the Filipino Pipe case, the Court acknowledged that the voluminous records and statistics submitted by plaintiff-appellant proved that there
has been a decline in the purchasing power of the Philippine peso, but this downward fall cannot be considered "extraordinary" but was simply a
universal trend that has not spared our country. Similarly, in Huibonhoa vs. Court of Appeals, the Court dismissed plaintiff-appellant's unsubstantiated
allegation that the Aquino assassination in 1983 caused building and construction costs to double during the period July 1983 to February 1984.
In Serra vs. Court of Appeals, the Court again did not consider the decline in the peso's purchasing power from 1983 to 1985 to be so great as to
result in an extraordinary inflation.
Like the Serra and Huibonhoa cases, the instant case also raises as basis for the application of Article 1250 the Philippine economic crisis in the early
1980s --- when, based on petitioner's evidence, the inflation rate rose to 50.34% in 1984. We hold that there is no legal or factual basis to support
petitioner's allegation of the existence of extraordinary inflation during this period, or, for that matter, the entire time frame of 1968 to 1983, to merit
the adjustment of the rentals in the lease contract dated July 16, 1968. Although by petitioner's evidence there was a decided decline in the
purchasing power of the Philippine peso throughout this period, we are hard put to treat this as an "extraordinary inflation" within the meaning and
intent of Article 1250.
Rather, we adopt with approval the following observations of the Court of Appeals on petitioner's evidence, especially the NEDA certification of
inflation rates based on consumer price index:
xxx (a) from the period 1966 to 1986, the official inflation rate never exceeded 100% in any single year; (b) the highest official inflation rate recorded
was in 1984 which reached only 50.34%; (c) over a twenty one (21) year period, the Philippines experienced a single-digit inflation in ten (10) years
(i.e., 1966, 1967, 1968, 1969, 1975, 1976, 1977, 1978, 1983 and 1986); (d) in other years (i.e., 1970, 1971, 1972, 1973, 1974, 1979, 1980, 1981, 1982, 1984
and 1989) when the Philippines experienced double-digit inflation rates, the average of those rates was only 20.88%; (e) while there was a decline in
the purchasing power of the Philippine currency from the period 1966 to 1986, such cannot be considered as extraordinary; rather, it is a normal
erosion of the value of the Philippine peso which is a characteristic of most currencies.
"Erosion" is indeed an accurate description of the trend of decline in the value of the peso in the past three to four decades. Unfortunate as this
trend may be, it is certainly distinct from the phenomenon contemplated by Article 1250.
Moreover, this Court has held that the effects of extraordinary inflation are not to be applied without an official declaration thereof by competent
authorities.
The burden of proving that there had been extraordinary inflation or deflation of the currency is upon the party that alleges it. Such circumstance
must be proven by competent evidence, and it cannot be merely assumed. In this case, petitioners presented no proof as to how much, for
instance, the price index of goods and services had risen during the intervening period. 21 All the information petitioners provided was the drop of the
U.S. dollar-Philippine peso exchange rate by 17 points from June 1997 to January 1998. While the said figure was based on the statistics of the Bangko
Sentral ng Pilipinas (BSP), it is also significant to note that the BSP did not categorically declare that the same constitute as an extraordinary inflation.

The existence of extraordinary inflation must be officially proclaimed by competent authorities, and the only competent authority so far recognized
by this Court to make such an official proclamation is the BSP.22
Neither can this Court, by merely taking judicial notice of the Asian currency crisis in 1997, already declare that there had been extraordinary
inflation. It should be recalled that the Philippines likewise experienced economic crisis in the 1980s, yet this Court did not find that extraordinary
inflation took place during the said period so as to warrant the application of Article 1250 of the Civil Code.
Furthermore, it is incontrovertible that Article 1250 of the Civil Code is based on equitable considerations. Among the maxims of equity are (1) he
who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. The latter is a frequently stat ed maxim which is
also expressed in the principle that he who has done inequity shall not have equity.23 Petitioner Citibank, hence, cannot invoke Article 1250 of the
Civil Code because it does not come to court with clean hands. The delay in the recovery 24 by respondent of her dollar accounts with CitibankGeneva was due to the unlawful act of petitioner Citibank in using the same to liquidate respondents loans. Petitioner Citibank even attempted to
justify the off-setting or compensation of respondents loans using her dollar accounts with Citibank-Geneva by the presentation of a highly
suspicious and irregular, and even possibly forged, Declaration of Pledge.
The damage caused to respondent of the deprivation of her dollar accounts for more than two decades is unquestionably relatively more extensive
and devastating, as compared to whatever damage petitioner Citibank, an international banking corporation with undoubtedly substantial capital,
may have suffered for respondents non-payment of her loans. It must also be remembered that petitioner Citibank had already considered
respondents loans paid or liquidated by 26 October 1979 after it had fully effected compensation thereof using respondents deposits and money
market placements. All this time, respondents dollar accounts are unlawfully in the possession of and are being used by petitioner Citibank for its
business transactions. In the meantime, respondents businesses failed and her properties were foreclosed because she was denied access to her
funds when she needed them most. Taking these into consideration, respondents dollar accounts with Citibank-Geneva must be deemed to be
subsisting and continuously deposited with petitioner Citibank all this while, and will only be presently withdrawn by respondent. Therefore, petitioner
Citibank should refund to respondent the U.S. $149,632.99 taken from her Citibank-Geneva accounts, 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.
As to respondents Motion to Clarify and/or Confirm Decision with Notice of Judgment
Respondent, in her Motion, is of the mistaken notion that the Court of Appeals Decision, dated 26 March 2002, as modified by the Resolution of the
same court, dated 20 November 2002, would be implemented or executed together with this Courts Decision.
This Court clarifies that its affirmation of the Decision of the Court of Appeals, as modified, is only to the extent that it recognizes that petitioners had
liabilities to the respondent. However, this Courts Decision modified that of the appellate courts by making its own determination of the specific
liabilities of the petitioners to respondent and the amounts thereof; as well as by recognizing that respondent also had liabilities to petitioner Citibank
and the amount thereof.
Thus, for purposes of execution, the parties need only refer to the dispositive portion of this Courts Decision, dated 16 October 2006, should it already
become final and executory, without any further modifications.
As the last point, there is no merit in respondents Motion for this Court to already declare its Decision, dated 16 October 2006, final and executory. A
judgment becomes final and executory by operation of law and, accordingly, the finality of the judgment becomes a fact upon the lapse of the
reglementary period without an appeal or a motion for new trial or reconsideration being filed. 25 This Court cannot arbitrarily disregard the
reglementary period and declare a judgment final and executory upon the mere motion of one party, for to do so will be a culpable violation of the
right of the other parties to due process.
IN VIEW OF THE FOREGOING, petitioners Motion for Partial Reconsideration of this Courts Decision, dated 16 October 2006, and respondents Motion
for this Court to declare the same Decision already final and executory, are both DENIED for lack of merit.

SO ORDERED.

Case #70 Best Evidence Rule

G.R. No. 177407

February 9, 2011

RICO
vs.
BOARD OF MEDICINE and EDITHA SIOSON, Respondents.

ROMMEL

ATIENZA, Petitioner,

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 Orders2 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-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 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 counteraffidavit 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 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 counteraffidavits 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.
"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 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 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
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 9teaches:
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:
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
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.1awphil 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 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.
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.

Case #71 Parol Evidence Rule

G.R. No. 177710

October 12, 2009

SPS.
RAMON
LEQUIN
vs.
SPS. RAYMUNDO VIZCONDE and SALOME LEQUIN VIZCONDE, Respondents.

and

VIRGINIA

LEQUIN, Petitioners,

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.
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.
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 orsapang 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 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
Decision5 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;
(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 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 defrauded and much less the machinations used by respondents. It ratiocinated that the
allegation of respondents telling petitioners that they own the 1,012-square meter lot and for which petitioners sold them 512 square meters thereof
does not fall in the concept of fraud. Anent the PhP 50,000 petitioners paid to respondents for the 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, required respondents to return the amount to petitioners.
On March 30, 2007, the CA denied petitioners Motion for Reconsideration of the above decision through the assailed resolution. Hence, petitioners
went to this Court.
The Issues
I
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;
II
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN NOT GIVING DUE CREDENCE TO THE FINDINGS OF FACTS OF THE TRIAL COURT
AND HOW THE LATTER APPRECIATED THE TESTIMONIES GIVEN BY THE WITNESSES;
III
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN FINDING THAT THERE WAS NO FRAUD ON THE PART OF THE RESPONDENTVIZCONDES;
IV
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN CONSIDERING THAT THE KASULATAN NG BILIHANG TULUYAN IS A VALID
CONTRACT OF SALE;
V
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN NOT CONSIDERING THAT THE RESPONDENTS DID NOT HAVE THE FINANCIAL
CAPACITY TO PURCHASE THE SUBJECT LAND FROM THE PETITIONERS.9
The Courts Ruling
The petition is meritorious.
The issues boil down to two core questions: whether or not the Kasulatan covering the 512 square-meter lot is a valid contract of sale; and who is the
legal owner of the other 500 square-meter lot.
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 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 Salaysay11 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, 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 t he subject matter of
the contract; and (3) cause of the obligation which is established.
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 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 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 magasawa ng Raymundo
Vizconde at Salome Lequin, at sa kanilang mga tagapagmana ang x x x.15
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 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
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.1avvphi1
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 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 CAG.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.
No pronouncement as to costs.
SO ORDERED.

Case #72 Parol Evidence Rule

G.R. No. 168387

August 25, 2010

SALUN-AT
MARQUEZ
and
NESTOR
DELA
CRUZ, Petitioners,
vs.
ELOISA ESPEJO, ELENITA ESPEJO, EMERITA ESPEJO, OPHIRRO ESPEJO, OTHNIEL ESPEJO, ORLANDO ESPEJO, OSMUNDO ESPEJO, ODELEJO ESPEJO and
NEMI FERNANDEZ, Respondents.
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 Certiorari1 assails the October 7, 2003 Decision,2 as well as the May 11, 2005 Resolution3 of the Court of Appeals (CA) in CA
G.R. SP No. 69981. The dispositive portion of the appellate courts Decision reads:
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;
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
husband7 of respondent Elenita Espejo (Elenita), while the Murong property is tenanted by petitioners Salun-at Marquez (Marquez) and Nestor Dela
Cruz (Dela Cruz).8
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:
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 Sale11described 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:

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 2114 of Republic Act (RA) No. 6657,15executed separate Deeds of Voluntary Land
Transfer (VLTs) in favor of petitioners Marquez 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 Marquez17 and Dela Cruz18 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 Complaint20 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 Answer21 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 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 answered22 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 Decision23
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 OICRARAD 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 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 Decision24
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.
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.
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 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 RBBI26 and petitioners27 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
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
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 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 speculations, surmises, or conjectures; (2)
when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based

on amisappreciation 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
Dismissal of RBBIs appeal

Issue

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 clearcut 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.
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
Is it correct to apply the Best Evidence Rule?

Issue

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 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.
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
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;
(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:
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.1wphi1
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
regarding the subjects of their contracts

intention

of

the

parties

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 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 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. 46A 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. T62096. 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
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 SETASIDE. 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. T62096. 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.

Case #73 Parol Evidence Rule

G.R. No. 185240

January 20, 2010

SPS.
MANUEL
vs.
SPS. SANTOS AND ERLINDA TAN, Respondents.

AND

VICTORIA

SALIMBANGON, Petitioners,

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
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 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 act ion 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:
1. Whether or not the CA erred in admitting in evidence contrary to the parol evidence rule Eduardo Cenizas 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 Courts Ruling
One. The Salimbangons point out that the CA ought to have rejected Eduardo Cenizas 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 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 Cenizas testimony even w hen this seemed at
variance, as far as they were concerned, with the 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 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.