FIRST DIVISION

[G.R. No. 188956. March 20, 2013.]

ARMED FORCES OF THE PHILIPPINES RETIREMENT AND

SEPARATION BENEFITS SYSTEM, petitioner, vs. REPUBLIC
OF THE PHILIPPINES, respondent.

DECISION

VILLARAMA, JR., J : p

Before us is a petition for review on certiorari under Rule 45 assailing the Orders
dated February 17, 2009 1 and July 9, 20092 of the Regional Trial Court (RTC) of
Pasig City, Branch 68, in Land Registration Case No. N-11517.
The first Order reconsidered and recalled the Decision 3 of the RTC dated April
21, 2008, which granted the application for land registration of petitioner Armed
Forces of the Philippines Retirement and Separation Benefits System. The
second Order denied the Motion for Reconsideration filed by the petitioner.
Petitioner was "created under Presidential Decree (P.D.) No. 361, 4 as amended,
and was designed to establish a separate fund to guarantee continuous financial
support to the [Armed Forces of the Philippines] military retirement system as
provided for in Republic Act No. 340." 5
Petitioner filed an Application for Registration of Title 6 over three parcels of land
located in West Bicutan, Taguig City, before the RTC of Pasig City. The said
application was later docketed as LRC Case No. N-11517 and raffled to Branch
68 of the court a quo. DcCEHI

These three parcels of land constitute a land grant by virtue of Presidential

Proclamation No. 1218, issued by former President Fidel V. Ramos on May 8,
1998. 7
The application was filed by Mr. Honorio S. Azcueta (Mr. Azcueta), the then
Executive Vice President and Chief Operating Officer of the petitioner, who was
duly authorized to do so by the Board of Trustees of the petitioner, as evidenced
by a notarized Secretary's Certificate 8 dated August 18, 2003.
After due posting and publication of the requisite notices, and since no oppositor
registered any oppositions after the petitioner met the jurisdictional requirements,
the court a quo issued an order of general default against the whole world, and
the petitioner was allowed to present evidence ex-parte. 9
The petitioner then presented as its witness, Ms. Alma P. Aban (Ms. Aban), its
Vice President and Head of its Asset Enhancement Office. She testified, inter
alia, that: among her main duties is to ensure that the properties and assets of
petitioner, especially real property, are legally titled and freed of liens and
encumbrances; the subject properties were acquired by the petitioner through a
land grant under Presidential Proclamation No. 1218; prior to Presidential
Proclamation No. 1218, the Republic of the Philippines was in open, continuous,
exclusive, notorious, and peaceful possession and occupation of the subject
properties in the concept of an owner to the exclusion of the world since time
immemorial; petitioner, after the Republic of the Philippines transferred
ownership of the subject properties to it, assumed open, continuous, exclusive,
notorious, and peaceful possession and occupation, and exercised control over
them in the concept of owner, and likewise assumed the obligations of an owner;
petitioner has been paying the real estate taxes on the subject properties; and
the subject properties are not mortgaged, encumbered, or tenanted. 10
Subsequently, petitioner submitted its Formal Offer of Evidence, 11 following
which, the court a quo granted the application in a Decision dated April 21, 2008.
The dispositive portion of the said decision reads:
WHEREFORE, finding the Petition meritorious, the Court DECLARES,
CONFIRMS AND ORDERS the registration of AFPRSBS' title thereto.
As soon as this Decision shall have become final and after payment of
the required fees, let the corresponding Decree be issued in the name
of Armed Forces of the Philippines Retirement and Separation
Benefits System.
Let copies of this Decision be furnished the Office of the Solicitor
General, Land Registration Authority, Land Management Bureau and the
Registry of Deeds, Taguig City, Metro Manila.
SO ORDERED. 12

In response, the Office of the Solicitor General (OSG) filed a Motion for
Reconsideration 13 dated May 12, 2008, wherein it argued that the petitioner
failed to prove that it has personality to own property in its name and the
petitioner failed to show that the witness it presented was duly authorized to
appear for and in its behalf.
On June 2, 2008, petitioner filed its Comment/Opposition. 14
On February 17, 2009, the court a quo issued the assailed Order granting the
Motion for Reconsideration of the OSG on the ground that the petitioner failed to
prosecute its case. The dispositive portion of the assailed Order reads:
WHEREFORE, premises considered, the OSG's motion for
reconsideration is GRANTED. The Court's Decision of April 21, 2008 is
hereby RECONSIDERED and RECALLED, and a new one
issued DISMISSING this Application for Registration of Title for failure to
prosecute. TSADaI

SO ORDERED. 15

The Motion for Reconsideration 16 of petitioner was denied by the court a quo in
the other assailed Order 17 dated July 9, 2009. Hence, this petition.
The issue to be resolved in the present case is whether the court a quo acted
contrary to law and jurisprudence when it dismissed petitioner's application for
land registration on the ground that petitioner failed to prosecute the subject
case.
We answer in the affirmative.
The reason of the court a quo in dismissing petitioner's application for land
registration on the ground of failure to prosecute was the lack of authority on the
part of Ms. Aban to testify on behalf of the petitioner.
However, Section 3, Rule 17 of the 1997 Rules of Civil Procedure, as amended,
provides only three instances wherein the Court may dismiss a case for failure to
prosecute:
Sec. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause,
the plaintiff fails to appear on the date of the presentation of his evidence
in chief on the complaint, or to prosecute his action for an unreasonable
length of time, or to comply with these Rules or any order of the court,
the complaint may be dismissed upon motion of the defendant or upon
the court's own motion, without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action. This
dismissal shall have the effect of an adjudication upon the merits, unless
otherwise declared by the court.

Jurisprudence has elucidated on this matter in De Knecht v. CA: 18 HcaATE

An action may be dismissed for failure to prosecute in any of the

following instances: (1) if the plaintiff fails to appear at the time of
trial; or (2) if he fails to prosecute the action for an unreasonable
length of time; or (3) if he fails to comply with the Rules of Court
or any order of the court. Once a case is dismissed for failure to
prosecute, this has the effect of an adjudication on the merits and is
 understood to be with prejudice to the filing of another action unless
otherwise provided in the order of dismissal. In other words, unless
there be a qualification in the order of dismissal that it is without
prejudice, the dismissal should be regarded as an adjudication on the
merits and is with prejudice. (Emphasis supplied.)

Clearly, the court a quo's basis for pronouncing that the petitioner failed to
prosecute its case is not among those grounds provided by the Rules. It had no
reason to conclude that the petitioner failed to prosecute its case. First, the
petitioner did not fail to appear at the time of the trial. In fact, the Decision of the
RTC dated April 21, 2008 ordering the registration of petitioner's title to the
subject lots shows that the petitioner appeared before the Court and was
represented by counsel. Records would also reveal that the petitioner was able
to present its evidence, and as a result, the RTC rendered judgment in its favor.
Second, the petitioner did not fail to prosecute the subject case considering that it
appeared during trial, presented Ms. Aban, who gave competent testimony as
regards the titling of the subject lots, and the court a quo never held petitioner
liable for any delay in prosecuting the subject case.
Third, a perusal of the records would demonstrate that the petitioner did not fail
to comply with the Rules or any order of the court a quo, as there is no ruling on
the part of the latter to this effect.
Indeed, there was no basis for the court a quo's ruling that the petitioner failed to
prosecute the subject case, because none of the grounds provided in
the Rules for dismissing a case due to failure to prosecute is present. That the
RTC dismissed the application for land registration of the petitioner for failure to
prosecute after the petitioner presented all its evidence and after said court has
rendered a decision in its favor, is highly irregular.CHcETA

At this juncture, it would be appropriate to discuss the basis of the court a quo in
dismissing the petitioner's application for land registration for failure to prosecute
— the alleged lack of authority of the witness, Ms. Aban, to testify on behalf of
the petitioner.
The assailed Order held as follows:
With things now stand, the Court believes that OSG was correct in
observing that indeed the AFPRSBS did not present its duly authorized
representative to prosecute this case. And the records support the
observation since AFPRSBS presented only one witness — Mrs. Aban.
In view of the foregoing the Court is left without choice than to grant
OSG's motion for reconsideration. 19

However, there is no substantive or procedural rule which requires a witness for

a party to present some form of authorization to testify as a witness for the party
presenting him or her. No law or jurisprudence would support the conclusion that
such omission can be considered as a failure to prosecute on the part of the
party presenting such witness. All that the Rules require of a witness is that the
witness possesses all the qualifications and none of the disqualifications
provided therein. Rule 130 of the Rules on Evidence provides:
SEC. 20. Witnesses; their qualifications. — Except as provided in the
next succeeding section, all persons who can perceive, and perceiving,
can make known their perception to others, may be witnesses.
xxx xxx xxx

Cavili v. Judge Florendo 20 speaks of the disqualifications:

Sections 19 and 20 of Rule 130 provide for specific disqualifications.
Section 19 disqualifies those who are mentally incapacitated and
children whose tender age or immaturity renders them incapable of
being witnesses. Section 20 provides for disqualification based on
conflicts of interest or on relationship. Section 21 provides for
disqualifications based on privileged communications. Section 15 of Rule
132 may not be a rule on disqualification of witnesses but it states the
grounds when a witness may be impeached by the party against whom
he was called.DEcTCa

. . . The specific enumeration of disqualified witnesses excludes the

operation of causes of disability other than those mentioned in the
Rules. It is a maxim of recognized utility and merit in the
construction of statutes that an express exception, exemption, or
saving clause excludes other exceptions. (In Re Estate of Enriquez,
29 Phil. 167) As a general rule, where there are express exceptions
these comprise the only limitations on the operation of a statute and no
other exception will be implied. (Sutherland on Statutory Construction,
Fourth Edition, Vol. 2A, p. 90) The Rules should not be interpreted to
include an exception not embodied therein. (Emphasis supplied.)

A reading of the pertinent law and jurisprudence would show that Ms. Aban is
qualified to testify as a witness for the petitioner since she possesses the
qualifications of being able to perceive and being able to make her perceptions
known to others. Furthermore, she possesses none of the disqualifications
described above.
The RTC clearly erred in ordering the dismissal of the subject application for land
registration for failure to prosecute because petitioner's witness did not possess
an authorization to testify on behalf of petitioner. The court a quo also erred when
it concluded that the subject case was not prosecuted by a duly authorized
representative of the petitioner. The OSG and the court a quo did not question
the Verification/Certification 21 of the application, and neither did they question
the authority of Mr. Azcueta to file the subject application on behalf of the
petitioner. Case records would reveal that the application was signed and filed by
Mr. Azcueta in his capacity as the Executive Vice President and Chief Operating
Officer of the petitioner, as authorized by petitioner's Board of Trustees. 22 The
authority of Mr. Azcueta to file the subject application was established by a
Secretary's Certificate 23 attached to the said application. The asseveration that
the subject case was not prosecuted by a duly authorized representative of the
petitioner is thus unfounded.IaCHTS

Interestingly enough, the respondent itself agrees with the petitioner that the
dismissal of the subject application by the court a quo on the ground of failure to
prosecute due to lack of authority of the sole witness of the petitioner is
unfounded and without legal basis. 24
WHEREFORE, the petition for review on certiorari is GRANTED. The Orders of
the Regional Trial Court dated February 17, 2009 and July 9, 2009
are REVERSED AND SET ASIDE. The Decision of the Regional Trial Court
dated April 21, 2008, granting the Application for Registration of Title of the
petitioner is hereby REINSTATED and UPHELD.
No pronouncement as to costs.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Bersamin and Reyes, JJ., concur.
(Armed Forces of the Philippines Retirement and Separation Benefits System v.
|||

Republic, G.R. No. 188956, [March 20, 2013], 707 PHIL 109-118)

THIRD DIVISION

[G.R. No. 143439. October 14, 2005.]

MAXIMO ALVAREZ, petitioner, vs. SUSAN

RAMIREZ, respondent.

DECISION

SANDOVAL-GUTIERREZ, J : p
 Before us is a petition for review on certiorari 1 assailing the Decision 2 of
the Court of Appeals dated May 31, 2000 in CA-G.R. SP No. 56154, entitled
"SUSAN RAMIREZ, petitioner, versus, HON. BENJAMIN M. AQUINO, JR., as
JUDGE RTC, MALABON, MM, BR. 72, and MAXIMO
ALVAREZ, respondents." STaIHc

Susan Ramirez, herein respondent, is the complaining witness in Criminal

Case No. 19933-MN for arson 3 pending before the Regional Trial Court, Branch
72, Malabon City. The accused is Maximo Alvarez, herein petitioner. He is the
husband of Esperanza G. Alvarez, sister of respondent.
On June 21, 1999, the private prosecutor called Esperanza Alvarez to the
witness stand as the first witness against petitioner, her husband. Petitioner and
his counsel raised no objection.
Esperanza testified as follows:
"ATTY. ALCANTARA:
We are calling Mrs. Esperanza Alvarez, the wife of the accused, Your
Honor.
COURT:
Swear in the witness.
xxx xxx xxx
ATTY. MESIAH: (sic)
Your Honor, we are offering the testimony of this witness for the
purpose of proving that the accused Maximo Alvarez committed
all the elements of the crime being charged particularly that
accused Maximo Alvarez pour on May 29, 1998 gasoline in the
house located at Blk. 5, Lot 9, Phase 1-C, Dagat-dagatan,
Navotas, Metro Manila, the house owned by his sister-in-law
Susan Ramirez; that accused Maximo Alvarez after pouring the
gasoline on the door of the house of Susan Ramirez ignited and
set it on fire; that the accused at the time he successfully set the
house on fire (sic) of Susan Ramirez knew that it was occupied by
Susan Ramirez, the members of the family as well as Esperanza
Alvarez, the estranged wife of the accused; that as a
consequence of the accused in successfully setting the fire to the
house of Susan Ramirez, the door of said house was burned and
together with several articles of the house, including shoes, chairs
and others.
COURT:
You may proceed.
 xxx xxx xxx
DIRECT EXAMINATION
ATTY. ALCANTARA:
xxx xxx xxx
Q: When you were able to find the source, incidentally what was the
source of that scent?
A: When I stand by the window, sir, I saw a man pouring the gasoline in
the house of my sister (and witness pointing to the person of the
accused inside the court room).
Q: For the record, Mrs. Witness, can you state the name of that person,
if you know?
A: He is my husband, sir, Maximo Alvarez.
Q: If that Maximo Alvarez you were able to see, can you identify him?
A: Yes, sir.
Q: If you can see him inside the Court room, can you please point him?
A: Witness pointing to a person and when asked to stand and asked his
name, he gave his name as Maximo Alvarez." 4

In the course of Esperanza's direct testimony against petitioner, the latter

showed "uncontrolled emotions," prompting the trial judge to suspend the
proceedings.
On June 30, 1999, petitioner, through counsel, filed a motion 5 to disqualify
Esperanza from testifying against him pursuant to Rule 130 of the Revised Rules
of Court on marital disqualification.
Respondent filed an opposition 6 to the motion. Pending resolution of the
motion, the trial court directed the prosecution to proceed with the presentation of
the other witnesses.
On September 2, 1999, the trial court issued the questioned Order
disqualifying Esperanza Alvarez from further testifying and deleting her testimony
from the records. 7 The prosecution filed a motion for reconsideration but was
denied in the other assailed Order dated October 19, 1999. 8
This prompted respondent Susan Ramirez, the complaining witness in
Criminal Case No. 19933-MN, to file with the Court of Appeals a petition
for certiorari 9 with application for preliminary injunction and temporary restraining
order. 10
 On May 31, 2000, the Appellate Court rendered a Decision nullifying and
setting aside the assailed Orders issued by the trial court.
Hence, this petition for review on certiorari.
The issue for our resolution is whether Esperanza Alvarez can testify
against her husband in Criminal Case No. 19933-MN.
Section 22, Rule 130 of the Revised Rules of Court provides:
"Sec. 22. Disqualification by reason of marriage. — During their
marriage, neither the husband nor the wife may testify for or against the
other without the consent of the affected spouse, except in a civil case
by one against the other, or in a criminal case for a crime committed by
one against the other or the latter's direct descendants or ascendants."

The reasons given for the rule are:

1. There is identity of interests between husband and wife;
2. If one were to testify for or against the other, there is consequent
danger of perjury;
3. The policy of the law is to guard the security and confidences of
private life, even at the risk of an occasional failure of justice,
and to prevent domestic disunion and unhappiness; and
4. Where there is want of domestic tranquility there is danger of
punishing one spouse through the hostile testimony of the
other. 11
But like all other general rules, the marital disqualification rule has its own
exceptions, both in civil actions between the spouses and in criminal cases for
offenses committed by one against the other. Like the rule itself, the exceptions
are backed by sound reasons which, in the excepted cases, outweigh those in
support of the general rule. For instance, where the marital and domestic
relations are so strained that there is no more harmony to be preserved nor
peace and tranquility which may be disturbed, the reason based upon such
harmony and tranquility fails. In such a case, identity of interests disappears and
the consequent danger of perjury based on that identity is non-existent. Likewise,
in such a situation, the security and confidences of private life, which the law
aims at protecting, will be nothing but ideals, which through their absence, merely
leave a void in the unhappy home. 12
In Ordoño vs. Daquigan, 13 this Court held:
 "We think that the correct rule, which may be adopted in this
jurisdiction, is that laid down in Cargil vs. State, 35 ALR 133, 220 Pac.
64, 25 Okl. 314, wherein the court said:
'The rule that the injury must amount to a physical wrong
upon the person is too narrow; and the rule that any offense
remotely or indirectly affecting domestic harmony comes within
the exception is too broad. The better rule is that, when an
offense directly attacks, or directly and vitally impairs, the conjugal
relation, it comes within the exception to the statute that one shall
not be a witness against the other except in a criminal prosecution
for a crime committee (by) one against the other.'"

Obviously, the offense of arson attributed to petitioner, directly impairs the

conjugal relation between him and his wife Esperanza. His act, as embodied in
the Information for arson filed against him, eradicates all the major aspects of
marital life such as trust, confidence, respect and love by which virtues the
conjugal relationship survives and flourishes.
As correctly observed by the Court of Appeals:
"The act of private respondent in setting fire to the house of his
sister-in-law Susan Ramirez, knowing fully well that his wife was there,
and in fact with the alleged intent of injuring the latter, is an act totally
alien to the harmony and confidences of marital relation which the
disqualification primarily seeks to protect. The criminal act complained of
had the effect of directly and vitally impairing the conjugal relation. It
underscored the fact that the marital and domestic relations between her
and the accused-husband have become so strained that there is no
more harmony, peace or tranquility to be preserved. The Supreme Court
has held that in such a case, identity is non-existent. In such a situation,
the security and confidences of private life which the law aims to protect
are nothing but ideals which through their absence, merely leave a void
in the unhappy home. (People v. Castañeda, 271 SCRA 504). Thus,
there is no longer any reason to apply the Marital Disqualification Rule."

It should be stressed that as shown by the records, prior to the commission

of the offense, the relationship between petitioner and his wife was already
strained. In fact, they were separated de facto almost six months before the
incident. Indeed, the evidence and facts presented reveal that the preservation of
the marriage between petitioner and Esperanza is no longer an interest the State
aims to protect.
At this point, it bears emphasis that the State, being interested in laying the
truth before the courts so that the guilty may be punished and the innocent
exonerated, must have the right to offer the direct testimony of Esperanza, even
against the objection of the accused, because (as stated by this Court
in Francisco 14 ), "it was the latter himself who gave rise to its necessity."
ADcSHC

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED. The

trial court, RTC, Branch 72, Malabon City, is ordered to allow Esperanza Alvarez
to testify against petitioner, her husband, in Criminal Case No. 19933-MN. Costs
against petitioner.
SO ORDERED.
Panganiban, Corona, Carpio Morales and Garcia, JJ., concur.
||| (Alvarez v. Ramirez, G.R. No. 143439, [October 14, 2005], 509 PHIL 650-658)

FIRST DIVISION

[G.R. No. L-58164. September 2, 1983.]

JOSE GUERRERO, MARIA GUERRERO, MAGDALENA GUERRERO

ESPIRITU, assisted by her husband CANDIDO ESPIRITU,
GREGORIO GUERRERO, CLARA GUERRERO, et
al., petitioner, vs. ST. CLARE'S REALTY CO., LTD., GUILLERMO T.
GUERRERO, CECILIA GUERRERO, assisted by ANGELO
CARDEÑO, PERLINDA GUERRERO, etc., et al., respondents.

Romeo J. Callejo for petitioners.

Poblador, Nazareno, Azada, Tomacruz & Paredez Law Offices for
respondent United Housing Corp.
Neptali Gonzales & Associates for respondent Guerreros.
F.B. Santiago & Associates for respondent St. Clare's Realty Co., Ltd.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; WITNESSES; INCOMPETENCY UNDER SEC.

20(a), RULE 130, RULES OF COURT, CONSTRUED. — The plain truth is that
Laura Cervantes and Jose Cervantes are not parties in the present case, and
neither are they assignors of the parties nor "persons in whose behalf a case is
prosecuted." They are mere witnesses by whose testimonies the plaintiffs aimed
to establish that it was not Cristina Guerrero, but Andres Guerrero, who owned
the disputed land at the time of its alleged sale to Manuel Guerrero; that Cristina
Guerrero did not really sell but merely mortgaged the property to Manuel
Guerrero. It may be said that competency to testify established in Sec. 20(a),
Rule 130, Rules of Court, affects only the persons therein mentioned, and no
others, that is, only parties plaintiff or their assignors, persons in whose behalf a
case is prosecuted. Mere witnesses who are neither parties plaintiff, nor their
assignors, nor persons in whose behalf a case is prosecuted, are not included in
the prohibition. (Moran, Comments on the Rules of Court, 1970 ed., Vol. 5, p.
166) By excluding the testimonies of the two witnesses and by barring them from
further testifying, upon reasoning that unduly strained the meaning of the
provisions of the Rules of Court relied upon, the trial court deprived itself of the
opportunity of knowing the truth in this case.
2. ID.; ID.; ID.; DEAD MAN'S RULE; INAPPLICABLE IN THE CASE AT BAR. —
The present case is not a claim or demand against the estate of the deceased
Manuel Guerrero. The defendants Guerreros are not the executors or
administrators or representatives of such deceased. They are being sued as
claimants of ownership in their individual capacities of the disputed lot. The lot is
not a part of the estate of Manuel Guerrero. Hence, the inapplicability of dead
man's rule. "It has been held that statutes providing that a party in interest is
incompetent to testify where the adverse party is dead or insane, must be applied
strictly in accordance with their express wording, irrespective of their spirit. The
law uses the word 'against an executor or administrator or other representative of
a deceased person.' It should be noted that after the mention of an executor or
administrator the words or other representative follows, which means that the
word 'representative' includes only those who, like the executor or administrator,
are sued in their representative, not personal, capacity. And that is emphasized
by the law by using the words 'against the estate of such deceased persons,'
which convey the idea of an estate actually owned by the deceased at the time
the case was brought and that, therefore, it is only his rights that are to be
asserted and defendant in the litigation by the person representing him, not the
personal rights of such representative." (Moran, ibid., pp. 169-171)
3. ID.; ID.; IMPROVIDENT EXCLUSION AND PRECLUSION FROM
PRESENTING FURTHER PROOF; CASE AT BAR. — Prior to the issuance of
the court's order of June 14, 1974, by which the plaintiffs were "deemed to have
waived their right to further present or formally offer their evidence," the following
had testified as witnesses of the plaintiffs, namely: Alfredo Zamora, Roman
Mataverde, Moises Javillionar, Dominador Ramirez, Bonifacio Sumulong, Frisco
Cervantes, Laura Cervantes and Jose Cervantes. It was error to hold that the
testimonial evidence should have been formally offered, or that without such
offer, such evidence was waived. The offer of testimonial evidence is effected by
calling the witness to the stand and letting him testify before the court upon
appropriate questions. (Moran, Comments on the Revised Rules of Court, Vol. 6,
1970 ed., p. 122)
4. ID.; JUDGMENT RENDERED SOLELY ON THE BASIS OF DEFENDANTS'
EVIDENCE DISREGARDING THAT OF THE PLAINTIFFS'; REMAND TO TRIAL
COURT PROPER RECOURSE. — The trial court rendered its decision solely on
the basis of the defendants' evidence and without regard to the proofs that the
plaintiffs had presented on July 17, 1974 before the Court of Appeals could finally
resolve plaintiffs' petition to disqualify the trial judge. As modified by the Court of
Appeals, the decision sentences the plaintiffs to pay damages and attorney's
feet, apart from the costs of suit, in the staggering amount of Two Million One
Hundred Eighty Three Thousand and Five Hundred (P12,183,500.00) Pesos,
without plaintiffs having been gives, the chance to complete their evidence, to
cross-examine the witnesses of the defense, and to present rebuttal evidence.
The way the trial court and the Court of Appeals proceeded in this case, litigation
became more a game of technicalities than a proceeding to search the truth and
mete justice. No other fairer course of action is demanded but for this Court to
remand the case for further proceedings.

DECISION

VASQUEZ, J : p

In their petition for review by certiorari, petitioners are seeking a reversal of the
decision of the former Court of Appeals (now the Intermediate Appellate Court)
dated April 30, 1981 in CA-G.R No. 57597-R, and its resolution dated September
3, 1981 which denied the petitioners' motion for reconsideration thereof. Our
resolution of May 25, 1981 gave due course to the petition.
The action initiated by the petitioners in the Court of First Instance of Rizal
prayed for a judgment:
"1. Declaring the in existence of the 'Deed of Sale of Lands, Annex 'A'
hereof, and 'Deeds of Absolute Sale', Annexes 'B' and 'C', as well as the
Original Certificate of Title No. 4591 and Transfer Certificates of Title
Nos. 339629 and 340842 of the Registry of Deeds, null and void;
2. Declaring the plaintiffs (now petitioners) the owners in fee simple of
the aforedescribed property, pro-indiviso;
3. Ordering the private defendants (now private respondents) to
reconvey to the plaintiffs the aforedescribed lot;
 4. Declaring the 'Joint Venture Agreement' executed by the defendant
partnership and the defendant corporation null and void and ineffective
insofar as the plaintiffs are concerned;
5. Ordering the defendant Register of Deeds of Rizal to issue a new
transfer certificate of title in favor of the plaintiffs over the said lot;
6. Condemning the defendants, except the defendant Register of Deeds,
to pay the plaintiffs, actual and exemplary damages, the amounts of
which they will prove during the hearing of the instant case on the merit;
7. Condemning the defendants, except the defendant Register of Deeds,
to pay to the plaintiffs attorney's fees in the amount of P5,000.00; plus
costs of suit." (Printed Record on Appeal, pp. 116-118.)

Petitioners' original and amended complaints alleged that during their lifetime the
spouses Isidoro Guerrero and Panay Ramos were the absolute owners of the
disputed property, which is a parcel of land located at San Dionisio, Parañaque,
Rizal, with an area of 42,299 square meters, more or less. The spouses had six
children, named Andres, Juliana, Aurelio, Leona, Jose and Cristina, and all
surnamed Guerrero. Panay Ramos predeceased Isidoro Guerrero. Before his
demise, Isidoro Guerrero verbally willed and ordained that the questioned lot be
assigned and adjudicated to Andres Guerrero as his share in the inheritance, the
other children having been assigned other lots. Accordingly, upon the death of
Isidoro Guerrero, Andres Guerrero physically possessed the lot and cultivated it
through his tenant Dominador Ramirez, who earned a 50% share in the net
produce, the other 50% being retained by Andres Guerrero who defrayed the
cultivation expenses and real estate taxes on the property. Shortly after the
beginning of the Japanese occupation, Andres Guerrero entrusted the land to his
sister, Cristina Guerrero, and allowed her to have the property cultivated and to
retain the owner's share in the harvests. The arrangement between brother and
sister was that Cristina Guerrero could continue in the cultivation of the land and
enjoyment of the owner's share in the produce for as long as she needed the
property. Dominador Ramirez continued his tenancy until shortly before the death
of Andres Guerrero. Sometime in July 1943, Andres Guerrero died survived by
his widow, Segunda Laquindanum, and their children, who are the petitioners in
this case. Cristina Guerrero continued as trustee of the deceased Andres
Guerrero. cdrep

The complaints further alleged that as early as December 10, 1957, the land was
surveyed by the Bureau of Lands for and in the name of Andres Guerrero as Lot
No. 4752, Case No. 4, Cadastre No. 229 of the Parañaque Cadastre. Sometime
during the latter part of 1971 certain people who introduced themselves as
agents or buyers of the land approached some of the plaintiffs in order to secure
their consent to the sale of the property. Said plaintiffs were informed that the
land was titled in the name of their cousin, Manuel Guerrero. Plaintiffs made
inquiries and discovered the following: that Manuel Guerrero was able to have
the lot titled in his name on the basis of a 'Deed of Sale of Land' dated April 24,
1948 purportedly executed by Cristina Guerrero; that he caused the lot to be
surveyed in his name as Lot No. 4752 and he was issued advance Plan No. AP-
10008 on February 28, 1962; that in the advance plan issued to him, it was duly
noted that Lot No. 4752 had been previously surveyed for Andres Guerrero; that
in 1963, Manuel Guerrero, assisted by Felicisimo Guerrero, father of the
defendants Guerreros, filed an application for registration of land with the Court
of First Instance of Rizal; that notwithstanding the opposition of the heirs of
Cristina Guerrero, the court ruled that Manuel Guerrero owned the lot; that
despite oppositors' appeal to a higher court, the Register of Deeds issued
Original Certificate of Title No. 4591 to the applicant; that on September 14,
1971, there was filed with the Register of Deeds of Rizal a "Deed of Absolute
Sale" purportedly executed by Manuel Guerrero in favor of the defendants
Guerreros; that the Register of Deeds gave due course to the registration of that
deed, cancelled OCT No. 4591 and was issued Transfer Certificate No. 339629
in its stead; that on the same day that the deed of sale was registered, the
defendants Guerreros caused to be notarized an "Articles of Partnership" of St.
Clare's Realty Company, Ltd., constituting themselves as partners; that on
September 28, 1971, the defendants Guerreros sold the disputed lot in a "Deed
of Absolute Sale" to the St. Clare's Realty Company, Ltd.; that by virtue thereof,
the Register of Deeds issued TCT No. 340842 in the name of said realty
company.

According to the original and amended complaints, the Deed of Sale in favor of
Manuel Guerrero was fraudulent, simulated and falsified for the reason, among
others, that Cristina Guerrero was not the owner of the land at the time she
purportedly sold it; that Manuel Guerrero obtained OCT No. 4591 in fraud of the
plaintiffs; that the Deeds of Sale to the defendants Guerreros and St. Clare's
Realty Company, Ltd. and the transfer certificates of title in their favor are
fraudulent and simulated, and ineffective against the plaintiffs for the reason,
among others, that at the time of execution of the Deeds of Sale, the defendants
Guerreros knew that the property belonged to Andres Guerrero; that long after
the complaint in the present case has been filed, the plaintiffs came to know that
the St. Clare's Realty Company, Ltd. executed a "Joint Venture Agreement" with
the United Housing Corporation under which the latter bound itself to develop the
property into a residential subdivision; and that the said agreement was entered
into in gross and evident bad faith.
Separate answers were filed by the defendants Guerreros, St. Clare's Realty
Company, Ltd. and United Housing Corporation. The defendants Guerreros
alleged that Cristina Guerrero was the absolute owner of the property; that the
action of the plaintiffs had prescribed and they are guilty of laches. St. Clare' s
Realty Company, Ltd. averred that its contract with United Housing Corporation
was made in good faith. United Housing Corporation averred that there is no
privity of interest between plaintiffs and this defendant considering that the
plaintiffs are not parties to the Joint Venture Agreement.
Issues having been joined, the case proceeded to trial.
Frisco Cervantes, grandson of Cristina Guerrero, testified as a witness of the
plaintiffs that having had previous information that the disputed lot was borrowed
from Andres Guerrero and that Cristina Guerrero merely mortgaged it to Manuel
Guerrero, he went to the house of Manuel Guerrero in Barrio San Dionisio,
Parañaque, Rizal, in 1968 at the behest of the plaintiffs, to inquire about the
mortgage; that in reply, Manuel Guerrero stated that the land had been sold but it
would be changed with another lot of the same area; that in 1970, Sotero
Cervantes and Laura Cervantes, children of Cristina Guerrero, and he went to
see Manuel Guerrero at the Sta. Rita Church in Parañaque; that Sotero and
Laura asked if they could get the land back, that Manuel Guerrero answered that
it were better to change the disputed lot with another parcel of the same area and
value; that as he was not satisfied with the answer, Frisco Cervantes went to the
Office of the Register of Deeds in Pasig, Rizal, where he obtained a copy of a
Deed of Sale in favor of Manuel Guerrero which he delivered to the children of
Andres Guerrero. cdll

Roman Mataverde, Chief Geodetic Engineer of the Bureau of Lands designated

as Officer-In-Charge of the Surveys Division, testified for the plaintiffs that in the
Bureau's Lot Data Computation Book showing the list of claimants for Lot 4752,
Case 4, Cadastre 299, Parañaque, Rizal, (Exhibit A), which was surveyed on
December 10, 1957, Andres Guerrero is listed as claimant. The records of the
Bureau of Lands from 1957 (when Lot 4752 was cadastrally surveyed for Andres
Guerrero) until 1962 show no claimant to the property except Andres Guerrero.
In 1962, the Bureau of lands received a letter with an affidavit attached to it from
Manuel Guerrero requesting that an advance plan be made. Advance Plan No.
10008 was made without Andres Guerrero being notified. But in the advance
plan, the Bureau of Lands listed Andres Guerrero as original claimant so that he
would not be prejudiced when a case comes to trial.
Dominador Ramirez testified that during the rainy season of 1936, Andres
Guerrero asked him to work on his land located at Barrio San Dionisio,
Parañaque, Rizal, with an area of four (4) hectares, more or less. As tenant, his
agreement with Andres Guerrero was that he would till the land in consideration
of 50% of the harvests with Andres Guerrero shouldering the cultivation
expenses. From 1936 to about 1941 or 1942, he worked on the land and gave
50% of the produce to Andres Guerrero who went personally to the field to get
the same. In 1941 or 1942, he stopped working on the land because war had
broken out.
On October 19, 1973, Laura Cervantes testified that her mother, Cristina
Guerrero, had been sick for a long time before she died at the age of 80 years in
1948; and that her mother could walk only inside their house in Parañaque; that
the money spent for the illness of her mother came from Manuel Guerrero; and
that, through her children, Cristina Guerrero could ask money from Manuel
Guerrero because of the land that Andres Guerrero had lent to her.
After Laura Cervantes had thus testified, counsel for the defendants Guerreros
objected to the line of questioning on the ground that the said witness was
testifying "on matters which are prohibited under Sec. 20(a), Rule 130, of the
Rules of Court." The trial court having ruled that the witness "may answer",
defendants' counsel registered a continuing objection. The court allowed the
witness to continue her testimony subject to such objection. (TSN, pp. 9-20,
October 19, 1973.)
Resuming her testimony, Laura Cervantes stated that the land was lent by
Andres Guerrero to Cristina Guerrero; that Manuel Guerrero loaned money to
Cristina Guerrero for quite some time; that shortly after the death of Cristina
Guerrero, Manuel Guerrero went to their house, accompanied by Felicisimo
Guerrero, and summed up the loans he had extended to Cristina Guerrero in the
total amount of P1,900.00; and that Felicisimo Guerrero asked Laura Cervantes
to sign a piece of paper to attest to the fact that a certain amount of money had
been borrowed from Manuel Guerrero. LexLib

On October 24, 1973, the defendants Guerreros filed a written motion to

disqualify Laura Cervantes as a witness on the basis of Section 20(a), Rule 130,
of the New Rules of Court. The motion was opposed by the plaintiffs. On
November 16, 1973, the trial court granted the motion and declared that Laura
Cervantes, Jose Cervantes as well as other witnesses similarly situated, are
disqualified to testify in the case.
On February 12, 1974, plaintiffs filed a "Motion For The Honorable Presiding
Judge Of This Honorable Court To Inhibit Himself And/Or To Transfer Case To
Another Branch." Oppositions to the said motion were filed. On April 26, 1974,
the trial court denied the motion.
At the continuation of the trial on June 14, 1974, plaintiffs and their counsel failed
to appear despite due notice and repeated previous warnings to their lawyer.
Instead of appearing in court, plaintiffs, thru counsel, filed an urgent motion to
reset the hearing, which was opposed by the defendants. On even date, the
court issued an order as follows:
 "In view of the non-appearance of the plaintiffs as well as their counsel
for today's hearing, they are deemed to have waived their right to further
present or formally offer their evidence in court, and on motion of
defendants' counsels, the Clerk of Court, Atty. Juan A. Carambas, is
hereby authorized and commissioned to receive the evidence for the
defendants. After the defendants have closed their case, they are given
10 days within which to file their respective memoranda and the case is
deemed submitted for decision after receipt of the complete transcript of
stenographic notes." (Record on Appeal, p. 212.)

On June 22, 1974, plaintiffs filed a "Manifestation" to the effect that they did not
waive their rights to present further evidence, to cross-examine defendants'
witnesses, and to present rebuttal evidence; and that they were reserving the
exercise of those rights upon the finality of the decision of the Court of Appeals in
a petition for certiorari, prohibition and mandamus against the Presiding Judge of
the trial court, which they were then preparing to file.
Indeed, on June 25, 1974, plaintiffs instituted the said special civil action, which
was docketed in the Court of Appeals as its CA-G.R. No. SF-03120. The action
sought the disqualification of the trial judge from continuing with the hearing of
the case. On June 27, 1974, the Court of Appeals denied the petition outright.
Copy of the resolution was received by the plaintiffs on July 2, 1974. They filed a
motion for reconsideration on July 17, 1974.
On the same date, July 17, 1974, the trial court rendered its decision with the
following dispositive part:
"WHEREFORE, judgment is hereby rendered in favor of the defendants
(and) against the plaintiffs:
1. Dismissing the complaint and Amended Complaint;
2. Ordering the plaintiffs to pay the private defendant Guerreros the
amount of P20,000.00 for actual damages, P500,000.00 for moral
damages and P10,000.00 as attorney's fees;
3. Ordering the plaintiffs to pay the defendant St. Clare's Realty Co. Ltd.,
the amount of P1,923,000.00 as actual damages, P50,000.00 as
exemplary damages and P5,000.00 as attorney's fees;
4. Ordering the plaintiffs to pay the defendant United Housing
Corporation the amount of P90,500.00 as actual damages; P100,000.00
for loss of goodwill and business reputation, P80,000.00 as exemplary
damages, P15,000.00 as lawyer's fees; and
5. To pay the cost of suit.
The Register of Deeds of Rizal is hereby directed to cancel the Lis
Pendens in Transfer Certificate of Title No. 340842 in the name of the
 St. Clare's Realty Co., Ltd., Book T-1971. Meanwhile, the defendant
United Housing Corporation is ordered to proceed and continue with its
commitments under the Memorandum Agreement dated October 12,
1971." (Record on Appeal, pp. 259-261.) LexLib

On July 20, 1974, or three (3) days before plaintiffs received the decision, they
filed with the trial court a "Motion Ex-Abundantia Cautela" praying that should the
Court of Appeals render an adverse resolution in CA-G.R. No. SF-03120, the
lower court should set aside its order of June 14, 1974 and allow plaintiffs to
present other evidence, cross-examine witnesses of the defendants, and present
rebuttal evidence.

On August 21, 1974, plaintiffs filed a motion for reconsideration of the decision
which they received on July 23, 1974.
Early in 1975, Judge Arsenio Alcantara who rendered the decision was replaced
by Judge Floreliana Castro-Bartolome. In her order of February 13, 1975, Judge
Castro-Bartolome resolved that:
"1) The plaintiffs' 'Motion Ex-Abundantia Cautela' dated July 18, 1974,
having been passed upon by Judge Arsenio B. Alcantara by the
rendition of the Decision dated July 17, 1974, is deemed to have been
clearly denied by the Honorable Judge who penned the said decision;
2) The plaintiffs' 'Motion for Reconsideration' dated August 21, 1974 and
'Supplemental Motion for Reconsideration' dated August 22, 1974, have
to be as they are hereby, denied;
xxx xxx xxx
5) The plaintiffs' 'Motion for Reconsideration' and 'Supplemental Motion
for Reconsideration' are not pro-forma and have suspended the running
of the period of appeal."

On February 21, 1975, plaintiffs perfected their appeal to the Court of Appeals
where the case was docketed as CA-G.R. No. 57597-R. On April 20, 1981, the
Court of Appeals rendered its decision as follows:
"WHEREFORE, all the foregoing considered, the decision appealed
from is hereby affirmed, with modification in regard to damages as
follows: (a) for the defendants Guerreros, P50,000.00 moral damages,
and P10,000.00 exemplary damages; (b) for the defendant St. Clare's
Realty Co., Ltd., P10,000.00 exemplary damages; (c) for the defendant
United Housing Corporation, P40,000.00 for loss of goodwill and
business reputation and P10,000.00 exemplary damages. The actual
damages and attorney's fees are hereby maintained."
On May 27, 1981, the Court of Appeals denied plaintiffs' motion for
reconsideration.
Hence, the present petition for review by certiorari.
In their instant petition for review, petitioners have raised substantive and
procedural points on which the lower tribunals have allegedly erred. The
substantive issues refer to the lack of basis for the grant of actual, moral and
exemplary damages in the huge amount of over two million pesos; and the error
of ruling that the action was barred by prescription and laches. Petitioners
underscore the procedural errors they attribute to the lower courts which resulted
in the deprivation of their full opportunity to ventilate their case and prove the
validity of their claim. They assail the ruling that their witnesses Laura Cervantes,
Jose Cervantes "and others similarly situated" are disqualified to testify; and that
they waived the right to present their evidence when they failed to appear at a
hearing set by the trial judge during the pendency of proceedings taken by the
petitioners to disqualify him due to alleged hostility manifested by the latter
towards the petitioners.cdll

At this instance, We consider it unnecessary to discuss the substantive merits of

the petitioners' cause of action. The record reveals that they have not yet
completed the presentation of their evidence. Whatever evidence they had
previously presented were apparently not considered in the rendition of the
questioned decisions for not having been "formally offered." It does not strike Us
as fair and just that the petitioners would be made answerable for damages in
such a huge amount for having filed an allegedly baseless and unfounded action
without affording them the full opportunity of establishing the merit of their claim.
On the face of the record, We are convinced that they had been denied that
chance due to some mistaken and capricious application of pertinent procedural
rules.
The first question of importance that engages the attention of this Court is
whether or not the witnesses Laura Cervantes and Jose Cervantes were
correctly disqualified from testifying in the case and their testimonies excluded on
the basis of Section 20(a), Rule 130, of the Rules of Court, which provides as
follows:
"Section 20. Disqualification by reason of interest or relationship. — The following
persons cannot testify as to matters in which they are interested, directly or
indirectly as herein enumerated:
(a) Parties or assignors of parties to a case, or persons in whose behalf a case is
prosecuted, against an executor or administrator or other representative of a
deceased person, or against a person of unsound mind, upon a claim or demand
against the estate of such deceased person or against such person of unsound
mind, cannot testify as to any matter of fact occurring before the death of such
deceased person or before such became of unsound mind."
Upon the facts and under the law, this Court is fully persuaded that the
affirmative rulings of both the trial court and the Court of Appeals were made in
error. The plain truth is that Laura Cervantes and Jose Cervantes are not parties
in the present case, and neither are they assignors of the parties nor "persons in
whose behalf a case is prosecuted." They are mere witnesses by whose
testimonies the plaintiffs aimed to establish that it was not Cristina Guerrero, but
Andres Guerrero, who owned the disputed land at the time of its alleged sale to
Manuel Guerrero; that Cristina Guerrero did not really sell but merely mortgaged
the property to Manuel Guerrero. LLjur

"Following this rule of construction, it may be said that incompetency to

testify established in the provision above quoted, affects only the
persons therein mentioned, and no others, that is, only parties plaintiff or
their assignors, persons in whose behalf a case is prosecuted. Mere
witnesses who are neither parties plaintiff, nor their assignors, nor
persons in whose behalf a case is prosecuted, are not included in the
prohibition." (Moran, Comments on the Rules of Court, 1970 ed., Vol. 5,
p. 166.)

By excluding the testimonies of the two witnesses and by barring them from
further testifying, upon reasoning that unduly strained the meaning of the
provisions of the Rules of Court relied upon, the trial court deprived itself of
the opportunity of knowing the truth in this case.
Moreover, the present case is not a claim or demand against the estate of the
deceased Manuel Guerrero. The defendants Guerreros are not the executors or
administrators or representatives of such deceased. They are being sued as
claimants of ownership in their individual capacities of the disputed lot. The lot is
not a part of the estate of Manuel Guerrero. Hence, the inapplicability of the dead
man's rule.
"It has been held that statutes providing that a party in interest is
incompetent to testify where the adverse party is dead or insane, must
be applied strictly in accordance with their express wording, irrespective
of their spirit. The law uses the word 'against an executor or
administrator or other representative of a deceased person.' It should be
noted that after the mention of an executor or administrator the words or
other representative follows, which means that the word 'representative'
includes only those who, like the executor or administrator, are sued in
their representative, not personal, capacity. And that is emphasized by
the law by using the words 'against the estate of such deceased
persons', which convey the idea of an estate actually owned by the
deceased at the time the case was brought and that, therefore, it is only
his rights that are to be asserted and defendant in the litigation by the
 person representing him, not the personal rights of such representative."
(Moran, ibid, pp. 169-171.)

The next question that requires attention is whether or not the exclusion of
plaintiffs' evidence and their preclusion from presenting further proof was
correctly sustained by the respondent Court of appeals. Prior to the issuance of
the court's order of June 14, 1974, by which the plaintiffs were "deemed to have
waived their right to further present or formally offer their evidence", the following
had testified as witnesses of the plaintiffs, namely: Alfredo Zamora, Roman
Mataverde, Moises Javillonar, Dominador Ramirez, Bonifacio Sumulong, Frisco
Cervantes, Laura Cervantes and Jose Cervantes. It was error to hold that the
testimonial evidence should have been formally offered, or that without such
offer, such evidence was waived. The offer of testimonial evidence is effected by
calling the witness to the stand and letting him testify before the court upon
appropriate questions. (Moran, Comments on the Revised Rules of Court, Vol. 6,
1970 ed., p. 122.) cdrep

Notwithstanding rigid cross-examination conducted by the lawyers of the

defendants, the witnesses discovered the following facts: In the 1930's Andres
Guerrero physically possessed the disputed lot, paid the real estate taxes for it,
had the same cultivated through a tenant, defrayed the cultivation expenses, and
exclusively enjoyed the owner's share in the harvests. Andres Guerrero loaned
the lot to his sister, Cristina Guerrero, before he died. Cristina Guerrero became
ill prior to the year 1948. She could walk only inside her house in Parañaque,
Rizal. The money spent for her illness was borrowed from Manuel Guerrero.
After the death of Cristina Guerrero, Manuel Guerrero and Felicisimo Guerrero
came to her house and the money loaned to her was totalled in the amount of
P1,900.00. On December 10, 1957, the questioned lot was cadastrally surveyed
and denominated as Lot 4752 of the Parañaque Cadastre. Andres Guerrero was
the lone claimant. Until 1962, no other person claimed the lot.
The foregoing proofs bear materially on the questions raised by the plaintiffs as
to whether or not: (1) Cristina Guerrero or Andres Guerrero owned the lot when
the former purportedly sold it to Manuel Guerrero in 1948; (2) Cristina Guerrero
really sold or merely mortgaged the land to Manuel Guerrero; (3) Manuel
Guerrero and, after him, the defendants Guerreros were buyers in good faith.
Instead of insulating itself from evidence that could lead it to the truth, the trial
court should have addressed itself to the questions why: (1) if it is true that
Cristina Guerrero was the owner of the disputed lot in 1948, the cadastral
surveyors who actually repaired to the field listed Andres Guerrero as the sole
claimant of the property, (2) until 1962, no other person except Andres Guerrero
claimed the lot as his own; (3) notwithstanding the purported deed of sale by
Cristina Guerrero to Manuel Guerrero was executed on April 24, 1948, it was
presented for registration with the Register of Deeds almost ten (10) years later
only on February 27, 1958 (TSN, p. 15, January 9, 1974); (4) in the deed of sale
to Manuel Guerrero, it is stated that he appeared in Parañaque, Rizal, before
Atty. Jose D. Villena who was a notary public in Makati, Rizal; (5) the area of the
land bought by Manuel Guerrero was 33,090 square meters whereas the area of
the land sold by him to the defendants Guerreros was 42,299 square meters.
The court also ought rather to have noticed the fact that in the deed of sale in
favor of Manuel Guerrero, it is stated that the subject parcel of land "is
surrounded by muddikes besides the stone monuments that visibly marked all its
"boundaries", which clearly indicate a previous survey and which may in turn lead
to the question if the deed of sale to Manuel Guerrero might have been made
after the cadastral survey in 1957 and not in 1948.

The trial court rendered its decision solely on the basis of the defendants'
evidence and without regard to the proofs that the plaintiffs had presented on
July 17, 1974 before the Court of Appeals could finally resolve plaintiffs' petition
to disqualify the trial judge. As modified by the Court of Appeals, the decision
sentences the plaintiffs to pay damages and attorney's fees, apart from the costs
of suit, in the staggering amount of Two Million One Hundred Eighty Three
Thousand and Five Hundred (P2,183,500.00) Pesos, without plaintiffs having
been given the chance to complete their evidence, to cross-examine the
witnesses of the defense, and to present rebuttal evidence. The way the trial
court and the Court of Appeals proceeded in this case, litigation became more a
game of technicalities than a proceeding to search the truth and mete justice. No
other fairer course of action is demanded but for this Court to remand the case
for further proceedings. prLL

WHEREFORE, the decision of the respondent Court of Appeals is hereby set

aside. Let the records of the case be remanded to the court of origin with
instruction to the trial court to allow the plaintiffs to complete their evidence, to
cross-examine the defendants' witnesses, and to present rebuttal evidence if
they so desire, and thereafter to decide the case anew.
SO ORDERED.
Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.
Teehankee (Chairman), J., took no part.

(Guerrero v. St. Clare's Realty Co., Ltd., G.R. No. L-58164, [September 2,
|||

1983], 209 PHIL 459-475)

 EN BANC

[G.R. No. L-16741. January 31, 1962.]

FLORENCIA Q. DE ABRAHAM, ALFONSO ABRAHAM, and

JESUS ABRAHAM, petitioners, vs. INTESTATE ESTATE OF
JUAN C. YSMAEL, PRISCILLA RECTO- KASTEN, respondent.

Menandro Quiogue for petitioners.

Jose Ma. Recto and Paterno R. Canlas for respondent.

SYLLABUS

1. EVIDENCE; EXAMINATION OF WITNESSES; PROHIBITION IN SECTION

26(c), RULE 123, RULES OF COURT; WAIVER; REASON. — There was a
waiver of the prohibition contained in Section 26(c), Rules 123 of the Rules of
Court, when the counsel for the administratrix extensively cross-examined the
witness on the very matters subject of the prohibition. The reason for the rule
apparently is that a litigant cannot be permitted to speculate as to what his
examination of a witness may bring forth. Having made his selection of one of
two courses which he may pursue, he has no right, after he discovers that the
course selected is not to his advantage, and after he has put the opposite party
to the expense, and has consumed the time of courts in a trial of the case in
accordance with the course selected, to change his position and make another
and different selection. Such course would be unfair both to the opposite party
and to the court and should not be countenanced in any court of justice (IV
Francisco, Rules of Court, 876, 877, citing the case of Comstock's Adm'r vs.
Jacobs, 89 VT. 133, 94 A. 497, Ann. Cas. 1918A, 465).
2. LACHES; ELEMENTS THAT SHOULD BE PRESENT. — In order that the
defense of laches may prosper, the following elements must be present: (1)
conduct on the part of defendant, or one under whom he claims, giving rise to the
situation complained of, (2) delay in asserting complainant's right after knowledge
or notice of defendant's conduct and an opportunity to sue, (3) lack of knowledge
or notice on the part of the defendant that complaint would assert the right on
which he bases suit, and (4) injury or prejudice to defendant in the event relief is
accorded. (Villoria vs. Secretary of Agriculture and Natural Resources, 107 Phil.,
879; 58 Off. Gaz., [28] 4963).
3. ID.; ID.; CHANGES OF CONDITION DETRIMENTAL TO DEFENDANT
NECESSARY IN LACHES. — The mere lapse of time during which there was
neglect to enforce the right is not the sole basis of the rule on laches, but also the
changes of conditions which may have arisen during the period there has been
neglect. When there are no changes of condition detrimental to the defendant,
the defense of laches may not prosper.
4. OBLIGATIONS AND CONTRACTS; DEBT MORATORIUM; EFFECT
OF REPUBLIC ACT No. 342. — Republic Act No. 342 did not lift the moratorium
on debts contracted during the war (Uy vs. Kalaw Katigbak, G.R. No. L-1830,
Dec. 31, 1949) but modified Executive Order No. 32 as to pre-war debts making
the protection available only to debtors who had war damage claims (Sison vs.
Mirasol, G.R. No. L-4711, Oct. 31, 1952).

DECISION

DE LEON, J : p

This is a petition to review on certiorari the decision of the Court of Appeals in

CA-G. R. No. 21222-R.
The facts as shown by the record are as follows: On September 3, 1943, Juan C.
Ysmael, obtained a loan from Alfonso Abraham Sr. in the amount of P12,500.00
in Japanese currency notes, and executed a promissory note in favor of the latter
promising to pay the loan within 90 days with interest at the rate of 10% per
annum. The note was executed in the presence of Florencia Q. Abraham, the
creditor's wife, who affixed her signature at the bottom thereof as a witness
thereto. Upon the maturity of the note, a demand was made for its payment, but
the debtor failed to pay.
On February 9, 1945, Alfonso Abraham Sr. died. On the other hand, Juan C.
Ysmael died intestate on April 23, 1952 leaving the note still unpaid.
On November 13, 1954, in Special Proceedings No. Q-285 for the settlement of
the intestate estate of Juan Ysmael, pending before the Court of First Instance of
Quezon City, Florencia Q. Vda. de Abraham together with her sons, Alfonso and
Jesus, all surnamed Abraham, filed a pleading entitled "Reclamacion"
demanding payment of the amount represented by the note. Because no regular
administrator of the estate had yet been appointed by the court, the
"Reclamacion" was not acted upon. However, as soon as Priscilla Recto-Kasten
was appointed administratrix, the claimants reproduced their "Reclamacion"
before the lower court and the same was finally set for hearing. As agreed upon
by the parties, the reception of evidence was delegated to a commissioner.
During the hearing before the commissioner, the counsel for the administratrix
interposed a general and continuing objection to the testimony of Florencia Vda.
de Abraham invoking the provisions of Section 26 (c), Rule 123 of the Rules of
Court. However, after the claimant had testified, he lengthily cross-examined her
on the very matters against which he interposed a general objection.
On October 4, 1956, the lower court issued an Order-Decree allowing the claim
against the intestate estate of Juan C. Ysmael, the dispositive portion of which
reads:
"IN VIEW OF THE FOREGOING CONSIDERATION, the Court rules that
the claimants established a just and valid claim against the estate of
Juan C. Ysmael, and therefore the "reclamacion" under consideration is
hereby APPROVED.
"The administratrix is hereby ordered to pay the claimants herein the
amount of P5,000.00 with interest thereon at 10% per annum, in
accordance with the Ballantyne Scale of Value for the year December,
1943, out of the funds of the estate in the course of her administration.
"SO ORDERED."

From the above Order-Decree, Priscilla Recto-Kasten, the administratrix,

appealed to the Court of Appeals. The appellate court concluding that "the lower
court erred in finding that the claimants have established a just and valid claim,
and in allowing the claim — supposing it was a claim with consideration — when
the same had been barred by prescription, estoppel and laches," reversed the
Order-Decree appealed from. Hence, this petition for review brought by the
claimants.
The main issue in this petition is whether or not petitioners have established a
just and valid claim. And if the answer is in the affirmative, whether the same is
already barred by prescription and laches.
The record shows that petitioners have established the due execution and
genuineness of the promissory note and that respondents failed to present any
evidence to destroy the same. Thus, in the Order-Decree appealed from, the
lower court observed:
"It is interesting to note that the promissory note executed by the
deceased was produced before the Court and marked as Exhibit B-1,
and the circumstances under which the same was executed was
extensively described by Florencia Q. de Abraham during the hearing,
who, strikingly is one of the witnesses to the said instrument. Much to
the surprise of the Court this description was more vividly given by the
said witness not in answer to the questions propounded by her lawyer
but on cross-examination of counsel for the administratrix, who feebly
attempted to destroy the due execution and genuineness of the said
 document. It is indeed unfortunate that counsel for the administratrix did
not choose to present evidence to destroy the alleged genuineness of
the promissory note (Exhibit B-1) in support of his theory, despite
insinuation during the course of the trial that he might try to secure the
services of an expert to determine the genuineness of the signature of
the late Juan C. Ysmael mentioned therein. (t.s.n., p. 83) Again counsel
manifested that if Exhibit B-1 is a genuine document the same has been
fully paid already, (t.s.n., p. 85), however, counsel did not present any
proof to support this contention."

It is true that Section 26 (c), Rule 123 of the Rules of Court provides:
"(c) Parties or assignors of parties to a case, or persons in whose behalf
a case is prosecuted, against an executor administrator or other
representative of a deceased person, or against a person of unsound
mind, upon a claim or demand against the estate of such deceased
person or against such person of unsound mind, cannot testify as to any
matter of fact occurring before the death of such deceased person or
before such person became of unsound mind;"

However, there was a waiver of the prohibition when the counsel for the
administratrix extensively cross-examined the witness on the very matters
subject of the prohibition. (Wright vs. Tinio, G. R. No. L-4004, May 29, 1952; see
also Tongco vs. Vianzon, 50 Phil. 698; Macfarlane vs. Green, 54 Phil. 551). It
was for this reason that the trial judge eventually overruled the counsel's previous
general and continuing objection and admitted the testimony of the witness.
Furthermore, it is difficult to believe that the counsel's lengthy cross-examination
on the prohibited matters was merely for the purpose of establishing the "motive,
prejudices and predilection" of the witness. In this connection, it has been said:
". . . The reason for the rule apparently is that a litigant cannot be
permitted to speculate as to what his examination of a witness may
bring forth. Having made his selection of one of two courses which
he may pursue, he has no light, after he discovers that the course
selected is not to his advantage, and after he has put the opposite
party to the expense, and has consumed the time of the courts in a
trial of the case in accordance with the course selected, to change
his position and make another and different selection. Such course
would be unfair both to the opposite party and to the court and
should not be countenanced in any court of justice. (IV Francisco,
RULES OF COURT, 876, 877, citing the case of Comstock's Adm'r
vs. Jacobs, 89 VT. 133, 94 A. 497, Ann. Cas. 1913A, 465)".
The next issue is whether or not the claim is already barred by prescription and
laches. Under the New Civil Code, an action upon a written contract must be
brought within 10 years from the time the right of action accrues. (Art. 1144, par.
1). In the case at bar, the cause of action accrued on December 3, 1943 (the
date when the note became due and demandable) and petitioners filed their
"reclamación" only on November 13, 1954. Apparently, the action has already
prescribed, because more than ten years had elapsed before any suit was filed.
However, it must he remembered that the provisions on moratorium had the
effect of suspending the statute of limitations from November 18, 1944 when
Executive Order No. 25 was issued, to May 18, 1953, the date of promulgation of
the decision in the case of Rutter vs. Esteban (G.R. No. L-3708) holding such
provisions no longer applicable (Rio y Compañia vs. Sandoval, G.R. No. L-9391,
November 28, 1956; Compañia Maritima vs. Court of Appeals, G.R. No. L-14949,
May 30, 1960). Thus, from December 3, 1943 to November 13, 1954, eleven
years, eleven months and ten days have elapsed. Deducting from this period
eight years and six months, the time during which the statute of limitations was
suspended, it is clear that petitioners' claim has not yet prescribed when it was
filed on November 13, 1954.

Respondents, however, contend that Republic Act No. 342, which tools effect on
July 26, 1948, lifted the moratorium on debts contracted during the Japanese
occupation. The contention is untenable. This court has already held
that Republic Act No. 342 did not lift the moratorium on debts contracted during
the war (Uy vs. Kalaw Katigbak, G. R. No. L-1830, Dec. 31, 1949) but modified
Executive Order No. 32 as to prewar debts, making the protection available only
to debtors who had war damage claims (Sison vs. Mirasol, G. R. No. L-4711,
Oct. 31, 1952).
In order that the defense of laches may prosper, the following elements must be
present: 1) conduct on the part of defendant, or one under whom he claims,
giving rise to the situation complained of, 2) delay in asserting complainant's right
after knowledge or notice of defendant's conduct and an opportunity to sue, 3)
lack of knowledge or notice on the part of the defendant that complainant would
assert the right on which he bases suit, and 4) injury or prejudice to defendant in
the event relief is accorded. (Villoria vs. Secretary of Agriculture and Natural
Resources, G.R. No. L-11754, April 29, 1960) Assuming that the first three
elements are present, we do not see how the last element may exists, for neither
injury or prejudice to respondent may occur by the allowance of the claim. It
should be emphasized here that mere lapse of time during which there was
neglect to enforce the right is not the sole basis of the rule on laches, but also the
changes of conditions which may have arisen during the period there has been
neglect. When there are no changes of condition detrimental to the defendant,
the defense of laches may not prosper.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals in CA-G. R.
No. 21222-R is hereby reversed and the Order-Decree dated October 4, 1956 of
the Court of First Instance of Quezon City in Special Proceedings No. Q-285 is
hereby affirmed in all respects. Without costs.
Bengzon, C.J., Padilla, Labrador; Concepcion, Reyes, J.B.L., Barrera,
Paredes and Dizon, JJ., concur.
Bautista Angelo, J., took no part.

(De Abraham v. Recto-Kasten, G.R. No. L-16741, [January 31, 1962], 114 PHIL
|||

239-245)

SECOND DIVISION

[G.R. No. L-27434. September 23, 1986.]

GENARO GOÑI, RUFINA P. VDA. DE VILLANUEVA, VIOLA P.

VILLANUEVA, OSCAR P. VILLANUEVA, MARINA P.
VILLANUEVA, VERNA P. VILLANUEVA, PRAXEDES P.
VILLANUEVA, JR., JOSE P. VILLANUEVA, SAMUEL P.
VILLANUEVA, LOURDES P. VILLANUEVA, MILAGROS P.
VILLANUEVA DE ARRIETA, petitioners-appellants, vs.THE
COURT OF APPEALS and GASPAR VICENTE, respondents-
appellees.

Ambrosio Padilla Law Office for petitioners-appellants.

San Juan, Africa, Gonzales & San Agustin Law Office for respondents-
appellees.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; DISQUALIFICATION OF WITNESSES BY

REASON OF INTEREST OR RELATIONSHIP; RATIONALE. — The object and
purpose of Rule 130, Sec. 20 par. (a) is to guard against the temptation to give
false testimony in regard to the transaction in question on the part of the
surviving party and further to put the two parties to a suit upon terms of equality
in regard to the opportunity of giving testimony. It is designed to close the lips of
the party plaintiff when death has closed the lips of the party defendant, in order
to remove from the surviving party the temptation to falsehood and the possibility
of fictitious claims against the deceased.
2. ID.; ID.; ID.; APPLICABLE IN THE CASE AT BAR. — The case at bar,
although instituted against the heirs of Praxedes Villanueva after the estate of the
latter had been distributed to them, remains within the ambit of the protection.
The reason is that the defendants-heirs are properly the "representatives" of the
deceased, not only because they succeeded to the decedent's right by descent
or operation of law, but more importantly because they are so placed in litigation
that they are called on to defend which they have obtained from the deceased
and make the defense which the deceased might have made if living, or to
establish a claim which deceased might have been interested to establish, if
living.
3. ID.; ID.; EXCEPTION; WAIVER, HOW MADE; CASE AT BAR. — The
protection under the Rules, was effectively waived when counsel for petitioners
cross-examined private respondent Vicente. "A waiver occurs when plaintiff's
deposition is taken by the representatives of the estate or when counsel for the
representative cross-examined the plaintiff as to matters occurring during
deceased's lifetime." It must further be observed that petitioners presented a
counterclaim against private respondent Vicente. When Vicente thus took the
witness stand, it was in a dual capacity as plaintiff in the action for recovery of
property and as defendant in the counterclaim for accounting and surrender of
fields nos. 13 and 14. Evidently, as defendant in the counterclaim, he was not
disqualified from testifying as to matters of fact occurring before the death of
Praxedes Villanueva, said action not having been brought against, but by the
estate of representatives of the estate/deceased person.
4. ID.; ID.; ID.; ID.; LIMITATIONS. — Under the great majority of statutes, the
adverse party is competent to testify to transactions or communications with the
deceased or incompetent person which were made with an agent of such person
in cases in which the agent is still alive and competent to testify. But the
testimony of the adverse party must be confined to those transactions or
communications which were had with the agent.
5. ID.; ID.; ID.; INEQUALITY SOUGHT TO BE AVOIDED BY THE RULES,
INEXISTENT. — The inequality or injustice sought to be avoided by Section 20
(a) of Rule 130, where one of the parties no longer has the opportunity to either
confirm or rebut the testimony of the other because death has permanently
sealed the former's lips, does not actually exist in the case at bar, for the reason
that petitioner Goni could and did not negate the binding effect of the
contract/promise to sell. Thus, while admitting the existence of the said
contract/promise to sell, petitioner Goni testified that the same was subsequently
novated into a verbal contract of lease over fields nos. 4 and 13 of the Hacienda
Dulce Nombre de Maria.
6. CIVIL LAW; CONTRACTS; MODE OF EXTINGUISHMENT; NOVATION;
DEFINED; REQUISITE. — Novation takes place when the object or principal
condition of an obligation is changed or altered. In order, however, that an
obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the
new obligations be on every point incompatible with each other. "Novation is
never presumed. It must be established that the old and the new contracts are
incompatible in all points, or that the will to novate appear by express agreement
of the parties or in acts of equivalent import."

DECISION

FERNAN, J : p

This is an appeal by certiorari from the decision of the then Court of Appeals in
CA-G.R. No. 27800-R entitled, "Gaspar Vicente, Plaintiff-Appellant, vs. Genaro
Goñi, et al., Defendants-Appellants" as well as from the resolution denying
petitioners' motion for reconsideration.
The factual backdrop is as follows:
The three (3) haciendas known as San Sebastian, Sarria and Dulce Nombre de
Maria situated in the Municipality of Bais, Negros Oriental, were originally owned
by the Compañia General de Tabacos de Filipinas [TABACALERA]. Sometime in
1949, the late Praxedes T. Villanueva, predecessor-in-interest of petitioners,
negotiated with TABACALERA for the purchase of said haciendas. However, as
he did not have sufficient funds to pay the price, Villanueva with the consent of
TABACALERA, offered to sell Hacienda Sarria to one Santiago Villegas, who
was later substituted by Joaquin Villegas. Allegedly because TABACALERA did
not agree to the transaction between Villanueva and Villegas, without a guaranty
private respondent Gaspar Vicente stood as guarantor for Villegas in favor of
TABACALERA. The guarantee was embodied in a document denominated as
"Escritura de Traspaso de Cuenta." 1
Either because the amount realized from the transaction between Villanueva and
Villegas still fell short of the purchase price of the three haciendas, or in
consideration of the guaranty undertaken by private respondent Vicente,
Villanueva contracted or promised to sell to the latter fields nos. 3, 4 and 13 of
Hacienda Dulce Nombre de Maria for the sum of P13,807.00. This agreement
was reduced to writing and signed by petitioner Genaro Goñi as attorney-in-fact
of Villanueva, thus:prLL

"En consideracion a la garantia que Don Gaspar Vicente asume con la

Cia. Gral. de Tabacos de Filipinas por el saldo de Don Santiago Villegas
de P43,539.75 asumido por Don Joaquin Villegas el que Suscribe
Praxedes T. Villanueva se compromete ceder es venta a Don Gaspar
Vicente los campos nos. 3, 4 y 13 del plano de porcelario de la
Hacienda Dulce Nombre de Maria, en compra projectada de la Cia. Gral.
de Tabacos de Filipinas. Estas campos representan 6-90-35 hectares
por valor de P13,807.00 que Don Gasper Vicente pagara directamente a
Praxedes T. Villanueva.
"Bais, Central, Octubre 24, 1949.
"Fdo. Praxedes T. Villanueva.
Por: "Fdo. Genaro Goñi
Apoderado" 2
Private respondent Vicente thereafter advised TABACALERA to debit from his
account the amount of P13,807.00 as payment for the balance of the purchase
price. However, as only the amount of P12,460.24 was actually needed to
complete the purchase price, only the latter amount was debited from private
respondent's account. The difference was supposedly paid by private respondent
to Villanueva, but as no receipt evidencing such payment was presented in court,
this fact was disputed by petitioners.
It is alleged by petitioners that subsequent to the execution of the
contract/promise to sell, Villanueva was able to raise funds by selling a property
in Ayungon, Negros Oriental. He thus went to private respondent Vicente for the
purpose of rescinding the contract/promise to sell. However, as the amount of
P12,460.24 had already been debited from private respondent's account, it was
agreed that lots 4 and 13 of the Hacienda Dulce Nombre de Maria would merely
be leased to private respondent Vicente for a period of five (5) years starting with
crop-year 1950-51 at an annual rental of 15% of the gross income, said rent to
be deducted from the money advanced by private respondent and any balance
owing to Villanueva would be delivered by Vicente together with the lots at the
end of the stipulated period of lease. cdrep

On December 10, 1949, TABACALERA executed a formal deed of sale covering

the three haciendas in favor of Villanueva. Fields Nos. 3, 4 and 13 of the
Hacienda Dulce Nombre de Maria were thereafter registered in the name of
Villanueva under TCT No. T-4780 of the Register of Deeds of Negros Oriental.
The fields were likewise mortgaged by Villanueva to the Rehabilitation Finance
Corporation (RFC), later transferred to the Philippine National Bank on
December 16, 1955, for a total indebtedness of P334,400.00. 3
Meanwhile, Fields nos. 4 and 13 were delivered to private respondent Vicente
after the 1949-1950 milling season in January and February, 1950.
On June 17, 1950, Villanueva executed a "Documento de la Venta Definitiva" in
favor of Joaquin Villegas, covering Lot No. 314 of the Cadastral Survey of Bais
with an area of 468,627 square meters, more or less, (Hacienda Sarria). A
supplemental instrument was later executed by Villanueva in favor of Villegas to
include in the sale of June 17, 1950 the sugar quota of the land.
On November 12, 1951, Villanueva died. Intestate proceedings were instituted on
November 24, 1951 before the then Court of First Instance of Negros Oriental,
docketed as Special Case No. 777. Among the properties included in the
inventory submitted to the court were fields nos. 3, 4 and 13 of Hacienda Dulce
Nombre de Maria. Field no. 13 with an area of 1 hectare, 44 ares and 95
centares was listed as Lot no. 723 of the inventory, while fields nos. 3 and 4, with
areas of 3 hectares, 75 ares and 60 centares, and 1 hectare, 69 ares and 80
centares, respectively, were included in Lot no. 257 of the inventory.

On October 7, 1954, the day before the intestate proceedings were ordered
closed and the estate of the late Praxedes Villanueva delivered to his heirs,
private respondent Vicente instituted an action for recovery of property and
damages before the then Court of First Instance of Negros Oriental against
petitioner Goñi in his capacity as administrator of the intestate estate of Praxedes
Villanueva. In his complaint docketed as Civil Case No. 2990, private respondent
Vicente sought to recover field no. 3 of the Hacienda Dulce Nombre de Maria,
basing his entitlement thereto on the contract/promise to sell executed by the late
Praxedes Villanueva in his favor on October 24, 1949. He likewise prayed by way
of attorney's fees and other costs the sum of P2,000.00 and for such other further
relief which the court may deem just and equitable in the premises. 4
On October 25, 1954, petitioner Goñi, as defendant in Civil Case No. 2990, filed
an answer with counterclaim for accounting of the produce of fields nos. 4 and
13, as well as the surrender thereof on June 20, 1955, the end of the fifth crop-
year, plus moral damages in the sum of P30,000.00 and P3,000.00 as attorney's
fees. After an answer to the counter-claim had been filed, private respondent
Vicente amended his complaint on September 1, 1955, to include a prayer for
damages representing the produce of field no. 3 from 1949-50 until delivery
thereof to him. An answer with counterclaim to the amended complaint was duly
filed, and on April 25, 1956, private respondent Vicente amended his complaint
anew to include as parties-defendants the heirs of the late Praxedes Villanueva.
On July 13, 1957, the parties entered into a stipulation of facts, agreeing, among
others, on the costs of production and produce of the three fields in question. The
case thereafter proceeded to trial. Plaintiff presented two (2) witnesses: then
party-plaintiff Gaspar Vicente, himself, who over the objection of therein
defendants testified on facts occurring before the death of Praxedes Villanueva,
and Epifanio Equio, a clerk of TABACALERA Agency in the Bais Sugar Central.
Defendants presented Genaro Goñi, who testified on the alleged verbal lease
agreement.
On December 18, 1959, the trial court rendered a decision ordering therein
defendants-heirs to deliver to Gaspar Vicente field no 3, to execute a formal deed
of sale covering fields nos. 3, 4 and 13 in favor of Vicente, to pay the latter actual
or compensatory damages in the amount of P81,204.48, representing 15% of the
total gross income of field no. 3 for crop-years 1950-51 to 1958-59, and such
other amounts as may be due from said field for the crop years subsequent to
crop-year 1958-59, until the field is delivered to Vicente, and to pay the sum of
P2,000.00 as attorney's fees plus costs. Therein defendant Goñi was relieved of
any civil liability for damages, either personally or as administrator of the estate. 5
Both parties appealed the decision to the then Court of Appeals; the plaintiff from
the portion awarding damages on a claim that he was entitled to more, and
defendants, from the entire decision. Cdpr

On December 15, 1966, the Court of Appeals promulgated its decision, affirming
that of the lower court, with the modification that the amount of damages to be
paid by defendant-heirs to the plaintiff should be the total net income from field
no. 3 from the crop year 1950-51 until said field is finally delivered to the plaintiff
plus interest thereon at the legal rate per annum. 6
Petitioners filed a motion for reconsideration, but were denied the relief sought in
a resolution dated February 9, 1967. Hence, the present appeal by certiorari
whereby petitioners raise the following questions of law:
"MAY RESPONDENT GASPAR VICENTE TESTIFY ON MATTERS OF
FACT OCCURRING BEFORE THE DEATH OF PRAXEDES T.
VILLANUEVA, WHICH CONSTITUTES A CLAIM OR DEMAND UPON
HIS ESTATE, IN VIOLATION OF RULE 123, SEC. 26, PAR. (C), NOW
RULE 130, SEC. 20 PAR. (A)?
"MAY NOT A WRITTEN PROMISE TO SELL DATED OCTOBER 24,
1949 BE NOVATED INTO A VERBAL AGREEMENT OF LEASE
DURING THE LIFETIME OF THE PROMISSOR, WHOSE DEATH
OCCURRED ON NOVEMBER 12, 1951, BY FACTS AND
CIRCUMSTANCES SUBSTANTIATED BY COMPETENT ORAL
EVIDENCE IN THIS CASE?
"SHOULD THE PROMISEE IN A PROMISE TO SELL, WHO PAID
P12,460.24 WHICH WAS TO BE ACCOUNTED AND TO BE
CREDITED AS RENTALS AFTER FIVE (5) YEARS OF LEASE, WHO
 IN HIS ORIGINAL COMPLAINT DID NOT ALLEGE NOR PROVE
DAMAGES, EXCEPT THE SUM OF P2,000.00 AS ATTORNEY'S FEES,
RECEIVE A JUDGMENT FOR DAMAGES IN THE AMOUNT OF
P74,056.35 WHICH CONSISTS OF P37,121.26 PLUS LEGAL
INTEREST FOR THE CROP YEARS 1950-51 TO 1958-59 AND FOR
P3,624.18 TO P4,374.78 FOR EVERY CROP YEAR SUBSEQUENT TO
1958-59 PLUS INTEREST?" 7

We find that neither the trial nor appellate court erred in ruling for the admissibility
in evidence of private respondent Vicente's testimony. Under ordinary
circumstances, private respondent Vicente 8 would be disqualified by reason of
interest from testifying as to any matter of fact occurring before the death of
Praxedes T. Villanueva, such disqualification being anchored on Section 20(a) of
Rule 130, commonly known as the Survivorship Disqualification Rule or Dead
Man Statute, which provides as follows:
"Section 20. Disqualification by reason of interest or relationship. — The
following persons cannot testify as to matters in which they are
interested, directly or indirectly, as herein enumerated:
"(a) Parties or assignors of parties to a case, or persons in whose behalf
a case is prosecuted, against an executor or administrator or other
representative of a deceased person, or against a person of unsound
mind, upon a claim or demand against the estate of such deceased
person or against such person of unsound mind, cannot testify as to any
matter of fact occurring before the death of such deceased person or
before such person became of unsound mind."

The object and purpose of the rule is to guard against the temptation to give false
testimony in regard to the transaction in question on the part of the surviving
party and further to put the two parties to a suit upon terms of equality in regard
to the opportunity of giving testimony. 9 It is designed to close the lips of the party
plaintiff when death has closed the lips of the party defendant, in order to remove
from the surviving party the temptation to falsehood and the possibility of fictitious
claims against the deceased. 10
The case at bar, although instituted against the heirs of Praxedes Villanueva
after the estate of the latter had been distributed to them, remains within the
ambit of the protection, The reason is that the defendants-heirs are properly the
"representatives" of the deceased, not only because they succeeded to the
decedent's right by descent or operation of law, but more importantly because
they are so placed in litigation that they are called on to defend which they have
obtained from the deceased and make the defense which the deceased might
have made if living, or to establish a claim which deceased might have been
interested to establish, if living. 11
Such protection, however, was effectively waived when counsel for petitioners
cross-examined private respondent Vicente. "A waiver occurs when plaintiff's
deposition is taken by the representative of the estate or when counsel for the
representative cross-examined the plaintiff as to matters occurring during
deceased's lifetime." 12 It must further be observed that petitioners presented a
counterclaim against private respondent Vicente. When Vicente thus took the
witness stand, it was in a dual capacity as plaintiff in the action for recovery of
property and as defendant in the counterclaim for accounting and surrender of
fields nos. 4 and 13. Evidently, as defendant in the counterclaim, he was not
disqualified from testifying as to matters of fact occurring before the death of
Praxedes Villanueva, said action not having been brought against, but by the
estate or representatives of the estate/deceased person. prLL

Likewise, under a great majority of statutes, the adverse party is competent to

testify to transactions or communications with the deceased or incompetent
person which were made with an agent of such person in cases in which the
agent is still alive and competent to testify. But the testimony of the adverse party
must be confined to those transactions or communications which were had with
the agent. 13 The contract/promise to sell under consideration was signed by
petitioner Goñi as attorney-in-fact (apoderado) of Praxedes Villanueva. He was
privy to the circumstances surrounding the execution of such contract and
therefore could either confirm or deny any allegations made by private
respondent Vicente with respect to said contract. The inequality or injustice
sought to be avoided by Section 20(a) of Rule 130, where one of the parties no
longer has the opportunity to either confirm or rebut the testimony of the other
because death has permanently sealed the former's lips, does not actually exist
in the case at bar, for the reason that petitioner Goñi could and did not negate
the binding effect of the contract/promise to sell. Thus, while admitting the
existence of the said contract/promise to sell, petitioner Goñi testified that the
same was subsequently novated into a verbal contract of lease over fields nos. 4
and 13 of the Hacienda Dulce Nombre de Maria.
Novation takes place when the object or principal condition of an obligation is
changed or altered. 14 In order, however, that an obligation may be extinguished
by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every point
incompatible with each other. 15 "Novation is never presumed. It must be
established that the old and the new contracts are incompatible in all points, or
that the will to novate appear by express agreement of the parties or in acts of
equivalent import." 16
The novation of the written contract/promise to sell into a verbal agreement of
lease was clearly and convincingly proven not only by the testimony of petitioner
Goñi, but likewise by the acts and conduct of the parties subsequent to the
execution of the contract/promise to sell. Thus, after the milling season of crop
year 1949-50, only fields nos. 4 and 13 were delivered to private respondent
Vicente. Fields nos. 3, 4 and 13 were subsequently registered in Villanueva's
name and mortgaged with the RFC. Villanueva likewise executed a deed of sale
covering Hacienda Sarria in favor of Joaquin Villegas. All these were known to
private respondent Vicente, yet he did not take any steps toward asserting and/or
protecting his claim over fields nos. 3, 4 and 13 either by demanding during the
lifetime of Villanueva that the latter execute a similar document in his favor, or
causing notice of his adverse claim to be annotated on the certificate of title of
said lots. If it were true that he made demands on Villanueva for the surrender of
field no. 3 as well as the execution of the corresponding deed of sale, he should
have, upon refusal of the latter to do so, immediately or within a reasonable time
thereafter, instituted an action for recovery, or as previously observed, caused
his adverse claim to be annotated on the certificate of title. Considering that field
no. 3, containing an area of three (3) hectares, 75 ares and 60 centares, is the
biggest among the three lots, an ordinary prudent man would have taken these
steps if he honestly believed he had any right thereto. Yet, private respondent
Vicente did neither, In fact such inaction persisted even during the pendency of
the intestate proceedings wherein he could have readily intervened to seek
exclusion of fields nos. 3, 4 and 13 from the inventory of properties of the late
Praxedes Villanueva.
The reason given by private respondent Vicente that field no. 3 was not delivered
to him together with fields nos. 4 and 13 because there were small sugar cane
growing on said field at that time belonging to TABACALERA, might be taken as
a plausible explanation why he could not take immediate possession of lot no. 3,
but it certainly could not explain why it took him four years before instituting an
action in court, and very conveniently, as petitioners noted, after Villanueva had
died and at the time when the verbal contract of lease was about to expire.
Both the trial and appellate courts chose to believe in the contract/promise to sell
rather than the lease agreement, simply because the former had been reduced to
writing, while the latter was merely verbal. It must be observed, though, that the
contract/promise to sell was signed by petitioner Goñi as attorney-in-fact of the
late Praxedes Villanueva, an indication, to our mind, that final arrangements were
made by petitioner Goñi in the absence of Villanueva. It was therefore natural for
private respondent Vicente to have demanded that the agreement be in writing to
erase any doubt of its binding effect upon Villanueva. On the other hand, the
verbal lease agreement was negotiated by and between Villanueva and private
respondent Vicente themselves. Being close friends and relatives 17 it can be
safely assumed that they did not find it necessary to reduce the same into
writing.
prLL

In rejecting petitioners' contention respecting the verbal lease agreement, the

appellate court put much weight on the failure of petitioners to demand an
accounting of the produce of fields nos. 4 and 13 from 1950 to 1954, when the
action for recovery of property was filed. Such failure was satisfactorily explained
by petitioners in their motion for reconsideration filed before the then Court of
Appeals, in this manner:
". . . Mr. Genaro Goñi is also a farmer by profession and that there was
no need for him to demand a yearly accounting of the total production
because the verbal lease agreement was for a term of 5 years. The
defendant Mr. Genaro Goñi as a sugar planter has already full
knowledge as to the annual income of said lots nos. 4 and 13, and since
there was the amount of P12,460.25 to be liquidated, said defendant
never deemed it wise to demand such a yearly accounting. It was only
after or before the expiration of the 5 year lease that said defendant
demanded the accounting from the herein plaintiff regarding the
production of the 2 lots that were then leased to him.
"It is the custom among the sugar planters in this locality that the Lessee
usually demands an advance amount to cover the rental for the period of
the lease, and the demand of an accounting will be only made after the
expiration of the lease period. It was adduced during the trial that the
amount of P12,460.75 was considered as an advance rental of the 2 lots
which was leased to the Plaintiff, lots nos. 4 and 13, so we humbly
believe that there was no necessity on the part of defendant Mr. Genaro
Griño to make a yearly demand for an accounting for the total production
of 2 parcels leased to the plaintiff." 18

Petitioners, having clearly and sufficiently shown that the contract/promise to sell
was subsequently novated into a verbal lease agreement, it follows that they are
entitled to a favorable decision on their counterclaim. Discussion of the third
issue raised therefore becomes unnecessary.
WHEREFORE, the decision appealed from is hereby reversed. The judicial
administrator of the estate of private respondent Gaspar Vicente and or his
successors-in-interest are hereby ordered to: a) surrender possession of fields
nos. 4 and 13 of the Hacienda Dulce Nombre de Maria to petitioners; b) render
an accounting of the produce of said fields for the period beginning crop-year
1950-51 until complete possession thereof shall have been delivered to
petitioners; and c) to pay the corresponding annual rent for the said fields in an
amount equivalent to 15% of the gross produce of said fields, for the periods
beginning crop-year 1950-51 until said fields shall have been surrendered to
petitioners, deducting from the amount due petitioners the sum of P12,460.24
advanced by private respondent Gaspar Vicente.
SO ORDERED.
Feria (Chairman), Alampay, Gutierrez, Jr. and Paras, JJ., concur.
(Goñi v. Court of Appeals, G.R. No. L-27434, [September 23, 1986], 228 PHIL
|||

222-235)

FIRST DIVISION

[G.R. No. 27498. September 20, 1927. 1 ]

Intestate estate of Marcelino Tongco, represented by JOSEFA

TONGCO, administratrix, plaintiff-appellant, vs. ANASTACIA
VIANZON, defendant-appellee.

M. H. de Joya and Enrique Tiangco, for appellant.

Vicente J. Francisco, for appellee.

SYLLABUS

1. EVIDENCE; WITNESSES; COMPETENCY; CODE OF CIVIL

PROCEDURE SECTION 383 (7) CONSTRUED. — The Code of Civil
Procedure in section 383 (7) provides that "Parties or assignors of parties to
an action or proceeding, or persons in whose behalf an action or proceeding
is prosecuted against an executor or administrator or other representative of a
deceased person . . . upon claim or demand against the estate of such
deceased person . . . , cannot testify as to any matter of fact occurring before
the death and purpose of this stature is to guard against the temptation to give
false testimony in regard to the transaction in question on the part of the
surviving party. The law designed to aid in arriving at the truth and was not
designed to suppress the truth.
2. ID.; ID.; ID.; — The law does not apply and a witness is competent to
testify when the actions were not brought "against" the estate, nor were they
brought upon claims "against" the estate. The authorities ate cited and
distinguished.
 3. ID.; ID.; ID.; WAIVER BY CROSS-EXAMINATION. — A waiver is
accomplished when the adverse party undertakes to cross-examination the
interested person with respect to prohibited matters.

DECISION

MALCOLM, J : p

The fundamental question which is being litigated in this case and its
companion case, R. G. No. 27499, 2 is whether the property in dispute should
be assigned to the estate of Marcelino Tongco, or whether it should be set
aside as belonging exclusively to the widow.
Marcelino Tongco and Anastacia Vianzon contracted marriage on July
5, 1984. The first named died on July 8, 1925, leaving the second named as
his widow. The niece of the deceased, Josefa Tongco, was named
administratrix of the estate. It appears that shortly before the death of
Marcelino Tongco, he had presented claims in a cadastral case in which he
had asked for titles to certain properties in the name of the conjugal
partnership consisting of himself and his wife, and that corresponding decrees
for these lots were issued in the name of the conjugal partnership not long
after his death.
In the cadastral case, the widow began action on April 28, 1926, when
she presented a motion for a revision of certain decrees within the one-year
period provided by the Land Registration Law. Issue was joined by the
administratrix of the estate. A decision was rendered by Judge of First
Instance Rovira concluding with this pronouncement of a judgment:
"Therefore, and by virtue of the provisions of section 38 of Act No. 496,
decrees Nos. 191390, 191504, and 190925, relative to lots Nos. 1062, 1263,
and 491 of this cadastral record, as well as the original certificates of title Nos.
3247, 3298, and 3297 in regard thereto, are hereby annulled and set aside,
and it is ordered that in lieu thereof new decrees and certificates of title be
issued for lots Nos. 1062, 1263, and 491, as the exclusive property of
Anastacia Vianzon, of legal age, widow, and resident of Orani, Bataan, free
from all encumbrances and liens. In regard to lot No. 460, the court sustains
the decree already issued in due time with respect to said lot." Sometime
later, a motion for a new trial was presented with accumulated affidavits by
counsel for the losing party. This motion was denied by the trial judge.
On July 19, 1926, the administratrix of the estate began action against
Anastacia Vianzon for the recovery of specified property and for damages.
The issue was practically the same as in the cadastral case. Judgment was
rendered by Judge Rovira couched in the following language: "Therefore, the
court renders judgment absolving the defendant from the complaint in this
case, and only declares that one-half of the value of the shares in
the Sociedad Cooperativa de Credito Rural de Orani, to the amount of ten
pesos (P10), belong to the intestate estate of Marcelino Tongco, which one-
half interest must appear in the inventory of the property of the estate of the
deceased Marcelino Tongco." The motion for a new trial was denied by His
Honor, the trial judge.
From both of the judgment hereinbefore mentioned, the administratrix
of the estate of Marcelino Tongco has appealed. The first action filed, which
was in the cadastral case, has now become the last in number and is 27499.
The second action filed in the property case has now become the first in
number and is 27498. As pursuant to the agreement of the parties the two
cases were tried together, they can be best disposed of together on appeal.
The first, third, fourth, and fifth errors assigned in the property case and
the second error assigned in the cadastral case primarily concern findings of
fact and relate to the discretionary power of the trial judge. The second error
assigned in the property case and the first error assigned in the cadastral
case attack the ruling of the trial judge to the effect that the widow was
competent to testify.
It is true that by reason of the provisions of article 1407 of the Civil
Code the presumption is that all the property of the spouses is partnership
property in the absence of proof that it belongs exclusively to the husband or
to the wife. But even proceeding on this assumption, we still think that the
widow has proved in a decisive and conclusive manner that the property in
question belonged exclusively to her, that is, it would, unless we are forced to
disregard her testimony. No reversible error was committed in the denial of
the motion for a new trial for it is not at all certain that it rested on a legal
foundation, or that if it had been granted it would have changed the result.

Counsel for the appellant, however, asserts that if the testimony of the
widow be discarded, as it should be, then the presumption of the Civil Code,
fortified by the unassailable character of Torrens titles, arises, which means
that the entire fabric of appellee's case is punctured. Counsel relies on that
portion of section 383 of the Code of Civil Procedure as provides that "Partied
or assignors of parties to an action or proceeding, or persons in whose behalf
an action or proceeding is prosecuted, against an executor or administrator or
other representative of a deceased person, . . ., upon a claim or
demand against the estate of such deceased person . . ., cannot testify as to
any matter of fact occurring before the death of such deceased person . . ."
Counsel is eminently correct in emphasizing that the object and purpose of
this statute is to guard against the temptation to give false testimony in regard
 to the transaction in question on the part of the surviving party. He has,
however, neglected the equally important rule that the law was designed to
aid in arriving at the truth and was not designed to suppress the truth.

The law twice makes use of the word "against." The actions were not
brought "against" the administratrix of the estate, nor were they brought upon
claims "against" the estate. In the first case at bar, the action is one by the
administratrix to enforce a demand "by" the estate. In the second case at bar,
the same analogy holds true for the claim was presented in cadastral
proceedings where in one sense there is no plaintiff and there is no
defendant. Director of Lands vs. Roman Catholic Archbishop of Manila [1920],
41 Phil., 120 — nature of cadastral proceedings; Fortis vs. Gutierrez
Hermanos [1906], 6 Phil., 100 — in point by analogy; Maxilom vs. Tabotabo
[1907], 9 Phil., 390 and Kiel vs. Estate of P. S. Sabert [1924], 46 Phil., 193 —
both clearly distinguishable as can be noted by looking at page 197 of the last
cited case; Sedgwick vs. Sedgwick [1877], 52 Cal., 336, 337; Myers vs.
Reinstein [1885], 67 Cal., 89; McGregor vs. Donelly [1885], 67 Cal., 149, 152;
Booth vs. Pendola [1891], 88 Cal., 36 Bernardis vs. Allen [1902], 136 Cal., 7
Calmon vs. Sarraille [1904], 142 Cal., 638, 642; Bollinger vs. Wright [1904],
143 Cal., 292, 296; Whitney vs. Fox [1897], 166 U. S., 637, 648.) Moreover, a
waiver was accomplished when the adverse party undertook to cross-
examination the interested person with respect to the prohibited matter. (4
Jones on Evidence, pp. 767 et seq.; Stair vs. McNulty [1916], 133 Minn., 136;
Ann. Cas., 1918D 201.) We are of the opinion that the witness was
competent.

The result, therefore, must be adhere to the findings and rulings of the
trial judge. No prejudicial error is noted in the proceedings.

Judgment affirmed, with the costs of this instance against the appellant.
Avanceña, C. J., Johnson, Street, Villamor, Johns,
Romualdez and Villa-Real, JJ., concur.
(Intestate Estate of Tongco v. Vianzon, G.R. No. 27498, [September 20, 1927],
|||

50 PHIL 698-703)

EN BANC

[G.R. No. L-2016. August 23, 1949.]

 Testate estate of RICHARD THOMAS FITZSIMMONS,
deceased. MARCIAL P. LICHAUCO, administrator-appellee, vs.
ATLANTIC, GULF & PACIFIC COMPANY OF MANILA, claimant-
appellant.

Perkins, Ponce Enrile, Contreras & Gomez and Tañada, Pelaez &
Teehankee for appellant.
Roxas, Picazo & Mejia for appellee.

SYLLABUS

1. EVIDENCE; SURVIVING-PARTIES RULE; WITNESSES;

CORPORATION AS A PARTY; OFFICERS AND/OR STOCKHOLDERS ARE
NOT DISQUALIFIED TO TESTIFY. — Inasmuch as section 26(c) of Rule 123
of the Rules of Court disqualifies only parties or assignors of parties, the
officers and/or stockholders of a corporation are not disqualified from
testifying for or against the corporation which is a party to an action upon a
claim or demand against the estate of a deceased person as to any matter of
fact occurring before the death of such deceased person.
2. ID.; SELF-SERVING DECLARATION AND DECLARATION
AGAINST INTEREST, COMPARED AND DISTINGUISHED. — A self-serving
declaration is a statement favorable to the interest of the declarant. It is not
admissible in evidence as proof of the facts asserted. "The vital objection to
the admission of this kind of evidence is its hearsay character. Furthermore
such declarations are untrustworthy; to permit their introduction in evidence
would open the door to frauds and perjuries." (20 Am. Jur., Evidence, sec.
558, pages 470, 471.) On the other hand, a declaration against the interest of
the person making it is admissible in evidence, notwithstanding its hearsay
character, if the declaration is relevant and the declarant has died, become
insane, or for some other reason is not available as a witness. "The true test
in reference to the reliability of the declaration is not whether it was made ante
litem motam, as is the case with reference to some classes of hearsay
evidence, but whether the declaration was uttered under circumstances
justifying the conclusion that there was no probable motive to falsify." (Id.,
section 556, pp. 467, 468.)
3. CORPORATIONS; OFFICERS; SALARIES; DURING PERIOD
WHEN CORPORATION IS NOT IN OPERATION AND OFFICERS ARE
INCAPACITATED OR DID NOT PERFORM ANY SERVICE. — There exists
no principle of law that would authorize the court to compel a corporation,
which for a long period was not in operation and did not receive any income,
 to pay the salaries of its officers during such period, even though they were
incapacitated and did not perform any service. To do so would be tantamount
to depriving the corporation or its stockholders of their property without due
process of law.

DECISION

OZAETA, J : p

This is an appeal from a judgment of the Court of First Instance of

Manila denying appellant's claim of P63,868.67 against the estate of the
deceased Richard T. Fitzsimmons, and granting appellee's counterclaim of
P90,000 against the appellant.

The appellant Atlantic, Gulf & Pacific Company of Manila is a foreign

corporation duly registered and licensed to do business in the Philippines,
with its office and principal place of business in the City of Manila.
Richard T. Fitzsimmons was the president and one of the largest
stockholders of said company when the Pacific war broke out on December 8,
1941. As such president he was receiving a salary of P3,000 a month. He
held 1,000 shares of stock, of which 545 shares had not been fully paid for,
but for which he had executed promissory notes in favor of the company
aggregating P245,250, at the rate of P450 a share. In 1941 the sum of
P64,500 had been credited in his favor on account of the purchase price of
the said 545 shares of stock out of bonuses and dividends to which he was
entitled from the company. Under his agreements with the company dated
April 4 and July 12, 1939, should he die without having fully paid for the said
545 shares of stock, the company, at its option, may either reacquire the said
545 shares of stock by returning to his estate the amount applied thereon, or
issue in favor of his estate the corresponding number of the company's shares
of stock equivalent to the amount paid thereon at P450 a share.
Soon after the Japanese army occupied Manila in January, 1942, it
seized and took possession of the office and all the properties and assets of
the appellant corporation and interned all its officials, they being American
citizens.
Richard T. Fitzsimmons died on June 27, 1944, in the Santo Tomas
internment camp, and special proceeding No. 70139 was subsequently
instituted in the Court of First Instance of Manila for the settlement of his
estate.
 The Atlantic, Gulf & Pacific Company of Manila resumed business
operations in March, 1945.
In due course the said company filed a claim against the estate of
Richard T. Fitzsimmons which, as amended, consisted of the following items:
A. Personal overdraft of Richard T. Fitzsimmons with
Atlantic, Gulf & Pacific Company of Manila
in current account P63,000.00

B. Charges from San Francisco agent of the company

not included in above figure A as of November 30,
1945 (P1,002), less subsequent credit advice from

San Francisco agent (P133.33) 868.67

________

Total P63,868.67

In the same claim the company offered to reacquire the 545 shares sold
to the deceased Fitzsimmons upon return to his estate of the amount of
P64,500 paid thereon, and asked the court to authorize the setoff of the
amount of its claim of P63,868.67 from the amount of P64,500 returnable to
the estate.
In his answer to the amended claim the administrator denied the
alleged indebtedness of the deceased to the claimant, expressed his
conformity to the refund of P64,500 by the claimant to the estate and the
retransfer by the latter to the former of the 545 shares of stock, and set up a
counterclaim of P90,000 for salaries allegedly due the deceased from the
claimant corresponding to the years 1942, 1943, and the first half of 1944, at
P36,000 per annum.
The issues raised by this appeal are:
1. Whether appellant's claims of P63,000 and P868.67 have been
established by satisfactory evidence; and
2. Whether the deceased Richard T. Fitzsimmons was entitled to his
salary as president of the Atlantic, Gulf & Pacific Company of Manila from
January, 1942, to June 27, 1944, when he died in the Santo Tomas
internment camp.
I. Upon the claim of P63,000 (item A) the evidence for the claimant
consisted of the testimony of Santiago Inacay and Modesto Flores, chief
accountant and assistant accountant, respectively, of the Atlantic, Gulf &
Pacific Company of Manila. (It is admitted that all the prewar books and
records of the company were completely destroyed or lost during the war.)
Santiago Inacay testified in substance as follows: He was chief of the
accounting department of the Atlantic, Gulf & Pacific Company from June,
1930, to December, 1941, and from March, 1945, to the present. The officers
of the company had the privilege of maintaining personal accounts with the
company. The deceased Fitzsimmons maintained such an account, which
consisted of cash advances from the company and payments of bills from
outside for his account. On the credit side were entered the salaries of the
official and the payments made by him. "The personal account of Mr.
Fitzsimmons, in the year 1941, was on the debit balance; that is, he owed
money to the company." "Q. How much was the amount of that debit account
of Mr. Fitzsimmons, basing on your recollections? — A. In my recollection of
the account, personal account of Mr. Fitzsimmons, as of the last statement of
account rendered in the year 1941, it was around P63,000." At the end of
each month the accounting department rendered to the deceased a statement
of his account showing the balance of his account, and at the bottom of that
statement the deceased signed his conformity to the correctness of the
balance. The last statement of account rendered to the deceased was that
corresponding to the month of November, 1941, the office of the company
having closed on December 29, 1941. Asked how it was possible for him to
remember the status of the personal account of Mr. Fitzsimmons, he replied:
"As Mr. Fitzsimmons was the president and member of the board of directors,
I have to remember it, because it is very shameful on my part that when the
said officer and other officers of the company come around and ask me about
their balance, I could not tell them the amount of their balance, although not in
exact figures, at least in round figures." This witness further testified on direct
examination as follows:
"Q. You said that Mr. Fitzsimmons is one of those officers whose
personal account with the Atlantic, Gulf & Pacific Co. used to be
on the debit side in the years previous to 1941. Can you tell the
Honorable Court what would happen at the end of each year to
the personal account, and to the status of the personal account of
Mr. Fitzsimmons? — A. At the end of each year, after the
declaration of dividends on paid shares, bonuses and directors'
fees, the account will balance to a credit balance. In other words,
at the start of the following years, the account will be on the credit
side.
"Q. So that I gather from you, Mr. Inacay, that the personal account of
Mr. Fitzsimmons, as well as the other officers of the Atlantic, Gulf
& Pacific Co., at the end of each year, and at the beginning of the
incoming year, generally, would be in the credit balance; because
 of the application of dividends on paid shares, bonuses and the
directors' fees? — A. Yes, sir." (Page 80, t. s. n.)
On cross-examination the witness admitted that he could not recollect
the amount of the balance, either debit or credit, of each of the Americans and
other employees who maintained a current account with the company; and on
redirect examination he explained that he remembered the balance of the
account of Mr. Fitzsimmons "because as accountant I should be — I should
have knowledge more or less, of the status of the account of the president,
the treasurer, and the rest of the directors."

Modesto Flores testified in substance as follows: He was assistant

accountant of the Atlantic, Gulf & Pacific Company from October 1, 1935, to
December, 1941, and from March 8, 1945, to the present. In 1941, Mr.
Fitzsimmons, president of the company, had a personal account with the latter
consisting of cash advances which he withdrew from the company and of
payments for his account of groceries, automobile, salary of his chauffeur,
gasoline and oil, and purchases of furniture for his house and other articles for
his personal use. On the credit side of his account were entered his monthly
salaries, the dividends declared, if any, the bonuses, and the director's fees.
Witness was the one who as accountant made the entries in the books of the
company. When Mr. Fitzsimmons withdrew funds by way of cash advances
from the company, he signed receipts therefor which were delivered to the
cashier, who in turn delivered them to him. When creditors of Mr. Fitzsimmons
presented bills to the accounting department for payment, those bills were
approved by Mr. Fitzsimmons and the company paid them and charged them
to his account. All the books, receipts, papers, documents, and accounts
referring to the personal account of Mr. Fitzsimmons were lost during the war.
Witness remembered that the personal account of Mr. Fitzsimmons on
December 29, 1941, was on the debit side, amounting to P63,000 more or
less, according to his best recollection. On cross-examination he testified that
in the absence of the records he could not state what part of the P63,000
represented cash advances and what part represented payments made by
the company to the creditors of Mr. Fitzsimmons.
Aside from Santiago Inacay and Modesto Flores, the claimant also
called as witnesses Mr. Henry J. Belden and Mr. Samuel Garmezy, vice-
president-treasurer and president, respectively, of the claimant company, to
testify on the status of the personal account of the deceased Fitzsimmons
with the company as of December, 1941; but upon objection of the
administrator the trial court refused to admit their testimony on that point on
the ground that said witnesses were incompetent under section 26(c) of Rule
123, they being not only large stockholders and members of the board of
directors but also vice-president-treasurer and president, respectively, of the
claimant company.
In view of the ruling of the trial court, counsel for the claimant stated in
the record that Mr. Belden, if permitted to testify, would testify as follows: That
the deceased Fitzsimmons, being president of the Atlantic, Gulf & Pacific
Company in the year 1941, had a current account with said company which,
upon the outbreak of the war in December, 1941, had a debit balance against
him of P63,000, and that said sum or any part thereof had not been paid. At
the suggestion of the court counsel asked his witness whether, if permitted,
he really would so testify, and the witness answered in the affirmative,
whereupon the court said: "Let Attorney Gomez's offer of testimony ratified by
the witness Mr. Belden be made of record."
With regard to the witness Mr. Garmezy, counsel for the claimant also
made the following offer of proof, to wit: That if said witness were allowed to
testify, he would testify as follows:
"That sometime in November — sometime during the last days of
November, or the first days of December, 1941 — he received a copy of
the trial balance sheet, and in that trial balance sheet, among other
things, the personal accounts of each and every one of the officers of the
Atlantic, Gulf & Pacific Co., including himself, and also the deceased R.
T. Fitzsimmons, appear; and that this witness would also testify to the
fact that on that occasion he checked up his own personal record with
the entries appearing in the said trial balance sheet, and he then had
occasion to find out that the account of the deceased Fitzsimmons with
the Atlantic, Gulf & Pacific Co. was a debit account in the amount of
around sixty-three thousand pesos, while the personal account of Mr.
Garmezy, the witness now testifying, showed a credit account in the sum
of around sixty-three thousand pesos. This witness will also testify that
this account of sixty-three thousand pesos owed by Mr. Fitzsimmons
appeared in that trial balance, which he had occasion to read in the first
days of December, 1941, was not paid by Mr. Fitzsimmons until the
present date." (Pages 35-36, t.s.n.)
That offer of proof was likewise ratified by the witness Garmezy and
made of record by the trial court.
The evidence for the administrator against this claim of P63,000
consisted of Exhibit 1 and the testimony of Mr. Marcial P. Lichauco explaining
the circumstances under which said document was prepared and signed by
the deceased Fitzsimmons. It appears that on December 15, 1942, Richard
Thomas Fitzsimmons sued his wife Miguela Malayto for divorce in the Court
of First Instance of Manila. On August 9, 1943, after due trial, the court
rendered judgment granting plaintiff's petition for divorce and ordering the
dissolution of the marriage between the parties. Attorney Lichauco
represented the plaintiff in that divorce case. After the decree of divorce had
become final the plaintiff Fitzsimmons, pursuant to the provisions of the
divorce law then in force, submitted to the court an inventory of the assets and
liabilities of the conjugal partnership, with a proposed adjudication or division
of the net assets among the ex-spouses and their children. A carbon copy of
said inventory, which was signed by Richard Thomas Fitzsimmons on
November 9, 1943, and filed in the Court of First Instance of Manila on the
same date in civil case No. 296, was presented by the administrator as Exhibit
1 in this case and admitted by the trial court over the objection of the claimant.
The administrator Mr. Lichauco testified herein that as attorney for Mr.
Fitzsimmons in the divorce case he prepared the said inventory from the data
furnished him by Mr. Fitzsimmons after he had conferred with and explained
to the latter why it was necessary to prepare said inventory, telling him that
under the divorce law the conjugal properties had to be liquidated; that since
he (Fitzsimmons) was married to Miguela Malayto in the year 1939, he had to
include in said inventory all the properties acquired by him between the date
of his marriage and the date of his divorce, and that all the obligations
incurred by him and not yet paid during the same period should be included
because they had to be deducted from the assets in order to determine the
net value of the conjugal properties; that he made it very clear to Mr.
Fitzsimmons that he should not forget the obligations he had because they
would diminish the amount his wife was going to receive, and that any
obligation not included in the inventory would be borne by him alone after his
wife had received her share.
According to Exhibit 1 the gross value of the assets of the conjugal
partnership between the deceased Fitzsimmons and his wife Miguela Malayto
as of November, 1943, was P174,700, and the total amount of the obligations
was P30,082. These obligations consisted of only two items — one of
P21,426 in favor of the Peoples Bank and Trust Company and another of
P8,656 in favor of the Philippine Bank of Commerce. In other words, no
obligation whatsoever in favor of the Atlantic, Gulf & Pacific Company of
Manila was listed in said inventory Exhibit 1. And upon that fact the
administrator based his opposition to the claim in question.
Before weighing the evidence hereinabove set forth to determine
whether it is sufficient to prove appellant's claim of P63,000, it is necessary for
us to pass upon appellant's first and third assignments of error referring,
respectively, to the trial court's rejection of the testimony of the witnesses
Belden and Garmezy and its admission of Exhibit 1.
The question raised by the first assignment of error is whether or not
the officers of a corporation which is a party to an action against an executor
or administrator of a deceased person are disqualified from testifying as to
any matter of fact occurring before the death of such deceased person, under
Rule 123, section 26(c), of the Rules of Court, which provides:
"Parties or assignors of parties to a case, or persons in whose
behalf a case is prosecuted, against an executor or administrator or
other representative of a deceased person, or against a person of
unsound mind, upon a claim or demand against the estate of such
deceased person or against such person of unsound mind, cannot testify
as to any matter of fact occurring before the death of such deceased
person or before such person became of unsound mind."
This provision was taken from section 383, paragraph 7, of our former
Code of Civil Procedure, which in turn was derived from section 1880 of the
Code of Civil Procedure of California.
In the case of City Savings Bank vs. Enos, 135 Cal., 167; 67 Pac., 52,
55, the Supreme Court of California, interpreting said article 1880, said:
". . . The provision applies only to parties or assignors of parties,
and Haslam was neither the one nor the other. If he was a stockholder,
which it is claimed he was, that fact would make no difference, for
interest no longer disqualifies under our law, Civ. Code Proc. sec. 1879.
Appellant cites section 14, Civ. Code, to the effect that the word 'person'
includes a corporation; and claims that, as the corporation can only
speak through its officers, the section must be held to apply to all who
are officially related to the corporation. A corporation may be conceded
to be a person, but the concession does not help appellant. To hold that
the statute disqualifies all persons from testifying who are officers or
stockholders of a corporation would be equivalent to materially
amending the statute by judicial interpretation. Plainly the law
disqualifies only 'parties or assignors of parties,' and does not apply to
persons who are merely employed by such parties or assignors of
parties."

In a later case, Merriman vs. Wickersman, 141 Cal., 567; 75 Pac., 180,
181-182, the same tribunal, in passing upon the competency of a vice-
president and principal stockholder of a corporation to testify, reaffirmed its
ruling in City Savings Bank vs. Enos, supra, after examining decisions of other
state supreme courts in relation to their respective statutes on the same
subject. The court said:
"The Burnham & Marsh Company is a corporation. Mr. Marsh,
vice-president and one of its principal stockholders, was allowed to
testify to matters and facts in issue. It is contended that the evidence
was improperly admitted, in violation of section 1880 of the Code of Civil
Procedure, which provides that 'the following persons cannot be
witnesses: . . . Parties or assignors of parties to an action or proceeding,
or persons in whose behalf an action or proceeding is prosecuted,
against an executor or administrator, upon a claim or demand against
the estate of a deceased person, as to any matter of fact occurring
before the death of such deceased person.' At common law interest
disqualified any person from being a witness. That rule has been
modified by statute. In this state interest is no longer a disqualification,
and the disqualifications are only such as the law imposes. Code Civ.
Proc., sec. 1879. An examination of the authorities from other states will
disclose that their decisions rest upon the wordings of their statutes, but
that generally, where interest in the litigation or its outcome has ceased
to disqualify, officers and directors of corporations are not considered to
be parties within the meaning of the law. In example, the statute of
Maryland (Pub. Gen. Laws, art. 35, sec. 2) limits the disability to the
'party' to a cause of action or contract, and it is held that a salesman of a
corporation, who is also a director and stockholder, is not a party, within
the meaning of the law, so as to be incompetent to testify in an action by
the company against the other party, who is insane or dead. Flach vs.
Cottschalk Co., 88 Md., 368; 41 Atl., 908; 42 L. R. A., 745; 71 Am. St.
Rep., 418. To the contrary, the Michigan law expressly forbids 'any
officer or agent of a corporation' to testify at all in relation to matters
which, if true, must have been equally within the knowledge of such
deceased person. Howell's Ann. St. Mich. sec. 7545. The Supreme
Court of Michigan, in refusing to extend the rule to agents of
partnerships, said: 'It is conceded that this testimony does not come
directly within the wording of the statute, but it is said there is the same
reason for holding the agent of a partnership disqualified from testifying
that there is in holding the agent of a corporation. This is an argument
which should be directed to the legislative rather than to the judicial
department of government. . . . The inhibition has been put upon agents
of corporations, and has not been put upon agents of partnerships. We
cannot, by construction, put into the statute what the Legislature has not
seen fit to put into it.' Demary vs. Burtenshaws' Estate (Mich.), 91 N. W.,
649. In New York the statute provides that against the executor,
administrator, etc., 'no party or person interested in the event, or person
from, through, or under whom such party or interested person derives
his interest or title shall be examined as a witness in his own behalf or
interest.' This is followed by the exception that a person shall not be
deemed interested by reason of being a stockholder or officer of any
banking corporation which is a party to the action or proceeding or
interested in the event thereof. Ann. Code Civ. Proc. N. Y., sec. 829.
Here it is apparent that the interest of the witness is made a
disqualification, and it is of course held that stockholders and officers of
corporations other than banking corporations are under disqualification.
Keller vs. West Bradley Mfg. Co., 39 Hun, 348.
"To like effects is the statute of Illinois, which declares that no
party to any civil action, suit or proceeding, or person directly interested
in the event thereof, shall be allowed to testify under the given
 circumstances. Under this statute it is held that stockholders are
interested, within the meaning of the section, and are incompetent to
testify against the representatives of the deceased party. Albers
Commission Co. vs. Sessel, 193 Ill., 153, 61 N. E., 1075. The law of
Missouri disqualifies 'parties to the contract or cause of action,' and it is
held that a stockholder, even though an officer of the bank, is not
disqualified by reason of his relation to the corporation when he is not
actually one of the parties to the making of the contract in the interest of
the bank.
"Our own statute, it will be observed, is broader than any of these.
It neither disqualifies parties to a contract nor persons in interest, but
only parties to the action (Code Civil Procedure, sections 1879, 1880);
and thus it is that in City Savings Bank vs. Enos, 135 Cal., 167, 67 Pac.,
52, it has been held that one who is cashier and at the same time a
stockholder of a bank was not disqualified, it being said: 'To hold that the
statute disqualifies all persons from testifying who are officers or
stockholders of a corporation would be equivalent to materially
amending the statute by judicial interpretation.' It is concluded, therefore,
that our statute does not exclude from testifying a stockholder of a
corporation, whether he be but a stockholder, or whether, in addition
thereto, he be a director or officer thereof."
The same view is sustained in Fletcher Cyclopedia Corporations, Vol.
9, pages 535-538; in Jones on Evidence, 1938 Ed. Vol. 3, page 1448; and in
Moran on the Law of Evidence in the Philippines, 1939 Ed. pages 141-142.
The appellee admits in his brief that in those states where the "dead
man's statute" disqualifies only parties to an action, officers and stockholders
of a corporation have been allowed to testify in favor of the corporation, while
in those states where "parties and persons interested in the outcome of the
litigation" are disqualified under the statute, officers and stockholders of the
corporation have been held to be incompetent to testify against the estate of a
deceased person.
The weight of authority sustains appellant's first assignment of error.
Inasmuch as section 26(c) of Rule 123 disqualifies only parties or assignors of
parties, we are constrained to hold that the officers and/or stockholders of a
corporation are not disqualified from testifying, for or against the corporation
which is a party to an action upon a claim or demand against the estate of a
deceased person, as to any matter of fact occurring before the death of such
deceased person.
It results that the trial court erred in not admitting the testimony of
Messrs. Belden and Garmezy. It is not necessary, however, to remand the
case for the purpose of taking the testimony of said witnesses because it
would be merely corroborative, if at all, and in any event what said witnesses
would have testified, if permitted, already appears in the record as
hereinabove set forth, and we can consider it together with the testimony of
the chief accountant and the assistant accountant who, according to the
appellant itself, were "the only ones in the best of position to testify on the
status of the personal account" of the deceased Fitzsimmons.
The third assignment of error raises the question of the admissibility of
Exhibit 1. Appellant contends that it is a self-serving declaration, while
appellee contends that it is a declaration against interest.
A self-serving declaration is a statement favorable to the interest of the
declarant. It is not admissible in evidence as proof of the facts asserted. "The
vital objection to the admission of this kind of evidence is its hearsay
character. Furthermore such declarations are untrustworthy; to permit their
introduction in evidence would open the door to frauds and perjuries." (20 Am.
Jur., Evidence, sec. 558, pages 470-471.)
On the other hand, a declaration against the interest of the person
making it is admissible in evidence, notwithstanding its hearsay character, if
the declaration is relevant and the declarant has died, become insane, or for
some other reason is not available as a witness. "The true test in reference to
the reliability of the declaration is not whether it was made ante litem motam,
as is the case with reference to some classes of hearsay evidence, but
whether the declaration was uttered under circumstances justifying the
conclusion that there was no probable motive to falsify." (Id., section 556, pp.
467-468.)
Insofar, at least, as the appellant was concerned, there was no
probable motive on the part of Fitzsimmons to falsify his inventory Exhibit 1 by
not including therein appellant's present claim of P63,000 among his
obligations or liabilities to be deducted from the assets of the conjugal
partnership between him and his divorced wife. He did not know then that he
would die within one year and that the corporation of which he was the
president and one of the largest stockholders would present the claim in
question against his estate. Neither did he know that the books and records of
that corporation would be destroyed or lost. Yet, although he listed in said
inventory his obligations in favor of the Peoples Bank and Trust Company and
the Philippine Bank of Commerce aggregating more than P30,000, he did not
mention at all any obligation in favor of the corporation of which he was the
president and one of the largest stockholders.
Assuming that he owed his corporation P63,000 for which he signed
receipts and vouchers and which appeared in the books of said corporation,
there was no probable motive for him not to include such obligation in the
inventory Exhibit 1. It would have been to his interest to include it so that his
estranged and divorced wife might share in its payment. The net assets
appearing in Exhibit 1 amounted to P144,618, one-half of which was
adjudicated to the children and the other half was divided between the
spouses, so that each of the latter received only P36,154.50. By not including
the obligation of P63,000 claimed by the appellant (assuming that he owed it),
Fitzsimmons' adjudicated share in the liquidation of the conjugal partnership
would be short by nearly P27,000 to meet said claim, whereas by including
said obligation he would have received a net share of more than P10,000 free
from any liability.

We find, therefore, that Exhibit 1, insofar as the omission therefrom of

the claim in question was concerned, far from being self-serving to, was a
declaration against the interest of, the declarant Fitzsimmons. He having
since died and therefore no longer available as a witness, said document was
correctly admitted by the trial court in evidence.
We shall now pass upon appellant's second assignment of error, which
raises the question of whether or not appellant's claim has been satisfactorily
proven.
We shall consider the claim of P63,000 separately from the item of
P868.67.
We have no reason whatsoever to doubt the good faith of Messrs.
Samuel Garmezy and Henry J. Belden, president and vice-president-
treasurer, respectively, of the claimant corporation, in presenting the claim of
P63,000 against the estate of Fitzsimmons, nor the good faith of the
administrator Mr. Marcial P. Lichauco in opposing said claim. They are all
men of recognized integrity and of good standing in society. The officers of
the claimant corporation have shown commendable fairness in their dealings
with the estate of Fitzsimmons. They voluntarily informed the administrator
that Fitzsimmons had paid P64,500 on account of the purchase price of 545
shares of stock of the company, and not P45,000 only, as the administrator
believed. Likewise, they voluntarily informed him in connection with his claim
for Fitzsimmons' back salaries that Fitzsimmons' annual salary was P36,000
and not P30,000, as the administrator believed. We can therefore readily
assume that Messrs. Garmezy and Belden believed in good faith that the
books of the corporation showed a debit balance of around P63,000 as of the
outbreak of the Pacific war on December 8, 1941.
On the other hand, if Mr. Fitzsimmons, who was the president and one
of the largest stockholders of the claimant corporation, really owed the latter
around P63,000 on December 8, 1941, and had not paid it before he
liquidated his conjugal partnership in November, 1943, as a consequence of
the decree of divorce he obtained against his wife, we see no reason why he
did not include such obligation in said liquidation. Judging from the high
opinion which the officers and stockholders of the corporation entertained of
Fitzsimmons as shown by their resolution hereinafter quoted, they cannot
impute bad faith to him in not acknowledging the claim in question.
There is a possible explanation of this seemingly irreconcilable conflict,
which in the absence of other proofs we consider satisfactory but which both
parties seem to have overlooked. We find it in the testimony on direct
examination of appellant's witness Santiago Inacay, page 80 of the transcript,
hereinabove quoted. According to Inacay, at the end of each year, after the
declaration of dividends, bonuses, and director's fees, the account of
Fitzsimmons was brought up to a credit balance. "In other words," he said, "at
the start of the following year the account will be on the credit side." Not
satisfied with that categorical statement, counsel for the appellant asked his
own witness the following question and the witness gave the following
answer:
"Q. So that I gather from you, Mr. Inacay, that the personal account of
Mr. Fitzsimmons, as well as the other officers of the Atlantic Gulf
& Pacific Co., at the end of each year, and at the beginning of the
incoming year, generally, would be in the credit balance; because
of the application of dividends on paid shares, bonuses, and
director's fees? — A. Yes, sir.
"Q. In the year, 1941, therefore, no declaration of dividends for the last
six months — there were no declarations of director's fees . . . I
withdraw the question, and that is all."
It is to be regretted that neither counsel for the appellant nor counsel for
the appellee pursued the examination of the witness to determine, if possible,
the approximate amount of the dividends, bonuses, and director's fees that
would have been credited to Fitzsimmons as of the end of the year 1941. But
enough appears in his testimony to warrant the deduction that had the war not
forced the corporation to close office on December 29, 1941, dividends,
bonuses, and director's fees for the year 1941 would, as of the end of that
year, have been declared and credited to the account of Fitzsimmons, which
as in previous years would or might have brought that account on the credit
side. President Garmezy reported to the meeting of the stockholders that the
volume of work performed by the company in 1941 "exceeded that of 1940."
(Exhibit 2.) We cannot assume that the company earned less profits in 1941
than in 1940. Probably the reason why Fitzsimmons did not include or
mention any obligation in favor of his own corporation in his inventory Exhibit
1 was that he believed he was entitled to be credited by said corporation with
dividends, bonuses, and director's fees corresponding to the year 1941, which
as in previous years would bring his account on the credit side. If that was the
case, the company was technically correct in asserting that at the outbreak of
the Pacific war in December, 1941, its books showed a debit balance against
Fitzsimmons — no dividends, bonuses, and director's fees having been
actually declared and credited to Fitzsimmons at that time. But we think
Fitzsimmons was justified in considering his account as having to all intents
and purposes been brought on the credit side; because if such dividends,
bonuses, and director's fees had been earned, the fact that they were not
actually declared and credited to him, should not prejudice him. The
subsequent loss of the company's properties and assets as a result of the war
should be borne by the company and not by its officers.
Leaving the foregoing reflections aside, we are confronted only, on the
one hand, by the oral testimony of the witnesses for the claimant based
entirely on their memory as to the status of Fitzsimmons' account, and on the
other by Exhibit 1, which contradicts said testimony. Realizing the frailty and
unreliability of human memory, especially with regard to figures, after the
lapse of more than five years, we find no sufficient basis upon which to
reverse the trial court's finding that this claim had not been satisfactorily
proven.
With reference to the item of P868.67, we find it to have been
sufficiently proven by the testimony of Santiago Inacay and Modesto Flores,
supported by the documents Exhibits A, B, C, and D, which establish the fact
that in November and December, 1941, the San Francisco agent of the
company deposited in the Crocker First National Bank of San Francisco the
total sum of $500 to the account of Fitzsimmons, which said agent debited
against the company. Debit notices of the deposits were not received by the
company until after the liberation. The administrator admitted in his testimony
that after the death of Fitzsimmons he received from the Crocker First
National Bank of San Francisco the balance of Mr. Fitzsimmons' account in
the sum of P1,788.75. Aside from that debit of P1,000 against the company
for the account of Fitzsimmons, the agent also paid $1 or P2 for Fitzsimmons'
subscription to the San Francisco Chronicle, making a total of P1,002. From
this was deducted a credit of P133.33, consisting of a payment made on June
30, 1946, by a creditor of Fitzsimmons named J. H. Chew, as testified to by
Mr. Flores and supported by Exhibit E, leaving a balance of P868.67.
The trial court therefore erred in not allowing said claim.
II. We shall now pass upon appellant's fourth assignment of error, which
assails the trial court's granting of appellee's counterclaim of P90,000 for
salaries allegedly due to the deceased Fitzsimmons as president of the
appellant corporation for the years 1942, 1943, and the first six months of
1944.
The undisputed facts are: Fitzsimmons was the president of the
appellant corporation in 1941 with a salary of P36,000 a year. The corporation
was forced to suspend its business operations from December 29, 1941, to
March 8, 1945, on account of the war, its office and all its properties having
been seized by the Japanese invader. Fitzsimmons, together with the other
officers of the corporation, was interned by the enemy in the Santo Tomas
internment camp, where he died on June 27, 1944.
At the annual meeting of the stockholders of the corporation held on
January 21, 1946, the president, S. Garmezy, reported among other things as
follows:
"While interned, the Company borrowed money on notes signed
by Mr. Fitzsimmons and Mr. Garmezy; money was also received for the
same purpose without signing of notes. Mr. Kihlstedt, who before the war
was Superintendent of the Philippine Iron Mines, helped a great deal in
obtaining this money, bringing it to Camp and distributing it to families
living outside the Camp. Mr. Kihlstedt being a Swedish citizen, was able
to live outside and he did some very good work."
And in that meeting the following resolutions, among others, were approved:
"RESOLVED, that all acts in 1941 through 1945 of the Directors
in office since their election in 1941 and elected in the interim, as duly
recorded in the minutes of the meetings of the Board, are hereby
approved, ratified and confirmed, and are to be accepted as acts of this
corporation."
"RESOLVED, that in the death of R. T. Fitzsimmons, President of
the Company from March, 1939, to the time of his death, which occurred
in the Santo Tomas Internment Camp, Manila, on June 27, 1944, the
Company suffered a distinct loss and his country a loyal American;
"FURTHER, that his passing is keenly felt and mourned by those
of the Company with whom he was associated for more than thirty years,
not only because of his value to the Company as an executive but also
for the kindness, consideration and tolerance he showed to all at all
times;
"BE IT FURTHER RESOLVED, that the Company convey its
sympathies to the family and other immediate relatives of the late Mr.
Fitzsimmons, transmitting to them a copy of this resolution."

Based upon those facts, the trial court granted the "back pay" claimed
by the appellee.
There was no resolution either of the stockholders or of the board of
directors of the company authorizing the payment of the salaries of the
president or any other officer or employee of the corporation for the period of
the war when the corporation was forced completely to suspend its business
operations and when its officers were interned or virtually held prisoners by
the enemy.
 The theory of the appellee, which was sustained by the trial court, is
that as long as a corporate officer with a fixed salary retains the office he is
entitled to that salary notwithstanding his inability to perform his duties. The
main case cited by the appellee in support of his theory is Brown vs.
Galveston Wharf Co., 50 S.W., 126, 128; 92 Tex., 520. In that case the
president of the defendant corporation claimed his salary for a period of
almost eleven months, during which he was on an indefinite leave of absence,
and the court allowed it, holding that "so long as he remained the president of
the company, the salary was an incident to the office, and ran with it for the
whole time, although he may have failed to perform the duties of president for
any given part of such time."
If such a sweeping pronouncement is to be applied regardless of
whether or not the corporation was in operation during the period covered by
the claim for the salary, as seems to be contended by the appellee, we must
say that we cannot subscribe to it.
We know of no principle of law that would authorize the court to compel
a corporation, which for a long period was not in operation and did not receive
any income, to pay the salaries of its officers during such period, even though
they were incapacitated and did not perform any service. To do so would be
tantamount to depriving the corporation or its stockholders of their property
without due process of law.
The resolutions of the stockholders hereinabove quoted are invoked by
the appellee to support the proposition that Fitzsimmons, during his
internment, performed certain acts as president of the corporation, which were
ratified and confirmed by the stockholders in their annual meeting on January
21, 1946. But those acts consisted merely of borrowing money for himself and
the other officers of the corporation and their respective families to enable
them to eke out an existence during their internment. The ratification of those
acts by the stockholders had for its purpose to relieve Fitzsimmons of
personal liability for the obligations thus contracted by him in the name of the
company. To say that by thus ratifying those acts of Fitzsimmons the
corporation became obligated to pay his salaries during his internment
aggregating P90,000, would be the height of absurdity.
We are clearly of the opinion that the estate of Fitzsimmons is not
entitled to its counterclaim of P90,000 or any part thereof.
Let judgment be entered modifying that of the trial court to read as
follows:
"The appellant Atlantic, Gulf & Pacific Company of Manila is
ordered to pay to the administrator the sum of P64,500 upon the
retransfer by the latter to the former of the 545 shares of stock
purchased by the decedent in 1939.
 "The administrator is ordered to pay to the said company the sum
of P868.67.
"The claim of the company against the estate for P63,000 and the
counterclaim of the estate against the company for P90,000 are
disapproved."
It is so ordered, without costs.
Moran, C.J., Paras, Feria, Bengzon, Padilla, Tuason,
Montemayor and Reyes, JJ., concur.

(Fitzsimmons v. Atlantic, Gulf & Pacific Co. of Manila, G.R. No. L-2016, [August
|||

23, 1949], 84 PHIL 330-350)

THIRD DIVISION

[G.R. No. 74306. March 16, 1992.]

ENRIQUE RAZON, petitioner, vs. INTERMEDIATE APPELLATE

COURT and VICENTE B. CHUIDIAN, in his capacity as
Administrator of the Estate of the Deceased JUAN T.
CHUIDIAN, respondents.

[G.R. No. 74315. March 16, 1992.]

VICENTE B. CHUIDIAN, petitioner, vs. INTERMEDIATE

APPELLATE COURT, ENRIQUE RAZON, and E. RAZON,
INC., respondents.

Rafael T. Durian for Enrique Razon.

Manuel R. Singson for Vicente B. Chuidian.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; RULES ON ADMISSIBILITY; QUALIFICATION

OF WITNESSES; DISQUALIFICATION BY REASON OF INTEREST OR
RELATIONSHIP; RULE. — "Section 20 (a) Rule 130 of the Rules of Court
(Section 23 of the Revised Rules on Evidence) states: "SEC. 20. Disqualification
by reason of interest or relationship. — The following persons cannot testify as to
matters in which they are interested directly or indirectly, as herein enumerated.
(a) Parties or assignors of parties to a case, or persons in whose behalf a case is
prosecuted, against an executor or administrator or other representative of a
deceased person, or against a person of unsound mind, upon a claim or demand
against the estate of such deceased person or against such person of unsound
mind, cannot testify as to any matter of fact accruing before the death of such
deceased person or before such person became of unsound mind."
2. ID.; ID.; ID.; ID.; ID.; ID.; PURPOSE THEREOF. — The purpose of "Section
20(a) Rule 130 of the Rules of Court (Section 23 of the Revised Rules on
Evidence)" has been explained by this Court in this wise: "The reason for the rule
is that if persons having a claim against the estate of the deceased or his
properties were allowed to testify as to the supposed statements made by him
(deceased person), many would be tempted to falsely impute statements to
deceased persons as the latter can no longer deny or refute them, thus unjustly
subjecting their properties or rights to false or unscrupulous claims or demands.
The purpose of the law is to 'guard against the temptation to give false testimony
in regard to the transaction in question on the part of the surviving party.'
(Tongco v. Vianzon, 50 Phil. 698; Go Chi Gun, et al. v. Co Cho, et al., 622
[1955]).
3. ID.; ID.; ID.; ID.; ID.; ID.; DELIMITATION. — The "Section 20(a) Rule 130 of
the Rules of Court (Section 23 of the Revised Rules on Evidence),"however,
delimits the prohibition it contemplates in that it is applicable to a
case against the administrator or its representative of an estate upon a
claim against the estate of the deceased person. (See Tongco v. Vianzon, 50
Phil. 698 [1927]).
4. ID.; ID.; ID.; ID.; ID.; CASE AT BAR NOT WITHIN PROHIBITION. — In the
instant case, the testimony excluded by the appellate court is that of the
defendant (petitioner herein) to the effect that the late Juan Chuidian, (the father
of private respondent Vicente Chuidian, the administrator of the estate of Juan
Chuidian) and the defendant agreed in the lifetime of Juan Chuidian that the
1,5000 shares of stock in E. Razon, Inc. are actually owned by the defendant
unless the deceased Juan Chuidian opted to pay the same which never
happened. The case was filed by the administrator of the estate of the late Juan
Chuidian to recover shares of stock in E. Razon, Inc. allegedly owned by the late
Juan T. Chuidian. It is clear, therefore, that the testimony of the petitioner is not
within the prohibition of the rule. The case was not filed against the administrator
of the estate, nor was it filed upon claims against the estate.
5. ID.; ID.; ID.; ID.; NON-OBJECTION THERETO; DEEMED A WAIVER OF THE
RULE; CASE AT BAR. — Furthermore, the records show that the private
respondent never objected to the testimony of the petitioner as regards the true
nature of his transaction with the late elder Chuidian. The petitioner's testimony
was subject to cross-examination by the private respondents' counsel. Hence,
granting that the petitioner's testimony is within the prohibition of Section 20 (a),
Rule 130 of the Rules of Court, the private respondent is deemed to have waived
the rule. We ruled in the case of Cruz v. Court of Appeals (192 SCRA 209
[1990]): "It is also settled that the court cannot disregard evidence which would
ordinarily be incompetent under the rules but has been rendered admissible by
the failure of a party to object thereto. Thus: "'. . . The acceptance of an
incompetent witness to testify in a civil suit, as well as the allowance of improper
questions that may be put to him while on the stand is a matter resting in the
discretion of the litigant. He may assert his right by timely objection or he may
waive it, expressly or by silence. In any case the option rests with him.
Once admitted, the testimony is in the case for what it is worth and the judge has
no power to disregard it for the sole reason that it could have been excluded, if it
had been objected to, nor to strike it out on its own motion. (Marella vs. Reyes,
12 Phil. 1.)"
6. COMMERCIAL LAW; CORPORATION; SHARES OF STOCK; MODE AND
MANNER OF TRANSFERRING THEREOF. — In the case of Embassy
Farms, Inc. v. Court of Appeals (188 SCRA 492 [1990] we ruled: ". . . For an
effective transfer of shares of stock the mode and manner of transfer as
prescribed by law must be followed (Navea v. Peers Marketing Corp., 74 SCRA
65). As provided under Section 3 of Batas Pambansa Bilang 68, otherwise
known as the Corporation Code of the Philippines, shares of stock may be
transferred by delivery to the transferee of the certificate properly indorsed. Title
may be vested in the transferee by the delivery of the duly indorsed certificate of
stock (18 C.J.S. 928, cited in Rivera v. Florendo, 144 SCRA 643). However, no
transfer is properly recorded in the books of the corporation" (Sec.
63, Corporation Code of the Philippines; Section 35 of the Corporation Law)
7. ID.; ID.; ID.; ID.; NOT COMPLIED WITH IN CASE AT BAR. — In the instant
case, there is no dispute the questioned 1,5000 shares of stock of E. Razon, Inc.
are in the name of the late Juan Chuidian in the books of the corporation.
Moreover, the records show that during his lifetime Chuidian was elected
member of the Board of Directors of the corporation which clearly shows that he
was a stockholder of the corporation. (See Section 30, Corporation Code) From
the point of view of the corporation, therefore, Chuidian was the owner of the
1,500 shares of stock. In such a case, the petitioner who claims ownership over
the questioned shares of stock must show that the same were transferred to him
by proving that all the requirements for the effective transfer of shares of stock in
accordance with the corporation's by laws, if any, were followed (See Nava v.
Peers Marketing Corporation, 74 SCRA 65 [1976]) or in accordance with the
provisions of law. The petitioner failed in both instances. The petitioner did not
present any by-laws which could show that the 1,500 shares of stock were
effectively transferred to him. In the absence of the corporation's bylaws or rules
governing effective transfer of shares of stock, the provisions of the Corporation
Law are made applicable to the instant case.
8. ID.; ID.; ID.; ID.; CERTIFICATE OF STOCK MUST BE DULY INDORSED
FOR EFFECTIVE TRANSFER. — The law is clear that in order for a transfer of
stock certificate to be effective, the certificate must be properly indorsed and that
title to such certificate of stock is vested in the transferee by the delivery of
the duly indorsed certificate of stock. (Section 35,Corporation Code) Since the
certificate of stock covering the questioned 1,5000 shares of stock registered in
the name of the late Juan Chuidian was never indorsed to the petitioner, the
inevitable conclusion is that the questioned shares of stock belong to Chuidian.
The petitioner's asseveration that he did not require an indorsement of the
certificate of stock in view of his intimate friendship with the late Juan Chuidian
can not overcome the failure to follow the procedure required by law or the
proper conduct of business even among friends. To reiterate, indorsement of the
certificate of stock is a mandatory requirement of law for an effective transfer of a
certificate of stock.
9. ID.; ID.; ID.; INCLUDES ALL CASH AND STOCK DIVIDENDS AND ALL PRE-
EMPTIVE RIGHTS ACCRUING THERETO. — In G.R. No. 74315, petitioner
Vicente B. Chuidian insists that the appellate court's decision declaring his
deceased father Juan T. Chuidian as owner of the 1,5000 shares of stock of E.
Razon, Inc. should have included all cash and stock dividends and all the pre-
emptive rights accruing to the said 1,5000 shares of stock. The petition is
impressed with merit. The cash and stock dividends and all the pre-emptive
rights are all incidents of stock ownership. The rights of stockholders are
generally enumerated as follows: ". . . [F]irst, to have a certificate or other
evidence of his status as stockholder issued to him; second, to vote at meetings
of the corporation; third, to receive his proportionate share of the profits of the
corporation; and lastly, to participate proportionately in the distribution of the
corporate assets upon the dissolution or winding up. (Purdy's Beach on Private
Corporations, sec. 554)" (Pascual v. Del Saz Orozco, 19 Phil. 82, 87).

DECISION

GUTIERREZ, JR., J : p

The main issue in these consolidated petitions centers on the ownership of 1,500
shares of stock in E. Razon, Inc. covered by the Stock Certificate No. 003 issued
on April 23, 1966 and registered under the name of Juan T. Chuidian in the
books of the corporation. The then Court of First Instance of Manila, now
Regional Trial Court of Manila, declared that Enrique Razon, the petitioner in
G.R. No. 74306 is the owner of the said shares of stock. The then Intermediate
Appellate Court, now Court of Appeals, however, reversed the trial court's
decision and ruled that Juan T. Chuidian, the deceased father of petitioner
Vicente B. Chuidian in G.R. No. 74315 is the owner of the shares of stock. Both
parties filed separate motions for reconsideration. Enrique Razon wanted the
appellate court's decision reversed and the trial court's decision affirmed while
Vicente Chuidian asked that all cash and stock dividends and all the pre-emptive
rights accruing to the 1,500 shares of stock be delivered to him. The appellate
court denied both motions. Hence, these petitions. prLL

The relevant antecedent facts are follows:

"In his complaint filed on June 29, 1971, and amended on November 16,
1971, Vicente B. Chuidian prayed that defendants Enrique B. Razon, E.
Razon, Inc., Geronimo Velasco, Francisco de Borja, Jose Francisco,
Alfredo B. de Leon, Jr., Gabriel Llamas and Luis M. de Razon be
ordered to deliver certificates of stocks representing the share holdings
of the deceased Juan T. Chuidian in the E. Razon, Inc. with a prayer for
an order to restrain the defendants from disposing of the said shares of
stock, for a writ of preliminary attachment v. properties of defendants
having possession of shares of stock and for receivership of the
properties of defendant corporation . . ..
xxx xxx xxx
In their answer filed on June 18, 1973, defendants alleged that all the
shares of stock in the name of stockholders of record of the corporation
were fully paid for by defendant, Razon; that said shares are subject to
the agreement between defendants and incorporators; that the shares of
stock were actually owned and remained in the possession of Razon.
Appellees also alleged . . . that neither the late Juan T. Chuidian nor the
appellant had paid any amount whatsoever for the 1,500 shares of stock
in question . . .
xxx xxx xxx
The evidence of the plaintiff shows that he is the administrator of the
intestate estate of Juan Telesforo Chuidian in Special Proceedings No.
71054, Court of First Instance of Manila.
Sometime in 1962, Enrique Razon organized the E. Razon, Inc. for the
purpose of bidding for the arrastre services in South Harbor, Manila. The
incorporators consisted of Enrique Razon, Enrique Valles, Luisa M. de
Razon, Jose Tuason, Jr., Victor Lim, Jose F. Castro and Salvador Perez
de Tagle.
 On April 23, 1966, stock certificate No. 003 for 1,5000 shares of stock of
defendant corporation was issued in the name of Juan T. Chuidian.
On the basis of the 1,500 shares of stock, the late Juan T. Chuidian and
after him, the plaintiff-appellant, were elected as directors of E. Razon,
Inc. Both of them actually served and were paid compensation as
directors of E. Razon, Inc.
"From the time the certificate of stock was issued on April 1966 up to
April 1971, Enrique Razon had not questioned the ownership by Juan T.
Chuidian of the shares of stock in question and had not brought any
action to have the certificate of stock over the said shares cancelled.
The certificate of stock was in the possession of defendant Razon who
refused to deliver said shares to the plaintiff, until the same was
surrendered by defendant Razon and deposited in a safety box in
Philippine Bank of Commerce.
Defendants allege that after organizing the E. Razon, Inc., Enrique
Razon distributed shares of stock previously placed in the names of the
withdrawing nominal incorporators to some friends including Juan T.
Chuidian.
Stock Certificate No. 003 covering 1,500 shares of stock upon instruction
of the late Chuidian on April 23, 1966 was personally delivered by
Chuidian on July 1, 1966 to the Corporate Secretary of Attorney Silverio
B. de Leon who was himself an associate of the Chuidian Law Office
(Exhs. C & 11). Since then, Enrique Razon was in possession of said
stock certificate even during the lifetime of the late Chuidian, from the
time the late Chuidian delivered the said stock certificate to defendant
Razon until the time (sic) of defendant Razon. By agreement of the
parties (sic) delivered it for deposit with the bank under the joint custody
of the parties as confirmed by the trial court in its order of August 7,
1971.
Thus, the 1,500 shares of stock under Stock Certificate No. 003 were
delivered by the late Chuidian to Enrique because it was the latter who
paid for all the subscription on the shares of stock in the defendant
corporation and the understanding was that he (defendant Razon) was
the owner of the said shares of stock and was to have possession
thereof until such time as he was paid therefor by the other nominal
incorporators/stockholders (TSN., pp. 4, 8, 10, 24-25, 25-26, 28-31, 31-
32, 60, 66-68, July 22, 1980, Exhs. "C", "11", "13: "14")." (Rollo —
74306. 99. 66-68).

In G.R. No. 74306, petitioner Enrique Razon assails the appellate court's
decision on its alleged misapplication of the dead man's statute rule under
Section 20 (a) Rule 130 of the Rules of Court. According to him, the "dead man's
statute" rule is not applicable to the instant case. Moreover, the private
respondent, as plaintiff in the case did not object to his oral testimony regarding
the oral agreement between him and the deceased Juan T. Chidian that the
ownership of the shares of stock was actually vested in the petitioner unless the
deceased opted to pay the same; and that the petitioner was subjected to a rigid
cross examination regarding such testimony. cdphil

Section 20 (a) Rule 130 of the Rules of Court (Section 23 of the Revised Rules
on Evidence) states:
"SEC. 20. Disqualification by reason of interest or relationship. — The
following persons cannot testify as to matters in which they are
interested directly or indirectly, as herein enumerated.
(a) Parties or assignors of parties to a case, or persons in whose behalf
a case is prosecuted, against an executor or administrator or other
representative of a deceased person, or against a person of unsound
mind, upon a claim or demand against the estate of such deceased
person or against such person of unsound mind, cannot testify as to any
matter of fact accruing before the death of such deceased person or
before such person became of unsound mind." (Italics supplied).
xxx xxx xxx

The purpose of the rule has been explained by this Court in this wise:
"The reason for the rule is that if persons having a claim against the
estate of the deceased or his properties were allowed to testify as to the
supposed statements made by him (deceased person), many would be
tempted to falsely impute statements to deceased persons as the latter
can no longer deny or refute them, thus unjustly subjecting their
properties or rights to false or unscrupulous claims or demands. The
purpose of the law is to 'guard against the temptation to give false
testimony in regard to the transaction in question on the part of the
surviving party.' (Tongco v. Vianzon, 50 Phil. 698; Go Chi Gun, et al. v.
Co Cho, et al., 622 [1955]).

The rule, however, delimits the prohibition it contemplates in that it is applicable

to a case against the administrator or its representative of an estate upon a
claim against the estate of the deceased person. (See Tongco v. Vianzon, 50
Phil. 698 [1927]).
In the instant case, the testimony excluded by the appellate court is that of the
defendant (petitioner herein) to the effect that the late Juan Chuidian, (the father
of private respondent Vicente Chuidian, the administrator of the estate of Juan
Chuidian) and the defendant agreed in the lifetime of Juan Chuidian that the
1,5000 shares of stock in E. Razon, Inc. are actually owned by the defendant
unless the deceased Juan Chuidian opted to pay the same which never
happened. The case was filed by the administrator of the estate of the late Juan
Chuidian to recover shares of stock in E. Razon, Inc. allegedly owned by the late
Juan T. Chuidian. cdrep

It is clear, therefore, that the testimony of the petitioner is not within the
prohibition of the rule. The case was not filedagainst the administrator of the
estate, nor was it filed upon claims against the estate.
Furthermore, the records show that the private respondent never objected to the
testimony of the petitioner as regards the true nature of his transaction with the
late elder Chuidian. The petitioner's testimony was subject to cross-examination
by the private respondents' counsel. Hence, granting that the petitioner's
testimony is within the prohibition of Section 20 (a), Rule 130 of the Rules of
Court, the private respondent is deemed to have waived the rule. We ruled in the
case of Cruz v. Court of Appeals (192 SCRA 209 [1990]):
"It is also settled that the court cannot disregard evidence which would
ordinarily be incompetent under the rules but has been rendered
admissible by the failure of a party to object thereto. Thus:
"'. . . The acceptance of an incompetent witness to testify in
a civil suit, as well as the allowance of improper questions that
may be put to him while on the stand is a matter resting in the
discretion of the litigant. He may assert his right by timely
objection or he may waive it, expressly or by silence. In any case
the option rests with him. Once admitted, the testimony is in the
case for what it is worth and the judge has no power to disregard
it for the sole reason that it could have been excluded, if it had
been objected to, nor to strike it out on its own motion (Emphasis
supplied). (Marella vs. Reyes, 12 Phil. 1.)"

The issue as to whether or not the petitioner's testimony is admissible having

been settled, we now proceed to discuss the fundamental issue on the ownership
of the 1,5000 shares of stock in E. Razon, Inc.
E. Razon, Inc. was organized in 1962 by petitioner Enrique Razon for the
purpose of participating in the bidding for the arrastre services in South Harbor,
Manila. The incorporators were Enrique Razon, Enrique Valles, Luisa M. de
Razon, Jose Tuazon, Jr., Victor L. Lim, Jose F. Castro and Salvador Perez de
Tagle. The business, however, did not start operations until 1966. According to
the petitioner, some of the incorporators withdrew from the said corporation. The
petitioner then distributed the stocks previously placed in the names of the
withdrawing nominal incorporators to some friends, among them the late Juan T.
Chuidian to whom he gave 1,5000 shares of stock. The shares of stock were
registered in the name of Chuidian only as nominal stockholder and with the
agreement that the said shares of stock were owned and held by the petitioner
but Chuidian was given the option to buy the same. In view of this arrangement,
Chuidian in 1966 delivered to the petitioner the stock certificate covering the
1,5000 shares of stock of E. Razon, Inc. Since then, the petitioner had in his
possession the certificate of stock until the time, he delivered it for deposit with
the Philippine Bank of Commerce under the parties' joint custody pursuant to
their agreement as embodied in the trial court's order. cdrep

The petitioner maintains that his aforesaid oral testimony as regards the true
nature of his agreement with the late Juan Chuidian on the 1,500 shares of stock
of E. Razon, Inc. is sufficient to prove his ownership over the said 1,5000 shares
of stock.
The petitioner's contention is not correct.
In the case of Embassy Farms, Inc. v. Court of Appeals (188 SCRA 492 [1990]
we ruled:
". . . For an effective transfer of shares of stock the mode and manner of
transfer as prescribed by law must be followed (Navea v. Peers
Marketing Corp., 74 SCRA 65). As provided under Section 3 of Batas
Pambansa Bilang 68, otherwise known as the Corporation Code of the
Philippines, shares of stock may be transferred by delivery to the
transferee of the certificate properly indorsed. Title may be vested in the
transferee by the delivery of the duly indorsed certificate of stock (18
C.J.S. 928, cited in Rivera v. Florendo, 144 SCRA 643). However, no
transfer is properly recorded in the books of the corporation" (Sec. 63,
Corporation Code of the Philippines; Section 35 of the Corporation Law)

In the instant case, there is no dispute the questioned 1,5000 shares of stock of
E. Razon, Inc. are in the name of the late Juan Chuidian in the books of the
corporation. Moreover, the records show that during his lifetime Chuidian was
elected member of the Board of Directors of the corporation which clearly shows
that he was a stockholder of the corporation. (SeeSection 30, Corporation Code)
From the point of view of the corporation, therefore, Chuidian was the owner of
the 1,500 shares of stock. In such a case, the petitioner who claims ownership
over the questioned shares of stock must show that the same were transferred to
him by proving that all the requirements for the effective transfer of shares of
stock in accordance with the corporation's by laws, if any, were followed (See
Nava v. Peers Marketing Corporation, 74 SCRA 65 [1976]) or in accordance with
the provisions of law.
The petitioner failed in both instances. The petitioner did not present any by-laws
which could show that the 1,500 shares of stock were effectively transferred to
him. In the absence of the corporation's bylaws or rules governing effective
transfer of shares of stock, the provisions of the Corporation Law are made
applicable to the instant case.
The law is clear that in order for a transfer of stock certificate to be effective, the
certificate must be properly indorsed and that title to such certificate of stock is
vested in the transferee by the delivery of the duly indorsed certificate of stock.
(Section 35, Corporation Code) Since the certificate of stock covering the
questioned 1,5000 shares of stock registered in the name of the late Juan
Chuidian was never indorsed to the petitioner, the inevitable conclusion is that
the questioned shares of stock belong to Chuidian. The petitioner's asseveration
that he did not require an indorsement of the certificate of stock in view of his
intimate friendship with the late Juan Chuidian can not overcome the failure to
follow the procedure required by law or the proper conduct of business even
among friends. To reiterate, indorsement of the certificate of stock is a mandatory
requirement of law for an effective transfer of a certificate of stock. LLjur

Moreover, the preponderance of evidence supports the appellate court's factual

findings that the shares of stock were given to Juan T. Chuidian for value. Juan
T. Chuidian was the legal counsel who handled the legal affairs of the
corporation. We give credence to the testimony of the private respondent that the
shares of stock were given to Juan T. Chuidian in payment of his legal services
to the corporation. Petitioner Razon failed to overcome this testimony.
In G.R. No. 74315, petitioner Vicente B. Chuidian insists that the appellate court's
decision declaring his deceased father Juan T. Chuidian as owner of the 1,5000
shares of stock of E. Razon, Inc. should have included all cash and stock
dividends and all the pre-emptive rights accruing to the said 1,5000 shares of
stock.
The petition is impressed with merit.
The cash and stock dividends and all the pre-emptive rights are all incidents of
stock ownership.
The rights of stockholders are generally enumerated as follows:
xxx xxx xxx
". . . [F]irst, to have a certificate or other evidence of his status as
stockholder issued to him; second, to vote at meetings of the
corporation; third, to receive his proportionate share of the profits of the
corporation; and lastly, to participate proportionately in the distribution of
the corporate assets upon the dissolution or winding up. (Purdy's Beach
on Private Corporations, sec. 554)" (Pascual v. Del Saz Orozco, 19 Phil.
82, 87)

WHEREFORE, judgment is rendered as follows:

a) In G.R. No. 74306, the petition is DISMISSED. The questioned decision and
resolution of the then Intermediate Appellate Court, now the Court of Appeals,
are AFFIRMED. Costs against the petitioner.
b) In G.R. No. 74315, the petition is GRANTED. The questioned Resolution
insofar as it denied the petitioner's motion to clarify the dispositive portion of the
decision of the then Intermediate Appellate Court, now Court of Appeals is
REVERSED and SET ASIDE. The decision of the appellate court is MODIFIED
in that all cash and stock dividends as well as all pre-emptive rights that have
accrued and attached to the 1,5000 shares in E. Razon, Inc., since 1966 are
declared to belong to the estate of Juan T. Chuidian.
SO ORDERED.
(Razon v. Intermediate Appellate Court, G.R. No. 74306, 74315, [March 16,
|||

1992], 283 PHIL 1069-1082)

EN BANC

[G.R. No. 31739. March 11, 1930.]

LEONOR MENDEZONA, plaintiff-appellee, vs. ENCARNACION

C. VIUDA DE GOITIA, administratrix of the estate of
Benigno Goitia, defendant-appellant.

[G.R. No. 31740. March 11, 1930.]

VALENTINA IZAGUIRRE Y NAZABAL, plaintiff-

appellee, vs. ENCARNACION C. VIUDA DE GOITIA,
ETC.,defendant-appellant.

Avanceña & Lata, for appellant.

Ramon Sotelo, for appellees.

SYLLABUS

1. PLEADING AND PRACTICE; AMENDMENT OF PLEADINGS. — As

in the other ordinary actions in which the pleadings may be amended, the
 amounts claimed in the complaint presented in the instant case before the
committee of claims and appraisal, were charged in the complaint which was
filed in the court and approved by the same without exception from the other
party. There was no change of the nature of the action, because that the
plaintiffs had not received the amounts claimed as dividends due on their
shares in the partnership styled "Tren de Aguadas."
2. ID.; DEMURRER FOR MISJOINDER; WAIVER. — Since the bill of
exception does not show that the appellant demurred on the ground of
misjoinder of parties, or alleged such misjoinder in her answer, in accordance
with section 93 of the Code of Civil Procedure she must be deemed to have
waived her right to raise any objection on that ground.
3. ID; ORDER FOR ACCOUNTING. — The order of the court enjoining
the appellant to render an account of all the amounts collected by her late
husband, as representative and attorney-in-fact of the plaintiffs, was made for
the purpose of giving her an opportunity of showing, if she could, just what
amounts the decedent had received on account of the plaintiff's shares. This
showing was proper because the action was to demand the reimbursement of
said amounts.
4. ID; LEGAL PROHIBITION TO TESTIFY. — The law prohibits a
witness directly interested in a claim against the estate of a decedent from
testifying upon a matter of fact which took place before the death of the
deceased. The underlying principle of this prohibition is to protect the estate
from fictitious claims; but it should not be understood to prohibit the filing of a
just claim against the decedent's estate.

DECISION

VILLAMOR, J : p

The plaintiffs, Leonor Mendezona and Valentina Izaguirre y Nazabal,

filed separate claims with the committee of claims and appraisal against the
intestate estate of Benigno Goitia y Lazaga (Court of First Instance of Manila,
civil case No. 30273), the first for the amount of P5,940, and the second,
P2,376. By order of the court dated June 16, 1927, these claims were herd by
the committee. The claimants presented their evidence, which the committee
deemed insufficient and disapproved their claims. Both claimants appealed
from the report of the committee, and in accordance with section 776 of the
Code of Civil Procedure, filed a new complaint which was later amended with
the approval of the court, there being nothing in the bill of exceptions to show
that the defendant, or the administratrix of the deceased Benigno Goitia,
excepted to the court's order admitting the amendments to the complaints.
The defendant answered the amended complaints, pleading in special
defense, that not having intervened in any of the transactions of
Benigno Goitia y Lazaga as attorney-in-fact of the plaintiffs, and having no
knowledge of the supposed management of their rights in the
"Tren de Aguadas," and, furthermore, not having seen nor received any
money of the plaintiff's from said business, she is not in a position to render
an account of any sort to the plaintiffs, either own personal capacity or as
judicial administratrix of Benigno Goitia's intestate estate.
By agreement of the parties, both cases were tried together, and the
trial court rendered but one decision upon them on October 31, 1928, holding
it sufficiently proved, "that defendant Encarnacion C. Vda. de Goitia has been
duly appointed judicial administratrix of the estate of her deceased husband
Benigno Goitia in special proceeding No. 30273 of this court; that
Benigno Goitia was the representative and attorney-in-fact of the plaintiffs in
the joint-account partnership known as the 'Tren de Aguadas' and located in
the City of Manila, of which the plaintiff Leonor Mendezona, widow of Juan
Bautista Goitia, owns 180 shares worth P18,00, and the plaintiff Valentina
Izaguirre y Nazabal owns 72 shares worth P7,200; that prior to 1915,
Benigno Goitia, at that time the manager of the aforesaid copartnership,
collected the dividends for the plaintiffs, which he remitted to them every year;
that prior to 1915, the usual dividends which Benigno Goitia forwarded to
plaintiff Leonor Mendezona each year were P540, and to plaintiff Valentina
Izaguirre y Nazabal, P216; that from 1915 until his death in August, 1926,
Benigno Goitia failed to remit to them the dividends upon their shares in the
'Tren de Aguadas'; that some time before his death, more particularly, in July,
1926, Benigno Goitia, who was no longer the manger of the said business,
received as attorney-in-fact of both plaintiffs, the amount P90 as dividend
upon plaintiff Leonor Mendezona's shares, and P36 upon Valentina Izaguirre
y Nazabal's stock; that from 1915 to 1926, the 'Tren de Aguadas' paid
dividends to the shareholders, one of them, Ramon Salinas, having received
the total amount of P1,155 as ordinary and special dividends upon his 15
shares, that calculating the dividends due from 1915 to 1926 upon
Leonor Mendezona's 180 shares at P540 per annum, and at P216 yearly
upon the 72 shares held by Valentina Izaguirre y Nazabal, counsel for both
plaintiffs filed their claims and appraisal of the estate of Benigno Goitia, and,
upon their disallowance, appealed from the committee's decision by means of
the complaints in these two cases."
The trial court likewise deemed it proven that "during the period from
1915 to 1926, Benigno Goitia collected and received certain sums as
dividends and profits upon the plaintiffs' stock in the 'Tren de Aguadas' in his
capacity as representative and attorney-in-fact for both of them, which he has
neither remitted nor accounted for to the said plaintiffs, although it has been
proved that said Benigno Goitia was their attorney-in-fact and representative
in the 'Trende Aguadas' up to the time of his death."
The court below therefore ordered the defendant, as judicial
administratrix of Benigno Goitia's estate to render a judicial account of the
intestate estate of the deceased Benigno Goitia, in special proceeding No.
30273 of this court (below), to render an account of the amounts collected by
her aforesaid husband Benigno Goitia, as attorney-in-fact and representative
of the plaintiffs Leonor Mendezona and Valentina Izaguirre y Nazabal in the
copartnership known as the "Tren de Aguadas" from 1915 to July, 1926,
within thirty days from the notice of this decision; and that the defendant may
see, examine, and make a copy of the books and documents relative to the
business of the aforementioned copartnership, in accordance with the
provisions of section 664 of the Code of Civil Procedure. Without special
pronouncement of costs.
On December 15, 1928, at the instance of the plaintiffs, the trial court
set the 15th of January, 1929, as the date on which the defendant should
present her account of the dividends and profits collected by the decedent, as
attorney-in-fact for the plaintiffs, with regard to the "Tren de Aguadas"
copartnership, from 1915 to 1926, and the hearing was postponed to the 7th
of February, 1929.
On February 6, 1929, the defendant, reiterating her exception to the
court's decision enjoining her to render accounts, manifested that after a
painstaking examination of the books of account of the copartnership
"tren deAguadas," and several attempts to obtain data from Ruperto Santos,
the manager and administrator thereof, she has found no more evidence of
any amount received by her late husband, Benigno Goitia, than a book of
accounts where she came upon an item of P90 for Leonor Mendezona, and
another P36 for Valentina Izaguirre.
In view of this report and the evidence taken at the hearing, the court
rendered a suppletory judgment, upon motion of the plaintiffs dated December
3, 1928; and taking into account chiefly the testimony of Ruperto Santos and
Ramon Salinas, it was held that, upon the basis of the dividends received by
the witness Salinas on his fifteen shares in the "Tren de Aguadas" from 1915
to 1925, it appears that the dividends distributed for each share was equal to
one-fifteenth of P1,087.50, that is P72.50. Thus the dividends upon plaintiff
Leonor Mendezona's 180 shares would be P13,050, upon the 72 shares
pertaining to Valentina Izaguirre, P5,220; and these sums, added to those
collected by the attorney-in-fact Benigno Goitia as part of the 1926 dividends,
P90 for Leonor Mendezona, and P36 for Valentina Izaguirre, show that
Benigno Goitia thereby received P13,140 in behalf of Leonor Mendezona, and
P5,256 in behalf of Valentina Izaguirre.
Wherefore, the court ordered the defendant, as judicial administratrix of
the estate of the deceased BenignoGoitia, to pay plaintiff
Leonor Mendezona the sum of P13,140 with legal interest from the date of the
filing of the complaint, and to pay the plaintiff Valentina Izaguirre P5,256
likewise with legal interest from the date of the filing of the complaint, and
moreover, to pay the costs of both instances.
The defendant duly appealed from this judgment to this Supreme Court
through the proper bill of exceptions.
The fundamental question raised by the appellant in the first
assignment of error refers to the court's jurisdiction to admit the amended
complaints whereby the plaintiffs claim P13,680 and P5,470, respectively,
whereas the claims presented to the committee of claims and appraisal were
only for P5,940 and P2,376, respectively. Appellant contends that the plaintiffs
have not perfected their appeal in accordance with section 773 of the Code of
Civil Procedure in claiming more in their complaints than in the claims filed
with the committee of claims and appraisal, by including therein, not only the
yearly dividends paid form 1915 to 1925, inclusive, but also the ordinary and
extraordinary dividends upon the shares for the years 1915 to 1926, alleged
to have been delivered to Benigno Goitia.

The fact that the claims filed with the committee were upon the basis of
annual dividends, while those filed with the court below were on ordinary and
extraordinary dividends, is of no importance, for, after all they refer to the
same amounts received by the deceased Benigno Goitia in the name and for
the benefits of the plaintiffs. The question to be decided is whether or not in
this jurisdiction a greater sum may be claimed before the court than was
claimed before the committee. It should be noted that according to the cases
cited by the appellant on pages 12 and 13 of her brief, to wit, Patrick vs.
Howard, 47 Mich., 40; 10 N. W., 71, 72; Dayton vs. Dakin's Estate, 61 N.W.,
349; and Luizzi vs. Brady's Estate, 113 N. W., 73; 12 Detroit Leg., 59, the
claims passed upon by the committee cannot be enlarged in the Circuit Court
by amendment. But counsel for the appellees draws our attention to the
doctrines of the Vermont Supreme Court (Maughan vs. Burns' Estate, 64 Vt.,
316, 24 Atlantic, 583), permitting an augmentative amendment to the claim
filed with the committee.
In the Maughan case, supra, the court stated:
"ROWELL, J. This is an appeal from the decision and report of
the commissioners of the estate of Michael Burns. Plaintiff presented her
claim to the commissioners at $2,789.65. The ad damnum in her
 declaration filed in the probate court was $3,500. In the county court she
recovered $3,813.49. Thereupon she moved for leave to amend her
declaration by raising the ad damnum to $4,000, which was granted, and
had judgment for the amount of her recovery. The identical claim
presented to the commissioners was the claim tried above. The amount
of plaintiff's recovery rested on the quantum meruit. The jury found that
she merited more than she estimated her claim when she presented it to
the commissioners. But such underestimate did not preclude her from
recovering more, if the testimony show her entitled to it, as presumably it
did, as more was found. The fact of such estimate was evidence against
her deserving more, as it was an implied admission was not conclusive
upon her, and did not prevent her from recovering more. (Rooney vs.
Minor, 56 Vt., 527; Stowe vs. Bishop, 58 Vt., 498; 3 Atl. Rep., 494;
Hard vs. Burton, 62 Vt., 314; 20 Atl. Rep., 269.)
"It is conceded that in common-law actions the court has power to
raise the ad damnum at any time; but it is claimed that as the probate
court is not a common-law court, but it is a court of special and limited
jurisdiction, and has no power to raise the ad damnum of the declaration
filed in the probate court. The country court has, by statute, appellate
jurisdiction of matters originally within the jurisdiction of the probate court
and in such appeals it sits as a higher court of probate, and its
jurisdiction is co-extensive with that of the probate court in the matter
appealed, but is expressly extended to matters originally within the
jurisdiction of that court. It is an appellate court for the rehearsing and
the re-examination of matters — not particular questions merely — that
have been acted upon in the court below. (Adams vs. Adams, 21 Vt.,
162.) And these matters embrace even those that rest in discretion.
(Holmes vs. Holmes, 26 Vt., 536.) In Francis vs. Lathrope, 2 Tyler, 372,
the claimant was allowed, on terms, to file a declaration in the country
court, he having omitted to file one in the probate court as required by
statute. It was within the jurisdiction of the probate court to have allowed
this amendment, and, as the country court had all the jurisdiction of the
probate court in this behalf, it also had power to allow the amendment."
However this may be, in this jurisdiction there is a rule governing the
question raised in this assignment of error, namely, section 776 of the Code of
Civil Procedure, as construed in the cases of Zaragoza vs. Estate
of De Viademonte (10 Phil., 23); Escuin vs. Escuin (11 Phil., 332); and In re
Estate of Santos (18 Phil., 403). This section provides:
"Sec. 776. Upon the lodging of such appeal with the clerk, the
disputed claim shall stand for trial in the same manner as any other
action in the Court of First Instance, the creditor being deemed to be the
plaintiff, and the estate the defendant, and pleadings as in other actions
shall be filed."
 Just as in ordinary actions in which the pleadings may be amended, so
in the instant case, the original complaint for the same amounts claimed
before the committee was altered, increasing the amounts, and the amended
complaint was approved by the court and not objected to by the adverse
party. The character of the action throughout is the same. The action before
the committee rested on the contention that as attorney-in-fact for the plaintiffs
with respect to the partnership "Tren de Aguadas," the late
Benigno Goitia had received dividends upon their shares which he failed to
turn over to them; the appeal to the Court of First Instance is founded on the
same contention. When the claim was filed with the committee, counsel for
the plaintiffs merely made a calculation of the amounts due, in view of the fact
that he had not all the data from the plaintiffs, who live in Spain; but after filing
the complaint on appeal with the Court of First Instance, he discovered that
his clients were entitled to larger sums, and was therefore compelled to
change the amount of the claims.
Considering the distance that separated the plaintiffs from their
attorney-in-fact, the deceased Benigno Goitia, and that the latter failed to
supply them with data from 1915 until his death in 1926, it is natural that they
had to resort to calculating the amounts due them from the
"Tren de Aguadas." To deny them the right to amen their complaint in
accordance with section 776, when they had secured more definite
information as to the amounts due them, would be an injustice, especially
when it taken into consideration that this action arises from trust relations
between the plaintiffs and the late Benigno Goitia as their attorney-in-fact.
The first error is therefore overruled.
The allegation found in the second assignment of error that the plaintiffs
are not in reality interested parties in this case is untenable. It does not
appear from the bill of exceptions that the appellant demurred on the ground
of misjoinder of parties, or alleged such misjoinder in her answer. In
accordance with section 93 of the Code of Civil Procedure, the appellant has
waived the right to raise any objection on the ground that the plaintiffs are not
the real parties in interest, or that the plaintiffs are not the real parties in
interest, or that they are not the owners of the stock in question (Broce vs.
Broce, 4 Phil., 611; and Ortiz vs. Aramburo, 8 Phil., 98.) Furthermore it
appears from Exhibits D, E, F, and G, that the Late Benigno Goitia recognized
that those shares of the "Tren de Aguadas" really belonged to the plaintiffs.
And above all, Exhibit K-1, which is a copy of the balance sheet for May and
June, 1926, taken from the books of the partnership, clearly shows that
Leonor Mendezona owned 180 shares, and Valentina Izaguirre, 72 shares.
Therefore the appellant cannot now contend that the plaintiffs are not the real
interested parties.
 In the third assignment of error it is argued that following section 676 of
the Code of Civil Procedure, the court below had no power to order the
defendant to render an account of dividends supposed to have been received
by her deceased husband. We are of opinion that the order of the court
enjoining the appellant to render an account of all the amounts collected by
her aforesaid husband Benigno Goitia as representative and attorney-in-fact
of the plaintiffs, from 1915 until June, 1926, was made for the purpose of
giving her an opportunity of showing, if she could, just what amounts alleged
to have been received by the deceased attorney-in-fact represented by the
appellant, it was quite in order to determine whether such amounts were really
received or not.
The fourth assignment of error relates to Exhibits A and B, being the
appellees' deposition made before the American consul at Bilbao, Spain, in
accordance with section 356 of the Code of Civil Procedure. Counsel for the
appellant was notified of the taking of these depositions, and he did not
suggest any other interrogatory in addition to the questions of the committee.
When these depositions were read in court, the defendant objected to their
admission, invoking section 383, No. 7, of the Code of Civil Procedure. Her
objection referred mainly to the following questions:
"1. Did Mr. Benigno Goitia render you an account of your
partnership in the "Tren de Aguadas?' — Yes, until the year 1914.
"2. From the year 1915, did Mr. Benigno Goitia send you any
report or money on account of profits upon your shares? — He sent me
nothing, nor did he answer, my letters.
"3. Did you ever ask him to send you a statement of your
account? — Yes, several times by letter, but I never received an
answer."
The first of these questions tends to show the relationship between the
principals and their attorney-in-fact Benigno Goitia up to 1914. Supposing it
was error to permit such a question, it would not be reversible error, for that
very relationship is proved by Exhibits C to F, and H to I. As to the other two
questions, it is to be noted that deponents deny having received from the
deceased Benigno Goitia any money on account of profits on their shares,
since 1915. We are of the opinion that the claimants' denial that a certain fact
occurred before the death of their attorney-in-fact Benigno Goitia does not
come within the legal prohibitions (section 383, No. 7, Code of Civil
Procedure). The law prohibits a witness directly interested in a claim against
the estate of a decedent from testifying upon a matter of fact which took place
before the death of the deceased. The underlying principle of this prohibition
is to protect the intestate estate from fictitious claims. But this protection
should not be treated as an absolute bar or prohibition from the filing of just
claims against the decedent's estate.
 The facts in the case of Maxilom vs. Tabotabo (9 Phil., 390), differ from
those in the case at bar. In that case, the plaintiff Maxilom liquidated his
accounts with the deceased Tabotabo during his lifetime, with the result that
there was a balance in his favor and against Tabotabo of P312.37, Mexican
currency. The liquidation was signed by both Maxilom and Tabotabo. In spite
of this, some years later, or in 1906, Maxilom filed a claim against the estate
of Tabotabo for P1,062.37, Mexican currency, alleging that P750 which
included the 1899 liquidation had not really been received, and that therefore
instead of P312.37, Mexican currency, that liquidation should have shown a
balance of P1,062.37 in favor Maxilom. It is evident that in view of the
prohibition of section 383, paragraph 7, of the Code of Civil Procedure,
Maxilom could not testify in his own behalf against Tabotabo's estate, so as to
alter the balance of the liquidation made by and between himself and the
decedent. But in the case before us there has been no such liquidation
between the plaintiffs and the deceased Goitia. They testify, denying any such
liquidation. to apply to them the rule that "if death has sealed the lips of one of
the parties, the law seals those of the other," would be to exclude all
possibility of a claim against the testamentary estate. We do not believe that
this was the legislator's intention.
The plaintiffs-appellees did not testify to a fact which took place before
their representative's death, but on the contrary denied that a liquidation had
been made or any money remitted on account of their shares in the
"Tren deAguadas" which is the ground of their claim. It was incumbent upon
the appellant to prove by proper evidence that the affirmative proposition was
true, either by bringing into court the books which attorney-in-fact was in duty
bound to keep, or by introducing copies of the drafts kept by the banks which
drew them, as was the decedent's usual practice according to Exhibit I, or by
other similar evidence.
The appellant admits having found a book of accounts kept by the
decedent showing an item of P90 for the account of Leonor Mendezona and
another of P36 for the account of Valentina Izaguirre, which agrees with the
statement of Ruperto Santos, who succeeded Benigno Goitia in the
administration of said partnership, to the effect that the deceased plaintiffs as
dividends on their shares for the months of May and June, 1926, or P90 for
LeonorMendezona, and P36 for Valentina Izaguirre, amounts which had not
been remitted by the deceased to the plaintiffs.
Finally, the appellant complains that the trial court held by mere
inference that Benigno Goitia received from the "Tren de Aguadas" the
amounts of P13,140 and P5,265 for Mendezona and Izaguirre, respectively,
as dividends for the years from 1915 to 1926, inclusive, and in holding again,
by mere inference, that Benigno Goitia did not remit said sums to the
plaintiffs.
It is a well established fact in the record that the plaintiffs had an
interest or some shares in the partnership called
"Tren de Aguadas," Mendezona holding 180 shares, worth P18,000, and
Izaguirre, 72 shares worth P7,200. By the testimony of Ruperto Santos,
former secretary of Benigno Goitia and his successor in the administration of
that partnership, it appears that the deceased Benigno Goitia had received
the dividends due the appellees for the months of May and June, 1926. And
according to Exhibit K-1, the dividend for the months of May and June, 1926.
And according to Exhibit K-1, the dividend for the months of May and June
was P0.50 a share. And witness Ramon Salinas, a practicing attorney and
one of the shareholders of the partnership "Tren de Aguadas," testified, from
a notebook which he had, that he received from the "Tren de Aguadas" the
following ordinary dividends: P45 in 1915; P45 in 1916; P45 in 1917; P45 in
1918; P45 in 1919; P90 in 1920; PP67.50 in 1921, and P45 each for 1922,
1923, 1924, 1925, and 1926. By way of extraordinary dividends, the witness
testified that he received P22.50 each year from 1915 to 1918 inclusive; P45
in 1919; P60 in 1920; P37.50 in 1921, 1922, 1923, and 1924; P15 in 1925;
and P22.50 in 1926. He further stated that he received P165 in 1918 as his
share of the proceeds of the sale of that boat Santolan. Summing up all these
amounts, we find that the witness Ramon Salinas, from 1915 to 1925,
received a total of P1,087.50.
It further appears that Ruperto Santos assured the court that the
dividends for the period from 1915 to 1926 have been distributed among the
shareholders, and that the late Benigno Goitia received the dividends due on
the shares pertaining to Leonor Mendezona and Valentina Izaguirre,
deducting them from the total distribution. In view of these data, the court
below reached the conclusion, on the basis of the dividends received by
partner Ramon Salinas, that the attorney-in-fact Benigno Goitia received from
the plaintiffs appellees, respectively, the amounts of P13,140 and P5,256,
including the dividends for 1926, or P90 for Leonor Mendezona, and P36 for
Valentina Izaguirre.
As to the interest imposed in the judgment appealed from, it is sufficient
to cite article 1724 of the Civil Code, which provides that an agent shall be
liable for interest upon any sums he may have applied to his own use, from
the day on which he did so, and upon those which he still owes, after the
expiration of the agency, from the time of his default.
The judgment, appealed from being in accordance with the merits of the
case, we are of the opinion, and so hold, that the same must be as it is
hereby, affirmed, with costs against the appellant. So ordered.
 (Mendezona v. Vda. de Goitia, G.R. No. 31739, 31740, [March 11, 1930], 54
|||

PHIL 557-570)

SECOND DIVISION

[G.R. No. 180843. April 17, 2013.]

APOLONIO GARCIA, in substitution of his deceased mother,

Modesta Garcia, and CRISTINA SALAMAT,petitioners, vs.
DOMINGA ROBLES VDA. DE CAPARAS, respondent.

DECISION

DEL CASTILLO, J : p

Under the Dead Man's Statute Rule, "[i]f one party to the alleged transaction is
precluded from testifying by death, insanity, or other mental disabilities, the other
party is not entitled to the undue advantage of giving his own uncontradicted and
unexplained account of the transaction." 1 Thus, the alleged admission of the
deceased Pedro Caparas (Pedro) that he entered into a sharing of leasehold
lights with the petitioners cannot be used as evidence against the herein
respondent as the latter would be unable to contradict or disprove the same.
This Petition for Review on Certiorari 2 seeks to reverse and set aside the August
31, 2007 Decision 3 of the Court of Appeals (CA) in CA-G.R. SP No. 90403, 4 as
well as its December 13, 2007 Resolution 5 denying petitioners' Motion for
Reconsideration.
Factual Antecedents
Flora Makapugay (Makapugay) is the owner of a 2.5-hectare farm in Barangay
Lugam, Malolos, Bulacan (the land) covered by Transfer Certificate of Title No.
(TCT) RT-65932 (T-25198) 6 and being tilled by Eugenio Caparas (Eugenio) as
agricultural lessee under a leasehold agreement. Makapugay passed away and
was succeeded by her nephews and niece, namely Amanda dela Paz-Perlas
(Amanda), Justo dela Paz (Justo) and Augusto dela Paz (Augusto). On the other
hand, Eugenio's children — Modesta Garcia (Garcia), Cristina Salamat (Salamat)
and Pedro — succeeded him.
Before she passed away, Makapugay appointed Amanda as her attorney-in-fact.
After Eugenio died, or in 1974, Amanda and Pedro entered into an agreement
entitled "Kasunduan sa Buwisan", 7 followed by an April 19, 1979 Agricultural
Leasehold Contract, 8 covering the land. In said agreements, Pedro was installed
and recognized as the lone agricultural lessee and cultivator of the land. SETaHC

Pedro passed away in 1984, and his wife, herein respondent Dominga Robles
Vda. de Caparas (Dominga), took over as agricultural lessee.
On July 10, 1996, the landowners Amanda, Justo and Augusto, on the one hand,
and Pedro's sisters Garcia and Salamat on the other, entered into a "Kasunduan
sa Buwisan ng Lupa" 9 whereby Garcia and Salamat were acknowledged as
Pedro's co-lessees.
On October 24, 1996, herein petitioners Garcia and Salamat filed a
Complaint 10 for nullification of leasehold and restoration of rights as agricultural
lessees against Pedro's heirs, represented by his surviving spouse and herein
respondent Dominga. Before the office of the Provincial Agrarian Reform
Adjudicator (PARAD) of Bulacan, the case was docketed as Department of
Agrarian Reform Adjudication Board (DARAB) Case No. R-03-02-3520-96.
In their Complaint, Garcia and Salamat claimed that when their father Eugenio
died, they entered into an agreement with their brother Pedro that they would
alternately farm the land on a "per-season basis"; that the landowner Makapugay
knew of this agreement; that when Makapugay passed away, Pedro reneged on
their agreement and cultivated the land all by himself, deliberately excluding
them and misrepresenting to Amanda that he is Eugenio's sole heir; that as a
result, Amanda was deceived into installing him as sole agricultural lessee in
their 1979 Agricultural Leasehold Contract; that when Amanda learned of Pedro's
misrepresentations, she executed on July 10, 1996 an Affidavit 11 stating among
others that Pedro assured her that he would not deprive Garcia and Salamat of
their "cultivatory rights"; that in order to correct matters, Amanda, Justo and
Augusto executed in their favor the 1996 "Kasunduan sa Buwisan ng Lupa",
recognizing them as Pedro's co-lessees; that when Pedro passed away,
Dominga took over the land and, despite demands, continued to deprive them of
their rights as co-lessees; that efforts to settle their controversy proved futile,
prompting the Barangay Agrarian Reform Committee to issue the proper
certification authorizing the filing of a case; and that they suffered damages as a
consequence. Petitioners prayed that the 1979 Agricultural Leasehold Contract
between Pedro and Amanda be nullified; that they be recognized as co-lessees
and allowed to cultivate the land on an alternate basis as originally agreed; and
that they be awarded P50,000.00 attorney's fees and costs of litigation.
In her Answer, 12 herein respondent Dominga claimed that when her father-in-
law Eugenio died, only her husband Pedro succeeded and cultivated the land,
and that petitioners never assisted him in farming the land; that Pedro is the sole
agricultural lessee of the land; that Amanda's July 10, 1996 Affidavit and
"Kasunduan sa Buwisan ng Lupa" of even date between her and the petitioners
are self-serving and violate the existing 1979 Agricultural Leasehold Contract;
that under Section 38 13 of Republic Act No. 3844 14 (RA 3844), petitioners'
cause of action has prescribed. Dominga further claimed that Pedro has been in
possession of the land even while Eugenio lived; that petitioners have never
cultivated nor possessed the land even for a single cropping; that Pedro has
been the one paying the lease rentals as evidenced by receipts; that when Pedro
died in 1984, she succeeded in his rights as lessee by operation of law, and that
she had been remitting lease rentals to the landowners since 1985; and that
petitioners had no right to institute themselves as her co-lessees. She prayed
that the Complaint be dismissed; that the July 10, 1996 "Kasunduan sa Buwisan
ng Lupa" be nullified; that the execution of a new leasehold agreement between
her and the landowners be ordered; and by way of counterclaim, that moral
damages 15 and litigation costs be awarded her. ICAcTa

Ruling of the PARAD

After hearing and consideration of the parties' respective position papers and
other submissions, the PARAD issued on May 4, 1998 a Decision, 16 which
decreed as follows:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the defendant and against the plaintiffs and Order is hereby
issued:
1. ORDERING the dismissal of the case;
2. DECLARING defendant Dominga Robles Vda. de Caparas as
lawful successor-tenant;
3. ORDERING plaintiffs to maintain defendant in her peaceful
possession and cultivation of the subject landholding;
4. ORDERING the MARO of Malolos, Bulacan to execute a new
leasehold contract between the landowner and defendant
Dominga Robles Vda. de Caparas;
5. No pronouncement as to costs.
SO ORDERED. 17

The PARAD held that Amanda's act of executing the July 10, 1996 Affidavit and
"Kasunduan sa Buwisan ng Lupa" amounted to dispossession of Pedro's
landholding and rights without cause; that Amanda's 1996 disclaimer, after
having installed Pedro as tenant in 1979, was belated and unjustified; that
petitioners have not shown by evidence that they actually cultivated the land, or
that they paid rentals to the landowners; that petitioners' cause of action has
prescribed in accordance with Section 38 of RA 3844; that for failure to timely
question Pedro's leasehold, his rights were transferred, by operation of law, to
Dominga upon his death. Finally, the PARAD held that petitioners' July 10, 1996
"Kasunduan sa Buwisan ng Lupa" is null and void for being issued against
Pedro's existing 1979 Agricultural Leasehold Contract, which has not been
cancelled by competent authority.
DARAB Case No. 03-03-10307-99
It appears that sometime after the execution of the July 10, 1996 "Kasunduan sa
Buwisan ng Lupa" and during the pendency of DARAB Case No. R-03-02-3520-
96, petitioners entered the land and began tilling the same. For this reason,
Dominga filed DARAB Case No. 03-03-10307-99, for maintenance of peaceful
possession with injunctive relief, against the landowners and petitioners. On
petitioners' motion, the case was dismissed. 18
Ruling of the DARAB
Petitioners appealed the May 4, 1998 PARAD Decision in DARAB Case No. R-
03-02-3520-96 to the DARAB, where the case was docketed as DARAB Case
No. 9722 19 (DCN 9722). Dominga likewise appealed the dismissal of DARAB
Case No. 03-03-10307-99, which appeal was docketed as DARAB Case No.
11155 (DCN 11155). On motion, both appeals were consolidated. ADSTCa

On June 15, 2005, the DARAB issued its Decision, 20 the dispositive portion of
which reads, as follows:
WHEREFORE, premises considered, a new judgment is hereby
rendered:
1. DECLARING Dominga Robles Vda. de Caparas as the lawful
successor-tenant of Pedro Caparas over the subject landholding;
2. ORDERING the plaintiffs in DCN 9722 and the respondents in DCN
11155 or any person acting in their behalves[sic], to maintain Dominga
Robles Vda. de Caparas in peaceful possession and cultivation of the
subject landholding;
3. ORDERING the MARO of Malolos, Bulacan, to execute a new
leasehold contract between the landowner and Dominga Robles Vda. de
Caparas; and
4. ORDERING for the dismissal of DCN 11155 for being moot and
academic.
SO ORDERED. 21
In upholding the PARAD Decision, the DARAB held that contrary to petitioners'
claim, there was no alternate farming agreement between the parties, and thus
petitioners may not claim that they were co-lessees; that Pedro merely shared
his harvest with petitioners as an act of generosity, and Dominga's act of
stopping this practice after succeeding Pedro prompted petitioners to file DARAB
Case No. R-03-02-3520-96 and claim the status of co-lessees; that Amanda's
Affidavit and the 1996 "Kasunduan sa Buwisan ng Lupa" between the
landowners and petitioners cannot defeat Pedro's 1979 Agricultural Leasehold
Contract and his rights as the sole tenant over the land; that for sleeping on their
rights, petitioners are now barred by laches from claiming that they are co-
lessees; and that petitioners' 1996 "Kasunduan sa Buwisan ng Lupa" is null and
void for being contrary to law, morals, public policy, and Pedro's 1979 Agricultural
Leasehold Contract, which was subsisting and which has not been cancelled by
competent authority.
Ruling of the Court of Appeals
Petitioners filed before the CA a Petition for Certiorari, which was docketed as
CA-G.R. SP No. 90403, seeking to set aside the DARAB Decision. The sole
basis of their Petition rests on the argument that as a result of a May 9, 2005
Order issued by the Regional Technical Director (Region III) of the Department of
Environment and Natural Resources, the survey returns and plans covering TCT
RT-65932 have been cancelled, which thus rendered the June 15, 2005 DARAB
Decision null and void and a proper subject of certiorari.SIcCTD

On August 31, 2007, the CA issued the assailed Decision which decreed as
follows:
IN LIGHT OF ALL THE FOREGOING, the instant petition is DENIED.
The assailed decision is AFFIRMED in toto.
SO ORDERED. 22

The CA held that the issue raised by petitioners — the cancellation of the survey
returns and plans covering TCT RT-65932 — was not part of their causes of
action in the PARAD or DARAB, and this new issue changed the theory of their
case against Dominga, which is not allowed. The CA added that it could not
decide the case on the basis of a question which was not placed in issue during
the proceedings below.
The CA held further that even granting that the issues are resolved on the merits,
the petition would fail; the cancellation of the survey returns and plans covering
TCT RT-65932 reverts the property to its original classification as agricultural
land which thus vindicates the leasehold agreements of the parties. And
speaking of leasehold agreements, the CA held that petitioners may not be
considered as Pedro's co-lessees, for lack of proof that they actually tilled the
land and with petitioners' own admission in their pleadings that they merely
received a share from Pedro's harvests; that the original 1974 and 1979
leasehold agreements between Makapugay, Amanda and Pedro categorically
show that Pedro is the sole designated agricultural lessee; and that without
proper legal termination of Pedro's lease in accordance with RA 3844, the
landowners cannot designate other tenants to the same land in violation of the
existing lessee's rights.
Petitioners moved for reconsideration, arguing that the land has been re-
classified as residential land, and has been actually used as such. Petitioners
cited a 1997 ordinance, Malolos Municipal Resolution No. 41-97, 23 which
adopted and approved the zoning ordinance and the Malolos Development Plan
prepared jointly by the Housing and Land Use Regulatory Board and the
Malolos Sangguniang Bayan. In the assailed December 13, 2007
Resolution, 24 the CA denied the Motion for Reconsideration.
Issues
In this petition, the following errors are assigned:
1. . . . RESPONDENT'S ACT OF HAVING BUILT THREE (3)
HOUSES (FOR HERSELF AND TWO OF HER CHILDREN), WAS
"CONVERSION OF THE FARMHOLD INTO A HOUSING-
RESIDENTIAL SUBDIVISION" AND THEREFORE, SHE IS NOT
BEING PUT IN SURPRISE NOR IN UNFAIR SITUATION.
CONSEQUENTLY, SHE IS THE PARTY IN ESTOPPEL. EaCSHI

AND FROM THE TIME BY HER ACTS OF SELF-CONVERSION OF

THE LAND, IN THE EARLY '90S OR EARLIER, SHE "LOST HER
SECURITY OF TENURE" AS AGRICULTURAL LESSEE.
2. THE DECISIONS OF THE DARAB PROVINCIAL ADJUDICATOR,
DARAB CENTRAL OFFICE, AND THE HONORABLE COURT OF
APPEALS, SPEAK OF NO HOMELOT HAVING BEEN AWARDED
BY THE DEPARTMENT OF AGRARIAN REFORM TO PRIVATE
RESPONDENT.
3. ACTUAL PHYSICAL CHANGE IN THE USE OF THE LAND FROM
AGRICULTURAL TO "RESIDENTIAL" MAY OCCUR AFTER TRIAL,
BUT DURING THE APPEAL, WHICH THE HON. COURT OF
APPEALS MAY CONSIDER.
4. "CONVERSION" (WHICH REQUIRES PRIOR APPROVAL BY
THE DAR) HAVING BECOME A "FAIT ACCOMPLI", SECTION 220
OF THE REAL ESTATE TAX CODE AND ARTICLE 217 OF THE
LOCAL GOVERNMENT CODE OF 1991 AFFIRM THE
TRUSTWORTHINESS OF THE TAX DECLARATION THAT IS, THE
PREVIOUS FARMHOLD HAS BEEN CONVERTED INTO
 "RESIDENTIAL" LAND, AND CONFIRMED BY THE CITY ZONING
DIRECTOR.
5. IN NOT HAVING CONSIDERED THE TAX DECLARATION AND
THE ZONING CERTIFICATION . . ., THE HON. COURT OF
APPEALS COMMITTED A VERY FUNDAMENTAL ERROR. 25

Petitioners' Arguments
In their Petition and Reply, 26 petitioners this time argue that in building houses
upon the land for herself and her children without a homelot award from the
Department of Agrarian Reform, Dominga converted the same to residential use;
and by this act of conversion, Dominga violated her own security of tenure and
the land was removed from coverage of the land reform laws. They add that the
Malolos zoning ordinance and the tax declaration covering the land effectively
converted the property into residential land.
Petitioners justify their change of theory, the addition of new issues, and the
raising of factual issues, stating that the resolution of these issues are necessary
in order to arrive at a just decision and resolution of the case in its totality. They
add that the new issues were raised as a necessary consequence of
supervening events which took place after the Decisions of the PARAD and
DARAB were issued. cTEICD

Respondent's Arguments
In her Comment, 27 Dominga argues that the Petition raises questions of fact
which are not the proper subject of a Petition under Rule 45 of the Rules. She
adds that petitioners raised anew issues which further changed the theory of their
case, and which issues may not be raised for the first time at this stage of the
proceedings.
Our Ruling
The Petition is denied.
DARAB Case No. R-03-02-3520-96, which was filed in 1996 or long after Pedro's
death in 1984, has no leg to stand on other than Amanda's declaration in her July
10, 1996 Affidavit that Pedro falsely represented to Makapugay and to her that
he is the actual cultivator of the land, and that when she confronted him about
this and the alleged alternate farming scheme between him and petitioners,
Pedro allegedly told her that "he and his two sisters had an understanding about
it and he did not have the intention of depriving them of their cultivatory
rights." 28 Petitioners have no other evidence, other than such verbal declaration,
which proves the existence of such arrangement. No written memorandum of
such agreement exists, nor have they shown that they actually cultivated the land
even if only for one cropping. No receipt evidencing payment to the landowners
of the latter's share, or any other documentary evidence, has been put forward.
What the PARAD, DARAB and CA failed to consider and realize is that Amanda's
declaration in her Affidavit covering Pedro's alleged admission and recognition of
the alternate farming scheme is inadmissible for being a violation of the Dead
Man's Statute, 29 which provides that "[i]f one party to the alleged transaction is
precluded from testifying by death, insanity, or other mental disabilities, the other
party is not entitled to the undue advantage of giving his own uncontradicted and
unexplained account of the transaction." 30 Thus, since Pedro is deceased, and
Amanda's declaration which pertains to the leasehold agreement affects the
1996 "Kasunduan sa Buwisan ng Lupa" which she as assignor entered into with
petitioners, and which is now the subject matter of the present case and claim
against Pedro's surviving spouse and lawful successor-in-interest Dominga, such
declaration cannot be admitted and used against the latter, who is placed in an
unfair situation by reason of her being unable to contradict or disprove such
declaration as a result of her husband-declarant Pedro's prior death.
If petitioners earnestly believed that they had a right, under their supposed
mutual agreement with Pedro, to cultivate the land under an alternate farming
scheme, then they should have confronted Pedro or sought an audience with
Amanda to discuss the possibility of their institution as co-lessees of the land;
and they should have done so soon after the passing away of their father
Eugenio. However, it was only in 1996, or 17 years after Pedro was installed as
tenant in 1979 and long after his death in 1984, that they came forward to
question Pedro's succession to the leasehold. As correctly held by the PARAD,
petitioners slept on their rights, and are thus precluded from questioning Pedro's
1979 agricultural leasehold contract. TEcCHD

Amanda, on the other hand, cannot claim that Pedro deceived her into believing
that he is the sole successor to the leasehold. Part of her duties as the
landowner's representative or administrator was to know the personal
circumstances of the lessee Eugenio; more especially so, when Eugenio died.
She was duty-bound to make an inquiry as to who survived Eugenio, in order that
the landowner — or she as representative — could choose from among them
who would succeed to the leasehold. Under Section 9 of RA 3844, Makapugay,
or Amanda — as Makapugay's duly appointed representative or administrator —
was required to make a choice, within one month from Eugenio's death, who
would succeed as agricultural lessee. Thus:
Section 9. Agricultural Leasehold Relation Not Extinguished by Death or
Incapacity of the Parties. — In case of death or permanent incapacity of
the agricultural lessee to work his landholding, the leasehold shall
continue between the agricultural lessor and the person who can
cultivate the landholding personally, chosen by the agricultural
 lessor within one month from such death or permanent incapacity,
from among the following: (a) the surviving spouse; (b) the eldest
direct descendant by consanguinity; or (c) the next eldest
descendant or descendants in the order of their age: Provided, That
in case the death or permanent incapacity of the agricultural lessee
occurs during the agricultural year, such choice shall be exercised at the
end of that agricultural year: Provided, further, That in the event the
agricultural lessor fails to exercise his choice within the periods
herein provided, the priority shall be in accordance with the order
herein established.
In case of death or permanent incapacity of the agricultural lessor, the
leasehold shall bind his legal heirs. (Emphasis supplied)

Amanda may not claim ignorance of the above provision, as ignorance of the law
excuses no one from compliance therewith. 31 Thus, when she executed the
1979 Agricultural Leasehold Contract with Pedro, she is deemed to have chosen
the latter as Eugenio's successor, and is presumed to have diligently performed
her duties, as Makapugay's representative, in conducting an inquiry prior to
malting the choice.
The same holds true for petitioners. They should be held to a faithful compliance
with Section 9. If it is true that they entered into a unique arrangement with Pedro
to alternately till the land, they were thus obliged to inform Makapugay or
Amanda of their arrangement, so that in the process of choosing Eugenio's
successor, they would not be left out. But evidently, they did not; they slept on
their rights, and true enough, they were excluded, if there was any such alternate
farming agreement between them. And after Pedro was chosen and installed as
Eugenio's successor, they allowed 17 years to pass before coming out to reveal
this claimed alternate farming agreement and insist on the same. ITDHcA

With the above pronouncements, there is no other logical conclusion than that
the 1996 "Kasunduan sa Buwisan ng Lupa" between Amanda and petitioners,
which is grounded on Pedro's inadmissible verbal admission, and which
agreement was entered into without obtaining Dominga's consent, constitutes an
undue infringement of Dominga's rights as Pedro's successor-in-interest under
Section 9, and operates to deprive her of such rights and dispossess her of the
leasehold against her will. Under Section 7 32 of RA 3844, Dominga is entitled to
security of tenure; and under Section 16, 33 any modification of the lease
agreement must be done with the consent of both parties and without prejudicing
Dominga's security of tenure.
This Court shall not delve into the issue of re-classification or conversion of the
land. Re-classification/conversion changes nothing as between the landowners
and Dominga in regard to their agreement, rights and obligations. On the
contrary, re-classification/conversion can only have deleterious effects upon
petitioners' cause. Not being agricultural lessees of the land, petitioners may not
benefit at all, for under the law, only the duly designated lessee — herein
respondent — is entitled to disturbance compensation in case of re-
classification/conversion of the landholding into residential, commercial, industrial
or some other urban purposes. 34 Besides, a valid re-classification of the land not
only erases petitioners' supposed leasehold rights; it renders them illegal
occupants and sowers in bad faith thereof, since from the position they have
taken as alleged lessees, they are not the owners of the land.
WHEREFORE, the Petition is DENIED. The assailed August 31, 2007 Decision
and December 13, 2007 Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
(Garcia v. Vda. de Caparas, G.R. No. 180843, [April 17, 2013], 709 PHIL 619-
|||

635)

SECOND DIVISION

[G.R. No. 22948. March 17, 1925.]

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-

appellee, vs. FAUSTO V. CARLOS, defendant-appellant.

M.H. de Joya, Jose Padilla, Vicente Sotto and Monico Mercado for
appellant.
Attorney-General Villa-Real and City Fiscal Guevarra for appellee.

SYLLABUS

1. CRIMINAL PROCEDURE; EVIDENCE; HUSBAND AND WIFE;

PRIVILEGED COMMUNICATION. — Where a privileged communication from
one spouse to the other comes into the hands of a third party, without
collusion or voluntary disclosure on the part of either of the spouses, the
privilege is privilege is thereby extinguished and the communication, if
otherwise competent, becomes admissible in evidence.
2. ID.; ID.; DOCUMENTS OBTAINED BY ILLEGAL SEARCHES. —
The rule laid down by the United States Supreme Court in the cases of Boyd
and Boyd vs. United States (116 U.S., 616) and Silverthorne Lumber Co. and
 Silverthorne vs. United States (251 U.S., 385) in regard to evidence obtained
by illegal searches, discussed.
3. ID.; ID.; LETTERS BETWEEN HUSBAND AND WIFE. — A letter
written by a wife to her husband is incompetent as evidence in a criminal case
against the latter where there is no indication of assent his part to the
statements contained in the letter. The letter may, however, be admissible to
impeach the testimony of the wife if she goes upon the witness-stand in the
trial of the case.

DECISION

OSTRAND, J : p

This is an appeal from a decision of the Court of First Instance of the

City of Manila finding the defendant Fausto V. Carlos guilty of the crime of
murder and sentencing him to suffer life imprisonment, with the accessory
penalties prescribed by the law and with the costs.
It appears from the evidence that the victim of the alleged murder, Dr.
Pablo G. Sityear, on March 3, 1924, in Mary Chiles Hospital, performed a
surgical operation upon the defendant's wife for appendicitis and certain other
ailments. She remained in the hospital until the 18th of the same month, but
after her release therefrom she was required to go several times to the clinic
of Doctor Sityar at No. 40 Escolta, for the purpose of dressing the wounds
caused by the operation. On these occasions she was accompanied by her
husband, the defendant. The defendant states that on one of the visits, that of
March 20, 1924, Doctor Sityar sent him out on an errand to buy some
medicine, and that while the defendant was absent on this errand Doctor
Sityar outraged the wife. The defendant further states that his wife informed
him of the outrage shortly after leaving the clinic. Notwithstanding this it
nevertheless appears that he again went there on March 28th to consult the
deceased about some lung trouble from which he, the defendant, was
suffering. He was given some medical treatment and appears to have made
at least one more visit to the clinic without revealing any special resentment.
On May 12, 1924, the defendant, suffering from some stomach trouble,
entered the Philippine General Hospital where he remained until May 18,
1924, and where he was under the care of two other physicians. While in the
hospital he received a letter (Exhibit 5) from Doctor Sityar asking for the
immediate settlement of the account for the professional services rendered
his wife. Shortly after his release from the hospital the defendant sought an
interview with Doctor Sityar and went to the latter's office several times
without finding him in. On one of these occasions he was asked by an
employee of the office, the nurse Cabanera, if he had come to settle his
account, to which the defendant answered that he did not believe he owed the
doctor anything.
In the afternoon of May 26th the defendant again went to the office of
the deceased and found him there alone. According to the evidence of the
prosecution, the defendant then, without any preliminary quarrel between the
two, attacked the deceased with a fan-knife and stabbed him twice. The
deceased made an effort to escape but the defendant pursued him and
overtaking him in the hall outside the office, inflicted another wound upon him
and as a consequence of the three wounds he died within a few minutes. The
defendant made his escape but surrendered himself to the Constabulary at
Malolos, Bulacan, in the evening of the following day.
The defendant admits that he killed the deceased but maintains that he
did so in self-defense. He explains that he went to Doctor Sityar's office to
protest against the amount of the fee charged by the doctor and, in any event,
to ask for an extension of the time of payment; that during the conversation
upon the subject the deceased insulted him by telling him that inasmuch as he
could not pay the amount demanded he could send his wife the office as she
was the one treated, and that she could then talk the matter over with the
deceased; that this statement was made in such insolent and contemptuous
manner that the defendant became greatly incensed and remembering the
outrage committed upon his wife, he assumed a threatening attitude and
challenged the deceased to go downstairs with him and there settle the
matter; that the deceased thereupon took a pocket-knife from the center
drawer of his desk and attacked the defendant, endeavoring to force him out
of the office; that the defendant, making use of his knowledge of fencing,
succeeded in taking the knife away from the deceased and blinded by fury
stabbed him first in the right side of the breast and then in the epigastric
region, and fearing that the deceased might secure some other weapon or
receive assistance from the people in the adjoining room, he again stabbed
him, this time in the back.
The defendant's testimony as to the struggle described is in conflict with
the evidence presented by the prosecution. But assuming that it is true, it is
very evident that it fails to establish a case of self-defense and that, in reality,
the only question here to be determined is whether the defendant is guilty of
murder or of simple homicide.
The court below found that the crime was committed with premeditation
and therefore constituted murder. This fining can only be sustained by taking
into consideration Exhibit L, a letter written to the defendant by his wife and
seized by the police in searching his effects on the day of his arrest. It is dated
May 25, 1924, two days before the commission of the crime and shows that
the writer feared that the defendant contemplated resorting to physical
violence in dealing with the deceased.
Counsel for the defendant argues vigorously that the letter was a
privileged communication and therefore not admissible in evidence. The
numerical weight of authority is, however, to the effect that where a privileged
communication from one spouse to another comes into the hands of a third
part, whether legally or not, without collusion and voluntary disclosure on the
part of either of the spouses, the privilege is thereby extinguished and the
communication, if otherwise competent, becomes admissible. (28 R.C.L., 530
and authorities there cited.) Such is the view of the majority of this court.
Professor Wigmore states the rule as follows:
"For documents of communication coming into the possession of
a third person, a distinction should obtain, analogous to that already
indicated for a client's communications (ante, par. 2325, 2326); i. e., if
they were obtained from the addressee by voluntary delivery, they
should still be privileged (for otherwise the privilege could by collusion be
practically nullified for written communications); but if they were obtained
surreptitiously or otherwise without the addressee's consent, the
privilege should cease." (5 Wigmore on Evidence, 2d ed., par. 2339.)
The letter in question was obtained through a search for which no
warrant appears to have been issued and counsel for the defendant cites the
causes of Boyd and Boyd vs. United States (116 U.S., 616) and Silverthrone
Lumber Co. and Silverthorne vs. United States (251 U.S., 385) as authority for
the proposition that documents obtained by illegal searches of the defendant's
effects are not admissible in evidence in a criminal case. In discussing this
point we can do not better than to quote Professor Wigmore:
"The foregoing doctrine (i.e., that the admissibility of evidence is
not affected by the illegality of the means evidence) was never doubted
until the appearance of the ill-starred majority opinion of Boyd vs. United
States, in 1885, which has exercise unhealthy influence upon
subsequent judicial opinion in many States.
xxx xxx xxx
"The progress of this doctrine of Boyd vs. United States was as
follows: (a) The Boyd Case remainedunquestioned in its own Court for
twenty years; meantime receiving frequent disfavor in the State Courts
(ante, par. 2183). (b) Then in Adams vs. New York, in 1904, it was
virtually repudiated in the Federal Supreme Court, and the orthodox
precedents recorded in the State courts (ante, par. 2183) were expressly
approved. (c) Next, after another twenty years, in 1914 — moved this
time, not by erroneous history, but by misplaced sentimentality — the
Federal Supreme Court, in Weeks vs. United States, reverted to the
original doctrine of the Boyd Case, but with a condition, viz., that the
 illegality of the search and seizures should first have been directly
litigated and established by a motion, made before trial, for the return of
the things seized; so that, after such a motion, and then only, the
illegality would be noticed in the main trial and the evidence thus
obtained would be excluded. . . ." (4 Wigmore on Evidence, 2d ed., par.
2184.)
In the Silverthorne Lumber Co. case the United States Supreme Court
adhered to its decision in the Weeks Case. The doctrine laid down in these
cases has been followed by some of the State courts but has been severely
criticized and does not appear to have been generally accepted. But
assuming, without deciding, that it prevails in this jurisdiction it is,
nevertheless, under the decisions in the Weeks and Silverthorne cases,
inapplicable to the present case. Here the illegality of the search and seizure
was not "directly litigated and established by a motion, made before trial, for
the return of the things seized."

The letter Exhibit L must, however, be excluded for reasons not

because in the briefs. The letter was written by the wife of the defendant and if
she had testified at the trial the letter might have been admissible to impeach
her testimony, but she was not put on the witness-stand and the letter was
therefore not offered for the purpose. If the defendant either by answer or
otherwise had indicated his assent to the statements contained in the letter it
might also have been admissible, but such is not the case here; the fact that
he had the letter in his possession is no indication of acquiescence or assent
on his part. The letter is therefore nothing but pure hearsay and its admission
in evidence violates the constitutional right of the defendant in a criminal case
to be confronted with the witnesses for the prosecution and have the
opportunity to cross-examine them. In this respect there can be no difference
between an ordinary communication and one originally privileged.
The question is radically different from that of the admissibility of
testimony of a third party as to a conversation between a husband and wife
overheard by the witness. Testimony of that character is admissible on the
ground that it relates to a conversation in which both spouses took part and
on the further ground that where the defendant has the opportunity to answer
a statement made to him by his spouse and fails to do so, his silence implies
assent. That cannot apply where the statement is contained in an unanswered
letter.
The Attorney-General in support of the contrary view quotes Wigmore,
as follows:
". . . Express communication is always a proper mode of
evidencing knowledge or belief. Communication to ahusband or wife is
always receivable to show probable knowledge by the other (except
 where they are living apart or are not in good terms), because, while it is
not certain that the one will tell the other, and while the probability is less
upon some subjects than upon others, still there is always some
probability, — which is all that can be fairly asked for admissibility. . . ."
(1 Wigmore, id., par. 261.)
This may possibly be good law, though Wigmore cites no authority in
support of his assertion, but as far as we can see it has little or nothing to do
with the present case.
As we have already intimated, if Exhibit L is excluded, there is in our
opinion not sufficient evidence in the record to show that the crime was
premeditated.
The prosecution maintains that the crime was committed with alevosia.
this contention is based principally on the fact that one of the wounds received
by the deceased showed a downward direction indicating that the deceased
was sitting down when the wound was inflicted. We do not think this fact is
sufficient proof. The direction of the wound would depend largely upon the
manner in which the knife was held.
For the reasons stated we find the defendant guilty of simple homicide,
without aggravating or extenuating circumstances.
The sentence appealed from is therefore modified by reducing the
penalty to fourteen years, eight months and one day of reclusion temporal,
with the corresponding accessory penalties and with the costs against the
appellant. So ordered.
Johnson, Malcolm, and Romualdez, JJ., concur.
||| (People v. Carlos, G.R. No. 22948, [March 17, 1925], 47 PHIL 626-635)

FIRST DIVISION

[G.R. No. 9231. January 6, 1915.]

UY CHICO, plaintiff-appellant, vs. THE UNION LIFE

ASSURANCE SOCIETY, LIMITED, ET AL., defendants-appellees.

Beaumont & Tenney for appellant.

Bruce, Lawrence, Ross & Block for appellees.
 SYLLABUS

1. WITNESSES; PRIVILEGED COMMUNICATIONS; ATTORNEY AND

CLIENT. — Communications made by a client to his attorney for the purpose
of being communicated to others are not privileged after they have been so
communicated, and may be proved by the testimony of the attorney. This rule
applies to a compromise agreement perfected by the attorney with the
authority and under the instructions of his client.
2. ID.; ID.; WAIVER. — AS to whether a waiver of the client's privilege
personally made in open court can be withdrawn before acted upon, quaere.

DECISION

TRENT, J :p

An appeal from a judgment dismissing the complaint upon the merits,

with costs.
The plaintiff seeks to recover the face value of two insurance policies
upon a stock of dry goods destroyed by fire. It appears that the father of the
plaintiff died in 1897, at which time he was conducting a business under his
own name, Uy Layco. The plaintiff and his brother took over the business and
continued it under the same name, "Uy Layco." Sometime before the date of
the fire, the plaintiff purchased his brother's interest in the business and
continued to carry on the business under the father's name. At the time of the
fire "Uy Layco" was heavily indebted and subsequent thereto the creditors
petitioned for the appointment of an administrator of the estate of the plaintiff's
father. During the course of these proceedings, the plaintiff's attorney
surrendered the policies of insurance to the administrator of the estate, who
compromised with the insurance company for one-half their face value, or
P6,000. This money was paid into court and is now being held by the sheriff.
The plaintiff now brings this action, maintaining that the policies and goods
insured belong to him and not to the estate of his deceased father and alleges
that he is not bound by the compromise effected by the administrator of his
father's estate.
The defendant insurance company sought to show that the plaintiff had
agreed to the compromise settlement of the policies, and for that purpose
introduced evidence showing that the plaintiff's attorney had surrendered the
policies to the administrator with the understanding that such a compromise
was to be effected. The plaintiff was asked, while on the witness stand, if he
had any objection to his attorney's testifying concerning the surrender of the
policies, to which he replied in the negative. The attorney was then called for
that purpose. Whereupon, counsel for the plaintiff formally withdrew the
waiver previously given by the plaintiff and objected to the testimony of the
attorney on the ground that it was privileged. Counsel, on this appeal, base
their argument on the proposition that a waiver of the client's privilege may be
withdrawn at any time before acted upon, and cite in support thereof
Ross vs. Great Northern Ry. Co. (101 Minn., 122; 111 N. W., 951). The case
of Natlee Draft Horse Co. vs. Cripe & Co. (142 Ky., 810), also appears to
sustain their contention. But a preliminary question suggests itself, Was the
testimony in question privileged?
Our practice Act provides: "A lawyer must strictly maintain inviolate the
confidence and preserve the secrets of his client. He shall not be permitted in
any court, without the consent of his client, given in open court, to testify to
any facts imparted to him by his client in professional consultation, or for the
purpose of obtaining advice upon legal matters." (Sec. 31, Act No. 190.)
A similar provision is inserted in section 383, No. 4. of the same Act. It
will be noted that the evidence in question concerned the dealings of the
plaintiff's attorney with a third person. Of the very essence of the veil of
secrecy which surrounds communications made between attorney and client,
is that such communications are not intended for the information of third
persons or to be acted upon by them, but for the purpose of advising the client
as to his rights. It is evident that a communication made by a client to his
attorney for the express purpose of its being communicated to a third person
is essentially inconsistent with the confidential relation. When the attorney has
faithfully carried out his instructions by delivering the communication to the
third person for whom it was intended and the latter acts upon it, it cannot, by
any reasoning whatever, be classified in a legal sense as a privileged
communication between the attorney and his client. It is plain that such a
communication, after reaching the party for whom it was intended at least, is a
communication between the client and a third person, and that the attorney
simply occupies the role of intermediary or agent. We quote from but one
case among the many which may be found upon the point:
"The proposition advanced by the respondent and adopted by the
trial court, that one, after fully authorizing his attorney, as his agent, to
enter into contract with a third party, and after such authority has been
executed and relied on, may effectively nullify his own and his duly
authorized agent's act by closing the attorney's mouth as to the giving of
such authority, is most startling. A perilous facility of fraud and wrong,
both upon the attorney and the third party, would result. The attorney
who, on his client's authority, contracts in his behalf, pledges his
reputation and integrity that he binds his client. The third party may well
rely on the assurance of a reputable lawyer that he has authority in fact,
though such assurance be given only by implication from the doing of
 the act itself. It is with gratification, therefore, that we find overwhelming
weight of authority, against the position assumed by the court below,
both in states where the privilege protecting communications with
attorneys is still regulated by the common law and in those where it is
controlled by statute, as in Wisconsin." (Koeber vs. Sommers, 108 Wis.,
497; 52 L. R. A., 512.)
Other cases wherein the objection to such evidence on the ground of
privilege has been overruled are: Hendersonvs. Terry (62 Tex., 281);
Shove vs. Martin (85 Minn., 29); In re Elliott (73 Kan., 151); Collins vs.
Hoffman (62 Wash., 278); Gerhardt vs. Tucker (187 Mo., 46). These cases
cover a variety of communications made by an attorney in behalf of his client
to third persons. And cases wherein evidence of the attorney as to
compromises entered into by him on behalf of his client were allowed to be
proved by the attorney's testimony are not wanting. (Williams vs. Blumenthal,
27 Wash., 24; Koeber vs. Sommers, supra.)
It is manifest that the objection to the testimony of the plaintiff's attorney
as to his authority to compromise was properly overruled. The testimony was
to the effect that when the attorney delivered the policies to the administrator,
he understood that there was a compromise to be effected, and that when he
informed the plaintiff of the surrender of the policies for that purpose the
plaintiff made no objection whatever. The evidence is sufficient to show that
the plaintiff acquiesced in the compromise settlement of the policies. Having
agreed to the compromise, he cannot now disavow it and maintain an action
for the recovery of their face value.
For the foregoing reasons the judgment appealed from is affirmed, with
costs. So ordered.
(Uy Chico v. Union Life Assurance Society, G.R. No. 9231, [January 6, 1915],
|||

29 PHIL 163-166)

EN BANC

[G.R. No. 105938. September 20, 1996.]

TEODORO R. REGALA, EDGARDO J. ANGARA, AVELINO V.

CRUZ, JOSE C. CONCEPCION, ROGELIO A. VINLUAN,
VICTOR P. LAZATIN, and EDUARDO U.
ESCUETA, petitioners, vs. THE HONORABLE
SANDIGANBAYAN, First Division, REPUBLIC OF THE
PHILIPPINES, ACTING THROUGH THE PRESIDENTIAL
 COMMISSION ON GOOD GOVERNMENT, and RAUL S.
ROCO, respondents.

[G.R. No. 108113. September 20, 1996.]

PARAJA G. HAYUDINI, petitioner, vs. THE SANDIGANBAYAN

and THE REPUBLIC OF THE PHILIPPINES,respondents.

Manuel G. Abello for petitioners.

Roco Bunag Kapunan & Migallos for Raul S. Roco.
Mario E. Ongkiko for Presidential Commission on Good Government.

SYLLABUS

1. LEGAL ETHICS; LAWYER-CLIENT RELATIONSHIP; BOUNDED BY RULES,

ETHICAL CONDUCT AND DUTIES; RATIONALE. — In the creation of lawyer-
client relationship, there are rules, ethical conduct and duties that breathe life into
it, among those, the fiduciary duty to his client which is of a very delicate,
exacting and confidential character, requiring a very high degree of fidelity and
good faith, that is required by reason of necessity and public interest based on
the hypothesis that abstinence from seeking legal advice in a good cause is an
evil which is fatal to the administration of justice. It is also the strict sense of
fidelity of a lawyer to his client that distinguishes him from any other professional
in society. This conception is entrenched and embodies centuries of established
and stable tradition. Considerations favoring confidentiality in lawyer-client
relationships are many and serve several constitutional and policy concerns. In
the constitutional sphere, the privilege gives flesh to one of the most sacrosanct
rights available to the accused, the right to counsel. If a client were made to
choose between legal representation without effective communication and
disclosure and legal representation with all his secrets revealed then he might be
compelled, in some instances, to either opt to stay away from the judicial system
or to lose the right to counsel. If the price of disclosure is too high, or if it amounts
to self incrimination, then the flow of information would be curtailed thereby
rendering the right practically nugatory. The threat this represents against
another sacrosanct individual right, the right to be presumed innocent is at once
self-evident. Encouraging full disclosure to a lawyer by one seeking legal
services opens the door to a whole spectrum of legal options which would
otherwise be circumscribed by limited information engendered by a fear of
disclosure. An effective lawyer-client relationship is largely between lawyer and
client which in turn requires a situation which encourages a dynamic and fruitful
exchange and flow of information. It necessarily follows that in order to attain
effective representation, the lawyer must invoke the privilege not as a matter of
option but as a matter of duty and professional responsibility.
2. ID.; ID.; AS A GENERAL RULE A LAWYER MAY NOT REFUSE TO
DIVULGE THE IDENTITY OF HIS CLIENT; RATIONALE. — As a matter of
public policy, a client's identity should not be shrouded in mystery. Under this
premise, the general rule in our jurisdiction as well as in the United States is that
a lawyer may not invoke the privilege and refuse to divulge the name or identity
of his client. The reasons advanced for the general rule are well established.
First, the court has a right to know that the client whose privileged information is
sought to be protected is flesh and blood. Second, the privilege begins to exist
only after the attorney-client relationship has been established. The attorney-
client privilege does not attach until there is a client. Third, the privilege generally
pertains to the subject matter of the relationship. Finally, due process
considerations require that the opposing party should, as a general rule, know his
adversary. "A party suing or sued is entitled to know who his opponent is. He
cannot be obliged to grope in the dark against unknown forces.
3. ID.; ID.; ID.; EXCEPTION; WHEN THE CLIENT'S IDENTITY IS PRIVILEGED.
— The general rule is, however, qualified by some important exception. 1) Client
identity is privileged where a strong probability exists that revealing the client's
name would implicate that client in the very activity for which he sought the
lawyer's advice. 2) Where disclosure would open the client to civil liability, his
identity is privileged. 3) Where the government's lawyers have no case against
an attorney's client unless, by revealing the client's name, the said name would
furnish the only link that would form the chain of testimony necessary to convict
an individual of a crime, the client's name is privileged. Apart from these principal
exceptions, there exist other situations which could qualify as exceptions to the
general rule. For example, the content of any client communication to a lawyer
lies within the privilege if it is relevant to the subject matter of the legal problem
on which the client seeks legal assistance. Moreover, where the nature of the
attorney-client relationship has been previously disclosedand it is the identity
which is intended to be confidential, the identity of the client has been held to be
privileged, since such revelation would otherwise result in disclosure and the
entire transaction. Summarizing these exceptions, information relating to the
identity of a client may fall within the ambit of the privilege when the client's name
itself has an independent significance, such that disclosure would then reveal
client confidences.
4. CONSTITUTIONAL LAW; BILL OF RIGHTS; EQUAL PROTECTION CLAUSE
CONSTRUED. — The equal protection clause is a guarantee which provides a
wall of protection against uneven application of statutes and regulations. In the
broader sense, the guarantee operates against uneven application of legal norms
so that all persons under similar circumstances would be accorded the same
treatment. (Gumabon v. Director of Prisons, 37 SCRA 420 [1971]). Those who
fall within a particular class ought to be treated alike not only as to privileges
granted but also as to the liabilities imposed. . . . What is required under this
Constitutional guarantee is the uniform operation of legal norms so that all
persons under similar circumstances would be accorded the same treatment
both in the privileges conferred and the liabilities imposed. As was noted in a
recent decision: 'Favoritism and undue preference cannot be allowed. For the
principle is that equal protection and security shall be given to every person
under circumstances, which if not identical are analogous. If law be looked upon
in terms of burden or charges, those that fall within a class should be treated in
the same fashion, whatever restrictions cast on some in the group equally
binding the rest.
VITUG, J., separate opinion:
LEGAL ETHICS; LAWYER-CLIENT RELATIONSHIP; COVERED BY THE
PROTECTION OF CONFIDENTIALITY. — The legal profession, despite all the
unrestrained calumny hurled against it, is still the noblest of professions. It exists
upon the thesis that, in an orderly society that is opposed to all forms of anarchy,
it so occupies, as it should, an exalted position in the proper dispensation of
justice. In time, principles have evolved that would help ensure its effective
ministation. The protection of confidentiality of the lawyer-client relationship is
one, and it has since been an accepted firmament in the profession. It allows the
lawyer and the client to institutionalize a unique relationship based on full trust
and confidence essential in a justice system that works on the basis of
substantive and procedural due process. To be sure, the rule is not without its
pitfalls, and demands against it may be strong, but these problems are, in the
ultimate analysis, no more than mere tests of vigor that have made and will make
that rule endure.
DAVIDE, JR. J., dissenting opinion:
1. LEGAL ETHICS; LAWYER-CLIENT RELATIONSHIP; NATURE OF THE
RULE OF CONFIDENTIALITY. — The rule of confidentiality under the lawyer-
client relationship is not a cause to exclude a party. It is merely a ground for
disqualification of a witness (Sec. 24, Rule 130, Rules of Court) and may only be
invoked at the appropriate time, i.e., when a lawyer is under compulsion to
answer as witness, as when, having taken the witness stand, he is questioned as
to such confidential communication or advice, or is being otherwise judicially
coerced to produce, through subpoenae duces tecum or otherwise, letters or
other documents containing the same privileged matter.
2. ID.; LAWYER-CLIENT PRIVILEGE; CONTRARY TO THE MAJORITY RULE,
AMERICAN JURISPRUDENCE SHOULD NOT BE APPLIED TO EXPAND THE
SCOPE OF THE PHILIPPINE RULE. — Hypothetically admitting the allegations
in the complaint in Civil Case No. 0033, I find myself unable to agree with the
majority opinion that the petitioners are immune from suit or that they have to be
excluded as defendants, or that they cannot be compelled to reveal or disclose
the identity of their principals, all because of the sacred lawyer-client privilege.
This privilege is well put in Rule 130 of the Rules of Court. The majority seeks to
expand the scope of the Philippine rule on the lawyer-client privilege by copious
citations of American jurisprudence which includes in the privilege the identity of
the client under the exceptional situations narrated therein. From the plethora of
cases cited, two facts stand out in bold relief. Firstly, the issue of privilege
contested therein arose in grand jury proceedings on different States, which are
primarily proceedings before the filing of the case in court, and we are not even
told what evidentiary rules apply in the said hearings. In the present case, the
privilege is invoked in the court where it was already filed. Secondly, and more
important, in the cases cited by the majority, the lawyers concerned were merely
advocating the cause of their clients but were not indicted for the charges against
their said clients. Here, the counsel themselves are co-defendants duly charged
in court as co-conspirators in the offenses charged. The cases cited by the
majority evidently do not apply to them.

3. ID.; ID.; MAY NOT BE INVOKED AS A SHIELD FOR THE COMMISSION OF

CRIME. — I wish to repeat and underscore the fact that the lawyer-client
privilege is not a shield for the commission of a crime or against the prosecution
of the lawyer therefor. We do not even have to go beyond our shores for an
authority that the lawyer-client privilege cannot be invoked to prevent the
disclosure of a client's identity where the lawyer and the client are conspirators in
the commission of a crime or a fraud. Under our jurisdiction, lawyers are
mandated not to counsel or abet activities aimed at defiance of the law or at
lessening confidence in the legal system (Rule 1.02, Canon 1, Code of
Professional Responsibility) and to employ only fair and honest means to attain
the lawful objectives of his client (Rule 19.01, Canon 19, Id). And under the
Canons of Professional Ethics, a lawyer must steadfastly bear in mind that his
great trust is to be performed within and not without the bounds of the law
(Canon 15, Id.), that he advances the honor of his profession and the best
interest of his client when he renders service or gives advice tending to impress
upon the client and his undertaking exact compliance with the strictest principles
of moral law (Canon 32, Id.). These canons strip a lawyer of the lawyer-client
privilege whenever he conspires with the client in the commission of a crime or a
fraud.
PUNO, J., dissenting opinion:
1. LEGAL ETHICS; LAWYER-CLIENT PRIVILEGE; CAN NEVER BE USED AS
A SHIELD TO COMMIT CRIME OR FRAUD. — The attorney-client privilege can
never be used as a shield to commit a crime or a fraud. Communications to an
attorney having for their object the commission of a crime ". . . partake the nature
of a conspiracy, and it is not only lawful to divulge such communications, but
under certain circumstances it might become the duty of the attorney to do so.
The interests of public justice require that no such shield from merited exposure
shall be interposed to protect a person who takes counsel how he can safely
commit a crime. The relation of attorney and client cannot exist for the purpose of
counsel in concocting crimes." (125 American Law Reports Annotated 516–519
citing People v. Van Alstine, 57 Mich 69, 23 NW 594)
2. ID.; ID.; DOES NOT INCLUDE THE RIGHT OF NON-DISCLOSURE OF
CLIENT IDENTITY AS A GENERAL RULE; EXCEPTIONS. — As a general rule,
the attorney-client privilege does not include the right of non-disclosure of client
identity. The general rule, however, admits of well-etched exceptions which
the Sandiganbayan failed to recognize. The general rule and its exceptions are
accurately summarized in In re Grand Jury Investigation. The Circuits have
embraced various "exceptions" to the general rule that the identity of a client is
not within the protective ambit of an attorney-client privilege. All such exceptions
appear to be firmly grounded in the Ninth Circuit's seminal decision in Baird
v. Koerner, 279 F. 2d 633 (8th Cir. 1960). 'The name of the client will be
considered privileged matter where the circumstances of the case are such that
the name of the client is material only for the purpose of showing an
acknowledgment of guilt on the part of such client of the very offenses on
account of which the attorney was employed.' 'A significant exception to this
principle of non-confidentiality holds that such information may be privileged
when the person invoking the privilege is able to show that a strong possibility
exists that disclosure of the information would implicate the client in the very
matter for which legal advice was sought in the first case.' Another exception to
the general rule that the identity of a client is not privileged arises where
disclosure of the identity would be tantamount to disclosing an otherwise
protected confidential communication. To the general rule is an exception, firmly
embedded as the rule itself. The privilege may be recognized where so much of
the actual communication has already been disclosed that identification of the
client amounts to disclosure of a confidential communication. The privilege may
be recognized where so much of the actual communication has already been
disclosed [not necessarily by the attorney but by independent sources as well]
that identification of the client [or of fees paid] amounts to disclosure of a
confidential communication. Another exception, articulated in the Fifth Circuit's en
banc decision of In re Grand Jury Proceedings (Pavlick), 680 F, 2D 1026 5th Cir.
1982 (en banc), is recognized when disclosure of the identity of the client would
provide the "last link" of evidence.
3. ID.; ID.; PERSON CLAIMING THE PRIVILEGE OR ITS EXCEPTIONS HAS
THE OBLIGATION TO PRESENT THE UNDERLYING FACTS
DEMONSTRATING THE EXISTENCE OF THE PRIVILEGE. — The person
claiming the privilege or its exception has theobligation to present the underlying
facts demonstrating the existence of the privilege. When these facts can be
presentedonly by revealing the very information sought to be protected by the
privilege, the procedure is for the lawyer to move for an inspection of the
evidence in an in camera hearing. The hearing can even be in camera and ex-
parte. Thus, it has been held that "a well-recognized means for an attorney to
demonstrate the existence of an exception to the general rule, while
simultaneously preserving confidentiality of the identity of his client, is to move
the court for an in camera ex-parte hearing. Without the proofs adduced in
these in camera hearings, the Court has no factual basis to determine whether
petitioners fall within any of the exceptions to the general rule.

DECISION

KAPUNAN, J : p

These cases touch the very cornerstone of every State's judicial system, upon
which the workings of the contentious and adversarial system in the Philippine
legal process are based — the sanctity of fiduciary duty in the client-lawyer
relationship. The fiduciary duty of a counsel and advocate is also what makes the
law profession a unique position of trust and confidence, which distinguishes it
from any other calling. In this instance, we have no recourse but to uphold and
strengthen the mantle of protection accorded to the confidentiality that proceeds
from the performance of the lawyer's duty to his client.
The facts of the case are undisputed.
The matters raised herein are an offshoot of the institution of the Complaint on
July 31, 1987 before the Sandiganbayan by the Republic of the Philippines,
through the Presidential Commission on Good Government against Eduardo M.
Cojuangco, Jr., as one of the principal defendants, for the recovery of alleged ill-
gotten wealth, which includes shares of stocks in the named corporations in
PCGG Case No. 33 (Civil Case No. 0033), entitled "Republic of the
Philippines versus Eduardo Cojuangco, et al." 1
Among the defendants named in the case are herein petitioners Teodoro Regala,
Edgardo J. Angara, Avelino V. Cruz, Jose C. Concepcion, Rogelio A. Vinluan,
Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayudini, and herein private
respondent Raul S. Roco, who all were then partners of the law firm Angara,
Abello, Concepcion, Regala and Cruz Law Offices (hereinafter referred to as the
ACCRA Law Firm). ACCRA Law Firm performed legal services for its clients,
which included, among others, the organization and acquisition of business
associations and/or organizations, with the correlative and incidental services
where its members acted as incorporators, or simply, as stockholders. More
specifically, in the performance of these services, the members of the law firm
delivered to its client documents which substantiate the client's equity holdings,
i.e., stock certificates endorsed in blank representing the shares registered in the
client's name, and a blank deed of trust or assignment covering said shares. In
the course of their dealings with their clients, the members of the law firm acquire
information relative to the assets of clients as well as their personal and business
circumstances. As members of the ACCRA Law Firm, petitioners and private
respondent Raul Roco admit that they assisted in the organization and
acquisition of the companies included in Civil Case No. 0033, and in keeping with
the office practice, ACCRA lawyers acted as nominees-stockholders of the said
corporations involved in sequestration proceedings. 2
On August 20, 1991, respondent Presidential Commission on Good government
(hereinafter referred to as respondent PCGG) filed a "Motion to Admit Third
Amended Complaint" and "Third Amended Complaint" which excluded private
respondent Raul S. Roco from the complaint in PCGG Case No. 33 as party-
defendant. 3 Respondent PCGG based its exclusion of private respondent Roco
as party-defendant on his undertaking that he will reveal the identity of the
principal/s for whom he acted as nominee/stockholder in the companies involved
in PCGG Case No. 33. 4
Petitioners were included in the Third Amended Complaint on the strength of the
following allegations:
14. Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C.
Concepcion, Teodoro Regala, Avelino V. Cruz, Rogelio A. Vinluan,
Eduardo U. Escueta, Paraja G. Hayudini and Raul Roco of the Angara
Concepcion Cruz Regala and Abello law offices (ACCRA) plotted,
devised, schemed, conspired and confederated with each other in
setting up, through the use of the coconut levy funds, the financial and
corporate framework and structures that led to the establishment of
UCPB, UNICOM, COCOLIFE, COCOMARK, CIC, and more than twenty
other coconut levy funded corporations, including the acquisition of San
Miguel Corporation shares and its institutionalization through presidential
directives of the coconut monopoly. Through insidious means and
machinations, ACCRA, being the wholly-owned investment arm, ACCRA
Investments Corporation, became the holder of approximately fifteen
million shares representing roughly 3.3% of the total outstanding capital
stock of UCPB as of 31 March 1987. This ranks ACCRA Investments
Corporation number 44 among the top 100 biggest stockholders of
 UCPB which has approximately 1,400,000 shareholders. On the other
hand, corporate books show the name Edgardo J. Angara as holding
approximately 3,744 shares as of February, 1984. 5

In their answer to the Expanded Amended Complaint, petitioners ACCRA

lawyers alleged that:
4.4. Defendants-ACCRA lawyers' participation in the acts with which
their co-defendants are charged, was in furtherance of legitimate
lawyering.
4.4.1. In the course of rendering professional and legal services to
clients, defendants-ACCRA lawyers, Jose C. Concepcion,
Teodoro D. Regala, Rogelio A. Vinluan and Eduardo U. Escueta,
became holders of shares of stock in the corporations listed under
their respective names in Annex 'A' of the expanded Amended
Complaint as incorporating or acquiring stockholders only and, as
such, they do not claim any proprietary interest in the said shares
of stock.
4.5. Defendant ACCRA-lawyer Avelino V. Cruz was one of the
incorporators in 1976 of Mermaid Marketing Corporation, which
was organized for legitimate business purposes not related to the
allegations of the expanded Amended Complaint. However, he
has long ago transferred any material interest therein and
therefore denies that the 'shares' appearing in his name in Annex
'A' of the expanded Amended Complaint are his assets. 6

Petitioner Paraja Hayudini, who had separated from ACCRA law firm, filed a
separate answer denying the allegations in the complaint implicating him in the
alleged ill-gotten wealth. 7
Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR
OPPOSITION" dated October 8, 1991 with Counter-Motion that respondent
PCGG similarly grant the same treatment to them (exclusion as parties-
defendants) as accorded private respondent Roco. 8 The Counter-Motion for
dropping petitioners from the complaint was duly set for hearing on October 18,
1991 in accordance with the requirements of Rule 15 of the Rules of Court.
In its "Comment," respondent PCGG set the following conditions precedent for
the exclusion of petitioners, namely: (a) the disclosure of the identity of its clients;
(b) submission of documents substantiating the lawyer-client relationship; and (c)
the submission of the deeds of assignments petitioners executed in favor of its
clients covering their respective shareholdings. 9
Consequently, respondent PCGG presented supposed proof to substantiate
compliance by private respondent Roco of the conditions precedent to warrant
the latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a) Letter
to respondent PCGG of the counsel of respondent Roco dated May 24, 1989
reiterating a previous request for reinvestigation by the PCGG in PCGG Case
No. 33; (b) Affidavit dated March 8, 1989 executed by private respondent Roco
as Attachment to the letter aforestated in (a); and (c) Letter of the Roco, Bunag,
and Kapunan Law Offices dated September 21, 1988 to the respondent PCGG in
behalf of private respondent Roco originally requesting the reinvestigation and/or
re-examination of the evidence of the PCGG against Roco in its Complaint in
PCGG Case No. 33. 10
It is noteworthy that during said proceedings, private respondent Roco did not
refute petitioners' contention that he did actually not reveal the identity of the
client involved in PCGG Case No. 33, nor had he undertaken to reveal the
identity of the client for whom he acted as nominee-stockholder. 11
On March 18, 1992, respondent Sandiganbayan promulgated the Resolution,
herein questioned, denying the exclusion of petitioners in PCGG Case No. 33, for
their refusal to comply with the conditions required by respondent PCGG. It held:
xxx xxx xxx
ACCRA lawyers may take the heroic stance of not revealing the identity
of the client for whom they have acted, i.e. their principal, and that will be
their choice. But until they do identify their clients, considerations of
whether or not the privilege claimed by the ACCRA lawyers exists
cannot even begin to be debated. The ACCRA lawyers cannot excuse
themselves from the consequences of their acts until they have begun to
establish the basis for recognizing the privilege; the
existence and identity of the client.
This is what appears to be the cause for which they have been
impleaded by the PCGG as defendants herein.
5. The PCGG is satisfied that defendant Roco has demonstrated his
agency and that Roco has apparently identified his principal, which
revelation could show the lack of cause against him. This in turn has
allowed the PCGG to exercise its power both under the rules of Agency
and under Section 5 of E.O. No. 14-A in relation to the Supreme Court's
ruling in Republic v. Sandiganbayan (173 SCRA 72).
The PCGG has apparently offered to the ACCRA lawyers the same
conditions availed of by Roco; full disclosure in exchange for exclusion
from these proceedings (par. 7, PCGG's COMMENT dated November 4,
1991). The ACCRA lawyers have preferred not to make the disclosures
required by the PCGG.
 The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping
them as party defendants. In the same vein, they cannot compel the
PCGG to be accorded the same treatment accorded to Roco.
Neither can this Court.
WHEREFORE, the Counter Motion dated October 8, 1991 filed by the
ACCRA lawyers and joined in by Atty. Paraja G. Hayudini for the same
treatment by the PCGG as accorded to Raul S. Roco is DENIED for lack
of merit. 12

ACCRA lawyers moved for a reconsideration of the above resolution but the
same was denied by the respondent Sandiganbayan. Hence, the ACCRA
lawyers filed the petition for certiorari, docketed as G.R. No. 105938, invoking the
following grounds:
I
The Honorable Sandiganbayan gravely abused its discretion in
subjecting petitioners ACCRA lawyers who undisputably acted as
lawyers in serving as nominee-stockholders, to the strict application of
the law of agency.
II
The Honorable Sandiganbayan committed grave abuse of discretion in
not considering petitioners ACCRA lawyers and Mr. Roco as similarly
situated and, therefore, deserving of equal treatment.
1. There is absolutely no evidence that Mr. Roco had revealed, or
had undertaken to reveal, the identities of the client(s) for
whom he acted as nominee-stockholder.
2. Even assuming that Mr. Roco had revealed, or had undertaken
to reveal, the identities of the client(s), the disclosure does
not constitute a substantial distinction as would make the
classification reasonable under the equal protection clause.
3. Respondent Sandiganbayan sanctioned favoritism and undue
preference in favor of Mr. Roco in violation of the equal
protection clause.
III
The Honorable Sandiganbayan committed grave abuse of discretion in
not holding that, under the facts of this case, the attorney-client privilege
prohibits petitioners ACCRA lawyers from revealing the identity of their
client(s) and the other information requested by the PCGG.
 1. Under the peculiar facts of this case, the attorney-client
privilege includes the identity of the client(s).
2. The factual disclosures required by the PCGG are not limited to
the identity of petitioners ACCRA lawyers' alleged client(s)
but extend to other privileged matters.
IV
The Honorable Sandiganbayan committed grave abuse of discretion in
not requiring that the dropping of party-defendants by the PCGG must
be based on reasonable and just grounds and with due consideration to
the constitutional right of petitioners ACCRA lawyers to the equal
protection of the law.

Petitioner Paraja G. Hayudini, likewise, filed his own motion for reconsideration of
the March 18, 1991 resolution which was denied by respondent Sandiganbayan.
Thus, he filed a separate petition for certiorari, docketed as G.R. No. 108113,
assailing respondent Sandiganbayan's resolution on essentially the same
grounds averred by petitioners in G.R. No. 105938.
Petitioners contend that the exclusion of respondent Roco as party-defendant in
PCGG Case No. 33 grants him a favorable treatment, on the pretext of his
alleged undertaking to divulge the identity of his client, giving him an advantage
over them who are in the same footing as partners in the ACCRA law firm.
Petitioners further argue that even granting that such an undertaking has been
assumed by private respondent Roco, they are prohibited from revealing the
identity of their principal under their sworn mandate and fiduciary duty as lawyers
to uphold at all times the confidentiality of information obtained during such
lawyer-client relationship. cdasia

Respondent PCGG, through its counsel, refutes petitioners' contention, alleging

that the revelation of the identity of the client is not within the ambit of the lawyer-
client confidentiality privilege, nor are the documents it required (deeds of
assignment) protected, because they are evidence of nominee status. 13
In his comment, respondent Roco asseverates that respondent PCGG acted
correctly in excluding him as party-defendant because he "(Roco) has not filed an
Answer. PCGG had therefore the right to dismiss Civil Case No. 0033 as to Roco
'without an order of court by filing a notice of dismissal,'" 14 and he has
undertaken to identify his principal. 15
Petitioners' contentions are impressed with merit.
I
It is quite apparent that petitioners were impleaded by the PCGG as co-
defendants to force them to disclose the identity of their clients. Clearly,
respondent PCGG is not after petitioners but the "bigger fish" as they say in
street parlance. This ploy is quite clear from the PCGG's willingness to cut a deal
with petitioners — the names of their clients in exchange for exclusion from the
complaint. The statement of the Sandiganbayan in its questioned resolution
dated March 18, 1992 is explicit:
ACCRA lawyers may take the heroic stance of not revealing the identity
of the client for whom they have acted, i.e., their principal, and that will
be their choice. But until they do identify their clients, considerations of
whether or not the privilege claimed by the ACCRA lawyers exists
cannot even begin to be debated. The ACCRA lawyers cannot excuse
themselves from the consequences of their acts until they have begun to
establish the basis for recognizing the privilege; the existence and
identity of the client.

This is what appears to be the cause for which they have been
impleaded by the PCGG as defendants herein. (Italics ours)

In a closely related case, Civil Case No. 0110 of the Sandiganbayan, Third
Division, entitled "Primavera Farms, Inc., et al. vs.Presidential Commission on
Good Government" respondent PCGG, through counsel Mario Ongkiko,
manifested at the hearing on December 5, 1991 that the PCGG wanted to
establish through the ACCRA that their "so called client is Mr. Eduardo
Cojuangco"; that "it was Mr. Eduardo Cojuangco who furnished all the monies to
those subscription payments in corporations included in Annex "A" of the Third
Amended Complaint; that the ACCRA lawyers executed deeds of trust and
deeds of assignment, some in the name of particular persons, some in blank.
We quote Atty. Ongkiko:
ATTY. ONGKIKO:
With the permission of this Hon. Court. I propose to establish through
these ACCRA lawyers that, one, their so-called client is Mr. Eduardo
Cojuangco. Second, it was Mr. Eduardo Cojuangco who furnished all the
monies to these subscription payments of these corporations who are
now the petitioners in this case. Third, that these lawyers executed
deeds of trust, some in the name of a particular person, some in blank.
Now, these blank deeds are important to our claim that some of the
shares are actually being held by the nominees for the late President
Marcos. Fourth, they also executed deeds of assignment and some of
these assignments have also blank assignees. Again, this is important to
our claim that some of the shares are for Mr. Cojuangco and some are
for Mr. Marcos. Fifth, that most of these corporations are really just
paper corporations. Why do we say that? One: There are no really fixed
 sets of officers, no fixed sets of directors at the time of incorporation and
even up to 1986, which is the crucial year. And not only that, they have
no permits from the municipal authorities in Makati. Next, actually all
their addresses now are care of Villareal Law Office. They really have no
address on records. These are some of the principal things that we
would ask of these nominees stockholders, as they called
themselves. 16

It would seem that petitioners are merely standing in for their clients as
defendants in the complaint. Petitioners are being prosecuted solely on the basis
of activities and services performed in the course of their duties as lawyers. Quite
obviously, petitioners' inclusion as co-defendants in the complaint is merely being
used as leverage to compel them to name their clients and consequently to
enable the PCGG to nail these clients. Such being the case, respondent PCGG
has no valid cause of action as against petitioners and should exclude them from
the Third Amended Complaint.
II
The nature of lawyer-client relationship is premised on the Roman Law concepts
of locatio conductio operarum (contract of lease of services) where one person
lets his services and another hires them without reference to the object of which
the services are to be performed, wherein lawyers' services may be
compensated by honorarium or for hire, 17 and mandato(contract of agency)
wherein a friend on whom reliance could be placed makes a contract in his
name, but gives up all that he gained by the contract to the person who
requested him. 18 But the lawyer-client relationship is more than that of the
principal-agent and lessor-lessee.
In modern day perception of the lawyer-client relationship, an attorney is more
than a mere agent or servant, because he possesses special powers of trust and
confidence reposed on him by his client. 19 A lawyer is also as independent as
the judge of the court, thus his powers are entirely different from and superior to
those of an ordinary agent. 20 Moreover, an attorney also occupies what may be
considered as a "quasi-judicial office" since he is in fact an officer of the
Court 21 and exercises his judgment in the choice of courses of action to be
taken favorable to his client.
Thus, in the creation of lawyer-client relationship, there are rules, ethical conduct
and duties that breathe life into it, among those, the fiduciary duty to his client
which is of a very delicate, exacting and confidential character, requiring a very
high degree of fidelity and good faith, 22 that is required by reason of necessity
and public interest 23 based on the hypothesis that abstinence from seeking legal
advice in a good cause is an evil which is fatal to the administration of justice. 24
It is also the strict sense of fidelity of a lawyer to his client that distinguishes him
from any other professional in society. This conception is entrenched and
embodies centuries of established and stable tradition. 25 In Stockton
v. Ford, 26 the U.S. Supreme Court held:
There are few of the business relations of life involving a higher trust and
confidence than that of attorney and client, or generally speaking, one
more honorably and faithfully discharged; few more anxiously guarded
by the law, or governed by the sterner principles of morality and justice;
and it is the duty of the court to administer them in a corresponding spirit,
and to be watchful and industrious, to see that confidence thus reposed
shall not be used to the detriment or prejudice of the rights of the party
bestowing it. 27

In our jurisdiction, this privilege takes off from the old Code of Civil
Procedure enacted by the Philippine Commission on August 7, 1901. Section
383 of the Code specifically "forbids counsel, without authority of his client to
reveal any communication made by the client to him or his advice given thereon
in the course of professional employment." 28 Passed on into various provisions
of the Rules of Court, the attorney-client privilege, as currently worded provides:
Sec. 24. Disqualification by reason of privileged communication. — The
following persons cannot testify as to matters learned in confidence in
the following cases:
xxx xxx xxx
An attorney cannot, without the consent of his client, be examined as to
any communication made by the client to him, or his advice given
thereon in the course of, or with a view to, professional employment, can
an attorney's secretary, stenographer, or clerk be examined, without the
consent of the client and his employer, concerning any fact the
knowledge of which has been acquired in such capacity. 29

Further, Rule 138 of the Rules of Court states:

Sec. 20. It is the duty of an attorney:
(e) to maintain inviolate the confidence, and at every peril to himself, to
preserve the secrets of his client, and to accept no compensation in
connection with his client's business except from him or with his
knowledge and approval.

This duty is explicitly mandated in Canon 17 of the Code of Professional

Responsibility which provides that:
Canon 17. A lawyer owes fidelity to the cause of his client and he shall
be mindful of the trust and confidence reposed in him.
Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity
to client:
The lawyer owes "entire devotion to the interest of the client, warm zeal
in the maintenance and defense of his rights and the exertion of his
utmost learning and ability," to the end that nothing be taken or be
withheld from him, save by the rules of law, legally applied. No fear of
judicial disfavor or public popularity should restrain him from the full
discharge of his duty. In the judicial forum the client is entitled to the
benefit of any and every remedy and defense that is authorized by the
law of the land, and he may expect his lawyer to assert every such
remedy or defense. But it is steadfastly to be borne in mind that the great
trust of the lawyer is to be performed within and not without the bounds
of the law. The office of attorney does not permit, much less does it
demand of him for any client, violation of law or any manner of fraud or
chicanery. He must obey his own conscience and not that of his client.

Considerations favoring confidentiality in lawyer-client relationships are many

and serve several constitutional and policy concerns. In the constitutional sphere,
the privilege gives flesh to one of the most sacrosanct rights available to the
accused, the right to counsel. If a client were made to choose between legal
representation without effective communication and disclosure and legal
representation with all his secrets revealed then he might be compelled, in some
instances, to either opt to stay away from the judicial system or to lose the right
to counsel. If the price of disclosure is too high, or if it amounts to self
incrimination, then the flow of information would be curtailed thereby rendering
the right practically nugatory. The threat this represents against another
sacrosanct individual right, the right to be presumed innocent is at once self-
evident.
Encouraging full disclosure to a lawyer by one seeking legal services opens the
door to a whole spectrum of legal options which would otherwise be
circumscribed by limited information engendered by a fear of disclosure. An
effective lawyer-client relationship is largely dependent upon the degree of
confidence which exists between lawyer and client which in turn requires a
situation which encourages a dynamic and fruitful exchange and flow of
information. It necessarily follows that in order to attain effective representation,
the lawyer must invoke the privilege not as a matter of option but as a matter of
duty and professional responsibility.
The question now arises whether or not this duty may be asserted in refusing to
disclose the name of petitioners' client(s) in the case at bar. Under the facts and
circumstances obtaining in the instant case, the answer must be in the
affirmative.
As a matter of public policy, a client's identity should not be shrouded in
mystery. 30 Under this premise, the general rule in our jurisdiction as well as in
the United States is that a lawyer may not invoke the privilege and refuse to
divulge the name or identity of his client. 31

The reasons advanced for the general rule are well established.
First, the court has a right to know that the client whose privileged information is
sought to be protected is flesh and blood.
Second, the privilege begins to exist only after the attorney-client relationship has
been established. The attorney-client privilege does not attach until there is a
client
Third, the privilege generally pertains to the subject matter of the relationship.
Finally, due process considerations require that the opposing party should, as a
general rule, know his adversary. "A party suing or sued is entitled to know who
his opponent is." 32 He cannot be obliged to grope in the dark against unknown
forces. 33
Notwithstanding these considerations, the general rule is however qualified by
some important exceptions.
1) Client identity is privileged where a strong probability exists that revealing the
client's name would implicate that client in the very activity for which he sought
the lawyer's advice.
In Ex-Parte Enzor, 34 a state supreme court reversed a lower court order
requiring a lawyer to divulge the name of her client on the ground that the subject
matter of the relationship was so closely related to the issue of the client's identity
that the privilege actually attached to both. In Enzor, the unidentified client, an
election official, informed his attorney in confidence that he had been offered a
bribe to violate election laws or that he had accepted a bribe to that end. In her
testimony, the attorney revealed that she had advised her client to count the
votes correctly, but averred that she could not remember whether her client had
been, in fact, bribed. The lawyer was cited for contempt for her refusal to reveal
his client's identity before a grand jury. Reversing the lower court's contempt
orders, the state supreme court held that under the circumstances of the case,
and under the exceptions described above, even the name of the client was
privileged.
U.S. v. Hodge and Zweig, 35 involved the same exception, i.e. that client identity
is privileged in those instances where a strong probability exists that the
disclosure of the client's identity would implicate the client in the very criminal
activity for which the lawyer's legal advice was obtained.
The Hodge case involved federal grand jury proceedings inquiring into the
activities of the "Sandino Gang," a gang involved in the illegal importation of
drugs in the United States. The respondents, law partners, represented key
witnesses and suspects including the leader of the gang, Joe Sandino.
In connection with a tax investigation in November of 1973, the IRS issued
summons to Hodge and Zweig, requiring them to produce documents and
information regarding payment received by Sandino on behalf of any other
person, and vice versa. The lawyers refused to divulge the names. The Ninth
Circuit of the United States Court of Appeals, upholding non-disclosure under the
facts and circumstances of the case, held:
A client's identity and the nature of that client's fee arrangements may be
privileged where the person invoking the privilege can show that a strong
probability exists that disclosure of such information would implicate that
client in the very criminal activity for which legal advice was sought Baird
v. Koerner, 279 F.2d at 680. While in Baird Owe enunciated this rule as
a matter of California law, the rule also reflects federal law. Appellants
contend that the Baird exception applies to this case.
The Baird exception is entirely consonant with the principal policy behind
the attorney-client privilege. "In order to promote freedom of consultation
of legal advisors by clients, the apprehension of compelled disclosure
from the legal advisors must be removed; hence, the law must prohibit
such disclosure except on the client's consent." 8 J. Wigmore, supra
Sec. 2291, at 545. In furtherance of this policy, the client's identity and
the nature of his fee arrangements are, in exceptional cases, protected
as confidential communications. 36

2) Where disclosure would open the client to civil liability, his identity is
privileged. For instance, the peculiar facts and circumstances of Neugass
v. Terminal Cab Corporation, 37 prompted the New York Supreme Court to allow
a lawyer's claim to the effect that he could not reveal the name of his client
because this would expose the latter to civil litigation. llcd

In the said case, Neugass, the plaintiff, suffered injury when the taxicab she was
riding, owned by respondent corporation, collided with a second taxicab, whose
owner was unknown. Plaintiff brought action both against defendant corporation
and the owner of the second cab, identified in the information only as John Doe.
It turned out that when the attorney of defendant corporation appeared on
preliminary examination, the fact was somehow revealed that the lawyer came to
know the name of the owner of the second cab when a man, a client of the
insurance company, prior to the institution of legal action, came to him and
reported that he was involved in a car accident. It was apparent under the
circumstances that the man was the owner of the second cab. The state
supreme court held that the reports were clearly made to the lawyer in his
professional capacity. The court said:
That his employment came about through the fact that the insurance
company had hired him to defend its policyholders seems immaterial.
The attorney in such cases is clearly the attorney for the policyholder
when the policyholder goes to him to report an occurrence contemplating
that it would be used in an action or claim against him.38
xxx xxx xxx.
All communications made by a client to his counsel, for the purpose of
professional advice or assistance, are privileged, whether they relate to
a suit pending or contemplated, or to any other matter proper for such
advice or aid; . . . And whenever the communication made, relates to a
matter so connected with the employment as attorney or counsel as to
afford presumption that it was the ground of the address by the client,
then it is privileged from disclosure. . . .
It appears . . . that the name and address of the owner of the second cab
came to the attorney in this case as a confidential communication. His
client is not seeking to use the courts, and his address cannot be
disclosed on that theory, nor is the present action pending against him
as service of the summons on him has not been effected. The objections
on which the court reserved decision are sustained. 39

In the case of Matter of Shawmut Mining Company, 40 the lawyer involved was
required by a lower court to disclose whether he represented certain clients in a
certain transaction. The purpose of the court's request was to determine whether
the unnamed persons as interested parties were connected with the purchase of
properties involved in the action. The lawyer refused and brought the question to
the State Supreme Court. Upholding the lawyer's refusal to divulge the names of
his clients the court held:
If it can compel the witness to state, as directed by the order appealed
from, that he represented certain persons in the purchase or sale of
these mines, it has made progress in establishing by such evidence their
version of the litigation. As already suggested, such testimony by the
witness would compel him to disclose not only that he was attorney for
certain people, but that, as the result of communications made to him in
the course of such employment as such attorney, he knew that they
were interested in certain transactions. We feel sure that under such
conditions no case has ever gone to the length of compelling an
attorney, at the instance of a hostile litigant, to disclose not only his
 retainer, but the nature of the transactions to which it related, when such
information could be made the basis of a suit against his client. 41

3) Where the government's lawyers have no case against an attorney's client

unless, by revealing the client's name, the said name would furnish the only link
that would form the chain of testimony necessary to convict an individual of a
crime, the client's name is privileged.
In Baird vs. Korner, 42 a lawyer was consulted by the accountants and the lawyer
of certain undisclosed taxpayers regarding steps to be taken to place the
undisclosed taxpayers in a favorable position in case criminal charges were
brought against them by the U.S. Internal Revenue Service (IRS).
It appeared that the taxpayer's returns of previous years were probably incorrect
and the taxes understated. The clients themselves were unsure about whether or
not they violated tax laws and sought advice from Baird on the hypothetical
possibility that they had. No investigation was then being undertaken by the IRS
of the taxpayers. Subsequently, the attorney of the taxpayers delivered to Baird
the sum of $12,706.85, which had been previously assessed as the tax due, and
another amount of money representing his fee for the advice given. Baird then
sent a check for $12,706.85 to the IRS in Baltimore, Maryland, with a note
explaining the payment, but without naming his clients. The IRS demanded that
Baird identify the lawyers, accountants, and other clients involved. Baird refused
on the ground that he did not know their names, and declined to name the
attorney and accountants because this constituted privileged communication. A
petition was filed for the enforcement of the IRS summons. For Baird's repeated
refusal to name his clients he was found guilty of civil contempt. The Ninth Circuit
Court of Appeals held that, a lawyer could not be forced to reveal the names of
clients who employed him to pay sums of money to the government voluntarily in
settlement of undetermined income taxes, unsued on, and with no government
audit or investigation into that client's income tax liability pending. The court
emphasized the exception that a client's name is privileged when so much has
been revealed concerning the legal services rendered that the disclosure of the
client's identity exposes him to possible investigation and sanction by
government agencies. The Court held:

The facts of the instant case bring it squarely within that exception to the
general rule. Here money was received by the government, paid by
persons who thereby admitted they had not paid a sufficient amount in
income taxes some one or more years in the past. The names of the
clients are useful to the government for but one purpose — to ascertain
which taxpayers think they were delinquent, so that it may check the
records for that one year or several years. The voluntary nature of the
 payment indicates a belief by the taxpayers that more taxes or interest or
penalties are due than the sum previously paid, if any. It indicates a
feeling of guilt for nonpayment of taxes, though whether it is criminal guilt
is undisclosed. But it may well be the link that could form the chain of
testimony necessary to convict an individual of a federal crime. Certainly
the payment and the feeling of guilt are the reasons the attorney here
involved was employed — to advise his clients what, under the
circumstances, should be done. 43

Apart from these principal exceptions, there exist other situations which could
qualify as exceptions to the general rule.
For example, the content of any client communication to a lawyer lies within the
privilege if it is relevant to the subject matter of the legal problem on which the
client seeks legal assistance. 44 Moreover, where the nature of the attorney-
client relationship has been previously disclosed and it is the identity which is
intended to be confidential, the identity of the client has been held to be
privileged, since such revelation would otherwise result in disclosure of the entire
transaction. 45
Summarizing these exceptions, information relating to the identity of a client may
fall within the ambit of the privilege when the client's name itself has an
independent significance, such that disclosure would then reveal client
confidences. 46
The circumstances involving the engagement of lawyers in the case at bench,
therefore, clearly reveal that the instant case falls under at least two exceptions
to the general rule. First, disclosure of the alleged client's name would lead to
establish said client's connection with the very fact in issue of the case, which is
privileged information, because the privilege, as stated earlier, protects the
subject matter or the substance (without which there would be no attorney-client
relationship).
The link between the alleged criminal offense and the legal advice or legal
service sought was duly established in the case at bar, by no less than the
PCGG itself. The key lies in the three specific conditions laid down by the PCGG
which constitutes petitioners' ticket to non-prosecution should they accede
thereto:
(a) the disclosure of the identity of its clients;
(b) submission of documents substantiating the lawyer-client
relationship; and
(c) the submission of the deeds of assignment petitioners executed in
favor of their clients covering their respective shareholdings.
From these conditions, particularly the third, we can readily deduce that the
clients indeed consulted the petitioners, in their capacity as lawyers, regarding
the financial and corporate structure, framework and set-up of the corporations in
question. In turn, petitioners gave their professional advice in the form of, among
others, the aforementioned deeds of assignment covering their client's
shareholdings.
There is no question that the preparation of the aforestated documents was part
and parcel of petitioners' legal service to their clients. More important, it
constituted an integral part of their duties as lawyers. Petitioners, therefore, have
a legitimate fear that identifying their clients would implicate them in the very
activity for which legal advice had been sought, i.e., the alleged accumulation of
ill-gotten wealth in the aforementioned corporations.
Furthermore, under the third main exception, revelation of the client's name
would obviously provide the necessary link for the prosecution to build its case,
where none otherwise exists. It is the link, in the words of Baird, "that would
inevitably form the chain of testimony necessary to convict the (client) of a . . .
crime." 47
An important distinction must be made between a case where a client takes on
the services of an attorney, for illicit purposes, seeking advice about how to go
around the law for the purpose of committing illegal activities and a case where a
client thinks he might have previously committed something illegal and consults
his attorney about it. The first case clearly does not fall within the privilege
because the same cannot be invoked for purposes illegal. The second case falls
within the exception because whether or not the act for which the client sought
advice turns out to be illegal, his name cannot be used or disclosed if the
disclosure leads to evidence, not yet in the hands of the prosecution, which might
lead to possible action against him.
These cases may be readily distinguished, because the privilege cannot be
invoked or used as a shield for an illegal act, as in the first example; while the
prosecution may not have a case against the client in the second example and
cannot use the attorney client relationship to build up a case against the latter.
The reason for the first rule is that it is not within the professional character of a
lawyer to give advice on the commission of a crime. 48 The reason for the
second has been stated in the cases above discussed and are founded on the
same policy grounds for which the attorney-client privilege, in general, exists.
In Matter of Shawmut Mining Co., supra, the appellate court therein stated that
"under such conditions no case has ever yet gone to the length of compelling an
attorney, at the instance of a hostile litigant, to disclose not only his retainer, but
the nature of the transactions to which it related, when such information could be
made the basis of a suit against his client." 49"Communications made to an
attorney in the course of any personal employment, relating to the subject
thereof, and which may be supposed to be drawn out in consequence of the
relation in which the parties stand to each other, are under the seal of confidence
and entitled to protection as privileged communications." 50 Where the
communicated information, which clearly falls within the privilege, would suggest
possible criminal activity but there would be not much in the information known to
the prosecution which would sustain a charge except that revealing the name of
the client would open up other privileged information which would substantiate
the prosecution's suspicions, then the client's identity is so inextricably linked to
the subject matter itself that it falls within the protection. The Baird exception,
applicable to the instant case, is consonant with the principal policy behind the
privilege, i.e., that for the purpose of promoting freedom of consultation of legal
advisors by clients, apprehension of compelled disclosure from attorneys must
be eliminated. This exception has likewise been sustained in In re Grand Jury
Proceedings 51 and Tillotson v. Boughner. 52 What these cases unanimously
seek to avoid is the exploitation of the general rule in what may amount to a
fishing expedition by the prosecution.
There are, after all, alternative sources of information available to the prosecutor
which do not depend on utilizing a defendant's counsel as a convenient and
readily available source of information in the building of a case against the latter.
Compelling disclosure of the client's name in circumstances such as the one
which exists in the case at bench amounts to sanctioning fishing expeditions by
lazy prosecutors and litigants which we cannot and will not countenance. When
the nature of the transaction would be revealed by disclosure of an attorney's
retainer, such retainer is obviously protected by the privilege. 53 It follows that
petitioner attorneys in the instant case owe their client(s) a duty and an obligation
not to disclose the latter's identity which in turn requires them to invoke the
privilege.
In fine, the crux of petitioner's objections ultimately hinges on their expectation
that if the prosecution has a case against their clients, the latter's case should be
built upon evidence painstakingly gathered by them from their own sources and
not from compelled testimony requiring them to reveal the name of their clients,
information which unavoidably reveals much about the nature of the transaction
which may or may not be illegal. The logical nexus between name and nature of
transaction is so intimate in this case that it would be difficult to simply dissociate
one from the other. In this sense, the name is as much "communication" as
information revealed directly about the transaction in question itself, a
communication which is clearly and distinctly privileged. A lawyer cannot reveal
such communication without exposing himself to charges of violating a principle
which forms the bulwark of the entire attorney-client relationship.
The uberrimei fidei relationship between a lawyer and his client therefore
imposes a strict liability for negligence on the former. The ethical duties owing to
the client, including confidentiality, loyalty, competence, diligence as well as the
responsibility to keep clients informed and protect their rights to make decisions
have been zealously sustained. In Milbank, Tweed, Hadley and McCloy
v. Boon, 54 the US Second District Court rejected the plea of the petitioner law
firm that it breached its fiduciary duty to its client by helping the latter's former
agent in closing a deal for the agent's benefit only after its client hesitated in
proceeding with the transaction, thus causing no harm to its client. The Court
instead ruled that breaches of a fiduciary relationship in any context comprise a
special breed of cases that often loosen normally stringent requirements of
causation and damages, and found in favor of the client.

To the same effect is the ruling in Searcy, Denney, Scarola, Barnhart, and
Shipley P.A. v. Scheller 55 requiring strict obligation of lawyers vis-a-vis clients. In
this case, a contingent fee lawyer was fired shortly before the end of completion
of his work, and sought payment quantum meruit of work done. The court,
however, found that the lawyer was fired for cause after he sought to pressure
his client into signing a new fee agreement while settlement negotiations were at
a critical stage. While the client found a new lawyer during the interregnum,
events forced the client to settle for less than what was originally offered.
Reiterating the principle of fiduciary duty of lawyers to clients in Meinhard
v. Salmon 56 famously attributed to Justice Benjamin Cardozo that "Not honesty
alone, but the punctilio of an honor the most sensitive, is then the standard of
behavior," the US Court found that the lawyer involved was fired for cause, thus
deserved no attorney's fees at all.
The utmost zeal given by Courts to the protection of the lawyer-client
confidentiality privilege and lawyer's loyalty to his client is evident in the duration
of the protection, which exists not only during the relationship, but extends even
after the termination of the relationship. 57
Such are the unrelenting duties required of lawyers vis-a-vis their clients because
the law, which the lawyers are sworn to uphold, in the words of Oliver Wendell
Holmes, 58 ". . . is an exacting goddess, demanding of her votaries in intellectual
and moral discipline." The Court, no less, is not prepared to accept respondents'
position without denigrating the noble profession that is lawyering, so extolled by
Justice Holmes in this wise:
Every calling is great when greatly pursued. But what other gives such
scope to realize the spontaneous energy of one's soul? In what other
does one plunge so deep in the stream of life — so share its passions its
battles, its despair, its triumphs, both as witness and actor? . . . But that
 is not all. What a subject is this in which we are united — this abstraction
called the Law, wherein as in a magic mirror, we see reflected, not only
in our lives, but the lives of all men that have been. When I think on this
majestic theme by eyes dazzle. If we are to speak of the law as our
mistress, we who are here know that she is a mistress only to be won
with sustained and lonely passion — only to be won by straining all the
faculties by which man is likened to God.

We have no choice but to uphold petitioners' right not to reveal the identity of
their clients under pain of the breach of fiduciary duty owing to their clients,
because the facts of the instant case clearly fall within recognized exceptions to
the rule that the client's name is not privileged information.
If we were to sustain respondent PCGG that the lawyer-client confidential
privilege under the circumstances obtaining here does not cover the identity of
the client, then it would expose the lawyers themselves to possible litigation by
their clients in view of the strict fiduciary responsibility imposed on them in the
exercise of their duties. LLphil

The complaint in Civil Case No. 0033 alleged that the defendants therein,
including herein petitioners and Eduardo Cojuangco, Jr. conspired with each
other in setting up through the use of coconut levy funds the financial and
corporate framework and structures that led to the establishment of UCPB,
UNICOM and others and that through insidious means and machinations,
ACCRA, using its wholly-owned investment arm, ACCRA Investments
Corporation, became the holder of approximately fifteen million shares
representing roughly 3.3% of the total capital stock of UCPB as of 31 March
1987. The PCGG wanted to establish through the ACCRA lawyers that Mr.
Cojuangco is their client and it was Cojuangco who furnished all the monies to
the subscription payment; hence, petitioners acted as dummies, nominees and/or
agents by allowing themselves, among others, to be used as instrument in
accumulating ill-gotten wealth through government concessions, etc., which acts
constitute gross abuse of official position and authority, flagrant breach of public
trust, unjust enrichment, violation of the Constitution and laws of the Republic of
the Philippines.
By compelling petitioners, not only to reveal the identity of their clients, but
worse, to submit to the PCGG documents substantiating the client-lawyer
relationship, as well as deeds of assignment petitioners executed in favor of its
clients covering their respective shareholdings, the PCGG would exact from
petitioners a link, "that would inevitably form the chain of testimony necessary to
convict the (client) of a crime."
III
In response to petitioners' last assignment of error, respondents allege that the
private respondent was dropped as party defendant not only because of his
admission that he acted merely as a nominee but also because of his
undertaking to testify to such facts and circumstances "as the interest of truth
may require, which includes . . . the identity of the principal."59
First, as to the bare statement that private respondent merely acted as a lawyer
and nominee, a statement made in his out-of-court settlement with the PCGG, it
is sufficient to state that petitioners have likewise made the same claim not
merely out-of-court but also in their Answer to plaintiff's Expanded Amended
Complaint, signed by counsel, claiming that their acts were made in furtherance
of "legitimate lawyering." 60 Being "similarly situated" in this regard, public
respondents must show that there exist other conditions and circumstances
which would warrant their treating the private respondent differently from
petitioners in the case at bench in order to evade a violation of the equal
protection clause of the Constitution.
To this end, public respondents contend that the primary consideration behind
their decision to sustain the PCGG's dropping of private respondent as a
defendant was his promise to disclose the identities of the clients in question.
However, respondents failed to show — and absolutely nothing exists in the
records of the case at bar — that private respondent actually revealed the
identity of his client(s) to the PCGG. Since the undertaking happens to be the
leitmotif of the entire arrangement between Mr. Roco and the PCGG, an
undertaking which is so material as to have justified PCGG's special treatment
exempting the private respondent from prosecution, respondent Sandiganbayan
should have required proof of the undertaking more substantial than a "bare
assertion" that private respondent did indeed comply with the undertaking.
Instead, as manifested by the PCGG, only three documents were submitted for
the purpose, two of which were mere requests for re-investigation and one simply
disclosed certain clients which petitioners (ACCRA lawyers) were themselves
willing to reveal. These were clients to whom both petitioners and private
respondent rendered legal services while all of them were partners at ACCRA,
and were not the clients which the PCGG wanted disclosed for the alleged
questioned transactions. 61
To justify the dropping of the private respondent from the case or the filing of the
suit in the respondent court without him, therefore, the PCGG should
conclusively show that Mr. Roco was treated as a species apart from the rest of
the ACCRA lawyers on the basis of a classification which made substantial
distinctions based on real differences. No such substantial distinctions exist from
the records of the case at bench, in violation of the equal protection clause.
The equal protection clause is a guarantee which provides a wall of protection
against uneven application of statutes and regulations. In the broader sense, the
guarantee operates against uneven application of legal norms so that all persons
under similar circumstances would be accorded the same treatment. 62 Those
who fall within a particular class ought to be treated alike not only as to privileges
granted but also as to the liabilities imposed.
. . . What is required under this constitutional guarantee is the uniform operation of legal
norms so that all persons under similar circumstances would be accorded the same
treatment both in the privileges conferred and the liabilities imposed. As was noted in a
recent decision: 'Favoritism and undue preference cannot be allowed. For the principle
is that equal protection and security shall be given to every person under
circumstances, which if not identical are analogous. If law be looked upon in terms of
burden or charges, those that fall within a class should be treated in the same fashion,
whatever restrictions cast on some in the group equally binding the rest. 63

We find that the condition precedent required by the respondent PCGG of the
petitioners for their exclusion as parties-defendants in PCGG Case No. 33
violates the lawyer-client confidentiality privilege. The condition also constitutes a
transgression by respondents Sandiganbayan and PCGG of the equal protection
clause of the Constitution. 64 it is grossly unfair to exempt one similarly situated
litigant from prosecution without allowing the same exemption to the others.
Moreover, the PCGG's demand not only touches upon the question of the identity
of their clients but also on documents related to the suspected transactions, not
only in violation of the attorney-client privilege but also of the constitutional right
against self-incrimination. Whichever way one looks at it, this is a fishing
expedition, a free ride at the expense of such rights.
An argument is advanced that the invocation by petitioners of the privilege of
attorney-client confidentiality at this stage of the proceedings is premature and
that they should wait until they are called to testify and examine as witnesses as
to matters learned in confidence before they can raise their objections. But
petitioners are not mere witnesses. They are co-principals in the case for
recovery of alleged ill-gotten wealth. They have made their position clear from
the very beginning that they are not willing to testify and they cannot be
compelled to testify in view of their constitutional right against self-incrimination
and of their fundamental legal right to maintain inviolate the privilege of attorney-
client confidentiality.

It is clear then that the case against petitioners should never be allowed to take
its full course in the Sandiganbayan. Petitioners should not be made to suffer the
effects of further litigation when it is obvious that their inclusion in the complaint
arose from a privileged attorney-client relationship and as a means of coercing
them to disclose the identities of their clients. To allow the case to continue with
respect to them when this Court could nip the problem in the bud at this early
opportunity would be to sanction an unjust situation which we should not here
countenance. The case hangs as a real and palpable threat, a proverbial Sword
of Damocles over petitioners' heads. It should not be allowed to continue a day
longer.
While we are aware of respondent PCGG's legal mandate to recover ill-gotten
wealth, we will not sanction acts which violate the equal protection guarantee and
the right against self-incrimination and subvert the lawyer-client confidentiality
privilege. LibLex

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent

Sandiganbayan (First Division) promulgated on March 18, 1992 and May 21,
1992 are hereby ANNULLED and SET ASIDE. Respondent Sandiganbayan is
further ordered to execute petitioners Teodoro D. Regala, Edgardo J. Angara,
Avelino V. Cruz, Jose C. Conception, Victor P. Lazatin, Eduardo U. Escueta and
Paraja G. Hayudini as parties-defendants in SB Civil Case No. 0033 entitled
"Republic of the Philippines v.Eduardo Cojuangco, Jr., et al."
SO ORDERED.
(Regala v. Sandiganbayan, G.R. No. 105938, 108113, [September 20, 1996],
|||

330 PHIL 678-755)

SECOND DIVISION

[G.R. No. 21237. March 22, 1924.]

JAMES D. BARTON, plaintiff-appellee, vs. LEYTE ASPHALT &

MINERAL OIL CO., defendant-appellant.

Block, Johnston & Greenbaum and Ross, Lawrence & Selph for
appellant.
Frank B. Ingersoll for appellee.

SYLLABUS
 1. PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT;
SALES TO SUBAGENT. — An agent who is clothed with authority to sell a
given commodity cannot bind the principle by selling to himself, either directly
or indirectly. It results that the principal is not obligated to fill orders taken by
the agent from his own subagent, unless the principal ratifies such sale with
full knowledge of the facts.
2. EVIDENCE; PRIVILEGE OF ATTORNEY AND CLIENT; LOSS OF
PRIVILEGE. — The privilege which protects communications between
attorney and client does not extend to a copy of a letter written by the client to
his attorney which comes to the hands of the adverse party. Where the
authenticity of such a document is admitted, the court will take no notice of the
manner in which it was obtained.

DECISION

STREET, J : p

This action was instituted in the Court of First Instance of the City of
Manila by James D. Barton, to recover of the Leyte Asphalt & Mineral Oil Co.,
Ltd., as damages for breach of contract, the sum of $318,563.30, United
States currency, and further to secure a judicial pronouncement to the effect
that the plaintiff is entitled to an extension of the terms of the sales agencies
specified in the contract Exhibit A. The defendant answered with a general
denial, and the cause was heard upon the proof, both documentary and oral,
after which the trial judge entered a judgment absolving the defendant
corporation from four of the six causes of action set forth in the complain and
giving judgment for the plaintiff to recover of said defendant, upon the first and
fourth causes of action, the sum of $202,500, United States currency,
equivalent to P405,000, Philippine currency, with legal interest from June 2,
1921, and with costs. From this judgment the defendant company appealed.

The plaintiff is a citizen of the United States, resident in the City of

Manila, while the defendant is a corporation organized under the laws of the
Philippine Islands with its principal office in the City of Cebu, Province of
Cebu, Philippine Islands. Said company appears to be the owner of a
valuable deposit of bituminous limestone and other asphalt products, located
on the Island of Leyte and known as the Lucio mine. On April 21,1920, one
William Anderson, as president and general manager of the defendant
company, addressed a letter Exhibit B, to the plaintiff Barton, authorizing the
latter to sell the products of the Lucio mine in the Commonwealth of Australia
and New Zealand upon a scale of prices indicated in said letter.
 In the third cause of action stated in the complaint the plaintiff alleges
that during the life of the agency indicated in Exhibit B, he rendered services
to the defendant company in the way of advertising and demonstrating the
products of the defendant and expended large sums of money in visiting
various parts of the world for the purpose of carrying on said advertising and
demonstrations, in shipping to various parts of the world samples of the
products of the defendant, and in otherwise carrying on advertising work. For
these services and expenditures the plaintiff sought, in said third cause of
action, to recover the sum of $16,563.80, United States currency. The court,
however, absolved the defendant from all liability on this cause of action and
the plaintiff did not appeal, with the result that we are not now concerned with
this phase of the case. Besides, the authority contained in said Exhibit B was
admitted superseded by the authority expressed in a later letter, Exhibit A,
dated October 1, 1920. This document bears the approval of the board of
directors of the defendant company and was formally accepted by the plaintiff.
As it supplies the principle basis of the action, it will be quoted in its entirety.
"(Exhibit A)
"Cebu, Cebu, P. I.,
"October 1, 1920.
"JAMES D. BARTON, Esq.,
"Cebu Hotel City.
"DEAR SIR: — You are hereby given the sole and exclusive sales
agency for our bituminous limestone and other asphalt, Ltd., until May
first, 1922, in the following territory:
Australia Saigon Java
New Zealand India China
Tasmania Sumatra Hongkong
"Siam and the Straits Settlements, also in the United States of
America until May 1, 1921.
"As regards bituminous limestone mined from the Lucio property .
No orders for less than one thousand (1,000) tons will be accepted
except under special agreement with us. All orders for said products are
to be billed to you as follows:
Per ton
In 1,000 ton lots P15
In 2,000 ton lots 14
In 5,000 ton lots 12
In 10,000 ton lots 10
with the understanding, however, that, should the sales in the above territory
equal or exceed ten thousand (10,000) tons in the year ending October 1,
1921, then in that event the price of all shipments made during the above
period shall be ten pesos (P10) per ton, and any sum charged to any of your
customers or buyers in the aforesaid territory in excess of ten pesos (P10) per
ton, shall be rebated to you. Said rebate to be due and payable when the
gross sales have equaled or exceeded ten thousand (10,000) tons in the
twelve months period as hereinbefore described. Rebates on lesser sales to
apply as per above price list.
"You are to have full authority to sell said product of the
sum Lucio mine for any sum you see fit in excess of the prices quoted
above and such excess in price shall be your extra and additional profit
and commission. Should we make any collections in excess of the prices
quoted, we agree to remit same to you within ten (10) days of the date of
such collections or payments.
"All contracts taken with municipal governments will be subject to
inspection before shipping, by any authorized representative of such
governments at whatever price may be contracted for by you and we
agree to accept such contracts subject to draft attached to bill of lading
in full payment of such shipment.
"It is understood that the purchasers of the products of
the Lucio mine are to pay freight from the mine carriers to destination
and are to be responsible for all freight, insurance and other charges,
providing said shipment has been accepted by their inspectors.
"All contracts taken with responsible firms are to be under the
same conditions as with municipal governments.
"All contracts will be subject to delays caused by the acts of God,
over which the parties hereto have no control.
"It is understood and agreed that we agree to load all ships,
steamers, boats or other carriers promptly and without delay and load
not less than 1,000 tons each twenty-four hours after March 1, 1921,
unless we so notify you specifically prior to that date what we are
prepared to load at that rate, and it is also stipulated that we shall not be
required to ship orders of 5,000 tons except on 30 days notice and
10,000 tons except on 60 days notice.
"If your sales in the United States reach five thousand tons on or
before May 1, 1921, you are to have sole rights for this territory also for
one year additional and should your sales in the second year reach or
exceed ten thousand tons you are to have the option to renew the
agreement for this territory on the same terms for an additional two
years.
"Should your sales equal or exceed ten thousand (10,000) tons in
the year ending October 1, 1921, or twenty thousand (20,000) tons by
May 1, 1922, then this contract is to be continued automatically for an
additional three years ending April 30, 1925, under the same terms and
conditions as above stipulated.
 "The products of the other mines can be sold by you in the
aforesaid territories under the same terms and conditions as the
products of the Lucio mine; scale of prices to be mutually agreed upon
between us.
"LEYTE ASPHALT & MINERAL OIL CO.,LTD.
"By (Sgd.) WM. ANDERSON
"President
(Sgd. "W.C.A. PALMER
"Secretary
"Approved by Board of Directors,
"October 1, 1920.
(Sgd.) "WM. ANDERSON
"President
"Accepted.
(Sgd.) "JAMES D. BARTON
"Witness D. G. McVean
Upon careful perusal of the fourth paragraph from the end of this letter it
is apparent that some negative word has been inadvertently omitted before
"prepared" so that the full expression should be "unless we should notify you
specifically prior to that we are unprepared to load at that rate," or "not
prepared to load at that rate."
Very soon after the aforesaid contract became effective, the plaintiff
requested the defendant company to give him a similar selling agency for
Japan. To this request the defendant company, through its president, Wm.
Anderson, replied, under date of November 27,1920, as follows:
"In your request for Japanese agency, will say, that we are willing
to give you, the same commission on all sales made by you in Japan, on
the same basis as your Australian sales, but we do not feel like giving
you a regular agency for Japan until you can make some large sized
sales there, because some other people have given us assurances that
they can handle our Japanese sales, therefore we have decided to leave
this agency open for a time."
Meanwhile the plaintiff had embarked for San Francisco and upon
arriving at that port he entered into an agreement with Ludvigsen & McCurdy,
of that city, whereby said firm was constituted a subagent and given the sole
selling rights for the bituminous limestone products of the defendant company
for the period of one year from November 11,1920, on terms stated in the
letter Exhibit K. The territory assigned to Ludvigsen & McCurdy included San
Francisco and all territory in California north of said city. Upon an earlier
voyage during the same year to Australia, the plaintiff had already made an
agreement with Frank B. Smith, of Sydney, whereby the latter was to act as
the plaintiff's sales agent for bituminous limestone mined at the defendant's
quarry in Leyte, until February 12, 1921. Later the same agreement was
extended for the period of one year from January 1, 1921. (Exhibit Q.)
On February 5, 1921, Ludvigsen & McCurdy, of San Francisco,
addressed a letter to the plaintiff, then in San Francisco, advising him that he
might enter an order for six thousand tons of bituminous limestone to be
loaded at Leyte not later than May 5, 1921, upon terms stated in the letter
Exhibit G. Upon this letter the plaintiff immediately indorsed his acceptance.
The plaintiff them returned to Manila; and on March 2, 1929, Anderson
wrote to him from Cebu, to the effect that the company was behind with
construction and was not then able to handle big contracts. (Exhibit FF.) On
March 12, Anderson was in Manila and the two had an interview in the Manila
Hotel, in the course of which the plaintiff informed Anderson of the San
Francisco order. Anderson thereupon said that, owing to lack of capita,
adequate facilities had not been provide by the company for filling large
orders and suggested that the plaintiff had better hold up in the matter of
taking orders. The plaintiff expressed surprise at this and told Anderson that
he had not only the San Francisco order (which he says he exhibited to
Anderson) but other orders for large quantities of bituminuos limestone to be
shipped to Australia and Shanghai. In another interview on the same day
Anderson definitely informed the plaintiff that the contracts which he claimed
to have procured would not be filled.
Three days later the plaintiff addressed a letter (Exhibit Y) to the
defendant company in Cebu, in which he notified the company to prepared to
ship five thousand tons of bituminuos limestone to John Chapman Co., San
Francisco, loading to commence on May 1, and to proceed at the rate of one
thousand tons per day of each twenty-four hours, weather permitting.
On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff
an order for five thousand tons of bituminuos limestone; and in his letter of
March 15 to the defendant, the plaintiff advised the defendant company to be
prepared to ship another five thousand tons of bituminuos limestone, on or
about may 6, 1921, in addition to the intended consignment for San
Francisco. the name Henry E. White was indicated as the name of the person
through whom this contract had been made and it was stated that the
consignee would be named later, no destination for the shipment being given.
The plaintiff explains that the name white, as used in this letter, was based on
an inference which he had erroneously drawn from the cable sent by Frank B.
Smith, and his intention was to have the second shipment consigned to
Australia in response to Smith's order.
 It will be noted in connection with this letter of the plaintiff, of March 15,
1921, that no mention was made of the names of the person, or firm, for
whom the shipments were really intended. The obvious explanation that
occurs in connection with this is that the plaintiff did not then care to reveal the
fact that the two orders had originated from his own subagents in San
Francisco and Sydney.
To the plaintiff's letter of March 15, the assistant manager of the
defendant company replied on March 25, 1921, acknowledging the receipt of
an order for five thousand tons of bituminous limestone to be consigned to
John Chapman Co., of San Francisco, and the further amount of five
thousand tons of the same material to be consigned to Henry E. White; and it
was stated that "no orders can be entertained unless cash has been actually
deposited with either the International Banking Corporation or the Chartered
bank of India, Australia and China, Cebu." (Exhibit Z.)
To this letter the plaintiff in turn replied from Manila, under date of
March 29,1921, questioning the right of the defendant to insist upon a cash
deposit in Cebu prior to the filling of the orders. In conclusion the plaintiff gave
orders for shipment to Australia of five thousand tons, or more, about May 22,
1921, and ten thousand tons, or more, about June 1, 1921. In conclusion the
plaintiff said "I have arranged for deposits to be made on these additional
shipments if you will signify your ability to fulfill these orders on the dates
mentioned." No name was mentioned as the purchaser, or purchasers, of
these intended Australian consignments.
Soon after writing the letter last above-mentioned, the plaintiff
embarked for China and Japan. With his activities in China we are not here
concerned, but we note that in Tokyo, Japan, he came in contact with one H.
Hiwatari, who appears to have been a suitable person for handling bituminous
limestone for construction work in Japan. In the letter Exhibit X, Hiwatari
speaks of himself as if he had been appointed exclusive sales agent for the
plaintiff in Japan, but no document expressly appointing him such is in
evidence.
While the plaintiff was Tokyo he procured the letter Exhibit W,
addressed to himself, to be signed by Hiwatari. This letter, edited by the
plaintiff himself, contains an order for one thousand tons of bituminous
limestone from the quarries of the defendant company, to be delivered as
soon after July 1, 1921, as possible. In this letter Hiwatari states, "on receipt
of the cable from you, notifying me of date you will be ready to ship, and also
tonnage rate, i will agree to transfer through the Bank of Taiwan, of Tokyo, to
the Asia Banking Corporation, of Manila, P. I., the entire payment of $16,000
gold, to be subject to your order on delivery of documents covering bill of
lading of shipment, the customs report of weight, and prepaid export tax
receipt. I will arrange in advance a confirmed or irrevocable letter of credit for
the above amount so that payment can be ordered by cable, in reply to your
cable advising shipping date."
In a later letter, Exhibit X, of May 16,1921, Hiwatari informs the plaintiff
that he had shown the contract, signed by himself, to the submanager of the
Taiwan Bank who had given it as his opinion that he would be able to issue,
upon request of Hiwatari, a credit note for the contracted amount, but he
added that the submanager was not personally able to place his approval on
the contract as that was a matter beyond his authority. Accordingly Hiwatari
advised that he was intending to make further arrangements when the
manager of the bank should return from Formosa.
In the letter of May 5, 1921, containing Hiwatari's order for one
thousand tons of bituminous limestone, it was stated that if the material
should prove satisfactory after being thoroughly tested by the Paving
Department of the City of Tokyo, he would contract with the plaintiff for a
minimum quantity of ten thousand additional tons, to be used within a year
from September 1, 1921, and that in this event the contract was to be
automatically extended for an additional four years. The contents of the letter
of May 5 seems to have been conveyed, though imperfectly, by the plaintiff to
his attorney, Mr. Frank B. Ingersoll, of Manila; and on May 17,1921, Ingersoll
addressed a note to the defendant company in Cebu in which he stated that
he had been requested by the plaintiff to notify the defendant that the plaintiff
had accepted an order from Hiwatari , of Tokyo, approved by the Bank of
Taiwan, for a minimum for a period of five years, the first shipment of one
thousand tons to be made as early after July 1 as possible. It will be noted
that this communication did not truly reflect the contents of Hiwatari's letter,
which called unconditionally for only one thousand tons, the taking of the
remainder being contingent upon future eventualities.
It will be noted that the only written communications between the
plaintiff and the defendant company in which the former gave notice of having
any orders for the sale of bituminous limestone are the four letters Exhibits Y,
AA, BB, and II. In the first of these letters, dated March 15,1921, the plaintiff
advises the defendant company to be prepared to ship five thousand tons of
bituminous limestone, to be consigned to John Chapman Co., of San
Francisco to be loaded by May 5, and a further consignment of five thousand
tons, through a contract with Henry E. White, consignees to be named later.
In the letter Exhibit BB dated May 17, 1921, the plaintiff of an order from
Hiwatari, of Tokyo, approved by the Bank of Taiwan, for a minimum of ten
thousand tons annually for a period of five years, first shipment of a thousand
tons to be as early after July 1 as possible. In the letter Exhibit II the plaintiff
gives notice of an "additional" (?) order from H.E. White, Sydney, for two lots
of bituminous limestone of five thousand tons each, one for shipment not later
than June 30, 1921, and the other by July 20,1921. In the same letter the
plaintiff reports for the first time an order for five thousand tons from F.B.
Smith, to be shipped to Brisbane, Australia, by June 30, and a similar amount
within thirty days later.
After the suit was brought, the plaintiff filed an amendment to his
complaint in which he set out, in tabulated form, the orders which he claims to
have received and upon which his letters of notification to the defendant
company were based. In this amended answer the name of Ludvigsen &
McCurdy appears for the first time; and the name of Frank B. Smith, of
Sydney, is used for the first time as the source of the intended consignments
of May 1, May 22, and June 1. We note, furthermore, that the letters, Exhibits
G, L, M, and W, containing the orders from Ludvigsen & McCurdy, Frank B,
Smith and H. Hiwatari were at no time submitted for inspection to any officer
of the defendant company, except possibly the Exhibit G, which the plaintiff
claims to have shown to Anderson in Manila on March 12, 1921.
The different items comprising the award which the trial judge gave in
favor of the plaintiff are all based upon the orders given by Ludvigsen &
McCurdy (Exhibit G), by Frank B. Smith (Exhibits L and M), and by Hiwatari in
Exhibit W; and the appeal does not involve an order which came from
Shanghai, China. We therefore now address ourselves to the question
whether or not the orders contained in Exhibits G, L, M, and W, in connection
with the subsequent notification thereof given by the plaintiff to the defendant,
are sufficient to support the judgment rendered by the trial court.
The transaction indicated in the orders from Ludvigsen & McCurdy and
from Frank B. Smith must, in our opinion, be at once excluded from
consideration as emanating from persons who had been constituted mere
agents of the plaintiff. The San Francisco order and the Australian orders are
the same in legal effect as if they were orders signed by the plaintiff and
drawn upon himself; and it cannot be pretended that those orders represent
sales to bona fidepurchasers found by the plaintiff. The original contract by
which the plaintiff was appointed sales agent for a limited period of time in
Australia and the United States contemplated that he should find reliable and
solvent buyers who should be prepared to obligate themselves to take the
quantity of bituminous limestone contracted for upon terms consistent with the
contract. These conditions were not met by the taking of these orders from the
plaintiff's own subagents, which was as if the plaintiff had bought for himself
the commodity which he was authorized to sell to others. Article 267 of the
Code of Commerce declares that no agent shall purchase for himself or for
another that which he has been ordered to sell. The law has placed its ban
upon a broker's purchasing from his principal unless the latter with full
knowledge of all the facts and circumstances acquiesces in such course; and
even then the broker's action must be characterized by the utmost good faith.
A sale made by a broker to himself without the consent of the principal is
ineffectual whether the broker has been guilty of fraudulent conduct or not. (4
R. C. L., 276-277.) We think, therefore, that the position of the defendant
company is indubitably sound in so far as it rests upon the contention that the
plaintiff has not in fact found any bona fide purchasers ready and able to take
the commodity contracted for upon terms compatible with the contract which
is the basis of the action.
It will be observed that the contract set out at the beginning of this
opinion contains provisions under which the period of the contract might be
extended. That privilege was probably considered a highly important incident
of the contract; and it will be seen that the sale of five thousand tons which the
plaintiff reported for shipment to San Francisco was precisely adjusted to the
purpose of the extension of the contract for the United States for the period of
an additional year; and the sales reported for shipment to Australia were
likewise adjusted to the requirements for the extension of the contract in that
territory. Given the circumstances surrounding these contracts as they were
reported to the defendant company and the concealment by the plaintiff of the
names of the authors of the orders, — who after all were merely the plaintiff's
subagents, — the officers of the defendant company might justly have
entertained the suspicion that the real and only person behind those contracts
was the plaintiff himself. Such at least turns out to have been the case.
Much energy has been expended in the briefs upon this appeal over the
contention whether the defendant was justified in laying down the condition
mentioned in the letter of March 26, 1921, to the effect that no order would be
entertained unless cash should be deposited with either the International
Banking Corporation or the Chartered Bank of India, Australia and China, in
Cebu. In this connection the plaintiff points to the stipulation of the contract
which provides that contracts with responsible parties are to be accepted
"subject to draft attached to bill of lading in full payment of such shipment."
What passed between the parties upon this point appears to have the
character of mere diplomatic parrying, as the plaintiff had no contract from any
responsible purchaser other than his own subagents and the defendant
company could not probably have filled the contracts even if they had been
backed by the Bank of England.
Upon inspection of the plaintiff's letters (Exhibits Y and AA), there will
be found ample assurance that deposits for the amount of each shipment
would be made with a bank in Manila provided the defendant would indicate
its ability to fill the orders; but these assurances rested upon no other basis
than the financial responsibility of the plaintiff himself, and this circumstance
doubtless did not escape the discernment of the defendant's officers.
With respect to the order from H. Hiwatari, we observe that while he
intimates that he had been promised the exclusive agency under the plaintiff
for Japan, nevertheless it does not affirmatively appear that he had been in
fact appointed to be such at the time he signed the order Exhibit W at the
request of the plaintiff. It may be assumed, therefore, that he was at that time
a stranger to the contract of agency. It clearly appears, however, that he did
not expect to purchase the thousand tons of bituminous limestone referred to
in his order without banking assistance; and although the submanager of the
Bank of Taiwan had said something encouraging in respect to the matter,
nevertheless that official had refrained from giving his approval to the order
Exhibit W. It is therefore not shown affirmatively that this order proceeds from
a responsible source.
The first assignment of error in the appellant's brief is directed to the
action of the trial judge in refusing to admit Exhibits 2, 7, 8, 9 and 10, offered
by the defendant, and in admitting Exhibit E, offered by the plaintiff. The
Exhibit 2 is a letter dated June 25, 1921, or more than three weeks after the
action was instituted, in which the defendant's assistant general manager
undertakes to reply to the plaintiff's letter of March 29 preceding. It was
evidently intended as an argumentative presentation of the plaintiff's point of
view in the litigation then pending, and its probative value is so slight, even if
admissible at all, that there was no error on the part of the trial court in
excluding it.
Exhibits 7, 8, 9 and 10 comprise correspondence which passed
between the parties by mail or telegraph during the first part of the year 1921.
The subject-matter of this correspondence relates to efforts that were being
made by Anderson to dispose of the controlling interest in the defendant
corporation, and Exhibit 9 in particular contains an offer from the plaintiff,
representing certain associates, to buy out Anderson's interest for a fixed
sum. While these exhibits perhaps shed some light upon the relations of the
parties during the time this controversy was brewing, the bearing of the matter
upon the litigation before us is too remote to exert any definitive influence on
the case. The trial court was not in error in our opinion in excluding these
documents.
Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920,
in which information is given concerning the property of the defendant
company. It is stated in this letter that the output of the Lucio mine (quarry)
during the coming year would probably be at the rate of about five tons for
twenty-four hours, with the equipment then on hand, but that with the
installation of a model cable-way which was under contemplation, the
company would be able to handle two thousand tons in twenty-four hours. We
see no legitimate reason for rejecting this document, although of slight
probative value; and the error imputed to the court in admitting the same was
not committed.
Exhibit 14, which was offered in evidence by the defendant, consists of
a carbon copy of a letter dated June 13, 1921, written by the plaintiff to his
attorney, Frank B. Ingersoll, Esq., of Manila, and in which plaintiff states,
among other things, that his profits from the San Francisco contract would
have been at the rate of eighty-five cents (gold) per ton. The authenticity of
this document is admitted, and when it was offered in evidence by the
attorney for the defendant the counsel for the plaintiff announced that he had
no objection to the introduction of this carbon copy in evidence if counsel for
the defendant would explain where this copy was secured. Upon this the
attorney for the defendant informed the court that he received the letter from
the former attorneys of the defendant without explanation of the manner in
which the document had come into their possession. Upon this the attorney
for the plaintiff made this announcement: "We hereby give notice at this time
that unless such an explanation is made, explaining fully how this carbon copy
came into the possession of the defendant company, or any one representing
it, we propose to object to its admission on the ground that it is a confidential
communication between client and lawyer." No further information was then
given by the attorney for the defendant as to the manner in which the letter
had come to his hands and the trial judge thereupon excluded the document,
on the ground that it was a privileged communication between client and
attorney.
We are of the opinion that this ruling was erroneous; for even
supposing that the letter was within the privilege which protects
communications between attorney and client, this privilege was lost when the
letter came to the hands of the adverse party. And it makes no difference how
the adversary acquired possession. The law protects the client from the effect
of disclosures made by him to his attorney in the confidence of the legal
relation, but when such a document, containing admissions of the client,
comes to the hand of a third party, and reaches the adversary, it is admissible
in evidence. In this connection Mr. Wigmore says:
"The law provides subjective freedom for the client by assuring
him of exemption from its processes of disclosure against himself or the
attorney or their agents of communication. This much, but not a whit
more, is necessary for the maintenance of the privilege. Since the
means of preserving secrecy of communication are entirely in the client's
hands, and since the privilege is derogation from the general testimonial
duty and should be strictly construed, it would be improper to extend its
prohibition to third persons who obtain knowledge of the
communications. One who overhears the communications, whether with
or without the client's knowledge, is not within the protection of the
privilege. The same rule ought to apply to one who surreptitiously reads
or obtains possession of a document in original or copy." (5 Wigmore on
Evidence, 2d ed., sec. 2326.)
Although the precedents are somewhat confusing, the better doctrine is
to the effect that when papers are offered in evidence a court will take no
 notice of how they were obtained, whether legally or illegally, properly or
improperly; nor will it from a collateral issue to try that question. (10 R. C. L.,
931; 1 Greenl. Evid., sec. 254a; State vs. Mathers, 15 L. R. A., 268; Gross vs.
State, 33 L. R. A., [N. S.], 477, note.)
Our conclusion upon the entire record is that the judgment appealed
from must be reversed; and the defendant will be absolved from the
complaint. It is so ordered, without special pronouncement as to costs of
either instance.
(Barton v. Leyte Asphalt & Mineral Oil Co., Ltd., G.R. No. 21237, [March 22,
|||

1924], 46 PHIL 938-957)

EN BANC

[G.R. No. 34098. September 17, 1930.]

ORIENT INSURANCE COMPANY, petitioner, vs. E. P. REVILLA,

Judge of First Instance of Manila, and TEAL MOTOR CO.,
INC., respondents.

Gibbs & McDonough, for petitioner.

Guevara, Francisco & Recto, for respondents.

SYLLABUS

1. EVIDENCE; INTRODUCTION OF PART OF WRITING; RIGHT OF

ADVERSARY TO INSPECT WHOLE. — When part of a writing is introduced
in evidence by one litigant, his adversary is entitled to use other parts of the
same writing, so far as relevant to the issues in the case; and to this end the
attorney of the latter has a right to inspect the writing and to require its
production in court.
2. ID.; PRIVILEGED COMMUNICATION; WAIVER. — The introduction
in evidence of part of a paper writing by one party waives privilege as to other
parts of the same writing.
3. ID.; INTRODUCTION OF WRITING; TO WHOM IMPUTED. — When
one party introduces oral testimony with respect to the contents of a written
document which, upon the insistence of the adversary party, is produced as
 the best evidence of such oral statement, the introduction of the writing must
be imputed to the party in whose behalf it was introduced and not to the
adversary who insisted upon the production of the best evidence.
4. MANDAMUS; EVIDENCE; PRODUCTION OF DOCUMENT IN
COURT OF FIRST INSTANCE; JURISDICTION OF THE SUPREME
COURT. — The Supreme Court has jurisdiction to entertain an application for
a writ of mandamus to require a Court of First Instance to permit the attorney
of a litigant to inspect the whole of a written communication, when part of the
same has been introduced in evidence by the other party.

DECISION

STREET, J : p

This is an original petition for writ of certiorari and mandamus filed in

this court by the Orient Insurance Company against the respondent judge of
the Court of First Instance and the Teal Motor Co., Inc. The object of the
petition is to obtain an order requiring the respondent judge to permit the
attorney for the petitioner to examine a letter (Exhibits 49 and 49-A) part of
which has been read into the record in the course of the examination of one of
the witnesses testifying for the plaintiff in the case of Teal Motor Co., Inc. vs.
Orient Insurance Company, now pending in the Court of First Instance of the
City of Manila, civil case No. 35825, with which, for purposes of trial, have
been consolidated several other cases of similar character. The cause is now
before us for resolution upon the complaint and answer interposed by the two
respondents.
The respondent Teal Motor Co., Inc., is plaintiff in a civil action
instituted in the Court of First Instance of Manila (civil case No. 35825) for the
purpose of recovering upon two fire insurance policies issued by the Orient
Insurance Company, aggregating P60,000, upon a stock of merchandise
alleged to be of the value of P414,513.56, which, with the exception of
salvage valued at about P50,000, was destroyed by a fire on or about January
6, 1929. In one of the clauses of the policies sued upon is a stipulation to the
effect that all benefit under the policy would be forfeited if, in case of loss, the
claim should be rejected by the insurer and action or suit should not be
commenced within three months after such rejection. In the answer of the
Orient Insurance Company, interposed in the civil case mentioned, it is
alleged, by way of defense, that the company rejected the claim on April 15,
1929, that notice of such rejection was given to the plaintiff by letter on the
same day, and that suit was not instituted on the policy until August 3, 1929,
which was more than three months after the rejection of the claim.
In a replication to the answer of the defendant, containing the foregoing
and other defenses, the plaintiff admitted that the adjusters of the defendant
company had, on April 15, 1929, notified the plaintiff that the Orient Insurance
Company would not pay the claim, basing refusal upon alleged incendiarism
and fraud on the part of the plaintiff; and by way of avoidance, it was alleged
in the replication that, after notification of denial of liability by the insurance
company, one E. E. Elser, as representative of the company, expressly
requested the plaintiff to defer judicial action until after the following July 31,
stating that there were great possibilities that an extrajudicial compromise
might be arranged in the matter; and it was further asserted, in the replication,
that the plaintiff had deferred action, relying upon this request.
It will thus be seen that the reason for the admitted delay in the
institution of the action is an important issue in the case, or cases, now in
course of trial.
It further appears that while case No. 35825 was in course of trial, as it
still is, before the respondent judge, in the Court of First Instance of Manila,
the witness E. M. Bachrach, president of the Teal Motor Co., Inc., while being
examined in chief by the attorneys for the plaintiff, and speaking of the
circumstances surrounding the institution of the action, said that he had
reported certain conversations to plaintiff's attorneys, and he added: "I waited
for about a week longer and not having heard anything about it, in the
meantime, on the 13th of July, I received a letter from our attorneys, Guevara,
Francisco & Recto, urging me to file these cases." The attorney for the
defendant, Orient Insurance Company, thereupon interposed, saying: "I ask
that the witness be required to produce the letter referred to from Mr.
Guevara, or else his answer be stricken out. (To the witness) Have you got
the letter there?" The witness replied that he had the letter with him and that
he had no objection to show that part of the letter in which Guevara urged him
to proceed with the cases. Upon being asked about the other part of the letter,
the witness said that the other part contained private matter, "between the
attorney and ourselves," meaning between the Teal Motor Co., Inc., and its
attorneys. Thereupon the attorney for the defendant, Orient Insurance
Company, said he would like to see the letter, inquiring as to its date. The
witness replied that it bore date of July 13, 1929; and upon the court inquiring
whether the witness had any objection to the reading of the letter by the
attorney for the defendant, the witness replied that he wished to consult with
his attorney. Upon this the attorney for the adversary party, the Orient
Insurance Company, suggested that he would like to have the letter marked
without his reading it, and it was accordingly marked as Exhibit 49. The
attorney then said: "In view of the production of the letter, I withdraw the
objection to the statement of the witness as to its contents," and he added: "I
now ask the permission of the court to read the letter for my information." The
court thereupon inquired of the attorney for the Teal Motor Co., Inc., whether
he had any objection, and the attorney observed that he would have no
objection to the disclosing of that part of the letter which referred exactly to the
point of the urging of the filing of the complaints, and he added:
"Unfortunately, the other part of the letter being a communication between a
client and attorney, I don't think, if your Honor please, it can be disclosed
without the consent of both."
In the course of the colloquy which thereupon ensued between the
attorney for the plaintiff and the attorney for the defendant, it was stated by
the attorney for the plaintiff that only a part of the letter had anything to do with
the urging of the presentation of the complaints in the cases to which the
witness had testified, and that the other part of the letter referred to the
contract of fees, or retaining of the services of plaintiff's attorneys in
connection with said cases, a matter, so the attorney suggested, entirely
distinct from the urging of the presentation of the cases. The attorney for the
defendant thereupon insisted before the court that, inasmuch as all the letter
refers to the case then in court, the entire document should be exhibited, in
conformity with the rule that when part of a document is offered in evidence,
the entire document must be presented.
Upon this the respondent judge ruled as follows: "Objection of the
counsel for the plaintiff and the witness, Mr. Bachrach, to the showing or
reading of the whole letter in the record is sustained, and it is ordered that
only that part of the letter which has been referred to by Mr. Bachrach, in his
testimony be read and transcribed into the record." To this ruling the attorney
for the defendant excepted and the respondent judge then said: "Let that part
of the letter pointed out by Mr. Bachrach be transcribed in the record;"
whereupon the following part of the letter was read out in court and
incorporated in the transcript:
"July 13, 1929
"DEAR SIR: As you know, your attorney Mr. Basilio Francisco has
turned over to us, prior to his departure, all the papers in connection with
the insurance claim of the Teal Motor Co., Inc., on destroyed or burned
merchandise, and everything is now ready for the filing of the
corresponding complaints in the Court of First Instance."
When the matter above quoted had been thus read into the record, the
attorney for the defendant made the following observation: "In view of the fact
that counsel for the plaintiff has just now read into the record and presented
as evidence a part of the letter of July 13, I now request that the entire letter
be produced." This request was overruled by the court, and the attorney for
the defendant excepted. After further discussion, upon the suggestion of the
attorney for the defendant and by agreement of counsel for both parties, the
second page of the letter was marked 49-A by the clerk of court.
The incident was renewed when it came at turn of the attorney for the
defendant to cross-examine the same witness E. M. Bachrach, when the
attorney for the defendant, having ascertained from the witness that he still
had the letter in his possession, and that he had not answered it in writing,
formally offered the letter in evidence. The attorney for the plaintiff again
objected, on the ground that the letter was of a privileged nature and that it
was the personal property of the witness. Thereupon the court, receiving the
letter in hand from the witness, observed that he had already ruled upon it,
and after further discussion, the court sustained the objection of the attorney
for the plaintiff and refused to admit in evidence so much of the letter as had
not already been read into the record. The attorney for the defendant again
excepted.

At a later stage of the trial the attorney interposed a formal motion for
reconsideration of the ruling of the court in refusing to admit the letter in
evidence, or the part of it not already incorporated in the record. The court,
however, adhered to its original ruling, and the attorney for the defendant
excepted. Another incident that might be noted, though not alleged as a
ground of relief in the petition before us, but set forth in the answer of the
respondents, is that the attorney for the defendant procured a
subpoena duces tecum to be issued by the clerk of court requiring the
attorneys for the plaintiff to produce in court certain papers including the letter
which gave rise to the present controversy. The court, on motion of the
attorneys for the plaintiff, quashed said subpoena.
The essential character of this incident, which we have perhaps
narrated with unnecessary prolixity, is readily discernible. A witness for the
plaintiff made an oral statement as to the substance of part of a letter which
had been received by the plaintiff from its attorney, and when the fact was
revealed that the communication had been made by letter, the attorney for the
defendant requested that the witness be required to produce the letter in
court, and if not, that his answer should be stricken out. This in legal effect
was a demand for the production of "the best evidence," it being a well-known
rule of law that a witness cannot be permitted to give oral testimony as to the
contents of a paper writing which can be produced in court. In response to this
request that portion of the letter to which the witness had supposedly referred
was read into the record.
The respondent judge appears to have considered that the excerpt from
the letter thus incorporated in the record was either proof of the defendant, its
production having been demanded by defendant's counsel, or that at least the
legal responsibility for the incorporation of said excerpt into the record was
attributable to the defendant. We are unable to accept this view. The
incorporation of this excerpt from the letter was a necessary support of the
oral statement which the witness had made, and if this basis for such
statement had not been laid by the incorporation of the excerpt into the
record, the oral statement of the witness concerning the tenor of the letter
should properly have been stricken out. But instead of withdrawing the oral
statement of the witness concerning the nature of the written communication,
the witness produced the letter and the part of it already quoted was read into
the record. The excerpt in question must therefore be considered as proof
submitted by the plaintiff; and there can be no question that, part of the letter
having been introduced in behalf of the plaintiff, the whole of the letter could
properly be examined by the other party, in accordance with the express
provision of section 283 of the Code of Civil Procedure.
It was stated in court by the attorney for the plaintiff, in opposing the
introduction of other portions of the letter in proof, that the other parts were
privileged, because they related to the terms of employment between attorney
and client, or to the fee to be paid to the attorney. With respect to this point it
is difficult to see how a contract for fees could be considered privileged.
Irrelevant it might, under certain circumstances, certainly be, but not
privileged. Of course contracts between attorneys and clients are inherently
personal and private matters, but they are a constant subject of litigation, and
contracts relating to fees are essentially not of a privileged nature. Privilege
primarily refers to communications from client to attorney, an idea which of
course includes communications from attorney to client relative to privileged
matters.
But, even supposing that the matter contained in the letter and withheld
from the inspection of the adversary was originally of a privileged nature, the
privilege was waived by the introduction in evidence of part of the letter. The
provision in section 283 of the Code of Civil Procedure making the whole of a
declaration, conversation, or writing admissible when part has been given in
evidence by one party, makes no exception as to privileged matter; and the
jurisprudence on the subject does not recognize any exception. Practically
every feature of the question now under consideration was involved in the
case of Western Union Tel. Co. vs. Baltimore & Ohio Tel. Co. (26 Fed., 55),
which in 1885 came before Wallace, J., a distinguished jurist presiding in the
Federal Circuit Court of the Southern District of New York. The substance of
the case is well stated in the note to Kelly vs. Cummens (20 Am. & Eng. Ann.
Cases, 1283, 1287), from which we quote as follows:
"In Western Union Tel. Co. vs. Baltimore, etc., Tel. Co. (26 Fed.,
55), it appeared that upon a motion in the cause, which was in equity for
a preliminary injunction, one of the questions involved was whether a
reissued patent upon which the suit was founded was obtained for the
legitimate purpose of correcting mistake or inadvertence in the
specification and claims of the original, or whether it was obtained
merely for the purpose of expanding the claims of the original in order to
subordinate to the reissue certain movements or inventions made by
others after the grant of the original patent and before the application for
the reissue. To fortify its theory of the true reasons for obtaining the
reissue, the complainant upon that motion embodied in affidavits
extracts from communications made by a patent expert and attorney in
the office of the solicitor general of the complainant, to the president and
the vice-president of the complainant, when the subject of applying for a
reissue was under consideration by the officers of the complainant, and
while the proceedings for a reissue were pending. After the cause had
proceeded to the taking of proofs for final hearing the defendant sought
to introduce in evidence the original communications, extracts from
which were used by the complainant upon the motion for an injunction,
on the ground that the parts of the communication which were not
disclosed had an important bearing upon the history of the application for
a reissue, and indicated that it was not made for any legitimate purpose.
The complainant resisted the efforts of the defendant to have the original
communications admitted, on the ground that they were privileged as
made to its officers by its attorney, but it was held that the defendant was
entitled to introduce them in evidence, the court saying: 'The question,
then, is whether the complainant can shelter itself behind its privilege to
insist upon the privacy of the communications between its attorney and
its other officers as confidential communications, when it has itself
produced fragmentary part of them, and sought to use them as a
weapon against the defendant to obtain the stringent remedy of a
preliminary injunction. Assuming that the communications addressed to
the president and vice-president of the complainant by Mr. Buckingham
were communications made to the complainant by its attorney, and as
such privileged at the option of the complainant, it was competent for the
complainant to waive its privilege. It would hardly be contended that the
complainant could introduce extracts from these communications as
evidence in its own behalf for the purpose of a final hearing, and yet
withhold the other parts if their production were required by the
defendant. A party cannot waive such a privilege partially. He cannot
remove the seal of secrecy from so much of the privileged
communications as makes for his advantage, and insist that it shall not
be removed as to so much as makes to the advantage of his adversary,
or may neutralize the effect of such as has been introduced. Upon
principle it would seem that it cannot be material at what stage of the
proceedings in a suit a party waives his right to maintain the secrecy of a
privileged communication. All the proceedings in the cause are
constituent parts of the controversy, and it is not obvious how any
distinction can obtain as to the effect of waiver when made by a party for
 the purpose of obtaining temporary relief and when made by him to
obtain final relief.' "
From the foregoing decision and other cases contained in the note
referred to, we are led to the conclusion that the attorney for the defendant in
the court below was entitled to examine the whole of the letter (Exhibits 49
and 49-A), with a view to the introduction in evidence of such parts thereof as
may be relevant to the case on trial, and the respondent judge was in error in
refusing to permit the inspection of the letter by said attorney.
It is suggested in the argument for the respondents that the question of
the admissibility in evidence of the parts of the letter not already read into the
record was prematurely raised, and that the attorney for the defendant should
have waited until it became his turn to present evidence in chief, when, as is
supposed, the question could have been properly raised. We are of the
opinion, however, that if the attorney for the defendant had a right to examine
the letter, it should have been produced when he asked for it on the cross-
examination of the witness who had the letter in his possession. Besides, in
the lengthy discussions between court and attorneys, occurring at different
times, there was not the slightest suggestion from the court that the parts of
the letter which were held inadmissible would be admitted at any time.
Furthermore, the action of the court in quashing the subpoena duces
tecum for the production of the letter shows that the court meant to rule that
the letter could not be inspected at all by the attorney for the defendant.
Objection is also here made by the attorney for the respondents to the
use of the writ of mandamus for the purpose of correcting the error which is
supposed to have been committed. The situation presented is, however, one
where the herein petitioner has no other remedy. The letter which the
petitioner seeks to examine has been ruled inadmissible, as to the parts not
introduced in evidence by the defendant in the court below, and the
respondent judge has not permitted the document to become a part of the
record in such a way that the petitioner could take advantage of the error
upon appeal to this court. It is idle to discuss whether other remedy would be
speedy or adequate when there is no remedy at all. This court is loath, of
course, to interfere in course of the trial of a case in a Court of First Instance,
as such interference might frequently prolong unduly the litigation in that
court. But this case has been pending before the respondent judge for a
considerable period of time, and undoubtedly the probatory period will be
necessarily extended much longer. Under these circumstances, the action of
this court in entertaining the present application will either be conducive to the
speedy determination of the case, or at least will not appreciably extend the
proceedings.
 It goes without saying that the subject matter of the contention is of a
nature which makes the use of the writ of mandamus appropriate since the
right from the exercise of which the petitioner is excluded is one to which it is
entitled under the law and the duty to be performed is one pertaining to the
respondent judge in his official capacity.
From what has been said it follows that the writ of mandamus prayed
for will be granted, and the respondent judge is directed to permit the attorney
for the defendant (petitioner here) to inspect the letter (Exhibits 49 and 49-A)
with a view to the introduction in evidence of such parts thereof as may be
relevant to the issues made by the pleadings in civil case No. 35825 and other
cases which have been consolidated with it for trial. So ordered, with costs
against the respondent Teal Motor Co., Inc.
(Orient Insurance Co. v. Revilla, G.R. No. 34098, [September 17, 1930], 54
|||

PHIL 919-930)

EN BANC

[G.R. Nos. 115439-41. July 16, 1997.]

PEOPLE OF THE PHILIPPINES, petitioner, vs. HONORABLE

SANDIGANBAYAN, MANSUETO V. HONRADA, CEFERINO S.
PAREDES, JR. and GENEROSO S. SANSAET, respondents.

Solicitor General for petitioner.

Rolando A. Suarez and Associates for public respondents.

SYNOPSIS

Respondent Paredes applied for a free patent over Lot No. 3097-A, Pls-67 of the
Rosario Public Land Subdivision Survey in 1976. His application was approved
and an original certificate of title was issued in his favor. In 1985, however, the
Director of Lands filed an action for the cancellation of Paredes' patent and
certificate of title since the land had been designated as a school site. The trial
court nullified said patent and title after finding that Paredes had obtained the
same through fraudulent misrepresentations in his application. Sansaet served
as counsel of Paredes in that case.
The Tanodbayan recommended the criminal prosecution of Paredes for violation
of Section 3(a) of Republic Act No. 3019 in that he used his former position as
Provincial Attorney to influence the Bureau of Lands officials to favorably act on
his application for free patent. Again, Sansaet was Paredes' counsel of record
therein. A criminal case was subsequently filed with the Sandiganbayan.
On January 23, 1990, one Teofilo Gelacio, sent a letter to the Ombudsman
seeking the investigation of the three respondents herein for falsification of public
documents, claiming that respondent Honrada, in conspiracy with his co-
respondents, simulated and certified as true copies certain documents purporting
to be a notice of arraignment and transcripts of stenographic notes supposedly
taken during the arraignment of Paredes on the perjury charge.
To evade responsibility for his own participation in the scheme, Sansaet claimed
that he filed falsified documents upon the inducement of Paredes. This was
intended to pave the way for his discharge as a government witness in the
consolidated cases. The proposal for the discharge of Sansaet as a state witness
was rejected by the Ombudsman, reasoning that the confession of Sansaet falls
under the privileged communication between him and his client, Paredes, which
may be objected to if presented in the trial. Thus, the three criminal cases were
filed in the Sandiganbayan. A motion was filed by the People on July 27, 1993 for
the discharge of Sansaet as a state witness.
The issues are (1) whether the projected testimony of Sansaet, as proposed
state witness, is barred by the attorney-client privilege, and (2) whether he is
eligible for discharge as a particeps criminis.
A distinction must be made between confidential communications relating to past
crimes already committed, and future crimes intended to be committed, by the
client. The Sandiganbayan believes that in the instant case it is dealing with a
past crime, and that Sansaet is set to testify on alleged criminal acts of
respondents Paredes and Honrada that have already been committed and
consummated.
But for the application of the attorney-client privilege, the period to be considered
is the date when the privileged communication was made by the client to the
attorney in relation to either a crime committed in the past or with respect to a
crime intended to be committed in the future. In other words, the privileged
confidentiality applies only to a crime already committed, but does not attach to a
crime which a client intends to commit in the future, for purposes of which he
seeks the lawyer's advice.
The testimony sought to be elicited from Sansaet as state witness are the
communications made to him by Paredes at the time he and Honrada were about
to falsify the documents which were later filed in the Tanodbayan by Sansaet.
Furthermore, Sansaet was himself a conspirator in the commission of the crime
of falsification which he, Paredes and Honrada foisted upon the authorities. It is
well settled that in order that a communication between a lawyer and his client
may be privileged, it must be for a lawful purpose or in furtherance of a lawful
end.
The Court is reasonably convinced that the requisites for the discharge of
Sansaet as a state witness are present and should have been favorably
appreciated by the Sandiganbayan. Sansaet is the only cooperative eyewitness
to the actual commission of the falsification charge, and the prosecution is faced
with the task of establishing the guilt of the two other co-respondents who
steadfastly deny the charge and stoutly protest their innocence. There is thus no
other direct evidence available for the prosecution of the case; hence there is
absolute necessity for the testimony of Sansaet.
The Sandiganbayan should have taken a holistic view of all facts and issues
herein in disposing of the matter of whether to allow Sansaet to testify as a state
witness, and not merely on the sole issue of the applicability of the attorney-client
privilege.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; ADMISSIBILITY; PRIVILEGED

COMMUNICATION BETWEEN LAWYER AND CLIENT; NOT CONFINED TO
VERBAL OR WRITTEN COMMUNICATION. — In the American jurisdiction from
which our present evidential rule was taken, there is no particular mode by which
a confidential communication shall be made by a client to his attorney. The
privilege is not confined to verbal or written communications made by the client to
his attorney but extends as well to information communicated by the client to the
attorney by other means.
2. ID.; ID.; ID.; ID.; FUTURE CRIMES, NOT COVERED. — A distinction must be
made between confidential communications relating to past crimes already
committed, and future crimes intended to be committed, by the client. Corollarily,
it is admitted that the announced intention of a client to commit a crime is not
included within the confidences which his attorney is bound to respect. For the
application of the attorney-client privilege, however, the period to be considered
is thedate when the privileged communication was made by the client to
the attorney in relation to either a crime committed in the past or with respect to a
crime intended to be committed in the future. In other words, if the client seeks
his lawyer's advice with respect to a crime that the former has theretofore
committed, he is given the protection of a virtual confessional seal which the
attorney-client privilege declares cannot be broken by the attorney without the
client's consent. The same privileged confidentiality, however, does not attach
with regard to a crime which a client intends to commit thereafter or in the future
and for purposes of which he seeks the lawyer's advice. Statements and
communications regarding the commission of a crime already committed, made
by a party who committed it, to an attorney, consulted as such,
areprivileged communications. Contrarily, the unbroken stream of judicial dicta is
to the effect that communications between attorney and client having to do with
the client's contemplated criminal acts, or in aid or furtherance thereof, are not
covered by the cloak of privileges ordinarily existing in reference to
communications between attorney and client. (emphasis supplied.)
3. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — In the present cases, the testimony
sought to be elicited from Sansaet as state witness are the communications
made to him by physical acts and/or accompanying words of Paredes at the time
he and Honrada, either with the active or passive participation of Sansaet, were
about to falsify, or in the process of falsifying, the documents which were later
filed in Tanodbayan by Sansaet and culminated in the criminal charges now
pending in respondent Sandiganbayan. Clearly, therefore, the confidential
communications thus made by Paredes to Sansaet were for purposes of and in
reference to the crime of falsification which had not yet been committed in the
past by Paredes but which he, in confederacy with his present co-respondents,
later committed. Having been made for purposes of a futureoffense, those
communications are outside the pale of the attorney-client privilege. It is evident,
therefore, that it was error for respondent Sandiganbayan to insist that such
unlawful communications intended for an illegal purpose contrived by
conspirators are nonetheless covered by the so-called mantle of privilege. To
prevent a conniving counsel from revealing the genesis of a crime which was
later committed pursuant to a conspiracy, because of the objection thereto of his
conspiring client, would be one of the worst travesties in the rules of evidence
and practice in the noble profession of law. The Court is reasonably convinced,
and so holds, that the other requisites for the discharge of respondent Sansaet
as a state witness are present and should have been favorably appreciated by
the Sandiganbayan.
4. ID.; ID.; ID.; ID.; PRIVILEGE MUST BE FOR A LAWFUL PURPOSE. — In
order that a communication between a lawyer and his client may be privileged, it
must be for a lawful purpose or in furtherance of a lawful purpose or in
furtherance of a lawful end. The existence of an unlawful purpose prevents the
privilege from attaching. In fact, it has also been pointed out to the Court that the
"prosecution of the honorable relation of attorney and client will not be permitted
under the guise of privilege, and every communication made to an attorney by a
client for a criminal purpose is a conspiracy or attempt at a conspiracy which is
not only lawful to divulge, but which the attorney under certain circumstances
may be bound to disclose at once in the interest of justice.
5. ID.; CRIMINAL PROCEDURE; DISCHARGE OF ACCUSED AS STATE
WITNESS; FACT OF FILING OF SEPARATE INFORMATION AGAINST THE
ACCUSED IMMATERIAL WHERE CASES WERE JOINED AND
CONSOLIDATED. — A reservation is raised over the fact that the three private
respondents here stand charged in three separate informations. It will be recalled
that in its resolution of February 24, 1992, the Ombudsman recommended the
filing of criminal charges for falsification of public documents against all the
respondents herein. That resolution was affirmed but, reportedly in order to
obviate further controversy, one information was filed against each of the three
respondents here, resulting in three informations for the same acts of
falsification. This technicality was, however, sufficiently explained away during
the deliberations in this case by the following discussion thereof by Mr. Justice
Davide, to wit; "Assuming no substantive impediment exists to block "Sansaet's
discharge as state witness, he can, nevertheless, be discharge even if indicted
under a separate information. I suppose the three cases were consolidated for
joint trial since they were all raffled to the Second Division of the Sandiganbayan.
Section 2, Rule XV of the Revised Rules of the Sandiganbayan allows
consolidation in only one Division of cases arising from the same incident or
series of incidents, or involving common questions of law and fact. Accordingly,
for all legal intents and purposes, Sansaet stood as co-accused and he could be
discharged as state witness. It is of no moment that he was charged separately
from his co-accused. While Section 9 of Rule 119 of the 1985 Rules of Criminal
Procedure uses the word jointly, which was absent in the old provision, the
consolidated and joint trial has the effect of making the three accused co-
accused or joint defendants, especially considering that they are charged for the
same offense. In criminal law, persons indicted for the same offense and tried
together are called joint defendants." As likewise submitted therefor by Mr.
Justice Francisco along the same vein, there having been a consolidation of the
three cases, the several actions lost their separate identities and became a
single action in which a single judgment is rendered, the same as if the different
causes of action involved had originally been joined in a single action.

6. ID.; ID.; ID.; WORD "JOINT," CONSTRUED. — Indeed, the former provision of
the Rules referring to the situation "(w)hen two or more persons are charged with
the commission of a certain offense" was too broad and indefinite; hence, the
word "joint" was added to indicate the identity of the charge and the fact that the
accused are all together charged therewith substantially in the same manner in
point of commission and time. The word "joint" means "common to two or more,"
as "involving the united activity of two or more," or "done or produced by two or
more working together," or "shared by or affecting two or more." Had it been
intended that all the accused should always be indicted in one and the same
information, the Rules could have said so with facility, but it did not so require in
consideration of the circumstances obtaining in the present case and the
problems that may arise from amending the information. After all, the purpose of
the Rule can be achieved by consolidation of the cases as an alternative mode.
7. ID.; ID.; ID.; ACCUSED MUST NOT APPEAR TO BE THE MOST GUILTY; IN
CONSPIRACY, THE ACTUAL AND INDIVIDUAL PARTICIPATION OF
ACCUSED SERVES AS CRITERIA. — In a conspiracy the act of one is the act
of all, the same penalty shall be imposed on all members of the conspiracy. Now,
one of the requirements for a state witness is that he "does not appear to be the
most guilty," not that he must be the least guilty as is so often erroneously framed
or submitted. The query would then be whether an accused who was held guilty
by reason of membership in a conspiracy is eligible to be a state witness.
In People vs. Ocimar, et al., the Court agreed with the observations of the
Solicitor General that the rule on the discharge of an accused to be utilized as
state witness clearly looks at his actual and individual participation in the
commission of the crime, which may or may not have been perpetrated in
conspiracy with the other accused. Since Bermudez was not individually
responsible for the killing committed on the occasion of the robbery except by
reason of conspiracy, it cannot be said then that Bermudez appears to be the
most guilty. Hence, his discharge to be a witness for the government is clearly
warranted.
8. ID.; ID.; ID.; GRANT OR DENIAL THEREOF MUST BE BASED NOT SOLELY
ON THE ISSUE OF APPLICABILITY OF ATTORNEY-CLIENT PRIVILEGE. —
This Court is not unaware of the doctrinal rule that, on this procedural aspect, the
prosecution may proposed that an accused be discharged as a state witness but
it is for the trial court, in the exercise of its sound discretion, to determine the
merits of the proposal and make the corresponding disposition. It must be
emphasized, however, that such discretion should have been exercised and the
disposition taken on a holistic view of all the facts and issue herein discussed,
and not merely on the sole issues of the applicability of the attorney-client
privilege.

DECISION

REGALADO, J : p

Through the special civil action for certiorari at bar, petitioner seeks the
annulment of the resolution of respondent Sandiganbayan, promulgated on
December 22, 1993, which denied petitioner's motion for the discharge of
respondent Generoso S. Sansaet to be utilized as a witness, and its resolution of
March 7, 1994 denying the motion for reconsideration of its preceding
disposition. 1
The records show that during the dates material to this case, respondent
Honrada was the Clerk of Court and Acting Stenographer of the First Municipal
Circuit Trial Court, San Francisco-Bunawan-Rosario in Agusan del Sur.
Respondent Paredes was successively the Provincial Attorney of Agusan del
Sur, then Governor of the same province, and is at present a Congressman.
Respondent Sansaet was a practicing attorney who served as counsel for
Paredes in several instances pertinent to the criminal charges involved in the
present recourse.
The same records also represent that sometime in 1976, respondent Paredes
applied for a free patent over Lot No. 3097-A, Pls-67 of the Rosario Public Land
Subdivision Survey. His application was approved and, pursuant to a free patent
granted to him, an original certificate of title was issued in his favor for that lot
which is situated in the poblacion of San Francisco, Agusan del Sur.
However, in 1985, the Director of Lands filed an action 2 for the cancellation of
respondent Paredes' patent and certificate of title since the land had been
designated and reserved as a school site in the aforementioned subdivision
survey. The trial court rendered judgment 3 nullifying said patent and title after
finding that respondent Paredes had obtained the same through fraudulent
misrepresentations in his application. Pertinently, respondent Sansaet served as
counsel of Paredes in that civil case. 4
Consequent to the foregoing judgment of the trial court, upon the subsequent
complaint of the Sangguniang Bayan and the preliminary investigation conducted
thereon, an information for perjury 5 was filed against respondent Paredes in the
Municipal Circuit Trial Court. 6 On November 27, 1985, the Provincial Fiscal was,
however, directed by the Deputy Minister of Justice to move for the dismissal of
the case on the ground inter alia of prescription, hence the proceedings were
terminated. 7 In this criminal case, respondent Paredes was likewise represented
by respondent Sansaet as counsel.
Nonetheless, respondent Paredes was thereafter haled before the Tanodbayan
for preliminary investigation on the charge that, by using his former position as
Provincial Attorney to influence and induce the Bureau of Lands officials to
favorably act on his application for free patent, he had violated Section 3(a)
of Republic Act No. 3019, as amended. For the third time, respondent Sansaet
was Paredes' counsel of record therein.
On August 29, 1988, the Tanodbayan, issued a resolution 8 recommending the
criminal prosecution of respondent Paredes. Atty. Sansaet, as counsel for his
aforenamed co-respondent, moved for reconsideration and, because of its legal
significance in this case, we quote some of his allegations in that motion:
". . . respondent had been charged already by the complainants before
the Municipal Circuit Court of San Francisco, Agusan del Sur, went to jail
on detention in 1984 under the same set of facts and the same evidence
. . . but said caseafter arraignment, was ordered dismissed by the
court upon recommendation of the Department of Justice. Copy of
thedismissal order, certificate of arraignment and the recommendation of
the Department of Justice are hereto attached for ready reference; thus
the filing of this case will be a case of double jeopardy for respondent
herein . . ." 9 (Emphasis supplied.)

A criminal case was subsequently filed with the Sandiganbayan 10 charging

respondent Paredes with a violation of Section 3(a) of Republic Act No. 3019, as
amended. However, a motion to quash filed by the defense was later granted in
respondent court's resolution of August 1, 1991 11 and the case was dismissed
on the ground of prescription.
On January 23, 1990, one Teofilo Gelacio, a taxpayer who had initiated the
perjury and graft charges against respondent Paredes, sent a letter to the
Ombudsman seeking the investigation of the three respondents herein for
falsification of public documents. 12 He claimed that respondent Honrada, in
conspiracy with his herein co-respondents, simulated and certified as true copies
certain documents purporting to be a notice of arraignment, dated July 1, 1985,
and transcripts of stenographic notes supposedly taken during the arraignment of
Paredes on the perjury charge. 13 These falsified documents were annexed to
respondent Paredes' motion for reconsideration of the Tanodbayan resolution for
the filing of a graft charge against him, in order to support his contention that the
same would constitute double jeopardy.
In support of his claim, Gelacio attached to his letter a certification that no notice
of arraignment was ever received by the Office of the Provincial Fiscal of Agusan
del Sur in connection with that perjury case; and a certification of Presiding
Judge Ciriaco Ariño that said perjury case in his court did not reach the
arraignment stage since action thereon was suspended pending the review of the
case by the Department of Justice. 14
Respondents filed their respective counter-affidavits, but Sansaet subsequently
discarded and repudiated the submissions he had made in his counter-affidavit.
In a so-called Affidavit of Explanations and Rectifications, 15 respondent Sansaet
revealed that Paredes contrived to have the graft case under preliminary
investigation dismissed on the ground of double jeopardy by making it appear
that the perjury case had been dismissed by the trial court after he had been
arraigned therein.
For that purpose, the documents which were later filed by respondent Sansaet in
the preliminary investigation were prepared and falsified by his co-respondents in
this case in the house of respondent Paredes. To evade responsibility for his own
participation in the scheme, he claimed that he did so upon the instigation and
inducement of respondent Paredes. This was intended to pave the way for his
discharge as a government witness in the consolidated cases, as in fact a motion
therefor was filed by the prosecution pursuant to their agreement. cdphil

Withal, in a resolution 16 dated February 24, 1992, the Ombudsman approved

the filing of falsification charges against all the herein private respondents. The
proposal for the discharge of respondent Sansaet as a state witness was
rejected by the Ombudsman on this evaluative legal position:
". . . Taking his explanation, it is difficult to believe that a lawyer of his
stature, in the absence of deliberate intent to conspire, would be
unwittingly induced by another to commit a crime. As counsel for the
accused in those criminal cases, Atty. Sansaet had control over the case
theory and the evidence which the defense was going to present.
Moreover, the testimony or confession of Atty. Sansaet falls under the
mantle of privileged communication between the lawyer and his client
which may be objected to, if presented in the trial."

The Ombudsman refused to reconsider that resolution 17 and, ostensibly to

forestall any further controversy, he decided to file separate informations for
falsification of public documents against each of the herein respondents. Thus,
three criminal cases, 18 each of which named one of the three private
respondents here as the accused therein, were filed in the graft court. However,
the same were consolidated for joint trial in the Second Division of the
Sandiganbayan.
As stated at the outset, a motion was filed by the People on July 27, 1993 for the
discharge of respondent Sansaet as a state witness. It was submitted that all the
requisites therefor, as provided in Section 9, Rule 119 of the Rules of Court, were
satisfied insofar as respondent Sansaet was concerned. The basic postulate was
that, except for the eyewitness testimony of respondent Sansaet, there was no
other direct evidence to prove the confabulated falsification of documents by
respondents Honrada and Paredes.
Unfortunately for the prosecution, respondent Sandiganbayan, hewing to the
theory of the attorney-client privilege adverted to by the Ombudsman and
invoked by the two other private respondents in their opposition to the
prosecution's motion, resolved to deny the desired discharge on this
ratiocination:
 "From the evidence adduced, the opposition was able to establish that
client and lawyer relationship existed between Atty. Sansaet and
Ceferino Paredes, Jr., before, during and after the period alleged in the
information. In view of such relationship, the facts surrounding the case,
and other confidential matter must have been disclosed by accused
Paredes, as client, to accused Sansaet, as his lawyer in his professional
capacity. Therefore, the testimony of Atty. Sansaet on the facts
surrounding the offense charged in the information is privileged." 19

Reconsideration of said resolution having been likewise denied, 20 the

controversy was elevated to this Court by the prosecution in an original action for
the issuance of the extraordinary writ of certiorari against respondent
Sandiganbayan.
The principal issues on which the resolution of the petition at bar actually turns
are therefore (1) whether or not the projected testimony of respondent Sansaet,
as proposed state witness, is barred by the attorney-client privilege; and (2)
whether or not, as a consequence thereof, he is eligible for discharge to testify as
a particeps criminis.
I
As already stated, respondent Sandiganbayan ruled that due to the lawyer-client
relationship which existed between herein respondents Paredes and Sansaet
during the relevant periods, the facts surrounding the case and other confidential
matters must have been disclosed by respondent Paredes, as client, to
respondent Sansaet, as his lawyer. Accordingly, it found "no reason to discuss it
further since Atty. Sansaet cannot be presented as a witness against accused
Ceferino S. Paredes, Jr. without the latter's consent." 21
The Court is of a contrary persuasion. The attorney-client privilege cannot apply
in these cases, as the facts thereof and the actuations of both respondents
therein constitute an exception to the rule. For a clearer understanding of that
evidential rule, we will first sweep aside some distracting mental cobwebs in
these cases.
1. It may correctly be assumed that there was a confidential communication
made by Paredes to Sansaet in connection with Criminal Cases Nos. 17791-93
for falsification before respondent court, and this may reasonably be expected
since Paredes was the accused and Sansaet his counsel therein. Indeed, the
fact that Sansaet was called to witness the preparation of the falsified documents
by Paredes and Honrada was as eloquent a communication, if not more, than
verbal statements being made to him by Paredes as to the fact and purpose of
such falsification. It is significant that the evidentiary rule on this point has always
referred to "any communication," without distinction or qualification. 22
In the American jurisdiction from which our present evidential rule was taken,
there is no particular mode by which a confidential communication shall be made
by a client to his attorney. The privilege is not confined to verbal or written
communications made by the client to his attorney but extends as well to
information communicated by the client to the attorney by other means. 23
Nor can it be pretended that during the entire process, considering their past and
existing relations as counsel and client and, further, in view of the purpose for
which such falsified documents were prepared, no word at all passed between
Paredes and Sansaet on the subject matter of that criminal act. The clincher for
this conclusion is the undisputed fact that said documents were thereafter filed by
Sansaet in behalf of Paredes as annexes to the motion for reconsideration in the
preliminary investigation of the graft case before the Tanodbayan. 24 Also, the
acts and words of the parties during the period when the documents were being
falsified were necessarily confidential since Paredes would not have invited
Sansaet to his house and allowed him to witness the same except under
conditions of secrecy and confidence.
2. It is postulated that despite such complicity of Sansaet at the instance of
Paredes in the criminal act for which the latter stands charged, a distinction must
be made between confidential communications relating to past crimes already
committed, and future crimes intended to be committed, by the client. Corollarily,
it is admitted that the announced intention of a client to commit a crime is not
included within the confidences which his attorney is bound to respect.
Respondent court appears, however, to believe that in the instant case it is
dealing with a past crime, and that respondent Sansaet is set to testify on alleged
criminal acts of respondents Paredes and Honrada that have already been
committed and consummated.
The Court reprobates the last assumption which is flawed by a somewhat
inaccurate basis. It is true that by now, insofar as the falsifications to be testified
to in respondent court are concerned, those crimes were necessarily committed
in the past. But for the application of the attorney-client privilege, however, the
period to be considered is the date when the privileged communication was
made by the client to the attorney in relation to either a crime committed in the
past or with respect to a crime intended to be committed in the future. In other
words, if the client seeks his lawyer's advice with respect to a crime that the
former has theretofore committed, he is given the protection of a virtual
confessional seal which the attorney-client privilege declares cannot be broken
by the attorney without the client's consent. The same privileged confidentiality,
however, does not attach with regard to a crime which a client intends to commit
thereafter or in the future and for purposes of which he seeks the lawyer's advice.
Statements and communications regarding the commission of a crime already
committed, made by a party who committed it, to an attorney, consulted as such,
are privileged communications. Contrarily, the unbroken stream of judicial dicta is
to the effect that communications between attorney and client having to do with
the client's contemplated criminal acts, or in aid or furtherance thereof, are not
covered by the cloak of privileges ordinarily existing in reference to
communications between attorney and client. 25 (Emphasis supplied.)
3. In the present cases, the testimony sought to be elicited from Sansaet as state
witness are the communications made to him by physical acts and/or
accompanying words of Paredes at the time he and Honrada, either with the
active or passive participation of Sansaet, were about to falsify, or in the process
of falsifying, the documents which were later filed in the Tanodbayan by Sansaet
and culminated in the criminal charges now pending in respondent
Sandiganbayan. Clearly, therefore, the confidential communications thus made
by Paredes to Sansaet were for purposes of and in reference to the crime of
falsification which had not yet been committed in the past by Paredes but which
he, in confederacy with his present co-respondents, later committed. Having
been made for purposes of a future offense, those communications are outside
the pale of the attorney-client privilege.
4. Furthermore, Sansaet was himself a conspirator in the commission of that
crime of falsification which he, Paredes and Honrada concocted and foisted upon
the authorities. It is well settled that in order that a communication between a
lawyer and his client may be privileged, it must be for a lawful purpose or in
furtherance of a lawful end. The existence of an unlawful purpose prevents the
privilege from attaching. 26 In fact, it has also been pointed out to the Court that
the "prosecution of the honorable relation of attorney and client will not be
permitted under the guise of privilege, and every communication made to an
attorney by a client for a criminal purpose is a conspiracy or attempt at a
conspiracy which is not only lawful to divulge, but which the attorney under
certain circumstances may be bound to disclose at once in the interest of
justice." 27
It is evident, therefore, that it was error for respondent Sandiganbayan to insist
that such unlawful communications intended for an illegal purpose contrived by
conspirators are nonetheless covered by the so-called mantle of privilege. To
prevent a conniving counsel from revealing the genesis of a crime which was
later committed pursuant to a conspiracy, because of the objection thereto of his
conspiring client, would be one of the worst travesties in the rules of evidence
and practice in the noble profession of law.
II
On the foregoing premises, we now proceed to the consequential inquiry as to
whether respondent Sansaet qualifies, as aparticeps criminis, for discharge from
the criminal prosecution in order to testify for the State. Parenthetically,
respondent court, having arrived at a contrary conclusion on the preceding issue,
did not pass upon this second aspect and the relief sought by the prosecution
which are now submitted for our resolution in the petition at bar. We shall,
however, first dispose likewise of some ancillary questions requiring preludial
clarification.

1. The fact that respondent Sandiganbayan did not fully pass upon the query as
to whether or not respondent Sansaet was qualified to be a state witness need
not prevent this Court from resolving that issue as prayed for by petitioner.
Where the determinative facts and evidence have been submitted to this Court
such that it is in a position to finally resolve the dispute, it will be in the pursuance
of the ends of justice and the expeditious administration thereof to resolve the
case on the merits, instead of remanding it to the trial court. 28
2. A reservation is raised over the fact that the three private respondents here
stand charged in three separate informations. It will be recalled that in its
resolution of February 24, 1992, the Ombudsman recommended the filing of
criminal charges for falsification of public documents against all the respondents
herein. That resolution was affirmed but, reportedly in order to obviate further
controversy, one information was filed against each of the three respondents
here, resulting in three informations for the same acts of falsification.
This technicality was, however, sufficiently explained away during the
deliberations in this case by the following discussion thereof by Mr. Justice
Davide, to wit:
"Assuming no substantive impediment exists to block Sansaet's
discharge as state witness, he can, nevertheless, be discharged even if
indicted under a separate information. I suppose the three cases were
consolidated for joint trial since they were all raffled to the Second
Division of the Sandiganbayan. Section 2, Rule XV of the Revised Rules
of the Sandiganbayan allows consolidation in only one Division of cases
arising from the same incident or series of incidents, or involving
common questions of law and fact. Accordingly, for all legal intents and
purposes, Sansaet stood as co-accused and he could be discharged as
state witness. It is of no moment that he was charged separately from
his co-accused. While Section 9 of Rule 119 of the 1985 Rules of
Criminal Procedure uses the word jointly, which was absent in the old
provision, the consolidated and joint trial has the effect of making the
three accused, co-accused or joint defendants, especially considering
that they are charged for the same offense. In criminal law, persons
 indicted for the same offense and tried together are called joint
defendants."

As likewise submitted therefor by Mr. Justice Francisco along the same vein,
there having been a consolidation of the three cases, the several actions lost
their separate identities and became a single action in which a single judgment is
rendered, the same as if the different causes of action involved had originally
been joined in a single action. 29
Indeed, the former provision of the Rules referring to the situation "(w)hen two or
more persons are charged with the commission of a certain offense" was too
broad and indefinite; hence the word "joint" was added to indicate the identity of
the charge and the fact that the accused are all together charged therewith
substantially in the same manner in point of commission and time. The word
"joint" means "common to two or more," as "involving the united activity of two or
more," or "done or produced by two or more working together," or "shared by or
affecting two or more. 30 Had it been intended that all the accused should always
be indicted in one and the same information, the Rules could have said so with
facility, but it did not so require in consideration of the circumstances obtaining in
the present case and the problems that may arise from amending the
information. After all, the purpose of the Rule can be achieved by consolidation of
the cases as an alternative mode.
2. We have earlier held that Sansaet was a conspirator in the crime of
falsification, and the rule is that since in a conspiracy the act of one is the act of
all, the same penalty shall be imposed on all members of the conspiracy. Now,
one of the requirements for a state witness is that he "does not appear to be the
most guilty," 31 not that he must be the least guilty 32 as is so often erroneously
framed or submitted. The query would then be whether an accused who was
held guilty by reason of membership in a conspiracy is eligible to be a state
witness.
To be sure, in People vs. Ramirez, et al. 33 we find this obiter:
"It appears that Apolonio Bagispas was the real mastermind. It is
believable that he persuaded the others to rob Paterno, not to kill him for
a promised fee. Although he did not actually commit any of the
stabbings, it was a mistake to discharge Bagispas as a state witness. All
the perpetrators of the offense, including him, were bound in a
conspiracy that made them equally guilty."

However, prior thereto, in People vs. Roxas, et al., 34 two conspirators charged
with five others in three separate informations for multiple murder were
discharged and used as state witnesses against their confederates. Subsequent
thereto, in Lugtu, et al. vs. Court of Appeals, et al., 35 one of the co-conspirators
was discharged from the information charging him and two others with the crime
of estafa. The trial court found that he was not the most guilty as, being a poor
and ignorant man, he was easily convinced by his two co-accused to open the
account with the bank and which led to the commission of the crime.
On appeal, this Court held that the finding of respondent appellate court that
Lugtu was just as guilty as his co-accused, and should not be discharged as he
did not appear to be not the most guilty, is untenable. In other words, the Court
took into account the gravity or nature of the acts committed by the accused to
be discharged compared to those of his co-accused, and not merely the fact that
in law the same or equal penalty is imposable on all of them.
Eventually, what was just somehow assumed but not explicitly articulated found
expression in People vs. Ocimar, et al., 36which we quote in extenso:
"Ocimar contends that in the case at bar Bermudez does not satisfy the
conditions for the discharge of a co-accused to become a state witness.
He argues that no accused in a conspiracy can lawfully be discharged
and utilized as a state witness, for not one of them could satisfy the
requisite of appearing not to be the most guilty. Appellant asserts that
since accused Bermudez was part of the conspiracy, he is equally guilty
as the others.
We do not agree. First, there is absolute necessity for the testimony of
Bermudez. For, despite the presentation of four (4) other witnesses,
none of them could positively identify the accused except Bermudez who
was one of those who pulled the highway heist which resulted not only in
the loss of cash, jewelry and other valuables, but even the life of Capt.
Cañeba, Jr. It was in fact the testimony of Bermudez that clinched the
case for the prosecution. Second, without his testimony, no other direct
evidence was available for the prosecution to prove the elements of the
crime Third, his testimony could be, as indeed it was, substantially
corroborated in its material points as indicated by the trial court in its
well-reasoned decision. Fourth, he does not appear to be the most
guilty. As the evidence reveals, he was only invited to a drinking party
without having any prior knowledge of the plot to stage a highway
robbery. But even assuming that he later became part of the conspiracy,
he does not appear to be the most guilty. What the law prohibits is that
the most guilty will be set free while his co-accused who are less guilty
will be sent to jail. And by "most guilty" we mean the highest degree of
culpability in terms of participation in the commission of the offense and
not necessarily the severity of the penalty imposed. While all the
accused may be given the same penalty by reason of conspiracy, yet
one may be considered least guilty if We take into account his degree of
participation in the perpetration of the offense. Fifth, there is no evidence
that he has at any time been convicted of any offense involving moral
turpitude.
 xxx xxx xxx
Thus, We agree with the observations of the Solicitor General that the
rule on the discharge of an accused to be utilized as state witness
clearly looks at his actual and individual participation in the commission
of the crime, which may or may not have been perpetrated in conspiracy
with the other accused. Since Bermudez was not individually responsible
for the killing committed on the occasion of the robbery except by reason
of conspiracy, it cannot be said then that Bermudez appears to be the
most guilty. Hence, his discharge to be a witness for the government is
clearly warranted." (Emphasis ours.)

The rule of equality in the penalty to be imposed upon conspirators found guilty
of a criminal offense is based on the concurrence of criminal intent in their minds
and translated into concerted physical action although of varying acts or degrees
of depravity. Since the Revised Penal Code is based on the classical school of
thought, it is the identity of the mens rea which is considered the predominant
consideration and, therefore, warrants the imposition of the same penalty on the
consequential theory that the act of one is thereby the act of all.
Also, this is an affair of substantive law which should not be equated with the
procedural rule on the discharge of particeps criminis. This adjective device is
based on other considerations, such as the need for giving immunity to one of
them in order that not all shall escape, and the judicial experience that the candid
admission of an accused regarding his participation is a guaranty that he will
testify truthfully. For those reasons, the Rules provide for certain qualifying
criteria which, again, are based on judicial experience distilled into a judgmental
policy.
III
The Court is reasonably convinced, and so holds, that the other requisites for the
discharge of respondent Sansaet as a state witness are present and should have
been favorably appreciated by the Sandiganbayan.

Respondent Sansaet is the only cooperative eyewitness to the actual

commission of the falsification charged in the criminal cases pending before
respondent court, and the prosecution is faced with the formidable task of
establishing the guilt of the two other co-respondents who steadfastly deny the
charge and stoutly protest their innocence. There is thus no other direct evidence
available for the prosecution of the case, hence there is absolute necessity for
the testimony of Sansaet whose discharge is sought precisely for that purpose.
Said respondent has indicated his conformity thereto and has, for the purposes
required by the Rules, detailed the substance of his projected testimony in his
Affidavit of Explanations and Rectifications.
His testimony can be substantially corroborated on its material points by
reputable witnesses, identified in the basic petition with a digest of their
prospective testimonies, as follows: Judge Ciriaco C. Ariño, Municipal Circuit
Trial Court in San Francisco, Agusan del Sur, Provincial Prosecutor and
Deputized Ombudsman Prosecutor Claudio A. Nistal; Teofilo Gelacio, private
complainant who initiated the criminal cases through his letter-complaint; Alberto
Juvilan of the Sangguniang Bayan of San Fernando, Agusan del Sur, who
participated in the resolution asking their Provincial Governor to file the
appropriate case against respondent Paredes, and Francisco Macalit, who
obtained the certification of non-arraignment from Judge Ariño.
On the final requirement of the Rules, it does not appear that respondent
Sansaet has at any time been convicted of any offense involving moral turpitude.
Thus, with the confluence of all the requirements for the discharge of this
respondent, both the Special Prosecutor and the Solicitor General strongly urge
and propose that he be allowed to testify as a state witness.
This Court is not unaware of the doctrinal rule that, on this procedural aspect, the
prosecution may propose but it is for the trial court, in the exercise of its sound
discretion, to determine the merits of the proposal and make the corresponding
disposition. It must be emphasized, however, that such discretion should have
been exercised, and the disposition taken on a holistic view of all the facts and
issues herein discussed, and not merely on the sole issue of the applicability of
the attorney-client privilege.
This change of heart and direction respondent Sandiganbayan eventually
assumed, after the retirement of two members of its Second Division 37 and the
reconstitution thereof. In an inversely anticlimactic Manifestation and
Comment 38 dated June 14, 1995, as required by this Court in its resolution on
December 5, 1994, the chairman and new members thereof 39declared:
"4) That the questioned Resolutions of December 22, 1993 and March 7,
1994 upon which the Petition for Certiorari filed by the prosecution are
based, was penned by Associate Justice Narciso T. Atienza and
concurred in by the undersigned and Associate Justice Augusto M.
Amores;
5) That while the legal issues involved had been already discussed and
passed upon by the Second Division in the aforesaid Resolution,
however, after going over the arguments submitted by the Solicitor-
General and re-assessing Our position on the matter, We respectfully
beg leave of the Honorable Supreme Court to manifest that We are
amenable to setting aside the questioned Resolutions and to grant the
prosecution's motion to discharge accused Generoso Sansaet as state
witness, upon authority of the Honorable Supreme Court for the
 issuance of the proper Resolution to that effect within fifteen (15) days
from notice thereof."cdasia

WHEREFORE, the writ of certiorari prayed for is hereby granted SETTING

ASIDE the impugned resolutions and ORDERING that the present reliefs sought
in these cases by petitioner be allowed and given due course by respondent
Sandiganbayan.
SO ORDERED.
(People v. Sandiganbayan, G.R. Nos. 115439-41, [July 16, 1997], 341 PHIL
|||

503-526)

US vs Gordon Nikka Sept 2, 1975

Appellant, Ana Gordon-Nikkar, was convicted after a trial by jury on all
three counts of an indictment charging her with conspiracy to possess
with intent to distribute approximately four kilograms of cocaine, and
the substantive charges of possession with intent to distribute and
distribution of the cocaine. 21 U.S.C. §§ 841(a) (1), 846. On appeal,
appellant contends her conviction should be reversed because the
district court permitted a Government witness, Brenda Marchand, to
give testimony regarding allegedly privileged conversations between
appellant's attorney and his clients, and because the trial court denied
appellant's motion to quash the jury panel on account of the exclusion
of resident aliens from grand and petit juries. We affirm.
Brenda Marchand was charged as a codefendant with the crimes for
which appellant was convicted. Marchand subsequently pled guilty on
Count I of the indictment and testified at trial for the Government. Prior
to entering her plea, Marchand had two meetings in the office of
appellant's attorney, Mr. Estrumsa.1 On each of these occasions,
several of the codefendants were present. Marchand, however, was
not a client of Estrumsa, and it is unclear whether all the other persons
in these meetings were Estrumsa's clients. Of the two conversations
related by Marchand, the second was the subject of thorough cross-
examination by Estrumsa. The second conversation involved
Estrumsa's alleged recommendation that Marchand leave the country
and go to Venezuela. On redirect, the Government inquired, over
defense objection, into the substance of the conversation during the
first meeting. Marchand testified that at this meeting the participants,
at Mr. Estrumsa's suggestion, agreed to give perjured cover-up
testimony at trial to the effect that none of them had possessed the
cocaine, but instead merely happened to be at a party where the
cocaine was discovered.
The principal issue in this regard is whether the statements in attorney
Estrumsa's office were protected by the attorney-client privilege.2
There were at least five persons present at Estrumsa's office on this
occasion; at least one of the persons, Brenda Marchand, and perhaps
others, were not clients of Mr. Estrumsa. A communication divulged to
"strangers" or outsiders can scarcely be considered a confidential
communication between attorney and client. See In re Grand Jury
Proceedings, 5 Cir., 1975,517 F.2d 666; United States v. Blackburn, 5
Cir., 1971, 446 F.2d 1089, 1091; International Business Machine
Corp. v. Sperry Rand Corp., D. Del., 1968,44 F.R.D. 10, 12; United
States v. United Shoe Machinery Corp., D. Mass., 1950, 89 F. Supp.
357, 358; 8 Wigmore on Evidence § 2311 (McNaughton Rev.1961).
Therefore, this communication is not protected by the attorney-client
privilege. But even if it appeared that the communication in question
were otherwise privileged (i. e., that the communication was
considered confidential despite the presence of a stranger), the
testimony was nonetheless admissible. The conversations in question
dealt with plans to commit perjury so as to hide the criminal activity of
appellant and others. It is beyond dispute that the attorney-client
privilege does not extend to communications regarding an intended
crime. See 8 Wigmore on Evidence § 2298 (McNaughton Rev.1961)
and cases cited; Pollock v. United States, 5 Cir., 1953, 202 F.2d 281,
286. The policy underlying the attorney-client privilege is to promote
the administration of justice. It would be a perversion of the privilege to
extend it so as to protect communications designed to frustrate justice
by committing other crimes to conceal past misdeeds.
Appellant next argues that the trial court erroneously refused to quash
the petit jury venire as requested on the ground that the exclusion
therefrom of resident aliens deprived her of her right to trial before a
jury representing a fair cross-section of the community. The right and
duty to act as grand or petit jurors is presently reserved to citizens.
"Any citizen of the United States . . . is competent to serve as a grand
or petit juror." 28 U.S.C. § 1861 (emphasis added). See also 28
U.S.C. § 1865. This statutory mandate serves to exclude otherwise
eligible resident aliens from jury service. All defendants at the trial
below were of Cuban origin. Defense counsel alleged to the trial court
that in Miami, where the trial took place, 30 per cent of the city's
population are resident aliens, mostly of Cuban descent. It is
contended that the exclusion of otherwise eligible resident aliens
under these circumstances deprived appellant of a fair trial.
It is true that the Supreme Court has held that the Sixth Amendment
right to an impartial jury encompasses a fundamental right to trial by a
jury which is a truly representative cross-section of the community.
Taylor v. Louisiana, 419 U.S. 522, 95 S. Ct. 692, 42 L. Ed. 2d 690
(1975); see Peters v. Kiff, 407 U.S. 493, 498, 92 S. Ct. 2163, 2166, 33
L. Ed. 2d 83 (1972); Glasser v. United States, 315 U.S. 60, 86, 62 S.
Ct. 457, 472, 86 L. Ed. 680 (1942).3 Despite this requirement,
however, "it has never been thought that federal juries must be drawn
from a cross-section of the total population without the imposition of
any qualifications." United States v. McVean, 5 Cir., 1971, 436 F.2d
1120, 1122, cert. denied, 404 U.S. 822, 92 S. Ct. 45, 30 L. Ed. 2d 50
(emphasis in original). Thus, if citizenship is a reasonable qualification
for jury duty and resident aliens may properly be excluded from jury
service, no Sixth Amendment violation results from such an exclusion.
The "truly representative cross-section" requirement encompasses
only individuals qualified to serve as jurors. Our inquiry is thus whether
the Government can constitutionally impose citizenship as a
qualification for jury service.
In a series of cases as recent as 1973, the Supreme Court has held
that aliens are protected by the Equal Protection Clause of the
Fourteenth Amendment, and that classifications based on alienage
are inherently suspect and subject to close judicial scrutiny. In re
Griffiths, 413 U.S. 717, 93 S. Ct. 2851, 37 L. Ed. 2d 910 (1973);
Sugarman v. Dougall, 413 U.S. 634, 93 S. Ct. 2842, 37 L. Ed. 2d 853
(1973); Graham v. Richardson, 403 U.S. 365, 91 S. Ct. 1848, 29 L.
Ed. 2d 534 (1971); Takahashi v. Fish and Game Commission,334
U.S. 410, 68 S. Ct. 1138, 92 L. Ed. 1478 (1948); cf. Truax v.
Raich, 239 U.S. 33, 36 S. Ct. 7, 60 L. Ed. 131 (1915); Yick Wo v.
Hopkins, 118 U.S. 356, 6 S. Ct. 1064, 30 L. Ed. 220 (1886). While all
the previous cases involved challenges based on the Equal Protection
Clause of the Fourteenth Amendment to discrimination by states on
the basis of alienage, the same analysis is applicable to the Due
Process Clause of the Fifth Amendment, which relates to
classifications by the Federal Government. See Bolling v. Sharpe, 347
U.S. 497, 74 S. Ct. 693, 98 L. Ed. 884 (1953). If a classification is
invalid under the Equal Protection Clause of the Fourteenth
Amendment, it is also invalid under the Due Process Clause of the
Fifth Amendment. Johnson v. Robinson,415 U.S. 361, 363 n. 4, 94 S.
Ct. 1160, 1164 n. 4, 39 L. Ed. 2d 289 (1974); see Richardson v.
Belcher, 404 U.S. 78, 81, 92 S. Ct. 254, 257, 30 L. Ed. 2d 231 (1971).
Because alienage is a suspect classification, the Federal Government
must therefore demonstrate that it has a compelling state interest in
confining the selection of jurors to those who are citizens.
The precise issue before this court was considered in Perkins v.
Smith, D. Md., 1974, 370 F. Supp. 134 (three-judge court), appeal
docketed,43 U.S.L.W. 3001 (U.S., June 21, 1974) (Docket No. 73-
1915).4 In Perkins, the court held that there was a compelling state
interest in restricting jury service to citizens, and upheld the federal
statutory scheme excluding non-citizens from jury service. We agree
with the court's conclusion that there was a compelling interest "in
ensuring that persons who serve as jurors are personally committed to
the proper application and enforcement of the laws of the United
States" which therefore justifies the exclusion of aliens. Perkins v.
Smith, supra, 370 F. Supp. at 142 (concurring opinion). The following
discussion from Perkins is pertinent:

In maintaining the jury system as "the very palladium of free

government" the states logically can anticipate that native-born
citizens would be conversant with the social and political institutions of
our society, the customs of the locality, the nuances of local tradition
and language. Likewise naturalized citizens, who have passed
through the citizenship classes sponsored by the Immigration and
Naturalization Service, have demonstrated a basic understanding of
our form of government, history and traditions. There is no
corresponding basis for assuming that resident aliens, who owe
allegiance not to any state or to the federal government, but are
subjects of a foreign power, have so assimilated our societal and
political mores that an equal reliance could be placed on their
performing as well as citizens the duties of jurors in our judicial
system.

The nature of the operation of juries makes it apparent that persons

unfit for jury service can work a great deal of harm, through inability or
malice, to efficiency and fairness. Jury deliberations are perhaps the
most secret form of decision-making in the nation; the means of
persuasion used by jurors on each other are never revealed. A single
juror who failed to understand the import of the evidence being
presented or who lacked any concern for the fairness of the outcome
could severely obstruct or distort the course of justice. A single
persuasive and unprincipled juror could even direct the course of
justice into channels deliberately chosen for their deleterious effect on
this country. We conclude, therefore, that the state has a compelling
interest in the restriction of jury service to those who will be loyal to,
interested in, and familiar with, the customs of this country.

Resident aliens by definition have not yet been admitted to citizenship.

Until they become citizens, they remain in most cases legally bound to
the country of their origin. Nothing is to prevent their return to that
country, or a move to yet a third nation. It is true that many, if not
most, aliens do intend to become citizens, and that their loyalty could
probably be counted upon. However, it is the process of filing for
citizenship that establishes that loyalty; any attempt at prior screening
would undercut the efficiency and significance of existing procedures.
Therefore, although the presumption that all aliens owe no allegiance
to the United States is not valid in every case, no alternative to taking
citizenship for testing allegiance can be devised, so that we conclude
that the classification is compelled by circumstances, and that it is
justifiable.
370 F. Supp. at 138.
While we are satisfied that the Government has a compelling state
interest sufficient to uphold the statute as constitutional, there is
another reason why aliens may be excluded from federal juries. Under
Article I, section 8, clause 4 of the Constitution, Congress is granted
the power "to establish an uniform Rule of Naturalization." This
specific grant of authority vests in Congress the plenary, unqualified
power to determine which aliens shall be admitted to this country, the
period they may remain, and the terms and conditions of their
naturalization. Graham v. Richardson, supra, 403 U.S. at 377, 91 S.
Ct. at 1854; Takahashi v. Fish and Game Comm'n, supra, 334 U.S. at
419, 68 S. Ct. at 1142; Hines v. Davidowitz, 312 U.S. 52, 66, 61 S. Ct.
399, 403, 85 L. Ed. 581 (1941); see also Harisiades v.
Shaughnessy,353 U.S. 72, 77 S. Ct. 618, 1 L. Ed. 2d 652 (1957);
United States ex rel. Knauff v. Shaughnessy, 338 U.S. 537, 70 S. Ct.
309, 94 L. Ed. 317 (1950).
The plenary authority to admit or exclude aliens necessarily permits
Congress to place certain conditions on an alien's right of entry or
continued residence. Silverman v. Rogers, 1 Cir., 1970, 437 F.2d 102,
107, cert. denied, 402 U.S. 983, 91 S. Ct. 1667, 29 L. Ed. 2d 149; see
Perdido v. I.N.S., 5 Cir., 1969, 420 F.2d 1179, 1181. While resident
aliens are entitled to the full protection of this country's laws, until they
obtain and maintain citizenship by naturalization they are subject to
the plenary authority of Congress' immigration and naturalization
powers. Carlson v. Landon, 342 U.S. 524, 534, 72 S. Ct. 525, 531, 96
L. Ed. 547 (1952). Thus, while most state classifications based on
alienage are inherently suspect, Graham v. Richardson, In re Griffiths,
Sugarman v. Dougall, Takahashi v. Fish and Game Comm'n, supra,
the same is not true of all such federal classifications where Congress'
plenary authority in the field of immigration is involved.
Although Congress may not single out aliens for discriminatory
treatment in matters not related to the furtherance of its naturalization
responsibilities, Ramos v. United States Civil Service Comm'n, D.P.R.,
1974,376 F. Supp. 361, 366 (three-judge court), Congress has the
power to define reasonable prerequisites to an alien's exercise of the
rights and duties of citizenship. We believe that preventing resident
aliens from serving as jurors is rationally related to Congress'
legitimate power to define the extent of resident aliens' rights prior to
obtaining citizenship. Recently, the Supreme Court stated that a state
may deny to aliens the opportunity to participate in the electoral
process because of a "State's historical power to exclude aliens from
participation in its democratic political institutions" and its
"constitutional responsibility for the establishment and operation of its
own government," Sugarman v. Dougall, supra, 413 U.S. at 648, 93 S.
Ct. at 2850-2851. If a state has the inherent power to deprive aliens of
the right to vote, Congress, with its broad powers in dealing with
aliens, may validly require citizenship as a prerequisite to service on
federal juries. Cf. Ramos v. United States Civil Service Comm'n,
supra, 376 F. Supp. at 367 n. 9; Perkins v. Smith, supra, 370 F. Supp.
at 139 n. 1 (concurring opinion). Since Congress may validly exclude
aliens from jury service, appellant was deprived of no Sixth
Amendment right by the failure to have resident aliens included in the
grand or petit jury venires.
Affirmed.
*
Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of
New York et al., 5 Cir., 1970, 431 F.2d 409, Part I
1
The defense does not contend that Marchand's presence in the
attorney's office during the conversations was a deliberate and
surreptitious invasion by a government agent into the legal camp of
the defense. Cf. Hoffa v. United States, 385 U.S. 293, 87 S. Ct. 408,
17 L. Ed. 2d 374 (1966)
2
While the Government contended that the statements were not
privileged, it also defended inquiry into the conversation not touched
on during cross-examination as "completion of an area only partially
explored on cross-examination." United States v. Koss, 2 Cir., 1974,
506 F.2d 1103, 1113
3
We assume, without deciding, that resident aliens of Cuban descent in
Miami constitute an "identifiable segment" or a "distinctive group" in
that community. Cf. Taylor v. Louisiana, supra
4
In Carter v. Jury Commission, 396 U.S. 320, 332, 90 S. Ct. 518, 525,
24 L. Ed. 2d 549 (1970), the Supreme Court in dictum commented
that states are "free to confine the selection (of jurors) to citizens . . . ."

US vs MCpartlin

THIRD DIVISION

[G.R. No. 91114. September 25, 1992.]

NELLY LIM, petitioner, vs. THE COURT OF APPEALS, HON.

MANUEL D. VICTORIO, as Presiding Judge of RTC-Rosales,
Pangasinan, Branch 53, and JUAN SIM, respondents.

Quisumbing, Torres & Evangelista for petitioner.

Bince, Oficiana & Dancel for private respondent.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; EVIDENCE; PRIVILEGED COMMUNICATIONS;

PHYSICIAN-PATIENT PRIVILEGE; RATIONAL BEHIND THE RULE. — This
rule on the physician-patient privilege is intended to facilitate and make safe full
and confidential disclosure by the patient to the physician of all facts,
circumstances and symptoms, untrammeled by apprehension of their
subsequent and enforced disclosure and publication on the witness stand, to the
end that the physician may form a correct opinion, and be enabled safely and
efficaciously to treat his patient. It rests in public policy and is for the general
interest of the community.
2. ID.; ID.; ID.; ID.; ID.; SUBJECT TO WAIVER. — Since the object of the
privilege is to protect the patient, it may be waived if no timely objection is made
to the physician's testimony.
3. ID.; ID.; ID.; ID.; ID.; REQUISITES. — In order that the privilege may be
successfully claimed, the following requisites must concur: "1. the privilege is
claimed in a civil case; 2. the person against whom the privilege is claimed is one
duly authorized to practice medicine, surgery or obstetrics; 3. such person
acquired the information while he was attending to the patient in his professional
capacity; 4. the information was necessary to enable him to act in that capacity;
and 5. the information was confidential, and, if disclosed, would blacken the
reputation (formerly character) of the patient."
4. ID.; ID.; ID.; ID.; CONDITIONS. — These requisites conform with the four (4)
fundamental conditions necessary for the establishment of a privilege against the
disclosure of certain communications, to wit: "1. The communications must
originate in a confidence that they will not be disclosed. 2. This element
of confidentiality must be essential to the full and satisfactory maintenance of the
relation between the parties. 3. The relation must be one which in the opinion of
the community ought to be sedulously fostered 4. The injury that would inure to
the relation by the disclosure of the communications must be greater than the
benefit thereby gained for the correct disposal of litigation."
5. ID.; ID.; ID.; ID.; PHYSICIAN-PATIENT PRIVILEGE; SCOPE. — The
physician may be considered to be acting in his professional capacity when he
attends to the patient for curative, preventive, or palliative treatment. Thus, only
disclosures which would have been made to the physician to enable him "safely
and efficaciously to treat his patient" are covered by the privilege. It is to be
emphasized that "it is the tenor only of the communication that is privileged.
The mere fact of making a communication, as well as the date of a consultation
and the number of consultations, are therefore not privileged from disclosure, so
long as the subject communicated is not stated."
6. ID.; ID.; ID.; BURDEN OF PROOF AND PRESUMPTIONS; ONE WHO
CLAIMS PRIVILEGED COMMUNICATIONS MUST PROVE REQUISITES
THEREOF. — One who claims this privilege must prove the presence of these
aforementioned requisites.
7. ID.; ID.; ID.; PRIVILEGED COMMUNICATIONS; PHYSICIAN-PATIENT
PRIVILEGE; INFORMATION GATHERED IN PRESENCE OF THIRD PARTIES,
NOT PRIVILEGED. — There is authority to the effect that information elicited
during consultation with a physician in the presence of third parties removes such
information from the mantle of the privilege: "Some courts have held that the
casual presence of a third person destroys the confidential nature of the
communication between doctor and patient and thus destroys the privilege, and
that under such circumstances the doctor may testify. Other courts have reached
a contrary result."
8. ID.; ID.; ID.; ID.; ID.; PRIVILEGE, WAIVED IN CASE AT BAR. — while it may
be true that counsel for the petitioner opposed the oral request for the issuance
of a subpoena ad testificandum to Dr. Acampado and filed a formal motion for
the quashal of the said subpoena a day before the witness was to testify, the
petitioner makes no claim in any of her pleadings that her counsel had objected
to any question asked of the witness on the ground that it elicited an answer that
would violate the privilege, despite the trial court's advise that said counsel may
interpose his objection to the testimony "once it becomes apparent that the
testimony, sought to be elicited is covered by the privileged communication rule."
The particular portions of the stenographic notes of the testimony of Dr.
Acampado quoted in the petitioner's Petition and Memorandum, and in the
private respondent's Memorandum, do not at all show that any objections were
interposed. Even granting ex gratiathat the testimony of Dr. Acampado could be
covered by the privilege, the failure to seasonably object thereto amounted to a
waiver thereof.

DECISION

DAVIDE, JR., J :p

This petition brings into focus the rule on the confidentiality of the physician-
patient relationship. Petitioner urges this Court to strike down as being violative
thereof the resolution of public respondent Court of Appeals in C.A.-G.R. SP No.
16991 denying due course to a petition to annul the order of the trial court
allowing a Psychiatrist of the National Mental Hospital to testify as an expert
witness and not as an attending physician of petitioner.
The parties are in agreement as to the following facts:
Petitioner and private respondent are lawfully married to each other.
On 25 November 1987, private respondent filed with Branch 53 of the Regional
Trial Court (RTC) of Pangasinan a petition for annulment of such marriage on the
ground that petitioner has been allegedly suffering from a mental illness called
schizophrenia "before, during and after the marriage and until the present." After
the issues were joined and the pre-trial was terminated, trial on the merits
ensued. Private respondent presented three (3) witnesses before taking the
witness stand himself to testify on his own behalf. On 11 January 1989, private
respondent's counsel announced that he would present as his next witness the
Chief of the Female Services of the National Mental Hospital, Dr. Lydia
Acampado, a Doctor of Medicine who specializes in Psychiatry. Said counsel
forthwith orally applied for the issuance of a subpoena ad testificandum requiring
Dr. Acampado to testify on 25 January 1989. Petitioner's counsel opposed the
motion on the ground that the testimony sought to be elicited from the witness is
privileged since the latter had examined the petitioner in a professional capacity
and had diagnosed her to be suffering from schizophrenia. Over such opposition,
the subpoena was issued on 12 January 1989. LLjur
On 24 January 1989, petitioner's counsel filed an urgent omnibus motion to
quash the subpoena and suspend the proceedings pending resolution of the
motion.
Before Dr. Acampado took the witness stand on 25 January 1989, the court
heard this urgent motion. Movant argued that having seen and examined the
petitioner in a professional capacity, Dr. Acampado is barred from testifying
under the rule on the confidentiality of a physician-patient relationship. Counsel
for private respondent contended, however, that Dr. Acampado would be
presented as an expert witness and would not testify on any information acquired
while attending to the petitioner in a professional capacity. The trial court, per
respondent Judge, denied the motion and allowed the witness to testify. Dr.
Acampado thus took the witness stand, was qualified by counsel for private
respondent as an expert witness and was asked hypothetical questions related to
her field of expertise. She neither revealed the illness she examined and treated
the petitioner for nor disclosed the results of her examination and the medicines
she had prescribed.
Since petitioner's counsel insisted that the ruling of the court on the motion be
reduced to writing, respondent Judge issued the following Order on the same
date:
"In his omnibus motion filed with the Court only yesterday, January 24,
1989, petitioner seeks to prevent Dr. Lydia Acampado from testifying
because she saw and examined respondent Nelly Lim in her
professional capacity perforce her testimony is covered by the privileged
(sic) communication rule.
Petitioner contends that Dr. Acampado is being presented as an expert
witness and that she will not testify on any information she acquired in
(sic) attending to Nelly Lim in her professional capacity.
Based on the foregoing manifestation of counsel for petitioner, the Court
denied the respondent's motion and forthwith allowed Dr. Acampado to
testify. However, the Court advised counsel for respondent to interpose
his objection once it becomes apparent that the testimony sought to be
elicited is covered by the privileged communication rule.
On the witness box, Dr. Acampado answered routinary (sic) questions to
qualify her as an expert in psychiatry; she was asked to render an
opinion as to what kind of illness (sic) are stelazine tablets applied to;
she was asked to render an opinion on a (sic) hypothetical facts
respecting certain behaviours of a person; and finally she admitted she
saw and treated Nelly Lim but she never revealed what illness she
examined and treated her (sic); nor (sic) the result of her examination of
Nelly Lim, nor (sic) the medicines she prescribed.
 WHEREFORE, the omnibus motion dated January 19, 1989 is hereby
DENIED." 1

On 3 March 1989, petitioner filed with the public respondent Court of Appeals a
petition 2 for certiorari and prohibition, docketed therein as C.A.-G.R. SP No.
16991, to annul the aforesaid order of respondent Judge on the ground that the
same was issued with grave abuse of discretion amounting to lack of jurisdiction,
and to prohibit him from proceeding with the reception of Dr. Acampado's
testimony.prcd

On 18 September 1989, the Court of Appeals promulgated a resolution 3 denying

due course to the petition on the ground that "the petitioner failed in establishing
the confidential nature of the testimony given by or obtained from Dr. Acampado
when she testified on January 25, 1989." Hence, the respondent Judge
committed no grave abuse of discretion. In support thereof, the respondent Court
discussed the conditions which would render as inadmissible testimonial
evidence between a physician and his patient under paragraph (c), Section 24,
Rule 130 of the Revised Rules of Court and made the following findings:
"The present suit is a civil case for annulment of marriage and the
person whose testimony is sought to be stopped as a privileged
communication is a physician, who was summoned by the patient in her
professional capacity for curative remedy or treatment. The divergence
in views is whether the information given by the physician in her
testimony in open court on January 25, 1989 was a privileged
communication. We are of the opinion that they do not fall within the
realm of a privileged communication because the information were (sic)
not obtained from the patient while attending her in her professional
capacity and neither were (sic) the information necessary to enable the
physician to prescribe or give treatment to the patient Nelly Lim. And
neither does the information obtained from the physician tend to blacken
the character of the patient or bring disgrace to her or invite reproach.
Dr. Acampado is a Medical Specialist II and in-charge (sic) of the
Female Service of the National Center for Mental Health a fellow of the
Philippine Psychiatrist Association and a Diplomate of the Philippine
Board of Psychiatrists. She was summoned to testify as an expert
witness and not as an attending physician of petitioner.
After a careful scrutiny of the transcript of Dr. Acampado's testimony, We
find no declaration that touched (sic) or disclosed any information which
she has acquired from her patient, Nelly Lim, during the period she
attended her patient in a professional capacity. Although she testified
that she examined and interviewed the patient, she did not disclose
anything she obtained in the course of her examination, interview and
treatment of her patient. Given a set of facts and asked a hypothetical
question, Dr. Acampado rendered an opinion regarding the history and
 behaviour of the fictitious character in the hypothetical problem. The
facts and conditions alleged in the hypothetical problem did not refer and
(sic) had no bearing to (sic) whatever information or findings the doctor
obtained from attending the (sic) patient. A physician is not disqualified
to testify as an expert concerning a patient's ailment, when he can
disregard knowledge acquired in attending such patient and make
answer solely on facts related in (sic) the hypothetical question. (Butler
vs. Role, 242 Pac. 436; Supreme Court of Arizona Jan. 7, 1926). Expert
testimony of a physician based on hypothetical question (sic) as to
cause of illness of a person whom he has attended is not privileged,
provided the physician does not give testimony tending to disclose
confidential information related to him in his professional capacity while
attending to the patient. (Crago vs. City of Cedar Rapids, 98 NW 354,
see Jones on Evidence, Vol. 3, p. 843, 3rd Ed.).
The rule on privilege (sic) communication in the relation of physician and
patient proceeds from the fundamental assumption that the
communication to deserve protection must be confidential in their origin.
Confidentiality is not to be blindly implied from the mere relation of
physician and patient. It might be implied according to circumstances of
each case, taking into consideration the nature of the ailment and the
occasion of the consultation. The claimant of the privilege has the
burden of establishing in each instance all the facts necessary to create
the privilege, including the confidential nature of the information given." 4

Her motion to reconsider the resolution having been denied, petitioner took this
recourse under Rule 45 of the Rules of Court. In her view, the respondent Court
of Appeals "seriously erred":
"I.
. . . in not finding that all the essential elements of the rule on physician-
patient privileged communication under Section 21, Rule 130 of the
Rules of Court (Section 24, Rule 130 of the Revised Rules of Evidence)
exist in the case at bar.
II.
. . . in believing that Dr. Acampado 'was summoned as an expert witness
and not as an attending physician of petitioner.'
III.
. . . in concluding that Dr. Acampado made 'no declaration that touched
(sic) or disclosed any information which she has acquired from her
patient, Nelly Lim, during the period she attended her patient in a
professional capacity.'
IV.
 . . . in declaring that 'the petitioner failed in establishing the confidential
nature of the testimony given by or obtained from Dr. Acampado.'" 5

We gave due course to the petition and required the parties to submit their
respective Memoranda 6 after the private respondent filed his Comment 7 and
the petitioner submitted her reply 8 thereto. The parties subsequently filed their
separate Memoranda.
The petition is devoid of any merit. Respondent Court of Appeals committed no
reversible error in its challenged resolution.
The law in point is paragraph (c), Section 24 of the Revised Rules on Evidence
which reads:
"SECTION 24. Disqualification by reason of privileged communication.
— The following persons cannot testify as to matters learned in
confidence in the following cases:
xxx xxx xxx
(c) A person authorized to practice medicine, surgery or
obstetrics cannot in a civil case, without the consent of the
patient, be examined as to any advice or treatment given by him
or any information which he may have acquired in attending such
patient in a professional capacity, which information was
necessary to enable him to act in that capacity, and which would
blacken the reputation of the patient." Cdpr

This is a reproduction of paragraph (c), Section 21, Rule 130 of the 1964
Revised Rules of Court with two (2) modifications, namely: (a) the inclusion of
the phrase "advice or treatment given by him," and (b) substitution of the
word reputation for the word character. Said Section 21 in turn is a
reproduction of paragraph (f), Section 26, Rule 123 of the 1940 Rules of Court
with a modification consisting in the change of the phrase "which would tend
to blacken" in the latter to "would blacken." 9 Verily, these changes affected
the meaning of the provision. Under the 1940 Rules of Court, it was sufficient
if the information would tend to blacken the character of the patient. In the
1964 Rules of Court, a stricter requirement was imposed; it was imperative
that the information would blacken such character. With the advent of the
Revised Rules on Evidence on 1 July 1989, the rule was relaxed once more
by the substitution of the word character with the wordreputation. There is a
distinction between these two concepts. "'Character' is what a man is,
and 'reputation' is what he is supposed to be in what people say he is.
'Character' depends on attributes possessed, and 'reputation' on attributes
which others believe one to possess. The former signifies reality and the latter
merely what is accepted to be reality at present." 10
This rule on the physician-patient privilege is intended to facilitate and make safe
full and confidential disclosure by the patient to the physician of all facts,
circumstances and symptoms, untrammeled by apprehension of their
subsequent and enforced disclosure and publication on the witness stand, to the
end that the physician may form a correct opinion, and be enabled safely and
efficaciously to treat his patient. 11 It rests in public policy and is for the general
interest of the community. 12
Since the object of the privilege is to protect the patient, it may be waived if no
timely objection is made to the physician's testimony. 13
In order that the privilege may be successfully claimed, the following requisites
must concur:
"1. the privilege is claimed in a civil case;
2. the person against whom the privilege is claimed is one duly
authorized to practice medicine, surgery or obstetrics;
3. such person acquired the information while he was attending to the
patient in his professional capacity;
4. the information was necessary to enable him to act in that capacity;
and
5. the information was confidential, and, if disclosed, would blacken the
reputation (formerly character) of the patient." 14

These requisites conform with the four (4) fundamental conditions necessary for
the establishment of a privilege against the disclosure of certain communications,
to wit:
"1. The communications must originate in a confidence that they will not
be disclosed.
2. This element of confidentiality must be essential to the full and
satisfactory maintenance of the relation between the parties.
3. The relation must be one which in the opinion of the community ought
to be sedulously fostered
4. The injury that would inure to the relation by the disclosure of the
communications must be greater than the benefit thereby gained for the
correct disposal of litigation." 15

The physician may be considered to be acting in his professional capacity

when he attends to the patient for curative, preventive, or palliative treatment.
Thus, only disclosures which would have been made to the physician to
enable him "safely and efficaciously to treat his patient" are covered by the
 privilege. 16 It is to be emphasized that "it is the tenoronly of the
communication that is privileged. The mere fact of making a
communication, as well as the date of a consultation and the number of
consultations, are therefore not privileged from disclosure, so long as the
subject communicated is not stated." 17

One who claims this privilege must prove the presence of these aforementioned
requisites. 18
Our careful evaluation of the submitted pleadings leads Us to no other course of
action but to agree with the respondent Court's observation that the petitioner
failed to discharge that burden. In the first place, Dr. Acampado was presented
and qualified as an expert witness. As correctly held by the Court of Appeals, she
did not disclose anything obtained in the course of her examination, interview
and treatment of the petitioner; moreover, the facts and conditions alleged in the
hypothetical problem did not refer to and had no bearing on whatever information
or findings the doctor obtained while attending to the patient. There is, as well, no
showing that Dr. Acampado's answers to the questions propounded to her
relating to the hypothetical problem were influenced by the information obtained
from the petitioner. Otherwise stated, her expert opinion excluded whatever
information or knowledge she had about the petitioner which was acquired by
reason of the physician-patient relationship existing between them. As an expert
witness, her testimony before the trial court cannot then be excluded. The rule on
this point is summarized as follows: Cdpr

"The predominating view, with some scant authority otherwise, is that

the statutory physician-patient privilege, though duly claimed, is not
violated by permitting a physician to give expert opinion testimony in
response to a strictly hypothetical question in a lawsuit involving the
physical mental condition of a patient whom he has attended
professionally, where his opinion is based strictly upon the hypothetical
facts stated, excluding and disregarding any personal professional
knowledge he may have concerning such patient. But in order to avoid
the bar of the physician-patient privilege where it is asserted in such a
case, the physician must base his opinion solely upon the facts
hypothesized in the question, excluding from consideration his personal
knowledge of the patient acquired through the physician and patient
relationship. If he cannot or does not exclude from consideration his
personal professional knowledge of the patient's condition he should not
be permitted to testify as to his expert opinion." 19

Secondly, it is quite clear from Dr. Acampado's testimony that the petitioner was
never interviewed alone. Said interviews were always conducted in the presence
of a third party, thus:
 "Q I am asking you, doctor, whom did you interview?
A I interviewed the husband first, then the father and after having the
history, I interviewed the patient, Nelly.
Q How many times did Juan Lim and Nelly Lim go to your office?
A Now, the two (2) of them came three (3) times. As I have stated
before, once in the month of April of 1987 and two (2) times for
the month of June 1987, and after that, since July of 1987, it was
the father of Nelly, Dr. Lim, who was bringing Nelly to me until
November of 1987.
Q Now, Dr. Lim is a fellow physician?
A Yes, I understand.
Q Was there anything that he told you when he visited with you in a
clinic?
A I would say that there was none. Even if I asked information about
Nelly, I could not get anything from Dr. Lim.
Q Now, when Dr. Lim and his daughter went to your clinic, was there any
doctor who was also present during that interview?
A No, sir, I don't remember any." 20

There is authority to the effect that information elicited during consultation with a
physician in the presence of third parties removes such information from the
mantle of the privilege:
"Some courts have held that the casual presence of a third person
destroys the confidential nature of the communication between doctor
and patient and thus destroys the privilege, and that under such
circumstances the doctor may testify. Other courts have reached a
contrary result." 21

Thirdly, except for the petitioner's sweeping claim — that "(T)he information given
by Dr. Acampado brings disgrace and invite (sic) reproach to petitioner by falsely
making it appear in the eyes of the trial court and the public that the latter was
suffering from a mental disturbance called schizophrenia — which caused, and
continues to cause, irreparable injury to the name and reputation of petitioner
and her family," 22 — which is based on a wrong premise, nothing specific or
concrete was offered to show that indeed, the information obtained from Dr.
Acampado would blacken the former's "character" (or "reputation"). Dr.
Acampado never disclosed any information obtained from the petitioner
regarding the latter's ailment and the treatment recommended therefor. prcd
Finally, while it may be true that counsel for the petitioner opposed the oral
request for the issuance of a subpoena ad testificandum to Dr. Acampado and
filed a formal motion for the quashal of the said subpoena a day before the
witness was to testify, the petitioner makes no claim in any of her pleadings that
her counsel had objected to any question asked of the witness on the ground that
it elicited an answer that would violate the privilege, despite the trial court's
advise that said counsel may interpose his objection to the testimony "once it
becomes apparent that the testimony, sought to be elicited is covered by the
privileged communication rule." The particular portions of the stenographic notes
of the testimony of Dr. Acampado quoted in the petitioner's Petition 23 and
Memorandum, 24 and in the private respondent's Memorandum, 25 do not at all
show that any objections were interposed. Even granting ex gratia that the
testimony of Dr. Acampado could be covered by the privilege, the failure to
seasonably object thereto amounted to a waiver thereof.
WHEREFORE, the instant petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
(Lim v. Court of Appeals, G.R. No. 91114, [September 25, 1992], 288 PHIL
|||

1053-1066)

FIRST DIVISION

[G.R. No. 108854. June 14, 1994.]

MA. PAZ FERNANDEZ KROHN, petitioner, vs. COURT OF

APPEALS and EDGAR KROHN, JR., respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; PRIVILEGED COMMUNICATION;

PHYSICIAN-PATIENT PRIVILEGE; PURPOSE. — statutes making
communications between physician and patient privileged are intended to inspire
confidence in the patient and encourage him to make a full disclosure to his
physician of his symptoms and condition. Consequently, this prevents the
physician from making public information that will result in humiliation,
embarrassment, or disgrace to the patient. For, the patient should rest assured
with the knowledge that the law recognizes the communication as confidential,
and guards against the possibility of his feelings being shocked or his reputation
tarnished by their subsequent disclosure. The physician-patient privilege creates
a zone of privacy, intended to preclude the humiliation of the patient that may
follow the disclosure of his ailments. Indeed, certain types of information
communicated in the context of the physician-patient relationship fall within the
constitutionally protected zone of privacy, including a patient's interest in keeping
his mental health records confidential. Thus, it has been observed that the
psychotherapist-patient privilege is founded upon the notion that certain forms of
antisocial behavior may be prevented by encouraging those in need of treatment
for emotional problems to secure the services of a psychotherapist.
2. ID.; ID.; ID.; ID.; REQUISITES; NOT COMPLIED WITH IN CASE AT BAR. —
Lim v. Court of Appeals (214 SCRA 273 [1992]) clearly lays down the requisites
in order that the privilege may be successfully invoked: (a) the privilege is
claimed in a civil cases; (b) the person against whom the privilege is claimed is
one duly authorized to practice medicine, surgery or obstetrics; (c) such person
acquired the information while he was attending to the patient in his professional
capacity; (d) the information was necessary to enable him to act in that capacity;
and, (e) the information was confidential and, if disclosed, would blacken the
reputation (formerly character) of the patient." In the instant case, the person
against whom the privilege is claimed is not one duly authorized to practice
medicine, surgery obstetrics. He is simply the patient's husband who wishes to
testify on a document executed by medical practitioners. Plainly and clearly, this
does not fall within the claimed prohibition. Neither can his testimony be
considered a circumvention of the prohibition because his testimony cannot have
the force and effect of the testimony of the physician who examined the patient
and executed the report.
3. ID.; ID.; HEARSAY TESTIMONY; EFFECT OF FAILURE TO OBJECT
THERETO. — Counsel for petitioner indulged heavily in objecting to the
testimony of private respondent on the ground that it was privileged. In his
Manifestation before the trial court dated 10 May 1991, he invoked the rule on
privileged communications but never questioned the testimony as hearsay. It was
a fatal mistake. For, in failing to object to the testimony on the ground that it was
hearsay, counsel waived his right to make such objection and, consequently, the
evidence offered may be admitted.
4. CONSTITUTIONAL LAW; SUPREME COURT; TRIAL JUDGE AND
COUNSELS ENJOINED TO AVOID STRATAGEMS THAT FURTHER DELAY
CASE; CASE AT BAR. — The instant appeal has taken its toll on the petition for
annulment. Three years have already lapsed and private respondent herein, as
petitioner before the trial court, has yet to conclude his testimony thereat. We
thus enjoin the trial judge and the parties' respective counsel to act with
deliberate speed in resolving the main action, and avoid any and all stratagems
that may further delay this case. If all lawyers are allowed to appeal every
perceived indiscretion of a judge in the course of trial and include in their appeals
depthless issues, there will be no end to litigations, and the docket of appellate
courts will forever be clogged with inconsequential cases. Hence, counsel should
exercise prudence in appealing lower court rulings and raise only legitimate
issues so as not to retard the resolution of cases. Indeed, there is no point in
unreasonably delaying the resolution of the petition and prolonging the agony of
the wedded couple who after coming out from a storm still have the right to a
renewed blissful life either alone or in the company of each other.

DECISION

BELLOSILLO, J : p

A confidential psychiatric evaluation report is being presented in evidence before

the trial court in a petition for annulment of marriage grounded on psychological
incapacity. The witness testifying on the report is the husband who initiated the
annulment proceedings, not the physician who prepared the report. LLjur

The subject of the evaluation report, Ma. Paz Fernandez Krohn, invoking the rule
on privileged communication between physician and patient, seeks to enjoin her
husband from disclosing the contents of the report. After failing to convince the
trial court and the appellate court, she is now before us on a petition for review
on certiorari.
LLjur

On 14 June 1964, Edgar Krohn, Jr., and Ma. Paz Fernandez were married at the
Saint Vincent de Paul Church in San Marcelino, Manila. The union produced
three children, Edgar Johannes, Karl Wilhelm and Alexandra. Their blessings
notwithstanding, the relationship between the couple developed into a stormy
one. In 1971, Ma. Paz underwent psychological testing purportedly in an effort to
ease the martial strain. The effort however proved futile. In 1973, they finally
separated in fact.
In 1975, Edgar was able to secure a copy of the confidential psychiatric report on
Ma. Paz prepared and signed by Drs. Cornelio Banaag, Jr., and Baltazar Reyes.
On 2 November 1978, presenting the report among others, he obtained a decree
("Conclusion") from the Tribunal Metropolitanum Matrimoniale in Manila nullifying
his church marriage with Ma. Paz on the ground of "incapacitas assumendi onera
conjugalia due to lack of due discretion existent at the time of the wedding and
thereafter." 1 On 10 July 1979, the decree was confirmed and pronounced "Final
and Definite." 2
Meanwhile, on 30 July 1982, the then Court of First Instance (now Regional Trial
Court) of Pasig, Br. II, issued an order granting the voluntary dissolution of the
conjugal partnership.
On 23 October 1990, Edgar filed a petition for the annulment of his marriage with
Ma. Paz before the trial court. 3 In his petition, he cited the Confidential
Psychiatric Evaluation Report which Ma. Paz merely denied in her Answer as
"either unfounded or irrelevant." 4
At the hearing on 8 May 1991, Edgar took the witness stand and tried to testify
on the contents of the Confidential Psychiatric Evaluation Report. This was
objected to on the ground that it violated the rule on privileged communication
between physician and patient. Subsequently, Ma. Paz filed a Manifestation
expressing her "continuing objection" to any evidence, oral or documentary, "that
would thwart the physician-patient privileged communication rule," 5 and
thereafter submitted a Statement for the Record asserting among others that
"there is no factual or legal basis whatsoever for petitioner (Edgar) to claim
'psychological incapacity' to annul their marriage, such ground being completely
false, fabricated and merely an afterthought." 6 Before leaving for Spain where
she has since resided after their separation, Ma. Paz also authorized and
instructed her counsel to oppose the suit and pursue her counterclaim even
during her absence. cdrep

On 29 May 1991, Edgar opposed Ma. Paz' motion to disallow the introduction of
the confidential psychiatric report as evidence, 7 and afterwards moved to strike
out Ma. Paz' Statement for the Record. 8
On 4 June 1991, the trial court issued an Order admitting the Confidential
Psychiatric Evaluation Report in evidence and ruling that —
. . . the Court resolves to overrule the objection and to sustain the
Opposition to the respondent's Motion; first, because the very issue in
this case is whether or not the respondent had been suffering from
psychological incapacity; and secondly, when the said psychiatric report
was referred to in the compliant, the respondent did not object thereto on
the ground of the supposed privileged communication between patient
and physician. What was raised by the respondent was that the said
psychiatric report was irrelevant. So, the Court feels that in the interest of
justice and for the purpose of determining whether the respondent as
alleged in the petition was suffering from psychological incapacity, the
said psychiatric report is very material and may be testified to by
petitioner (Edgar Krohn, Jr.) without prejudice on the part of the
respondent to dispute the said report or to cross-examine first the
petitioner and later the psychiatrist who prepared the same if the latter
will be presented. 9
On 27 November 1991, the trial court denied the Motion to Reconsider Order
dated June 4, 1991, and directed that the Statement for the Record filed by Ma.
Paz be stricken off the record. A subsequent motion for reconsideration filed by
her counsel was likewise denied.
Counsel of Ma. Paz then elevated the issue to respondent Court of Appeals. In a
Decision promulgated 30 October 1992, the appellate court dismissed the
petition for certiorari. 10 On 5 February 1993, the motion to reconsider the
dismissal was likewise denied. Hence, the instant petition for review. llcd

Petitioner now seeks to enjoin the presentation and disclosure of the contents of
the psychiatric report and prays for the admission of her Statement for the
Record to form part of the records of the case. She argues that since Sec. 24,
par. (c), Rule 130, of the Rules of Court 11 prohibits a physician from testifying on
matters which he may have acquired in attending to a patient in a professional
capacity, "WITH MORE REASON should a third person (like respondent-
husband in this particular instance) be PROHIBITED from testifying on privileged
matters between a physician and patient or from submitting any medical report,
findings or evaluation prepared by a physician which the latter has acquired as a
result of his confidential and privileged relation with a patient." 12 She says that
the reason behind the prohibition is —

. . . to facilitate and make safe, full and confidential disclosure by a

patient to his physician of all facts, circumstances and symptoms,
untrammeled by apprehension of their subsequent and enforced
disclosure and publication on the witness stand, to the end that the
physician may form a correct opinion, and be enabled safely and
efficaciously to treat his patient. 13

She further argues that to allow her husband to testify on the contents of the
psychiatric evaluation report "will set a very bad and dangerous precedent
because it abets circumvention of the rule's intent in preserving the sanctity,
security and confidence to the relation of physician and his patient." 14 Her thesis
is that what cannot be done directly should not be allowed to be done indirectly.
Petitioner submits that her Statement for the Record simply reiterates under oath
what she asserted in her Answer, which she failed to verify as she had already
left for Spain when her Answer was filed. She maintains that her "Statement for
the Record is a plain and simple pleading and is not as it has never been
intended to take the place of her testimony;" 15 hence, there is no factual and
legal basis whatsoever to expunge it from the records. Cdpr

Private respondent Edgar Krohn, Jr., however contends that "the rules are very
explicit: the prohibition applies only to a physician. Thus . . . . the legal prohibition
to testify is not applicable to the case at bar where the person sought to be
barred from testifying on the privileged communication is the husband and not
the physician of the petitioner." 16 In fact, according to him, the Rules sanction
his testimony considering that a husband may testify against his wife in a civil
case filed by one against the other.
Besides, private respondent submits that privileged communication may be
waived by the person entitled thereto, and this petitioner expressly did when she
gave her unconditional consent to the use of the psychiatric evaluation report
when it was presented to the Tribunal Metropolitanum Matrimoniale which took it
into account among others in deciding the case and declaring their marriage null
and void. Private respondent further argues that petitioner also gave her implied
consent when she failed to specifically object to the admissibility of the report in
her Answer where she merely described the evaluation report as "either
unfounded or irrelevant." At any rate, failure to interpose a timely objection at the
earliest opportunity to the evidence presented on privileged matters may be
construed as an implied waiver. LibLex

With regard to the Statement for the Record filed by petitioner, private
respondent posits that this in reality is an amendment of her Answer and thus
should comply with pertinent provisions of the Rules of the Court, hence, its
exclusion from the records for failure to comply with the Rules is proper.
The treatise presented by petitioner on the privileged nature of the
communication between physician and patient, as well as the reasons therefor, is
not doubted. Indeed, statutes making communications between physician and
patient privileged are intended to inspire confidence in the patient and encourage
him to make a full disclosure to his physician of his symptoms and
condition. 17 Consequently, this prevents the physician from making public
information that will result in humiliation, embarrassment, or disgrace to the
patient. 18 For, the patient should rest assured with the knowledge that the law
recognizes the communication as confidential, and guards against the possibility
of his feelings being shocked or his reputation tarnished by their subsequent
disclosure. 19 The physician-patient privilege creates a zone of privacy, intended
to preclude the humiliation of the patient that may follow the disclosure of his
ailments. Indeed, certain types of information communicated in the context of the
physician-patient relationship fall within the constitutionally protected zone of
privacy,20 including a patient's interest in keeping his mental health records
confidential. 21 Thus, it has been observed that the psychotherapist-patient
privilege is founded upon the notion that certain forms of antisocial behavior may
be prevented by encouraging those in need of treatment for emotional problems
to secure the services of a psychotherapist. LLphil
Petitioner's discourse while exhaustive is however misplaced. Lim v. Court of
Appeals 22 clearly lays down the requisites in order that the privilege may be
successfully invoked: (a) the privilege is claimed in a civil cases; (b) the person
against whom the privilege is claimed is one duly authorized to practice
medicine, surgery or obstetrics; (c) such person acquired the information while
he was attending to the patient in his professional capacity; (d) the information
was necessary to enable him to act in that capacity; and, (e) the information was
confidential and, if disclosed, would blacken the reputation (formerly character) of
the patient."
In the instant case, the person against whom the privilege is claimed is not one
duly authorized to practice medicine, surgery obstetrics. He is simply the patient's
husband who wishes to testify on a document executed by medical practitioners.
Plainly and clearly, this does not fall within the claimed prohibition. Neither can
his testimony be considered a circumvention of the prohibition because his
testimony cannot have the force and effect of the testimony of the physician who
examined the patient and executed the report.
Counsel for petitioner indulged heavily in objecting to the testimony of private
respondent on the ground that it was privileged. In his Manifestation before the
trial court dated 10 May 1991, he invoked the rule on privileged communications
but never questioned the testimony as hearsay. It was a fatal mistake. For, in
failing to object to the testimony on the ground that it was hearsay, counsel
waived his right to make such objection and, consequently, the evidence offered
may be admitted.
The other issue raised by petitioner is too trivial to merit the full attention of this
Court. The allegations contained in the Statement for the Records are but
refutations of private respondent's declarations which may be denied or
disproved during the trial. LLpr

The instant appeal has taken its toll on the petition for annulment. Three years
have already lapsed and private respondent herein, as petitioner before the trial
court, has yet to conclude his testimony thereat. We thus enjoin the trial judge
and the parties' respective counsel to act with deliberate speed in resolving the
main action, and avoid any and all stratagems that may further delay this case. If
all lawyers are allowed to appeal every perceived indiscretion of a judge in the
course of trial and include in their appeals depthless issues, there will be no end
to litigations, and the docket of appellate courts will forever be clogged with
inconsequential cases. Hence, counsel should exercise prudence in appealing
lower court rulings and raise only legitimate issues so as not to retard the
resolution of cases. Indeed, there is no point in unreasonably delaying the
resolution of the petition and prolonging the agony of the wedded couple who
after coming out from a storm still have the right to a renewed blissful life either
alone or in the company of each other. 23
WHEREFORE, the instant petition for review is DENIED for lack of merit. The
assailed Decision of respondent Court of Appeals promulgated on 30 October
1992 is AFFIRMED. LexLib

SO ORDERED.
(Krohn v. Court of Appeals, G.R. No. 108854, [June 14, 1994], 303 PHIL 155-
|||

165)

FIRST DIVISION

[G.R. No. 169737. February 12, 2008.]

BLUE CROSS HEALTH CARE, INC., petitioner, vs. NEOMI * and

DANILO OLIVARES, respondents.

DECISION

CORONA, J : p

This is a petition for review on certiorari 1 of a decision 2 and

resolution 3 of the Court of Appeals (CA) dated July 29, 2005 and September
21, 2005, respectively, in CA-G.R. SP No. 84163 which affirmed the decision
of the Regional Trial Court (RTC), Makati City, Branch 61 dated February 2,
2004 in Civil Case No. 03-1153, 4 which in turn reversed the decision of the
Metropolitan Trial Court (MeTC), Makati City, Branch 66 dated August 5, 2003
in Civil Case No. 80867. 5
Respondent Neomi T. Olivares applied for a health care program with
petitioner Blue Cross Health Care, Inc., a health maintenance firm. For the
period October 16, 2002 to October 15, 2003, 6 she paid the amount of
P11,117. For the same period, she also availed of the additional service of
limitless consultations for an additional amount of P1,000. She paid these
amounts in full on October 17, 2002. The application was approved on
October 22, 2002. In the health care agreement, ailments due to "pre-existing
conditions" were excluded from the coverage. 7
 On November 30, 2002, or barely 38 days from the effectivity of her
health insurance, respondent Neomi suffered a stroke and was admitted at
the Medical City which was one of the hospitals accredited by petitioner.
During her confinement, she underwent several laboratory tests. On
December 2, 2002, her attending physician, Dr. Edmundo Saniel, 8 informed
her that she could be discharged from the hospital. She incurred hospital
expenses amounting to P34,217.20. Consequently, she requested from the
representative of petitioner at Medical City a letter of authorization in order to
settle her medical bills. But petitioner refused to issue the letter and
suspended payment pending the submission of a certification from her
attending physician that the stroke she suffered was not caused by a pre-
existing condition. 9
She was discharged from the hospital on December 3, 2002. On
December 5, 2002, she demanded that petitioner pay her medical bill. When
petitioner still refused, she and her husband, respondent Danilo Olivares,
were constrained to settle the bill. 10 They thereafter filed a complaint for
collection of sum of money against petitioner in the MeTC on January 8,
2003. 11 In its answer dated January 24, 2003, petitioner maintained that it
had not yet denied respondents' claim as it was still awaiting Dr. Saniel's
report.
In a letter to petitioner dated February 14, 2003, Dr. Saniel stated that:
This is in response to your letter dated February 13, 2003. [Respondent]
Neomi T. Olivares called by phone on January 29, 2003. She stated that
she is invoking patient-physician confidentiality. That she no longer has
any relationship with [petitioner]. And that I should not release any
medical information concerning her neurologic status to anyone without
her approval. Hence, the same day I instructed my secretary to inform
your office thru Ms. Bernie regarding [respondent's] wishes.
xxx xxx xxx 12

In a decision dated August 5, 2003, the MeTC dismissed the complaint

for lack of cause of action. It held:
. . . the best person to determine whether or not the stroke she suffered
was not caused by "pre-existing conditions" is her attending physician
Dr. Saniel who treated her and conducted the test during her
confinement. . . . But since the evidence on record reveals that it was no
less than [respondent Neomi] herself who prevented her attending
physician from issuing the required certification, petitioner cannot be
faulted from suspending payment of her claim, for until and unless it can
be shown from the findings made by her attending physician that the
stroke she suffered was not due to pre-existing conditions could she
demand entitlement to the benefits of her policy. 13
 On appeal, the RTC, in a decision dated February 2, 2004, reversed the
ruling of the MeTC and ordered petitioner to pay respondents the following
amounts: (1) P34,217.20 representing the medical bill in Medical City and
P1,000 as reimbursement for consultation fees, with legal interest from the
filing of the complaint until fully paid; (2) P20,000 as moral damages; (3)
P20,000 as exemplary damages; (4) P20,000 as attorney's fees and (5) costs
of suit. 14 The RTC held that it was the burden of petitioner to prove that the
stroke of respondent Neomi was excluded from the coverage of the health
care program for being caused by a pre-existing condition. It was not able to
discharge that burden. 15
Aggrieved, petitioner filed a petition for review under Rule 42 of the
Rules of Court in the CA. In a decision promulgated on July 29, 2005, the CA
affirmed the decision of the RTC. It denied reconsideration in a resolution
promulgated on September 21, 2005. Hence this petition which raises the
following issues: (1) whether petitioner was able to prove that respondent
Neomi's stroke was caused by a pre-existing condition and therefore was
excluded from the coverage of the health care agreement and (2) whether it
was liable for moral and exemplary damages and attorney's fees.
The health care agreement defined a "pre-existing condition" as:
. . . a disability which existed before the commencement date of
membership whose natural history can be clinically determined, whether
or not the Member was aware of such illness or condition. Such
conditions also include disabilities existing prior to reinstatement date in
the case of lapse of an Agreement. Notwithstanding, the following
disabilities but not to the exclusion of others are considered pre-existing
conditions including their complications when occurring during the first
year of a Member's coverage:
I. Tumor of Internal Organs
II. Hemorrhoids/Anal Fistula
III. Diseased tonsils and sinus conditions requiring surgery
IV. Cataract/Glaucoma
V. Pathological Abnormalities of nasal septum or turbinates
VI. Goiter and other thyroid disorders
VII. Hernia/Benign prostatic hypertrophy
VIII. Endometriosis
IX. Asthma/Chronic Obstructive Lung disease
X. Epilepsy
 XI. Scholiosis/Herniated disc and other Spinal column
abnormalities
XII. Tuberculosis
XIII. Cholecysitis
XIV. Gastric or Duodenal ulcer
XV. Hallux valgus
XVI. Hypertension and other Cardiovascular diseases
XVII. Calculi
XVIII. Tumors of skin, muscular tissue, bone or any form of blood
dyscracias
XIX. Diabetes Mellitus
XX. Collagen/Auto-Immune disease
After the Member has been continuously covered for 12 months, this
pre-existing provision shall no longer be applicable except for illnesses
specifically excluded by an endorsement and made part of this
Agreement. 16

Under this provision, disabilities which existed before the

commencement of the agreement are excluded from its coverage if they
become manifest within one year from its effectivity. Stated otherwise,
petitioner is not liable for pre-existing conditions if they occur within one year
from the time the agreement takes effect.
Petitioner argues that respondents prevented Dr. Saniel from submitting
his report regarding the medical condition of Neomi. Hence, it contends that
the presumption that evidence willfully suppressed would be adverse if
produced should apply in its favor. 17
Respondents counter that the burden was on petitioner to prove that
Neomi's stroke was excluded from the coverage of their agreement because it
was due to a pre-existing condition. It failed to prove this. 18
We agree with respondents.
In Philamcare Health Systems, Inc. v. CA, 19 we ruled that a health care
agreement is in the nature of a non-life insurance. 20 It is an established rule
in insurance contracts that when their terms contain limitations on liability,
they should be construed strictly against the insurer. These are contracts of
adhesion the terms of which must be interpreted and enforced stringently
against the insurer which prepared the contract. This doctrine is equally
applicable to health care agreements. 21
 Petitioner never presented any evidence to prove that respondent
Neomi's stroke was due to a pre-existing condition. It merely speculated that
Dr. Saniel's report would be adverse to Neomi, based on her invocation of the
doctor-patient privilege. This was a disputable presumption at best.
Section 3 (e), Rule 131 of the Rules of Court states:
Sec. 3. Disputable presumptions. — The following presumptions are
satisfactory if uncontradicted, but may be contradicted and overcome by
other evidence:
xxx xxx xxx
(e) That evidence willfully suppressed would be adverse if produced.

Suffice it to say that this presumption does not apply if (a) the evidence is at
the disposal of both parties; (b) the suppression was not willful; (c) it is merely
corroborative or cumulative and (d) the suppression is an exercise of a
privilege. 22 Here, respondents' refusal to present or allow the presentation of
Dr. Saniel's report was justified. It was privileged communication between
physician and patient.
Furthermore, as already stated, limitations of liability on the part of the
insurer or health care provider must be construed in such a way as to
preclude it from evading its obligations. Accordingly, they should be
scrutinized by the courts with "extreme jealousy" 23 and "care" and with a
"jaundiced eye." 24 Since petitioner had the burden of proving exception to
liability, it should have made its own assessment of whether respondent
Neomi had a pre-existing condition when it failed to obtain the attending
physician's report. It could not just passively wait for Dr. Saniel's report to bail
it out. The mere reliance on a disputable presumption does not meet the strict
standard required under our jurisprudence.
Next, petitioner argues that it should not be held liable for moral and
exemplary damages, and attorney's fees since it did not act in bad faith in
denying respondent Neomi's claim. It insists that it waited in good faith for Dr.
Saniel's report and that, based on general medical findings, it had reasonable
ground to believe that her stroke was due to a pre-existing condition,
considering it occurred only 38 days after the coverage took effect. 25
We disagree.
The RTC and CA found that there was a factual basis for the damages
adjudged against petitioner. They found that it was guilty of bad faith in
denying a claim based merely on its own perception that there was a pre-
existing condition:
[Respondents] have sufficiently shown that [they] were forced to engage
in a dispute with [petitioner] over a legitimate claim while [respondent
 Neomi was] still experiencing the effects of a stroke and forced to pay for
her medical bills during and after her hospitalization despite being
covered by [petitioner's] health care program, thereby suffering in the
process extreme mental anguish, shock, serious anxiety and great
stress. [They] have shown that because of the refusal of [petitioner] to
issue a letter of authorization and to pay [respondent Neomi's] hospital
bills, [they had] to engage the services of counsel for a fee of
P20,000.00. Finally, the refusal of petitioner to pay respondent
Neomi's bills smacks of bad faith, as its refusal [was] merely based on
its own perception that a stroke is a pre-existing condition. (emphasis
supplied)

This is a factual matter binding and conclusive on this Court. 26 We see

no reason to disturb these findings.
WHEREFORE, the petition is hereby DENIED. The July 29, 2005
decision and September 21, 2005 resolution of the Court of Appeals in CA-
G.R. SP No. 84163 are AFFIRMED.
Treble costs against petitioner.
SO ORDERED.
(Blue Cross Health Care, Inc. v. Olivares, G.R. No. 169737, [February 12,
|||

2008], 568 PHIL 526-535)

THIRD DIVISION

[G.R. No. 179786. July 24, 2013.]

JOSIELENE LARA CHAN, petitioner, vs. JOHNNY T.

CHAN, respondent.

DECISION

ABAD, J : p

This case is about the propriety of issuing a subpoena duces tecum for the
production and submission in court of the respondent husband's hospital record
in a case for declaration of nullity of marriage where one of the issues is his
mental fitness as a husband.
 The Facts and the Case
On February 6, 2006 petitioner Josielene Lara Chan (Josielene) filed before the
Regional Trial Court (RTC) of Makati City, Branch 144 a petition for the
declaration of nullity of her marriage to respondent Johnny Chan (Johnny), the
dissolution of their conjugal partnership of gains, and the award of custody of
their children to her. Josielene claimed that Johnny failed to care for and support
his family and that a psychiatrist diagnosed him as mentally deficient due to
incessant drinking and excessive use of prohibited drugs. Indeed, she had
convinced him to undergo hospital confinement for detoxification and
rehabilitation.
Johnny resisted the action, claiming that it was Josielene who failed in her wifely
duties. To save their marriage, he agreed to marriage counseling but when he
and Josielene got to the hospital, two men forcibly held him by both arms while
another gave him an injection. The marriage relations got worse when the police
temporarily detained Josielene for an unrelated crime and released her only after
the case against her ended. By then, their marriage relationship could no longer
be repaired. aSTAIH

During the pre-trial conference, Josielene pre-marked the Philhealth Claim

Form 1 that Johnny attached to his answer as proof that he was forcibly confined
at the rehabilitation unit of a hospital. The form carried a physician's handwritten
note that Johnny suffered from "methamphetamine and alcohol abuse."
Following up on this point, on August 22, 2006 Josielene filed with the RTC a
request for the issuance of a subpoena duces tecum addressed to Medical City,
covering Johnny's medical records when he was there confined. The request was
accompanied by a motion to "be allowed to submit in evidence" the records
sought by subpoena duces tecum. 2
Johnny opposed the motion, arguing that the medical records were covered by
physician-patient privilege. On September 13, 2006 the RTC sustained the
opposition and denied Josielene's motion. It also denied her motion for
reconsideration, prompting her to file a special civil action of certiorari before the
Court of Appeals (CA) in CA-G.R. SP 97913, imputing grave abuse of discretion
to the RTC.
On September 17, 2007 the CA 3 denied Josielene's petition. It ruled that, if
courts were to allow the production of medical records, then patients would be
left with no assurance that whatever relevant disclosures they may have made to
their physicians would be kept confidential. The prohibition covers not only
testimonies, but also affidavits, certificates, and pertinent hospital records. The
CA added that, although Johnny can waive the privilege, he did not do so in this
case. He attached the Philhealth form to his answer for the limited purpose of
showing his alleged forcible confinement.
 Question Presented
The central question presented in this case is:
Whether or not the CA erred in ruling that the trial court correctly denied the
issuance of a subpoena duces tecum covering Johnny's hospital records on the
ground that these are covered by the privileged character of the physician-patient
communication. AaHcIT

The Ruling of the Court

Josielene requested the issuance of a subpoena duces tecum covering the
hospital records of Johnny's confinement, which records she wanted to present in
court as evidence in support of her action to have their marriage declared a
nullity. Respondent Johnny resisted her request for subpoena, however, invoking
the privileged character of those records. He cites Section 24 (c), Rule 130 of
the Rules of Evidence which reads:
SEC. 24. Disqualification by reason of privileged communication. — The
following persons cannot testify as to matters learned in confidence in
the following cases:
xxx xxx xxx
(c) A person authorized to practice medicine, surgery or obstetrics
cannot in a civil case, without the consent of the patient, be examined as
to any advice or treatment given by him or any information which he may
have acquired in attending such patient in a professional capacity, which
information was necessary to enable him to act in that capacity, and
which would blacken the reputation of the patient.

The physician-patient privileged communication rule essentially means that a

physician who gets information while professionally attending a patient cannot in
a civil case be examined without the patient's consent as to any facts which
would blacken the latter's reputation. This rule is intended to encourage the
patient to open up to the physician, relate to him the history of his ailment, and
give him access to his body, enabling the physician to make a correct diagnosis
of that ailment and provide the appropriate cure. Any fear that a physician could
be compelled in the future to come to court and narrate all that had transpired
between him and the patient might prompt the latter to clam up, thus putting his
own health at great risk. 4HCDaAS

1. The case presents a procedural issue, given that the time to object to the
admission of evidence, such as the hospital records, would be at the time they
are offered. The offer could be made part of the physician's testimony or as
independent evidence that he had made entries in those records that concern the
patient's health problems.
Section 36, Rule 132, states that objections to evidence must be made after the
offer of such evidence for admission in court. Thus:
SEC. 36. Objection. — Objection to evidence offered orally must be
made immediately after the offer is made.
Objection to a question propounded in the course of the oral examination
of a witness shall be made as soon as the grounds therefor shall
become reasonably apparent.
An offer of evidence in writing shall be objected to within three (3) days
after notice of the offer unless a different period is allowed by the court.
In any case, the grounds for the objections must be specified.

Since the offer of evidence is made at the trial, Josielene's request for
subpoena duces tecum is premature. She will have to wait for trial to begin
before making a request for the issuance of a subpoena duces tecum covering
Johnny's hospital records. It is when those records are produced for examination
at the trial, that Johnny may opt to object, not just to their admission in evidence,
but more so to their disclosure. Section 24 (c), Rule 130 of the Rules of
Evidence quoted above is about non-disclosure of privileged matters.
2. It is of course possible to treat Josielene's motion for the issuance of a
subpoena duces tecum covering the hospital records as a motion for production
of documents, a discovery procedure available to a litigant prior to trial. Section
1, Rule 27 of the Rules of Civil Procedure provides: HEDSCc

SEC. 1. Motion for production or inspection; order. — Upon motion of

any party showing good cause therefor, the court in which an action is
pending may (a) order any party to produce and permit the inspection
and copying or photographing, by or on behalf of the moving party, of
any designated documents, papers, books, accounts, letters,
photographs, objects or tangible things, not privileged, which constitute
or contain evidence material to any matter involved in the action and
which are in his possession, custody or control; or (b) order any party to
permit entry upon designated land or other property in his possession or
control for the purpose of inspecting, measuring, surveying, or
photographing the property or any designated relevant object or
operation thereon. The order shall specify the time, place and manner of
making the inspection and taking copies and photographs, and may
prescribe such terms and conditions as are just. (Emphasis supplied)

But the above right to compel the production of documents has a limitation:
the documents to be disclosed are "not privileged."
Josielene of course claims that the hospital records subject of this case are not
privileged since it is the "testimonial" evidence of the physician that may be
regarded as privileged. Section 24 (c) of Rule 130 states that the physician
"cannot in a civil case, without the consent of the patient, be examined" regarding
their professional conversation. The privilege, says Josielene, does not cover the
hospital records, but only the examination of the physician at the trial.
To allow, however, the disclosure during discovery procedure of the hospital
records — the results of tests that the physician ordered, the diagnosis of the
patient's illness, and the advice or treatment he gave him — would be to allow
access to evidence that is inadmissible without the patient's consent. Physician
memorializes all these information in the patient's records. Disclosing them would
be the equivalent of compelling the physician to testify on privileged matters he
gained while dealing with the patient, without the latter's prior consent. aATCDI

3. Josielene argues that since Johnny admitted in his answer to the petition
before the RTC that he had been confined in a hospital against his will and in fact
attached to his answer a Philhealth claim form covering that confinement, he
should be deemed to have waived the privileged character of its records.
Josielene invokes Section 17, Rule 132 of the Rules of Evidence that provides:
SEC. 17. When part of transaction, writing or record given in evidence,
the remainder admissible. — When part of an act, declaration,
conversation, writing or record is given in evidence by one party, the
whole of the same subject may be inquired into by the other, and when a
detached act, declaration, conversation, writing or record is given in
evidence, any other act, declaration, conversation, writing or record
necessary to its understanding may also be given in evidence.

But, trial in the case had not yet begun. Consequently, it cannot be said that
Johnny had already presented the Philhealth claim form in evidence, the act
contemplated above which would justify Josielene into requesting an inquiry into
the details of his hospital confinement. Johnny was not yet bound to adduce
evidence in the case when he filed his answer. Any request for disclosure of his
hospital records would again be premature.
For all of the above reasons, the CA and the RTC were justified in denying
Josielene her request for the production in court of Johnny's hospital records.
ACCORDINGLY, the Court DENIES the petition and AFFIRMS the Decision of
the Court of Appeals in CA-G.R. SP 97913 dated September 17, 2007.
SO ORDERED.
||| (Chan v. Chan, G.R. No. 179786, [July 24, 2013], 715 PHIL 67-77)
 EN BANC

[G.R. No. 180643. March 25, 2008.]

ROMULO L. NERI, petitioner, vs. SENATE COMMITTEE ON

ACCOUNTABILITY OF PUBLIC OFFICERS AND
INVESTIGATIONS, SENATE COMMITTEE ON TRADE AND
COMMERCE, AND SENATE COMMITTEE ON NATIONAL
DEFENSE AND SECURITY, respondents.

DECISION

LEONARDO-DE CASTRO, J : p

At bar is a petition for certiorari under Rule 65 of the Rules of

Court assailing the show cause Letter 1 dated November 22, 2007 and
contempt Order 2 dated January 30, 2008 concurrently issued by respondent
Senate Committees on Accountability of Public Officers and
Investigations, 3 Trade and Commerce, 4 and National Defense and
Security 5 against petitioner Romulo L. Neri, former Director General of the
National Economic and Development Authority (NEDA).
The facts, as culled from the pleadings, are as follows:
On April 21, 2007, the Department of Transportation and
Communication (DOTC) entered into a contract with Zhing Xing
Telecommunications Equipment (ZTE) for the supply of equipment and
services for the National Broadband Network (NBN) Project in the amount of
U.S. $329,481,290 (approximately P16 Billion Pesos). The Project was to be
financed by the People's Republic of China.
In connection with this NBN Project, various Resolutions were
introduced in the Senate, as follows:
(1) P.S. Res. No. 127, introduced by Senator Aquilino Q. Pimentel, Jr.,
entitled RESOLUTION DIRECTING THE BLUE RIBBON COMMITTEE
AND THE COMMITTEE ON TRADE AND INDUSTRY TO
INVESTIGATE, IN AID OF LEGISLATION, THE CIRCUMSTANCES
LEADING TO THE APPROVAL OF THE BROADBAND CONTRACT
WITH ZTE AND THE ROLE PLAYED BY THE OFFICIALS
CONCERNED IN GETTING IT CONSUMMATED AND TO MAKE
RECOMMENDATIONS TO HALE TO THE COURTS OF LAW THE
PERSONS RESPONSIBLE FOR ANY ANOMALY IN CONNECTION
 THEREWITH AND TO PLUG THE LOOPHOLES, IF ANY IN THE BOT
LAW AND OTHER PERTINENT LEGISLATIONS.
(2) P.S. Res. No. 144, introduced by Senator Mar Roxas, entitled A
RESOLUTION URGING PRESIDENT GLORIA MACAPAGAL ARROYO
TO DIRECT THE CANCELLATION OF THE ZTE CONTRACT.
(3) P.S. Res. No. 129, introduced by Senator Panfilo M. Lacson, entitled
RESOLUTION DIRECTING THE COMMITTEE ON NATIONAL
DEFENSE AND SECURITY TO CONDUCT AN INQUIRY IN AID OF
LEGISLATION INTO THE NATIONAL SECURITY IMPLICATIONS OF
AWARDING THE NATIONAL BROADBAND NETWORK CONTRACT
TO THE CHINESE FIRM ZHONG XING TELECOMMUNICATIONS
EQUIPMENT COMPANY LIMITED (ZTE CORPORATION) WITH THE
END IN VIEW OF PROVIDING REMEDIAL LEGISLATION THAT WILL
PROTECT OUR NATIONAL SOVEREIGNTY, SECURITY AND
TERRITORIAL INTEGRITY.
(4) P.S. Res. No. 136, introduced by Senator Miriam Defensor Santiago,
entitled RESOLUTION DIRECTING THE PROPER SENATE
COMMITTEE TO CONDUCT AN INQUIRY, IN AID OF LEGISLATION,
ON THE LEGAL AND ECONOMIC JUSTIFICATION OF THE
NATIONAL BROADBAND NETWORK (NBN) PROJECT OF THE
NATIONAL GOVERNMENT.
At the same time, the investigation was claimed to be relevant to the
consideration of three (3) pending bills in the Senate, to wit:
1. Senate Bill No. 1793, introduced by Senator Mar Roxas, entitled AN
ACT SUBJECTING TREATIES, INTERNATIONAL OR
EXECUTIVE AGREEMENTS INVOLVING FUNDING IN THE
PROCUREMENT OF INFRASTRUCTURE PROJECTS, GOODS,
AND CONSULTING SERVICES TO BE INCLUDED IN THE
SCOPE AND APPLICATION OF PHILIPPINE PROCUREMENT
LAWS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO.
9184, OTHERWISE KNOWN AS THE GOVERNMENT
PROCUREMENT REFORM ACT, AND FOR OTHER
PURPOSES;
2. Senate Bill No. 1794, introduced by Senator Mar Roxas, entitled AN
ACT IMPOSING SAFEGUARDS IN CONTRACTING LOANS
CLASSIFIED AS OFFICIAL DEVELOPMENT ASSISTANCE,
AMENDING FOR THE PURPOSEREPUBLIC ACT NO. 8182, AS
AMENDED BY REPUBLIC ACT NO. 8555, OTHERWISE
KNOWN AS THE OFFICIAL DEVELOPMENT ASSISTANCE ACT
OF 1996, AND FOR OTHER PURPOSES; and
3. Senate Bill No. 1317, introduced by Senator Miriam Defensor
Santiago, entitled AN ACT MANDATING CONCURRENCE TO
 INTERNATIONAL AGREEMENTS AND EXECUTIVE
AGREEMENTS.
Respondent Committees initiated the investigation by sending
invitations to certain personalities and cabinet officials involved in the NBN
Project. Petitioner was among those invited. He was summoned to appear
and testify on September 18, 20, and 26 and October 25, 2007. However, he
attended only the September 26 hearing, claiming he was "out of town" during
the other dates.
In the September 18, 2007 hearing, businessman Jose de Venecia III
testified that several high executive officials and power brokers were using
their influence to push the approval of the NBN Project by the NEDA. It
appeared that the Project was initially approved as a Build-Operate-Transfer
(BOT) project but, on March 29, 2007, the NEDA acquiesced to convert it into
a government-to-government project, to be financed through a loan from the
Chinese Government.
On September 26, 2007, petitioner testified before respondent
Committees for eleven (11) hours. He disclosed that then Commission on
Elections (COMELEC) Chairman Benjamin Abalos offered him P200 Million in
exchange for his approval of the NBN Project. He further narrated that he
informed President Arroyo about the bribery attempt and that she instructed
him not to accept the bribe. However, when probed further on what they
discussed about the NBN Project, petitioner refused to answer, invoking
"executive privilege". In particular, he refused to answer the questions
on(a) whether or not President Arroyo followed up the NBN
Project, 6 (b) whether or not she directed him to prioritize it, 7and (c) whether
or not she directed him to approve. 8
Unrelenting, respondent Committees issued a Subpoena Ad
Testificandum to petitioner, requiring him to appear and testify on November
20, 2007.
However, in the Letter dated November 15, 2007, Executive Secretary
Eduardo R. Ermita requested respondent Committees to dispense with
petitioner's testimony on the ground of executive privilege. The pertinent
portion of the letter reads:
With reference to the subpoena ad testificandum issued to Secretary
Romulo Neri to appear and testify again on 20 November 2007 before
the Joint Committees you chair, it will be recalled that Sec. Neri had
already testified and exhaustively discussed the ZTE/NBN project,
including his conversation with the President thereon last 26 September
2007.
 Asked to elaborate further on his conversation with the President, Sec.
Neri asked for time to consult with his superiors in line with the ruling of
the Supreme Court in Senate v. Ermita, 488 SCRA 1 (2006).
Specifically, Sec. Neri sought guidance on the possible invocation of
executive privilege on the following questions, to wit:
a) Whether the President followed up the (NBN) project?
b) Were you dictated to prioritize the ZTE?
c) Whether the President said to go ahead and approve the
project after being told about the alleged bribe?
Following the ruling in Senate v. Ermita, the foregoing questions fall
under conversations and correspondence between the President and
public officials which are considered executive privilege (Almonte v.
Vasquez, G.R. 95637, 23 May 1995; Chavez v. PEA, G.R. 133250, July
9, 2002). Maintaining the confidentiality of conversations of the President
is necessary in the exercise of her executive and policy decision making
process. The expectation of a President to the confidentiality of her
conversations and correspondences, like the value which we accord
deference for the privacy of all citizens, is the necessity for protection of
the public interest in candid, objective, and even blunt or harsh opinions
in Presidential decision-making. Disclosure of conversations of the
President will have a chilling effect on the President, and will hamper her
in the effective discharge of her duties and responsibilities, if she is not
protected by the confidentiality of her conversations.
The context in which executive privilege is being invoked is that the
information sought to be disclosed might impair our diplomatic as well as
economic relations with the People's Republic of China. Given the
confidential nature in which these information were conveyed to the
President, he cannot provide the Committee any further details of these
conversations, without disclosing the very thing the privilege is designed
to protect.
In light of the above considerations, this Office is constrained to invoke
the settled doctrine of executive privilege as refined in Senate v. Ermita,
and has advised Secretary Neri accordingly.
Considering that Sec. Neri has been lengthily interrogated on the subject
in an unprecedented 11-hour hearing, wherein he has answered all
questions propounded to him except the foregoing questions involving
executive privilege, we therefore request that his testimony on 20
November 2007 on the ZTE/NBN project be dispensed with.
On November 20, 2007, petitioner did not appear before respondent
Committees. Thus, on November 22, 2007, the latter issued the show
cause Letter requiring him to explain why he should not be cited in contempt.
The Letter reads:
Since you have failed to appear in the said hearing, the Committees on
Accountability of Public Officers and Investigations (Blue Ribbon), Trade
and Commerce and National Defense and Security require you to show
cause why you should not be cited in contempt under Section 6, Article 6
of the Rules of the Committee on Accountability of Public Officers and
Investigations (Blue Ribbon).
The Senate expects your explanation on or before 2 December 2007.
On November 29, 2007, petitioner replied to respondent Committees,
manifesting that it was not his intention to ignore the Senate hearing and that
he thought the only remaining questions were those he claimed to be covered
by executive privilege, thus:
It was not my intention to snub the last Senate hearing. In fact, I have
cooperated with the task of the Senate in its inquiry in aid of legislation
as shown by my almost 11 hours stay during the hearing on 26
September 2007. During said hearing, I answered all the questions that
were asked of me, save for those which I thought was covered by
executive privilege, and which was confirmed by the Executive Secretary
in his Letter 15 November 2007. In good faith, after that exhaustive
testimony, I thought that what remained were only the three questions,
where the Executive Secretary claimed executive privilege. Hence, his
request that my presence be dispensed with.
Be that as it may, should there be new matters that were not yet taken
up during the 26 September 2007 hearing, may I be furnished in
advance as to what else I need to clarify, so that as a resource person, I
may adequately prepare myself.
In addition, petitioner submitted a letter prepared by his counsel, Atty.
Antonio R. Bautista, stating, among others that: (1) his (petitioner) non-
appearance was upon the order of the President; and (2) his conversation
with President Arroyo dealt with delicate and sensitive national security and
diplomatic matters relating to the impact of the bribery scandal involving high
government officials and the possible loss of confidence of foreign investors
and lenders in the Philippines. The letter ended with a reiteration of
petitioner's request that he "be furnished in advance" as to what else he
needs to clarify so that he may adequately prepare for the hearing.
In the interim, on December 7, 2007, petitioner filed with this Court the
present petition for certiorari assailing the show cause Letter dated November
22, 2007.
Respondent Committees found petitioner's explanations unsatisfactory.
Without responding to his request for advance notice of the matters that he
should still clarify, they issued the Order dated January 30, 2008, citing him in
contempt of respondent Committees and ordering his arrest and detention at
the Office of the Senate Sergeant-At-Arms until such time that he would
appear and give his testimony. The said Order states:
ORDER
For failure to appear and testify in the Committee's hearing on Tuesday,
September 18, 2007; Thursday, September 20, 2007; Thursday, October
25, 2007; and Tuesday, November 20, 2007, despite personal notice
and Subpoenas Ad Testificandum sent to and received by him, which
thereby delays, impedes and obstructs, as it has in fact delayed,
impeded and obstructed the inquiry into the subject reported
irregularities, AND for failure to explain satisfactorily why he should not
be cited for contempt (Neri letter of 29 November 2007), herein
attached) ROMULO L. NERI is hereby cited in contempt of this
Committees and ordered arrested and detained in the Office of the
Senate Sergeant-At-Arms until such time that he will appear and
give his testimony.
The Sergeant-At-Arms is hereby directed to carry out and implement this
Order and make a return hereof within twenty four (24) hours from its
enforcement.
SO ORDERED.
On the same date, petitioner moved for the reconsideration of the
above Order. 9 He insisted that he has not shown "any contemptible conduct
worthy of contempt and arrest." He emphasized his willingness to testify on
new matters, however, respondent Committees did not respond to his request
for advance notice of questions. He also mentioned the petition
for certiorari he filed on December 7, 2007. According to him, this should
restrain respondent Committees from enforcing the show
cause Letter "through the issuance of declaration of contempt" and arrest.
In view of respondent Committees' issuance of the contempt Order,
petitioner filed on February 1, 2008 aSupplemental Petition for Certiorari (With
Urgent Application for TRO/Preliminary Injunction), seeking to restrain the
implementation of the said contempt Order.
On February 5, 2008, the Court issued a Status Quo Ante
Order (a) enjoining respondent Committees from implementing their contempt
Order, (b) requiring the parties to observe the status quo prevailing prior to
the issuance of the assailed order, and (c) requiring respondent Committees
to file their comment.
Petitioner contends that respondent Committees' show
cause Letter and contempt Order were issued with grave abuse of discretion
amounting to lack or excess of jurisdiction. He stresses that his conversations
with President Arroyo are "candid discussions meant to explore options in
making policy decisions." According to him, these discussions "dwelt on
the impact of the bribery scandal involving high government officials on
the country's diplomatic relations and economic and military affairs and
the possible loss of confidence of foreign investors and lenders in the
Philippines." He also emphasizes that his claim of executive privilege is upon
the order of the President and within the parameters laid down in Senate v.
Ermita 10 and United States v. Reynolds. 11 Lastly, he argues that he is
precluded from disclosing communications made to him in official confidence
under Section 7 12 of Republic Act No. 6713, otherwise known as Code of
Conduct and Ethical Standards for Public Officials and Employees, and
Section 24 13 (e) of Rule 130 of the Rules of Court.
Respondent Committees assert the contrary. They argue
that (1) petitioner's testimony is material and pertinent in the investigation
conducted in aid of legislation; (2) there is no valid justification for petitioner to
claim executive privilege; (3) there is no abuse of their authority to order
petitioner's arrest; and (4) petitioner has not come to court with clean hands.
In the oral argument held last March 4, 2008, the following issues were
ventilated:
1. What communications between the President and petitioner Neri are
covered by the principle of 'executive privilege'?
1.a Did Executive Secretary Ermita correctly invoke the principle
of executive privilege, by order of the President, to
cover (i) conversations of the President in the exercise of
her executive and policy decision-making
and (ii) information, which might impair our diplomatic as
well as economic relations with the People's Republic of
China?
1.b. Did petitioner Neri correctly invoke executive privilege to
avoid testifying on his conversations with the President on
the NBN contract on his assertions that the said
conversations "dealt with delicate and sensitive
national security and diplomatic matters relating to the
impact of bribery scandal involving high government
officials and the possible loss of confidence of foreign
investors and lenders in the Philippines" . . . within the
principles laid down in Senate v. Ermita (488 SCRA 1
[2006])?
1.c Will the claim of executive privilege in this case violate the
following provisions of the Constitution:
 Sec. 28, Art. II (Full public disclosure of all transactions involving
public interest)
Sec. 7, Art. III (The right of the people to information on matters
of public concern)
Sec. 1, Art. XI (Public office is a public trust)
Sec. 17, Art. VII (The President shall ensure that the laws be
faithfully executed)
and the due process clause and the principle of separation of
powers?
2. What is the proper procedure to be followed in invoking executive
privilege?
3. Did the Senate Committees gravely abuse their discretion in ordering
the arrest of petitioner for non-compliance with the subpoena?
After the oral argument, the parties were directed to manifest to the
Court within twenty-four (24) hours if they are amenable to the Court's
proposal of allowing petitioner to immediately resume his testimony before the
Senate Committees to answer the other questions of the Senators without
prejudice to the decision on the merits of this pending petition. It was
understood that petitioner may invoke executive privilege in the course of the
Senate Committees proceedings, and if the respondent Committees disagree
thereto, the unanswered questions will be the subject of a supplemental
pleading to be resolved along with the three (3) questions subject of the
present petition. 14 At the same time, respondent Committees were directed to
submit several pertinent documents. 15
The Senate did not agree with the proposal for the reasons stated in the
Manifestation dated March 5, 2008. As to the required documents, the Senate
and respondent Committees manifested that they would not be able to submit
the latter's "Minutes of all meetings" and the "Minute Book" because it has
never been the "historical and traditional legislative practice to keep
them." 16 They instead submitted the Transcript of Stenographic Notes of
respondent Committees' joint public hearings.
On March 17, 2008, the Office of the Solicitor General (OSG) filed
a Motion for Leave to Intervene and to Admit Attached Memorandum, founded
on the following arguments:
(1) The communications between petitioner and the President are
covered by the principle of "executive privilege."
(2) Petitioner was not summoned by respondent Senate Committees in
accordance with the law-making body's power to conduct
 inquiries in aid of legislation as laid down in Section 21, Article VI
of the Constitution andSenate v. Ermita.
(3) Respondent Senate Committees gravely abused its discretion for
alleged non-compliance with the Subpoenadated November 13,
2007.
The Court granted the OSG's motion the next day, March 18, 2007.
As the foregoing facts unfold, related events transpired.
On March 6, 2008, President Arroyo issued Memorandum Circular No.
151, revoking Executive Order No. 464 and Memorandum Circular No. 108.
She advised executive officials and employees to follow and abide by
the Constitution, existing laws and jurisprudence, including, among others, the
case of Senate v. Ermita 17 when they are invited to legislative inquiries in aid
of legislation.
At the core of this controversy are the two (2) crucial queries, to wit:
First, are the communications elicited by the subject three (3) questions
covered by executive privilege?
And second, did respondent Committees commit grave abuse of
discretion in issuing the contempt Order?
We grant the petition.
At the outset, a glimpse at the landmark case of Senate v.
Ermita 18 becomes imperative. Senate draws in bold strokes the distinction
between the legislative and oversight powers of the Congress, as embodied
under Sections 21 and 22, respectively, of Article VI of the Constitution, to wit:
SECTION 21. The Senate or the House of Representatives or any of its
respective committees may conduct inquiriesin aid of legislation in
accordance with its duly published rules of procedure. The rights of
persons appearing in or affected by such inquiries shall be respected.
SECTION 22. The heads of department may upon their own initiative,
with the consent of the President, or upon the request of either House, or
as the rules of each House shall provide, appear before and be heard by
such House on any matter pertaining to their departments. Written
questions shall be submitted to the President of the Senate or the
Speaker of the House of Representatives at least three days before their
scheduled appearance. Interpellations shall not be limited to written
questions, but may cover matters related thereto. When the security of
the state or the public interest so requires and the President so states in
writing, the appearance shall be conducted in executive session.
Senate cautions that while the above provisions are closely related and
complementary to each other, they should not be considered as pertaining to
the same power of Congress. Section 21 relates to the power to conduct
inquiries in aid of legislation, its aim is to elicit information that may be used
for legislation, while Section 22 pertains to the power to conduct a question
hour, the objective of which is to obtain information in pursuit of Congress'
oversight function. 19Simply stated, while both powers allow Congress or any
of its committees to conduct inquiry, their objectives are different.
This distinction gives birth to another distinction with regard to the use
of compulsory process. Unlike in Section 21, Congress cannot compel the
appearance of executive officials under Section 22. The Court's
pronouncement inSenate v. Ermita 20 is clear:
When Congress merely seeks to be informed on how department heads
are implementing the statutes which it has issued, its right to such
information is not as imperative as that of the President to whom, as
Chief Executive, such department heads must give a report of their
performance as a matter of duty. In such instances, Section 22, in
keeping with the separation of powers, states that Congress may
only request their appearance. Nonetheless, when the inquiry in which
Congress requires their appearance is 'in aid of legislation' under
Section 21, the appearance is mandatory for the same reasons stated
in Arnault.
In fine, the oversight function of Congress may be facilitated by
compulsory process only to the extent that it is performed in
pursuit of legislation. This is consistent with the intent discerned from
the deliberations of the Constitutional Commission.
Ultimately, the power of Congress to compel the appearance of
executive officials under section 21 and the lack of it under Section 22
find their basis in the principle of separation of powers. While the
executive branch is a co-equal branch of the legislature, it cannot
frustrate the power of Congress to legislate by refusing to comply with its
demands for information. (Emphasis supplied.)
The availability of the power of judicial review to resolve the issues
raised in this case has also been settled inSenate v. Ermita, when it held:
As evidenced by the American experience during the so-called
"McCarthy era", however, the right of Congress to conduct inquiries in
aid of legislation is, in theory, no less susceptible to abuse than
executive or judicial power. It may thus be subjected to judicial review
pursuant to the Court's certiorari powers under Section 1, Article VIII of
theConstitution.
Hence, this decision.
I
 The Communications Elicited by the Three (3)
Questions are Covered by Executive Privilege
We start with the basic premises where the parties have conceded.
The power of Congress to conduct inquiries in aid of legislation is
broad. This is based on the proposition that a legislative body cannot legislate
wisely or effectively in the absence of information respecting the conditions
which the legislation is intended to affect or change. 21 Inevitably, adjunct
thereto is the compulsory process to enforce it. But, the power, broad as it is,
has limitations. To be valid, it is imperative that it is done in accordance with
the Senate or House duly published rules of procedure and that the rights of
the persons appearing in or affected by such inquiries be respected.
The power extends even to executive officials and the only way for
them to be exempted is through a valid claim of executive privilege. 22 This
directs us to the consideration of the question — is there a recognized claim
of executive privilege despite the revocation of E.O. 464?
A-There is a Recognized Claim
of Executive Privilege Despite the
Revocation of E.O. 464
At this juncture, it must be stressed that the revocation of E.O.
464 does not in any way diminish our concept of executive privilege. This is
because this concept has Constitutional underpinnings. Unlike the United
States which has further accorded the concept with statutory status by
enacting the Freedom of Information Act 23 and the Federal Advisory
Committee Act, 24 the Philippines has retained its constitutional origination,
occasionally interpreted only by this Court in various cases. The most recent
of these is the case of Senate v. Ermita where this Court declared
unconstitutional substantial portions of E.O. 464. In this regard, it is worthy to
note that Executive Ermita's Letter dated November 15, 2007 limit its bases
for the claim of executive privilege to Senate v. Ermita, Almonte v.
Vasquez, 25 andChavez v. PEA. 26 There was never a mention of E.O. 464.
While these cases, especially Senate v. Ermita, 27 have
comprehensively discussed the concept of executive privilege, we deem it
imperative to explore it once more in view of the clamor for this Court to
clearly define the communications covered by executive privilege.
The Nixon and post-Watergate cases established the broad contours of
the presidential communications privilege. 28 In United States v.
Nixon, 29 the U.S. Court recognized a great public interest in preserving "the
confidentiality of conversations that take place in the President's
performance of his official duties." It thus considered presidential
communications as "presumptively privileged." Apparently, the presumption
is founded on the "President's generalized interest in confidentiality." The
privilege is said to be necessary to guarantee the candor of presidential
advisors and to provide "the President and those who assist him. . . with
freedom to explore alternatives in the process of shaping policies and
making decisions and to do so in a way many would be unwilling to
express except privately."
In In re: Sealed Case, 30 the U.S. Court of Appeals delved deeper. It
ruled that there are two (2) kinds of executive privilege; one is
the presidential communications privilege and, the other is
the deliberative process privilege. The former pertains
to "communications, documents or other materials that reflect
presidential decision-making and deliberations and that the President
believes should remain confidential." The latter includes 'advisory
opinions, recommendations and deliberations comprising part of a
process by which governmental decisions and policies are formulated."
Accordingly, they are characterized by marked
distinctions. Presidential communications privilege applies todecision-
making of the President while, the deliberative process privilege,
to decision-making of executive officials. The first is rooted in the
constitutional principle of separation of power and the President's unique
constitutional role; the second on common law privilege. Unlike
the deliberative process privilege, the presidential communications
privilege applies to documents in their entirety, and covers final and
post-decisional materials as well as pre-deliberative ones 31 As a
consequence, congressional or judicial negation of the presidential
communications privilege is always subject to greater scrutiny than denial
of the deliberative process privilege.
Turning on who are the officials covered by the presidential
communications privilege, In Re Sealed Caseconfines the privilege only to
White House Staff that has "operational proximity" to direct presidential
decision-making. Thus, the privilege is meant to encompass only those
functions that form the core of presidential authority, involving what the court
characterized as "quintessential and non-delegable Presidential power", such
as commander-in-chief power, appointment and removal power, the power to
grant pardons and reprieves, the sole-authority to receive ambassadors and
other public officers, the power to negotiate treaties etc. 32
The situation in Judicial Watch, Inc. v. Department of Justice 33 tested
the In Re Sealed Case principles. There, while the presidential decision
involved is the exercise of the President's pardon power, a non-delegable,
core-presidential function, the Deputy Attorney General and the Pardon
Attorney were deemed to be too remote from the President and his senior
White House advisors to be protected. The Court conceded that functionally
those officials were performing a task directly related to the President's
pardon power, but concluded that an organizational test was more appropriate
for confining the potentially broad sweep that would result from the In Re
Sealed Case's functional test. The majority concluded that, the lesser
protections of the deliberative process privilege would suffice. That privilege
was, however, found insufficient to justify the confidentiality of the 4,341
withheld documents.
But more specific classifications of communications covered by
executive privilege are made in older cases. Courts ruled early that the
Executive has a right to withhold documents that might reveal military or
state secrets 34 identity of government informers in some
circumstances, 35 and information related to pending
investigations. 36 An area where the privilege is highly revered is in foreign
relations. In United States v. Curtiss-Wright Export Corp. 37 the U.S. Court,
citing President George Washington, pronounced:
The nature of foreign negotiations requires caution, and their success
must often depend on secrecy, and even when brought to a conclusion,
a full disclosure of all the measures, demands, or eventual concessions
which may have been proposed or contemplated would be extremely
impolitic, for this might have a pernicious influence on future negotiations
or produce immediate inconveniences, perhaps danger and mischief, in
relation to other powers. The necessity of such caution and secrecy was
one cogent reason for vesting the power of making treaties in the
President, with the advice and consent of the Senate, the principle on
which the body was formed confining it to a small number of members.
To admit, then, a right in the House of Representatives to demand and
to have as a matter of course all the papers respecting a negotiation with
a foreign power would be to establish a dangerous precedent.
Majority of the above jurisprudence have found their way in our
jurisdiction. In Chavez v. PCGG, 38 this Court held that there is a
"governmental privilege against public disclosure with respect to state secrets
regarding military, diplomatic and other security matters." In Chavez v.
PEA, 39 there is also a recognition of the confidentiality of Presidential
conversations, correspondences, and discussions in closed-door Cabinet
meetings. In Senate v. Ermita, the concept of presidential communications
privilege is fully discussed.
As may be gleaned from the above discussion, the claim of executive
privilege is highly recognized in cases where the subject of inquiry relates to a
power textually committed by the Constitution to the President, such as the
area of military and foreign relations. Under our Constitution,the President is
the repository of the commander-in-chief, 40appointing, 41 pardoning, 42 and
diplomatic 43 powers. Consistent with the doctrine of separation of powers, the
information relating to these powers may enjoy greater confidentiality than
others.
The above cases, especially, Nixon, In Re Sealed Case and Judicial
Watch, somehow provide the elements ofpresidential communications
privilege, to wit:
1) The protected communication must relate to a "quintessential and
non-delegable presidential power."
2) The communication must be authored or "solicited and received" by a
close advisor of the President or the President himself. The
judicial test is that an advisor must be in "operational proximity"
with the President.
3) The presidential communications privilege remains a qualified
privilege that may be overcome by a showing of adequate need,
such that the information sought "likely contains important
evidence" and by the unavailability of the information elsewhere
by an appropriate investigating authority. 44
In the case at bar, Executive Secretary Ermita premised his claim of
executive privilege on the ground that the communications elicited by the
three (3) questions "fall under conversation and correspondence between the
President and public officials" necessary in "her executive and policy decision-
making process" and, that "the information sought to be disclosed might
impair our diplomatic as well as economic relations with the People's Republic
of China." Simply put, the bases are presidential communications
privilege and executive privilege on matters relating to diplomacy or foreign
relations.
Using the above elements, we are convinced that, indeed, the
communications elicited by the three (3) questions are covered by
the presidential communications privilege. First, the communications
relate to a "quintessential and non-delegable power" of the President, i.e. the
power to enter into an executive agreement with other countries. This
authority of the President to enter into executive agreements without the
concurrence of the Legislature has traditionally been recognized in Philippine
jurisprudence. 45 Second, the communications are "received" by a close
advisor of the President. Under the "operational proximity" test, petitioner can
be considered a close advisor, being a member of President Arroyo's
cabinet. And third, there is no adequate showing of a compelling need that
would justify the limitation of the privilege and of the unavailability of the
information elsewhere by an appropriate investigating authority.
The third element deserves a lengthy discussion.
 United States. v. Nixon held that a claim of executive privilege is subject
to balancing against other interest. In other words, confidentiality in
executive privilege is not absolutely protected by the Constitution. The U.S.
Court held:
[N]either the doctrine of separation of powers, nor the need for
confidentiality of high-level communications, without more, can sustain
an absolute, unqualified Presidential privilege of immunity from judicial
process under all circumstances.
The foregoing is consistent with the earlier case of Nixon vs.
Sirica, 46 where it was held that presidential communications privilege are
presumptively privileged and that the presumption can be overcome only by
mere showing of public need by the branch seeking access to conversations.
The courts are enjoined to resolve the competing interests of the political
branches of the government "in the manner that preserves the essential
functions of each Branch." 47 Here, the record is bereft of any categorical
explanation from respondent Committees to show a compelling or critical
need for the answers to the three (3) questions in the enactment of a law.
Instead, the questions veer more towards the exercise of the legislative
oversight function under Section 22 of Article VI rather than Section 21 of the
same Article. Senate v. Ermita ruled that the "the oversight function of
Congress may be facilitated by compulsory process only to the extent
that it is performed in pursuit of legislation." It is conceded that it is
difficult to draw the line between an inquiry in aid of legislation and an inquiry
in the exercise of oversight function of Congress. In this regard, much will
depend on the content of the questions and the manner the inquiry is
conducted.
Respondent Committees argue that a claim of executive privilege does
not guard against a possible disclosure of a crime or wrongdoing. We see no
dispute on this. It is settled in United States v. Nixon 48 that "demonstrated,
specific need for evidence in pending criminal trial" outweighs the
President's "generalized interest in confidentiality." However, the present
case's distinction with the Nixon case is very evident. In Nixon, there is a
pending criminal proceeding where the information is requested and it is the
demands of due process of law and the fair administration of criminal justice
that the information be disclosed. This is the reason why the U.S. Court was
quick to "limit the scope of its decision." It stressed that it is "not
concerned here with the balance between the President's generalized
interest in confidentiality . . . and congressional demands for
information." Unlike in Nixon, the information here is elicited, not in a criminal
proceeding, but in a legislative inquiry. In this regard, Senate v.
Ermita stressed that the validity of the claim of executive privilege depends
not only on the ground invoked but, also, the procedural setting or
thecontext in which the claim is made. Furthermore, in Nixon, the President
did not interpose any claim of need to protect military, diplomatic or sensitive
national security secrets. In the present case, Executive Secretary Ermita
categorically claims executive privilege on the grounds of presidential
communications privilege in relation to her executive and policy decision-
making process and diplomatic secrets.
The respondent Committees should cautiously tread into the
investigation of matters which may present a conflict of interest that may
provide a ground to inhibit the Senators participating in the inquiry if later on
an impeachment proceeding is initiated on the same subject matter of the
present Senate inquiry. Pertinently, in Senate Select Committee on
Presidential Campaign Activities v. Nixon, 49 it was held that since an
impeachment proceeding had been initiated by a House Committee, the
Senate Select Committee's immediate oversight need for five presidential
tapes, should give way to the House Judiciary Committee which has the
constitutional authority to inquire into presidential impeachment. The Court
expounded on this issue in this wise:
It is true, of course, that the Executive cannot, any more than the other
branches of government, invoke a general confidentiality privilege to
shield its officials and employees from investigations by the proper
governmental institutions into possible criminal wrongdoing. The
Congress learned this as to its own privileges in Gravel v. United States,
as did the judicial branch, in a sense, in Clark v. United States, and the
executive branch itself in Nixon v. Sirica. But under Nixon v. Sirica, the
showing required to overcome the presumption favoring
confidentiality turned, not on the nature of the presidential conduct that
the subpoenaed material might reveal, but, instead, on the nature and
appropriateness of the function in the performance of which the
material was sought, and the degree to which the material was
necessary to its fulfillment. Here also our task requires and our
decision implies no judgment whatever concerning possible
presidential involvement in culpable activity. On the contrary, we
think the sufficiency of the Committee's showing must depend
solely on whether the subpoenaed evidence is demonstrably
critical to the responsible fulfillment of the Committee's functions.
In its initial briefs here, the Committee argued that it has shown exactly
this. It contended that resolution, on the basis of the subpoenaed tapes,
of the conflicts in the testimony before it 'would aid in a determination
whether legislative involvement in political campaigns is necessary' and
'could help engender the public support needed for basic reforms in our
electoral system.' Moreover, Congress has, according to the Committee,
power to oversee the operations of the executive branch, to investigate
instances of possible corruption and malfeasance in office, and to
expose the results of its investigations to public view. The Committee
 says that with respect to Watergate-related matters, this power has been
delegated to it by the Senate, and that to exercise its power responsibly,
it must have access to the subpoenaed tapes.
We turn first to the latter contention. In the circumstances of this case,
we need neither deny that the Congress may have, quite apart from its
legislative responsibilities, a general oversight power, nor explore what
the lawful reach of that power might be under the Committee's
constituent resolution. Since passage of that resolution, the House
Committee on the Judiciary has begun an inquiry into presidential
impeachment. The investigative authority of the Judiciary Committee
with respect to presidential conduct has an express constitutional
source. . . . We have been shown no evidence indicating that
Congress itself attaches any particular value to this interest. In
these circumstances, we think the need for the tapes premised
solely on an asserted power to investigate and inform cannot
justify enforcement of the Committee's subpoena.
The sufficiency of the Committee's showing of need has come to
depend, therefore, entirely on whether the subpoenaed materials are
critical to the performance of its legislative functions. There is a clear
difference between Congress's legislative tasks and the responsibility of
a grand jury, or any institution engaged in like functions. While fact-
finding by a legislative committee is undeniably a part of its task,
legislative judgments normally depend more on the predicted
consequences of proposed legislative actions and their political
acceptability, than on precise reconstruction of past events;
Congress frequently legislates on the basis of conflicting information
provided in its hearings. In contrast, the responsibility of the grand jury
turns entirely on its ability to determine whether there is probable cause
to believe that certain named individuals did or did not commit specific
crimes. If, for example, as inNixon v. Sirica, one of those crimes is
perjury concerning the content of certain conversations, the grand jury's
need for the most precise evidence, the exact text of oral statements
recorded in their original form, is undeniable. We see no comparable
need in the legislative process, at least not in the circumstances of
this case. Indeed, whatever force there might once have been in the
Committee's argument that the subpoenaed materials are necessary to
its legislative judgments has been substantially undermined by
subsequent events. (Emphasis supplied)
Respondent Committees further contend that the grant of petitioner's
claim of executive privilege violates the constitutional provisions on right of the
people to information on matters of public concern. 50 We might have agreed
with such contention if petitioner did not appear before them at all. But
petitioner made himself available to them during the September 26 hearing,
where he was questioned for eleven (11) hours. Not only that, he expressly
manifested his willingness to answer more questions from the Senators, with
the exception only of those covered by his claim of executive privilege.
The right to public information, like any other right, is subject to
limitation. Section 7 of Article III provides:
The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall
be afforded the citizen, subject to such limitations as may be
provided by law.
The provision itself expressly provides the limitation, i.e. as may be
provided by law. Some of these laws are Section 7 of Republic Act (R.A.)
No. 6713, 51 Article 229 52 of the Revised Penal Code, Section 3 (k) 53 of R.A.
No. 3019, and Section 24 (e) 54 of Rule 130 of the Rules of Court. These are
in addition to what our body of jurisprudence classifies as confidential 55 and
what our Constitution considers as belonging to the larger concept of
executive privilege. Clearly, there is a recognized public interest in the
confidentiality of certain information. We find the information subject of this
case belonging to such kind.
More than anything else, though, the right of Congress or any of its
Committees to obtain information in aid of legislation cannot be equated with
the people's right to public information. The former cannot claim that every
legislative inquiry is an exercise of the people' right to information. The
distinction between such rights is laid down in Senate v. Ermita:
There are, it bears noting, clear distinctions between the right of
Congress to information which underlies the power of inquiry and the
right of people to information on matters of public concern. For one, the
demand of a citizen for the production of documents pursuant to his right
to information does not have the same obligatory force as a subpoena
duces tecum issued by Congress. Neither does the right to information
grant a citizen the power to exact testimony from government officials.
These powers belong only to Congress, not to individual citizen.
Thus, while Congress is composed of representatives elected by
the people, it does not follow, except in a highly qualified sense,
that in every exercise of its power of inquiry, the people are
exercising their right to information.
The members of respondent Committees should not invoke as
justification in their exercise of power a right properly belonging to the people
in general. This is because when they discharge their power, they do so as
public officials and members of Congress. Be that as it may, the right to
information must be balanced with and should give way in appropriate cases
to constitutional precepts particularly those pertaining to delicate interplay of
executive-legislative powers and privileges which is the subject of careful
review by numerous decided cases.
B-The Claim of Executive Privilege
is Properly Invoked
We now proceed to the issue — whether the claim is properly
invoked by the President. Jurisprudence teaches that for the claim to be
properly invoked, there must be a formal claim of privilege, lodged by the
head of the department which has control over the matter." 56 A formal and
proper claim of executive privilege requires a "precise and certain reason" for
preserving their confidentiality. 57
The Letter dated November 17, 2007 of Executive Secretary Ermita
satisfies the requirement. It serves as the formal claim of privilege. There he
expressly states that "this Office is constrained to invoke the settled
doctrine of executive privilege as refined in Senate v. Ermita, and has
advised Secretary Neri accordingly." Obviously, he is referring to the Office
of the President. That is more than enough compliance. In Senate v. Ermita, a
less categorical letter was even adjudged to be sufficient.
With regard to the existence of "precise and certain reason", we find the
grounds relied upon by Executive Secretary Ermita specific enough so as not
"to leave respondent Committees in the dark on how the requested
information could be classified as privileged." The case of Senate v.
Ermita only requires that an allegation be made "whether the information
demanded involves military or diplomatic secrets, closed-door Cabinet
meetings, etc." The particular ground must only be specified. The
enumeration is not even intended to be comprehensive." 58 The following
statement of grounds satisfies the requirement:
The context in which executive privilege is being invoked is that the
information sought to be disclosed might impair our diplomatic as well as
economic relations with the People's Republic of China. Given the
confidential nature in which these information were conveyed to the
President, he cannot provide the Committee any further details of these
conversations, without disclosing the very thing the privilege is designed
to protect.
At any rate, as held further in Senate v. Ermita, 59 the Congress must
not require the executive to state the reasons for the claim with such
particularity as to compel disclosure of the information which the privilege is
meant to protect. This is a matter of respect to a coordinate and co-equal
department.
II
 Respondent Committees Committed Grave Abuse
of Discretion in Issuing the Contempt Order
Grave abuse of discretion means "such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other words
where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and it must be so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law." 60
It must be reiterated that when respondent Committees issued the
show cause Letter dated November 22, 2007, petitioner replied immediately,
manifesting that it was not his intention to ignore the Senate hearing and that
he thought the only remaining questions were the three (3) questions he
claimed to be covered by executive privilege. In addition thereto, he submitted
Atty. Bautista's letter, stating that his non-appearance was upon the order of
the President and specifying the reasons why his conversations with
President Arroyo are covered by executive privilege. Both correspondences
include an expression of his willingness to testify again, provided he "be
furnished in advance" copies of the questions. Without responding to his
request for advance list of questions, respondent Committees issued
the Order dated January 30, 2008, citing him in contempt of respondent
Committees and ordering his arrest and detention at the Office of the Senate
Sergeant-At-Arms until such time that he would appear and give his
testimony. Thereupon, petitioner filed a motion for reconsideration, informing
respondent Committees that he had filed the present petition for certiorari.
Respondent Committees committed grave abuse of discretion in issuing
the contempt Order in view of five (5) reasons.
First, there being a legitimate claim of executive privilege, the issuance
of the contempt Order suffers from constitutional infirmity.
Second, respondent Committees did not comply with the requirement
laid down in Senate vs. Ermita that the invitations should contain the "possible
needed statute which prompted the need for the inquiry", along with "the usual
indication of the subject of inquiry and the questions relative to and in
furtherance thereof." Compliance with this requirement is imperative, both
under Sections 21 and 22 of Article VI of the Constitution. This must be so to
ensure that the rights of both persons appearing in or affected by such
inquiry are respected as mandated by said Section 21 and by virtue of the
express language of Section 22. Unfortunately, despite petitioner's repeated
demands, respondent Committees did not send him advance list of questions.
Third, a reading of the transcript of respondent Committees' January
30, 2008 proceeding reveals that only a minority of the members of the
Senate Blue Ribbon Committee were present during the
deliberation. 61 Section 18 of theRules of Procedure Governing Inquiries in Aid
of Legislation provides that:
"The Committee, by a vote of majority of all its members, may punish
for contempt any witness before it who disobey any order of the
Committee or refuses to be sworn or to testify or to answer proper
questions by the Committee or any of its members."
Clearly, the needed vote is a majority of all the members of the
Committee. Apparently, members who did not actually participate in the
deliberation were made to sign the contempt Order. Thus, there is a cloud of
doubt as to the validity of the contempt Order dated January 30, 2008. We
quote the pertinent portion of the transcript, thus:
THE CHAIRMAN (SEN. CAYETANO, A).
For clarification. . . . The Chair will call either a caucus or will ask
the Committee on Rules if there is a problem. Meaning, if we
do not have the sufficient numbers. But if we have a
sufficient number, we will just hold a caucus to be able to
implement that right away because. . . Again, our Rules
provide that any one held in contempt and ordered arrested,
need the concurrence of a majority of all members of the said
committee and we have three committees conducting this.
So thank you very much to the members. . .
SEN. PIMENTEL.
Mr. Chairman.
THE CHAIRMAN (SEN. CAYETANO, A).
May I recognize the Minority Leader and give him the floor, Senator
Pimentel.
SEN. PIMENTEL.
Mr. Chairman, there is no problem, I think, with consulting the other
committees. But I am of the opinion that the Blue Ribbon
Committee is the lead committee, and therefore, it should have
preference in enforcing its own decisions. Meaning to say, it is not
something that is subject to consultation with other committees. I
am not sure that is the right interpretation. I think that once we
decide here, we enforce what we decide, because otherwise,
before we know it, our determination is watered down by delay
and, you know, the so-called "consultation" that inevitably will
have to take place if we follow the premise that has been
explained.
 So my suggestion, Mr. Chairman, is the Blue Ribbon Committee
should not forget it's the lead committee here, and therefore, the
will of the lead committee prevails over all the other, you, know
reservations that other committees might have who are only
secondary or even tertiary committees, Mr. Chairman.
THE CHAIRMAN (SEN. CAYETANO, A.)
Thank you very much to the Minority Leader. And I agree with the
wisdom of his statements. I was merely mentioning that under
Section 6 of the Rules of the Committee and under Section 6,
"The Committee by a vote of a majority of all its members may
punish for contempt any witness before it who disobeys any order
of the Committee."
So the Blue Ribbon Committee is more than willing to take that
responsibility. But we only have six members here today, I am
the seventh as chair and so we have not met that number. So
I am merely stating that, sir, that when we will prepare the
documentation, if a majority of all members sign and I am
following the Sabio v. Gordon rule wherein I do believe, if I am not
mistaken, Chairman Gordon prepared the documentation and
then either in caucus or in session asked the other members to
sign. And once the signatures are obtained, solely for the purpose
that Secretary Neri or Mr. Lozada will not be able to legally
question our subpoena as being insufficient in accordance with
law.
SEN. PIMENTEL.
Mr. Chairman, the caution that the chair is suggesting is very well-
taken. But I'd like to advert to the fact that the quorum of the
committee is only two as far as I remember. Any two-member
senators attending a Senate committee hearing provide that
quorum, and therefore there is more than a quorum demanded by
our Rules as far as we are concerned now, and acting as Blue
Ribbon Committee, as Senator Enrile pointed out. In any event,
the signatures that will follow by the additional members will only
tend to strengthen the determination of this Committee to put its
foot forward — put down on what is happening in this country, Mr.
Chairman, because it really looks terrible if the primary Committee
of the Senate, which is the Blue ribbon Committee, cannot even
sanction people who openly defy, you know, the summons of this
Committee. I know that the Chair is going through an agonizing
moment here. I know that. But nonetheless, I think we have to
uphold, you know, the institution that we are representing
because the alternative will be a disaster for all of us, Mr.
Chairman. So having said that, I'd like to reiterate my point.
 THE CHAIRMAN (SEN. CAYETANO, A.)
First of all, I agree 100 percent with the intentions of the Minority
Leader. But let me very respectfully disagree with the legal
requirements. Because, yes, we can have a hearing if we are
only two but both under section 18 of the Rules of the Senate
and under Section 6 of the Rules of the Blue Ribbon
Committee, there is a need for a majority of all members if it
is a case of contempt and arrest. So, I am simply trying to avoid
the court rebuking the Committee, which will instead of
strengthening will weaken us. But I do agree, Mr. Minority Leader,
that we should push for this and show the executive branch that
the well-decided — the issue has been decided upon
the Sabio versus Gordon case. And it's very clear that we are all
allowed to call witnesses. And if they refure or they disobey not
only can we cite them in contempt and have them arrested. . . 62
Fourth, we find merit in the argument of the OSG that respondent
Committees likewise violated Section 21 of Article VI of the Constitution,
requiring that the inquiry be in accordance with the "duly published rules of
procedure." We quote the OSG's explanation:
The phrase "duly published rules of procedure" requires the Senate of
every Congress to publish its rules of procedure governing inquiries in
aid of legislation because every Senate is distinct from the one before it
or after it. Since Senatorial elections are held every three (3) years for
one-half of the Senate's membership, the composition of the Senate also
changes by the end of each term. Each Senate may thus enact a
different set of rules as it may deem, fit.Not having published its Rules
of Procedure, the subject hearings in aid of legislation conducted
by the 14th Senate, are therefore, procedurally infirm.
And fifth, respondent Committees' issuance of the contempt Order is
arbitrary and precipitate. It must be pointed out that respondent Committees
did not first pass upon the claim of executive privilege and inform petitioner of
their ruling. Instead, they curtly dismissed his explanation as "unsatisfactory"
and simultaneously issued the Order citing him in contempt and ordering his
immediate arrest and detention.
A fact worth highlighting is that petitioner is not an unwilling witness.
He manifested several times his readiness to testify before respondent
Committees. He refused to answer the three (3) questions because he was
ordered by the President to claim executive privilege. It behooves respondent
Committees to first rule on the claim of executive privilege and inform
petitioner of their finding thereon, instead of peremptorily dismissing his
explanation as "unsatisfactory." Undoubtedly, respondent Committees' actions
constitute grave abuse of discretion for being arbitrary and for denying
petitioner due process of law. The same quality afflicted their conduct when
they (a) disregarded petitioner's motion for reconsideration alleging that he
had filed the present petition before this Court and (b) ignored petitioner's
repeated request for advance list of questions, if there be any aside from the
three (3) questions as to which he claimed to be covered by executive
privilege.
Even the courts are repeatedly advised to exercise the power of
contempt judiciously and sparingly with utmost self-restraint with the end in
view of utilizing the same for correction and preservation of the dignity of the
court, not for retaliation or vindication. 63 Respondent Committees should
have exercised the same restraint, after all petitioner is not even an ordinary
witness. He holds a high position in a co-equal branch of government.
In this regard, it is important to mention that many incidents of judicial
review could have been avoided if powers are discharged with circumspection
and deference. Concomitant with the doctrine of separation of powers is the
mandate to observe respect to a co-equal branch of the government.
One last word.
The Court was accused of attempting to abandon its constitutional duty
when it required the parties to consider a proposal that would lead to a
possible compromise. The accusation is far from truth. The Court did so, only,
to test a tool that other jurisdictions find to be effective in settling similar
cases, to avoid a piecemeal consideration of the questions for review, and to
avert a constitutional crisis between the executive and legislative branches of
government.
In United States v. American Tel. & Tel Co., 64 the court refrained from
deciding the case because of its desire to avoid a resolution that might disturb
the balance of power between the two branches and inaccurately reflect their
true needs. Instead, it remanded the record to the District Court for further
proceedings during which the parties are required to negotiate a settlement. In
the subsequent case United States v. American Tel. &Tel Co., 65 it was held
that "much of this spirit of compromise is reflected in the generality of
language found in the Constitution." It proceeded to state:
Under this view, the coordinate branches do not exist in an exclusively
adversary relationship to one another when a conflict in authority arises.
Rather each branch should take cognizance of an implicit constitutional
mandate to seek optimal accommodation through a realistic evaluation
of the needs of the conflicting branches in the particular fact situation.
It thereafter concluded that: "The Separation of Powers often impairs
efficiency, in terms of dispatch and the immediate functioning of
government. It is the long-term staying power of government that is
 enhanced by the mutual accommodation required by the separation of
powers."
In rendering this decision, the Court emphasizes once more that the
basic principles of constitutional law cannot be subordinated to the needs of a
particular situation. As magistrates, our mandate is to rule objectively and
dispassionately, always mindful of Mr. Justice Holmes' warning on the
dangers inherent in cases of this nature, thus:
"some accident of immediate and overwhelming interest. . . appeals to
the feelings and distorts the judgment. These immediate interests
exercise a kind of hydraulic pressure which makes what previously was
clear seem doubtful, and before which even well settled principles of law
will bend." 66
In this present crusade to "search for truth", we should turn to the
fundamental constitutional principles which underlie our tripartite system of
government, where the Legislature enacts the law, the Judiciary interprets it
and the Executive implements it. They are considered separate, co-equal,
coordinate and supreme within their respective spheres but, imbued with a
system of checks and balances to prevent unwarranted exercise of power.
The Court's mandate is to preserve these constitutional principles at all times
to keep the political branches of government within constitutional bounds in
the exercise of their respective powers and prerogatives, even if it be in the
search for truth. This is the only way we can preserve the stability of our
democratic institutions and uphold the Rule of Law.
WHEREFORE, the petition is hereby GRANTED. The subject Order
dated January 30, 2008, citing petitioner Romulo L. Neri in contempt of the
Senate Committees and directing his arrest and detention, is hereby nullified.
(Neri v. Senate Committee on Accountability of Public Officers and
|||

Investigations, G.R. No. 180643, [March 25, 2008], 572 PHIL 554-910)

SECOND DIVISION

[G.R. No. 177861. July 13, 2010.]

IN RE: PETITION FOR CANCELLATION AND CORRECTION OF

ENTRIES IN THE RECORD OF BIRTH,

EMMA K. LEE, petitioner, vs. COURT OF APPEALS, RITA K.

LEE, LEONCIO K. LEE, LUCIA K. LEE-ONG, JULIAN K. LEE,
 MARTIN K. LEE, ROSA LEE-VANDERLEK, MELODY LEE-CHIN,
HENRY K. LEE, NATIVIDAD LEE-MIGUEL, VICTORIANO K.
LEE, and THOMAS K. LEE, represented by RITA K. LEE, as
Attorney-in-Fact, respondents.

DECISION

ABAD, J :p

This case is about the grounds for quashing a subpoena ad

testificandum and a parent's right not to testify in a case against his children.
The Facts and the Case
Spouses Lee Tek Sheng (Lee) and Keh Shiok Cheng (Keh) entered the
Philippines in the 1930s as immigrants from China. They had 11 children,
namely, Rita K. Lee, Leoncio K. Lee, Lucia K. Lee-Ong, Julian K. Lee, Martin
K. Lee, Rosa Lee-Vanderlek, Melody Lee-Chin, Henry K. Lee, Natividad Lee-
Miguel, Victoriano K. Lee, and Thomas K. Lee (collectively, the Lee-Keh
children).
In 1948, Lee brought from China a young woman named Tiu Chuan
(Tiu), supposedly to serve as housemaid. The respondent Lee-Keh children
believe that Tiu left the Lee-Keh household, moved into another property of
Lee nearby, and had a relation with him.
Shortly after Keh died in 1989, the Lee-Keh children learned that Tiu's
children with Lee (collectively, the Lee's other children) claimed that they, too,
were children of Lee and Keh. This prompted the Lee-Keh children to request
the National Bureau of Investigation (NBI) to investigate the matter. After
conducting such an investigation, the NBI concluded in its report:
[I]t is very obvious that the mother of these 8 children is certainly
not KEH SHIOK CHENG, but a much younger woman, most
probably TIU CHUAN. Upon further evaluation and analysis by
these Agents, LEE TEK SHENG is in a quandary in fixing the age of
KEH SHIOK CHENG possibly to conform with his grand design of
making his 8 children as their own legitimate children,
consequently elevating the status of his second family and secure
their future. The doctor lamented that this complaint would not
have been necessary had not the father and his second family kept
on insisting that the 8 children are the legitimate children of KEH
SHIOK CHENG. 1 aIHSEc
 The NBI found, for example, that in the hospital records, the eldest of
the Lee's other children, Marcelo Lee (who was recorded as the 12th child of
Lee and Keh), was born of a 17-year-old mother, when Keh was already 38
years old at the time. Another of the Lee's other children, Mariano Lee, was
born of a 23-year-old mother, when Keh was then already 40 years old, and
so forth. In other words, by the hospital records of the Lee's other children,
Keh's declared age did not coincide with her actual age when she supposedly
gave birth to such other children, numbering eight.
On the basis of this report, the respondent Lee-Keh children filed two
separate petitions, one of them before the Regional Trial Court (RTC) of
Caloocan City 2 in Special Proceeding C-1674 for the deletion from the
certificate of live birth of the petitioner Emma Lee, one of Lee's other children,
the name Keh and replace the same with the name Tiu to indicate her true
mother's name.
In April 2005 the Lee-Keh children filed with the RTC an ex
parte request for the issuance of a subpoena ad testificandum to compel Tiu,
Emma Lee's presumed mother, to testify in the case. The RTC granted the
motion but Tiu moved to quash the subpoena, claiming that it was oppressive
and violated Section 25, Rule 130 of the Rules of Court, the rule on parental
privilege, she being Emma Lee's stepmother. 3 On August 5, 2005 the RTC
quashed the subpoena it issued for being unreasonable and oppressive
considering that Tiu was already very old and that the obvious object of the
subpoena was to badger her into admitting that she was Emma Lee's mother.
Because the RTC denied the Lee-Keh children's motion for
reconsideration, they filed a special civil action ofcertiorari before the Court of
Appeals (CA) in CA-G.R. SP 92555. On December 29, 2006 the CA rendered
a decision, 4setting aside the RTC's August 5, 2005 Order. The CA ruled that
only a subpoena duces tecum, not a subpoena ad testificandum, may be
quashed for being oppressive or unreasonable under Section 4, Rule 21 of
the Rules of Civil Procedure. The CA also held that Tiu's advanced age alone
does not render her incapable of testifying. The party seeking to quash the
subpoena for that reason must prove that she would be unable to withstand
the rigors of trial, something that petitioner Emma Lee failed to do.
Since the CA denied Emma Lee's motion for reconsideration by
resolution of May 8, 2007, 5 she filed the present petition with this Court.
The Question Presented
The only question presented in this case is whether or not the CA erred
in ruling that the trial court may compel Tiu to testify in the correction of entry
case that respondent Lee-Keh children filed for the correction of the certificate
of birth of petitioner Emma Lee to show that she is not Keh's daughter.
 The Ruling of the Court
Petitioner Emma Lee claims that the RTC correctly quashed the
subpoena ad testificandum it issued against Tiu on the ground that it was
unreasonable and oppressive, given the likelihood that the latter would be
badgered on oral examination concerning the Lee-Keh children's theory that
she had illicit relation with Lee and gave birth to the other Lee children. cTECIA

But, as the CA correctly ruled, the grounds cited — unreasonable and

oppressive — are proper for subpoena ad duces tecum or for the production
of documents and things in the possession of the witness, a command that
has a tendency to infringe on the right against invasion of privacy. Section 4,
Rule 21 of the Rules of Civil Procedure, thus provides:
SECTION 4. Quashing a subpoena. — The court may quash a
subpoena duces tecum upon motion promptly made and, in any
event, at or before the time specified therein if it is unreasonable
and oppressive, or the relevancy of the books, documents or things
does not appear, or if the person in whose behalf the subpoena is
issued fails to advance the reasonable cost of the production
thereof.

Notably, the Court previously decided in the related case of Lee v.

Court of Appeals 6 that the Lee-Keh children have the right to file the action
for correction of entries in the certificates of birth of Lee's other children,
Emma Lee included. The Court recognized that the ultimate object of the suit
was to establish the fact that Lee's other children were not children of Keh.
Thus:
It is precisely the province of a special proceeding such as the one
outlined under Rule 108 of the Revised Rules of Court to establish
the status or right of a party, or a particular fact. The petitions filed
by private respondents for the correction of entries in the
petitioners' records of birth were intended to establish that for
physical and/or biological reasons it was impossible for Keh Shiok
Cheng to have conceived and given birth to the petitioners as
shown in their birth records. Contrary to petitioners' contention
that the petitions before the lower courts were actually actions to
impugn legitimacy, the prayer therein is not to declare that
petitioners are illegitimate children of Keh Shiok Cheng, but to
establish that the former are not the latter's children. There is
nothing to impugn as there is no blood relation at all between Keh
Shiok Cheng and petitioners. 7(Underscoring supplied)

Taking in mind the ultimate purpose of the Lee-Keh children's action,

obviously, they would want Tiu to testify or admit that she is the mother of
Lee's other children, including petitioner Emma Lee. Keh had died and so
could not give testimony that Lee's other children were not hers. The Lee-Keh
children have, therefore, a legitimate reason for seeking Tiu's testimony and,
normally, the RTC cannot deprive them of their right to compel the attendance
of such a material witness.
But petitioner Emma Lee raises two other objections to requiring Tiu to
come to court and testify: a) considering her advance age, testifying in court
would subject her to harsh physical and emotional stresses; and b) it would
violate her parental right not to be compelled to testify against her
stepdaughter. aCHDST

1.Regarding the physical and emotional punishment that would be

inflicted on Tiu if she were compelled at her age and condition to come to
court to testify, petitioner Emma Lee must establish this claim to the
satisfaction of the trial court. About five years have passed from the time the
Lee-Keh children sought the issuance of a subpoena for Tiu to appear before
the trial court. The RTC would have to update itself and determine if Tiu's
current physical condition makes her fit to undergo the ordeal of coming to
court and being questioned. If she is fit, she must obey the subpoena issued
to her.
Tiu has no need to worry that the oral examination might subject her to
badgering by adverse counsel. The trial court's duty is to protect every
witness against oppressive behavior of an examiner and this is especially true
where the witness is of advanced age. 8
2.Tiu claimed before the trial court the right not to testify against her
stepdaughter, petitioner Emma Lee, invoking Section 25, Rule 130 of
the Rules of Evidence, which reads:
SECTION 25. Parental and filial privilege. — No person may be
compelled to testify against his parents, other direct ascendants,
children or other direct descendants.

The above is an adaptation from a similar provision in Article 315 of

the Civil Code that applies only in criminal cases. But those who revised
the Rules of Civil Procedure chose to extend the prohibition to all kinds of
actions, whether civil, criminal, or administrative, filed against parents and
other direct ascendants or descendants.
But here Tiu, who invokes the filial privilege, claims that she is the
stepmother of petitioner Emma Lee. The privilege cannot apply to them
because the rule applies only to "direct" ascendants and descendants, a
family tie connected by a common ancestry. A stepdaughter has no common
ancestry by her stepmother. Article 965 thus provides:
 Art. 965. The direct line is either descending or ascending. The
former unites the head of the family with those who descend from
him. The latter binds a person with those from whom he descends.

Consequently, Tiu can be compelled to testify against petitioner Emma Lee.

WHEREFORE, the Court DENIES the petition and AFFIRMSthe
decision and resolution of the Court of Appeals in CA-G.R. SP 92555.
SO ORDERED. CSTcEI

||| (Lee v. Court of Appeals, G.R. No. 177861, [July 13, 2010], 639 PHIL 78-85)