1. People v.
Mallilin Held: Yes, petitioner may defeat the positive assertions through proving the failure to follow the chain of custody rule.
Title: JUNIE MALILLIN Y. LOPEZ, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.
Reference: G.R. No. 172953 / April 30, 2008
Topic: Rules of Admissibility – Object/Real Evidence – Chain of Custody
Ponente: TINGA, J
Nature: Petition for Review under Rule 45, Junie Malillin y Lopez (petitioner) assails the Decision of the CA denying his motion
for reconsideration. The challenged decision has affirmed the Decision of the RTC which found petitioner guilty beyond
reasonable doubt of illegal possession of methamphetamine hydrochloride (shabu), a prohibited drug.
Facts:
Police officers raided the residence of Junie Malillin y Lopez (petitioner). The search allegedly yielded two (2) plastic sachets
of shabu and five (5) empty plastic sachets containing residual morsels of the said substance. Petitioner was charged with
violation of Sec. 11, Art. II of RA No. 9165 (The Comprehensive Dangerous Drugs Act of 2002).
Petitioner entered a negative plea. At the ensuing trial, the prosecution presented P/Insp Bolanos, Arroyo (forensic chemist) and
PO3 Esternon as witnesses.
The evidence for the defense focused on the irregularity of the search and seizure conducted by the police operatives. Petitioner
testified that PO3 Esternon began the search of the bedroom with Licup and petitioner himself inside. Petitioner was then asked
by a police officer to buy cigarettes at a nearby store.
Petitioner asserted that on his return from the errand, he was summoned by Esternon to the bedroom and once inside, the officer
closed the door and asked him to lift the mattress on the bed. And as he was doing as told, Esternon stopped him and ordered
him to lift the portion of the headboard. In that instant, Esternon showed him "sachet of shabu" which according to him came
from a pillow on the bed. Petitioner's account in its entirety was corroborated in its material respects by Norma (petitioner's
mother), barangay kagawad Licup and Sheila (petitioner’s wife) in their testimonies. Norma and Sheila positively declared that
petitioner was not in the house for the entire duration of the search because at one point he was sent by Esternon to the store to
buy cigarettes while Sheila was being searched by the lady officer. Licup for his part testified on the circumstances surrounding
the discovery of the plastic sachets. He recounted that after the five empty sachets were found, he went out of the bedroom and
into the living room and after about three minutes, Esternon, who was left inside the bedroom, exclaimed that he had just found
two filled sachets.
The trial court declared petitioner guilty beyond reasonable doubt of the offense charged. The trial court reasoned that the fact
that shabu was found in the house of petitioner was prima facie evidence of petitioner's animus possidendi sufficient to convict
him of the charge inasmuch as things which a person possesses or over which he exercises acts of ownership are presumptively
owned by him. It also noted petitioner's failure to ascribe ill motives to the police officers to fabricate charges against him.
Petitioner filed a Notice of Appeal with the CA, calling the attention of the court to certain irregularities in the manner by which
the search of his house was conducted. The OSG advanced that on the contrary, the prosecution evidence sufficed for petitioner's
conviction and that the defense never advanced any proof to show that the members of the raiding team was improperly
motivated to hurl false charges against him and hence the presumption that they had regularly performed their duties should
prevail.
The CA affirmed the judgment of the trial court.
Issue: Whether petitioner's bare denial cannot defeat the positive assertions of the prosecution and that the same does not suffice
to overcome the prima facie existence of animus possidendi.
 The dangerous drug itself constitutes the very corpus delicti of the offense and the fact of its existence is vital to a
judgment of conviction.
o Essential therefore in these cases is that the identity of the prohibited drug be established beyond doubt.
o Be that as it may, the mere fact of unauthorized possession will not suffice to create in a reasonable mind the
moral certainty required to sustain a finding of guilt. More than just the fact of possession, the fact that the
substance illegally possessed in the first place is the same substance offered in court as exhibit must also be
established with the same unwavering exactitude as that requisite to make a finding of guilt.
o The chain of custody requirement performs this function in that it ensures that unnecessary doubts concerning
the identity of the evidence are removed.
 As a method of authenticating evidence, the chain of custody rule requires that the admission of an exhibit be preceded by
evidence sufficient to support a finding that the matter in question is what the proponent claims it to be.
o It would include testimony about every link in the chain, from the moment the item was picked up to the time it
is offered into evidence, in such a way that every person who touched the exhibit would describe how and from
whom it was received, where it was and what happened to it while in the witness' possession, the condition in
which it was received and the condition in which it was delivered to the next link in the chain.
o These witnesses would then describe the precautions taken to ensure that there had been no change in the
condition of the item and no opportunity for someone not in the chain to have possession of the same.
 An unbroken chain of custody becomes indispensable and essential when the item of real evidence is not distinctive and is
not readily identifiable, or when its condition at the time of testing or trial is critical, or when a witness has failed to
observe its uniqueness.
o The same standard likewise obtains in case the evidence is susceptible to alteration, tampering,
contamination and even substitution and exchange. In other words, the exhibit's level of susceptibility to
fungibility, alteration or tampering—without regard to whether the same is advertent or otherwise not—dictates
the level of strictness in the application of the chain of custody rule.
 A unique characteristic of narcotic substances is that they are not readily identifiable as in fact they are subject to scientific
analysis to determine their composition and nature.
o Hence, in authenticating the same, a standard more stringent than that applied to cases involving objects which
are readily identifiable must be applied, a more exacting standard that entails a chain of custody of the item with
sufficient completeness if only to render it improbable that the original item has either been exchanged with
another or been contaminated or tampered with.
 A mere fleeting glance at the records readily raises significant doubts as to the identity of the sachets of shabu allegedly
seized from petitioner. Of the people who came into direct contact with the seized objects, only Esternon and Arroyo
testified for the specific purpose of establishing the identity of the evidence.
o SPO2 Gallinera, to whom Esternon supposedly handed over the confiscated sachets for recording and marking,
as well as Garcia, the person to whom Esternon directly handed over the seized items for chemical analysis at
the crime laboratory, were not presented in court to establish the circumstances under which they handled the
subject items.
o Any reasonable mind might then ask the question: Are the sachets of shabu allegedly seized from petitioner the
very same objects laboratory tested and offered in court as evidence?
 The prosecution's evidence is incomplete to provide an affirmative answer.
o Considering that it was Gallinera who recorded and marked the seized items, his testimony in court is crucial to
affirm whether the exhibits were the same items handed over to him by Esternon at the place of seizure and
acknowledge the initials marked thereon as his own.
o The same is true of Garcia who could have, but nevertheless failed, to testify on the circumstances under which
she received the items from Esternon, what she did with them during the time they were in her possession until
before she delivered the same to Arroyo for analysis.
 The prosecution was thus unsuccessful in discharging its burden of establishing the identity of the seized items because it
failed to offer not only the testimony of Gallinera and Garcia but also any sufficient explanation for such failure.
o In effect, there is no reasonable guaranty as to the integrity of the exhibits inasmuch as it failed to rule out the
possibility of substitution of the exhibits, which cannot but inure to its own detriment.
 Also the records disclose a series of irregularities committed by the police officers from the commencement of the search
of petitioner's house until the submission of the seized items to the laboratory for analysis.
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 o The Court takes note of the unrebutted testimony of petitioner, corroborated by that of his wife, that prior to the
discovery of the two filled sachets petitioner was sent out of his house to buy cigarettes at a nearby store.
o Equally telling is the testimony of Bolanos that he posted some of the members of the raiding team at the door
of petitioner's house in order to forestall the likelihood of petitioner fleeing the scene.
o By no stretch of logic can it be conclusively explained why petitioner was sent out of his house on an errand
when in the first place the police officers were in fact apprehensive that he would flee to evade arrest.
o This fact assumes prime importance because the two filled sachets were allegedly discovered by Esternon
immediately after petitioner returned to his house from the errand, such that he was not able to witness the
conduct of the search during the brief but crucial interlude that he was away.
 It is also strange that, as claimed by Esternon, it was petitioner himself who handed to him the items to be searched
including the pillow from which the two filled sachets allegedly fell. Indeed, it is contrary to ordinary human behavior that
petitioner would hand over the said pillow to Esternon knowing fully well that illegal drugs are concealed therein.
 Moreover, Section 21 of the Implementing Rules and Regulations of R.A. No. 9165 clearly outlines the post-seizure
procedure in taking custody of seized drugs.
o It mandates that the officer acquiring initial custody of drugs under a search warrant must conduct the
photographing and the physical inventory of the item at the place where the warrant has been served.
o Esternon deviated from this procedure. It was elicited from him that at the close of the search of petitioner's
house, he brought the seized items immediately to the police station for the alleged purpose of making a "true
inventory" thereof, but there appears to be no reason why a true inventory could not be made in petitioner's
house when in fact the apprehending team was able to record and mark the seized items and there and then
prepare a seizure receipt therefor.
o Lest it be forgotten, the raiding team has had enough opportunity to cause the issuance of the warrant which
means that it has had as much time to prepare for its implementation.
o While the final proviso in Section 21 of the rules would appear to excuse non-compliance therewith, the same
cannot benefit the prosecution as it failed to offer any acceptable justification for Esternon's course of action.
 Given the foregoing deviations of police officer Esternon from the standard and normal procedure in the implementation of
the warrant and in taking post-seizure custody of the evidence, the blind reliance by the trial court and the Court of Appeals
on the presumption of regularity in the conduct of police duty is manifestly misplaced.
o The presumption of regularity is merely just that—a mere presumption disputable by contrary proof and which
when challenged by the evidence cannot be regarded as binding truth.
o Suffice it to say that this presumption cannot preponderate over the presumption of innocence that prevails if
not overthrown by proof beyond reasonable doubt.
o In the present case the lack of conclusive identification of the illegal drugs allegedly seized from petitioner,
coupled with the irregularity in the manner by which the same were placed under police custody before offered
in court, strongly militates a finding of guilt.
WHEREFORE, the assailed Decision of the Court of Appeals dated 27 January 2006 affirming with modification the judgment
of conviction of the Regional Trial Court of Sorsogon City, Branch 52, and its Resolution dated 30 May 2006 denying
reconsideration thereof, are REVERSED and SET ASIDE. Petitioner Junie Malillin y Lopez isACQUITTED on reasonable
doubt and is accordingly ordered immediately released from custody unless he is being lawfully held for another offense.
_______________________________________________________________________________________________________
[A.M. No. MTJ-02-1431. May 9, 2003]
SPO2 JOSE B. YAP, complainant, vs. JUDGE AQUILINO A. INOPIQUEZ, JR., respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is the administrative complaint filed by SPO2 Jose B. Yap of Matag-ob, Leyte Police Station against Judge
Aquilino A. Inopiquez, Jr. of the Municipal Circuit Trial Court (MCTC) of Kananga-Matag-ob, same province, for grave abuse
of authority and acts unbecoming a judge.
In his sworn affidavit-complaint dated July 12, 1999, complainant alleged that on March 6, 1999 (Saturday), pursuant to
an alias arrest warrant, he arrested Antonio Laurente, Jr., the accused in Criminal Case No. 8458 for violation of B.P. Blg. 22,
pending in the Metropolitan Trial Court in Cities (MTCC) at Ormoc City.
On the same day, March 6, respondent judge issued an Order of Release[1] on the basis of a cash bond posted on March 8,
1999, as shown by the corresponding Official Receipt No. 9215725. [2]
Also on March 6, respondent judge issued another Order of Release,[3] this time based on a property bond. This bond was
subscribed and sworn to before him on March 10, 1999 (Wednesday) by bondsman Antonio Laurente, Sr. However, this date
was changed to March 6.
Complainant claimed that respondent judge issued the two (2) Orders of Release on March 6, 1999 although there was yet
no cash bond or property bond, for actually the cash bond was posted on March 8, while the property bond was filed on March
10. Clearly, respondent judge ordered the release of the accused prematurely. Complainant finally alleged that the accused is the
relative of respondents wife.
On October 27, 1999, respondent judge filed his comment. He denied the charges, asserting that the relationship of his
wife to the accused has no bearing to his judicial duties of approving the bail and issuing the Order of Release. On March 6,
1999, when accused Laurente, Jr. was arrested, his brother Silverio Laurente and one Salvador Almoroto went to respondents
residence and presented O.R. No. 9215725 showing that on that date, a cash bond was posted with the office of respondents
Clerk of Court Servando O. Veloso, Jr. The money in the amount of P18,000.00 belonged to Almoroto. Silverio Laurente also
handed to respondent judge, for his signature, the Order of Release dated March 7, 1999 prepared by Clerk of Court Veloso. The
latter placed the date March 7 instead of March 6 because he thought respondent judge would only be available on that date.
Also on the same day, March 6, minutes after Silverio Laurente and Almoroto left, Antonio Laurente, Sr., accuseds father,
and Court Interpreter Pedro M. Beltran arrived. Laurente, Sr. presented to respondent judge a property bond and an Order of
Release, also dated March 6, 1999, both prepared by Beltran. Respondent judge told them that he had already approved the cash
bond and signed the corresponding Order of Release. However, Laurente, Sr. pleaded to him to approve the property bond in
order that the money utilized as cash bond could be returned to Almoroto to avoid paying interest thereon. After examining the
property bond, respondent judge approved the same and signed another Order of Release.
Respondent judge claimed that O.R. No. 9215725 was actually issued to Almoroto on March 6 after he had posted the
cash bond that same day. Respondent judge insisted though that it was Clerk of Court Veloso who altered the date appearing
thereon, from March 6 to March 8, 1999, since complainant angrily protested that Veloso should not issue an official receipt
dated March 6, 1999 as it was a Saturday, a non-working day.
In our Resolution dated March 21, 2001, we referred the instant case to Executive Judge Fortunito L. Madrona, Regional
Trial Court (RTC), Ormoc City, for investigation, report and recommendation.
In his Report and Recommendation dated September 3, 2001, Executive Judge Madrona found that there is no substantial
basis in the claim of complainant about the alleged anomaly in the issuance of two Orders of Release by the respondent judge.
Thus, Executive Judge Madrona recommended the dismissal of the charges for lack of merit. Executive Judge Madrona further
recommended that respondent judge be reprimanded for his failure to avoid the appearance of impropriety by exercising proper
safeguards in the performance of his official duties, considering that accused Laurente, Jr. is his relative by affinity. On this
point, Executive Judge Madrona was referring to respondent judges failure to observe Section 11, Rule 114 of the Revised Rules
of Criminal Procedure, as amended, quoted as follows:
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Sec. 11. Property bond, how posted. A property bond is an undertaking constituted as lien on the real property given as security
for the amount of the bail. Within ten (10) days after the approval of the bond, the accused shall cause the annotation of the lien
on the certificate of title on file with the Registry of Deeds if the land is registered, or if unregistered, in the Registration Book
on the space provided therefore, in the Registry of Deeds for the province or city where the land lies, and on the corresponding
tax declaration in the office of the provincial, city and municipal assessor concerned.
Within the same period, the accused shall submit to the court his compliance and his failure to do so shall be sufficient cause for
the cancellation of the property bind and his re-arrest and detention.
It appears that respondent judge did not require the accused to cause the annotation of the lien (property bond) in the
Registration Book of the Registry of Deeds and on the corresponding tax declaration in the office of the provincial, city or
municipal assessor concerned.
Executive Judge Madronas recommendation to dismiss the charges is based on his findings quoted as follows:
(12) On this particular factual issue of the real date of the official receipt for the cash bond, which the undersigned finds crucial
in the overall appreciation of the herein complaint, it is the opinion of the undersigned that the version of testimony of Mr. Veloso
is credible. That is, the date of issuance of the official receipt was actually March 6, 1999 but that he caused it to change to
March 8, 1999 affixing thereon his counter initial for the reason, according to him, that when complainant went to see him on
March 8, he was protesting to him about the date, and to avoid further argument he did the alteration. For this indiscretion on
Velosos part, he should be made to answer administratively.
xxx
(14) In short, the whole complaint boils down to an appreciation of the factual issues which have been substantially presented in
the foregoing. As to whether there was really cash bond being posted on March 6, 1999 as could be attested to in the official
receipt issued therefor and which could validate the first Order of Release issued by the respondent judge the undersigned finds
in the affirmative. It is the words of Mr. Veloso, the Clerk of Court who issued the official receipt for the cash, bond as against
the words of the complainant. In the absence of strong and convincing evidence to the contrary, the explanation of Mr. Veloso as
regards his official acts had to be given credence as one coming from one whose official duty is presumed to have been regularly
performed. (Sec. 3 (m), Rule 131, Rules of Court)
(15) The factual issue surrounding the date of issuance of the official receipt for the cash bond having been resolved, there is no
substantial basis in the claim of complainant about alleged anomaly in the issuance of the two Orders of Release by the
respondent judge. Complainants basis is reduced only to mere suspicion.
On October 10, 2001, this Court referred Executive Judge Madronas Report and Recommendation to the Office of the
Court Administrator (OCA).
In her Report dated March 5, 2002, Deputy Court Administrator Zenaida N. Elepao, adopted the findings of Executive
Judge Madrona but recommended that:
1. The complaint against respondent judge be re-docketed as an administrative case and that he be ordered to pay a fine of Three
Thousand Pesos (P3,000.00) for giving unwarranted favor to the accused who is a second cousin of his wife, by approving the
two (2) bail bonds and issuing the two (2) release orders;
2. Clerk of Court Servando O. Veloso, Jr. be directed to explain within thirty days from notice why no disciplinary sanction
should be imposed on him for: a) altering the date of the official receipt of the cash bond; and (b) failure to cancel the cash bond
and the first Order of Release after the approval of the property bond;
3. Interpreter Pedro M. Beltran be ordered to: (a) explain within thirty days from notice why he should not be administratively
sanctioned for preparing and processing bail bonds without the authority of his presiding judge; and (b) immediately cease and
desist from preparing and processing bail bonds unless duly authorized.
In the same Report, Deputy Court Administrator Elepao stated that respondent judge was previously adjudged guilty of
abuse of authority and gross ignorance of the law and fined in the amount of Twenty Thousand Pesos (P20,000.00) and
suspended without pay for three months.[4]
On May 28, 2002, we issued a Resolution approving respondent judges application for optional retirement in A.M. No.
10822-RET but directing that his retirement benefits be withheld pending the resolution of the instant case.
On April 24, 2002, we resolved to (a) re-docket the case as a regular administrative matter; (b) direct Clerk of Court
Veloso and Interpreter Beltran to submit their explanations as recommended by the OCA; and (c) require the parties to manifest,
within twenty (20) days from notice, whether they are submitting the case for decision on the basis of the pleadings.
On July 22, 2002, respondent judge filed his Manifestation that he is willing to have the case so decided. To date, or after
almost one year, complainant has not yet submitted the required manifestation. Therefore, he is deemed to have agreed that the
case be decided on the basis of the pleadings.
Clerk of Court Veloso and Interpreter Beltran submitted the required explanations.
Clerk of Court Veloso explains that he altered the date of O.R. No. 9215725 from March 6 to March 8, 1999 after
complainant went to his office and inquired why it was dated March 6 (Saturday), a non-working day. Veloso stated that there
was nothing wrong in rendering service on a Saturday. However, complainant refused to listen and continued to berate him. To
avoid further arguments, he superimposed 8 over 6. He altered the date, believing there was nothing irregular in doing so
because the cash bond had already been released to the bondsman and substituted with a property bond.
Beltran states that he has been assisting litigants in the preparation of bail bonds with the knowledge of respondent judge
and Clerk of Court Veloso. He does not charge fees for this service because he believes that as a court employee, it is his duty to
assist anyone who seeks his help. Upon receipt of our April 24, 2002 Resolution, he immediately ceased assisting any litigant in
the preparation of bail bonds. He now earnestly seeks the compassion and understanding of this Court.
On January 10, 2003, Deputy Court Administrator Elepao, submitted a Report reiterating her recommendation that
respondent judge be fined in the amount of Three Thousand Pesos (P3,000.00) and recommending further that Clerk of Court
Veloso and Interpreter Beltran be fined in the amount of One Thousand Pesos (P1,000.00), each, with a warning that a repetition
of the same acts shall be dealt with more severely.
The sole issue for our resolution is whether respondent judge ordered the release of accused Antonio Laurente, Jr.
although the cash or property bond for his temporary liberty had not yet been posted and approved.
Section 14, Rule 114 of the Revised Rules of Criminal Procedure, as amended, provides that if the accused is arrested in a
province, city or municipality other than where the case is pending, bail may be filed with any RTC of said place, or, if no judge
thereof is available, with any metropolitan trial judge, municipal trial judge or municipal circuit trial judge therein.
Criminal Case No. 9458 against Antonio Laurente, Jr. was filed with the MTCC of Ormoc City but he was arrested in
Matag-ob, Leyte. Since there was no RTC in Matag-ob, respondent judge, as Presiding Judge of MCTC, Kananga-Matag-ob,
was then authorized under Rule 114 to approve the bail of Antonio Laurente, Jr. and order his release.
Complainant contends that the cash bond of P18,000.00 was posted by Almoroto not on March 6, 1999, when the accused
was released, but on March 8, 1999 as shown by the corresponding O.R. No. 9215725. [5]
To justify the issuance of the Order of Release on March 6, respondent judge would want us to believe that O.R. No.
9215725 was issued on March 6, not March 8, 1999, the date appearing thereon. In fact, he insisted that it was Clerk of Court
Veloso who altered the date of the O.R. from March 6 to March 8. It can be readily discerned that respondent judge, in order to
cover up his misdeed, even laid the blame on his Clerk of Court who, out of apparent loyalty to him, admitted having changed
the date in order to make it appear that the cash bond was posted on March 6. Clerk of Court Velosos pretext that he gave in to
complainants demand to avoid further arguments is too flimsy and unworthy of belief.
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 Relative to the property bond, respondent judge maintains that it was filed also on the same day, March 6, minutes after Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral obliquity and
Almoroto posted the cash bond. Consequently, he issued the corresponding Order of Release also on March 6. conscious doing of a wrong; a breach of a sworn duty through some motive or intent or ill-will; it partakes of the nature of fraud
(Spiegel v. Beacon Participation, 8 NE 2nd Series, 895, 1007). It contemplates a state of mind affirmatively operating with
We observe that the property bond was subscribed and sworn to by bondsman Antonio Laurente, Sr. before respondent furtive design or some motive of self-interest or ill will for ulterior purposes (Air France v. Carrascoso, 18 SCRA 155, 166-
judge on March 10, 1999 (Wednesday). However, very clear to the naked eye is that 6 was superimposed on 10 th (day of March) 167). Evident bad faith connotes a manifest deliberate intent on the part of the accused to do wrong or cause damage (Llorente,
to make it appear that the bail was accomplished and filed on March 6. The jurat positively shows that the property bond, in lieu Jr. v. Sandiganbayan, 287 SCRA 382 [1998], citing Marcelo v. Sandiganbayan, 185 SCRA 346 [1990]).
of the cash bond, was filed, not on March 6, but on March 10, 1999, or four (4) days after respondent judge issued his second
Order of Release on March 6, 1999.
Gross misconduct under Section 8(3), Rule 140 of the Revised Rules of Court, as amended, is classified as a serious
It is a basic rule of evidence that between documentary and oral evidence, the former carries more weight.[6] The cash charge punishable by any of the sanctions provided under Section 11 of the same Rule, thus:
bond was posted on March 8 (Monday), not on March 6, 1999, as shown by O.R. No. 9215725. The property bond, in
substitution of the cash bond, was filed, not on March 6, but on March 10 (Wednesday), as shown by the jurat. Both Orders of
Sec. 11. Sanctions. A. If the respondent is guilty of a serious charge, any of the following sanctions may be imposed:
Release were issued on March 6 (Saturday). Therefore, there is no doubt that respondent judge ordered the release of the accused
despite the fact that there was yet no bail filed and approved for his provisional liberty.
1. Dismissal from the service, forfeiture of all or part of the benefits as the Court may determine, and disqualification from
That respondent judge issued the release orders prematurely is not difficult to understand. He admitted that accused reinstatement or appointment to any public office, including government-owned or controlled corporations; Provided, however,
Antonio Laurente, Jr. is his wifes relative. And in his desire to help the accused and please his wife, he would even involve his that the forfeiture of benefits shall in no case include accrued leave benefits;
Clerk of Court and Interpreter. Considering the facts of this case, it is safe to conclude that they were constrained to comply with
his instructions. Hence, they should have been spared from any administrative sanction.
2. Suspension from office without salary and other benefits for more than three (3) but not exceeding six (6) months; or
Section 3, Rule 114 of the Revised Rules of Criminal Procedure, as amended, provides that an accused may only be
released on bail after the corresponding cash or property bond has been properly posted. Respondent judge violated this Rule
3. A fine of more than P20,000.00 but not exceeding P40,000.00.
when he issued the two Orders of Release on March 6, 1999 in favor of accused Antonio Laurente, Jr. despite the fact that the
corresponding cash or property bond was posted only thereafter, or on March 8 and March 10, 1999, respectively.
WHEREFORE, Judge AQUILINO A. INOPIQUEZ, JR. is declared GUILTY of GROSS MISCONDUCT and is FINED
Moreover, records show that upon approval of the property bond filed after the release of the accused, respondent judge in the amount of THIRTY THOUSAND PESOS (P30,000.00) to be deducted from his retirement benefits.
failed to order the cancellation of the cash bond. Neither did he require the accused, within ten (10) days from the approval of the
bond, to cause the annotation of the bail as lien in the Registration Book of the Registry of Deeds and on the corresponding tax SO ORDERED.
declaration in the office of the provincial, city or municipal assessor concerned, pursuant to Section 11, Rule 114 of the Revised
Rules of Criminal Procedure, as amended, quoted earlier.
_______________________________________________________________________________________________________
We have held that the exacting standards of conduct demanded from judges are designed to promote public confidence in ____
the integrity and impartiality of the judiciary.[7] When the judge himself becomes a transgressor of any law which he is sworn to
apply, he places his office in disrepute, encourages disrespect for the law and impairs public confidence in the integrity of the Vda. de Corpus vs. Brabangco
judiciary itself.[8] This Court cannot countenance such act as it erodes the publics trust in the judiciary.

In the instant case, respondent not only failed to perform his judicial duties in accordance with the rules, he acted in bad 59 O.G. 8262 (1963)
faith. Despite the fact that he ordered the release of a person lawfully arrested even before he had posted bail, he tried to hide his
culpability by altering the dates of the cash bond and property bond. His actuations constitute gross misconduct which merits Best Evidence Rule
sanctions even if he already retired[9] on January 1, 2002.[10]

In Canson vs. Garchitorena,[11] this Court explained the concept of gross misconduct, thus:
Misconduct is defined as any unlawful conduct on the part of a person concerned in the administration of justice prejudicial to
the rights of parties or to the right determination of the cause (Blacks Law Dictionary, Fourth Ed., p. 1150). It generally means
wrongful, improper, unlawful conduct motivated by a premeditated, obstinate or intentional purpose (Words and Phrases, Vol.
27, p. 466, citing Sewell vs. Sharp, La App. 102 So 2d 259, 261). The term, however, does not necessarily imply corruption or
criminal intent (Ibid., citing State Ex Rel Asbaugh v. Bahr, 40 N.E. 2d 677, 680, 68 Ohio App. 308). On the other hand, the
term gross connotes something "out of all measure; beyond allowance; not to be excused; flagrant; shameful" (Blacks Law
Dictionary, Fourth Ed., p. 832).
For administrative liability to attach it must be established that the respondent was moved by bad faith, dishonesty, hatred or
some other like motive (Atty. Antonio T. Guerrero v. Hon. Adriano Villamor, AM No. RTJ-90-483; George Carlos v. Hon.
Adriano Villamor, AM No. RTJ-90-617, 25 September 1998). As defined
FACTS:
Defendant Tiburcia Brabangco is the owner of a certain parcel of land. Plaintiffs, the surviving widow and children
of the deceased German Corpus alleges that the land was sold by defendant Tiburcia Brabangco to their father German Corpus
for and in consideration of P450 of which P300 was paid right upon the execution of the Deed of sale in due form witnessed by
Pablo Albeza and Bonifacio Villareal (now deceased) and acknowledged be defendant Brabangco before notary Public Jose
Tirador (also deceased). At the same time, Plaintiffs Corpus allege that their predecessor in interest was and is in possession of
said lands up to his death until Defendants with the aid and protection of policemen entered the premises and got bamboos and
corn. Defendants, on the other hand, allege that a sale never took place. Defendants’ answer avers “that they simply
accommodated and allowed the Plaintiffs Corpus to build their evacuation cottage when Japanese forces occupied the
Philippines. Plaintiffs filed a case against the defendants. With reference to the deed of sale from which the plaintiffs’ case
draw its cause of action was said to be lost during the war. The trial court ruled in favor of the plaintiffs and upheld the sale. The

4
defendants appealed claiming that the sale never took place since the document of sale could not be produced and the plaintiff
has failed to establish the contents of the deed of sale as required by Rule 130, Sec. 3.
ISSUES
(1) Whether or not the Plaintiffs have sufficiently proven the existence, due execution and subsequent loss of the Deed of
sale.
(2) Whether or not the plaintiffs have adduced sufficient evidence to prove the contents of the loss deed of sale?
RULING: Yes.
The plaintiff declared that the original deed of sale signed by defendant Tiburcia was lost during the war. The record
of the present case will bear that its existence was convincingly proven not only by the testimony of Heraclea Vda. De Corpus,
the surviving widow, and by the environmental facts disclosed by the evidence, but also by the disinterested testimony of Pablo
Albeza. After proper proof of the due execution & delivery of the instrument & its loss or destruction, oral evidence may be
given of its contents by any person who signed the document, or who read it.
As to the second issue, it is not necessary, in order to admit evidence of the contents of a lost instrument, that the
witness should be able to testify with verbal accuracy to its contents; it is sufficient if they are able to state it in substance.
Witnesses cannot be expected to recite the content word for word. It is enough if intelligent witnesses have read the paper & can
state substantially its contents & import with reasonable accuracy. Thus, it was held sufficient if the witness can recollect and
testify to facts showing the presence of essential elements of a contract, namely; consent, subject matter, consideration and form
in certain instances. In the case at bar, the evidence adduced by the plaintiffs are more than enough to satisfy the statutory
requirements as to execution and subsequent loss of the deed of sale as well as to its contents.
____________________________________________________________________________________
People vs. Tan
105 Phil. 1242 (1959)
Best Evidence Rule
FACTS:
Pacita Gonzales and others were charged with the crime of falsification of public documents in their capacities as
public officials and employees. It was alleged that they have made it appear that certain relief supplies were purchased by
Gonzales for distribution to calamity victims in such quantities and at such prices and from such business establishments or
persons as are made to appear in the said public documents, when in truth and in fact, no such distributions of such relief and
supplies as valued and supposedly purchased by said Pacita Gonzales in the public and official documents had ever been made.
The prosecution presented to a witness a booklet of receipts containing blue invoices of the Metro Drug Corporation.
The booklet contained the triplicate copies, and according to said witness the original invoices were sent to the Manila office of
the company, the duplicates to the customers, so that the triplicate copies remained in the booklet. The witness further testified
that in preparing receipts, two carbons were used between the three sheets, so that the duplicates and the triplicates were filled
out by the use of the carbons. While the witness was testifying, the trial court judge interrupted and said that the triplicates are
not admissible unless it is first proven that the originals were lost and cannot be produced.
Another witness was presented by the prosecution to testify. The witness testified that the original practice of keeping
the original white copies no longer prevails as the originals are given to the customers. After the cross-examination of this last
witness, the prosecution again went back to the identification of the triplicate invoice. At this point, the judge told the prosecutor
that the originals must be produced. The prosecution filed a petition for certiorari with the Supreme Court.
ISSUE: Whether or not triplicates formed by the use of carbon papers are admissible in evidence without accounting first for the
loss of the originals.
RULING:
The Court said that the admissibility of duplicates or triplicates has long been a settled question. It quoted with
approval the opinion of Moran, a commentator on the Rules of Court. When carbon sheets are inserted between two or more
sheets of writing paper so that the writing of a contract upon the outside sheet, including the signature of the party to be charged
thereby, produces a facsimile upon the sheets beneath, such signature being thus reproduced by the same stroke of the pen which
made the surface or exposed the impression, all of the sheets so written on are regarded as duplicate originals and either of them
may be introduced in evidence as such without accounting for the non-production of the others.
______________________________________________________________________________
People vs. Tandoy
192 SCRA 98 (1990)
Best Evidence Rule
FACTS:
On May 27, 1986, detectives of the Makati Police conducted a buy-bust operation at Solchuaga St., Barangay Singkamas,
Makati. The target area was a store along the said street, and detective Singayan was to pose as the buyer. He stood alone near
the store waiting for any pusher to approach. Soon, three men approached him. One of them was Mario Tandoy who said: “Pare,
gusto mo bang umiskor?” Singayan answered yes. The exchange was made then and there—two rolls of marijuana for one
P10.00 and two P5.00 bills marked ANU (meaning Anti-Narcotics Unit). The team then moved in and arrested Tandoy. The
marked money and eight foils of marijuana were found on Tandoy’s body. An information was filed against Tandoy. The RTC
of Makati found him guilty of violating RA 6425. Tandoy appealed. In his appeal, Tandoy invoked the best evidence rule and
questioned the admission by the trial court of the Xerox copy only of the marked P10.00 bill.
ISSUE: Whether or not the Xerox copy of the marked P10.00 bill is excludible under the best evidence rule.
RULING:
No. The Supreme Court quoted with approval the Solicitor General’s Comment which refuted the contention of
Tandoy. The best evidence rule applies only when the contents of the document are the subject of inquiry. Where the issue is
only as to whether or not such document was actually executed, or exists, or in the circumstances relevant to or surrounding its
execution, the best evidence rule does not apply and testimonial evidence is admissible. Since the aforesaid marked money was
presented by the prosecution solely for the purpose of establishing its existence and not its contents, other substitutionary
evidence, like a Xerox copy thereof, is therefore admissible without the need of accounting for the original.
_____________________________________________________________________________________________
Compania Maritima vs. Allied Free Workers Union
5
 77 SCRA 24 (1977)
Best Evidence Rule
FACTS:
Plaintiff-appellee Compania Maritima (company) and the Defendant- appellant Allied Free Workers Union (union)
entered into a written contract whereby the union will perform arrastre and stevedoring work for the company’s vessels, effective
for 1 month, renewable upon agreement. The company could terminate the contract if the union failed to render proper service.
The union agreed that the company would not pay for the loading, unloading and deliveries of cargoes and that these would be
paid by the owners and consignees of the cargoes as has been the practice in the port of Iligan.
However, shippers and consignees refused to pay the union for the stevedoring services because the bill of lading
provided that the unloading of the cargo was at the ship owner’s expense. The company, on the other hand, refused to pay for
the stevedoring services because this was provided for in the contract between the company and the union. This became the root
of all the problems between the two parties. Despite of the fact that the set-up was disadvantageous on the Union, it did not
terminate the contract because its members were in dire need of work, which although not adequately compensated, was
preferable to having no work at all.
Thus, upon the expiration of the one month period, the contract was verbally renewed. Then, the union sent the
company a letter requesting that it be recognized as the exclusive bargaining unit. The company ignored the demand. The union
then filed with the CIR a petition that it be certified as the sole collective bargaining unit. The company then terminated the
contract. The union filed an Unfair Labor Practice case. Then, the company entered into a new stevedoring contract with Iligan
Stevedoring. On the following day, the Union members picketed the wharf and prevented the Iligan Stevedoring from
performing arrastre and stevedoring work. The company sued the union. Thereafter, a legal battle ensued with the trial court in
the end ruling in favor of the company. Also, the Trial court awarded actual damages, amounting to P450, 000 and other
damages on the basis of the auditor’s reports, Exhibits A to I.
Plaintiff Company to bolster its case presented Teves, the company’s manager who testified in its favor. One of the
pieces of evidence he presented was a statement showing the alleged cost of 3 forklifts, pallet boards, wire rope slings and
tarpaulins in the sum of P27, 215. (The company alleges that it was forced to purchase the equipment in order to improve the
arrastre & stevedoring services.) He claims that the damages to the company by reason of depreciation of the said equipment
amounted to P38, 385 or more than the cost thereof. Also presented was Accountant Demetrio Jayme who was a personal
friend of Teves and company’s branch manager in Ozamis. His testimony is basically that the Company due to the act of Union
members, the company suffered losses as shown in the books of the as to unrealized freight and passenger revenue. The
Company also claims damages on lost cargoes and freight as set forth by Salvador Magante, the company’s chief clerk in Iligan
City in his statement. Magante did not testify on his statement, instead it was Jayme who testified on behalf of Magante.
ISSUE:
Whether the Trial Court erred in awarding to the plaintiff company actual damages, moral damages, and attorneys
fees on the ground that the Auditors report on which they were based were hearsay?
RULING:
The company argues that the accountant’s (auditor’s) reports are admissible in evidence because of the rule that
“when the original consists of numerous accounts or other documents which cannot be examined in court without great loss of
time and the fact sought to be established from them is only the general result of the whole, the original writings need not be
produced. That rule cannot be applied in this case because the voluminous character of the records on which the accountant’s
reports were based was not duly established. Moreover, in order for said rule to be applied, the records and accounts should be
made accessible to the adverse party so that the correctness of the summary may be tested on cross-examination.
What applies is the general rule “that an audit made by or the testimony of a private auditor is inadmissible in
evidence as proof of the original records, books of accounts, reports or the like. The company failed to make a preliminary
showing as to the difficulty or impossibility attending the production of the records in court and their examination and analysis
as evidence by the court
As to the statement presented by Teves, SC said that the best evidence on the cost of the equipment would have been
the sales invoice instead of his mere oral testimony of. Also, he should have produced the sales invoice. The same is true with
regard to Jayme’s estimates as recoverable damages. The pertinent records of the company should have been produced in Court.
As to Magante’s report, Jayme was not competent to take his place since the statement was prepared by Magante and not by
Jayme. More appropriate still, the documents and records on which the statement was based should have been presented as
evidence or at least brought to the Court for examination. Lower court’s award of damages is reversed and set aside.
Villa Rey Transit vs. Ferrer
25 SCRA 845 (1968)
Best Evidence Rule
FACTS:
Jose Villarama was an operator of a bus company (Villa Rey Transit) pursuant to CPCs granted him by the PSC. In
1959, he sold 2 CPCs to Pangasinan Transpo. Co. (Pantranco) with the condition that Villarama shall not, for 10 years, apply for
any TPU service competing with buyer. 3 months later, Villa Rey Transit Inc. (VRTI) was formed wherein the wife and
relatives of Jose Villarama were the stockholders and the incorporators. The Corporation. then bought 5 CPCs from Valentin
Fernando. The Sheriff levied 2 out of the 5 CPCs pursuant to a writ of execution in favor of Eusebio Ferrer, Fernando’s
judgment creditor. The 2 CPCs were sold at auction with Ferrer as highest bidder. Ferrer then sold these 2 CPCs to Pantranco .
Thus, VRTI filed a complaint for annulment of the sheriff’s sale of the CPCs in favor of Ferrer and its subsequent sale to
Pantranco. The CFI declared these sales as null and void. Hence, this appeal. It is the contention of Pantranco that Jose
Villarama and the Corporation were one and the same. Therefore, the non competition clause embodied in the deed of sale
entered into by Jose Villarama is also binding to the Corporation. The evidence presented by Pantanco to prove its contention is
Photostatic copies of ledger entries and vouchers. Jose Villarama has assailed the admissibility of these exhibits, contending that
no evidentiary value whatsoever should be given to them since “they were merely photostatic copies of the originals, the best
evidence being the originals themselves”.
ISSUE:
6
 Whether or not photostatic copies of ledger entries and vouchers (Exh. 6 to 19 and 22) showing that Villarama had
co-mingled his personal funds and transactions with those made in the name of VRTI are admissible in evidence?
RULING:
Yes. Exhibits 6 to 19 and Exhibit 22 which are photostatic copies of the ledger entries and vouchers showing that
Villarama had co- mingled his personal funds and transactions with those made in the name of the Corporation are very
illuminating evidence. The requisites for the admissibility of secondary evidence when the original is in the custody of the
adverse party are: a.) opponent’s possession of the original; b.) reasonable notice to opponent to produce the original; c.)
satisfactory proof of its existence; d.) failure or refusal of opponent to produce the original in court.
Said requisites have been complied with. Villarama has practically admitted the 2 nd and 4th. As to the 3rd, he
admitted their previous existence in the files of VRTI and had even seen some of them. As to the 1st, he said that the originals
were missing and that VRTI was no longer in possession of the same. However, it is not necessary for a party seeking to
introduce secondary evidence to show that the original is in the actual possession of the adversary. It is enough that the
circumstances are such as to indicate that the writing is in his possession or under his control.
Neither is it required that the party entitled to the custody of the instrument, on being notified to produce it, admit
having it in his possession. Secondary evidence is admissible where he denied having it in his possession. The party calling for
such evidence may introduce a copy thereof as in the case of loss because among the exceptions to the best evidence rule is
“when the original has been lost, destroyed or cannot be produced in court.” The original of the vouchers must be deemed to
have been lost as even VRTI admit such loss. Thus, said evidence, though secondary, are admissible.
__________________________________________________________________________________________________
[G.R. No. 150905. September 23, 2003]
CITIBANK, N.A. MASTERCARD, petitioner, vs. EFREN S. TEODORO, respondent.
DECISION
PANGANIBAN, J.:
Before secondary evidence may be admitted to prove the contents of original documents, the offeror must prove the due
execution and the subsequent loss or unavailability of the original.
The Case
The Petition for Review[1] before us assails the July 31, 2001 Decision [2] and the November 22, 2001 Resolution[3] of the
Court of Appeals (CA) in CA-GR SP No. 62891. The dispositive portion of the challenged Decision reads as follows:
WHEREFORE, premises considered, the Petition is GRANTED; and the Decisions of the trial courts are
hereby REVERSED and SET ASIDE. No costs.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
Petitioner operates a credit card system through which it extends credit accommodations to its cardholders for the
purchase of goods and services from its member establishments. The purchases are later on paid for by cardholders upon receipt
of the billings or statements of account from the company. Respondent Efren S. Teodoro was one such cardholder. On December
14, 1990, he applied for membership with petitioner. After his application was approved, he was issued Citibank, N.A.
Mastercard No. 5423-3920-4457-7009.
Under the terms and conditions governing the use of the Citibank credit card, the cardholder undertakes to pay all the
purchases made using the card within the period indicated on the statement of account or within thirty (30) days from the date or
dates of its use. Charges that remain unpaid within the period fixed in the monthly statement of account shall earn interest at the
rate of 3.5 percent per month plus a penalty fee equivalent to 5 percent of the amount due for every month or even a fraction of a
months delay.
Respondent made various purchases through his credit card. Accordingly, he was billed by petitioner for those purchases,
for which he tendered various payments.
Petitioner claims that as of January 20, 1995, the obligations of respondent stood at P191,693.25, inclusive of interest and
service charges. Several times it demanded payment from him, but he refused to pay, claiming that the amount demanded did not
correspond to his actual obligations. His refusal prompted petitioner to file a Complaint for collection on January 25, 1996
before the Regional Trial Court (RTC) of Makati City. The case was docketed as Civil Case No. 96-092 and raffled to Branch
133.
The RTC, in an Order dated April 23, 1996, dismissed the Complaint for lack of jurisdiction over the amount
involved. The case was then transferred to the Metropolitan Trial Court (MTC) of Makati City, where it was docketed as Civil
Case No. 51586 and raffled to Branch 66.
During the trial, petitioner presented several sales invoices or charge slips, which added up to only P24,388.36. Although
mere photocopies of the originals, the invoices were marked in evidence as Exhibits F to F-4. Because all these copies appeared
to bear the signatures of respondent, the trial court deemed them sufficient proof of his purchases with the use of the credit
card. Accordingly, the MTC in its July 25, 2000 Decision [5] ordered him to pay petitioner the amount of P24,388.36 plus interest
and penalty fee. The material portion of the Decision reads:
[Petitioner] is claiming that [respondent] made use of its credit card. And as of January 20, 1995, [respondents] obligation to
[petitioner] ballooned to the sum of P191,693.25.
This is clear according to [petitioner] as shown by the Statement of Accounts.
To the mind of this Court, the Statement of Account alone will not prove that [respondent] has an outstanding obligation to
[petitioner] in the amount of P191,693.95. This must be substantiated by the Sales Invoices which unearthed the purchases made
by [respondent] when he availed himself of the credit card of [petitioner].
7
While it is true that [petitioner] has offered the Sales Invoices (Exhibits F, F-1, F-4) to show the purchases made by
[respondent], it is equally true also that adding all the amount in said invoices, the sum of P191,693.95 which according to
[petitioner] is the outstanding obligation of [respondent], is hardly met. [Petitioner] even admitted that it could not produce all
the invoices. Without the other Sales Invoices, there is a cloud of doubt hovering over the claim of [petitioner] to [respondent].
In fact, summing up all the amount[s] indicated in the aforesaid Sales Invoices the fact that the [respondent] has incurred to
[petitioner] an obligation in the amount of P24,388.36 as a result of the formers availment of the credit card of the latter.
It is elementary procedure that [petitioner] must prove [its] case with preponderance of evidence. Without all the other Sales
Invoices to uncover the purchases made by [respondent] when he used the credit card of [petitioner], it is undeniable x x x that
[petitioner] is caught in the web of doubt with respect to the accuracy of its claim to the [respondent].
WHEREFORE, premises considered, this Court hereby renders judgment as follows:
1. Ordering [respondent] to pay [petitioner] P24,388.36 with an interest of 3.5% and a penalty fee equivalent to another 5% of
the amount due for every month due or a fraction of a months delay starting February 21, 1995 until the entire obligation is fully
paid;
2. Ordering [respondent] to pay [petitioner] 25% of any and all amounts due and payable as agreed attorneys fees plus cost of
suit.[6]
Thereafter, respondent appealed the MTC judgment to the RTC of Makati City, where the appeal was docketed as Civil
Case No. 00-1051 and raffled to Branch 146. In its October 30, 2000 Decision,[7] the RTC affirmed the MTC Decision in toto.
Ruling of the Court of Appeals
The focal issue of the case according to the CA was whether the photocopies of the sales invoices or charge slips, marked
as Exhibits F to F-4, were competent proofs of the obligations of respondent. These were the only evidence presented by
petitioner that could prove the actual amount of obligation he had incurred in favor of the former. In reversing the trial courts,
the CA ruled that this evidence was insufficient to prove any liability on respondents part.
According to Sections 3 and 5 of Rule 130 of the Rules of Court, whenever the subject of inquiry is the content of a
document, its original must be produced, as it is the best evidence to prove such content. Secondary evidence, like the subject
photocopies, is inadmissible. It will be admissible only if the offeror proves (a) any of the exceptions enumerated in Section 3
and (b) the conditions for its admissibility set forth in Section 5 of Rule 130. For secondary evidence to be admissible, there
must be satisfactory proof of (1) the due execution of the original; (2) the originals loss, destruction or unavailability that is not
due to the offerors bad faith; and (3) reasonable diligence and good faith in the search for or attempt to produce the original.
Although petitioner was able to prove the existence of the original sales invoices, it failed to prove their due execution or
to account for their loss or unavailability.
Hence, this Petition.[8]
Issues
Petitioner raises the following issues for our consideration:
I. Whether or not the Court of Appeals erred in reversing and setting aside the decision of the trial courts for
insufficiency of evidence to support its findings.
II. Whether or not the Court of Appeals erred in holding that petitioner failed to prove the due execution and the
cause of the unavailability and non-production of the charge slips marked in evidence as Exhibits F to F-4.[9]
In brief, the main issue boils down to whether the photocopies of the sales invoices or charge slips marked during trial as
Exhibits F to F-4 are admissible in evidence.
The Courts Ruling
The Petition has no merit.
Main Issue:
Admissibility of Photocopies
Petitioner contends that the testimony[10] of its principal witness - Mark Hernando, assistant manager of Citibank, N.A.
Mastercard -- proves the following:
a) the existence or due execution of the original sales invoices which sufficiently proved respondents liability of
P24,388.36;
b) the loss or unavailability of the original sales invoices; and
c) petitioners reasonable diligence and good faith in the search for or attempt to produce the originals.
It further argues that Hernando competently identified the signatures of respondent on the sales invoices, having
recognized them as identical to the signature on the latters credit card application form.
On the other hand, respondent maintains that petitioner failed to prove the due execution of the sales invoices. According
to him, Hernando was not privy to such execution and could not have properly or competently declared that the signatures on the
invoices and on the application form belonged to the former. The latter was not the person before whom the application form
was signed, executed or acknowledged; he was not even present then. As to the sales invoices and respondents alleged signatures
thereon, he saw them only after the Complaint had been filed in court or long after those invoices had been executed. He was
therefore not competent to identify the signatures.
Because Hernandez had not actually witnessed the execution of the sales invoices and the application form, respondent
concludes that petitioner failed to observe Section 5 of Rule 130 of the Rules of Court, which provides that the contents of the
original may be proven by the testimony of witnesses.
Finally, respondent contends that the alleged loss or unavailability of the original sales invoices was not sufficiently
established. Allegedly, Hernandez had requested the originals from Equitable Credit Card Network, Inc., but failed to show in
court that he had followed up his request as advised by another witness, Zen Hipolito. Therefore, the requirement of reasonable
diligence and good faith in the search for or attempt to produce the originals was not satisfied, because he had shown no proof of
having followed up the request.
The burden of proof rests upon petitioner, as plaintiff, to establish its case based on a preponderance of evidence. It is
well-settled that in civil cases, the party that alleges a fact has the burden of proving it. [11] Petitioner failed to prove that
8
respondent had an obligation in the principal amount of P24,388.36, because the photocopies of the original sales invoices it had
presented in court were inadmissible in evidence. Moreover, had they been admissible, they would still have had little probative
value.[12]
The original copies of the sales invoices are the best evidence to prove the alleged obligation. Photocopies thereof are
mere secondary evidence. As such, they are inadmissible because petitioner, as the offeror, failed to prove any of the exceptions
provided under Section 3[13] of Rule 130 of the Rules of Court, as well s the conditions of their admissibility. Because of the
inadmissibility of the photocopies in the absence of the originals, respondents obligation was not established.
Section 5 of Rule 130 of the Rules of Court states:
SEC. 5. When original document is unavailable. When the original document has been lost or destroyed, or cannot be produced
in court, the offeror, upon proof of its execution or existence and the cause of its unavailability without bad faith on his part, may
prove its contents by a copy, or by a recital of its contents in some authentic document, or by the testimony of witnesses in the
order stated.
Applying the above Rule to the present case, before a party is allowed to adduce secondary evidence to prove the contents
of the original sales invoices, the offeror must prove the following: (1) the existence or due execution of the original; (2) the loss
and destruction of the original or the reason for its nonproduction in court; and (3) on the part of the offeror, the absence of bad
faith to which the unavailability of the original can be attributed.[14] The correct order of proof is as follows: existence, execution,
loss, and contents. At the sound discretion of the court, this order may be changed if necessary. [15]
In the present case, the existence of the original sales invoices was established by the photocopies and the testimony of
Hernandez. Petitioner, however, failed to prove that the originals had been lost or could not be produced in court after reasonable
diligence and good faith in searching for them.
Indeed, the loss of the originals and reasonable diligence in the search for them were conditions that were not met,
because the sales invoices might have been found by Equitable.Hernandez, testifying that he had requested the originals from
Equitable, failed to show that he had subsequently followed up the request.[16]
Finally, when more than one original copy exists, it must appear that all of them have been lost, destroyed, or cannot be
produced in court before secondary evidence can be given of any one. A photocopy may not be used without accounting for the
other originals.[17]
In Santos v. Santos[18] the Court upheld the pronouncement of the CA that before the appellees therein could be allowed to
adduce secondary evidence to prove the contents of the original, they had to prove -- with the requisite quantum of evidence --
the loss, the destruction or the unavailability of all original copies of the document.
In the present case, triplicates were produced, although the cardholder signed the sales invoice only once. [19] During the
trial, Hernandez explained that an original copy had gone to respondent, another to the merchant, and still another to
petitioner.[20]
Each of these three copies is regarded as an original in accordance with Section 4 (b) of Rule 130 of the Rules of
Court.[21] Petitioner failed to show that all three original copies were unavailable, and that due diligence had been exercised in the
search for them.
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERed
_____________________________________________________________
G.R. No. 150758 February 18, 2004
VERONICO TENEBRO, petitioner
vs.
THE HONORABLE COURT OF APPEALS, respondent.
DECISION
YNARES-SANTIAGO, J.:
We are called on to decide the novel issue concerning the effect of the judicial declaration of the nullity of a second or
subsequent marriage, on the ground of psychological incapacity, on an individual’s criminal liability for bigamy. We hold that
the subsequent judicial declaration of nullity of marriage on the ground of psychological incapacity does not retroact to the date
of the celebration of the marriage insofar as the Philippines’ penal laws are concerned. As such, an individual who contracts a
second or subsequent marriage during the subsistence of a valid marriage is criminally liable for bigamy, notwithstanding the
subsequent declaration that the second marriage is void ab initio on the ground of psychological incapacity.
Petitioner in this case, Veronico Tenebro, contracted marriage with private complainant Leticia Ancajas on April 10, 1990. The
two were wed by Judge Alfredo B. Perez, Jr. of the City Trial Court of Lapu-lapu City. Tenebro and Ancajas lived together
continuously and without interruption until the latter part of 1991, when Tenebro informed Ancajas that he had been previously
married to a certain Hilda Villareyes on November 10, 1986. Tenebro showed Ancajas a photocopy of a marriage contract
between him and Villareyes. Invoking this previous marriage, petitioner thereafter left the conjugal dwelling which he shared
with Ancajas, stating that he was going to cohabit with Villareyes.1
On January 25, 1993, petitioner contracted yet another marriage, this one with a certain Nilda Villegas, before Judge German
Lee, Jr. of the Regional Trial Court of Cebu City, Branch 15.2 When Ancajas learned of this third marriage, she verified from
Villareyes whether the latter was indeed married to petitioner. In a handwritten letter,3 Villareyes confirmed that petitioner,
Veronico Tenebro, was indeed her husband.
Ancajas thereafter filed a complaint for bigamy against petitioner. 4 The Information,5 which was docketed as Criminal Case No.
013095-L, reads:
That on the 10th day of April 1990, in the City of Lapu-lapu, Philippines, and within the jurisdiction of this Honorable Court, the
aforenamed accused, having been previously united in lawful marriage with Hilda Villareyes, and without the said marriage
having been legally dissolved, did then and there willfully, unlawfully and feloniously contract a second marriage with LETICIA
ANCAJAS, which second or subsequent marriage of the accused has all the essential requisites for validity were it not for the
subsisting first marriage.
CONTRARY TO LAW.
When arraigned, petitioner entered a plea of "not guilty".6
During the trial, petitioner admitted having cohabited with Villareyes from 1984-1988, with whom he sired two children.
However, he denied that he and Villareyes were validly married to each other, claiming that no marriage ceremony took place to
solemnize their union.7 He alleged that he signed a marriage contract merely to enable her to get the allotment from his office in
connection with his work as a seaman.8 He further testified that he requested his brother to verify from the Civil Register in
Manila whether there was any marriage at all between him and Villareyes, but there was no record of said marriage. 9
On November 10, 1997, the Regional Trial Court of Lapu-lapu City, Branch 54, rendered a decision finding the accused guilty
beyond reasonable doubt of the crime of bigamy under Article 349 of the Revised Penal Code, and sentencing him to four (4)
years and two (2) months of prision correccional, as minimum, to eight (8) years and one (1) day of prision mayor, as
9
maximum.10 On appeal, the Court of Appeals affirmed the decision of the trial court. Petitioner’s motion for reconsideration was
denied for lack of merit.
Hence, the instant petition for review on the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED, AND THIS ERROR IS CORRECTIBLE IN
THIS APPEAL – WHEN IT AFFIRMED THE DECISION OF THE HONORABLE COURT A QUOCONVICTING
THE ACCUSED FOR (sic) THE CRIME OF BIGAMY, DESPITE THE NON-EXISTENCE OF THE FIRST
MARRIAGE AND INSUFFICIENCY OF EVIDENCE.
II. THE COURT ERRED IN CONVICTING THE ACCUSED FOR (sic) THE CRIME OF BIGAMY DESPITE
CLEAR PROOF THAT THE MARRIAGE BETWEEN THE ACCUSED AND PRIVATE COMPLAINANT HAD
BEEN DECLARED NULL AND VOID AB INITIO AND WITHOUT LEGAL FORCE AND EFFECT. 11
After a careful review of the evidence on record, we find no cogent reason to disturb the assailed judgment.
Under Article 349 of the Revised Penal Code, the elements of the crime of Bigamy are:
(1) that the offender has been legally married;
(2) that the first marriage has not been legally dissolved or, in case his or her spouse is absent, the absent spouse
could not yet be presumed dead according to the Civil Code;
(3) that he contracts a second or subsequent marriage; and
(4) that the second or subsequent marriage has all the essential requisites for validity. 12
Petitioner’s assignment of errors presents a two-tiered defense, in which he (1) denies the existence of his first marriage to
Villareyes, and (2) argues that the declaration of the nullity of the second marriage on the ground of psychological incapacity,
which is an alleged indicator that his marriage to Ancajas lacks the essential requisites for validity, retroacts to the date on which
the second marriage was celebrated.13 Hence, petitioner argues that all four of the elements of the crime of bigamy are absent,
and prays for his acquittal.14
Petitioner’s defense must fail on both counts.
First, the prosecution presented sufficient evidence, both documentary and oral, to prove the existence of the first marriage
between petitioner and Villareyes. Documentary evidence presented was in the form of: (1) a copy of a marriage contract
between Tenebro and Villareyes, dated November 10, 1986, which, as seen on the document, was solemnized at the Manila City
Hall before Rev. Julieto Torres, a Minister of the Gospel, and certified to by the Office of the Civil Registrar of Manila; 15 and (2)
a handwritten letter from Villareyes to Ancajas dated July 12, 1994, informing Ancajas that Villareyes and Tenebro were legally
married.16
To assail the veracity of the marriage contract, petitioner presented (1) a certification issued by the National Statistics Office
dated October 7, 1995;17 and (2) a certification issued by the City Civil Registry of Manila, dated February 3, 1997. 18 Both these
documents attest that the respective issuing offices have no record of a marriage celebrated between Veronico B. Tenebro and
Hilda B. Villareyes on November 10, 1986.
To our mind, the documents presented by the defense cannot adequately assail the marriage contract, which in itself would
already have been sufficient to establish the existence of a marriage between Tenebro and Villareyes.
All three of these documents fall in the category of public documents, and the Rules of Court provisions relevant to public
documents are applicable to all. Pertinent to the marriage contract, Section 7 of Rule 130 of the Rules of Court reads as follows:
Sec. 7. Evidence admissible when original document is a public record. – When the original of a document is in the custody of a
public officer or is recorded in a public office, its contents may be proved by a certified copy issued by the public officer in
custody thereof (Emphasis ours).
This being the case, the certified copy of the marriage contract, issued by a public officer in custody thereof, was admissible as
the best evidence of its contents. The marriage contract plainly indicates that a marriage was celebrated between petitioner and
Villareyes on November 10, 1986, and it should be accorded the full faith and credence given to public documents.
Moreover, an examination of the wordings of the certification issued by the National Statistics Office on October 7, 1995 and
that issued by the City Civil Registry of Manila on February 3, 1997 would plainly show that neither document attests as a
positive fact that there was no marriage celebrated between Veronico B. Tenebro and Hilda B. Villareyes on November 10,
1986. Rather, the documents merely attest that the respective issuing offices have no record of such a marriage. Documentary
evidence as to the absence of a record is quite different from documentary evidence as to the absence of a marriage ceremony, or
documentary evidence as to the invalidity of the marriage between Tenebro and Villareyes.
The marriage contract presented by the prosecution serves as positive evidence as to the existence of the marriage between
Tenebro and Villareyes, which should be given greater credence than documents testifying merely as to absence of any record of
the marriage, especially considering that there is absolutely no requirement in the law that a marriage contract needs to be
submitted to the civil registrar as a condition precedent for the validity of a marriage. The mere fact that no record of a marriage
exists does not invalidate the marriage, provided all requisites for its validity are present. 19 There is no evidence presented by the
defense that would indicate that the marriage between Tenebro and Villareyes lacked any requisite for validity, apart from the
self-serving testimony of the accused himself. Balanced against this testimony are Villareyes’ letter, Ancajas’ testimony that
petitioner informed her of the existence of the valid first marriage, and petitioner’s own conduct, which would all tend to
indicate that the first marriage had all the requisites for validity.
Finally, although the accused claims that he took steps to verify the non-existence of the first marriage to Villareyes by
requesting his brother to validate such purported non-existence, it is significant to note that the certifications issued by the
National Statistics Office and the City Civil Registry of Manila are dated October 7, 1995 and February 3, 1997, respectively.
Both documents, therefore, are dated after the accused’s marriage to his second wife, private respondent in this case.
As such, this Court rules that there was sufficient evidence presented by the prosecution to prove the first and second requisites
for the crime of bigamy.
The second tier of petitioner’s defense hinges on the effects of the subsequent judicial declaration 20 of the nullity of the second
marriage on the ground of psychological incapacity.
Petitioner argues that this subsequent judicial declaration retroacts to the date of the celebration of the marriage to Ancajas. As
such, he argues that, since his marriage to Ancajas was subsequently declared void ab initio, the crime of bigamy was not
committed.21
This argument is not impressed with merit.
10
Petitioner makes much of the judicial declaration of the nullity of the second marriage on the ground of psychological
incapacity, invoking Article 36 of the Family Code. What petitioner fails to realize is that a declaration of the nullity of the
second marriage on the ground of psychological incapacity is of absolutely no moment insofar as the State’s penal laws are
concerned.
As a second or subsequent marriage contracted during the subsistence of petitioner’s valid marriage to Villareyes, petitioner’s
marriage to Ancajas would be null and void ab initio completely regardless of petitioner’s psychological capacity or
incapacity.22 Since a marriage contracted during the subsistence of a valid marriage is automatically void, the nullity of this
second marriage is not per se an argument for the avoidance of criminal liability for bigamy. Pertinently, Article 349 of the
Revised Penal Code criminalizes "any person who shall contract a second or subsequent marriage before the former marriage has
been legally dissolved, or before the absent spouse has been declared presumptively dead by means of a judgment rendered in
the proper proceedings". A plain reading of the law, therefore, would indicate that the provision penalizes the mere act of
contracting a second or a subsequent marriage during the subsistence of a valid marriage.
Thus, as soon as the second marriage to Ancajas was celebrated on April 10, 1990, during the subsistence of the valid first
marriage, the crime of bigamy had already been consummated. To our mind, there is no cogent reason for distinguishing
between a subsequent marriage that is null and void purely because it is a second or subsequent marriage, and a subsequent
marriage that is null and void on the ground of psychological incapacity, at least insofar as criminal liability for bigamy is
concerned. The State’s penal laws protecting the institution of marriage are in recognition of the sacrosanct character of this
special contract between spouses, and punish an individual’s deliberate disregard of the permanent character of the special bond
between spouses, which petitioner has undoubtedly done.
Moreover, the declaration of the nullity of the second marriage on the ground of psychological incapacity is not an indicator that
petitioner’s marriage to Ancajas lacks the essential requisites for validity. The requisites for the validity of a marriage are
classified by the Family Code into essential (legal capacity of the contracting parties and their consent freely given in the
presence of the solemnizing officer)23 and formal (authority of the solemnizing officer, marriage license, and marriage ceremony
wherein the parties personally declare their agreement to marry before the solemnizing officer in the presence of at least two
witnesses).24 Under Article 5 of the Family Code, any male or female of the age of eighteen years or upwards not under any of
the impediments mentioned in Articles 3725 and 3826 may contract marriage.27
In this case, all the essential and formal requisites for the validity of marriage were satisfied by petitioner and Ancajas. Both
were over eighteen years of age, and they voluntarily contracted the second marriage with the required license before Judge
Alfredo B. Perez, Jr. of the City Trial Court of Lapu-lapu City, in the presence of at least two witnesses.
Although the judicial declaration of the nullity of a marriage on the ground of psychological incapacity retroacts to the date of
the celebration of the marriage insofar as the vinculum between the spouses is concerned, it is significant to note that said
marriage is not without legal effects. Among these effects is that children conceived or born before the judgment of absolute
nullity of the marriage shall be considered legitimate.28 There is therefore a recognition written into the law itself that such a
marriage, although void ab initio, may still produce legal consequences. Among these legal consequences is incurring criminal
liability for bigamy. To hold otherwise would render the State’s penal laws on bigamy completely nugatory, and allow
individuals to deliberately ensure that each marital contract be flawed in some manner, and to thus escape the consequences of
contracting multiple marriages, while beguiling throngs of hapless women with the promise of futurity and commitment.
As such, we rule that the third and fourth requisites for the crime of bigamy are present in this case, and affirm the judgment of
the Court of Appeals.
As a final point, we note that based on the evidence on record, petitioner contracted marriage a third time, while his marriages to
Villareyes and Ancajas were both still subsisting. Although this is irrelevant in the determination of the accused’s guilt for
purposes of this particular case, the act of the accused displays a deliberate disregard for the sanctity of marriage, and the State
does not look kindly on such activities. Marriage is a special contract, the key characteristic of which is its permanence. When an
individual manifests a deliberate pattern of flouting the foundation of the State’s basic social institution, the State’s criminal laws
on bigamy step in.
Under Article 349 of the Revised Penal Code, as amended, the penalty for the crime of bigamy is prision mayor, which has a
duration of six (6) years and one (1) day to twelve (12) years. There being neither aggravating nor mitigating circumstance, the
same shall be imposed in its medium period. Applying the Indeterminate Sentence Law, petitioner shall be entitled to a
minimum term, to be taken from the penalty next lower in degree, i.e., prision correccional which has a duration of six (6)
months and one (1) day to six (6) years. Hence, the Court of Appeals correctly affirmed the decision of the trial court which
sentenced petitioner to suffer an indeterminate penalty of four (4) years and two (2) months of prision correccional, as minimum,
to eight (8) years and one (1) day of prision mayor, as maximum.
WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED. The assailed decision of the Court of
Appeals in CA-G.R. CR No. 21636, convicting petitioner Veronico Tenebro of the crime of Bigamy and sentencing him to
suffer the indeterminate penalty of four (4) years and two (2) months of prision correccional, as minimum, to eight (8) years and
one (1) day of prision mayor, as maximum, is AFFIRMED in toto.
SO ORDERED.
________________________________________________________________________________________
G.R. No. 159288 October 19, 2004
JOHNSON LEE, petitioner,
vs.
PEOPLE OF THE PHILIPPINES and NEUGENE MARKETING, INC., respondents.
Facts: NEUGENE Marketing, Inc. (NMI) was incorporated in 1978 with funds provided by the Uy Family. One of the
original incorporators, Eugenio Flores, Jr. assigned/divested himself of his shares in favor of Sonny Moreno, 1,050 shares;
Arsenio Yang, Jr., 700 shares and Charles O. Sy, 700 shares.
In 1987, the NMI sold and delivered to the Victorias Milling Company, Inc. (VMCI), in Victorias, Negros Occidental, 77,500
pieces of empty white bags for the price of 565,750.00. NMI issued Charge Invoice No. 0809 dated June 11, 1987 to VMCI
covering said sale. VMCI again purchased 100,000 pieces of empty white bags from NMI for 730,000.00 for which NMI issued
Charge Invoice No. 0810. In payment of said purchases from NMI, VMCI drew and issued two Bank of the Philippine Islands
(BPI) Checks: Check No. 068706 dated August 3, 1987 in the amount of 565,750.00 and Check No. 068993 dated August 19,
1987 in the amount of 934,400.00. Both checks were payable to the order of NMI.
On March 22, 1988, Johnson Lee, Sonny Moreno, Leoncio Tan and Nicanor Martin filed a petition with the Securities and
Investigation Clearing Department (SICD) of the Commission praying, among other things, for the annulment or nullification of
the Certification of Filing of Resolution of Voluntary Dissolution of NMI for being contrary to law and its by-laws.
In the meantime, the trustee wrote the petitioner, Johnson Lee, being the president of the company, on March 8, 1988 requesting
him to turn over to it the P1,500,150.00 he received in payment of the empty bags sold by NMI to VCMI. However, he failed to
do so.
Due to nonpayment, a verified complaint for three (3) counts of estafa was filed against the petitioner and Sonny Moreno with
the City Prosecutor’s Office. Appended to the complaint were photocopies of Charge Invoices, issued by NMI to VMCI.
To prove the loss due to destruction of the original copies of the charge invoices and checks, as well as the authenticity and due
execution thereof, the prosecution presented Ban Hua Flores, who testified that she saw the two checks in the office of the
petitioner at the Singson Building, Plaza Moraga, Sta. Cruz, Manila. Sometime in 1987, she went to the office of the VMCI and
inquired if it still had copies of the two checks and the clerk thereat informed her that it would be difficult to locate the checks as
they were stored in the bodega, where many other checks were kept. Flores also testified that the signatures at the dorsal portion
of the checks were those of the petitioner, the President of NMI, with whom she had been working, and that he indorsed and
deposited the same on September 4, 1987 with the Solidbank, instead of the BPI Plaza Cervantes branch in Manila, the official
depository bank of NMI. According to Flores, she was able to secure microfilm copies of the checks from Solidbank, and was
sure that the copies of the checks and invoices were faithful reproductions of the original copies thereof.
11
Testifying for the prosecution in obedience to a subpoena issued by the court, Merlita Bayaban, Manager for Corporate Affairs
of VMCI, declared that the records section of VMCI, which had custody of all checks and other corporate records, was near her
office. She testified that the checks, including their other records, were lost during the flood in 1985. She also testified on the
Certification issued by Carolina Diaz, the Comptroller of VMCI, confirming the loss of the two checks. She, however, admitted
that she did not see the original copies of the checks and that she was not a signatory thereto.
The RTC ruled in favor of the prosecution. The accused filed a motion for reconsideration of the order, claiming that the
prosecution failed to prove the authenticity and due execution of the offered documents, a prerequisite to the admission thereof
as secondary evidence. They also filed a Motion for Leave to File a Demurrer to Evidence. The trial court denied both motions.
The Court of Appeals affirmed the RTC Decision.
Issue:
Can the photocopies of invoices offered as secondary evidence be admitted without proof of its loss or unavailability and
execution of the original?
Held:
The rule applicable for this case is 130, Section 5 of the Revised Rules of Court:
When the original document is unavailable. – When the original document has been lost or destroyed, or cannot be
produced in court, the offeror, upon proof of its execution or existence and the cause of its unavailability without bad
faith on his part, may prove its contents by a copy, or by a recital of its contents in some authentic document, or by
the testimony of witnesses in the order stated.
The court agreed with the petitioner that the Certification signed by Carolina Diaz was inadmissible in evidence against him
because of the failure of the prosecution to present her as witness and to testify on said certification.
However, the records show that, in obedience to the subpoena duces tecum and ad testificandum issued by the trial court
directing the VMCI to produce the originals of the checks and the charge invoices, Bayaban, the Manager for Corporate Affairs
of VMCI, testified that all its records, including the charge invoices and checks, were destroyed seven years ago in a flash flood
which occurred on November 28, 1995, and that such loss/destruction was known to all the employees of VMCI, including
herself.
Contrary to the claim of the petitioner, the prosecution adduced preponderant evidence to prove the existence, the due execution
and the authenticity of the said checks and charge invoices consisting of the admission of no less than the petitioner in his
counter-affidavit. The petitioner admitted therein that he received the total amount of P1,500,150.00 from VMCI in full payment
of the delivery and sale of the empty bags by NMI to VMCI and that the said amount was in the custody of the said corporation.
The decision of the Court of Appeals is affirmed.
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Consolidated Bank vs. Del Monte
CHICO-NAZARIO, J.:
[2]
This is a petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. CV No. 16886 entitled, The
Consolidated Bank & Trust Corporation (SOLIDBANK) v. Del Monte Motor Works, Inc., Narciso O. Morales and Spouse
promulgated on 25 November 1999 and of the Resolution of the appellate court dated 11 May 2000 denying petitioners motion
for reconsideration. Said decision and resolution affirmed the order dated 28 December 1987 of the Regional Trial Court (RTC),
Branch 27, Manila.
The facts of the case are as follows:
On 13 June 1984, petitioner filed before the RTC of Manila a complaint[3] for recovery of sum of money against respondents,
impleading the spouse of respondent Narciso O. Morales (respondent Morales) in order to bind their conjugal partnership of
gains. Petitioner, a domestic banking and trust corporation, alleges therein that on 23 April 1982, it extended in favor of
respondents a loan in the amount of One Million Pesos (P1,000,000.00) as evidenced by a promissory note executed by
respondents on the same date. Under the promissory note, respondents Del Monte Motor Works, Inc. (respondent corporation)
and Morales bound themselves jointly and severally to pay petitioner the full amount of the loan through twenty-five monthly
installments of P40,000.00 a month with interest pegged at 23% per annum. The note was to be paid in full by 23 May 1984. As
respondents defaulted on their monthly installments, the full amount of the loan became due and demandable pursuant to the
terms of the promissory note. Petitioner likewise alleges that it made oral and written demands upon respondents to settle their
obligation but notwithstanding these demands, respondents still failed to pay their indebtedness which, as of 09 March 1984,
stood at P1,332,474.55. Petitioner attached to its complaint as Annexes A, B, and C, respectively, a photocopy of the promissory
note supposedly executed by respondents, a copy of the demand letter it sent respondents dated 20 January 1983, and statement
of account pertaining to respondents loan.
On 31 October 1984, petitioner filed an Ex-Parte Motion to Declare the Defendants in Default which was opposed by the
defendants upon the ground that they were never served with copies of the summons and of petitioners complaint.
On 23 November 1984, respondent corporation filed before the trial court a manifestation attaching thereto its answer to
petitioners complaint which states the following:
2- That it denies generally and specifically the allegations contained in paragraphs 3, 4, 5, 6, 7 and 8
thereof for lack of knowledge and information sufficient to form a belief as to the truth of the matters
therein alleged, the truth being those alleged in the Special and Affirmative Defenses hereinbelow
contained;
3- ANSWERING FURTHER, and by way of a first special and affirmative defense, defendant herein
states that the promissory note in question is void for want of valid consideration and/or there was no
valuable consideration involved as defendant herein did not receive any consideration at all;
4- ANSWERING FURTHER, and by way of a second special affirmative defense, defendant herein
alleges that no demand has ever been sent to nor received by herein defendant and if ever demands were
made, denies any liability as averred therein.
5- ANSWERING FURTHER, and by way of a third special and affirmative defense, defendant herein
avers that the complaint states no cause of action and has no basis either in fact or in law;
VERIFICATION
I, JEANETTE D. TOLENTINO, of legal age, after having been duly sworn to in accordance with law,
depose and state:
That I am the Controller of Del Monte Motor Works, Inc., one of the defendants in this case.
That for and in behalf of the defendant corporation, I caused the preparation of the above-narrated answer.
That I have read the contents thereof and they are true of my own knowledge.
(SGD) JEANNETTE D. TOLENTINO[4]
On 06 December 1984, respondent Morales filed his manifestation together with his answer wherein he likewise
renounced any liability on the promissory note, thus:
12
 1. He ADMIT[S] paragraphs 1, 2, and 3 of the complaint with a qualification in paragraph 3 thereof that
he has long been separated from his wife and the system governing their property relations is that of
complete separation of property and not that of conjugal partnership of gain[s];
2. He [DENIES], generally and specifically, the allegations contained in paragraphs 4, 5, 6, 7, and 8
thereof, for lack of knowledge and information sufficient to form a belief and as to the truth of the matter
therein averred, the truth being those alleged in the Special And Affirmative Defenses hereinbelow
pleaded;
SPECIAL AND AFFIRMATIVE DEFENSES
4. He has never signed the promissory note attached to the complaint in his personal and/or individual
capacity as such;
5. That the said promissory note is ineffective, unenforceable and void for lack of valid consideration;
6. That even admitting, argumenti gratia, the validity and execution of the questioned promissory note,
still, defendant herein cannot be bound personally and individually to the said obligations as banking
procedures requires, it being a standard operating procedure of all known banking institution, that to hold
a borrower jointly and severally liable in his official as well as personal capacity, the borrower must sign a
Suretyship Agreement or at least, a continuing guarranty with that of the corporation he represent(s) but
which in this case is wanting;
7. That transaction/obligation in question did not, in any way, redound/inure to the benefit of the conjugal
partnership of gain, as there is no conjugal partnership of gain to speak with, defendant having long been
separated from his wife and their property relation is governed by the system of complete separation of
property, and more importantly, he has never signed the said promissory note in his personal and
individual capacity as such;
VERIFICATION
That I, NARCISO MORALES, after having been duly sworn to in accordance with law, hereby depose
and declare that:
I am one of the named defendant[s] in the above-entitled case;
I have cause[d] the preparation of the foregoing Answer upon facts and figures supplied by me to my
retained counsel; have read each and every allegations contained therein and hereby certify that the same
are true and correct of my own knowledge and information.
(SGD) NARCISO MORALES
Affiant
[5]
On 26 December 1984, the trial court denied petitioners motion to declare respondents in default and admitted their respective
answers.[6]
During the trial on the merits of this case, petitioner presented as its sole witness, Liberato A. Lavarino (Lavarino), then
the manager of its Collection Department. Substantially, Lavarino stated that respondents obtained the loan, subject of
this case, from petitioner and due to respondents failure to pay a single monthly installment on this loan, petitioner was
constrained to send a demand letter to respondents; that as a result of this demand letter, Jeannette Tolentino
(Tolentino), respondent corporations controller, wrote a letter to petitioner requesting for some consideration because of
the unfavorable business atmosphere then buffeting their business operation; that Tolentino enclosed to said letter a
check with a face value of P220,020.00 to be discounted by petitioner with the proceeds being applied as partial payment
to their companys obligation to petitioner; that after receipt of this partial payment, respondents obligation again became
stagnant prompting petitioner to serve respondents with another demand letter which, unfortunately, was unheeded by
respondents. Lavarino also identified the following exhibits for petitioner: photocopy of the duplicate original of the
promissory note attached to the complaint as Exhibit A;[7]petitioners 20 January 1983 demand letter marked as Exhibit
B;[8] Tolentinos letter to petitioner dated 10 February 1983 and marked as Exhibit C;[9] and the 09 March 1984 statement
of account sent to respondents marked as Exhibit D.[10]
On 26 September 1985, petitioner made its formal offer of evidence. However, as the original copy of Exhibit A could no
longer be found, petitioner instead sought the admission of the duplicate original of the promissory note which was
identified and marked as Exhibit E.
The trial court initially admitted into evidence Exhibit E and granted respondents motion that they be allowed to amend their
respective answers to conform with this new evidence.[11]
On 30 September 1985, respondent corporation filed a manifestation and motion for reconsideration [12] of the trial courts order
admitting into evidence petitioners Exhibit E. Respondent corporation claims that Exhibit E should not have been admitted as it
was immaterial, irrelevant, was not properly identified and hearsay evidence. Respondent corporation insists that Exhibit E was
not properly identified by Lavarino who testified that he had nothing to do in the preparation and execution of petitioners
exhibits, one of which was Exhibit E. Further, as there were markings in Exhibit A which were not contained in Exhibit E, the
latter could not possibly be considered an original copy of Exhibit A. Lastly, respondent corporation claims that the exhibit in
question had no bearing on the complaint as Lavarino admitted that Exhibit E was not the original of Exhibit A which was the
foundation of the complaint and upon which respondent corporation based its own answer.
Respondent Morales similarly filed a manifestation with motion to reconsider order admitting as evidence Exhibit E[13] which,
other than insisting that the due execution and genuineness of the promissory note were not established as far as he was
concerned, essentially raised the same arguments contained in respondent corporations manifestation with motion for
reconsideration referred to above.
On 06 December 1985, the trial court granted respondents motions for reconsideration. [14] Petitioner moved for the
reconsideration of this order which was denied by the court a quo on 20 December 1985.[15]
On 26 December 1985, respondents separately filed their motions to dismiss on the similar ground that with the exclusion of
Exhibits A and E, petitioner no longer possessed any proof of respondents alleged indebtedness.[16]
On 08 April 1986, petitioner filed a motion[17] praying that the presiding judge, Judge Ricardo D. Diaz, of the court a quo inhibit
himself from this case maintaining that the latter rushed into resolving its motion for reconsideration of the trial courts order of
06 December 1985 thereby depriving it the opportunity of presenting proof that the original of Exhibit A was delivered to
respondents as early as 02 April 1983. Such haste on the part of the presiding judge, according to petitioner, cast doubt on his
objectivity and fairness. This motion to inhibit was denied by the trial court on 06 August 1987. [18]
In an order dated 28 December 1987,[19] the case before the trial court was dismissed, the dispositive portion of which reads:
WHEREFORE, the instant case against defendants Del Monte Motor Works, Inc. and Narciso O. Morales
and spouse, is hereby DISMISSED, with costs against the plaintiff.
The trial courts finding was affirmed by the Court of Appeals in the assailed decision now before us. The dispositive
portion of the appellate courts decision reads:
13
WHEREFORE, PREMISES CONSIDERED, the decision of the Regional Trial Court, Manila, Branch 27, dated
December 28, 1987 dismissing plaintiff-appellant['s] complaint is hereby AFFIRMED. Cost against the plaintiff-
appellant.[20]
Petitioner thereafter filed a motion for reconsideration dated 14 December 1999 which was denied for lack of merit in a
resolution of the Court of Appeals promulgated on 11 May 2000. [21]
Aggrieved by the appellate courts ruling, petitioner now seeks redress from this Court imputing the following errors on
the Court of Appeals:
I did not truly express the real intention of the parties as stated in the defenses
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT FOUND THAT PRIVATE
RESPONDENTS DENIED THE MATERIAL ALLEGATIONS OF PETITIONER SOLIDBANKS
COMPLAINT, DESPITE THE PRESENCE OF INDUBITABLE FACTS CLEARLY POINTING TO
THE FACT THAT SAID PRIVATE RESPONDENTS ADMITTED THE GENUINENESS AND DUE
EXECUTION OF THE SUBJECT PROMISSORY NOTE.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT UPHELD THE
EXCLUSION OF EXHIBIT E, THE SECOND ORIGINAL OF THE PROMISSORY NOTE, DESPITE
THE FACT THAT THE ORIGINAL OF EXHIBIT A (XEROX COPY OF THE DUPLICATE
ORIGINAL OF THE PROMISSORY NOTE) WAS ACTUALLY IN THE POSSESSION OF PRIVATE
RESPONDENTS, THUS WARRANTING THE ADMISSION OF SECONDARY EVIDENCE.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
TRIAL JUDGE SHOULD HAVE INHIBITED HIMSELF FROM TAKING COGNIZANCE OF AND
FROM TRYING AND DECIDING THE INSTANT CASE CONSIDERING HIS PERCEIVED AND
MANIFEST BIAS AND PARTIALITY IN FAVOR OF THE PRIVATE RESPONDENTS TO THE
GRAVE PREJUDICE OF PETITIONER SOLIDBANK.[22]
The petition is meritorious.
In resolving the case against petitioner, the appellate court held that contrary to petitioners stance, respondents were able to
generally and specifically deny under oath the genuineness and due execution of the promissory note, thus:
There can be no dispute to the fact that the allegations in the answer (Record, p. 20, 26-27), of both defendants, they denied
generally and specifically under oath the genuineness and due execution of the promissory note and by way of special and
affirmative defenses herein states that he (MORALES) never signed the promissory note attached to the complaint (Exh. A) in
his personal and/or individual capacity. Moreover, what appears in the record (Record, p. 20) was an admission of paragraphs 1
& 2 but they deny generally and specifically the rest of the allegations. It would be considered that there is a sufficient
compliance of the requirement of the law for specific denial.[23]
We hold otherwise. The pertinent portion of the Rules of Court on the matter provides:
SEC. 8. How to contest such documents. When an action or defense is founded upon a written instrument, copied in or attached
to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be
deemed admitted unless the adverse party, under oath, specifically denies them and sets forth what he claims to be the facts; but
the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when
compliance with an order for an inspection of the original instrument is refused.[24]
In the case of Permanent Savings and Loan Bank v. Mariano Velarde,[25] this Court held that
. . . Respondent also denied any liability on the promissory note as he allegedly did not receive the amount
stated therein, and the loan documents do not express the true intention of the parties. Respondent
reiterated these allegations in his denial under oath, stating that the promissory note sued upon, assuming
that it exists and bears the genuine signature of herein defendant, the same does not bind him and that it
Respondents denials do not constitute an effective specific denial as contemplated by law. In the early
case of Songco vs. Sellner,[26] the Court expounded on how to deny the genuineness and due execution of
an actionable document, viz.:
. . . This means that the defendant must declare under oath that he did not sign the
document or that it is otherwise false or fabricated. Neither does the statement of
the answer to the effect that the instrument was procured by fraudulent
representation raise any issue as to its genuineness or due execution. On the
contrary such a plea is an admission both of the genuineness and due execution
thereof, since it seeks to avoid the instrument upon a ground not affecting either. [27]
In this case, both the court a quo and the Court of Appeals erred in ruling that respondents were able to
specifically deny the allegations in petitioners complaint in the manner specifically required by the rules.
In effect, respondents had, to all intents and purposes, admitted the genuineness and due execution of the
subject promissory note and recognized their obligation to petitioner.
The appellate court likewise sustained the ruling of the trial court that the best evidence rule or primary
evidence must be applied as the purpose of the proof is to establish the terms of the writing meaning the
alleged promissory note as it is the basis of the recovery of the money allegedly loaned to the defendants
(respondents herein).[28]
The best evidence rule is encapsulated in Rule 130, Section 3, of the Revised Rules of Civil Procedure which provides:
Sec. 3. Original document must be produced; exceptions. When the subject of inquiry is the contents of a
document, no evidence shall be admissible other than the original document itself, except in the following
cases:
(a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the
part of the offeror;
(b) When the original is in the custody or under the control of the party against whom the evidence is
offered, and the latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other documents which cannot be examined in
court without great loss of time and the fact sought to be established from them is only the general result
of the whole; and
14
 (d) When the original is a public record in the custody of a public officer or is recorded in a public office.
The best evidence rule, according to Professor Thayer, first appeared in the year 1699-1700 when in one case involving a
goldsmith, Holt, C. J., was quoted as stating that they should take into consideration the usages of trade and that the best proof
that the nature of the thing will afford is only required.[29] Over the years, the phrase was used to describe rules which were
already existing such as the rule that the terms of a document must be proved by the production of the document itself, in
preference to evidence about the document; it was also utilized to designate the hearsay rule or the rule excluding assertions
made out of court and not subject to the rigors of cross-examination; and the phrase was likewise used to designate the group of
rules by which testimony of particular classes of witnesses was preferred to that of others. [30]
According to McCormick, an authority on the rules of evidence, the only actual rule that the best evidence phrase denotes today
is the rule requiring the production of the original writing[31] the rationale being: (1) that precision in presenting to the court the
exact words of the writing is of more than average importance, particularly as respects operative or dispositive instruments, such
as deeds, wills and contracts, since a slight variation in words may mean a great difference in rights, (2) that there is a substantial
hazard of inaccuracy in the human process of making a copy by handwriting or typewriting, and (3) as respects oral testimony
purporting to give from memory the terms of a writing, there is a special risk of error, greater than in the case of attempts at
describing other situations generally. In the light of these dangers of mistransmission, accompanying the use of written copies or
of recollection, largely avoided through proving the terms by presenting the writing itself, the preference for the original writing
is justified.[32]
Bearing in mind that the risk of mistransmission of the contents of a writing is the justification for the best evidence
rule, we declare that this rule finds no application to this case. It should be noted that respondents never disputed the
terms and conditions of the promissory note thus leaving us to conclude that as far as the parties herein are concerned,
the wording or content of said note is clear enough and leaves no room for disagreement. In their responsive
pleadings, respondents principal defense rests on the alleged lack of consideration of the promissory note. In addition,
respondent Morales also claims that he did not sign the note in his personal capacity. These contentions clearly do not
question the precise wording[33] of the promissory note which should have paved the way for the application of the
best evidence rule. It was, therefore, an error for the Court of Appeals to sustain the decision of the trial court on this
point.
Besides, the best evidence rule as stated in our Revised Rules of Civil Procedure is not absolute. As quoted earlier, the rule
accepts of exceptions one of which is when the original of the subject document is in the possession of the adverse party. As
pointed out by petitioner in its motion to inhibit, had it been given the opportunity by the court a quo, it would have sufficiently
established that the original of Exhibit A was in the possession of respondents which would have called into application one of
the exceptions to the best evidence rule.
Significantly, and as discussed earlier, respondents failed to deny specifically the execution of the promissory note. This being
the case, there was no need for petitioner to present the original of the promissory note in question. Their judicial admission with
respect to the genuineness and execution of the promissory note sufficiently established their liability to petitioner regardless of
the fact that petitioner failed to present the original of said note.[34]
Indeed, when the defendant fails to deny specifically and under oath the due execution and genuineness of a document copied in
a complaint, the plaintiff need not prove that fact as it is considered admitted by the defendant. [35] In the case of Asia Banking
Corporation v. Walter E. Olsen & Co.,[36] this Court held that
Another error assigned by the appellant is the fact that the lower court took into consideration the documents attached
to the complaint as a part thereof, without having been expressly introduced in evidence. This was no error. In the answer of the
defendants there was no denial under oath of the authenticity of these documents. Under Section 103 of the Code of Civil
Procedure, the authenticity and due execution of these documents must, in that case, be deemed admitted. The effect of this is to
relieve the plaintiff from the duty of expressly presenting such documents as evidence. The court, for the proper decision of the
case, may and should consider, without the introduction of evidence, the facts admitted by the parties. [37]
Anent petitioners allegation that the presiding judge of the court a quo should have inhibited himself from this case, we resolve
this issue against petitioner.
In order for this Court to sustain a charge of partiality and prejudice brought against a judge, there must be convincing proof to
show that he or she is, indeed, biased and partial. Bare allegations are not enough. Bias and prejudice are serious charges which
cannot be presumed particularly if weighed against a judges sacred obligation under his oath of office to administer justice
without respect to person and do equal right to the poor and the rich.[38] There must be a showing of bias and prejudice stemming
from an extrajudicial source resulting in an opinion in the merits on some basis other than what the judge learned from his
participation in the case.[39]
In this case, as petitioner failed to proffer any evidence indicating that Judge Diaz was guilty of bias and prejudice, we affirm the
Court of Appeals holding that there was no cogent reason for him to disqualify himself from this case.
Finally, Rule 33, Section 1, of the Revised Rules of Civil Procedure states the rule on the effect of judgment on demurrer to
evidence. It reads:
SECTION 1. Demurrer to evidence.- After the plaintiff has completed the presentation of his evidence,
the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has
shown no right to relief. If his motion is denied, he shall have the right to present evidence. If the motion
is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived the right to
present evidence.
A demurrer to evidence abbreviates judicial proceedings, it being an instrument for the expeditious termination of an action.
Caution, however, must be exercised by the party seeking the dismissal of a case upon this ground as under the rules, if the
movants plea for the dismissal on demurrer to evidence is granted and the order of dismissal is reversed on appeal, he loses his
right to adduce evidence. If the defendants motion for judgment on demurrer to evidence is granted and the order is subsequently
reversed on appeal, judgment is rendered in favor of the adverse party because the movant loses his right to present
evidence.[40] The reviewing court cannot remand the case for further proceedings; rather, it should render judgment on the basis
of the evidence presented by the plaintiff.[41]
Under the promissory note executed by respondents in this case, they are obligated to petitioner in the amount of One Million
Pesos, this being the amount of loan they obtained on 23 April 1982. In addition, they also bound themselves to pay the 23%
interest per annum on the loan; and a penalty charge of 3% per annum on the amount due until fully paid. Respondents likewise
agreed to pay attorneys fees equivalent to 10% of the total amount due, but in no case less than P200.00, plus costs of suit with
both these amounts bearing a 1% interest per month until paid. Costs against respondents.
WHEREFORE, premises considered, the Court of Appeals decision dated 25 November 1999 as well as its Resolution of 11
May 2000, affirming the order of the Regional Trial Court, Manila, Branch 27, dated 28 December 1987, are
hereby REVERSED and SET ASIDE. Respondents are ordered to pay One Million Pesos (P1,000,000.00) plus 23%
interest per annum, penalty charge of 3% interest per annum, and 10% of the amount due as attorneys fees together with a 1%
interest per month until fully paid. The sum of P220,020.00 which was the value of the postdated check given by respondents to
petitioner as partial payment should be deducted from the amount due from respondents.SO ORDERED.
________________________________________________________________________________________
REPUBLIC OF THE PHILIPPINES,
Petitioner,
versus
MA. IMELDA “IMEE” R. MARCOS-MANOTOC, FERDINAND “BONGBONG” R. MARCOS, JR., GREGORIO MA.
ARANETA III, IRENE R. MARCOS-ARANETA, YEUNG CHUN FAN, YEUNG CHUN HO, YEUNG CHUN KAM, and
PANTRANCO EMPLOYEES ASSOCIATION (PEA)-PTGWO,
Respondents.
15
 G. R. No. 171701
February 8, 2012
FACTS:
After the People Power Revolution in 1986, President Corazon C. Aquino created the Presidential Commission on Good
Government (PCGG) that was primarily tasked to investigate and recover the alleged ill-gotten wealth amassed by the then
President Ferdinand E. Marcos, his immediate family, relatives and associates.
On 16 July 1987, the PCGG, acting on behalf of the Republic with the Office of the Solicitor General (OSG), filed a Complaint
for Reversion, Reconveyance, Restitution, Accounting and Damages against Ferdinand E. Marcos, who was later substituted by
his estate upon his death; Imelda R. Marcos; and herein respondents Imee Marcos-Manotoc, Irene Marcos-Araneta, Bongbong
Marcos, Tomas Manotoc, and Gregorio Araneta III.
Four amended Complaints were thereafter filed imputingactive participation and collaboration of another persons, viz. Nemesio
G. Co and Yeungs (Kam, Ho and Fan) of Glorious Sun Fashion Manufacturing Corporation Phils.; and, Imelda Cojuangco for
the estate of Ramon Cojuangco and Prime Holdings, in the alleged illegal activities and undertakings of the Marcoses in relation
to the ₱200 Billion Pesos ill-gotten wealth allegation.
Petitioner presented and formally offered its evidence against herein respondents. However, the latter objected on the ground that
the documents were unauthenticated and mere photocopies.
On 2002, the Sandiganbayan issued a RESOLUTION ADMITTING all the documentary exhibits formally offered by the
prosecution; however, their evidentiary value was left to the determination of the Court.
Subsequently, Imelda R. Marcos, Imee Marcos-Manotoc and Bongbong Marcos, Jr.; Irene Marcos-Araneta and Gregorio Ma.
Araneta III;Yeung Chun Kam, Yeung Chun Ho and Yeung Chun Fan; and the PEA-PTGWO filed their respective Demurrers to
Evidence.
On 2005, the Sandiganbayan issued a resolution, granting all the demurrers to evidence except the one filed by Imelda R.
Marcos. The sequestration orders on the properties in the name of Gregorio Maria AranetaIII are accordingly lifted.
With regard to Imee Marcos-Manotoc and Bongbong Marcos, Jr., Irene Marcos and Gregorio Araneta III, the court noted that
their involvement in the alleged illegal activities was never established; neither did the documentary evidence pinpoint their
involvement therein. The court held that all presented evidence are hearsay, for being merely photocopies and that the originals
were not presented in court, nor were they authenticated by the persons who executed them. Furthermore, the court pointed out
that petitioner failed to provide any valid reason why it did not present the originals in court. These exhibits were supposed to
show the interests of Imee Marcos-Manotoc in the media networks IBC-13, BBC-2 and RPN-9, all three of which she had
allegedly acquired illegally, her alleged participation in dollar salting through De Soleil Apparel and to prove how the Marcoses
used the Potencianos as dummies in acquiring and operating the bus company PANTRANCO.
Meanwhile, as far as the YEUNGS were concerned, the court found the allegations against them baseless. Petitioner failed to
demonstrate howGlorious Sunwas used as a vehicle for dollar salting; or to show that they were dummies of the Marcoses.
Again, the court held that the documentary evidence relevant to this allegation was INADMISSIBLE for being mere
photocopies, and that the affiants had not been presented as witnesses.
ISSUE:
THE SANDIGANBAYAN ERRED IN GRANTING THE DEMURRERS TO EVIDENCE FILED BY RESPONDENTS MA.
IMELDA (IMEE) R. MARCOS AND FERDINAND (BONGBONG) R. MARCOS, JR.; RESPONDENT-SPOUSES
GREGORIO ARANETA III AND IRENE MARCOS ARANETA AND RESPONDENTS YEUNG CHUN KAM, YEUNG
CHUN FAN, AND YEUNG CHUN HO
RULING:
It is petitioner’s burden to prove the allegations; the operative act on how and in what manner must be clearly shown through
preponderance of evidence.
The petitioner does not deny that what should be proved are the contents of the documents themselves. It is imperative;
therefore, to submit the original documents that could prove petitioner’s allegations. Thus, the photocopied documents are in
violation of best evidence rule, which mandates that the evidence must be the original document itself. Furthermore, petitioner
did not even attempt to provide a plausible reason why the originals were not presented, or any compelling ground why the court
such documents as secondary evidence absent the affiant’s testimony.
The presentation of the originals of the aforesaid exhibits is not validly excepted under Rule 130 of the Rules of Court. Under
Section 3 (d), when ‘the original document is a public record in the custody of a public officer or is recorded in a public office,’
the original thereof need not be presented. However, all except one of the exhibits are not necessarily public documents. The
transcript of stenographic notes (TSN) of the proceedings purportedly before the PCGG may be a public document but what the
plaintiff presented was a mere photocopy of the purported TSN which was not a certified copy and was not even signed by the
stenographer who supposedly took down the proceedings. The Rules provide that when the original document is in the custody
of a public officer or is recorded in a public office; a certified copy issued by the public officer in custody thereof may prove its
contents.
In order that secondary evidence may be admissible, there must be proof by satisfactory evidence of (1) due execution of the
original; (2) loss, destruction or unavailability of all such originals and (3) reasonable diligence and good faith in the search for
or attempt to produce the original. None of the abovementioned requirements were complied by the plaintiff.Exhibits ‘P’, ‘Q’,
‘R’, ‘S’, and ‘T’ were all photocopies. ‘P’, ‘R’, and ‘T’ were affidavits of persons who did not testify before the Court. Exhibit
16
‘S’ is a letter, which is clearly a private document. It is emphasized, even if originals of these affidavits were presented, they
The prosecution offered in evidence the photocopy of PNB Check No. 399967, which the court admitted
would still be considered hearsay evidence if the affiants do not testify and identify them.
Petitioner having failed to observe the best evidence rule rendered the offered documentary evidence futile and worthless in The trial court, thereafter, issued an Order declaring the case submitted for decision. The petitioner filed a motion for a
reconsideration of the Order, which the trial court denied on January 26, 1996.
alleged accumulation of ill-gotten wealth insofar as the specific allegations herein were concerned.Hence, Sandiganbayan is
correct in granting the respondents respective Demurers to evidence. The petitioner then filed an Omnibus Supplemental Motion and to Allow Him to Adduce Evidence alleging, inter alia, that:

___________________________________________________________________________ h) Despite the absence of the original, with only a xerox copy of the PNB Check worth P600,000.00, and further stressing that
the same was paid, the prosecutor insisted, against the vigorous objection of accused, in filing the case in Court
ENGR. BAYANI MAGDAYAO, petitioner,
vs.
In its Opposition to the said motion, the prosecution averred that it dispensed with the presentation of the original of the
PEOPLE OF THE PHILIPPINES, respondent.
dishonored check because the same had been returned to the petitioner. It also pointed out that the petitioner failed to object to
the presentation of the photocopy of the dishonored check.
152881_2004
In a Special Manifestation, the petitioner insisted that the photocopy of the subject check was inadmissible in evidence because
TOPIC: 130 – best evidence rule
of the prosecution’s failure to produce the original thereof
PONENTE: CALLEJO, SR., J.:
All motions of petitioner were denied
AUTHOR:
NOTES: (if applicable)
Trial court adjudged petitioner guilty. CA affirmed

FACTS: (chronological order)

ISSUE(S): (a) the photocopy of PNB Check No. 399967, adduced in evidence by the prosecution, is inadmissible in evidence
An Information was filed charging petitioner with violation of B.P. Blg. 22
under Rule 129, Section 1 of the Revised Rules of Evidence; hence, has no probative weight; --- it is admissible
XXX did then and there willfully, unlawfully and feloniously make, draw, issue and deliver to one RICKY OLVIS, in payment
b) the prosecution failed to present the BPI-Family Bank teller to testify on the presentment of PNB Check No. 399967 and the
of his obligation to the latter, PNB Check No. 399967 dated September 30, 1991 in the amount of SIX HUNDRED
dishonor thereof; and – not necessary to present the teller
THOUSAND PESOS (P600,000.00), XXX
(c) the prosecution failed to prove that it was he who drew and delivered the dishonored check to the private complainant, and
the petitioner, assisted by counsel, entered a plea of not guilty.
that he was properly notified of the dishonor of the said check. – it was duly proven
HELD: Petition - dismissed
When the case for trial was called on June 7, 1995 for the prosecution to adduce its evidence, the petitioner and his counsel were
RATIO: We agree with the petitioner that it was incumbent upon the prosecution to adduce in evidence the original copy of PNB
absent.
Check No. 399967 to prove the contents thereof, more specifically the names of the drawer and endorsee, the date and amount
and the dishonor thereof, as well as the reason for such dishonor. Section 3, Rule 129 of the Revised Rules on Evidence
The prosecution presented the private complainant, Ricky Olvis, who testified on direct examination that on September 30, 1991,
specifically provides that when the subject of inquiry is the contents of the document, no evidence shall be admissible other than
the petitioner drew and issued a check in the amount of P600,000.00.
the original thereof. The purpose of the rule requiring the production by the offeror of the best evidence is the prevention of
fraud, because if a party is in possession of such evidence and withholds it and presents inferior or secondary evidence in its
the drawee bank dishonored the check for the reason "Drawn Against Insufficient Funds" stamped on the dorsal portion of the
place, the presumption is that the latter evidence is withheld from the court and the adverse party for a fraudulent or devious
check. Olvis testified that when informed that his check was dishonored, the petitioner pleaded for time to pay the amount
purpose which its production would expose and defeat. As long as the original evidence can be had, the court should not receive
thereof, but reneged on his promise. Olvis then filed a criminal complaint against the petitioner for violation of B.P. Blg. 22 on
in evidence that which is substitutionary in nature, such as photocopies, in the absence of any clear showing that the original
September 4, 1992, docketed as I.S. No. 92-368.
writing has been lost or destroyed or cannot be produced in court. Such photocopies must be disregarded, being inadmissible
evidence and barren of probative weight
The petitioner again offered to repay Olvis the amount of the obligation by retrieving the dishonored check and replacing the
same with two other checks: one for P400,000.00 and another for P200,000.00 payable to Olvis. Taking pity on the petitioner, he
Furthermore, under Section 3(b), Rule 130 of the said Rules, secondary evidence of a writing may be admitted when the original
agreed. He then returned the original copy of the check to the petitioner, but the latter again failed to make good on his promise
is in the custody or under the control of the party against whom the evidence is offered, and the latter fails to produce it after
and failed to pay the P600,000.00.
reasonable notice. To warrant the admissibility of secondary evidence when the original of a writing is in the custody or control
of the adverse party, Section 6 of Rule 130 provides that the adverse party must be given reasonable notice, that he fails or
The prosecution moved that such direct examination of Olvis be continued on another date, and that the petitioner be ordered to
refuses to produce the same in court and that the offeror offers satisfactory proof of its existence.
appear before the court so that he could be identified as the drawer of the subject check. The trial court granted the motion and
set the continuation of the trial on June 13, 1997. In the meantime, the prosecution marked a photocopy of PNB Check No.
The mere fact that the original of the writing is in the custody or control of the party against whom it is offered does not warrant
399967 as Exhibit "A," and the dorsal portion thereof as Exhibit "A-1."
the admission of secondary evidence. The offeror must prove that he has done all in his power to secure the best evidence by
giving notice to the said party to produce the document. The notice may be in the form of a motion for the production of the
After several postponements at the instance of the petitioner, he and his counsel failed to appear before the court for continuation
original or made in open court in the presence of the adverse party or via a subpoena duces tecum, provided that the party in
of trial

17
custody of the original has sufficient time to produce the same. When such party has the original of the writing and does not
voluntarily offer to produce it or refuses to produce it, secondary evidence may be admitted.
In this case, Olvis, the private complainant, testified that after the check was dishonored by the drawee bank for insufficiency of
funds, he returned it to the petitioner upon the latter’s offer to pay the amount of the check by drawing and issuing two checks,
one for P400,000.00 and the other for P200,000.00. However, the petitioner still failed to satisfy his obligation to Olvis
In his "Motion to Suspend Proceedings" in the trial court, the petitioner admitted that he received the original copy of the
dishonored check from the private complainant and that he caused the non-payment of the dishonored check.
The petitioner cannot feign ignorance of the need for the production of the original copy and the fact that the prosecution was
able to present in evidence only a photocopy thereof because the original was in his possession
In fact the petitioner complained of the prosecution’s violation of the best evidence rule. The petitioner, however, never
produced the original of the check, much less offered to produce the same. The petitioner deliberately withheld the original of
the check as a bargaining chip for the court to grant him an opportunity to adduce evidence in his defense, which he failed to do
following his numerous unjustified postponements
2nd and 3rd issue:
There was no longer a need for the prosecution to present as witness the employee of the drawee bank who made the notation at
the dorsal portion of the dishonored check to testify that the same was dishonored for having been drawn against insufficient
funds. The petitioner had already been informed of such fact of dishonor and the reason therefor when Olvis returned the original
of the check to him. In fact, as shown by the testimony of Olvis, the petitioner drew and issued two other separate checks, one
for P400,000.00 and the other for P200,000.00, to replace the dishonored check.
Because of his dilatory tactics, the petitioner failed to adduce evidence to overcome that of the prosecution’s.
The petitioner’s contention that Olvis failed to identify him as the drawer of the subject check is nettlesome. It bears stressing
that Olvis was ready to identify the petitioner after his direct examination, but the latter and his counsel inexplicably failed to
appear. The direct examination of Olvis had to be continued to enable him to point to and identify the petitioner as the drawer of
the check.
__________________________________________________________________________________________
[G.R. No. 117384. October 21, 1998]
HEIRS OF TEODORO DELA CRUZ represented by EDRONEL DELA CRUZ, petitioners, vs. COURT OF APPEALS,
PACIFICO MARQUEZ, FILOMENO and GREGORIO, both surnamed MADRID, respondents.
DECISION
ROMERO, J.:
Petitioners seek the reversal of the decision of the Court of Appeals,[1] in CA G.R. No. 25339 dated September 27, 1994
affirming the decision of the Regional Trial Court of Isabela in Civil Case No. 19-219 dated October 9, 1989 which adjudicated
lot Nos. 7036-A-10-A, 7036-A-10-B and 7036-A-10-C to herein private respondents.[2]
The following facts, concisely related in the petition[3] are not in dispute.
On November 20, 1986, petitioners filed an action for reconveyance with damages[4] against private respondents involving a
parcel of land situated in Poblacion, San Mateo, Isabela with a total area of 3,277 square meters. In their complaint, petitioners
assert that the subject land was bought by their predecessor-in-interest from the private respondents, Madrid brothers, for
P4,000.00 in a deed of sale executed on May 18, 1959, and since then they have been in actual, physical, continuous and open
possession of the property. However, sometime in October 1986, much to their dismay and surprise, private respondents
managed to obtain a Torrens Title over the said land.
On the other hand, the Madrids denied having executed the said deed of sale and assuming that said document exists, the same is
fictitious and falsified. Moreover, while they admit petitioners possession of the land, they assert that this possession is in
defiance of their repeated demands that the former relinquish the same. Meanwhile, Pacifico Marquez contends that he is an
innocent purchaser for value of the property having bought the same from the Madrid brothers in 1976.[5]
During the trial, petitioners were unable to present the original deed of sale since it was lost. Consequently, they were
constrained to offer, as Exhibit A, a photo copy of the purported original carbon copy of the deed of sale in an effort to prove the
transaction.
However, in disposing of the case, the trial court ruled that Exhibit A was inadmissible in evidence, thus:
Since at the time of the execution of Teodoro dela Cruz affidavit or on June 14, 1966, a duplicate original carbon copy of the
alleged sale was still in his possession, the plaintiffs must have to account for it. No proof was adduced that this remaining copy
was lost or destroyed. Furthermore, no attempt was done to produce the copies retained by the notary public although there is a
possibility that the same still exist (sic). Neither was there any proof that the copy sent to the court as required by the notarial law
is unavailable. Under these (sic) state of facts, the Court believes that the xerox copy of a certified true copy of the original
issued by the notary public cannot be admitted in evidence to prove the conveyance of the land in question.
Accordingly, the trial court dismissed petitioners complaint, the dispositive portion of the decision of which reads:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
1. Dismissing the complaint;
2. Declaring the defendants the lawful owners of the land in question insofar as the portion thereof falling or found in their
respective titles are concerned; and
3. Ordering the plaintiffs, their agents, representatives or any person or persons deriving their title, ownership or possession from
the plaintiffs, to vacate the portions of Lots 7036-A-10-A, 70360A-10-B and 7036-A-10-C, occupied by them and to deliver the
possession thereof to the defendants;
No pronouncement as to costs.
SO ORDERED.
Evidently aggrieved by the decision, petitioners appealed to the Court of Appeals contending that the trial court erred in holding
that: (1) Exhibit A was inadmissible in evidence to prove the transaction; (2) there was no valid sale of the land in question; (3)
that they (petitioners) are not entitled to the improvements they had introduced in the land.
On September 27, 1994, the Court of Appeals rendered its judgment which ruled that Exhibit A was admissible in evidence for
failure of the private respondents to object when it was offered during the trial, thus:
It is therefore evident that defendants-appellees never put in issue the inadmissible nature of Exh. A as a mere secondary
evidence and that the trial judge did not exclude the same when it was formally offered, only to ultimately exclude it in its
decision. It is true that the originals of Exh. A were never produced or accounted for by plaintiffs. Yet, notwithstanding this
omission, the defense did not object to its not being the best evidence when it was formally offered. Had the defendants
interposed an objection to Exh. A on the ground of its incompetency for not complying with the best evidence rule, it would
have been properly excluded by the trial court. Defendants omission to object on the proper ground operated as a waiver, as this
was a matter resting on their discretion.
Unfortunately, petitioners victory was shortlived. For the Court of Appeals, while ruling that Exhibit A was admissible,
concluded that the same had no probative value to support the allegation of the petitioners that the disputed land was sold to
them in 1959, viz.:
18
The lone fact that Atty. Tabangay asserted that he recognized his signature on the copy shown by Teodoro when the loss of the
originals was just made known to him, does not render Exh. A trustworthy as to the actual execution of the alleged deed of sale.
Exh. A does not even contain a reproduction of the alleged signatures of the Madrid brothers for comparison purposes. The
surviving witness to the alleged execution, Constantino Balmoja was not presented to corroborate Atty. Tabangays testimony,
hinged as the latter was on secondary evidence.
Hence, the Court of Appeals affirmed the trial courts decision, the dispositive portion of which reads:
WHEREFORE, IN VIEW OF THE FOREGOING, the decision of the trial court dated October 9, 1989 is hereby AFFIRMED
with the modification that the case be remanded to the court a quo to conduct the proper proceedings to determine the value of
the useful improvements introduced by appellants for reimbursement by appellees.
SO ORDERED.
Failing in their bid to reconsider the decision, the petitioners have filed the present petition.
Petitioners maintain that even if Exhibit A were a mere photo copy of the original carbon copy, they had presented other
substantial evidence during the trial to prove the existence of the sale.[6] First, the testimony of the notary public, Atty.
Tabangay, who acknowledged the due execution of the deed of sale. Second, their long possession of the land in question,
bolstered by the construction of various improvements gives rise to the disputable presumption of ownership.
While we concur with the Court of Appeals finding that Exhibit A does not prove that the sale of the land indeed occurred, still
we are constrained to reverse its decision in view of the circumstances present in this case.
To begin with, Atty. Sevillano Tabangay, the notary public who notarized the deed of sale, testified that the document has about
five (5) copies.[7] Hence, it is imperative that all the originals must be accounted for before secondary evidence can be
presented.[8] These petitioners failed to do. Moreover, records show that none of these five copies was even presented during the
trial. Petitioners explanation that these copies were lost or could not be found in the National Archives was not even supported
by any certification from the said office.
It is a well-settled principle that before secondary evidence can be presented, all duplicates and/or counterparts must be
accounted for, and no excuse for the non-production of the original document itself can be regarded as established until all its
parts are unavailable.[9]
Notwithstanding this procedural lapse, when Exhibit A was presented private respondents failed, not only to object, but even to
cross-examine the notary public, Atty. Tabangay, regarding its execution.[10] Forthwith, upon private respondents failure to
object to Exhibit A when it was presented, the same becomes primary evidence.[11] To be sure, even if Exhibit A is admitted in
evidence, we agree with the Court of Appeals that its probative value must still meet the various tests by which its reliability is to
be determined. Its tendency to convince and persuade must be considered for admissibility of evidence should not be confused
with its probative value.[12]
As earlier stated, Exhibit A was merely a photocopy lifted from the carbon copy of the alleged deed of sale.[13] A cursory
glance will immediately reveal that it was unsigned by any of the parties and undated as to when it was executed. Worse, when
Atty. Tabangay typed Exhibit A, the contents were based on an alleged carbon original which petitioners predecessor-in-interest
presented to him, without bothering to check his own files to verify the correctness of the contents of the document he was
copying. In other words, Atty. Tabangays failure to determine the accuracy of the carbon copy requested by the petitioners
predecessor-in-interest renders Exhibit A unreliable.
However, despite our prescinding discussion, all is not lost for the petitioner.
The records show that the disputed property has been in the possession of the petitioners since 1959. They have since been
introducing several improvements on the land which certainly could not have escaped the attention of the Madrids. Furthermore,
during all this time, the land was enclosed, thus signifying petitioners exclusive claim of ownership. The construction of various
infrastructure on the land - rice mill, storage house, garage, pavements and other buildings - was undoubtedly a clear exercise of
ownership which the Madrids could not ignore. Oddly, not one of them protested.
We cannot accept the Madrids explanation that they did not demand the petitioners to vacate the land due to the unexplained
killings within the area.[14] Not a single shred of evidence was presented to show that these killings were perpetrated by the
petitioners. All told, their remonstration and fears are nothing but pure speculation. To make matters worse, the record is bereft
of any documentary evidence that the Madrids sent a written demand to the petitioners ordering them to vacate the land. Their
failure to raise a restraining arm or a shout of dissent to the petitioners possession of the subject land in a span of almost thirty
(30) years is simply contrary to their claim of ownership.
Next, the Madrids argue that neither prescription nor laches can operate against them because their title to the property is
registered under the Torrens system and therefore imprescriptable.[15] The principles raised, while admittedly correct, are not
without exception. The fact that the Madrids were able to secure TCT No. 167250, and Marquez, TCT Nos. 167220 and 167256,
did not operate to vest upon them ownership of the property. The Torrens system does not create or vest title. It has never been
recognized as a mode of acquiring ownership,[16] especially considering the fact that both the Madrids and Marquezes obtained
their respective TCTs only in October 1986, twenty-seven long (27) years after petitioners first took possession of the land. If the
Madrids and Marquezes wished to assert their ownership, they should have filed a judicial action for recovery of possession and
not merely to have the land registered under their respective names. For as earlier mentioned, Certificates of Title do not
establish ownership.[17]
Even if we were to rule that the Certificates of Title to the private respondents would ripen into ownership of the land, and
therefore, the defense of prescription would be unavailing, still, the petitioners would have acquired title to it by virtue of the
equitable principle of laches. The Madrids long inaction or passivity in asserting their rights over disputed property will preclude
them from recovering the same.[18]
The above ruling was stressed in the following cases:
Miguel v. Catalino[19] declared:
Notwithstanding the errors aforementioned in the appealed decision, we are of the opinion that the judgment in favor of
defendant-appellee Florencio Catalino must be sustained. For despite the invalidity of his sale to Catalino Agyapao, father of
defendant-appellee, the vendor Bacaquio suffered the latter to enter, possess and enjoy the land in question without protest, from
1928 to 1943, when the seller died; and the appellants, in turn, while succeeding the deceased, also remained inactive, without
taking any step to reinvindicate the lot from 1944 to 1962, when the present suit was commenced in court. Even granting
appellants proposition that no prescription lies against their fathers recorded title, their passivity and inaction for more than 34
years (1928-1962) justifies the defendant-appellee in setting up the equitable defense of laches in his own behalf. As a result, the
action of plaintiffs-appellants must be considered barred and the Court below correctly so held. Courts can not look with favor at
parties who, by their silence, delay and inaction, knowingly induce another to spend time, effort and expense in cultivating the
land, paying taxes and making improvements thereon for 30 long years, only to spring from ambush and claim title when the
possessors efforts and the rise of land values offer an opportunity to make easy profit at his expense. x x x.
Pabalete v. Echarri[20] stated:
Upon a careful consideration of the facts and circumstances, we are constrained to find, however, that while no legal defense to
the action lies, an equitable one lies in favor of the defendant and that is, the equitable defense of laches. We hold that the
defense of prescription or adverse possession in derogation of the title of the registered owner Domingo Mejia does not lie, but
that of the equitable defense of laches. Otherwise stated, we hold that while defendant may not be considered as having acquired
title by virtue of his and his predecessors long continued possession for 37 years, the original owners right to recover back the
possession of the property and the title thereto from the defendant has, by the long period of 37 years and by patentees inaction
and neglect been converted into a stale demand. (Quoting Mejia de Lucas v. Gamponia, 100 Phil. 277).
xxxxxxxxx
This defense is an equitable one and does not concern itself with the character of the defendants title, but only with whether or
not by reason of the plaintiffs long inaction or inexcusable neglect he should be barred from asserting this claim at all, because to
allow him to do so would be inequitable and unjust to the defendant. x x x.
19
Lastly, Marquez claim that he is a purchaser in good faith and for value does not inspire any merit. In his testimony, he admitted
that he knew the land in question.[21] Curiously, in his Answer[22] to the complaint filed by the petitioners, he stated that he has
been aware that the former were in possession of the land since 1959. Where a purchaser was fully aware of another persons
possession of the lot he purchased, he cannot successfully pretend later to be an innocent purchaser for value.[23] Moreover, one
who buys without checking the vendors title takes all the risks and losses consequent to such failure.[24]
In fact, it would have been expected that in the normal course of daily life, both the Madrids and Marquezes talked about the
status of the property. This being so, it would be difficult to imagine that the latter were not made aware of the petitioners
possession of the land. Armed with such information, they should have acted with the diligence of a prudent man in determining
the circumstances surrounding the property. Otherwise, the law does not give him the benefit afforded to an innocent purchaser
for value.[25]
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated September 24, 1994 in CA - G.R. No.
25339 is hereby REVERSED and SET ASIDE. Instead, petitioners are hereby declared as the legal owners of the subject land.
No costs.
SO ORDERED.
____________________________________________________________________________________________
Enriquez, et. al. v. Ramos
G.R. No. L-18077, September 29, 1962
CHARACTERS:
 Plaintiffs Rodrigo Enriquez, et al – seller-mortgagor of parcels of land in Quezon City
 Defendant Socorro Ramos – second buyer-mortgagee of the land in question; partner of Pedro del Rosario
 Pedro del Rosario – first buyer of the land in question
WRITTEN INSTRUMENT: Contract of Sale (Exhibit A) between Enriquez et al and Ramos
ALLEGED ORAL AGREEMENT: that Enriquez et al would undertake the construction of roads
PAROL EVIDENCE: “Explanation” (Exhibit 3) used by Ramos to prove the existence of the alleged oral agreement
FACTS:
 This case concerns of an instrument called “Explanation” (marked as Exhibit 3) used by defendant Ramos to prove
the existence of an oral agreement with the plaintiffs which the latter DID NOT INCLUDE in the subject Contract of
Sale (Exhibit A)
 This Exhibit 3, as admitted in evidence, was considered by the RTC in dismissing the foreclosure proceedings
instituted by the plaintiffs against Ramos
 Plaintiffs entered into a contract of conditional sale with Pedro del Rosario
 To guarantee the performance of the conditions stipulated, Pedro executed aperformance bond.
 Del Rosario was given possession of the land for DEVELOPMENT AS A SUBDIVISIONat his expense.
o the consideration: he was allowed to buy the property for P600,000.00within a period of two years
 with the condition that, upon his failure to pay said price when due:
 all the improvements introduced by him would automatically become part of
the propertywithout reimbursementand
 the conditional sale would be rescinded
 Yun nanga, Pedro failed to pay the price
 But, to avoid court litigation, plaintiffs and Pedro, together with Ramosenteredinto a Contract of Rescission(dire
nanisulodsa picture si Ramos)
 And, to release the performance bondand to enable Ramos to pay some of the lots for her own purposes,
plaintiffs allowed Ramos to buy 20 of the lots herein involved
o condition:Ramos will assume the payment of P50,000.00 as her share in the construction of roads and
other improvements
 Meanwhile, both parties ALLEGEDLY ORALLY AGREED that plaintiffs would undertake the construction of
roadstherein
 Ramos paid in partial, with the P200,000 balance being payable within 2 years from date of sale
 So, Contract of Sale (Exhibit A) with Mortgage came into being!
 On the same day, plaintiffs and Ramos executed SEPARATEinstrument called 'Explanation' (Exhibit 3) which
stated that:
o Ramos contributed P50,000.00 for the construction of the roads which the plaintiffs would
undertake'in accordance with the provisions of the City Ordinance of Quezon City'(remember: this
was their ORAL AGREEMENT)
o Said City Ordinance of Quezon Cityrequires that sellers of lands therein to be converted into subdivision
lots must construct the roads in said subdivision before the lots could be sold
 But, Ramosfailed to pay the balance within the stipulated period
 So, plaintiffs instituted the foreclosure proceedings in question with the RTC
 Plaintiffsoffered the Contract of Salemarked as Exhibit A to prove the existence of the sale and the
mortgagewith such conditions
 Ramos contended that the Exhibit A/Contract DOES NOT EXPRESSthe true agreementof the parties because
certain important conditions agreed uponWERE NOT INCLUDED therein among whichis:
o the promise assumed by plaintiffs that they would undertake to construct the roads that may be
required in the subdivision'in accordance with the provisions of the City Ordinance of Quezon City'
 Ramosadded that it was the plaintiffs’ counsel who suggestedNOT TO INCLUDE the same promise/agreement
BECAUSE the Quezon City OrdinanceWAS ALREADY DEEMED TO BE PART of the contract
 Ramos offeredthe “Explanation” marked as Exhibit 3 to prove that such plaintiffs’ promise/oral agreement
existed
RTC Ruling: Complaint DISMISSED for being PREMATURE
o Admittingand considering the “Explanation” (Exhibit 3), RTC ruled that plaintiffs indeed undertook to construct
the roads as condition precedent to Ramos’ obligation, for the reason that the subdivision regulations of
Quezon City requires that sellers of lands therein to be converted into subdivision lots must construct the roads in
said subdivision before the lots could be sold
o In other words, the RTC said that both parties, during the sale, had already in their mind the construction of
such roadsby plaintiffs-sellers
o And since plaintiffs failed to fulfill the condition precedent, no action can be had yet against Ramos
Thus, plaintiffs appealed from the RTC’s Decision
20
 o Plaintiffs contended that RTC violated the Parol Evidence Rule when it allowed the presentation ofand admitted
in evidence Exhibit 3 (the “Explanation”) – a parol evidence – to prove that a contemporaneous oral
agreement was also reachedbetween parties relative to the construction of the roads

o The Parol Evidence Rule (Rule 130, Sec. 9, par. 1) provides that when the terms of an agreement had BEEN
REDUCED TO WRITINGit is to be considered as containing all that has been agreed upon and that no evidence
other than the terms there can be admittedbetween the parties(meaning no evidence allunde or evidence outside
the written agreementcan be admitted; otherwise stated, only the contents of the written agreement can be admitted
in evidence)

ISSUE:

WON the RTC erred in admitting in evidence and giving weight to the “Explanation” (Exhibit 3)?

RULING:

NO, the RTC DID NOT ERR in admitting the “Explanation” (Exhibit 3) in evidence.

The Parol Evidence Rule only holds true (maybe the Court mean: ‘DOES NOT’ hold true) if there is allegation
that the agreement DOES NOT EXPRESS the intent of the parties(Rule 130, Sec. 9, par. 2 (b)). If there is and this claim
is in issue in the pleadings, parol evidence or evidence allundemay be offered in evidence.

So, for the exceptions to the Parol Evidence Rule to be availed of, they must be PUT IN ISSUE in the pleadings.

Here, RamosHAS SPECIFICALLY PLEADED that the contract of sale in question DOES NOT EXPRESS the
true intent of the parties with regard to the construction of the roads.

Thus, the RTC DID NOT ERR in admitting the “Explanation” (Exhibit 3) in evidence. Consequently, it DID NOT
ERR in dismissing the complaint for being premature.

21
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18077 September 29, 1962
RODRIGO ENRIQUEZ, ET AL., plaintiffs-appellants,
vs.
SOCORRO A. RAMOS, defendant-appellee.
Gelacio L. Dimaano for plaintiffs-appellants.
Vicente K. Aranda for defendant-appellee.
BAUTISTA ANGELO, J.:
This is an action for foreclosure of a real estate mortgage.
It is alleged that on November 24, 1958 defendant purchased from plaintiffs 20 parcels of land located in Quezon City and
covered by transfer certificates of title for the amount of P235,056.00 of which only the amount of P35,056.00 was paid on the
date of sale, the balance of P200,000.00 being payable within two years from the date of sale, with 6% interest per annum
during the first year, and the remainder to draw 12% interest per annum if paid thereafter, provided that at least P100,000.00
should be paid during the first year, otherwise the whole unpaid balance would become immediately demandable; that to secure
the payment of the balanceof P200,000.00 defendant executed a mortgagein favor of plaintiffs upon the 20 parcels of land
sold and on a half interest over a parcel of land in Bulacanwhich was embodied in the same DEED OF SALE; that said
deed of sale with mortgage was registered in the Offices of the Registers of Deeds of Quezon City and Pampanga; and that as
defendant broke certain stipulations contained in said deed of sale with mortgage, plaintiffs instituted the present
foreclosure proceedings.
Defendant set up as affirmative defense that the contractmentioned in the complaint does not express the true agreement of
the parties because certain important conditions agreedupon were not included therein by the counsel who prepared the
contract; that the stipulation that was omitted from the contract was the promise assumed by plaintiffs that they would
construct roads in the lands which were to be subdivided for sale on or before January, 1959; that said condition was not
placed in the contract because, according to plaintiffs' counsel, it was a superfluity, inasmuch as there is an ordinance in
Quezon City which requires the construction of roads in a subdivision before lots therein could be sold; and that, upon the
suggestion of plaintiff's counsel, their promise to construct the roads was not included in the contract because the
ordinance was deemed part of the contract. Defendant further claims that the true purchase price of the sale was not
P235,056.00 but only P185,000.00, the difference of P50,000.00 being the voluntary contribution of defendant to the cost of the
construction of the roads which plaintiffs assumed to do as abovementioned.
After the reception of the evidence, the trial court sustained the contention of defendant and dismissed the complaint on the
ground that the action of plaintiffs was premature. It found that plaintiffs really assumed the construction of the roads as
a condition precedent to the fulfillment of the obligationstipulated in the contract on the part of defendant, and since the
same has not been undertaken, plaintiffs have no cause of action. In due time, plaintiffs have appealed.
The evidence of record discloses the following facts: On November 6, 1966, plaintiffs entered into a contract of conditional
sale with one Pedro del Rosariocovering a parcel of land in Quezon City described in Transfer Certificate of Title No. 1148
which has a total area of 77,772 square meters in consideration of a purchase price of P10.00 per square meter. To guarantee
the performance of the conditions stipulatedtherein a performance bond in the amount of P100,000.00 was executed by
Pedro del Rosario.Del Rosario was given possession of the land for development as a subdivisionat his expense. He
undertook to pay for the subdivision survey, the construction of roads, the installation of light and water, and the income tax
plaintiffs may be required to pay arising from the transaction, in consideration of which Del Rosario was allowed to buy the
property for P600,000.00within a period of two years from November 6, 1956 with the condition that, upon his failure to
pay said price when due, all the improvements introduced by him would automatically become part of the
propertywithout any right on his part to reimbursementand the conditional sale would be rescinded.
Unable to pay the considerationof P600,000.00 as agreed upon, and in order to avoid court litigation, plaintiffs and Del
Rosario, together with defendant Socorro A. Ramos, who turned out to be a partner of the latter, entered into a contract of
rescission on November 24, 1958. To release the performance bondand to enable defendant to pay some of the lots for her
own purposes, plaintiffs allowed defendant to buy 20 of the lots herein involvedat the rate of P16.00 per square meter on
condition that she will assume the payment of P50,000.00 as her share in the construction of roads and other
improvementsrequired in the subdivision. This situation led to the execution of the contract of sale Exhibit A subject of the
present foreclosure proceedings.
The main issues closed in this appeal are: (1) Is the purchase price of the 20 lots bought by defendant from plaintiffs the sum of
P185,000.00, as claimed by defendant, or P235.056.00, as claimed by plaintiffs?; and (2) Was an oral agreement, coetaneous to
the execution of the contract of sale, entered into between the parties to the effect that plaintiffs would undertake the construction
of the roads on the lots sold before defendant could be required to comply with her financial obligation?
Defendant contends that the contract of sale Exhibit A does not express the true agreement of the parties because certain
important conditions agreed upon were not included therein by plaintiffs' counsel among which isthe promise assumed
by plaintiffs that they would undertake to construct the roads that may be required in the subdivision(ORAL
AGREEMENT) subject sale of the sale on or before January, 1959; that said condition was not placed in the contract because
plaintiffs' counsel said that it was a superfluity inasmuch as there was then in Quezon City an ordinance which requires the
construction of road in a subdivision before the lots therein could be sold; and that, upon the suggestion of plaintiffs' counsel,
such commitment was not included in the contract because the ordinance aforesaid was already deemed to be part of the
contract.
Plaintiffs, on the other hand, dispute the above contention arguing that there was no such oral agreement or understanding
because all that was agreed upon between the parties was already expressed and included in the contract of sale Exhibit
Aexecuted between the parties, and since defendant failed to pay the balance of her obligation within the period stipulated
the whole obligation became due and demandable thus giving plaintiffs the right to foreclose the mortgage in accordance with
law.1awphîl.nèt
After considering and evaluating the evidence submitted by both parties, the court a quo found defendant's contention well-
taken, thereby concluding that the action of plaintiffs was premature. In reaching this conclusion; the court a quo made the
following comment:
. . . The Court is of the opinion that the construction of the roads was a condition precedent to the enforcement of the
terms of Exhibit A, particularly the foreclosure of mortgage, for the reason that the subdivision regulations of Quezon
City requires, as a matter of law, that the sellers of lands therein to be converted into subdivision lots must construct
the roads in said subdivision before the lots could be sold. This requirement must have been uppermost in the
mind of the partiesin this case which led to the execution of the so-called 'Explanation' (Exhibit 3) (the parole
evidence in this case)wherein it is stated that the sum of P50,000.00 was a contribution of the herein defendant
for the construction of the roads which the plaintiffs would undertake 'in accordance with the provisions of the
City Ordinance of Quezon City' (Exhibit 3). It is to be noted that Exhibit 3 was executed on November 24, 1958,
the very day when Exhibit A was also executed. Exhibit 3 also proves that the purchase price is not, as appearing in
22
 the deed of sale with mortgage Exhibit A, actually P235,000.00 but only P185,000.00 which would approximately be
the price of the entire area of the land sold at the rate of P16.00 per square meter.
We find no error in the conclusion reached by the court a quo for indeed that is the condition to be expected by a person who
desires to purchase a big parcel of land for purposes of subdivision. In a subdivision the main improvement to be undertaken
before it could be sold to the public is feeder roads as otherwise it would be inaccessible and valueless and would offer no
attraction to the buying public. And so it is correct to presume was the court a quo did, that when the sale in question was being
negotiated the construction of roads in the prospective subdivision must have been uppermost in the mind of defendant for her
purpose in purchasing the property was to develop it into a subdivision. That such requirement was uppermost in the mind of
defendant is proven by the execution by the plaintiffs of the so-called "Explanation" (Exhibit 3) on the very day the deed of sale
was executed wherein it was stated that the sum of P50,000.00 was advanced by defendant as her contribution to the
construction of the roads which plaintiffs assumed to undertake "in accordance with the provisions of the City Ordinance of
Quezon City." It is to be noted that said document specifically states that the amount of P50,000.00 should be deducted from the
purchase price of P235,056.00 appearing in the deed of sale, and this is a clear indication that the real purchase price is only
P185,000.00 as claimed by defendant, which would approximately be the price of the entire area of the land at the rate of P16.00
per square meter.
A circumstance which lends cogency to defendant's claim that the commitment of plaintiffs to construct roads was not inserted in
the contract because of the insurance made by their counsel that it would be a superfluity is the fact that in Quezon City there
was really an ordinance which requires the construction of roads it subdivision before lots therein could be sold, and considering
that this assurance came from the very counsel who prepared the document who even intimated that ordinance was deemed part
of the contract, defendant must have agreed to the omission relying on the good faith plaintiffs and their counsel. At any rate,
the execute of the document Exhibit 3 clarifies whatever doubt may have existed with regard to the true terms of the
agreement on the matter.
It is argued that the court a quo erred in allowing presentation of parole evidence to prove that a contemporaneous oral
agreement was also reachedbetween parties relative to the construction of the roads for same is in violation of our rule which
provides that when the terms of an agreement had been reduced to writing it is to be considered as containing all that has
been agreed upon and that no evidence other than the terms there can be admitted between the parties(Section 22, Rule
123). This rule, however, only holds true (maybe the Court mean: ‘DOES NOT’ hold true) if there is allegation that the
agreement does not express the intent of the parties.
If there is and this claim is in issue in the pleadings, the same may be the subject parole evidence(Idem.). The fact that
such failure has been put in issue in this case is patent in the answer wherein defendant HAS SPECIFICALLY
PLEADED that the contract of sale in question DOES NOT EXPRESS the true intent of the parties with regard to the
construction of the roads.
It appearing that plaintiffs have failed to comply with the condition precedent relative to the construction of the roads in the
subdivision in question, it follows that their action is premature as found by the court a quo. The failure of defendant to pay the
realty and income taxes as agreed upon, as well as to register the mortgage with respect to the Bulacan property, aside from
being minor matters, appear sufficiently explained in the brief of defendant-appellee.
WHEREFORE, the decision appealed from is affirmed, with costs against appellants.
____________________________________________________________________________________________
G.R. No. L-9935 February 1, 1915
YU TEK and CO., plaintiff-appellant,
vs.
BASILIO GONZALES, defendant-appellant.
Beaumont, Tenney and Ferrier for plaintiff.
Buencamino and Lontok for defendant.
TRENT, J.:
The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine currency from Messrs. Yu
Tek and Co., and that in consideration of said sum be obligates himself to deliver to the said Yu Tek and Co., 600
piculs of sugar of the first and second grade, according to the result of the polarization, within the period of three
months, beginning on the 1st day of January, 1912, and ending on the 31st day of March of the same year, 1912.
2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek and Co., of this city the
said 600 piculs of sugar at any place within the said municipality of Santa Rosa which the said Messrs. Yu Tek and
Co., or a representative of the same may designate.
3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the 600 piculs of sugar
within the period of three months, referred to in the second paragraph of this document, this contract will be
rescinded and the said Mr. Basilio Gonzales will then be obligated to return to Messrs. Yu Tek and Co. the P3,000
received and also the sum of P1,200 by way of indemnity for loss and damages.
Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Plaintiff
prayed for judgment for the P3,000 and, in addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000
only, and from this judgment both parties appealed.
The points raised by the defendant will be considered first. He alleges that the court erred in refusing to permit parol evidence
showing that the parties intended that the sugar was to be secured from the crop which the defendant raised on his plantation, and
that he was unable to fulfill the contract by reason of the almost total failure of his crop. This case appears to be one to which the
rule which excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable. There is not the
slightest intimation in the contract that the sugar was to be raised by the defendant. Parties are presumed to have reduced to
writing all the essential conditions of their contract. While parol evidence is admissible in a variety of ways to explain the
meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous
conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. In an early case this court
declined to allow parol evidence showing that a party to a written contract was to become a partner in a firm instead of a creditor
of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of
employment provided that the plaintiff should receive from the defendant a stipulated salary and expenses. The defendant sought
to interpose as a defense to recovery that the payment of the salary was contingent upon the plaintiff's employment redounding
to the benefit of the defendant company. The contract contained no such condition and the court declined to receive parol
evidence thereof.
In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There
is no clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a
specified quantity of sugar within a specified time. The contract placed no restriction upon the defendant in the matter of
obtaining the sugar. He was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant
owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our
23
conclusion is that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The
rights of the parties must be determined by the writing itself.
The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might raise
upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from
complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in
assuming that there was a perfected sale. Article 1450 defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed
upon the thing which is the object of the contract and upon the price, even when neither has been delivered.
Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the
provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article of sale has been
physically segregated from all other articles Thus, a particular tobacco factory with its contents was held sold under a contract
which did not provide for either delivery of the price or of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil.
Rep., 295). Quite similar was the recent case of Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares of stock in
a tobacco factory were held sold by a contract which deferred delivery of both the price and the stock until the latter had been
appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific
house was held perfected between the vendor and vendee, although the delivery of the price was withheld until the necessary
documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered
a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing
the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, the hemp
was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already
delivered, the title had passed and the loss was the vendee's. It is our purpose to distinguish the case at bar from all these cases.
In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the first and second classes.
Was this an agreement upon the "thing" which was the object of the contract within the meaning of article 1450, supra? Sugar is
one of the staple commodities of this country. For the purpose of sale its bulk is weighed, the customary unit of weight being
denominated a "picul." There was no delivery under the contract. Now, if called upon to designate the article sold, it is clear that
the defendant could only say that it was "sugar." He could only use this generic name for the thing sold. There was no
"appropriation" of any particular lot of sugar. Neither party could point to any specific quantity of sugar and say: "This is the
article which was the subject of our contract." How different is this from the contracts discussed in the cases referred to above!
In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and
distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to
transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was
shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp.
A number of cases have been decided in the State of Louisiana, where the civil law prevails, which confirm our position.
Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a
traveling salesman for a quantity of shoes, the sales having been made by sample. The court said of this contract:
But it is wholly immaterial, for the purpose of the main question, whether Mitchell was authorized to make a definite
contract of sale or not, since the only contract that he was in a position to make was an agreement to sell or an
executory contract of sale. He says that plaintiff sends out 375 samples of shoes, and as he was offering to sell by
sample shoes, part of which had not been manufactured and the rest of which were incorporated in plaintiff's stock in
Lynchburg, Va., it was impossible that he and Seegars and Co. should at that time have agreed upon the specific
objects, the title to which was to pass, and hence there could have been no sale. He and Seegars and Co. might have
agreed, and did (in effect ) agree, that the identification of the objects and their appropriation to the contract necessary
to make a sale should thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the legend
printed in red ink on plaintiff's billheads ("Our responsibility ceases when we take transportation Co's. receipt `In
good order'" indicates plaintiff's idea of the moment at which such identification and appropriation would become
effective. The question presented was carefully considered in the case of State vs. Shields, et al. (110 La., 547, 34
Sou., 673) (in which it was absolutely necessary that it should be decided), and it was there held that in receiving an
order for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock, warehoused at
another place, the agent receiving the order merely enters into an executory contract for the sale of the goods, which
does not divest or transfer the title of any determinate object, and which becomes effective for that purpose only
when specific goods are thereafter appropriated to the contract; and, in the absence of a more specific agreement on
the subject, that such appropriated takes place only when the goods as ordered are delivered to the public carriers at
the place from which they are to be shipped, consigned to the person by whom the order is given, at which time and
place, therefore, the sale is perfected and the title passes.
This case and State vs. Shields, referred to in the above quotation are amply illustrative of the position taken by the Louisiana
court on the question before us. But we cannot refrain from referring to the case of Larue and Prevost vs.Rugely, Blair and Co.
(10 La. Ann., 242) which is summarized by the court itself in the Shields case as follows:
. . . It appears that the defendants had made a contract for the sale, by weight, of a lot of cotton, had received $3,000
on account of the price, and had given an order for its delivery, which had been presented to the purchaser, and
recognized by the press in which the cotton was stored, but that the cotton had been destroyed by fire before it was
weighed. It was held that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000 paid
on account of the price.
We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and not a sale. At there
was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The defendant having defaulted in his
engagement, the plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion of the judgment
appealed from must therefore be affirmed.
The plaintiff has appealed from the judgment of the trial court on the ground that it is entitled to recover the additional sum of
P1,200 under paragraph 4 of the contract. The court below held that this paragraph was simply a limitation upon the amount of
damages which could be recovered and not liquidated damages as contemplated by the law. "It also appears," said the lower
court, "that in any event the defendant was prevented from fulfilling the contract by the delivery of the sugar by condition over
which he had no control, but these conditions were not sufficient to absolve him from the obligation of returning the money
which he received."
The above quoted portion of the trial court's opinion appears to be based upon the proposition that the sugar which was to be
delivered by the defendant was that which he expected to obtain from his own hacienda and, as the dry weather destroyed his
growing cane, he could not comply with his part of the contract. As we have indicated, this view is erroneous, as, under the
contract, the defendant was not limited to his growth crop in order to make the delivery. He agreed to deliver the sugar and
nothing is said in the contract about where he was to get it.
We think is a clear case of liquidated damages. The contract plainly states that if the defendant fails to deliver the 600 piculs of
sugar within the time agreed on, the contract will be rescinded and he will be obliged to return the P3,000 and pay the sum of
P1,200 by way of indemnity for loss and damages. There cannot be the slightest doubt about the meaning of this language or the
intention of the parties. There is no room for either interpretation or construction. Under the provisions of article 1255 of the
Civil Code contracting parties are free to execute the contracts that they may consider suitable, provided they are not in
contravention of law, morals, or public order. In our opinion there is nothing in the contract under consideration which is
opposed to any of these principles.
For the foregoing reasons the judgment appealed from is modified by allowing the recovery of P1,200 under paragraph 4 of the
contract. As thus modified, the judgment appealed from is affirmed, without costs in this instance.
24
__________________________________________________________________________________
LAND SETTLEMENT AND DEVELOPMENT CORPORATION v. GARCIA PLANTATION CO., INC
G.R. No. L-17820 || April 24, 1963 || Paredes J.
Petitioner: LAND SETTLEMENT AND DEVELOPMENT CORPORATION (LSDC hereinafter), plaintiff-appellant
Respondent: GARCIA PLANTATION CO., INC., and/or SALUD GARCIA and VICENTE B. GARCIA, defendant-appelle
SUMMARY:
LSDC filed a specific action case against Garcia plantation and/or Salud and Vicente Garcia for the payment of P5,995.30 as
unpaid balance of 2 tractors they bought from plaintiff. Salud was made a party because of 2 promissory notes she issued.
Defendants assert that the PN was actually novated by a letter (Exhibit L) sent by Atty. Kintanar, the LSDC Board of
Liquidators, extending their deadline to pay until May 31, 1957. When LSDC presented its witness Atty. Lucido Guinto, the
writer of the said letter, to disclose the intention of the said agreement, defendant objected to it. The Lower Court ruled it out and
said that it was parole evidence. CA certified the case to SC. Issue: W/N the lower court erred in denying the presentation of
Atty. Guinto’s testimony, and considering it as parole evidence.
The 2nd paragraph contained a condition precedent, which states: “This matter has been the subject of agreement between your
husband and this office.” When the operation of the contract is made to depend upon the occurrence of an event, which, for that
reason is a condition precedent, such may be established by parol evidence. This is an exception to parol evidence rule. This rule
does not prevent the introduction of extrinsic evidence to show that a supposed contract never became effective by reason of the
failure of some collateral condition or stipulation, pre-requisite to liability. In the case at bar, reference is made of a previous
agreement, in the second paragraph of letter Exhibit L, and although a document is usually to be interpreted in the precise terms
in which it is couched, Courts, in the exercise of sound discretion, may admit evidence of surrounding circumstances, in order to
arrive at the true intention of the parties.
FACTS:
 LSDC filed a specific action case against Garcia Plantation (Salud and Vicente Garcia) for the recovery of P5,955.30,
as unpaid balance of 2 tractors bought by respondents.
 Salud was made a co-defendant because of two promissory notes executed by her , whereby she personally assumed
the account of the company and her husbad Vicente.
 Defendants contended that it has been novated by a subsequent agreement contained in a letter (Exh. L)
sent by Filomeno C. Kintanar, Manager, Board of Liquidators of the LSDC allowing an extension to pay
(Until May 31, 1957).
 Furthermore, since the complaint was filed on February 20, 1957, they claimed that the action was
premature and prayed that the complaint be dismiss.
 LSDC admitted the genuiness of the letter but contended that the same did not express the true and intent agreement
of the parties, thereby placing the fact in issue.
 The parties requested for more time to settle the case but the court ordered a trial on the merits.
 At the trial, the defendant admitted defendant admitted the documentary evidence of its debt.
 When the plaintiff presented Atty. Lucido A. Guinto, Legal Officer of the Board of Liquidators, to testify on the true
agreement and the intention of the parties at the time the letter (Exh. L) was drafted and prepared, the lower court
judge, upon the objection of the counsel for defendants, ruled out said testimony and prevented the introduction of
evidence under the parol evidence rule (Sec. 22, Rule 123).
 Since the court ruled out Atty. Guinto’s testimony, writer of the letter in question, the plaintiff rested its case. Lower
court dismissed the case. CA certified the case to the SC.
ISSUE:
Whether or not the Court erred in excluding parol evidence. Yes.
HELD:
The decision appealed from is reversed, and the case remanded to the lower court for further proceedings. Costs against the
appellees.
RATIO:
 The parol evidence consisted of the testimony of Attys. Guinto and Kintanar.
 Atty. Kintanar gave the defendants up to May 31, 1957, to coincide with their ramie harvest "provided that
they will make a substantial down payment immediately, with the understanding that upon non-payment
of the substantial amount, the extension shall be deemed as not granted and the LASEDECO shall feel
free to seek redress in court"
 That there was such condition precedent as manifested by the second paragraph of the letter Exhibit L:
Mrs. Salud de Garcia Tacurong, Cotabato
Dear Madam;
Please be advised that the Board has granted you an extension up to May 31, 1957, within which to pay your account.
This matter has been the subject of agreement between your husband and this office.
Respectfully,
(Sgd.) FILOMENO C. KINTANAR
 The subject of the contention was the condition to be complied with or the consideration given for the
extension of time, within which the Garcia spouses pay their account.
 The lower court should have admitted the parol evidence
 The parol evidence sought to be introduced to prove the failure of the document in question to express the
true intent and agreement of the parties.
 When the operation of the contract is made to depend upon the occurrence of an event, which, for that
reason is a condition precedent, such may be established by parol evidence. This is an exception to parol
evidence rule. *
 This is not varying the terms of the written contract by extrinsic agreement, for the simple reason that
there is no contract in existence; there is nothing to which to apply the excluding rule.
 This rule does not prevent the introduction of extrinsic evidence to show that a supposed contract never
became effective by reason of the failure of some collateral condition or stipulation, pre-requisite to
liability" (Peabody & Co. v. Bromfield & Ross, 38 Phil. 841).
 The rule excluding parol evidence to vary or contradict a writing does not preclude admission of extrinsic
evidence, to show prior or contemporaneous collateral parol agreements between the parties
 Such evidence may be received, regardless of whether or not the written agreement contains reference to
such collateral agreement (Robles v. Lizarraga Hnos., 50 Phil. 387)
 In the case at bar, reference is made of a previous agreement, in the second paragraph of letter Exhibit L,
and although a document is usually to be interpreted in the precise terms in which it is couched, Courts, in
the exercise of sound discretion, may admit evidence of surrounding circumstances, in order to arrive at
the true intention of the parties
 Re: prematurity of the case
 If the court allowed the plaintiff to prove the intention of the parties, then it could have proved that there
was a breach of the letter.
 So that, although the complaint was filed on February 20, 1957, three months before the deadline of the
extension on May 31, 1957, there would be no premature institution of the case.
_______________________________________________________________________
SPS. ALFREDO R. EDRADA G.R. No. 154413
25
and ROSELLA L. EDRADA, On 3 June 1996, respondents filed an action against petitioners for specific performance with damages before the RTC, praying
that petitioners be obliged to execute the necessary deed of sale of the two fishing vessels and to pay the balance of the purchase
Petitioners, Present: price. In their Complaint,[7] respondents alleged that petitioners contracted to buy the two fishing vessels for the agreed purchase
PUNO, J., price of Nine Hundred Thousand Pesos (P900,000.00), as evidenced by the above-quoted document, which according to them
- versus - Chairman, evinced a contract to
AUSTRIA-MARTINEZ , buy. However, despite delivery of said vessels and repeated oral demands, petitioners failed to pay the balance, so respondents
CALLEJO, SR., further averred.
TINGA, and
SPS. EDUARDO RAMOS CHICO-NAZARIO, JJ. Belying the allegations of respondents, in their Answer with Counterclaim,[8] petitioners averred that the document sued upon
and CARMENCITA RAMOS, merely embodies an agreement brought about by the loans they extended to respondents. According to petitioners, respondents
Respondents. allowed them to manage or administer the fishing vessels as a business on the understanding that should they find the business
Promulgated profitable, the vessels would be sold to them for Nine Hundred Thousand Pesos (P900,000.00). But petitioners decided to call it
August 31, 2005 quits after spending a hefty sum for the repair and maintenance of the vessels which were already in dilapidated condition.

x ---------------------------------------------------------------x After trial, the RTC rendered a Decision[9] dated 22 February 1999, the dispositive portion of which reads:

DECISIOn
TINGA, J.:
In this Petition[1] under Rule 45, petitioner Spouses Alfredo and Rosella Edrada (petitioners) seek the reversal of the Former
Second Division of the Court of Appeals Decision[2] and Resolution[3] in CA-G.R. CV No. 66375, which affirmed
the Decision of Regional Trial Court (RTC) of Antipolo City, Branch 71,[4] in Civil Case No. 96-4057, and denied the Motion for
Reconsideration[5] therein.
Respondent spouses Eduardo and Carmencita Ramos (respondents) are the owners of two (2) fishing vessels, the Lady Lalaine
and the Lady Theresa. On 1 April 1996, respondents and petitioners executed an untitled handwritten document which lies at the
center of the present controversy. Its full text is reproduced below:
1st April 1996
This is to acknowledge that Fishing Vessels Lady Lalaine and Lady Theresa owned by
Eduardo O. Ramos are now in my possession and received in good running and serviceable order. As
such, the vessels are now my responsibility.
Documents pertaining to the sale and agreement of payments between me and the owner of the
vessel to follow. The agreed price for the vessel is Nine Hundred Thousand Only (P900,000.00).
(SGD.) (SGD.)
EDUARDO O. RAMOS ALFREDO R. EDRADA
(Seller) (Purchaser)
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants and the latter are ordered to pay
to the former the amount of Eight Hundred Sixty Thousand Pesos (P860,000.00) with legal interests thereon from June 30, 1996
until fully paid; the amount of P20,000.00 as attorneys fees and the cost of suit.
The counterclaim of the defendants for moral and exemplary damages and for attorneys fees is dismissed for lack of merit.
SO ORDERED.[10]
The RTC treated the action as one for collection of a sum of money and for damages and considered the document as a perfected
contract of sale. On 19 April 1999, petitioners filed a Motion for Reconsideration which the RTC denied in an Order[11] dated 2
July 1999.
Both parties appealed the RTC Decision. However, finding no reversible error in the appealed decision, the Court of Appeals, in
its Decision,[12] affirmed the same and dismissed both appeals. Only petitioners elevated the controversy to this Court.
Petitioners raised the nature of the subject document as the primary legal issue. They contend that there was no perfected
contract of sale as distinguished from a contract to sell. They likewise posed as sub-issues the purpose for which the checks were
issued, whether replacement of the crew was an act of ownership or administration, whether petitioners failed to protest the
dilapidated condition of the vessels, and whether the instances when the vessels went out to sea proved that the vessels were not
seaworthy.[13] It is also alleged in the petition that the true agreement as between the parties was that of a loan.
Evidently, the petition hinges on the true nature of the document dated 1 April 1996. Normally, the Court is bound by the factual
findings of the lower courts, and accordingly, should affirm the conclusion that the document in question was a perfected
contract of sale. However, we find that both the RTC and the Court of Appeals gravely misapprehended the nature of the said
document, and a reevaluation of the document is in order.[14] Even if such reevaluation would lead the court to examine issues
not raised by the parties, it should be remembered that the Court has authority to review matters even if not assigned as errors in
the appeal, if it is found that their consideration is necessary in arriving at a just decision of the case.[15]

CONFORME: CONFORME:
(SGD.) (SGD.)
CARMENCITA RAMOS ROSIE ENDRADA[6]
Upon the signing of the document, petitioners delivered to respondents four (4) postdated Far East Bank and Trust
Company (FEBTC) checks payable to cash drawn by petitioner Rosella Edrada, in various amounts totaling One Hundred Forty
Thousand Pesos (P140,000.00). The first three (3) checks were honored upon presentment to the drawee bank while the fourth
check for One Hundred Thousand Pesos (P100,000.00) was dishonored because of a stop payment order.
In doing so, we acknowledge that the contending parties offer vastly differing accounts as to the true nature of the agreement.
Still, we need not look beyond the document dated 1 April 1996 and the stipulations therein in order to ascertain what
obligations, if any, have been contracted by the party. The parol evidence rule forbids any addition to or contradiction of the
terms of a written agreement by testimony or other evidence purporting to show that different terms were agreed upon by the
parties, varying the purport of the written
contract. Whatever is not found in the writing is understood to have been waived and abandoned.[16]
We disagree with the RTC and the Court of Appeals that the document is a perfected contract of sale. A contract of sale is
defined as an agreement whereby one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in money or its equivalent. [17] It must evince the consent on the
part of the seller to transfer and deliver and on the part of the buyer to pay. [18]

26
An examination of the document reveals that there is no perfected contract of sale. The agreement may confirm the receipt by
respondents of the two vessels and their purchase price. However, there is no equivocal agreement to transfer ownership of the
vessel, but a mere commitment that documents pertaining to the sale and agreement of payments[are] to follow. Evidently, the
document or documents which would formalize the transfer of ownership and contain the terms of payment of the purchase
price, or the period when such would become due and demandable, have yet to be executed. But no such document was executed
and no such terms were stipulated upon.
The fact that there is a stated total purchase price should not lead to the conclusion that a contract of sale had been perfected. In
numerous cases,[19] the most recent of which is Swedish Match, AB v. Court of Appeals,[20] we held that before a valid and
binding contract of sale can exist, the manner of payment of the purchase price must first be established, as such stands as
essential to the validity of the sale. After all, such agreement on the terms of payment is integral to the element of a price certain,
such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.
Assuming arguendo that the document evinces a perfected contract of sale, the absence of definite terms of payment therein
would preclude its enforcement by the respondents through the instant Complaint. A requisite for the judicial enforcement of an
obligation is that the same is due and demandable. The absence of a stipulated period by which the purchase price should be paid
indicates that at the time of the filing of the complaint, the obligation to pay was not yet due and demandable.
Respondents, during trial, did claim the existence of a period. Respondent Carmencita Ramos, during cross-examination,
claimed that the supposed balance shall be paid on 30 June 1996.[21] But how do respondents explain why the Complaint was
filed on 3 June 1996? Assuming that the 30 June 1996 period was duly agreed upon by the parties, the filing of
the Complaint was evidently premature, as no cause of action had accrued yet. There could not have been any breach of
obligation because on the date the action was filed, the alleged maturity date for the payment of the balance had not yet arrived.
In order that respondents could have a valid cause of action, it is essential that there must have been a stipulated period within
which the payment would have become due and demandable. If the parties themselves could not come into agreement, the courts
may be asked to fix the period of the obligation, under Article 1197 of the Civil Code.[22] The respondents did not avail of such
relief prior to the filing of the instantComplaint; thus, the action should fail owing to its obvious prematurity.
Returning to the true nature of the document, we neither could conclude that a contract to sell had been established. A contract to
sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. [23]
A contract is perfected when there is concurrence of the wills of the contracting parties with respect to the object and the cause
of the contract. In this case, the agreement merely acknowledges that a purchase price had been agreed on by the parties. There
was no mutual promise to buy on the part of petitioners and to sell on the part of respondents. Again, the aforestated proviso in
the agreement that documents pertaining to the sale and agreement of payments between the parties will follow clearly manifests
lack of agreement between the parties as to the terms of the contract to sell, particularly the object and cause of the contract.
The agreement in question does not create any obligatory force either for the transfer of title of the vessels, or the rendition of
payments as part of the purchase price. At most, this agreement bares only their intention to enter into either a contract to sell or
a contract of sale.
Consequently, the courts below erred in ordering the enforcement of a contract of sale that had yet to come into existence.
Instead, the instant Complaint should be dismissed. It prays for three reliefs arising from the enforcement of the document:
execution by the petitioners of the necessary deed of sale over the vessels, the payment of the balance of the purchase price, and
damages. The lower courts have already ruled that damages are unavailing. Our finding that there is no perfected contract of sale
precludes the finding of any cause of action that would warrant the granting of the first two reliefs. No cause of action arises
until there is a breach or violation thereof by either party.[24] Considering that the documents create no obligation to execute or
even pursue a contract of sale, but only manifest an intention to eventually contract one, we find no rights breached or violated
that would warrant any of the reliefs sought in the Complaint.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals
are REVERSED and SET ASIDE. The case before the Regional Trial Court is ordered DISMISSED. No pronouncement as to
costs.
SO ORDERED.
________________________________________________________
LECHUGAS V. CA
PRINCIPLE:
FACTS: Victoria Lechugas (petitioner) bought a land from a certain Leoncia Lasangue. After the purchase of the land, the Deed of
Absolute Sale executed by Leoncia Lasangue in her favor specified a certain land Lot No. 5456 stated in the contract. Then the
defendants (respondents) occupied Lot No. 5456, petitioner filed a complaint for forcible entry with damages against against
the defendants but it was dismissed. Petitioner appealed the case to the CFI (now RTC) of Iloilo. While the appeal for the ejectment case was
pending, petitioner filed another case in the RTC for the recovery of the possession against the same defendants involving
the same Lot No. 5456.
During the trial, the defendants (respondents presented their witness in the person of Leoncia Lasangue herself. Leoncia Lasangue testified
during the trial that according to her, the lot that she sold to the petitioner was not Lot No. 5456 but another lot, Lot 5522.
Lasangue did not know how to read and write, so the document of sale was prepared by the petitioner, thereafter, the former was
made to sign it. Based on her testimony, the lot indicated in the Deed of Sale which she sold to petitioner was erroneous. It was
clear that she did not intend to sell a piece of land already sold by her father to the predecessor 1in1interest of
the defendants (respondents). This was objected by the petitioner under the parole evidence rule.
ISSUE: Whether or not the Parole Evidence Rule apply in this case
HELD: The Court resolved in the negative. The Parole evidence rule will not apply in this case because it is Leoncia Lasangue
who is one of the parties to the subject Deed of Sale not the defendants. The defendants in the case &ere not parties to the Deed
of Sale executed between Leoncia Lasange and petitioner Lechugas. The rule is not applicable where the controversy is
between one of the parties to the document and third persons. The deed of sale was executed by Leoncia
Lasangue in favor of Victoria Lechugas. The dispute over that was actually sold is between petitioner and the private
respondents. In the case at bar, through the testimony of Leoncia Lasangue, it was shown that that she really intended to sell and
to be the subject of Exhibit A was Lot No. 5522 but not being able to read and write and fully relying on the good faith of her
first cousin, the p e t i t i o n e r , s h e j u s t p l a c e d h e r t h u m b m a r k o n a p i e c e o f p a p e r w h i c h p e t i t i o n e r
t o l d h e r w a s t h e document evidencing the sale of land. The deed of sale described the disputed lot instead.
__________________________________________________________________________________________________
INCIONG VS COURT OF APPEALS
G.R. No. 96405, June 26, 1996
FACTS:
On February 3, 1983, petitioner Baldomero L. Inciong, Jr. together with Rene C. Naybe and Gregorio D. Pantanosas signed a
promissory note in the amount of P50, 000.00 holding themselves jointly and severally liable to private respondent Philippine
Bank of Communications. The promissory note was due on May 5, 1983. Said due date expired without the promissors having
paid their obligation.
On November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams demanding payment thereof. On
December 11, 1983, private respondent also sent registered mail a final letter of demand to Rene C. Naybe. Since both obligors
did not respond to the demand made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,
000.00 against the three (3) obligors. On January 27, 1987, the lower court dismissed the case against defendant Pantanosas as
prayed by herein private respondent. Meanwhile, only the summons addressed to petitioner was served for the reason that
defendant Naybe had gone to Saudi Arabia.
The lower court rendered its decision holding petitioner solidarily liable and to pay herein respondent bank the amount of P50,
000.00 plus interest thereon. Petitioner appealed the said decision to the Court of Appeals. The respondent court, however,
affirmed the decision of the lower court. The petitioner moved for reconsideration, which was later on denied by the respondent
Court of Appeals.
ISSUE:
27
Whether or not the dismissal of the complaint against Naybe, the principal debtor, and against Pantanosas, his co-maker,
constituted a release of his obligation.
HELD:
The dismissal of the complaint against Naybe and Pantanosas did not constitute a release of petitioner‘s obligation, especially
because the dismissal of the case against Pantanosas was upon the motion of private respondent itself. Petitioner signed the
promissory note as a solidary co-maker and not as a guarantor. A solidary or joint and several obligation is one in which each
debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. The promissory note
involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of
them may be proceeded against for the entire obligation. The choice is left to the solidary creditor to determine against whom he
will enforce collection
Under Article 1207 of the Civil Code, when there are two or more debtors in one and the same obligation, the presumption is
that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. There is solidary liability
only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.
____________________________________________________________________________________________
G.R. No. L-11310 January 31, 1918
CARLOS PALANCA, plaintiff-appellant,
vs.
FRED WILSON & CO., defendant-appellee.
Alfredo Chicote and Jose Arnaiz for appellant.
Gilbert, Cohn and Fisher for appellee.
MALCOLM, J.:
As the culmination of negotiations, on June 11, 1913, Song Fo and Co., of Manila, through its manager Carlos Palanca, entered
into a contract with Fred Wilson and Co. for the purchase of a distilling apparatus for P10,000. Wilson and Co. ordered the
apparatus of Turner, Schon and Co., London, installing it in January, 1914. On May 18, 1914, or about five months after the
machine was installed, Palanca wrote Wilson and Co. that the rectifying machine had been examined by a number of competent
persons who stated that the machine was not capable of producing the amount of alcohol stipulated in the contract. Getting no
satisfaction from the reply of Wilson and Co., action for damages for breach of contract was begun in the Court of First Instance
of the city of Manila, praying first that the defendant be ordered to comply strictly with the terms of the contract and second that
the defendant be ordered to pay as damages the amount of P16,713.80.
Defendant answered with a general denial and a cross-complaint asking judgment against the plaintiff in the sum of P5,000, the
final installment claimed to be due as the purchase price of the machine. By the judgment handed down by the Honorable James
A. Ostrand, judge of first instance, it was ordered that the plaintiff take nothing by his action, and that the defendant have and
recovered judgment against the plaintiff for the sum of P5,000, with interest thereon at the rate of 12 per cent per annum from
the first day of September, 1914, without special findings as to costs.
It is around the first clause of the contract (Exhibit D) that all the argument centers. This clause reads: "Un aparato; 'Guillaume'
para la destilacion-rectificacion directa y continua; tipo 'C,' Agricola, de una capacidad de 6,000 litros cada 24 horas de trabajo,
de un grado de 96-97 Gay Lussac, todo segun el grabado de la pagina 30 del catalogo Egrot, edicion de 1907." We believe in the
first place, that it is undeniable from the evidence, that the apparatus in question, while it could treat 6,000 liters of raw material
a day, did not produce 6,000 liters a day, but on the contrary only something over 480 liters a day of rectified alcohol of the
required grade. This being true, appellant vigorously asserts that there has been a breach of the contract in that instead of the
machine having a capacity of 6,000 liters for every 24 hours of work, it only had (a producing) capacity of 480 liters for this
period of time. Appellant would require that all the terms of the contract be given effect with special emphasis upon the phrase
"de un grado de 96-97 Gay Lussac." This last phrase in connection with the previous one "de una capacidad de 6,000 litros cada
24 horas de trabajo" according to appellant could not possibly mean that the machine was only to take in 6,000 liters for this
would be improbable in view of the express mention of the grade of the product. Appellee on the other hand relies on the
ordinary meaning of the word "capacity" as indicating receptivity and on the preliminary negotiations as explaining the intention
of the parties. The evidence is of little assistance in resolving the question. Thus, Carlos Palanca, the manager of Song Fo and
Co., and now the successor of the company, testified that he told the agents of Wilson and Co. that he need a machine that would
produce at least 6,000 liters of alcohol a day. The agent of Wilson and Co., James F. Loader, squarely contradicted this on the
stand and said that Palanca asked him to get on an apparatus to treat 6,000 liters.
Beginning anew, in order to reach a proper conclusion as to the meaning of clause one of the contract, we approach the subject
from two directions. Under the first view, we take up the meaning of the words themselves. Under the second, believing that it is
necessary to explain intrinsic ambiguity in the contract, we can go, as we are permitted to do under chapter IV title II, book IV of
the Civil Code, and chapter X of the Code of Civil Procedure, especially section 285, to evidence of the circumstances under
which the agreement was made.
The terms of the contract disclose the following essential constituents: (1) A machine Guillaume, type "C" (Agricola) as
described on page 30 of the Catalogue Egrot, edition of 1907; (2) a machine of a capacity of 6,000 liters for every 24 hours of
work, and (3) a machine producing alcohol of a grade 96-97 Gay Lussac. Type C (Agricola) as described on pages 30 and 31 of
the catalogue mentions the grade of alcohol guaranteed of 96-97 Gay Lussac, but contains no mention of a capacity of 6,000
liters a day. Passing the second element for the moment, there is no dispute in the record, or more properly speaking the plaintiff
did not prove, that the machine did not turn out alcohol of the grade 96-97 Gay Lussac. Predicated therefore on the description to
be found in the catalogue, it is plain that the defendant sold to the plaintiff the machine there mentioned. This leaves for
interpretation the one word "capacity."
That in connection with the distilling of liquor, the word "capacity" may have different meanings unless restricted in
terminology, is disclosed by the decision of the United States Supreme Court in Chicago Distilling Co. vs. Stone ([1891] 140 U.
S., 647), where the qualifying phrases "working capacity" and "producing capacity" are specifically" mentioned. The ordinary
meaning of the word is defined in the English Dictionaries as "ability to receive or contain; cubic extent; carrying power or
space; said of that within which any solid or fluid may be placed, and also used figuratively; as the keg has a capacity of 10
gallons; the ship's capacity is 1,000 tons." The ordinary meaning of the Spanish equivalent "capacidad" as disclosed by the
Spanish Dictionaries is "ambito que tiene alguna cosa y es suficiente para contener en si otra; como el de una vasijia, arca, etc.
En el vaso se debe atender la disposicion y capacidad." Both definitions denote that which anything can receive or contain.
We think, however, that it can be laid down as a premise for further discussion that there is intrinsic ambiguity in the contract
which needs explanation. Section 285 of the Code of Civil Procedure providing that a written agreement shall be presumed to
contain all the terms, nevertheless "does not exclude other evidence of the circumstances under which the agreement was made,
or to which it relates, or to explain an intrinsic ambiguity." Turning, therefore, to the surrounding circumstances, we find the
following: Wilson and Co. in their offer to Song Fo and Co. on June 9, 1913, while mentioning capacity, only did so in express
connection with the name and description of the machine as illustrated in the catalogue. They furnished Song Fo and Co. with
plans and specifications of the distilling apparatus; and these describe a capacity of 6,000 liters of jus (ferment). Wilson and
Co.'s order to manufacturer, while mentioning a capacity of 6,000 liters per day, does so again in connection with the description
in the maker's catalogue. And, finally, it was stated during the trial, and it has not been denied, that a machine capable of
producing 6,000 liters of rectified alcohol every 24 hours from nipa ferment would cost between P35,000 and P40,000.
We are accordingly constrained to hold that the proper construction of clause 1 of the contract, in question in connection with the
conduct of the parties and surrounding circumstances, is that Wilson and Co. were to furnish Song Fo and CO. a distilling
apparatus, type C (Agricola), as described on page 30 of the maker's catalogue, capable of receiving or treating 6,000 liters every
24 hours of work and of producing alcohol of a grade 96-97 Gay Lussac.
We conclude that the judgment of the trial court should be affirmed without special finding as to costs. So ordered.
____________________________________________________________________________________________
Case Digest - PAROL EVIDENCE
1. G.R. No. L-62741 May 29, 1987
FILIPINAS MANUFACTURERS BANK, plaintiff-appellee, vs. EASTERN RIZAL FABRICATORS, defendant-appellant.
FACTS:
Filipinas Manufacturers Bank filed in the Court of First Instance (now RTC), a complaint against Eastern Rizal Fabricators. It
alleged inter alia that defendant Eastern Rizal Fabricators had executed on July 30, 1976, a promissory note for P370,000.00
which has matured for two years and four months already. And that despite repeated demands, defendant refused to pay without
any valid and legal grounds.
28
ISSUE:
WHETHER OR NOT THE LOAN OF PHP. 370,000 WHICH IS THE SUBJECT MATTER OF THE PRESENT DISPUTE,
WAS STILL OUTSTANDING AND IF NO FULL PAYMENT HAS BEEN MADE, TO SUBMIT MEMORANDA
SUBSTANTIATING THEIR RESPECTIVE ALLEGATIONS CONCERNING THEIR RESPECTIVE ALLEGATION
CONCERNING THE DEFENSE OF FORBEARANCE.
RULING:
Yes. The loan was still outstanding but only up to the extent of balance in the amount of Php. 230,000.00.
When the appellant submitted a memorandum, stating it still has an outstanding balance of Php. 230,000.00 on its
aforesaid account ‘ with the appellee bank. It reiterated its prayer that the judgment complained of be reversed. The appellee
bank did not file its memorandum despite notices sent to its counsel of record.
Appellee bank’s unexplained inaction has left the court with no recourse but to order the appellant to discharge its debt to
the admitted amount of Php. 230,000.00. By its silence, we can assume that the appellee bank has no objections to the amount
owing as acknowledge by the appellant.
Parol evidence provides that the terms of an agreement has been reduced to writing, it is to be considered as containing
all such terms and therefore can be, as between the parties and their successors in interest, as evidence of the terms of the
agreement to written other than the contents of the writing itself, except when there are subsequent agreement to written
contracts may be made orally and evidence in reference thereto does not violate the parol evidence rule.
The reason for the rule is fundamental. The parties cannot be presumed to have intended the written instrument to cover
all their possible subsequent agreements. Moreover, parol evidence does not in any way deny that the original agreement was
that which the writing purports to express, but merely shows that the parties have exercised their right to change or abrogate their
original understanding or to make a new and independent one. It makes no difference how soon after the execution of the written
contract the parol one was made. If it was in fact subsequent and is otherwise unobjectionable, it may be proved and enforced.
___________________________________________________________________________________________
PHILIPPINE NATIONAL RAILWAYS (PNR) and BINGABING vs.HON. DEL VALLE (Presiding Judge, Court of Agrarian
Relations [CAR]) and DOLTZ
G.R. No. L-29381, September 30, 1969
(Case digested by Ana Nihara D. Magarang)
The decisive issue to be resolved in this case is whether or not strips of land by PNR, which are on both sides of its
railroad ans are part of its right of way for its operations, but temporary leased, are agricultural lands within the purview of the
Agricultural Tenancy Act and the Agricultural Land Reform Code, such as would come within the jurisdiction of the CAR.
FACTS:
PNR, a government-owned corporation, is the registered owner of 3 strips of land, which are part of its railroad right
of way.
The portions of these land not actually occupied by the railroad track had been source of trouble. Thus, PNR adopted
temporary rules and regulations, as follows:
a) The possession and enjoyment of the property should be awarded to interested persons thru competitive public
bidding;
b) The rental is to be determined from the amount offered by the highest bidder;
c) The duration of the lease shall be for a limited period, not to exceed 3 years; The lessee cannot sublease the property;
d) The lessee cannot sublease the premises;
e) The lease contract is revocable at any time upon demand by the owner, whenever it needs the same for its own use or
for a more beneficial purpose;
f) The owner can enter the leased premises during the period to make necessary repairs; and
g) The lessee shall not use the premises in a manner prejudicial to the operation of the trains.
In 1963, after a competitive public bidding, PNR awarded the portions of the 3 strips of land, which are on both sides
of the railroad track, to Bingabing for a period of 3 years. The contact stipulates that Bingabing will use the property temporarily
for agriculture. However, Bingaging failed to take possession because Doltz was occupying the land and built a house thereon.
In March 1965, PNR and Bingabing filed suit against Doltz for recovery of possession of the land in the Court of
First Instance (CFI) of Albay. They averred that Doltz illegally entered the land, constructed a house, and planted palay.
Doltz claims that he had been a tenant of one Pablo Gomba who leased the property from PNR, then a tenant of one
Demetrio de Vera, Gomba’s successor, then later on, a tenant of Bingabing. He also claimed that he was given a 1/3 share of the
last two harvests of Bingabing.
However, the case was dismissed on the ground that the subject matter of the action is tenancy.
While the case was pending in the CFI of Albay, Doltz registered with the CAR a petition against Bingabing for
security of tenure, the adoption of 70-30 share of the crops, and reliquidation of past harvests.
The petitioners maintained that the properties are not agricultural land within the contemplation of the Agricultural
Tenancy Act (RA 1199) or the Agricultural Land Reform Code (RA 3844). They also sustained that there was no tenancy
relationship existed between the parties, thus, CAR lacked jurisdiction over the case; and that there is a pending case in another
court involving same controversy.
In 1968, the Car upheld its jurisdiction and ruled in favor of Doltz.
Thus, this case went up to the SC questioning CAR’s jurisdiction.
ISSUES:
• W/N the land in controversy is agricultural land w/in the meaning of RA 1199 and RA 3844
• W/N Doltz may be considred as a true and lawful tenant
• W/N CAR have jurisdiction over the case
RULING:
First Issue
According to Sec 3 of RA 1199, agricultural tenancy is the physical possession by a person of land devoted to
agriculture belonging to, or legally possessed by, another for the purpose of production through the labor of the former and of the
members of his immediate farm household, in consideration of which the former agrees to share the harvest with the latter, or to
pay a price certain or ascertainable, either in produce or in money, or in both.
According to our constitution, as interpreted in Krivenko vs. Register of Deeds, 79 Phil. 461, 471, the phrase
"agricultural land," includes all lands that are neither mineral nor timber lands and embraces within it wide sweep not only lands
strictly agricultural or devoted to cultivation for agricultural purposes but also commercial, industrial, residential lands and lands
for other purposes. On the other hand, by Section 166(1) of the RA 3844, "agricultural land" means land devoted to any growth
including but not limited to crop lands, salt beds, fishponds, idle land and abandoned land as defined in paragraphs 18 and 19 of
this section, respectively.
It is obvious then that under the law, the land here in controversy does not fit into the concept of agricultural land.
PNR cannot devote it to agriculture because by its own charter, Republic Act 4156, PNR cannot engage in agriculture.
Indeed, the land — which adjoins the railroad track on both sides — is part of PNR's right of way. The entire
property is important to PNR's railroad operations. Buildings should not be constructed so close to the track.
Besides, the use of the strips of land on both sides of the track in railroad operation is inconsistent with agricultural
activities. The contract of lease authorizes the railroad company to enter upon the premises to make repairs, place its materials
on the land. It may even take soil from the land to fill up any part of the railroad track destroyed by water during rainy days.
What if PNR should decide to construct another parallel track on the land leased? The occupant of the land cannot prevent or
stop PNR from doing any of these. Security of tenure so important in landlord-tenant relationship may not thus be attained.
Second Issue and Third Issue
To be borne in mind is the fact that PNR executed with Bingabing a civil law lease contract, not an agricultural lease.
That contract is temporary, at best for a short term. It is revocable any time upon demand by PNR whenever it needs the same
for its own use or for a more beneficial purpose.
This distinction is expressly recognized by the law, specifically Section 166(2) of RA 3844, which reads:
Section 166(2)… Agricultural lessee means a person who, by himself and with the aid available from within his immediate farm
household, cultivates the land belonging to, or possessed by, another with the latter's consent for purposes of production, for a
price certain in money or in produce or both. It is distinguished from civil law lessee as understood in the Civil Code of the
Philippines.
Even on the assumption that the land is agricultural, there is the circumstance that PNR prohibits the sublease of the
premises. This rule was even stated in the rules and regulations adopted by PNR. The lessees cannot give what they are not
allowed to give. Any contract then of sublease between Doltz, the supposed tenant, and Pablo Gomba or Demetrio de Vera, the
previous awardees, or even of Pantaleon Bingabing, the present awardee — without PNR's consent — cannot bind the latter. No
such consent was here given.
The security of tenure guaranteed by our tenancy law may be invoked only by tenants de jure, not by those who are
not true and lawful tenants.
In Pabustan vs. De Guzman, L-12898, August 31, 1960, the tenant sublet the landholding to a third person without
the knowledge and consent of the landowner. In an ejectment suit brought by the landowner against said third person in the
29
CAR, this Court held that the CAR had no jurisdiction because no tenancy relationship existed between the parties, as the third
person was, in reality, an unlawful squatter or intruder. Correlating Pabustan to the present case, the lessee here had no power to
sublease. There is also thus no legally cognizable relationship of tenancy between the parties.
Thus the Court, accordingly, rule that CAR does not have jurisdiction over the case at bar and the proceedings below
are thus null and void.
____________________________________________________________________________________________
Lapu-Lapu Foundation vs CA Case Digest
Lapu-Lapu Foundation vs. Court of Appeals
[GR 126006, 29 January 2004]
Facts: Sometime in 1977, Elias Q. Tan, then President of Lapulapu Foundation, Inc., obtained four loans from Allied Banking
Corporation covered by four promissory notes in the amounts of P100,000 each. As of 23 January 1979, the entire obligation
amounted to P493,566.61 and despite demands made on them by the Bank, Tan and the foundation failed to pay the same. The
Bank was constrained to file with the Regional Trial Court of Cebu City, Branch 15, a complaint seeking payment by Tan and
the foundation, jointly and solidarily, of the sum of P493,566.61 representing their loan obligation, exclusive of interests, penalty
charges, attorney’s fees and costs. In its answer to the complaint, the Foundation denied incurring indebtedness from the Bank
alleging that the loans were obtained by Tan in his personal capacity, for his own use and benefit and on the strength of the
personal information he furnished the Bank. The Foundation maintained that it never authorized Tan to co-sign in his capacity as
its President any promissory note and that the Bank fully knew that the loans contracted were made in Tan’s personal capacity
and for his own use and that the Foundation never benefited, directly or indirectly, therefrom.
The Foundation then interposed a cross-claim against Tan alleging that he, having exceeded his authority, should be solely liable
for said loans, and a counterclaim against the Bank for damages and attorney’s fees. For his part, Tan admitted that he contracted
the loans from the Bank in his personal capacity. The parties, however, agreed that the loans were to be paid from the proceeds
of Tan’s shares of common stocks in the Lapulapu Industries Corporation, a real estate firm. The loans were covered by
promissory notes which were automatically renewable (“rolled-over”) every year at an amount including unpaid interests, until
such time as Tan was able to pay the same from the proceeds of his aforesaid shares. According to Tan, the Bank’s employee
required him to affix two signatures on every promissory note, assuring him that the loan documents would be filled out in
accordance with their agreement. However, after he signed and delivered the loan documents to the Bank, these were filled out
in a manner not in accord with their agreement, such that the Foundation was included as party thereto. Further, prior to its filing
of the complaint, the Bank made no demand on him.
After due trial, the court rendered judgment (1) requiring Tan and the Foundation to pay jointly and solidarily to the Bank the
amount of P493,566.61 as principal obligation for the four promissory notes, including all other charges included in the same,
with interest at 14% per annum, computed from 24 January 1979, until the same are fully paid, plus 2% service charges and 1%
monthly penalty charges; (2) requiring Tan and the Foundation to pay jointly and solidarily, attorney’s fees in the equivalent
amount of 25% of the total amount due from them on the promissory notes, including all charges; and (3) requiring Tan and the
Foundation to pay jointly and solidarily litigation expenses of P1,000.00 plus costs of the suit. On appeal, the CA affirmed with
modification the judgment of the court a quo by deleting the award of attorney’s fees in favor of the Bank for being without
basis. Tan and the foundation filed the petition for review on certiorari.
Issue:
Whether Tan and the foundation should be held jointly and solidarily liable.
Whether the foundation gave Tan an apparent authority to deal with the Bank.
Held:
1. The appellate court did not err in holding Tan and the foundation jointly and solidarily liable as it applied the doctrine of
piercing the veil of corporate entity. Tan and the foundation cannot hide behind the corporate veil under the following
circumstances: "The evidence shows that Tan has been representing himself as the President of Lapulapu Foundation, Inc. He
opened a savings account and a current account in the names of the corporation, and signed the application form as well as the
necessary specimen signature cards twice, for himself and for the foundation. He submitted a notarized Secretary’s Certificate
from the corporation, attesting that he has been authorized, inter alia, to sign for and in behalf of the Lapulapu Foundation any
and all checks, drafts or other orders with respect to the bank; to transact business with the Bank, negotiate loans, agreements,
obligations, promissory notes and other commercial documents; and to initially obtain a loan for P100,000.00 from any bank.
Under these circumstances, the foundation is liable for the transactions entered into by Tan on its behalf.
2. Per its Secretary’s Certificate, the Foundation had given its President, Tan, ostensible and apparent authority to inter alia deal
with the Bank. Accordingly, the Foundation is estopped from questioning Tan’s authority to obtain the subject loans from the
respondent Bank. It is a familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act
within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the
corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s
authority.
____________________________________________________________________________________________
G.R. NO. 144435, February 6, 2007
GUILLERMINA BALUYUT, Petitioner, vs. EULOGIO POBLETE, SALUD POBLETE and THE HON.COURT OF
APPEALS, Respondents.
Facts: On July 20, 1981, herein petitioner, Guillermina Baluyut (Baluyut), loaned from the spouses Eulogio and Salud Poblete
the sum of P850,000.00. As evidence of her indebtedness, Baluyut signed, on even date, a promissory note for the amount
borrowed. Under the promissory note, the loan shall mature in one month. To secure the payment of her obligation, she
conveyed to the Poblete spouses, by way of a real estate mortgage contract, a house and lot she owns.
Upon maturity of the loan, Baluyut failed to pay her indebtedness. The Poblete spouses subsequently decided to extrajudicially
foreclose the real estate mortgage. OnAugust 27, 1982, the mortgaged property was sold on auction by the Provincial Sheriff of
Rizal to the Poblete spouses who were the highest bidders.
Baluyut failed to redeem the subject property within the period required by law prompting Eulogio Poblete to execute an
Affidavit of Consolidation of Title.
Baluyut remained in possession of the subject property and refused to vacate the same. Subsequently, the trial court issued an
order granting the writ of possession. However, before Eulogio and the heirs of Salud could take possession of the property,
Baluyut filed an action for annulment of mortgage, extrajudicial foreclosure and sale of the subject property, as well as
cancellation of the title issued in the name of Eulogio and the heirs of Salud, plus damages.
Issue: WON extrajudicial foreclose was valid.
Held: Yes. In the present case, there was sufficient evidence to prove that notices of the foreclosure sale of the subject property
were published in accordance with law and that there was no allegation, much less proof, that the property was sold for a price
which is considerably lower than its value as to show collusion between the sheriff and herein private respondents. Hence, even
granting that the sheriff failed to post the notices of foreclosure in at least three public places, such failure, pursuant to Olizon, is
not a sufficient basis in nullifying the auction sale and the subsequent issuance of title in favor of private respondents.
As to petitioner’s argument that the sheriff in charge of the auction sale is required to execute an affidavit of posting of notices,
the Court agrees with private respondents’ contention that petitioner’s reliance on the provisions of Section 5, Republic Act
(R.A.) No. 720, as amended by R.A. No. 5939, as well as on the cases of Roxas v. Court of Appeals, Pulido v. Court of
Appeals and Tambunting v. Court of Appeals, is misplaced as the said provision of law refers specifically and exclusively to the
foreclosure of mortgages covering loans granted by rural banks. In the present case, the contracts of loan and mortgage are
between private individuals. The governing law, insofar as the extrajudicial foreclosure proceedings are concerned, is Act No.
3135, as amended by Act No. 4118. Section 3 of the said law reads as follows:
Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the
municipality or city where the property is situated and if such property is worth more than four hundred pesos, such notice shall
also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or
city.
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED in toto.
___________________________________________________________________________________________
URETA v. URETA
G.R. No. 165748, 14 September 2011
30
Mendoza, J.:
FACTS
In his lifetime, Alfonso Ureta begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco,
Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of Policronio (Heirs of Policronio),
are opposed to the rest of Alfonso’s children and their descendants.
Alfonso was financially well-off during his lifetime. He owned several fishpens, a fishpond, a sari-sari store, a passenger jeep,
and was engaged in the buying and selling of copra. Policronio, the eldest, was the only child of Alfonso who failed to finish
schooling and instead worked on his father’s lands.
Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met at the
house of Liberato. Francisco, who was then a municipal judge, suggested that in order to reduce the inheritance taxes, their
father should make it appear that he had sold some of his lands to his children. Accordingly, Alfonso executed four (4) Deeds of
Sale covering several parcels of land in favor of Policronio, Liberato, Prudencia, and his common-law wife, Valeriana Dela
Cruz. The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered six parcels of land, which are the
properties in dispute in this case.
Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso continued to own,
possess and enjoy the lands and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the administrator of his father’s estate. He was later succeeded by his
sister Prudencia, and then by her daughter, Carmencita Perlas. Except for a portion of parcel 5, the rest of the parcels transferred
to Policronio were tenanted by the Fernandez Family. These tenants never turned over the produce of the lands to Policronio or
any of his heirs, but to Alfonso and, later, to the administrators of his estate.
Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his heirs ever took
possession of the subject lands.
On April 19, 1989, Alfonso’s heirs executed a Deed of Extra-Judicial Partition, which included all the lands that were covered
by the four (4) deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado, Policronio’s eldest son,
representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-heirs.
After their father’s death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. On June 15,
1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio.
Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed of Extra-Judicial Partition involving
Alfonso’s estate when it was published in the July 19, 1995 issue of the Aklan Reporter.
ISSUE
Whether or not the Deed of Extra-Judicial Partition was valid.
RULING: Yes. It has been held in several cases that partition among heirs is not legally deemed a conveyance of real
property resulting in change of ownership. It is not a transfer of property from one to the other, but rather, it is a confirmation or
ratification of title or right of property that an heir is renouncing in favor of another heir who accepts and receives the
inheritance. It is merely a designation and segregation of that part which belongs to each heir. The Deed of Extra-Judicial
Partition cannot, therefore, be considered as an act of strict dominion. Hence, a special power of attorney is not necessary.
In fact, as between the parties, even an oral partition by the heirs is valid if no creditors are affected. The requirement of a
written memorandum under the statute of frauds does not apply to partitions effected by the heirs where no creditors are
involved considering that such transaction is not a conveyance of property resulting in change of ownership but merely a
designation and segregation of that part which belongs to each heir.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
Therefore, Conrado’s failure to obtain authority from his co-heirs to sign the Deed of Extra-Judicial Partition in their behalf did
not result in his incapacity to give consent so as to render the contract voidable, but rather, it rendered the contract valid but
unenforceable against Conrado’s co-heirs for having been entered into without their authority.
____________________________________________________________________________________________
FINANCIAL BUILDING CORPORATION vs. RUDLIN
DECISION
VILLARAMA, JR., J.:
The present consolidated petitions for review under Rule 45 assail the Decision[1] dated December 12, 2003 of the Court of
Appeals (CA) in CA-G.R. CV No. 41224 which affirmed with modification the Decision[2] dated January 12, 1993 of the
Regional Trial Court (RTC) of Makati City, Branch 65 in Civil Case No. 16266.
The Facts
Sometime in October 1985, Rudlin International Corporation (Rudlin) invited proposals from several contractors to undertake
the construction of a three-storey school building and other appurtenances thereto at Vista Grande, BF Resort Village, Las Pias,
Metro Manila. The contract was eventually awarded to Financial Building Corporation (FBC), with a bid of P6,933,268.00 as
total project cost. On November 22, 1985, Rudlin represented by its Chairman of the Board and President Rodolfo J. Lagera, and
FBC represented by its Vice-President and Treasurer Jaime B. Lo, executed a Construction Agreement[3] which, among others,
provided for the total consideration and liability for delay as follows:
SECTION FOUR
CONTRACT PRICE
The OWNER agrees to pay the CONTRACTOR, for the work stated in Section Two hereof, the total price of SIX MILLION
NINE HUNDRED THIRTY THREE THOUSAND TWO HUNDRED SIXTY EIGHT PESOS (P6,933,268.00) in accordance
with Section five et seq. Payment of this amount is subject to additions or deductions in accordance with the provisions of this
Agreement and of the other documents to which this Agreement is made subject to.[4]
xxxx
SECTION TWELVE
TIME OF ESSENCE; EXTENSION OF TIME
Time is of the essence in this Agreement and any delay not due to force majeure will result in injury and damage to the OWNER
in view of which it is hereby stipulated that, in the completion of the work, the CONTRACTOR shall be liable to the OWNER in
the sum equivalent to 1/10 of 1% of the total contract price for every calendar day of delay (Sundays and Legal Holidays
included). Any sums accruing in favor of the OWNER under this provision shall be deductible from the stipulated Contract Price
or any balance thereof due to the CONTRACTOR.[5]
The contract also provided for completion date not later than April 30, 1986 unless an extension of time has been authorized and
approved by the OWNER and the ARCHITECT in writing.[6] It appears that the construction was not finished on said date as
Rudlin wrote FBC to complete the project not later than May 31, 1986, except for the administration wing which Rudlin
expected to be turned over to it 100% complete by June 10, 1986.[7]
31

On June 5, 1986, Rudlin and FBC made amendments to their Construction Agreement dated November 22, 1985 through a
Letter-Agreement[8] signed by Rodolfo J. Lagera and Jaime B. Lo, as follows:
1. Financial Building Corporation (FBC) shall complete and deliver the Project to Rudlin International, Inc. (RII) on or before 10
June 1986.
2. Payment of the balance due on the contract price shall be made after the parties have reconciled their accounts with regard to
the upgrading and downgrading of the work done on the Project, which reconciliation shall be settled not later than 30 June
1986.
3. RII shall pay FBC the unpaid balance as determined under paragraph 2 hereof, under the following terms and conditions:
(a) RII shall pay FBC an additional payment of Two Hundred Fifty Thousand Pesos (P250,000.00) upon signing hereof, receipt
of which is hereby acknowledged. This is in addition to the Two Hundred Fifty Thousand Pesos (P250,000.00) paid on 29 May
1986.
(b) The rest of the unpaid balance shall be payable within a period of ninety (90) days from the date the said balance is
determined in accordance with paragraph 2 hereof, adequately secured by post dated checks and the same to earn interest at the
prevailing bank rates. There shall be a moratorium of thirty (30) days, the payments to be made in accordance with the following
schedule:
On or before 15 July 1986 - 25%
On or before 31 July 1986 - 25%
On or before 15 August 1986 - 25%
On or before 31 August 1986 - 25%
TOTAL PAYMENTS DUE - 100%
This Letter-Agreement amends the corresponding provisions of the Construction Agreement dated 22 November 1985, except
that Section 12 thereof is hereby waived.[9] (Emphasis supplied.)
On June 15, 1986, the subject school building, Bloomfield Academy, was inaugurated and utilized by Rudlin upon the start of
the school year. From the exchange of correspondence between FBC and Rudlin, it can be gleaned that no reconciliation of
accounts took place pursuant to the Letter-Agreement dated June 5, 1986. FBC demanded payment of the balance of the adjusted
contract price per its computation, but it was not heeded by Rudlin.
On March 10, 1987, FBC filed in the RTC a suit for a sum of money with prayer for preliminary attachment against Rudlin,
Bloomfield Educational Foundation, Inc. (Bloomfield) and their officers, directors or stockholders, namely: Rodolfo J. Lagera,
Ma. Erlinda J. Lagera and Josaphat R. Bravante. FBC alleged that the total and final contract price, inclusive of additives and
deductives which are covered by valid documents, is P7,324,128.44; that Rudlin paid FBC only P4,874,920.14, thus leaving a
balance of P2,449,208.30; and that despite repeated demands by FBC, Rudlin refused to pay its obligations. FBC further prayed
for legal interest on the amount of P2,449,208.30 from the time it became due and demandable, attorneys fees equivalent to 25%
of the total amount due, moral and exemplary damages and the cost of suit.[10]
The trial court granted the prayer for preliminary attachment but before the sheriff could implement the writ issued by the court,
Rudlin filed the proper counter bond.
In their Answer with Counterclaim,[11] defendants denied the allegations of the complaint. Rudlin averred that the Construction
Agreement did not reflect the true contract price agreed upon, which is P6,006,965.00. The amount of P6,933,268.00, which is
FBCs bid price, was indicated in the Construction Agreement solely for the purpose of obtaining a higher amount of loan from
the Bank of Philippine Islands (BPI). The execution of said document was made with the understanding between FBC and
Rudlin that the contract price stated therein would be decreased to a mutually acceptable contract price. However, due to
inadvertence, the parties forgot to sign an agreement fixing the true contract price.
Rudlin also denied that the construction of the project was completed by FBC. The original completion date, April 30, 1986, was
later moved to June 10, 1986. But despite the extension given by Rudlin, FBC still has not completed the project. Neither did
FBC deliver to Rudlin a complete release of all liens arising out of the Construction Agreement or receipts in full in lieu thereof,
as well as an affidavit that the releases and receipts include all the labor, interests and equipment for which a claim or action can
be filed, as required under Section Eight of the Construction Agreement. In fact, for non-payment by FBC of one of its sub-
contractors, Rudlin was sued as a co-defendant with FBC in Civil Case No. 15734 pending before the RTC of Makati, Branch
138.
Rudlin likewise claimed that many portions of the work performed by FBC are incomplete and/or faulty, defective and deficient
(valued at P1,180,127.35), for which reason Architect Eduardo R. Quezon has not certified on the full performance and
completion of the project. The work done by FBC was thus not accepted by Rudlin for valid reasons. Rudlin had already paid
FBC the total amount of P5,564,219.58. After considering the 10% retention money and the value of additives and deductives,
Rudlin had actually overpaid FBC by P415,701.34. Clearly, Rudlin does not owe FBC the amount stated in its Complaint; FBC
likewise had sent a final demand letter dated March 2, 1987 to Rudlin which mentioned only the amount of P115,000.00 as
Rudlins outstanding accountability.
As to Bloomfield and the individual defendants, they contended that not being parties to the Construction Agreement, FBC has
no cause of action against them. Moreover, in their dealings with FBC, they acted with justice, honesty and good faith.
Under its counterclaim, Rudlin invoked the provision in the Construction Agreement granting the Owner the right to terminate
the contract and take over the construction works upon default of the Contractor who abandons or fails to complete the project,
or fails to carry out the work in accordance with the provisions of the Contract Documents, and to deduct the costs from
whatever payment is due or to become due to the Contractor. Rudlin asserted that despite demands it made upon FBC, the latter
still failed and refused to complete and make good its obligations under the Construction Agreement and to correct faulty and
defective works.
In its Reply,[12] FBC asserted that the demand letter dated March 2, 1987 pertains to another account of Rudlin. FBC asserted
that its failure to deliver releases of some liens was due to Rudlins failure to pay the amount claimed in the complaint. At any
rate, by the very fact that Rudlin is actually making use of the school building constructed by FBC, it is deemed to have accepted
the work.
By agreement of the parties, the trial court appointed three Commissioners to resolve factual issues pertaining to the construction
of the subject building, specifically the following:
1) Adherence or non-adherence to the plan and specifications;
2) Additives, deductives, defects and faults in the construction; [and]
3) Completion or non-completion of the project.[13]
The Commissioners conducted ocular inspection of the subject school building on February 23, 1988, March 6, 1988, March 12,
1988, April 25, 1988, April 26, 1988 and May 12, 1988.[14] On September 28, 1989, they submitted a detailed report on their
findings and conclusions, including the additives (modifications and additional works, the value of which are to be reimbursed
by the Owner) and deductives (deficiencies and cost of repairs done by the Owner and other expenses which shall be deducted
from the contract price due to the Contractor).[15] FBC submitted its comments on the said report denying any responsibility for
the alleged defects and deficiencies found by the commissioners and insisting that it had fully performed all the works in
accordance with the plans, specifications and modifications as approved by Rudlin.
During the trial, the following witnesses testified: Jaime Beltran Lo, Alexander E. Reyes, Gregorio P. Pineda, Rodolfo J. Lagera,
Teresita L. Ngan Tian, Carolina F. Bodoy, and the court-appointed commissioners Engr. Alberto R. Payumo, Architect Agaton
R. Sabino and Edmundo B. Flores.
32
Ruling of the RTC
In its decision,[16] the trial court concluded that as shown by the Commissioners Report, the subject school building had several
defects. It found untenable FBCs denial of any responsibility for the defects caused by the inferior quality of waterproofing
material used by its subcontractor, INDESCO, citing Section Eleven of the Construction Agreement whereby the Contractor
assumes full responsibility for the acts, negligence or omissions of all its employees, as well as for those of its subcontractor and
the latters employees. Moreover, the modifications to the original plans and specifications, which gave rise to the deductives and
additives, were not shown to have been approved by Rudlin nor concurred in by the project Architect, contrary to FBCs
allegation.
The trial court thus decreed:
In view of the foregoing, the complaint against defendant Rudlin is dismissed. Considering that defendant Bloomfield
Educational Foundation was not a party to the Construction Agreement, the complaint against the latter is dismissed. Plaintiff
having failed to prove that defendants Rodolfo Lagera, Ma. Erlinda Lagera and Josaphat Bravante acted in their personal
capacities, the complaint against them is likewise dismissed.
There being bad faith on the part of defendant Rudlin in that it deliberately failed to disclose the true contract price, defendants
counterclaim is dismissed.
No pronouncement as to costs.
SO ORDERED.[17]
Both FBC and Rudlin filed notices of appeal.
Ruling of the CA
While the CA upheld the dismissal of the complaint as against the individual defendants and Bloomfield, it found that FBC was
able to substantiate its claim against Rudlin for the unpaid balance of the contract price of P6,933,268.00 (not P6,006,965.00),
which after considering the additives and deductives, the direct payment made by Rudlin, cost of chargeable materials and
rebates, would still leave the amount of P1,508,464.84 due to FBC based on the Summary of Contract Revisions and Unpaid
Balances on which Gregorio P. Pineda testified.[18]
According to the CA, if not for the alleged construction defects and supposed additives and deductives, Rudlin could have
considered the building complete, as in fact the school building is already being used as such by Rudlin. In resolving the issues
pertinent to said construction defects, the CA declared that it cannot rely solely on the Commissioners Report considering that
the commissioners who tried to explain their conclusions contained in the said report testified that these were made not exactly
what they actually intended to report. The CA then grouped the defects noted by the commissioners during the ocular inspection
as follows: (1) the defect in the waterproofing of the gutter and the water stains and delamination of plywood and tiles
reasonably presumed as caused by the water seepage; (2) the hairline cracks on walls, beams and floors; (3) the cracks which
extend to the outer portion of the walls; (4) cracks on the floors; (5) the gap between the inner wall and the beams at the
conference room; (6) missing components such as tiles, door locksets and cold water knob. Based on the testimonies of
Commissioners Sabino and Payumo, the CA observed that the causes of the foregoing defects were not fully established; that
these may be considered as either ordinary defects due to wear and tear or construction defects, depending on the interpretation
that a party would like to adopt; and the commissioners who testified had admitted that they themselves were not certain of the
causes and were merely stating their respective opinions on the possible causes of the noted defects.
Analyzing the evidence on record, the CA concluded that FBC was not liable for the defect in waterproofing and delay in the
completion of the works for the following reasons: (1) the changing of the brand of the waterproofing used in the gutter was
fully discussed during the regular meeting between the representatives of FBC and Architect Quezon; it was in fact Josaphat
Bravante who selected the subcontractor and the brand of the waterproofing to be used; (2) there was no convincing proof that
FBC failed to supervise the performance of said subcontractor chosen by Rudlin; (3) Gregorio P. Pineda who was present during
the aforesaid meetings was competent to testify on the preparation of the minutes of the meetings (Exhibits EE and GG to WW),
pursuant to which the additives and deductives were made, and that Rudlins silence on this matter only supports such a
conclusion; (4) Rudlins claim that it undertook repairs on the defects in the construction for which the amount of P350,000.00
was supposedly spent, was not supported by any receipt or concrete evidence other than the self-serving testimony of Rodolfo J.
Lagera; (5) there was no formal walk-through made and certification by the architect because Architect Quezon ignored FBCs
letter requesting the said final walk-through, the relationship between the parties at that time having turned sour; and (6) Rudlins
reliance on Section Twelve of the Construction Agreement is misplaced, the Letter-Agreement dated June 5, 1986 shows that the
parties agreed for a new date of completion of the school building and the schedule of payment of the remaining construction
price.
The CA thus ordered Rudlin to pay FBC the remaining balance of P1,508,464.84.[19]
Rudlin filed a motion for reconsideration while FBC moved for partial reconsideration of the CA decision. The CA denied both
motions under its Resolution dated June 23, 2004.[20]
The Cases
Petitioner FBC in G.R. No. 164186 seeks modification of the CA Decision insofar as it failed to include legal interest on the
amount which Rudlin was adjudged still liable to pay FBC (P1,508,464.84) and attorneys fees and litigation expenses equivalent
to 25% of the total award. FBC likewise prays that the individual defendants and Bloomfield be declared solidarily liable with
Rudlin.[21]
In G.R. No. 164347, petitioner Rudlin contends that the CA resolved the issues of the case in a way that is not in accord with the
law and applicable jurisprudence and contradicted by the evidence on record. In particular, Rudlin assails the CA in
perfunctorily denying its Motion for Reconsideration dated January 7, 2004; in not finding that petitioners fully substantiated
their assertion that the Construction Agreement is not reflective of the true intent of the parties; in not finding that Bloomfield
Academy Building was not actually completed as scheduled in violation of the Construction Agreement and causing Rudlin to
spend P350,000.00 for the same; in not declaring -- as correctly found by the trial court that FBC is liable for the defects in the
waterproofing since the change in waterproofing specifications was not approved by Rudlin nor concurred in by the Project
Engineer, and that some modifications to the original plans and specifications which gave rise to the additives and deductive
were not approved by Rudlin nor concurred in by the Project Engineer; and in not holding that Rudlins claim for damages by
reason of delay is with legal and factual basis.[22]
From the foregoing, the issues to be resolved are: (1) whether FBC is liable for the defects in the construction of the subject
school building and delay in the completion of the works; (2) after considering the payments, deductives and additives and other
charges admitted, whether Rudlin is still liable for the balance of the contract price and the amount thereof; and (3) whether
Rudlin is entitled to its counterclaim.
Our Ruling
The resolution of these cases calls for a reexamination of facts. While generally, the Court is not a trier of facts, a recognized
exception thereto is a situation where the findings of fact of the CA and the trial court are conflicting.[23]
Contrary to the findings of the appellate court, we hold that the facts on record clearly established FBCs liability for the defects
and deficiencies so numerous that it took several days for the court-appointed commissioners to complete the ocular inspection.
The CA tried to minimize the impact of such findings by declaring that the Commissioners Report cannot be the sole basis for
determining whether FBC faithfully complied with all its undertakings and obligations under the Construction Agreement.
However, the glaring fact remains that there were construction defects which have been described in detail under each inspection
date. While it is true that the commissioners who testified gave different opinions as to whether the noted defects and
deficiencies were due to substandard materials and poor workmanship or the same was just the result of ordinary wear and tear
and even lack of maintenance, the court can properly evaluate the common findings and conclusions reflected in the
Commissioners Report based on the totality of evidence.
33
Perusing the records, we are unable to agree with the appellate courts view that the testimonies given in court by the
commissioners had left uncertain the determination of the nature of the defects and deficiencies, i.e., whether these are
construction defects or merely due to improper maintenance.
First, it stands undisputed that the damage wrought by water seepage causing water stains, leaking roofs, peeling off of paint,
cracks on walls and delamination of plywood, among others, was so pervasive on many portions of the building that even after
the same was inaugurated in time for the school opening on June 15, 1986, most of the classrooms and administrative offices, as
well as other common areas such as the lobby and comfort rooms, could not be properly utilized as their defective condition
posed danger to the teachers and students. It must be noted that at the time of ocular inspection in 1988, it was barely two years
from the time the building was actually used and yet the overall structure of the building was severely impaired by the defective
waterproofing and other deficiencies. Prior to the court-authorized inspection, those visible defects had been photographed under
the supervision of Rodolfo J. Lagera, which further confirmed the findings of the commissioners.[24] The CA thus erred in
giving weight to FBCs claim that the seepage of water into the beams, walls and floor can be attributed to lack of proper
maintenance, citing the declarations of FBCs Alexander E. Reyes and Commissioner Payumo who allegedly found piles of dirt
collected on the gutter and when the dirt was removed, the water flowed down to the spout. Given the extent of the defects and
deficiencies found in the school building, this simplistic explanation from FBC is unacceptable.
Although Commissioner Sabino testified that it was possible that the water seepage was caused by the clogging of the
downspout due to lack of maintenance in clearing the gutter of dirt, Commissioner Payumo, an engineer, testified that whether
the building is properly maintained on that aspect does not really matter because good waterproofing should always hold and
prevent seepage whenever there is accumulation of rainwater in the gutter of the roof. Engr. Payumo stated that waterproofing
should hold for a period of at least five years:
ATTY. FERNANDEZ (continuing)
Q In other words, Mr. Witness, from what you saw, the water proofing there was for poor maintenance, the owner did not
remove the dirt.
A No sir, because if the water proofing is good, it should not fade [sic, should read as fail].
xxxx
ATTY. AUTEA: (TO WITNESS)
Q Based on the standard of practice on the construction industry, how long should a water proofing pool [sic, should read as
hold]?
xxxx
WITNESS
A The practice is about five (5) years.
COURT:
Before the water proofing fail?
A Yes, your Honor.[25] (Emphasis supplied.)
We thus cannot agree with the CAs stance that in view of the disagreement expressed by the commissioners in their testimonies,
it would be unjust to hold FBC responsible for the substandard waterproofing. The following conclusions set forth in the
Commissioners Report are categorical in declaring the omissions, deviations and negligence of the Contractor (FBC) in the
execution of the construction project, to wit:
1. The subject construction project, i.e., Bloomfield Academy located at Wilfredo Tecson Avenue, Vista Grande, BF Resort
Village, Las Pinas, Metro Manila, has been completed with a lot of deficiencies and defects in the work.
2. There were additives and deductives done without proper and formal approval from any of the parties.
3. There was no formal approved cost adjustments nor contract time for the additive and deductive works.
4. There were portions of the subject construction project that [were] not in accordance [with] the agreed plans and
specifications.
5. There were no formal request nor approval for some deviations from the plans and specifications from the owners nor from
the Architect.
6. There were several portions of the subject construction project that we found defective and below standards which were found
during the ocular inspection done by the Commissioners and [were] reflected in the stenographic report.
7. Some deficiencies and defects in the works and the punchlist of Architect [were] not acted upon nor any repairs made to date
as required under the contract prior to acceptance.
8. Some items in the Architects punchlist although repaired and acted on [were] never formally turned over nor accepted.
9. There was no contract time adjustment on the lapsed contract time for the original contract and for the additional works done.
10. There was no formal turn-over made by the contractor nor acceptance on the part of the owner of the project.
11. There are provisions in the contract that were violated or have not been followed by the contractor in his performance of the
project like the non-submittal of the various bonds (Section 16, M and N) and other contract documents needed in the execution
of the contract as some of the findings of the commissioner in the investigation.[26] (Emphasis supplied.)
The CA, however, declared that notwithstanding the damage caused by water seepage, Rudlin cannot claim that the building was
not completed and that the only reason which could have justified Rudlins refusal to pay the balance is the liability of FBC for
changing the specified waterproofing brand from John Mans Ville to Neo-pren Elastomeric. The CA thus ruled:
... it appears beyond cavil that the changing of the brand of the waterproofing used in the gutter was fully discussed during the
regular meeting between the representatives of plaintiff-appellant FBC and Architect Quezon. In fact, it was the defendant-
appellant Rudlin through defendant-appellant Josaphat Bravante who selected the sub-contractor and the brand of waterproofing
to be used in the gutter. As the general contractor, plaintiff-appellant FBC was only duty bound to supervise the performance of
the sub-contractor and see to it that the proper procedure was properly followed. In the absence of any convincing proof that
plaintiff-appellant FBC failed to supervise the performance of the sub-contractor, it is highly unjust on the part of plaintiff-
appellant FBC to be held liable and even be required to re-do the whole work using the original specified brand at its own
expense. A contrary ruling would lead to a scenario where the owner of the subject building would start imposing the use of
cheaper materials to save money because after all when the substituted materials fail, the contractor can nevertheless be held
liable.[27] (Italics supplied.)
We do not agree. The purported minutes of meetings, wherein the modifications to the original plans and specifications,
particularly the change of waterproofing were allegedly discussed and approved by Rudlins representative in the person of
Josaphat Bravante (Exhibits EE and GG to WW[28]), were not given credence by the trial court as these actually showed that
not all such modifications have been approved. Moreover, the trial court held that FBC failed to prove their due execution and
authenticity. But the CA reversed the trial court and held that witness Gregorio P. Pineda who was present in the said meetings
was competent to testify on the contents and due execution of the aforesaid Exhibits EE and GG to WW.
Even assuming arguendo that the change in waterproofing brand was indeed taken up during a meeting in the presence of
Rudlins representative, we cannot agree with the CAs position that the alleged verbal assent by Josaphat Bravante in the
purported minutes of meetings[29] was sufficient evidence of the Owners approval of the modifications in the original plans and
specifications. Likewise, the letter dated July 7, 1986[30] of FBCs project engineer Alexander E. Reyes informing Architect
34
Quezon that the change in waterproofing brand was approved by Bravante is at best, self-serving, and the same does not bind
Rudlin.
Under Section Nine of the Construction Agreement, Architect Quezon, as representative of the Owner, is the one vested with the
general supervision and direction of the work and who is authorized to reject work which does not conform to the Contract
Documents and to formally stop such work or a portion thereof when necessary.[31] More explicitly, Section Ten of the same
agreement provides that the Owner shall give all instructions to the Contractor through the Architect.
FBC therefore cannot escape liability for the poor quality of waterproofing on the ground that Rudlins representative was present
during the meeting when the change in brand to be used was allegedly discussed with his concurrence. The requirements for a
valid change or modification in the original plans and specifications were clearly set out in Section Fifteen of the Construction
Agreement, which provides:
SECTION FIFTEEN
WORK CHANGES
The OWNER reserves the right to order work changes in the nature of additions, deletions, or modifications, without
invalidating this Agreement. All changes shall be authorized by a written change order signed by the OWNER and by the
ARCHITECT.
Work shall be changed, and the completion time shall be modified only as set out in the written change order. Any adjustment in
the Contract Price resulting in a credit or a charge to the OWNER shall be determined by written agreement of the parties, before
starting the work involved in the change.[32]
As it is, the modification effected by FBC on waterproofing work was never approved in writing by Architect Quezon and
Rudlin. Contrary to the appellate courts declaration that Rudlin by its silence impliedly approved the change in waterproofing
brand, the letter dated September 1, 1986 of Architect Quezon to Jimmy Lo deplored the unauthorized change in the specified
brand exacerbated by defective application, and required FBC to re-do such work. Said letter reads:
DEAR JIMMY,
SOMETIME IN JUNE 1986, OUR GROUP DISCUSSED IN ADVANCE WITH MS. LINDA LAGERA, THE POSSIBILITY
OF LEAKS IN THE PROJECT, DUE TO CHANGE IN OUR SPECIFICATIONS. WE ALSO ASKED ENGR. ALEX REYES
TO WRITE US OFFICIALLY REGARDING CHANGE ON WATERPROOFING SPECIFICATIONS AND SUBSTITUTION
OF ANOTHER BRAND WITHOUT OUR APPROVAL. THE SPECIFIED BRAND IS BIRD & SONS OR JOHNS
MANVILLE AGAINST NEOPRENE AS SUBSTITUTE, A PRODUCT WHICH WE ARE NOT USE TO.
YOUR ENGINEER CLAIMS THAT THEY WERE ASKED TO MADE CHANGES BY MR. PAT BRAVANTE AS PART
OF THE DOWNGRADING OF THE PROJECT, BUT SOMEHOW ERRORS WERE MADE IN THE EXECUTION OF THE
WORK. THE SITUATION IS NOW HOPELESSLY SNARLED. DUE TO MANY LEAKS IN THE PROJECT, ESPECIALLY
AT THE ADMINISTRATION AREA AND LEAVING US WITHOUT ASSURANCE ON YOUR PART ON THE
CORRECTIVE MEASURE OF THIS PROBLEM.
THIS REQUIRE URGENT ACTION ON YOUR SIDE TO RE-DO ALL WATERPROOFING WORKS, USING OUR
SPECIFICATIONS WITHOUT ANY EXPENSE TO THE OWNER AS PART OF THE GENERAL CONDITIONS OF THE
CONTRACT DOCUMENT. ANYTHING YOU CAN DO TO EXPIDITE (sic) CORRECTION OF THE ERROR ON THE
PROJECT WILL BE GREATLY APPRECIATED.[33] (Emphasis supplied.)
At this point, it bears to stress that the June 5, 1986 Letter-Agreement signed by both FBC and Rudlin, which extended the
completion time to June 10, 1986 expressly amended only the corresponding provisions of the Construction Agreement
pertaining to completion date and schedule of payment of the balance due to FBC, which was conditioned on the reconciliation
of the upgrading and downgrading of the work done by the contractor. Said Letter-Agreement did not relieve FBC as contractor
of responsibility for defects under its warranties under the Construction Agreement, which include those works performed by its
subcontractor. The pertinent provisions of the Construction Agreement showed that FBC was obligated to correct and/or re-
execute defective work before and after final payment, pursuant to its general warranties as contractor, thus:
SECTION FOURTEEN
CORRECTING WORK
1. BEFORE FINAL PAYMENT
The CONTRACTOR shall promptly remove from the premises all works and materials condemned by the ARCHITECT as
failing to conform with the Contract Documents, whether incorporated in the work or not, and the CONTRACTOR shall
promptly replace and reexecute the work in accordance with the Contract Documents and without expense to the OWNER.
If the CONTRACTOR does not remove such condemned work and materials within a reasonable time fixed by the written
notice, the OWNER may remove them and may store the materials at the expense of the CONTRACTOR. If the
CONTRACTOR does not pay the expenses for such removal within ten (10) days, the OWNER may, after written notice to the
CONTRACTOR, sell such materials at auction or at a private sale and shall account for the net proceeds thereof, after deducting
all the costs and expenses that should have been borne by the CONTRACTOR. This does not preclude other actions or remedies
which the OWNER may have against the CONTRACTOR.
2. AFTER FINAL PAYMENT
Neither the final certificate for payment nor any provision in the Contract Documents shall relieve the CONTRACTOR of
responsibility for faulty materials or workmanship. It shall remedy any defects due thereto and pay for any damage to other work
resulting therefrom, which shall appear within the specified guaranty period. All questions arising under this provision shall be
subject to arbitration in case of failure of the parties to arrive at an agreement.
xxxx
SECTION SIXTEEN
GUARANTY-WARRANTY
The CONTRACTOR shall, in case of work performed by its subcontractors, secure warranties from said subcontractors and
deliver copies of the same to the ARCHITECT or OWNER upon completion of the work.
The CONTRACTOR shall and does hereby warrant and guarantee the following:
(a) All works, for a period of one (1) year from the date of completion as evidenced by the date of final acceptance in writing of
the entire work by the OWNER.
(b) All work performed by it directly or performed by its sub-contractors, shall be free from any defects of materials and
workmanship.
(c) The CONTRACTOR further agrees that it will, at its own expense, repair and/or replace all such defective materials or work,
and all other work damaged thereby which becomes defective during the term of this Guaranty-Warranty. (Emphasis supplied.)
The above-stipulated period of warranty has not even commenced considering that even if Bloomfield proceeded with the
inauguration in time for the opening of classes, there was no formal turn over of the building to Rudlin and no final acceptance
in writing was made by Rudlin. FBC faulted Architect Quezon whose alleged absence and refusal to meet with their officers and
to conduct the final walk-through, prevented it from having the building formally turned over to the Owner. Such contention is
unfounded because the evidence on record reveals that it was FBC which defaulted on its obligations under the Construction
Agreement. FBC is bound by its undertaking under Section Fourteen (1) to replace and re-execute defective waterproofing and
correct the damage such had caused to the structure and finishing of the building.
35
In a letter dated September 17, 1986 addressed to FBCs lawyer, Rudlins lawyer responded to FBCs demands for payment, as
follows:
We write in behalf of our client, RUDLIN INTERNATIONAL, INC., in reply to your letter dated 20 August 1986 and the letter
of your client, Financial Building Corporation (FBC) dated 12 August 1986, regarding your clients alleged remaining balance
with our client under the above-captioned Agreement.
We would like to remind your client that our client has not yet accepted the Project nor has Architect Eduardo R. Quezon
certified that FBC has fully performed and completed the Project. Neither has your client delivered to our client a complete
release of all liens arising out of the Agreement or receipts in full in lieu thereof, and an affidavit that the releases and receipts
include all the labor, interests and equipment for which a claim or action can be filed, as required under Section Eight of said
Agreement. We would also like to call your attention to the letter of Architect Quezon to our client dated 10 September 1986, a
copy of which is attached as Annex A, enumerating therein what your client has to submit/furnish, and pay our client before any
final payment is made by our client to your client.
Further, we would like to inform you that the uncompleted and/on faulty work, defects and deficiencies in the Project which
were enumerated in the Punch List dated 27 June 1986 and received by FBC on 30 June 1986, have not been completed and/or
corrected by FBC. Our client requested said Architect Quezon to update the same. We are forwarding to you a copy of the
updated Punch List dated 10 September 1986 which is attached hereto as Annex B. Moreover, your client should visit the Project
to see, among other things, how the administrative offices, library, chapel and classrooms get flooded when it rains. This
situation poses a hazard to the health and life of the students, teachers and staff of Bloomfield Academy.
Moreover, based on the Updated Tabulation Report of Architect Eduardo R. Quezon in relation to his Additive and Deductive
Evaluation Report, a copy of which is attached as Annex C, it appears that whatever minimum balance which FBC may have
against our client will not even be sufficient to complete the Project, to undertake correction of its faulty and defective work, and
to cover the 10% cash retention. It appears further that our client has overpaid your client by Four Hundred Fifteen Thousand
Seven Hundred One and 34/100 Pesos (P415,701.34).
We are, therefore, giving your client fifteen (15) days from your receipt of this letter to complete and make good its
undertakings/obligations under the Agreement. Failure on the part of your client to do so will leave our client no other alternative
but to invoke the provisions of said Agreement declaring your client in default, and cause the Project to be completed and the
deficiencies corrected, deducting the costs from whatever payment which may be due to your client, and collecting from your
client the difference.
Further, please advise your client that there will be legal constraints for our Atty. Avelino J. Cruz, Jr. to mediate between your
client and our client under the circumstances. Please be assured, however, that like you, we are advising our client to opt for a
reasonable resolution of the problem.[34]
In its letter-reply dated September 24, 1986 of FBCs counsel, FBC insisted that Rudlin still owed it the sum of P2.4 million,
more or less; that it cannot turn over the project because Architect Quezon refused to meet with FBCs engineers to discuss the
additives and deductives work summary; that Architect Quezons letter cannot be made the basis of FBCs obligations under the
Construction Agreement; and that the punch list dated June 27, 1986 is only a dilatory document as certain items being purely
additional works should be excluded. FBC protested the leaks and flooding mentioned by Rudlins counsel, which FBC said are
minor items which can be easily corrected as in fact it was corrected by the waterproofing subcontractor INDESCO which was
referred by Rudlin. To solve the problem, FBC proposed that the corrective works be done by Rudlin provided the price thereof
be approved by FBC and Rudlin will not spend more than P50,000.00 therefor. As to the 10% retention fund, FBC advised that
per understanding with Rudlin, this was waived in view of the commitment of FBC to finish the project to the best of its funding
ability.[35]
FBC then suggested that Rudlin release the sum of P500,000.00 so that FBC can pay its suppliers and to enable it to submit the
required affidavit of complete payment of labor and material men; that Rudlins retained architect complete the reconciliation of
the additive and deductive works with FBC; and thereafter, to arrange payment backed up by sufficient collaterals.[36]
In its subsequent letter dated October 3, 1986, FBC again pressed for payment and further distanced itself from INDESCO,
claiming that negotiations for the waterproofing works with INDESCO was handled by Rudlins Mr. Bravante. FBC informed
Rudlin that it was advised by INDESCO that the waterproofing complaints have been attended to.[37] But since the roof leaks
and flooding of the corridor and classrooms persisted despite the repairs supposedly done by the subcontractor, Rudlin formally
notified its lawyer that it was invoking the contractors warranty under the Construction Agreement and sought assistance to have
the said defects and deficiencies corrected by the Contractor.[38] Consequently, Rudlin through a letter dated October 14, 1986
signed by its Vice-President and Chief Operating Officer, Teresita L. Ngan Tian, advised FBC that the latters request for
payment has been held in abeyance until the waterproofing job is completed to the satisfaction of the Owners.[39]
We find that in withholding payment of the balance of the contract price, Rudlin properly exercised its rights under the
Construction Agreement. The CA thus erred in ordering Rudlin to pay FBC the balance of the contract price which was
computed as follows:
1. Contract Price
2. Additives
Total Additive Cost
3. Deductives
4. Direct Payment
5. Chargeable Materials
6. Rebates
Total Payments
TOTAL UNPAID BALANCE
P 6,933,268.00
P 1,074,385.53
P 8,007,653.53
P 886,706.45
P 4,874,920.14
P 727,688.90
P 9,793.22
P 6,499,188.71
P 1,508,464.84[40]
The above computation was based solely on the Summary of Contract Revisions and Unpaid Balances submitted by FBCs
witness Gregorio P. Pineda. Rudlin submitted its own computation based on what it claims as the true contract price of
P6,006,965.00 and asserting that the following should be deducted: P4,878,920.14 as payments to FBC which the latter
admitted; P727,688.90 direct payments to suppliers also admitted by FBC; deductives of P1,180,127.35 representing the cost of
modifications in the original plans and specifications which were not approved by Rudlin and its architect; and P350,000.00 for
the repairs undertaken by Rudlin.
Considering that FBC had not completed the corrective/repair works in accordance with the Contract Documents and as
approved or certified in writing by the Architect as to its completion, its demand for the payment of the final balance was
premature. Under the Letter-Agreement dated June 5, 1986, final payment was subject to reconciliation of their accounts
regarding the upgrading and downgrading done on the project. Obviously, this cannot be complied with unless FBC as the
defaulting party completes the repair/corrective works for only then can the actual cost of additives and deductives be
determined. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him.[41] When the substandard waterproofing caused extensive damage to the
school building, it was incumbent upon FBC to institute at its own expense the proper repairs in accordance with the guaranty-
warranty stated in the Construction Agreement. Thus, Rudlin cannot be said to have incurred delay in the reconciliation of
accounts, as a precondition for final payment; instead, it is FBC who was guilty of delay by its stubborn refusal to replace or re-
execute the defective waterproofing of the subject school building.
36
On the issue of the correct total contract price, we hold that Rudlin failed to substantiate its claim that the contract price stated in
the Construction Agreement (P6,933,268.00) was not the true contract price because it had an understanding with FBCs Jaime B.
Lo that they would decrease said amount to a mutually acceptable amount.
Under the general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement were reduced in writing,
as in this case, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the
contents thereof. Rudlin argues that under Section 9, Rule 130, a party may present evidence to modify, explain or add to the
terms of the written agreement if it is put in issue in the pleading, [t]he failure of the written agreement to express the true intent
and the agreement of the parties thereto. Assuming as true Rudlins claim that Exhibit 7 failed to accurately reflect an intent of
the parties to fix the total contract price at P6,006,965.00, Rudlin failed to avail of its right to seek the reformation of the
instrument to the end that such true intention may be expressed.
Evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation
of a valid contract.[42] Section 9 of Rule 130 of the Rules of Court states:
SEC. 9. Evidence of written agreements.When the terms of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such
terms other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his
pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors-in-interest after the execution of the written
agreement.
The term agreement includes wills.
Rudlin cannot invoke the exception under (a) or (b) of the above provision. Such exception obtains only where the written
contract is so ambiguous or obscure in terms that the contractual intention of the parties cannot be understood from a mere
reading of the instrument. In such a case, extrinsic evidence of the subject matter of the contract, of the relations of the parties to
each other, and of the facts and circumstances surrounding them when they entered into the contract may be received to enable
the court to make a proper interpretation of the instrument.[43]
Under the fourth exception, however, Rudlins evidence is admissible to show the existence of such other terms agreed to by the
parties after the execution of the contract. But apart from the Bar Chart and Cash Flow Chart prepared by FBC, and the
testimony of Rodolfo J. Lagera, no competent evidence was adduced by Rudlin to prove that the amount of P6,006,965.00 stated
therein as contract price was the actual decreased amount that FBC and Rudlin found mutually acceptable. As to the affidavits
executed by Architect Quezon and his associate Roberto R. Antonio,[44] the same do not serve as competent proof of the
purported actual contract price as they did not testify thereon. Significantly, the June 5, 1986 Letter-Agreement did not at all
mention the total contract price. Likewise, there is nothing in the various letters sent by Rudlin to FBC while construction was in
progress and even subsequent to the execution of the said Letter-Agreement indicating that Rudlin corrected the contract price of
P6,933,268.00 which FBC had repeatedly mentioned in its letters and documents.[45]
As to Rudlins counterclaim for reimbursement of its expenses in repairing the defective waterproofing, not a single receipt was
presented by Rudlin to prove that such expense was actually incurred by it. Under the Civil Code, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. The award of actual damages must be based
on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and
nonsubstantial proof.[46]
The testimony of Rodolfo J. Lagera on the total cost allegedly spent by Rudlin in repairing the waterproofing works does not
suffice. A court cannot rely on speculations, conjectures or guesswork as to the fact of damage but must depend upon competent
proof that they have indeed been suffered by the injured party and on the basis of the best evidence obtainable as to the actual
amount thereof. It must point out specific facts that could provide the gauge for measuring whatever compensatory or actual
damages were borne.[47]
The counterclaim for attorneys fees must likewise be denied. We have stressed that the award of attorneys fees is the exception
rather than the rule, as they are not always awarded every time a party prevails in a suit because of the policy that no premium
should be placed on the right to litigate. Attorneys fees as part of damages is awarded only in the instances specified in Article
2208 of the Civil Code.[48]
ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered,
except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be
recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.
None of the foregoing situations obtains in the case at bar.
WHEREFORE, the petition in G.R. No. 164186 is DENIED while the petition in G.R. No. 164347 is PARTLY GRANTED. The
Decision dated December 12, 2003 of the Court of Appeals in CA-G.R. CV No. 41224 is REVERSED and SET ASIDE, and the
Decision dated January 12, 1993 of the Regional Trial Court of Makati City, Branch 65 in Civil Case No. 16266 is
REINSTATED.
No costs.
SO ORDERED.
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