G.R. No.
83377 February 9, 1993 On July 20, 1977, respondent Mariano Aguilar was issued a free patent to the
BASILIO DE VERA, LUIS DE VERA, FELIPE DE VERA, HEIRS OF
EUSTAQUIA DE VERA-PAPA represented by GLICERIA PAPA-FRANCISCO,
et al., petitioners,
vs.
SPOUSES MARIANO AGUILAR and LEONA V. AGUILAR, respondents.
Pablo M. Gancayaco for petitioners.
De Mesa, Villarica & Associates for respondents.
CAMPOS, JR., J.:
This is a petition for review on certiorari of the decision * of the Court of Appeals
dated November 27, 1987 in CA-GR CV No. 07448 entitled, "Basilio de Vera,
Luis de Vera, Felipe de Vera, Heirs of Eustaquia de Vera-Papa, represented by
Gliceria Papa-Francisco, and Heirs of Maria de Vera-Torres, represented by Luis
V. Torres, plaintiffs-appellees versus Spouses Mariano Aguilar and Leona V.
Aguilar, defendants-appellants", which reversed the decision ** of the Regional
Trial Court of Bulacan, Third Judicial Region, Branch 14, for failure of petitioners
to prove the loss or destruction of the original deed of sale and of all its duplicate
original copies.
The undisputed facts are as follows:
Petitioners Basilio, Luis, Felipe, Eustaquia and Maria, all surnamed de Vera and
respondent Leona, married to respondent Mariano Aguilar, are the children and
heirs of the late Marcosa Bernabe who died on May 10, 1960. In her lifetime,
Marcosa Bernabe owned the disputed parcel of land situated in Camalig,
Meycauayan, Bulacan, with an area of 4,195 square meters, designated as
Cadastral Lot No. 3621, Cad. 337, Case No. 4, Meycauayan Cadastre.
The disputed property was mortgaged by petitioners Basilio and Felipe de Vera
to a certain Atty. Leonardo Bordador. When the mortgage had matured, the
respondents redeemed the property from Atty. Leonardo Bordador and in turn
Marcosa Bernabe sold the same to them as evidenced by a deed of absolute
sale dated February 11, 1956.
On February 13, 1956, the respondents registered the deed with the Registry of
Deeds of Bulacan resulting in the cancellation of the tax declaration in the name
of Marcosa Bernabe and the issuance of another in the name of the Aguilars.
Since then and up to the present, the Aguilars have been paying taxes on the
land.
land on the basis of which Original Certificate of Title No. P-1356(M) was issued
in his name.
On September 1, 1980, the petitioners wrote to the respondents claiming that as
children of Marcosa Bernabe, they were co-owners of the property and
demanded partition thereof on threats that the respondents would be charged
with perjury and/or falsification. The petitioners also claimed that the respondents
had resold the property to Marcosa Bernabe on April 28, 1959.
On September 27, 1980, the respondents wrote in reply to the petitioners that
they were the sole owners of the disputed parcel of land and denied that the land
was resold to Marcosa Bernabe.
True to petitioners' threat, they filed a falsification case against the respondents.
However, on March 31, 1981, Assistant Provincial Fiscal Arsenio N. Mercado of
Bulacan recommended dismissal of the charge of falsification of public document
against the respondents for lack of a prima facie case.
On March 26, 1981, petitioners filed a suit for reconveyance of the lot covered by
Original Certificate of Title No. P-1356(M).
On July 31, 1985, the trial court rendered its decision *** the dispositive portion of
which reads as follows:
WHEREFORE, judgment is hereby rendered ordering
defendants:
1. To reconvey the property in question to the plaintiffs;
2. To pay plaintiffs P10,000.00 as litigation expenses;
3. To pay plaintiffs P5,000.00 as exemplary damages;
4. To pay P10,000.00 as attorney's fees.
SO ORDERED.1
In ruling in favor of the petitioners, the trial court admitted, over the objection of
the respondents, Exhibit A purporting to be a xeroxed copy of an alleged deed of
sale executed on April 28, 1959 by the respondents selling, transferring and
conveying unto Marcosa Bernabe the disputed parcel of land for and in
consideration of P1,500.00.
Not contented with the decision, respondents appealed to the Court of Appeals
contending that they never sold back to Marcosa Bernabe the disputed parcel of
land. Furthermore, respondents contended that since the petitioners have failed
to produce the original of the alleged deed of sale dated April 28, 1959, the same
was not the best evidence of the alleged sale hence it should have been
excluded and should not have been accorded any evidentiary value. On the other
hand, the petitioners claimed that the existence of the document of sale dated
April 28, 1959 had been duly established by the testimony of the notary public
before whom it was acknowledged and by Luis de Vera who was present during
its execution and that the loss of the original document had been proven by the
testimony of the representatives of the offices of the National Archives and the
Provincial Assessor of Bulacan.
On November 29, 1987, the Court of Appeals rendered its decision reversing the
trial court's decision. It found that the loss or destruction of the original deed of
sale has not been duly proven by the petitioners. Hence, secondary
evidence, i.e., presentation of the xeroxed copy of the alleged deed of sale is
inadmissible.
Hence this petition.
The crux of this case is whether or not the petitioners have satisfactorily proven
the loss of the original deed of sale so as to allow the presentation of the xeroxed
copy of the same.
We rule in the negative.
Section 4 of Rule 130 (now Section 5, Rule 130) of the Rules of Court on
Secondary Evidence states:
Sec. 4. Secondary evidence when original is lost or destroyed.
— When the original writing has been lost or destroyed, or
cannot be produced in court, upon proof of its execution and
loss or destruction, or unavailability, its contents may be
proved by a copy, or by a recital of its contents in some
authentic document, or by the recollection of witnesses.
Secondary evidence is admissible when the original documents were actually
lost or destroyed. But prior to the introduction of such secondary evidence, the
proponent must establish the former existence of the instrument. The correct
order of proof is as follows: Existence; execution; loss; contents although this
order may be changed if necessary in the discretion of the court. The sufficiency
of proof offered as a predicate for the admission of an alleged lost deed lies
within the judicial discretion of the trial court under all the circumstances of the
particular case.2
A reading of the decision of the trial court shows that it merely ruled on the
existence and due execution of the alleged deed of sale dated April 28, 1959. It
failed to look into the facts and circumstances surrounding the loss or destruction
of the original copies of the alleged deed of sale.
In the case at bar, the existence of an alleged sale of a parcel of land was proved
by the presentation of a xeroxed copy of the alleged deed of absolute sale.
In establishing the execution of a document the same may be established by the
person or persons who executed it, by the person before whom its execution was
acknowledged, or by any person who was present and saw it executed or who,
after its execution, saw it and recognized the signatures; or by a person to whom
the parties to the instrument had previously confessed the execution thereof. 3
We agree with the trial court's findings that petitioners have sufficiently
established the due execution of the alleged deed of sale through the testimony
of the notary public to wit:
Preponderance of evidence clearly disclosed the facts that
Atty. Ismael Estela prepared Exhibit A. Atty. Emiliano Ibasco,
Jr. positively identified the signatures appearing therein to be
that (sic) of the spouses and witnesses Luis de Vera and
Ismael Estela, in his capacity as Notary Public who ratified the
document.4
After the due execution of the document has been established, it must next be
proved that said document has been lost or destroyed. The destruction of the
instrument may be proved by any person knowing the fact. The loss may be
shown by any person who knew the fact of its loss, or by any one who had made,
in the judgment of the court, a sufficient examination in the place or places where
the document or papers of similar character are usually kept by the person in
whose custody the document lost was, and has been unable to find it; or who has
made any other investigation which is sufficient to satisfy the court that the
instrument is indeed lost.5
However, all duplicates or counterparts must be accounted for before using
copies. For, since all the duplicates or multiplicates are parts of the writing itself
to be proved, no excuse for non-production of the writing itself can be regarded
as established until it appears that all of its parts are unavailable (i.e. lost,
retained by the opponent or by a third person or the like). 6
In the case at bar, Atty. Emiliano Ibasco, Jr., notary public who notarized the
document testified that the alleged deed of sale has about four or five original
copies.7 Hence, all originals must be accounted for before secondary evidence
can be given of any one. This petitioners failed to do. Records show that
petitioners merely accounted for three out of four or five original copies.
In reversing the trial court, the respondent Court of Appeals considered the transmittal; and that most of the record before 1960 were
following points: destroyed by termites (pp. 8-12, tsn., Oct. 5, 1982, Steno,
Tecson), prove loss or destruction of the original and of all the
Asked on the witness stand where the original of the document duplicate original copies of the document in question. 8
(Exhibit A) was, plaintiff-appellee Luis de Vera answered that it
was with the Provincial Assessor in Malolos, Bulacan, We find no cogent reason to rule otherwise.
whereupon the appellees reserved its (sic) right to present it in
evidence (p. 11, tsn., August 11, 1981, Steno, Tecson). The WHEREFORE, the decision of the Court of Appeals dated November 27, 1987 is
same question propounded to the same witness at the next hereby AFFIRMED.
hearing, he replied that in the early part of 1976 his sister
Maria borrowed from him the original document and a certified
true copy thereof and brought them to the Office of the SO ORDERED.
Register of Deeds in Malolos "for the purpose of having it
registered;" and that when she returned she told him that the
original copy of the document was submitted to that office "and
it (the property) was transferred in the name of Marcosa
Bernabe instead of Mariano Aguilar" (p. 8, tsn., December 10,
1981, Steno, Crisostomo; p. 9, tsn., Mar. 16, 1982, Steno,
Vallarta).

Indeed, upon the appellees' own evidence the original of the

deed of sale in question, a purported xerox copy and certified
true copy of which are marked as Exhibits A and B, has not
been lost or destroyed. It was submitted to the Office of the
Register of Deeds of Malolos for registration. The appellees,
therefore, should have asked the office to produce it in court
and if it could not be produced for one reason or another
should have called the Register of Deeds or his representative
to explain why. That they failed to do. The loss or destruction
of the original of the document in question has not, therefore,
been established. Hence, secondary evidence of it is
inadmissible . . . .

Neither did the testimony of notary public Ibasco, Jr. to the

effect that he did not have a copy of the deed of sale in
question because his files were burned when his office at
Ronquillo Street, Manila was gutted by fire in 1971 and 1972
(p. 4, tsn., November 10, 1981, Steno, Crisostomo) establish
the loss or destruction of the original document in question.
What was lost or destroyed in the custody of Atty. Ibasco, Jr.
was but one of the duplicate original copies on file with him.
Nor did the testimony of Hipolito Timoteo, representative of the
Assessor's Office of Bulacan, to the effect that he failed to see
the deed of absolute sale annotated on the simple copy of tax
declaration No. 15412 (p. 7, tsn., Aug. 12, 1982, Steno,
Vallarta) and of David Montenegro, Jr. of the National Archives
to the effect that his office had no copy of the document in
question because the notary public might not have submitted a
copy thereof; or that it was lost or destroyed during the
G. R. No. 171701 February 8, 2012
REPUBLIC OF THE PHILIPPINES Petitioner,
vs.
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.
DECISION
SERENO, J.:
Before this Court is a Petition for Review filed by the Republic of the Philippines
assailing the Resolutions1 issued by the Sandiganbayan in connection with an
alleged portion of the Marcoses’ supposed ill-gotten wealth.
This case involves ₱200 billion of the Marcoses’ alleged accumulated ill-gotten
wealth. It also includes the alleged use of the media networks IBC-13, BBC-2
and RPN-9 for the Marcos family’s personal benefit; the alleged use of De Soleil
Apparel for dollar salting; and the alleged illegal acquisition and operation of the
bus company Pantranco North Express, Inc. (Pantranco).
The Facts
After the EDSA People Power Revolution in 1986, the first executive act of then
President Corazon C. Aquino was to create the Presidential Commission on
Good Government (PCGG). Pursuant to Executive Order No. 1, the PCGG was
given the following mandate:
Sec. 2. The Commission shall be charged with the task of assisting the President
in regard to the following matters:
(a) The recovery of all ill-gotten wealth accumulated by former President
Ferdinand E. Marcos, his immediate family, relatives, subordinates and
close associates, whether located in the Philippines or abroad, including
the takeover or sequestration of all business enterprises and entities
owned or controlled by them, during his administration, directly or
through nominees, by taking undue advantage of their public office
and/or using their powers, authority, influence, connections or
relationship.
(b) The investigation of such cases of graft and corruption as the
President may assign to the Commission from time to time.
(c) The adoption of safeguards to ensure that the above practices shall
not be repeated in any manner under the new government, and the
institution of adequate measures to prevent the occurrence of
corruption.
Sec. 3. The Commission shall have the power and authority:
(a) To conduct investigation as may be necessary in order to
accomplish and carry out the purposes of this order.
(b) To sequester or place or cause to be placed under its control or
possession any building or office wherein any ill-gotten wealth or
properties may be found, and any records pertaining thereto, in order to
prevent their destruction, concealment or disappearance which would
frustrate or hamper the investigation or otherwise prevent the
Commission from accomplishing its task.
(c) To provisionally take over in the public interest or to prevent its
disposal or dissipation, business enterprises and properties taken over
by the government of the Marcos Administration or by entities or
persons close to former President Marcos, until the transactions leading
to such acquisition by the latter can be disposed of by the appropriate
authorities.
(d) To enjoin or restrain any actual or threatened commission of facts by
any person or entity that may render moot and academic, or frustrate, or
otherwise make ineffectual the efforts of the Commission to carry out its
tasks under this order.
(e) To administer oaths, and issue subpoena requiring the attendance
and testimony of witnesses and/or the production of such books,
papers, contracts, records, statement of accounts and other documents
as may be material to the investigation conducted by the Commission.
(f) To hold any person in direct or indirect contempt and impose the
appropriate penalties, following the same procedures and penalties
provided in the Rules of Court.
(g) To seek and secure the assistance of any office, agency or
instrumentality of the government.
(h) To promulgate such rules and regulations as may be necessary to
carry out the purpose of this order.
Thus, numerous civil and criminal cases were subsequently filed. One of the civil
cases filed before the Sandiganbayan to recover the Marcoses’ alleged ill-gotten
wealth was Civil Case No. 0002, now subject of this Petition.
On 16 July 1987, the PCGG, acting on behalf of the Republic and assisted by 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.
On 1 October 1987, the PCGG filed an amended Complaint to add Constante
Rubio as defendant.
Again on 9 February 1988, it amended the Complaint, this time to include as
defendants Nemesio G. Co and herein respondents Yeung Chun Kam, Yeung
Chun Ho, and Yeung Chun Fan.
For the third time, on 23 April 1990, the PCGG amended its Complaint, adding to
its growing list of defendants Imelda Cojuangco, the estate of Ramon Cojuangco,
and Prime Holdings, Inc.2
The PCGG filed a fourth amended Complaint, which was later denied by the
Sandiganbayan in its Resolution dated 2 September 1998.
The allegations contained in the Complaint specific to herein respondents are the
following:3
29. Defendants Imelda (IMEE) R. Marcos-Manotoc, Tomas Manotoc, Irene R.
Manotoc (sic) Araneta, Gregorio Ma. Araneta III, and Ferdinand R. Marcos, Jr.,
actively collaborated, with Defendants Ferdinand E. Marcos and Imelda R.
Marcos among others, in confiscating and/or unlawfully appropriating funds and
other property, and in concealing the same as described above. In addition, each
of the said Defendants, either by taking undue advantage of their relationship
with Defendants Ferdinand E. Marcos and Imelda R. Marcos, or by reason of the
above-described active collaboration, unlawfully acquired or received property,
shares of stocks in corporations, illegal payments such as commissions, bribes
or kickbacks, and other forms of improper privileges, income, revenues and
benefits. Defendant Araneta in particular made use of Asialand Development
Corporation which is included in Annex "A" hereof as corporate vehicle to benefit
in the manner stated above.
31. Defendants Nemesio G. Co, Yeung Chun Kam, Yeung Chun Ho and Yeung
Chun Fan are the controlling stockholders of Glorious Sun Fashion
Manufacturing Corporation (Phils.). Through Glorious Sun (Phils.), they acted as
fronts or dummies, cronies or otherwise willing tools of spouses Ferdinand and
Imelda Marcos and/or the family, particularly of Defendant Imelda (Imee) Marcos-
Manotoc, in the illegal salting of foreign exchange 4 by importing denim fabrics
from only one supplier – a Hong Kong based corporation which was also owned
and controlled by defendant Hong Kong investors, at prices much higher than
those being paid by other users of similar materials to the grave and irreparable
damage of Plaintiff.
Thus, petitioner set forth the following causes of action in its Complaint: 5
32. First Cause of Action: BREACH OF PUBLIC TRUST – A public office is a
public trust.1avvphi1 By committing all the acts described above, Defendants
repeatedly breached public trust and the law, making them liable solidarily to
Plaintiff. The funds and other property acquired by Defendants following, or as a
result of, their breach of public trust, some of which are mentioned or described
above, estimated to amount to ₱ 200 billion are deemed to have been acquired
for the benefit of Plaintiff and are, therefore, impressed with constructive trust in
favor of Plaintiff and the Filipino people. Consequently, Defendants are solidarily
liable to restore or reconvey to Plaintiff all such funds and property thus
impressed with constructive trust for the benefit of Plaintiff and the Filipino
people.
33. Second Cause of Action: ABUSE OF RIGHT AND POWER –
(a) Defendants, in perpetrating the unlawful acts described above,
committed abuse of right and power which caused untold misery,
sufferings and damages to Plaintiff. Defendants violated, among others
Articles 19, 20, and 21 of the Civil Code of the Philippines;
(b) As a result of the foregoing acts, Defendants acquired the title to the
beneficial interest in funds and other property and concealed such title,
funds and interest through the use of relatives, business associates,
nominees, agents, or dummies. Defendants are, therefore, solidarily
liable to Plaintiff to return and reconvey all such funds and other
property unlawfully acquired by them estimated at TWO HUNDRED
BILLION PESOS, or alternatively, to pay Plaintiff, solidarily, by way of
indemnity, the damage caused to Plaintiff equivalent to the amount of
such funds or the value of other property not returned or restored to
Plaintiff, plus interest thereon from the date of unlawful acquisition until
full payment thereof.
34. Third Cause of Action: UNJUST ENRICHMENT –
Defendants illegally accumulated funds and other property whose estimated
value is ₱ 200 billion in violation of the laws of the Philippines and in breach of
their official functions and fiduciary obligations. Defendants, therefore, have
unjustly enriched themselves to the grave and irreparable damage and prejudice
of Plaintiff. Defendants have an obligation at law, independently of breach of trust
and abuse of right and power, and as an alternative, to solidarily return to Plaintiff
such funds and other property with which Defendants, in gross evident bad faith,
have unjustly enriched themselves or, in default thereof, restore to Plaintiff the
amount of such funds and the value of the other property including those which
may have been wasted, and/or lost estimated at ₱ 200 billion with interest
thereon from the date of unlawful acquisition until full payment thereof.
35. Fourth Cause of Action: ACCOUNTING –
The Commission, acting pursuant to the provisions of the applicable law, believe
that Defendants, acting singly or collectively, in unlawful concert with one
another, and with the active collaboration of third persons, subject of separate
suits, acquired funds, assets and property during the incumbency of Defendant
public officers, manifestly out of proportion to their salaries, to their other lawful
income and income from legitimately acquired property. Consequently, they are
required to show to the satisfaction of this Honorable Court that they have
lawfully acquired all such funds, assets and property which are in excess of their
legal net income, and for this Honorable Court to decree that the Defendants are
under obligation to account to Plaintiff with respect to all legal or beneficial
interests in funds, properties and assets of whatever kind and wherever located
in excess of the lawful earnings or lawful income from legitimately acquired
property.
36. Fifth Cause of Action – LIABILITY FOR DAMAGES –
(a) By reason of the unlawful acts set forth above, Plaintiff and the
Filipino people have suffered actual damages in an amount
representing the pecuniary loss sustained by the latter as a result of the
Defendants’ unlawful acts, the approximate value and interest of which,
from the time of their wrongful acquisition, are estimated at ₱ 200 billion
plus expenses which Plaintiff has been compelled to incur and shall
continue to incur in its effort to recover Defendants’ ill-gotten wealth all
over the world, which expenses are reasonably estimated at ₱ 250
million. Defendants are, therefore, jointly and severally liable to Plaintiff
for actual damages in an amount reasonably estimated at ₱ 200 Billion
Pesos and to reimburse expenses for recovery of Defendants’ ill-gotten
wealth estimated to cost ₱ 250 million or in such amount as are proven
during the trial.
(b) As a result of Defendants’ acts described above, Plaintiff and the
Filipino people had painfully endured and suffered moral damages for
more than twenty long years, anguish, fright, sleepless nights, serious
anxiety, wounded feelings and moral shock as well as besmirched
reputation and social humiliation before the international community.
(c) In addition, Plaintiff and the Filipino people are entitled to temperate
damages for their sufferings which, by their very nature are incapable of
pecuniary estimation, but which this Honorable Court may determine in
the exercise of its sound discretion.
(d) Defendants, by reason of the above described unlawful acts, have
violated and invaded the inalienable right of Plaintiff and the Filipino
people to a fair and decent way of life befitting a Nation with rich natural
and human resources. This basic and fundamental right of Plaintiff and
the Filipino people should be recognized and vindicated by awarding
nominal damages in an amount to be determined by the Honorable
Court in the exercise of its sound discretion.
(e) By way of example and correction for the public good and in order to
ensure that Defendants’ unlawful, malicious, immoral and wanton acts
are not repeated, said Defendants are solidarily liable to Plaintiff for
exemplary damages.
In the meantime, the Pantranco Employees Association-PTGWO (PEA-
PTGWO), a union of Pantranco employees, moved to intervene before the
Sandiganbayan. The former alleged that the trust funds in the account of
Pantranco North Express, Inc. (Pantranco) amounting to ₱ 55 million rightfully
belonged to the Pantranco employees, pursuant to the money judgment the
National Labor Relations Commission (NLRC) awarded in favor of the employees
and against Pantranco. Thus, PEA-PTGWO contested the allegation of petitioner
that the assets of Pantranco were ill-gotten because, otherwise, these assets
would be returned to the government and not to the employees.
Thereafter, petitioner presented and formally offered its evidence against herein
respondents. However, the latter objected to the offer primarily on the ground
that the documents violated the best evidence rule of the Rules of Court, as
these documents were unauthenticated; moreover, petitioner had not provided
any reason for its failure to present the originals.
On 11 March 2002, the Sandiganbayan issued a Resolution 6 admitting the pieces
of evidence while expressing some reservation, to wit:
WHEREFORE, taking note of the objections of accused Marcoses and the reply
thereto by the plaintiff, all the documentary exhibits formally offered by the
prosecution are hereby admitted in evidence; however, their evidentiary value
shall be left to the determination of the Court.
SO ORDERED.
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 subsequently filed their
respective Demurrers to Evidence.
On 6 December 2005, the Sandiganbayan issued the assailed Resolution, 7 which
granted all the Demurrers to Evidence except the one filed by Imelda R. Marcos.
The dispositive portion reads:
WHEREFORE, premises considered, the Demurrer to Evidence filed by
defendant Imelda R. Marcos is hereby DENIED. The Demurrer to Evidence filed
by defendants Maria Imelda Marcos Manotoc, Ferdinand Marcos, Jr., Irene
Marcos Araneta, Gregorio Maria Araneta III, Yeung Chun Kam, Yeung Chun
Fan, Yeung Chun Ho, and intervenor PEA-PTGWO, are hereby GRANTED. The
sequestration orders on the properties in the name of defendant Gregorio Maria
Araneta III, are accordingly ordered lifted.
SO ORDERED.
The Sandiganbayan denied Imelda R. Marcos’ Demurrer primarily because she
had categorically admitted that she and her husband owned properties
enumerated in the Complaint, while stating that these properties had been
lawfully acquired. The court held that the evidence presented by petitioner
constituted a prima facie case against her, considering that the value of the
properties involved was grossly disproportionate to the Marcos spouses’ lawful
income. Thus, this admission and the fact that Imelda R. Marcos was the
compulsory heir and administratrix of the Marcos estate were the primary
reasons why the court held that she was responsible for accounting for the funds
and properties alleged to be ill-gotten.
Secondly, the court pointed out that Rolando Gapud, whose deposition was
taken in Hong Kong, referred to her as one directly involved in amassing ill-
gotten wealth. The court also considered the compromise agreement between
petitioner and Antonio O. Floirendo, who disclosed that he had performed several
business transactions upon the instructions of the Marcos spouses.
With regard to the siblings Imee Marcos-Manotoc and Bongbong Marcos, Jr., the
court noted that their involvement in the alleged illegal activities was never
established. In fact, they were never mentioned by any of the witnesses
presented. Neither did the documentary evidence pinpoint any specific
involvement of the Marcos children.
Moreover, the court held that the evidence, in particular, exhibits
"P,"8 "Q,"9 "R,"10 "S,"11 and "T,"12 were considered hearsay, because their 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-Manotok in the media networks
IBC-13, BBC-2 and RPN-9, all three of which she had allegedly acquired illegally.
These exhibits also sought to prove her alleged participation in dollar salting
through De Soleil Apparel.
Finally, the court held that the relationship of respondents to the Marcos spouses
was not enough reason to hold the former liable.
In the matter of the spouses Irene Marcos and Gregorio Araneta III, the court
similarly held that there was no testimonial or documentary evidence that
supported petitioner’s allegations against the couple. Again, petitioner failed to
present the original documents that supposedly supported the allegations against
them. Instead, it merely presented photocopies of documents that sought to
prove how the Marcoses used the Potencianos 13 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 how their business,
Glorious Sun Fashion Garments Manufacturing, Co. Phils. (Glorious Sun), was
used as a vehicle for dollar salting; or to show that they themselves 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.
Finally, the court also granted the Demurrer filed by PEA-PTGWO. While the
court held that there was no evidence to show that Pantranco was illegally
acquired, the former nevertheless held that there was a need to first determine
the ownership of the disputed funds before they could be ordered released to the
rightful owner.
On 20 December 2005, petitioner filed its Motion for Partial Reconsideration,
insisting that there was a preponderance of evidence to show that respondents
Marcos siblings and Gregorio Araneta III had connived with their parents in
acquiring ill-gotten wealth. It pointed out that respondents were compulsory heirs
to the deposed President and were thus obliged to render an accounting and to
return the ill-gotten wealth.
Moreover, petitioner asserted that the evidence established that the Yeungs were
dummies of the Marcoses, and that the Pantranco assets were part of the
Marcoses’ alleged ill-gotten wealth.
Finally, petitioner questioned the court’s ruling that the evidence previously
admitted was later held to be inadmissible in evidence against respondents, thus,
depriving the former of due process.
Inadvertently, petitioner was not able to serve a copy of the motion on
respondents Imee Marcos-Manotoc and Bongbong Marcos, Jr. But upon
realizing the oversight, it immediately did so and filed the corresponding
Manifestation and Motion before the court. Nonetheless, this inadvertence
prompted Imee Marcos-Manotoc and Bongbong Marcos, Jr. to file their Motion
for Entry of Judgment.
On 2 March 2006, the court issued the second assailed Resolution,14 denying
petitioner’s Motion. The court pointed out its reservation in its Resolution dated
12 March 2002, wherein it said that it would still assess and weigh the evidentiary
value of the admitted evidence. Furthermore, it said that even if it included the
testimonies of petitioner’s witnesses, these were not substantial to hold
respondents liable. Thus, the court said:
WHEREFORE, there being no sufficient reason to set aside the resolution dated
December 6, 2005, the plaintiff’s Motion for Partial Reconsideration is
hereby DENIED. The plaintiff’s Motion and Manifestation dated January 18, 2006
is GRANTED in the interest of justice. The Motion for Entry of Judgment filed by
defendants Imee Marcos and Bongbong Marcos is DENIED.
SO ORDERED.
Hence, this Petition.
Petitioner raises the same issues it raised in its Motion for Reconsideration filed
before the Sandiganbayan, to wit:15
I. THE SANDIGANBAYAN ERRED IN GRANTING THE DEMURRER
TO EVIDENCE FILED BY RESPONDENTS MA. IMELDA (IMEE) R.
MARCOS AND FERDINAND (BONGBONG) R. MARCOS, JR.,
CONSIDERING THAT MORE THAN PREPONDERANT EVIDENCE
ON RECORD CLEARLY DEMONSTRATES THEIR CONNIVANCE
WITH FORMER PRESIDENT FERDINAND E. MARCOS AND OTHER
MARCOS DUMMIES AND ABUSED THEIR POWER AND INFLUENCE
IN UNLAWFULLY AMASSING FUNDS FROM THE NATIONAL
TREASURY.
II. PETITION PROVED, BY MORE THAN PREPONDERANT
EVIDENCE, THAT RESPONDENT-SPOUSES GREGORIO ARANETA
III AND IRENE MARCOS ARANETA CONNIVED WITH FORMER
PRESIDENT MARCOS IN UNLAWFULLY ACQUIRING BUSINESS
INTERESTS WHICH ARE GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT, AND IN A MANNER PROHIBITED UNDER THE
CONSTITUTION AND ANTI-GRAFT STATUTES.
III. RESPONDENTS IMEE, BONGBONG, AND IRENE MARCOS ARE
COMPULSORY HEIRS OF FORMER PRESIDENT MARCOS AND
ARE EQUALLY OBLIGED TO RENDER AN ACCOUNTING AND
RETURN THE ALLEGED ILL-GOTTEN WEALTH OF THE
MARCOSES.
IV. THERE EXISTS CONCRETE EVIDENCE PROVING THAT
RESPONDENTS YEUNG CHUN KAM, YEUNG CHUN FAN, AND
YEUNG CHUN HO ACTED AS DUMMIES FOR THE MARCOSES,
AND USED THE CORPORATION, GLORIOUS SUN, AS A CONDUIT
IN AMASSING THE ILL-GOTTEN WEALTH. ACCORDINGLY, THE
SANDIGANBAYAN ERRED IN GRANTING THEIR DEMURRER TO
EVIDENCE.
V. THE DEMURRER TO EVIDENCE FILED BY INTERVENOR PEA-
PTGWO WITH RESPECT TO THE PANTRANCO ASSETS SHOULD
NOT HAVE BEEN GRANTED SINCE AMPLE EVIDENCE PROVES
THAT THE SAID ASSETS INDUBITABLY FORM PART OF THE
MARCOS ILL-GOTTEN WEALTH, AS BUTTRESSED BY THE FACT
THAT NO JUDICIAL DETERMINATION HAS BEEN MADE AS TO
WHOM THESE ASSETS RIGHTFULLY BELONG.
VI. THE SANDIGANBAYAN’S RULING WHICH REJECTED
PEITITONER’S DOCUMENTARY EXHIBITS ALLEGEDLY FOR BEING
"INADMISSIBLE" DIRECTLY CONTRADICTS ITS EARLIER RULING
ADMITTING ALL SAID DOCUMENTARY EVIDENCE AND WAS
RENDERED IN A MANNER THAT DEPRIVED PETITIONER’S RIGHT
TO DUE PROCESS OF LAW.
There is some merit in petitioner’s contention.
The Marcos Siblings and
Gregorio Araneta III
Closely analyzing petitioner’s Complaint and the present Petition for Review, it is
clear that the Marcos siblings are being sued in two capacities: first, as co-
conspirators in the alleged accumulation of ill-gotten wealth; and second, as the
compulsory heirs of their father, Ferdinand E. Marcos.16
With regard to the first allegation, as contained in paragraph 29 of its Third
Amended Complaint quoted above, petitioner accused the Marcos siblings of
having collaborated with, participated in, and/or benefitted from their parents’
alleged accumulation of ill-gotten wealth. In particular, as far as Imee Marcos-
Manotoc was concerned, she was accused of dollar salting by using Glorious
Sun to import denim fabrics from one supplier at prices much higher than those
paid by other users of similar materials. It was also alleged that the Marcoses
personally benefitted from the sequestered media networks IBC-13, BBC-2, and
RPN-9, in which Imee Marcos had a substantial interest.
Irene Marcos-Araneta, on the other hand, was accused of having conspired with
her husband, respondent Gregorio Araneta III, in his being President Marcos’
conduit to Pantranco, thereby paving the way for the President’s ownership of the
company in violation of Article VII, Section 4, paragraph 2 of the 1973
Constitution.17
To prove the general allegations against the Marcos siblings, petitioner primarily
relied on the Sworn Statement18and the Deposition19 of one of the financial
advisors of President Marcos, Rolando C. Gapud, taken in Hong Kong on various
dates.
Meanwhile, to prove the participation and interests of Imee Marcos-Manotoc in
De Soleil Apparel and the media networks, petitioner relied on the Affidavits of
Ramon S. Monzon,20 Yeung Kwok Ying,21 and Rodolfo V. Puno;22 and the
transcript of stenographic notes (TSN) taken during the PCGG hearing held on 8
June 1987.23
As to spouses Irene Marcos-Araneta and Gregorio Araneta III, petitioner
submitted the Articles of Incorporation of Northern Express Transport, Inc.;24 the
Memorandum of Agreement25 and the Purchase Agreement26 between Pantranco
and Batangas Laguna Tayabas Bus Company, Inc. (BLTBCo.); the Confidential
Memorandum regarding the sale of the Pantranco assets; 27 the Affidavit28 and the
letter to the PCGG29 of Dolores A. Potenciano, owner of BLTBCo.; the
Affidavit30 and the Memorandum31 of Eduardo Fajardo, who was then the Senior
Vice-President of the Account Management Group of the Philippine National
Bank (PNB), which was in turn the creditor for the Pantranco sale; and the
Affidavit of Florencio P. Lucio, who was the Senior Account Specialist of the
National Investment and Development Corporation.32
Petitioner contends that these documents fall under the Rule’s third exception,
that is, these documents are public records in the custody of a public officer or
are recorded in a public office. It is its theory that since these documents were
collected by the PCGG, then, necessarily, the conditions for the exception to
apply had been met. Alternatively, it asserts that the "documents were offered to
prove not only the truth of the recitals of the documents, but also of other external
or collateral facts."33
The Court’s Ruling
Petitioner failed to observe the
best evidence rule.
It is petitioner’s burden to prove the allegations in its Complaint. For relief to be
granted, the operative act on how and in what manner the Marcos siblings
participated in and/or benefitted from the acts of the Marcos couple must be
clearly shown through a preponderance of evidence. Should petitioner fail to
discharge this burden, the Court is constrained and is left with no choice but to
uphold the Demurrer to Evidence filed by respondents.
First, 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 Rule 130, Sec. 3 of the Rules
of Court, otherwise known as the best evidence rule, which mandates that the
evidence must be the original document itself. The origin of the best evidence
rule can be found and traced to as early as the 18th century in Omychund v.
Barker,34 wherein the Court of Chancery said:
The judges and sages of the law have laid it down that there is but one general
rule of evidence, the best that the nature of the case will admit.
The rule is, that if the writings have subscribing witnesses to them, they
must be proved by those witnesses.
The first ground judges have gone upon in departing from strict rules, is an
absolute strict necessity. Secondly, a presumed necessity. In the case of
writings, subscribed by witnesses, if all are dead, the proof of one of their hands
is sufficient to establish the deed: where an original is lost, a copy may be
admitted; if no copy, then a proof by witnesses who have heard the deed, and yet
it is a thing the law abhors to admit the memory of man for evidence.
Petitioner did not even attempt to provide a plausible reason why the originals
were not presented, or any compelling ground why the court should admit these
documents as secondary evidence absent the testimony of the witnesses who
had executed them.
In particular, it may not insist that the photocopies of the documents fall under
Sec. 7 of Rule 130, which states:
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 be a certified copy issued by the public
officer in custody thereof.
Secs. 19 and 20 of Rule 132 provide:
SECTION 19. Classes of documents. ─ For the purpose of their presentation in
evidence, documents are either public or private.
Public documents are:
(a) The written official acts, or records of the official acts of the
sovereign authority, official bodies and tribunals, and public officers,
whether of the Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills
and testaments; and
(c) Public records, kept in the Philippines, of private documents required
by law to be entered therein.
All other writings are private.
SECTION 20. Proof of private document. — Before any private document offered
as authentic is received in evidence, its due execution and authenticity must be
proved either:
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of
the maker.
Any other private document need only be identified as that which it is claimed to
be.
The fact that these documents were collected by the PCGG in the course of its
investigations does not make them per se public records referred to in the quoted
rule.
Petitioner presented as witness its records officer, Maria Lourdes Magno, who
testified that these public and private documents had been gathered by and
taken into the custody of the PCGG in the course of the Commission’s
investigation of the alleged ill-gotten wealth of the Marcoses. However, given the
purposes for which these documents were submitted, Magno was not a credible
witness who could testify as to their contents. To reiterate, "[i]f the writings have
subscribing witnesses to them, they must be proved by those witnesses."
Witnesses can testify only to those facts which are of their personal knowledge;
that is, those derived from their own perception.35 Thus, Magno could only testify
as to how she obtained custody of these documents, but not as to the contents of
the documents themselves.
Neither did petitioner present as witnesses the affiants of these Affidavits or
Memoranda submitted to the court. Basic is the rule that, while affidavits may be
considered as public documents if they are acknowledged before a notary public,
these Affidavits are still classified as hearsay evidence. The reason for this rule is
that they are not generally prepared by the affiant, but by another one who uses
his or her own language in writing the affiant's statements, parts of which may
thus be either omitted or misunderstood by the one writing them. Moreover, the
adverse party is deprived of the opportunity to cross-examine the affiants. For
this reason, affidavits are generally rejected for being hearsay, unless the affiants
themselves are placed on the witness stand to testify thereon. 36
As to the copy of the TSN of the proceedings before the PCGG, while it may be
considered as a public document since it was taken in the course of the PCGG’s
exercise of its mandate, it was not attested to by the legal custodian to be a
correct copy of the original. This omission falls short of the requirement of Rule
132, Secs. 24 and 25 of the Rules of Court.37
In summary, we adopt the ruling of the Sandiganbayan, to wit:
Further, again contrary to the theory of the plaintiff, the presentation of the
originals of the aforesaid exhibits is not validly excepted under Rule 130, Section
3 (a), (b), and (d) of the Rules of Court. Under paragraph (d), when ‘the original
document is a public record in the custody of a public officer or is recorded in a
public office,’ presentation of the original thereof is excepted. However, as earlier
observed, all except one of the exhibits introduced by the plaintiff were not
necessarily public documents. The transcript of stenographic notes (TSN) of the
proceedings purportedly before the PCGG, the plaintiff’s exhibit "Q", may be a
public document, but what was presented by the plaintiff was a mere photocopy
of the purported TSN. The Rules provide that when the original 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. Exhibit
"Q" was not a certified copy and it was not even signed by the stenographer who
supposedly took down the proceedings.
The rest of the above-mentioned exhibits cannot likewise be excepted under
paragraphs (a) and (b) of Section 3. Section 5 of the same Rule provides that
‘when the original documents 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.’ Thus, 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 these requirements were complied with by the plaintiff. Similar
to exhibit ‘Q’, exhibits ‘P’, ‘R’, ‘S’, and ‘T’ were all photocopies. ‘P’, ‘R’, and ‘T’
were affidavits of persons who did not testify before the Court. Exhibit ‘S’ is a
letter which is clearly a private document. Not only does it not fall within the
exceptions of Section 3, it is also a mere photocopy. As We previously
emphasized, even if originals of these affidavits were presented, they would still
be considered hearsay evidence if the affiants do not testify and identify them. 38
Thus, absent any convincing evidence to hold otherwise, it follows that petitioner
failed to prove that the Marcos siblings and Gregorio Araneta III collaborated with
former President Marcos and Imelda R. Marcos and participated in the first
couple’s alleged accumulation of ill-gotten wealth insofar as the specific
allegations herein were concerned.
The Marcos siblings are compulsory heirs.
To reiterate, in its third Amended Complaint, petitioner prays that the Marcos
respondents be made to (1) pay for the value of the alleged ill-gotten wealth with
interest from the date of acquisition; (2) render a complete accounting and
inventory of all funds and other pieces of property legally or beneficially held
and/or controlled by them, as well as their legal and beneficial interest therein; (3)
pay actual damages estimated at ₱200 billion and additional actual damages to
reimburse expenses for the recovery of the alleged ill-gotten wealth estimated at
₱250 million or in such amount as may be proven during trial; (4) pay moral
damages amounting to ₱50 billion; (5) pay temperate and nominal damages, as
well as attorney’s fees and litigation expenses in an amount to be proven during
the trial; (6) pay exemplary damages in the amount of ₱1 billion; and (7) pay
treble judicial costs.39
It must be stressed that we are faced with exceptional circumstances, given the
nature and the extent of the properties involved in the case pending with the
Sandiganbayan. It bears emphasis that the Complaint is one for the reversion,
the reconveyance, the restitution and the accounting of alleged ill-gotten wealth
and the payment of damages. Based on the allegations of the Complaint, the
court is charged with the task of (1) determining the properties in the Marcos
estate that constitute the alleged ill-gotten wealth; (2) tracing where these
properties are; (3) issuing the appropriate orders for the accounting, the
recovery, and the payment of these properties; and, finally, (4) determining if the
award of damages is proper.
Since the pending case before the Sandiganbayan survives the death of
Ferdinand E. Marcos, it is imperative therefore that the estate be duly
represented. The purpose behind this rule is the protection of the right to due
process of every party to a litigation who may be affected by the intervening
death. The deceased litigant is himself protected, as he continues to be properly
represented in the suit through the duly appointed legal representative of his
estate.40 On that note, we take judicial notice of the probate proceedings
regarding the will of Ferdinand E. Marcos. In Republic of the Philippines v.
Marcos II,41 we upheld the grant by the Regional Trial Court (RTC) of letters
testamentary in solidum to Ferdinand R. Marcos, Jr. and Imelda Romualdez-
Marcos as executors of the last will and testament of the late Ferdinand E.
Marcos.
Unless the executors of the Marcos estate or the heirs are ready to waive in favor
of the state their right to defend or protect the estate or those properties found to
be ill-gotten in their possession, control or ownership, then they may not be
dropped as defendants in the civil case pending before the Sandiganbayan.
Rule 3, Sec. 7 of the Rules of Court defines indispensable parties as those
parties-in-interest without whom there can be no final determination of an action.
They are those parties who possess such an interest in the controversy that a
final decree would necessarily affect their rights, so that the courts cannot
proceed without their presence. Parties are indispensable if their interest in the
subject matter of the suit and in the relief sought is inextricably intertwined with
that of the other parties.42
In order to reach a final determination of the matters concerning the estate of
Ferdinand E. Marcos – that is, the accounting and the recovery of ill-gotten
wealth – the present case must be maintained against Imelda Marcos and herein
respondent Ferdinand "Bongbong" R. Marcos, Jr., as executors of the Marcos
estate pursuant to Sec. 1 of Rule 87 of the Rules of Court. According to this
provision, actions may be commenced to recover from the estate, real or
personal property, or an interest therein, or to enforce a lien thereon; and actions
to recover damages for an injury to person or property, real or personal, may be
commenced against the executors.
We also hold that the action must likewise be maintained against Imee Marcos-
Manotoc and Irene Marcos-Araneta on the basis of the non-exhaustive list
attached as Annex "A" to the Third Amended Complaint, which states that the
listed properties therein were owned by Ferdinand and Imelda Marcos and their
immediate family.43 It is only during the trial of Civil Case No. 0002 before the
Sandiganbayan that there could be a determination of whether these properties
are indeed ill-gotten or were legitimately acquired by respondents and their
predecessors. Thus, while it was not proven that respondents conspired in
accumulating ill-gotten wealth, they may be in possession, ownership or control
of such ill-gotten properties or the proceeds thereof as heirs of the Marcos
couple. Thus, their lack of participation in any illegal act does not remove the
character of the property as ill-gotten and, therefore, as rightfully belonging to the
State.
Secondly, under the rules of succession, the heirs instantaneously became co-
owners of the Marcos properties upon the death of the President. The property
rights and obligations to the extent of the value of the inheritance of a person are
transmitted to another through the decedent’s death. 44 In this concept, nothing
prevents the heirs from exercising their right to transfer or dispose of the
properties that constitute their legitimes, even absent their declaration or absent
the partition or the distribution of the estate. In Jakosalem v. Rafols,45 we said:
Article 440 of the Civil Code provides that "the possession of hereditary
property is deemed to be transmitted to the heir without interruption from
the instant of the death of the decedent, in case the inheritance be
accepted." And Manresa with reason states that upon the death of a person,
each of his heirs "becomes the undivided owner of the whole estate left
with respect to the part or portion which might be adjudicated to him, a
community of ownership being thus formed among the coowners of the
estate while it remains undivided." (3 Manresa, 357; Alcala vs. Alcala, 35 Phil.
679.) And according to article 399 of the Civil Code, every part owner may
assign or mortgage his part in the common property, and the effect of such
assignment or mortgage shall be limited to the portion which may be allotted him
in the partition upon the dissolution of the community. Hence, in the case of
Ramirez vs. Bautista, 14 Phil. 528, where some of the heirs, without the
concurrence of the others, sold a property left by their deceased father,
this Court, speaking thru its then Chief Justice Cayetano Arellano, said that
the sale was valid, but that the effect thereof was limited to the share which
may be allotted to the vendors upon the partition of the estate. (Emphasis
supplied)
Lastly, petitioner’s prayer in its Third Amended Complaint directly refers to herein
respondents, to wit:
1. AS TO THE FIRST SECOND AND THIRD CAUSES OF
ACTION – To return and reconvey to Plaintiff all funds and other
property acquired by Defendants during their incumbency as public
officers, which funds and other property are manifestly out of proportion
to their salaries, other lawful income and income from legitimately
acquired property which Defendants have failed to establish as having
been, in fact, lawfully acquired by them, alternatively, to solidarily pay
Plaintiff the value thereof with interest thereon from the date of
acquisition until full payment.
2. AS TO THE FOURTH CAUSE OF ACTION – to individually render
to this Honorable Court a complete accounting and inventory,
subject to evaluation of Court-appointed assessors, of all funds and
other property legally or beneficially held and/or controlled by them, as
well as their legal and beneficial interest in such funds and other
property. (Emphasis supplied)
In sum, the Marcos siblings are maintained as respondents, because (1) the
action pending before the Sandiganbayan is one that survives death, and,
therefore, the rights to the estate must be duly protected; (2) they allegedly
control, possess or own ill-gotten wealth, though their direct involvement in
accumulating or acquiring such wealth may not have been proven.
Yeung Chun Kam, Yeung Chun
Ho And Yeung Chun Fan
It is worthy to note that respondents draw our attention to American Inter-Fashion
Corporation v. Office of the President46 in which they contend that this Court
considered the allegation of dollar salting as baseless. The cited case, however,
finds no application herein as the former merely ruled that Glorious Sun was
denied due process when it was not furnished by the Garments and Textile
Export Board (GTEB) any basis for the cancellation of the export quota because
of allegations of dollar salting. That Decision did not prevent petitioner from
adducing evidence to support its allegation in Civil Case No. 0002 before the
Sandiganbayan under a different cause of action.
Nevertheless, the allegations against Yeung Chun Kam, Yeung Chun Ho and
Yeung Chun Fan in the case at bar were also proved to be baseless. Again,
petitioner failed to illustrate how respondents herein acted as dummies of the
Marcoses in acquiring ill-gotten wealth. This Court notes that the Complaint
against the Yeungs alleges that the Marcoses used Glorious Sun – the garment
company in which the Yeungs are controlling stockholders – for illegal dollar
salting through the company’s importation of denim fabrics from only one supplier
at prices much higher than those being paid by other users of similar materials.
Notably, no mention of De Soleil Apparel was made.
To prove its allegations, petitioner submitted the controverted Exhibits "P," "Q,"
"R," "S," and "T." As earlier discussed in detail, these pieces of evidence were
mere photocopies of the originals and were unauthenticated by the persons who
executed them; thus, they have no probative value. Even the allegations of
petitioner itself in its Petition for Review are bereft of any factual basis for holding
that these documents undoubtedly show respondents’ participation in the alleged
dollar salting. The pertinent portion of the Petition reads:
To illustrate, the Affidavit dated May 29, 1987 executed by Mr. Ramon Monzon
which was submitted as Exhibit P, showed that respondent Imee Marcos-
Manotoc owns and controls IBC-13, BBC-2 and (R)PN-9, and has interest in the
De Soleil Apparel. The testimony of Mr. Ramon Monzon during the hearing on
June 8, 1987 before the Presidential Commission on Good Government as
shown in the Transcript of Stenographic Notes also affirmed his declarations in
the Affidavit dated May 29, 1987. The Transcript of Stenographic Notes dated
June 8, 1987 was presented as Exhibit Q. Moreover, the Affidavit dated March
21, 1986 of Yeung Kwok Ying which was presented as Exhibit R disclosed that
Imee Marcos-Manotoc is the owner of 67% equity of De Soleil Apparel. The letter
dated July 17, 1984 signed by seven (7) incorporators of De Soleil Apparel,
addressed to Hongkong investors which was presented as Exhibit S confirmed
that the signatories hold or own 67% equity of the corporation in behalf of the
beneficial owners previously disclosed to the addressees. In addition to the
foregoing documents, petitioner presented the Affidavit of Rodolfo V. Puno,
Chairman of the Garments and Textile Export Group (GTEB) as Exhibit
T wherein he categorically declared that the majority of De Soleil Apparel was
actually owned by respondent Imee Marcos-Manotoc.47
The foregoing quotation from the Petition is bereft of any factual matter that
warrants a consideration by the Court. Straight from the horse’s mouth, these
documents are only meant to show the ownership and interest of Imee Marcos
Manotoc in De Soleil – and not how respondent supposedly participated in dollar
salting or in the accumulation of ill-gotten wealth.
PEA-PTGWO
The PEA-PTGWO Demurrer to Evidence was granted primarily as a
consequence of the prosecution’s failure to establish that the assets of Pantranco
were ill-gotten, as discussed earlier. Thus, we find no error in the assailed Order
of the Sandiganbayan.
A Final Note
As earlier adverted to, the best evidence rule has been recognized as an
evidentiary standard since the 18th century. For three centuries, it has been
practiced as one of the most basic rules in law. It is difficult to conceive that one
could have finished law school and passed the bar examinations without knowing
such elementary rule. Thus, it is deeply disturbing that the PCGG and the Office
of the Solicitor General (OSG) – the very agencies sworn to protect the interest
of the state and its people – could conduct their prosecution in the manner that
they did. To emphasize, the PCGG is a highly specialized office focused on the
recovery of ill-gotten wealth, while the OSG is the principal legal defender of the
government. The lawyers of these government agencies are expected to be the
best in the legal profession.
However, despite having the expansive resources of government, the members
of the prosecution did not even bother to provide any reason whatsoever for their
failure to present the original documents or the witnesses to support the
government’s claims. Even worse was presenting in evidence a photocopy of the
TSN of the PCGG proceedings instead of the original, or a certified true copy of
the original, which the prosecutors themselves should have had in their custody.
Such manner of legal practice deserves the reproof of this Court. We are
constrained to call attention to this apparently serious failure to follow a most
basic rule in law, given the special circumstances surrounding this case.
However, it must be emphasized that Merciales was filed exactly to determine
whether the prosecution and the trial court gravely abused their discretion in the
proceedings of the case, thus resulting in the denial of the offended party’s due
process. Meanwhile, the present case merely alleges that there was an error in
the Sandiganbayan’s consideration of the probative value of evidence. We also
note that in Merciales, both the prosecution and the trial court were found to be
equally guilty of serious nonfeasance, which prompted us to remand the case to
the trial court for further proceedings and reception of evidence. Merciales is thus
inapplicable to the case at bar.
Nevertheless, given the particular context of this case, the failure of the
prosecution to adhere to something as basic as the best evidence rule raises
serious doubts on the level and quality of effort given to the government’s cause.
Thus, we highly encourage the Office of the President, the OSG, and the PCGG
to conduct the appropriate investigation and consequent action on this matter.

The public prosecutors should employ and use all government resources and
powers efficiently, effectively, honestly and economically, particularly to avoid
wastage of public funds and revenues. They should perform and discharge their
duties with the highest degree of excellence, professionalism, intelligence and
skill.48
The basic ideal of the legal profession is to render service and secure justice for
those seeking its aid.49 In order to do this, lawyers are required to observe and
adhere to the highest ethical and professional standards. The legal profession is
so imbued with public interest that its practitioners are accountable not only to
their clients, but to the public as well.
The public prosecutors, aside from being representatives of the government and
the state, are, first and foremost, officers of the court. They took the oath to exert
every effort and to consider it their duty to assist in the speedy and efficient
administration of justice.50 Lawyers owe fidelity to the cause of the client and
should be mindful of the trust and confidence reposed in them. 51 Hence, should
serve with competence and diligence.52
WHEREFORE, in view of the foregoing, the Petition is PARTIALLY GRANTED.
The assailed Sandiganbayan Resolution dated 6 December 2005
is AFFIRMED with MODIFICATION. For the reasons stated herein, respondents
Imelda Marcos-Manotoc, Irene Marcos-Araneta, and Ferdinand R. Marcos, Jr.
shall be maintained as defendants in Civil Case No. 0002 pending before the
Sandiganbayan.
Let a copy of this Decision be furnished to the Office of the President so that it
may look into the circumstances of this case and determine the liability, if any, of
the lawyers of the Office of the Solicitor General and the Presidential
Commission on Good Government in the manner by which this case was
handled in the Sandiganbayan.
SO ORDERED.

We note that there are instances when this Court may overturn the dismissal of
the lower courts in instances when it is shown that the prosecution has deprived
the parties their due process of law. In Merciales v. Court of Appeals, 53we
reversed the Decision of the RTC in dismissing the criminal case for rape with
homicide. In that case, it was very apparent that the public prosecutor violated
the due process rights of the private complainant owing to its blatant disregard of
procedural rules and the failure to present available crucial evidence, which
would tend to prove the guilt or innocence of the accused therein. Moreover, we
likewise found that the trial court was gravely remiss in its duty to ferret out the
truth and, instead, just "passively watched as the public prosecutor bungled the
case."
G.R. No. L-58509 December 7, 1982
IN THE MATTER OF THE PETITION TO APPROVE THE WILL OF RICARDO
B. BONILLA deceased, MARCELA RODELAS, petitioner-appellant,
vs.
AMPARO ARANZA, ET AL., oppositors-appellees, ATTY. LORENZO
SUMULONG, intervenor.
Luciano A. Joson for petitioner-appellant.
Cesar Paralejo for oppositor-appellee.
RELOVA, J.:
This case was certified to this Tribunal by the Court of Appeals for final
determination pursuant to Section 3, Rule 50 of the Rules of Court.
As found by the Court of Appeals:
... On January 11, 1977, appellant filed a petition with the Court
of First Instance of Rizal for the probate of the holographic will
of Ricardo B. Bonilla and the issuance of letters testamentary
in her favor. The petition, docketed as Sp. Proc. No. 8432, was
opposed by the appellees Amparo Aranza Bonilla, Wilferine
Bonilla Treyes Expedita Bonilla Frias and Ephraim Bonilla on
the following grounds:
(1) Appellant was estopped from claiming that the deceased
left a will by failing to produce the will within twenty days of the
death of the testator as required by Rule 75, section 2 of the
Rules of Court;
(2) The alleged copy of the alleged holographic will did not
contain a disposition of property after death and was not
intended to take effect after death, and therefore it was not a
will
(3) The alleged hollographic will itself,and not an alleged copy
thereof, must be produced, otherwise it would produce no
effect, as held in Gam v. Yap, 104 Phil. 509; and
(4 ) The deceased did not leave any will, holographic or
otherwise, executed and attested as required by law.
The appellees likewise moved for the consolidation of the case
with another case Sp. Proc. No, 8275). Their motion was
granted by the court in an order dated April 4, 1977.
On November 13, 1978, following the consolidation of the
cases, the appellees moved again to dismiss the petition for
the probate of the will. They argued that:
(1) The alleged holographic was not a last will but merely an
instruction as to the management and improvement of the
schools and colleges founded by decedent Ricardo B. Bonilla;
and
(2) Lost or destroyed holographic wills cannot be proved by
secondary evidence unlike ordinary wills.
Upon opposition of the appellant, the motion to dismiss was
denied by the court in its order of February 23, 1979.
The appellees then filed a motion for reconsideration on the
ground that the order was contrary to law and settled
pronouncements and rulings of the Supreme Court, to which
the appellant in turn filed an opposition. On July 23, 1979, the
court set aside its order of February 23, 1979 and dismissed
the petition for the probate of the will of Ricardo B. Bonilla. The
court said:
... It is our considered opinion that once the original copy of the
holographic will is lost, a copy thereof cannot stand in lieu of
the original.
In the case of Gam vs. Yap, 104 Phil. 509, 522, the Supreme
Court held that 'in the matter of holographic wills the law, it is
reasonable to suppose, regards the document itself as the
material proof of authenticity of said wills.
MOREOVER, this Court notes that the alleged holographic will
was executed on January 25, 1962 while Ricardo B. Bonilla
died on May 13, 1976. In view of the lapse of more than 14
years from the time of the execution of the will to the death of
the decedent, the fact that the original of the will could not be
located shows to our mind that the decedent had discarded
before his death his allegedly missing Holographic Will.
Appellant's motion for reconsideration was denied. Hence, an appeal to the Court
of Appeals in which it is contended that the dismissal of appellant's petition is
contrary to law and well-settled jurisprudence.
On July 7, 1980, appellees moved to forward the case to this Court on the
ground that the appeal does not involve question of fact and alleged that the trial
court committed the following assigned errors:

I. THE LOWER COURT ERRED IN HOLDING THAT A LOST

HOLOGRAPHIC WILL MAY NOT BE PROVED BY A COPY
THEREOF;

II. THE LOWER COURT ERRED IN HOLDING THAT THE

DECEDENT HAS DISCARDED BEFORE HIS DEATH THE
MISSING HOLOGRAPHIC WILL;

III. THE LOWER COURT ERRED IN DISMISSING

APPELLANT'S WILL.

The only question here is whether a holographic will which was lost or cannot be
found can be proved by means of a photostatic copy. Pursuant to Article 811 of
the Civil Code, probate of holographic wills is the allowance of the will by the
court after its due execution has been proved. The probate may be uncontested
or not. If uncontested, at least one Identifying witness is required and, if no
witness is available, experts may be resorted to. If contested, at least three
Identifying witnesses are required. However, if the holographic will has been lost
or destroyed and no other copy is available, the will can not be probated because
the best and only evidence is the handwriting of the testator in said will. It is
necessary that there be a comparison between sample handwritten statements
of the testator and the handwritten will. But, a photostatic copy or xerox copy of
the holographic will may be allowed because comparison can be made with the
standard writings of the testator. In the case of Gam vs. Yap, 104 PHIL. 509, the
Court ruled that "the execution and the contents of a lost or destroyed
holographic will may not be proved by the bare testimony of witnesses who have
seen and/or read such will. The will itself must be presented; otherwise, it shall
produce no effect. The law regards the document itself as material proof of
authenticity." But, in Footnote 8 of said decision, it says that "Perhaps it may be
proved by a photographic or photostatic copy. Even a mimeographed or carbon
copy; or by other similar means, if any, whereby the authenticity of the
handwriting of the deceased may be exhibited and tested before the probate
court," Evidently, the photostatic or xerox copy of the lost or destroyed
holographic will may be admitted because then the authenticity of the handwriting
of the deceased can be determined by the probate court.

WHEREFORE, the order of the lower court dated October 3, 1979, denying
appellant's motion for reconsideration dated August 9, 1979, of the Order dated
July 23, 1979, dismissing her petition to approve the will of the late Ricardo B.
Bonilla, is hereby SET ASIDE.

SO ORDERED.
G.R. No. 170633 October 17, 2007
MCC INDUSTRIAL SALES CORPORATION, petitioner,
vs.
SSANGYONG CORPORATION, respondents.
DECISION
NACHURA, J.:
Decision1
Before the Court is a petition for review on certiorari of the of the Court
of Appeals in CA-G.R. CV No. 82983 and its Resolution2 denying the motion for
reconsideration thereof.
Petitioner MCC Industrial Sales (MCC), a domestic corporation with office at
Binondo, Manila, is engaged in the business of importing and wholesaling
stainless steel products.3 One of its suppliers is the Ssangyong Corporation
(Ssangyong),4 an international trading company5 with head office in Seoul, South
Korea and regional headquarters in Makati City, Philippines.6 The two
corporations conducted business through telephone calls and facsimile or
telecopy transmissions.7 Ssangyong would send the pro forma invoices
containing the details of the steel product order to MCC; if the latter conforms
thereto, its representative affixes his signature on the faxed copy and sends it
back to Ssangyong, again by fax.8
On April 13, 2000, Ssangyong Manila Office sent, by fax, a letter 9 addressed to
Gregory Chan, MCC Manager [also the President10 of Sanyo Seiki Stainless
Steel Corporation], to confirm MCC's and Sanyo Seiki's order of 220 metric
tons (MT) of hot rolled stainless steel under a preferential rate
of US$1,860.00 per MT. Chan, on behalf of the corporations, assented and
affixed his signature on the conforme portion of the letter.11
On April 17, 2000, Ssangyong forwarded to MCC Pro Forma Invoice No. ST2-
POSTSO40112 containing the terms and conditions of the transaction. MCC sent
back by fax to Ssangyong the invoice bearing the conformity signature 13 of Chan.
As stated in the pro forma invoice, payment for the ordered steel products would
be made through an irrevocable letter of credit (L/C) at sight in favor of
Ssangyong.14 Following their usual practice, delivery of the goods was to be
made after the L/C had been opened.
In the meantime, because of its confirmed transaction with MCC, Ssangyong
placed the order with its steel manufacturer, Pohang Iron and Steel Corporation
(POSCO), in South Korea15 and paid the same in full.
Because MCC could open only a partial letter of credit, the order for 220MT of
steel was split into two,16 one for 110MT covered by Pro Forma Invoice No. ST2-
POSTS0401-117 and another for 110MT covered by ST2-POSTS0401-2,18 both
dated April 17, 2000.
On June 20, 2000, Ssangyong, through its Manila Office, informed Sanyo Seiki
and Chan, by way of a fax transmittal, that it was ready to ship 193.597MT of
stainless steel from Korea to the Philippines. It requested that the opening of the
L/C be facilitated.19 Chan affixed his signature on the fax transmittal and returned
the same, by fax, to Ssangyong.20
Two days later, on June 22, 2000, Ssangyong Manila Office informed Sanyo
Seiki, thru Chan, that it was able to secure a US$30/MT price adjustment on the
contracted price of US$1,860.00/MT for the 200MT stainless steel, and that the
goods were to be shipped in two tranches, the first 100MT on that day and the
second 100MT not later than June 27, 2000. Ssangyong reiterated its request for
the facilitation of the L/C's opening.21
Ssangyong later, through its Manila Office, sent a letter, on June 26, 2000, to the
Treasury Group of Sanyo Seiki that it was looking forward to receiving the L/C
details and a cable copy thereof that day.22 Ssangyong sent a separate letter of
the same date to Sanyo Seiki requesting for the opening of the L/C covering
payment of the first 100MT not later than June 28, 2000. 23 Similar letters were
transmitted by Ssangyong Manila Office on June 27, 2000. 24 On June 28, 2000,
Ssangyong sent another facsimile letter to MCC stating that its principal in Korea
was already in a difficult situation25 because of the failure of Sanyo Seiki and
MCC to open the L/C's.
The following day, June 29, 2000, Ssangyong received, by fax, a letter signed by
Chan, requesting an extension of time to open the L/C because MCC's credit line
with the bank had been fully availed of in connection with another transaction,
and MCC was waiting for an additional credit line.26 On the same date,
Ssangyong replied, requesting that it be informed of the date when the L/C would
be opened, preferably at the earliest possible time, since its Steel Team 2 in
Korea was having problems and Ssangyong was incurring warehousing
costs.27 To maintain their good business relationship and to support MCC in its
financial predicament, Ssangyong offered to negotiate with its steel
manufacturer, POSCO, another US$20/MT discount on the price of the stainless
steel ordered. This was intimated in Ssangyong's June 30, 2000 letter to
MCC.28 On July 6, 2000, another follow-up letter29 for the opening of the L/C was
sent by Ssangyong to MCC.
However, despite Ssangyong's letters, MCC failed to open a letter of
credit.30 Consequently, on August 15, 2000, Ssangyong, through counsel, wrote
Sanyo Seiki that if the L/C's were not opened, Ssangyong would be compelled to
cancel the contract and hold MCC liable for damages for breach thereof
amounting to US$96,132.18, inclusive of warehouse expenses, related interests
and charges.31
Later, Pro Forma Invoice Nos. ST2-POSTS080-132 and ST2-POSTS080-
233 dated August 16, 2000 were issued by Ssangyong and sent via fax to MCC.
The invoices slightly varied the terms of the earlier pro forma invoices (ST2-
POSTSO401, ST2-POSTS0401-1 and ST2-POSTS0401-2), in that the quantity
was now officially 100MT per invoice and the price was reduced
to US$1,700.00 per MT. As can be gleaned from the photocopies of the said
August 16, 2000 invoices submitted to the court, they both bear the conformity
signature of MCC Manager Chan.
On August 17, 2000, MCC finally opened an L/C with PCIBank for
US$170,000.00 covering payment for 100MT of stainless steel coil under Pro
Forma Invoice No. ST2-POSTS080-2.34 The goods covered by the said invoice
were then shipped to and received by MCC.35
MCC then faxed to Ssangyong a letter dated August 22, 2000 signed by Chan,
requesting for a price adjustment of the order stated in Pro Forma Invoice No.
ST2-POSTS080-1, considering that the prevailing price of steel at that time was
US$1,500.00/MT, and that MCC lost a lot of money due to a recent strike. 36
Ssangyong rejected the request, and, on August 23, 2000, sent a demand
letter37 to Chan for the opening of the second and last L/C of US$170,000.00 with
a warning that, if the said L/C was not opened by MCC on August 26, 2000,
Ssangyong would be constrained to cancel the contract and hold MCC liable for
US$64,066.99 (representing cost difference, warehousing expenses, interests
and charges as of August 15, 2000) and other damages for breach. Chan failed
to reply.
Exasperated, Ssangyong through counsel wrote a letter to MCC, on September
11, 2000, canceling the sales contract under ST2-POSTS0401-1 /ST2-
POSTS0401-2, and demanding payment of US$97,317.37 representing losses,
warehousing expenses, interests and charges.38
Ssangyong then filed, on November 16, 2001, a civil action for damages due to
breach of contract against defendants MCC, Sanyo Seiki and Gregory Chan
before the Regional Trial Court of Makati City. In its complaint,39Ssangyong
alleged that defendants breached their contract when they refused to open the
L/C in the amount of US$170,000.00 for the remaining 100MT of steel under Pro
Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2.
After Ssangyong rested its case, defendants filed a Demurrer to
Evidence40 alleging that Ssangyong failed to present the original copies of
the pro forma invoices on which the civil action was based. In an Order dated
April 24, 2003, the court denied the demurrer, ruling that the documentary
evidence presented had already been admitted in the December 16, 2002
Order41 and their admissibility finds support in Republic Act (R.A.) No. 8792,
otherwise known as the Electronic Commerce Act of 2000. Considering that both
testimonial and documentary evidence tended to substantiate the material
allegations in the complaint, Ssangyong's evidence sufficed for purposes of a
prima facie case.42
After trial on the merits, the RTC rendered its Decision43 on March 24, 2004, in
favor of Ssangyong. The trial court ruled that when plaintiff agreed to sell and
defendants agreed to buy the 220MT of steel products for the price of US$1,860
per MT, the contract was perfected. The subject transaction was evidenced
by Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2, which
were later amended only in terms of reduction of volume as well as the price per
MT, following Pro Forma Invoice Nos. ST2-POSTS080-1 and ST2-POSTS080-2.
The RTC, however, excluded Sanyo Seiki from liability for lack of competent
evidence. The fallo of the decision reads:
WHEREFORE, premises considered, Judgment is hereby rendered
ordering defendants MCC Industrial Sales Corporation and Gregory
Chan, to pay plaintiff, jointly and severally the following:
1) Actual damages of US$93,493.87 representing the outstanding
principal claim plus interest at the rate of 6% per annum from March 30,
2001.
2) Attorney's fees in the sum of P50,000.00 plus P2,000.00 per
counsel's appearance in court, the same being deemed just and
equitable considering that by reason of defendants' breach of their
obligation under the subject contract, plaintiff was constrained to litigate
to enforce its rights and recover for the damages it sustained, and
therefore had to engage the services of a lawyer.
3) Costs of suit.
No award of exemplary damages for lack of sufficient basis.
SO ORDERED.44
On April 22, 2004, MCC and Chan, through their counsel of record, Atty. Eladio
B. Samson, filed their Notice of Appeal.45 On June 8, 2004, the law office of
Castillo Zamora & Poblador entered its appearance as their collaborating
counsel.
In their Appeal Brief filed on March 9, 2005,46 MCC and Chan raised before the
CA the following errors of the RTC:
I. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING
THAT APPELLANTS VIOLATED THEIR CONTRACT WITH APPELLEE
 A. THE HONORABLE COURT A QUO PLAINLY ERRED IN
FINDING THAT APPELLANTS AGREED TO PURCHASE 200
METRIC TONS OF STEEL PRODUCTS FROM APPELLEE,
INSTEAD OF ONLY 100 METRIC TONS.
1. THE HONORABLE COURT A QUO PLAINLY
ERRED IN ADMITTING IN EVIDENCE THE PRO
FORMA INVOICES WITH REFERENCE NOS. ST2-
POSTS0401-1 AND ST2-POSTS0401-2.
II. THE HONORABLE COURT A QUO PLAINLY ERRED IN
AWARDING ACTUAL DAMAGES TO APPELLEE.
III. THE HONORABLE COURT A QUO PLAINLY ERRED IN
AWARDING ATTORNEY'S FEES TO APPELLEE.
IV. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING
APPELLANT GREGORY CHAN JOINTLY AND SEVERALLY LIABLE
WITH APPELLANT MCC.47
On August 31, 2005, the CA rendered its Decision48 affirming the ruling of the
trial court, but absolving Chan of any liability. The appellate court ruled, among
others, that Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-
2 (Exhibits "E", "E-1" and "F") were admissible in evidence, although they were
mere facsimile printouts of MCC's steel orders.49 The dispositive portion of the
appellate court's decision reads:
WHEREFORE, premises considered, the Court holds:
(1) The award of actual damages, with interest, attorney's fees and
costs ordered by the lower court is hereby AFFIRMED.
(2) Appellant Gregory Chan is hereby ABSOLVED from any liability.
SO ORDERED.50
A copy of the said Decision was received by MCC's and Chan's principal
counsel, Atty. Eladio B. Samson, on September 14, 2005. 51 Their collaborating
counsel, Castillo Zamora & Poblador,52 likewise, received a copy of the CA
decision on September 19, 2005.53
On October 4, 2005, Castillo Zamora & Poblador, on behalf of MCC, filed a
motion for reconsideration of the said decision.54 Ssangyong opposed the motion
contending that the decision of the CA had become final and executory on
account of the failure of MCC to file the said motion within the reglementary
period. The appellate court resolved, on November 22, 2005, to deny the motion
on its merits,55 without, however, ruling on the procedural issue raised.
Aggrieved, MCC filed a petition for review on certiorari56 before this Court,
imputing the following errors to the Court of Appeals:
THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN
ACCORDANCE WITH JURISPRUDENCE AND SANCTIONED A
DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF
JUDICIAL PROCEEDINGS BY REVERSING THE COURT A
QUO'S DISMISSAL OF THE COMPLAINT IN CIVIL CASE NO. 02-124
CONSIDERING THAT:
I. THE COURT OF APPEALS ERRED IN SUSTAINING THE
ADMISSIBILITY IN EVIDENCE OF THE PRO-FORMA
INVOICES WITH REFERENCE NOS. ST2-POSTSO401-1
AND ST2-POSTSO401-2, DESPITE THE FACT THAT THE
SAME WERE MERE PHOTOCOPIES OF FACSIMILE
PRINTOUTS.
II. THE COURT OF APPEALS FAILED TO APPRECIATE THE
OBVIOUS FACT THAT, EVEN ASSUMING PETITIONER
BREACHED THE SUPPOSED CONTRACT, THE FACT IS
THAT PETITIONER FAILED TO PROVE THAT IT SUFFERED
ANY DAMAGES AND THE AMOUNT THEREOF.
III. THE AWARD OF ACTUAL DAMAGES IN THE AMOUNT
OF US$93,493.87 IS SIMPLY UNCONSCIONABLE AND
SHOULD HAVE BEEN AT LEAST REDUCED, IF NOT
DELETED BY THE COURT OF APPEALS.57
In its Comment, Ssangyong sought the dismissal of the petition, raising the
following arguments: that the CA decision dated 15 August 2005 is already final
and executory, because MCC's motion for reconsideration was filed beyond the
reglementary period of 15 days from receipt of a copy thereof, and that, in any
case, it was a pro formamotion; that MCC breached the contract for the purchase
of the steel products when it failed to open the required letter of credit; that the
printout copies and/or photocopies of facsimile or telecopy transmissions were
properly admitted by the trial court because they are considered original
documents under R.A. No. 8792; and that MCC is liable for actual damages and
attorney's fees because of its breach, thus, compelling Ssangyong to litigate.
The principal issues that this Court is called upon to resolve are the following:
I – Whether the CA decision dated 15 August 2005 is already final and
executory;
II – Whether the print-out and/or photocopies of facsimile transmissions are
electronic evidence and admissible as such;
III – Whether there was a perfected contract of sale between MCC and
Ssangyong, and, if in the affirmative, whether MCC breached the said contract;
and
IV – Whether the award of actual damages and attorney's fees in favor of
Ssangyong is proper and justified.
-I-
It cannot be gainsaid that in Albano v. Court of Appeals,58 we held that receipt of
a copy of the decision by one of several counsels on record is notice to all, and
the period to appeal commences on such date even if the other counsel has not
yet received a copy of the decision. In this case, when Atty. Samson received a
copy of the CA decision on September 14, 2005, MCC had only fifteen (15) days
within which to file a motion for reconsideration conformably with Section 1, Rule
52 of the Rules of Court, or to file a petition for review on certiorari in accordance
with Section 2, Rule 45. The period should not be reckoned from September 29,
2005 (when Castillo Zamora & Poblador received their copy of the decision)
because notice to Atty. Samson is deemed notice to collaborating counsel.
We note, however, from the records of the CA, that it was Castillo Zamora &
Poblador, not Atty. Samson, which filed both MCC's and Chan's Brief and Reply
Brief. Apparently, the arrangement between the two counsels was for the
collaborating, not the principal, counsel to file the appeal brief and subsequent
pleadings in the CA. This explains why it was Castillo Zamora & Poblador which
filed the motion for the reconsideration of the CA decision, and they did so on
October 5, 2005, well within the 15-day period from September 29, 2005, when
they received their copy of the CA decision. This could also be the reason why
the CA did not find it necessary to resolve the question of the timeliness of
petitioner's motion for reconsideration, even as the CA denied the same.
Independent of this consideration though, this Court assiduously reviewed the
records and found that strong concerns of substantial justice warrant the
relaxation of this rule.
In Philippine Ports Authority v. Sargasso Construction and Development
Corporation,59 we ruled that:
In Orata v. Intermediate Appellate Court, we held that where strong
considerations of substantive justice are manifest in the petition, this
Court may relax the strict application of the rules of procedure in the
exercise of its legal jurisdiction. In addition to the basic merits of the
main case, such a petition usually embodies justifying circumstance
which warrants our heeding to the petitioner's cry for justice in spite of
the earlier negligence of counsel. As we held in Obut v. Court of
Appeals:
[W]e cannot look with favor on a course of action which would
place the administration of justice in a straight jacket for then
the result would be a poor kind of justice if there would be
justice at all. Verily, judicial orders, such as the one subject of
this petition, are issued to be obeyed, nonetheless a non-
compliance is to be dealt with as the circumstances attending
the case may warrant. What should guide judicial action is the
principle that a party-litigant is to be given the fullest
opportunity to establish the merits of his complaint or defense
rather than for him to lose life, liberty, honor or property on
technicalities.
The rules of procedure are used only to secure and not override or
frustrate justice. A six-day delay in the perfection of the appeal, as in
this case, does not warrant the outright dismissal of the appeal.
In Development Bank of the Philippines vs. Court of Appeals, we gave
due course to the petitioner's appeal despite the late filing of its brief in
the appellate court because such appeal involved public interest. We
stated in the said case that the Court may exempt a particular case from
a strict application of the rules of procedure where the appellant failed to
perfect its appeal within the reglementary period, resulting in the
appellate court's failure to obtain jurisdiction over the case. In Republic
vs. Imperial, Jr., we also held that there is more leeway to exempt a
case from the strictness of procedural rules when the appellate court
has already obtained jurisdiction over the appealed case. We
emphasize that:
[T]he rules of procedure are mere tools intended to facilitate
the attainment of justice, rather than frustrate it. A strict and
rigid application of the rules must always be eschewed when it
would subvert the rule's primary objective of enhancing fair
trials and expediting justice. Technicalities should never be
used to defeat the substantive rights of the other party. Every
party-litigant must be afforded the amplest opportunity for the
proper and just determination of his cause, free from the
constraints of technicalities.60
Moreover, it should be remembered that the Rules were promulgated to set
guidelines in the orderly administration of justice, not to shackle the hand that
dispenses it. Otherwise, the courts would be consigned to being mere slaves to
technical rules, deprived of their judicial discretion. Technicalities must take a
backseat to substantive rights. After all, it is circumspect leniency in this respect
that will give the parties the fullest opportunity to ventilate the merits of their
respective causes, rather than have them lose life, liberty, honor or property on
sheer technicalities.61
The other technical issue posed by respondent is the alleged pro forma nature of
MCC's motion for reconsideration, ostensibly because it merely restated the
arguments previously raised and passed upon by the CA.
In this connection, suffice it to say that the mere restatement of arguments in a
motion for reconsideration does not per se result in a pro forma motion.
In Security Bank and Trust Company, Inc. v. Cuenca,62 we held that a motion for
reconsideration may not be necessarily pro forma even if it reiterates the
arguments earlier passed upon and rejected by the appellate court. A movant
may raise the same arguments precisely to convince the court that its ruling was
erroneous. Furthermore, the pro forma rule will not apply if the arguments were
not sufficiently passed upon and answered in the decision sought to be
reconsidered.
- II -
The second issue poses a novel question that the Court welcomes. It provides
the occasion for this Court to pronounce a definitive interpretation of the equally
innovative provisions of the Electronic Commerce Act of 2000 (R.A. No.
8792) vis-à-vis the Rules on Electronic Evidence.
Although the parties did not raise the question whether the original facsimile
transmissions are "electronic data messages" or "electronic documents" within
the context of the Electronic Commerce Act (the petitioner merely assails as
inadmissible evidence the photocopies of the said facsimile transmissions), we
deem it appropriate to determine first whether the said fax transmissions are
indeed within the coverage of R.A. No. 8792 before ruling on whether the
photocopies thereof are covered by the law. In any case, this Court has ample
authority to go beyond the pleadings when, in the interest of justice or for the
promotion of public policy, there is a need to make its own findings in order to
support its conclusions.63
Petitioner contends that the photocopies of the pro forma invoices presented by
respondent Ssangyong to prove the perfection of their supposed contract of sale
are inadmissible in evidence and do not fall within the ambit of R.A. No. 8792,
because the law merely admits as the best evidence the original fax transmittal.
On the other hand, respondent posits that, from a reading of the law and the
Rules on Electronic Evidence, the original facsimile transmittal of the pro
forma invoice is admissible in evidence since it is an electronic document and,
therefore, the best evidence under the law and the Rules. Respondent further
claims that the photocopies of these fax transmittals (specifically ST2-
POSTS0401-1 and ST2-POSTS0401-2) are admissible under the Rules on
Evidence because the respondent sufficiently explained the non-production of
the original fax transmittals.
In resolving this issue, the appellate court ruled as follows:
Admissibility of Pro Forma
Invoices; Breach of Contract
by Appellants
Turning first to the appellants' argument against the admissibility of the
Pro Forma Invoices with Reference Nos. ST2-POSTS0401-1 and ST2-
POSTS0401-2 (Exhibits "E", "E-1" and "F", pp. 215-218, Records),
appellants argue that the said documents are inadmissible (sic) being
violative of the best evidence rule.
The argument is untenable.
The copies of the said pro-forma invoices submitted by the appellee are
admissible in evidence, although they are mere electronic facsimile
printouts of appellant's orders. Such facsimile printouts are considered
Electronic Documents under the New Rules on Electronic Evidence,
which came into effect on August 1, 2001. (Rule 2, Section 1 [h], A.M.
No. 01-7-01-SC).
"(h) 'Electronic document' refers to information or the
representation of information, data, figures, symbols or other
modes of written expression, described or however
represented, by which a right is established or an obligation
extinguished, or by which a fact may be proved and affirmed,
which is received, recorded, transmitted, stored, processed,
retrieved or produced electronically. It includes digitally signed
documents and any printout or output, readable by sight or
other means, which accurately reflects the electronic data
message or electronic document. For purposes of these Rules,
the term 'electronic document' may be used interchangeably
with 'electronic data message'.
An electronic document shall be regarded as the equivalent of an
original document under the Best Evidence Rule, as long as it is a
printout or output readable by sight or other means, showing to reflect
the data accurately. (Rule 4, Section 1, A.M. No. 01-7-01-SC)
The ruling of the Appellate Court is incorrect. R.A. No. 8792,64 otherwise known
as the Electronic Commerce Act of 2000, considers an electronic data message
or an electronic document as the functional equivalent of a written document for
evidentiary purposes.65 The Rules on Electronic Evidence66 regards an electronic
document as admissible in evidence if it complies with the rules on admissibility
prescribed by the Rules of Court and related laws, and is authenticated in the
manner prescribed by the said Rules.67 An electronic document is also the
equivalent of an original document under the Best Evidence Rule, if it is a
printout or output readable by sight or other means, shown to reflect the data
accurately.68
Thus, to be admissible in evidence as an electronic data message or to be
considered as the functional equivalent of an original document under the Best
Evidence Rule, the writing must foremost be an "electronic data message" or an
"electronic document."
The Electronic Commerce Act of 2000 defines electronic data message and
electronic document as follows:
Sec. 5. Definition of Terms. For the purposes of this Act, the following
terms are defined, as follows:
xxx
c. "Electronic Data Message" refers to information generated, sent,
received or stored by electronic, optical or similar means.
xxx
f. "Electronic Document" refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed,
which is received, recorded, transmitted, stored, processed, retrieved or
produced electronically.
The Implementing Rules and Regulations (IRR) of R.A. No. 8792, 69 which was
signed on July 13, 2000 by the then Secretaries of the Department of Trade and
Industry, the Department of Budget and Management, and then Governor of
the Bangko Sentral ng Pilipinas, defines the terms as:
Sec. 6. Definition of Terms. For the purposes of this Act and these
Rules, the following terms are defined, as follows:
xxx
(e) "Electronic Data Message" refers to information generated, sent,
received or stored by electronic, optical or similar means, but not limited
to, electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy. Throughout these Rules, the term "electronic data message"
shall be equivalent to and be used interchangeably with "electronic
document."
xxxx
(h) "Electronic Document" refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed,
which is received, recorded, transmitted, stored, processed, retrieved or
produced electronically. Throughout these Rules, the term "electronic
document" shall be equivalent to and be used interchangeably with
"electronic data message."
The phrase "but not limited to, electronic data interchange (EDI), electronic mail,
telegram, telex or telecopy" in the IRR's definition of "electronic data message" is
copied from the Model Law on Electronic Commerce adopted by the United
Nations Commission on International Trade Law (UNCITRAL),70 from which
majority of the provisions of R.A. No. 8792 were taken. 71 While Congress deleted
this phrase in the Electronic Commerce Act of 2000, the drafters of the IRR
reinstated it. The deletion by Congress of the said phrase is significant and
pivotal, as discussed hereunder.
The clause on the interchangeability of the terms "electronic data message" and
"electronic document" was the result of the Senate of the Philippines' adoption, in
Senate Bill 1902, of the phrase "electronic data message" and the House of
Representative's employment, in House Bill 9971, of the term "electronic
document."72 In order to expedite the reconciliation of the two versions, the
technical working group of the Bicameral Conference Committee adopted both
terms and intended them to be the equivalent of each one.73 Be that as it may,
there is a slight difference between the two terms. While "data message" has
reference to information electronically sent, stored or transmitted, it does not
necessarily mean that it will give rise to a right or extinguish an
obligation,74 unlike an electronic document. Evident from the law, however, is the
legislative intent to give the two terms the same construction.
The Rules on Electronic Evidence promulgated by this Court defines the said
terms in the following manner:
SECTION 1. Definition of Terms. – For purposes of these Rules, the
following terms are defined, as follows:
xxxx
(g) "Electronic data message" refers to information generated, sent,
received or stored by electronic, optical or similar means.
(h) "Electronic document" refers to information or the representation of
information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed,
which is received, recorded, transmitted, stored, processed, retrieved or
produced electronically. It includes digitally signed documents and print-
out or output, readable by sight or other means, which accurately
 reflects the electronic data message or electronic document. For
purposes of these Rules, the term "electronic document" may be used
interchangeably with "electronic data message."
Given these definitions, we go back to the original question: Is an original printout
of a facsimile transmission an electronic data message or electronic document?
The definitions under the Electronic Commerce Act of 2000, its IRR and the
Rules on Electronic Evidence, at first glance, convey the impression
that facsimile transmissions are electronic data messages or electronic
documents because they are sent by electronic means. The expanded definition
of an "electronic data message" under the IRR, consistent with the UNCITRAL
Model Law, further supports this theory considering that the enumeration "xxx [is]
not limited to, electronic data interchange (EDI), electronic mail, telegram, telex
or telecopy." And to telecopy is to send a document from one place to another via
a fax machine.75
As further guide for the Court in its task of statutory construction, Section 37 of
the Electronic Commerce Act of 2000 provides that
Unless otherwise expressly provided for, the interpretation of this
Act shall give due regard to its international origin and the need to
promote uniformity in its application and the observance of good faith in
international trade relations. The generally accepted principles of
international law and convention on electronic commerce shall likewise
be considered.
Obviously, the "international origin" mentioned in this section can only refer to the
UNCITRAL Model Law, and the UNCITRAL's definition of "data message":
"Data message" means information generated, sent, received or stored
by electronic, optical or similar means including, but not limited to,
electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy.76
is substantially the same as the IRR's characterization of an "electronic data
message."
However, Congress deleted the phrase, "but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy," and replaced the
term "data message" (as found in the UNCITRAL Model Law ) with "electronic
data message." This legislative divergence from what is assumed as the term's
"international origin" has bred uncertainty and now impels the Court to make an
inquiry into the true intent of the framers of the law. Indeed, in the construction or
interpretation of a legislative measure, the primary rule is to search for and
determine the intent and spirit of the law.77 A construction should be rejected that
gives to the language used in a statute a meaning that does not accomplish the
purpose for which the statute was enacted, and that tends to defeat the ends
which are sought to be attained by the enactment. 78
Interestingly, when Senator Ramon B. Magsaysay, Jr., the principal author of
Senate Bill 1902 (the predecessor of R.A. No. 8792), sponsored the bill on
second reading, he proposed to adopt the term "data message" as formulated
and defined in the UNCITRAL Model Law.79 During the period of amendments,
however, the term evolved into "electronic data message," and the phrase "but
not limited to, electronic data interchange (EDI), electronic mail, telegram, telex
or telecopy" in the UNCITRAL Model Law was deleted. Furthermore, the term
"electronic data message," though maintaining its description under the
UNCITRAL Model Law, except for the aforesaid deleted phrase, conveyed a
different meaning, as revealed in the following proceedings:
xxxx
Senator Santiago. Yes, Mr. President. I will furnish a copy together with
the explanation of this proposed amendment.
And then finally, before I leave the Floor, may I please be allowed to go
back to Section 5; the Definition of Terms. In light of the acceptance by
the good Senator of my proposed amendments, it will then become
necessary to add certain terms in our list of terms to be defined. I would
like to add a definition on what is "data," what is "electronic record" and
what is an "electronic record system."
If the gentleman will give me permission, I will proceed with the
proposed amendment on Definition of Terms, Section 5.
Senator Magsaysay. Please go ahead, Senator Santiago.
Senator Santiago. We are in Part 1, short title on the Declaration of
Policy, Section 5, Definition of Terms.
At the appropriate places in the listing of these terms that have to be
defined since these are arranged alphabetically, Mr. President, I would
like to insert the term DATA and its definition. So, the amendment will
read: "DATA" MEANS REPRESENTATION, IN ANY FORM, OF
INFORMATION OR CONCEPTS.
The explanation is this: This definition of "data" or "data" as it is now
fashionably pronounced in America - - the definition of "data" ensures
that our bill applies to any form of information in an electronic record,
whether these are figures, facts or ideas.
So again, the proposed amendment is this: "DATA" MEANS
REPRESENTATIONS, IN ANY FORM, OF INFORMATION OR
CONCEPTS.
Senator Magsaysay. May I know how will this affect the definition of
"Data Message" which encompasses electronic records, electronic
writings and electronic documents?
Senator Santiago. These are completely congruent with each other.
These are compatible. When we define "data," we are simply reinforcing
the definition of what is a data message.
Senator Magsaysay. It is accepted, Mr. President.
Senator Santiago. Thank you. The next term is "ELECTRONIC
RECORD." The proposed amendment is as follows:
"ELECTRONIC RECORD" MEANS DATA THAT IS RECORDED OR
STORED ON ANY MEDIUM IN OR BY A COMPUTER SYSTEM OR
OTHER SIMILAR DEVICE, THAT CAN BE READ OR PERCEIVED BY
A PERSON OR A COMPUTER SYSTEM OR OTHER SIMILAR
DEVICE. IT INCLUDES A DISPLAY, PRINTOUT OR OTHER OUTPUT
OF THAT DATA.
The explanation for this term and its definition is as follows: The term
"ELECTRONIC RECORD" fixes the scope of our bill. The record is the
data. The record may be on any medium. It is electronic because it is
recorded or stored in or by a computer system or a similar device.
The amendment is intended to apply, for example, to data on magnetic
strips on cards or in Smart cards. As drafted, it would not apply to
telexes or faxes, except computer-generated faxes, unlike the
United Nations model law on electronic commerce. It would also not
apply to regular digital telephone conversations since the information is
not recorded. It would apply to voice mail since the information has
been recorded in or by a device similar to a computer. Likewise, video
records are not covered. Though when the video is transferred to a
website, it would be covered because of the involvement of the
computer. Music recorded by a computer system on a compact disc
would be covered.
In short, not all data recorded or stored in digital form is covered. A
computer or a similar device has to be involved in its creation or
storage. The term "similar device" does not extend to all devices that
create or store data in digital form. Although things that are not recorded
or preserved by or in a computer system are omitted from this bill, these
may well be admissible under other rules of law. This provision focuses
on replacing the search for originality proving the reliability of systems
instead of that of individual records and using standards to show
systems reliability.
Paper records that are produced directly by a computer system such as
printouts are themselves electronic records being just the means of
intelligible display of the contents of the record. Photocopies of the
printout would be paper record subject to the usual rules about copies,
but the original printout would be subject to the rules of admissibility of
this bill.
However, printouts that are used only as paper records and whose
computer origin is never again called on are treated as paper records. In
that case, the reliability of the computer system that produces the record
is irrelevant to its reliability.
Senator Magsaysay. Mr. President, if my memory does not fail me,
earlier, the lady Senator accepted that we use the term "Data Message"
rather than "ELECTRONIC RECORD" in being consistent with the
UNCITRAL term of "Data Message." So with the new amendment of
defining "ELECTRONIC RECORD," will this affect her accepting of the
use of "Data Message" instead of "ELECTRONIC RECORD"?
Senator Santiago. No, it will not. Thank you for reminding me. The term
I would like to insert is ELECTRONIC DATA MESSAGE in lieu of
"ELECTRONIC RECORD."
Senator Magsaysay. Then we are, in effect, amending the term of the
definition of "Data Message" on page 2A, line 31, to which we have
no objection.
Senator Santiago. Thank you, Mr. President.
xxxx
Senator Santiago. Mr. President, I have proposed all the amendments
that I desire to, including the amendment on the effect of error or
change. I will provide the language of the amendment together with the
explanation supporting that amendment to the distinguished sponsor
and then he can feel free to take it up in any session without any further
intervention.
Senator Magsaysay. Before we end, Mr. President, I understand from
the proponent of these amendments that these are based on
the Canadian E-commerce Law of 1998. Is that not right?
 Senator Santiago. That is correct.80
Thus, when the Senate consequently voted to adopt the term "electronic data
message," it was consonant with the explanation of Senator Miriam Defensor-
Santiago that it would not apply "to telexes or faxes, except computer-generated
faxes, unlike the United Nations model law on electronic commerce." In
explaining the term "electronic record" patterned after the E-Commerce Law of
Canada, Senator Defensor-Santiago had in mind the term "electronic data
message." This term then, while maintaining part of the UNCITRAL Model Law's
terminology of "data message," has assumed a different context, this time,
consonant with the term "electronic record" in the law of Canada. It accounts for
the addition of the word "electronic" and the deletion of the phrase "but not
limited to, electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy." Noteworthy is that the Uniform Law Conference of Canada, explains
the term "electronic record," as drafted in the Uniform Electronic Evidence Act, in
a manner strikingly similar to Sen. Santiago's explanation during the Senate
deliberations:
"Electronic record" fixes the scope of the Act. The record is the data.
The record may be any medium. It is "electronic" because it is recorded
or stored in or by a computer system or similar device. The Act is
intended to apply, for example, to data on magnetic strips on cards, or
in smart cards. As drafted, it would not apply to telexes or faxes (except
computer-generated faxes), unlike the United Nations Model Law on
Electronic Commerce. It would also not apply to regular digital
telephone conversations, since the information is not recorded. It would
apply to voice mail, since the information has been recorded in or by a
device similar to a computer. Likewise video records are not covered,
though when the video is transferred to a Web site it would be, because
of the involvement of the computer. Music recorded by a computer
system on a compact disk would be covered.
In short, not all data recorded or stored in "digital" form is covered. A
computer or similar device has to be involved in its creation or storage.
The term "similar device" does not extend to all devices that create or
store data in digital form. Although things that are not recorded or
preserved by or in a computer system are omitted from this Act, they
may well be admissible under other rules of law. This Act focuses on
replacing the search for originality, proving the reliability of systems
instead of that of individual records, and using standards to show
systems reliability.
Paper records that are produced directly by a computer system, such as
printouts, are themselves electronic records, being just the means of
intelligible display of the contents of the record. Photocopies of the
printout would be paper records subject to the usual rules about copies,
but the "original" printout would be subject to the rules of admissibility of
this Act.
However, printouts that are used only as paper records, and whose
computer origin is never again called on, are treated as paper records.
See subsection 4(2). In this case the reliability of the computer system
that produced the record is relevant to its reliability. 81
There is no question then that when Congress formulated the term "electronic
data message," it intended the same meaning as the term "electronic record" in
the Canada law. This construction of the term "electronic data message,"
which excludes telexes or faxes, except computer-generated faxes, is in
harmony with the Electronic Commerce Law's focus on "paperless"
communications and the "functional equivalent approach"82 that it espouses. In
fact, the deliberations of the Legislature are replete with discussions on
paperless and digital transactions.
Facsimile transmissions are not, in this sense, "paperless," but verily are paper-
based.
A facsimile machine, which was first patented in 1843 by Alexander Bain, 83 is a
device that can send or receive pictures and text over a telephone line. It works
by digitizing an image—dividing it into a grid of dots. Each dot is either on or off,
depending on whether it is black or white. Electronically, each dot is represented
by a bit that has a value of either 0 (off) or 1 (on). In this way, the fax machine
translates a picture into a series of zeros and ones (called a bit map) that can be
transmitted like normal computer data. On the receiving side, a fax machine
reads the incoming data, translates the zeros and ones back into dots, and
reprints the picture.84 A fax machine is essentially an image scanner, a modem
and a computer printer combined into a highly specialized package. The scanner
converts the content of a physical document into a digital image, the modem
sends the image data over a phone line, and the printer at the other end makes a
duplicate of the original document.85 Thus, in Garvida v. Sales, Jr.,86where we
explained the unacceptability of filing pleadings through fax machines, we ruled
that:
A facsimile or fax transmission is a process involving the transmission
and reproduction of printed and graphic matter by scanning an original
copy, one elemental area at a time, and representing the shade or tone
of each area by a specified amount of electric current. The current is
transmitted as a signal over regular telephone lines or via microwave
relay and is used by the receiver to reproduce an image of the
elemental area in the proper position and the correct shade. The
receiver is equipped with a stylus or other device that produces a
printed record on paper referred to as a facsimile.
x x x A facsimile is not a genuine and authentic pleading. It is, at best,
an exact copy preserving all the marks of an original. Without the
original, there is no way of determining on its face whether the facsimile
pleading is genuine and authentic and was originally signed by the party
and his counsel. It may, in fact, be a sham pleading.87
Accordingly, in an ordinary facsimile transmission, there exists an original paper-
based information or data that is scanned, sent through a phone line, and re-
printed at the receiving end. Be it noted that in enacting the Electronic Commerce
Act of 2000, Congress intended virtual or paperless writings to be
the functional equivalent and to have the same legal function as paper-based
documents.88 Further, in a virtual or paperless environment, technically, there is
no original copy to speak of, as all direct printouts of the virtual reality are the
same, in all respects, and are considered as originals. 89 Ineluctably, the law's
definition of "electronic data message," which, as aforesaid, is interchangeable
with "electronic document," could not have included facsimile transmissions,
which have an original paper-based copy as sent and a paper-based
facsimile copy as received. These two copies are distinct from each other, and
have different legal effects. While Congress anticipated future developments in
communications and computer technology90 when it drafted the law, it excluded
the early forms of technology, like telegraph, telex and telecopy (except
computer-generated faxes, which is a newer development as compared to the
ordinary fax machine to fax machine transmission), when it defined the term
"electronic data message."
Clearly then, the IRR went beyond the parameters of the law when it adopted
verbatim the UNCITRAL Model Law's definition of "data message," without
considering the intention of Congress when the latter deleted the phrase "but not
limited to, electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy." The inclusion of this phrase in the IRR offends a basic tenet in the
exercise of the rule-making power of administrative agencies. After all, the power
of administrative officials to promulgate rules in the implementation of a statute is
necessarily limited to what is found in the legislative enactment itself. The
implementing rules and regulations of a law cannot extend the law or expand its
coverage, as the power to amend or repeal a statute is vested in the
Legislature.91 Thus, if a discrepancy occurs between the basic law and an
implementing rule or regulation, it is the former that prevails, because the law
cannot be broadened by a mere administrative issuance—an administrative
agency certainly cannot amend an act of Congress.92 Had the Legislature really
wanted ordinary fax transmissions to be covered by the mantle of the Electronic
Commerce Act of 2000, it could have easily lifted without a bit of tatter the entire
wordings of the UNCITRAL Model Law.
Incidentally, the National Statistical Coordination Board Task Force on the
Measurement of E-Commerce,93 on November 22, 2006, recommended a
working definition of "electronic commerce," as "[a]ny commercial transaction
conducted through electronic, optical and similar medium, mode, instrumentality
and technology. The transaction includes the sale or purchase of goods and
services, between individuals, households, businesses and governments
conducted over computer-mediated networks through the Internet, mobile
phones, electronic data interchange (EDI) and other channels through open and
closed networks." The Task Force's proposed definition is similar to the
Organization of Economic Cooperation and Development's (OECD's) broad
definition as it covers transactions made over any network, and, in addition, it
adopted the following provisions of the OECD definition: (1) for transactions, it
covers sale or purchase of goods and services; (2) for channel/network, it
considers any computer-mediated network and NOT limited to Internet alone;
(3) it excludes transactions received/placed using fax, telephone or non-
interactive mail; (4) it considers payments done online or offline; and (5) it
considers delivery made online (like downloading of purchased books, music or
software programs) or offline (deliveries of goods). 94
We, therefore, conclude that the terms "electronic data message" and "electronic
document," as defined under the Electronic Commerce Act of 2000, do not
include a facsimile transmission. Accordingly, a facsimile transmissioncannot be
considered as electronic evidence. It is not the functional equivalent of an
original under the Best Evidence Rule and is not admissible as electronic
evidence.
Since a facsimile transmission is not an "electronic data message" or an
"electronic document," and cannot be considered as electronic evidence by the
Court, with greater reason is a photocopy of such a fax transmission not
electronic evidence. In the present case, therefore, Pro Forma Invoice Nos. ST2-
POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E" and "F"), which are mere
photocopies of the original fax transmittals, are not electronic evidence, contrary
to the position of both the trial and the appellate courts.
- III -
Nevertheless, despite the pro forma invoices not being electronic evidence, this
Court finds that respondent has proven by preponderance of evidence the
existence of a perfected contract of sale.
In an action for damages due to a breach of a contract, it is essential that the
claimant proves (1) the existence of a perfected contract, (2) the breach thereof
by the other contracting party and (3) the damages which he/she sustained due
to such breach. Actori incumbit onus probandi. The burden of proof rests on the
party who advances a proposition affirmatively.95 In other words, a plaintiff in a
civil action must establish his case by a preponderance of evidence, that is,
evidence that has greater weight, or is more convincing than that which is offered
in opposition to it.96
In general, contracts are perfected by mere consent, 97 which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and the acceptance
absolute.98 They are, moreover, obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are
present.99 Sale, being a consensual contract, follows the general rule that it is
perfected at the moment there is a meeting of the minds upon the thing which is
the object of the contract and upon the price. From that moment, the parties may
reciprocally demand performance, subject to the provisions of the law governing
the form of contracts.100
The essential elements of a contract of sale are (1) consent or meeting of the
minds, that is, to transfer ownership in exchange for the price, (2) object certain
which is the subject matter of the contract, and (3) cause of the obligation which
is established.101
In this case, to establish the existence of a perfected contract of sale between
the parties, respondent Ssangyong formally offered in evidence the testimonies
of its witnesses and the following exhibits:
Exhibit Description
E Pro forma Invoice dated 17 April
2000 with Contract No. ST2-
POSTS0401-1, photocopy
E-1 Pro forma Invoice dated 17 April
2000 with Contract No. ST2-
POSTS0401, contained in
facsimile/thermal paper faxed by
defendants to plaintiff showing the
printed transmission details on the
upper portion of said paper as
coming from defendant MCC on 26
Apr 00 08:41AM
E-2 Conforme signature of Mr. Gregory
Chan, contained in facsimile/thermal
paper faxed by defendants to plaintiff
showing the printed transmission
details on the upper portion of said
paper as coming from defendant
MCC on 26 Apr 00 08:41AM
F Pro forma Invoice dated 17 April
2000 with Contract No. ST2-
POSTSO401-2, photocopy
G Letter to defendant SANYO SEIKE
dated 20 June 2000, contained in
facsimile/thermal paper
G-1 Signature of defendant Gregory
Chan, contained in facsimile/thermal
paper.
H Letter to defendants dated 22 June
2000, original
I Letter to defendants dated 26 June To prove that plaintiff repeatedly
2000, original defendants for the agreed open
Letters of Credit, defendants' fa
J Letter to defendants dated 26 June
2000, original refusal to comply with their oblig
problems of plaintiff is incurring
K Letter to defendants dated 27 June defendants' failure and refusal t
2000, original
L/Cs.
L Facsimile message to defendants
dated 28 June 2000, photocopy
M Letter from defendants dated 29 To prove that defendants admit
Purpose
June 2000, contained in liabilities to plaintiff, that they re
To show that defendants contracted with facsimile/thermal paper faxed by "more extension" of time for the
plaintiff for the delivery of 110 MT of stainless defendants to plaintiff showing the Letter of Credit, and begging for
steel from Korea payable by way of an printed transmission details on the understanding and consideratio
irrevocable letter of credit in favor of plaintiff, upper portion of said paper as
among other conditions. coming from defendant MCC on 29
To show that defendants sent their June 00 11:12 AM
confirmation of the (i) delivery toM-1
it of the Signature of defendant Gregory
specified stainless steel products, (ii) Chan, contained in facsimile/thermal
defendants' payment thereof by way of an paper faxed by defendants to plaintiff
irrevocable letter of credit in favor of plaintiff, showing the printed transmission
among other conditions. details on the upper portion of said
paper as coming from defendant
MCC on June 00 11:12 AM
N Letter to defendants dated 29 June
To show that defendants sent their 2000, original
confirmation of the (i) delivery to it of the total
O Letter to defendants dated 30 June To prove that plaintiff reiterated
of 220MT specified stainless steel products, (ii)
2000, photocopy defendants to L/C opening after
defendants' payment thereof by way of an
request for extension of time wa
irrevocable letter of credit in favor of plaintiff,
defendants' failure and refusal t
among other conditions.
therewith extension of time notw
P Letter to defendants dated 06 July
To show that defendants contracted with
2000, original
plaintiff for delivery of another 110 MT of
stainless steel from Korea payable Q by way of Demand letter to defendants dated To prove that plaintiff was const
an irrevocable letter of credit in favor of 15 Aug 2000, original engaged services of a lawyer fo
plaintiff, among other conditions. efforts.
R
To prove that defendants were informed of the Demand letter to defendants dated To prove that defendants opene
date of L/C opening and 23 Aug 2000, original in favor of plaintiff, requested fo
defendant's conforme/approval thereof. postponement of the final L/C a
amounts, were urged to open th
time, and were informed that fai
will cancel the contract.
S Demand letter to defendants dated To show defendants' refusal an
To prove that defendants were informed of the
11 Sept 2000, original open the final L/C on time, the c
successful price adjustments secured by
the contract as a consequence
plaintiff in favor of former and were advised of
final demand upon defendants t
the schedules of its L/C opening.
obligations.
W Letter from plaintiff SSANGYONG to
defendant SANYO SEIKI dated 13
April 2000, with fax back from
defendants SANYO SEIKI/MCC to
plaintiff SSANGYONG, contained in
facsimile/thermal paper with back-up
photocopy
W-1 Conforme signature of defendant
Gregory Chan, contained in
facsimile/thermal paper with back-up
photocopy
W-2 Name of sender MCC Industrial
Sales Corporation
X Pro forma Invoice dated 16 August
2000, photocopy
X-1 Notation "1/2", photocopy
X-2 Ref. No. ST2-POSTS080-
1, photocopy
X-3 Conforme signature of defendant
Gregory Chan, photocopy
DD Letter from defendant MCC to plaintiff To prove that there was beena perfected
SSANGYONG dated 22 August
2000, contained in facsimile/thermal SSANGYONG and defendant
paper with back-up photocopy
DD-1 Ref. No. ST2-POSTS080-
1, contained in facsimile/thermal
paper with back-up photocopy
DD-2 Signature of defendant Gregory
Chan, contained in facsimile/thermal Gregory Chan, agreedthe
paper with back-up photocopy
To prove that there was a perfected sale and metric tons which was delivered
purchase agreement between the parties for Ssangyong and paid for by defe
220 metric tons of steel products at the price of
US$1,860/ton.
Significantly, among these documentary evidence presented by respondent,
MCC, in its petition before this Court, assails the admissibility only of Pro
Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E"
and "F"). After sifting through the records, the Court found that these invoices
To prove that defendants, actingphotocopies
are mere through of their original fax transmittals. Ssangyong avers that
Gregory Chan, agreedthese to thedocuments
sale and were prepared after MCC asked for the splitting of the original
purchase of 220 metricordertons into
of steel
two,products
so that the latter can apply for an L/C with greater facility. It,
at the price of US$1,860/ton.
however, failed to explain why the originals of these documents were not
To prove that defendantspresented.
sent their conformity
to the sale and purchase agreement by
facsimile transmission.To determine whether these documents are admissible in evidence, we apply the
To prove that defendant ordinary Rules on
MCC agreed Evidence, for as discussed above we cannot apply the
to adjust
and split the confirmedElectronic
purchase Commerce
order into 2Act of 2000 and the Rules on Electronic Evidence.
shipments at 100 metric tons each at the
discounted price of US$1,700/ton.
Because these documents are mere photocopies, they are simply secondary
To prove that the present Pro forma
evidence, Invoice only upon compliance with Rule 130, Section 5, which
admissible
was the first of 2 pro forma
states, invoices.
"[w]hen the original document has been lost or destroyed, or cannot be
produced
To prove that the present in court, the offeror, upon proof of its execution or existence and the
Pro formaInvoice
cause of its unavailability without bad faith on his part, may prove its contents by
was the first of 2 pro formainvoices.
a copy, or by a recital of its contents in some authentic document, or by the
To prove that defendant MCC, acting through
testimony of witnesses in the order stated." Furthermore, the offeror of secondary
Gregory Chan, agreed to the sale and
evidence must prove the predicates thereof, namely: (a) the loss or destruction of
purchase of the balance of 100 metric tons at
the original without bad faith on the part of the proponent/offeror which can be
the discounted price of US$1,700/ton, apart
shown by circumstantial evidence of routine practices of destruction of
from the other order and shipment of 100
documents; (b) the proponent must prove by a fair preponderance of evidence as
metric tons which was delivered by plaintiff
to raise a reasonable inference of the loss or destruction of the original copy; and
SSANGYONG and paid for by defendant MCC.
(c) it must be shown that a diligent and bona fide but unsuccessful search has
made forsale the and
document in the proper place or places. It has been held that
purchase agreement between
where the plaintiff
missing document is the foundation of the action, more strictness in
proof is MCCrequiredfor than
the where the document is only collaterally involved.103
balance of 100 metric tons, apart from the
other order and shipment of 100 metric tons
Given these norms, we find that respondent failed to prove the existence of the
which was delivered by plaintiff SSANGYONG
original fax transmissions of Exhibits E and F, and likewise did not sufficiently
and paid for by defendant MCC.
prove the loss or destruction of the originals. Thus, Exhibits E and F cannot be
To prove that there was a perfected
admitted sale and
in evidence and accorded probative weight.
purchase agreement between plaintiff
SSANGYONG and defendant MCC for the
balance of 100 metric It is observed,
tons, apart fromhowever,
the that respondent Ssangyong did not rely merely on
other order and shipmentExhibits
of 100 E metric
and F to prove the perfected contract. It also introduced in evidence a
tons
which was delivered byvariety of SSANGYONG
plaintiff other documents, as enumerated above, together with the testimonies
of its witnesses. Notable among them are Pro Forma Invoice Nos. ST2-
and paid for by defendant MCC.
POSTS080-1 and ST2-POSTS080-2 which were issued by Ssangyong and sent
To prove that defendant viaMCC,
fax toacting
MCC.through
As already mentioned, these invoices slightly varied the terms of
to the saleinvoices
earlier and such that the quantity was now officially 100MT per invoice
purchase of the balance and ofthe
100price
metric tons, to US$1,700.00 per MT. The copies of the said August 16,
reduced
apart from the other order and shipment of 100
2000 invoices submitted to the court bear the conformity signature of MCC
Manager Chan.
Pro Forma Invoice No. ST2-POSTS080-1 (Exhibit "X"), however, is a mere
photocopy of its original. But then again, petitioner MCC does not assail the
admissibility of this document in the instant petition. Verily, evidence not objected
to is deemed admitted and may be validly considered by the court in arriving at
its judgment.104 Issues not raised on appeal are deemed abandoned.
As to Pro Forma Invoice No. ST2-POSTS080-2 (Exhibits "1-A" and "2-C"), which
was certified by PCIBank as a true copy of its original,105 it was, in fact, petitioner
MCC which introduced this document in evidence. Petitioner MCC paid for the
order stated in this invoice. Its admissibility, therefore, is not open to question.
These invoices (ST2-POSTS0401, ST2-POSTS080-1 and ST2-POSTS080-2),
along with the other unchallenged documentary evidence of respondent
Ssangyong, preponderate in favor of the claim that a contract of sale was
perfected by the parties.
This Court also finds merit in the following observations of the trial court:
Defendants presented Letter of Credit (Exhibits "1", "1-A" to "1-R")
referring to Pro Forma Invoice for Contract No. ST2POSTS080-2, in the
amount of US$170,000.00, and which bears the signature of Gregory
Chan, General Manager of MCC. Plaintiff, on the other hand, presented
Pro Forma Invoice referring to Contract No. ST2-POSTS080-1, in the
amount of US$170,000.00, which likewise bears the signature of
Gregory Chan, MCC. Plaintiff accounted for the notation "1/2" on the
right upper portion of the Invoice, that is, that it was the first of two (2)
pro forma invoices covering the subject contract between plaintiff and
the defendants. Defendants, on the other hand, failed to account for the
notation "2/2" in its Pro Forma Invoice (Exhibit "1-A"). Observably
further, both Pro Forma Invoices bear the same date and details, which
logically mean that they both apply to one and the same transaction. 106
Indeed, why would petitioner open an L/C for the second half of the transaction if
there was no first half to speak of?
The logical chain of events, as gleaned from the evidence of both parties, started
with the petitioner and the respondent agreeing on the sale and purchase of
220MT of stainless steel at US$1,860.00 per MT. This initial contract
was perfected. Later, as petitioner asked for several extensions to pay,
adjustments in the delivery dates, and discounts in the price as originally agreed,
the parties slightly varied the terms of their contract, without necessarily novating
it, to the effect that the original order was reduced to 200MT, split into two
deliveries, and the price discounted to US$1,700 per MT. Petitioner, however,
paid only half of its obligation and failed to open an L/C for the other 100MT.
Notably, the conduct of both parties sufficiently established the existence of a
contract of sale, even if the writings of the parties, because of their contested
admissibility, were not as explicit in establishing a contract. 107 Appropriate
conduct by the parties may be sufficient to establish an agreement, and while
there may be instances where the exchange of correspondence does not
disclose the exact point at which the deal was closed, the actions of the parties
may indicate that a binding obligation has been undertaken. 108
With our finding that there is a valid contract, it is crystal-clear that when
petitioner did not open the L/C for the first half of the transaction (100MT),
despite numerous demands from respondent Ssangyong, petitioner breached its
contractual obligation. It is a well-entrenched rule that the failure of a buyer to
furnish an agreed letter of credit is a breach of the contract between buyer and
seller. Indeed, where the buyer fails to open a letter of credit as stipulated, the
seller or exporter is entitled to claim damages for such breach. Damages for
failure to open a commercial credit may, in appropriate cases, include the loss of
profit which the seller would reasonably have made had the transaction been
carried out.109
- IV -
This Court, however, finds that the award of actual damages is not in accord with
the evidence on record. It is axiomatic that actual or compensatory damages
cannot be presumed, but must be proven with a reasonable degree of
certainty.110 In Villafuerte v. Court of Appeals,111 we explained that:
Actual or compensatory damages are those awarded in order to
compensate a party for an injury or loss he suffered. They arise out of a
sense of natural justice and are aimed at repairing the wrong done.
Except as provided by law or by stipulation, a party is entitled to an
adequate compensation only for such pecuniary loss as he has duly
proven. It is hornbook doctrine that to be able to recover actual
damages, the claimant bears the onus of presenting before the court
actual proof of the damages alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such
pecuniary loss actually suffered by him as he has duly proved.
Such damages, to be recoverable, must not only be capable of
proof, but must actually be proved with a reasonable degree of
certainty. We have emphasized that these damages cannot be
presumed and courts, in making an award must point out
specific facts which could afford a basis for measuring
whatever compensatory or actual damages are borne.112
In the instant case, the trial court awarded to respondent Ssangyong
US$93,493.87 as actual damages. On appeal, the same was affirmed by the
appellate court. Noticeably, however, the trial and the appellate courts, in making
the said award, relied on the following documents submitted in evidence by the
respondent: (1) Exhibit "U," the Statement of Account dated March 30, 2001; (2) DESCRIPTION: Hot Rolled Stainless Steel Coil SUS 304
Exhibit "U-1," the details of the said Statement of Account); (3) Exhibit "V," the
SIZE AND QUANTITY:
contract of the alleged resale of the goods to a Korean corporation; and (4)
Exhibit "V-1," the authentication of the resale contract from the Korean Embassy 2.6 MM X 4' X C 10.0MT
and certification from the Philippine Consular Office. 3.0 MM X 4' X C 25.0MT
4.0 MM X 4' X C 15.0MT
The statement of account and the details of the losses sustained by respondent 4.5 MM X 4' X C 15.0MT
due to the said breach are, at best, self-serving. It was respondent Ssangyong
5.0 MM X 4' X C 10.0MT
itself which prepared the said documents. The items therein are not even
substantiated by official receipts. In the absence of corroborative evidence, the 6.0 MM X 4' X C 25.0MT
said statement of account is not sufficient basis to award actual damages. The TOTAL: 100MT116
court cannot simply rely on speculation, conjecture or guesswork as to the fact
and amount of damages, but must depend on competent proof that the claimant
had suffered, and on evidence of, the actual amount thereof.113 From the foregoing, we find merit in the contention of MCC that Ssangyong did
not adequately prove that the items resold at a loss were the same items ordered
by the petitioner. Therefore, as the claim for actual damages was not proven, the
Furthermore, the sales contract and its authentication certificates, Exhibits "V" Court cannot sanction the award.
and "V-1," allegedly evidencing the resale at a loss of the stainless steel subject
of the parties' breached contract, fail to convince this Court of the veracity of its
contents. The steel items indicated in the sales contract 114 with a Korean Nonetheless, the Court finds that petitioner knowingly breached its contractual
corporation are different in all respects from the items ordered by petitioner MCC, obligation and obstinately refused to pay despite repeated demands from
even in size and quantity. We observed the following discrepancies: respondent. Petitioner even asked for several extensions of time for it to make
good its obligation. But in spite of respondent's continuous accommodation,
petitioner completely reneged on its contractual duty. For such inattention and
List of commodities as stated in Exhibit "V": insensitivity, MCC must be held liable for nominal damages. "Nominal damages
are 'recoverable where a legal right is technically violated and must be vindicated
COMMODITY: Stainless Steel HR Sheet in Coil, Slit Edge against an invasion that has produced no actual present loss of any kind or
SPEC: SUS304 NO. 1 where there has been a breach of contract and no substantial injury or actual
damages whatsoever have been or can be shown.'" 117 Accordingly, the Court
SIZE/Q'TY:
awards nominal damages of P200,000.00 to respondent Ssangyong.
2.8MM X 1,219MM X C 8.193MT
3.0MM X 1,219MM X C 7.736MT As to the award of attorney's fees, it is well settled that no premium should be
3.0MM X 1,219MM X C 7.885MT placed on the right to litigate and not every winning party is entitled to an
3.0MM X 1,219MM X C 8.629MT automatic grant of attorney's fees. The party must show that he falls under one of
the instances enumerated in Article 2208 of the Civil Code. 118 In the instant case,
4.0MM X 1,219MM X C 7.307MT however, the Court finds the award of attorney's fees proper, considering that
4.0MM X 1,219MM X C 7.247MT petitioner MCC's unjustified refusal to pay has compelled respondent Ssangyong
4.5MM X 1,219MM X C 8.450MT to litigate and to incur expenses to protect its rights.
4.5MM X 1,219MM X C 8.870MT
WHEREFORE, PREMISES CONSIDERED, the appeal is PARTIALLY
5.0MM X 1,219MM X C 8.391MT GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 82983
6.0MM X 1,219MM X C 6.589MT is MODIFIED in that the award of actual damages is DELETED. However,
6.0MM X 1,219MM X C 7.878MT petitioner is ORDERED to pay respondent NOMINAL DAMAGES in the amount
of P200,000.00, and the ATTORNEY'S FEES as awarded by the trial court.
6.0MM X 1,219MM X C 8.397MT
TOTAL: 95.562MT115
SO ORDERED.

List of commodities as stated in Exhibit "X" (the invoice that was not
paid):
G.R. No. 164273 March 28, 2007
EMMANUEL B. AZNAR, Petitioner,
vs.
CITIBANK, N.A., (Philippines), Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a Petition for Review assailing the Decision 1 of the Court of
Appeals (CA) in CA-G.R. CV No. 62554 dated January 30, 2004 which set aside
the November 25, 1998 Order of the Regional Trial Court (RTC) Branch 10,
Cebu City and reinstated the Decision of RTC Branch 20 of Cebu City dated May
29, 1998 in Civil Case No. CEB-16474; and the CA Resolution dated May 26,
2004 denying petitioner’s motion for reconsideration.
The facts are as follows:
Emmanuel B. Aznar (Aznar), a known businessman2 in Cebu, is a holder of a
Preferred Master Credit Card (Mastercard) bearing number 5423-3920-0786-
7012 issued by Citibank with a credit limit of ₱150,000.00. As he and his wife,
Zoraida, planned to take their two grandchildren, Melissa and Richard Beane, on
an Asian tour, Aznar made a total advance deposit of ₱485,000.00 with Citibank
with the intention of increasing his credit limit to ₱635,000.00.3
With the use of his Mastercard, Aznar purchased plane tickets to Kuala Lumpur
for his group worth ₱237,000.00. On July 17, 1994, Aznar, his wife and
grandchildren left Cebu for the said destination.4
Aznar claims that when he presented his Mastercard in some establishments in
Malaysia, Singapore and Indonesia, the same was not honored.5 And when he
tried to use the same in Ingtan Tour and Travel Agency (Ingtan Agency) in
Indonesia to purchase plane tickets to Bali, it was again dishonored for the
reason that his card was blacklisted by Citibank. Such dishonor forced him to buy
the tickets in cash.6 He further claims that his humiliation caused by the denial of
his card was aggravated when Ingtan Agency spoke of swindlers trying to use
blacklisted cards.7 Aznar and his group returned to the Philippines on August 10,
1994.8
On August 26, 1994, Aznar filed a complaint for damages against Citibank,
docketed as Civil Case No. CEB-16474 and raffled to RTC Branch 20, Cebu City,
claiming that Citibank fraudulently or with gross negligence blacklisted his
Mastercard which forced him, his wife and grandchildren to abort important tour
destinations and prevented them from buying certain items in their tour.9 He
further claimed that he suffered mental anguish, serious anxiety, wounded
feelings, besmirched reputation and social humiliation due to the wrongful
blacklisting of his card.10 To prove that Citibank blacklisted his Mastercard, Aznar
presented a computer print-out, denominated as ON-LINE AUTHORIZATIONS
FOREIGN ACCOUNT ACTIVITY REPORT, issued to him by Ingtan Agency
(Exh. "G") with the signature of one Victrina Elnado Nubi (Nubi)11 which shows
that his card in question was "DECL OVERLIMIT" or declared over the limit.12
Citibank denied the allegation that it blacklisted Aznar’s card. It also contended
that under the terms and conditions governing the issuance and use of its credit
cards, Citibank is exempt from any liability for the dishonor of its cards by any
merchant affiliate, and that its liability for any action or incident which may be
brought against it in relation to the issuance and use of its credit cards is limited
to ₱1,000.00 or the actual damage proven whichever is lesser.13
To prove that they did not blacklist Aznar’s card, Citibank’s Credit Card
Department Head, Dennis Flores, presented Warning Cancellation Bulletins
which contained the list of its canceled cards covering the period of Aznar’s trip. 14
On May 29, 1998, RTC Branch 20, Cebu City, through Judge Ferdinand J.
Marcos, rendered its decision dismissing Aznar’s complaint for lack of
merit.15 The trial court held that as between the computer print-out16 presented
by Aznar and the Warning Cancellation Bulletins 17 presented by Citibank, the
latter had more weight as their due execution and authenticity were duly
established by Citibank.18 The trial court also held that even if it was shown that
Aznar’s credit card was dishonored by a merchant establishment, Citibank was
not shown to have acted with malice or bad faith when the same was
dishonored.19
Aznar filed a motion for reconsideration with motion to re-raffle the case saying
that Judge Marcos could not be impartial as he himself is a holder of a Citibank
credit card.20 The case was re-raffled21 and on November 25, 1998, the RTC, this
time through Judge Jesus S. De la Peña of Branch 10 of Cebu City, issued an
Order granting Aznar’s motion for reconsideration, as follows:
WHEREFORE, the Motion for Reconsideration is hereby GRANTED. The
DECISION dated May 29, 1998 is hereby reconsidered, and consequently, the
defendant is hereby condemned liable to pay the following sums of money:
a) ₱10,000,000.00 as moral damages;
b) ₱5,000,000.00 as exemplary damages;
c) ₱1,000,000.00 as attorney’s fees; and
d) ₱200,000.00 as litigation expenses.22
Judge De la Peña ruled that: it is improbable that a man of Aznar’s stature would
fabricate Exh. "G" or the computer print-out which shows that Aznar’s Mastercard
was dishonored for the reason that it was declared over the limit; Exh. "G" was
printed out by Nubi in the ordinary or regular course of business in the modern
credit card industry and Nubi was not able to testify as she was in a foreign
country and cannot be reached by subpoena; taking judicial notice of the practice
of automated teller machines (ATMs) and credit card facilities which readily print
out bank account status, Exh. "G" can be received as prima facie evidence of the
dishonor of Aznar’s Mastercard; no rebutting evidence was presented by Citibank
to prove that Aznar’s Mastercard was not dishonored, as all it proved was that
said credit card was not included in the blacklisted cards; when Citibank
accepted the additional deposit of ₱485,000.00 from Aznar, there was an implied
novation and Citibank was obligated to increase Aznar’s credit limit and ensure
that Aznar will not encounter any embarrassing situation with the use of his
Mastercard; Citibank’s failure to comply with its obligation constitutes gross
negligence as it caused Aznar inconvenience, mental anguish and social
humiliation; the fine prints in the flyer of the credit card limiting the liability of the
bank to ₱1,000.00 or the actual damage proven, whichever is lower, is a contract
of adhesion which must be interpreted against Citibank. 23
Citibank filed an appeal with the CA and its counsel filed an administrative case
against Judge De la Peña for grave misconduct, gross ignorance of the law and
incompetence, claiming among others that said judge rendered his decision
without having read the transcripts. The administrative case was held in
abeyance pending the outcome of the appeal filed by Citibank with the
CA.24lawphi1.net
On January 30, 2004, the CA rendered its Decision granting Citibank’s appeal
thus:
WHEREFORE, the instant appeal is GRANTED. The assailed order of the
Regional Trial Court, 7th Judicial Region, Branch 10, Cebu City, in Civil Case No.
CEB-16474, is hereby SET ASIDE and the decision, dated 29 May 1998 of the
Regional Trial Court, 7th Judicial Region, Branch 20, Cebu City in this case is
REINSTATED.
SO ORDERED.25
The CA ruled that: Aznar had no personal knowledge of the blacklisting of his
card and only presumed the same when it was dishonored in certain
establishments; such dishonor is not sufficient to prove that his card was
blacklisted by Citibank; Exh. "G" is an electronic document which must be
authenticated pursuant to Section 2, Rule 5 of the Rules on Electronic
Evidence26 or under Section 20 of Rule 132 of the Rules of Court27 by anyone
who saw the document executed or written; Aznar, however, failed to prove the
authenticity of Exh. "G", thus it must be excluded; the unrefuted testimony of
Aznar that his credit card was dishonored by Ingtan Agency and certain
establishments abroad is not sufficient to justify the award of damages in his
favor, absent any showing that Citibank had anything to do with the said
dishonor; Citibank had no absolute control over the actions of its merchant
affiliates, thus it should not be held liable for the dishonor of Aznar’s credit card
by said establishments.28
Aznar filed a motion for reconsideration which the CA dismissed in its Resolution
dated May 26, 2004.29
Parenthetically, the administrative case against Judge De la Peña was activated
and on April 29, 2005, the Court’s Third Division30 found respondent judge guilty
of knowingly rendering an unjust judgment and ordered his suspension for six
months. The Court held that Judge De la Peña erred in basing his Order on a
manifestation submitted by Aznar to support his Motion for Reconsideration,
when no copy of such manifestation was served on the adverse party and it was
filed beyond office hours. The Court also noted that Judge De la Peña made an
egregiously large award of damages in favor of Aznar which opened himself to
suspicion.31
Aznar now comes before this Court on a petition for review alleging that: the CA
erroneously made its own factual finding that his Mastercard was not blacklisted
when the matter of blacklisting was already a non-issue in the November 25,
1998 Order of the RTC; the RTC found that Aznar’s Mastercard was dishonored
for the reason that it was declared over the credit limit; this factual finding is
supported by Exh. "G" and by his (Aznar’s) testimony; the issue of dishonor on
the ground of ‘DECL OVERLIMIT’, although not alleged in the complaint, was
tried with the implied consent of the parties and should be treated as if raised in
the pleadings pursuant to Section 5, Rule 10 of the Rules of Civil
Procedure;32 Exh. "G" cannot be excluded as it qualifies as an electronic
evidence following the Rules on Electronic Evidence which provides that print-
outs are also originals for purposes of the Best Evidence Rule; Exh. "G" has
remained complete and unaltered, apart from the signature of Nubi, thus the
same is reliable for the purpose for which it was generated; the RTC judge
correctly credited the testimony of Aznar on the issuance of the computer print-
out as Aznar saw that it was signed by Nubi; said testimony constitutes the "other
evidence showing the integrity and reliability of the print-out to the satisfaction of
the judge" which is required under the Rules on Electronic Evidence; the trial
court was also correct in finding that Citibank was grossly negligent in failing to
credit the additional deposit and make the necessary entries in its systems to
prevent Aznar from encountering any embarrassing situation with the use of his
Mastercard.33
Citibank, in its Comment, contends that: Aznar never had personal knowledge
that his credit card was blacklisted as he only presumed such fact; the issue of
dishonor on the ground that the card was declared over the limit was also never
tried with the implied consent of both parties; Aznar’s self-serving testimony is
not sufficient to prove the integrity and reliability of Exh. "G"; Aznar did not
declare that it was Nubi who printed the document and that said document was
printed in his presence as he merely said that the print-out was provided him;
there is also no annotation on Exh. "G" to establish that it was Nubi who printed
the same; assuming further that Exh. "G" is admissible and Aznar’s credit card
was dishonored, Citibank still cannot be held liable for damages as it only shows
that Aznar’s credit card was dishonored for having been declared over the limit;
Aznar’s cause of action against Citibank hinged on the alleged blacklisting of his
card which purportedly caused its dishonor; dishonor alone, however, is not
sufficient to award Aznar damages as he must prove that the dishonor was
caused by a grossly negligent act of Citibank; the award of damages in favor of
Aznar was based on Article 117034 of the Civil Code, i.e., there was fraud,
negligence or delay in the performance of its obligation; there was no proof,
however that Citibank committed fraud or delay or that it contravened its
obligations towards Aznar; the terms and conditions of the credit card cannot be
considered as a contract of adhesion since Aznar was entirely free to reject the
card if he did not want the conditions stipulated therein; a person whose stature
is such that he is expected to be more prudent with respect to his transactions
cannot later on be heard to complain for being ignorant or having been forced
into merely consenting to the contract.35
In his Reply, Aznar contended that to a layman, the term "blacklisting" is
synonymous with the words "hot list" or "declared overlimit"; and whether his card
was blacklisted or declared over the limit, the same was dishonored due to the
fault or gross negligence of Citibank.36
Aznar also filed a Memorandum raising as issues the following:
I. Whether or not the augmentation deposit in the amount of
₱485,000.00 of the Petitioner constitutes relative extinctive novation;
II. Whether or not the purchases made by Petitioner were beyond his
credit limit;
III. Whether or not the issues of dishonor by reason of overlimit was
tried with the consent of the parties;
IV. Whether or not the "On Line Authorization Report" is an electronic
document."
V. Whether or not the "On Line Authorization Report" constitutes
electronic evidence;
VI. Whether or not the agreement between the parties is a contract of
adhesion;
VII. Whether or not the Respondent is negligent in not crediting the
deposits of the Respondent.37
Aznar further averred in his Memorandum that Citibank assured him that with the
use of his Mastercard, he would never be turned down by any merchant store,
and that under Section 43, Rule 130 of the Rules of Court, Exh. "G" is admissible
in evidence.38
Citibank also filed a Memorandum reiterating its earlier arguments. 39
Stripped to its essentials, the only question that needs to be answered is:
whether Aznar has established his claim against Citibank.
The answer is no.
It is basic that in civil cases, the burden of proof rests on the plaintiff to establish
his case based on a preponderance of evidence. The party that alleges a fact
also has the burden of proving it.40
In the complaint Aznar filed before the RTC, he claimed that Citibank blacklisted
his Mastercard which caused its dishonor in several establishments in Malaysia,
Singapore, and Indonesia, particularly in Ingtan Agency in Indonesia where he
was humiliated when its staff insinuated that he could be a swindler trying to use
a blacklisted card.
As correctly found by the RTC in its May 29, 1998 Decision, Aznar failed to prove
with a preponderance of evidence that Citibank blacklisted his Mastercard or
placed the same on the "hot list."41
Aznar in his testimony admitted that he had no personal knowledge that his
Mastercard was blacklisted by Citibank and only presumed such fact from the
dishonor of his card.
Q Now, paragraph 12 also states and I quote: "its entry in the "hot" list was
confirmed to be authentic".
Now, who confirmed that the blacklisting of your Preferred Citibank Mastercard
was authentic?
A. Okey. When I presented this Mastercard, my card rather, at the Merchant’s
store, I do not know, they called up somebody for verification then later they told
me that "your card is being denied". So, I am not in a position to answer that. I do
not know whom they called up; where they verified. So, when it is denied that’s
presumed to be blacklisted.
Q. So the word that was used was denied?
A. Denied.
Q. And after you were told that your card was denied you presumed that it
was blacklisted?
A. Definitely.
Q. So your statement that your card was allegedly blacklisted is only your
presumption drawn from the fact, from your allegations, that it was denied
at the merchandise store?
A. Yes, sir.42 (Emphasis supplied)
The dishonor of Aznar’s Mastercard is not sufficient to support a conclusion that
said credit card was blacklisted by Citibank, especially in view of Aznar’s own
admission that in other merchant establishments in Kuala Lumpur and
Singapore, his Mastercard was accepted and honored.43
Aznar puts much weight on the ON-LINE AUTHORIZATION FOREIGN
ACCOUNT ACTIVITY REPORT, a computer print-out handed to Aznar by Ingtan
Agency, marked as Exh. "G", to prove that his Mastercard was dishonored for
being blacklisted. On said print-out appears the words "DECL OVERLIMIT"
opposite Account No. 5423-3920-0786-7012.
As correctly pointed out by the RTC and the CA, however, such exhibit cannot be
considered admissible as its authenticity and due execution were not sufficiently
established by petitioner.
The prevailing rule at the time of the promulgation of the RTC Decision is Section
20 of Rule 132 of the Rules of Court. It provides that whenever any private
document offered as authentic is received in evidence, its due execution and
authenticity must be proved either by (a) anyone who saw the document
executed or written; or (b) by evidence of the genuineness of the signature or
handwriting of the maker.
Aznar, who testified on the authenticity of Exh. "G," did not actually see the
document executed or written, neither was he able to provide evidence on the
genuineness of the signature or handwriting of Nubi, who handed to him said
computer print-out. Indeed, all he was able to allege in his testimony are the
following:
Q I show to you a Computer Print Out captioned as On Line Authorization Activity
Report where it is shown that the Preferred Master Card Number
5423392007867012 was denied as per notation on the margin of this Computer
Print Out, is this the document evidencing the dishonor of your Preferred Master
Card?
xxxx
A Yes sir, after that Ingtan incident, I went straight to the Service Agency there
and on the left hand side you will be able to see the name of the person in-
charged [sic] there certifying that really my card is being blacklisted and there is
the signature there of the agency.
ATTY. NAVARRO:
The witness, your honor, is pointing to the signature over the handwritten name
of Victrina Elnado Nubi which I pray, your honor, that the Computer Print Out be
marked as our Exhibit "G" and the remarks at the left hand bottom portion of
Victorina Elnado Nubi with her signature thereon be encircled and be marked as
our Exhibit "G-1".
xxxx
Q Mr. Aznar, where did you secure this Computer Print Out marked as
Exhibit "G"?
A This is provided by that Agency, your honor. They were the ones who
provided me with this. So what the lady did, she gave me the Statement
and I requested her to sign to show proof that my Preferred Master Card
has been rejected.44 (Emphasis supplied).
Even if examined under the Rules on Electronic Evidence, which took effect on
August 1, 2001, and which is being invoked by Aznar in this case, the
authentication of Exh. "G" would still be found wanting.
Pertinent sections of Rule 5 read:
Section 1. Burden of proving authenticity. – The person seeking to introduce an
electronic document in any legal proceeding has the burden of proving its
authenticity in the manner provided in this Rule.
Section 2. Manner of authentication. – Before any private electronic document
offered as authentic is received in evidence, its authenticity must be proved by
any of the following means:
(a) by evidence that it had been digitally signed by the person purported
to have signed the same;
(b) by evidence that other appropriate security procedures or devices as
may be authorized by the Supreme Court or by law for authentication of
electronic documents were applied to the document; or
(c) by other evidence showing its integrity and reliability to the
satisfaction of the judge.
Aznar claims that his testimony complies with par. (c), i.e., it constitutes the
"other evidence showing integrity and reliability of Exh. "G" to the satisfaction of
the judge." The Court is not convinced. Aznar’s testimony that the person from
Ingtan Agency merely handed him the computer print-out and that he thereafter
asked said person to sign the same cannot be considered as sufficient to show
said print-out’s integrity and reliability. As correctly pointed out by Judge Marcos
in his May 29, 1998 Decision, Exh. "G" does not show on its face that it was
issued by Ingtan Agency as Aznar merely mentioned in passing how he was able
to secure the print-out from the agency; Aznar also failed to show the specific
business address of the source of the computer print-out because while the
name of Ingtan Agency was mentioned by Aznar, its business address was not
reflected in the print-out.45
Indeed, Aznar failed to demonstrate how the information reflected on the print-out
was generated and how the said information could be relied upon as true. In fact,
Aznar to repeat, testified as follows:
ATTY. NERI
Q Now, paragraph 12 also states and I quote: "its entry in the "hot" list was
confirmed to be authentic"
Now, who confirmed that the blacklisting of your Preferred Citibank Mastercard
was authentic?
A Okey. When I presented this Mastercard, my card rather, at the Merchant’s
store, I do not know, they called up somebody for verification then later they told
me that "your card is being denied". So, I am not in a position to answer that. I do
not know whom they called up; where they verified. So, when it is denied
that’s presumed to be blacklisted.46 (Emphasis supplied)
Aznar next invokes Section 43 of Rule 130 of the Rules of Court, which pertains
to entries in the course of business, to support Exh. "G". Said provision reads:
Sec. 43. Entries in the course of business. – Entries made at, or near the time of
the transactions to which they refer, by a person deceased or unable to testify,
who was in a position to know the facts therein stated, may be received as prima
facie evidence, if such person made the entries in his professional capacity or in
the performance of duty and in the ordinary or regular course of business or duty.
Under this rule, however, the following conditions are required:
1. the person who made the entry must be dead, or unable to testify;
2. the entries were made at or near the time of the transactions to which
they refer;
3. the entrant was in a position to know the facts stated in the entries;
4. the entries were made in his professional capacity or in the
performance of a duty, whether legal, contractual, moral or religious;
and
5. the entries were made in the ordinary or regular course of business or
duty.47
As correctly pointed out by the RTC in its May 29, 1998 Decision, there appears
on the computer print-out the name of a certain "Victrina Elnado Nubi" and a
signature purportedly belonging to her, and at the left dorsal side were
handwritten the words "Sorry for the delay since the records had to be retrieved.
Regards. Darryl Mario." It is not clear therefore if it was Nubi who encoded the
information stated in the print-out and was the one who printed the same. The
handwritten annotation signed by a certain Darryl Mario even suggests that it
was Mario who printed the same and only handed the print-out to Nubi. The
identity of the entrant, required by the provision above mentioned, was therefore
not established. Neither did petitioner establish in what professional capacity did
Mario or Nubi make the entries, or whether the entries were made in the
performance of their duty in the ordinary or regular course of business or duty.
And even if Exh. "G" is admitted as evidence, it only shows that the use of the
credit card of petitioner was denied because it was already over the limit. There
is no allegation in the Complaint or evidence to show that there was gross
negligence on the part of Citibank in declaring that the credit card has been used
over the limit.
The Court is also perplexed that stated on Exh. "G" is the amount of
"6,289,195.10" opposite petitioner's account number, which data, petitioner did
not clarify.48 As plaintiff in this case, it was incumbent on him to prove that he did
not actually incur the said amount which is above his credit limit. As it is, the
Court cannot see how Exh. "G" could help petitioner's claim for damages.
The claim of petitioner that Citibank blacklisted his card through fraud or gross
negligence is likewise effectively negated by the evidence of Citibank which was
correctly upheld by the RTC and the CA, to wit:
xxx Mr. Dennis Flores, the Head of the Credit Card Department of defendant
Bank, presented documents known as Warning Cancellation Bulletin for July 10,
17, 24, and 31, 1994 (Exhibits ‘3’, ‘3-1’ to ‘3-38’, ‘4’, ‘4-1’ to ‘4-38’ ‘5’, ‘5-1’ to ‘5-
39’ and ‘6’, ‘6-1’ to ‘6-39’), for August 7, 1994 (Exhibit[s] ‘7’, ‘7-1’ to ‘7-37’), for
August 8, 1994 (Exhibit[s] ‘8’, ‘8-1’ to ‘8-20’) which show that plaintiff’s Citibank
preferred mastercard was not placed in a hot list or was not blacklisted.
The Warning Cancellation Bulletins (WCB) (Exhibits ‘3’, ‘4’, ‘5’, ‘6’, ‘7’, ‘8’ and
their submarkings) which covered the period of four (4) days in July 1994 (from
July 10, 17, 24 and 31, 1994), and two (2) days in August 1994, (August 7 and 8,
1994), when plaintiff traveled in the aforementioned Asian countries showed that
said Citibank preferred mastercard had never been placed in a ‘hot list’ or the
same was blacklisted, let alone the fact that all the credit cards which had been
cancelled by the defendant bank were all contained, reported and listed in said
Warning Cancellation Bulletin which were issued and released on a regular
basis.
These three hundred (300) Warning Cancellation Bulletins pieces of
documentary proofs, all in all, adduced by defendant pointed to the fact that said
plaintiff’s credit car (sic) was not among those found in said bulletins as having
been cancelled for the period for which the said bulletins had been issued.
Between said computer print out (Exhibit ‘G’) and the Warning Cancellation
Bulletins (Exhibits ‘3’ to ‘8’ and their submarkings) the latter documents adduced
by defendant are entitled to greater weight than that said computer print out
presented by plaintiff that bears on the issue of whether the plaintiff’s preferred
master card was actually placed in the ‘hot list’ or blacklisted for the following
reasons:
COURT:
Q When was this ticket purchased, after the account was augmented
or before?
A After the account was augmented, Your Honor, because there is no way we
can approve a P250,000.00 purchase with a P150,000.00 credit limit. 51
xxx
ATTY. NERI:
For the record, your honor, the deposit of P450,000.00 was made as per
exhibit of the plaintiff on June 28. The purchase of the tickets amount to
P237,000.00 was approved and debited on the account of Mr. Aznar on July
20, your honor. The deposit was made about a month before the purchase
of the tickets as per documentary exhibits, your honor.

The first reason is that the due execution and authentication of these Warning COURT:
Cancellation Bulletins (or WCB) have been duly established and identified by
defendant’s own witness, Dennis Flores, one of the bank’s officers, who is the
head of its credit card department, and, therefore, competent to testify on the So, Atty. Navarro, what do you say to that explanation?
said bulletins as having been issued by the defendant bank showing that
plaintiff’s preferred master credit card was never blacklisted or placed in the ATTY. NAVARRO [counsel of petitioner]:
Bank’s ‘hot list’. But on the other hand, plaintiff’s computer print out (Exhibit ‘G’)
was never authenticated or its due execution had never been duly established.
That is correct, your honor, that is borne out by the records, your
Thus, between a set of duly authenticated commercial documents, the Warning
honor. (Emphasis supplied)
Cancellation Bulletins (Exhibits ‘3’ to ‘8’ and their submarkings), presented by
defendants (sic) and an unauthenticated private document, plaintiff’s computer
print out (Exhibit ‘G’), the former deserves greater evidentiary weight supporting COURT: (to witness)
the findings of this Court that plaintiff’s preferred master card (Exhibit ‘1’) had
never been blacklisted at all or placed in a so-called ‘hot list’ by defendant.49 Q So, I think Atty. Navarro is only after whether a credit line could be extended?

Petitioner next argues that with the additional deposit he made in his account A Yes, your honor.
which was accepted by Citibank, there was an implied novation and Citibank was
under the obligation to increase his credit limit and make the necessary entries in
Q Even if there is no augmenting?
its computerized systems in order that petitioner may not encounter any
embarrassing situation with the use of his credit card. Again, the Court finds that
petitioner's argument on this point has no leg to stand on. A No, sir, it is not possible. So, the only way the ₱237,000.00 transaction
could be approved was by way of advance payment which actually
happened in this case because there is no way that the ₱237,000.00 can be
Citibank never denied that it received petitioner’s additional deposit.50 It even
approved with the ₱150,000.00 credit limit.52 (Emphasis supplied)
claimed that petitioner was able to purchase plane tickets from Cebu to Kuala
Lumpur in the amount of ₱237,170.00, which amount was beyond his
₱150,000.00 limit, because it was able to credit petitioner’s additional deposit to The allegations of blacklisting not having been proved, is Citibank liable for
his account. Flores of Citibank testified: damages for the dishonor of Aznar’s Mastercard?
Again, the answer is no.
Citibank, in its attempt to evade liability, invokes paragraphs 7 and 15 of the
terms and conditions governing the issuance of its Mastercard which read:
7. MERCHANT AFFILIATES. [Citibank is] not responsible if the Card is not
honored by any merchant affiliate for any reason. Furthermore, [the cardholder]
will not hold [Citibank] responsible for any defective product or service purchased
through the Card.
xxxx
15. LIMITATION OF LIABILITY. In any action arising from this agreement or any
incident thereto which [the cardholder] or any other party may file against
[Citibank], [Citibank’s] liability shall not exceed One Thousand Pesos [₱1,000.00]
or the actual damages proven, whichever is lesser.53
On this point, the Court agrees with Aznar that the terms and conditions of
Citibank’s Mastercard constitute a contract of adhesion. It is settled that contracts
between cardholders and the credit card companies are contracts of adhesion,
so-called, because their terms are prepared by only one party while the other
merely affixes his signature signifying his adhesion thereto. 54
In this case, paragraph 7 of the terms and conditions states that "[Citibank is] not
responsible if the Card is not honored by any merchant affiliate for any reason x x
x". While it is true that Citibank may have no control of all the actions of its
merchant affiliates, and should not be held liable therefor, it is incorrect, however,
to give it blanket freedom from liability if its card is dishonored by any merchant
affiliate for any reason. Such phrase renders the statement vague and as the
said terms and conditions constitute a contract of adhesion, any ambiguity in its
provisions must be construed against the party who prepared the contract,55 in
this case Citibank.
Citibank also invokes paragraph 15 of its terms and conditions which limits its
liability to ₱1,000.00 or the actual damage proven, whichever is lesser.
Again, such stipulation cannot be considered as valid for being unconscionable
as it precludes payment of a larger amount even though damage may be clearly
proven. This Court is not precluded from ruling out blind adherence to the terms
of a contract if the attendant facts and circumstances show that they should be
ignored for being obviously too one-sided.56
The invalidity of the terms and conditions being invoked by Citibank,
notwithstanding, the Court still cannot award damages in favor of petitioner.
It is settled that in order that a plaintiff may maintain an action for the injuries of
which he complains, he must establish that such injuries resulted from a breach
of duty which the defendant owed to the plaintiff – a concurrence of injury to the
plaintiff and legal responsibility by the person causing it. The underlying basis for
the award of tort damages is the premise that an individual was injured in
contemplation of law; thus there must first be a breach before damages may be
awarded and the breach of such duty should be the proximate cause of the
injury.57
It is not enough that one merely suffered sleepless nights, mental anguish or
serious anxiety as a result of the actuations of the other party. It is also required
that a culpable act or omission was factually established, that proof that the
wrongful act or omission of the defendant is shown as the proximate cause of the
damage sustained by the claimant and that the case is predicated on any of the
instances expressed or envisioned by Arts. 221958 and 222059 of the Civil
Code.60
In culpa contractual or breach of contract, moral damages are recoverable only if
the defendant has acted fraudulently or in bad faith, or is found guilty of gross
negligence amounting to bad faith, or in wanton disregard of his contractual
obligations. The breach must be wanton, reckless, malicious or in bad faith,
oppressive or abusive.61
While the Court commiserates with Aznar for whatever undue embarrassment he
suffered when his credit card was dishonored by Ingtan Agency, especially when
the agency’s personnel insinuated that he could be a swindler trying to use
blacklisted cards, the Court cannot grant his present petition as he failed to show
by preponderance of evidence that Citibank breached any obligation that would
make it answerable for said suffering.
As the Court pronounced in BPI Express Card Corporation v. Court of Appeals,62
We do not dispute the findings of the lower court that private respondent suffered
damages as a result of the cancellation of his credit card. However, there is a
material distinction between damages and injury. Injury is the illegal invasion of a
legal right; damage is the loss, hurt, or harm which results from the injury; and
damages are the recompense or compensation awarded for the damage
suffered. Thus, there can be damage without injury to those instances in which
the loss or harm was not the result of a violation of a legal duty. In such cases,
the consequences must be borne by the injured person alone, the law affords no
remedy for damages resulting from an act which does not amount to a legal
injury or wrong. These situations are often called damnum absque injuria.63
WHEREFORE, the petition is denied for lack of merit.
SO ORDERED.
G.R. No. 170491 April 4, 2007
NATIONAL POWER CORPORATION, Petitioner,
vs.
HON. RAMON G. CODILLA, JR., Presiding Judge, RTC of Cebu, Br. 19,
BANGPAI SHIPPING COMPANY, and WALLEM SHIPPING,
INCORPORATED, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Civil Procedure, assailing the Decision1 of the Court of Appeals in CA-G.R. CEB-
SP No. 00848, dated 9 November 2005, which dismissed the Petition for
Certiorari filed by the National Power Corporation seeking to set aside the
Order2 issued by the Regional Trial Court (RTC) of Cebu, Branch 19 dated 16
November 2004, denying admission and excluding from the records plaintiff’s
(herein petitioner) Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I", "J",
and its sub-markings, "K", "L", "M" and its sub-markings, "N" and its sub-
markings, "O", "P" and its sub-markings, "Q" and its sub-markings, "R" and "S"
and its sub-markings.
On 20 April 1996, M/V Dibena Win, a vessel of foreign registry owned and
operated by private respondent Bangpai Shipping, Co., allegedly bumped and
damaged petitioner’s Power Barge 209 which was then moored at the Cebu
International Port. Thus, on 26 April 1996, petitioner filed before the Cebu RTC a
complaint for damages against private respondent Bangpai Shipping Co., for the
alleged damages caused on petitioner’s power barges.
Thereafter, petitioner filed an Amended Complaint dated 8 July 1996 impleading
herein private respondent Wallem Shipping, Inc., as additional defendant,
contending that the latter is a ship agent of Bangpai Shipping Co. On 18
September 1996, Wallem Shipping, Inc. filed a Motion to Dismiss which was
subsequently denied by public respondent Judge in an Order dated 20 October
1998. Bangpai Shipping Co. likewise filed a Motion to Dismiss which was also
denied by public respondent Judge in an Order issued on 24 January 2003.
Petitioner, after adducing evidence during the trial of the case, filed a formal offer
of evidence before the lower court on 2 February 2004 consisting of Exhibits "A"
to "V" together with the sub-marked portions thereof. Consequently, private
respondents Bangpai Shipping Co. and Wallem Shipping, Inc. filed their
respective objections to petitioner’s formal offer of evidence.
On 16 November 2004, public respondent judge issued the assailed order
denying the admission and excluding from the records petitioner’s Exhibits "A",
"C", "D", "E", "H" and its sub-markings, "I", "J" and its sub-markings, "K", "L", "M"
and its sub-markings, "N" and its sub-markings, "O", "P" and its sub-markings,
"Q" and its sub-markings, "R" and "S" and its sub-markings. According to the
court a quo:
The Court finds merit in the objections raised and the motion to strike out filed
respectively by the defendants. The record shows that the plaintiff has been
given every opportunity to present the originals of the Xerox or photocopies of
the documents it offered. It never produced the originals. The plaintiff attempted
to justify the admission of the photocopies by contending that "the photocopies
offered are equivalent to the original of the document" on the basis of the
Electronic Evidence (Comment to Defendant Wallem Philippines’ Objections and
Motion to Strike). But as rightly pointed out in defendant Wallem’s Reply to the
Comment of Plaintiff, the Xerox copies do not constitute the electronic evidence
defined in Section 1 of Rule 2 of the Rules on Electronic Evidence as follows:
"(h) "Electronic document" refers to information or the representation of
information, data, figures, symbols or other models of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which is
received, recorded, transmitted, stored, processed, retrieved or produced
electronically. It includes digitally signed documents and any printout, readable
by sight or other means which accurately reflects the electronic data message or
electronic document. For the purpose of these Rules, the term "electronic
document" may be used interchangeably with "electronic data message".
The information in those Xerox or photocopies was not received, recorded,
retrieved or produced electronically. Moreover, such electronic evidence must be
authenticated (Sections 1 and 2, Rule 5, Rules on Electronic Evidence), which
the plaintiff failed to do. Finally, the required Affidavit to prove the admissibility
and evidentiary weight of the alleged electronic evidence (Sec. 1, Rule 9, Ibid)
was not executed, much less presented in evidence.
The Xerox or photocopies offered should, therefore, be stricken off the record.
Aside from their being not properly identified by any competent witness, the loss
of the principals thereof was not established by any competent proof.
xxxx
WHEREFORE, plaintiff’s Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I",
"J", and its sub-markings, "K", "L", "M" and its sub-markings, "N" and its sub-
markings, "O", "P" and its sub-markings, "Q" and its sub-markings, and "R" are
hereby DENIED admission and excluded from the records. However, these
excluded evidence should be attached to the records of this case to enable the
appellate court to pass upon them should an appeal be taken from the decision
on the merits to be rendered upon the termination of the trial of this case.
Exhibits "S" and its sub-markings are also DENIED admission for lack of proper
identification since the witness who brought these pictures expressly admitted
that he was not present when the photos were taken and had not knowledge
when the same where taken.3
Upon denial of petitioner’s Motion for Reconsideration in an Order dated 20 April
2005, petitioner filed a Petition for Certiorari under Rule 65 of the Rules of Civil
Procedure before the Court of Appeals maintaining that public respondent Judge
acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
denying the admission of its Exhibits "A", "C", "D", "E", "H" and its sub-markings,
"I", "J" and its sub-markings, "K", "L", "M" and its sub-markings, "N" and its sub-
markings, "O", "P" and its sub-markings, "Q" and its sub-markings, "R", and "S"
and its sub-markings.
On 9 November 2005, the appellate court issued a Decision dismissing
petitioner’s petition for certiorari, the pertinent portions of which elucidate:
After a judicious scrutiny of the record of the case on hand, together with the
rules and jurisprudence which are applicable in the premises, we have come up
with a finding that the petition for certiorari filed in this case is not meritorious.
It appears that there is no sufficient showing by the petitioner that the respondent
judge acted with grave abuse of discretion in issuing the assailed orders in Civil
Case No. CEB-18662. As what our jurisprudence tells us, grave abuse of
discretion is meant such capricious and whimsical exercise of judgment as would
be equivalent to lack of jurisdiction x x x.
In the case at bench, what has been shown to the contrary by the totality of the
record on hand is that the respondent judge acted correctly and within the pale of
his sound discretion in issuing the assailed order, dated November 16, 2004, in
Civil Case No. CEB-18662.
Indeed, it appears that the pieces of petitioner’s documentary evidence which
were denied admission by the respondent judge were not properly identified by
any competent witness. As pointed out by the respondent Bangpai Shipping
Company in its comment on the petition filed in this case which reproduces some
excerpts of the testimonies in the court a quo of Atty. Marianito De Los Santos,
Engr. Nestor Enriquez, Jr. and Mr. Rodulfo I. Pagaling, the said witnesses did not
have personal knowledge of and participation in the preparation and making of
the pieces of documentary evidence denied admission by respondent judge x x
x. In other words, there was lack of proper identification of said pieces of
documentary evidence. x x x.
Then another ground for denying admission of petitioner’s Exhibits A, C, D, E, H,
I, J, K, L, M, N, O, P, Q, R, and S by the respondent judge is that said pieces of
documentary evidence were merely photocopies of purported documents or
papers. There is no gainsaying the fact that the respondent judge acted within
the pale of his discretion when he denied admission of said documentary
evidence. Section 3 of Rule 130 of the Rules of Court of the Philippines is very
explicit in providing that, when the subject of inquiry are the contents of
documents, no evidence shall be admissible other than the original documents
themselves, except in certain cases specifically so enumerated therein, and the
petitioner has not shown that the non-presentation or non-production of its
original documentary pieces of evidence falls under such exceptions. As aptly
pointed out by the respondent judge in the order issued by him on November 16,
2004:
"x x x The record shows that the plaintiff (petitioner herein) has been given every
opportunity to present the originals of the Xerox or photocopies of the documents
it offered. It never produced said originals."
So, the petitioner has only itself to blame for the respondent judge’s denial of
admission of its aforementioned documentary evidence.
Of course, the petitioner tries to contend that the photocopies of documents
offered by it are equivalent to the original documents that it sought to offer in
evidence, based on the Rules on Electronic Evidence which were in force and
effect since August 1, 2001. However, such a contention is devoid of merit. The
pieces of documentary evidence offered by the petitioner in Civil Case CEB-
18662 which were denied admission by the respondent judge do not actually
constitute as electronic evidence as defined in the Rules on Electronic Evidence.
The informations therein were not received, retrieved or produced electronically.
The petitioner has not adequately established that its documentary evidence
were electronic evidence. it has not properly authenticated such evidence as
electronic documents, assuming arguendo that they are. Lastly, the petitioner
has not properly established by affidavit pursuant to Rule 9 of the Rules on
Electronic Evidence the admissibility and evidentiary weight of said documentary
evidence.
Thus, by any legal yardstick, it is manifest that the respondent judge did not
commit grave abuse of discretion in denying admission of the aforementioned
documentary evidence of petitioner.
But even if it be granted just for the sake of argument that the respondent judge
committed an error in denying the aforementioned documentary evidence of the
petitioner, still the petition for certiorari filed in this case must fail. Such error
would at most be only an error of law and not an error of jurisdiction. In Lee vs.
People, 393 SCRA 397, the Supreme Court of the Philippines said that certiorari
will not lie in case of an error of law. x x x.
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered
by us DISMISSING the petition filed in this case and AFFIRMING the assailed
orders issued by respondent judge in Civil Case No. CEB-18662.4
Aggrieved by the aforequoted decision, petitioner filed the instant petition.
The focal point of this entire controversy is petitioner’s obstinate contention that
the photocopies it offered as formal evidence before the trial court are the
functional equivalent of their original based on its inimitable interpretation of the
Rules on Electronic Evidence.
Petitioner insists that, contrary to the rulings of both the trial court and the
appellate court, the photocopies it presented as documentary evidence actually
constitute electronic evidence based on its own premise that an "electronic
document" as defined under Section 1(h), Rule 2 of the Rules on Electronic
Evidence is not limited to information that is received, recorded, retrieved or
produced electronically. Rather, petitioner maintains that an "electronic
document" can also refer to other modes of written expression that is produced
electronically, such as photocopies, as included in the section’s catch-all proviso:
"any print-out or output, readable by sight or other means".
We do not agree.
In order to shed light to the issue of whether or not the photocopies are indeed
electronic documents as contemplated in Republic Act No. 8792 or the
Implementing Rules and Regulations of the Electronic Commerce Act, as well as
the Rules on Electronic Evidence, we shall enumerate the following documents
offered as evidence by the petitioner, to wit:
1. Exhibit "A" is a photocopy of a letter manually signed by a certain
Jose C. Troyo, with "RECEIVED" stamped thereon, together with a
handwritten date;
2. Exhibit "C" is a photocopy of a list of estimated cost of damages of
petitioner’s power barges 207 and 209 prepared by Hopewell Mobile
Power Systems Corporation and manually signed by Messrs. Rex
Malaluan and Virgilio Asprer;
3. Exhibit "D" is a photocopy of a letter manually signed by a certain
Nestor G. Enriquez, Jr., with "RECEIVED" stamped thereon, together
with a handwritten notation of the date it was received;
4. Exhibit "E" is a photocopy of a Standard Marine Protest Form which
was filled up and accomplished by Rex Joel C. Malaluan in his own
handwriting and signed by him. Portions of the Jurat were handwritten,
and manually signed by the Notary Public;
5. Exhibit "H" is a photocopy of a letter manually signed by Mr. Nestor
G. Enriquez, Jr. with "RECEIVED" stamped thereon, together with a
handwritten notation of the date it was received;
6. Exhibit "I" is a photocopy of a computation of the estimated energy
loss allegedly suffered by petitioner which was manually signed by Mr.
Nestor G. Enriquez, Jr.;
7. Exhibit "J" is a photocopy of a letter containing the breakdown of the
cost estimate, manually signed by Mr. Nestor G. Enriquez, Jr., with
"RECEIVED" stamped thereon, together with a handwritten notation of
the date it was received, and other handwritten notations;
8. Exhibit "K" is a photocopy of the Subpoena Duces Tecum Ad
Testificandum written using a manual typewriter, signed manually by
Atty. Ofelia Polo-De Los Reyes, with a handwritten notation when it was
received by the party;
9. Exhibit "L" is a photocopy of a portion of the electricity supply and
operation and maintenance agreement between petitioner and
Hopewell, containing handwritten notations and every page containing
three unidentified manually placed signatures;
10. Exhibit "M" is a photocopy of the Notice of Termination with
attachments addressed to Rex Joel C. Malaluan, manually signed by
Jaime S. Patinio, with a handwritten notation of the date it was received.
The sub-markings also contain manual signatures and/or handwritten
notations;
11. Exhibit "N" is a photocopy of a letter of termination with attachments
addressed to VIrgilio Asprer and manually signed by Jaime S. Patino.
The sub-markings contain manual signatures and/or handwritten
notations;
12. Exhibit "O" is the same photocopied document marked as Annex C;
13. Exhibit "P" is a photocopy of an incident report manually signed by
Messrs. Malaluan and Bautista and by the Notary Public, with other
handwritten notations;
14. Exhibit "Q" is a photocopy of a letter manually signed by Virgilio
Asprer and by a Notary Public, together with other handwritten
notations.
On the other hand, an "electronic document" refers to information or the
representation of information, data, figures, symbols or other models of written
expression, described or however represented, by which a right is established or
an obligation extinguished, or by which a fact may be proved and affirmed, which
is received, recorded, transmitted, stored, processed, retrieved or produced
electronically.5 It includes digitally signed documents and any printout, readable
by sight or other means which accurately reflects the electronic data message or
electronic document.6
The rules use the word "information" to define an electronic document received,
recorded, transmitted, stored, processed, retrieved or produced electronically.
This would suggest that an electronic document is relevant only in terms of the
information contained therein, similar to any other document which is presented
in evidence as proof of its contents.7 However, what differentiates an electronic
document from a paper-based document is the manner by which the information
is processed; clearly, the information contained in an electronic document is
received, recorded, transmitted, stored, processed, retrieved or produced
electronically.
A perusal of the information contained in the photocopies submitted by petitioner
will reveal that not all of the contents therein, such as the signatures of the
persons who purportedly signed the documents, may be recorded or produced
electronically. By no stretch of the imagination can a person’s signature affixed
manually be considered as information electronically received, recorded,
transmitted, stored, processed, retrieved or produced. Hence, the argument of
petitioner that since these paper printouts were produced through an electronic
process, then these photocopies are electronic documents as defined in the
Rules on Electronic Evidence is obviously an erroneous, if not preposterous,
interpretation of the law. Having thus declared that the offered photocopies are
not tantamount to electronic documents, it is consequential that the same may
not be considered as the functional equivalent of their original as decreed in the
law.
Furthermore, no error can be ascribed to the court a quo in denying admission
and excluding from the records petitioner’s Exhibits "A", "C", "D", "E", "H" and its
sub-markings, "I", "J" and its sub-markings, "K", "L", "M" and its sub-markings,
"N" and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-
markings, and "R". The trial court was correct in rejecting these photocopies as
they violate the best evidence rule and are therefore of no probative value being
incompetent pieces of evidence. Before the onset of liberal rules of discovery,
and modern technique of electronic copying, the best evidence rule was
designed to guard against incomplete or fraudulent proof and the introduction of
altered copies and the withholding of the originals.8 But the modern justification
for the rule has expanded from the prevention of fraud to a recognition that
writings occupy a central position in the law.9The importance of the precise terms
of writings in the world of legal relations, the fallibility of the human memory as
reliable evidence of the terms, and the hazards of inaccurate or incomplete
duplicate are the concerns addressed by the best evidence rule. 10
Moreover, as mandated under Section 2, Rule 130 of the Rules of Court:
"SECTION 2. Original writing must be produced; exceptions. — There can be no
evidence of a writing the contents of which is the subject of inquiry, other than the
original writing itself, except in the following cases:
(a) When the original has been lost, destroyed, or cannot be produced
in court;
(b) When the original is in the possession of the party against whom the
evidence is offered, and the latter fails to produce it after reasonable
notice;
(c) When the original is a record or other document in the custody of a
public officer;
(d) When the original has been recorded in an existing record a certified
copy of which is made evidence by law;
(e) 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."
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.11 The offeror of secondary evidence is burdened to
prove the predicates thereof: (a) the loss or destruction of the original without bad
faith on the part of the proponent/offeror which can be shown by circumstantial
evidence of routine practices of destruction of documents;12 (b) the proponent
must prove by a fair preponderance of evidence as to raise a reasonable
inference of the loss or destruction of the original copy; and (c) it must be shown
that a diligent and bona fide but unsuccessful search has been made for the
document in the proper place or places.13 However, in the case at bar, though
petitioner insisted in offering the photocopies as documentary evidence, it failed
to establish that such offer was made in accordance with the exceptions as
enumerated under the abovequoted rule. Accordingly, we find no error in the
Order of the court a quo denying admissibility of the photocopies offered by
petitioner as documentary evidence.
Finally, it perplexes this Court why petitioner continued to obdurately disregard
the opportunities given by the trial court for it to present the originals of the
photocopies it presented yet comes before us now praying that it be allowed to
present the originals of the exhibits that were denied admission or in case the
same are lost, to lay the predicate for the admission of secondary evidence. Had
petitioner presented the originals of the documents to the court instead of the
photocopies it obstinately offered as evidence, or at the very least laid the
predicate for the admission of said photocopies, this controversy would not have
unnecessarily been brought before the appellate court and finally to this Court for
adjudication. Had it not been for petitioner’s intransigence, the merits of
petitioner’s complaint for damages would have been decided upon by the trial
court long ago. As aptly articulated by the Court of Appeals, petitioner has only
itself to blame for the respondent judge’s denial of admission of its
aforementioned documentary evidence and consequently, the denial of its prayer
to be given another opportunity to present the originals of the documents that
were denied admission nor to lay the predicate for the admission of secondary
evidence in case the same has been lost.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The

Decision of the Court of Appeals in CA-G.R. CEB-SP No. 00848, dated 9
November 2005 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
 FIRST DIVISION
[G.R. NO. 163011 : June 7, 2007]
DUVAZ CORPORATION, Petitioner, v. EXPORT AND INDUSTRY
BANK, Respondent.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this Petition for Review under Rule 45 of
the Rules of Court is the Decision1 dated March 26, 2004 of the Court of Appeals
(CA) in CA-G.R. SP No. 75903, nullifying an earlier Order of the Regional Trial
Court (RTC) of Makati City, Branch 143, which granted petitioner's prayer for a
writ of preliminary injunction in its Civil Case No. 02-1029, an action for
reformation of instrument thereat instituted by the petitioner against the herein
respondent, Export and Industry Bank (EIB).
The relevant facts, pertaining to the sole issue of whether the CA gravely erred
when it nullified the RTC's order granting petitioner's prayer for a writ of
preliminary injunction in Civil Case No. 02-1029, are as follows:
During the period 1994-1995, RDR Property Holdings, Inc. (RDR), which was a
subsidiary of petitioner Duvaz Corporation (Duvaz) until it was eventually
absorbed by the latter, obtained various loans from the then Urban Banking
Corporation (Urban Bank) to finance its real estate business. These loans were
secured by real estate mortgages on seventeen (17) condominium units and
thirty (30) parking slots at The Peak Condominium situated at 107 Alfaro St.,
Salcedo Village, Makati City.
Sometime after it declared a bank holiday on April 25, 2000, Urban Bank was
acquired and merged with respondent EIB.
Meanwhile, as a consequence of RDR being absorbed by petitioner Duvaz, the
latter acquired all the assets and liabilities of the former, more specifically RDR's
loan obligations with Urban Bank, which loan obligations were later transferred to
respondent EIB as a result of the corporate merger of the two banks.
With the 1997 Asian financial crisis sending the Philippine economy into turmoil,
petitioner Duvaz defaulted in the payment of its loan obligations with Urban Bank
as they fell due. On record, petitioner and Urban Bank mutually agreed to the
restructuring of the former's indebtedness. By virtue of said loan restructuring,
petitioner executed in favor of Urban Bank twelve (12) promissory notes for P20
Million each and one (1) promissory note for P23 Million, or a total of P263
Million, with a uniform interest rate of 18.75% per annum, and all to mature on
October 31, 2000.
Respondent EIB took over the operations of Urban Bank sometime before
maturity of the restructured loans. Eventually, the restructured loans matured and
became due and demandable. Because the loans remained unpaid, however,
respondent EIB required petitioner Duvaz to submit a mutually acceptable plan
for the payment of the loan which, as of June 30, 2002, already amounted
to P562,157,530.02 inclusive of interest and penalty charges. However, instead
of submitting any proposal for a plan of payment, as required by respondent,
petitioner protested the total amount of obligation being demanded upon.
On August 8, 2002, respondent EIB sent a final demand letter to petitioner to
settle its obligations.
It was on account of said demand letter that on August 29, 2002, in the RTC of
Makati City, petitioner Duvaz filed against respondent EIB a complaint for
reformation of instrument with prayer for a temporary restraining order and/or writ
of preliminary injunction to enjoin EIB, as defendant in the suit, from commencing
any foreclosure proceedings on the mortgaged properties of the petitioner as
plaintiff. In its complaint, docketed in the same court as Civil Case No. 02-1029
and raffled to Branch 143 thereof, Duvaz alleged that its real agreement of
dacion en pago with Urban Bank (EIB's predecessor-in-interest), which true
agreement was intended for the full and complete settlement of its entire
obligation, was not reflected in the loan-restructuring agreement that was entered
into in 1998, hence, the need to modify the terms thereof to reflect the parties'
true intention.
Pending determination of the merit of petitioner's prayer for a writ of preliminary
injunction, the parties mutually agreed to maintain the status quo ante. The trial
court, therefore, found no need to issue any temporary restraining order.
Eventually, however, via an Order2 dated September 25, 2002, the court granted
the preliminary injunction prayed for by Duvaz, to wit:
WHEREFORE, in the interest of justice and equity, the Court GRANTS the
injunction prayed for and accordingly orders defendant [to refrain] from initiating
any foreclosure proceedings until further orders from this Court. Bond is fixed at
TEN MILLION PESOS (P10,000,000.00). (Words in brackets added.)
SO ORDERED.
In time, EIB moved for reconsideration but its motion was denied by the court in
its subsequent order of January 8, 2003.
Therefrom, EIB went to the CA on a petition for certiorari, thereat docketed as
CA-G.R. SP No. 75903.
As stated at the threshold hereof, the CA, in its herein assailed Decision of March
26, 2004, nullified the challenged orders of the trial court pertaining to the
preliminary injunction it issued in favor of Duvaz, thus:
WHEREFORE, premises considered, the instant petition for certiorari is hereby
GRANTED. Accordingly, the assailed orders are ANNULLED AND SET ASIDE
and a new one issued DENYING [petitioner's] prayer for a writ of preliminary
injunction.
SO ORDERED.
In granting EIB's certiorari petition and nullifying the questioned orders of the trial
court, the appellate court notes Duvaz' failure to show in its complaint and at the
hearing of its application for preliminary injunction the indubitable existence of its
right to the injunctive relief. In the precise words of the CA:
In the case at bar, [petitioner] sought to enjoin [respondent] from foreclosing its
mortgage properties on the ground that their alleged agreement entered into in
1998 is in reality a dacion en pago and not a loan-restructuring agreement which
is the written contract. In short, [petitioner's] alleged right emanates from an
alleged dacion en pago which is yet to be proven in Court. This right is, therefore,
contingent and future which cannot be protected by a writ of preliminary
injunction. Moreover, the parol evidence rule proscribes the varying of the terms
of a written agreement except in certain cases. [Petitioner] claims that its case
falls under the exception, but then this is harping on the exception, not the rule,
which is yet to be proven during trial. If indeed, there is such an agreement as
dacion en pago, then only at that time can we say that [petitioner] possesses the
right to be protected. But of course, this is merely conjectural and a future
proposition, if not assumption, which is, however, insufficient to support the grant
of a writ of preliminary injunction. (Words in brackets supplied.)
Hence, this recourse by petitioner Duvaz, it being its submission that the CA
gravely erred -
1. xxx in failing to recognize that Duvaz has an actual, existing right in esse that
may properly be protected by writ of preliminary injunction.
2. xxx when it reversed the lower court, because it failed to comprehend the trial
court's basis and rationale in granting the injunctive writ. The appellate court
committed serious error in finding that Duvaz's "alleged right emanates from an
alleged dacion en pago which is yet to be proven in court," and that such right,
being "contingent and future, xxx cannot be protected by a writ of preliminary
injunction." In fact, Duvaz has more than one clear legal right in esse to protect.
3. xxx in holding that "the parole evidence rule proscribing the varying of the
terms of a written agreement, except in certain cases," applies in this instance,
as to bar Duvaz from proving the existence of the agreement for dacion en pago
by parole evidence.
4. xxx in granting [EIB's] petition and lifting the preliminary injunction against
EIB's foreclosure of the mortgaged properties of Duvaz, because the challenged
Decision effectively allows EIB to carry out extrajudicial foreclosure based on a
sham and simulated agreement made in contravention of law, thereby enabling
respondent bank to unjustly enrich itself at petitioner's expense to the tune of
hundreds of millions of pesos; this will consequently result in substantial,
permanent, irreparable and irreversible damage being unjustly inflicted upon
petitioner. Moreover, the challenged Decision will inequitably and inevitably result
in preventing Duvaz from enforcing its just and lawful claim against respondent
bank, and in denying Duvaz its day in court.
5. xxx in granting EIB's Petition, which was not only premature, but also
constituted flagrant forum shopping, and should have been dismissed outright,
with corresponding imposition of sanctions on account thereof.
We DENY.
With the recognition of the fact that the present petition only involves the
propriety of the RTC's issuance of the writ of preliminary injunction and not the
merit of the main action for reformation of instrument, the issues presently raised
by the petitioner may be reduced to only two: first, whether there exists a right in
esse on petitioner's part which may rightfully be the basis for the issuance of a
writ of preliminary injunction; and second, whether EIB's recourse to the CA in
CA-G.R. SP No. 75903 from the orders of the trial court in the matter of
preliminary injunction constitutes forum shopping. The rest of the issues raised
by the petitioner may be properly argued in the main case before the trial court.
Anent the first issue, the requisites for preliminary injunctive relief are: (a) the
invasion of right sought to be protected is material and substantial; (b) the right of
the plaintiff is clear and unmistakable; and (c) there is an urgent and paramount
necessity for the writ to prevent serious damage. As such, a writ of preliminary
injunction may be issued only upon clear showing of an actual existing right to be
protected during the pendency of the principal action. The twin requirements of a
valid injunction are the existence of a right and its actual or threatened violation.
Thus, to be entitled to an injunctive writ, the right to be protected and the violation
against that right must be shown.3
In Almeida v. Court of Appeals,4 the Court stressed how important it is for the
applicant for an injunctive writ to establish his right thereto by competent
evidence:
Thus, the petitioner, as plaintiff, was burdened to adduce testimonial and/or
documentary evidence to establish her right to the injunctive writs. It must be
stressed that injunction is not designed to protect contingent or future rights, and,
as such, the possibility of irreparable damage without proof of actual existing
right is no ground for an injunction. A clear and positive right especially calling for
judicial protection must be established. Injunction is not a remedy to protect or
enforce contingent, abstract, or future rights; it will not issue to protect a right not
in esse and which may never arise, or to restrain an action which did not give rise
to a cause of action. There must be an existence of an actual right. Hence, where
the plaintiff's right or title is doubtful or disputed, injunction is not proper.
An injunctive remedy may only be resorted to when there is a pressing necessity
to avoid injurious consequences which cannot be remedied under any standard
compensation. The possibility of irreparable damage without proof of an actual
existing right would not justify injunctive relief in his favor.
xxx xxx xxx
x x x. In the absence of a clear legal right, the issuance of the injunctive writ
constitutes grave abuse of discretion. As the Court had the occasion to state
in Olalia v. Hizon, 196 SCRA 665 (1991):
It has been consistently held that there is no power the exercise of which is more
delicate, which requires greater caution, deliberation and sound discretion, or
more dangerous in a doubtful case, than the issuance of an injunction. It is the
strong arm of equity that should never be extended unless to cases of great
injury, where courts of law cannot afford an adequate or commensurate remedy
in damages.
Every court should remember that an injunction is a limitation upon the freedom
of action of the defendant and should not be granted lightly or precipitately. It
should be granted only when the court is fully satisfied that the law permits it and
the emergency demands it. (Emphasis supplied.)
We are in full accord with the CA when it struck down, for having been issued
with grave abuse of discretion, the RTC's Order of September 25, 2002, granting
petitioner's prayer for a writ of preliminary injunction during the pendency of the
main case, Civil Case No. 02-1029. The reason therefor is that the right sought to
be protected by the petitioner in this case through the writ of preliminary
injunction is merely contingent and not in esse. It bears stressing that the existing
written contract between petitioner and respondent was admittedly one of loan
restructuring; there is no mention whatsoever or even a slightest reference in that
written contract to a supposed agreement of dacion en pago. In fine, it is still
necessary for petitioner to establish in the main case its rights on the alleged
dacion en pago before those rights become in esse or actual and existing. Only
then can the injunctive writ be properly issued. It cannot be the other way around.
Otherwise, it will be like putting the cart before the horse.
Besides, conformably to the Parol Evidence Rule, which is the general rule, 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, as between the parties
and their successors in interest, no evidence of such terms other than the
contents of the written agreement. This poses another big obstacle to a favorable
finding of petitioner's right in esse under the alleged dacion en pago agreement.
Again, petitioner must first establish that alleged agreement in the main case
where it bears the burden of duly proving by competent evidence that the written
loan restructuring agreement failed to express the true intent of the parties. Until
and unless this has been successfully carried out, there is no right in esse to
speak of. And with EIB denying petitioner's allegation of a right arising from an
alleged dacion en pago agreement supposedly entered into by it not with EIB
itself, but with Urban Bank, petitioner's burden becomes doubly cumbersome.
It must be stressed that a clear and positive right especially calling for judicial
protection must be shown. Injunction is not a remedy to protect or enforce
contingent, abstract, or future rights; it will not issue to protect a right not in esse
and which may never arise, or to restrain an act which does not give rise to a
cause of action. There must exist an actual right. There must be a patent
showing by the complaint that there exists a right to be protected and that the
acts against which the writ is to be directed are violative of said right.5 In the
present case, we find no such actual and existing right in favor of the petitioner
that demands protection by the office of preliminary injunction. To stress, the
written contract admittedly existing between petitioner and respondent's
predecessor-in-interest (Urban Bank) is a loan restructuring agreement which is
completely silent about the dacion en pago arrangement being harped upon by
petitioner.
With the reality that EIB very much puts in issue in the main case the existence
of the alleged dacion en pago contract relied upon by the petitioner in its
complaint, we rule and so hold, as did the CA, that the issuance by the trial court
of the writ of preliminary injunction to protect a right asserted by the petitioner
under the disputed dacion en pago arrangement truly constitutes grave abuse of
discretion.
This brings us to the second issue of whether, in invoking the CA's jurisdiction to
rectify the trial court's grave abuse of discretion, respondent EIB thereby
ventured into forum shopping.
We hold in that there is no forum shopping in this case.
There is forum shopping when any party litigant repetitively avails of several
judicial remedies in different courts, simultaneously or successively, all
substantially founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either pending in, or
already resolved adversely by, some other court. It has also been defined as an
act of a party against whom an adverse judgment has been rendered in one
forum of seeking and possibly getting a favorable opinion in another forum, other
than by appeal or the special civil action of certiorari, or the institution of two or
more actions or proceedings grounded on the same cause on the supposition
that one or the other court would make a favorable disposition. 6

Here, EIB assailed the trial court's order directing the issuance of the writ of
preliminary injunction by filing a petition for certiorari with the CA. Seeking a
reversal of an adverse judgment or order by appeal or certiorari does not
constitute forum shopping. Such remedies are sanctioned and provided for by
the rules. There will only be forum shopping when a party seeks a favorable
opinion, other than by appeal or certiorari, in another forum.7 There is simply no
rhyme nor reason to tag as forum shopping EIB's availment of a remedy provided
under the rules in a situation where, as here, the RTC clearly gravely abused its
discretion.

Besides, the function of certiorari before the CA is only to annul the assailed
interlocutory order of the trial court and nothing else. The CA cannot go beyond
the said assailed interlocutory order and dismiss the main action which has not
yet been resolved with finality.

WHEREFORE, the instant petition is DENIED and the assailed CA Decision

dated 26 March 2004 is AFFIRMED in toto.
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 balance of P200,000.00 defendant executed a mortgage in favor
of plaintiffs upon the 20 parcels of land sold and on a half interest over a parcel
of land in Bulacan which 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 contract mentioned in the
complaint does not express the true agreement of the parties because certain
important conditions agreed upon 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 obligation stipulated 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 Rosario
covering 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 stipulated therein 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 subdivision at 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 P600,000.00 within 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
property without any right on his part to reimbursement and the conditional sale
would be rescinded.
Unable to pay the consideration of 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 bond and to
enable defendant to pay some of the lots for her own purposes, plaintiffs allowed
defendant to buy 20 of the lots herein involved at 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 improvements required 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 is the promise assumed
by plaintiffs that they would undertake to construct the roads that may be
required in the subdivision 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 A executed 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 parties
in this case which led to the execution of the so-called 'Explanation'
(Exhibit 3) 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 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 conteporaneous oral agreement was also reached between
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 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-17820 April 24, 1963
LAND SETTLEMENT AND DEVELOPMENT CORPORATION, plaintiff-
appellant,
vs.
GARCIA PLANTATION CO., INC., and/or SALUD GARCIA and VICENTE B.
GARCIA, defendants-appellees.
Lucido A. Guinto, Alfonso O. Alindogan and Marcelino A. Yumol for plaintiff-
appellant.
Bausa and Ampil for defendants-appellees.
PAREDES, J.:
This is a case of specific performance of contract, instituted by the Land
Settlement and Development Corporation, against the Garcia Plantation Co., Inc.
and/or Salud C. De Garcia and Vicente B. Garcia, for the recovery of the sum of
P5,955.30, representing the unpaid balance of the purchase price of two tractors,
bought by the defendant Garcia Plantation Co., Inc. from the plaintiff. Salud C. de
Garcia was made alternative
co-defendant because of two promissory notes executed by her, whereby she
personally assumed the account of the company with the plaintiff, and the
defendant Vicente B. Garcia was included as husband of Salud C. de Garcia.
The defendants, in their answer, admitted the execution of the two promissory
notes, but contended that the same had been novated by a subsequent
agreement contained in a letter (Exh. L) sent by Filomeno C. Kintanar, Manager,
Board of Liquidators of the LASEDECO, giving the defendant Salud C. de Garcia
an extension up to May 31, 1957, within which to pay the account, and since the
complaint was filed on February 20, 1957, they claimed that the action was
premature and prayed that the complaint be dismissed. The plaintiff in the reply
and answer to the counterclaim, admitted the due execution and genuineness of
the letter marked Exhibit L, but contended that the same did not express the true
and intent agreement of the parties, thereby placing the fact in issue, in the
pleadings.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1äwphï1.ñët
After several postponements requested by both parties on the ground of pending
amicable settlement, trial on the merits was ordered and held on July 25, 1957,
at 1:00 o'clock in the afternoon. At the trial, the defendant admitted all the
documentary evidence adduced by the plaintiffs, showing that they were
indebted to said plaintiff. However, 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 for the defendants)
was drafted and prepared, the lower court presided by the Hon. B. A. Tan, 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). Plaintiff also intended to present Mr. Kintanar, the writer of the letter,
to testify on the same matter, but in view of the ruling of the lower court, it rested
its case. The lower court dismissed the case, stating that the action was
premature. Plaintiff appealed to the Court of Appeals, which certified the case to
us, pointing that the questions presented were purely legal in nature.
Appellants allege that the lower court erred (1) In forcing the parties to trial
despite requests by both parties for more time to submit an amicable settlement
of the case; (2) In excluding parol evidence, tending to prove the true intention
and agreement of the parties and the existence of a condition precedent, before
the extension granted the defendants, contained in Exhibit L, could become
effective and (3) In holding that the action was premature and in dismissing the
case on this ground.
The disposal of the second issue would render the determination of the other
issues unnecessary. The fact that the letter Exhibit L, failed "to express the true
intent and agreement of the parties", Section 22, Rule 123, had been put in issue
by the Answer of the plaintiff to defendants' counterclaim (Heirs of Dela Rama v.
Talisay-Silay Milling Co., 54 Phil., 580). The parol evidence consisted of the
testimony of Attys. Guinto and Kintanar, to the effect that in view of the plea of
defendant Vicente B. Garcia to give the defendants an extension of time to pay
their accounts, 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 is manifested by the second paragraph of the letter Exhibit L,
quoted hereunder:
November 20, 1956
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 agreement alluded to in the second paragraph of the above letter,
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 sought to be introduced to prove the
failure of the document in question to express the true intent and agreement of
the parties. It should not have improvidently and hastily excluded said parol
evidence, knowing that the subject-matter treated therein, was one of the
exceptions to the parol evidence rule. 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 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 (Heitman vs. Commercial Bank of Savannah, 6 Ga. App. 584, 65 SE 590,
cited in Comments on the Rules of Court, 1957 Ed., 200), "... 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
extend so far as to preclude the admission of extrinsic evidence, to show prior or
contemporaneous collateral parol agreements between the parties, but 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 (Aves & Alzona v. Orilleneda, 70 Phil.
262). Rulings by the same effect were also announced by the United States
courts (Payne v. Campbell, 6 E & B, 370; Wilson v. Powers, 131 Mass. 540;
Blewitt v. Brown, 142 NY 357; Burke v. Delany, 153 US 288).

Had the trial court permitted, as it should, the plaintiff to prove the condition
precedent to the extension of the payment the said plaintiff would have been able
to show that because the defendants had failed to pay a substantial down
payment, the agreement was breached and the contract contained in Exhibit "L",
never became effective and the extension should be considered as not having
been given at all. 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. The lower court, therefore, erred in
dismissing the case.

The decision appealed from is reversed, and the case remanded to the lower
court for further proceedings. Costs against the appellees.

Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera,

Dizon, Regala and Makalintal, JJ., concur.
Labrador, J., took no part.
G.R. No. L-46943 June 8, 1978
PHILIPPINE NATIONAL RAILWAYS, petitioner,
vs.
COURT OF FIRST INSTANCE OF ALBAY, Branch I, presided by JUDGE
ROMULO P. UNTALAN, CARMEN MYRICK SALVACION MYRICK, CELSO
MILLABAS, JOSEFINA MILLABAS, and CELERINA MILLABAS, respondents.
Jose B. Calimlim, Marcelino B. Bermudez & Natividad G. Gepiga for petitioner.
Madrid Law Office for private respondents.
AQUINO, J.:
This certiorari and prohibition case is about the parol evidence rule.
On September 28, 1971, Carmen Myrick, Salvacion Myrick, and Celso, Josefina
and Celerina, all surnamed Millabas, filed in the Court of First Instance of Albay a
complaint to annul a supposed conditional donation of two parcels of land located
at Comum Camalig, Albay, with areas of "47-52" and "1-25-00" square meters, a
donation which they had allegedly made in !963 to the Philippine National
Railways (PNR).
The ground for the annulment was the alleged non-fulfillment of the five
conditions of the donation (Civil Case No. 4507). No deed of donation or
actionable document was annexed to the complaint. (See. sec. 7, Rule 8, Rules
of Court.)
The PNR in its answer denied the donation for lack of sufficient knowledge
thereof but it contradicted 'that denial by stating in its affirmative defenses that
the donation was unconditionally made by the late Antonio J. A. Myrick and that
the plaijtiffs are guilty of laches. No deed of donation was attached to the answer
to sustain the defense that the donation was pure and unconditional. (In the
complaint it was alleged that Antonio was deceased brother of plaintiffs Carmen
Myrick and Salvacion Myrick but it was not alleged that he was the donor or that
the plaintiffs are his legal heirs.)
At the hearing of the case on March 6 (11), 1974, while plaintiff Salvacion Myrick
was testifying, she was asked to identify a deed of donation dated August 23,
1962 made by her brother, Antonio, which is reproduced below (Exh. B or 1):
DEED OF DONATION
KNOW ALL MEN BY THESE PRESENTS
This DEED OF DONATION made and executed by ANTONIO
J. A. MYRICK, of legal age, single/married to , with residence
at , hereinafter called the DONOR, in favor of the Manila
Railroad Company, a government-owned corporation, duly
organized and existed under and by virtue of the laws of the
Philippines, with principal office at tutuban Terminal,
Azcarraga, Manila, herein represented by P. T. CASES, its
general Manager, hereinafter called the DONEE.
WITNESSETH
That the DONOR is theowner in fee simple of that certain real
property with the buildings and/or improvements thereon,
situated in the barrio of Taladong, Camalig, Albay, and more
particularly described in Original/Transfer Certificate of title no.
Lot 3118 of the Land Registry of ALBAY PROVINCE, as
follows, to wit:
A portion or 1/4 o fparcel of land situated in the barrio of
Taladong, Camalig, Albay, Philippines containing an area of
THIRTEEN THOUSAND SIX HUNDRED THREE (13, 603)
square meters more or less bounded on the N, by Meliton Naz;
on the E, by Pedro Moron; on the S, by Louis Myrik; and on the
W, by Pedro Moros; declared under tax No. 19739 in the name
of Cenon Zamora and assessed for ONE THOUSAND TWO
HUNDRED THIRTY PESOS (P1,230.00). Said property was
acquired by the donor by way of inheritance from his late father
Louis Myrik who likewise acquired the property by way of
Abslute Sale from Felix Nimo.
That for and in consideration of his generosity and
benevolence, as well as his love for public service, the
DONOR by this presents, transfers and conveys by way of
DONATION, unto the said DONEE, its successors and
assigns, a portion of the above-described real property free
from all liens and encumbrances, tentatively described, as
follows:
A portion of SIX THOUSAND ONE HUNDRED EIGHTY-
EIGHT (6,188) square meters more or less traversed and
encroached by the MRRCo. Sorsogon RR Ext. Project's right-
of-way at Km. 464 ÷ 780 - ÷ 888.86 in the above described
property bounded on the N, by Antonio Myrik; on the E, by
Dominador Muyo; on the S, by Antonio J. A. Myrik and on the
W, by Lot Nos. 3120-A & 3119-A; subject to the technical
description that may hereinafter be made by the Survey TEam
of the MMRCo, and the plan thereof approved by the Director
of lands; said donated portion will be used for railway tracks or 1. (Sgd.) SALVACION E. A. MYRIK
railroad purposes.
2. (Sgd.) LIBORIO MARMOL
That the DONOR does hereby state, for the purpose of giving
full effect to this donation that he/she has reserved for (NOTARIAL ACKNOWLEDGMENT IS OMITTED)
himself/herself in full ownership sufficient property to support
him/her in a manner appropriate to his/her needs.
DEED OF ACCEPTANCE OF THE AFORECITED
That the DONEE does hereby accept this donation of the
above-described real property, and does hereby express their DONATION:
gratitutde for the kindness and liberality of the DONOR, and
the acceptance thereof is to be executed in a separate The undersigned duly appointed General Manager of the
instrument in the City of Manila, Philippines. MRRCo. hereby these presents accept and receive the
abovementioned donation.
IN WITNESS WHEREOF, THE DONOR have hereunto set
his/her hand this 23rd day of August, 1962, at Municipality of MANILA RAILROAD COMPANY
Camalig, Albay, Philippines.
By
(
S
(Sgd.) P. T. CASES
g
d
General
. Manager
)
A
WITNESSES
N
T
1. (Sgd.)ILLEGIBLE 2. (Sgd.) ILLEGIBLE
O
N
(NOTARIAL
I ACKNOWLEDGMENT IS OMITTED)
O
It may be noted thatJ the alleged donation was made in 1962 to the Manila
Railroad Company. that it was made by Antonio J. A. Myrick (Myrick) and not by
A private respondents; that the land donated is located at
the plaintiffs, now the
Barrio Taladong (not. Comun) Camalig and that the area of the land donated is
6,188 square meters.M
Y
R
After Salvacion Myrick had Identified the deed of donation quoted above, her
I
counsel propounded the following questions:
K

Q. You said that you know of the execution

D
of this Deed of Donation which is marked
O
Exhibit 1 for the defendant and also marked
N
as Exhibit B for the plaintiffs during the pre-
O
trial, and which I am also adopting now that
R
the same be marked Exhibit B for the trial on
the merits,
WITNESSES
 Having known of the execution of this Deed
of Donation. will not tell this Honorable Court
why as a brother (sic) and co-heir of your
late brother Antonio, why you did not sign in
this Deed of Donation?
A. (of Salvacion Myrick) Because the
Philippine National Railways should first
comply with the promise in the donation.
Q. Will you tell this Court the promise of the
PNR with respect to the execution of this
Deed of Donation, Exhibit B
A. ATTY. ABELLERA (counsel of the PNR): I
firmly object to the question. Counsel is
trying to elicit oral evidence which is violative
of the parol evidence rule. The Deed of
Donation is very clear. It has no condition
whatsoever. If the condition now is place on
the record that will alter the condition of the
donation.
In view of that objection, the hearing was suspended. The trial court ordered the
parties to submit memoranda on the issue of Whether or not that question should
be allowed under the parol evidence rule. That issue remained pending until the
lower court, through respondent Judge, resolved it ill the third of July 7, 1977,
now being assailed herein.
The lower court held that the question should be allowed the objection should be
overruled because to allow the witness answer the question would not be a
transgression of tilt parol evidence rule.
We hold that, under the pleadings and considering the defense of lack of cause
of action interposed by the PNR, that lower court committed a grave abuse of
discretion in not sustaining petitioner's objection based on the parol evidence
rule. That rule is found in Rule 130 of the Rules of Court which provides:
SEC. 7. Evidence of written agreements. — When the terms of
an agreement have been reduced to writing, it is to be
considered as containing all such terms and. therefore, there
can be, between the parties and their successors in interest,
no evidence of the terms The agreement other than the
contents of the writing, except in the following case:
(a) Where a mistake or imperfection of the writing, or it failure
to express The true intent and agreement of the parties, or the
of the agreement is put in issue by the pleadings;
(b) When there is an intrinsic ambiguity in the writing,
The term 'agreement' includes wills.
Section 7 requires that in order that parol or extrinsic evidence may be admitted
to vary the terms of the writing, the mistake or imperfection thereof or its failure to
express the true intent and agreement of the parties should be put in issue by the
pleadings. In the instant case, the plaintiffs did not expressly plead that the deed
of donation was incomplete or that its execution was vitiated by mistake or that it
did not reflect the intention of the donor and the donee.
The plaintiffs in paragraph four of their complaint merely alleged that the donation
was subject to five conditions. Then, they prayed that the donation should be
annulled or rescinded for noncompliance with those conditions.
At the trial they tried to prove those conditions by parol evidence. Obviously, they
could not introduce parol evidence to vary the terms of the agreement because
they did not plead any of the exceptions mentioned in the parol evidence rule.
Their case is covered by the general rule that the contents of the writing
constitute the sole repository of the terms of the agreement between the parties.
Thus, it was held that where there is no allegation in the complaint that there was
any mistake or imperfection in the written agreement or that it failed to express
the true intent of the parties, parol evidence is inadmissible to vary the terms of
the agreement (Villanueva vs. Yulo, 106 Phil. 1170).
On the other hand, if the defendant set up the affirmative defense that the
contract mentioned in the complaint does not express the true agreement of the
parties, then parol evidence is admissible to prove the true agreement of the
parties (Enriquez vs. Ramos, 11 6 Phil. 525, 531; Philippine Sugar E. D. Co. vs.
Philippines, 62 L. Ed. 1177, 247 U. S. 385; Heirs of De la Rama vs. Talisay-Silay
Milling Co., 54 Phil. 580, 588; Land Settlement and Dev. Corp. vs. Garcia
Plantation Co., Inc., 117 Phil. 761, 765).
The plaintiffs or their predecessor, the donor, Antonio J. A. Myrick, could have
asked for the reformation of the deed of donation. Instead of doing so, they
asked for its annulment or rescission on the theory that there was non-
compliance with the supra resolutory conditions of the donation (See art. 764,
Civil Code: Parks vs. Province of Tarlac, 49 Phil. 142).
But whether the action is for revocation or reformation, it was necessary for the
plaintiffs, in order to prove that the donation was conditional, to plead that the
deed of donation did not express the true intent of the parties. Not having done
so, their parol evidence on the alleged conditions is dismissible upon seasonable
objection interposed during the trial by the donee's counsel. (Yu Tek & Co. vs.
Gonzalez, 29 Phil. 384; Soriano vs. Cia. General de Tabacos de Filipinas, L-
17392, December 17, 1966. 18 SCRA 999, 1015.)

Other considerations may be adduced to fortify the holding that the plaintiffs
cannot prove the conditional character of the donation.

It should be observed that the action for annulment was brought by the alleged
collateral relatives of the deceased donor. Their capacity to bring the action has
not been specifically pleaded (See sec. 4, Rule 8, Rules of Court: Concepcion vs.
Sta. Ana, 87 Phil. 787).

The anomalous or odd situation in this case is that the plaintiffs belatedly filed an
action to annul (not reform) a donation made by their collateral relative. Evidently,
they had no copy of the deed of donation because they did not attach a copy
thereof to their complaint. They were not cognizant of the terms thereof. They did
not know the exact date of the donation and the description, location and area of
the lands donated- They pretended that five conditions were engrafted on the
deed of donation which to the does not take any condition at all. How they came
to know of those conditions, when they were not the donors, was not pleaded in
their complaint.

The private respondents contend that the rulings ot a trial judge on the admission
of evidence are reviewable on appeal and cannot be assailed by means of
certiorari (Philippine Air Lines, Inc vs. Teodoro, 9 7 Phi1. 461);

That is the general rule, Where, as in this case, petitioner's contention is clearly
tenable and the lower court, in overruling the objection to the evidence,
committed a patent mistake amounting to a grave abuse of discretion, the error
may be corrected by means of certiorari (De Laureano vs. Adil, L-43345, July 29,
1976, 72 SCRA 148, 161).

As to private respondents' contention in their memorandum in the lower court that

Antonio J.A. Myrick was not the absolute owner of the donated properties See
page 41 of Rollo). that ultimate fact should likewise have been alleged in their
complaint,

WHEREFORE, the trial court's order of July 7, 1977 is reversed and set aside.
Costs against the private respondents.
G.R. No. L-8844 December 16, 1914
FERNANDO MAULINI, ET AL., plaintiffs-appellees,
vs.
ANTONIO G. SERRANO, defendant-appellant.
R. M. Calvo for appellant.
Jose Arnaiz for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of the city of
Manila in favor of the plaintiff for the sum of P3,000, with interest thereon at the
rate of
1½ per cent month from September 5, 1912, together with the costs.
The action was brought by the plaintiff upon the contract of indorsement alleged
to have been made in his favor by the defendant upon the following promissory
note:
3,000. Due 5th of September, 1912.
We jointly and severally agree to pay to the order of Don Antonio G.
Serrano on or before the 5th day of September, 1912, the sum of three
thousand pesos (P3,000) for value received for commercial operations.
Notice and protest renounced. If the sum herein mentioned is not
completely paid on the 5th day of September, 1912, this instrument will
draw interest at the rate of 1½ per cent per month from the date when
due until the date of its complete payment. The makers hereof agree to
pay the additional sum of P500 as attorney's fees in case of failure to
pay the note.
Manila, June 5, 1912.
(Sgd.) For Padern, Moreno & Co., by F. Moreno, member of the firm.
For Jose Padern, by F. Moreno. Angel Gimenez.
The note was indorsed on the back as follows:
Pay note to the order of Don Fernando Maulini, value received. Manila,
June 5, 1912. (Sgd.) A.G. Serrano.
The first question for resolution on this appeal is whether or not, under the
Negotiable Instruments Law, an indorser of a negotiable promissory note may, in
an action brought by his indorsee, show, by parol evidence, that the indorsement
was wholly without consideration and that, in making it, the indorser acted as
agent for the indorsee, as a mere vehicle of transfer of the naked title from the
maker to the indorsee, for which he received no consideration whatever.
The learned trial court, although it received parol evidence on the subject
provisionally, held, on the final decision of the case, that such evidence was not
admissible to alter, very, modify or contradict the terms of the contract of
indorsement, and, therefore, refused to consider the evidence thus provisionally
received, which tended to show that, by verbal agreement between the indorser
and the indorsee, the indorser, in making the indorsement, was acting as agent
for the indorsee, as a mere vehicle for the transference of naked title, and that his
indorsement was wholly without consideration. The court also held that it was
immaterial whether there was a consideration for the transfer or not, as the
indorser, under the evidence offered, was an accommodation indorser.
We are of the opinion that the trial court erred in both findings.1awphil.net
In the first place, the consideration of a negotiable promissory note, or of any of
the contracts connected therewith, like that of any other written instrument, is,
between the immediate parties to the contract, open to attack, under proper
circumstances, for the purpose of showing an absolute lack or failure of
consideration.
It seems, according to the parol evidence provisionally admitted on the trial, that
the defendant was a broker doing business in the city of Manila and that part of
his business consisted in looking up and ascertaining persons who had money to
loan as well as those who desired to borrow money and, acting as a mediary,
negotiate a loan between the two. He had done much business with the plaintiff
and the borrower, as well as with many other people in the city of Manila, prior to
the matter which is the basis of this action, and was well known to the parties
interested. According to his custom in transactions of this kind, and the
arrangement made in this particular case, the broker obtained compensation for
his services of the borrower, the lender paying nothing therefor. Sometimes this
was a certain per cent of the sum loaned; at other times it was a part of the
interest which the borrower was to pay, the latter paying 1½ per cent and the
broker ½ per cent. According to the method usually followed in these
transactions, and the procedure in this particular case, the broker delivered the
money personally to the borrower, took note in his own name and immediately
transferred it by indorsement to the lender. In the case at bar this was done at
the special request of the indorsee and simply as a favor to him, the latter stating
to the broker that he did not wish his name to appear on the books of the
borrowing company as a lender of money and that he desired that the broker
take the note in his own name, immediately transferring to him title thereto by
indorsement. This was done, the note being at once transferred to the lender.
According to the evidence referred to, there never was a moment when Serrano
was the real owner of the note. It was always the note of the indorsee, Maulini,
he having furnished the money which was the consideration for the note directly
to the maker and being the only person who had the slightest interest therein,
Serrano, the broker, acting solely as an agent, a vehicle by which the naked title
to the note passed fro the borrower to the lender. The only payment that the
broker received was for his services in negotiating the loan. He was paid
absolutely nothing for becoming responsible as an indorser on the paper, nor did
the indorsee lose, pay or forego anything, or alter his position thereby.
Nor was the defendant an accommodation indorser. The learned trial court
quoted that provision of the Negotiable Instruments Law which defines an
accommodation party as "one who has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value therefor, and for the purpose
of lending his name to some other person. Such a person is liable on the
instrument to a holder for value, notwithstanding such holder at the time of taking
the instrument knew the same to be only an accommodation party." (Act No.
2031, sec. 29.)
We are of the opinion that the trial court misunderstood this definition. The
accommodation to which reference is made in the section quoted is not one to
the person who takes the note — that is, the payee or indorsee, but one to the
maker or indorser of the note. It is true that in the case at bar it was an
accommodation to the plaintiff, in a popular sense, to have the defendant indorse
the note; but it was not the accommodation described in the law, but, rather, a
mere favor to him and one which in no way bound Serrano. In cases of
accommodation indorsement the indorser makes the indorsement for the
accommodation of the maker. Such an indorsement is generally for the purpose
of better securing the payment of the note — that is, he lend his name to the
maker, not to the holder. Putting it in another way: An accommodation note is
one to which the accommodation party has put his name, without consideration,
for the purpose of accommodating some other party who is to use it and is
expected to pay it. The credit given to the accommodation part is sufficient
consideration to bind the accommodation maker. Where, however, an
indorsement is made as a favor to the indorsee, who requests it, not the better to
secure payment, but to relieve himself from a distasteful situation, and where the
only consideration for such indorsement passes from the indorser to the
indorsee, the situation does not present one creating an accommodation
indorsement, nor one where there is a consideration sufficient to sustain an
action on the indorsement.
The prohibition in section 285 of the Code of Civil Procedure does not apply to a
case like the one before us. The purpose of that prohibition is to prevent
alternation, change, modification or contradiction of the terms of a written
instrument, admittedly existing, by the use of parol evidence, except in the cases
specifically named in the section. The case at bar is not one where the evidence
offered varies, alters, modifies or contradicts the terms of the contract of
indorsement admittedly existing. The evidence was not offered for that purpose.
The purpose was to show that no contract of indorsement ever existed; that the
minds of the parties never met on the terms of such contract; that they never
mutually agreed to enter into such a contract; and that there never existed a
consideration upon which such an agreement could be founded. The evidence
was not offered to vary, alter, modify, or contradict the terms of an agreement
which it is admitted existed between the parties, but to deny that there ever
existed any agreement whatever; to wipe out all apparent relations between the
parties, and not to vary, alter or contradict the terms of a relation admittedly
existing; in other words, the purpose of the parol evidence was to demonstrate,
not that the indorser did not intend to make the particular indorsement which he
did make; not that he did not intend to make the indorsement in the terms made;
but, rather, to deny the reality of any indorsement; that a relation of any kind
whatever was created or existed between him and the indorsee by reason of the
writing on the back of the instrument; that no consideration ever passed to
sustain an indorsement of any kind whatsoever.
The contention has some of the appearances of a case in which an indorser
seeks prove forgery. Where an indorser claims that his name was forged, it is
clear that parol evidence is admissible to prove that fact, and, if he proves it, it is
a complete defense, the fact being that the indorser never made any such
contract, that no such relation ever existed between him and the indorsee, and
that there was no consideration whatever to sustain such a contract. In the case
before us we have a condition somewhat similar. While the indorser does not
claim that his name was forged, he does claim that it was obtained from him in a
manner which, between the parties themselves, renders, the contract as
completely inoperative as if it had been forged.
Parol evidence was admissible for the purpose named.1awphil.net
There is no contradiction of the evidence offered by the defense and received
provisionally by the court. Accepting it as true the judgment must be reversed.
The judgment appealed from is reversed and the complaint dismissed on the
merits; no special finding as to costs.
Arellano, C.J., Johnson and Trent, JJ., concur.
Separate Opinions
TORRES, J., concurring:
Act No. 2031, known as the Negotiable Instruments Law, which governs the
present case, establishes various kinds of indorsements by means of which the
liability of the indorser is in some manner limited, distinguishing it from that of the
regular or general indorser, and among those kinds is that of the qualified
indorsement which, pursuant to section 38 of the same Act, constitutes the
indorser a mere assignor of the title to the instrument, and may be made by
adding to the indorser's signature the words "without recourse" or any words of
similar import.
If the defendant, Antonio G. Serrano, intervened, as he alleged and tried to prove
that he did at the trial, only as a broker or agent between the lender and plaintiff,
Maulini, and the makers of the promissory note, Padern, Moreno & Co. and
Angel Gimenez, in order to afford an opportunity to the former to invest the
amount of the note in such manner that it might bring him interest, the defendant
could have qualified the indorsement in question by adding to his signature the
words "without recourse" or any others such as would have made known in what
capacity he intervened in that transaction. As the defendant did not do so ad as
he signed the indorsement in favor of the plaintiff Maulini for value received from
the latter, his liability, according to section 66 of the Act aforecited, is that of a
regular or general indorser, who, this same section provides, engages that if the
instrument be dishonored, and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent indorser
who may be compelled to pay it. And the evidence which the defendant
presented, tending to show what were the conditions to which the defendant
presented, tending to show what were the conditions to which he obligated
himself and in what capacity he intervened in making that indorsement and that
this latter was absolutely without consideration, should not have been admitted
so that he might elude the aforesaid obligation, or, if admitted, should not be
taken into account, because as a regular indorser he warranted, pursuant to the
said section 66, that the instrument was genuine and in all respects what it
purported to be, that he had a good title to it, and that it was at the time of his
indorsement valid and subsisting. He cannot, therefore, by means of any
evidence, and much less of such as consists of his own testimony, and as such
interested party, alter, modify, contradict or annul, as he virtually claimed and
claims to be entitled to do, what in writing and with a full and perfect knowledge
of the meaning and import of the words contained in the indorsement, he set
forth therein over his signature.
Section 63 of the Act above cited says that a person placing his signature upon
an instrument otherwise than as maker, drawer, or acceptor is deemed to be an
indorser, unless he clearly indicates by appropriate words his contention to be
bound indicates by appropriate words his intention to be bound in some other
capacity. This provision of the law clearly indicates that in every negotiable
instrument it is absolutely necessary to specify the capacity in which the person
intervenes who is mentioned therein or takes part in its negotiation, because only
by so doing can it be determined what liabilities arise from that intervention and
from whom, how and when they must be exacted. And if, in the vent of a failure
to express the capacity in which the person who signed the negotiable instrument
intended to be bound, he should be deemed to be an indorser, when the very
words of the instrument expressly and conclusively show that such he is, as
occurs in the present case, and when the indorsement contains no restriction,
modification, condition or qualification whatever, there cannot be attributed to
him, without violating the provisions of the said Act, any other intention than that
of being bound in the capacity in which he appears in the instrument itself, nor
can evidence be admitted or, if already admitted, taken into consideration, for the
purpose of proving such other intention, for the simple reason that if the law has
already fixed ad determined the capacity in which it must be considered that the
person who signed the negotiable instrument intervened and the intention of his
being bound in a definite capacity, for no other purpose, undoubtedly, than that
there shall be no evidence given in the matter, when the capacity appears in the
instrument itself and the intention is determined by the very same capacity, as
occurs in this case, the admission of evidence in reference thereto is entirely
unnecessary, useless, and contrary to the purposes of the law, which is clear and
precise in its provisions and admits of no subterfuges or evasions for escaping
obligations contracted upon the basis of credit, with evident and sure detriment to
those who intervened or took part in the negotiation of the instrument.
However, it is held in the majority opinion, for the purpose of sustaining the
premises that the proofs presented by the defendant could have been admitted
without violating the provisions of section 285 of the Code of Civil Procedure, that
the evidence was not offered to vary, alter, modify, or contradict the terms of an
agreement which it is admitted existed between the parties, but to deny that there
ever existed any agreement whatever; to wipe out all apparent relations between
the parties, and not to vary, alter or contradict the terms of a relation admittedly
existing; in other words, the purpose of the parol evidence was to demonstrate,
not that the indorser did not intend to make the particular indorsement in the
terms made, but rather to deny the reality of any indorsement; to deny that a
relation of any kind whatsoever was created or existed between him and the
indorsee by reason of the writing on the back of the instrument; to deny that any
consideration ever passed to sustain an indorsement of any kind whatsoever. It
is stated in the same decision that the contention has some of the appearances
of a case in which an indorser seeks to prove forgery.
First of all, we do not see that there exists any appearance or similarity whatever
between the case at bar and one where forgery is sought to be proved. The
defendant did not, either civilly or criminally, impugn the indorsement as being
false. He admitted its existence, as stated in the majority opinion itself, and did
not disown his signature written in the indorsement. His denial to the effect that
the indorsement was wholly without consideration, aside from the fact that it is i
contradiction to the statements that he over his signature made in the instrument,
does not allow the supposition that the instrument was forged.
The meaning which the majority opinion apparently wishes to convey, in calling
attention to the difference between what, as it says, was the purpose of the
evidence presented by the defendant and what was sought to be proved thereby,
is that the defendant does not endeavor to contradict or alter the terms of the
agreement, which is contained in the instrument and is admitted to exist between
the parties; but to deny the existence of such an agreement between them, that
is, the existence of any indorsement at all, and that any consideration ever
passed to sustain the said indorsement, or, in other words, that the defendant
acknowledged the indorsement as regards the form in which it appears to have
been drawn up, but not with respect to its essence, that is, to the truth of the
particular facts set forth in the indorsement. It cannot be denied that the practical
result evidence is other than to contradict, modify, alter or even to annul the
terms of the agreement contained in the indorsement: so that, in reality, the
distinction does not exist that is mentioned as a ground of the decision of the
majority of the court in support of the opinion that the evidence in question might
have been admitted, without violating the provisions of the aforementioned
section 285 of the Code of Civil Procedure. This section is based upon the same
principle which is taken into account in the Negotiable Instruments Law to write
into it such positive and definite provisions which purport, without possibility of
discussion or doubt, the uselessness of taking evidence when the capacity of the
person who intervened in a negotiable instrument or his intention of being bound
in a particular way appears in the instrument itself or has been fixed by statute, if
it is not shown that he did so in some other capacity than that of maker, drawer
or acceptor.
But aside from what the Code of Civil Procedure prescribes with respect to this
matter, as the present case is governed by the Negotiable Instruments Law, we
must abide by its provisions.
Section 24 of this Act, No. 2031, says that every negotiable instrument is
deemed prima facie to have been issued for a valuable consideration; and every
person whose signature appears thereon, to have become a party thereto for
value. If the Act establishes this presumption for the case where there might be
doubt with respect to the existence of a valuable consideration, in order to avoid
the taking of evidence in the matter, when the consideration appears from the
instrument itself by the expression of the value, the introduction of evidence is
entirely unnecessary and improper.
According to section 25 of the same Act, value is any consideration sufficient to
support a simple contract, and so broad is the scope the law gives to the
meaning of "value" in this kind of instruments that it considers as such a prior of
preexistent debt, whether the instrument be payable on demand or at some
future date.
Section 26 provides that where value has at any time been given for the
instrument, the holder is deemed a holder for value, both in respect to the maker
and to the defendant indorser, it is immaterial whether he did so directly to the
person who appears in the promissory note as the maker or whether he delivered
the sum to the defendant in order that this latter might in turn deliver it to the
maker.
The defendant being the holder of the instrument, he is also unquestionably the
holder in due course. In the first place, in order to avoid doubts with respect to
this matter which might require the introduction of evidence, the Act before
mentioned has provided, in section 59, that every holder is deemed prima
facie to be a holder in due course, and such is the weight it gives to this
presumption and to the consequences derived therefrom, that it imposes upon
the holder the burden to prove that he or some person under whom he claims
acquired the title in due course, only when it is shown that the title of any person
who has negotiated the instrument was defective. This rule, however, pursuant to
the said section, does not apply in favor of a party who became bound on the
instrument prior to the acquisition of such defective title, in which case the
defendant Serrano is not included, because, in the first place, he was not bound
on the instrument prior to the acquisition of the title by the plaintiff, but it was the
maker of the promissory note who was bound on the instrument executed in
favor of the defendant or indorser prior to the acquisition of the title by the
plaintiff; and, in the second place, it does not appear, nor was it proved, as will be
seen hereinafter, that the title in question was defective.
According to section 52 of the same Act, the plaintiff is the holder in due course
of the instrument in question, that is, of the promissory note containing the
obligation compliance with which is demanded of him by the defendant, because
he took the instrument under the condition: (a) That it was complete and regular
upon its face; (b) that he became the holder of it before it was overdue, and
without notice that it had been previously dishonored; (c) that he took it in good
faith and for value; and (d) that at the time it was negotiated to him he had no
notice of any deficiency in the instrument or defect in the title of the person
negotiating it.
Pursuant to section 56 of the said Act, to constitute notice of a deficiency in the
instrument or defect in the title of the person negotiating the same, the person to
whom it is transferred must have had actual knowledge of the deficiency or
defect, or knowledge of such facts that his action in taking the instrument
amounted to bad faith.
In the present case it cannot be said, for it is not proven, that the plaintiff, upon
accepting the instrument from the defendant, had actual knowledge of any
deficiency or defect in the same, for the simple reason that it contains no
deficiency or defect. Its terms are very clear and positive. There is nothing
ambiguous, concealed, or which might give rise to any doubt whatever with
respect to its terms or to the agreement made by the parties. Furthermore, as
stated in the majority opinion, the defendant did not intend to make the particular
indorsement which he did make in the terms, form and manner in which it was
made, nor did he intend to change or alter the terms of the agreement which is
admitted to have existed between the parties. All of which indicates that, neither
as regards the plaintiff nor as regards the defendant, was there any deficiency or
defect in the title or in the instrument, and that the plaintiff, upon taking or
receiving the instrument from the defendant, had no knowledge of any fact from
which bad faith on his part might be implied. Besides, no evidence was produced
of the existence of any such bad faith, nor of the knowledge of any deficiency or
defect.
Moreover, section 55 of Act No. 2031 provides that the title of a person who
negotiates an instrument is defective within the meaning of this Act when he
obtained the instrument, or any signature thereto, by fraud, duress, or force and
fear, or other unlawful means, or for an illegal consideration, or when he
negotiates it in breach of faith, or under such circumstances as amount to a
fraud. As no evidence was taken on these points, the only ones that may be
proven as regards negotiable instruments, the defendant must be deemed to be
the holder of the instrument in due course, pursuant to the provisions of the
aforecited section 59, and he cannot be required to prove that he or his
predecessor in interest acquired the title as such holder in due course.
Now then, according to section 28 of the same Act, as against the holder of the
instrument in due course absence or failure of consideration is not a matter of
defense; and, pursuant to section 57, a holder in due course holds the instrument
free from any defect of title of prior parties, and free from defenses available to
prior parties among themselves, and may enforce payment of the instrument for
the full amount thereof against all parties liable thereon. And the next section,
No. 58 prescribes that in the hands of any holder other than a holder in due
course, a negotiable instrument is subject to the same defenses as if it were
nonnegotiable.
So it could not be clearer than that, pursuant to the provisions of the Negotiable
Instrument Law, which governs the case at bar, as the plaintiff is the holder in
due course of the instrument in question, no proof whatever from the defendant
could be admitted, nor if admitted should be taken into account, bearing on the
lack of consideration in the indorsement, as alleged by him, and for the purpose
of denying the existence of any indorsement and that any relation whatever was
created or existed between him and the indorsee; likewise, that no defense of
any kind could have been admitted from the defendant in respect to the said
instrument, and, finally, that the defendant is obligated to pay the sum mentioned
in the said indorsement, it being immaterial whether or not he be deemed to be
an accommodation party in the instrument, in order that compliance with the said
obligation may be required of him in his capacity of indorser.
Basing our conclusions on the foregoing grounds, and regretting to dissent from
the opinion of the majority of our colleagues, we believe that the judgment
appealed from should be affirmed, with the costs against the appellant.
Araullo, J., dissents.
#Separate Opinions
TORRES, J., concurring:
Act No. 2031, known as the Negotiable Instruments Law, which governs the
present case, establishes various kinds of indorsements by means of which the
liability of the indorser is in some manner limited, distinguishing it from that of the
regular or general indorser, and among those kinds is that of the qualified
indorsement which, pursuant to section 38 of the same Act, constitutes the
indorser a mere assignor of the title to the instrument, and may be made by
adding to the indorser's signature the words "without recourse" or any words of
similar import.
If the defendant, Antonio G. Serrano, intervened, as he alleged and tried to prove
that he did at the trial, only as a broker or agent between the lender and plaintiff,
Maulini, and the makers of the promissory note, Padern, Moreno & Co. and
Angel Gimenez, in order to afford an opportunity to the former to invest the
amount of the note in such manner that it might bring him interest, the defendant
could have qualified the indorsement in question by adding to his signature the
words "without recourse" or any others such as would have made known in what
capacity he intervened in that transaction. As the defendant did not do so ad as
he signed the indorsement in favor of the plaintiff Maulini for value received from
the latter, his liability, according to section 66 of the Act aforecited, is that of a
regular or general indorser, who, this same section provides, engages that if the
instrument be dishonored, and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent indorser
who may be compelled to pay it. And the evidence which the defendant
presented, tending to show what were the conditions to which the defendant
presented, tending to show what were the conditions to which he obligated
himself and in what capacity he intervened in making that indorsement and that
this latter was absolutely without consideration, should not have been admitted
so that he might elude the aforesaid obligation, or, if admitted, should not be
taken into account, because as a regular indorser he warranted, pursuant to the
said section 66, that the instrument was genuine and in all respects what it
purported to be, that he had a good title to it, and that it was at the time of his
indorsement valid and subsisting. He cannot, therefore, by means of any
evidence, and much less of such as consists of his own testimony, and as such
interested party, alter, modify, contradict or annul, as he virtually claimed and
claims to be entitled to do, what in writing and with a full and perfect knowledge
of the meaning and import of the words contained in the indorsement, he set
forth therein over his signature.
Section 63 of the Act above cited says that a person placing his signature upon
an instrument otherwise than as maker, drawer, or acceptor is deemed to be an
indorser, unless he clearly indicates by appropriate words his contention to be
bound indicates by appropriate words his intention to be bound in some other
capacity. This provision of the law clearly indicates that in every negotiable
instrument it is absolutely necessary to specify the capacity in which the person
intervenes who is mentioned therein or takes part in its negotiation, because only
by so doing can it be determined what liabilities arise from that intervention and
from whom, how and when they must be exacted. And if, in the vent of a failure
to express the capacity in which the person who signed the negotiable instrument
intended to be bound, he should be deemed to be an indorser, when the very
words of the instrument expressly and conclusively show that such he is, as
occurs in the present case, and when the indorsement contains no restriction,
modification, condition or qualification whatever, there cannot be attributed to
him, without violating the provisions of the said Act, any other intention than that
of being bound in the capacity in which he appears in the instrument itself, nor
can evidence be admitted or, if already admitted, taken into consideration, for the
purpose of proving such other intention, for the simple reason that if the law has
already fixed ad determined the capacity in which it must be considered that the
person who signed the negotiable instrument intervened and the intention of his
being bound in a definite capacity, for no other purpose, undoubtedly, than that
there shall be no evidence given in the matter, when the capacity appears in the
instrument itself and the intention is determined by the very same capacity, as
occurs in this case, the admission of evidence in reference thereto is entirely
unnecessary, useless, and contrary to the purposes of the law, which is clear and
precise in its provisions and admits of no subterfuges or evasions for escaping
obligations contracted upon the basis of credit, with evident and sure detriment to
those who intervened or took part in the negotiation of the instrument.
However, it is held in the majority opinion, for the purpose of sustaining the
premises that the proofs presented by the defendant could have been admitted
without violating the provisions of section 285 of the Code of Civil Procedure, that
the evidence was not offered to vary, alter, modify, or contradict the terms of an
agreement which it is admitted existed between the parties, but to deny that there
ever existed any agreement whatever; to wipe out all apparent relations between
the parties, and not to vary, alter or contradict the terms of a relation admittedly
existing; in other words, the purpose of the parol evidence was to demonstrate,
not that the indorser did not intend to make the particular indorsement in the
terms made, but rather to deny the reality of any indorsement; to deny that a
relation of any kind whatsoever was created or existed between him and the
indorsee by reason of the writing on the back of the instrument; to deny that any
consideration ever passed to sustain an indorsement of any kind whatsoever. It
is stated in the same decision that the contention has some of the appearances
of a case in which an indorser seeks to prove forgery.
First of all, we do not see that there exists any appearance or similarity whatever
between the case at bar and one where forgery is sought to be proved. The
defendant did not, either civilly or criminally, impugn the indorsement as being
false. He admitted its existence, as stated in the majority opinion itself, and did
not disown his signature written in the indorsement. His denial to the effect that
the indorsement was wholly without consideration, aside from the fact that it is i
contradiction to the statements that he over his signature made in the instrument,
does not allow the supposition that the instrument was forged.
The meaning which the majority opinion apparently wishes to convey, in calling
attention to the difference between what, as it says, was the purpose of the
evidence presented by the defendant and what was sought to be proved thereby,
is that the defendant does not endeavor to contradict or alter the terms of the
agreement, which is contained in the instrument and is admitted to exist between
the parties; but to deny the existence of such an agreement between them, that
is, the existence of any indorsement at all, and that any consideration ever
passed to sustain the said indorsement, or, in other words, that the defendant
acknowledged the indorsement as regards the form in which it appears to have
been drawn up, but not with respect to its essence, that is, to the truth of the
particular facts set forth in the indorsement. It cannot be denied that the practical
result evidence is other than to contradict, modify, alter or even to annul the
terms of the agreement contained in the indorsement: so that, in reality, the
distinction does not exist that is mentioned as a ground of the decision of the
majority of the court in support of the opinion that the evidence in question might
have been admitted, without violating the provisions of the aforementioned
section 285 of the Code of Civil Procedure. This section is based upon the same
principle which is taken into account in the Negotiable Instruments Law to write
into it such positive and definite provisions which purport, without possibility of
discussion or doubt, the uselessness of taking evidence when the capacity of the
person who intervened in a negotiable instrument or his intention of being bound
in a particular way appears in the instrument itself or has been fixed by statute, if
it is not shown that he did so in some other capacity than that of maker, drawer
or acceptor.
But aside from what the Code of Civil Procedure prescribes with respect to this
matter, as the present case is governed by the Negotiable Instruments Law, we
must abide by its provisions.
Section 24 of this Act, No. 2031, says that every negotiable instrument is
deemed prima facie to have been issued for a valuable consideration; and every
person whose signature appears thereon, to have become a party thereto for
value. If the Act establishes this presumption for the case where there might be
doubt with respect to the existence of a valuable consideration, in order to avoid
the taking of evidence in the matter, when the consideration appears from the
instrument itself by the expression of the value, the introduction of evidence is
entirely unnecessary and improper.
According to section 25 of the same Act, value is any consideration sufficient to
support a simple contract, and so broad is the scope the law gives to the
meaning of "value" in this kind of instruments that it considers as such a prior of
preexistent debt, whether the instrument be payable on demand or at some
future date.
Section 26 provides that where value has at any time been given for the
instrument, the holder is deemed a holder for value, both in respect to the maker
and to the defendant indorser, it is immaterial whether he did so directly to the
person who appears in the promissory note as the maker or whether he delivered
the sum to the defendant in order that this latter might in turn deliver it to the
maker.
The defendant being the holder of the instrument, he is also unquestionably the
holder in due course. In the first place, in order to avoid doubts with respect to
this matter which might require the introduction of evidence, the Act before
mentioned has provided, in section 59, that every holder is deemed prima
facie to be a holder in due course, and such is the weight it gives to this
presumption and to the consequences derived therefrom, that it imposes upon
the holder the burden to prove that he or some person under whom he claims
acquired the title in due course, only when it is shown that the title of any person
who has negotiated the instrument was defective. This rule, however, pursuant to
the said section, does not apply in favor of a party who became bound on the
instrument prior to the acquisition of such defective title, in which case the
defendant Serrano is not included, because, in the first place, he was not bound
on the instrument prior to the acquisition of the title by the plaintiff, but it was the
maker of the promissory note who was bound on the instrument executed in
favor of the defendant or indorser prior to the acquisition of the title by the
plaintiff; and, in the second place, it does not appear, nor was it proved, as will be
seen hereinafter, that the title in question was defective.
According to section 52 of the same Act, the plaintiff is the holder in due course
of the instrument in question, that is, of the promissory note containing the
obligation compliance with which is demanded of him by the defendant, because
he took the instrument under the condition: (a) That it was complete and regular
upon its face; (b) that he became the holder of it before it was overdue, and
without notice that it had been previously dishonored; (c) that he took it in good
faith and for value; and (d) that at the time it was negotiated to him he had no
notice of any deficiency in the instrument or defect in the title of the person
negotiating it.
Pursuant to section 56 of the said Act, to constitute notice of a deficiency in the
instrument or defect in the title of the person negotiating the same, the person to
whom it is transferred must have had actual knowledge of the deficiency or
defect, or knowledge of such facts that his action in taking the instrument
amounted to bad faith.
In the present case it cannot be said, for it is not proven, that the plaintiff, upon
accepting the instrument from the defendant, had actual knowledge of any
deficiency or defect in the same, for the simple reason that it contains no
deficiency or defect. Its terms are very clear and positive. There is nothing
ambiguous, concealed, or which might give rise to any doubt whatever with
respect to its terms or to the agreement made by the parties. Furthermore, as
stated in the majority opinion, the defendant did not intend to make the particular
indorsement which he did make in the terms, form and manner in which it was
made, nor did he intend to change or alter the terms of the agreement which is
admitted to have existed between the parties. All of which indicates that, neither
as regards the plaintiff nor as regards the defendant, was there any deficiency or
defect in the title or in the instrument, and that the plaintiff, upon taking or
receiving the instrument from the defendant, had no knowledge of any fact from
which bad faith on his part might be implied. Besides, no evidence was produced
of the existence of any such bad faith, nor of the knowledge of any deficiency or
defect.
the full amount thereof against all parties liable thereon. And the next section,
No. 58 prescribes that in the hands of any holder other than a holder in due
course, a negotiable instrument is subject to the same defenses as if it were
nonnegotiable.
So it could not be clearer than that, pursuant to the provisions of the Negotiable
Instrument Law, which governs the case at bar, as the plaintiff is the holder in
due course of the instrument in question, no proof whatever from the defendant
could be admitted, nor if admitted should be taken into account, bearing on the
lack of consideration in the indorsement, as alleged by him, and for the purpose
of denying the existence of any indorsement and that any relation whatever was
created or existed between him and the indorsee; likewise, that no defense of
any kind could have been admitted from the defendant in respect to the said
instrument, and, finally, that the defendant is obligated to pay the sum mentioned
in the said indorsement, it being immaterial whether or not he be deemed to be
an accommodation party in the instrument, in order that compliance with the said
obligation may be required of him in his capacity of indorser.
Basing our conclusions on the foregoing grounds, and regretting to dissent from
the opinion of the majority of our colleagues, we believe that the judgment
appealed from should be affirmed, with the costs against the appellant.
Araullo, J., dissents.

Moreover, section 55 of Act No. 2031 provides that the title of a person who
negotiates an instrument is defective within the meaning of this Act when he
obtained the instrument, or any signature thereto, by fraud, duress, or force and
fear, or other unlawful means, or for an illegal consideration, or when he
negotiates it in breach of faith, or under such circumstances as amount to a
fraud. As no evidence was taken on these points, the only ones that may be
proven as regards negotiable instruments, the defendant must be deemed to be
the holder of the instrument in due course, pursuant to the provisions of the
aforecited section 59, and he cannot be required to prove that he or his
predecessor in interest acquired the title as such holder in due course.

Now then, according to section 28 of the same Act, as against the holder of the
instrument in due course absence or failure of consideration is not a matter of
defense; and, pursuant to section 57, a holder in due course holds the instrument
free from any defect of title of prior parties, and free from defenses available to
prior parties among themselves, and may enforce payment of the instrument for
G.R. No. L-11346 March 21, 1918
ESPIRIDIONA CANUTO, plaintiff-appellee,
vs.
JUAN MARIANO, defendant-appellant.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Alfonso E. Mendoza for appellee.
CARSON, J.:
This is an appeal from a judgment of the Court of First Instance of Manila,
providing for the execution of a deed evidencing the repurchase by the plaintiff of
a parcel of land from the defendant, upon the payment by the former of the sum
of P360.
On December 4, 1913, the plaintiff executed a deed of sale of the parcel of land
described in the complaint, to the defendant, for the sum of P360, reserving the
right to repurchase the land for that amount within one year from the date of the
deed of sale. The redemption period having elapsed, and the plaintiff having
failed to exercise her right to repurchase within that period, the defendant set up
a claim of absolute ownership to the land, notwithstanding the insistent demand
of the plaintiff that she be permitted to exercise her reserved right of repurchase
in accordance with an alleged oral agreement for the extension of the r
redemption period down to the end of the month of December, 1914. She claims
that on the second day of December, 1914, two days before the expiration of the
original redemption period, she asked the defendant for an extension of time for
the repurchase of the land and that upon her promise to make the repurchase
during the month of December, 1914, the defendant agreed to extend the
redemption set out in the written contract, to the end of that month; that after the
expiration of the original redemption period, she thought to make the repurchase
in accordance with the agreement as to the extension of the time therefor; but the
defendant failed to appear at the time and place agreed upon for the payment of
the purchase price and has refused since that time to execute a deed of resale,
or to reserve the purchase price agreed upon, despite the plaintiff's repeated
demands and tender of the purchase price.
The plaintiff testified that on the morning of December the second, 1914, while
she was washing clothes near a well, the defendant passed by; that she seized
the opportunity to beg an extension of time in which to repurchase the land,
promising the defendant that she would borrow the money and make payment if
he would extend the redemption period until the end of the month; that after
some demur the defendant agreed to allow her the whole of the month of
December in which to redeem the land; that the following Sunday she went to the
house of the defendant and that he promised to meet her at the house of
Mercado, an attorney, at 4 o'clock of the next day, there to receive the purchase
price and execute the necessary documents evidencing the transaction; that she
took the money to the lawyer's office at the time appointed, and waited there until
dark, but that the defendant failed to meet his engagement; that she then went to
his house, but was told that he was not at home; and that since that time
defendant has refused to carry out his oral agreement, claiming that the
redemption period set out in the original deed of sale expired on the fourth day of
December, 1914, and that she had no right to repurchase the land after that date.
Severino Pascual, who was present when the oral agreement to extend the time
for the repurchase of the land was made, corroborated her testimony in this
regard, and we find nothing in the record which would justify us in disturbing the
findings of the trial judge who accepted her testimony as a substantially true
account of all that occurred, and declined to believe the conflicting testimony of
the defendant which he characterized as vague and incredible.
The defendant having extended the time within which the plaintiff could
repurchase the land on condition that she would find the money and make
repurchase within the extended period, it is clear that he cannot be permitted to
repudiate his promise, it appearing that the plaintiff stood ready to make the
payment within the extended period, and was only prevented from doing so by
the conduct of the defendant himself. (Villegas vs. Capistrano, 9 Phil. Rep., 416;
Fructo vs. Fuentes, 15 Phil. Rep., 362; Retes vs. Suelto, 20 Phil. Rep., 394;
Rosales vs. Reyes and Ordoveza, 25 Phil. Rep., 495.)
The contention that the plaintiff should not be permitted to alter, vary, or
contradict the terms of the written instrument by the introduction of oral evidence
is manifestly untenable under the circumstances of the case, as will readily
appear from the following citation from 17 Cyc., p. 734, and numerous cases
cited in support of the doctrine:
The rule forbidding the admission of parol or extrinsic evidence to alter,
vary, or contradict a written instrument does not apply so as to prohibit
the establishment by parol of an agreement between the parties to a
writing, entered into subsequent to the time when the written instrument
was executed, notwithstanding such agreement may have the effect of
adding to, changing, modifying, or even altogether abrogating the
contract of the parties as evidenced by the writing; for the parol
evidence does not in any way deny that the original agreement of the
parties was that which the writing purports to express, but merely goes
to show that the parties have exercised their right to change or abrogate
the same, or to make a new and independent contract.
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.
The contention that the plaintiff lost her right to redeem because she failed to
make judicial deposit of the purchase price when the defendant declined to
receive it, is not entitled to serious consideration in view of the repeated
decisions of this court to the contrary collated and discussed in the case of
Rosales vs. Reyes and Ordoveza (25 Phil. Rep., 495). In that case and in the
cases cited therein we declared that the settled rule in this jurisdiction is that a
bona fide offer or tender of the price agreed upon for the repurchase is sufficient
to preserve the rights of the party making it, without the necessity of making
judicial deposit, if the offer or tender is refused; and in the case of Fructo vs.
Fuentes (15 Phil. Rep., 362) we said that in such cases when diligent effort is
made by the vendor of the land to exercise the right to repurchase reserved by
him in his deed of sale "and fails by reason of circumstances over which he has
no control, we are of the opinion and so hold that he does not lose his right to
repurchase on the day of maturity."

We conclude that the judgment entered in the court below should be affirmed
with costs of this instance against the appellant. So ordered.

Arellano, C.J., Street, Malcolm, Avanceña, and Fisher, JJ., concur.

Torres and Araullo, JJ., concur in the result.
Johnson, J., did not sign.