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G.R. No.

156132, October 16, 2006


CITIBANK, N.A. (FORMERLY FIRST NATIONAL CITY BANK) AND
INVESTORS' FINANCE CORPORATION, DOING BUSINESS UNDER THE
NAME AND STYLE OF FNCB FINANCE, PETITIONERS, VS. MODESTA R.
SABENIANO, RESPONDENT.

DECISION
CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari,[1] under Rule 45 of the Revised
Rules of Court, of the Decision[2] of the Court of Appeals in CA-G.R. CV No. 51930,
dated 26 March 2002, and the Resolution,[3] dated 20 November 2002, of the same court
which, although modifying its earlier Decision, still denied for the most part the Motion
for Reconsideration of herein petitioners.

Petitioner Citibank, N.A. (formerly known as the First National City Bank) is a banking
corporation duly authorized and existing under the laws of the United States of America
and licensed to do commercial banking activities and perform trust functions in the
Philippines.

Petitioner Investor's Finance Corporation, which did business under the name and style
of FNCB Finance, was an affiliate company of petitioner Citibank, specifically handling
money market placements for its clients. It is now, by virtue of a merger, doing business
as part of its successor-in-interest, BPI Card Finance Corporation. However, so as to
consistently establish its identity in the Petition at bar, the said petitioner shall still be
referred to herein as FNCB Finance.[4]

Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB
Finance. Regrettably, the business relations among the parties subsequently went awry.

On 8 August 1985, respondent filed a Complaint[5] against petitioners, docketed as Civil


Case No. 11336, before the Regional Trial Court (RTC) of Makati City. Respondent
claimed to have substantial deposits and money market placements with the petitioners,
as well as money market placements with the Ayala Investment and Development
Corporation (AIDC), the proceeds of which were supposedly deposited automatically
and directly to respondent's accounts with petitioner Citibank. Respondent alleged that
petitioners refused to return her deposits and the proceeds of her money market
placements despite her repeated demands, thus, compelling respondent to file Civil Case
No. 11336 against petitioners for "Accounting, Sum of Money and Damages."
Respondent eventually filed an Amended Complaint[6] on 9 October 1985 to include
additional claims to deposits and money market placements inadvertently left out from
her original Complaint.

In their joint Answer[7] and Answer to Amended Complaint,[8] filed on 12 September


1985 and 6 November 1985, respectively, petitioners admitted that respondent had
deposits and money market placements with them, incluing dollar accounts in the
Citibank branch in Geneva, Switzerland (Citibank-Geneva). Petitioners further alleged
that the respondent later obtained several loans from petitioner Citibank, for which she
executed Promissory Notes (PNs), and secured by (a) a Declaration of Pledge of her
dollar accounts in Citibank-Geneva, and (b) Deeds of Assignment of her money market
placements with petitioner FNCB Finance. When respondent failed to pay her loans
despite repeated demands by petitioner Citibank, the latter exercised its right to off-set
or compensate respondent's outstanding loans with her deposits and money market
placements, pursuant to the Declaration of Pledge and the Deeds of Assignment
executed by respondent in its favor. Petitioner Citibank supposedly informed respondent
Sabeniano of the foregoing compensation through letters, dated 28 September 1979 and
31 October 1979. Petitioners were therefore surprised when six years later, in 1985,
respondent and her counsel made repeated requests for the withdrawal of respondent's
deposits and money market placements with petitioner Citibank, including her dollar
accounts with Citibank-Geneva and her money market placements with petitioner
FNCB Finance. Thus, petitioners prayed for the dismissal of the Complaint and for the
award of actual, moral, and exemplary damages, and attorney's fees.

When the parties failed to reach a compromise during the pre-trial hearing,[9] trial proper
ensued and the parties proceeded with the presentation of their respective evidence.
Ten years after the filing of the Complaint on 8 August 1985, a Decision[10] was finally
rendered in Civil Case No. 11336 on 24 August 1995 by the fourth Judge[11] who handled
the said case, Judge Manuel D. Victorio, the dispositive portion of which reads -
WHEREFORE, in view of all the foregoing, decision is hereby rendered as follows:

(1) Declaring as illegal, null and void the setoff effected by the defendant Bank
[petitioner Citibank] of plaintiff's [respondent Sabeniano] dollar deposit with Citibank,
Switzerland, in the amount of US$149,632.99, and ordering the said defendant
[petitioner Citibank] to refund the said amount to the plaintiff with legal interest at the
rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979
until fully paid, or its peso equivalent at the time of payment;

(2) Declaring the plaintiff [respondent Sabeniano] indebted to the defendant Bank
[petitioner Citibank] in the amount of P1,069,847.40 as of 5 September 1979 and
ordering the plaintiff [respondent Sabeniano] to pay said amount, however, there shall
be no interest and penalty charges from the time the illegal setoff was effected on 31
October 1979;

(3) Dismissing all other claims and counterclaims interposed by the parties against each
other.

Costs against the defendant Bank.


All the parties appealed the foregoing Decision of the RTC to the Court of Appeals,
docketed as CA-G.R. CV No. 51930. Respondent questioned the findings of the RTC
that she was still indebted to petitioner Citibank, as well as the failure of the RTC to
order petitioners to render an accounting of respondent's deposits and money market
placements with them. On the other hand, petitioners argued that petitioner Citibank
validly compensated respondent's outstanding loans with her dollar accounts with
Citibank-Geneva, in accordance with the Declaration of Pledge she executed in its favor.
Petitioners also alleged that the RTC erred in not declaring respondent liable for
damages and interest.

On 26 March 2002, the Court of Appeals rendered its Decision[12] affirming with
modification the RTC Decision in Civil Case No. 11336, dated 24 August 1995, and
ruling entirely in favor of respondent in this wise -
Wherefore, premises considered, the assailed 24 August 1995 Decision of the court a
quo is hereby AFFIRMED with MODIFICATION, as follows:
1 Declaring as illegal, null and void the set-off effected by the defendant-appellant
Bank of the plaintiff-appellant's dollar deposit with Citibank, Switzerland, in the
amount of US$149,632.99, and ordering defendant-appellant Citibank to refund
the said amount to the plaintiff-appellant with legal interest at the rate of twelve
percent (12%) per annum, compounded yearly, from 31 October 1979 until fully
paid, or its peso equivalent at the time of payment;
2
3 As defendant-appellant Citibank failed to establish by competent evidence the
alleged indebtedness of plaintiff-appellant, the set-off of P1,069,847.40 in the
account of Ms. Sabeniano is hereby declared as without legal and factual basis;
4
5 As defendants-appellants failed to account the following plaintiff-appellant's
money market placements, savings account and current accounts, the former is
hereby ordered to return the same, in accordance with the terms and conditions
agreed upon by the contending parties as evidenced by the certificates of
investments, to wit:
6 (i) Citibank NNPN Serial No. 023356 (Cancels and Supersedes NNPN No.
22526) issued on 17 March 1977, P318,897.34 with 14.50% interest p.a.;

(ii) Citibank NNPN Serial No. 23357 (Cancels and Supersedes NNPN No. 22528)
issued on 17 March 1977, P203,150.00 with 14.50 interest p.a.;

(iii) FNCB NNPN Serial No. 05757 (Cancels and Supersedes NNPN No. 04952),
issued on 02 June 1977, P500,000.00 with 17% interest p.a.;

(iv) FNCB NNPN Serial No. 05758 (Cancels and Supersedes NNPN No. 04962),
issued on 02 June 1977, P500,000.00 with 17% interest per annum;

(v) The Two Million (P2,000,000.00) money market placements of Ms. Sabeniano
with the Ayala Investment & Development Corporation (AIDC) with legal
interest at the rate of twelve percent (12%) per annum compounded yearly, from
30 September 1976 until fully paid;
7 Ordering defendants-appellants to jointly and severally pay the plaintiff-appellant
the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) by way of
moral damages, FIVE HUNDRED THOUSAND PESOS (P500,000.00) as
exemplary damages, and ONE HUNDRED THOUSAND PESOS (P100,000.00)
as attorney's fees.
Apparently, the parties to the case, namely, the respondent, on one hand, and the
petitioners, on the other, made separate attempts to bring the aforementioned Decision
of the Court of Appeals, dated 26 March 2002, before this Court for review.

G.R. No. 152985

Respondent no longer sought a reconsideration of the Decision of the Court of


Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, and instead, filed immediately
with this Court on 3 May 2002 a Motion for Extension of Time to File a Petition for
Review,[13] which, after payment of the docket and other lawful fees, was assigned the
docket number G.R. No. 152985. In the said Motion, respondent alleged that she
received a copy of the assailed Court of Appeals Decision on 18 April 2002 and, thus,
had 15 days therefrom or until 3 May 2002 within which to file her Petition for Review.
Since she informed her counsel of her desire to pursue an appeal of the Court of
Appeals Decision only on 29 April 2002, her counsel neither had enough time to file a
motion for reconsideration of the said Decision with the Court of Appeals, nor a
Petition for Certiorari with this Court. Yet, the Motion failed to state the exact extension
period respondent was requesting for.

Since this Court did not act upon respondent's Motion for Extension of Time to file her
Petition for Review, then the period for appeal continued to run and still expired on 3
May 2002.[14] Respondent failed to file any Petition for Review within the prescribed
period for appeal and, hence, this Court issued a Resolution,[15] dated 13 November
2002, in which it pronounced that -
G.R. No. 152985 (Modesta R. Sabeniano vs. Court of Appeals, et al.). - It appearing that
petitioner failed to file the intended petition for review on certiorari within the period
which expired on May 3, 2002, the Court Resolves to DECLARE THIS CASE
TERMINATED and DIRECT the Division Clerk of Court to INFORM the parties
that the judgment sought to be reviewed has become final and executory.
The said Resolution was duly recorded in the Book of Entries of Judgments on 3
January 2003.

G.R. No. 156132

Meanwhile, petitioners filed with the Court of Appeals a Motion for Reconsideration of
its Decision in CA-G.R. CV No. 51930, dated 26 March 2002. Acting upon the said
Motion, the Court of Appeals issued the Resolution,[16] dated 20 November 2002,
modifying its Decision of 26 March 2002, as follows -
WHEREFORE, premises considered, the instant Motion for Reconsideration is
PARTIALLY GRANTED as Sub-paragraph (V) paragraph 3 of the assailed Decision's
dispositive portion is hereby ordered DELETED.

The challenged 26 March 2002 Decision of the Court is AFFIRMED with


MODIFICATION.
Assailing the Decision and Resolution of the Court of Appeals in CA-G.R. CV No.
51930, dated 26 March 2002 and 20 November 2002, respectively, petitioners filed the
present Petition, docketed as G.R. No. 156132. The Petition was initially denied[17] by
this Court for failure of the petitioners to attach thereto a Certification against Forum
Shopping. However, upon petitioners' Motion and compliance with the requirements,
this Court resolved[18] to reinstate the Petition.

The Petition presented fourteen (14) assignments of errors allegedly committed by the
Court of Appeals in its Decision, dated 26 March 2002, involving both questions of fact
and questions of law which this Court, for the sake of expediency, discusses jointly,
whenever possible, in the succeeding paragraphs.

The Resolution of this Court, dated


13 November 2002, in G.R. No.
152985, declaring the Decision of the
Court of Appeals, dated 26 March
2002, final and executory, pertains to
respondent Sabeniano alone.

Before proceeding to a discussion of the merits of the instant Petition, this Court
wishes to address first the argument, persistently advanced by respondent in her
pleadings on record, as well as her numerous personal and unofficial letters to this Court
which were no longer made part of the record, that the Decision of the Court of
Appeals in CA-G.R. CV No. 51930, dated 26 March 2002, had already become final and
executory by virtue of the Resolution of this Court in G.R. No. 152985, dated 13
November 2002.

G.R. No. 152985 was the docket number assigned by this Court to respondent's Motion
for Extension of Time to File a Petition for Review. Respondent, though, did not file
her supposed Petition. Thus, after the lapse of the prescribed period for the filing of
the Petition, this Court issued the Resolution, dated 13 November 2002, declaring the
Decision of the Court of Appeals, dated 26 March 2002, final and executory. It should
be pointed out, however, that the Resolution, dated 13 November 2002, referred only to
G.R. No. 152985, respondent's appeal, which she failed to perfect through the filing of a
Petition for Review within the prescribed period. The declaration of this Court in the
same Resolution would bind respondent solely, and not petitioners which filed their own
separate appeal before this Court, docketed as G.R. No. 156132, the Petition at bar. This
would mean that respondent, on her part, should be bound by the findings of fact and
law of the Court of Appeals, including the monetary amounts consequently awarded to
her by the appellate court in its Decision, dated 26 March 2002; and she can no longer
refute or assail any part thereof. [19]

This Court already explained the matter to respondent when it issued a Resolution[20] in
G.R. No. 156132, dated 2 February 2004, which addressed her Urgent Motion for the
Release of the Decision with the Implementation of the Entry of Judgment in the
following manner -
[A]cting on Citibank's and FNCB Finance's Motion for Reconsideration, we resolved to
grant the motion, reinstate the petition and require Sabeniano to file a comment thereto
in our Resolution of June 23, 2003. Sabeniano filed a Comment dated July 17, 2003 to
which Citibank and FNCB Finance filed a Reply dated August 20, 2003.

From the foregoing, it is clear that Sabeniano had knowledge of, and in fact participated
in, the proceedings in G.R. No. 156132. She cannot feign ignorance of the proceedings
therein and claim that the Decision of the Court of Appeals has become final and
executory. More precisely, the Decision became final and executory only with regard to
Sabeniano in view of her failure to file a petition for review within the extended period
granted by the Court, and not to Citibank and FNCB Finance whose Petition for Review
was duly reinstated and is now submitted for decision.

Accordingly, the instant Urgent Motion is hereby DENIED. (Emphasis supplied.)


To sustain the argument of respondent would result in an unjust and incongruous
situation wherein one party may frustrate the efforts of the opposing party to appeal the
case by merely filing with this Court a Motion for Extension of Time to File a Petition
for Review, ahead of the opposing party, then not actually filing the intended Petition.[21]
The party who fails to file its intended Petition within the reglementary or extended
period should solely bear the consequences of such failure.

Respondent Sabeniano did not


commit forum shopping.

Another issue that does not directly involve the merits of the present Petition, but raised
by petitioners, is whether respondent should be held liable for forum shopping.

Petitioners contend that respondent committed forum shopping on the basis of the
following facts:

While petitioners' Motion for Reconsideration of the Decision in CA-G.R. CV No.


51930, dated 26 March 2002, was still pending before the Court of Appeals, respondent
already filed with this Court on 3 May 2002 her Motion for Extension of Time to File a
Petition for Review of the same Court of Appeals Decision, docketed as G.R. No.
152985. Thereafter, respondent continued to participate in the proceedings before the
Court of Appeals in CA-G.R. CV No. 51930 by filing her Comment, dated 17 July 2002,
to petitioners' Motion for Reconsideration; and a Rejoinder, dated 23 September 2002,
to petitioners' Reply. Thus, petitioners argue that by seeking relief concurrently from this
Court and the Court of Appeals, respondent is undeniably guilty of forum shopping, if
not indirect contempt.

This Court, however, finds no sufficient basis to hold respondent liable for forum
shopping.

Forum shopping has been defined as the filing of two or more suits involving the same
parties for the same cause of action, either simultaneously or successively, for the
purpose of obtaining a favorable judgment.[22] The test for determining forum
shopping is whether in the two (or more) cases pending, there is an identity of parties,
rights or causes of action, and relief sought.[23] To guard against this deplorable
practice, Rule 7, Section 5 of the revised Rules of Court imposes the following
requirement -
SEC. 5. Certification against forum shopping. - The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim for
relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge,
no such other action or claim is pending therein; (b) if there is such other pending action
or claim, a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is pending, he
shall report that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to
the corresponding administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as
well as cause for administrative sanctions.
Although it may seem at first glance that respondent was simultaneously seeking
recourse from the Court of Appeals and this Court, a careful and closer scrutiny of the
details of the case at bar would reveal otherwise.

It should be recalled that respondent did nothing more in G.R. No. 152985 than to file
with this Court a Motion for Extension of Time within which to file her Petition for
Review. For unexplained reasons, respondent failed to submit to this Court her intended
Petition within the reglementary period. Consequently, this Court was prompted to
issue a Resolution, dated 13 November 2002, declaring G.R. No. 152985 terminated, and
the therein assailed Court of Appeals Decision final and executory. G.R. No. 152985,
therefore, did not progress and respondent's appeal was unperfected.

The Petition for Review would constitute the initiatory pleading before this Court, upon
the timely filing of which, the case before this Court commences; much in the same way
a case is initiated by the filing of a Complaint before the trial court. The Petition for
Review establishes the identity of parties, rights or causes of action, and relief sought
from this Court, and without such a Petition, there is technically no case before this
Court. The Motion filed by respondent seeking extension of time within which to file
her Petition for Review does not serve the same purpose as the Petition for Review
itself. Such a Motion merely presents the important dates and the justification for the
additional time requested for, but it does not go into the details of the appealed case.

Without any particular idea as to the assignments of error or the relief respondent
intended to seek from this Court, in light of her failure to file her Petition for Review,
there is actually no second case involving the same parties, rights or causes of action,
and relief sought, as that in CA-G.R. CV No. 51930.

It should also be noted that the Certification against Forum Shopping is required to be
attached to the initiatory pleading, which, in G.R. No. 152985, should have been
respondent's Petition for Review. It is in that Certification wherein respondent certifies,
under oath, that: (a) she has not commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of her
knowledge, no such other action or claim is pending therein; (b) if there is such other
pending action or claim, that she is presenting a complete statement of the present
status thereof; and (c) if she should thereafter learn that the same or similar action or
claim has been filed or is pending, she shall report that fact within five days therefrom to
this Court. Without her Petition for Review, respondent had no obligation to execute
and submit the foregoing Certification against Forum Shopping. Thus, respondent did
not violate Rule 7, Section 5 of the Revised Rules of Court; neither did she mislead this
Court as to the pendency of another similar case.

Lastly, the fact alone that the Decision of the Court of Appeals, dated 26 March 2002,
essentially ruled in favor of respondent, does not necessarily preclude her from
appealing the same. Granted that such a move is ostensibly irrational, nonetheless, it
does not amount to malice, bad faith or abuse of the court processes in the absence of
further proof. Again, it should be noted that the respondent did not file her intended
Petition for Review. The Petition for Review would have presented before this Court the
grounds for respondent's appeal and her arguments in support thereof. Without said
Petition, any reason attributed to the respondent for appealing the 26 March 2002
Decision would be grounded on mere speculations, to which this Court cannot give
credence.

II
As an exception to the general rule,
this Court takes cognizance of questions of
fact raised in the Petition at bar.

It is already a well-settled rule that the jurisdiction of this Court in cases brought before
it from the Court of Appeals by virtue of Rule 45 of the Revised Rules of Court is
limited to reviewing errors of law. Findings of fact of the Court of Appeals are
conclusive upon this Court. There are, however, recognized exceptions to the foregoing
rule, namely: (1) when the findings are grounded entirely on speculation, surmises, or
conjectures; (2) when the interference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based
on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in
making its findings, the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7) when
the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondent; and (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record.[24]

Several of the enumerated exceptions pertain to the Petition at bar.

It is indubitable that the Court of Appeals made factual findings that are contrary to
those of the RTC,[25] thus, resulting in its substantial modification of the trial court's
Decision, and a ruling entirely in favor of the respondent. In addition, petitioners
invoked in the instant Petition for Review several exceptions that would justify this
Court's review of the factual findings of the Court of Appeals, i.e., the Court of
Appeals made conflicting findings of fact; findings of fact which went beyond the issues
raised on appeal before it; as well as findings of fact premised on the supposed absence
of evidence and contradicted by the evidence on record.

On the basis of the foregoing, this Court shall proceed to reviewing and re-evaluating
the evidence on record in order to settle questions of fact raised in the Petition at bar.

The fact that the trial judge who


rendered the RTC Decision in Civil
Case No. 11336, dated 24 August
1995, was not the same judge who
heard and tried the case, does not, by
itself, render the said Decision
erroneous.

The Decision in Civil Case No. 11336 was rendered more than 10 years from the
institution of the said case. In the course of its trial, the case was presided over by four
(4) different RTC judges.[26] It was Judge Victorio, the fourth judge assigned to the case,
who wrote the RTC Decision, dated 24 August 1995. In his Decision,[27] Judge Victorio
made the following findings -
After carefully evaluating the mass of evidence adduced by the parties, this Court is not
inclined to believe the plaintiff's assertion that the promissory notes as well as the deeds
of assignments of her FNCB Finance money market placements were simulated. The
evidence is overwhelming that the plaintiff received the proceeds of the loans evidenced
by the various promissory notes she had signed. What is more, there was not an iota of
proof save the plaintiff's bare testimony that she had indeed applied for loan with the
Development Bank of the Philippines.

More importantly, the two deeds of assignment were notarized, hence they partake the
nature of a public document. It makes more than preponderant proof to overturn the
effect of a notarial attestation. Copies of the deeds of assignments were actually filed
with the Records Management and Archives Office.

Finally, there were sufficient evidence wherein the plaintiff had admitted the existence
of her loans with the defendant Bank in the total amount of P1,920,000.00 exclusive of
interests and penalty charges (Exhibits "28", "31", "32", and "33").

In fine, this Court hereby finds that the defendants had established the genuineness and
due execution of the various promissory notes heretofore identified as well as the two
deeds of assignments of the plaintiff's money market placements with defendant FNCB
Finance, on the strength of which the said money market placements were applied to
partially pay the plaintiff's past due obligation with the defendant Bank. Thus, the total
sum of P1,053,995.80 of the plaintiff's past due obligation was partially offset by the
said money market placement leaving a balance of P1,069,847.40 as of 5 September
1979 (Exhibit "34").
Disagreeing in the foregoing findings, the Court of Appeals stressed, in its Decision in
CA-G.R. CV No. 51930, dated 26 March 2002, "that the ponente of the herein assailed
Decision is not the Presiding Judge who heard and tried the case."[28] This brings us to
the question of whether the fact alone that the RTC Decision was rendered by a judge
other than the judge who actually heard and tried the case is sufficient justification for
the appellate court to disregard or set aside the findings in the Decision of the court a
quo?

This Court rules in the negative.

What deserves stressing is that, in this jurisdiction, there exists a disputable presumption
that the RTC Decision was rendered by the judge in the regular performance of his
official duties. While the said presumption is only disputable, it is satisfactory unless
contradicted or overcame by other evidence.[29] Encompassed in this presumption of
regularity is the presumption that the RTC judge, in resolving the case and drafting his
Decision, reviewed, evaluated, and weighed all the evidence on record. That the said
RTC judge is not the same judge who heard the case and received the evidence is of
little consequence when the records and transcripts of stenographic notes (TSNs) are
complete and available for consideration by the former.

In People v. Gazmen,[30] this Court already elucidated its position on such an issue -
Accused-appellant makes an issue of the fact that the judge who penned the decision
was not the judge who heard and tried the case and concludes therefrom that the
findings of the former are erroneous. Accused-appellant's argument does not merit a
lengthy discussion. It is well-settled that the decision of a judge who did not try the case
is not by that reason alone erroneous.

It is true that the judge who ultimately decided the case had not heard the controversy at
all, the trial having been conducted by then Judge Emilio L. Polig, who was indefinitely
suspended by this Court. Nonetheless, the transcripts of stenographic notes taken
during the trial were complete and were presumably examined and studied by Judge
Baguilat before he rendered his decision. It is not unusual for a judge who did not try a
case to decide it on the basis of the record. The fact that he did not have the
opportunity to observe the demeanor of the witnesses during the trial but merely relied
on the transcript of their testimonies does not for that reason alone render the judgment
erroneous.

(People vs. Jaymalin, 214 SCRA 685, 692 [1992])

Although it is true that the judge who heard the witnesses testify is in a better position to
observe the witnesses on the stand and determine by their demeanor whether they are
telling the truth or mouthing falsehood, it does not necessarily follow that a judge who
was not present during the trial cannot render a valid decision since he can rely on the
transcript of stenographic notes taken during the trial as basis of his decision.

Accused-appellant's contention that the trial judge did not have the opportunity to
observe the conduct and demeanor of the witnesses since he was not the same judge
who conducted the hearing is also untenable. While it is true that the trial judge who
conducted the hearing would be in a better position to ascertain the truth and falsity of
the testimonies of the witnesses, it does not necessarily follow that a judge who was not
present during the trial cannot render a valid and just decision since the latter can also
rely on the transcribed stenographic notes taken during the trial as the basis of his
decision.

(People vs. De Paz, 212 SCRA 56, 63 [1992])

At any rate, the test to determine the value of the testimony of the witness is whether or
not such is in conformity with knowledge and consistent with the experience of
mankind (People vs. Morre, 217 SCRA 219 [1993]). Further, the credibility of witnesses
can also be assessed on the basis of the substance of their testimony and the
surrounding circumstances (People v. Gonzales, 210 SCRA 44 [1992]). A critical
evaluation of the testimony of the prosecution witnesses reveals that their testimony
accords with the aforementioned tests, and carries with it the ring of truth end perforce,
must be given full weight and credit.
Irrefragably, by reason alone that the judge who penned the RTC Decision was not the
same judge who heard the case and received the evidence therein would not render the
findings in the said Decision erroneous and unreliable. While the conduct and
demeanor of witnesses may sway a trial court judge in deciding a case, it is not, and
should not be, his only consideration. Even more vital for the trial court judge's
decision are the contents and substance of the witnesses' testimonies, as borne out by
the TSNs, as well as the object and documentary evidence submitted and made part of
the records of the case.

This Court proceeds to making its


own findings of fact.

Since the Decision of the Court of Appeals in CA-G.R. CV No. 51930, dated 26 March
2002, has become final and executory as to the respondent, due to her failure to
interpose an appeal therefrom within the reglementary period, she is already bound by
the factual findings in the said Decision. Likewise, respondent's failure to file, within the
reglementary period, a Motion for Reconsideration or an appeal of the Resolution of
the Court of Appeals in the same case, dated 20 November 2002, which modified its
earlier Decision by deleting paragraph 3(v) of its dispositive portion, ordering petitioners
to return to respondent the proceeds of her money market placement with AIDC, shall
already bar her from questioning such modification before this Court. Thus, what is for
review before this Court is the Decision of the Court of Appeals, dated 26 March 2002,
as modified by the Resolution of the same court, dated 20 November 2002.

Respondent alleged that she had several deposits and money market placements with
petitioners. These deposits and money market placements, as determined by the Court
of Appeals in its Decision, dated 26 March 2002, and as modified by its Resolution,
dated 20 November 2002, are as follows -
Deposit/Placement
Amount
Dollar deposit with Citibank-Geneva
$ 149,632.99
Money market placement with Citibank, evidenced by Promissory Note (PN) No. 23356
(which cancels and supersedes PN No. 22526), earning 14.5% interest per annum (p.a.)
P 318,897.34
Money market placement with Citibank, evidenced by PN No. 23357 (which cancels and
supersedes PN No. 22528), earning 14.5% interest p.a.
P 203,150.00
Money market placement with FNCB Finance, evidenced by PN No. 5757 (which
cancels and supersedes PN No. 4952), earning 17% interest p.a.
P 500,000.00
Money market placement with FNCB Finance, evidenced by PN No. 5758 (which
cancels and supersedes PN No. 2962), earning 17% interest p.a.
P 500,000.00
This Court is tasked to determine whether petitioners are indeed liable to return the
foregoing amounts, together with the appropriate interests and penalties, to respondent.
It shall trace respondent's transactions with petitioners, from her money market
placements with petitioner Citibank and petitioner FNCB Finance, to her savings and
current accounts with petitioner Citibank, and to her dollar accounts with Citibank-
Geneva.

Money market placements with petitioner Citibank

The history of respondent's money market placements with petitioner Citibank began
on 6 December 1976, when she made a placement of P500,000.00 as principal amount,
which was supposed to earn an interest of 16% p.a. and for which PN No. 20773 was
issued. Respondent did not yet claim the proceeds of her placement and, instead, rolled-
over or re-invested the principal and proceeds several times in the succeeding years for
which new PNs were issued by petitioner Citibank to replace the ones which matured.
Petitioner Citibank accounted for respondent's original placement and the subsequent
roll-overs thereof, as follows -
Date
(mm/dd/yyyy)
PN No.
Cancels
PN No.
Maturity Date (mm/dd/yyyy)
Amount
(P)

Interest (p.a.)
12/06/1976
20773
None
01/13/1977
500,000.00
16%
01/14/1977
21686
20773
02/08/1977
508,444.44
15%
02/09/1977
22526
21686
03/16/1977
313,952.59
15-3/4%
22528
21686
03/16/1977
200,000.00
15-3/4%
03/17/1977
23356
22526
04/20/1977
318,897.34
14-1/2%
23357
22528
04/20/1977
203,150.00
14-1/2%
Petitioner Citibank alleged that it had already paid to respondent the principal amounts
and proceeds of PNs No. 23356 and 23357, upon their maturity. Petitioner Citibank
further averred that respondent used the P500,000.00 from the payment of PNs No.
23356 and 23357, plus P600,000.00 sourced from her other funds, to open two time
deposit (TD) accounts with petitioner Citibank, namely, TD Accounts No. 17783 and
17784.

Petitioner Citibank did not deny the existence nor questioned the authenticity of PNs
No. 23356 and 23357 it issued in favor of respondent for her money market
placements. In fact, it admitted the genuineness and due execution of the said PNs, but
qualified that they were no longer outstanding.[31] In Hibberd v. Rohde and McMillian,
[32] this Court delineated the consequences of such an admission -

By the admission of the genuineness and due execution of an instrument, as provided in


this section, is meant that the party whose signature it bears admits that he signed it or
that it was signed by another for him with his authority; that at the time it was signed it
was in words and figures exactly as set out in the pleading of the party relying upon it;
that the document was delivered; and that any formal requisites required by law, such as
a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him. Hence,
such defenses as that the signature is a forgery (Puritan Mfg. Co. vs. Toti & Gradi, 14 N.
M., 425; Cox vs. Northwestern Stage Co., 1 Idaho, 376; Woollen vs. Whitacre, 73 Ind.,
198; Smith vs. Ehnert, 47 Wis., 479; Faelnar vs. Escao, 11 Phil. Rep., 92); or that it was
unauthorized, as in the case of an agent signing for his principal, or one signing in
behalf of a partnership (Country Bank vs. Greenberg, 127 Cal., 26; Henshaw vs. Root,
60 Inc., 220; Naftzker vs. Lantz, 137 Mich., 441) or of a corporation (Merchant vs.
International Banking Corporation, 6 Phil Rep., 314; Wanita vs. Rollins, 75 Miss., 253;
Barnes vs. Spencer & Barnes Co., 162 Mich., 509); or that, in the case of the latter, that
the corporation was authorized under its charter to sign the instrument (Merchant vs.
International Banking Corporation, supra); or that the party charged signed the
instrument in some other capacity than that alleged in the pleading setting it out (Payne
vs. National Bank, 16 Kan., 147); or that it was never delivered (Hunt vs. Weir, 29 Ill., 83;
Elbring vs. Mullen, 4 Idaho, 199; Thorp vs. Keokuk Coal Co., 48 N.Y., 253; Fire
Association of Philadelphia vs. Ruby, 60 Neb., 216) are cut off by the admission of its
genuineness and due execution.

The effect of the admission is such that in the case of a promissory note a prima facie
case is made for the plaintiff which dispenses with the necessity of evidence on his part
and entitles him to a judgment on the pleadings unless a special defense of new matter,
such as payment, is interposed by the defendant (Papa vs. Martinez, 12 Phil. Rep., 613;
Chinese Chamber of Commerce vs. Pua To Ching, 14 Phil. Rep., 222; Banco Espaol-
Filipino vs. McKay & Zoeller, 27 Phil. Rep., 183). x x x
Since the genuineness and due execution of PNs No. 23356 and 23357 are uncontested,
respondent was able to establish prima facie that petitioner Citibank is liable to her for
the amounts stated therein. The assertion of petitioner Citibank of payment of the said
PNs is an affirmative allegation of a new matter, the burden of proof as to such resting
on petitioner Citibank. Respondent having proved the existence of the obligation, the
burden of proof was upon petitioner Citibank to show that it had been discharged.[33] It
has already been established by this Court that -
As a general rule, one who pleads payment has the burden of proving it. Even where
the plaintiff must allege non-payment, the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. The
debtor has the burden of showing with legal certainty that the obligation has been
discharged by payment.

When the existence of a debt is fully established by the evidence contained in the record,
the burden of proving that it has been extinguished by payment devolves upon the
debtor who offers such defense to the claim of the creditor. Where the debtor
introduces some evidence of payment, the burden of going forward with the evidence -
as distinct from the general burden of proof - shifts to the creditor, who is then under
the duty of producing some evidence of non-payment.[34]
Reviewing the evidence on record, this Court finds that petitioner Citibank failed to
satisfactorily prove that PNs No. 23356 and 23357 had already been paid, and that the
amount so paid was actually used to open one of respondent's TD accounts with
petitioner Citibank.

Petitioner Citibank presented the testimonies of two witnesses to support its contention
of payment: (1) That of Mr. Herminio Pujeda,[35] the officer-in-charge of loans and
placements at the time when the questioned transactions took place; and (2) that of Mr.
Francisco Tan,[36] the former Assistant Vice-President of Citibank, who directly dealt
with respondent with regard to her deposits and loans.

The relevant portion[37] of Mr. Pujeda's testimony as to PNs No. 23356 and 23357
(referred to therein as Exhibits No. "47" and "48," respectively) is reproduced below -
Atty. Mabasa:
Okey [sic]. Now Mr. Witness, you were asked to testify in this case and this case is [sic]
consist [sic] of several documents involving transactions between the plaintiff and the
defendant. Now, were you able to make your own memorandum regarding all these
transactions?

A
Yes, based on my recollection of these facts, I did come up of [sic] the outline of the
chronological sequence of events.

Court:

Are you trying to say that you have personal knowledge or participation to these
transactions?

A
Yes, your Honor, I was the officer-in charge of the unit that was processing these
transactions. Some of the documents bear my signature.

Court:
And this resume or summary that you have prepared is based on purely your recollection
or documents?

A
Based on documents, your Honor.

Court:

Are these documents still available now?

A
Yes, your honor.

Court:

Better present the documents.


Atty. Mabasa:

Yes, your Honor, that is why your Honor.

Atty. Mabasa:

Q
Now, basing on the notes that you prepared, Mr. Witness, and according to you basing
also on your personal recollection about all the transactions involved between Modesta
Sabeniano and defendant City Bank [sic] in this case. Now, would you tell us what
happened to the money market placements of Modesta Sabeniano that you have earlier
identified in Exhs. "47" and "48"?

A
The transactions which I said earlier were terminated and booked to time deposits.

Q
And you are saying time deposits with what bank?

A
With First National Citibank.
Q
Is it the same bank as Citibank, N.A.?

A
Yes, sir.

Q
And how much was the amount booked as time deposit with defendant Citibank?

A
In the amount of P500,000.00.

Q
And outside this P500,000.00 which you said was booked out of the proceeds of Exhs.
"47" and "48", were there other time deposits opened by Mrs. Modesta Sabeniano at that
time.

A
Yes, she also opened another time deposit for P600,000.00.

Q
So all in all Mr. Witness, sometime in April of 1978 Mrs. Modesta Sabeneano [sic] had
time deposit placements with Citibank in the amount of P500,000.00 which is the
proceeds of Exh. "47" and "48" and another P600,000.00, is it not?
A
Yes, sir.

Q
And would you know where did the other P600,000 placed by Mrs. Sabeneano [sic] in a
time deposit with Citibank, N.A. came [sic] from?

A
She funded it directly.

Q
What are you saying Mr. Witness is that the P600,000 is a [sic] fresh money coming from
Mrs. Modesta Sabeneano [sic]?

A
That is right.
In his deposition in Hong Kong, Mr. Tan recounted what happened to PNs No. 23356
and 23357 (referred to therein as Exhibits "E" and "F," respectively), as follows -
Atty. Mabasa :
Now from the Exhibits that you have identified Mr. Tan from Exhibits "A" to "F",
which are Exhibits of the plaintiff. Now, do I understand from you that the original
amount is Five Hundred Thousand and thereafter renewed in the succeeding exhibits?

Mr. Tan :
Yes, Sir.
Atty. Mabasa :
Alright, after these Exhibits "E" and "F" matured, what happened thereafter?

Mr. Tan :
Split into two time deposits.

Atty. Mabasa :
Exhibits "E" and "F"?
Before anything else, it should be noted that when Mr. Pujeda's testimony before the
RTC was made on 12 March 1990 and Mr. Tan's deposition in Hong Kong was
conducted on 3 September 1990, more than a decade had passed from the time the
transactions they were testifying on took place. This Court had previously recognized
the frailty and unreliability of human memory with regards to figures after the lapse of
five years.[38] Taking into consideration the substantial length of time between the
transactions and the witnesses' testimonies, as well as the undeniable fact that bank
officers deal with multiple clients and process numerous transactions during their tenure,
this Court is reluctant to give much weight to the testimonies of Mr. Pujeda and Mr. Tan
regarding the payment of PNs No. 23356 and 23357 and the use by respondent of the
proceeds thereof for opening TD accounts. This Court finds it implausible that they
should remember, after all these years, this particular transaction with respondent
involving her PNs No. 23356 and 23357 and TD accounts. Both witnesses did not give
any reason as to why, from among all the clients they had dealt with and all the
transactions they had processed as officers of petitioner Citibank, they specially
remembered respondent and her PNs No. 23356 and 23357. Their testimonies likewise
lacked details on the circumstances surrounding the payment of the two PNs and the
opening of the time deposit accounts by respondent, such as the date of payment of the
two PNs, mode of payment, and the manner and context by which respondent relayed
her instructions to the officers of petitioner Citibank to use the proceeds of her two
PNs in opening the TD accounts.

Moreover, while there are documentary evidences to support and trace respondent's
money market placements with petitioner Citibank, from the original PN No. 20773,
rolled-over several times to, finally, PNs No. 23356 and 23357, there is an evident
absence of any documentary evidence on the payment of these last two PNs and the use
of the proceeds thereof by respondent for opening TD accounts. The paper trail seems
to have ended with the copies of PNs No. 23356 and 23357. Although both Mr. Pujeda
and Mr. Tan said that they based their testimonies, not just on their memories but also
on the documents on file, the supposed documents on which they based those portions
of their testimony on the payment of PNs No. 23356 and 23357 and the opening of the
TD accounts from the proceeds thereof, were never presented before the courts nor
made part of the records of the case. Respondent's money market placements were of
substantial amounts - consisting of the principal amount of P500,000.00, plus the
interest it should have earned during the years of placement - and it is difficult for this
Court to believe that petitioner Citibank would not have had documented the payment
thereof.

When Mr. Pujeda testified before the RTC on 6 February 1990,[39] petitioners' counsel
attempted to present in evidence a document that would supposedly support the claim
of petitioner Citibank that the proceeds of PNs No. 23356 and 23357 were used by
respondent to open one of her two TD accounts in the amount of P500,000.00.
Respondent's counsel objected to the presentation of the document since it was a mere
"xerox" copy, and was blurred and hardly readable. Petitioners' counsel then asked for a
continuance of the hearing so that they can have time to produce a better document,
which was granted by the court. However, during the next hearing and continuance of
Mr. Pujeda's testimony on 12 March 1990, petitioners' counsel no longer referred to the
said document.

As respondent had established a prima facie case that petitioner Citibank is obligated to
her for the amounts stated in PNs No. 23356 and 23357, and as petitioner Citibank
failed to present sufficient proof of payment of the said PNs and the use by the
respondent of the proceeds thereof to open her TD accounts, this Court finds that PNs
No. 23356 and 23357 are still outstanding and petitioner Citibank is still liable to
respondent for the amounts stated therein.

The significance of this Court's declaration that PNs No. 23356 and 23357 are still
outstanding becomes apparent in the light of petitioners' next contentions - that
respondent used the proceeds of PNs No. 23356 and 23357, together with additional
money, to open TD Accounts No. 17783 and 17784 with petitioner Citibank; and,
subsequently, respondent pre-terminated these TD accounts and transferred the
proceeds thereof, amounting to P1,100,000.00, to petitioner FNCB Finance for money
market placements. While respondent's money market placements with petitioner
FNCB Finance may be traced back with definiteness to TD Accounts No. 17783 and
17784, there is only flimsy and unsubstantiated connection between the said TD
accounts and the supposed proceeds paid from PNs No. 23356 and 23357. With PNs
No. 23356 and 23357 still unpaid, then they represent an obligation of petitioner
Citibank separate and distinct from the obligation of petitioner FNCB Finance arising
from respondent's money market placements with the latter.

Money market placements with petitioner FNCB Finance

According to petitioners, respondent's TD Accounts No. 17783 and 17784, in the total
amount of P1,100,000.00, were supposed to mature on 15 March 1978. However,
respondent, through a letter dated 28 April 1977,[40] pre-terminated the said TD
accounts and transferred all the proceeds thereof to petitioner FNCB Finance for
money market placement. Pursuant to her instructions, TD Accounts No. 17783 and
17784 were pre-terminated and petitioner Citibank (then still named First National City
Bank) issued Manager's Checks (MC) No. 199253[41] and 199251[42] for the amounts of
P500,000.00 and P600,00.00, respectively. Both MCs were payable to Citifinance
(which, according to Mr. Pujeda,[43] was one with and the same as petitioner FNCB
Finance), with the additional notation that "A/C MODESTA R. SABENIANO."
Typewritten on MC No. 199253 is the phrase "Ref. Proceeds of TD 17783," and on MC
No. 199251 is a similar phrase, "Ref. Proceeds of TD 17784." These phrases
purportedly established that the MCs were paid from the proceeds of respondent's pre-
terminated TD accounts with petitioner Citibank. Upon receipt of the MCs, petitioner
FNCB Finance deposited the same to its account with Feati Bank and Trust Co., as
evidenced by the rubber stamp mark of the latter found at the back of both MCs. In
exchange, petitioner FNCB Finance booked the amounts received as money market
placements, and accordingly issued PNs No. 4952 and 4962, for the amounts of
P500,000.00 and P600,000.00, respectively, payable to respondent's savings account with
petitioner Citibank, S/A No. 25-13703-4, upon their maturity on 1 June 1977. Once
again, respondent rolled-over several times the principal amounts of her money market
placements with petitioner FNCB Finance, as follows -

Date
(mm/dd/yyyy)
PN No.

Cancels
PN No.
Maturity
Date
(mm/dd/yyyy)

Amount
(P)

Interest
(p.a.)
04/29/1977
4952
None
06/01/1977
500,000.00
17%
4962
None
06/01/1977
600,000.00
17%
06/02/1977
5757
4952
08/31/1977
500,000.00
17%
5758
4962
08/31/1977
500,000.00
17%
08/31/1977
8167
5757
08/25/1978
500,000.00
14%
8169
5752
08/25/1978
500,000.00
14%
As presented by the petitioner FNCB Finance, respondent rolled-over only the principal
amounts of her money market placements as she chose to receive the interest income
therefrom. Petitioner FNCB Finance also pointed out that when PN No. 4962, with
principal amount of P600,000.00, matured on 1 June 1977, respondent received a partial
payment of the principal which, together with the interest, amounted to P102,633.33;[44]
thus, only the amount of P500,000.00 from PN No. 4962 was rolled-over to PN No.
5758.

Based on the foregoing records, the principal amounts of PNs No. 5757 and 5758, upon
their maturity, were rolled over to PNs No. 8167 and 8169, respectively. PN No. 8167[45]
expressly canceled and superseded PN No. 5757, while PN No. 8169[46] also explicitly
canceled and superseded PN No. 5758. Thus, it is patently erroneous for the Court of
Appeals to still award to respondent the principal amounts and interests covered by PNs
No. 5757 and 5758 when these were already canceled and superseded. It is now
incumbent upon this Court to determine what subsequently happened to PNs No. 8167
and 8169.

Petitioner FNCB Finance presented four checks as proof of payment of the principal
amounts and interests of PNs No. 8167 and 8169 upon their maturity. All the checks
were payable to respondent's savings account with petitioner Citibank, with the
following details -
Date of Issuance
(mm/dd/yyyy)

Check No.
Amount
(P)
Notation
09/01/1978

76962
12,833.34
Interest payment on PN#08167
09/01/1978

76961
12,833.34
Interest payment on PN#08169
09/05/1978
77035
500,000.00
Full payment of principal on PN#08167 which is hereby cancelled
09/05/ 1978
77034
500,000.00
Full payment of principal on PN#08169 which is hereby cancelled
Then again, Checks No. 77035 and 77034 were later returned to petitioner FNCB
Finance together with a memo,[47] dated 6 September 1978, from Mr. Tan of petitioner
Citibank, to a Mr. Bobby Mendoza of petitioner FNCB Finance. According to the
memo, the two checks, in the total amount of P1,000,000.00, were to be returned to
respondent's account with instructions to book the said amount in money market
placements for one more year. Pursuant to the said memo, Checks No. 77035 and
77034 were invested by petitioner FNCB Finance, on behalf of respondent, in money
market placements for which it issued PNs No. 20138 and 20139. The PNs each
covered P500,000.00, to earn 11% interest per annum, and to mature on 3 September
1979.

On 3 September 1979, petitioner FNCB Finance issued Check No. 100168, pay to the
order of "Citibank N.A. A/C Modesta Sabeniano," in the amount of P1,022,916.66, as
full payment of the principal amounts and interests of both PNs No. 20138 and 20139
and, resultantly, canceling the said PNs.[48] Respondent actually admitted the issuance
and existence of Check No. 100168, but with the qualification that the proceeds thereof
were turned over to petitioner Citibank.[49] Respondent did not clarify the circumstances
attending the supposed turn over, but on the basis of the allegations of petitioner
Citibank itself, the proceeds of PNs No. 20138 and 20139, amounting to P1,022,916.66,
was used by it to liquidate respondent's outstanding loans. Therefore, the determination
of whether or not respondent is still entitled to the return of the proceeds of PNs No.
20138 and 20139 shall be dependent on the resolution of the issues raised as to the
existence of the loans and the authority of petitioner Citibank to use the proceeds of
the said PNs, together with respondent's other deposits and money market placements,
to pay for the same.

Savings and current accounts with petitioner Citibank

Respondent presented and submitted before the RTC deposit slips and bank statements
to prove deposits made to several of her accounts with petitioner Citibank, particularly,
Accounts No. 00484202, 59091, and 472-751, which would have amounted to a total of
P3,812,712.32, had there been no withdrawals or debits from the said accounts from the
time the said deposits were made.

Although the RTC and the Court of Appeals did not make any definitive findings as to
the status of respondent's savings and current accounts with petitioner Citibank, the
Decisions of both the trial and appellate courts effectively recognized only the
P31,079.14 coming from respondent's savings account which was used to off-set her
alleged outstanding loans with petitioner Citibank.[50]

Since both the RTC and the Court of Appeals had consistently recognized only the
P31,079.14 of respondent's savings account with petitioner Citibank, and that
respondent failed to move for reconsideration or to appeal this particular finding of fact
by the trial and appellate courts, it is already binding upon this Court. Respondent is
already precluded from claiming any greater amount in her savings and current accounts
with petitioner Citibank. Thus, this Court shall limit itself to determining whether or
not respondent is entitled to the return of the amount of P31,079.14 should the off-set
thereof by petitioner Citibank against her supposed loans be found invalid.

Dollar accounts with Citibank-Geneva

Respondent made an effort of preparing and presenting before the RTC her own
computations of her money market placements and dollar accounts with Citibank-
Geneva, purportedly amounting to a total of United States (US) $343,220.98, as of 23
June 1985.[51] In her Memorandum filed with the RTC, she claimed a much bigger
amount of deposits and money market placements with Citibank-Geneva, totaling
US$1,336,638.65.[52] However, respondent herself also submitted as part of her formal
offer of evidence the computation of her money market placements and dollar accounts
with Citibank-Geneva as determined by the latter.[53] Citibank-Geneva accounted for
respondent's money market placements and dollar accounts as follows -
MODESTA SABENIANO &/OR
==================

US$
30'000.--

Principal Fid. Placement


+ US$
339.06

Interest at 3,875% p.a. from 12.07. - 25.10.79


- US$
95.--

Commission (minimum)

US$
30'244.06

Total proceeds on 25.10.1979

US$
114'000.--

Principal Fid. Placement


+ US$
1'358.50

Interest at 4,125% p.a. from 12.07. - 25.10.79


- US$
41.17

Commission

US$
115'317.33

Total proceeds on 25.10.1979

US$
145'561.39

Total proceeds of both placements on 25.10.1979


+ US$
11'381.31

total of both current accounts

US$
156'942.70

Total funds available

- US$
149'632.99

Transfer to Citibank Manila on 26.10.1979

(counter value of Pesos 1'102'944.78)


US$
7'309.71

Balance in current accounts


- US$
6'998.84

Transfer to Citibank Zuerich - ac no. 121359 on March 13, 1980

US$
310.87

various charges including closing charges


According to the foregoing computation, by 25 October 1979, respondent had a total of
US$156,942.70, from which, US$149,632.99 was transferred by Citibank-Geneva to
petitioner Citibank in Manila, and was used by the latter to off-set respondent's
outstanding loans. The balance of respondent's accounts with Citibank-Geneva, after
the remittance to petitioner Citibank in Manila, amounted to US$7,309.71, which was
subsequently expended by a transfer to another account with Citibank-Zuerich, in the
amount of US$6,998.84, and by payment of various bank charges, including closing
charges, in the amount of US$310.87. Rightly so, both the RTC and the Court of
Appeals gave more credence to the computation of Citibank-Geneva as to the status of
respondent's accounts with the said bank, rather than the one prepared by respondent
herself, which was evidently self-serving. Once again, this Court shall limit itself to
determining whether or not respondent is entitled to the return of the amount of
US$149,632.99 should the off-set thereof by petitioner Citibank against her alleged
outstanding loans be found invalid. Respondent cannot claim any greater amount since
she did not perfect an appeal of the Decision of the Court of Appeals, dated 26 March
2002, which found that she is entitled only to the return of the said amount, as far as her
accounts with Citibank-Geneva is concerned.

III

Petitioner Citibank was able to


establish by preponderance of
evidence the existence of
respondent's loans.

Petitioners' version of events

In sum, the following amounts were used by petitioner Citibank to liquidate


respondent's purported outstanding loans -
Description
Amount
Principal and interests of PNs No. 20138 and 20139

(money market placements with petitioner FNCB Finance)


P 1,022,916.66
Savings account with petitioner Citibank
31,079.14
Dollar remittance from Citibank-Geneva (peso equivalent

Of US$149,632.99)
1,102,944.78
Total
P 2,156,940.58
According to petitioner Citibank, respondent incurred her loans under the circumstances
narrated below.

As early as 9 February 1978, respondent obtained her first loan from petitioner Citibank
in the principal amount of P200,000.00, for which she executed PN No. 31504.[54]
Petitioner Citibank extended to her several other loans in the succeeding months. Some
of these loans were paid, while others were rolled-over or renewed. Significant to the
Petition at bar are the loans which respondent obtained from July 1978 to January 1979,
appropriately covered by PNs (first set).[55] The aggregate principal amount of these
loans was P1,920,000.00, which could be broken down as follows -
PN No.
Date of Issuance (mm/dd/yyyy)
Date of Maturity (mm/dd/yyyy)
Principal Amount
Date of Release (mm/dd/yyyy)
MC
No.
32935
07/20/1978
09/18/1978
P 400,000.00
07/20/1978
220701
33751
10/13/1978
12/12/1978
100,000.00
Unrecovered
33798
10/19/1978
11/03/1978
100,000.00
10/19/1978
226285
34025
11/15/1978
01/15/1979
150,000.00
11/16/1978
226439
34079
11/21/1978
01/19/1979
250,000.00
11/21/1978
226467
34192
12/04/1978
01/18/1979
100,000.00
12/05/1978
228057
34402
12/26/1978
02/23/1979
300,000.00
12/26/1978
228203
34534
01/09/1979
03/09/1979
150,000.00
01/09/1979
228270
34609
01/17/1979
03/19/1979
150,000.00
01/17/1979
228357
34740
01/30/1979
03/30/1979
220,000.00
01/30/1979
228400
Total P 1,920,000.00

When respondent was unable to pay the first set of PNs upon their maturity, these were
rolled-over or renewed several times, necessitating the execution by respondent of new
PNs in favor of petitioner Citibank. As of 5 April 1979, respondent had the following
outstanding PNs (second set),[56] the principal amount of which remained at
P1,920,000.00 -
PN No.
Date of Issuance
(mm/dd/yyyy)
Date of Maturity
(mm/dd/yyyy)
Principal Amount
34510
01/01/1979
03/02/1979
P 400,000.00
34509
01/02/1979
03/02/1979
100,000.00
34534
01/09/1979
03/09/1979
150,000.00
34612
01/19/1979
03/16/1979
150,000.00
34741
01/26/1979
03/12/1979
100,000.00
35689
02/23/1979
05/29/1979
300,000.00
35694
03/19/1979
05/29/1979
150,000.00
35695
03/19/1979
05/29/1979
100,000.00
356946
03/20/1979
05/29/1979
250,000.00
35697
03/30/1979
05/29/1979
220,000.00
T o t a l
P1,920,000.00

All the PNs stated that the purpose of the loans covered thereby is "To liquidate existing
obligation," except for PN No. 34534, which stated for its purpose "personal
investment."

Respondent secured her foregoing loans with petitioner Citibank by executing Deeds of
Assignment of her money market placements with petitioner FNCB Finance. On 2
March 1978, respondent executed in favor of petitioner Citibank a Deed of
Assignment[57] of PN No. 8169, which was issued by petitioner FNCB Finance, to
secure payment of the credit and banking facilities extended to her by petitioner
Citibank, in the aggregate principal amount of P500,000.00. On 9 March 1978,
respondent executed in favor of petitioner Citibank another Deed of Assignment,[58]
this time, of PN No. 8167, also issued by petitioner FNCB Finance, to secure payment
of the credit and banking facilities extended to her by petitioner Citibank, in the
aggregate amount of P500,000.00. When PNs No. 8167 and 8169, representing
respondent's money market placements with petitioner FNCB Finance, matured and
were rolled-over to PNs No. 20138 and 20139, respondent executed new Deeds of
Assignment,[59] in favor of petitioner Citibank, on 25 August 1978. According to the
more recent Deeds, respondent assigned PNs No. 20138 and 20139, representing her
rolled-over money market placements with petitioner FNCB Finance, to petitioner
Citibank as security for the banking and credit facilities it extended to her, in the
aggregate principal amount of P500,000.00 per Deed.

In addition to the Deeds of Assignment of her money market placements with


petitioner FNCB Finance, respondent also executed a Declaration of Pledge,[60] in which
she supposedly pledged "[a]ll present and future fiduciary placements held in my
personal and/or joint name with Citibank, Switzerland," to secure all claims the
petitioner Citibank may have or, in the future, acquire against respondent. The
petitioners' copy of the Declaration of Pledge is undated, while that of the respondent,
a copy certified by a Citibank-Geneva officer, bore the date 24 September 1979.[61]

When respondent failed to pay the second set of PNs upon their maturity, an exchange
of letters ensued between respondent and/or her representatives, on one hand, and the
representatives of petitioners, on the other.

The first letter[62] was dated 5 April 1979, addressed to respondent and signed by Mr.
Tan, as the manager of petitioner Citibank, which stated, in part, that -
Despite our repeated requests and follow-up, we regret you have not granted us with any
response or payment.

We, therefore, have no alternative but to call your loan of P1,920,000.00 plus interests
and other charges due and demandable. If you still fail to settle this obligation by
4/27/79, we shall have no other alternative but to refer your account to our lawyers for
legal action to protect the interest of the bank.
Respondent sent a reply letter[63] dated 26 April 1979, printed on paper bearing the
letterhead of respondent's company, MC Adore International Palace, the body of which
reads -
This is in reply to your letter dated April 5, 1979 inviting my attention to my loan which
has become due. Pursuant to our representation with you over the telephone through
Mr. F. A. Tan, you allow us to pay the interests due for the meantime.

Please accept our Comtrust Check in the amount of P62,683.33.

Please bear with us for a little while, at most ninety days. As you know, we have a
pending loan with the Development Bank of the Philippines in the amount of P11-M.
This loan has already been recommended for approval and would be submitted to the
Board of Governors. In fact, to further facilitate the early release of this loan, we have
presented and furnished Gov. J. Tengco a xerox copy of your letter.

You will be doing our corporation a very viable service, should you grant us our request
for a little more time.
A week later or on 3 May 1979, a certain C. N. Pugeda, designated as "Executive
Secretary," sent a letter[64] to petitioner Citibank, on behalf of respondent. The letter
was again printed on paper bearing the letterhead of MC Adore International Palace.
The pertinent paragraphs of the said letter are reproduced below -
Per instructions of Mrs. Modesta R. Sabeniano, we would like to request for a re-
computation of the interest and penalty charges on her loan in the aggregate amount of
P1,920,000.00 with maturity date of all promissory notes at June 30, 1979. As she has
personally discussed with you yesterday, this date will more or less assure you of early
settlement.

In this regard, please entrust to bearer, our Comtrust check for P62,683.33 to be
replaced by another check with amount resulting from the new computation. Also, to
facilitate the processing of the same, may we request for another set of promissory
notes for the signature of Mrs. Sabeniano and to cancel the previous ones she has signed
and forwarded to you.
This was followed by a telegram,[65] dated 5 June 1979, and received by petitioner
Citibank the following day. The telegram was sent by a Dewey G. Soriano, Legal
Counsel. The telegram acknowledged receipt of the telegram sent by petitioner Citibank
regarding the "re-past due obligation" of McAdore International Palace. However, it
reported that respondent, the President and Chairman of MC Adore International
Palace, was presently abroad negotiating for a big loan. Thus, he was requesting for an
extension of the due date of the obligation until respondent's arrival on or before 31
July 1979.

The next letter,[66] dated 21 June 1979, was signed by respondent herself and addressed
to Mr. Bobby Mendoza, a Manager of petitioner FNCB Finance. Respondent wrote
therein -
Re: PN No. 20138 for P500,000.00 & PN No.
20139 for P500,000.00 totalling P1 Million,
both PNs will mature on 9/3/1979.

This is to authorize you to release the accrued quarterly interests payment from my
captioned placements and forward directly to Citibank, Manila Attention: Mr. F. A. Tan,
Manager, to apply to my interest payable on my outstanding loan with Citibank.

Please note that the captioned two placements are continuously pledged/hypothecated
to Citibank, Manila to support my personal outstanding loan. Therefore, please do not
release the captioned placements upon maturity until you have received the instruction
from Citibank, Manila.
On even date, respondent sent another letter[67] to Mr. Tan of petitioner Citibank,
stating that -
Re: S/A No. 25-225928
and C/A No. 484-946
This letter serves as an authority to debit whatever the outstanding balance from my
captioned accounts and credit the amount to my loan outstanding account with you.
Unlike respondent's earlier letters, both letters, dated 21 June 1979, are printed on plain
paper, without the letterhead of her company, MC Adore International Palace.

By 5 September 1979, respondent's outstanding and past due obligations to petitioner


Citibank totaled P2,123,843.20, representing the principal amounts plus interests.
Relying on respondent's Deeds of Assignment, petitioner Citibank applied the proceeds
of respondent's money market placements with petitioner FNCB Finance, as well as her
deposit account with petitioner Citibank, to partly liquidate respondent's outstanding
loan balance,[68] as follows -
Respondent's outstanding obligation (principal and interest)
P 2,123,843.20
Less:
Proceeds from respondent's money market placements

with petitioner FNCB Finance (principal and interest)


(1,022,916.66)

Deposits in respondent's bank accounts with petitioner

Citibank
(31,079.14)
Balance of respondent's obligation
P 1,069,847.40
Mr. Tan of petitioner Citibank subsequently sent a letter,[69] dated 28 September 1979,
notifying respondent of the status of her loans and the foregoing compensation which
petitioner Citibank effected. In the letter, Mr. Tan informed respondent that she still
had a remaining past-due obligation in the amount of P1,069,847.40, as of 5 September
1979, and should respondent fail to pay the amount by 15 October 1979, then petitioner
Citibank shall proceed to off-set the unpaid amount with respondent's other collateral,
particularly, a money market placement in Citibank-Hongkong.

On 5 October 1979, respondent wrote Mr. Tan of petitioner Citibank, on paper bearing
the letterhead of MC Adore International Palace, as regards the P1,920,000.00 loan
account supposedly of MC Adore Finance & Investment, Inc., and requested for a
statement of account covering the principal and interest of the loan as of 31 October
1979. She stated therein that the loan obligation shall be paid within 60 days from
receipt of the statement of account.

Almost three weeks later, or on 25 October 1979, a certain Atty. Moises Tolentino
dropped by the office of petitioner Citibank, with a letter, dated 9 October 1979, and
printed on paper with the letterhead of MC Adore International Palace, which
authorized the bearer thereof to represent the respondent in settling the overdue
account, this time, purportedly, of MC Adore International Palace Hotel. The letter was
signed by respondent as the President and Chairman of the Board.

Eventually, Atty. Antonio Agcaoili of Agcaoili & Associates, as counsel of petitioner


Citibank, sent a letter to respondent, dated 31 October 1979, informing her that
petitioner Citibank had effected an off-set using her account with Citibank-Geneva, in
the amount of US$149,632.99, against her "outstanding, overdue, demandable and
unpaid obligation" to petitioner Citibank. Atty. Agcaoili claimed therein that the
compensation or off-set was made pursuant to and in accordance with the provisions of
Articles 1278 through 1290 of the Civil Code. He further declared that respondent's
obligation to petitioner Citibank was now fully paid and liquidated.

Unfortunately, on 7 October 1987, a fire gutted the 7th floor of petitioner Citibank's
building at Paseo de Roxas St., Makati, Metro Manila. Petitioners submitted a
Certification[70] to this effect, dated 17 January 1991, issued by the Chief of the Arson
Investigation Section, Fire District III, Makati Fire Station, Metropolitan Police Force.
The 7th floor of petitioner Citibank's building housed its Control Division, which was in
charge of keeping the necessary documents for cases in which it was involved. After
compiling the documentary evidence for the present case, Atty. Renato J. Fernandez,
internal legal counsel of petitioner Citibank, forwarded them to the Control Division.
The original copies of the MCs, which supposedly represent the proceeds of the first set
of PNs, as well as that of other documentary evidence related to the case, were among
those burned in the said fire.[71]

Respondent's version of events

Respondent disputed petitioners' narration of the circumstances surrounding her loans


with petitioner Citibank and the alleged authority she gave for the off-set or
compensation of her money market placements and deposit accounts with petitioners
against her loan obligation.

Respondent denied outright executing the first set of PNs, except for one (PN No.
34534 in particular). Although she admitted that she obtained several loans from
petitioner Citibank, these only amounted to P1,150,000.00, and she had already paid
them. She secured from petitioner Citibank two loans of P500,000.00 each. She
executed in favor of petitioner Citibank the corresponding PNs for the loans and the
Deeds of Assignment of her money market placements with petitioner FNCB Finance
as security.[72] To prove payment of these loans, respondent presented two provisional
receipts of petitioner Citibank - No. 19471,[73] dated 11 August 1978, and No. 12723,[74]
dated 10 November 1978 - both signed by Mr. Tan, and acknowledging receipt from
respondent of several checks in the total amount of P500,744.00 and P500,000.00,
respectively, for "liquidation of loan."

She borrowed another P150,000.00 from petitioner Citibank for personal investment,
and for which she executed PN No. 34534, on 9 January 1979. Thus, she admitted to
receiving the proceeds of this loan via MC No. 228270. She invested the loan amount in
another money market placement with petitioner FNCB Finance. In turn, she used the
very same money market placement with petitioner FNCB Finance as security for her
P150,000.00 loan from petitioner Citibank. When she failed to pay the loan when it
became due, petitioner Citibank allegedly forfeited her money market placement with
petitioner FNCB Finance and, thus, the loan was already paid.[75]

Respondent likewise questioned the MCs presented by petitioners, except for one (MC
No. 228270 in particular), as proof that she received the proceeds of the loans covered
by the first set of PNs. As recounted in the preceding paragraph, respondent admitted
to obtaining a loan of P150,000.00, covered by PN No. 34534, and receiving MC No.
228270 representing the proceeds thereof, but claimed that she already paid the same.
She denied ever receiving MCs No. 220701 (for the loan of P400,000.00, covered by PN
No. 33935) and No. 226467 (for the loan of P250,000.00, covered by PN No. 34079),
and pointed out that the checks did not bear her indorsements. She did not deny
receiving all other checks but she interposed that she received these checks, not as
proceeds of loans, but as payment of the principal amounts and/or interests from her
money market placements with petitioner Citibank. She also raised doubts as to the
notation on each of the checks that reads "RE: Proceeds of PN#[corresponding PN
No.]," saying that such notation did not appear on the MCs when she originally received
them and that the notation appears to have been written by a typewriter different from
that used in writing all other information on the checks (i.e., date, payee, and amount).
[76] She even testified that MCs were not supposed to bear notations indicating the

purpose for which they were issued.

As to the second set of PNs, respondent acknowledged having signed them all.
However, she asserted that she only executed these PNs as part of the simulated loans
she and Mr. Tan of petitioner Citibank concocted. Respondent explained that she had a
pending loan application for a big amount with the Development Bank of the
Philippines (DBP), and when Mr. Tan found out about this, he suggested that they could
make it appear that the respondent had outstanding loans with petitioner Citibank and
the latter was already demanding payment thereof; this might persuade DBP to approve
respondent's loan application. Mr. Tan made the respondent sign the second set of PNs,
so that he may have something to show the DBP investigator who might inquire with
petitioner Citibank as to respondent's loans with the latter. On her own copies of the
said PNs, respondent wrote by hand the notation, "This isa (sic) simulated non-
negotiable note, signed copy given to Mr. Tan., (sic) per agreement to be shown to DBP
representative. itwill (sic) be returned to me if the P11=M (sic) loan for MC Adore
Palace Hotel is approved by DBP."[77]

Findings of this Court as to the existence of the loans

After going through the testimonial and documentary evidence presented by both sides
to this case, it is this Court's assessment that respondent did indeed have outstanding
loans with petitioner Citibank at the time it effected the off-set or compensation on 25
July 1979 (using respondent's savings deposit with petitioner Citibank), 5 September
1979 (using the proceeds of respondent's money market placements with petitioner
FNCB Finance) and 26 October 1979 (using respondent's dollar accounts remitted from
Citibank-Geneva). The totality of petitioners' evidence as to the existence of the said
loans preponderates over respondent's. Preponderant evidence means that, as a whole,
the evidence adduced by one side outweighs that of the adverse party.[78]

Respondent's outstanding obligation for P1,920,000.00 had been sufficiently


documented by petitioner Citibank.

The second set of PNs is a mere renewal of the prior loans originally covered by the
first set of PNs, except for PN No. 34534. The first set of PNs is supported, in turn, by
the existence of the MCs that represent the proceeds thereof received by the
respondent.

It bears to emphasize that the proceeds of the loans were paid to respondent in MCs,
with the respondent specifically named as payee. MCs checks are drawn by the bank's
manager upon the bank itself and regarded to be as good as the money it represents.[79]
Moreover, the MCs were crossed checks, with the words "Payee's Account Only."

In general, a crossed check cannot be presented to the drawee bank for payment in
cash. Instead, the check can only be deposited with the payee's bank which, in turn,
must present it for payment against the drawee bank in the course of normal banking
hours. The crossed check cannot be presented for payment, but it can only be deposited
and the drawee bank may only pay to another bank in the payee's or indorser's account.
[80] The effect of crossing a check was described by this Court in Philippine Commercial

International Bank v. Court of Appeals[81] -


[T]he crossing of a check with the phrase "Payee's Account Only" is a warning that the
check should be deposited in the account of the payee. Thus, it is the duty of the
collecting bank PCI Bank to ascertain that the check be deposited in payee's account
only. It is bound to scrutinize the check and to know its depositors before it can make
the clearing indorsement "all prior indorsements and/or lack of indorsement
guaranteed."
The crossed MCs presented by petitioner Bank were indeed deposited in several
different bank accounts and cleared by the Clearing Office of the Central Bank of the
Philippines, as evidenced by the stamp marks and notations on the said checks. The
crossed MCs are already in the possession of petitioner Citibank, the drawee bank,
which was ultimately responsible for the payment of the amount stated in the checks.
Given that a check is more than just an instrument of credit used in commercial
transactions for it also serves as a receipt or evidence for the drawee bank of the
cancellation of the said check due to payment,[82] then, the possession by petitioner
Citibank of the said MCs, duly stamped "Paid" gives rise to the presumption that the
said MCs were already paid out to the intended payee, who was in this case, the
respondent.

This Court finds applicable herein the presumptions that private transactions have been
fair and regular,[83] and that the ordinary course of business has been followed.[84] There
is no question that the loan transaction between petitioner Citibank and the respondent
is a private transaction. The transactions revolving around the crossed MCs - from their
issuance by petitioner Citibank to respondent as payment of the proceeds of her loans;
to its deposit in respondent's accounts with several different banks; to the clearing of the
MCs by an independent clearing house; and finally, to the payment of the MCs by
petitioner Citibank as the drawee bank of the said checks - are all private transactions
which shall be presumed to have been fair and regular to all the parties concerned. In
addition, the banks involved in the foregoing transactions are also presumed to have
followed the ordinary course of business in the acceptance of the crossed MCs for
deposit in respondent's accounts, submitting them for clearing, and their eventual
payment and cancellation.

The afore-stated presumptions are disputable, meaning, they are satisfactory if


uncontradicted, but may be contradicted and overcome by other evidence.[85]
Respondent, however, was unable to present sufficient and credible evidence to dispute
these presumptions.

It should be recalled that out of the nine MCs presented by petitioner Citibank,
respondent admitted to receiving one as proceeds of a loan (MC No. 228270), denied
receiving two (MCs No. 220701 and 226467), and admitted to receiving all the rest, but
not as proceeds of her loans, but as return on the principal amounts and interests from
her money market placements.

Respondent admitted receiving MC No. 228270 representing the proceeds of her loan
covered by PN No. 34534. Although the principal amount of the loan is P150,000.00,
respondent only received P146,312.50, because the interest and handling fee on the loan
transaction were already deducted therefrom.[86] Stamps and notations at the back of
MC No. 228270 reveal that it was deposited at the Bank of the Philippine Islands (BPI),
Cubao Branch, in Account No. 0123-0572-28.[87] The check also bore the signature of
respondent at the back.[88] And, although respondent would later admit that she did sign
PN No. 34534 and received MC No. 228270 as proceeds of the loan extended to her by
petitioner Citibank, she contradicted herself when, in an earlier testimony, she claimed
that PN No. 34534 was among the PNs she executed as simulated loans with petitioner
Citibank.[89]
Respondent denied ever receiving MCs No. 220701 and 226467. However, considering
that the said checks were crossed for payee's account only, and that they were actually
deposited, cleared, and paid, then the presumption would be that the said checks were
properly deposited to the account of respondent, who was clearly named the payee in
the checks. Respondent's bare allegations that she did not receive the two checks fail to
convince this Court, for to sustain her, would be for this Court to conclude that an
irregularity had occurred somewhere from the time of the issuance of the said checks,
to their deposit, clearance, and payment, and which would have involved not only
petitioner Citibank, but also BPI, which accepted the checks for deposit, and the Central
Bank of the Philippines, which cleared the checks. It falls upon the respondent to
overcome or dispute the presumption that the crossed checks were issued, accepted for
deposit, cleared, and paid for by the banks involved following the ordinary course of
their business.

The mere fact that MCs No. 220701 and 226467 do not bear respondent's signature at
the back does not negate deposit thereof in her account. The liability for the lack of
indorsement on the MCs no longer fall on petitioner Citibank, but on the bank who
received the same for deposit, in this case, BPI Cubao Branch. Once again, it must be
noted that the MCs were crossed, for payee's account only, and the payee named in both
checks was none other than respondent. The crossing of the MCs was already a warning
to BPI to receive said checks for deposit only in respondent's account. It was up to BPI
to verify whether it was receiving the crossed MCs in accordance with the instructions
on the face thereof. If, indeed, the MCs were deposited in accounts other than
respondent's, then the respondent would have a cause of action against BPI.[90]

BPI further stamped its guarantee on the back of the checks to the effect that, "All prior
endorsement and/or Lack of endorsement guaranteed." Thus, BPI became the indorser
of the MCs, and assumed all the warranties of an indorser,[91] specifically, that the checks
were genuine and in all respects what they purported to be; that it had a good title to the
checks; that all prior parties had capacity to contract; and that the checks were, at the
time of their indorsement, valid and subsisting.[92] So even if the MCs deposited by
BPI's client, whether it be by respondent herself or some other person, lacked the
necessary indorsement, BPI, as the collecting bank, is bound by its warranties as an
indorser and cannot set up the defense of lack of indorsement as against petitioner
Citibank, the drawee bank.[93]

Furthermore, respondent's bare and unsubstantiated denial of receipt of the MCs in


question and their deposit in her account is rendered suspect when MC No. 220701 was
actually deposited in Account No. 0123-0572-28 of BPI Cubao Branch, the very same
account in which MC No. 228270 (which respondent admitted to receiving as proceeds
of her loan from petitioner Citibank), and MCs No. 228203, 228357, and 228400 (which
respondent admitted to receiving as proceeds from her money market placements) were
deposited. Likewise, MC No. 226467 was deposited in Account No. 0121-002-43 of BPI
Cubao Branch, to which MCs No. 226285 and 226439 (which respondent admitted to
receiving as proceeds from her money market placements) were deposited. It is an
apparent contradiction for respondent to claim having received the proceeds of checks
deposited in an account, and then deny receiving the proceeds of another check
deposited in the very same account.

Another inconsistency in respondent's denial of receipt of MC No. 226467 and her


deposit of the same in her account, is her presentation of Exhibit "HHH," a provisional
receipt which was supposed to prove that respondent turned over P500,000.00 to Mr.
Tan of petitioner Citibank, that the said amount was split into three money market
placements, and that MC No. 226467 represented the return on her investment from
one of these placements.[94] Because of her Exhibit "HHH," respondent effectively
admitted receipt of MC No. 226467, although for reasons other than as proceeds of a
loan.

Neither can this Court give credence to respondent's contention that the notations on
the MCs, stating that they were the proceeds of particular PNs, were not there when she
received the checks and that the notations appeared to be written by a typewriter
different from that used to write the other information on the checks. Once more,
respondent's allegations were uncorroborated by any other evidence. Her and her
counsel's observation that the notations on the MCs appear to be written by a typewriter
different from that used to write the other information on the checks hardly convinces
this Court considering that it constitutes a mere opinion on the appearance of the
notation by a witness who does not possess the necessary expertise on the matter. In
addition, the notations on the MCs were written using both capital and small letters,
while the other information on the checks were written using capital letters only, such
difference could easily confuse an untrained eye and lead to a hasty conclusion that they
were written by different typewriters.

Respondent's testimony, that based on her experience transacting with banks, the MCs
were not supposed to include notations on the purpose for which the checks were
issued, also deserves scant consideration. While respondent may have extensive
experience dealing with banks, it still does not qualify her as a competent witness on
banking procedures and practices. Her testimony on this matter is even belied by the
fact that the other MCs issued by petitioner Citibank (when it was still named First
National City Bank) and by petitioner FNCB Finance, the existence and validity of
which were not disputed by respondent, also bear similar notations that state the reason
for which they were issued.

Respondent presented several more pieces of evidence to substantiate her claim that she
received MCs No. 226285, 226439, 226467, 226057, 228357, and 228400, not as
proceeds of her loans from petitioner Citibank, but as the return of the principal
amounts and payment of interests from her money market placements with petitioners.
Part of respondent's exhibits were personal checks[95] drawn by respondent on her
account with Feati Bank & Trust Co., which she allegedly invested in separate money
market placements with both petitioners, the returns from which were paid to her via
MCs No. 226285 and 228400. Yet, to this Court, the personal checks only managed to
establish respondent's issuance thereof, but there was nothing on the face of the checks
that would reveal the purpose for which they were issued and that they were actually
invested in money market placements as respondent claimed.

Respondent further submitted handwritten notes that purportedly computed and


presented the returns on her money market placements, corresponding to the amount
stated in the MCs she received from petitioner Citibank. Exhibit "HHH-1"[96] was a
handwritten note, which respondent attributed to Mr. Tan of petitioner Citibank,
showing the breakdown of her BPI Check for P500,000.00 into three different money
market placements with petitioner Citibank. This Court, however, noticed several
factors which render the note highly suspect. One, it was written on the reversed side of
Provisional Receipt No. 12724 of petitioner Citibank which bore the initials of Mr. Tan
acknowledging receipt of respondent's BPI Check No. 120989 for P500,000.00; but the
initials on the handwritten note appeared to be that of Mr. Bobby Mendoza of
petitioner FNCB Finance.[97] Second, according to Provisional Receipt No. 12724, BPI
Check No. 120989 for P500,000.00 was supposed to be invested in three money market
placements with petitioner Citibank for the period of 60 days. Since all these money
market placements were made through one check deposited on the same day, 10
November 1978, it made no sense that the handwritten note at the back of Provisional
Receipt No. 12724 provided for different dates of maturity for each of the money
market placements (i.e., 16 November 1978, 17 January 1979, and 21 November 1978),
and such dates did not correspond to the 60 day placement period stated on the face of
the provisional receipt. And third, the principal amounts of the money market
placements as stated in the handwritten note - P145,000.00, P145,000.00 and
P242,000.00 - totaled P532,000.00, and was obviously in excess of the P500,000.00
acknowledged on the face of Provisional Receipt No. 12724.

Exhibits "III" and "III-1," the front and bank pages of a handwritten note of Mr.
Bobby Mendoza of petitioner FNCB Finance,[98] also did not deserve much evidentiary
weight, and this Court cannot rely on the truth and accuracy of the computations
presented therein. Mr. Mendoza was not presented as a witness during the trial before
the RTC, so that the document was not properly authenticated nor its contents
sufficiently explained. No one was able to competently identify whether the initials as
appearing on the note were actually Mr. Mendoza's.

Also, going by the information on the front page of the note, this Court observes that
payment of respondent's alleged money market placements with petitioner FNCB
Finance were made using Citytrust Checks; the MCs in question, including MC No.
228057, were issued by petitioner Citibank. Although Citytrust (formerly Feati Bank &
Trust Co.), petitioner FNCB Finance, and petitioner Citibank may be affiliates of one
another, they each remained separate and distinct corporations, each having its own
financial system and records. Thus, this Court cannot simply assume that one
corporation, such as petitioner Citibank or Citytrust, can issue a check to discharge an
obligation of petitioner FNCB Finance. It should be recalled that when petitioner
FNCB Finance paid for respondent's money market placements, covered by its PNs No.
8167 and 8169, as well as PNs No. 20138 and 20139, petitioner FNCB Finance issued its
own checks.

As a last point on this matter, if respondent truly had money market placements with
petitioners, then these would have been evidenced by PNs issued by either petitioner
Citibank or petitioner FNCB Finance, acknowledging the principal amounts of the
investments, and stating the applicable interest rates, as well as the dates of their of
issuance and maturity. After respondent had so meticulously reconstructed her other
money market placements with petitioners and consolidated the documentary evidence
thereon, she came surprisingly short of offering similar details and substantiation for
these particular money market placements.

Since this Court is satisfied that respondent indeed received the proceeds of the first set
of PNs, then it proceeds to analyze her evidence of payment thereof.

In support of respondent's assertion that she had already paid whatever loans she may
have had with petitioner Citibank, she presented as evidence Provisional Receipts No.
19471, dated 11 August 1978, and No. 12723, dated 10 November 1978, both of
petitioner Citibank and signed by Mr. Tan, for the amounts of P500,744.00 and
P500,000.00, respectively. While these provisional receipts did state that Mr. Tan, on
behalf of petitioner Citibank, received respondent's checks as payment for her loans,
they failed to specifically identify which loans were actually paid. Petitioner Citibank was
able to present evidence that respondent had executed several PNs in the years 1978 and
1979 to cover the loans she secured from the said bank. Petitioner Citibank did admit
that respondent was able to pay for some of these PNs, and what it identified as the first
and second sets of PNs were only those which remained unpaid. It thus became
incumbent upon respondent to prove that the checks received by Mr. Tan were actually
applied to the PNs in either the first or second set; a fact that, unfortunately, cannot be
determined from the provisional receipts submitted by respondent since they only
generally stated that the checks received by Mr. Tan were payment for respondent's
loans.

Mr. Tan, in his deposition, further explained that provisional receipts were issued when
payment to the bank was made using checks, since the checks would still be subject to
clearing. The purpose for the provisional receipts was merely to acknowledge the
delivery of the checks to the possession of the bank, but not yet of payment.[99] This
bank practice finds legitimacy in the pronouncement of this Court that a check, whether
an MC or an ordinary check, is not legal tender and, therefore, cannot constitute valid
tender of payment. In Philippine Airlines, Inc. v. Court of Appeals, [100] this Court
elucidated that:
Since a negotiable instrument is only a substitute for money and not money, the delivery
of such an instrument does not, by itself, operate as payment (Sec. 189, Act 2031 on
Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255;
Tan Sunco, v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's check
or ordinary check, is not legal tender, and an offer of a check in payment of a debt is
not a valid tender of payment and may be refused receipt by the obligee or creditor.
Mere delivery of checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the payment by commercial
document is actually realized (Art. 1249, Civil Code, par. 3).
In the case at bar, the issuance of an official receipt by petitioner Citibank would have
been dependent on whether the checks delivered by respondent were actually cleared
and paid for by the drawee banks.

As for PN No. 34534, respondent asserted payment thereof at two separate instances by
two different means. In her formal offer of exhibits, respondent submitted a deposit
slip of petitioner Citibank, dated 11 August 1978, evidencing the deposit of BPI Check
No. 5785 for P150,000.00.[101] In her Formal Offer of Documentary Exhibits, dated 7
July 1989, respondent stated that the purpose for the presentation of the said deposit
slip was to prove that she already paid her loan covered by PN No. 34534.[102] In her
testimony before the RTC three years later, on 28 November 1991, she changed her
story. This time she narrated that the loan covered by PN No. 34534 was secured by her
money market placement with petitioner FNCB Finance, and when she failed to pay the
said PN when it became due, the security was applied to the loan, therefore, the loan was
considered paid.[103] Given the foregoing, respondent's assertion of payment of PN No.
34534 is extremely dubious.

According to petitioner Citibank, the PNs in the second set, except for PN No. 34534,
were mere renewals of the unpaid PNs in the first set, which was why the PNs stated
that they were for the purpose of liquidating existing obligations. PN No. 34534,
however, which was part of the first set, was still valid and subsisting and so it was
included in the second set without need for its renewal, and it still being the original PN
for that particular loan, its stated purpose was for personal investment.[104] Respondent
essentially admitted executing the second set of PNs, but they were only meant to cover
simulated loans. Mr. Tan supposedly convinced her that her pending loan application
with DBP would have a greater chance of being approved if they made it appear that
respondent urgently needed the money because petitioner Citibank was already
demanding payment for her simulated loans.

Respondent's defense of simulated loans to escape liability for the second set of PNs is
truly a novel one. It is regrettable, however, that she was unable to substantiate the
same. Yet again, respondent's version of events is totally based on her own
uncorroborated testimony. The notations on the second set of PNs, that they were non-
negotiable simulated notes, were admittedly made by respondent herself and were, thus,
self-serving. Equally self-serving was respondent's letter, written on 7 October 1985, or
more than six years after the execution of the second set of PNs, in which she
demanded return of the simulated or fictitious PNs, together with the letters relating
thereto, which Mr. Tan purportedly asked her to execute. Respondent further failed to
present any proof of her alleged loan application with the DBP, and of any
circumstance or correspondence wherein the simulated or fictitious PNs were indeed
used for their supposed purpose.
In contrast, petitioner Citibank, as supported by the testimonies of its officers and
available documentation, consistently treated the said PNs as regular loans - accepted,
approved, and paid in the ordinary course of its business.

The PNs executed by the respondent in favor of petitioner Citibank to cover her loans
were duly-filled out and signed, including the disclosure statement found at the back of
the said PNs, in adherence to the Central Bank requirement to disclose the full finance
charges to a loan granted to borrowers.

Mr. Tan, then an account officer with the Marketing Department of petitioner Citibank,
testified that he dealt directly with respondent; he facilitated the loans; and the PNs, at
least in the second set, were signed by respondent in his presence.[105]

Mr. Pujeda, the officer who was previously in charge of loans and placements,
confirmed that the signatures on the PNs were verified against respondent's specimen
signature with the bank.[106]

Ms. Cristina Dondoyano, who worked at petitioner Citibank as a loan processor, was
responsible for booking respondent's loans. Booking the loans means recording it in the
General Ledger. She explained the procedure for booking loans, as follows: The account
officer, in the Marketing Department, deals directly with the clients who wish to borrow
money from petitioner Citibank. The Marketing Department will forward a loan
booking checklist, together with the borrowing client's PNs and other supporting
documents, to the loan pre-processor, who will check whether the details in the loan
booking checklist are the same as those in the PNs. The documents are then sent to
Signature Control for verification of the client's signature in the PNs, after which, they
are returned to the loan pre-processor, to be forwarded finally to the loan processor.
The loan processor shall book the loan in the General Ledger, indicating therein the
client name, loan amount, interest rate, maturity date, and the corresponding PN
number. Since she booked respondent's loans personally, Ms. Dondoyano testified that
she saw the original PNs. In 1986, Atty. Fernandez of petitioner Citibank requested her
to prepare an accounting of respondent's loans, which she did, and which was presented
as Exhibit "120" for the petitioners. The figures from the said exhibit were culled from
the bookings in the General Ledger, a fact which respondent's counsel was even willing
to stipulate.[107]

Ms. Teresita Glorioso was an Investigation and Reconcilement Clerk at the Control
Department of petitioner Citibank. She was presented by petitioner Citibank to
expound on the microfilming procedure at the bank, since most of the copies of the
PNs were retrieved from microfilm. Microfilming of the documents are actually done by
people at the Operations Department. At the end of the day or during the day, the
original copies of all bank documents, not just those pertaining to loans, are
microfilmed. She refuted the possibility that insertions could be made in the microfilm
because the microfilm is inserted in a cassette; the cassette is placed in the microfilm
machine for use; at the end of the day, the cassette is taken out of the microfilm
machine and put in a safe vault; and the cassette is returned to the machine only the
following day for use, until the spool is full. This is the microfilming procedure followed
everyday. When the microfilm spool is already full, the microfilm is developed, then sent
to the Control Department, which double checks the contents of the microfilms against
the entries in the General Ledger. The Control Department also conducts a random
comparison of the contents of the microfilms with the original documents; a random
review of the contents is done on every role of microfilm.[108]

Ms. Renee Rubio worked for petitioner Citibank for 20 years. She rose from the ranks,
initially working as a secretary in the Personnel Group; then as a secretary to the
Personnel Group Head; a Service Assistant with the Marketing Group, in 1972 to 1974,
dealing directly with corporate and individual clients who, among other things, secured
loans from petitioner Citibank; the Head of the Collection Group of the Foreign
Department in 1974 to 1976; the Head of the Money Transfer Unit in 1976 to 1978; the
Head of the Loans and Placements Unit up to the early 1980s; and, thereafter, she
established operations training for petitioner Citibank in the Asia-Pacific Region
responsible for the training of the officers of the bank. She testified on the standard
loan application process at petitioner Citibank. According to Ms. Rubio, the account
officer or marketing person submits a proposal to grant a loan to an individual or
corporation. Petitioner Citibank has a worldwide policy that requires a credit committee,
composed of a minimum of three people, which would approve the loan and amount
thereof. There can be no instance when only one officer has the power to approve the
loan application. When the loan is approved, the account officer in charge will obtain
the corresponding PNs from the client. The PNs are sent to the signature verifier who
would validate the signatures therein against those appearing in the signature cards
previously submitted by the client to the bank. The Operations Unit will check and
review the documents, including the PNs, if it is a clean loan, and securities and
deposits, if it is collateralized. The loan is then recorded in the General Ledger. The
Loans and Placements Department will not book the loans without the PNs. When the
PNs are liquidated, whether they are paid or rolled-over, they are returned to the client.
[109] Ms. Rubio further explained that she was familiar with respondent's accounts since,

while she was still the Head of the Loan and Placements Unit, she was asked by Mr. Tan
to prepare a list of respondent's outstanding obligations.[110] She thus calculated
respondent's outstanding loans, which was sent as an attachment to Mr. Tan's letter to
respondent, dated 28 September 1979, and presented before the RTC as Exhibits "34-B"
and "34-C."[111]

Lastly, the exchange of letters between petitioner Citibank and respondent, as well as the
letters sent by other people working for respondent, had consistently recognized that
respondent owed petitioner Citibank money.

In consideration of the foregoing discussion, this Court finds that the preponderance of
evidence supports the existence of the respondent's loans, in the principal sum of
P1,920,000.00, as of 5 September 1979. While it is well-settled that the term
"preponderance of evidence" should not be wholly dependent on the number of
witnesses, there are certain instances when the number of witnesses become the
determining factor -
The preponderance of evidence may be determined, under certain conditions, by the
number of witnesses testifying to a particular fact or state of facts. For instance, one or
two witnesses may testify to a given state of facts, and six or seven witnesses of equal
candor, fairness, intelligence, and truthfulness, and equally well corroborated by all the
remaining evidence, who have no greater interest in the result of the suit, testify against
such state of facts. Then the preponderance of evidence is determined by the number
of witnesses. (Wilcox vs. Hines, 100 Tenn. 524, 66 Am. St. Rep., 761.)[112]
Best evidence rule

This Court disagrees in the pronouncement made by the Court of Appeals summarily
dismissing the documentary evidence submitted by petitioners based on its broad and
indiscriminate application of the best evidence rule.

In general, the best evidence rule requires that the highest available degree of proof
must be produced. Accordingly, for documentary evidence, the contents of a document
are best proved by the production of the document itself,[113] to the exclusion of any
secondary or substitutionary evidence.[114]

The best evidence rule has been made part of the revised Rules of Court, Rule 130,
Section 3, which reads -
SEC. 3. Original document must be produced; exceptions. - When the subject of
inquiry is the contents of a document, no evidence shall be admissible other than the
original document itself, except in the following cases:

(a) When the original has been lost or destroyed, or cannot be produced in court,
without bad faith on the part of the offeror;

(b) When the original is in the custody or under the control of the party against whom
the evidence is offered, and the latter fails to produce it after reasonable notice;

(c) When the original consists of numerous accounts or other documents which cannot
be examined in court without great loss of time and the fact sought to be established
from them is only the general result of the whole; and

(d) When the original is a public record in the custody of a public officer or is recorded
in a public office.
As the afore-quoted provision states, the best evidence rule applies only when the
subject of the inquiry is the contents of the document. The scope of the rule is more
extensively explained thus -
But even with respect to documentary evidence, the best evidence rule applies only
when the content of such document is the subject of the inquiry. Where the issue is
only as to whether such document was actually executed, or exists, or on the
circumstances relevant to or surrounding its execution, the best evidence rule does not
apply and testimonial evidence is admissible (5 Moran, op. cit., pp. 76-66; 4 Martin, op.
cit., p. 78). Any other substitutionary evidence is likewise admissible without need for
accounting for the original.

Thus, when a document is presented to prove its existence or condition it is offered not
as documentary, but as real, evidence. Parol evidence of the fact of execution of the
documents is allowed (Hernaez, et al. vs. McGrath, etc., et al., 91 Phil 565). x x x [115]
In Estrada v. Desierto,[116] this Court had occasion to rule that -
It is true that the Court relied not upon the original but only copy of the Angara Diary
as published in the Philippine Daily Inquirer on February 4-6, 2001. In doing so, the
Court, did not, however, violate the best evidence rule. Wigmore, in his book on
evidence, states that:

"Production of the original may be dispensed with, in the trial court's discretion,
whenever in the case in hand the opponent does not bona fide dispute the contents of
the document and no other useful purpose will be served by requiring production.24

"x x x x

"In several Canadian provinces, the principle of unavailability has been abandoned, for
certain documents in which ordinarily no real dispute arised. This measure is a sensible
and progressive one and deserves universal adoption (post, sec. 1233). Its essential
feature is that a copy may be used unconditionally, if the opponent has been given an
opportunity to inspect it." (Emphasis supplied.)
This Court did not violate the best evidence rule when it considered and weighed in
evidence the photocopies and microfilm copies of the PNs, MCs, and letters submitted
by the petitioners to establish the existence of respondent's loans. The terms or
contents of these documents were never the point of contention in the Petition at bar.
It was respondent's position that the PNs in the first set (with the exception of PN No.
34534) never existed, while the PNs in the second set (again, excluding PN No. 34534)
were merely executed to cover simulated loan transactions. As for the MCs representing
the proceeds of the loans, the respondent either denied receipt of certain MCs or
admitted receipt of the other MCs but for another purpose. Respondent further
admitted the letters she wrote personally or through her representatives to Mr. Tan of
petitioner Citibank acknowledging the loans, except that she claimed that these letters
were just meant to keep up the ruse of the simulated loans. Thus, respondent questioned
the documents as to their existence or execution, or when the former is admitted, as to
the purpose for which the documents were executed, matters which are, undoubtedly,
external to the documents, and which had nothing to do with the contents thereof.

Alternatively, even if it is granted that the best evidence rule should apply to the
evidence presented by petitioners regarding the existence of respondent's loans, it
should be borne in mind that the rule admits of the following exceptions under Rule
130, Section 5 of the revised Rules of Court -
SEC. 5. When the original document is unavailable. - When the original document has
been lost or destroyed, or cannot be produced in court, the offeror, upon proof of its
execution or existence and the cause of its unavailability without bad faith on his part,
may prove its contents by a copy, or by a recital of its contents in some authentic
document, or by the testimony of witnesses in the order stated.
The execution or existence of the original copies of the documents was established
through the testimonies of witnesses, such as Mr. Tan, before whom most of the
documents were personally executed by respondent. The original PNs also went
through the whole loan booking system of petitioner Citibank - from the account officer
in its Marketing Department, to the pre-processor, to the signature verifier, back to the
pre-processor, then to the processor for booking.[117] The original PNs were seen by Ms.
Dondoyano, the processor, who recorded them in the General Ledger. Mr. Pujeda
personally saw the original MCs, proving respondent's receipt of the proceeds of her
loans from petitioner Citibank, when he helped Attys. Cleofe and Fernandez, the bank's
legal counsels, to reconstruct the records of respondent's loans. The original MCs were
presented to Atty. Cleofe who used the same during the preliminary investigation of the
case, sometime in years 1986-1987. The original MCs were subsequently turned over to
the Control and Investigation Division of petitioner Citibank.[118]

It was only petitioner FNCB Finance who claimed that they lost the original copies of
the PNs when it moved to a new office. Citibank did not make a similar contention;
instead, it explained that the original copies of the PNs were returned to the borrower
upon liquidation of the loan, either through payment or roll-over. Petitioner Citibank
proffered the excuse that they were still looking for the documents in their storage or
warehouse to explain the delay and difficulty in the retrieval thereof, but not their
absence or loss. The original documents in this case, such as the MCs and letters, were
destroyed and, thus, unavailable for presentation before the RTC only on 7 October
1987, when a fire broke out on the 7th floor of the office building of petitioner
Citibank. There is no showing that the fire was intentionally set. The fire destroyed
relevant documents, not just of the present case, but also of other cases, since the 7th
floor housed the Control and Investigation Division, in charge of keeping the necessary
documents for cases in which petitioner Citibank was involved.

The foregoing would have been sufficient to allow the presentation of photocopies or
microfilm copies of the PNs, MCs, and letters by the petitioners as secondary evidence
to establish the existence of respondent's loans, as an exception to the best evidence
rule.

The impact of the Decision of the Court of Appeals in the Dy case

In its assailed Decision, the Court of Appeals made the following pronouncement -
Besides, We find the declaration and conclusions of this Court in CA-G.R. CV No.
15934 entitled Sps. Dr. Ricardo L. Dy and Rosalind O. Dy vs. City Bank, N.A., et al,
promulgated on 15 January 1990, as disturbing taking into consideration the similarities
of the fraud, machinations, and deceits employed by the defendant-appellant Citibank
and its Account Manager Francisco Tan.

Worthy of note is the fact that Our declarations and conclusions against Citibank and
the person of Francisco Tan in CA-G.R. CV No. 15934 were affirmed in toto by the
Highest Magistrate in a Minute Resolution dated 22 August 1990 entitled Citibank, N.A.,
vs. Court of Appeals, G.R. 93350.

As the factual milieu of the present appeal created reasonable doubts as to whether the
nine (9) Promissory Notes were indeed executed with considerations, the doubts,
coupled by the findings and conclusions of this Court in CA-G.R. CV No. 15934 and
the Supreme Court in G.R. No. 93350. should be construed against herein defendants-
appellants Citibank and FNCB Finance.
What this Court truly finds disturbing is the significance given by the Court of Appeals
in its assailed Decision to the Decision[119] of its Third Division in CA-G.R. CV No.
15934 (or the Dy case), when there is an absolute lack of legal basis for doing such.

Although petitioner Citibank and its officer, Mr. Tan, were also involved in the Dy case,
that is about the only connection between the Dy case and the one at bar. Not only did
the Dy case tackle transactions between parties other than the parties presently before
this Court, but the transactions are absolutely independent and unrelated to those in the
instant Petition.

In the Dy case, Severino Chua Caedo managed to obtain loans from herein petitioner
Citibank amounting to P7,000,000.00, secured to the extent of P5,000,000.00 by a Third
Party Real Estate Mortgage of the properties of Caedo's aunt, Rosalind Dy. It turned
out that Rosalind Dy and her husband were unaware of the said loans and the mortgage
of their properties. The transactions were carried out exclusively between Caedo and
Mr. Tan of petitioner Citibank. The RTC found Mr. Tan guilty of fraud for his
participation in the questionable transactions, essentially because he allowed Caedo to
take out the signature cards, when these should have been signed by the Dy spouses
personally before him. Although the Dy spouses' signatures in the PNs and Third Party
Real Estate Mortgage were forged, they were approved by the signature verifier since the
signature cards against which they were compared to were also forged. Neither the RTC
nor the Court of Appeals, however, categorically declared Mr. Tan personally
responsible for the forgeries, which, in the narration of the facts, were more likely
committed by Caedo.

In the Petition at bar, respondent dealt with Mr. Tan directly, there was no third party
involved who could have perpetrated any fraud or forgery in her loan transactions.
Although respondent attempted to raise suspicion as to the authenticity of her
signatures on certain documents, these were nothing more than naked allegations with
no corroborating evidence; worse, even her own allegations were replete with
inconsistencies. She could not even establish in what manner or under what
circumstances the fraud or forgery was committed, or how Mr. Tan could have been
directly responsible for the same.

While the Court of Appeals can take judicial notice of the Decision of its Third
Division in the Dy case, it should not have given the said case much weight when it
rendered the assailed Decision, since the former does not constitute a precedent. The
Court of Appeals, in the challenged Decision, did not apply any legal argument or
principle established in the Dy case but, rather, adopted the findings therein of
wrongdoing or misconduct on the part of herein petitioner Citibank and Mr. Tan. Any
finding of wrongdoing or misconduct as against herein petitioners should be made
based on the factual background and pieces of evidence submitted in this case, not
those in another case.

It is apparent that the Court of Appeals took judicial notice of the Dy case not as a legal
precedent for the present case, but rather as evidence of similar acts committed by
petitioner Citibank and Mr. Tan. A basic rule of evidence, however, states that,
"Evidence that one did or did not do a certain thing at one time is not admissible to
prove that he did or did not do the same or similar thing at another time; but it may be
received to prove a specific intent or knowledge, identity, plan, system, scheme, habit,
custom or usage, and the like."[120] The rationale for the rule is explained thus -
The rule is founded upon reason, public policy, justice and judicial convenience. The
fact that a person has committed the same or similar acts at some prior time affords, as a
general rule, no logical guaranty that he committed the act in question. This is so
because, subjectively, a man's mind and even his modes of life may change; and,
objectively, the conditions under which he may find himself at a given time may likewise
change and thus induce him to act in a different way. Besides, if evidence of similar acts
are to be invariably admitted, they will give rise to a multiplicity of collateral issues and
will subject the defendant to surprise as well as confuse the court and prolong the trial.
[121]

The factual backgrounds of the two cases are so different and unrelated that the Dy case
cannot be used to prove specific intent, knowledge, identity, plan, system, scheme, habit,
custom or usage on the part of petitioner Citibank or its officer, Mr. Tan, to defraud
respondent in the present case.

IV

The liquidation of respondent's


outstanding loans were valid in so
far as petitioner Citibank used
respondent's savings account with
the bank and her money market
placements with petitioner FNCB
Finance; but illegal and void in so
far as petitioner Citibank used
respondent's dollar accounts with
Citibank-Geneva.

Savings Account with petitioner Citibank

Compensation is a recognized mode of extinguishing obligations. Relevant provisions


of the Civil Code provides -
Art. 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other.

Art. 1279. In order that compensation may be proper, it is necessary;

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.
There is little controversy when it comes to the right of petitioner Citibank to
compensate respondent's outstanding loans with her deposit account. As already found
by this Court, petitioner Citibank was the creditor of respondent for her outstanding
loans. At the same time, respondent was the creditor of petitioner Citibank, as far as her
deposit account was concerned, since bank deposits, whether fixed, savings, or current,
should be considered as simple loan or mutuum by the depositor to the banking
institution.[122] Both debts consist in sums of money. By June 1979, all of respondent's
PNs in the second set had matured and became demandable, while respondent's savings
account was demandable anytime. Neither was there any retention or controversy over
the PNs and the deposit account commenced by a third person and communicated in
due time to the debtor concerned. Compensation takes place by operation of law,[123]
therefore, even in the absence of an expressed authority from respondent, petitioner
Citibank had the right to effect, on 25 June 1979, the partial compensation or off-set of
respondent's outstanding loans with her deposit account, amounting to P31,079.14.

Money market placements with FNCB Finance

Things though are not as simple and as straightforward as regards to the money market
placements and bank account used by petitioner Citibank to complete the compensation
or off-set of respondent's outstanding loans, which came from persons other than
petitioner Citibank.
Respondent's money market placements were with petitioner FNCB Finance, and after
several roll-overs, they were ultimately covered by PNs No. 20138 and 20139, which, by
3 September 1979, the date the check for the proceeds of the said PNs were issued,
amounted to P1,022,916.66, inclusive of the principal amounts and interests. As to
these money market placements, respondent was the creditor and petitioner FNCB
Finance the debtor; while, as to the outstanding loans, petitioner Citibank was the
creditor and respondent the debtor. Consequently, legal compensation, under Article
1278 of the Civil Code, would not apply since the first requirement for a valid
compensation, that each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other, was not met.

What petitioner Citibank actually did was to exercise its rights to the proceeds of
respondent's money market placements with petitioner FNCB Finance by virtue of the
Deeds of Assignment executed by respondent in its favor.

The Court of Appeals did not consider these Deeds of Assignment because of
petitioners' failure to produce the original copies thereof in violation of the best
evidence rule. This Court again finds itself in disagreement in the application of the
best evidence rule by the appellate court.

To recall, the best evidence rule, in so far as documentary evidence is concerned,


requires the presentation of the original copy of the document only when the context
thereof is the subject of inquiry in the case. Respondent does not question the contents
of the Deeds of Assignment. While she admitted the existence and execution of the
Deeds of Assignment, dated 2 March 1978 and 9 March 1978, covering PNs No. 8169
and 8167 issued by petitioner FNCB Finance, she claimed, as defense, that the loans for
which the said Deeds were executed as security, were already paid. She denied ever
executing both Deeds of Assignment, dated 25 August 1978, covering PNs No. 20138
and 20139. These are again issues collateral to the contents of the documents involved,
which could be proven by evidence other than the original copies of the said documents.

Moreover, the Deeds of Assignment of the money market placements with petitioner
FNCB Finance were notarized documents, thus, admissible in evidence. Rule 132,
Section 30 of the Rules of Court provides that -
SEC. 30. Proof of notarial documents. - Every instrument duly acknowledged or
proved and certified as provided by law, may be presented in evidence without further
proof, the certificate of acknowledgement being prima facie evidence of the execution
of the instrument or document involved.
Significant herein is this Court's elucidation in De Jesus v. Court of Appeals,[124] which
reads -
On the evidentiary value of these documents, it should be recalled that the notarization
of a private document converts it into a public one and renders it admissible in court
without further proof of its authenticity (Joson vs. Baltazar, 194 SCRA 114 [1991]). This
is so because a public document duly executed and entered in the proper registry is
presumed to be valid and genuine until the contrary is shown by clear and convincing
proof (Asido vs. Guzman, 57 Phil. 652 [1918]; U.S. vs. Enriquez, 1 Phil 241 [1902];
Favor vs. Court of Appeals, 194 SCRA 308 [1991]). As such, the party challenging the
recital of the document must prove his claim with clear and convincing evidence (Diaz
vs. Court of Appeals, 145 SCRA 346 [1986]).
The rule on the evidentiary weight that must be accorded a notarized document is clear
and unambiguous. The certificate of acknowledgement in the notarized Deeds of
Assignment constituted prima facie evidence of the execution thereof. Thus, the burden
of refuting this presumption fell on respondent. She could have presented evidence of
any defect or irregularity in the execution of the said documents[125] or raised questions
as to the verity of the notary public's acknowledgment and certificate in the Deeds.[126]
But again, respondent admitted executing the Deeds of Assignment, dated 2 March
1978 and 9 March 1978, although claiming that the loans for which they were executed
as security were already paid. And, she assailed the Deeds of Assignment, dated 25
August 1978, with nothing more than her bare denial of execution thereof, hardly the
clear and convincing evidence required to trounce the presumption of due execution of
a notarized document.

Petitioners not only presented the notarized Deeds of Assignment, but even secured
certified literal copies thereof from the National Archives.[127] Mr. Renato Medua, an
archivist, working at the Records Management and Archives Office of the National
Library, testified that the copies of the Deeds presented before the RTC were certified
literal copies of those contained in the Notarial Registries of the notary publics
concerned, which were already in the possession of the National Archives. He also
explained that he could not bring to the RTC the Notarial Registries containing the
original copies of the Deeds of Assignment, because the Department of Justice (DOJ)
Circular No. 97, dated 8 November 1968, prohibits the bringing of original documents
to the courts to prevent the loss of irreplaceable and priceless documents.[128]

Accordingly, this Court gives the Deeds of Assignment grave importance in establishing
the authority given by the respondent to petitioner Citibank to use as security for her
loans her money her market placements with petitioner FNCB Finance, represented by
PNs No. 8167 and 8169, later to be rolled-over as PNs No. 20138 and 20139. These
Deeds of Assignment constitute the law between the parties, and the obligations arising
therefrom shall have the force of law between the parties and should be complied with
in good faith.[129] Standard clauses in all of the Deeds provide that -

The ASSIGNOR and the ASSIGNEE hereby further agree as follows:


xxxx
2 In the event the OBLIGATIONS are not paid at maturity or upon demand, as the
case may be, the ASSIGNEE is fully authorized and empowered to collect and
receive the PLACEMENT (or so much thereof as may be necessary) and apply
the same in payment of the OBLIGATIONS. Furthermore, the ASSIGNOR
agrees that at any time, and from time to time, upon request by the ASSIGNEE,
the ASSIGNOR will promptly execute and deliver any and all such further
instruments and documents as may be necessary to effectuate this Assignment.
xxxx
5 This Assignment shall be considered as sufficient authority to FNCB Finance to
pay and deliver the PLACEMENT or so much thereof as may be necessary to
liquidate the OBLIGATIONS, to the ASSIGNEE in accordance with terms and
provisions hereof.[130]
Petitioner Citibank was only acting upon the authority granted to it under the foregoing
Deeds when it finally used the proceeds of PNs No. 20138 and 20139, paid by petitioner
FNCB Finance, to partly pay for respondent's outstanding loans. Strictly speaking, it did
not effect a legal compensation or off-set under Article 1278 of the Civil Code, but
rather, it partly extinguished respondent's obligations through the application of the
security given by the respondent for her loans. Although the pertinent documents were
entitled Deeds of Assignment, they were, in reality, more of a pledge by respondent to
petitioner Citibank of her credit due from petitioner FNCB Finance by virtue of her
money market placements with the latter. According to Article 2118 of the Civil Code -
ART. 2118. If a credit has been pledged becomes due before it is redeemed, the pledgee
may collect and receive the amount due. He shall apply the same to the payment of his
claim, and deliver the surplus, should there be any, to the pledgor.
PNs No. 20138 and 20139 matured on 3 September 1979, without them being redeemed
by respondent, so that petitioner Citibank collected from petitioner FNCB Finance the
proceeds thereof, which included the principal amounts and interests earned by the
money market placements, amounting to P1,022,916.66, and applied the same against
respondent's outstanding loans, leaving no surplus to be delivered to respondent.

Dollar accounts with Citibank-Geneva

Despite the legal compensation of respondent's savings account and the total
application of the proceeds of PNs No. 20138 and 20139 to respondent's outstanding
loans, there still remained a balance of P1,069,847.40. Petitioner Citibank then
proceeded to applying respondent's dollar accounts with Citibank-Geneva against her
remaining loan balance, pursuant to a Declaration of Pledge supposedly executed by
respondent in its favor.

Certain principles of private international law should be considered herein because the
property pledged was in the possession of an entity in a foreign country, namely,
Citibank-Geneva. In the absence of any allegation and evidence presented by
petitioners of the specific rules and laws governing the constitution of a pledge in
Geneva, Switzerland, they will be presumed to be the same as Philippine local or
domestic laws; this is known as processual presumption.[131]

Upon closer scrutiny of the Declaration of Pledge, this Court finds the same
exceedingly suspicious and irregular.

First of all, it escapes this Court why petitioner Citibank took care to have the Deeds of
Assignment of the PNs notarized, yet left the Declaration of Pledge unnotarized. This
Court would think that petitioner Citibank would take greater cautionary measures with
the preparation and execution of the Declaration of Pledge because it involved
respondent's "all present and future fiduciary placements" with a Citibank branch in
another country, specifically, in Geneva, Switzerland. While there is no express legal
requirement that the Declaration of Pledge had to be notarized to be effective, even so,
it could not enjoy the same prima facie presumption of due execution that is extended
to notarized documents, and petitioner Citibank must discharge the burden of proving
due execution and authenticity of the Declaration of Pledge.

Second, petitioner Citibank was unable to establish the date when the Declaration of
Pledge was actually executed. The photocopy of the Declaration of Pledge submitted
by petitioner Citibank before the RTC was undated.[132] It presented only a photocopy
of the pledge because it already forwarded the original copy thereof to Citibank-Geneva
when it requested for the remittance of respondent's dollar accounts pursuant thereto.
Respondent, on the other hand, was able to secure a copy of the Declaration of Pledge,
certified by an officer of Citibank-Geneva, which bore the date 24 September 1979.[133]
Respondent, however, presented her passport and plane tickets to prove that she was out
of the country on the said date and could not have signed the pledge. Petitioner Citibank
insisted that the pledge was signed before 24 September 1979, but could not provide an
explanation as to how and why the said date was written on the pledge. Although Mr.
Tan testified that the Declaration of Pledge was signed by respondent personally before
him, he could not give the exact date when the said signing took place. It is important to
note that the copy of the Declaration of Pledge submitted by the respondent to the
RTC was certified by an officer of Citibank-Geneva, which had possession of the
original copy of the pledge. It is dated 24 September 1979, and this Court shall abide by
the presumption that the written document is truly dated.[134] Since it is undeniable that
respondent was out of the country on 24 September 1979, then she could not have
executed the pledge on the said date.

Third, the Declaration of Pledge was irregularly filled-out. The pledge was in a standard
printed form. It was constituted in favor of Citibank, N.A., otherwise referred to
therein as the Bank. It should be noted, however, that in the space which should have
named the pledgor, the name of petitioner Citibank was typewritten, to wit -
The pledge right herewith constituted shall secure all claims which the Bank now has or
in the future acquires against Citibank, N.A., Manila (full name and address of the
Debtor), regardless of the legal cause or the transaction (for example current account,
securities transactions, collections, credits, payments, documentary credits and
collections) which gives rise thereto, and including principal, all contractual and penalty
interest, commissions, charges, and costs.
The pledge, therefore, made no sense, the pledgor and pledgee being the same entity.
Was a mistake made by whoever filled-out the form? Yes, it could be a possibility.
Nonetheless, considering the value of such a document, the mistake as to a significant
detail in the pledge could only be committed with gross carelessness on the part of
petitioner Citibank, and raised serious doubts as to the authenticity and due execution of
the same. The Declaration of Pledge had passed through the hands of several bank
officers in the country and abroad, yet, surprisingly and implausibly, no one noticed such
a glaring mistake.

Lastly, respondent denied that it was her signature on the Declaration of Pledge. She
claimed that the signature was a forgery. When a document is assailed on the basis of
forgery, the best evidence rule applies -
Basic is the rule of evidence that when the subject of inquiry is the contents of a
document, no evidence is admissible other than the original document itself except in
the instances mentioned in Section 3, Rule 130 of the Revised Rules of Court. Mere
photocopies of documents are inadmissible pursuant to the best evidence rule. This is
especially true when the issue is that of forgery.

As a rule, forgery cannot be presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party alleging forgery. The best
evidence of a forged signature in an instrument is the instrument itself reflecting the
alleged forged signature. The fact of forgery can only be established by a comparison
between the alleged forged signature and the authentic and genuine signature of the
person whose signature is theorized upon to have been forged. Without the original
document containing the alleged forged signature, one cannot make a definitive
comparison which would establish forgery. A comparison based on a mere xerox copy
or reproduction of the document under controversy cannot produce reliable results.[135]
Respondent made several attempts to have the original copy of the pledge produced
before the RTC so as to have it examined by experts. Yet, despite several Orders by the
RTC,[136] petitioner Citibank failed to comply with the production of the original
Declaration of Pledge. It is admitted that Citibank-Geneva had possession of the
original copy of the pledge. While petitioner Citibank in Manila and its branch in
Geneva may be separate and distinct entities, they are still incontestably related, and
between petitioner Citibank and respondent, the former had more influence and
resources to convince Citibank-Geneva to return, albeit temporarily, the original
Declaration of Pledge. Petitioner Citibank did not present any evidence to convince this
Court that it had exerted diligent efforts to secure the original copy of the pledge, nor
did it proffer the reason why Citibank-Geneva obstinately refused to give it back, when
such document would have been very vital to the case of petitioner Citibank. There is
thus no justification to allow the presentation of a mere photocopy of the Declaration
of Pledge in lieu of the original, and the photocopy of the pledge presented by
petitioner Citibank has nil probative value.[137] In addition, even if this Court cannot
make a categorical finding that respondent's signature on the original copy of the pledge
was forged, it is persuaded that petitioner Citibank willfully suppressed the presentation
of the original document, and takes into consideration the presumption that the
evidence willfully suppressed would be adverse to petitioner Citibank if produced.[138]

Without the Declaration of Pledge, petitioner Citibank had no authority to demand the
remittance of respondent's dollar accounts with Citibank-Geneva and to apply them to
her outstanding loans. It cannot effect legal compensation under Article 1278 of the
Civil Code since, petitioner Citibank itself admitted that Citibank-Geneva is a distinct
and separate entity. As for the dollar accounts, respondent was the creditor and
Citibank-Geneva is the debtor; and as for the outstanding loans, petitioner Citibank was
the creditor and respondent was the debtor. The parties in these transactions were
evidently not the principal creditor of each other.

Therefore, this Court declares that the remittance of respondent's dollar accounts from
Citibank-Geneva and the application thereof to her outstanding loans with petitioner
Citibank was illegal, and null and void. Resultantly, petitioner Citibank is obligated to
return to respondent the amount of US$149,632,99 from her Citibank-Geneva accounts,
or its present equivalent value in Philippine currency; and, at the same time, respondent
continues to be obligated to petitioner Citibank for the balance of her outstanding loans
which, as of 5 September 1979, amounted to P1,069,847.40.

The parties shall be liable for


interests on their monetary
obligations to each other, as
determined herein.

In summary, petitioner Citibank is ordered by this Court to pay respondent the proceeds
of her money market placements, represented by PNs No. 23356 and 23357, amounting
to P318,897.34 and P203,150.00, respectively, earning an interest of 14.5% per annum as
stipulated in the PNs,[139] beginning 17 March 1977, the date of the placements.

Petitioner Citibank is also ordered to refund to respondent the amount of


US$149,632.99, or its equivalent in Philippine currency, which had been remitted from
her Citibank-Geneva accounts. These dollar accounts, consisting of two fiduciary
placements and current accounts with Citibank-Geneva shall continue earning their
respective stipulated interests from 26 October 1979, the date of their remittance by
Citibank-Geneva to petitioner Citibank in Manila and applied against respondent's
outstanding loans.

As for respondent, she is ordered to pay petitioner Citibank the balance of her
outstanding loans, which amounted to P1,069,847.40 as of 5 September 1979. These
loans continue to earn interest, as stipulated in the corresponding PNs, from the time of
their respective maturity dates, since the supposed payment thereof using respondent's
dollar accounts from Citibank-Geneva is deemed illegal, null and void, and, thus,
ineffective.

VI

Petitioner Citibank shall be liable for


damages to respondent.
Petitioners protest the award by the Court of Appeals of moral damages, exemplary
damages, and attorney's fees in favor of respondent. They argued that the RTC did not
award any damages, and respondent, in her appeal before the Court of Appeals, did not
raise in issue the absence of such.

While it is true that the general rule is that only errors which have been stated in the
assignment of errors and properly argued in the brief shall be considered, this Court has
also recognized exceptions to the general rule, wherein it authorized the review of
matters, even those not assigned as errors in the appeal, if the consideration thereof is
necessary in arriving at a just decision of the case, and there is a close inter-relation
between the omitted assignment of error and those actually assigned and discussed by
the appellant.[140] Thus, the Court of Appeals did not err in awarding the damages when
it already made findings that would justify and support the said award.

Although this Court appreciates the right of petitioner Citibank to effect legal
compensation of respondent's local deposits, as well as its right to the proceeds of PNs
No. 20138 and 20139 by virtue of the notarized Deeds of Assignment, to partly
extinguish respondent's outstanding loans, it finds that petitioner Citibank did commit
wrong when it failed to pay and properly account for the proceeds of respondent's
money market placements, evidenced by PNs No. 23356 and 23357, and when it sought
the remittance of respondent's dollar accounts from Citibank-Geneva by virtue of a
highly-suspect Declaration of Pledge to be applied to the remaining balance of
respondent's outstanding loans. It bears to emphasize that banking is impressed with
public interest and its fiduciary character requires high standards of integrity and
performance.[141] A bank is under the obligation to treat the accounts of its depositors
with meticulous care whether such accounts consist only of a few hundred pesos or of
millions of pesos.[142] The bank must record every single transaction accurately, down to
the last centavo, and as promptly as possible.[143] Petitioner Citibank evidently failed to
exercise the required degree of care and transparency in its transactions with
respondent, thus, resulting in the wrongful deprivation of her property.

Respondent had been deprived of substantial amounts of her investments and deposits
for more than two decades. During this span of years, respondent had found herself in
desperate need of the amounts wrongfully withheld from her. In her testimony[144]
before the RTC, respondent narrated -
Q
By the way Mrs. Witness will you kindly tell us again, you said before that you are a
businesswoman, will you tell us again what are the businesses you are engaged into [sic]?

A
I am engaged in real estate. I am the owner of the Modesta Village 1 and 2 in San
Mateo, Rizal. I am also the President and Chairman of the Board of Macador [sic] Co.
and Business Inc. which operates the Macador [sic] International Palace Hotel. I am also
the President of the Macador [sic] International Palace Hotel, and also the Treasures
Home Industries, Inc. which I am the Chairman and president of the Board and also
operating affiliated company in the name of Treasures Motor Sales engaged in car
dealers [sic] like Delta Motors, we are the dealers of the whole Northern Luzon and I
am the president of the Disto Company, Ltd., based in Hongkong licensed in Honkong
[sic] and now operating in Los Angeles, California.

Q
What is the business of that Disto Company Ltd.?

A
Disto Company, Ltd., is engaged in real estate and construction.

Q
Aside from those businesses are you a member of any national or community
organization for social and civil activities?

A
Yes sir.

Q
What are those?

A
I am the Vice-President of thes [sic] Subdivision Association of the Philippines in 1976,
I am also an officer of the ... Chamber of Real Estate Business Association; I am also an
officer of the Chatholic [sic] Women's League and I am also a member of the CMLI, I
forgot the definition.

Q
How about any political affiliation or government position held if any?

A
I was also a candidate for Mayo last January 30, 1980.

Q
Where?

A
In Dagupan City, Pangasinan.

Q
What else?

A
I also ran as an Assemblywoman last May, 1984, Independent party in Regional I,
Pangasinan.

Q
What happened to your businesses you mentioned as a result of your failure to recover
you [sic] investments and bank deposits from the defendants?

A
They are not all operating, in short, I was hampered to push through the businesses that
I have.

A [sic]
Of all the businesses and enterprises that you mentioned what are those that are
paralyzed and what remain inactive?

A
Of all the company [sic] that I have, only the Disto Company that is now operating in
California.

Q
How about your candidacy as Mayor of Dagupan, [sic] City, and later as
Assemblywoman of Region I, what happened to this?

A
I won by voting but when election comes on [sic] the counting I lost and I protested
this, it is still pending and because I don't have financial resources I was not able to push
through the case. I just have it pending in the Comelec.

Q
Now, do these things also affect your social and civic activities?
A
Yes sir, definitely.

Q
How?

A
I was embarrassed because being a businesswoman I would like to inform the
Honorable Court that I was awarded as the most outstanding businesswoman of the
year in 1976 but when this money was not given back to me I was not able to comply
with the commitments that I have promised to these associations that I am engaged into
[sic], sir.
For the mental anguish, serious anxiety, besmirched reputation, moral shock and social
humiliation suffered by the respondent, the award of moral damages is but proper.
However, this Court reduces the amount thereof to P300,000.00, for the award of moral
damages is meant to compensate for the actual injury suffered by the respondent, not to
enrich her.[145]

Having failed to exercise more care and prudence than a private individual in its dealings
with respondent, petitioner Citibank should be liable for exemplary damages, in the
amount of P250,000.00, in accordance with Article 2229[146] and 2234[147] of the Civil
Code.

With the award of exemplary damages, then respondent shall also be entitled to an
award of attorney's fees.[148] Additionally, attorney's fees may be awarded when a party is
compelled to litigate or to incur expenses to protect his interest by reason of an
unjustified act of the other party.[149] In this case, an award of P200,000.00 attorney's
fees shall be satisfactory.

In contrast, this Court finds no sufficient basis to award damages to petitioners.


Respondent was compelled to institute the present case in the exercise of her rights and
in the protection of her interests. In fact, although her Complaint before the RTC was
not sustained in its entirety, it did raise meritorious points and on which this Court rules
in her favor. Any injury resulting from the exercise of one's rights is damnum absque
injuria.[150]
IN VIEW OF THE FOREGOING, the instant Petition is PARTLY GRANTED. The
assailed Decision of the Court of Appeals in CA-G.R. No. 51930, dated 26 March 2002,
as already modified by its Resolution, dated 20 November 2002, is hereby AFFIRMED
WITH MODIFICATION, as follows -
1 PNs No. 23356 and 23357 are DECLARED subsisting and outstanding.
Petitioner Citibank is ORDERED to return to respondent the principal amounts
of the said PNs, amounting to Three Hundred Eighteen Thousand Eight
Hundred Ninety-Seven Pesos and Thirty-Four Centavos (P318,897.34) and Two
Hundred Three Thousand One Hundred Fifty Pesos (P203,150.00), respectively,
plus the stipulated interest of Fourteen and a half percent (14.5%) per annum,
beginning 17 March 1977;
2
3 The remittance of One Hundred Forty-Nine Thousand Six Hundred Thirty Two
US Dollars and Ninety-Nine Cents (US$149,632.99) from respondent's Citibank-
Geneva accounts to petitioner Citibank in Manila, and the application of the same
against respondent's outstanding loans with the latter, is DECLARED illegal, null
and void. Petitioner Citibank is ORDERED to refund to respondent the said
amount, or its equivalent in Philippine currency using the exchange rate at the
time of payment, plus the stipulated interest for each of the fiduciary placements
and current accounts involved, beginning 26 October 1979;
4
5 Petitioner Citibank is ORDERED to pay respondent moral damages in the
amount of Three Hundred Thousand Pesos (P300,000.00); exemplary damages in
the amount of Two Hundred Fifty Thousand Pesos (P250,000.00); and attorney's
fees in the amount of Two Hundred Thousand Pesos (P200,000.00); and
6
7 Respondent is ORDERED to pay petitioner Citibank the balance of her
outstanding loans, which, from the respective dates of their maturity to 5
September 1979, was computed to be in the sum of One Million Sixty-Nine
Thousand Eight Hundred Forty-Seven Pesos and Forty Centavos (P1,069,847.40),
inclusive of interest. These outstanding loans shall continue to earn interest, at
the rates stipulated in the corresponding PNs, from 5 September 1979 until
payment thereof.
SO ORDERED.

x--x

G.R. NO. 170491, April 03, 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 Decision[1] 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 Order[2] 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
3 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;
4
5 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;
6
7 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;
8
9 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;
10
11 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.;
12
13 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;
14
15 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;
16
17 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;
18
19 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;
20
21 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;
22
23 Exhibit "O" is the same photocopied document marked as Annex C;
24
25 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;
26
27 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.[9] The 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.

x--x

G.R. No. 109293, August 18, 1993


HOME INSURANCE CORPORATION, PETITIONER, VS. THE HON. COURT
OF APPEALS, FORMER 7TH DIVISION AND MABUHAY BROKERAGE CO.,
INC., RESPONDENTS.

DECISION
CRUZ, J.:

Filipro Phil., now known as Nestle Phil., was the consignee of two hydraulic engines
shipped on April 25, 1979, by INREDECO from the United States on the M/S Oriental
Statesman. The cargo arrived in Manila on May 17, 1979, on board the M/S Pacific
Conveyor. It was turned over to E. Razon Arrastre, which retained custody until July 20,
1979. The cargo was later hauled by Mabuhay Brokerage Co. to its warehouse, where it
stayed until July 26, 1979. On this date it was delivered to the consignee.
When the skidded plywood cases were opened by the consignee, one of the engines was
found to be damaged. Its fan cover was broken and misaligned and its cap deformed.
The consignee refused to accept the unit.
Nestle subsequently filed a claim against E. Razon, Mabuhay, the Port Authority, and its
insurer, the Home Insurance Corp., for P49,170.00. When the other companies denied
liability, Home Insurance paid the claim and was issued a subrogation receipt for
$6,070.00.[1]
Mabuhay alone was sued by Home Insurance for the recovery of the amount it had paid
to Nestle. Mabuhay again denied liability. After trial, the Regional Trial Court of Manila
rendered judgment dismissing the complaint.[2] Judge Lorenzo B. Veneracion declared
that the plaintiff failed to establish the legal and factual bases for its claim.
The decision noted that the insurance contract between the corporation and the
consignee was not presented and that the other supporting documents were all only
photocopies. No explanation was given for the failure of the plaintiffs to submit the
originals. The trial court also observed that the crates of the shipment did not comply
with the accepted international standards, taking into consideration the length of the
voyage and the transshipment of the cargo. Its conclusion was that whatever damage
was sustained by the engine must have occurred while it was at sea, for which Mabuhay
could not be held liable.
The judgment was affirmed on appeal.[3] In addition, the respondent court held that the
appellant had failed to establish a valid subrogation, which could not be presumed,[4] and
to prove the amount Home had paid to Nestle. There was no evidence either of what
happened to the damaged engine, which still retained a residual value despite its defects.
The Court of Appeals stressed that the petitioner could be excused from presenting the
original of the insurance contract only if there was proof that this had been lost. The
unrebutted claim, however, is that the original was in its possession all the time.[5] The
respondent court added that even if a valid subrogation could be established, Mabuhay
was nevertheless not an absolute insurer against all risks of the transport of the goods.
In any case, it appeared that Mabuhay had exercised extraordinary diligence for the safe
delivery of the cargo.
The challenged decision, however, deleted the award of P8,000.00 for litigation expenses
for lack of legal or equitable justification.
In the present petition, it is argued that: (1) the subrogation receipt proves the existence
of the insurance contract between Nestle and Home Insurance and the amount paid by
the latter to the former; and (2) the law or presumption of negligence operates against
the carrier.
The petition has no merit.
Home's action against Mabuhay supposedly arose from its contract of insurance with
Nestle. Having paid the consignee the damages it sustained during the shipment, Home
now claims it is rightfully subrogated under such contract to the rights of the consignee.
But the problem is - what rights? And against whom?
The insurance contract has not been presented. It may be assumed for the sake of
argument that the subrogation receipt may nevertheless be used to establish the
relationship between the petitioner and the consignee and the amount paid to settle the
claim. But that is all the document can do. By itself alone, the subrogation receipt is not
sufficient to prove the petitioner's claim holding the respondent liable for the damage to
the engine.
The shipment of the cargo passed through several stages: first, from the shipper to the
port of departure; second, from the port of departure to the M/S Oriental Statesman;
third; from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the
M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre
operator; sixth, from the arrastre operator to the hauler; and lastly, from the hauler to the
consignee.
In the absence of proof of stipulations to the contrary, the hauler can be liable only for
any damage that occurred from the time it received the cargo until it finally delivered it
to the consignee. It cannot be held responsible for the handling of the cargo before it
actually received it, particularly since there was no indication from the external
appearance of the crates, which Mabuhay did not open, that the engine was damaged.
As a mere subrogee of Nestle, Home can exercise only such rights against the parties
handling the cargo as were granted to Nestle under the insurance contract. The
insurance contract would have clearly indicated the scope of the coverage but there is no
evidence of this. It cannot simply be supposed that the hauling was included in the
coverage; it is possible that the coverage ended with the arrastre. In other words, the
rights transferred to Home by Nestle - still assuming there was a valid subrogation -
might not include the right to sue Mabuhay.
The petitioner cites Article 1735 of the Civil Code reading as follows:
Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently unless they prove that they
observed extraordinary diligence as required in Article 1733.
This presumption is applicable only if the shipper or consignee has, to begin with, a
right of action against the carrier. It has not been shown in the case at bar that Home, as
the supposed subrogee of Nestle, has acquired such a right against Mabuhay.
The insurance contract might have proved that it covered the hauling portion of the
shipment and was not limited to the transport of the cargo while at sea, if that were
really the case. It could have shown that the agreement was not only a marine
transportation insurance but covered all phases of the cargo's shipment, from the time
the cargo was loaded on the vessel in the United States until it was delivered to the
consignee in the Philippines. But there is no acceptable evidence of these stipulations
because the original contract of insurance has not been presented.
Rule 130, Section 3 of the Rules of Court is quite clear:
Sec. 3. Original document must be produced; exceptions. - When the subject of inquiry
is the contents of a document, no evidence shall be admissible other than the original
document itself, except in the following cases:
(a) When the original has been lost or destroyed, or cannot be produced in court,
without bad faith on the part of the offeror;
(b) When the original is in custody or under the control of the party against whom
the evidence is offered, and the latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other documents which
cannot be examined in court without great loss of time and the fact sought to be
established from them is only the general result of the whole; and
(d) When the original is a public record in the custody of a public officer or is
recorded in a public office.
It is curious that the petitioner disregarded this rule, knowing that the best evidence of
the insurance contract was its original copy, which was presumably in the possession of
Home itself. Failure to present this original (or even a copy of it), for reasons the Court
cannot comprehend, must prove fatal to this petition.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so
ordered.

x--x

G.R. No. L-40098, August 29, 1975


ANTONIO LIM TANHU, DY OCHAY, ALFONSO LEONARDO NG SUA AND
CO OYO, PETITIONERS, VS. HON. JOSE R. RAMOLETE, AS PRESIDING
JUDGE, BRANCH III, CFI, CEBU, AND TAN PUT, RESPONDENTS.

DECISION
BARREDO, J.:

Petition for (1) certiorari to annul and set aside certain actuations of respondent Court
of First Instance of Cebu Branch III in its Civil Case No. 12328, an action for
accounting of properties and money totalling allegedly about P15 million pesos filed
with a common cause of action against six defendants, in which after declaring four of
the said defendants herein petitioners, in default and while the trial as against the two
defendants not declared in default was in progress, said court granted plaintiff's motion
to dismiss the case in so far as the non-defaulted defendants were concerned and
thereafter proceeded to hear ex-parte the rest of the plaintiffs evidence and subsequently
rendered judgment by default against the defaulted defendants with the particularities
that notice of the motion to dismiss was not duly served on any of the defendants, who
had alleged a compulsory counterclaim against plaintiff in their joint answer, and the
judgment so rendered granted reliefs not prayed for in the complaint, and (2) prohibition
to enjoin further proceedings relative to the motion for immediate execution of the said
judgment.

Originally, this litigation was a complaint filed on February 9, 1971 by respondent Tan
Put only against the spouses-petitioners Antonio Lim Tanhu and Dy Ochay.
Subsequently, in an amended complaint dated September 26, 1972, their son Lim Teck
Chuan and the other spouses-petitioners Alfonso Leonardo Ng Sua and Co Oyo and
their son Eng Chong Leonardo were included as defendants. In said amended
complaint, respondent Tan alleged that she "is the widow of Tee Hoon Lim Po Chuan,
who was a partner in the commercial partnership, Glory Commercial Company ... with
Antonio Lim Tanhu and Alfonso Ng Sua"; that "defendant Antonio Lim Tanhu,
Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng Chong Leonardo, through fraud
and machination, took actual and active management of the partnership and although
Tee Hoon Lim Po Chuan was the manager of Glory Commercial Company, defendants
managed to use the funds of the partnership to purchase lands and buildings in the cities
of Cebu, Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla, some of
which were hidden, but the description of those already discovered were as follows: (list
of properties) x x x;" and that:

"13. (A)fter the death of Tee Hoon Lim Po Chuan; the defendants, without liquidation,
continued the business of Glory Commercial Company, by purportedly organizing a
corporation known as the Glory Commercial Company, Incorporated, with paid up
capital in the sum of P125,000.00, which money and other assets of the said Glory
Commercial Company, Incorporated are actually the assets of the defunct Glory
Commercial Company partnership, of which the plaintiff has a share equivalent to one
third (1/3) thereof:

14. (P)laintiff, on several occasions after the death of her husband, has asked
defendants of the above-mentioned properties and for the liquidation of the business of
the defunct partnership, including investments on real estate in Hong Kong, but
defendants kept on promising to liquidate said properties and just told plaintiff to wait;

15. (S)ometime in the month of November, 1967, defendants, particularly Antonio Lim
Tanhu, by means of fraud, deceit and misrepresentations did then and there, induce and
convince the plaintiff to execute a quitclaim of all her rights and interests, in the assets
of the partnership of Glory Commercial Company, which quitclaim is null and void,
executed through fraud and without any legal effect. The original of said quitclaim is in
the possession of the adverse party, defendant Antonio Lim Tanhu;

"16. (A)s a matter of fact, after the execution of said quitclaim, defendant Antonio Lim
Tanhu offered to pay the plaintiff the amount of P65,000.00 within a period of one(1)
month, for which plaintiff was made to sign a receipt for the amount of P65,000.00
although no such amount was given, and plaintiff was not even given a copy of said
document;

17. (T)hereafter, in the year 1968-69, the defendants who had earlier promised to
liquidate the aforesaid properties and assets in favor, among others of plaintiff and until
the middle of the year 1970 when the plaintiff formally demanded from the defendants
the accounting of real and personal properties of the Glory Commercial Company,
defendants refused and stated that they would not give the share of the plaintiff." (Pp.
36-37, Record.)

She prayed as follows:

"WHEREFORE, it is most respectfully prayed that judgment be rendered:

a) Ordering the defendants to render an accounting of the real and personal properties
of the Glory Commercial Company including those registered in the names of the
defendants and other persons, which properties are located in the Philippines and in
Hong Kong;
b) Ordering the defendants to deliver to the plaintiff after accounting, one third (1/3)
of the total value of all the properties which is approximately P5,000,000.00
representing the just share of the plaintiff;

c) Ordering the defendants to pay the attorney of the plaintiff the sum of Two
Hundred Fifty Thousand Pesos (P250,000.00) by way of attorney's fees and damages in
the sum of One Million Pesos (P1,000,000.00).

"This Honorable Court is prayed for other remedies and reliefs consistent with law and
equity and order the defendants to pay the costs." (Page 38, Record.)

The admission of said amended complaint was opposed by defendants upon the ground
that there were material modifications of the causes of action previously alleged, but
respondent judge nevertheless allowed the amendment reasoning that:

"The present action is for accounting of real and personal properties as well as for the
recovery of the same with damages.

An objective consideration of pars. 13 and 15 of the amended complaint pointed out by


the defendants to sustain their opposition will show that the allegations of facts therein
are merely to amplify material averments constituting the cause of action in the original
complaint. It likewise includes necessary and indispensable defendants without whom
no final determination can be had in the action and in order that complete relief is to be
accorded as between those already parties.

Considering that the amendments sought to be introduced do not change the main
causes of action in the original complaint and the reliefs demanded and to allow
amendments is the rule, and to refuse them the exception and in order and that the real
question between the parties may be properly and justly threshed out in a single
proceeding to avoid multiplicity of actions." (Page 40, Record.)

In a single answer with counterclaim, over the signature of their common counsel,
defendants denied specifically not only the allegation that respondent Tan is the widow
of Tee Hoon because, according to them, his legitimate wife was Ang Siok Tin, still
living and with whom he had four (4) legitimate children, a twin born in 1942, and two
others born in 1949 and 1965, all presently residing in Hongkong, but also all the
allegations of fraud and conversion quoted above, the truth being, according to them,
that proper liquidation had been regularly made of the business of the partnership and
Tee Hoon used to receive his just share until his death, as a result of which the
partnership was dissolved and what corresponded to him were all given to his wife and
children. To quote the pertinent portions of said answer:

"AND BY WAY OF SPECIAL AND


AFFIRMATIVE DEFENSES,
defendants hereby incorporate all facts averred and alleged in the answer, and further
most respectfully declare:

1. That in the event that plaintiff is filing the present complaint as an heir of Tee Hoon
Lim Po Chuan, then, she has no legal capacity to sue as such, considering that the
legitimate wife, namely: Ang Siok Tin, together with their children are still alive. Under
Sec. 1, (d), Rule 16 of the Revised Rules of Court, lack of legal capacity to sue is one of
the grounds for a motion to dismiss and so defendants prays that a preliminary hearing
be conducted as provided for in Sec. 5, of the same rule;

2. That in the alternative case or event that plaintiff is filing the present case under Art.
144 of the Civil Code, then, her claim or demand has been paid, waived abandoned or
otherwise extinguished as evidenced by the 'quitclaim' Annex 'A' hereof, the ground
cited is another ground for a motion to dismiss (Sec. 1, (h), Rule 16) and hence
defendants pray that a preliminary hearing be made in connection therewith pursuant to
Section 5 of the aforementioned rule;

3. That Tee Hoon Lim Po Chuan was legally married to Ang Siok Tin and were blessed
with the following children, to wit: Ching Siong Lim and Ching Hing Lim (twins) born
on February 16, 1942; Lim Shing Ping born on March 3, 1942 and Lim Eng Lu born on
June 25, 1965 and presently residing in Hongkong;

4. That even before the death of Tee Hoon Lim Po Chuan, the plaintiff was no longer
his common-law wife and even though she was not entitled to anything left by Tee
Hoon Lim Po Chuan, yet, out of the kindness and generosity on the part of the
defendants, particularly Antonio Lim Tanhu, who, was inspiring to be monk and in fact
he is now a monk, plaintiff was given a substantial amount evidenced by the
'quitclaim' (Annex 'A');

5. That the defendants have acquired properties out of their own personal fund and
certainly not from the funds belonging to the partnership, just as Tee Hoon Lim Po
Chuan had acquired properties out of his personal fund and which are now in the
possession of the widow and neither the defendants nor the partnership have anything
to do about said properties;

6. That it would have been impossible to buy properties from funds belonging to the
partnership without the other partners knowing about it considering that the amount
taken allegedly is quite big and with such big amount withdrawn the partnership would
have been insolvent;

7. That the plaintiff and Tee Hoon Lim Po Chuan were not blessed with children who
would have been lawfully entitled to succeed to the properties left by the latter together
with the widow and legitimate children;
8. That despite the fact that plaintiff knew that she was no longer entitled to anything
of the shares of the late Tee Hoon Lim Po Chuan, yet, this suit was filed against the
defendant who have to interpose the following

COUNTERCLAIM

A. That the defendants hereby reproduced, by way of reference, all the allegations and
foregoing averments as part of his counterclaim;

B. That plaintiff knew and was aware that she was merely the common-law wife of Tee
Hoon Lim Po Chuan and that the lawful and legal is still living, together with the
legitimate children, and yet she deliberately suppressed this fact, thus showing her bad
faith and is therefore liable for exemplary damages in an amount which the Honorable
Court may determine in the exercise of its sound judicial discretion. In the event that
plaintiff is married to Tee Hoon Lim Po Chuan, then, her marriage is bigamous and
should suffer the consequences thereof;

"C. That plaintiff was aware and had knowledge about the 'quitclaim', even though she
was not entitled to it, and yet she falsely claimed that defendants refused even to see her
and for filing this unfounded, baseless, futile and puerile complaint, defendants suffered
mental anguish and torture conservatively estimated to be not less than P3,000,000.00;

D. That in order to defend their rights in court, defendants were constrained to engage
the services of the undersigned counsel, obligating themselves to pay P500,000.00 as
attorney's fees;

E. That by way of litigation expenses during the time that this case will be before this
Honorable Court and until the same will be finally terminated and adjudicated,
defendants will have to spend at least P5,000.00," (Pp 44-47, Record.)

After unsuccessfully trying to show that this counterclaim is merely permissive and
should be dismissed for nonpayment of the corresponding filing fee, and after being
overruled by the court, in due time, plaintiff answered the same, denying its material
allegations.

On February 3, 1973, however, the date set for the pre-trial, both of the two defendants-
spouses, the Lim Tanhus, and Ng Suas, did not appear, for which reason, upon motion
of plaintiff dated February 16, 1973, in an order of March 12, 1973, they were all
"declared in DEFAULT as of February 3, 1973 when they failed to appear at the pre-
trial." They sought to have this order lifted thru a motion for reconsideration, but the
effort failed when the court denied it. Thereafter, the trial started, but at the stage
thereof where the first witness of the plaintiff by the name of Antonio Nu?ez, who
testified that he is her adopted son, was up for re-cross-examination, said plaintiff
unexpectedly filed on October 19, 1974 the following simple and unreasoned
"MOTION TO DROP DEFENDANTS LIM TECK CHUAN AND ENG CHONG
LEONARDO

"COMES now plaintiff, through her undersigned counsel, unto the Honorable Court
most respectfully moves to drop from the complaint the defendants Lim Teck Chuan
and Eng Chong Leonardo and to consider the case dismissed insofar as said defendants
Lim Teck Chuan and Eng Chong Leonardo are concerned.

WHEREFORE, it is most respectfully prayed of the Honorable Court to drop from the
complaint the defendants Lim Teck Chuan and Eng Chong Leonardo and to dismiss the
case against them without pronouncement as to costs." (Page 50, Record.)

which set for hearing on October 21, 1974. According to petitioners, none of the
defendants declared in default were notified of said motion, in violation of Section 9 of
Rule 13, since they had asked for the lifting of the order of default, albeit unsuccessfully,
and as regards the defendants not declared in default, the setting of the hearing of said
motion on October 21, 1974 infringed the three-day requirement of Section 4 of Rule
15, inasmuch as Atty. Adelino Sitoy of Lim Teck Chuan was served with a copy of the
motion personally only on October 19, 1974, while Atty. Benjamin Alcudia of Eng
Chong Leonardo was served by registered mail sent only on the same date.

Evidently without even verifying the notices of service, just as simply as plaintiff had
couched her motion, and also without any legal grounds stated, respondent court
granted the prayer of the above motion thus:

"O R D E R

Acting on the motion of the plaintiff praying for the dismissal of the complaint as
against defendants Lim Teck Chuan and Eng Chong Leonardo ?

The same is hereby GRANTED. The complaint as against defendant Lim Teck Chuan
and Eng Chong Leonardo is hereby ordered DISMISSED without pronouncement as to
costs."

Simultaneously, the following order was also issued:

"Considering that defendants Antonio Lim Tanhu and his spouse Dy Ochay as well as
defendants Alfonso Ng Sua and his spouse Co Oyo have been declared in default for
failure to appear during the pre-trial and as to the other defendants the complaint had
already been ordered dismissed as against them, ?
Let the hearing of the plaintiffs evidence ex-parte be set on November 20, 1974, at 8:30
A.M. before the Branch Clerk of Court who is deputized for the purpose, to swear in
witnesses and to submit her report within ten (10) days thereafter. Notify the plaintiff.

SO ORDERED.

Cebu City, Philippines, October 21, 1974." (Pages 52, Record.)

But, in connection with this last order, the scheduled ex-parte reception of evidence did
not take place on November 20, 1974, for on October 28,1974, upon verbal motion of
plaintiff, the court issued the following self-explanatory order:

"Acting favorably on the motion of the plaintiff dated October 18, 1974, the Court
deputized the Branch Clerk of Court to receive the evidence of the plaintiff ex-parte to
be made on November 20, 1974. However, on October 28, 1974, the plaintiff, together
with her witnesses, appeared in court and asked, thru counsel, that she be allowed to
present her evidence.

Considering the time and expenses incurred by the plaintiff in bringing her witnesses to
the court, the Branch Clerk of Court is hereby authorized to receive immediately the
evidence of the plaintiff ex-parte.

SO ORDERED.

Cebu City, Philippines, October 28, 1974." (Pages 53, Record.)

Upon learning of these orders, on October 23, 1973, the defendant Lim Teck Cheng,
thru counsel, Atty. Sitoy, filed a motion for reconsideration thereof, and on November 1,
1974, defendant Eng Chong Leonardo, thru counsel Atty. Alcudia, filed also his own
motion for reconsideration and clarification of the same orders. These motions were
denied in an order dated December 6, 1974 but received by the movants only on
December 23, 1974. Meanwhile, respondent court rendered the impugned decision on
December 20, 1974. It does not appear when the parties were served copies of this
decision.

Subsequently, on January 6, 1975, all the defendants, thru counsel, filed a motion to
quash the order of October 28, 1974. Without waiting however for the resolution,
thereof, on January 13, 1974, Lim Teck Chuan and Eng Chong Leonardo went to the
Court of Appeals with a petition for certiorari seeking the annulment of the above-
mentioned orders of October 21, 1974 and October 28, 1974 and decision of
December 20, 1974. By resolution of January 24, 1975, the Court of Appeals dismissed
said petition, holding that its filing was premature, considering that the motion to quash
the order of October 28, 1974 was still unresolved by the trial court. This holding was
reiterated in the subsequent resolution of February 5, 1975 denying the motion for
reconsideration of the previous dismissal.
On the other hand, on January 20, 1975, the other defendants, petitioners herein, filed
their notice of appeal, appeal bond and motion for extension to file their record on
appeal, which was granted the extension to expire after fifteen (15) days from January 26
and 27, 1975, for defendants Lim Tanhu and Ng Suas, respectively. But on February 7,
1975, before the perfection of their appeal, petitioners filed the present petition with this
Court. And with the evident intent to make their procedural position clear, counsel for
defendants, Atty. Manuel Zosa, filed with respondent court a manifestation dated
February 14, 1975, stating that "when the non-defaulted defendants Eng Chong
Leonardo and Lim Teck Chuan filed their petition in the Court of Appeals, they in
effect abandoned their motion to quash the order of October 28, 1974." and that
similarly "when Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua and Co Oyo,
filed their petition for certiorari and prohibition. . .in the Supreme Court, they likewise
abandoned their motion to quash." This manifestation was acted upon by respondent
court together with plaintiffs motion for execution pending appeal in its order of the
same date February 14, 1975 thiswise:

"O R D E R

When these incidents, the motion to quash the order of October 28, 1974 and the
motion for execution pending appeal were called for hearing today, counsel for the
defendants-movants submitted their manifestation inviting the attention of this Court
that by their filing for certiorari and prohibition with preliminary injunction in the Court
of Appeals which was dismissed and later the defaulted defendants filed with the
Supreme Court certiorari with prohibition they in effect abandoned their motion to
quash.

IN VIEW HEREOF, the motion to quash is ordered ABANDONED. The resolution


of the motion for execution pending appeal shall be resolved after the petition for
certiorari and prohibition shall have been resolved by the Supreme Court.

SO ORDERED.

Cebu City, Philippines, February 14, 1975." (Pages 216, Record.)

Upon these premises, it is the position of petitioners that respondent court acted
illegally, in violation of the rules or with grave abuse of discretion in acting on
respondent's motion to dismiss of October 18, 1974 without previously ascertaining
whether or not due notice thereof had been served on the adverse parties, as, in fact, no
such notice was timely served on the non-defaulted defendants Lim Teck Chuan and
Eng Chong Leonardo and no notice at all was ever sent to the other defendants, herein
petitioners, and more so, in actually ordering the dismissal of the case by its order of
October 21, 1974 and at the same time setting the case for further hearing as against the
defaulted defendants, herein petitioners, actually hearing the same ex-parte and
thereafter rendering the decision of December 20, 1974 granting respondent Tan even
reliefs not prayed for in the complaint. According to petitioners, to begin with, there
was a compulsory counterclaim in the common answer of the defendants the nature of
which is such that it cannot be decided in an independent action and as to which the
attention of respondent court was duly called in the motions for reconsideration.
Besides, and more importantly, under Section 4 of Rule 18, respondent court had no
authority to divide the case before it by dismissing the same as against the non-defaulted
defendants and thereafter proceeding to hear it ex-parte and subsequently rendering
judgment against the defaulted defendants considering that in their view, under the said
provision of the rules, when a common cause of action is alleged against several
defendants, the default of any of them is a mere formality by which those defaulted are
not allowed to take part in the proceedings, but otherwise, all the defendants, defaulted
and not defaulted, are supposed to have but a common fate, win or lose. In other
words, petitioners posit that in such a situation, there can only be one common
judgment for or against all the defendants, the non-defaulted and the defaulted. Thus,
petitioners contend that the order of dismissal of October 21, 1974 should be
considered also as the final judgment insofar as they are concerned, or, in the alternative,
it should be set aside together with all the proceedings and decision held and rendered
subsequent thereto, and that the trial be resumed as of said date, with the defendants
Lim Teck Chuan and Eng Chong Leonardo being allowed to defend the case for all the
defendants.

On the other hand, private respondent maintains the contrary view that inasmuch as
petitioners had been properly declared in default, they have no personality nor interest to
question the dismissal of the case as against their non-defaulted co-defendants and
should suffer the consequences of their own default. Respondent further contends, and
this is the only position discussed in the memorandum submitted by her counsel, that
since petitioners have already made or at least started to make their appeal, as they are in
fact entitled to appeal, this special civil action has no reason for being. Additionally, she
invokes the point of prematurity upheld by the Court of Appeals in regard to the above-
mentioned petition therein of the non-defaulted defendants Lim Teck Chuan and Eng
Leonardo. Finally, she argues that in any event, the errors attributed to respondent court
are errors of judgment and may be reviewed only in an appeal.

After careful scrutiny of all the above-related proceedings in the court below and mature
deliberation, the Court has arrived at the conclusion that petitioners should be granted
relief, if only to stress emphatically once more that the rules of procedure may not be
misused and abused as instruments for the denial of substantial justice. A review of the
record of this case immediately discloses that here is another demonstrative instance of
how some members of the bar, availing of their proficiency in invoking the letter of the
rules without regard to their real spirit and intent, succeed in inducing courts to act
contrary to the dictates of justice and equity, and, in some instances, to wittingly or
unwittingly abet unfair advantage by ironically camouflaging their actuations as earnest
efforts to satisfy the public clamor for speedy disposition of litigations, forgetting all the
while that the plain injunction of Section 2 of Rule 1 is that the "rules shall be liberally
construed in order to promote their object and to assist the parties in obtaining" not
only 'speedy' but more imperatively, "just . . . and inexpensive determination of every
action and proceeding." We cannot simply pass over the impression that the procedural
maneuvers and tactics revealed in the records of the case at bar were deliberately
planned with the calculated end in view of depriving petitioners and their co-defendants
below of every opportunity to properly defend themselves against a claim of more than
substantial character, considering the millions of pesos worth of properties involved as
found by respondent judge himself in the impugned decision, a claim that appears, in
the light of the allegations of the answer and the documents already brought to the
attention of the court at the pre-trial, to be rather dubious. What is most regrettable is
that apparently, all of these alarming circumstances have escaped respondent judge who
did not seem to have hesitated in acting favorably on the motions of the plaintiff
conducive to the deplorable objective just mentioned, and which motions, at the very
least, appeared to be of highly controversial merit, considering that their obvious
tendency and immediate result would be to convert the proceedings into a one?sided
affair, a situation that should be readily condemnable and intolerable to any court of
justice.

Indeed, a seeming disposition on the part of respondent to lean more on the


contentions of private respondent may be discerned from the manner it resolved the
attempts of defendants Dy Ochay and Antonio Lim Tanhu to have the earlier order of
default against them lifted. Notwithstanding that Dy Ochay's motion of October 8,
1971, co-signed by her with their counsel, Atty. Jovencio Enjambre, (Annex 2 of
respondent answer herein) was over the jurat of the notary public before whom she
took her oath, in the order of November 2, 1971, (Annex 3 id.) it was held that "the
oath appearing at the bottom of the motion is not the one contemplated by the above-
quoted pertinent provision (Sec. 3, Rule 18) of the rules. It is not even a verification.
(Sec. 6, Rule 7.) What the rule requires as interpreted by the Supreme Court is that the
motion must have to be accompanied by an affidavit of merits that the defendant has a
meritorious defense", thereby ignoring the very simple legal point that the ruling of the
Supreme Court in Ong Peng vs. Custodio, 1 SCRA 781, relied upon by His Honor,
under which a separate affidavit of merit is required refers obviously to instances where
the motion is not over the oath of the party concerned, considering that what the cited
provision literally requires is no more than a "motion under oath." Stated otherwise,
when a motion to lift an order of default contains the reasons for the failure to answer
as well as the facts constituting the prospective defense of the defendant and it is sworn
to by said defendant, neither a formal verification nor a separate affidavit of merit is
necessary.

What is worse, the same order further held that the motion to lift the order of default "is
an admission that there was a valid service of summons" and that said motion could not
amount to a challenge against the jurisdiction of the court over the person of the
defendant. Such a rationalization is patently specious and reveals an evident failure to
grasp the import of the legal concepts involved. A motion to lift an order of default on
the ground that service of summons has not been made in accordance with the rules is
in order and is in essence verily an attack against the jurisdiction of he court over the
person of the defendant, no less than if it were worded in a manner specifically
embodying such a direct challenge.

And then, in the order of February 14, 1972 (Annex 6, id.) lifting at last the order of
default as against defendant Lim Tanhu, His Honor posited that said defendant "has a
defense (quitclaim) which renders the claim of the plaintiff contentious." We have read
defendants' motion for reconsideration of November 25, 1971 (Annex 5, id.), but We
cannot find in it any reference to a "quitclaim". Rather, the allegation of a quitclaim is in
the amended complaint (Pars. 15-16, Annex B of the petition herein) in which plaintiff
maintains that her signature thereto was secured through fraud and deceit. In truth, the
motion for reconsideration just mentioned, Annex 5, merely reiterated the allegation in
Dy Ochay's earlier motion of October 8, 1971, Annex 2, to set aside the order of
default, that plaintiff Tan could be but the common law wife only of Tee Hoon, since
his legitimate wife was still alive, which allegation, His Honor held in the order of
November 2, 1971, Annex 3, to be "not good and meritorious defense". To top it all,
whereas, as already stated, the order of February 19, 1972, Annex 6, lifted the default
against Lim Tanhu because of the additional consideration that "he has a defense
(quitclaim) which renders the claim of the plaintiff contentious", the default of Dy
Ochay was maintained notwithstanding that exactly the same "contentious" defense as
that of her husband was invoked by her.

Such tenuous, if not altogether erroneous reasonings and manifest inconsistency in the
legal postures in the orders in question can hardly convince Us that the matters here in
issue were accorded due and proper consideration by respondent court. In fact, under
the circumstances herein obtaining, it seems appropriate to stress that, having in view
the rather substantial value of the subject matter involved together with the obviously
contentious character of plaintiff's claim, which is discernible even on the face of the
complaint itself, utmost care should have been taken to avoid the slightest suspicion of
improper motivations on the part of anyone concerned. Upon the considerations
hereunder to follow, the Court expresses its grave concern that much has to be done to
dispel the impression that herein petitioners and their co-defendants are being railroaded
out of their rights and properties without due process of law, on the strength of
procedural technicalities adroitly planned by counsel and seemingly unnoticed and
undetected by respondent court, whose orders, gauged by their tenor and the citations
of supposedly pertinent provisions and jurisprudence made therein, cannot be said to
have proceeded from utter lack of juridical knowledgeability and competence.

The first thing that has struck the Court upon reviewing the record is the seeming
alacrity with which the motion to dismiss the case against non-defaulted defendants Lim
Teck Chuan and Eng Chong Leonardo was disposed of, which definitely ought not to
have been the case. The trial was proceeding with the testimony of the first witness of
plaintiff and he was still under re-cross-examination. Undoubtedly, the motion to
dismiss at that stage and in the light of the declaration of default against the rest of the
defendants was a well calculated surprise move, obviously designed to secure utmost
advantage of the situation, regardless of its apparent unfairness. To say that it must
have been entirely unexpected by all the defendants, defaulted and non-defaulted, is
merely to rightly assume that the parties in a judicial proceeding can never be the victims
of any procedural waylaying, as long as lawyers and judges are imbued with the requisite
sense of equity and justice.

But the situation here was aggravated by the indisputable fact that the adverse parties
who were entitled to be notified of such unanticipated dismissal motion did not get due
notice thereof. Certainly, the non-defaulted defendants had the right to the three-day
prior notice required by Section 4 of Rule 15. How could they have had such
indispensable notice when the motion was set for hearing on Monday, October 21, 1974,
whereas the counsel for Lim Teck Chuan, Atty. Sitoy, was personally served with the
notice only on Saturday, October 19, 1974 and the counsel for Eng Chong Leonardo,
Atty. Alcudia, was notified by registered mail which was posted only that same Saturday,
October 19, 1974? According to Chief Justice Moran, "three days at least must
intervene between the date of service of notice and the date set for the hearing,
otherwise the court may not validly act on the motion." (Comments on the Rules of
Court by Moran, Vol. 1, 1970 ed. p. 474.) Such is the correct construction of Section 4
of Rule 15. And in the instant case, there can be no question that the notices to the
non-defaulted defendants were short of the requirement of said provision.

We can understand the over-anxiety of counsel for plaintiff, but what is


incomprehensible is the seeming inattention of respondent judge to the explicit mandate
of the pertinent rule, not to speak of the imperatives of fairness, considering he should
have realized the far-reaching implications, specially from the point of view he
subsequently adopted, albeit erroneously, of his favorably acting on it. Actually, he was
aware of said consequences, for simultaneously with his order of dismissal, he
immediately set the case for the ex-parte hearing of the evidence against the defaulted
defendants, which, incidentally, from the tenor of his order which We have quoted
above, appears to have been done by him motu proprio. As a matter of fact, plaintiff's
motion also quoted above did not pray for it.

Withal, respondent court's twin actions of October 21, 1974 further ignores or is
inconsistent with a number of known juridical principles concerning defaults, which We
will here take occasion to reiterate and further elucidate on, if only to avoid a repetition
of the unfortunate errors committed in this case. Perhaps some of these principles have
not been amply projected and elaborated before, and such pausity of elucidation could
be the reason why respondent judge must have acted as he did. Still, the Court cannot
but express its vehement condemnation of any judicial actuation that unduly deprives
any party of the right to be heard without clear and specific warrant under the terms of
existing rules or binding jurisprudence. Extreme care must be the instant reaction of
every judge when confronted with a situation involving risks that the proceedings may
not be fair and square to all the parties concerned. Indeed, a keen sense of fairness,
equity and justice that constantly looks for consistency between the letter of the
adjective rules and these basic principles must be possessed by every judge, if substance
is to prevail, as it must, over form in our courts. Literal observance of the rules, when it
is conducive to unfair and undue advantage on the part of any litigant before it, is
unworthy of any court of justice and equity. Withal, only those rules of procedure
informed with and founded on public policy deserve obedience in accord with their
unequivocal language of words.

Before proceeding to the discussion of the default aspects of this case, however, it
should not be amiss to advert first to the patent incorrectness, apparent on the face of
the record, of the aforementioned order of dismissal of October 21, 1974 of the case
below as regards non-defaulted defendants Lim and Leonardo. While it is true that said
defendants are not petitioners herein, the Court deems it necessary for a full view of the
outrageous procedural strategy conceived by respondent's counsel and sanctioned by
respondent court to also make reference to the very evident fact that in ordering said
dismissal respondent court disregarded completely the existence of defendant's
counterclaim which it had itself earlier held, if indirectly, to be compulsory in nature
when it refused to dismiss the same on the ground alleged by respondent Tan that the
docketing fees for the filing thereof had not been paid by defendants.

Indeed, that said counterclaim is compulsory needs no extended elaboration. As may be


noted in the allegations thereof aforequoted, it arose out of or is necessarily connected
with the occurrence that is the subject matter of the plaintiff's claim, (Section 4, Rule 9)
namely, plaintiff's allegedly being the widow of the deceased Tee Hoon entitled, as such,
to demand accounting of and to receive the share of her alleged late husband as partner
of defendants Antonio Lim Tanhu and Alfonso Leonardo Ng Sua in Glory Commercial
Company, the truth of which allegations all the defendants have denied. Defendants
maintain in their counterclaim that plaintiff knew of the falsity of said allegations even
before she filed her complaint, for she had in fact admitted her common-law
relationship with said deceased in a document she had jointly executed with him by way
of agreement to terminate their illegitimate relationship, for which she received P40,000
from the deceased, and with respect to her pretended share in the capital and profits in
the partnership, it is also defendants' posture that she had already quitclaimed, with the
assistance of able counsel, whatever rights if any she had thereto in November, 1967,
for the sum of P25,000 duly receipted by her, which quitclaim was, however, executed,
according to respondent herself in her amended complaint, through fraud. And having
filed her complaint knowing, according to defendants, as she ought to have known, that
the material allegations thereof are false and baseless, she has caused them to suffer
damages. Undoubtedly, with such allegations, defendants' counterclaim is compulsory,
not only because the same evidence to sustain it will also refute the cause or causes of
action alleged in plaintiff's complaint, (Moran, supra p. 352) but also because from its
very nature, it is obvious that the same cannot "remain pending for independent
adjudication by the court." (Section 2, Rule 17.)
The provision of the rules just cited specifically enjoins that "(i)f a counter-claim has
been pleaded by a defendant prior to the service upon him of the plaintiff's motion to
dismiss, the action shall not be dismissed against the defendant's objection unless the
counterclaim can remain pending for independent adjudication by the court."
Defendants Lim and Leonardo had no opportunity to object to the motion to dismiss
before the order granting the same was issued, for the simple reason that they were not
opportunely notified of the motion therefor, but the record shows clearly that at least
defendant Lim immediately brought the matter of their compulsory counterclaim to the
attention of the trial court in his motion for reconsideration of October 23, 1974, even
as the counsel for the other defendant, Leonardo, predicated his motion on other
grounds. In its order of December 6, 1974, however, respondent court not only upheld
the plaintiffs supposed absolute right to choose her adversaries but also held that the
counterclaim is not compulsory, thereby virtually making an unexplained and
inexplicable 180-degree turnabout in that respect.

There is another equally fundamental consideration why the motion to dismiss should
not have been granted. As the plaintiff's complaint has been framed, all the six
defendants are charged with having actually taken part in a conspiracy to misappropriate,
conceal and convert to their own benefit the profits, properties and all other assets of
the partnership Glory Commercial Company, to the extent that they have allegedly
organized a corporation, Glory Commercial Company, Inc. with what they had illegally
gotten from the partnership. Upon such allegations, no judgment finding the existence
of the alleged conspiracy or holding the capital of the corporation to be the money of
the partnership is legally possible without the presence of all the defendants. The non-
defaulted defendants are alleged to be stockholders of the corporation and any decision
depriving the same of all its assets cannot but prejudice the interests of said defendants.
Accordingly, upon these premises, and even prescinding from the other reasons to be
discussed anon, it is clear that all the six defendants below, defaulted and non-defaulted,
are indispensable parties. Respondents could do no less than grant that they are so on
page 23 of their answer. Such being the case, the questioned order of dismissal is
exactly the opposite of what ought to have been done. Whenever it appears to the court
in the course of a proceeding that an indispensable party has not been joined, it is the
duty of the court to stop the trial and to order the inclusion of such party. (The Revised
Rules of Court, Annotated & Commented by Senator Vicente J. Francisco; Vol. I, p. 271,
1973 ed.; See also Cortez vs. Avila, 101 Phil. 705.) Such an order is unavoidable, for the
"general rule with reference to the making of parties in a civil action requires the joinder
of all necessary parties wherever possible, and the joinder of all indispensable parties
under any and all conditions, the presence of those latter being a sine qua non of the
exercise of judicial power." (Borlasa vs. Polistico, 47 Phil. 345, at p. 347.) It is precisely
"when an indispensable party is not before the court (that) the action should be
dismissed." (People v. Rodriguez, 106 Phil. 325, at p. 327.) The absence of an
indispensable party renders all subsequent actuations of the court null and void, for
want of authority to act, not only as to the absent parties but even as to those present.
In short, what respondent court did here was exactly the reverse of what the law ordains
it eliminated those who by law should precisely be joined.
As may be noted from the order of respondent court quoted earlier, which resolved the
motions for reconsideration of the dismissal order filed by the non-defaulted
defendants, His Honor rationalized his position thus:

"It is the rule that it is the absolute prerogative of the plaintiff to choose, the theory
upon which he predicates his right of action, or the parties he desires to sue, without
dictation or imposition by the court or the adverse party. If he makes a mistake in the
choice of his right of action, or in that of the parties against whom he seeks to enforce
it, that is his own concern as he alone suffers therefrom. The plaintiff cannot be
compelled to choose his defendants. He may not, at his own expense, be forced to
implead anyone who, under the adverse party's theory, is to answer for defendants'
liability. Neither may the Court compel him to furnish the means by which defendant
may avoid or mitigate their liability. (Vano vs. Alo, 95 Phil, 495-496.)

This being the rule this court cannot compel the plaintiff to continue prosecuting her
cause of action against the defendants-movants if in the course of the trial she believes
she can enforce it against the remaining defendants subject only to the limitation
provided in Section 2, Rule 17 of the Rules of Court. x x x" (Pages 6263, Record.)

Noticeably, His Honor has employed the same equivocal terminology as in plaintiff's
motion of October 18, 1974 by referring to the action he had taken as being "dismissal
of the complaint against them or their being dropped therefrom", without perceiving
that the reason for the evidently intentional ambiguity is transparent. The apparent idea
is to rely on the theory that under Section 11 of Rule 3, parties may be dropped by the
court upon motion of any party at any stage of the action, hence "it is the absolute right
prerogative of the plaintiff to choose the parties he desires to sue, without dictation
or imposition by the court or the adverse party." In other words, the ambivalent pose is
suggested that plaintiff's motion of October 18, 1974 was not predicated on Section 2
of Rule 17 but more on Section 11 of Rule 3. But the truth is that nothing can be more
incorrect. To start with, the latter rule does not comprehend whimsical and irrational
dropping or adding of parties in a complaint. What it really contemplates is erroneous
or mistaken nonjoinder and misjoinder of parties. No one is free to join anybody in a
complaint in court only to drop him unceremoniously later at the pleasure of the
plaintiff. The rule presupposes that the original inclusion had been made in the honest
conviction that it was proper and the subsequent dropping is requested because it has
turned out that such inclusion was a mistake. And this is the reason why the rule ordains
that the dropping be "on such terms as are just" just to all the other parties. In the
case at bar, there is nothing in the record to legally justify the dropping of the non-
defaulted defendants, Lim and Leonardo. The motion of October 18, 1974 cites none.
From all appearances, plaintiff just decided to ask for it, without any relevant
explanation at all. Usually, the court in granting such a motion inquires for the reasons
and in the appropriate instances directs the granting of some form of compensation for
the trouble undergone by the defendant in answering the complaint, preparing for or
proceeding partially to trial, hiring counsel and making corresponding expenses in the
premises. Nothing of these, appears in the order in question. Most importantly, His
Honor ought to have considered that the outright dropping of the non-defaulted
defendants Lim and Leonardo, over their objection at that, would certainly be unjust not
only to the petitioners, their own parents, who would in consequence be entirely
defenseless, but also to Lim and Leonardo themselves who would naturally
correspondingly suffer from the eventual judgment against their parents. Respondent
court paid no heed at all to the mandate that such dropping must be "on such terms as
are just" meaning to all concerned with its legal and factual effects.

Thus, it is quite plain that respondent court erred in issuing its order of dismissal of
October 21, 1974 as well as its order of December 6, 1974 denying reconsideration of
such dismissal. As We make this ruling, We are not oblivious of the circumstance that
defendants Lim and Leonardo are not parties herein. But such consideration is
inconsequential. The fate of the case of petitioners is inseparably tied up with said
order of dismissal, if only because the order of ex-parte hearing of October 21, 1974
which directly affects and prejudices said petitioners is predicated thereon. Necessarily,
therefore, We have to pass on the legality of said order, if We are to decide the case of
herein petitioners properly and fairly.

The attitude of the non-defaulted defendants of no longer pursuing further their


questioning of the dismissal is from another point of view understandable. On the one
hand, why should they insist on being defendants when plaintiff herself has ready
released them from her claims? On the other hand, as far as their respective parents-co-
defendants are concerned, they must have realized that they (their parents) could even be
benefited by such dismissal because they could question whether or not plaintiff can still
prosecute her case against them after she had secured the order of dismissal in
question. And it is in connection with this last point that the true and correct concept
of default becomes relevant.

At this juncture, it may also be stated that the decision of the Court of Appeals of
January 24, 1975 in G.R. No. SP-03066 dismissing the petition for certiorari of non-
defaulted defendants Lim and Leonardo impugning the order of dismissal of October
21, 1974, has no bearing at all in this case, not only because that dismissal was premised
by the appellate court on its holding that the said petition was premature inasmuch as
the trial court had not yet resolved the motion of the defendants of October 28, 1974
praying that said disputed order be quashed, but principally because herein petitioners
were not parties in that proceeding and cannot, therefore, be bound by its result. In
particular, We deem it warranted to draw the attention of private respondent's counsel
to his allegations in paragraphs XI to XIV of his answer, which relate to said decision of
the Court of Appeals and which have the clear tendency to make it appear to the Court
that the appeals court had upheld the legality and validity of the actuations of the trial
court being questioned, when as a matter of indisputable fact, the dismissal of the
petition was based solely and exclusively on its being premature without in any manner
delving into its merits. The Court must and does admonish counsel and that such
manner of pleading, being deceptive and lacking in candor, has no place in any court,
much less in the Supreme Court, and if We are adopting a passive attitude in the
premises, it is due only to the fact, that this is counsel's first offense. But similar conduct
on his part in the future will definitely be dealt with more severely. Parties and counsel
would be well advised to avoid such attempts to befuddle the issues as invariably they
will be exposed for what they are, certainly unethical and degrading to the dignity of the
law profession. Moreover, almost always they only betray the inherent weakness of the
cause of the party resorting to them.

Coming now to the matter itself of default, it is quite apparent that the impugned orders
must have proceeded from inadequate apprehension of the fundamental precepts
governing such procedure under the Rules of Court. It is time indeed that the concept
of this procedural device were fully understood by the bench and bar, instead of being
merely taken for granted as being that of a simple expedient of not allowing the
offending party to take part in the proceedings, so that after his adversary shall have
presented his evidence, judgment may be rendered in favor of such opponent, with
hardly any chance of said judgment being reversed or modified.

The Rules of Court contain a separate rule on the subject of default, Rule 18. But said
rule is concerned solely with default resulting from failure of the defendant or
defendants to answer within the reglementary period. Referring to the simplest form of
default, that is where there is only one defendant in the action and he fails to answer on
time, Section 1 of the rule provides that upon "proof of such failure, (the court shall)
declare the defendant in default. Thereupon the court shall proceed to receive the
plaintiff's evidence and render judgment granting him such relief as the complaint and
the facts proven may warrant." This last clause is clarified by Section 5 which says that "a
judgment entered against a party in default shall no exceed the amount or be different in
kind from that prayed for."

Unequivocal, in the literal sense, as these provisions are, they do not readily convey the
full import of what they contemplate. To begin with, contrary to the immediate notion
that can be drawn from their language, these provisions are not to be understood as
meaning that default or the failure of the defendant to answer should be "interpreted as
an admission by the said defendant that the plaintiff's causes of action find support in
the law or the plaintiff is entitled to the relief prayed for." (Moran, supra, p. 535 citing
Macondray & Co. v. Eustaquio, 64. Phil. 466, citing with approval Chaffin v. McFadden,
41 Ark. 42; Johnson v. Pierce, 12 Ark. 599; Mayden v. Johnson, 59 Ga. 105; People v.
Rust, 292 III. 328; Ken v. Leopold, 21 I11. A. 163; Chicago, etc. Electric R. Co. v.
Krempel, 116 I11. A. 253.)

Being declared in default does not constitute a waiver of rights except that of being
heard and of presenting evidence in the trial court. According to Section 2, "except as
provided in Section 9 of Rule 13, a party declared in default shall not be entitled to
notice of subsequent proceedings, nor to take part in the trial." That provision referred
to reads: "No service of papers other than substantially amended pleadings and final
orders or judgments shall be necessary on a party in default unless he files a motion to
set aside the order of default, in which event he shall be entitled to notice of all further
proceedings regardless of whether the order of default is set aside or not." And
pursuant to Section 2 of Rule 41, "a party who has been declared in default may likewise
appeal from the judgment rendered against him as contrary to the evidence or to the law,
even if no petition for relief to set aside the order of default has been presented by him
in accordance with Rule 38."

In other words, a defaulted defendant is not actually thrown out of court. While in a
sense it may be said that by defaulting he leaves himself at the mercy of the court, the
rules see to it that any judgment against him must be in accordance with law. The
evidence to support the plaintiff's cause is, of course, presented in his absence, but the
court is not supposed to admit that which is basically incompetent. Although the
defendant would not be in a position to object, elementary justice requires that only legal
evidence should be considered against him. If the evidence presented should not be
sufficient to justify a judgment for the plaintiff, the complaint must be dismissed. And
if an unfavorable judgment should be justifiable, it cannot exceed in amount or be
different in kind from what is prayed for in the complaint.

Incidentally, these considerations argue against the present widespread practice of trial
judges, as was done by His Honor in this case, of delegating to their clerks of court the
reception of the plaintiff's evidence when the defendant is in default. Such a practice is
wrong in principle and orientation. It has no basis in any rule. When a defendant allows
himself to be declared in default, he relies on the faith that the court would take care
that his rights are not unduly prejudiced. He has a right to presume that the law and the
rules will still be observed. The proceedings are held in his forced absence, and it is but
fair that the plaintiff should not be allowed to take advantage of the situation to win by
foul or illegal means or with inherently incompetent evidence. Thus, in such instances,
there is need for more attention from the court, which only the judge himself can
provide. The clerk of court would not be in a position much less have the authority to
act in the premises in the manner demanded by the rules of fair play and as
contemplated in the law, considering his comparably limited area of discretion and his
presumably inferior preparation for the functions of a judge. Besides, the default of the
defendant is no excuse for the court to renounce the opportunity to closely observe the
demeanor and conduct of the witnesses of the plaintiff, the better to appreciate their
truthfulness and credibility. We therefore declare as a matter of judicial policy that there
being no imperative reason for judges to do otherwise, the practice should be
discontinued.

Another matter of practice worthy of mention at this point is that it is preferable to


leave enough opportunity open for possible lifting of the order of default before
proceeding with the reception of the plaintiff's evidence and the rendition of the
decision. "A judgment by default may amount to a positive and considerable injustice to
the defendant; and the possibility of such serious consequences necessitates a careful
and liberal examination of the grounds upon which the defendant may seek to set it
aside." (Moran, supra p. 534, citing Coombs vs. Santos, 24 Phil. 446; 449-450.) The
expression, therefore, in Section 1 of Rule 18 aforequoted which says that "thereupon
the court shall proceed to receive the plaintiff's evidence etc." is not to be taken literally.
The gain in time and dispatch should the court immediately try the case on the very day
of or shortly after the declaration of default is far outweighed by the inconvenience and
complications involved in having to undo everything already done in the event the
defendant should justify his omission to answer on time.

The foregoing observations, as may be noted, refer to instances where the only
defendant or all the defendants, there being several, are declared in default. There are
additional rules embodying more considerations of justice and equity in cases where
there are several defendants against whom a common cause of action is averred and not
all of them answer opportunely or are in default, particularly in reference to the power
of the court to render judgment in such situations. Thus, in addition to the limitation of
Section 5 that the judgment by default should not be more in amount nor different in
kind from the reliefs specifically sought by plaintiff in his complaint Section 4 restricts
the authority of the court in rendering judgment in the situations just mentioned as
follows:

"Sec. 4. Judgment when some defendants answer, and others make default. When a
complaint states a common cause of action against several defendants, some of whom
answer, and the others fail to do so, the court shall try the case against all upon the
answers thus filed and render judgment upon the evidence presented. The same
procedure applies when a common cause of action is pleaded in a counterclaim, cross-
claim and third-party claim."

Very aptly does Chief Justice Moran elucidate on this provision and the controlling
jurisprudence explanatory thereof this wise:

'"Where a complaint states a common cause of action against several defendants and
some appear to defend the case on the merits while others make default, the defense
interposed by those who appear to litigate the case inures to the benefit of those who
fail to appear; and if the court finds that a good defense has been made, all of the
defendants must be absolved. In other words, the answer filed by one or some of the
defendants inures to the benefit of all the others, even those who have not seasonably
filed their answer. (Bueno v. Ortiz, L-22978, June 27, 1968, 23 SCRA 1151.) The proper
mode of proceeding where a complaint states a common cause of action against several
defendants, and one of them makes default, is simply to enter a formal default order
against him, and proceed with the cause upon the answers of the others. The defaulting
defendant merely loses his standing in court, he not being entitled to the service of
notices in the cause, nor to appear in the suit in any way. He cannot adduce evidence;
nor can he be heard at the final hearing, (Lim Toco v. Go Fay, 80 Phil. 166.) although he
may appeal the judgment rendered against him on the merits. (Rule 41, sec. 2.) If the
case is finally decided in the plaintiff's favor, a final decree is then entered against all the
defendants; but if the suit should be decided against the plaintiff, the action will be
dismissed as to all the defendants alike. (Velez v. Ramas, 40 Phil. 787-792; Frow v. de Ia
Vega, 15 Wal. 552, 21 L. Ed 60.) In other words, the judgment will affect the defaulting
defendants either favorably or adversely. (Castro v. Pea, 80 Phil. 488.)

Defaulting defendant may ask execution if judgment i


s in his favor. (Castro v. Pea, supra.)" (Moran, Rules of Court, Vol. I, pp. 538-539.)

In Castro vs. Pea, 80 Phil. 488, one of the numerous cases cited by Moran, this Court
elaborated on the construction of the same rule when it sanctioned the execution, upon
motion and for the benefit of the defendant in default, of a judgment which was adverse
to the plaintiff. The Court held:

"As above stated, Emilia Matanguihan, by her counsel, also was a movant in the petition
for execution Annex 1. Did she gave a right to be such, having been declared in
default? In Frow vs. De Ia Vega, supra, cited as authority in Velez vs. Ramas, supra, the
Supreme Court of the United States adopted as ground for its own decision the
following ruling of the New York Court of Errors in Clason vs. Morris, 10 Johns., 524:

'It would be unreasonable to hold that because one defendant had made default, the
plaintiff should have a decree even against him, where the court is satisfied from the
proofs offered by the other, that in fact the plaintiff is not entitled to a decree.' (21 Law,
ed., 61.)

The reason is simple: justice has to be consistent. The complaint stating a common
cause of action against several defendants, the complainant's rights or lack of them
in the controversy have to be the same, and not different, as against all the
defendants, although one or some make default and the other or others appear, join
issue, and enter into trial. For instance, in the case of Clason vs. Morris above cited, the
New York Court of Errors in effect held that in such a case if the plaintiff is not
entitled to a decree, he will not be entitled to it, not only as against the defendant
appearing and resisting his action but also as against the one who made default. In the
case at bar, the cause of action in the plaintiffs' complaint was common against the
Mayor of Manila, Emilia Matanguihan, and the other defendants in Civil Case No. 1318
of the lower court. The Court of First Instance in its judgment found and held upon
the evidence adduced by the plaintiff and the defendant mayor that as between said
plaintiff and defendant Matanguihan the latter was the one legally entitled to occupy the
stalls; and it decreed, among other things, that said plaintiff immediately vacate them.
Paraphrasing the New York of Court of Errors, it would be unreasonable to hold now
that because Matanguihan had made default, the said plaintiff should be declared, as
against her, legally entitled to the occupancy of the stalls, or to remain therein, although
the Court of First Instance was so firmly satisfied, from the proofs offered by the other
defendant, that the same plaintiff was not entitled to such occupancy that it
peremptorily ordered her to vacate the stalls. If in the cases of Clason vs. Morris, supra,
- Frow vs. De la Vega, supra, and Velez vs. Rams, supra, the decrees entered inured to
the benefit of the defaulting defendants, there is no reason why that entered in said case
No. 1318 should not be held also to have inured to the benefit of the defaulting
defendant Matanguihan. Indeed, the doctrine in said three cases plainly implies that
there is nothing in the law governing default which would prohibit the court from
rendering judgment favorable to the defaulting defendant in such cases. If it inured to
her benefit, it stands to reason that she had a right to claim that benefit, for it would not
be a benefit if the supposed beneficiary were barred from claiming it; and if the benefit
necessitated the execution of the decree, she must be possessed of the right to ask for
the execution thereof as she did when she, by counsel, participated in the petition for
execution Annex 1.

Section 7 of Rule 35 would seem to afford a solid support to the above considerations.
It provides that when a complaint states a common cause of action against several
defendants, some of whom answer, and the others make default, 'the court shall try the
case against all upon the answer thus filed and render judgment upon the evidence
presented by the parties in court'. It is obvious that under this provision the case is tried
jointly not only against the defendants answering but also against those defaulting, and
the trial is held upon the answer filed by the former; and the judgment, if adverse, will
prejudice the defaulting defendants no less than those who answer. In other words, the
defaulting defendants are held bound by the answer filed by their codefendants and by
the judgment which the court may render against all of them. By the same token, and
by all rules of equity and fair play, if the judgment should happen to be favorable, totally
or partially, to the answering defendants, it must correspondingly benefit the defaulting
ones, for it would not be just to let the judgment produce effects as to the defaulting
defendants only when adverse to them and not when favorable."

In Bueno vs. Ortiz, 23 SCRA 1151, the Court applied the provision under discussion in
the following words:

"In answer to the charge that respondent Judge had committed a grave abuse of
discretion in rendering a default judgment against the PC, respondents allege that, not
having filed its answer within the reglementary period, the PC was in default, so that it
was proper for Patanao to forthwith present his evidence and for respondent Judge to
render said judgment. It should be noted, however, that in entering the area in question
and seeking to prevent Patanao from continuing his logging operations therein, the PC
was merely executing an order of the Director of Forestry and acting as his agent.
Patanao's cause of action against the other respondents in Case No. 190, namely, the
Director of Forestry, the District Forester of Agusan, the Forest Officer of Bayugan,
Agusan, and the Secretary of Agriculture and Natural Resources. Pursuant to Rule 18,
Section 4, of the Rules of Court, 'when a complaint states a common cause of action
against several defendants some of whom answer and the others fail to do so, the court
shall try the case against all upon the answer thus filed (by some) and render judgment
upon the evidence presented.' In other words, the answer filed by one or some of the
defendants inures to the benefit of all others, even those who have not seasonably filed
their answer.

"Indeed, since the petition in Case No. 190 sets forth a common cause of action against
all of the respondents therein, a decision in favor of one of them would necessarily
favor the others. In fact, the main issue, in said case, is whether Patanao has a timber
license to undertake logging operations in the disputed area. It is not possible to decide
such issue in the negative, insofar as the Director of Forestry, and to settle it otherwise,
as regards the PC, which is merely acting as agent of the Director of Forestry, and is,
therefore, his alter ego, with respect to the disputed forest area."

Stated differently, in all instances where a common cause of action is alleged against
several defendants, some of whom answer and the others do not, the latter or those in
default acquire a vested right not only to own the defense interposed in the answer of
their co-defendant or co-defendants not in default but also to expect a result of the
litigation totally common with them in kind and in amount whether favorable or
unfavorable. The substantive unity of the plaintiff's cause against all the defendants is
carried through to its adjective phase as ineluctably demanded by the homogeneity and
indivisibility of justice itself. Indeed, since the singleness of the cause of action also
inevitably implies that all the defendants are indispensable parties, the court's power to
act is integral and cannot be split such that it cannot relieve any of them and at the same
time render judgment against the rest. Considering the tenor of the section in question,
it is to be assumed that when any defendant allows himself to be declared in default
knowing that his co-defendant has already answered, he does so trusting in the assurance
implicit in the rule that his default is in essence a mere formality that deprives him of no
more than the right to take part in the trial and that the court would deem anything done
by or for the answering defendant as done by or for him. The presumption is that
otherwise he would not have seen to it that he would not be in default. Of course, he
has to suffer the consequences of whatever the answering defendant may do or fail to
do, regardless of possible adverse consequences, but if the complaint has to be
dismissed in so far as the answering defendant is concerned, it becomes his inalienable
right that the same be dismissed also as to him. It does not matter that the dismissal is
upon the evidence presented by the plaintiff or upon the latter's mere desistance, for in
both contingencies, the lack of sufficient legal basis must be the cause. The integrity of
the common cause of action against all the defendants and the indispensability of all of
them in the proceedings do not permit any possibility of waiver of the plaintiff's, right
only as to one or some of them, without including all of them, and so, as a rule,
withdrawal must be deemed to be a confession of weakness as to all. This is not only
elementary justice; it also precludes the concomitant hazard that plaintiff might resort to
the kind of procedural stratagem practiced by private respondent herein that resulted in
totally depriving petitioners of every opportunity to defend themselves against her
claims which, after all, as will be seen later in this opinion, the record does not show to
be invulnerable, both in their factual and legal aspects, taking into consideration the
tenor of the pleadings and the probative value of the competent evidence which were
before the trial court when it rendered its assailed decision. Where all the defendants are
indispensable parties, for which reason the absence of any of them in the case would
result in the court losing its competency to act validly, any compromise that the plaintiff
might wish to make with any of them must, as a matter of correct procedure, have to
await until after the rendition of the judgment, at which stage the plaintiff may then
treat the matter of its execution and the satisfaction of his claim as variably as he might
please. Accordingly, in the case now before Us together with the dismissal of the
complaint against the non-defaulted defendants, the court should have ordered also the
dismissal thereof as to petitioners.

Indeed, there is more reason to apply here the principle of unity and indivisibility of the
action just discussed because all the defendants here have already joined genuine issues
with plaintiff. Their default was only at the pre-trial. And as to such absence of
petitioners at the pre-trial, the same could be attributed to the fact that they might not
have considered it necessary anymore to be present, since their respective children Lim
and Leonardo, with whom they have common defenses, could take care of their
defenses as well. Anything that might have had to be done by them at such pre-trial
could have been done for them by their children, at least initially, specially because in the
light of the pleadings before the court, the prospects of a compromise must have
appeared to be rather remote. Such attitude of petitioners is neither uncommon nor
totally unjustified. Under the circumstances, to declare them immediately and
irrevocably in default was not an absolute necessity. Practical considerations and reasons
of equity should have moved respondent court to be more understanding in dealing
with the situation. After all, declaring them in default as respondent court did did not
impair their right to a common fate with their children.

Another issue to be resolved in this case is the question of whether or not herein
petitioners were entitled to notice of plaintiff's motion to drop their co-defendants Lim
and Leonardo, considering that petitioners had been previously declared in default. In
this connection, the decisive consideration is that according to the applicable rule,
Section 9, Rule 13, already quoted above, (1) even after a defendant has been declared in
default, provided he "files a motion to set aside the order of default, he shall be
entitled to notice of all further proceedings regardless of whether the order of default is
set aside or not" and (2) a party in default who has not filed such a motion to set aside
must still be served with all "substantially amended or supplemental pleadings." In the
instant case, it cannot be denied that petitioners had all filed their motion for
reconsideration of the order declaring them in default. Respondents' own answer to the
petition herein makes reference to the order of April 3, 1973, Annex 8 of said answer,
which denied said motion for reconsideration. On page 3 of petitioners' memorandum
herein this motion is referred to as "a motion to set aside the order of default." But as
We have not been favored by the parties with a copy of the said motion, We do not even
know the excuse given for petitioners' failure to appear at the pre-trial, and We cannot,
therefore, determine whether or not the motion complied with the requirements of
Section 3 of Rule 18 which We have held to be controlling in cases of default for failure
to answer on time. (The Philippine-British Co., Inc. etc. et al. vs. The Hon. Walfrido de
los Angeles etc. et al., 63 SCRA 50.)

We do not, however, have here, as earlier noted, a case of default for failure to answer
but one for failure to appear at the pre-trial. We reiterate in the situation now before Us,
issues have already been joined. In fact, evidence had been partially offered already at
the pre-trial and more of it at the actual trial which had already begun with the first
witness of the plaintiff undergoing re-cross-examination. With these facts in mind and
considering that issues had already been joined even as regards the defaulted defendants,
it would be requiring the obvious to pretend that there was still need for an oath or a
verification as to the merits of the defense of the defaulted defendants in their motion
to reconsider their default. Inasmuch as none of the parties had asked for a summary
judgment, there can be no question that the issues joined were genuine, and
consequently, the reason for requiring such oath or verification no longer holds. Besides,
it may also be reiterated that being the parents of the non-defaulted defendants,
petitioners must have assumed that their presence was superfluous, particularly because
the cause of action against them as well as their own defenses are common. Under
these circumstances, the form of the motion by which the default was sought to be
lifted is secondary and the requirements of Section 3 of Rule 18 need not be strictly
complied with, unlike in cases of default for failure to answer. We can thus hold as We
do hold for the purposes of the revival of their right to notice under Section 9 of Rule
13, that petitioners' motion for reconsideration was in substance legally adequate,
regardless of whether or not it was under oath.

In any event, the dropping of the defendants Lim and Leonardo from plaintiff's
amended complaint was virtually a second amendment of plaintiff's complaint. And
there can be no doubt that such amendment was substantial, for with the elimination
thereby of two defendants allegedly solidarily liable with their co-defendants, herein
petitioners, it had the effect of increasing proportionally what each of the remaining
defendants, the said petitioners, would have to answer for jointly and severally.
Accordingly, notice to petitioners of the plaintiff's motion of October 18, 1974 was
legally indispensable under the rule above-quoted. Consequently, respondent court had
no authority to act on the motion to dismiss, pursuant to Section 6 of Rule 15, for
according to Senator Francisco, "(t)he Rules of Court clearly provide that no motion
shall be acted upon by the Court without the proof of service of notice thereof,
together with a copy of the motion and other papers accompanying it, to all parties
concerned at least three days before the hearing thereof, stating the time and place for
the hearing of the motion. (Rule 26, sections 4, 5 and 6, Rules of Court (now Sec. 15,
new Rules). When the motion does not comply with this requirement, it is not a
motion. It presents no question which the court could decide. And the Court acquires
no jurisdiction to consider it. (Roman Catholic Bishop of Lipa vs. Municipality of
Unisan, 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.) (Laserna vs. Javier, et al., CA-G.R.
No. 7885, April 22, 1955; 21 L.J. 36, citing Roman Catholic Bishop of Lipa vs.
Municipality of Unisan, 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.) (Francisco, The
Revised Rules of Court in the Philippines, pp. 861-862.) Thus, We see again, from a
different angle, why respondent court's order of dismissal of October 21, 1974 is fatally
ineffective.

The foregoing considerations notwithstanding, it is respondents' position that certiorari


is not the proper remedy of petitioners. It is contended that inasmuch as said
petitioners have in fact made their appeal already by filing the required notice of appeal
and appeal bond and a motion for extension to file their record on appeal, which motion
was granted by respondent court, their only recourse is to prosecute that appeal.
Additionally, it is also maintained that since petitioners have expressly withdrawn their
motion to quash of January 4, 1975 impugning the order of October 28, 1974, they have
lost their right to assail by certiorari the actuations of respondent court now being
questioned, respondent court not having been given the opportunity to correct any
possible error it might have committed.

We do not agree. As already shown in the foregoing discussion, the proceedings in the
court below have gone so far out of hand that prompt action is needed to restore order
in the entangled situation created by the series of plainly illegal orders it had issued. The
essential purpose of certiorari is to keep the proceedings in lower judicial courts and
tribunals within legal bounds, so that due process and the rule of law may prevail at all
times and arbitrariness, whimsicality and unfairness which justice abhors may
immediately be stamped out before graver injury, juridical and otherwise, ensues. While
generally these objectives may well be attained in an ordinary appeal, it is undoubtedly
the better rule to allow the special remedy of certiorari at the option of the party
adversely affected, when the irregularity committed by the trial court is so grave and so
far reaching in its consequences that the long and cumbersome procedure of appeal will
only further aggravate the situation of the aggrieved party because other untoward
actuations are likely to materialize as natural consequences of those already perpetrated.
If the law were otherwise, certiorari would have no reason at all for being.

No elaborate discussion is needed to show the urgent need for corrective measures in
the case at bar. Verily, this is one case that calls for the exercise of the Supreme Court's
inherent power of supervision over all kinds of judicial actions of lower courts. Private
respondent's procedural technique designed to disable petitioners to defend themselves
against her claim which appears on the face of the record itself to be at least highly
controversial seems to have so fascinated respondent court that none would be surprised
should her pending motion for immediate execution of the impugned judgment receive
similar ready sanction as her previous motions which turned the proceedings into a one-
sided affair. The stakes here are high. Not only is the subject matter considerably
substantial; there is the more important aspect that not only the spirit and intent of the
rules but even the basic rudiments of fair play have been disregarded. For the Court to
leave unrestrained the obvious tendency of the proceedings below would be nothing
short of wittingly condoning inequity and injustice resulting from erroneous
construction and unwarranted application of procedural rules.

The sum and total of all the foregoing disquisitions is that the decision here in question
is legally anomalous. It is predicated on two fatal malactuations of respondent court,
namely (1) the dismissal of the complaint against the non-defaulted defendants Lim and
Leonardo and (2) the ex-parte reception of the evidence of the plaintiff by the clerk of
court, the subsequent using of the same as basis for its judgment and the rendition of
such judgment.

For at least three reasons which We have already fully discussed above, the order of
dismissal of October 21, 1974 is unworthy of Our sanction: (1) there was no timely
notice of the motion therefore to the non-defaulted defendants, aside from there being
no notice at all to herein petitioners; (2) the common answer of the defendants,
including the non-defaulted, contained a compulsory counterclaim incapable of being
determined in an independent action; and (3) the immediate effect of such dismissal was
the removal of the two non-defaulted defendants as parties, and inasmuch as they are
both indispensable parties in the case, the court consequently lost the "sine qua non of
the exercise of judicial power", per Borlasa vs. Polistico, supra. This is not to mention
anymore the irregular delegation to the clerk of court of the function of receiving
plaintiff's evidence. And as regards the ex-parte reception of plaintiff's evidence and
subsequent rendition of the judgment by default based thereon, We have seen that it was
violative of the right of the petitioners, under the applicable rules and principles on
default, to a common and single fate with their non-defaulted co-defendants. And We
are not yet referring, as We shall do this anon, to the numerous reversible errors in the
decision itself.

It is to be noted, however, that the above-indicated two fundamentals flaws in


respondent court's actuations do not call for a common corrective remedy. We cannot
simply rule that all the impugned proceedings are null and void and should be set aside,
without being faced with the insurmountable obstacle that by so doing We would be
reviewing the case as against the two non-defaulted defendants who are not before Us to
hold that the order of dismissal should be allowed to stand, as contended by
respondents themselves who insist that the same is already final, not only because the
period for its finality has long passed but also because allegedly, albeit not very
accurately, said non-defaulted defendants unsuccessfully tried to have it set aside by the
Court of Appeals whose decision on their petition is also already final, We would have
to disregard whatever evidence had been presented by the plaintiff against them and, of
course, the findings of respondent court based thereon which, as the assailed decision
shows, are adverse to them. In other words, whichever of the two apparent remedies
the Court chooses, it would necessarily entail some kind of possible juridical
imperfection. Speaking of their respective practical or pragmatic effects, to annul the
dismissal would inevitably prejudice the rights of the non-defaulted defendants whom
We have not heard and who even respondents would not wish to have anything anymore
to do with the case. On the other hand, to include petitioners in the dismissal would
naturally set at naught every effort private respondent has made to establish or prove her
case thru means sanctioned by respondent court. In short, We are confronted with a
legal para-dilemma. But one thing is certain this difficult situation has been brought
about by none other than private respondent who has quite cynically resorted to
procedural maneuvers without realizing that the technicalities of the adjective law, even
when apparently accurate from the literal point of view, cannot prevail over the
imperatives of the substantive law and of equity that always underlie them and which
have to be inevitably considered in the construction of the pertinent procedural rules.

All things considered, after careful and mature deliberation, the Court has arrived at the
conclusion that as between the two possible alternatives just stated, it would only be fair,
equitable and proper to uphold the position of petitioners. In other words, We rule that
the order of dismissal of October 21, 1974 is in law a dismissal of the whole case of the
plaintiff, including as to petitioners herein. Consequently, all proceedings held by
respondent court subsequent thereto including and principally its decision of December
20, 1974 are illegal and should be set aside.

This conclusion is fully justified by the following considerations of equity:

1. It is very clear to Us that the procedural maneuver resorted to by private respondent


in securing the decision in her favor was ill-conceived. It was characterized by that
which every principle of law and equity disdains taking unfair advantage of the rules
of procedure in order to unduly deprive the other party of full opportunity to defend
his cause. The idea of "dropping" the non-defaulted defendants with the end in view of
completely incapacitating their co-defendants from making any defense, without
considering that all of them are indispensable parties to a common cause of action to
which they have countered with a common defense readily connotes an intent to secure
a one-sided decision, even improperly. And when, in this connection, the obvious
weakness of plaintiff's evidence is taken into account one easily understands why such
tactics had to be availed of. We cannot directly or indirectly give Our assent to the
commission of unfairness and inequity in the application of the rules of procedure,
particularly when the propriety of reliance thereon is not beyond controversy.

2. The theories of remedial law pursued by private respondents, although approved by


His Honor, run counter to such basic principles in the rules on default and such
elementary rules on dismissal of actions and notice of motions that no trial court should
be unaware of or should be mistaken in applying. We are at a loss as to why His Honor
failed to see through counsel's inequitous strategy, when the provisions (1) on the three-
day rule on notice of motions, Section 4 of Rule 15, (2) against dismissal of actions on
motion of plaintiff when there is a compulsory "counter-claim, Section 2, Rule 17, (3)
against permitting the absence of indispensable parties, Section 7, Rule 3, (4) on service
of papers upon defendants in default when there are substantial amendments to
pleadings, Section 9, Rule 13, and (5) on the unity and integrity of the fate of defendants
in default with those not in default where the cause of action against them and their own
defenses are common, Section 4, Rule 18, are so plain and the jurisprudence declaratory
of their intent and proper construction are so readily comprehensible that any error as
to their application would be unusual in any competent trial court.

3. After all, all the malactuations of respondent court are traceable to the initiative of
private respondent and/or her counsel. She cannot, therefore, complain that she is
being made to unjustifiably suffer the consequences of what We have found to be
erroneous orders of respondent court. It is only fair that she should not be allowed to
benefit from her own frustrated objective of securing a one-sided decision.

4. More importantly, We do not hesitate to hold that on the basis of its own recitals, the
decision in question cannot stand close scrutiny. What is more, the very considerations
contained therein reveal convincingly the inherent weakness of the cause of the
plaintiff. To be sure, We have been giving serious thought to the idea of merely
returning this case for a resumption of trial by setting aside the order of dismissal of
October 21, 1974, with all its attendant difficulties on account of its adverse effects on
parties who have not been heard, but upon closer study of the pleadings and the
decision and other circumstances extant in the record before Us, We are now persuaded
that such a course of action would only lead to more legal complications incident to
attempts on the part of the parties concerned to desperately squeeze themselves out of
a bad situation. Anyway, We feel confident that by and large, there is enough basis here
and now for Us to rule out the claim of the plaintiff.

Even a mere superficial reading of the decision would immediately reveal that it is
littered on its face with deficiencies and imperfections which would have had no reason
for being were there less haste and more circumspection in rendering the same.
Recklessness in jumping to unwarranted conclusions, both factual and legal, is at once
evident in its findings relative precisely to the main bases themselves of the reliefs
granted. It is apparent therein that no effort has been made to avoid glaring
inconsistencies. Where references are made to codal provisions and jurisprudence,
inaccuracy and inapplicability are at once manifest. It hardly commends itself as a
deliberate and consciencious adjudication of a litigation which, considering the
substantial value of the subject matter it involves and the unprecedented procedure that
was followed by respondent's counsel, calls for greater attention and skill than the
general run of cases would.

Inter alia, the following features of the decision make it highly improbable that if We
took another course of action, private respondent would still be able to make out any
case against petitioners, not to speak of their co-defendants who have already been
exonerated by respondent herself thru her motion to dismiss:

1. According to His Honor's own statement of plaintiff's case, "she is the widow of the
late Tee Hoon Po Chuan (Po Chuan, for short) who was then one of the partners in the
commercial partnership, Glory Commercial Co. . . . with defendants Antonio Lim Tanhu
(Lim Tanhu, for short) and Alfonso Leonardo Ng Sua (Ng Sua, for short) as co-
partners; that after the death of her husband on March 11,1966 she is entitled to share
not only in the capital and profits of the partnership but also in the other assets, both
real and personal, acquired by the partnership with funds of the latter during its
lifetime."

Relatedly, in the latter part of the decision, the findings are to the following effect:

"That the herein plaintiff Tan Put and her late husband Po Chuan were married at the
Philippine Independent Church of Cebu City on December 20, 1949; that Po Chuan
died on March 11, 1966; that the plaintiff and the late Po Chuan were childless but the
former has a foster son Antonio Nu?ez whom she has reared since his birth with whom
she lives up to the present; that prior to the marriage of the plaintiff to Po Chuan the
latter was already managing the partnership Glory Commercial Co. then engaged in a
little business in hardware at Manalili St., Cebu City; that prior to and just after the
marriage of the plaintiff to Po Chuan she was engaged in the drugstore business; that
not long after her marriage, upon the suggestion of Po Chuan, the plaintiff sold her
drugstore for P125,000.00 which amount she gave to her husband in the presence of
defendant Lim Tanhu and was invested in the partnership Glory Commercial Co.
sometime in 1950; that after the investment of the above-stated amount in the
partnership its business flourished and it embarked in the import business and also
engaged in the wholesale and retail trade of cement and GI sheets and under huge
profits;

"x x x x x x x x x

"That the late Po Chuan was the one who actively managed the business of the
partnership Glory Commercial Co.; he was the one who made the final decisions and
approved the appointments of new personnel who were taken in by the partnership; that
the late Po Chuan and defendants Lim Tanhu and Ng Sua are brothers, the latter two (2)
being the elder brothers of the former; that defendants Lim Tanhu and Ng Sua are both
naturalized Filipino citizens whereas the late Po Chuan until the time of his death was a
Chinese citizen; that the three (3) brothers were partners in the Glory Commercial Co.
but Po Chuan was practically the owner of the partnership having the controlling
interest; that defendants Lim Tanhu and Ng Sua were partners in name but they were
mere employees of Po Chuan; x x x" (Pp. 89-91, Record.)

How did His Honor arrive at these conclusions? To start with, it is not clear in the
decision whether or not in making its findings of fact the court took into account the
allegations in the pleadings of the parties and whatever might have transpired at the pre-
trial. All that We can gather in this respect is that references are made therein to pre-trial
exhibits and to Annex A of the answer of the defendants to plaintiff's amended
complaint. Indeed, it was incumbent upon the court to consider not only the evidence
formally offered at the trial but also the admissions, expressed or implied, in the
pleadings, as well as whatever might have been placed before it or brought to its
attention during the pre-trial. In this connection, it is to be regretted that none of the
parties has thought it proper to give Us an idea of what took place at the pretrial of the
present case and what are contained in the pre-trial order, if any was issued pursuant to
Section 4 of Rule 20.

The fundamental purpose of pre-trial, aside from affording the parties every
opportunity to compromise or settled their differences, is for the court to be apprised of
the unsettled issues between the parties and of their respective evidence relative thereto,
to the end that it may take corresponding measures that would abbreviate the trial as
much as possible and the judge may be able to ascertain the facts with the least
observance of technical rules. In other words, whatever is said or done by the parties or
their counsel at the pre-trial serves to put the judge on notice of their respective basic
positions, in order that in appropriate cases he may, if necessary in the interest of justice
and a more accurate determination of the facts, make inquiries about or require
clarifications of matters taken up at the pre-trial, before finally resolving any issue of
fact or of law. In brief, the pre-trial constitutes part and parcel of the proceedings, and
hence, matters dealt with therein may not be disregarded in the process of decision
making. Otherwise, the real essence of compulsory pre-trial would be insignificant and
worthless.

Now, applying these postulates to the findings of respondent court just quoted, it will be
observed that the court's conclusion about the supposed marriage of plaintiff to the
deceased Tee Hoon Lim Po Chuan is contrary to the weight of the evidence brought
before it during the trial and the pre-trial.

Under Article 55 of the Civil Code, the declaration of the contracting parties that they
take each other as husband and wife "shall be set forth in an instrument" signed by the
parties as well as by their witnesses and the person solemnizing the marriage.
Accordingly, the primary evidence of a marriage must be an authentic copy of the
marriage contract. While a marriage may also be proved by other competent evidence,
the absence of the contract must first be satisfactorily explained. Surely, the certification
of the person who allegedly solemnized a marriage is not admissible evidence of such
marriage unless proof of loss of the contract or of any other satisfactory reason for its
non-production is first presented to the court. In the case at bar, the purported
certification issued by a Mons. Jose M. Recoleto, Bishop, Philippine Independent
Church, Cebu City, is not, therefore, competent evidence, there being absolutely no
showing as to unavailability of the marriage contract and, indeed, as to the authenticity
of the signature of said certifier, the jurat allegedly signed by a second assistant
provincial fiscal not being authorized by law, since it is not part of the functions of his
office. Besides, inasmuch as the bishop did not testify, the same is hearsay.

As regards the testimony of plaintiff herself on the same point and that of her witness
Antonio Nuez, there can be no question that they are both self-serving and of very
little evidentiary value, it having been disclosed at the trial that plaintiff has already
assigned all her rights in this case to said Nuez, thereby making him the real party in
interest here and, therefore, naturally as biased as herself. Besides, in the portion of the
testimony of Nuez copied in Annex C of petitioner's memorandum, it appears
admitted that he was born only on March 25, 1942, which means that he was less than
eight years old at the supposed time of the alleged marriage. If for this reason alone, it
is extremely doubtful if he could have been sufficiently aware of such event as to be
competent to testify about it.

Incidentally, another Annex C of the same memorandum purports to be the certificate


of birth of one Antonio T. Uy supposed to have been born on March 23, 1937 at
Centro Misamis, Misamis Occidental, the son of one Uy Bien, father, and Tan Put,
mother. Significantly, respondents have not made any adverse comment on this
document. It is more likely, therefore, that the witness is really the son of plaintiff by
her husband Uy Kim Beng. But she testified she was childless. So which is which? In
any event, if on the strength of this document, Nu?ez is actually the legitimate son of
Tan Put and not her adopted son, he would have been but 13 years old in 1949, the year
of her alleged marriage to Po Chuan, and even then, considering such age, his testimony
in regard thereto would still be suspect.

Now, as against such flimsy evidence of plaintiff, the court had before it, two documents
of great weight belying the pretended marriage. We refer to (1) Exhibit LL, the income
tax return of the deceased Tee Hoon Lim Po Chuan indicating the name of his wife was
Ang Siok Tin and (2) the quitclaim, Annex A of the answer, wherein plaintiff Tan Put
stated that she had been living with the deceased without benefit of marriage and that
she was his "common-law wife." Surely, these two documents are far more reliable than
all the evidence of the plaintiff put together.

Of course, Exhibit LL is what might be termed as pre-trial evidence. But it is evidence


offered to the judge himself, not to the clerk of court, and should have at least moved
him to ask plaintiff to explain if not rebut it before jumping to the conclusion regarding
her alleged marriage to the deceased, Po Chuan. And in regard to the quitclaim
containing the admission of a common-law relationship only, it is to be observed that
His Honor found that "defendants Lim Tanhu and Ng Sua had the plaintiff execute a
quitclaim on November 29, 1967 (Annex "A", Answer) where they gave plaintiff the
amount of P25,000 as her share in the capital and profits of the business of Glory
Commercial Co. which was engaged in the hardware business", without making mention
of any evidence of fraud and misrepresentation in its execution, thereby indicating
either that no evidence to prove that allegation of the plaintiff had been presented by
her or that whatever evidence was actually offered did not produce persuasion upon the
court. Stated differently, since the existence of the quitclaim has been duly established
without any circumstance to detract from its legal import, the court should have held
that plaintiff was bound by her admission therein that she was the common-law-wife
only of Po Chuan and what is more, that she had already renounced for valuable
consideration whatever claim she might have relative to the partnership Glory
Commercial Co.

And when it is borne in mind that in addition to all these considerations, there are
mentioned and discussed in the memorandum of petitioners (1) the certification of the
Local Civil Registrar of Cebu City and (2) a similar certification of the Apostolic Prefect
of the Philippine Independent Church, Parish of Sto. Nino, Cebu City, that their
respective official records corresponding to December 1949 to December 1950 do not
show any marriage between Tee Hoon Lim Po Chuan and Tan Put, neither of which
certifications have been impugned by respondent until now, it stands to reason that
plaintiff's claim of marriage is really unfounded. Withal, there is still another document,
also mentioned and discussed in the same memorandum and impugned by respondents,
a written agreement executed in Chinese, but purportedly translated into English by the
Chinese Consul of Cebu, between Tan Put and Tee Hoon Lim Po Chuan to the
following effect:

"CONSULATE OF THE REPUBLIC OF CHINA


Cebu City, Philippines

TRANSLATION

This is to certify that I, Miss Tan Ki Eng Alias Tan Put, have lived with Mr. Lim Po
Chuan alias Tee Hoon since 1949 but it recently occurs that we are incompatible with
each other and are not in the position to keep living together permanently. With the
mutual concurrence, we decided to terminate the existing relationship of common law-
marriage and promised not to interfere each other's affairs from now on. The Forty
Thousand Pesos (P40,000.00) has been given to me by Mr. Lim Po Chuan for my
subsistence.

Witnesses:

Mr. Lim Beng Guan

Mr. Huang Sing Se

Signed on the 10 day of the 7th month of the 54th year of the Republic of China
(corresponding to the year 1965).

(SGD) TAN KI ENG

Verified from the records.

JORGE TABAR"
(Pp. 283-284, Record.)

Indeed, not only does this document prove that plaintiff's relation to the deceased was
that of a common-law wife but that they had settled their property interest with the
payment to her of P40,000.

In the light of all these circumstances, We find no alternative but to hold that plaintiff
Tan Put's allegation that she is the widow of Tee Hoon Lim Po Chuan has not been
satisfactorily established and that, on the contrary, the evidence on record convincingly
shows that her relation with said deceased was that of a common-law wife and
furthermore, that all her claims against the company and its surviving partners as well as
those against the estate of the deceased have already been settled and paid. We take
judicial notice of the fact that the respective counsel who assisted the parties in the
quitclaim, Attys. H. Hermosisima and Natalio Castillo, are members in good standing of
the Philippine Bar, with the particularity that the latter has been a member of the
Cabinet and of the House of Representatives of the Philippines, hence, absent any
credible proof that they had allowed themselves to be parties to a fraudulent document
His Honor did right in recognizing its existence, albeit erring in not giving due legal
significance to its contents.

2. If, as We have seen, plaintiff's evidence of her alleged status as legitimate wife of Po
Chuan is not only unconvincing but has been actually overcome by the more competent
and weighty evidence in favor of the defendants, her attempt to substantiate her main
cause of action that defendants Lim Tanhu and Ng Sua have defrauded the partnership
Glory Commercial Co. and converted its properties to themselves is even more dismal.
From the very evidence summarized by His Honor in the decision in question, it is clear
that not an iota of reliable proof exists of such alleged misdeeds.

Of course, the existence of the partnership has not been denied, it is actually admitted
impliedly in defendants' affirmative defense that Po Chuan's share had already been duly
settled with and paid to both the plaintiff and his legitimate family. But the evidence as
to the actual participation of the defendants Lim Tanhu and Ng Sua in the operation of
the business that could have enabled to make the extractions of funds alleged by
plaintiff is at best confusing and at certain points manifestly inconsistent.

In her amended complaint, plaintiff repeatedly alleged that as widow of Po Chuan she is
entitled to 1/3 share of the assets and properties of the partnership. In fact, her prayer
in said complaint is, among others, for the delivery to her of such 1/3 share. His
Honor's statement of the case as well as his findings and judgment are all to that same
effect. But what did she actually try to prove at the ex-parte hearing?

According to the decision, plaintiff had shown that she had money of her own when
she "married" Po Chuan and "that prior to and just after the marriage of plaintiff to Po
Chuan, she was engaged in the drugstore business; that not long after her marriage,
upon the suggestion of Po Chuan the plaintiff sold her drugstore for P125,000 which
amount she gave to her husband in the presence of Tanhu and was invested in the
partnership Glory Commercial Co. sometime in 1950; that after the investment of the
above-stated amount in the partnership, its business flourished and it embarked in the
import business and also engaged in the wholesale and retail trade of cement and GI
sheets and under (sic) huge profits." (pp. 25-26, Annex L, petition.)

To begin with, this theory of her having contributed P125,000 to the capital of the
partnership by reason of which the business flourished and amassed all the millions
referred to in the decision has not been alleged in the complaint, and inasmuch as what
was being rendered was a judgment by default, such theory should not have been
allowed to be the subject of any evidence. But inasmuch as it was the clerk of court
who received the evidence, it is understandable that he failed to observe the rule. Then,
on the other hand, if it was her capital that made the partnership flourish, why would
she claim to be entitled to only to 1/3 of its assets and profits? Under her theory found
proven by respondent court, she was actually the owner of everything, particularly
because His Honor also found "that defendants Lim Tanhu and Ng Sua were partners in
the name but they were employees of Po Chuan; that defendants Lim Tanhu and Ng
Sua had no means of livelihood at the time of their employment with the Glory
Commercial Co. under the management of the late Po Chuan except their salaries
therefrom; . . ." (p. 27, id.) Why then does she claim only 1/3 share? Is this an indication
of her generosity towards defendants or of a concocted cause of action existing only in
her confused imagination engendered by the death of her common-law husband with
whom she had settled her common-law claim for recompense of her services as
common-law wife for less than what she must have known would go to his legitimate
wife and children?

Actually, as may be noted from the decision itself, the trial court was confused as to the
participation of defendants Lim Tanhu and Ng Sua in Glory Commercial Co. At one
point, they were deemed partners, at another point mere employees and then elsewhere
as partners-employees, a newly found concept, to be sure, in the law on partnership.
And the confusion is worse confounded in the judgment which allows these "partners in
name" and "partners-employees" or employees who had no means of livelihood and
who must not have contributed any capital in the business, "as Po Chuan was practically
the owner of the partnership having the controlling interest", 1/3 each of the huge
assets and profits of the partnership. Incidentally, it may be observed at this juncture
that the decision has made Po Chuan play the inconsistent role of being "practically the
owner" but at the same time getting his capital from the P125,000 given to him by
plaintiff and from which capital the business allegedly "flourished."

Anent the allegation of plaintiff that the properties shown by her exhibits to be in the
names of defendants Lim Tanhu and Ng Sua were bought by them with partnership
funds, His Honor confirmed the same by finding and holding that "it is likewise clear
that real properties together with the improvements in the names of defendants Lim
Tanhu and Ng Sua were acquired with partnership funds as these defendants were only
partners-employees of deceased Po Chuan in the Glory Commercial Co. until the time
of his death on March 11, 1966." (p. 30, id.) It is Our considered view, however, that this
conclusion of His Honor is based on nothing but pure unwarranted conjecture.
Nowhere is it shown in the decision how said defendants could have extracted money
from the partnership in the fraudulent and illegal manner pretended by plaintiff. Neither
in the testimony of Nu?ez nor in that of plaintiff, as these are summarized in the
decision, can there be found any single act of extraction of partnership funds
committed by any of said defendants. That the partnership might have grown into a
multimillion enterprise and that the properties described in the exhibits enumerated in
the decision are not in the names of Po Chuan, who was Chinese, but of the defendants
who are Filipinos, do not necessarily prove that Po Chuan had not gotten his share of
the profits of the business or that the properties in the names of the defendants were
bought with money of the partnership. In this connection, it is decisively important to
consider that on the basis of the concordant and mutually cumulative testimonies of
plaintiff and Nuez, respondent court found very explicitly that, and We reiterate:

x x x x x x x x x

"That the late Po Chuan was the one who actively managed the business of the
partnership Glory Commercial Co.; he was the one who made the final decisions and
approved the appointments of new personnel who were taken in by the partnership; that
the late Po Chuan and defendants Lim Tanhu and Ng Sua are brothers, the latter two (2)
being the elder brothers of the former; that defendants Lim Tanhu and Ng Sua are both
naturalized Filipino citizens whereas the late Po Chuan until the time of his death was a
Chinese citizen; that the three (3) brothers were partners in the Glory Commercial Co.
but Po Chuan was practically the owner of the partnership having the controlling
interest; that defendants Lim Tanhu and Ng Sua were partners in name but they were
mere employees of Po Chuan; x x x" (Pp. 90-91, Record.)

If Po Chuan was in control of the affairs and the running of the partnership, how could
the defendants have defrauded him of such huge amounts as plaintiff had made His
Honor believe? Upon the other hand, since Po Chuan was in control of the affairs of
the partnership, the more logical inference is that if defendants had obtained any portion
of the funds of the partnership for themselves, it must have been with the knowledge
and consent of Po Chuan, for which reason no accounting could be demanded from
them therefor, considering that Article 1807 of the Civil Code refers only to what is
taken by a partner without the consent of the other partner or partners. Incidentally
again, this theory about Po Chuan having been actively managing the partnership up to
his death is a substantial deviation from the allegation in the amended complaint to the
effect that "defendants Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck
Chuan and Eng Chong Leonardo, through fraud and machination, took actual and active
management of the partnership and although Tee Hoon Lim Po Chuan was the
manager of Glory Commercial Co., defendants managed to use the funds of the
partnership to purchase lands and buildings etc." (Par. 4, p. 2 of amended complaint,
Annex B of petition) and should not have been permitted to be proven by the hearing
officer, who naturally did not know any better.

Moreover, it is very significant that according to the very tax declarations and land titles
listed in the decision, most if not all the of properties supposed to have been acquired
by the defendants Lim Tanhu and Ng Sua with funds of the partnership appear to have
been transferred to their names only in 1969 or later, that is, long after the partnership
had been automatically dissolved as a result of the death of Po Chuan. Accordingly,
defendants have no obligation to account to anyone for such acquisitions in the absence
of clear proof that they had violated the trust of Po Chuan during the existence of the
partnership. (See Hanlon vs. Hansserman and Beam, 40 Phil. 796.)

There are other particulars which should have caused His Honor to readily disbelieve
plaintiff's pretensions. Nu?ez testified that "for about 18 years he was in charge of the
GI sheets and sometimes attended to the imported items of the business of Glory
Commercial Co." Counting 18 years back from 1965 or 1966 would take Us to 1947 or
1948. Since according to Exhibit LL, the baptismal certificate produced by the same
witness as his birth certificate, shows he was born in March, 1942, how could he have
started managing Glory Commercial Co. in 1949 when he must have been barely six or
seven years old? It should not have escaped His Honor's attention that the photographs
showing the premises of Philippine Metal Industries after its organization "a year or two
after the establishment of Cebu Can Factory in 1957 or 1958" must have been taken
after 1959. How could Nu?ez have been only 13 years old then as claimed by him to
have been his age in those photographs when according to his "birth certificate", he was
born in 1942? His Honor should not have overlooked that according to the same
witness, defendant Ng Sua was living in Bantayan until he was directed to return to Cebu
after the fishing business thereat floundered, whereas all that the witness knew about
defendant Lim Teck Chuan's arrival from Hongkong and the expenditure of partnership
money for him were only told to him allegedly by Po Chuan, which testimonies are
veritably exculpatory as to Ng Sua and hearsay as to Lim Teck Chuan. Neither should
His Honor have failed to note that according to plaintiff herself, "Lim Tanhu was
employed by her husband although he did not go there always being a mere employee of
Glory Commercial Co." (p. 22, Annex L, the decision.)

The decision is rather emphatic in that Lim Tanhu and Ng Sua had no known income
except their salaries. Actually, it is not stated, however, from what evidence such
conclusion was derived in so far as Ng Sua is concerned. On the other hand, with
respect to Lim Tanhu, the decision itself states that according to Exhibit NN-Pre-trial,
in the supposed income tax return of Lim Tanhu for 1964, he had an income of P4,800
as salary from Philippine Metal Industries alone and had a total assessable net income of
P23,920.77 that year for which he paid a tax of P4,656.00. (p. 14, Annex L, id.) And per
Exhibit GG-Pre-trial, in the year, he had a net income of P32,000 for which he paid a
tax of P3,512.40. (id.) As early as 1962, "his fishing business in Madridejos, Cebu was
making money, and he reported "a net gain from operation (in) the amount of
P865.64" (id., per Exhibit VV-Pre-trial.) From what then did His Honor gather the
conclusion that all the properties registered in his name have come from funds
malversed from the partnership?

It is rather unusual that His Honor delved into financial statements and books of Glory
Commercial Co. without the aid of any accountant or without the same being explained
by any witness who had prepared them or who has knowledge of the entries therein.
This must be the reason why there are apparent inconsistencies and inaccuracies in the
conclusions His Honor made out of them. In Exhibit SS-Pre-trial, the reported total
assets of the company amounted to P2,328,460.27 as of December, 1965, and yet,
Exhibit TT-Pre-trial, according to His Honor, showed that the total value of goods
available as of the same date was P11,166,327.62. On the other hand, per Exhibit XX-
Pre-trial, the supposed balance sheet of the company for 1966, "the value of inventoried
merchandise, both local and imported", as found by His Honor, was P584,034.38.
Again, as of December 31, 1966, the value of the company's goods available for sale was
P5,524,050.87, per Exhibit YY and YY-1-Pre-trial. Then, per Exhibit II-3-Pre-trial, the
supposed Book of Account, whatever that is, of the company showed its "cash analysis"
was P12,223,182.55. We do not hesitate to make the observation that His Honor, unless
he is a certified public accountant, was hardly qualified to read such exhibits and draw
any definite conclusions therefrom, without risk of erring and committing an injustice.
In any event, there is no comprehensible explanation in the decision of the conclusion
of His Honor that there were P12,223,182.55 cash money defendants have to account
for, particularly when it can be very clearly seen in Exhibits II-4, II-4-A, II-5 and II-6,
Pre-trial, Glory Commercial Co. had accounts payable as of December 31, 1965 in the
amount of P4,801,321.17. (p. 15, id.) Under the circumstances, We are not prepared to
permit anyone to predicate any claim or right from respondent court's unaided exercise
of accounting knowledge.

Additionally, We note that the decision has not made any finding regarding the allegation
in the amended complaint that a corporation denominated Glory Commercial Co., Inc.
was organized after the death of Po Chuan with capital from the funds of the
partnership. We note also that there is absolutely no finding made as to how the
defendants Dy Ochay and Co Oyo could in any way be accountable to plaintiff, just
because they happen to be the wives of Lim Tanhu and Ng Sua, respectively. We further
note that while His Honor has ordered defendants to deliver or pay jointly and severally
to the plaintiff P4,074,394.18 or 1/3 of the P12,223,182.55, the supposed cash
belonging to the partnership as of December 31, 1965, in the same breath, they have
also been sentenced to partition and give 1/3 share of the properties enumerated in the
dispositive portion of the decision, which seemingly are the very properties allegedly
purchased from the funds of the partnership which would naturally include the
P12,223,182.55 defendants have to account for. Besides, assuming there has not yet
been any liquidation of the partnership, contrary to the allegation of the defendants,
then Glory Commercial Co. would have the status of a partnership in liquidation and the
only right plaintiff could have would be to what might result after such liquidation to
belong to the deceased partner, and before this is finished, it is impossible to determine,
what rights or interests, if any, the deceased had (Bearneza vs. Dequilla, 43 Phil. 237.) In
other words, no specific amounts or properties may be adjudicated to the heir or legal
representative of the deceased partner without the liquidation being first terminated.

Indeed, only time and the fear that this decision would be much more extended than it is
already prevent us from further pointing out the inexplicable deficiencies and
imperfections of the decision in question. After all, what have been discussed should be
more than sufficient to support Our conclusion that not only must said decision be set
aside but also that the action of the plaintiff must be totally dismissed, and, were it not
seemingly futile and productive of other legal complications, that plaintiff is liable on
defendant's counterclaims. Resolution of the other issues raised by the parties albeit
important and perhaps pivotal has likewise become superfluous.

IN VIEW OF ALL THE FOREGOING, the petition is granted. All proceedings held
in respondent court in its Civil Case No. 12328 subsequent to the order of dismissal of
October 21, 1974 are hereby annulled and set aside, particularly the ex-parte proceedings
against petitioners and the decision of December 20, 1974. Respondent court is hereby
ordered to enter an order extending the effects of its order of dismissal of the action
dated October 21, 1974 to herein petitioners Antonio Lim Tanhu, Dy Ochay, Alfonso
Leonardo Ng Sua and Co Oyo. And respondent court is hereby permanently enjoined
from taking any further action in said civil case save and except as herein indicated.
Costs against private respondent.

Fernando and Concepcion, Jr., JJ., concur.

x--x

AIR FRANCE, PETITIONER, VS. RAFAEL CARRASCOSO AND THE


HONORABLE COURT OF APPEALS, RESPONDENTS.

DECISION
SANCHEZ, J.:

The Court of First Instance of Manila [1] sentenced petitioner to pay respondent Rafael
Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages;
P393.20 representing the difference in fare between first class and tourist class for the
portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate,
from the date of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees;
and the costs of suit.
On appeal, [2] the Court of Appeals slightly reduced the amount of refund on
Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm the appealed
decision "in all other respects", with costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as "fully supported by the evidence of
record", are:
"Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left
Manila for Lourdes on March 30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine
Air Lines, Inc., issued to plaintiff a 'first class' round trip airplane ticket from Manila to
Rome. From Manila to Bangkok, plaintiff travelled in 'first class', but at Bangkok, the
Manager of the defendant airline forced plaintiff to vacate the 'first class' seat that he
was occupying because, in the words of the witness Ernesto G. Cuento, there was a
'white man', who, the Manager alleged, had a 'better right to the seat. When asked to
vacate his 'first class' seat, the plaintiff, as was to be expected, refused, and told
defendant's Manager that his seat would be taken over his dead body; a commotion
ensued, and, according to said Ernesto G. Cuento, 'many of the Filipino passengers got
nervous in the tourist class; when they found out that Mr. Carrascoso was having a hot
discussion with the white man [manager], they came all across to Mr. Carrascoso and
pacified Mr. Carrascoso to give his seat to the white man (Transcript, p. 12, Hearing of
May 26, 1959); and plaintiff reluctantly gave his 'first class' seat in the plane." [3]
1. The thrust of the relief petitioner now seeks is that we review all the findings" [4] of
respondent Court of Appeals. Petitioner charges that respondent court failed to make
complete findings of fact on all the issues properly laid before it. We are asked to
consider facts favorable to petitioner, and then, to overturn the appellate court's
decision.
Coming into focus is the constitutional mandate that "No decision shall be rendered by
any court of record without expressing therein clearly and distinctly the facts and the law
on which it is based". [5] This is echoed in the statutory demand that a judgment
determining the merits of the case shall state "clearly and distinctly the facts and the law
on which it is based"; [6] and that "Every decision of the Court of Appeals shall contain
complete findings of fact on all issues properly raised before it". [7]
A decision with absolutely nothing to support it is a nullity. It is open to direct attack. [8]
The law, however, solely insists that a decision state the "essential ultimate facts" upon
which the court's conclusion is drawn. [9] A court of justice is not hidebound to write in
its decision every bit and piece of evidence [10] presented by one party and the other
upon the issues raised. Neither is it to be burdened with the obligation "to specify in the
sentence the facts" which a party "considered as proved. [11] This is but a part of the
mental process from which the Court draws the essential ultimate facts. A decision is not
to be so clogged with details such that prolixity, if not confusion, may result. So long as
the decision of the Court of Appeals contains the necessary facts to warrant its
conclusions, it is no error for said court to withhold therefrom "any specific finding of
facts with respect to the evidence for the defense". Because, as this Court well observed,
"There is no law that so requires". [12]] Indeed, "the mere failure to specify (in the
decision) the contentions of the appellant and the reasons for refusing to believe them is
not sufficient to hold the same contrary to the requirements of the provisions of law
and the Constitution". It is in this setting that in Manigque, it was held that the mere fact
that the findings "were based entirely on the evidence for the prosecution without taking
into consideration or even mentioning the appellant's side in the controversy as shown
by his own testimony", would not vitiate the judgment. [13] If the court did not recite in
the decision the testimony of each witness for, or each item of evidence presented by,
the defeated party, it does not mean that the court has overlooked such testimony or
such item of evidence. [14] At any rate, the legal presumptions are that official duty has
been regularly performed, and that all the matters within an issue in a case were laid
before the court and passed upon by it. [15]
Findings of fact, which the Court of Appeals is required to make, maybe defined as "the
written statement of the ultimate facts as found by the court x x x and essential to
support the decision and judgment rendered thereon". [16] They consist of the court's
"conclusions with respect to the determinative facts in issue". [17] A question of law,
upon the other hand, has been declared as "one which does not call for an examination
of the probative value of the evidence presented by the parties." [18]
2. By statute, "only questions of law may be raised" in an appeal by certiorari from a
judgment of the Court of Appeals. [19] That judgment is conclusive as to the facts. It is
not appropriately the business of this Court to alter the facts or to review the questions
of fact. [20]
With these guideposts, we now face the problem of whether the findings of fact of the
Court of Appeals support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received from
petitioner a first class ticket. But petitioner asserts that said ticket did not represent the
true and complete intent and agreement of the parties; that said respondent knew that
he did not have confirmed reservations for first class on any specific flight, although he
had tourist class protection; that, accordingly, the issuance of a first class ticket was no
guarantee that he would have a first class ride, but that such would depend upon the
availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed in its brief
before the Court of Appeals under its third assignment of error, which reads: "The trial
court erred in finding that plaintiff had confirmed reservations for, and a right to, first
class seats on the 'definite segments of his journey, particularly that from Saigon to
Beirut". [21]
And, the Court of Appeals disposed of this contention thus:
"Defendant seems to capitalize on the argument that the issuance of a first-class ticket
was no guarantee that the passenger to whom the same had been issued, would be
accommodated in the first-class compartment, for as in the case of plaintiff he had yet
to make arrangements upon arrival at every station for the necessary first-class
reservation. We are not impressed by such a reasoning. We cannot understand how a
reputable firm like defendant airplane company could have the indiscretion to give out
tickets it never meant to honor at all. It received the corresponding amount in payment
of first-class tickets and yet it allowed the passenger to be at the mercy of its employees.
It is more in keeping with the ordinary course of business that the company should
know whether or not the tickets it issues are to be honored or not." [22]
Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's
contention, thus:
"On the fact that plaintiff paid for, and was issued a First class' ticket, there can be no
question. Apart from his testimony, see plaintiff's Exhibits 'A, 'A-1', 'B, 'B-1, 'B-2, 'C
and 'C-1, and defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony
and testified as follows:
Q. In these tickets there are marks 'O.K. From what you know, what does this O.K.
mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, 'first class'. (Transcript, p. 169)
xxxx
"Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael
Altonaga that although plaintiff paid for, and was issued a 'first class' airplane ticket, the
ticket was subject to confirmation in Hongkong. The court cannot give credit to the
testimony of said witnesses. Oral evidence cannot prevail over written evidence, and
plaintiff's Exhibits 'A, 'A-1', 'B', 'B-1', 'C and 'C-1 belie the testimony of said witnesses,
and clearly show that the plaintiff was issued, and paid for, a first class ticket without any
reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified
that the reservation for a 'first class' accommodation for the plaintiff was confirmed.
The court cannot believe that after such confirmation defendant had a verbal
understanding with plaintiff that the 'first class ticket issued to him by defendant would
be subject to confirmation in Hongkong." [23]
We have heretofore adverted to the fact that except for a slight difference of a few pesos
in the amount refunded on Carrascoso's ticket, the decision of the Court of First
Instance was affirmed by the Court of Appeals in all other respects. We hold the view
that such a judgment of affirmance has merged the judgment of the lower court. [24]
Implicit in that affirmance is a determination by the Court of Appeals that the
proceeding in the Court of First Instance was free from prejudicial error and that "all
questions raised by the assignments of error and all questions that might have been so
raised are to be regarded as finally adjudicated against the appellant". So also, the
judgment affirmed "must be regarded as free from all error". [25] We reached this policy
construction because nothing in the decision of the Court of Appeals on this point
would suggest that its findings of fact are in any way at war with those of the trial court.
Nor was said affirmance by the Court of Appeals upon a ground or grounds different
from those which were made the basis of the conclusions of the trial court. [26]
If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat,
notwithstanding the fact that seat availability in specific flights is therein confirmed, then
an air passenger is placed in the hollow of the hands of an airline. What security then
can a passenger have? It will always be an easy matter for an airline aided by its
employees, to strike out the very stipulations in the ticket, and say that there was a verbal
agreement to the contrary. What if the passenger had a schedule to fulfill? We have long
learned that, as a rule, a written document speaks a uniform language; that spoken word
could be notoriously unreliable. If only to achieve stability in the relations between
passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case
here. The lower courts refused to believe the oral evidence intended to defeat the
covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there are facts
upon which the Court of Appeals predicated the finding that respondent Carrascoso
had a first class ticket and was entitled to a first class seat at Bangkok, which is a
stopover in the Saigon to Beirut leg of the flight. [27] We perceive no "welter of
distortions by the Court of Appeals of petitioner's statement of its position", as charged
by petitioner. [28] Nor do we subscribe to petitioner's accusation that respondent
Carrascoso "surreptitiously took a first class seat to provoke an issue". [29] And this
because, as petitioner states, Carrascoso went to see the Manager at his office in
Bangkok "to confirm my seat and because from Saigon I was told again to see the
Manager". [30] Why, then, was he allowed to take a first class seat in the plane at Bangkok,
if he had no seat? Or, if another had a better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant
claim is that Carrascoso's action is planted upon breach of contract; that to authorize an
award for moral damages there must be an averment of fraud or bad faith; [31] and that
the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal
allegations in the complaint bearing on this issue are:
"3. That x x x plaintiff entered into a contract of air carriage with the Philippine Air
Lines for a valuable consideration, the latter acting as general agents for and in behalf of
the defendant, under which said contract, plaintiff was entitled to, as defendant agreed
to furnish plaintiff, First Class passage on defendant's plane during the entire duration
of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's
return trip to Manila, x x x
4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon
to Bangkok, defendant furnished to the plaintiff First Class accommodation but only
after protestations, arguments and/or insistence were made by the plaintiff with
defendant's employees.
5. That finally, defendant failed to provide First Class passage, but instead furnished
plaintiff only Tourist Class accommodations from Bangkok to Teheran and/or
Casablanca, x x x the plaintiff has been compelled by defendant's employees to leave the
First Class accommodation berths at Bangkok after he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the inconvenience and
embarrassments brought by defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from Madrid to Manila. [32]
xxxx
2. That likewise, as a result of defendant's failure to furnish First Class accommodations
aforesaid, plaintiff suffered inconveniences, embarrassments, and humiliations, thereby
causing plaintiff mental anguish, serious anxiety, wounded feelings, social humiliation,
and the like injury, resulting in moral damages in the amount of P30,000.00." [33]
The foregoing, in our opinion, substantially aver: First, That there was a contract to
furnish plaintiff a first class passage covering, amongst others, the Bangkok-Teheran leg;
Second, That said contract was breached when petitioner failed to furnish first class
transportation at Bangkok; and Third, That there was bad faith when petitioner's
employee compelled Carrascoso to leave his first class accommodation berth "after he
was already seated" and to take a seat in the tourist class, by reason of which he suffered
inconvenience, embarrassments and humiliations, thereby causing him mental anguish,
serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is
true that there is no specific mention of the term bad faith in the complaint. But, the
inference of bad faith is there; it may be drawn from the facts and circumstances set
forth therein. [34] The contract was averred to establish the relation between the parties.
But the stress of the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right at the start of the trial, respondent's
counsel placed petitioner on guard on what Carrascoso intended to prove: That while
sitting in the plane in Bangkok, Carrascoso was ousted by petitioner's manager who gave
his seat to a white man; [35] and (b) evidence of bad faith in the fulfillment of the
contract was presented without objection on the part of the petitioner. It is, therefore,
unnecessary to inquire as to whether or not there is sufficient averment in the complaint
to justify an award for moral damages. Deficiency in the complaint, if any, was cured by
the evidence. An amendment thereof to conform to the evidence is not even required.
[36] On the question of bad faith, the Court of Appeals declared:

"That the plaintiff was forced out of his seat in the first class compartment of the plane
belonging to the defendant Air France while at Bangkok, and was transferred to the
tourist class not only without his consent but against his will, has been sufficiently
established by plaintiff in his testimony before the court, corroborated by the
corresponding entry made by the purser of the plane in his notebook which notation
reads as follows:

'First-class passenger was forced to go to the tourist class against his will, and that the
captain refused to intervene, *** and by the testimony of an eye-witness, Ernesto G.
Cuento, who was a co-passenger. The captain of the plane who was asked by the
manager of defendant company at Bangkok to intervene even refused to do so. It is
noteworthy that no one on behalf of defendant ever contradicted or denied this
evidence for the plaintiff. It could have been easy for defendant to present its manager at
Bangkok to testify at the trial of the case, or yet to secure his deposition; but defendant
did neither. [37]

The Court of Appeals further stated -


"Neither is there evidence as to whether or not a prior reservation was made by the
white man. Hence, if the employees of the defendant at Bangkok sold a first-class ticket
to him when all the seats had already been taken, surely the plaintiff should not have
been picked out as the one to suffer the consequences and to be subjected to the
humiliation and indignity of being ejected from his seat in the presence of others.
Instead of explaining to the white man the improvidence committed by defendant's
employees, the manager adopted the more drastic step of ousting the plaintiff who was
then safely ensconsced in his rightful seat. We are strengthened in our belief that this
probably was what happened there, by the testimony of defendant's witness Rafael
Altonaga who, when asked to explain the meaning of the letters 'O.K.' appearing on the
tickets of plaintiff, said 'that the space is confirmed for first class. Likewise, Zenaida
Faustino, another witness for defendant, who was the chief of the Reservation Office of
defendant, testified as follows:
Q. How does the person in the ticket-issuing office know what reservation the
passenger has arranged with you?
A. They call us up by phone and ask for the confirmation,' (t.s.n., p. 247, June 19, 1959)
In this connection, we quote with approval what the trial Judge has said on this point:

'Why did the, using the words of the witness Ernesto G. Cuento, 'white man have a
'better right' to the seat occupied by Mr. Carrascoso? The record is silent. The defendant
airline did not prove any better', nay, any right on the part of the 'white man to the
'First class seat that the plaintiff was occupying and for which he paid and was issued a
corresponding 'first class' ticket.
'If there was a justified reason for the action of the defendant's Manager in Bangkok,
the defendant could have easily proven it by having taken the testimony of the said
Manager by deposition, but defendant did not do so; the presumption is that evidence
willfully suppressed would be adverse if produced [Sec. 69, par. (e), Rules of Court]; and,
under the circumstances, the Court is constrained to find, as it does find, that the
Manager of the defendant airline in Bangkok not merely asked but threatened the
plaintiff to throw him out of the plane if he did not give up his 'first class seat because
the said Manager wanted to accommodate, using the words of the witness Ernesto G.
Cuento, the 'white man [38]

It is really correct to say that the Court of Appeals in the quoted portion first
transcribed did not use the term "bad faith". But can it be doubted that the recital of
facts therein points to bad faith? The manager not only prevented Carrascoso from
enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly
ejected him from his seat, made him suffer the humiliation of having to go to the tourist
class compartment - just to give way to another passenger whose right thereto has not
been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a
meaning different from what is understood in law. For, "bad faith" contemplates a "state
of mind affirmatively operating with furtive design or with some motive of self-interest
or ill will or for ulterior purpose." [39]
And if the foregoing were not yet sufficient, there is the express finding of bad faith in
the judgment of the Court of First Instance, thus:
"The evidence shows that defendant violated its contract of transportation with plaintiff
in bad faith, with the aggravating circumstances that defendant's Manager in Bangkok
went to the extent of threatening the plaintiff in the presence of many passengers to
have him thrown out of the airplane to give the 'first class seat that he was occupying to,
again using the words of the witness Ernesto G. Cuento, a 'white man whom he
(defendant's Manager) wished to accommodate, and the defendant has not proven that
this 'white man had any 'better right' to occupy the 'first class' seat that the plaintiff was
occupying, duly paid for, and for which the corresponding 'first class ticket was issued
by the defendant to him." [40]
5. The responsibility of an employer for the tortious act of its employees need not be
essayed. It is well settled in law. [41] For the willful malevolent act of petitioner's manager,
petitioner, his employer, must answer. Article 21 of the Civil Code says:

"ART. 21. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage."

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon
the provisions of Article 2219 (10), Civil Code, moral damages are recoverable. [42]
6. A contract to transport passengers is quite different in kind and degree from any other
contractual relation. [43] And this, because of the relation which an air-carrier sustains
with the public. Its business is mainly with the travelling public. It invites people to avail
of the comforts and advantages it offers. The contract of air carriage, therefore,
generates a relation attended with a public duty. Neglect or malfeasance of the carrier's
employees, naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by
the carrier's employees with kindness, respect, courtesy and due consideration. They are
entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. So it is, that any rude or discourteous conduct on the part
of employees towards a passenger gives the latter an action for damages against the
carrier. [44]
Thus, "Where a steamship company [45] had accepted a passenger's check, it was a breach
of contract and a tort, giving a right of action for its agent in the presence of third
persons to falsely notify her that the check was worthless and demand payment under
threat of ejection, though the language used was not insulting and she was not ejected.
[46] And this, because, although the relation of passenger and carrier is "contractual both

in origin and nature" nevertheless "the act that breaks the contract may be also a tort".
[47] And in another case, "Where a passenger on a railroad train, when the conductor

came to collect his fare, tendered him the cash fare to a point where the train was
scheduled not to stop, and told him that as soon as the train reached such point he
would pay the cash fare from that point to destination, there was nothing in the conduct
of the passenger which justified the conductor in using insulting language to him, as by
calling him a lunatic," and the Supreme Court of South Carolina there held the carrier
liable for the mental suffering of said passenger. [48]
Petitioner's contract with Carrascoso is one attended with public duty. The stress of
Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a
violation of public duty by the petitioner-air carrier - a case of quasi-delict. Damages are
proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus -
"Q. You mentioned about an attendant. Who is that attendant and purser?
A. When we left already - that was already in the trip - I could not help it. So one of the
flight attendants approached me and requested from me my ticket and I said, What for?
and she said, 'We will note that you were transferred to the tourist class'. I said, 'Nothing
of that kind. That is tantamount to accepting my transfer.' And I also said, 'You are not
going to note anything there because I am protesting to this transfer'.
Q. Was she able to note it?
A. No, because I did not give my ticket.
Q. About that purser?
A. Well, the seats there are so close that you feel uncomfortable and you don't have
enough leg room, I stood up and I went to the pantry that was next to me and the
purser was there. He told me, 'I have recorded the incident in my notebook.' He read it
and translated it to me - because it was recorded in French - 'First class passenger was
forced to go to the tourist class against his will, and that the captain refused to
intervene.'
MR. VALTE -
I move to strike out the last part of the testimony of the witness because the best
evidence would be the notes. Your Honor.
COURT -
I will allow that as part of his testimony." [49]
Petitioner charges that the finding of the Court of Appeals that the purser made an
entry in his notebook reading "First class passenger was forced to go to the tourist class
against his will, and that the captain refused to intervene" is predicated upon evidence
[Carrascoso's testimony above] which is incompetent. We do not think so. The subject
of inquiry is not the entry, but the ouster incident. Testimony on the entry does not
come within the proscription of the best evidence rule. Such testimony is admissible.
[49A]
Besides, from a reading of the transcript just quoted, when the dialogue happened, the
impact of the startling occurrence was still fresh and continued to be felt. The
excitement had not as yet died down. Statements then, in this environment, are
admissible as part of the res gestae. [50] For, they grow "out of the nervous excitement
and mental and physical condition of the declarant". [51] The utterance of the purser
regarding his entry in the notebook was spontaneous, and related to the circumstances
of the ouster incident. Its trustworthiness has been guaranteed. [52] It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.
At all events, the entry was made outside the Philippines. And, by an employee of
petitioner. It would have been an easy matter for petitioner to have contradicted
Carrascoso's testimony. If it were really true that no such entry was made, the deposition
of the purser could have cleared up the matter.
We, therefore, hold that the transcribed testimony of Carrascoso is admissible in
evidence.
8. Exemplary damages are well awarded. The Civil Code gives the court ample power to
grant exemplary damages - in contracts and quasi-contracts. The only condition is that
defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner". [53] The manner of ejectment of respondent Carrascoso from his
first class seat fits into this legal precept. And this, in addition to moral damages. [54]
9. The right to attorneys fees is fully established. The grant of exemplary damages
justifies a similar judgment for attorneys' fees. The least that can be said is that the
courts below felt that it is but just and equitable that attorneys' fees be given. [55] We do
not intend to break faith with the tradition that discretion well exercised - as it was here -
should not be disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court and the
Court of Appeals, thus: P25,000.00, as moral damages; P10,000.00, by way of exemplary
damages, and P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily
with the trial court. [56] The Court of Appeals did not interfere with the same. The
dictates of good sense suggest that we give our imprimatur thereto. Because, the facts
and circumstances point to the reasonableness thereof. [57]
On balance, we say that the judgment of the Court of Appeals does not suffer from
reversible error. We accordingly vote to affirm the same. Costs against petitioner.
SO ORDERED.

x--x

G.R. No, L-23924, April 29, 1968


THE PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE VS. FELIPE S.
TANJUTCO, DEFENDANT-APPELLANT.

DECISION
REYES, J.B.L., Acting C.J.:

In an information filed in the Court of First Instance of Manila (Crim. Case No. 34595)
on March 5, 1956, Felipe S. Tanjutco was accused of the crime of qualified theft,
allegedly committed as follows:

That in, about and during the period comprised between January 7, 1953 and January,
1955, inclusive, in the City of Manila, Philippines, the said accused, being then the
private secretary of Roman R. Santos, and as such is entrusted with the duty of
depositing large sums of money in the bank for and in behalf of the said Roman R.
Santos, with grave abuse of confidence did then and there willfully, unlawfully and
feloniously, with intent of gain and without the knowledge and consent of the owner
thereof, take, steal and carry away various sums of money amounting to P400,086.19,
belonging to the said Roman R. Santos, to the damage and prejudice of the said owner
in the aforesaid sum of P400,086.19, Philippine currency.

After a protracted trial, decision was rendered on October 14, 1964, the court finding
the accused guilty beyond reasonable doubt of the crime charged, and sentencing him to
life imprisonment and to the accessory penalties of the law, to indemnify the estate of
the deceased Roman R. Santos in the sum of P400,086.19, and to pay the costs.

From this decision, the accused appealed to this Court assigning 15 errors allegedly
committed by the court below, all boiling down to the question of sufficiency of
evidence to support the lower court's conclusion that he had misappropriated the total
sum of P400,086.19, and in sentencing him to life imprisonment. In short, the main
issue here is not whether the accused had committed acts of misappropriation, but how
much he had misappropriated, according to the evidence on record.

The abovementioned 1 judgment of the court below was based on the findings that
during the period specified in the complaint, the accused was the private secretary of the
complainant Roman R. Santos, businessman, financier and, at the time, Chairman of the
Board of Directors of the Prudential Bank and Trust Company (PBTC) which he had
founded. As such secretary to the Board-Chairman, the accused held office in the bank
premises, had free access to all offices of the bank and free use of its equipment. The
relationship between the accused and his employer was so intimate and confidential that
the latter used to send to the former sums of money to be deposited in his (Don
Roman's) current accounts with the Prudential Bank. It was in the discharge of this duty
that the accused betrayed, the confidence reposed on him by his employer by retaining
for his personal use part of the money entrusted to him, resulting in shortage in the
accounts of the employer, which was discovered only in January, 1957.

The intricate operation said to have been resorted to by the accused and enabled him to
cover up his defalcations for some time, was succinctly described in the decision now on
appeal, thus:

Mr. Santos (Roman) maintained four accounts, all current, with the bank. They were
identified as accounts Nos. 1, 2, 3, and 4. Every time Mr. Santos sent money to the
accused to be deposited, the former indicated the current account number to which said
amount should be deposited. The accused would then deposit the amount with the bank
and obtain a duplicate of the deposit slip duly stamped by the bank. This duplicate
deposit slip would later on be shown to Mr. Santos to satisfy the latter that the money
entrusted to the accused was already deposited according to his instructions. After the
latter shall have checked the correctness of the amount appearing in the duplicate
deposit slip, he would return said duplicate to the accused for safekeeping.

For its part, the bank kept the original of the deposit slips and a separate ledger for
each account of every depositor. In this ledger were entered the deposits and withdrawal
during the month, arranged according to the dates of the transactions. Said entries were
taken from the original deposit slips in its possession.

In the case of Mr. Santos, the deposit slips prepared by the accused indicated the
account number to be credited with the amount of each deposit and the check used in
withdrawing from the deposits likewise carried the account number to be debited with
the amount of the check. These ledgers were prepared in duplicate, and the bank sent
the duplicate to" the depositor after the end of each month. In this manner, the
depositor could check the duplicate deposit slips in his possession with the entries in the
duplicate ledger received by him monthly to determine whether or not correct entries of
the deposits and withdrawals were made.
The accused, at first, proved to be loyal, faithful and trustworthy a secretary and
confidant as his employer wished and thought him to be. Later on, however, he was
tempted to use part of the money entrusted to him. Probably, he expected to replace it
before his dishonesty was discovered. However, the temptation to use more of the
money entrusted to him was stronger than his will to replace the amounts he abstracted.
Hence, the amount he stole grew bigger and bigger until he realized that it was only a
question of time when his crime would be discovered

Sometimes, he deposited a smaller amount than that he received from his employer. At
times, he did not deposit anything at all, altho he received money for deposit.

To hide his crime, the accused used to falsify duplicate deposit slips which he showed
to Mr. Santos. And when he received the monthly customer's ledger, he likewise falsified
a duplicate monthly customer's ledger, entering in the falsified ledger the correct amount
he received from Mr. Santos for deposit in place of the amount he actually deposited. It
was this falsified ledger which the accused showed to Mr. Santos monthly. It is obvious
that Mr. Santos could not detect any defalcation if he relied solely on the falsified
duplicate deposit slips and falsified duplicate customers monthly ledgers.

Appellant does not dispute that a number of duplicate deposit slips and monthly bank
statements, supposed to have been submitted by him to complainant Roman Santos,
were found to be falsified. What he is contesting here is the lower court's finding that he,
appellant, authored such falsifications, which conclusion, he claims, is not supported by
the evidence.

This allegation is without merit. We found established, through the testimony of


prosecution witnesses, that when he deposited money for the accounts of complainant
Roman Santos, accused-appellant used to prepare two deposit slips - one, the original, to
be submitted to the bank, and the other to be shown to Don Roman and later to be kept
in his file;[1] that the accused himself picked up the monthly bank statements of Roman
R. Santos,[2] which he would either withhold or destroy; that he would thereafter prepare
in the bank machine after office hours, other statements indicating amounts he
purportedly deposited,[3] although actually the deposits must have been for lesser
amounts or no deposits were made at all (as later revealed by the original deposit slips
and bank ledgers). It is true that not a single witness testified to having personally seen
the accused in the act of falsifying the duplicate deposit slips or bank statements. But
direct evidence on this point is not imperative. Considering that it was the accused-
appellant who prepared the original and deposit slips; that there appeared discrepancies
between the original deposit slips retained by the Prudential Bank and the duplicates
thereof which were found by the auditors; that the amounts indicated in the originals
were accordingly credited by the bank for the account of the depositor Roman R.
Santos; that there were supposed duplicate deposit slips, duly signed by accused-
appellant which contained forged initials of the bank-teller, or else not covered by any
original slip at all;[4] that accused-appellant admitted, not only of having manipulated the
records of his employer, but also of having been able, by that means, to abstract an
undetermined amount from the funds of the latter[5] no other conclusion could be
drawn from the foregoing facts than that the falsified documents were the ones prepared
by appellant to hide his misdeeds. Even assuming these evidences to be circumstantial,
they nevertheless constitute legal evidence[6] that may support a conviction, affording as
they are basis for a reasonable inference of the existence of the fact thereby sought to
be proved.[7]

Contrary to appellants contention, there is even no necessity for all these duplicate
deposit slips to be identified one by one, before they may properly be considered against
the accused. These slips were not only bundled into a bunch and formally presented as
Exhibit Q; they had also been consistently referred to as one of the bases of the
prosecutions claim that the misappropriated amount totalled P400,086.19. As ruled by
this Court in another criminal case, the absence of any record of the formal
presentation of certain exhibits does not render their consideration reversible error, if
repeated references thereto in the course of the trial by counsel for the accused and of
the court convincingly show that the documents were part of the prosecution's
evidence.[8] No error, therefore, was committed by the trial court in giving due credence
and weight to the deposit slips (Exh. Q).

Appellant also challenges the competence of 40 duplicate deposit slips which do not
bear his signature, and urges that the amount covered thereof - P233,744.63 - should be
deducted from the total amount covered by the duplicate deposit slips coming from the
files of Don Roman Santos.

We have gone over these 40 documents, and found the following:

One (1) deposit slip, dated July 21, 1953 for P13,283.07, Account No. 2; although
unsigned by accused-appellant, this tallies with an original deposit slip retained by the
Prudential Bank. The amount it covered was duly credited for the account of Roman R.
Santos as per the bank ledger, Exhibit Y-8.

Two (2) duplicates dated November 19, 1953, for P2,562.00 and P2,689.00, respectively
(Account No. 4), are evidently genuine; they tally with the originals. The amount they
covered were credited in favor of complainant Roman Santos (Exh. R-2b).

One (1) duplicate dated September 8, 1953, for P8,762.07, for Account No. 2, tallies
with the original (Exh. 6), and the amount covered thereby is duly credited for the
account of complainant Santos.

One (1) slip dated September 10, 1953, for P12,274.65 (Account No. 2), is supposed to
be the duplicate of the original (Exh. Q-29). It is noted, however, that while in the
original, the cash deposit was P1,535.20, which amount was accordingly entered in the
bank ledger for the account of complainant Santos, in the purported duplicate, the cash
deposit was placed only at P1,319.65. The total amount covered by this particular
duplicate deposit slip (P12,274,48), is not deductible from the sum covered by all the
duplicate deposit slips found in the possession of complainant Roman Santos, because it
is clear that the said amount of P12,274.48 was actually received by the accused and in
fact deposited by him in the bank.

Nine (9) duplicates (Account No. 2), all dated June 17, 1954, for P5,523.78, P500.00,
P1,000.00, P733.51, P564.25, P1,000.00, P974.57, P3,000.00, P3,058.84, respectively, tally
with the originals left with the bank (Exh. 7), and the amounts thereby covered were
duly credited in favor of complainant Santos (Exh. Z-10). It was noted that no signature
also appears over the appellants typewritten name even in the originals submitted to the
bank.

Six (6) duplicate slips (Account No. 2) for P1 ,724.40 P1,509.20, P1,510.30, Pl,485.75,
P1,487.85 and P3,851.14, all dated October, 13, 1954, are genuine duplicates of the
originals in the possession of the Prudential Bank. It may be mentioned that where the
duplicates are duly covered with original deposit slips, the number and denomination of
the cash deposits made were noted in said original slips. Both original and duplicate slips
of these deposits are not signed; the amount thus covered were duly credited to the
complainant Santos (Exh. Z-14).

One (1) duplicate slip dated November 9, 1954, for a deposit of P1,782.00; one of the
several deposits made by the accused for the account of complainant Santos on the
same day. Both the original and duplicate slips have no signature over the typewritten
name of appellant. Amount covered thereby duly credited in favor of complainant (Exh.
Z-16).

Thirteen (13) unsigned duplicate deposit slips (Account No. 2), for P1,281.00, Pl,374.45,
Pl,323.00, Pl,416.96, P1,256.64, P1,346.40, P1,330.17, Pl.438.80, Pl,490.00, P1,201.00,
P1,122.70, P1,747.27 and P1,235.52, respectively, formed part of a group of 25 deposit
slips, all dated December 23, 1954. These 13 unsigned duplicates, however, have their
corresponding originals in the custody of the bank, and the amounts they covered were
duly credited to the account of complainant Santos. They are apparently genuine copies
of the originals (Exh. Z-16).

One (1) duplicate deposit slip dated March 12, 1954 (Account No. 3). This slip was
accomplished in handwriting, on the face of which was written diagonally: Non-
negotiable PBTC Teller No. 2 (True Copy); the covered amount of P7,809.40 was duly
credited in favor of the complainant. This is apparently a reconstructed duplicate of the
original.

One slip dated January 5, 1953, bearing the rubber stampmark on PBTC Teller No. 4,
but without said tellers initials. No signature also appears over the typewritten name of
the depositor F. S. Tanjutco. This slip purportedly showed that a cash deposit of
P2,034.15 and checks for P8,917.33 were made on that day. A checking of the bank
entry for that day established that seven out of the eight checks specified in this
duplicate deposit slip (PBTC Checks Nos. 12955, for Pl,081.10; 12959 for P941.31;
12960 for P545.88; 12961 for P871.66; 12963 for P440.00; 12978 for P2,887.38, and
12979 for P150.00) were debited as withdrawals from the same Account No. 2 on
January 5, 1954. Clearly, this supposed duplicate slip is falsified. Considering that by
appellant's own admission, he was able to cover up the shortages in the funds of his
employer by manipulation of records and documents (see the testimonies of witnesses
Amado S. Carlos, Felix Costa and Nazario L. Cruz),[9] the inclusion of the amount
covered by this slip in the computation of the sum for which appellant is accountable, is
justified. The very existence of this simulated deposit slip is sufficient proof that it was
intended to be shown to complainant Roman Santos and thus escape detection by the
latter of appellants defalcation of his (complainant's) funds.

Two (2) deposit slips purporting to be duplicates, but without the corresponding
originals, dated December 16, 1954 and December 27, 1954 for P2,780.27 and P1
26,692.89, respectively, did not have appellants signature; said amounts were not also
reflected in the bank ledger as actual deposits made by appellant. Nevertheless, we have
to sustain the inclusion of these amounts in the computation of the money under
appellants accountability for the same reason as that given in the discussion of the
preceding item.

These 40 duplicate deposit slips were admitted by the Court below, not to prove
falsification, but only to establish the fact that accused-appellant has received money to
be deposited for the account of his employer, and determine the exact amount thus
received. The relevancy of these documents to prove the fact is not affected by the
absence of appellant's signature thereon.

In the first place, having been passed upon and favorably considered by the trial court,
the matter of relevancy of these documents ordinarily cannot be reviewed on appeal.
This lies within the sound discretion of said court and deserves the respect of the
appellate tribunal.[10] Secondly, most of the amounts covered by these 40 deposit slips
are sufficiently backed by the original deposit slips and the bank ledgers. And, there is no
showing that the figures indicated in both the original and duplicate slips are separately
treated or that the amount thus covered is included twice in the summing up of the
missing amounts. As regards those without corresponding originals, we have given the
reason for their inclusion in the total sum for which appellant is accountable, in our
discussion of those individual items. Furthermore, it appearing that even some of the
original deposit slips delivered to the bank do not bear appellant's signature, the absence
alone of such signature is no indication that the 40 duplicate slips in question were not
in fact prepared by him.

Appellant likewise assails the admissibility of entries appearing in the ledgers of the
Prudential Bank (Exhs. W, W-l to W-4, X, X-l to X-6, Y, Y-l to Y-13, Z, Z-l to Z-18, TT,
TT-1 to TT-5), of the bank statements from its file (Exhs. R, R-l to R-5), and the
monthly bank statements taken from the files of complainant Roman Santos (Exhs. S, S-
l to S-3), claiming that under the prosecution's theory,[11] the best evidence to prove his
guilt would be the original slips and their duplicates.
There is no merit to the contention. It must be remembered that the prosecution had to
prove the amount allegedly embezzled by the accused. This, the prosecution tried to do
by establishing the amounts received by the accused-appellant and comparing it with
those deposited in the bank; the resulting difference being treated as the amount
abstracted from the funds of the complainant. Under this theory, the ledgers and bank
statements naturally are not just secondary, but the primary evidence of the deposits
made, while the monthly bank statements found in the files of complainant Roman
Santos which were supposed to confirm the amounts he had ordered the accused-
appellant to be deposited, are the best evidence of the amounts actually entrusted to the
latter. Consequently, the trial court committed no error in ruling in favor of the
admissibility of the above-mentioned exhibits.

We also find as untenable appellant's allegation that there was no positive, direct
evidence to show that the monthly bank statements found in the file of the
complainant were the same documents delivered by him to the latter. By urging in his
Fifth Assignment of Error the deduction from the total sum covered by all the duplicate
deposit slips coming from the files of complainant, of the amounts covered by the 40
unsigned deposit slips, claiming that the resulting difference is the correct total amounts
covered by duplicate deposit slips for which accused can be held liable" (p. 27,
appellant's brief), said accused-appellant in fact acknowledged that these duplicate
deposit slips were the ones delivered by him to complainant Santos.

Neither would it be accurate to say that the decision of the lower court was based solely
on the alleged hearsay report of the auditing firm of Costa & Cruz (Exh. P). Said court,
in its decision, stated:

The auditors Costa and Cruz found that the accused manipulated only accounts Nos. 2,
3, and 4. As stated above, he at various times deposited less than what he received for
deposit and at times he did not deposit anything at all but simply used the entire amount
he received for deposit. To cover up for his criminal act and in order to avoid detection
especially when he feared that Don Roman Santos might make a big withdrawal, the
accused also resorted to transferring of funds of Don Roman from his fixed deposits to
his current account. The report of the auditors (Exh. P) is clear and the evidence
introduced in Court in support of their report and the testimony of Mr. Costa
convinced the Court aof the correctness of the figures arrived at by them." (Decision,
pp. 8-9).

In other words, the lower court gave due weight to the report of the auditors because it
was found to be clear and duly supported by testimonial and documentary evidence
(monthly bank accounts, bank statements, deposit slips the materiality and relevancy
of which were already here sustained) presented during the trial, to which conclusion we
fully agree.
After going with the evidence on record, the court below concluded that the accused
had defalcated out of the money delivered to him for deposit in the bank, the following
amounts:
I. Deficiency from:

a. Account No. 2

(Exhibit No. I)

1954
P134,105.89

1955
15,760.58

P149,866.47
b. Account No. 3

(Exhibit No. II)

1953
P 14,405.05

1954
13,1 14.01

P27 519 06
c. Account No. 4

(Exhibit No.III)

1953
P 23,733.87

1954
198,725.83
P222,459.70

Total shortage of Accounts - P399,845.23

Nos. 2, 3 & 4

II. Interest from FIXED DEPOSIT:

a. F/dNo. 182 12/27/54

Schedule I Notation P20.95

b.F/dNo.208 1/20/54

220.00

240.96

TOTAL SHORTAGES
P400,086.19
Appellant maintains that the amount he misappropriated could not have exceeded
P50,000.00. But this allegation is not only unsupported by any corroborative evidence,
but is in itself uncertain, appellant having admitted in court that he never kept any
record of the sums he abstracted from the funds of the complainant, and that the
amount of "P50,000.00 was only his estimate (t.s.n., p. 2114, hearing of Feb. 24, 1964).
Such bare testimony indeed cannot overcome the prosecutions proof that the
unaccounted amount, for which appellant is answerable, totalled P400,086.19.
Finally, making capital of the acceptance by complainant of properties belonging to the
accused and his relatives allegedly assigned to the former for the settlement of his
obligations, accused-appellant claims that there had been novation of the relationship
between him and the said complainant, resulting in the obliteration or extinction of his
criminal liability. This argument is anchored on the alleged recognition by this Court of
the novation theory (to extinguish criminal liability) in the case of People vs. Nery, G.R.
No. L-19567, February 5, 1964.

Reliance on the aforecited Nery case, in support of the contention that the acceptance
by complainant of payment converted the liability of the accused-appellant into a civil
obligation or else that it estopped said complainant from proceeding with the
prosecution of the case, is misplaced and unwarranted.

Firstly, in the Nery case, which is an action for estafa, there was contractual relationship
between the parties that can be validly novated by the settlement of the obligation of
the offender. Whatever was said in that case, therefore, cannot be invoked in the present
case where no contractual relationship or bilateral agreement, which can be modified or
altered by the parties, is involved. There is here merely a taking of the complainant's
property by one who never acquired juridical possession thereof, qualified by grave
abuse of confidence.

Secondly, it is inaccurate to say unqualifiedly that the theory that payment can obliterate
or extinguish criminal liability was upheld in the Nery case. On the contrary, it was there
explicitly said:
It may be observed in this regard that novation is not one of the means recognized by
the Penal Code whereby criminal liability can be extinguished; hence, the role of
novation may only be to either prevent the rise of criminal liability or to cast doubt on
the true nature of the original basic transaction, whether or not it was such that its
breach would not give rise to penal responsibility, as when money loaned is made to
appear as a deposit, or other similar disguise is resorted to (cf. Abeto vs. People, 90 Phil
58; U.S vs Villareal, 27 Phil. 481).

Even in Civil Law the acceptance of partial payments, without further change in the
original relation between the complainant and the accused, cannot produce novation.
For the latter to exist, there must be proof of intent to extinguish the original
relationship, and such intent cannot be inferred from the mere acceptance of payments
on account of what is totally due. Much less can it be said that the acceptance of partial
satisfaction can affect the nullification of a criminal liability that is fully matured, and
already in the process of enforcement. Thus, this Court has ruled that the offended
partys acceptance of a promissory note for all or part of the amount misapplied does
not obliterate the criminal offense. (Camus vs. Court of Appeals, 48 O. G. 3898).
Assuming, therefore, that there was partial payment[12] by the accused-appellant of the
amount he misappropriated, that would not have sufficed to bar the filing and
prosecution of the criminal case for qualified theft against him, considering that he
concedes having actually used money belonging to his employer although in an amount
less than P400,086.19. Furthermore, it may be mentioned that the mother and sister of
accused-appellant, before the criminal case here was filed, instituted in the Court of First
Instance of Pampanga an action for annulment of the deeds of assignment of their
properties (Civil Case No. 875) on the ground that they were induced to execute the
same through fraud and deceit. In view of our ruling on the foregoing issue, the
outcome of this annulment-case will certainly not affect the accused-appellants liability
for the crime he had committed.

WHEREFORE, finding no error in the decision appealed from, the same is hereby
affirmed, in all respects, with costs against the appellant.

x--x

G.R. No. 86062 June 6, 1990

INTERPACIFIC TRANSIT, INC., petitioner,


vs.
RUFO AVILES and JOSEPHINE AVILES, respondents.

Balane, Barican, Cruz, Alampay Law Office for petitioner.

Francisco G. Mendoza private respondents.

CRUZ, J.:

This case hinges on the proper interpretation and application of the rules on the
admissibility of documentary evidence and the viability. of a civil action for damages
arising from the same acts imputed to the defendant in a criminal action where he has
been acquitted.

In the information filed against Rufo and Josephine Aviles, the private respondents
herein, it was alleged that being then sub-agents of Interpacific Transit, Inc. and as such
enjoying its trust and confidence, they collected from its various clients payments for
airway bills in the amount of P204,030.66 which, instead of remitting it to their
principal, they unlawfully converted to their own personal use and benefit. 1

At the trial, the prosecution introduced photocopies of the airway bills supposedly
received by the accused for which they had not rendered proper accounting. This was
done in, the course of the direct examination of one of the prosecution witnesses. 2
The defense objected to their presentation, invoking the best evidence rule. The
prosecution said it would submit the original airway bills in due time. Upon such
undertaking, the trial court allowed the marking of the said documents a s Exhibits "B"
to "OO." The e prosecution n did submit the original airway bills nor did it prove their
loss to justify their substitution with secondary evidence. Nevertheless, when the
certified photocopies of the said bills formally were offered, 3 in evidence, the defense
interposed no objection.

In acquitting the accused, Judge Herminio I. Benito of the Regional Trial Court of
Makati rejected the agency theory of the prosecution and held that the relationship
between the petitioner and Rufo Aviles was that of creditor and debtor only. "Under
such relationship,' it declared, "the outstanding account, if any, of the accused in favor
of ITI would be in the nature of an indebtedness, the non- payment of which does not
Constitute estafa." 4

The court' also held that the certified photocopies of the airway by were not admissible
under the rule that "there can be no evidence of a writing the content of which is the
subject of inquiry other' than the writing itself." Loss of the originals had not been
proved to justify the exception to the rule as one of the prosecution witness had testified
that they were still in the ITI bodega. Neither had it been shown that the originals had
been "recorded in an existing record a certified copy of which is made evidence by law."

In its order denying the motion for reconsideration, the trial court declared that it "had
resolved the issue of whether the accused has civil obligation to ITI on the basis of the
admissibility in evidence of the xerox copies of the airway bills." 5

Right or wrong, the acquittal on the merits of the accused can no longer be the subject
of an appeal under the double jeopardy rule. However, the petitioner seeks to press the
civil liability of the private respondents, on the ground that the dismissal of the criminal
action did not abate the civil claim for the recovery of the amount. More to the point,
ITI argues that the evidence of the airways bills should not have been rejected and that it
had sufficiently established the indebtedness of the private respondents to it.

The Court of Appeals 6 affirmed, the decision of the trial court in toto, adding that the
existing record spoken of in Section 2 (e) and (d) of Rule 130 of the Rules of Court
must be in the custody, of a public officer only. It also declared that:

Since no evidence of civil liability was presented, no necessity existed on the part of the
private respondents to present evidence of payment of an obligation which was not
shown to exist.

The petitioner now asks this Court to annul that judgment as contrary to law and the
facts established at the As in the courts below, it is insisting on the admissibility of its
evidence to prove the civil liability of the private respondents.
We agree with the petitioner. The certified photocopies of the airway bills should have
been considered.

In assessing this evidence, the lower courts confined themselves to the best evidence
rule and the nature of the documents being presented, which they held did not come
under any of the exceptions to the rule. There is no question that the photocopies were
secondary evidence and as such were not admissible unless there was ample proof of
the loss of the originals; and neither were the other exceptions allowed by the Rules
applicable. The trouble is that in rejecting these copies under Rule 130, Section 2, the
respondent court disregarded an equally important principle long observed in our trial
courts and amply supported by jurisprudence.

This is the rule that objection to documentary evidence must be made at the time it is
formally offered. as an exhibit and not before. Objection prior to that time is premature.

It is instructive at this paint to make a distinction between Identification of documentary


evidence and its formal offer as an exhibit. The first is done in the course of the trial
and is accompanied by the marking of the evidence an an exhibit. The second is done
only when the party rests its case and not before. The mere fact that a particular
document is Identified and marked as an exhibit does not mean it will be or has been
offered as part of the evidence of the party. The party may decide to formally offer it if
it believes this will advance its cause, and then again it may decide not to do so at all. In
the latter event, the trial court is, under Rule 132, Section 35, not authorized to consider
it.

Objection to the documentary evidence must be made at the time it is formally offered,
not earlier. The Identification of the document before it is marked as an exhibit does not
constitute the formal offer of the document as evidence for the party presenting it.
Objection to the Identification and marking of the document is not equivalent to
objection to the document when it is formally offered in evidence. What really matters is
the objection to the document at the time it is formally offered as an exhibit.

In the case at bar, the photocopies of the airway bills were objected to by the private
respondents as secondary evidence only when they, were being Identified for marking by
the prosecution. They were nevertheless marked as exhibits upon the promise that the
original airway bills would be submitted later. it is true that the originals were never
produced. Yet, notwithstanding this omission, the defense did not object when the
exhibits as previously marked were formally offered in evidence. And these were
subsequently admitted by the trial court. 7

In People v. Teodoro, 8 a document being Identified by a prosecution witness was


objected to as merely secondary, whereupon the trial judge ordered the testimony
stricken out. This Court, in holding the objection to be premature, said:
It must be noted that the Fiscal was only Identifying the official records of service of
the defendant preparatory to introducing them as evidence. ... The time for the
presentation of the records had not yet come; presentation was to be made after their
Identification. For what purpose and to what end the Fiscal would introduce them as
evidence was not yet stated or disclosed. ... The objection of counsel for the defendant
was, therefore, premature, especially as the Fiscal had not yet stated for what purpose he
would introduce the said records. ...

The time for objecting the evidence is when the same is offered. (Emphasis supplied).

The objection of the defense to the photocopies of the airway bins while they were
being Identified and marked as exhibits did not constitute the objection it should have
made when the exhibits were formally offered in evidence by the prosecution. No valid
and timely objection was made at that time. And it is no argument to say that the earlier
objection should be considered a continuing objection under Sec. 37 of Rule 132, for
that provision obviously refers to a single objection to a class of evidence (testimonial or
documentary) which when first offered is considered to encompass the rest of the
evidence. The presumption is, of course, that there was an offer and a seasonable
objection thereto. But, to repeat, no objection was really made in the case before us
because it was not made at the proper time.

It would have been so simple for the defense to reiterate its former objection, this time
seasonably, when the formal offer of exhibits was made. It is curious that it did not,
especially so since the objections to the formal offer of exhibits was made in writing. In
fact, the defense filed no objection at all not only to the photocopies but to all the other
exhibits of the prosecution.

The effect of such omission is obvious. The rule is that evidence not objected to is
deemed admitted and may be validly considered by the court in arriving at its judgment.
9 This is true even if by its nature the evidence is inadmissible and would have surely
been rejected if it had been challenged at the proper time.

The records certainly would have been the, beet proof of such former conviction. The
certificate was not the best proof. There seems to be no justification for the presentation
of proof of a character. ... Under an objection upon the ground that the said certificate
was not the best proof, it should have been rejected. Once admitted, however, without
objection, even though not admissible under an objection, we are not inclined now to
reject it. If the defendant had opportunely presented an objection to the admissibility of
said certificate, no doubt the prosecution would have presented the best proof upon the
questions to which said certificate relates. 10

(It) is universally accepted that when secondary or incompetent evidence is presented


and accepted without any objection on the part of the other party, the latter is bound
thereby and the court is obliged to grant it the probatory value it deserves. 11
We hold therefore that it was erroneous for the lower courts to reject the photocopies
of the airway bills to prove the liability of the private respondents to the petitioner.
While we may agree that there was really no criminal liability that could attach to them
because they had no fiduciary relationship with ITI, the rejected evidence sufficiently
established their indebtedness to the petitioner. Hence, we must reverse the ruling below
that "on account of the inadmissibility of the prosecution's Exhibits 'B' and 'OO',
coupled with the denial made by the accused, there appears to be no concrete proof of
such accountability."

Accoording to Rule 120, Section 2, of the Rules of Court:

In case of acquittal, unless there is a clear showing that the act from which the civil
liability might arise did not exist, the judgment shall make a finding on the civil liability
of the accused in favor of the offended party.

With the admission of such exhibits pursuant to the ruling above made, we find that
there is concrete proof of the defendant's accountability. More than this, we also
disbelieve the evidence of the private respondents that the said airway bills had been
paid for. The evidence consists only of check stubs corresponding to payments allegedly
made by the accused to the ITI, and we find this insufficient.

As it is Aviles who has alleged payment, it is for him to prove that allegation. He did not
produce any receipt of such payment. He said that the cancelled payment checks had
been lost and relied merely on the check stubs, which are self-serving. The prosecution
correctly stressed in its motion for reconsideration that the accused could have easily
secured a certification from the bank that the checks allegedly issued to ITI had been
honored. No such certification was presented. In short, the private respondents failed to
establish their allegation that payment for the airway bills delivered to them had been
duly remitted to ITI.

In Padilla v. Court of Appeals, 12 we held:

There appear to be no sound reasons to require a separate civil action to still be filed
considering that the facts to be proved in the civil case have already been established in
the criminal proceedings where the accused was acquitted. He was, in fact, exonerated of
the charge. The constitutional presumption of innocence called for more vigilant efforts
on the part of prosecuting attorneys and defense counsel, a keener awareness by all
witnesses of the serious implications of perjury, and a more studied consideration by the
judge of the entire records and of applicable statutes and precedents. To require a
separate civil action simply because the accused was I acquitted would mean needless
clogging of court dockets and unnecessary duplication of litigation with all its attendant
loss of time, effort, and money on the part of all concerned.

By the same token, we find that remand of this case to, the trial court for further
hearings would be a needless waste of time and effort to the prejudice of the speedy
administration of justice. Applying the above ruling, we hereby declare therefore, on the
basis of the evidence submitted at the trial as reflected in the records before us, that the
private respondents are liable to the petitioner in the sum of P204,030.66, representing
the cost of the airway bills.

WHEREFORE, the petition is GRANTED. The challenged decision of the Court of


Appeals is SET ASIDE and a new one is rendered ORDERING the private
respondents to. pay to the petitioner the sum of P204,030.66, with 6% interest from
November 16, 1981, plus the costs of this suit.

SO ORDERED.

x--x

G.R. No. L-27134, February 28, 1986


COMPANIA MARITIMA, PLAINTIFF-APPELLANT, VS. JOSE C. LIMSON,
DEFENDANT-APPELLANT.

DECISION
PATAJO, J.:

This is an appeal from a decision of the Court of First Instance of Manila[1] holding
plaintiff Compania Maritima liable to defendant in the amount of P441,339.01
representing the difference between the claim of plaintiff for unpaid passage and freight
charges for shipments of hogs and cattle on plaintiff's vessels for the period from
October 1957 to February 1961 and the claim of defendant for the purchase price of
foodstuffs sold by defendant to plaintiff, payments on account of freight not accounted
for by plaintiff and rebate to which defendant was entitled on the aforesaid freight
charges.

On October 8, 1962, plaintiff Compania Maritima filed a complaint against defendant


Jose C. Limson for collection of the sum of P44,701.54 representing the balance of
defendant's unpaid accounts for passage and freight on shipments of hogs, cattle and
carabaos abroad plaintiff's vessel from various ports of Visayas and Mindanao for the
period from October 1957 to February 1961. Attached to said complaint was the
statement of account supporting plaintiff's claim for unpaid passage and freight.
Defendant filed a motion for bill of particulars asking that plaintiff attach to the
complaint the bills of lading referred to in said statement of account in order to enable
defendant to answer plaintiff's complaint. Plaintiff opposed said motion. The Court
however ordered plaintiff to attach photostat copies of the bills of lading upon which
the statement of account was based. Plaintiff's motion for reconsideration of said order
was denied by the Court but upon motion of plaintiff said order was modified to allow
plaintiff to attach duplicate originals of the bills of lading instead of photostat copies
thereof.

On July 16, 1963, defendant filed his answer to the complaint denying any liability to
plaintiff. Defendant alleged that he had already fully paid for all the shipments he made
and that a number of the bills of lading submitted by plaintiff as basis of its claim are
not properly chargeable to defendant since he was not the shipper nor had he authorized
said shipments which were made by parties other than those for whom defendant is
liable or who had been duly authorized by defendant to make said shipments.
Defendant further set up a counterclaim for the refund of the rebate to which he was
entitled to pursuant to an agreement that he had with plaintiff for shipments made by
him from Davao, Cotabato, Dadiangas, Iligan and Masbate and for cost of foodstuffs
sold or delivered to plaintiff in the total amount of P411,477.45.

Since the case involved primarily questions of accounting, upon motion of plaintiff,
without the opposition of defendant, the Court appointed a commissioner to examine
the accounts involved before the Court proceed with the hearing of the case. Anselmo
T. del Rosario, a certified public accountant, was thus appointed by the Court.

On October 29, 1963, Mr. del Rosario submitted his report to the Court. The salient
points in said report showed that with respect to the claim of defendant against plaintiff,
the same was in the total amount of P676,416.05 broken down as follows:

For purchases of foodstuffs . . . . . . . . . . .


P433,237.75
Freight adjustments . . . . . . . . . . . . . . . . .
8,170.45
Cash payments made by defendant. . . . .
235,007.85

P 676,416.05

On the other hand, the claim of the plaintiff totalled P545,394.24 based on 1,521 bills
of lading examined by him of which 267 were signed by defendant totaling P67,061.66;
3 bills signed by representative of defendant totaling P1,148.10; 91 bills signed by a
certain "Perry" with Jose Limson, the defendant, as shipper and consignee totaling
P61,981.00; 149 bills signed by said "Perry" for others as shippers and consignees
totaling P46,869.60; 16 bills signed by others totaling P5,180.70; 662 bills unsigned
totaling P260,170.23 and 333 bills missing totaling P102,982.46. According to the
Commissioner defendant can be held liable only for the 267 bills signed by him and the
3 bills signed by his representative in the total amount of P68,209.79.

The bills examined by the Commissioner had been classified and regrouped by him into
(1) original bills of lading signed by defendant or his agent; (2) original bills of lading
without signature of defendant or his agent; and (3) charges with no original bills of
lading, to wit:

(1) Original bills of lading duly signed by defendant or his agent . . . . . . . . . . . . . . .


P68,209.76

(2) Original bills of lading without the signature of defendant . . . . . . . . . . . . . . .


310,317.21

(3) No original bills of lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


166,867.28

Said Commissioner recommended that only the amount of P68,209.76 supported by


original bills of lading signed by defendant or his agent is properly chargeable to
defendant.

After hearing the lower Court rendered judgment based principally on the report of the
Commissioner. The Court, however, held that defendant was liable for the bills of
lading without originals involving a total of P166,867.26 but not liable on the bills of
lading which had not been signed by him or his authorized representative. The Court
sustained defendant's claim that "Perry" was not his authorized representative. Thus the
lower Court rendered judgment sentencing plaintiff to pay defendant the sum of
P441,339.01 with interest thereon at the legal rate from the date of the filing of the
counterclaim plus P5,000.00 as attorney's fees. The amount of P441,339.01 is computed
as follows:

Amount to defendant:

Freight adjustments.............................................................
P 8,170.45
Cash payments...................................................................
235,007.85
Foodstuffs and supplies delivered.........................................
433,237.75
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P676,416.05

Deduct amount to plaintiff on


bills of lading signed by
defendant or his authorized
representative ........................................................................
68,209.76

Bills of lading without originals but supported by


other copies of said bills
of lading............................................................................
166,867.28

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

235,077.04

Balance due defendant . . . . . . . . . . . . . . . . . . . .

P441,339.01

From said decision both plaintiff and defendant appealed to this Court, plaintiff
assigning six assignment of errors, to wit:

"I

"The Trial Court erred in finding that the report of the Commissioner is fully supported
by the documentary evidence presented in this case.

"II

"The Trial Court erred in concurring with the Commissioner that without the
supporting original documents, the customer's subsidiary ledger cards are not sufficient
and reliable.

"III

"The Trial Court erred in holding that the Commissioner is right in disallowing bills of
lading not signed either by defendant or his authorized representatives, instead of
holding that the corresponding freight charges for said bills of lading were probably
debited in defendant's charge account.

"IV
"The Trial Court erred in finding that the fact that no periodic statements of account
furnished, Limson was kept in the dark as to the true status of his account with plaintiff.

"V

"The Trial Court erred in finding that there is a balance of P441,339.01 due the
defendant, said sum with interest thereon from the date of the filing of the counterclaim
plus P5,000.00 as attorney's fees and costs.

"VI

"The Trial Court erred in dismissing the complaint and in not sentencing the defendant
to pay the plaintiff the sum of P44,701.54 representing the unpaid balance of
defendant's charge account with plaintiff plus legal interest thereon from the filing of
the complaint, and the sum of P2,000.00 and P1,000.00 as attorney's fees and expenses
of litigation respectively incurred by the plaintiff."

while defendant assigned one sole assignment of error:

"I

"The Trial Court erred in declaring appellant Limson liable in the amount of
P166,867.28 for freighters and in deducting the same from his claim against Maritima."
We find that the Court a quo erred in rejecting the bills of lading signed by "Perry"
where defendant appeared shipper or consignee, those signed by "Perry" where persons
other than defendant-appellant as shipper and the bills of lading unsigned by defendant.

With regards to the 91 controverted bills of lading signed by "Perry" with Limson as
shipper or consignee in the total amount of P61,981.50, witness Cabling testified that
the signatures therein are those of Cipriano Magtibay alias "Perry" who took delivery of
the cargoes stated therein after signing the delivery receipts. He testified thus:
"These are all the signatures of Perry. I know it to be his because oftentimes he goes
there to get the delivery orders and he signed as "Perry" in my presence. His real name
is Cipriano Magtibay. I allowed delivery of the cargoes to him because he was the
regular representative of Mr. Limson." (t.s.n. pp. 12-13, Nov. 19, 1964)
On the other hand, Nolasco Cruz Ilagan, delivery order clerk of Compania Maritima,
testified to this wise:
"In issuing these delivery orders, I get the data from the manifests or from the bills of
lading. I know the defendant Limson in this case. He is now in the Court room. I
knew him since the middle of 1956 up to 1961 when I was assigned in the Terminal
Office of Maritima. I came to know him because Mr. Cabling introduced to us that he
is a regular shipper of hogs, cattles, carabaos coming from the southern ports. As a
clerk, I prepared the delivery orders for these cargoes to be delivered to Mr. Limson or
his authorized representatives. I will mention some of his representatives: For hog the
authorized representative is Cipriano Magtibay or Perry; and for cattles, carabaos and
cows, is Eye, Mario, Mr. Marcelino Tinoco and others whom I don't remember the
names. When these representatives of Mr. Limson take delivery of the shipments, I let
them sign the delivery orders. I prepared the delivery orders as soon as Mr. Limson
himself or his authorized representative go to our office and present the bills of lading.
In case where there is no original bill of lading, delivery order is effected also only when
authorized by Mr. Cabling, basing on the manifests. The boat gives us the manifest as
soon as it arrives. (t.s.n. 255-256, Mar. 10/65 & 256-260, Mar. 10/65. Even though the
name of the shipper is not Mr. Limson or the consignee is not Mr. Limson, I prepared
delivery orders by authorization of Mr. Cabling. (pp. 260-261 Id). The authorized
representative to receive for hogs was Mr. Cipriano Magtibay alias "Perry". He signs the
delivery orders by the name of "Perry". (p. 261 Id.)

"We were also the ones who put on the delivery orders the statement "account Limson".
We put that to indicate the cargo is chargeable to Mr. Limson, so that the accounting
department would know that the shipment is chargeable to Mr. Limson." (pp. 263-265
Id.)

"I am familiar with the signature of Perry. In these two bunches of delivery orders, I
find that the signature appearing therein is that of Perry, the authorized representative
of Limson, These delivery orders were signed by Perry in my presence. I know that Mr.
Perry or Magtibay is the authorized representative of Mr. Limson because he was
introduced to us by Limson himself that he is the one authorized by him to get his
cargoes. He was authorized only to sign delivery orders for hogs. I also knew that
Tinoco, Eye, Mario and other were also authorized by Limson to receive shipment for
him (pp. 265-270 Id). These other persons who were authorized representatives to
receive big cattles signed delivery orders in my presence. The delivery orders were
requested by Eye, Mario, and Tinoco, the authorized representatives. I know personally
that these men are the authorized representatives for Limson." (pp. 270-275 Id.)
(Plaintiff's brief, pp. 35-37).
Regarding the 16 controverted bills of lading signed by persons other than "Perry" with
freight charges totalling P5,180.70, Ilagan testified that the representatives that signed
the delivery receipts and took delivery of the cargoes thereof were Limson's agents.
Ilagan testified thus:
"As clerk, I prepared the delivery orders for those cargoes to be delivered to Mr. Limson
or his authorized representatives. For hogs the authorized representative was Cipriano
Magtibay; and for cattle, carabaos and cows the authorized representatives were Eye,
Mario, Tinoco and others who I cannot recall the names." (t.s.n. pp. 260-261, Nov.
1/65).

"These other persons who were authorized representatives to receive cattle signed
delivery receipts in my presence. The delivery orders were requested by Eye, Mario and
Tinoco, the authorized representatives. I know personally that these men are the autho-
rized representative for Limson." (pp. 27-275, Id.). (underscoring supplied).
With respect to the 662 unsigned bills of lading with freight charges totaling
P260,170.23, delivery receipts were issued upon delivery of the shipments. Cabling and
Ilagan who were presented the plaintiff as witnesses testified that the ordinary procedure
at plaintiff's terminal office was to require the surrender of the original bill of lading,
but when the bill of lading cannot be surrendered because it had not arrived or received
by the consignee or assignee, the delivery of the cargo was authorized just the same, and
the delivery receipt was prepared based on the ship's cargo manifests or ship's copy of
the bill of lading. This accommodation was specially given Limson, because defendant
was a regular shipper and ship chandler of plaintiff, and was a compadre of Cabling,
Besides, said hogs and cattle had to be unloaded and released from the pier for they
cannot be kept there long, after having been on board for several days because they
might die. (t.s.n. pp. 320-323, March 10, 1965).

Regarding the 149 controverted bills of lading in the name of other persons as shippers
or consignees and signed by Perry in the total amount of P46,869.60, it was established
that said bills of lading were for cattle and hogs purchased by the defendant from his
"viajeros" in Manila which were delivered to and received by defendant, and for which
he had to pay the freight charges, where in turn, he deducted from the purchase price
the corresponding cost of freight; or were for cattle or hogs that belonged to Marcelino
Tinoco from whom defendant had made arrangements for paying the purchase price of
said Tinoco's cargo partly with the freight costs for which defendant agreed to be
debited in his charge account with Maritima. These facts were admitted by the
defendant himself when he testified on direct and cross-examination, supra. This was
also confirmed by the testimony of Cabling. And now, corroborating the above facts as
testified, Pagkalinawan, another witness for the plaintiff, testified thus:
"I know Mr. Limson, He is also a meat dealer. As ship's chandler he supplies foodstuffs,
meat, to Maritima ships. I came to know Mr. Limson when Mr. Tinoco introduced me
to him. Mr. Limson was getting meat from Mr. Tinoco at that time. It was cow and
carabao meat. These cow and carabao meat which Mr. Limson used to get from Tinoco
came from the Visayas to Manila. They were brought by the Maritima ships and those
were the cows and carabaos that I took delivery at that time. I do not pay the freight for
the delivery of these cows and carabaos. I was allowed by the Compania Maritima to
take delivery of these cows and carabaos of Mr. Tinoco without paying the freight
because the freights will be charged to Mr. Limson. These freight charges that I did not
pay for the shipment of cows and carabaos of Mr. Tinoco were charged against Mr.
Limson. These freight charges that were charged against Mr. Limson in his account in
the Maritima were credited as payment of Mr. Limson to the meat that he gets from Mr.
Tinoco. (t.s.n. pp. 6-14, April 20, 1966). I am not the only one who received the cows
and carabaos of Mr. Tinoco at the Maritima. There were many more, Mario Valencia,
Remy and one whom I know only as Ben Negro. (t.s.n. pp. 14-15, April 30, 1966).
Sometimes Marcelino Tinoco himself takes the cargo, I used to accompany him, and I
am the one signing the delivery permit. Sometimes he does too. He does not pay the
freight because it is charged against the account of Mr. Limson. (t.s.n. pp. 15-20, April
20, 1966). I have occasions taking delivery of the cows and carabaos of Mr. Tinoco
even if there was no original bill of lading and the freight of which were charged against
Mr. Limson. The office makes true copies of the bills of lading for the originals which
could not be produced. Just the same I could take delivery of the said cows and
carabaos. (t.s.n. pp. 20-21- Id).

"In all occasions that I withdrew the cows and carabaos of Mr. Tinoco for which I
signed the delivery receipts there were corresponding original bills of lading or copies of
the bills of lading which were made even if the original bills could not be produced
(t.s.n. pp. 2-3, May 6, 1966). Mr. Limson signed these bills of lading that I have
presented to him. Those that were not, I was the one who signed it. When the
unloading takes place at nights I just call him up by telephone. (t.s.n., p. 3, Id).

"For the shipments of Mr. Marcelino Tinoco, I was the one who gets the delivery order.
But if I am not around, my companions get them. However, if he is there at the pier, he
himself receives his shipments. (t.s.n. pp. 9-11, Id.) All shipments of Mr. Tinoco are
vales of Mr. Limson. If I do not have the bills of lading, that were signed by Mr.
Limson, I can still get the delivery in this manner. If the shipments takes place at night
and I could not get the signature of Mr. Limson, I simply call him up thru the telephone
who in turn directs me to call on Mr. Cabling and Mr. Cabling used to tell me to sign the
bills of lading because he and Mr. Limson had already an arrangement." (t.s.n. pp. 17-18
Id.)
Plaintiff also presented Exhibits B-276 to 1018 in the total amount of P81,462.92, bills
of lading not in the name of defendant Limson, but which Limson himself signed,
thereby proving that defendant took delivery of shipments in the names of others,
shipper or consignee, and which the corresponding charges were debited to his account.

The simpler way to determine how much is the total claim of plaintiff againdt defendant
is to compute the amount of the freight on the face of the bills of lading supporting the
statement of account attached to the complaint and deducting therefrom the rebates to
which defendant is entitled to under the special arrangement made between defendant
and Mr. F.J. Garay of Compania Maritima dated March 27, 1957. According to the
statement of account submitted by plaintiff and attached to the complaint, the total of
freight charges due from defendant is P698,159.14 (Annex "A" Complaint).

This is the amount due based on what is charged in the bills of lading. It did not reflect
the rebates because said bills of lading were prepared in the field offices of plaintiff
where the special arrangement entitling defendant to rebate had not been transmitted.

According to the report of the Commissioner, the total rebate to which defendant will
be entitled to is P127,418.89 (Supplementary Report dated January 27, 1964, Exhibit 7-
B). According to said Commissioner, he arrived at such amount in the following
manner:
"I selected the freightage from Davao comprised of 340 shipments from October 15,
1957, up to February 11, 1961. 340 shipments, and I used P4.50 as the freightage from
Davao to Manila. Now I used the P5.00 as you requested, and that is the difference."
In other words, the Commissioner summed up the total number of hogs involved in the
340 shipments from Davao which must be some 50,692 hogs. The difference was
arrived at, thus -

50,692 hogs multiplied by P5.00 per head


=
P253,460.00

less : 50,692 hogs multiplied by 4.50 per head


=
P228,114.00

P 25,346.00

The difference, (P25,346.00) subtracted from the original computation of P152,764.89


resulted to the reduced rebate of P127,418.89 (Supplementary Report, supra).

However, instead of merely verifying the accuracy of the above-stated computation, the
special rates, supra, accorded Limson was individually applied in computing the
freightage due from Limson's shipments, as itemized in the "Spread of Charges made to
Limson's account" (Commissioner's report, Exh. "7"), and arrived at the following:

Total freight charges (special rates used for


shipments from ports as provided for in
the Agreement) . . . . . . . . . . . . . . . . . . . . . . .

P517,842.30

Total freight charges (Limson's


shipments (rates used as com puted
in port of origin) from
ports other than those stated
in the Agreement . . . . . . . . . . . . . . . . . .

69,025.66
Total charges to Limson's
Account . . . . . . . . . . . . . . . . . . . . . . . . .

P 586,867.96

In other words, the total freight over-charges which may be due Limson is (P698,159.14
less P586,867.96) P111,291.18 and not P127,418.91 as reported by the Commissioner.

To be added to said rebate of P111,291.18 are the cash payment made by defendant of
P235,007.85, freight adjustment of P1,138.45 and cost of foodstuffs purchased by
plaintiff from defendant of P411,982.35 (from the total of P433,237.75 representing the
amount of said purchase deduct P21,255.40 which had been billed twice), all of which
would total P759,419.83. Deducting from said amount, the total of freight charges in
favor of plaintiff as per the statement of account attached as Annex "A" to the
complaint of P698,159.14 would give a balance of P61,260.69 in favor of defendant.

It may be noted that in his answer to the complaint defendant stated that the total of his
claim against plaintiff for the cost of foodstuffs delivered is P411,477.45 (par. 22,
Answer of Defendant, page 68, Record on Appeal).

Now, turning to defendant's sole assignment of error, namely, that the Trial Court erred
in declaring defendant liable in the amount of P166,867.20 representing the amount
covered by bills of lading where the originals had been presented.

With respect to defendant's sole assignment of errors, namely, that Court a quo erred in
declaring defendant liable in the amount of P166,867.28 which represents charges for
freight where the originals of the bills of lading were not submitted, We find merit in the
contention of plaintiff that the respondent Court correctly held defendant liable for said
amount because the same actually represented freight charges based on the carbon
originals of the ship's copy of the bills of lading where Limson appeared as consignee in
the amount of P84,529.42 and those based on the ship's cargo manifests, where
defendant appeared as consignee in the amount of P81,874.10. Respondent Court
admitted in evidence said copies of the bills of lading which were not considered by the
Commissioner because they are not actually the original copy of the bill of lading. The
Commissioner accepted only the originals of the bills of lading because he did not
consider even duplicate originals duly signed as originals. The ship's copies of the bills
of lading and the cargo manifests were substantiated by other supporting documents
whixh were found after the report of the Commissioner from among the records
salvaged from the San Nicolas bodega fire or which were found among the records kept
an plaintiff's terminal office. Said documents were presented in lieu of corresponding
original of the consignee's copy of bill of lading which could not be submitted to the
Commissioner nor presented as plaintiff's evidence to the Court because they were lost
or destroyed during the re-modelling of plaintiff's office building or during the fire at
plaintiff's bodega at San Nicolas where they were brought for safekeeping. All said
documents were presented as evidence to prove that all the freight charges for the
shipments evidence thereby were duly earned by plaintiff and were properly debited in
defendant's charge account. Apparently, the Commissioner rejected plaintiff's claims
which were not actually supported by the original of the bills of lading notwithstanding
the fact that duplicate original of the said documents and other secondary evidence such
as the ship cargo manifests have been presented as evidence. As stated above, witnesses
Cabling and Ilagan testified that the practice was that when the originals of the bills of
lading could not be surrendered because they have not yet been received by the
consignee, the delivery of the cargo was nevertheless authorized and a delivery receipt
was prepared on the basis of the ship's cargo manifests or the ship's copy of the bills of
lading. This only shows that the ship's cargo manifests or the ship's copy of the bills of
lading can be accepted as evidence of shipments made by defendant since he was
allowed to accept delivery of said shipments even without presented his copy of the bill
of lading.

By way of recapitulation, the total of freight charges due plaintiff based on the freight
charges appearing on the face of the bills of lading supporting the statement of account
attached to the complaint is P698,159.14. Deduct from said amount the following:

(1) Rebate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P111,291.18


(2) Cash payments made by defendant . . . . . . . . . . . . . . . 235,007.85
(3) Freight adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,138.45
(4) Cost of foodstuffs purchased from defendant . . . . . . . . 411,982.35

Total . . . . . . . . . . . . . . . . . . . . . . P759,419.83

would show a balance in favor of defendant of P61,260.69.

Presented otherwise, the total freight charges due plaintiff after deducting the rebate to
which defendant is entitled to is P586,867.96. (.698,159.14 minus P111,291.18).

Against said freight charges of P586,867.96 defendant should be credited:

(1) Cash payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P235,007.85


(2) Freight adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,138.45
(3) Cost of foodstuffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411,982.35

Total . . . . . . . . . . . . . . . . . . . . . P648,128.65

giving a balance in favor of defendant of P61,260.69.

WHEREFORE, the decision of the Court a quo is hereby MODIFIED and judgment
rendered against plaintiff on defendant's counterclaim for the amount of P61,260.69.
In all other respects, the appealed decision is hereby AFFIRMED. No pronouncement
as to cost.
SO ORDERED.

x--x

G.R. No. L-35366 August 5, 1931

THE PROVINCIAL FISCAL OF PAMPANGA, petitioner,


vs.
HERMOGENES REYES, Judge of First Instance of Pampanga, and ANDRES
GUEVARRA, respondents.

Provincial Fiscal Daza in his own behalf.


Monico R. Mercado for respondent judge.
Francisco Lazatin for respondent Guevarra.

VILLAMOR, J.:

The petitioner prays for a writ of mandamus to compel the respondent judge to admit
Exhibits A, B, C, and D (attached to the petition), as evidence for the prosecution in
criminal cases Nos. 4501 and 4502 of the Court of First Instance of Pampanga.

The provincial fiscal of Pampanga filed two informations for libel against Andres
Guevarra. The informations alleged that the defendant, with malicious intent, published
on page 9 of the weekly paper Ing Magumasid in its issue of July 13, 1930, a squib in
verse, of which a translation into Spanish was included therein, intended to impeach the
honesty, integrity, and reputation of Clemente Dayrit (information in criminal cause No.
4501) and of Mariano Nepomuceno (information in criminal cause No. 4502).

The defendant demurred on the ground of duplicity of informations, he having


published only one libelous article in the Ing Magumasid for July 13, 1930. The court
overruled the demurrer.

A joint trial was held of criminal cases Nos. 4501 and 4502. The fiscal attempted to
present as evidence for the prosecution, the aforementioned Exhibits A, B, C, and D,
which are copies of the Ing Magumasid containing the libelous article with the
innuendo, another article in the vernacular published in the same weekly, and its
translation into Spanish. Counsel for the defendant objected to this evidence, which
objection was sustained by the court.

The respondents answered the petition for mandamus, praying for its dismissal with
costs against the petitioner.
At the hearing of this case, both parties appeared and moved that they be allowed to
present memoranda in lieu of an oral argument, which memoranda are in the record.

The petitioner contends that the exhibits in question are the best evidence of the libel,
the subject matter of the information, and should therefore be admitted; while the
respondents maintain that, inasmuch as the libelous articles were not quoted in the
information, said evidence cannot be admitted without amending the information. The
prosecution asked for an amendment to the information, but the court denied the
petition on the ground that it would impair the rights of the defendant, holding that the
omission of the libelous article in the original was fatal to the prosecution.

The first question raised here is whether an information charging a libel published in an
unofficial language, without including a copy of the libelous article, but only a
translation into Spanish, is valid or not. It is true that in United States vs. Eguia and
Lozano (38 Phil., 857), it was stated: "The general rule is that the complaint or
information for libel must set out the particular defamatory words as published, and a
statement of their substance and effect is usually considered insufficient." But this
general rule does not exclude certain exceptions, such as, cases where the libel is
published in a non-official language. "When the defamation has been published in a
foreign tongue, it is proper, and in general, necessary, to set out the communication as it
was originally made, with an exact translation into English; and if from the translation
no cause of action appears, it is immaterial that the foreign words were actionable. In
some jurisdictions, however, under the influence of the liberality of laws on practice, it is
held unnecessary to set out the communication in the foreign language in which it is
alleged to have been published, so long as the foreign publication is alleged, with an
English translation attached." (37 C. J., 27, sec. 336.)

If the libelous article had been published in one of our official languages, English or
Spanish, it would have been necessary to follow the general rule; but since the article in
question was published in the Pampango dialect, it is sufficient to insert a Spanish
translation in the information. The justice of this exception to the general rule becomes
more evident if we consider a libelous article published, for instance, in Moro or
Chinese, who use characters different from our own.

The second question refers to the admissibility of the aforesaid exhibits. The general
rules regarding the admissibility of evidence are applicable to cases of libel or slander.
The evidence must be relevant, and not hearsay. (37 C.J., 151, sec. 688.) This being so,
the rule of procedure which requires the production of the best evidence, is applicable
to the present case. And certainly the copies of the weekly where the libelous article was
published, and its translation, constitute the best evidence of the libel charged. The
newspaper itself is the best evidence of an article published in it. (Bond vs. Central Bank
of Georgia, 2 Ga., 92.).

The respondent judge undoubtedly has discretion to admit or reject the evidence offered
by the fiscal; but in the instant case his refusal to admit such evidence amounts to an
abuse of that discretion, which may be controlled by this court by means of mandamus
proceedings. In so far as the jurisdiction of this court is concerned, we believe the
doctrine is applicable which was held in Orient Insurance Co. vs. Revilla and Teal Motor
Co. (54 Phil., 919), namely, that the Supreme Court has jurisdiction to entertain an
application for a writ of mandamus to compel a Court of First Instance to permit the
attorney of a litigant to examine the entire written communication, when part of the
same has been introduced in evidence by the other party.

Wherefore, the writ prayed for against the respondent judge of the Court of First
Instance of Pampanga should be issued, requiring him to admit Exhibits A, B, C, and D,
in question in criminal cases Nos. 4501 and 4502 of that court, and it is so ordered,
without special pronouncement of costs.

x--x

G.R. No. L-14257 July 31, 1959

THE PEOPLE OF THE PHILIPPINES, petitioner,


vs.
HON. BIENVENIDO A. TAN as Judge of the Court of First Instance of Manila. Br.
XIII, PACITA MADRIGAL-GONZALES, ANGELITA CENTENO, JULIA
CARPIO, CALIXTO HERMOSA, and CRISPULA R. PAGARAN alias PULA,
respondents.

Assistant Fiscal Apolinar Tolentino, Prosecutors Norberto J. Quisumbing and Antonio


Villegas for petitioner.
Gonzalo W. Gonzales and Bausa, Ampil and Suarez for respondent Pacita M. Gonzales.
Estanislao A. Fernandez for the other respondents.

LABRADOR, J.:

In Criminal Case No. 36885 of the Court of First Instance of Manila, respondents
Pacita Madrigal-Gonzales and others charged with the crime of falsification of the
public documents, in their capacities as public officials and employees, by having made it
appear that certain relief supplies and/or merchandise were purchased by Pacita
Madrigal-Gonzales for distribution to calamity indigents or sufferers, in such quantities
and at such prices and from such business establishments or persons as are made to
appear in the said public documents, when in fact and in truth, no such distributions of
such relief and supplies as valued and supposedly purchased by said Pacita Madrigal
Gonzales in the public and official documents had ever been made.

In order to prove the charge of falsification, the prosecution presented to a witness a


booklet of receipts, which was marked Exh. "D", containing value invoices numbered
101301 to 101400 of the Metro Drug Corporation, Magallanes corner Jakosalem, Cebu
City. The booklet contained the triplicate copies, and according to said witness the
original invoices were sent to Manila office of the company, the duplicates to the
customers, so that the triplicate copies remained in the booklet. Witness further
explained that in preparing receipts for sales, two carbons were used between the three
sheets, the original, the duplicate and triplicate so that the duplicates and the triplicates
were filed out by the use of the carbons in the course of the preparation and signing of
the originals. The witness giving the testimony was the salesman who issued a triplicates
marked as Exh. "D-1".

As the witness was explaining the figures or words appearing on the triplicates, Hon.
Bienvenido M. Tan, then presiding in the court below, interrupted the proceeding
holding that the triplicates are not admissible unless it is first proven that the originals
were lost and can not be produced. Said the court:

Triplicates are evidence when it is proven first that the original is lost cannot be
produced. But as the witness has alleged that the original is in the Manila Office, why
not produce the original?

Another witness, accountant of the Metro Drug Corporation in Manila, was also called
by the prosecution to testify. He declared that sales in the provinces were reported to the
Manila office of the Metro Drug Corporation, and that the originals of the sales
invoices are transmitted to the main office in support of cash journal sheets, but that the
original practice of keeping the original white copies no longer prevails as the originals
are given to the customers, while only the duplicate or pink copies are submitted to the
central office in Manila. Testifying on certain cash journal sheets, Exhs. "A", "A-1" to
"A-10" he further declared that he received these from the Metro Drug Corporation,
Cebu branch, and that the said cash journal sheets contained the sales made in the Cebu
branch.

After the cross-examination of this last witness, the prosecution again went back to the
identification of the triplicate invoice, Exh. "D-1", already above referred to. It was at
this stage that the judge below told the prosecution that the law applicable is Section 46,
Rule 123 of the Rules of Court, which requires the production of the originals. In
response to the above ruling, the special prosecutor claimed that the evidence of the
prosecution would not be able to secure the production of the originals on account of
their loss.

In view of the above circumstances, the prosecution announced its intention to file a
petition for certiorari against the ruling of the court below to which the court below to
which the court below agreed. Hence this petition.

It is alleged that the invoice sought to be introduced, which were produced by the use of
carbon sheets, and which thereby produced a facsimile of the originals, including the
figures and the signatures on the originals, are regarded as duplicate originals and may
introduced as such, even without accounting for the non-production of the originals.

The decision of the question is far from difficult. The admissibly of duplicates or
triplicates has long been a settled question and we need not elaborate on the reasons for
the rule. This matter has received consideration from the foremost commentator on the
Rules of Court thus:

"When carbon sheets are inserted between two or more sheets of writing paper so that
the writing of a contract upon the outside sheet, including the signature of the party to
be charged thereby, produces 2 facsimile upon the sheets beneath, such signature being
thus reproduced by the same stroke of the pen which made the surface or exposed
impression, all of the sheets so written on are regarded as duplicate originals and either
of them may be introduced in evidence as such without accounting for the
nonproduction of the others." (Moran, 1952 ed., p. 444.)

It has also been in favor of the petitioner by US in the case of People vs. Quinones, 44
Off. Gaz., No. 5, 1520, 1525, thus:

It is argued in the second assignment of error that the confession Exhibit B is not
admissible because it is merely a carbon copy. The said confession Exhibit B, being a
carbon copy of the original and bearing as it does the signature of the appellant, is
admissible in evidence and possess all the probative value of the original, and the same
does not require an accounting for the non-production of the original. (Sec 47, Rule 123,
Rules of Court).

Two principal authors on the law on evidence have sustained the theory of the
admissibility of duplicate originals, as follows:

SEC. 386. . . . the best evidence rule is that rule which requires the highest grade of
evidence obtainable to prove a disputed fact. p. 616. A "duplicate sales slip" (People vs.
Stone, 349 III. 52, 181 N. E. 648) has been held to be primary evidence, p. 616.

SEC. 420. Duplicate originals. Where letters are produced by mechanical means and,
concurrently with the original, duplicate are produced, as by placing carbon paper and
writing on the exposed surface at the same time, all are duplicate originals, and any one
of them may introduced in evidence without accounting for the nonproduction of the
other. Citing International Harvester Co. vs. Elfstrom, 101 Minn. 263, 112 N. W. 252.
See also 12 L.R.A.(N.S.) 343, People of Hauke, 335 II, 217, 167 N. E. 1; State vs. Keife,
165 La. 47, 115 So. 363; Taylor vs. Com. 117 Va. 909, 85 S.E. 499. (Wharton's Criminal
Evidence, Vol. I, p. 661).

SEC. 100. Carbon copies, however, when made at the same time and on the same
machine as the original, are duplicate originals, and these have been held to be as much
primary evidence as the originals. Citings U.S. vs. Manton, 107 Fed. (2d) 834, denied 309
U. S. 664, 84 L. ed. 1012; O'Shea vs. U.S. 93 F. (2d) 169; Leonard vs. State, 36 Ala. App.
397, 58 So. (2d) 138; State vs. Lee, 173 La. 770, 138 So. 662; Newman vs. State 65 Ga.
App. 288, 16 S. E. (2d) 87. (Underhill's Criminal Evidence, 5th ed., Vol. I, p. 168.)

We find that the ruling of the court below to the effect that the triplicates formed by the
used of carbon papers are not admissible in evidence, without accounting first for the
loss of the originals is incorrect and must be reversed. The court below is hereby
ordered to proceed in the trial of the case in accordance with this ruling. No cost. So
ordered.

x--x

G.R. No. L-17970 June 30, 1966

MARIA MAHILUM, SALVADOR MAHILUM, ANGEL MAHILUM, EMILIO


OGDIMAN, VICTORIO SALAZAR and TOMAS SALAZAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and GORGONIA FLORA DE SOTES,
respondents.

R. L. Mahilum and Res. A. Sobretodo for petitioners.


Angel C. Sepedoza for respondents.

MAKALINTAL, J.:

This is an action for partition and damages filed in the Court of First Instance of
Negros Occidental, where it was docketed as Civil Case No. 3822. Present respondent
Gorgonia Flora de Sotes was plaintiff, and present petitioners were defendants. The
latter's answer to the complaint contained a counterclaim, also for damages. The trial
court rendered judgment dismissing both the complaint and the counterclaim; but upon
appeal by plaintiff the Court of Appeals reversed as follows:

For the foregoing considerations, the judgment appealed from is hereby set aside and
another entered, ordering the partition of Lot No. 2195 of the Cadastral Survey of San
Carlos, Negros Occidental in accordance with the deed of sale (Exh. "D") and ordering
the receiver to deliver the funds in his possession to plaintiff who is hereby declared as
the rightful owner of a portion of 150,333 square meters of said Cadastral Lot No.
2195, without special pronouncement as to costs in this instance.

The case is now before us on petition for review filed by defendants.

The findings and conclusions of the appellate court are as follows:


It appears that one Pedro Mahilum was the registered owner of a parcel of land, known
as Lot No. 2195 of the Cadastral Survey of San Carlos, Negros Occidental, with an area
of 150,333 square meters, as evidenced by Original Certificate of Title No. RO-6024
(22893) (Exh. "1"). Upon the death of Pedro Mahilum in 1934, he was succeeded by his
six children, namely, Tomas, Juan, Clemente, Antonia, Juliana and Tomasa who on May
13, 1935, executed a "deed of definite sale" in favor of Gorgonia Flora, married to
Basilio Sotes, whereby in consideration of P2,000.00, receipt of which was
acknowledged by them, they had ceded and conveyed unto her

"A parcel of land (Lot No. 2195 Part of the Cadastral Survey of San Carlos (with
improvements thereon situated in sitio Calimbasan Bo. Lipat-on, Calatrava, bounded on
the North by Lots Nos. 2324, 2320, & 2862; on the East by Lots Nos. 2852, 2334, &
2197; on the South by Lots Nos. 2193, 2559, 2198 & 2197; and on the West by Lots
Nos. 2194 & 2196 Part of Maximina Antero, containing an area of 15 hectares, 03
ares and 33 centares, more or less (150,333 square meters) including 500 coconut trees
within said lot".

The vendors had acknowledged the deed of sale before Notary Public Nicolas D.
Destua.

It further appears that Gorgonia Flora, the herein plaintiff, had declared the contested
portion for taxation purposes and began paying the taxes therefor in 1936.1wph1.t

The Mahilums, however, claimed that they never sold any portion of the aforesaid Lot
No. 2195 of the San Carlos Cadastre. As a matter of fact, according to them, Original
Certificate of Title No. RO-6024 (22893) is free from any encumbrance whatsoever.
They further claimed that if plaintiff had been in possession of a portion of said lot, it
was a mere toleration on their part, but not an acknowledgment of her right if
ownership over the property. It may be mentioned in this connection that most of the
six children of the late Tomas Mahilum, only two were living at the trial of this case,
namely, Tomasa and Juan. According to Tomasa, neither she nor her brothers and sisters
appeared before notary public Nicolas Destua on May 18, 1935, much less
thumbmarked and/or signed the deed of sale (Exh. "D"). But could the lone testimony
of Tomasa overcome the probative value of a public instrument? The rule is well settled
that clear and positive evidence is necessary to destroy the credence of a public
instrument, especially so where, like in the instant case, the notary public who ratified
the deed of sale (Exh. "D") took the witness stand and categorically declared that

"Those are the genuine thumbmarks of Tomas, Antonia, Juan, Juliana and Tomasa and
this signature is the signature of Clemente Mahilum. (t.s.n., p. 31, Estadillo)."

And according to the plaintiff, only Clemente Mahilum affixed his signature on the
document, and they simply thumbmarked the same (t.s.n., p. 9 Estadillo). For these
reasons, the lone testimony of Tomasa Mahilum is insufficient to destroy the probative
value of the public document (Exh. "D") which, according to the trial court, came into
existence only in 1941, a conclusion that is not correct. For Juan Mahilum (three
surviving children of the late Pedro Mahilum) alleged in their complaint for "Annulment
of Contract of Definite Sale," dated March 11, 1955 filed in the Court of First Instance
of Occidental against Gorgonia Flora Vda. de Sotes (herein plaintiff)

"That the defendant (Gorgonia Flora Vda. de Sotes) on May 13, 1955, fraudulently
taking advantage of the illiteracy or incapacity of the plaintiff and their brothers and
sisters, Tomas, Clemente and Antonia who were then living, induced them to sign a
certain writing, which writing the defendant, in conspiracy with Notary Public, Nicolas
D. Destua ..., falsely and fraudulently represented to be an acknowledgment of debt of
plaintiffs father, Pedro Mahilum, but which is in fact a Definite Contract of Sale
disposing of Lot No. 2195 as aforesaid."

As the document (Exh. "D") which according to the court below came into existence
only 1941, is dated May 13, 1935, and entitled 'Deed of Definite Sale,' we can safely say
that it is the very document referred to in the aforequoted portion (Par. 5) of the
complaint (Exh. "Y"). For this reason, the lower court incurred an error when it stated
that the deed of sale (Exh. "D") came into existence only 1941. The trial court likewise
erred when it declared that no tax declaration was available when the deed of sale (Exh.
"D") was executed on May 13, 1935, for the first tax declaration Exhibit "A", was issued
only in 1941. In the first place, tax declaration No. 4995 (Exh. "A") was subscribed and
sworn to on Sept. 19, 1940, but the tax thereunder was to begin in 1941. Note that tax
declaration No. 4995 (Exh. "A") cancelled tax declaration No. 4232 in the name of
Gorgonia Flora (herein plaintiff) who paid the corresponding taxes in 1936 for the land
therein described and declared, identified as "Cadastral Lot No. 2195, part", the very
land of the deceased Pedro Mahilum. Similarly, in 1938, 1939, plaintiff had paid realty
tax under tax declaration No. 4232 (Pls. see Exhs. "C-1" & "C-2").

True enough that the deed of sale (Exh. "D") was not registered for twenty years, but
such fact does not destroy its efficacy and the party in whose favor it was executed is not
either barred from registering it now. For these reasons as well as those that have been
pointed out above, we hold and declare that the document (Exh. "D") is not fictitious
and fraudulent.

We are not, however, inclined to condemn defendants to pay any damages to plaintiff in
their attempt to assert their right of ownership over the portion of land in question that
stemmed from the clean title of their predecessor in interest, Pedro Mahilum.

Three errors are assigned by petitioners, namely:

(1) The Court of Appeals erred in not holding that the deed of sale (Exh. "D") is
inadmissible in evidence because it lacks the necessary documentary stamps.

(2) The Court of Appeals erred in not holding that the deed of sale (Exh. "D") could
not validly convey registered land because it is not signed by two disinterested witnesses.
(3) The Court of Appeals erred in not holding that the Original Title No. RO-6024 of
the herein Petitioners over Lot No. 2195 of San Carlos Cadastre is conclusive evidence
of ownership.

The first assignment of error is without merit. Exhibit D is a duplicate copy of the
original, signed and/or thumbmarked by the parties and acknowledged before notary
public Nicolas D. Destua. The stamps referred to by petitioners (and required by Section
238 of the Internal Revenue Code so that a public document may be admitted as
evidence) are supposed to be, and as a matter of practice actually are, affixed to the
original or first copy of the document and not to any of the duplicates or carbon copies
thereof. There is no evidence whatsoever that such practice was not observed in regard
to the deed of sale involved in this case, and consequently the presumptions that official
duty has been regularly performed, that private transactions have been fair and regular,
and that the regular course of business has been followed, must be applied (Sec. 69[q],
Rule 123; now Sec. 5, Rule 131). The burden is upon those who seek to destroy this
presumption to do so by convincing proof.

With respect to the contention that Exhibit D should not have been admitted as
evidence because it is only a copy and the non-production of the original has not been
explained, it should be pointed out that said exhibit is itself a signed carbon copy or
duplicate executed at the same time as the original. This is what is known as duplicate
original, and it may be introduced in evidence without accounting for the non-
production of the other copies.

The second assignment of error is likewise without merit. The requirement of two
witnesses to the execution of an instrument, as provided for in Section 127 of Act 496,
was complied with in Exhibit D. The notary public himself, Nicolas D. Destua, signed
the instrument as such witness, together with his wife, and there is nothing in the law
which prohibits a notary public from acting in that capacity.

Under the third assignment of error petitioners claim that Original Certificate of Title
No. RO-6024 is conclusive evidence of ownership. This is of course not disputed as the
registered owner of the land was the deceased Pedro Mahilum, who was succeeded by
his children and heirs upon his death in 1934. These are the persons who sold the land
in question to herein respondent in 1935. The fact that the deed of sale has not been
registered since then does not destroy its efficacy insofar as they and their own privies
are concerned. They delivered possession to said respondent, as found by the Court of
Appeals; and no superior rights of third persons have intervened.

The decision of the Court of Appeals is affirmed, with costs against petitioners-
appellants.

x--x
G.R. No. L-43955-56 July 30, 1979

RENATO LAZATIN alias RENATO STA. CLARA, petitioner,


vs.
HONORABLE JUDGE JOSE C. CAMPOS, JR., NORA L. DE LEON, BERNARDO
DE LEON, ARLENE DE LEON and IRMA L. VELOSO, respondents.

Ernesto T. Zshornack, Jr. for petitioner.

Jose W. Diokno Law Office private respondents the Leons.

Arturo E. Balbastro for privates respondent Veloso.

TEEHANKEE, J.:1wph1.t

The Court dismisses the petition which seeks to overrule respondent judge's orders
declaring that petitioner has failed to establish by competent evidence his alleged status
as an adopted child of the deceased Lazatin spouses and prays for judgment of this
Court "declaring as established the fact of (his) adoption as a son of the deceased
spouses entitling him to succeed in their estates as such." Respondent judge correctly
ruled that he could not allow petitioner (who had filed a motion to intervene in the
proceedings to probate the will of the late Margarita de Asis Vda. de Lazatin and to
settle her estate as her adopted son, after having earlier filed a motion to intervene in the
intestate proceedings of her pre-deceased husband as his admitted illegitimate [not
natural] son), over the opposition of private respondents, to introduce evidence that he
had "enjoyed ... the status of an adopted child of the without his first producing
competent and documentary that there had been judicial proceedings for his by the said
spouses which resulted in the final judgment of a competent court decreeing his
adoption.

On January 13, 1974, Dr. Mariano M. Lazatin diamond intestate in Pasay City, survived
by his wife, Margarita de Asis, and his adopted twin daughters, respondent Nora L. de
Leon, married to respondent Bernardo de Leon, and respondent Irma Lazatin, married
to Francisco Veloso.

One month after Mariano's death, his widow, Margarita de Asis, commenced an intestate
proceeding before the Court of First Instance of Pasay, docketed as Sp. Proc. No. 2326-
P. Mariano, Oscar, Virgilio and Yvonne, claiming to be admitted illegitimate (not natural)
children of Dr. Lazatin with one Helen Munoz, intervened. Subsequently, one Lily
Lazatin also intervened, claiming to be another admitted illegitimate (not natural) child.
Two months after or on April 11, 1974, the widow, Margarita de Asis, also died, leaving a
& holographic will executed on May 29, 1970, providing, among others, for a legacy of
cash, jewelry, and stocks to respondent Arlene de Leon, a granddaughter; a legacy of
support to Rodolfo Gallardo, a son of her late sister; and a legacy of education to
Ramon Sta. Clara, son of petitioner Renato Lazatin alias Renato Sta. Clara.

During her lifetime, Margarita de Asis kept a safety deposit box at the People's Bank and
Trust Company, Roxas Boulevard branch, which either she or respondent Nora L. de
Leon could open. Five days after Margarita's death, respondent Nora L. de Leon,
accompanied by her husband, respondent Bernardo de Leon, opened the safety deposit
box and removed its contents: (a) shares of stock; (b) her adoption papers and those of
her sister, respondent Irma L. Veloso; and (c) jewelry belonging to her and to her
mother. Respondent Nora L. de Leon claims that she opened the safety deposit box in
good faith, believing that it was held jointly by her and her deceased mother. Her sole
reason for opening the box was to get her stock certificates and other small items
deposited therein. When she was to close the deposit box, the bank personnel informed
her that she needed an authority from the court to do so, in view of her mother's death
and so, she removed everything from the box.

On June 3, 1974, private respondents filed a petition to probate the will of the late
Margarita de Asis, before docketed as Sp. Proc. No. 2341-P of respondent Court, Days
after having learned that respondent Nora L. de Leon had opened this safety deposit
box, petitioner's son, Ramon Sta. Clara, filed a motion in the probate court, claiming that
the deceased had executed a will subsequent to that submitted for probate and
demanding its production. He likewise prayed for the opening of the safety deposit box.
Respondent Nora L. de Leon admitted that she opened the box but there was no will or
any document resembling a will therein.

Upon the order of the probate court, presided over by Judge Arsenio B. Alcantara, the
safety deposit box was opened on November 6, 1974, at which time it was found to be
empty, because prior thereto respondent Nora L. de Leon had already removed its
contents.

On November 22, 1974, or seven months after, the death of Margarita de Asis,
petitioner intervened for the first time in the proceedings to settle the estate of the late
Dr. Mariano M. Lazatin (Sp. Proc. No. 2326- P), as an admitted illegitimate (not natural)
child.

Under the same date of November 22, 1974, petitioner's son, Ramon, filed a petition in
the estate proceedings of Margarita de Asis to examine private respondents on the
contents of the safety deposit box, Whereupon, on January 31, 1975, the probate court
ordered respondent Nora L. de Leon to deliver the properties taken from the safety
deposit box to the Clerk of Court. Subsequently, however, the two cases (Sp. Proc. No.
2326-P, Mariano Lazatin, and 2341-P, Margarita de Asis) were transferred to the sala of
respondent Judge Jose C. Campos, Jr.
On May 29, 1975, Judge Campos issued an order requiring counsel for respondents
Nora L. de Leon and Bernardo de Leon to produce all those papers and items removed
from the safety deposit box and to deliver the same to the custody of the court within
one week. Within the period ordered, respondent Nora L. de Leon deposited with the
Clerk of Court, not the items themselves, but two keys to a new safety deposit box
which could only be opened upon order of the court.

On August 20, 1975, petitioner Renato to Lazatin alias Renato Sta. Clara filed a motion
to intervene in the estate of Margarita de Asis, Sp. Proc. No. 2341-P, as an adopted child,
on the basis of an affidavit executed by Benjamin Lazatin, brother of the deceased Dr.
Mariano M. Lazatin, the petitioner was an "illegitimate son" of Dr. Lazatin and was later
adopted by him. This affidavit was later modified on August 19, 1975 to state that
petitioner was adopted by both Mariano M. Lazatin and his wife Margarita de Asis.

On September 29, 1975, Judge Campos found respondent' Nora L. de Leon guilty of
contempt of court for not complying with the orders of January 31, 1975 and May 29,
1975, requiring her to produce and deliver to the court an the papers and items removed
from the safety deposit box. Her former counsel was also found guilty of contempt,
sentenced to pay a fine of P00.00 and suspended from appearing in the two cases (Sp.
Proc. No. 2326-P, Mariano M. Lazatin, and Sp. Proc. No. 2341-P, Margarita de Asis), on
her testimony that she, Nora L. de Leon, acted upon his advice.

Respondent court heard petitioner's motion to intervene as an adopted son in the estate
of Margarita de Asis, Sp. Proc. No. 2341-P, at which hearings petitioner presented no
decree of adoption in his, favor. Instead, petitioner attempted to prove, over private
respondents' objections, that he had recognized the deceased spouses as his parents; he
had been supported by them until their death; formerly he was known as "Renato
Lazatin" but was compelled to change his surname to "Sta. Clara" when the deceased
spouses refused to give consent to his marriage to his present wife; that at first, he and
his wife stayed at the residence of Engracio de Asis, father of Margarita, but a few
months later, they transferred to the Mercy Hospital at Taft Avenue, Manila, owned by
the deceased spouses, where they continuously resided up to the present. Photographs
were also intended to be presented by petitioner, e.g., photograph of Irma Veloso where
she addressed herself as sister of petitioner; photograph of deceased Margarita de Asis
and petitioner when he was a boy; document showing that petitioners real name is
"Renato Lazatin." 1

Respondent court first reserved its ruling on private respondents' objections to the
admission of petitioner's evidence, but on November 14, 1975, when petitioner could
not present evidence on the issue of his alleged legal adoption, respondent court
discontinued the hearing and gave the parties time to file memoranda on the question of
the admissibility of the evidence sought to be introduced by petitioner.
On March 4, 1976, respondent court barred the introduction of petitioner's evidence
because: t.hqw

All the evidence submitted by Renato and Ramon Sta. Clara through their counsel do
not prove or have no tendency to prove the existence of any judicial proceeding where
the adoption of the parties above named were taken up by any court. Neither do the
evidence tend to establish the presence of any record of a proceeding in court where the
adoption of the above named persons was held. The evidence, however, tends to prove
a status of a recognized natural child which, however, is not the legal basis for which
Renato and Ramon seek to intervene in this proceedings. In view thereof, and taking
into consideration the evidence heretofore presented by the petitioners, any further
introduction of similar evidence, documentary or oral, would not prove or tend to prove
the fact of their adoption but rather of a recognized natural child.

Petitioner then filed on March 16, 1976, in both cases, a motion to declare as established
the fact of adoption in view of respondent Nora L. de Leon's refusal to comply with the
orders of respondent court to deposit the items she had removed from the safety
deposit box of Margarita de Asis. As authority therefor, petitioner invokes the sanction
of Rule 29, Section 3 of the Rules of Court, since according to him, the order of the
court for the production of the items in the safety deposit box can be considered as an
order for production and inspection of documents under Rule 27.

Private respondents opposed the motion, and on March 26, 1976, respondent court
denied petitioner's motion. On April 26, 1976, respondent Nora L. de Leon deposited
with respondent court the items she had removed from the safety deposit box. An
inventory was conducted by respondent court, with notice to the parties, and the items
surrendered consisted only of pieces of jewelry and stock certificates.

On June 3,1976, respondent court, ruling on petitioners motion for definite resolution
on his previous n declare as established the fact of adoption, issued the f order: t.
hqw

As far as the case of Renato Sta. Clara is his Petition to establish his status as an adopted
child, The Court has ruled that he has failed to establish such status. The any motion for
reconsideration unless based on some documentary proof.

Hence, the petition at bar.

We find the ruling of the respondent court to be in conformity with law and
jurisprudence.

1. Adoption is a juridical act, a proceeding in rem 2 which creates between two


persons a relationship similar to that which results from legitimate paternity and filiation.
3 Only an adoption made through the court, or in pursuance with the procedure laid
down under Rule 99 of the Rules of Court is valid in this jurisdiction. 4 It is not of
natural law at all, but is wholly and entirely artificial. 5 To establish the relation, the
statutory requirements must be strictly carried out, otherwise, the adoption is an absolute
nullity. 6 The fact of adoption is never presumed, but must be affirmatively proved by
the person claiming its existence. The destruction by fire of a public building in which
the adoption papers would have been filed if existent does not give rise to a
presumption of adoption nor is the destruction of the records of an adoption
proceeding to be presumed. On the contrary, the absence of a record of adoption has
been said to evolve a presumption of its non-existence. 7 Where, under the provisions
of the statute, an adoption is effected by a court order, the records of such court
constitute the evidence by which such adoption may be established. 8

2. Petitioner's flow of evidence in the case below does not lead us to any proof of
judicial adoption. We can not pluck from his chain of evidence any link to the real
existence of a court decree of adoption in his favor. Petitioner's proofs do not show or
tend to show that at one time or another a specific court of competent jurisdiction
rendered in an adoption proceeding initiated by the late spouses an order approving his
adoption as a child of the latter. No judicial records of such adoption or copies thereof
are presented or attempted to be presented. Petitioner merely proceeds from a nebulous
assumption that he was judicially adopted between the years 1928 and 1932. By what
particular court was the adoption decreed or by whom was the petition heard, petitioner
does not even manifest, much less show. There are no witnesses cited to that adoption
proceeding or to the adoption decree. Apparently on the assumption that the adoption
was commenced in Manila, petitioner's counsel secured a certification from the Court of
first Instance of Manila which, however, negatively reported "(T)hat among the salvaged
records now available in this Office, there has not been found, after a diligent search, any
record regarding the adoption of Mr. Renato Lazatin alias Renato Sta. Clara allegedly
filed sometime in the years 1928 to 1931 by the spouses Dr. Mariano M. Lazatin and
Margarita de Asis Lazatin." The certification of the Local Civil Registrar of Manila
"(T)hat our pre-war records relative to decisions of the Court of First Instance were
either destroyed or burned during the Liberation of the City of Manila," does not
furnish any legal basis for a presumption of adoption in favor of petitioner. This is
because there was no proof that petitioner was really adopted in Manila or that an
adoption petition was filed in the Court of first Instance of Manila by the deceased
spouses, where, after hearing, a judgment of approval was rendered by said court.
Moreover, if there was really such adoption, petitioner could have conveniently secured
a copy of the newpaper publication of the adoption as required under Section 4, Rule
99 of the Rules of Court (formerly Section 4, Rule 100) or a certification of the
publishing house to that effect. Petitioner's failure on this point is anotherer strong
indication of the non-existence of the one who gave the written consent of the non-
existence of the adoption paper. We also observed to the adoption (Section 3, Rule 99,
Rules of Court), whether the parents or orphanage, does not appear on this point is not
so difficult and such proof must be presented if only to prove the real existence of the
adoption. And of course, if the war, the clear right and duty of petitioner was to duly
reconstitute the records as provided by law.
3. The absence of proof of such order of adoption by the court, as provided by the
statute, cannot be substituted by parol evidence that a child has lived with a person, not
his parent, and has been treated as a child to establish such adoption. 9 Even evidence
of declaration of the deceased, made in his lifetime, that he intended to adopt a child as
his heir, and that he had adopted him, and of the fact that the child resided with the
deceased, as a member of his family, from infancy until he attained his majority, is not
sufficient to establish the fact of adoption. 10 Nor does the fact that the deceased
spouses fed, clothed, educated, recognized and referred to one like petitioner as an
adopted child, recognized and referred to one like petitioner as an adopted child,
necessarily establish adoption of the child. 11 Withal, the attempts of petitioner to prove
his adoption by acts and declarations of the deceased do not discharge the mandatory
presentation of the judicial decree of adoption. The thrust of petitioner's evidence is
rather to establish his status as an admitted illegitimate child, not an adopted child which
status of an admitted illegitimate child was the very basis of his petitioner for
intervention in the estate proceedings of the late Dr. Lazatin, as above stated. (Supra, at
page 3 hereof)

We do not discount though that declarations in regard to pedigree, although hearsay, are
admitted on the principle that they are natural expressions of persons who must know
the truth. 12 Pedigree testimony is admitted because it is the best that the nature of the
case admits and because greater evil might arise from the rejection of such proof than
from its admission. 13 But, in proving an adoption, there is a better proof available and
it should be produced. The whereabouts of the child's family and circulation of the
jurisdiction in which they resided and investigation in those courts where adoption are
usually granted would surely produce an adoption order, if indeed there was an order. 14
Besides, since the point in favor of receiving hearsay evidence upon matters of family
history or pedigree is its reliability, it has been set forth as a condition upon which such
evidence is received that it emanate from a source within the family. Pursuant to this
view, before a declaration of a deceased person can be admitted to prove pedigree, or
ancestry, the relationship of the declarant, by either of blood or affinity to the family in
question, or a branch thereof, must ordinarily be established by competent evidence. 15
Section 33 of Rule 130 states: "The act or declaration of a person deceased, or outside
of the Philippines, or unable to testify, in respect to the pedigree of another person
related to him by birth or marriage, may be received in evidence where it occurred
before the controversy, and the relationship between the two persons is shown by
evidence other than such actor declaration ..."

4. Secondary evidence is nonetheless admissible where the records of adoption


proceedings 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.
16 The sufficiency of the 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. 17 As earlier pointed out, petitioner failed to establish the former
existence of the adoption paper and its subsequent loss or destruction. Secondary proof
may only be introduced if it has first beer. established that such adoption paper really
existed and was lost. This is indispensable. 18 Petitioner's supposed adoption was only
testified to by him and is allegedly to be testified to a brother of the deceased Mariano
M. Lazatin or others who have witnessed that the deceased spouses treated petitioner as
their child. If adoption was really made, the records thereof should have existed and the
same presented at the hearing or subsequent thereto or a reasonable explanation of loss
or destruction thereof, if that be the case, adduced. 19

Assuming the mere fact that the deceased spouses treated petitioner as their child does
not justify the conclusion that petitioner had been in fact judicially adopted by the
spouses nor does it constitute admissible proof of adoption.

We cannot entertain the plea of petitioner that the sanction of Rule 29 should be
applied to consider as established the fact of his adoption due to the refusal of
respondent Nora L. de Leon to produce the document of adoption, because first, the
fact or real existence of petitioner's adoption had not been established; second, there is
no proof that such document of adoption is in the possession of respondent Nora L.
de Leon; third, the motu proprio order of the court for Nora de Leon to produce the
items retrieved from the safety deposit box cannot be treated as a mode of discovery of
production and inspection of documents under Rule 27; and fourth, the items deposited
in the safety deposit box have already been surrendered by respondent Nora L. de Leon
on April 26; 1976 and no document of adoption in favor of petitioner was listed as
found in the safety deposit box.

5. As a necessary consequence, petitioner Renato Lazatin alias Renato Sta. Clara


cannot properly intervene in the settlement of the estate of Margarita de Asis, Sp. Proc.
No. 2341-P as an adopted child because of lack of proof thereof. For one to intervene
in an estate proceeding, it is a requisite that he has an interest in the estate, either as one
who would be benefited as an heir or one who has a claim against the estate like a
creditor. 20 A child by adoption cannot inherit from the parent creditor. by adoption
unless the act of adoption has been done in strict accord with the statue. Until this is
done, no rights are acquired by the child and neither the supposed adopting parent or
adopted child could be bound thereby. 21 The burden of proof in establishing adoption
is upon the person claiming such relationship. He must prove compliance with the
statutes relating to adoption in the jurisdiction where the adoption occurred. 22 A
fortiori if no hereditary interest in the estate can be gained by a claimant who failed to
submit proof thereof, whether the will is probated or not, intervention should be denied
as it would merely result in unnecessary complication. 23 To succeed, a child must be
ligitimate, legitimated, adopted, acknowledged illegitimate natural child or natural child
by legal fiction or recognized spurious child. 24

In the face of the verified pleadings of record (constituting judicial admissions) which
show that petitioner sought to intervene on November 22, 1974 in the estate
proceedings of his alleged adoptive father Dr. Mariano M. Lazatin (Sp. Proc. No. 2326-
P) as an admitted illegitimate (not natural) child, 25 while his intervention on August 20,
1975 in the estate of Margarita de Asis, widow of the deceased Dr. Lazatin (Sp. Proc.
No. 2341-P) was as her adopted child on the basis of the affidavit of a brother of the
deceased Dr. Lazatin, Benjamin Lazatin, executed August 19, 1975 (which affidavit
modified a first affidavit executed on May 31, 1975, which failed to estate by "oversight"
petitioner, but stated that affiant knew petitioner to be "an illegitimate son" of Dr.
Lazatin who later "legally adopted (him) as a son before the Court of First Instance of
Manila sometime between the years 1928 and 1921") and prescinding from the question
of whether a natural or spurious child may be legally adopted by the putative father, we
hold that no grave abuse of discretion nor error of law as committed by respondent
judge in issuing the questioned orders of March 4, 1976, March 26, 1976 and June 3,
1976 denying petitioner's petition "to declare as established in this proceeding the fact of
adoption" and denying "any motion for reconsideration unless based on some
documentary proof." The Court finds no basis to grant the affirmative relief sought in
this proceeding by petitioner for a rendition of judgment "declaring as established the
fact of your petitioner's adoption as a son of the deceased spouses entitling him to
succeed in their estates as such in accordance with the applicable law on succession as to
his inheritance."

Upon the filing of the petition, the Court issued on June 16, 1976 a temporary
restraining order; which as amended on July 21, 1976, restrained respondent judge "from
proceeding with the hearing scheduled on June 17, 1976 at 8:30 a.m., requiring the
submission of evidence to establish heirship in Special Proceedings No. 2326-P entitled
'Intestate Estate of the Late Mariano M. Lazatin' and Special Proceedings No. 2341-P,
entitled 'Testate Estate of the late Margarita de Asis Vda. de Lazatin,' and from
proceeding with the probate of the alleged holographic will of the deceased Do;a
Margarita de Asis Vda. de Lazatin scheduled on June 29, 1976, August 10 and 12, 1976
and on any other dates." With the Court's determination of the issues as herein set
forth, there is no longer any need for restraining the proceedings below and the said
restraining order shall be immediately lifted.

On January 24, 1977, the Court upon petitioner's motion resolved to conditionally allow
respondent judge "to take the deposition of petitioner's witnesses to perpetuate their
testimonies pursuant to Rule 134, Section 7 of the Rules of Court, subject to the Court's
ruling in due course on the admissibility of such testimonies." The Court thereby
permitted in effect the advance testimonies of petitioner's witnesses, principally among
them Rafael Lazatin and Esteban L. Lazatin, both brothers of the deceased Dr. Mariano
L. Lazatin and as stated in petitioner's motion of January 11, 1977: t.hqw

Substantially, the testimony of the above-named witnesses will be on the fact that they
had been informed by the deceased spouses, Mariano and Margarita Lazatin that your
petitioner was their [Mariano's and Margarita's] judicially adopted son and to elicit
further from them the fact that your petitioner enjoys the reputation of being their
judicially adopted son in the Lazatin family.
The Court's resolution allowing the advance testimonies of petitioner's witnesses was
but in application of the Court's long standing admonition to trial courts is reaffirmed in
Lamagan vs. De la Cruz, 26, "to be liberal in accepting proferred evidence since even if
they were to refuse to accept the evidence, the affected party will nevertheless be allowed
to spread the excluded evidence on the record, for review on appeal." The Court therein
once again stressed the established rule that "it is beyond question that rulings of the
trial court on procedural questions and on admissibility of evidence during the course of
the trial are interlocutory in nature and may not be the subject of separate appeal or
review on certiorari, but are to be assigned as errors and reviewed in the appeal properly
taken from the decision rendered by the trial court on the merits of the case," 27 and
that a party's recourse when proferred evidence is rejected by the trial court is to make a
offer stating on the record what a party or witness would have testified to were his
testimony not excluded, as well as to attach to the record any rejected exhibits.

At the continuation of the proceedings below for declaration of heirship and for
probate of the alleged holographic the deceased Margarita de Asis Vda. de Lazatin, pet
who has failed to establish his status as an alleged ;m child of Margarita de Asis (unless,
as reserved to him by the court below, he can show some documentary proof),and
whose intervention in the estate of the deceased Dr. Mariano Lazatin is as an admitted
illegitimate child, win have to decide whether he will pursue his first theory of having the
of such admitted illegitimate child of said deceased. Whatever be his theory and his
course of action and whether or not he may be duly snowed to intervene in the
proceedings below as such alleged admitted illegitimate child, his recourse in the event
of an adverse ruling against him is to make a formal offer of proof and of his excluded
evidence, oral and documentary, and seek a reversal on an appeal in due course.

ACCORDINGLY, the petition is dismissed and the questioned orders denying


petitioner's petition below "to declare as established in this proceeding the fact of [his]
adoption" are hereby affirmed. The temporary restraining order issued on June 16, 1976
and amended on July 21, 1976 is ordered lifted, effective immediately. Without costs.

SO ORDERED.

x--x

G.R. No. L-10824 December 24, 1915

E. MICHAEL & CO., INC., plaintiff-appellant,


vs.
ADRIANO ENRIQUEZ, defendant-appellee.
Sepulveda, Pelaez and Espina for appellant.
No appearance for appellee.

MORELAND, J.:

This is an appeal from a judgment of the Court of First Instance of Cebu dismissing
the action after trial on the ground that the plaintiff did not prove facts sufficient to
constitute a cause of action.

We are of the opinion that the judgment must be reversed and a new trial ordered.itc-
a1f

The action is based on a sale with a right to repurchase made by Adriano Enriquez in
favor of E. Michael and E. Michael & Co., sociedad en comandita, of which appellant
claims to be the successor, by reason of an instrument, duly executed and delivered by
said companies to appellant, transferring property, business and assets of every kind,
including the land which is the subject of this litigation. It is alleged in the complaint
that the time to repurchase having expired, the title to the property became absolute in
appellant and that it is accordingly the owner of the land described in said instruments.
On the trial appellant sought to prove the execution and delivery of the conveyance
transferring to it the land described in the sale with right to repurchase. The trial court
prevented appellant from the proving the fact. Appellant also attempted to prove the
fact that the instrument so executed and delivered was lost, it being his purpose to lay
the basis for the introduction of secondary evidence as to its contents. The trial court
also prevented appellant from proving that fact.

While the efforts of appellant's counsel to prove the execution and delivery were at
times rather informal and inartificial and objections to such questions were properly
sustained, at others the questions put for the purpose of proving those facts were well
framed and answer should have been allowed to them; but, even in such cases, the trial
court also sustained objections to the questions and the evidence sought to be adduced
was excluded. The same may be said with respect to the attempts to establish the loss of
the document. Exceptions were taken by plaintiff's counsel to all adverse rulings of the
court respecting the admission of evidence tending to establish the execution and
delivery and the subsequent loss of the document in question, thus laying them proper
foundation for the bringing up the rulings of the court on those matters.

Trial courts do well in refusing at all times to permit the introduction of incompetent
evidence and particularly secondary evidence of the contents of written instruments
unless the facts required by the Code of Civil Procedure as the conditions precedent for
such evidence are clearly shown to exist. Section 321 of the Code provides: "An original
writing must be produced and proved, except as otherwise provided in this Act. If it has
been lost, proof of the loss must first be made before evidence can be given of its
contents. Upon such proof being made, together with proof of the due execution of
the writing, its contents may be proved by a copy or by a recital of its contests in some
authentic document, or by the recollection of a witness."

As will be seen from this section, the writing itself must be produced unless it has been
lost or destroyed in which case, before its contents may be proved by other evidence, it
must be shown by the person offering the secondary evidence (1) that the document was
duly executed and delivered, where delivery is necessary, and (2) that it has been lost or
destroyed. The execution and delivery of the document may be established by the
person or persons who executed it, by the person before whom its execution was
acknowledged, pr by any person who was present and saw it executed and delivered or
who, after its execution and delivery, saw it and recognized the signatures; or by a person
to whom the parties to the instruments had previously confessed the execution thereof.
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 anyone who has
made, in the judgment of the court, a sufficient examination in the place 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. If
it appears, on an attempt to prove the loss, that the document is in fact in existence, then
the proof of the loss or destruction fails and secondary evidence is inadmissible unless
section 322 of the Code of Civil Procedure should be applicable. After proper proof of
the due execution and delivery of the instrument and its loss or destruction, oral
evidence may be give of its contents by any person who signed the document, or who
read it, or who heard it read knowing, or it being proved from other sources, that the
document so read was the one in question. Such evidence may also be given by any
person who was present when the contents of the document were talked over between
the parties thereto to such an extent as to give him reasonably full information as to its
contents; or the contents may be proved by any person to whom the parties to the
instrument have confessed or stated the contents thereof; or by a copy thereof; or by a
recital of its contents in some authentic document.

Objections were sustained by the trial court to several question put by appellants counsel
relative to the due execution and delivery of the instrument of transfer between the
partnership of E. Michael & Co., sociedad en comandita, and appellant, on the ground
that counsel, in an attempt to identify the document to which his question referred,
described or characterized it as an instrument of transfer or cession. Counsel, if he had
desired to identify the instrument to which the question referred, might have done
better, perhaps, if he asked the witness if he knew of the execution of an instrument
between appellant and its predecessor in interest relating to the lands described in the
complaint or to the property and business of E. Michael & Co., sociedad en comandita,
instead of asking him if he knew of the execution of a document between appellant and
his predecessors in interest transferring the lands in question, or the property and
business of E. Michael & Co., sociedad en comandita, the appellant. Having obtained an
affirmative answer to the question indicated counsel could then have shown how the
witness came to know of the execution or existence of the document, and, if such
circumstances disclosed that the witness was sufficiently acquainted with the facts, he
would have been allowed to testify to its execution and delivery. After this had been done
the document might then have been presented for identification and when identified,
offered in evidence. If its contents showed that it referred to the lands described in the
complaint, its admissibility would have been instantly evident.

The mere fact that counsel for appellant, in putting his question to the witness,
characterized or described the instrument as one of transfer, while objectionable, was
not sufficient to cut him off altogether from proving the execution and delivery of the
document if other requisites were present. While it is always best to avoid
characterizations of that kind, its harm is minimized where the case is tried before a
court instead of a jury, the court well knowing that it cannot accept the characterization
as evidence but must go to the document itself or the evidence of its contents to
determine its nature and legal effect. Trial courts should not be so strict with reference
to matters of the character under discussion as to cause a miscarriage of justice; but on
the other hand, they should see to it that they are not impose on by the introduction of
fabricated testimony and that injustice shall not result from an evasion of the rules of
evidence by designing persons.1awphil.net

We are of the opinion on the whole record that proper questions, tending to the
production of very material and competent evidence, were put by plaintiff's counsel,
objections to which were sustained by the trial court; and that the error thus committed
was not cure by subsequent questions and answers or by the introduction of the same
evidence in different manner or form.

The judgment must be reversed and a new trial ordered without costs in this instance. So
ordered.

x--x

G.R. No. L-4974 May 16, 1969

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
JOSE LAVA, ET AL., defendants-appellees.

-----------------------------

G.R. No. L-4975 May 16, 1969

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
LAMBERTO MAGBOO, ET AL., defendants-appellants.

-----------------------------

G.R. No. L-4976 May 16, 1969

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
SIMEON G. RODRIGUEZ, ET AL., defendants-appellees.

-----------------------------

G.R. No. L-4977 May 16, 1969

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
HONOFRE MANGILA, ET AL., defendants-appellants.

-----------------------------

G.R. No. L-4978 May 16, 1969

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
MAGNO PONTILLERA BUENO, ET AL., defendants-appellees.

Office of the Assistant Solicitor General Pacifico P. de Castro and Solicitor Jorge Coquia
for plaintiff-appellee.
Recto Law Office, Juan T. David, Crispin D. Baizas and Delgado, Flores, Macapagal and
Dizon for defendant-appellant Jose Lava.
Cipriano C. Manansala for defendants-appellants Federico Maclang, Lamberto Magboo,
Honofre D. Magila, Marcos Medina, Cenon Bungay and Magno P. Bueno.
R. M. Paterno for defendants-appellants Marciano de Leon and Cesareo Torres.
Irineo M. Cabrera for defendant-appellant Iluminada Calonje.
Salonga, Ordoez and Associates for defendants-appellants Angel Baking and Arturo
Baking.
Jose P. Laurel Law Office for defendant-appellant Simeon Rodriguez.
J. Antonio Araneta, Claudio Teehankee and Manuel O. Chan for defendant-appellant
Federico Bautista.
Ismael T. Torres for defendant-appellant Felipe Engreso.
Meliton Soliman for defendant-appellant Nicanor Razon, Sr.

ZALDIVAR, J.:
These are appeals from the joint decision of the Court of First Instance of Manila in its
Criminal Cases Nos. 14071, 14082, 14270, 14315 and 14344.

In Criminal Case No. 14071, the defendants were Jose Lava, Federico Bautista, Federico
Maclang, Ramon Espiritu, Salome Cruz y Adriano, Rosario C. viuda de Santos and
Angel Baking. The appeal from the decision in this case is now in G.R. No. L-4974
before this Court.

In Criminal Case No. 14082, the defendants were Lamberto Magboo, Nicanor Razon,
Sr., Esteban Gonzales y la Torre, Marcos Medina, Cesario Torres, Rosenda Canlas Reyes,
and Arturo Baking y Calma. The appeal from the decision in this case is now in G.R.
No. L-4975 before this Court.

In Criminal Case No. 14270, the defendants were Simeon Gutierrez y Rodriguez, Julita
Rodriguez y Gutierrez, and Victorina Rodriguez y Gutierrez, and Marciano de Leon.
The appeal from the decision in this case is now in G.R. No. L-4976 before this Court.

In Criminal Case No. 14315, the defendants were Honofre D. Mangila and Cenon
Bungay y Bagtas. The appeal from the decision in this case is now in G.R. No. L-4977
before this Court.

In Criminal Case No. 14344 the defendants were Magno Pontillera Bueno, Nicanor
Capalad, Rosalina Quizon, Pedro Vicencio, Julia Mesina, Felipe Engreso, Elpidio Acuo
Adime, Josefina Adelan y Abusejo, Conrado Domingo, Aurora Garcia, and Naty Cruz.
The appeal from the decision in this case is now in G.R. No. L-4978 before this Court.

All the above-named defendants were charged with having committed the complex
crime of rebellion with murders and arsons under an identical information, filed in each
of the five cases, which reads as follows: .

That on or about the 6th day of May, 1946, and for sometime prior and subsequent
thereto and continuously up to the present time, in the City of Manila, the seat of the
Government of the Republic of the Philippines which the herein accused have intended
to overthrow, and the place they have chosen for that purpose as the nerve center of all
their rebellious activities in the different parts of the country, the said accused being
then high ranking officers or otherwise members of the Communist Party of the
Philippines (PKP) of which the "Hukbong Mapagpalaya ng Bayan" (HMB) otherwise or
formerly known as the Hukbalahap (Huks), is its armed forces, having come to an
agreement and decided to commit the crime of rebellion, and therefore, conspiring and
confederating together, acting with many more others whose whereabouts and identities
are still unknown up to the filing of this information, and helping one another, did then
and there willfully, unlawfully, and feloniously promote, maintain, cause, direct and/or
command the Hukbong Mapagpalaya ng Bayan (HMB) or the Hukbalahaps (Huks) to
rise publicly and take arms against the Government or otherwise participate therein for
the purpose of overthrowing the same, as in fact the said Hukbong Mapagpalaya ng
Bayan or Hukbalahaps (Huks) have risen publicly and taken arms against the
Government, by then and there making armed raids, sorties and ambushes, attacks
against police, constabulary and army detachments, and as a necessary means to commit
the crime of rebellion, in connection therewith and in furtherance thereof, by then and
there committing wanton acts of murder, spoilage, looting, arson, planned destruction
of private and public buildings, to create and spread terrorism in order to facilitate the
accomplishment of the aforesaid purpose, as follows, to wit:

(1) On May 6, 1946, the 10th MPC Co. led by First Lt. Mamerto Lorenzo while on
patrol duty in the barrio of Santa Monica, Aliaga, Nueva Ecija, was with evident
premeditation on the part of the huks ambushed and treacherously attacked by a band
of well-armed dissidents or rebels. Ten enlisted men of the MP company were killed.
First Lt. Mamerto Lorenzo was captured and beheaded by the rebels.

(2) On August 6, 1946, a group of more than 30 Huks under the leadership of Salvador
Nolasco armed with guns of different calibers raided the municipal building of Majayjay,
Laguna. They were able to get one Garand, one carbine, one Thompson GMG, and one
pistol. They also took one typewriter and stationery (NR Laguna, dated Sept. 2, 1946).

(3) On April 10, 1947, 14 EM under the command of Lt. Pablo C. Cruz, while on their
way to investigate a holdup in the barrio of San Miguel na Munti, Talavera, Nueva Ecija
were with evident premeditation and treachery on the part of the Huks ambushed and
fired upon by Huks armed with 30-caliber rifles, machine guns, and grenades. Lt. Pablo
Cruz and Pvt. Santiago Mercado were killed and 6 others were wounded.

(4) On May 9, 1947, Huks numbering around 100 under Lomboy and Liwayway raided
the town proper of Laur and forced Municipal Treasurer Jose A. Viloria to open the
treasury safe and obtained therefrom more than P600. Policeman Fermin Sanchez was
taken by the bandits with one Springfield rifle. Bandits robbed the towns people of their
money, personal belongings, rice and carabaos (WITR May 10, 1947). .

(5) On August 19, 1947, Capt. Jose Gamboa, First Lt. Celestino Tiansec, and Second Lt.
Marciano Lising, all from the 115th Co., while riding in a jeep following an armored car,
were treacherously fired upon by a group of about 100 dissidents armed with automatic
rifles, Thompsons, and Garands and lined up on both sides of Highway No. 5 near the
cemetery of San Miguel, Bulacan. First Lt. Celestino Tiansec and Second Lt. Marciano
Lising were killed.

(6) In or about the month of June, 1946, Alejandro Viernes, alias Stalin, commander of
Joint Forces No. 108 with about 180 men, entered the town of Pantabangan, Nueva
Ecija, and raised their Huk flag for more than twenty-four hours. The Municipal officials
did not offer any resistance because of the superiority in number of the Huks. After
demanding from the civilians foodstuffs such as rice, chickens, goats, and carabaos, they
left the town, admonishing the civilians always to support the Huk organization. The
MP forces under Capt. Ponciano Hanili, S-3, Capt. Federico C. Olares, then Asst. S-3, of
Nueva Ecija province, proceeded to Pantabangan with forces of the 112th MP Co.
under Capt. Nicanor Garcia, to verify the information, but were not able to contact the
dissidents at Pantabangan. They proceeded to the barrio of Marikit, between
Pantabangan and Laur, where they engaged some dissidents. When our forces were on
their way home, they were pocketed by the dissidents at the zigzag road, but owing to
the initiative of our forces, they were able to extricate themselves from their precarious
position and were able to fire their mortars and Cal. 50 and .30 machineguns.
Investigations made on the field of battle showed that the Huks suffered heavy
casualties which was verified later to have been seven cart loads of dead men. (Special
Report, PC Nueva Ecija, dated February 23, 1948.)

(7) Mrs. Aurora Aragon Quezon and party were with evident premeditation and
treachery on the part of the Huks ambushed at about 10:30, 28 April 49 by an
undetermined number of dissidents under Commanders Viernes, Marzan, Lupo and
Mulong at kilometer 62, barrio Salubsob, Bongabong, Nueva Ecija. PC escort exchanged
fire with the dissidents. Patrol of the First Heavy Weapons Company, 1st PC Battalion
was dispatched to reinforce the PC escort. The following persons were killed: Mrs.
Quezon, Baby Quezon, Mayor P. Bernardo, Major P. San Agustin, A. San Agustin, Lt.
Lasam, Philip Buencamino III, and several soldiers. General Jalandoni and Capt.
Manalang sustained slight wounds.

(8) On August 25, 1950, Camp Macabulos, Tarlac, Tarlac was attacked, raided and set fire
to and among the casualties therein were Major D. E. Orlino, Capt. T. D. Cruz, Lt. G. T.
Manawis, Lt. C. N. Tan, Lt. Eusebio Cabute, Sgt. Isabelo Vargas, Sgt. Bernardo Cadoy,
Sgt. Bienvenido Bugay, Sgt. Samuel Lopez, Cpl. Vicente Awitan, Cpl. Ruiz Ponce, Cpl.
Eugenio Ruelra, Pvt. Agustin Balatbat, Saturnino Guarin, E. Cabanban, Antonio Monte,
Felix Quirin, Gregoria Balcoco, Jose Mojica, Cornelio Melegan, Carlos Bojade, Rodrigo
Espejo and Rosario Sotto, a Red Cross nurse.

Counsel for defendants Jose Lava and Federico Bautista filed a motion to quash the
information against them upon the grounds that the information did not conform to the
prescribed form, that it charged the defendants with more than one offense, and that the
court had no jurisdiction over the offense charged. Also filed was a petition for
provisional liberty under bail of 14 of the defendants, upon the grounds that (1) the
evidence of guilt was not strong and (2) the suspension of the writ of habeas corpus
under Proclamation No. 210, dated October 22, 1950, by the President of the
Philippines was unconstitutional. Both motion and petition were denied by the trial
court in an order dated November 1, 1950.

Upon agreement of the prosecution and the defense, and with the conformity of all the
defendants, the five cases were tried jointly, with the understanding that each defendant
could present his/her separate and independent defenses. Notwithstanding the fact that
several witnesses had already testified in the first two cases (Criminal Cases Nos. 14071
and 14082) at the time the other three cases (Criminal Cases Nos. 14270, 14315 and
14344) were filed, the defendants in the latter three cases expressed their conformity to a
joint trial with the first two cases and agreed that the evidence already taken in the first
two cases be reproduced in the latter three cases.

While the joint trial was being held, the prosecution, after a reinvestigation of the cases,
moved that the case with respect to defendant Julia Mesina be dismissed upon the
ground of insufficiency of evidence. After the trial and before the cases were submitted
for decision, the prosecution also moved for the dismissal of the case against defendant
Rosenda Canlas Reyes upon the ground that the evidence on record was not sufficient to
support her conviction. Both motions were granted by the trial court.

After the joint trial, the trial court rendered a joint decision in the five cases, dated May
11, 1951.

In Criminal Case No. 14071, the court found defendants FEDERICO MACLANG alias
Eto alias O. Beria alias Olibas alias Mariano Cruz alias Ambrosio Reyes alias Manuel
Santos; RAMON ESPIRITU alias Johnny alias Ka Johnny; ILUMINADA CALONJE
alias Salome Cruz alias Luming; JOSE LAVA alias Harry alias Felix Cruz alias Gaston
Silayan alias Gaston alias Gregorio Santayana alias Greg alias Gavino; FEDERICO M.
BAUTISTA alias Freddie alias Fred; ANGEL BAKING alias Angel alias Boriz alias
Bayan; and ROSARIO VDA. DE SANTOS alias Charing, guilty as principals of the
complex crime of rebellion with multiple murder, arsons, and robberies, and pursuant to
Article 248, subsections 1 and 3 of the Revised Penal Code, in connection with its
Article 48, sentenced defendants Federico Maclang, Ramon Espiritu and Iluminada
Calonje to the capital penalty of death; and defendants Jose Lava, Federico M. Bautista,
Angel Baking, and Rosario C. Vda de Santos to reclusion perpetua. The defendants were
also ordered to pay the costs in this case.

In imposing the death penalty upon Federico Maclang, Ramon Espiritu and Iluminada
Calonje, the court took into consideration not only the very nature of the crime
committed but also the aggravating circumstance that the said three defendants secured
the aid of persons under 15 years of age in the commission of the crime.

In Criminal Case No. 14082, the court found defendants CESAREO TORRES alias
Cesareo Yacat, alias Leo alias Leodones; ARTURO BAKING Y CALMA alias Arturo C.
Baking alias A. C. Baking alias Arturo Calma Baking alias Eduardo Santos, and
MARCOS MEDINA alias Hiwara guilty as principals of the complex crime of rebellion
with multiple murder, arsons, and robberies and sentenced the said defendants to
reclusion perpetua. The court also found defendants LAMBERTO MAGBOO alias
Berting alias Eddie and NICANOR RAZON, SR., alias Elias Ruvi, as accomplice in the
commission of the said crime and were sentenced to an indeterminate prison term of
ten (10) years of prision mayor as minimum to seventeen (17) years of reclusion
temporal as maximum.
The court did not find sufficient evidence to establish the guilt of the defendant
ESTEBAN GONZALES Y LA TORRE, alias Esteban La Torre Gonzales, either as
principal or accomplice in the commission of the said crime. The court, however, found
him guilty as member of the Communist Party in the Philippines, which is an illegal
association, and pursuant to Article 147 of the Revised Penal Code, the said defendant
was sentenced to four (4) months of arresto mayor. All the defendants were ordered to
pay costs.

In Criminal Case No. 14270, the court found defendants SIMEON GUTIERREZ Y
RODRIGUEZ alias Simeon Rodriguez alias Sammy alias S. G. R. alias Lakindanum;
MARClANO DE LEON Y ESPIRITU alias Marciano E. de Leon alias Marcial alias
Mar, guilty as principals in the commission of the complex crime of rebellion with
multiple murder, arsons, and robberies; and JULITA RODRIGUEZ Y GUTIERREZ
alias Judith alias Juling alias Juliet alias Julie, as accomplice in the commission of the said
crime, and sentenced defendants Simeon Gutierrez y Rodriguez, and Marciano de Leon
y Espiritu to reclusion perpetua; and defendant Julita Rodriguez y Gutierrez to an
indeterminate prison term of ten (10) years of prision mayor as minimum to seventeen
(17) years of reclusion temporal as maximum. These defendants were ordered to pay the
costs.

The court acquitted defendant VICTORINA RODRIGUEZ Y GUTIERREZ alias


Vicky alias Toring.

In Criminal Case No. 14315, the court found defendants CENON BUNGAY Y
BAGTAS alias Ruping alias Commander Ruping alias Bagtas and HONOFRE D.
MANGILA alias Onofre Mangila alias Tommy alias Miller guilty as principals of the
complex crime of rebellion with multiple murder, arsons and robberies, and pursuant to
the provision of Article 48 of the Revised Penal Code the said defendant Cenon Bungay
y Bagtas and Honofre D. Mangila were sentenced to death. In arriving at this decision
the court took into consideration the gravity of their participation in the said complex
crime, the first being a Huk squadron commander, who led and took part in several raids
and ambuscades conducted by the HMB and caused the killing of Major Leopoldo
Alicbusan of the PC Detachment at San Pablo City, Laguna, and the second (Mangila)
being a member of the powerful Central Committee of the Communist Party in the
Philippines, which elects the Politburo members. The said defendants were also ordered
to pay the costs.

In Criminal Case No. 14344, the court found defendant MAGNO PONTILLERA
BUENO alias Magno Bueno alias Mamerto Banyaga alias Narding, guilty as principal of
the complex crime of rebellion with multiple murder, arsons, and robberies and
sentenced the said defendant to death. The court, likewise found defendants
ROSALINA V. QUIZON alias Regina Quiambao; PEDRO VICENCIO alias Pedring;
FELIPE ENGRESO alias Ipe; JOSEFINO ADELAN Y ABUSEJO alias Fely;
ELPIDIO ACUO ADIME alias Rolly, alias Rolly Enriquez alias Rol alias Pidiong, and
NATY CRUZ alias Natie alias Naty alias Spring, and CONRADO DOMINGO alias
Adong guilty beyond reasonable doubt as accomplices in the commission of the said
crime and sentenced the said Rosalina Quizon and Pedro Vicencio to an indeterminate
penalty of ten (10) years of prision mayor as minimum to seventeen (17) years of
reclusion temporal as maximum; and Felipe Engreso, Josefina Adelan and Conrado
Domingo to an indeterminate prison term of four (4) years of prision correccional as
minimum to ten (10) years of prision mayor as maximum. The last three accused were
declared entitled to the privileged mitigating circumstance of minority, they being under
18 years of age.

With respect to defendants Elpidio Acuo Adime and Naty Cruz, they being under 16
years of age, further proceedings were suspended and pursuant to the provision of
Article 80 of the Revised Penal Code, the court ordered that the said Elpidio Acuo
Adime be committed to the Boys' Training School and Naty Cruz to the Girls' Training
School at Mandaluyong, Rizal under the custody and supervision of the Commissioner
of Social Welfare or his authorized representatives until they reach the age of majority
or until further orders of the court. The Commissioner of Social Welfare was directed
to submit to the court every four months a written report on the good or bad conduct
of the said minors, on the moral and intellectual progress made by them during the
period of their confinement in said institutions.

The court acquitted defendants NICANOR CAPALAD alias Canor and AURORA
GARCIA alias Laring.

All the defendants except Nicanor Capalad and Aurora Garcia were ordered to pay the
costs.

In imposing the capital penalty on Magno Pontillera Bueno the Court took into account
not only his being a member of the powerful Central Committee of the Communist
Party jointly with Federico Maclang and Honofre Mangila but also his being an
instructor on Military Tactics in the "Stalin University", the military training school for
Huks in the mountains.

The rights to file a civil action to recover indemnity for the death of the victims of the
murders specifically referred to in these cases were reserved to the heirs of the said
victims.

Thus, of the original 31 defendants in these five criminal cases, five were acquitted,
namely: Julia Mesina, Rosenda Canlas Reyes, Victorina Rodriguez y Gutierrez, Nicanor
Capalad and Aurora Garcia. Of the 26 who were convicted, all appealed to this Court
except defendant Esteban Gonzales la Torre. Later, defendants Rosalina Quizon, Elpidio
Acuo Adime, Josefina Adelan Abusejo, Conrado Domingo and Naty Cruz withdrew
their appeal. During the pendency of the appeal, defendants Julita Rodriguez y Gutierrez
and Magno Pontillera Bueno died. The appeals now before this Court, therefore, involve
only 18 defendants, namely: Jose Lava, Federico Bautista, Federico Maclang, Ramon
Espiritu, Salome Cruz, Rosario Vda. de Santos, Angel Baking, Lamberto Magboo,
Nicanor Razon, Marcos Medina, Cesareo Torres, Arturo Baking, Simeon G. Rodriguez,
Marciano de Leon, Honofre Mangila, Cenon Bungay, Pedro Vicencio, and Felipe
Engreso.

Upon petition by the Deputy Chief, Military Intelligence Service (MIS) of the Armed
Forces of the Philippines, this Court, by order of March 7, 1952, appointed the MIS the
custodian of the exhibits and documents that were presented as evidence in these five
criminal cases before the trial court. This step was taken because those documents and
exhibits were needed also as evidence in other courts in the prosecution of other
members of the HMB (Hukbong Mapagpalaya ng Bayan). Later, by order of April 14,
1955, this Court appointed the Staff Judge Advocate of the Philippine Constabulary the
custodian of the same documents and exhibits. Those documents and exhibits were kept
at the headquarters of the Philippine Constabulary at Camp Crame, Quezon City. On
September 10, 1958 the headquarters of the PC was destroyed by fire, and all those
documents and exhibits were burned. Upon a petition for the reconstitution of the said
documents and exhibits, this Court appointed Deputy Clerk of Court Bienvenido
Ejercito as Commissioner to receive evidence for the reconstitution of those documents
and exhibits. The Commissioner, after due hearing, submitted his report, dated October
6, 1959, recommending that the documents and exhibits that were burned be declared
reconstituted by the photostatic copies of the originals of those documents and exhibits.
The Commissioner stated in his report that those photostatic copies were duly identified
during the hearings on the reconstitution. Over the objection of counsels for the
defendants-appellants, this Court approved the report of the Commissioner.

Counsels for the appellants were allowed by the Court all the time that they needed to
prepare the briefs for the appellants. The last brief for the appellants was filed on
January 22, 1963. The Solicitor General filed the brief for the appellee (People of the
Philippines) on June 29, 1963. These appeals were set for hearing on oral argument on
August 28, 1963. On that date counsel for some of the defendants-appellants argued the
case for their clients; and counsels for other defendants-appellants were given a period
of 20 days to submit a memorandum in lieu of oral argument. The Solicitor General was
likewise granted leave to submit a reply memorandum within 20 days from the receipt of
the copies of the appellants' memoranda. Upon the filing of the memoranda these cases
were considered submitted for decision.

These cases have been pending for decision in this Court since October, 1963, and it
would seem that this Court has not acted with dispatch in the disposition of these cases.
It must be known, however, that this Court has been swamped with cases appealed from
the lower courts and from administrative bodies and officials, as provided by law, and
despite the arduous labors by the members of this Court the docket of this Court has
been, and still is, clogged. There are numerous criminal cases appealed to this Court
ahead of these five cases. Certainly the appellants in those earlier appealed criminal cases
deserve the same concern from this Court that the appellants in these five cases expect
for themselves. The record of these five cases, consisting of the "rollos", the transcript
of the stenographic notes taken during the trial and the documentary exhibits, is so
voluminous that when piled vertically it would stand almost three feet high. The record
has to be meticulously examined and studied by the members of this Court, working as
a collegiate body. In deciding cases, this Court inclines more to careful study and
deliberation rather than to dispatch.

Existence and activities of the CPP and HMB

We have thoroughly examined the testimonial and documentary evidence in the present
cases, and We find it conclusively proved, as did the lower court, that as of the year 1950
when elements of the police and armed forces of the Government arrested the
defendants in these five cases there was already a nationwide organization of the
Communist Party of the Philippines (CPP), and that said party had a well-organized plan
to overthrow the Philippine Government by armed struggle and to establish in the
Philippines a communist form of government similar to that of Soviet Russia and Red
China. The Communist Party of the Philippines had as its military arm the organization
known as the "Hukbong Mapagpalaya ng Bayan" (HMB), otherwise or formerly known
as the Hukbalahaps (Huks). It is established that the rebellious activities of the HMB,
and the commission of common crimes in different parts of the country by the HMB,
were directed by the Communist Party of the Philippines through its Politburo (PB)
and/or Secretariat (SEC). The Politburo and/or the Secretariat gave orders to the field
through its general headquarters (GHQ) and its regional commands (RECOS), and
reports to the Politburo and/or Secretariat were made regarding the activities of the
HMB, giving accounts of the sorties or ambushes and attacks against elements of the
police, the Philippine Constabulary and the army, and of killings, lootings and
destruction's of property. It is also established that the plan of the Communist Party was
not only to overthrow the Philippine Government but also to kill officials of the
Government and private individuals who refused to cooperate with the rebels, and
orders to this effect were transmitted to the HMB.

Among the documentary evidence presented during the trial is the Constitution of the
Communist Party of the Philippines, one of the documents seized in one of the raids
when some of the appellant were arrested. In this document it is shown that the CPP
has a National Congress (NC) which is the highest Authority in the party. The National
Congress formulates the policies of the party, and determines the functions of the party
and of the standing committees; it renders decisions on all problems regarding
organizations and tactics, and on appeals brought before it; and it elects the members of
the Central Committee (CC). The Central Committee, which is the highest authority
when the National Congress is not in session, enforces the Constitution, implements the
policies formulated by the National Congress, promulgates Rules and regulations,
supervises all political and organizational work of the party, takes charge of financial
matters and renders an accounting thereof to the National Congress, and elects the
General Secretary (SEC) and all the members of the Politburo. The Politburo (PB) is the
real executive body of the party, and is responsible for the execution of the powers and
duties of the Central Committee when the latter is not in session. The General Secretary
and the Politburo are responsible to the Central Committee for all their decisions and
actions. Then there are departments, bureaus, committees and other organizational units.
There is the National Education Department (NED), the educational Department (ED),
the Organization Bureau (OB), the Organizational Department (OD), the District
Organization Committee (DOC) the Peasants' Organization (PO), the Trade Union
Department (TUD), the Sanggunian Tanggulang Baryo (STB), the Military Committee
(MC), the General Headquarters (GHQ), the Regional Command (RECO), the Field
Command (FC), the Battalion (BN), the Company, (CO), the Platoon (PLN), and the
Squad (SQD). There is also the National Finance Committee (NFC) in charge of the
financial matters of the Party, the RECO Finance Committee (RFC), the District
Finance Committee (DFC), the Field Command Supply Officer (FC-G-4), the Battalion
Supply Officer (Bn-G-4), the Company Supply Officer (Co-G-4), the Platoon Supply
Officer (Pln-S-4), the National Courier Division (NCD), the Reco Courier Division
(RCB), the Central Post (CP), and Field Command Courier (FC-Courier).

The Secretariat provisionally assumed the functions of the GHQ which was abolished
by the Politburo in its conference in January 1950. The Secretariat alone has final
authority to impose the death penalty in court martial cases where SECCOM (National
Committee) cadres are involved. Several SEC transmissions to the Politburo members
assigned to regional commands indicate that the Secretariat discussed plans of attack by
the HMB, distributes forces, and supplies intelligence information.

There is the National Courier (or Communication) Division (NCD), which is in charge
of the communication system of the CPP, and the distribution of supplies to the
different regional commands in the field. There is a Special Warfare Division, in charge
of operating technological warfare against the enemy such as the use of homemade
bombs, molotov cocktails, land mine traps, etc. There is the Technical Group (TG)
which attends to the manufacture of homemade firearms and other weapons. This
group includes chemists and engineers. Then there is the National Intelligence Division,
in charge of gathering military intelligence, as well as political and economic intelligence.

For purposes of regional commands, the Philippines was divided geographically into ten
regions in order to facilitate the political, military, and economic administration by the
Communist Party of the Philippines. Those regional commands are as follows: .

RECO 1 Nueva Ecija, Pangasinan and lower Mt. Province.

RECO 2 Pampanga, Tarlac, Zambales and Bataan.

RECO 3 Bulacan and Rizal, except the towns under City Command.

RECO 4 Laguna, Batangas, Quezon and Cavite.

RECO 5 Camarines Norte, Camarines Sur, Albay and Sorsogon.

RECO 6 Panay, Negros, Cebu, Samar, Leyte, Bohol and Palawan.


RECO 7 Davao, Lanao, Cotabato, Zamboanga and Agusan.

RECO 8 Cagayan Valley provinces and Nueva Viscaya.

RECO 9 Ilocos Norte, Ilocos Sur, Abra, and La Union.

CITY COMMAND Manila, Malabon, Caloocan, Navotas, San Francisco del Monte,
Quezon City, Mandaluyong, San Juan, Marikina, Pasig, Guadalupe, Pasay, Baclaran,
Paraaque, Muntinglupa and Alabang.

The Communist Party of the Philippines has a flag, colored red, with the symbols of the
hammer and the sickle (Exhibit A), and a newspaper organ called "TITIS". In the
general plan to indoctrinate the masses into communistic ideas and principles,
communist schools some of them called "Stalin University" were set up in a
number of places in the mountain fastnesses, where trained instructors gave lectures and
taught lessons in the principles of Karl Marx, Frederich Engels, Joseph Stalin and
Nicolai Lenin. .

As has been stated, the CPP has an armed force, which is the HMB. The predecessor of
the HMB was the HUKBALAHAP, an organization created by the party during the
Japanese occupation to resist the Japanese forces. Upon liberation of the Philippines, the
members of the Hukbalahap continued their activities, the organization was renamed
HMB, and its members were indoctrinated in communistic principles. The members of
the HMB are known as "Huks".

The tie-up between the CPP and the HMB is established beyond doubt by the evidence.
It is shown that the heads of the CPP were in regular communication with the leaders
of the HMB, and the raids, ambushes, burnings, lootings and killings were planned and
authorized by the CPP. Appellant Federico Maclang, who is a member of the Politburo,
in his testimony, admitted that the HMB is the armed force of the CPP. Luis Taruc, who
at the time was the head of the HMB, participated in the meetings and deliberations of
the CPP. Some instances may be cited: (1) When Luis Taruc, leader of the HMB, was
interviewed by Manuel Manahan representing the newspaper "Bagong Buhay",
sometime in July 1950, the said interview was planned, approved and authorized by the
Secretariat of the Communist Party. The purpose of the interview was to make Taruc
declare about the true status of the leadership in the HMB and the CPP, and belie
reports of division among the leaders; (2) When appellant Simeon Rodriguez, a member
of the Politburo and a ranking member of the National Finance Committee, was
arrested at 268 Pasaje Rosario, Paco, Manila on October 18, 1950, there were found in
his possession 65 P100-bills and 60 P50-bills and also P145 circulating notes and $312 in
paper currency whose serial numbers (except two dollars) tallied with the serial numbers
of part of the money (amounting to more than P80,000) that was taken by the Huks
from the safe of the office of the Provincial Treasurer when they raided Sta. Cruz,
Laguna, on August 26, 1950. Provincial Treasurer Balbino Kabigting of Laguna had a
record of the serial numbers of the money taken by the Huks, and he even issued a
warning to the public about the loss of the money mentioning in the warning the
serial numbers of the money taken. There are documents showing that this money taken
from the provincial treasury of Laguna was the subject of communications between
Luis Taruc and appellant Federico Maclang and other members of the Secretariat.

Written articles and official publications of the CPP and HMB, which were presented as
evidence, show the tie-up between the CPP and HMB. Following are some excerpts
from those publications:

As the situation now stands, it can be assumed that the HMB under Communist
leadership, already enjoys a quantitative edge over the Nationalista Party ... (Exh. K-211,
p. 7, "Struggle against Awaitism". Emphasis supplied).

The enemy was caught by surprise. The CPP and the HMB it is leading scored a
tremendous political victory ... (Exh. O-33, "Twenty Years of Struggle of the CPP."
Emphasis supplied)

Documentary and testimonial evidence establish that the various raids and ambuscades
perpetrated by the HMB were planned, directed and supported by the CPP. Thus, in the
"Milestones in the History of the CPP", written by appellant Jose Lava, it is stated that at
the enlarged Politburo conference of January, 1950, it was decided to intensify HMB
military operations for political and organizational purposes. The widespread raids and
attacks on the occasion of the 8th HMB anniversary (March 28-29, 1950) was decided at
the PB conference:

The conference specifically decided to launch coordinated military operations on the


occasion of the eight anniversary of the HMB. (Exh. 249, Folder of Exhibits, Vol. V.)

The CPP ordered the HMB to fight the Philippine Constabulary and attack government
installations. Thus testified Benjamin Advincula, a former high ranking HMB member,
who said that when he was Secretary of RECO No. 4, he received orders for
transmission to the HMB to fight the Philippine Constabulary. Attacks by the HMB
were also reported to the CPP. The accomplishments, for instance, of RECO 2 during
the attacks at dawn on March 29, 1950 were reported in Enteng's (Luis Taruc) letter to
the Secretariat on April 1, 1950. This letter reported the ambush and liquidation of
Captain Dumlao and others; the attack and burning of the CG (Civilian Guard) camp at
Manibong, Porac, and the capture of arms and ammunitions thereat; the losses on the
enemy side; the burning of 12 houses and the liquidation of 2 spies at Mabalacat,
Pampanga. A similar report was furnished by a certain Pedring of RECO 2 in a letter to
Eto (Federico Maclang) dated April 2, 1950.

It was, in fact, the Communist Party that celebrated the eighth anniversary of the HMB,
as appears in the Communist Party document "Twenty Years of Struggle of the CPP" in
which we read about the simultaneous attacks of the HMB on March 29, 1950 the
following:

In quick succession, the Party celebrated the eighth anniversary of the HMB by the
coordinated military operations from the far north down to southern Luzon ... (Exh.
O-33, Folder of Exhibits, Vol. V)

The Secretariat issued the following instructions in connection with the May 1, 1950
(Labor Day) attack:

... Repeat March 29 simultaneous attacks to time with May 1 celebration to convince the
workers of the peasants' unity in struggle with them. Party and HMB messages to be
sent. (Exh. O-313, Folder of Exhibits, Vol. V)

Replying to said order (Exh. 0-313), the Politburo representative of Regional Command
No. 3 wrote Gaston (Jose Lava of the Secretariat) and said:

Ukol sa Plan for May lst OK. We will try our best to accomplish our part without
hesitation. (Exh. M-179, Folder of Exhibits, Vol. III).

The May 1, 1950 attack was followed by simultaneous attacks by the HMB on August
26, 1950, in commemoration of the first "Cry of Balintawak." These attacks were again
decided, planned and directed by the Communist Party of the Philippines as shown by
transmissions from the Secretariat to the Politburo members in the field. (Exhs. O-93;
par. 2; O-102, par. 6). The attacks on August 26, 1950 were also ordered by the
Secretariat, because the evidence shows that the Secretariat required submission of
complete report thereof, and reports were in fact submitted by Taruc (Enteng) on
September 9, 1950 (Exhs. O-638, par. 8; O-278).

The Communist Party also planned the attack for November 7, 1950, the 20th
anniversary of the CPP, which required bigger operations than the attack of August 26,
because towns were to be captured, barracks and jails were to be raided and political
enemies were to be liquidated. The SEC assigned and allocated the forces to different
phases and places of operations. In hand-written notes identified by expert witness to
have been written by appellant Jose Lava, the following appears in connection with the
plans for November 7:

... Coordinated Core: Capture of towns near Manila, but near Mt. bases
Coordination of RECO 2, 3 & 4, Rizal Cavite. Pol liquidation in City. Bringing fight
near strategic political, military and economic centers Supporting RECO 1 in ILOCOS
& CAGAYAN. RECO 5 in BICOL & RECO 6 in VISAYAS. (Exh. O-12.)

As We have stated, the primordial objective of the Communist Party of the Philippines
and of its armed force, the HMB, was to overthrow the Philippine Government by
armed struggle. To attain this objective, the CPP also envisioned the following
expansion: of the cadres from 3,600 in July, 1950 to 56,000 in September 1951; of the
party members from 10,900 in July, 1950 to 172,800 in September, 1951; of HMB
members from 10,800 in July, 1950 to 172,800 in September, 1951; and of the organized
masses from 30,000 in July, 1950 to 2,430,000 in September, 1951.

The Communist Party declared the existence of a revolutionary situation in November,


1949 and went underground. This appears in the following excerpts from documents
that were presented as evidence during the trial.

Quickly sizing up the existence of a revolutionary situation, arising from the merger ...
of the crises of production due to the imperialist-feudal domination of our economy,
and the parliamentary crises due to fraud and terrorism in the 1949 elections, the CPP
openly called on the people to overthrow the Liberal Party puppets of the American
imperialists. (Exh. O-32, "Twenty Years of Struggle of the CPP", Exh. O-12 [hh])

In the Philippines, the CPP has already declared the existence of a revolutionary
situation; and it is concentrating all its energies towards the hastening of the maturity of
the revolutionary situation into a crisis leading to the overthrow of the imperialist
puppets and the achievement of the NEW DEMOCRACY. (Exh. O-949, "Strategy and
Tactics," Exhs. O-126-141) .

The CPP has declared the existence of a revolutionary situation; since November, 1949,
as a result of the merger of the crisis in production of our imperialist feudal dominated
economy and the crisis of the burgeois parliamentarism ... Since then, the CPP went
completely underground, and openly called on the people for the armed overthrow of
the power of American imperialism and its allies in the Philippines exercised through its
puppets ... (Exh. O-65)

The Communist Party of the Philippines is leading the armed struggle for national
liberation and the establishment of a New Democracy in order to crush the power of
the exploiters, achieve power for the exploited classes, and who are disposed to accept
the new society ..." (Exh. O-119 "Accounting for the Peoples' Fund Received and Spent
to Finance the Revolution"; see also Exhs. K-12 (u), N-570-573, M-1574, K-244,
O-749-56, Documents approved by SEC in its meeting on February 15, 1950. Exh.
O-312, par. 3. See Vol. III, Folder of Exhibits)

... The Communist Party marks the 54th anniversary of the CRY OF BALINTAWAK
calling on the people to join the HMB in annihilating the enemy today, no different from
the enemy denounced by Bonifacio. (Exh. M-1524, Vol. III, Folder of Exhibits).

We find that the criminal acts, consisting of attacks against Philippine Constabulary,
murders, robberies, kidnapping, arson, etc. alleged in the information are duly proved by
evidence presented during the trial. It is noteworthy that the appellants did not attempt
to disprove the evidence regarding the commission of these crimes. Besides those
alleged in the information, there were other acts of attacks against the Philippine
Constabulary, murders, robberies, etc. that were committed by the Huks that are proved
by the evidence also not disproved by the appellants as follows:

(1) On March 29, 1950, a band of armed Huks carrying a communist flag raided San
Pablo, Laguna. An encounter with the 27th PC Company ensued, and several members
of the PC were injured. The Huks looted several Chinese stores.

(2) At about 3 o'clock in the morning of August 26, 1950, approximately 400 Huk
dissidents armed with machine guns and rifles attacked Santa Cruz, Laguna. The cashier
of the office of the Provincial Treasurer was forced at gun point, to open the vault from
which the Huks took more than P80,600. The Huks also took typewriters and office
supplies from the office of the Provincial Treasurer. The Huks, after forcing the warden
to give the keys, opened the provincial jail and released the prisoners. The provincial jail
was later burned. The Huks looted houses and took rice, cigarettes and clothes, and
burned five buildings.

(3) On March 29, 1950, several Huks raided San Mateo, Rizal, opened the safe in the
municipal building and took money. They also got food and medicines from the
townspeople.

(4) On August 28, 1950, Huks attacked the municipal building of Arayat, Pampanga, and
forced the municipal mayor at the point of a gun to give P3,629.31 in cash and some
documentary stamps. Killed during the incident was one Atty. Samia.

(5) On March 28, 1950, about 80 to 100 Huks attacked San Rafael, Montalban, killing 4
and wounding all soldiers. After the attack, the Huks left communist propaganda leaflets.

(6) On August 30, 1949, upon receiving a report that there was a concentration of Huks
at Kamog, San Jose del Monte, Bulacan, Lt. Restituto A. Bisda organized a patrol of 20
enlisted men. On the way the patrol was fired upon by the Huks. After the encounter,
one Huk member was found dead and from his body were taken several documents.

(7) On October 15 and 17, 1950, P.C. Lt. Velasquez led three platoons of soldiers to the
southwestern slope of Mount Malipuo at Lipa City upon receipt of a report that about
200 Huks were gathered in that place. While climbing the mountain they were suddenly
attacked and fired upon by the dissidents killing one soldier and wounding others. When
they retaliated, the Huks retreated leaving behind a wounded Huk. The Huks abandoned
their hideouts in the place. Upon inspection, Lt. Velasquez found a hut with several
blackboards, papers and other school supplies inside and a red hammer-and-sickle flag
displayed on the wall with letters "STALIN U" (Stalin University), which indicated that
the place is one of the military schools for the Huks. (The flag was produced in court
and marked Exhibit "A" for the prosecution. This flag had been identified by a witness
for the prosecution, a former Huk Colonel named Benjamin Advincula, to be the official
flag of the HMB in their military training school in the mountains wherein he had also
undergone Huk military training.)
(8) At about midnight on March 29, 1950, Huk dissidents entered the town of Tanauan,
Batangas. According to George Collantes, the municipal mayor, there was shooting in
the town, and later the industrial center and market were burned after they were raided.
Mayor Collantes saw a red flag hoisted by the dissidents. Two of the Huk dissidents
were killed.

Issues raised by appellants

The appellants, in their defense in the present appeals, have raised issues that are
common to them all, and also issues particular to each one of them. The issues
particular to individual appellants will be discussed at the latter part of this opinion
when we deal with their respective appeals.

1. The appellants are charged with having committed the crime of rebellion with
murders and arsons. The trial court declared some of them guilty as principals, and some
as accomplices, in the commission of the crime of rebellion complexed with multiple
murder, arsons and robberies.

The law pertinent to the determination of the criminal responsibility of the appellants
are Articles 134, 135, and 136 of Revised Penal Code, as follows: .

ART 134. Rebellion or insurrection How committed. The crime of rebellion or


insurrection is committed by rising publicly and taking arms against the Government for
the purpose of removing from the allegiance to said Government or its laws, the
territory of the Philippine Islands or any part thereof, of any body of land, naval or
other armed forces, or of depriving the Chief Executive or the Legislature, wholly or
partially, of any of their powers or prerogatives.

ART. 135. Penalty for rebellion or insurrection. Any person who promotes,
maintains, or heads a rebellion or insurrection, or who, while holding any public office
or employment takes part therein, engaging in war against the forces of the
Government, destroying property or committing serious violence, exacting contributions
or diverting public funds from the lawful purpose for which they have been
appropriated, shall suffer the penalty of prision mayor and a fine not to exceed 20,000
pesos.

Any person merely participating or executing the commands of others in a rebellion


shall suffer the penalty of prision mayor in its minimum period.

When the rebellion or insurrection shall be under the command of unknown leaders,
any person who in fact directed the others, spoke for them, signed receipts and other
documents issued in their name, or performed similar acts, on behalf of the rebels shall
be deemed the leader of such rebellion.
ART. 136. Conspiracy and proposal to commit rebellion or insurrection. The
conspiracy and proposal to commit rebellion or insurrection shall be punished,
respectively, by prision correccional in its maximum period and a fine which shall not
exceed 5,000 pesos, and by prision correccional in its medium period and a fine not
exceeding 2,000 pesos.

It is the common contention of the appellants that the trial court erred in declaring that
the crime committed by the appellants was that of "rebellion complexed with multiple
murder, arsons, and robberies."

We uphold the contention of the appellants. The question, of whether or not a person
may be prosecuted and held guilty of the crime of rebellion complexed with murder,
arson, robbery and/or other common crimes, is now settled. In the case of People vs.
Hernandez, etc., et al., 1 this Court held that the crime of rebellion cannot be complexed
with other common crimes. The accused in the Hernandez case were charged, as are
appellants in the instant cases, "with the crime of rebellion with multiple murder, arsons,
and robberies." This Court ruled that:

One of the means by which rebellion may be committed, in the words of said Article
135, is by "engaging in war against the forces of the government" and "committing
serious violence" in the prosecution of said "war". These expressions imply everything
that war connotes, namely; resort to arms, requisition of property and services,
collection of taxes and contributions, restraint of liberty, damage to property, physical
injuries and loss of life, and the hunger, illness and unhappiness that war leaves in its
wake except that very often, it is worse than war in the international sense, for it
involves internal struggle, a fight between brothers, with a bitterness and a passion or
ruthlessness seldom found in a contest between strangers. Being within the purview of
"engaging in war" and "committing serious violence", said resort to arms, with the
resulting impairment or destruction of life and property, constitutes not two or more
offenses, but only one crime that of rebellion plain and simple. Thus, for instance, it
has been held that "the crime of treason may be committed" by executing either a single
or similar intentional overt acts, different or similar but distinct, and for that reason, it
may be considered one single continuous offense. (Guinto vs. Veluz, 77 Phil. 801, 44
Off. Gaz., 909.)" (People vs. Pacheco, 93 Phil. 521.).

Inasmuch as the acts specified in said Article 135 constitute, we repeat, one single crime,
it follows necessarily that said acts offer no occasion for the application of Article 48,
which requires therefor the commission of, at least, two crimes. Hence, this court has
never in the past, convicted any person of the "complex crime of rebellion with
murder". What is more, it appears that in every one of the cases of rebellion published
in the Philippine Reports, the defendants were convicted of simple rebellion, although
they had killed several persons, sometimes peace officers. (U.S. vs. Lagnason, 3 Phil. 472;
U.S. vs. Baldello, 3 Phil. 509; U.S. vs. Ayala, 6 Phil. 151; League vs. People, 73 Phil. 155)

xxx xxx xxx


There is one other reason and a fundamental one at that why Article 48 of our
Penal Code cannot be applied in the case at bar. If murder were not complexed with
rebellion, and the two crimes punished separately (assuming that this could be done), the
following penalties would be imposable upon the movant, namely: (1) for the crime of
rebellion, a fine not exceeding P20,000 and prision mayor, in the corresponding period,
depending upon the modifying circumstances present, but never exceeding 12 years of
prision mayor; and (2) for the crime of murder, reclusion temporal in its maximum
period to death, depending upon the modifying circumstances present. In other words,
in the absence of aggravating circumstances, the extreme penalty could not be imposed
upon him. However, under Article 48, said penalty would have to be meted out to him,
even in the absence of a single aggravating circumstance. Thus, said provision, if
construed in conformity with the theory of the prosecution, would be unfavorable to
the movant.

Upon the other hand, said Article 48 was enacted for the purpose of favoring the
culprit, not of sentencing him to a penalty more severe than that which would be proper
if the several acts performed by him were punished separately. In the words of
Rodriguez Navarro:

La unificacion de penas en los casos de concurso de delitos a que hace referencia este
articulo (75 del Codigo de 1932), esta basado francamente en el principio pro reo. (II
Doctrina Penal del Tribunal Supremo de Espaa, p. 2168.)

... It is evident to us that the policy of our statutes on rebellion is to consider all acts
committed in furtherance thereof as specified in Article 134 and 135 of the Revised
Penal Code as constituting only one crime, punishable with one single penalty
namely, that prescribed in said Article 135. ....

... In conclusion, we hold that, under the allegations of the amended information against
defendant-appellant Amado V. Hernandez, the murders, arsons and robberies described
therein are mere ingridients of the crime of rebellion allegedly committed by the said
defendants, as means "necessary" (4) for the perpetration of said offense of rebellion;
that the crime charged in the aforementioned amended information is, therefore, simple
rebellion, not the complex crime of rebellion with multiple murder, arsons and
robberies; that the maximum penalty imposable under such charge cannot exceed twelve
(12) years of prision mayor and a fine of P20,000; and that, in conformity with the
policy of this court in dealing with accused persons amenable to a similar punishment,
said defendant may be allowed to bail." The foregoing ruling was adhered to in the
decisions of this Court in the cases of People vs. Geronimo, G.R. No. L-8936, October
23, 1956; People vs. Togonon, G.R. No. L-8926, June 29, 1957; People vs. Romagosa,
G.R. No. L-8476, February 28, 1958; and People vs. Santos, G.R. No. L-11813,
September 17, 1958.
In People vs. Geronimo, supra, this Court further elaborated on the Hernandez ruling,
as follows:

As in treason, where both intent and overt act are necessary, the crime of rebellion is
integrated by the coexistence of both the armed uprising for the purposes expressed in
Article 134 of the Revised Penal Code, and the overt acts of violence described in the
first paragraph of Article 135. That both purpose and overt acts are essential
components of one crime, and that without either of them the crime of rebellion legally
does not exist is shown by the absence of any penalty attached to Article 134. It follows,
therefore, that any or all of the acts described in Article 135, when committed as a
means to or in furtherance of the subversive ends described in Article 134, becomes
absorbed in the crime of rebellion, and cannot be regarded or penalized as distinct
crimes in themselves. In law they are part and parcel of the rebellion itself, and cannot
be considered as giving rise to a separate crime, that, under Article 48 of the Code,
would constitute a complex one with that of rebellion.

And in People vs. Aquino, et al., L-13789, June 30, 1960, 57 O.G. 9180, this Court said:

On the other hand, from the very testimony of Filomeno Casal, another witness for the
prosecution, it can be gathered that the one who killed or ordered the killing of
Mendoza was Commander Silva who, according to Casal, ordered Mendoza to lie down
and when the latter refused he shot him. If we are to believe the testimony of this
witness the only one responsible for Mendoza's death is Commander Silva for there is
nothing to show that his companions who were under his command knew that his
design was to liquidate him. At any rate, since it appears that the killing was committed
not because of any personal motive on the part of the accused but merely in pursuance
of the huk movement to overthrow the duly constituted authorities, the proper charge
against them would be rebellion and not murder ....

The reason for this was already given by this Court in People vs. Hernandez, et al., supra,
to wit:

In short, political crimes are those directly aimed against the political order, as well as
such common crimes as may be committed to achieve a political purpose. The decisive
factor is the intent or motive. If a crime usually regarded as common, like homicide, is
perpetrated for the purpose of removing from the allegiance "to the Government the
territory of the Philippine Islands or any part thereof," then said offense becomes
stripped of its "common" complexion, inasmuch as, being part and parcel of the crime
of rebellion, the former acquires the political character of the latter."2

The Solicitor General, in behalf of the appellee, The People of the Philippines, asks this
Court to reexamine the ruling in the Hernandez case "based not only on grounds of
public policy but also to interpret the law in order to have justice and adequacy into the
Philippine law on rebellion on the basis of prevailing jurisprudential schools of thought
such as the sociological theory on the natural law doctrine and ... the policy science
theory." 3 This Court has given this plea of the Solicitor General a very serious
consideration, but after a mature deliberation the members of this Court have decided
to maintain that ruling in the Hernandez case and to adhere to what this Court said in
that case, as follows:

The Court is conscious of the keen interest displayed, and the considerable efforts
exerted, by the Executive Department in the apprehension and prosecution of those
believed to be guilty of crimes against public order, of the lives lost, and the time and
money spent in connection therewith, as well as of the possible implications or
repercussions in the security of the State. The careful consideration given to said policy
of a coordinate and co-equal branch of the Government is reflected in the time
consumed, the extensive and intensive research work undertaken, and the many meetings
held by the members of the court for the purpose of elucidating on the question under
discussion and of settling the same.

The role of the judicial department under the Constitution is, however, clear to settle
justiciable controversies by the application of the law. And the latter must be enforced as
it is with all its flaws and defects, not affecting its validity not as the judges would
have it. In other words, the courts must apply the policy of the State as set forth in its
laws, regardless of the wisdom thereof.

xxx xxx xxx

Thus the settled policy of our laws on rebellion, since the beginning of the century, has
been one of decided leniency, in comparison with the laws in force during the Spanish
regime. Such policy has not suffered the slightest alteration. Although the Government
has, for the past five or six years, adopted a more vigorous course of action in the
apprehension of violators of said law and in their prosecution, the established policy of
the State, as regards the punishment of the culprits has remained unchanged since 1932.
It is not for us to consider the merits and demerits of such policy. This falls within the
province of the policy-making branch of the Government the Congress of the
Philippines ...

xxx xxx xxx

Such evils as may result from the failure of the policy of the law punishing the offense
to dovetail with the policy of the law enforcing agencies in the apprehension and
prosecution of the offenders are matters which may be brought to the attention of the
departments concerned. The judicial branch cannot amend the former in order to suit
the latter. The Court cannot indulge in judicial legislation without violating the principles
of separation of powers, and, hence, undermining the foundation of our republican
system. In short, we cannot accept the theory of the prosecution without causing much
bigger harm than that which would allegedly result from the adoption of the opposite
view.
2. The appellants also contend that the informations against them charge more than one
offense, in violation of Section 12, Rule 106 of the old Rules of Court (now Section 12,
Rule 117 of the new Rules of Court). This contention has no merit. A reading of the
informations reveals the theory of the prosecution that the accused had committed the
complex crime of rebellion with murders, robberies and arsons, enumerating therein
eight counts regarding specific acts of murder, robbery and arson. These acts were
committed, to quote the information, "to create and spread terrorism in order to
facilitate the accomplishment of the aforesaid purpose", that is, to overthrow the
Government. The appellants are not charged with the commission of each and every
crime specified in the counts as crimes separate and distinct from that of rebellion. The
specific acts are alleged merely to complete the narration of facts, thereby specifying the
way the crime of rebellion was allegedly committed, and to apprise the defendants of
the particular facts intended to be proved as the basis for a finding of conspiracy and/or
direct participation in the commission of the crime of rebellion. 4 An information is not
duplicitous if it charges several related acts, all of which constitute a single offense,
although the acts may in themselves be distinct offenses. 5 Moreover, this Court has held
that acts of murder, arson, robbery, physical injuries, etc. are absorbed by, and form part
and parcel of, the crime of rebellion if committed as a means to or in furtherance of the
rebellion charged. 6

3. Another contention of appellants is that the trial court, the Court of First Instance of
Manila, did not have jurisdiction to try the cases against them because the acts
enumerated in the eight counts in the information were committed outside the territorial
jurisdiction of the court. This contention is also without merit. Section 14 of Rule 110
of the Rules of Court provides that the criminal action shall be instituted and tried in
the court of the municipality or province where the offense was committed or any one
of the essential ingredients thereof took place. The informations allege that Manila is
the seat of the Government of the Republic of the Philippines which the appellants
sought to overthrow and that Manila was chosen by the accused as the nerve center of
all their rebellious activities in the different parts of the country. While it is true that the
murders, robberies and arsons alleged in the information were committed outside the
City of Manila, in the informations it is alleged that it was in Manila where the accused
had decided and agreed to commit the crime of rebellion and it was in Manila where
they promoted, maintained, caused, directed and/or commanded the HMB to rise
publicly and take arms against the Government, as in fact the HMB had risen publicly,
making armed raids, sorties, ambushes, and committing wanton acts of murder, arson,
looting, etc. An essential ingredient of the crime of which appellants were charged,
therefore, took place in Manila.

4. Some of the appellants contend that their constitutional rights were violated because
the documentary evidence presented against them were illegally seized or had come
from doubtful sources. This claim has no merit. We have carefully examined the record,
and We find that search warrants were properly secured by the peace officers before
raids were effected and that the documents, articles and effects seized from each place
raided were listed, inventoried and marked. It even appears that statements were signed
by some of the appellants certifying that the search warrants were executed in an orderly
and peaceful manner by the raiding parties.

5. The appellants assail the reconstitution of the exhibits that were destroyed, and claim
that the reconstituted exhibits should not be considered in this appeal. We have stated at
the earlier part of this opinion that the exhibits (documentary and other articles) were
placed in the custody of the Philippine Constabulary because they had to be presented
as evidence in the trial of rebellion cases pending in other courts. Most of the originals
of the documentary evidence were burned during the fire that gutted the headquarters
of the Philippine Constabulary on September 10, 1958. The Solicitor General filed a
petition for the reconstitution of the burned exhibits. The petition was given due course
by this Court, and the Deputy Clerk of this Court was commissioned to receive the
evidence on the reconstitution of the burned documents. The list of reconstituted
exhibits is Exhibit C-Reconstitution. In his report, dated October 6, 1959, the
Commissioner recommended the admission of all the reconstituted exhibits.

We find that the reconstitution was made in accordance with the provisions of Act 3110,
which provides for the procedure in the reconstitution of court records. Section 59 of
said act provides that destroyed documentary evidence shall be reconstituted by means
of secondary evidence which may be presented to any Justice of the Supreme Court or
any other officer commissioned by the Court. Section 14 of the act provides that the
destroyed or lost documentary evidence shall be replaced by secondary evidence. A
photostatic copy of an original document is admissible as a secondary evidence of the
contents of the originals and they constitute evidence of a satisfactory nature. 7 The
record shows that the photostatic copies of the destroyed exhibits, which were presented
before the Commissioner during the reconstitution proceedings, were taken before the
originals were destroyed by fire. The photostatic copies had been compared with the
originals, properly checked and recorded, by the officer who was the custodian of the
exhibits.

The certified typewritten copies made from the original documents that were hand
written in ink are also secondary evidence of the contents of the latter. Sgt. Aquilino
Tingco, assigned as assistant to the document officer in charge of the court of exhibits
in the rebellion cases, testified that he was the one who furnished the typists the original
documents, and after those originals were copied on the typewriter he compared the
typewritten copies with the originals, proofread them, stamped them and had them
certified as true copies. This witness further testified that before the certified copies were
presented in court as evidence said copies were compared with their originals. 8

During the reconstitution proceedings, counsel for appellants objected to the admission
of some of the reconstituted documents upon the ground that they were not sufficiently
identified. The Commissioner, however, admitted all there constituted documents, and
We find that the Commissioner rightly did so. We find that Exhibits R-X-6 to R-P-73-79,
the admission of which was objected to, were properly identified. Captain Enrique L.
Reyes of the PC, who was entrusted with the custody of the documents, had the list of
all the exhibits that were burned, which were inventoried and verified; as well as a list of
those exhibits that were presented in these cases, of which photostatic copies had been
taken; and when asked where the photostatic copies were, Capt. Reyes said that he had
the photostatic copies, and pointed to a bundle of folders containing them. These
exhibits were checked and counter-checked with the record of the present cases in the
Supreme Court. 9 Sgt. Aquilino Tingco, who brought the exhibits to the different courts
where they were presented as evidence, and who personally supervised the taking of the
microfilm and the photostatic copies that were presented in the courts in lieu of the
originals, when asked to show to the Commissioner the photostats made of the
documents which were used the Politburo cases, extracted from a folder a bundle of
papers and presented the list of exhibits (Exh. C-Reconstitution) along with photostatic
copies of those listed exhibits, and he testified on them. The witness was asked to
consult the list of exhibits (Exhibit C-Reconstitution) and he pointed to the
Commissioner the exhibits to be marked according to the list, which the Commissioner
himself marked. The witness testified that the contents of the documents thus marked
were the same as those of the originals. The Commissioner considered the documents
properly identified and he admitted the documents over the objection of counsel for the
appellants, and he recommended to this Court the admission of all of them. This Court
approved the report of the Commissioner.

We have carefully examined and analyzed these reconstituted exhibits and We believe
that they constitute a competent evidence to be considered in arriving at a decision in
these cases.

6. The appellants also claim that they were not afforded the time and freedom to prepare
for their defense. This claim of appellants is not borne by the record. The record shows,
that the trial of these cases took months; all the defendants were represented by counsel,
either de officio or de parte, who did their best to defend the appellants during the trial.
In fact the defense lawyers were commended by the trial court for their efforts in
defense of the appellants. None of the appellants was deprived of his day in court.
Everyone was given an opportunity testify and/or adduce evidence in his behalf. All the
appellants, except Jose Lava and Nicanor Razon, Sr., testified in court in their own
defense. The record does not show that appellant Razon had testified or had presented
any evidence in his behalf. Appellant Jose Lava voluntarily refrained from taking the
witness stand, but, instead, he presented witnesses who vouched for his good moral
character and exemplary conduct as a citizen. We find no merit in the claim that the
appellants were not afforded ample time and opportunity to prepare for their defense.

Having thus resolved the common issues raised by the appellants, We now proceed to
determine the criminal responsibility, if any, of the individual appellants.

The lower court found some of the appellants guilty as principals, and some as
accomplices, in the commission of the complex crime of rebellion with multiple murder,
arsons and robberies. We have already declared in this opinion that the crime of
rebellion cannot be complexed with murder, robbery and other common crimes. Our
task, therefore, is to determine the degree of responsibility of each of the appellants in
the commission of the crime of simple rebellion as defined and penalized under the
provisions of Articles 134, 135 and 136 of the Revised Penal Code.

1. The appeal of Jose Lava

Upon a careful study of the evidence, We find:

That appellant Jose Lava was known under these aliases: Harry, Felix Cruz, Gaston,
Gaston Silayan, Greg, Gregorio Santayana and Gavino. Jose Lava became a member of
the Communist Party of the Philippines during the Japanese occupation. In a self-
appraisal which he wrote, and published in mimeograph form with the approval of the
Secretariat, he stated that although he was a new Party member he had been entrusted
with responsible positions in the Party and that due to his high sense of responsibility
and initiative he could rank with the best in the party. Lava was not only, a confirmed
communist; he was a ranking leader of the CPP, being a member of the Central
Committee (CC) of the CPP and he participated in the Politburo meetings. In the
Politburo conference in Manila in January 1947 he proposed armed struggle to
overthrow the Government. His participation therein was described in Exhibit
O-228-229, as follows:

... There was an attempt in the conference to give it a character of a CC conference


notwithstanding the fact that there were only eleven CC members, out of thirty-five,
present in the conference. There was also an attempt to isolate some CC members who
were easily available, as evidenced by the non-invitation of Coms VY, Harry and Pacing
known for their views in support of the Nacionalista-Democratic Alliance coalition, and
for an early resumption of the armed struggle. It was only later in the conference, when
their absence was noted by certain comrades, that Com Harry was invited to the
conference ....

Com Harry proposed that the conference declare that armed struggle be the main form
of struggle ....

Other documents show that Jose Lava had been attending meetings of the Secretariat
(SEC) since October, 1949. He signed, under the alias "Gaston Silayan", the Secretariat's
transmission to the Politburo members in the field, under date of October 22, 1949. He
issued under different aliases, for and in behalf of the Secretariat, Secretariat
transmissions up to October 14, 1950. He signed as "Gaston" the Secretariat's
transmission dated December 24, 1949; he signed as "Greg" those of July 22, 1950, of
September 23, 1950, of September 30, 1950, of October 7, 1950, and of October 14,
1950; and signed as "Gavino" the transmission dated September 25, 1950.

Jose Lava's membership in the Secretariat of the CPP is shown in various documents
(Exh. C-1313 and Exhs. O-269-270). In another exhibit, N-1015-1017, Kas. Gaston was
addressed as the General Secretary.
As member of the SEC, and as General Secretary, Jose Lava attended SEC meetings and
transmitted the decisions of the SEC to the comrades of the Politburo in the regional
commands. His direct participation in the meetings of the SEC was mentioned in several
SEC transmissions. In one such transmission he (Gaston) advocated the overthrow of
the corrupt Liberal Party administration because of the wholesale fraud and terrorism
during the elections of 1949. In the meeting of May 5, 1950, he (Gaston) disagreed with
Eto (Federico Maclang) and Johnny (Ramon Espiritu) on the way of giving money to
deserving families, saying that:

Even if we have a million pesos now, we still would need same to buy arms and ammo,
decisively improve our propaganda to spread our influence over all the country, improve
the diet of our fighting soldiers to increase their fighting efficiency, all with a view to
hastening the people's victory and end their suffering earlier. (Exh. O-91, par. 2)

In the SEC meeting of September 29, 1950 "Greg" (Jose Lava) dissented from the
majority decision rejecting the proposal that Boris (Angel Baking) be allowed to attend
the Military Committee (MC) meeting. (Exh. O-339, par. 15).

Apart from his routinary duties as General Secretary, other duties were assigned to Jose
Lava under his aliases. Thus, as "Gaston", he was designated in the SEC's meeting of
December 20, 1949 to take care of the editorial of the "TITIS", the official organ of the
Communist Party; he was given supervision over women matters, and over political and
educational matters, in the meetings of February 15, 1950 and April 14, 1950. "Gaston"
was also in charge of Direct Party Propaganda, Curriculum and Analysis. As "Greg", he
was appointed by the SEC as one of the 15 members of the Military Committee (MC).
He was to supervise, as decided in the SEC meeting of April 14, 1950, the newly
organized Technological Group. He was instructed by the SEC, in its meeting of
September 15, 1950, to prepare a draft of the resolution for discussion before the
Military Committee. In the meeting of the SEC on September 22, 1950, he was given
power to review all the minutes and decisions of the National Education Commission
(NEC) and only matters which he did not approve were to be taken up by the
Secretariat.

Jose Lava also attended and presided at meetings of the Communists and the HMB in
his house in Tejeron, Makati. 10

Jose Lava was the author of many articles and/or writings, among them: "Self-Appraisal
by Gregorio Santayana," a handwritten outline; "Struggle against Awaitism, by Gregorio
Santayana", also a handwritten outline, with a typewritten copy; "Outline of Strategy and
Tactics"; "Strategy and Tactics"; "Twenty Years of Struggle of the CPP"; "Outline on
Milestones in the History of the CPP"; "Milestones in the History of the CPP", which is
a part of the curriculum in the secondary course of the schools conducted by the CPP.
The "Outline on Strategy and Tactics" and "Strategy and Tactics" were also in the
secondary curriculum texts of the CPP. He is also the author of "Finance Opportunism,
Its Basic Causes and Remedies", a portion of which reads: .

... There is no question that we cannot drastically eradicate finance opportunism within
the Party and the National liberation movement it is leading, and thereby hasten the
maturity of the revolutionary crisis and prepare the Party to create a clear and honest
body of administrators and state functionaries and thereby maintain the power of the
NEW DEMOCRACY that we are set to establish.

Another work of Jose Lava is "Accounting of the People's Funds Received and Spent to
Finance the Revolutions", a portion of which reads as follows:

The Communist Party of the Philippines is leading the armed struggle for national
liberation and the establishment of a New Democracy in order to crush the power of
the exploiters, achieve power for the exploited classes and exercise such power for their
benefit, and for those who are disposed to accept the new society ....

Jose Lava also wrote other documents, among them his handwritten notes containing
the territorial extent of Recos 1 to 7, and a plan of attack on the November 7, 1950
celebration; a list containing several persons (aliases) assigned to Recos 1 to 7 and to the
Military, Pol-Ed, organizational and GHQ organs; a letter to Eto (Federico Maclang) on
the reverse of a list containing names of Malaca__an special agents. He also wrote
letters to Party members concerning the activities of the Party and/or HMB
unmistakably indicating conspiracy or connection between him and other top HMB and
CPP leaders in the field. Thus, "Gaston" (Lava) wrote a letter to Leo (Cesareo Torres)
informing the latter that the stencils for "Ang Komunista" were already sent by NED-
Out and that if Leo needed funds, he could ask from the NFC. In a letter of September
4, 1950 to Eto (Federico Maclang), "Gaston" (Lava) transmitted to Maclang three letters,
on the reverse side of one which was a note of O. Beria (Maclang) asking who the
writers were. In his letter of September 26, 1950 "Gaston" advised Eto (Maclang) to
circularize all Recos about the conference of the RECO-Ed and G-3 before October 15.
In his letter of September 12, Gaston asked the addressee Johnny (Ramon Espiritu)
about the latter's self-appraisal, the Hospital Group, and the selection of two additional
members to help Luming (Iluminada Calonje or Salome Cruz).

The foregoing findings of this Court are based mainly on documents presented as
evidence during the trial. Those documents were taken: some from the third floor of the
Mayflower Apartments, at Estrada and Pennsylvania Streets in Manila, which was then
rented by appellant Lava when it was raided by peace officers on June 23, 1950; and the
other documents from the different places that were raided by the MIS agents and the
Manila Police on October 18, 1950, where most of the accused in these five cases were
arrested. One of the places raided on October 18, 1950 was 683 Pasaje Rosario, Paco,
Manila, where appellant Lava was arrested along with his co-accused Federico Bautista,
Simeon Rodriguez, Victorina G. Rodriguez and Pedro Vicencio. Numerous documents,
books, and articles were seized at that place where Lava was arrested, and those
documents were used as evidence during the trial of these five cases in the court below.

Some of the documents thus seized, and which were presented as evidence, were in
appellant Lava's handwriting, or were signed by him using his alias names. This is clearly
established by the testimony of a handwriting expert that was presented by the
prosecution. The conclusion of the handwriting expert was based on the specimens of
Lava's handwriting which were used as standards in comparing with the handwriting
and/or signature (in alias) of the appellant that appear in the documents that were
presented as evidence against him. It is contended by appellant's counsel that no genuine
specimen of Lava's handwriting was presented as standard for comparison. We do not
see merit in this contention. We find that the standards for comparison that were used
were the documents marked Exhibits FF-1 and FF-2. 11 Exhibit FF-1 is an application
for employment signed by Jose Lava. The signature thereon was testified to by witness
Eduardo Romualdez (now Secretary of Finance) as looking "like the signature of Jose
Lava." Eduardo Romualdez was acquainted with the handwriting of Jose Lava, having
received reports (Exh. FF), parts of which were in the handwriting of Jose Lava "not
less than three or four times" while Jose lava, was a bank examiner. 12 Exhibit FF-2 is a
cardboard containing a list of books requested by Jose Lava while the latter was detained
in Bilibid Prison. Buenaventura Villanueva, to whom the list was given, testified that he
saw Lava writing the list on the cardboard. What appears on Exhibit FF-2 is certainly a
genuine specimen of Lava's handwriting.

The handwriting of a person may be proved by any witness who believes it to be the
handwriting of such person, and has seen the person write. Evidence respecting the
handwriting may also be given by comparison, made by the witness or the court, with
writings admitted or treated as genuine by the party against whom the evidence is
offered, or proved to be genuine to the satisfaction of the judge. 13 The handwriting
expert who made the comparison in this case positively identified the handwriting of
Jose Lava on the documents presented as evidence against said appellant, specially the
handwritten names of Gregorio Santayana, Gaston, Gaston Silayan, Gavino and Greg.
14

Appellant Jose Lava did not take the witness stand to testify in his own behalf. Instead,
he presented witnesses to testify on his good moral character, his strong convictions and
his good citizenship. An accused, however, is not entitled to an acquittal simply because
of his previous good moral character and exemplary conduct. When a court believes
that an accused is guilty beyond reasonable doubt of the crime charged, it must convict
him notwithstanding evidence of his good moral character and previous exemplary
conduct. 15

We find that the evidence adduced during the trial has proved beyond reasonable doubt
that appellant Jose Lava was one of the top leaders of the CCP, and that he was not only
working to propagate the doctrine of communism in the Philippines but was actually
promoting an armed uprising against the Government. He did not actually take to the
field and participate in the armed attacks against constituted authorities, but in the
positions that he held in the CCP, he actually promoted, maintained, and even directed
the armed activities of the HMB which were aimed at overthrowing the Government
and implanting a new system of government in the Philippines. As General Secretary of
the CCP he signed, in his aliases, the communications or transmissions of the Secretariat
to the HMB and CCP leaders in the field. As We have stated in this opinion, there was a
tie-up between the CCP and the HMB, and that the HMB was the military arm of the
CCP. The CCP went underground sometime in November 1949. It was precisely during
the latter part of 1949 and during the year 1950 (before the arrests of the accused in
these five cases on October 18, 1950) when the HMB was most active in its armed
operations against the Government or against the elements of the Army, the PC and
the Police, and against public officials and even against civilians. The evidence against
appellant Lava shows that it was in 1949 and 1950 when he, in his capacity as one of the
top leaders of the CPP, actively participated in the armed struggle being carried on by
the HMB by sending directives and other communications to the leaders of the HMB
and to the heads of the regional commands of the CPP who were operating in the field.
He was, in fact, one of the leaders of the rebellion. He planned the attack for the
November 7, (1950) anniversary celebration, which was to include the capture of towns
near Manila and the liquidation of enemies in the City by the different regional
commands.

We agree with the finding of the lower court that appellant Jose Lava is guilty as
principal in the commission of the crime of rebellion, and he should be punished
accordingly.

2. Appeal of Federico Bautista

We find it conclusively shown by the evidence that:

Appellant Federico Bautista had used, or was known under, the aliases: F. Payat, Fred,
Freddie, and Freding. He was arrested by the MIS agents and the police on October 18,
1950 at 683 Pasaje Rosario, Paco, Manila, along with his co-accused Jose Lava, Simeon
Rodriguez, Victorina G. Rodriguez and Pedro Vicencio. He joined the CPP on August 8,
1949. Testifying in his own behalf, he said that he joined the CPP because of the failure
of the administration then to carry out the terms of the Amnesty Proclamation which
he helped to bring about; and also because, of the ouster of six members of Congress
from the central Luzon provinces who were elected in the 1946 elections, of the frauds
and terrorism committed in subsequent elections and the graft and corruption in the
government.

He was a member of the National Finance Committee of the CPP, 16 of which


committee Ramon Espiritu (co-accused) was the chairman, and Simeon Rodriguez (co-
accused) was a ranking member. As such member of the National Finance Committee
part of his duties and responsibilities was the procurement of supplies, such as arms,
ammunitions, medicine, office supplies, clothing, etc., for the dissidents' (both of the
CPP and of the HMB) organizations in the field. He became a member of the Military
Committee of the CPP, with special assignment as Chief of Intelligence, GHQ. 17 He
was also assigned to, and exercised authority over, the armed forces (AF [HMB]) in
Manila and suburbs, which was called the City Command. He also had supervisory
powers over the National Courier Division. 18

This appellant did not actually take to the field and participated in the armed operations
of the HMB, but he did staff work which to promote, maintain and direct the
operations of the HMB. Thus, there was presented in evidence a letter 19 written by this
appellant to Leo (co-accused Cesareo Torres), under date of July 10, 1950, transmitting
the latest party decision regarding authorized daily subsistence allowance of personnel
of the CPP organs, ranging from P1.00 to P1.20. Cesareo Torres is the head of the
Technical Office in charge of propaganda. In a handwritten tabulation prepared by him,
20 which was sort of a financial statement, there is shown an amount spent for
communications and for intelligence. It appears that of the total income of P8,006.80
for April, May and June 1950, 20% was allotted for ammunitions and 10% for
intelligence. This financial statement, as finally published, was certified to by Johnny (co-
accused Ramon Espiritu) as head of the National Finance Committee, and audited and
approved by Tommy (co-accused Honofre Mangila). This document once more indicates
clearly that the HMB was being supported by the CPP.

There is a document labelled "Memorandum on Intelligence", 21 a typewritten draft,


which was shown to bear the pencil handwritten insertions and corrections made by
appellant Federico Bautista, indicating that this draft was prepared by him. Portion of
this document reads:

Without deviating from the general orientation of expanding evenly along the four
branches of intelligence, viz.: Political, economic, cultural and military, the emphasis for
the present is on military intelligence both strategic and tactical. This is in conformity
with and in direct pursuance of the Party's program of "all for expansion and the armed
struggle." The mechanics of wresting power will eventually be a military struggle, we
must have a continual basis by which we can estimate what the enemy intends to do and
the tenacity with which they will implement these intentions singly and collectively.

Appellant Federico Bautista was identified with the high councils of the CPP. He
attended Politburo conferences. 22 Along with Ramon Espiritu and one Nicasio
Pamintuan, he sat to try, and found guilty, one Domingo Clarin, a member of the HMB
Trigger Squad, who was charged with having squealed regarding the hold-up of the
Naric in Pulilan. Appellant Federico Bautista had previously assigned Clarin to guard
Jose Lava. 23

We have carefully studied the evidence for the prosecution and defense, as well as the
argument of the counsel in the appellant's brief, and We believe that it is proved beyond
reasonable doubt that appellant Federico Bautista is one of the leaders of the rebellion
jointly undertaken by the CPP and HMB. We agree with the finding of the lower court
that this appellant is guilty as principal in the commission of the crime of rebellion, and
he should be punished accordingly.

3. Appeal of Federico Maclang

Appellant Federico Maclang was arrested on October 18, 1950 by agents of the MIS and
the Manila Police at 1938 Interior 7, Felix Huertas, Manila, along with Julita Rodriguez
and Felipe Engreso the latter two being among those convicted by the lower court in
these five cases, but Julita Rodriguez withdrew her appeal. He used the aliases: O. Beria,
Eto, Olibas, Manuel Santos, Manuel Santa Fe and Ambrosia Reyes.

The evidence conclusively shows that this appellant is a ranking communist, and he was
responsible for the organization of the CPP in Manila and Rizal. He issued directives,
plans and instructions to the different units of the CPP in the field that were working in
close collaboration with the HMB in the latter's armed operations. By his own testimony
he revealed that he is a confirmed communist. He declared that he was one of the
organizers of the PKM (a peasants' organization) in Luzon, that he became a communist
after studying thoroughly the principles of communism in relation to the economic and
political conditions of the country; that he believes in the overthrow of "imperialism"
and the establishment of a "new democracy" in the Philippines.

It is shown by the evidence that:

Appellant Maclang joined the CPP sometime in 1939; and he was a member of the
Politburo from 1944 up to the time of his arrest on October 18, 1950. 24

In the document labelled "Pagtuya sa Sarile", shown to have been written by him, 25 it
appears that he was the Chief of the Organizational Bureau (OB) of the CPP from 1948
until the time of his arrest, and that as an organizer he was responsible for the
organization of the Regional Commands (Recos) of the party. He was also one of the
members of the Secretariat, and as such he actively participated in the deliberations and
decisions of the body.

In several letters of Enteng (Luis Taruc) to him, which were identified during the trial, as
well as in his letter to Enteng, a copy of which was found in his possession and was
identified by him, 26 his membership in the Secretariat is clearly shown. As a member of
the Secretariat he was assigned the supervision on all organizational matters, on the
youth problems and activities, and also on military affairs. Likewise, he was assigned
supervision over the Trade Union Division (TUD) and the trade union struggle; also he
had supervision over the news section of the TITIS; and he was authorized by the
Secretariat to review the decisions of the Regional Command (RECO) and, like
appellant Jose Lava, only those decisions which he did not approve were taken up by the
Secretariat. 27 As chief of the Organizational Bureau he issued, or approved the
issuance of, circulars, plans, and directives to the different organs of the CPP. 28
This appellant prepared the document entitled "Impiltrasyon". 29 In this document he
discussed the problems of infiltration and the methods or techniques to be followed by
party members in infiltrating government offices, the armed forces, and the ranks of
anti-communist groups, in connection with the underground work of the CPP and the
HMB. He also prepared "Pakikibaka sa Pagani" 30 where he urged the peasants to fight
for bigger crop shares, and the workers to fight for better wages, pointing out that the
government cannot meet the demands of the working class so that the only alternative is
to support the "People's Liberation Movement" and effect changes through armed
struggle. He wrote the "Pangatawanan ang Kampanya sa Pagpalawak ng Ating Patanim
at Pagpalitaw sa Inuhi". 31 where he states the policy of the CPP regarding the
expansion of the production areas and the production of more crops to maintain and
support the revolution and to prepare the masses for self-government.

Likewise, he wrote the "Ang Kompiskasyon", a circular issued by the Organizational


Bureau (OB), of which he was the head, to all the organizational units of the CPP,
explaining the Party's theory of confiscation. This circular authorizes confiscation as a
means to raise revenue for the "People's Liberation Movement". This circular lists the
classes of individuals who are considered enemies of the revolution and whose
properties may be confiscated. 32

When this appellant was arrested on October 18, 1950, there were found in his
possession documents which indubitably show the high positions that he occupied in the
CPP and the direct connections that he had with the operations of the HMB. Thus,
there is Exhibit N-52, which is a partial report of Reco 2 regarding military operations
during the "Cry of Balintawak" celebration. In this report are stated the simultaneous
HMB attacks at Camp Makabulos, Tarlac, and at Arayat in the evening of August 25,
1950. There are also Exhibits N-56-57 which are the reports from Reco 2 of the HMB
attacks at barrio Capalad, Arayat on September 12, 1950, and at San Luis on September
13, 1950. There was found in his possession, when he was arrested, a file copy (Exh.
N-202) of a letter addressed to his comrades in Regional Command No. 4, dated
October 14, 1950. The original of this letter (Exh. M-292) was found at 1608-B
Andalucia, apparently in transit through the National Courier Division. It should be
noted that it is in 1608-B Andalucia where Salome Cruz, the Chairman of the National
Courier Division, had her headquarters. In this letter appellant Maclang wrote:

I received a letter to the SEC from Com Bonifacio, PBS, R-5, dated Oct. 10, 1950.
Because of the urgency and because the Comca is leaving at 12:00 a.m. this day, I, as in
charge of military matters of the SEC, in the absence of the SEC meeting I have
rendered the following decision:

xxx xxx xxx

ORDER: I hereby order to R-4 to take all action concerning all the requests of the letter
of Com. Bonifacio to the SEC. Reject the idea of sending back these deserters (men and
officers) to R-5 and I am giving full authority to R-4 to arrest and try all these said
deserters. All actions should be based on our military rulings.

The letter of Comrade Bonifacio referred to in the above-quoted letter of appellant


Maclang was found in his possession at the time of his arrest. A copy of this letter was
found in the possession of the appellant Jose Lava when the latter was arrested at 683
Pasaje Rosario, Paco, Manila, on October 18, 1950. 33 It was shown during the trial that
this letter of appellant Maclang was transcribed from the stenographic notes taken down
by Julita Rodriguez on her notebook (Exh. M-31-E). This Julita Rodriguez worked as a
clerk with appellant-Maclang, and she was also arrested on October 18, 1950 along with
Maclang and Felipe Engreso, another employee of Maclang. Both Julita Rodriguez and
Felipe Engreso were also accused in these cases. The authority of appellant Maclang on
military matters is made manifest in the above-mentioned letter.

In another letter of appellant Maclang, which was his reply to the letter he received from
one Plaridel, regarding the plan for attack on November 7, 1950 celebration, 34 he said:

Re-celebration, I am glad that you are actively preparing to achieve the SEC objectives.
We have no objections on the towns that you have stated including Mcy. Our only doubt
here is Mrqn, because this is very near enemy camp, however, proceed to your
preparation and we will help you on intelligence operations on said localities. In this
connection, we have the opinion that Com. Pacing will cooperate with you in this task as
we have been informed that he is coming to your place.

Re-request on arms and ammos, we are not yet in a position to give you the assurance of
aid, however, we are dealing with the smugglers to purchase these ammos to supply such
operations. Because it is not very sure, it will be better for the Recos to cooperate on the
preparation of ammos.

There are letters of appellant Maclang to Luming (Salome Cruz), one of the accused,
which were presented in evidence, where he gave her orders and instructions regarding
the dispatch of couriers to the regional commands and the activities of the National
Courier Division. 35 Documents were also presented, which appear to have been issued
or approved by the Organizational Bureau of which this appellant was the chief, dealing
with the methods of improving the communication system of the CPP. 36 All these
indicate that appellant Maclang had also supervision over the National Courier Division
(NCD) of the CPP.

Appellant Maclang, in his defense, denied knowledge about the HMB raids and
ambushes. We find, however, overwhelming evidence that disproves his claim. The
evidence clearly shows that he participated directly in planning, coordinating, supporting,
and approving the HMB raids, attacks and ambushes. He was a member of the
Secretariat of the CPP and participated in its meetings. He was in charge of the military
affairs of the CPP; he gave orders to the Recos to attack the government forces; he
approved the plans of attack against the City of Manila and towns around Manila on
November 7, 1959; he received reports of HMB raids and attacks. All these make him,
in contemplation of law, a leader of the rebellion.

There is, to Us, no doubt that by the high positions he held in the CPP, appellant
Federico Maclang was one of the leaders of the CPP that promoted, maintained and
directed the armed operations of the HMB to overthrow the Philippine government. We
agree with the finding of the lower court that this appellant is guilty as principal in the
commission of the crime of rebellion, and he should be punished accordingly.

4. Appeal of Ramon Espiritu

Appellant Ramon Espiritu was arrested by the agents of the MIS and the Manila Police
on October 18, 1950 at 1608-B Andalucia Street, Manila, along with Salome Cruz,
Rosario Vda. de Santos, Naty Cruz, Aurora Garcia, Lamberto Magboo and Josefina
Adelan. He was known by the alias "Johnny".

In his written statement, 37 he admitted that he was a member of the Politburo and the
Chairman of the National Finance Committee of the CPP. The evidence shows that he
was a member of the Secretariat of the CPP, and he participated in the deliberations and
decisions of that body. 38 He was also one of the 15 members of the Military
Committee (MC). 39 He was the Politburo and Secretariat Supervisor of the National
Courier Division. 40 He had been assigned to various important positions in the CPP,
like the supervision of Trade Union Division (TUD) and the trade union struggle,
together with his co-accused Federico R. Maclang. 41 He was also assigned to the City
Committee to reorganize the City Committee and the City Command. 42 He was
likewise assigned to supervise Luming (co-accused Salome Cruz) in taking care of the
sick comrades coming from provinces. 43 He attended meetings of the Communists and
HMB. He was one of those who tried Huk member Domingo Clarin, assigned to the
Trigger Squad of the HMB, and found him guilty of having squealed regarding the
holdup of the NARIC at Pulilan. 44

In his defense appellant Espiritu testified that he had nothing to do with the HMB raids
and ambushes. Seemingly, to justify his membership in the Communist Party, this
appellant discussed the general history of labor and its unsavory relations with capital,
for which he blamed the feudal economy that had pervaded the economic life of the
Filipino people. He candidly recounted his efforts in trying to understand the cause of
the people's economic ills, and the efforts of labor unions in demanding better wages
and living conditions for laborers.

Considering the tie-up between the CPP and the HMB, there can hardly be any question
that appellant Ramon Espiritu, member of the Politburo, of the Secretariat, and of the
Military Committee, of the CPP, had actively participated in promoting and maintaining
the armed operations of the HMB, along with top CPP leaders, Jose Lava, Federico
Bautista, Federico Maclang, and others. We agree, also, with the finding of the lower
court that this appellant is guilty as principal in the commission of the crime of
rebellion, and he should be punished accordingly.

5. Appeal of Salome Cruz

Appellant Salome Cruz, wife of appellant Ramon Espiritu, was arrested on October 18,
1950 at 1608-B, Andalucia St., Manila. She was known by her two aliases: Luming, and
Iluminada Calonje in her written statement, she admitted that she was the Chairman of
the National Communication Division (NCD) of the CPP from November, 1949 to
May, 1950. 45

Documentary evidence shows her various positions in the CPP, namely: Acting Chief of
the Central Post of the Communications Division and in charge of Sub-Posts; In-charge
of Couriers; In-charge of finance from November, 1949 to May 17, 1950; In-charge of
all Central Committee cadres when they came to Manila for medical attention; In-charge
of sick comrades coming from provinces under the supervision of Johnny (Ramon
Espiritu) in the National Commission; and Chairman of the Hospital Group to take care
of the sick and wounded from the City and provinces. 46

The evidence further shows that Salome Cruz wrote several notes and/or documents
showing her activities in the National Communication Division, Hospital Group and
other party organs. Thus, on July 4, 1950, she made handwritten notes on " Sub-Posts"
containing names (aliases) of regular and irregular couriers of RECO 1 to 7, Dist. No. 5
and Pangasinan; on July 5, 1950, she also made notes on "Regular na Dating at alis ng
mga Korriers sa NCD napunta sa bawat Recos", which show the dates of arrivals and
departures of the couriers for Recos 1 to 7 Dist. No. 4 Pangasinan and Cavite; on May 5,
1950 she wrote a letter to Johnny (Ramon Espiritu) informing the latter of the arrival
and departure of couriers of RECO 1 and the availability for distribution of the April
12 and 30 issues of TITIS; she also wrote letters to Beria (co-accused Federico
Maclang), Payat and Fred (co-accused Federico Bautista), and Berting (co-accused
Lamberto Magboo), regarding couriers and the activities of the National
Communication Division (NCD). 47 She also made handwritten notes on the National
Communication Division (NCD) Consolidated Report, showing the income and
expenses from May 1 to May 17, 1950 of the Central Post and the Outposts; and a letter
to Charing (co-accused Rosario C. Vda. de Santos) on May 17, 1950 instructing the latter
to check up the Sub-Posts. 48

In her brief, appellant Salome Cruz claimed, among other things, that the trial court
erred in convicting her as principal, despite the fact that her participation was only on
inconsequential details, and her guilt had not been established beyond reasonable doubt.

There is no evidence to show that appellant Salome Cruz actually took part in the raids,
attacks and ambushes perpetrated by the HMB. It cannot be said, however, that her role
in the plan to overthrow the Government was inconsequential, she having been in
charge of communications, transmitting orders and directives of the Politburo and
Secretariat to the HMB in the field until May 1950; she being in charge of couriers,
making notes of regular and irregular couriers, their arrivals and departures; she being in
charge of the Hospital group to take care of the sick and wounded from the city and
provinces. These facts show that she was cooperating actively in promoting and
maintaining the armed activities of the HMB, considering the tie-up between the CPP
and the HMB. The maintenance of communications between the top leaders of the
CPP and the units operating in the field is very essential in the success of the rebellion.
It is in this connection that this appellant played a very important role.

We agree with the finding of the lower court that appellant Salome Cruz is guilty as
principal in the commission of the crime of rebellion, and she should be punished
accordingly.

6. Appeal of Rosario C. Vda. de Santos

Appellant Rosario C. Vda. de Santos was arrested by the agents of the MIS and the
Manila Police, together with co-accused Ramon Espiritu, Salome Cruz, Naty Cruz,
Aurora Garcia, Lamberto Magboo, and Josefina Adelan, in these five cases, at 1608-B
Andalucia, Sampaloc, Manila, on October 18, 1950.

The evidence shows that:

Appellant Rosario C. Vda. de Santos uses the alias "Charing". In her testimony, however,
she claims that her real name is Aurelia Cayetano. She was designated by the Secretariat
of the CPP In-charge of Outpost of the National Communication Division, with the
duty to maintain discipline among couriers coming from without. 49 She worked under
Salome Cruz (Luming) who was the Chairman of the National Communications
Division (NCD) of the CPP. This appellant was in charge of checking the irregular
couriers for Regional Commands, 1, 2, 3, 4, 5 and Pangasinan. 50 She was a staff
member of the NCD, and she participated in the NCD meetings, took down minutes,
and rendered reports. She made reports to the head of the NCD. One such report says:
51

Naisasagawang maayos na pagtanggap sa lahat ng dumating at maayos na pagalis ng


couriers.

Another report was that one she made on July 12, 1950, about the outpost: 52

(a) Reco 1, means of communication still good and 2 couriers arrived June 25 and
departed July 4.

(b) Reco 2, The road is still clear and the couriers of Pangasinan were already
established there, thru Com. Piping.
(c) Reco 3 The road is difficult that is the reason why the Post at San Jose is no
longer used but that of San Rafael.

(d) Reco 4 The road is difficult connection severed but D-4 is already connected.
(Exh. 159-162).

As chief of the Outpost, she made, on August 19, 1950, the following report: 53

(a) Reco 1 Couriers did not arrive, so no report.

(b) Reco 2 Couriers arrived as the PC are out daily in the field ....

(c) Reco 3 Road is also difficult.

(d) Reco 4 Road is not difficult, but no definite Post for the couriers.

(e) District No. 4 2 weeks no arrival of couriers but special couriers in Com. Amat
(now under arrest) arrived on 12 July '50.

(f) Cavite Did not arrive last Sunday while the agreement was Saturday.

In a letter to her co-accused Luming (Salome Cruz), she stated that she knew the
circumstances surrounding the killing, and the murderers of Norberto Icasiano, Mayor
of Bulacan. 54 She even mentioned that she met the deceased's brother in a school
house in Malolos, Bulacan, and that she had to hide her face behind her umbrella in
order to avoid being recognized.

Various documents were shown during the trial which were written by her, and that they
were written during meetings of the leaders of the CPP. 55

In her defense, this appellant testified that her co-accused Ramon Espiritu requested her
to stay with him as a household help with a salary of P10.00 a month; that besides
preparing food, she was also assigned the duty of recording the letters delivered to and
received at that place; that her real name is Aurelia Cayetano, but she was using the name
of Rosario C. Vda. de Santos because she was a wanted woman by the Japanese during
the occupation for having aided the guerillas, and she was known by that name among
her friends even after the liberation. She admitted that the name "Charing" was hers, but
claimed that she did not know the persons writing to her and that they were writing to
her because she was the one always in the house.

We find it proven that this appellant was a staff member of the National Courier (or
Communication) Division of the CPP, and that she checked and made reports on the
arrival and dispatch of couriers. The lower court declared her guilty as principal in the
commission of the crime of rebellion. In Our appraisal of the evidence, however, We
find that she was merely executing the orders or commands of others who are superior
to her in the organizational set-up of the CPP. Considering that her activities took place
while the CPP was underground, and during the period when the armed operations of
the HMB were taking place, We find her guilty as a mere participant in the commission
of the crime of rebellion under the second paragraph of Article 135 of the Revised
Penal Code, and should be punished accordingly.

7. Appeal of Angel Baking

Appellant Angel Baking was arrested by the agents of the MIS and of the Manila Police
in his office at Room 504 Samanillo Building, Escolta, Manila, on October 19, 1950,
along with Marciano de Leon who is also one of the accused in these cases. His house at
No. 1518 Calixto Dayco, Paco, Manila, was also raided. From his office and his residence
many books, documents, and other papers were seized, which proved that this appellant
was a confirmed communist and was having close connections with leaders of the CPP.
Some of the books found in his residence are: "The Third Five Year Plan" by V.
Molotov; "Reminiscence of Lenin" by C. Zetkin; Marx and Engels (Selected
correspondence); "Heroic Lenin-grad"; "Theory of the Agrarian Question (Lenin);
"Stalin" (G. I. R., James; "Constitution of the Kirghis Soviet Socialist Republic"; "The
Class Struggle in France"; "Biographical Compilation of Communist Leaders outside the
Soviet Unions", etc. There are also found reading materials labelled: "Comparative
Outlines of Communism and Capitalism showing advantages of communistic ideology";
"Blue Record containing outline of the Taruc story" (this contains draft of Taruc story
for filming and publication); "Political Economy" (typewritten this was shown to be
used as text for HMB studies); "Stalin and the National Colonial Question" by John
Blake; etc.

We find, by the evidence, that:

Appellant Angel Baking used the aliases: Bayan, B. and Boriz. He joined the communist
party in April, 1949, although he had been identified with the leaders of the CPP since
the early part of 1944. 56 He had been associated with top communists like Jorge
Frianeza, Luis Taruc, Federico Bautista, Simeon Rodriguez and Jose Lava. When the
Technological Group (TG) of the CPP was organized, it was placed under the
immediate supervision of Boriz (Angel Baking) although the final supervision was under
Greg (Jose Lava). 57

In the meeting of the Secretariat of the CPP on September 29, 1950, the attendance of
Boriz in the meeting of the Military Committee was discussed, and it appears in the
record: "Com. Boriz is a competent technologist, is ready to go out and ready to stay in
the field as the Party decides." 58 The Secretariat of the CPP assigned him to head the
Special Warfare Division under the GHQ. 59 As head of the Special Warfare Division
under the GHQ, appellant Angel Baking wrote a memorandum for the Secretariat
regarding the immediate installation of a wireless communication system between the
GHQ and the Secretariat. Some paragraphs of the memorandum read as follows:
Briefly the main point to be dealt with pertains to equipment, its procurement, technical
description, distribution, installation, operation and maintenance; technical personnel
who will participate in the solution of the technical aspects of the problems; the Code
system, which is an integral part of the WCS; and the non-technical implications of the
problems.

Because of the underground nature of the system, several problems not met in the legal
installation of this system creep to the surface. The equipment itself is conditioned by
abnormal factors which are not met ordinarily; the personnel is difficult to enlist; and the
installation, operation and maintenance of the system become unduly handicapped and
difficult to perform.

Since the transmitting unit in Manila cannot be fully used without risking its immediate
detection by the enemy, transmissions to the field from HQ (Manila) may partly be
coursed thru the legitimate radio stations. This has always been done before, and there is
no reason why it cannot be developed now. The essential requirements for this measure
would be:

(1) A cadre to infiltrate the Corps of broadcasters in the radio stations, which may be
assigned to the Cultural Group. This cadre should get a position as broadcaster at
specific hours, either as station announcer or newscaster for the newspaper or time
buyers at the stations;

(2) This cadre should be given a code system thru which whatever message to be
transmitted, may be coursed.60

Appellant Baking admitted having prepared the foregoing draft but he claimed, in his
testimony, that draft was prepared way back in May 1948 at the request of one Jorge
Frianesa who was a ranking member of the CCP. It appears, however, that when his
office in the Samanillo building was raided by the agents of the MIS and the Manila
Police this document was found torn inside a waste basket, and this circumstance made
the lower court conclude that he wrote the draft not in 1948 but shortly before the raid
on October 19, 1950. The lower court further pointed out that his explanation was
filmsy because of the numerous evidence which showed that he supervised the
Technological Group and the Special Warfare Division at the GHQ of the CCP. We
agree with the conclusions of the lower court in this respect.

Besides there were found in his office at Room 504 Samanillo Building at the time of the
raid several U.S. Army technical manuals on Cipher Systems and Advanced Military
Cryptography, and these manuals have connection with the recommendation in his
memorandum for the use of the code system for transmitting messages thru legitimate
radio stations.
There are still other documents which clearly indicate appellant Baking's cooperation
with the leaders of the CCP in the furtherance of the plan to seize power. In the
document, marked Exhibit L-33s, he made the following statement:

To forestall errors in the planning for the future, the training of leading Cadres as
economists should be intensified. It is more than likely that by the time CCP seized
power, the struggle in Asia shall have been resolved.

There was found in the possession of Simeon G. Rodriguez (one of the appellants in
these cases), the document marked Exhibit O-254 where it appears that appellant Angel
Baking acknowledged having received from the National Finance Committee of the
CCP the sum of P45.00 for the Technological Group (TG) of which he was a member.
Simeon G. Rodriguez is a member of the National Finance Committee of the CCP.

At the time of his arrest, appellant Angel Baking was a foreign affairs officer in the
Department of Foreign Affairs of the Republic of the Philippines. That he was using
his position in the Department of Foreign Affairs for intelligence work and the lower
court calls this a manifestation of his "scheming mind" may be gathered from what
he wrote in his diary as follows:

There was a tactical error in my transfer to the new office room. The office was
supposed to be occupied by ambassadors and high-ranking officials. I transferred to it
without insuring my hold on the important men of the department. Thus I opened my
flank and left my rear unprotected, and made myself extremely vulnerable.

Because of this, I find myself unprepared to handle that problem. Peter ordered
Quiamco that I be transferred back to where I came from.

I also forgot that the important thing to remember is the unbroken and steady ....

AGB (Exh. L-78e).

There is another document found in Baking's residence at 518-B Calixto Dayco which
was admitted by him to be his. This document contains entries which indicate his
dealings with the CCP organizations and its members. The entries are as follows:

NFC ....................................... P200


Graciano ....................................... 190
Graciano ....................................... 100
Apolinario ....................................... 100
Talas ....................................... 100
SGR ....................................... 20
Abe ....................................... 50
Godong ....................................... 50
Lake ....................................... 50
Mario ....................................... 50
Lamang ....................................... 450
The "NFC" has been shown to stand for National Finance Committee of the CCP, and
"SGR" for Simeon G. Rodriguez, a member of the NFC of the CCP, who is also one of
the appellants in the present cases. There were sheets of blank papers seized from 742
Colorado Street, Manila, the printing office of TITIS and the working place of Cesario
Torres, also one of the appellants in the present cases, bearing signatures of
"Apolinario", "Mariano P. Balgos" and "Luis Taruc".

Considering the facts We have hereinabove-stated, We have no doubt in our mind that
appellant Angel Baking as a confirmed communist, had aided in the efforts of the
leaders of the CPP to promote and maintain the armed operations of the HMB to
overthrow the government. The lower court found this appellant guilty as principal in
the commission of the crime of rebellion. We have noted that the role played by this
appellant was that of a technician or adviser. Considering that he participated in the
rebellion efforts of the CPP while he was holding a public office. We agree with the
finding of the lower court, and he should be punished under the first paragraph of
Article 135 of the Revised Penal Code.

8. Appeal of Lamberto Magboo

Appellant Lamberto Magboo was arrested by the agents of the MIS and of the Manila
Police at 1608-B Andalucia, Manila, on October 18, 1950, along with the accused Ramon
Espiritu, Salome Cruz, Rosario C. Vda. de Santos, Naty Cruz, Aurora Garcia and
Josefina Adelan. It must be noted that the place, 1608-B Andalucia, is the headquarters
of Salome Cruz who was the Chief of the National Courier Division of the CPP. The
evidence shows that the other persons who were arrested in that place namely, Naty
Cruz, and Josefina Adelan worked as couriers under Salome Cruz. Rosario C. Vda. de
Santos also worked under Salome Cruz as in-charge of outpost. Aurora Garcia was
employed by her aunt, Rosario Vda. de Santos, as a maid and that she was selling the
TITIS.

The evidence shows that:

Appellant Lamberto Magboo used the aliases Berting and Eddie. He admitted that he
was a courier of the CPP, and that he actually mailed letters and packages at the Bureau
of Posts and at the post office at the Far Eastern University; and he delivered letters,
boxes of medicines, canned goods, lanterns, and shoes, from 1608-B Andalucia Street
(house of appellant Salome Cruz) to the La Mallorca Bus station, to the LTB station, at
Altura Street, Sta. Mesa, at Divisoria Street, and at Celeridad Street in Pasay City. 61 He
was a checker of the regular and irregular couriers of Recos 1, 4, 5, 6 and 7 and Dist.
No. 4 Pangasinan, and was also a special courier of Dist. No. 4, c/o Reco 4. 62

Considering that the Recos are the units of the CPP that are operating with the HMB in
the field, such that the person who acts as courier from the headquarters of the National
Courier Division of the CPP in Manila to these Recos was actually working and
cooperating with the armed operations to overthrow the government. We find appellant
Lamberto Magboo guilty as a mere participant in the commission of the crime of
rebellion, under the second paragraph of Article 135 of the Revised Penal Code, and he
should be punished accordingly.

9. Appeal of Nicanor Razon, Sr.

Appellant Nicanor Razon, Sr., known also by the alias Elias Rubi, admitted that he had
been a member of the CPP since July 1, 1945. Among the documents found at 1608-B
Andalucia, Sampaloc, Manila, was the cadre registration and oath of this appellant as a
member of the CPP. He was the secretary of Barangay I SECCOM (Sectional
Committee) II of the District of Tondo, and later rose to the position of treasurer in the
same committee. He helped in distributing the TITIS, the official organ of the CPP. 63

The record does not show that this appellant had testified in his behalf, nor presented
any evidence in his defense. In his brief before this Court, however, this appellant claims
that the lower court erred in finding him guilty as an accomplice in the commission of
the crime of rebellion, no evidence having been adduced to show that he had performed
any act, which would constitute a cooperation in promoting the rebellion jointly
undertaken by the CPP and the HMB.

We find merit in the contention of this appellant. We find that the evidence against this
appellant only shows that he is a member of the Communist Party, and that he had been
secretary and later treasurer of SECCOM II of the District of Tondo. There is no
evidence regarding his actual participation in the efforts of the leaders of the CPP and
the HMB to promote the rebellion. His having distributed the TITIS, the official organ
of the CPP, is at most an act in the category of a propaganda which in itself does not
show that he advocated actual uprising against the Government. It has not been shown
that he collaborated in the efforts to advance the cause of the rebellion. The fact that he
is a member of the Communist Party and an officer of one of its committees is not a
sufficient basis for declaring him guilty as an accomplice in the commission of the crime
of rebellion.

In the case of People vs. Hernandez, G. R. Nos. L-6025-6026 this Court held:

... We do not believe that mere membership in the Communist Party or in the CLO
renders the members liable either of rebellion or of conspiracy to commit rebellion,
because mere membership and nothing more merely implied advocacy of abstract
theory or principle without any action being induced thereby; and that such advocacy
becomes criminal only if it is coupled with action or advocacy of action, namely actual
rebellion or conspiracy to commit rebellion, or acts conducive thereto or evincing the
same.
We, therefore, declare that appellant Nicanor Razon, Sr. is not guilty as an accomplice in
the commission of the crime of rebellion, nor can We hold him guilty of the crime of
conspiracy to commit rebellion. He should, therefore, be absolved of the charge against
him in the information.

Neither can We find him guilty of having committed a crime under the Anti-Subversion
Law (R.A. No. 1700) which outlaws the Communist Party of the Philippines, because
this law was enacted only in the year 1957, whereas the information against this
appellant was filed on October 27, 1950. Again, in the case of People vs. Hernandez,
supra, this Court held:

On the other hand, Rep. Act 1700, known as the Anti-Subversion Act, which penalizes
membership in any organization or association committed to subvert the Government,
cannot be applied to the appellants because said Act was approved on June 20, 1957 and
was not in force at the time of the commission of the acts charged against appellants
(committed 1945-1950); the Anti-Subversion Act punishes participation or membership
in an organization committed to overthrow the duly constituted Government, a crime
distinct from that of actual rebellion with which appellants are charged.

10. Appeal of Marcos Medina

Appellant Marcos Medina was arrested by MIS agents on October 17, 1950 at 1028-B,
Quezon Boulevard. He used the alias Hiwara. He admitted in his written statement 64
that he was a member of the Hukbalahap Squadron 25 with headquarters at Kandating,
Candaba; that he became a corporal of the Huks in 1944; and that he was a member of
the Organizational Committee, Reco 4, Laguna, from 1946 to 1949. 65 In 1949, he
studied at the Central Institute of Technology, and while studying, he used to help HMB
couriers Lydia (alias of Alicia Villegas), and Celong (alias of Marcelino Calma) in
carrying things for delivery to Commander REG of Reco 4. 66 In his testimony he
stated that the Organizational Committee, of which he was a member, had the duty to
go to the barrios to teach and convince the people to join the HMB. 67

Testifying in his behalf, this appellant said that he was maltreated at Camp Murphy to
make him sign the statement marked as Exhibits EE to EE-4. 68 However, Sotero
Morales, who was the one who investigated him, testified that Marcos Medina did not
complain of any maltreatment when he was investigated. 69

We do not agree with the finding of the lower court that this appellant is guilty as
principal in the commission of the crime of rebellion. There is no evidence that he
actually participated in any of the raids and ambushes alleged in the information
although he admitted that he was a Huk. The evidence shows that he simply helped
HMB couriers. We hold, however, that his being a member of the HMB is a sufficient
basis to find him guilty of the crime of conspiracy to commit rebellion, punishable
under Article 136 of the Revised Penal Code. In the case of People vs. Hernandez,
supra, this Court held:.
On the other hand, membership in the HMB (Hukbalahap), implies participation in an
actual uprising or rebellion to secure, as the Huks pretend, the liberation of the peasants
and laboring class from thraldom. By membership in the HMB, one already advocates
uprising and the use of force, and by such membership he agrees or conspires that force
be used to secure the ends of the party. Such membership, therefore, even if there is
nothing more, renders the member guilty of conspiracy to commit rebellion punishable
by law.

And when a Huk member, not content with his membership, does anything to promote
the ends of the rebellion like soliciting contributions, or acting as courier, he thereby
becomes guilty of conspiracy, unless he takes to the field and joins in the rebellion of
uprising, in which latter case he commits rebellion.

We therefore declare appellant Marcos Medina guilty of the crime of conspiracy to


commit rebellion, and he should be punished accordingly.

11. Appeal of Cesario Torres

Appellant Cesario Torres was arrested by the agents of the MIS and the Manila Police
on October 19, 1950 at his residence at 742 Colorado St., Manila, along with his wife,
Rosenda Canlas Torres, and his co-accused, Arturo Baking. From his house the agents
seized subversive documents, and articles including a typewriter, a mimeographing
machine, mimeographing ink, stencils, coupon bond papers. Some of these coupon
bond papers were blank but bore the signature of Luis M. Taruc.

The evidence shows that:

Appellant Cesario Torres used the aliases: Leo and Leodones, and he was also known as
Cesario Yacat Torres. He admitted being a member of the HMB and of the CPP, that he
was head of the Technical Office under the Propaganda Branch of the CPP, and as the
head of that office he was in charge of typing and mimeographing the CPP documents
and leaflets, and the TITIS which was the official organ of the CPP. 70

Documents were presented during the trial which clearly prove that this appellant was in
regular communication with Federico Maclang, one of the top leaders of the CPP and
of the rebellion. Thus, in one letter, he explained to Maclang why the issue of the TITIS
for the previous week did not come out; and in another letter he informed Maclang that
he would try to make the TITIS come out every Sunday morning. 71 In a letter to
Maclang dated April 6, 1950, he inquired for the number of copies of "Suliranin ng mga
Familia" that should be printed; and in another letter he was requesting from Maclang
P18.40 for the printing of 600 copies of the "Mapagpalaya", the official organ of the
HMB. 72 Using the name Leodones, this appellant wrote subversive poems calculated to
arouse popular support for the cause of the CPP and the HMB. One such poem,
entitled "Ang Dalawangpung Taon Buhay ng PKP", eulogized the CPP, advocated
armed revolt against the government and the liquidation of Liberals, Nacionalistas, and
priests. The other poems were "Gumising Ka Kabataan", "Maiksing Kasaysayan ng
Kilusang Magbubukid sa Filipinas", "Ang Ikawalong Taong Kaarawan ng Hukbong
Magpapalaya ng Bayan", and "Ang Sigaw ng Bayan Api". All these poems were
published in the different issues of the TITIS. 73

We find that appellant Cesario Torres played a very vital role in the promotion of the
armed struggle that was jointly prosecuted by the CPP and the HMB. He was admittedly
a member of both the CPP and the HMB. His membership with the HMB alone is a
sufficient basis to hold him guilty of the crime of conspiring to commit rebellion. We
believe, however, that he did more than to conspire with the leaders of the HMB and
the CPP to commit rebellion. He was in charge of the publication and circulation of the
TITIS which was the official organ the CPP, and of the "Mapagpalaya" which was the
official organ of the HMB. It is through these two organs that the people were being
aroused to support the armed struggle against the government. While it is true that this
appellant did not go to the field to take up arms, the provocative poems and articles that
he wrote and published in the official organs of the CPP and the HMB were just as
effective to prosecute the rebellion as the guns and other weapons used by the HMB in
the field.

We agree with the finding of the lower court that this appellant is guilty as principal in
the commission of the crime of rebellion, and he should be punished accordingly.

12. Appeal of Arturo Baking

Appellant Arturo Baking was arrested by the agents of MIS and the Manila Police on
October 19, 1950 at 742 Colorado St., Manila, along with his co-accused Cesario Torres
and the latter's wife, Rosenda Canlas Torres. He is the nephew of appellant Angel
Baking.

It is shown by the evidence that:

Appellant Arturo Baking used the aliases Red Bell, Eduardo Santos, Arturo Calma and
Ed. He became a member of the CPP in December 1949. 74 In August 1950 he was
employed by his co-accused Cesario Torres as assistant in the publication center of the
CPP at 742 Colorado St., Manila. He was one of those assigned as typist in the
Educational Department of the CPP, it having been admitted by him that the
publication center was under the Educational Department of the CPP. As assistant to
Cesario Torres he helped in the printing, mimeographing and distribution of the TITIS,
the official organ of the CPP; as well as in the printing, mimeographing and distribution
of HMB documents. His work included the procurement of office supplies, and the
keeping of records of CPP documents that had been printed and distributed to the
different officials and organizational units of the CPP. 75 This appellant had studied and
finished the prescribed secondary course of the Communist Party, and was given a
certificate, "Katibayan sa Pagaaral", attesting to his having satisfactorily completed such
subjects as the "History of National Liberation Movement", "Dialektika ng
Materialismo", "Political Economy", "Estado at Himagsikan", and "Ang Pagkakatatag ng
Partido". 76 By his own declaration this appellant admitted having made studies about
communism, took rigid tests in order to be accepted to the CPP, and that he believed a
communist government should be implanted in the Philippines. In his testimony, he
stated that he had developed a deep-seated hatred against the agents of the law because
of the predatory acts that were committed by them on poor fishermen, and that on
several occasions, especially at various checkpoints, he saw the harsh treatment done by
the Constabulary soldiers to civilians. He bewailed the graft and corruption in the
government. 77

We have no doubt that this appellant is a confirmed communist, and that he was in full
sympathy with the armed struggle being promoted by the leaders of the CPP and the
HMB in order to overthrow the existing government of the Philippines. Upon appraisal
of the evidence, however, We cannot agree with the finding of the lower court that this
appellant is guilty as principal in the commission of the crime of rebellion. We find that
he was the assistant of appellant Cesario Torres, who was entrusted with the publication
and distribution of the official organs of the CPP and the HMB, as well as of the
printing and distribution of the documents of these two organizations. Being an
assistant of appellant Cesario Tores whom We have declared to be a principal in the
commission of the crime of rebellion, We hold that appellant Arturo Baking is guilty as
a mere participant in the commission of the crime of rebellion, under the second
paragraph of the Article 135 of the Revised Penal Code, and he should be punished
accordingly.

13. Appeal of Simeon G. Rodriguez

Appellant Simeon G. Rodriguez was arrested by the agents of the MIS and the Manila
Polioe in his house at 683 Pasaje Rosario, Paco, Manila, on October 18, 1950, along with
Jose Lava, Federico Bautista, Victorina G. Rodriguez and Pedro Vicencio.

The evidence shows that:

Appellant Simeon G. Rodriguez used two aliases: Lakindanum (Laquindanum) and


Sammy. He was a member of the National Finance Committee of the CPP since
October 21, 1949. 78 When he was arrested on October 18, 1950 there were found in
his house some P42,376.00 in paper currency in different denominations. Of the money
that was found in his house, it was conclusively shown that 65 P100-bills, 60 P50-bills,
P145.00 in PNB circulating notes and $310.00 formed part of the money that were
taken from the office of the Provincial Treasurer in Sta. Cruz, Laguna, when the HMB
raided that town in the night of August 26, 1950. We have stated at the early part of this
opinion that on the night of August 26, 1950 some 400 Huks raided Sta. Cruz. The
cashier of the office of the Provincial Treasurer was forced by the Huks at gun point to
open the vault of the provincial treasury from which the Huks took some P80,600.00. It
happened that the Provincial Treasurer of Laguna, Mr. Balbino Kabigting, had a record
of the serial numbers of the paper money that was deposited in the provincial treasury
which were taken by the Huks, and after that raid Mr. Kabigting even issued a warning
to the public about the loss of the money mentioning in the warning the serial
numbers of the money taken. It was found out that the serial numbers of the 65 P100-
bills, of the 60 P50-bills, of the P145.00 PNB circulating notes, and of the $310 found
in the house of appellant Rodriguez tallied with the serial numbers of the paper
currency that was taken from the provincial treasury of Laguna. This appellant, in his
testimony, declared that the paper money whose serial numbers tallied with those paper
money that were taken from the provincial treasury of Laguna formed part of the
money that Jose Lava (one of the appellant herein) brought to his house. Considering
the high position that appellant Lava held in the CPP and the fact that the armed
operations of the HMB were promoted and directed by the Secretariat of the CPP, of
which Lava was a member, and the fact that appellant Simeon Rodriguez was a member
of the National Finance Committee, it is easy to understand why Jose Lava brought to
this appellant that money which was taken by the HMB from the provincial treasury of
Laguna. Significantly, one of the evidence presented during the trial was a receipt, dated
October 5, 1950, signed by Lakindanum in favor of Com. Torres (Casto Alejandrino, a
well-known HMB commander) of Reco 4, acknowledging receipt of P32,740, $310, and
P145 in PNB circulating notes. 79 It could be that Jose Lava made Rodriguez prepare
that receipt when he delivered the money, and the receipt was intended to be sent to
Com. Torres to assure the latter that the money was delivered to Rodriguez. That receipt
was among the papers seized when these appellants were arrested. This is a clear
indication of the connection of appellant Simeon Rodriguez to the armed operations of
the HMB, and the coordinated work of the leaders of the CPP and of the HMB in the
armed uprising.

There are other documents clearly indicating the connection of appellant Rodriguez to
the HMB commanders in the field: (1) There is a letter dated October 13, 1950,
addressed to Com. Lakindanum (Simeon G. Rodriguez) coming from Com. Torres
(Casto Alejandrino) wherein the latter acknowledged receipt of the letter and articles
that were sent to him by Com. Lakindanum. This letter also instructed Lakindanum not
to send the watches to Reco 4. 80 (2) There is another letter dated October 13, 1950, of
Com. Lanao, addressed to Com. Lakindanum, wherein the former was requisitioning
from Lakindanum a radio set. In this letter Com. Lanao, among others, said: "We would
make the attempt to provide you with an extra ration of camote leaves when you visit us
again". 81 This statement in the letter of Com. Lanao indicates that appellant Simeon
Rodriguez used to visit the men in the field. (3) There is still another letter that came
from Com. Amor, addressed to Com. Lakindanum, wherein the former acknowledged
receipt of all the things, including a radio tester costing P30.00, that the latter had sent to
him. 82 (4) Then there is a letter written by herein appellant to Com. Beria (Federico
Maclang) stating that he delivered the tester to Com. Reg in the absence from camp of
Com. Torres. 83 (5) There is a receipt showing that appellant Rodriguez signed in the
name of the National Finance Committee, acknowledging receipt of the amount of
P705.00. 84 (6) There is still another receipt signed by herein appellant acknowledging
receipt of P1,200 from the National Finance Committee, which was prepared for
accounting purposes. 85

This appellant admitted, in his testimony, his close association with Jose Lava. He also
said that he was inclined to believe in the tenets of communism and the use of force in
case the people decide to take political power in their hands.

We have carefully examined the evidence of the prosecution against this appellant, and
also the evidence which he presented in his defense consisting of his own testimony
mainly denying the positive evidences against him and of the testimonies of witnesses
vouching for his good character and the fact that he was a businessman and We have
arrived at the conclusion that this appellant is one of the top communist leaders who
had promoted and maintained the armed operations of the HMB in the field. We agree
with the finding of the lower court that appellant Simeon G. Rodriguez is guilty as
principal in the commission of the crime of rebellion; and he should be punished
accordingly.

14. Appeal of Marciano de Leon

Appellant Marciano de Leon was arrested, together with Angel Baking at Room 504,
Samanillo Building, Escolta, Manila, on October 19, 1950. He used the aliases Mar and
Marcial. At the time of his arrest, he worked in the Personnel Section at the
Headquarters of the Philippine Constabulary. He admitted having supplied his co-
accused Federico Bautista with government documents and confidential information
regarding the HMB from the PC Headquarters. These were: 86

1. Memorandum to all PC Commander re Huk infiltration.

2. Memorandum to all PC Commanders re Loyalty Status of all PC personnel.

3. Memorandum on PC-Civilian Relations.

4. List of PC Agents and their addresses.

5. List of persons wanted by the PC.

6. Letter on the subject: "Yellow Journalism."

7. U.S. Army Technical Manuals and Field Manuals.

We concur with what the lower court said about this appellant: "Considering the nature
of the documents he admitted in his confession to have been furnished by him to
Federico Bautista, the contents of his confession and the accessibility to him of those
documents by reason of his position in the Personnel Section of the Philippine
Constabulary, the Court is inclined to believe that he also took part in the conspiracy to
overthrow the government by armed struggle and did his bit by furnishing Federico
Bautista with information and records regarding the HMB activities obtainable from the
PC Headquarters." We do not agree with the lower court, however, that this appellant is
guilty as principal in the commission of the crime of rebellion. Considering the top
position of Federico Bautista in the CPP hierarchy, it cannot be denied that appellant
Marciano de Leon, by giving the information hereinabove stated to Federico Bautista,
had cooperated or helped in the prosecution of the armed rebellion. We hold this
appellant guilty as a mere participant in the commission of the crime of rebellion, under
the second paragraph of Article 135 of the Revised Penal Code, and should be punished
accordingly.

15. Appeal of Honofre Mangila

We find, by the evidence, that:

Appellant Honofre Mangila was arrested on November 22, 1950 at 215 Leveriza, Pasay
City. He used the aliases Miller and Tommy. He admitted being a communist in fact,
he said he was proud to be a communist and being a member of the Central
Committee of the CPP. He was also a member of the Trade Union Division (TUD) of
the CPP. In the meeting of the Secretariat of the CPP on September 1, 1950, appellant
Mangila was appointed auditor of funds and books of account of the National Finance
Commission (NFC). 87 He actually audited the financial statements of the NFC for the
months of April, May and June, 1950; Mangila's auditing of the National Finance
Commission's account was approved by the Secretariat in its meeting of September 22,
1950. He was also the chairman of the organizational department (OD) for Manila
under the Organizational Bureau of the CPP. 88

There is no question that this appellant is one of the top men in the hierarchy of the
CPP. He was a member of the Central Committee which is the body second only to the
National Congress of the CPP. When the National Congress is not in session it is this
Central Committee that makes decisions for the party. While testifying in his behalf he
revealed his strong communist party discipline when he declined to reveal, upon being
cross-examined, the identity of the other members of the Central Committee, and the
members of the National Congress and of the Politburo. While testifying he was very
outspoken in indicting the existing economic and social order in the country, and
asserted that it is only under the Communist Party when the laboring class can expect a
bright future.

During the trial letters signed by "Miller" or "Tommy", were presented in evidence.
Those were letters addressed to Johnny (Ramon Espiritu) and to Luming (Salome Cruz)
concerning financial matters, meetings and other activities in the CPP. 89

Considering that it is the CPP, as We have shown, that promotes and maintains the
armed operations of the HMB against the government, and considering that appellant
Honofre Mangila is a member of the Central Committee which is the most powerful
body in the CPP when its National Congress is not in session, and considering further
that this appellant was even appointed auditor to audit the funds of the CPP, We believe
that this appellant is one of the principal leaders of the rebellion as charged in the
information. We agree with the finding of the lower court that appellant Honofre
Mangila is guilty as principal in the commission of the crime of rebellion and that he
should be punished accordingly.

16. Appeal of Cenon Bungay

We find, by the evidence, that:

Appellant Cenon Bungay was arrested by Vicente Roco of the 20th BCT and some
members of the Manila Police on November 21, 1950, at 432 Isabel, Sampaloc, Manila.
This appellant used the alias Rufing.

In written statements, he admitted that he joined the Huks in 1946, and at the time of
his arrest on November 21, 1950 he was the commander of the HMB in the province of
Batangas and the G-3 of Field Command (FC) No. 3 of the HMB. While testifying in
open court, he declared that as the HMB commander he had 1,300 fully armed men
(equivalent to 4 HMB battalions) under him, and as a Huk commander he had been
receiving directives from the higher authorities of the HMB. He revealed that Luis Taruc
was the Supreme of the HMB. 90 He also admitted his direct participation in an
encounter between the HMB and the government forces in Plaridel, Bulacan, on March
27, 1950. He stated that in obedience to an order from Regional Command No. 4, he led
his unit in the raid of San Pablo City on March 29, 1950, resulting in the death of Maj.
Alicbusan. He said that their purpose was to overthrow the government by force, and to
establish the "New Democracy." 91 He also declared that he joined the Huks in 1942
because of poverty; that his parents were tenants in Hacienda Bahay Pare at Candaba,
Pampanga; that he stopped schooling after the 7th grade in order to help support his
parents and ten brothers and sisters; that realizing the miserable conditions of the
tenants, he joined the "Aguman Ding Talapagobra" (ADT), the aim of which was the
amelioration of the tenants; that through this organization he realized that the tenants
must organize to promote their welfare and to prevent the abuses of landlords. He
further declared that in spite of the sacrifices of the Huks for 3 years during the
Japanese occupation, the Huks representing the countless tenants, were ignored by the
U.S. armed forces and by the Commonwealth Government; and having been harassed,
persecuted and frustrated in their aims to ameliorate the condition of the masses, the
Huks went underground. According to him the Huks felt more persecuted when Luis
Taruc, the successful congressional candidate in 1946 of the Democratic Alliance, was
denied his seat in Congress, and that they lost faith in the government due to the frauds
and terrorism perpetrated in the elections that followed. 92

Appellant Bungay admitted that the HMB had to use force in order to change the
administration. He said that the men under him used arms given by the American
soldiers and Communist sympathizers. He also revealed that while he was the Huk
commander at Cavite, he had two encounters with government forces, one at Aliang,
Malabon on February 18, 1950; and the other at Alfonso, Cavite, on February 22, 1950.
These admissions were fully corroborated by Benjamin Advincula, a ranking officer and
Secretary of Reco Command No. 4 of the HMB and by Ronald Dorsey, a former Huk
member. 93

There is no doubt that Cenon Bungay, as Huk commander, was also a leader in the
rebellion. We agree with the finding of the lower court that this appellant is guilty as
principal in the commission of the crime of rebellion, and he should be punished
accordingly.

17. Appeal of Pedro T. Vicencio

Appellant Pedro T. Vicencio was arrested on October 18, 1950 at 683 Pasaje Rosario,
Paco, Manila, along with Jose Lava, Federico Bautista, Simeon Rodriguez and Victorina
Rodriguez. He was also known as Pedring. In a statement, signed by him at Camp
Murphy after his arrest, he admitted that he used to run errands, bringing foodstuffs,
medicines and other supplies intended for the HMB, and also delivering packages that
were labelled R-1, R-2, R-3, R-4 and R-5, which stood for Reco-1, Reco-2, etc.,
respectively, to Andalucia Street where Rosario Vda. de Santos received them. 94 We
have found, in this decision, that Rosario Vda. de Santos was working under Salome
Cruz who was the chairman of the National Communications Division (NCD) of the
CPP, and that she was in charge of an outpost, checking the irregular couriers for Recos
1, 2, 3, 4, 5 and Pangasinan, and she was staying at 1608-B Andalucia, Sampaloc, Manila.

Testifying in his own behalf, appellant Vicencio denied being a member of the CPP nor
of the HMB, although he stated that at the time of his arrest, he was studying the
principles of communism, and that he sympathized with the Huks. At the time of his
arrest this appellant was 20 years old, and he was a first year Liberal Arts student. He
admitted in his testimony that he delivered to Angel Baking notes sent by Simeon
Rodriguez. 95

While it is not shown that this appellant actually took part in the armed operations of
the HMB, his having delivered foodstuffs, medicines and other supplies which were
intended for the HMB, and his having delivered packages to Rosario Vda. de Santos who
was in charge of the outpost where couriers go to deliver, or to get, letters or articles
intended for RECOS in the field, clearly indicate that this appellant was actively
cooperating in the efforts of those promoting the rebellion. Being 20 years of age and a
college student, it can be expected that he knew that he was doing something for the
communists and the Huks. More so, because he was living with Simeon G. Rodriguez,
one of the top leaders of the CPP. He admitted having delivered notes sent by Simeon
Rodriguez to Angel Baking, another top leader of the CPP. The house of Rodriguez was
the meeting place of CPP leaders.lawphil.et
We find this appellant guilty as a mere participant in the commission of the crime of
rebellion, under the second paragraph of Article 135 of the Revised Penal Code, and he
should be punished accordingly.

18. Appeal of Felipe Engreso

Appellant Felipe Engreso was arrested on October 18, 1950 at 1938 Int. 7, Felix Huertas
St., Manila, along with Federico Maclang and Julita Rodriguez. At the time of his arrest,
he was about 15 years old, and was living as a houseboy of one known to him as
Ambrosio Reyes.

It appears that in a written statement that he signed before the MIS agents, this appellant
admitted having delivered letters to Mr. Espiritu (Ramon Espiritu) at Andalucia St.,
Manila; to Cesar (Cesario Torres) at 742 Colorado, Manila; and to Gaston (Jose Lava) at
Celeridad St., Pasay City. It also appears in that statement that he used to get the TITIS
from Colorado St. (residence of Cesario Torres and the CPP publication center) to
deliver them to Andalucia Street (residence of Ramon Espiritu, Salome Cruz and
Rosario Vda. de Santos) and retained one copy for Ambrosio Reyes. 96

Testifying in his behalf, appellant Engreso declared that before his arrest he never knew
that his master, Ambrosio Reyes, is the accused Federico Maclang. He came to know his
master to be Federico Maclang only when they were already detained at Muntinglupa. 97

Upon a careful study of the evidence against this appellant, We have come to the
conclusion that his guilt has not been proved beyond reasonable doubt. This appellant
was only around 15 years old. We accept his testimony that he did not know that his
master was Federico Maclang, and that all the time he knew him to be Ambrosio Reyes.
He was simply a houseboy of Maclang. He had to obey orders to deliver letters or
deliver copies of TITIS. There is no showing that he knew the contents of the letters
that he was made to deliver, or that he knew the addressees to be communists. The
Solicitor General recommends the acquittal of this appellant upon the ground that there
is no sufficient evidence to show his criminal intent. We agree with the Solicitor General.
We, therefore, acquit appellant Felipe Engreso of the charge against him in the
information.

xxx xxx xxx

IN VIEW OF THE FOREGOING, the decision appealed from should be, as it is


hereby, modified, as follows:

1. In G.R. No. L-4974

Appellants Jose Lava, Federico Bautista, Federico Maclang, Ramon Espiritu, Salome
Cruz and Angel Baking are found guilty as principals in the commission of the crime of
simple rebellion under the first paragraph of Article 135 of the Revised Penal Code, and
every one of them is hereby sentenced to suffer imprisonment for ten (10) years of
prision mayor, and a fine of P20,000, with the accessories provided by law, but without
subsidiary imprisonment in case of insolvency, and to pay their proportionate shares of
the costs.

Appellant Rosario C. Vda. de Santos is found guilty as a participant in the commission


of the crime of simple rebellion under the second paragraph of Article 135 of the
Revised Penal Code, and she is hereby sentenced to suffer imprisonment of seven (7)
years and four (4) months of prision mayor, with the accessories provided by law, and to
pay her proportionate share of the costs.

2. In G.R. No. L-4975

Appellant Cesario Torres is found guilty as principal in the commission of the crime of
simple rebellion under the first paragraph of Article 135 of the Revised Penal Code, and
he is hereby sentenced to suffer imprisonment of ten (10) years of prision mayor, and a
fine of P20,000, with the accessories provided by law, but without subsidiary
imprisonment in case of insolvency, and to pay his proportionate share of the costs.

Appellants Lamberto Magboo and Arturo Baking are found guilty as participants in the
commission of the crime of simple rebellion under the second paragraph of Article 135
of the Revised Penal Code, and every one of them is hereby sentenced to suffer
imprisonment of seven (7) years and four (4) months of prision mayor, with the
accessories provided by law, and to pay their proportionate shares of the costs.

Appellant Marcos Medina is found guilty of the crime of conspiracy to commit


rebellion under Article 136 of the Revised Penal Code, and he is hereby sentenced to
suffer imprisonment of five (5) years, four (4) months, and twenty (20) days of prision
correccional and a fine of P2,000, with the accessories provided by law, with subsidiary
imprisonment in case of insolvency, and to pay his proportionate share of the costs.

Appellant Nicanor Razon, Sr. is hereby acquitted, with costs de oficio.

3. In G.R. No. L-4976

Appellant Simeon G. Rodriguez is found guilty as principal in the commission of the


crime of simple rebellion under the first paragraph of Article 135 of the Revised Penal
Code, and is hereby sentenced to suffer imprisonment of ten (10) years of prision mayor
and a fine of P20,000, with the accessories provided by law, but without subsidiary
imprisonment in case of insolvency, and to pay his proportionate share of the costs.

Appellant Marciano de Leon is found guilty as a participant in the commission of the


crime of simple rebellion under the second paragraph of Article 135 of the Revised
Penal Code, and is hereby sentenced to suffer imprisonment of seven (7) years and four
(4) months of prision mayor with the accessories provided by law, and to pay his
proportionate share of the costs.

4. In G.R. No. L-4977

Appellants Honofre Mangila and Simeon Bungay are found guilty as principals in the
commission of the crime of simple rebellion under the first paragraph of Article 135 of
the Revised Penal Code, and every one of them is sentenced to suffer imprisonment of
ten (1O) years of prision mayor, and a fine of P20,000, with the accessories provided by
law, but without subsidiary imprisonment in case of insolvency, and to pay their
proportionate shares of the costs.

5. In G.R. No. L-4978

Appellant Pedro T. Vicencio is found guilty as a participant in the commission of the


crime of simple rebellion under the second paragraph of Article 135 of the Revised
Penal Code, and is sentenced to suffer imprisonment of seven (7) years and four (4)
months of prision mayor, with the accessories provided by law, and to pay his
proportionate share of the costs.

Appellant Felipe Engreso is hereby acquitted, with costs de oficio.

The Court takes judicial notice, that, except for appellants Lamberto Magboo, Nicanor
Razon, Sr., Pedro T. Vicencio, and Felipe Engreso who are on provisional liberty under
bail, all the rest of these appellants are detained, and their detention dates back as of
August, October or November, of the year 1950, as the case may be. The Director of
the Bureau of Prisons is hereby directed to determine the period of detention that
should be credited to the appellants who are under detention, pursuant to the provisions
of Article 29 of the Revised Penal Code, and to release immediately those appellants
who are entitled to be credited with the period of their detention equal to the penalty of
imprisonment imposed upon them in this decision. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Sanchez and Capistrano, JJ., concur.


Teehankee and Barredo, JJ., took no part.
Concepcion, C.J., and Castro, J., are on leave.

x--x
G.R. No. L-23893 October 29, 1968

VILLA REY TRANSIT, INC., plaintiff-appellant,


vs.
EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION CO., INC. and
PUBLIC SERVICE COMMISSION, defendants.
EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC.,
defendants-appellants.

PANGASINAN TRANSPORTATION CO., INC., third-party plaintiff-appellant,


vs.
JOSE M. VILLARAMA, third-party defendant-appellee.

Chuidian Law Office for plaintiff-appellant.


Bengzon, Zarraga & Villegas for defendant-appellant / third-party plaintiff-appellant.
Laurea & Pison for third-party defendant-appellee.

ANGELES, J.:

This is a tri-party appeal from the decision of the Court of First Instance of Manila,
Civil Case No. 41845, declaring null and void the sheriff's sale of two certificates of
public convenience in favor of defendant Eusebio E. Ferrer and the subsequent sale
thereof by the latter to defendant Pangasinan Transportation Co., Inc.; declaring the
plaintiff Villa Rey Transit, Inc., to be the lawful owner of the said certificates of public
convenience; and ordering the private defendants, jointly and severally, to pay to the
plaintiff, the sum of P5,000.00 as and for attorney's fees. The case against the PSC was
dismissed.

The rather ramified circumstances of the instant case can best be understood by a
chronological narration of the essential facts, to wit:

Prior to 1959, Jose M. Villarama was an operator of a bus transportation, under the
business name of Villa Rey Transit, pursuant to certificates of public convenience
granted him by the Public Service Commission (PSC, for short) in Cases Nos. 44213 and
104651, which authorized him to operate a total of thirty-two (32) units on various
routes or lines from Pangasinan to Manila, and vice-versa. On January 8, 1959, he sold
the aforementioned two certificates of public convenience to the Pangasinan
Transportation Company, Inc. (otherwise known as Pantranco), for P350,000.00 with the
condition, among others, that the seller (Villarama) "shall not for a period of 10 years
from the date of this sale, apply for any TPU service identical or competing with the
buyer."

Barely three months thereafter, or on March 6, 1959: a corporation called Villa Rey
Transit, Inc. (which shall be referred to hereafter as the Corporation) was organized with
a capital stock of P500,000.00 divided into 5,000 shares of the par value of P100.00
each; P200,000.00 was the subscribed stock; Natividad R. Villarama (wife of Jose M.
Villarama) was one of the incorporators, and she subscribed for P1,000.00; the balance
of P199,000.00 was subscribed by the brother and sister-in-law of Jose M. Villarama; of
the subscribed capital stock, P105,000.00 was paid to the treasurer of the corporation,
who was Natividad R. Villarama.
In less than a month after its registration with the Securities and Exchange Commission
(March 10, 1959), the Corporation, on April 7, 1959, bought five certificates of public
convenience, forty-nine buses, tools and equipment from one Valentin Fernando, for the
sum of P249,000.00, of which P100,000.00 was paid upon the signing of the contract;
P50,000.00 was payable upon the final approval of the sale by the PSC; P49,500.00 one
year after the final approval of the sale; and the balance of P50,000.00 "shall be paid by
the BUYER to the different suppliers of the SELLER."

The very same day that the aforementioned contract of sale was executed, the parties
thereto immediately applied with the PSC for its approval, with a prayer for the issuance
of a provisional authority in favor of the vendee Corporation to operate the service
therein involved.1 On May 19, 1959, the PSC granted the provisional permit prayed for,
upon the condition that "it may be modified or revoked by the Commission at any time,
shall be subject to whatever action that may be taken on the basic application and shall
be valid only during the pendency of said application." Before the PSC could take final
action on said application for approval of sale, however, the Sheriff of Manila, on July 7,
1959, levied on two of the five certificates of public convenience involved therein,
namely, those issued under PSC cases Nos. 59494 and 63780, pursuant to a writ of
execution issued by the Court of First Instance of Pangasinan in Civil Case No. 13798,
in favor of Eusebio Ferrer, plaintiff, judgment creditor, against Valentin Fernando,
defendant, judgment debtor. The Sheriff made and entered the levy in the records of
the PSC. On July 16, 1959, a public sale was conducted by the Sheriff of the said two
certificates of public convenience. Ferrer was the highest bidder, and a certificate of sale
was issued in his name.

Thereafter, Ferrer sold the two certificates of public convenience to Pantranco, and
jointly submitted for approval their corresponding contract of sale to the PSC.2
Pantranco therein prayed that it be authorized provisionally to operate the service
involved in the said two certificates.

The applications for approval of sale, filed before the PSC, by Fernando and the
Corporation, Case No. 124057, and that of Ferrer and Pantranco, Case No. 126278,
were scheduled for a joint hearing. In the meantime, to wit, on July 22, 1959, the PSC
issued an order disposing that during the pendency of the cases and before a final
resolution on the aforesaid applications, the Pantranco shall be the one to operate
provisionally the service under the two certificates embraced in the contract between
Ferrer and Pantranco. The Corporation took issue with this particular ruling of the PSC
and elevated the matter to the Supreme Court,3 which decreed, after deliberation, that
until the issue on the ownership of the disputed certificates shall have been finally
settled by the proper court, the Corporation should be the one to operate the lines
provisionally.

On November 4, 1959, the Corporation filed in the Court of First Instance of Manila, a
complaint for the annulment of the sheriff's sale of the aforesaid two certificates of
public convenience (PSC Cases Nos. 59494 and 63780) in favor of the defendant Ferrer,
and the subsequent sale thereof by the latter to Pantranco, against Ferrer, Pantranco and
the PSC. The plaintiff Corporation prayed therein that all the orders of the PSC relative
to the parties' dispute over the said certificates be annulled.

In separate answers, the defendants Ferrer and Pantranco averred that the plaintiff
Corporation had no valid title to the certificates in question because the contract
pursuant to which it acquired them from Fernando was subject to a suspensive condition
the approval of the PSC which has not yet been fulfilled, and, therefore, the
Sheriff's levy and the consequent sale at public auction of the certificates referred to, as
well as the sale of the same by Ferrer to Pantranco, were valid and regular, and vested
unto Pantranco, a superior right thereto.

Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging
that Villarama and the Corporation, are one and the same; that Villarama and/or the
Corporation was disqualified from operating the two certificates in question by virtue of
the aforementioned agreement between said Villarama and Pantranco, which stipulated
that Villarama "shall not for a period of 10 years from the date of this sale, apply for any
TPU service identical or competing with the buyer."

Upon the joinder of the issues in both the complaint and third-party complaint, the case
was tried, and thereafter decision was rendered in the terms, as above stated.

As stated at the beginning, all the parties involved have appealed from the decision. They
submitted a joint record on appeal.

Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey
Transit, Inc. (Corporation) is a distinct and separate entity from Jose M. Villarama; that
the restriction clause in the contract of January 8, 1959 between Pantranco and
Villarama is null and void; that the Sheriff's sale of July 16, 1959, is likewise null and
void; and the failure to award damages in its favor and against Villarama.

Ferrer, for his part, challenges the decision insofar as it holds that the sheriff's sale is null
and void; and the sale of the two certificates in question by Valentin Fernando to the
Corporation, is valid. He also assails the award of P5,000.00 as attorney's fees in favor
of the Corporation, and the failure to award moral damages to him as prayed for in his
counterclaim.

The Corporation, on the other hand, prays for a review of that portion of the decision
awarding only P5,000.00 as attorney's fees, and insisting that it is entitled to an award of
P100,000.00 by way of exemplary damages.

After a careful study of the facts obtaining in the case, the vital issues to be resolved are:
(1) Does the stipulation between Villarama and Pantranco, as contained in the deed of
sale, that the former "SHALL NOT FOR A PERIOD OF 10 YEARS FROM THE
DATE OF THIS SALE, APPLY FOR ANY TPU SERVICE IDENTICAL OR
COMPETING WITH THE BUYER," apply to new lines only or does it include
existing lines?; (2) Assuming that said stipulation covers all kinds of lines, is such
stipulation valid and enforceable?; (3) In the affirmative, that said stipulation is valid, did
it bind the Corporation?

For convenience, We propose to discuss the foregoing issues by starting with the last
proposition.

The evidence has disclosed that Villarama, albeit was not an incorporator or stockholder
of the Corporation, alleging that he did not become such, because he did not have
sufficient funds to invest, his wife, however, was an incorporator with the least
subscribed number of shares, and was elected treasurer of the Corporation. The
finances of the Corporation which, under all concepts in the law, are supposed to be
under the control and administration of the treasurer keeping them as trust fund for the
Corporation, were, nonetheless, manipulated and disbursed as if they were the private
funds of Villarama, in such a way and extent that Villarama appeared to be the actual
owner-treasurer of the business without regard to the rights of the stockholders. The
following testimony of Villarama,4 together with the other evidence on record, attests to
that effect:

Q. Doctor, I want to go back again to the incorporation of the Villa Rey Transit, Inc.
You heard the testimony presented here by the bank regarding the initial opening
deposit of ONE HUNDRED FIVE THOUSAND PESOS, of which amount Eighty-
Five Thousand Pesos was a check drawn by yourself personally. In the direct
examination you told the Court that the reason you drew a check for Eighty-Five
Thousand Pesos was because you and your wife, or your wife, had spent the money of
the stockholders given to her for incorporation. Will you please tell the Honorable Court
if you knew at the time your wife was spending the money to pay debts, you personally
knew she was spending the money of the incorporators?

A. You know my money and my wife's money are one. We never talk about those
things.

Q. Doctor, your answer then is that since your money and your wife's money are one
money and you did not know when your wife was paying debts with the incorporator's
money?

A. Because sometimes she uses my money, and sometimes the money given to her
she gives to me and I deposit the money.

Q. Actually, aside from your wife, you were also the custodian of some of the
incorporators here, in the beginning?

A. Not necessarily, they give to my wife and when my wife hands to me I did not
know it belonged to the incorporators.
Q. It supposes then your wife gives you some of the money received by her in her
capacity as treasurer of the corporation?

A. Maybe.

Q. What did you do with the money, deposit in a regular account?

A. Deposit in my account.

Q. Of all the money given to your wife, she did not receive any check?

A. I do not remember.

Q. Is it usual for you, Doctor, to be given Fifty Thousand Pesos without even asking
what is this?

xxx xxx xxx

JUDGE: Reform the question.

Q. The subscription of your brother-in-law, Mr. Reyes, is Fifty-Two Thousand Pesos,


did your wife give you Fifty-two Thousand Pesos?

A. I have testified before that sometimes my wife gives me money and I do not
know exactly for what.

The evidence further shows that the initial cash capitalization of the corporation of
P105,000.00 was mostly financed by Villarama. Of the P105,000.00 deposited in the
First National City Bank of New York, representing the initial paid-up capital of the
Corporation, P85,000.00 was covered by Villarama's personal check. The deposit slip for
the said amount of P105,000.00 was admitted in evidence as Exh. 23, which shows on
its face that P20,000.00 was paid in cash and P85,000.00 thereof was covered by Check
No. F-50271 of the First National City Bank of New York. The testimonies of Alfonso
Sancho5 and Joaquin Amansec,6 both employees of said bank, have proved that the
drawer of the check was Jose Villarama himself.

Another witness, Celso Rivera, accountant of the Corporation, testified that while in the
books of the corporation there appears an entry that the treasurer received P95,000.00
as second installment of the paid-in subscriptions, and, subsequently, also P100,000.00
as the first installment of the offer for second subscriptions worth P200,000.00 from the
original subscribers, yet Villarama directed him (Rivera) to make vouchers liquidating the
sums.7 Thus, it was made to appear that the P95,000.00 was delivered to Villarama in
payment for equipment purchased from him, and the P100,000.00 was loaned as
advances to the stockholders. The said accountant, however, testified that he was not
aware of any amount of money that had actually passed hands among the parties
involved,8 and actually the only money of the corporation was the P105,000.00 covered
by the deposit slip Exh. 23, of which as mentioned above, P85,000.00 was paid by
Villarama's personal check.

Further, the evidence shows that when the Corporation was in its initial months of
operation, Villarama purchased and paid with his personal checks Ford trucks for the
Corporation. Exhibits 20 and 21 disclose that the said purchases were paid by Philippine
Bank of Commerce Checks Nos. 992618-B and 993621-B, respectively. These checks
have been sufficiently established by Fausto Abad, Assistant Accountant of Manila
Trading & Supply Co., from which the trucks were purchased9 and Aristedes Solano, an
employee of the Philippine Bank of Commerce,10 as having been drawn by Villarama.

Exhibits 6 to 19 and Exh. 22, which are photostatic copies of ledger entries and
vouchers showing that Villarama had co-mingled his personal funds and transactions
with those made in the name of the Corporation, are very illuminating evidence.
Villarama has assailed the admissibility of these exhibits, contending that no evidentiary
value whatsoever should be given to them since "they were merely photostatic copies of
the originals, the best evidence being the originals themselves." According to him, at the
time Pantranco offered the said exhibits, it was the most likely possessor of the originals
thereof because they were stolen from the files of the Corporation and only Pantranco
was able to produce the alleged photostat copies thereof.

Section 5 of Rule 130 of the Rules of Court provides for the requisites for the
admissibility of secondary evidence when the original is in the custody of the adverse
party, thus: (1) opponent's possession of the original; (2) reasonable notice to opponent
to produce the original; (3) satisfactory proof of its existence; and (4) failure or refusal
of opponent to produce the original in court.11 Villarama has practically admitted the
second and fourth requisites.12 As to the third, he admitted their previous existence in
the files of the Corporation and also that he had seen some of them.13 Regarding the
first element, Villarama's theory is that since even at the time of the issuance of the
subpoena duces tecum, the originals were already missing, therefore, the Corporation
was no longer in possession of the same. However, it is not necessary for a party seeking
to introduce secondary evidence to show that the original is in the actual possession of
his adversary. It is enough that the circumstances are such as to indicate that the writing
is in his possession or under his control. Neither is it required that the party entitled to
the custody of the instrument should, on being notified to produce it, admit having it in
his possession.14 Hence, secondary evidence is admissible where he denies having it in
his possession. The party calling for such evidence may introduce a copy thereof as in
the case of loss. For, among the exceptions to the best evidence rule is "when the
original has been lost, destroyed, or cannot be produced in court."15 The originals of
the vouchers in question must be deemed to have been lost, as even the Corporation
admits such loss. Viewed upon this light, there can be no doubt as to the admissibility in
evidence of Exhibits 6 to 19 and 22.
Taking account of the foregoing evidence, together with Celso Rivera's testimony,16 it
would appear that: Villarama supplied the organization expenses and the assets of the
Corporation, such as trucks and equipment;17 there was no actual payment by the
original subscribers of the amounts of P95,000.00 and P100,000.00 as appearing in the
books;18 Villarama made use of the money of the Corporation and deposited them to
his private accounts;19 and the Corporation paid his personal accounts.20

Villarama himself admitted that he mingled the corporate funds with his own money.21
He also admitted that gasoline purchases of the Corporation were made in his name22
because "he had existing account with Stanvac which was properly secured and he
wanted the Corporation to benefit from the rebates that he received."23

The foregoing circumstances are strong persuasive evidence showing that Villarama has
been too much involved in the affairs of the Corporation to altogether negative the
claim that he was only a part-time general manager. They show beyond doubt that the
Corporation is his alter ego.

It is significant that not a single one of the acts enumerated above as proof of
Villarama's oneness with the Corporation has been denied by him. On the contrary, he
has admitted them with offered excuses.

Villarama has admitted, for instance, having paid P85,000.00 of the initial capital of the
Corporation with the lame excuse that "his wife had requested him to reimburse the
amount entrusted to her by the incorporators and which she had used to pay the
obligations of Dr. Villarama (her husband) incurred while he was still the owner of Villa
Rey Transit, a single proprietorship." But with his admission that he had received
P350,000.00 from Pantranco for the sale of the two certificates and one unit,24 it
becomes difficult to accept Villarama's explanation that he and his wife, after
consultation,25 spent the money of their relatives (the stockholders) when they were
supposed to have their own money. Even if Pantranco paid the P350,000.00 in check to
him, as claimed, it could have been easy for Villarama to have deposited said check in his
account and issued his own check to pay his obligations. And there is no evidence
adduced that the said amount of P350,000.00 was all spent or was insufficient to settle
his prior obligations in his business, and in the light of the stipulation in the deed of sale
between Villarama and Pantranco that P50,000.00 of the selling price was earmarked for
the payments of accounts due to his creditors, the excuse appears unbelievable.

On his having paid for purchases by the Corporation of trucks from the Manila Trading
& Supply Co. with his personal checks, his reason was that he was only sharing with the
Corporation his credit with some companies. And his main reason for mingling his
funds with that of the Corporation and for the latter's paying his private bills is that it
would be more convenient that he kept the money to be used in paying the registration
fees on time, and since he had loaned money to the Corporation, this would be set off
by the latter's paying his bills. Villarama admitted, however, that the corporate funds in
his possession were not only for registration fees but for other important obligations
which were not specified.26

Indeed, while Villarama was not the Treasurer of the Corporation but was, allegedly,
only a part-time manager,27 he admitted not only having held the corporate money but
that he advanced and lent funds for the Corporation, and yet there was no Board
Resolution allowing it.28

Villarama's explanation on the matter of his involvement with the corporate affairs of
the Corporation only renders more credible Pantranco's claim that his control over the
corporation, especially in the management and disposition of its funds, was so extensive
and intimate that it is impossible to segregate and identify which money belonged to
whom. The interference of Villarama in the complex affairs of the corporation, and
particularly its finances, are much too inconsistent with the ends and purposes of the
Corporation law, which, precisely, seeks to separate personal responsibilities from
corporate undertakings. It is the very essence of incorporation that the acts and conduct
of the corporation be carried out in its own corporate name because it has its own
personality.

The doctrine that a corporation is a legal entity distinct and separate from the members
and stockholders who compose it is recognized and respected in all cases which are
within reason and the law.29 When the fiction is urged as a means of perpetrating a
fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime,30 the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be lifted to allow
for its consideration merely as an aggregation of individuals.

Upon the foregoing considerations, We are of the opinion, and so hold, that the
preponderance of evidence have shown that the Villa Rey Transit, Inc. is an alter ego of
Jose M. Villarama, and that the restrictive clause in the contract entered into by the latter
and Pantranco is also enforceable and binding against the said Corporation. For the rule
is that a seller or promisor may not make use of a corporate entity as a means of
evading the obligation of his covenant.31 Where the Corporation is substantially the
alter ego of the covenantor to the restrictive agreement, it can be enjoined from
competing with the covenantee.32

The Corporation contends that even on the supposition that Villa Rey Transit, Inc. and
Villarama are one and the same, the restrictive clause in the contract between Villarama
and Pantranco does not include the purchase of existing lines but it only applies to
application for the new lines. The clause in dispute reads thus:

(4) The SELLER shall not, for a period of ten (10) years from the date of this sale
apply for any TPU service identical or competing with the BUYER. (Emphasis supplied)
As We read the disputed clause, it is evident from the context thereof that the intention
of the parties was to eliminate the seller as a competitor of the buyer for ten years along
the lines of operation covered by the certificates of public convenience subject of their
transaction. The word "apply" as broadly used has for frame of reference, a service by
the seller on lines or routes that would compete with the buyer along the routes acquired
by the latter. In this jurisdiction, prior authorization is needed before anyone can operate
a TPU service,33whether the service consists in a new line or an old one acquired from a
previous operator. The clear intention of the parties was to prevent the seller from
conducting any competitive line for 10 years since, anyway, he has bound himself not to
apply for authorization to operate along such lines for the duration of such period.34

If the prohibition is to be applied only to the acquisition of new certificates of public


convenience thru an application with the Public Service Commission, this would, in
effect, allow the seller just the same to compete with the buyer as long as his authority to
operate is only acquired thru transfer or sale from a previous operator, thus defeating the
intention of the parties. For what would prevent the seller, under the circumstances,
from having a representative or dummy apply in the latter's name and then later on
transferring the same by sale to the seller? Since stipulations in a contract is the law
between the contracting parties,

Every person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith. (Art. 19, New
Civil Code.)

We are not impressed of Villarama's contention that the re-wording of the two previous
drafts of the contract of sale between Villarama and Pantranco is significant in that as it
now appears, the parties intended to effect the least restriction. We are persuaded, after
an examination of the supposed drafts, that the scope of the final stipulation, while not
as long and prolix as those in the drafts, is just as broad and comprehensive. At most, it
can be said that the re-wording was done merely for brevity and simplicity.

The evident intention behind the restriction was to eliminate the sellers as a competitor,
and this must be, considering such factors as the good will35 that the seller had already
gained from the riding public and his adeptness and proficiency in the trade. On this
matter, Corbin, an authority on Contracts has this to say.36

When one buys the business of another as a going concern, he usually wishes to keep it
going; he wishes to get the location, the building, the stock in trade, and the customers.
He wishes to step into the seller's shoes and to enjoy the same business relations with
other men. He is willing to pay much more if he can get the "good will" of the business,
meaning by this the good will of the customers, that they may continue to tread the old
footpath to his door and maintain with him the business relations enjoyed by the seller.

... In order to be well assured of this, he obtains and pays for the seller's promise not to
reopen business in competition with the business sold.
As to whether or not such a stipulation in restraint of trade is valid, our jurisprudence
on the matter37says:

The law concerning contracts which tend to restrain business or trade has gone through
a long series of changes from time to time with the changing condition of trade and
commerce. With trifling exceptions, said changes have been a continuous development
of a general rule. The early cases show plainly a disposition to avoid and annul all
contract which prohibited or restrained any one from using a lawful trade "at any time or
at any place," as being against the benefit of the state. Later, however, the rule became
well established that if the restraint was limited to "a certain time" and within "a certain
place," such contracts were valid and not "against the benefit of the state." Later cases,
and we think the rule is now well established, have held that a contract in restraint of
trade is valid providing there is a limitation upon either time or place. A contract,
however, which restrains a man from entering into business or trade without either a
limitation as to time or place, will be held invalid.

The public welfare of course must always be considered and if it be not involved and
the restraint upon one party is not greater than protection to the other requires,
contracts like the one we are discussing will be sustained. The general tendency, we
believe, of modern authority, is to make the test whether the restraint is reasonably
necessary for the protection of the contracting parties. If the contract is reasonably
necessary to protect the interest of the parties, it will be upheld. (Emphasis supplied.)

Analyzing the characteristics of the questioned stipulation, We find that although it is in


the nature of an agreement suppressing competition, it is, however, merely ancillary or
incidental to the main agreement which is that of sale. The suppression or restraint is
only partial or limited: first, in scope, it refers only to application for TPU by the seller in
competition with the lines sold to the buyer; second, in duration, it is only for ten (10)
years; and third, with respect to situs or territory, the restraint is only along the lines
covered by the certificates sold. In view of these limitations, coupled with the
consideration of P350,000.00 for just two certificates of public convenience, and
considering, furthermore, that the disputed stipulation is only incidental to a main
agreement, the same is reasonable and it is not harmful nor obnoxious to public service.
38 It does not appear that the ultimate result of the clause or stipulation would be to
leave solely to Pantranco the right to operate along the lines in question, thereby
establishing monopoly or predominance approximating thereto. We believe the main
purpose of the restraint was to protect for a limited time the business of the buyer.

Indeed, the evils of monopoly are farfetched here. There can be no danger of price
controls or deterioration of the service because of the close supervision of the Public
Service Commission.39 This Court had stated long ago,40 that "when one devotes his
property to a use in which the public has an interest, he virtually grants to the public an
interest in that use and submits it to such public use under reasonable rules and
regulations to be fixed by the Public Utility Commission."
Regarding that aspect of the clause that it is merely ancillary or incidental to a lawful
agreement, the underlying reason sustaining its validity is well explained in 36 Am. Jur.
537-539, to wit:

... Numerous authorities hold that a covenant which is incidental to the sale and transfer
of a trade or business, and which purports to bind the seller not to engage in the same
business in competition with the purchaser, is lawful and enforceable. While such
covenants are designed to prevent competition on the part of the seller, it is ordinarily
neither their purpose nor effect to stifle competition generally in the locality, nor to
prevent it at all in a way or to an extent injurious to the public. The business in the hands
of the purchaser is carried on just as it was in the hands of the seller; the former merely
takes the place of the latter; the commodities of the trade are as open to the public as
they were before; the same competition exists as existed before; there is the same
employment furnished to others after as before; the profits of the business go as they
did before to swell the sum of public wealth; the public has the same opportunities of
purchasing, if it is a mercantile business; and production is not lessened if it is a
manufacturing plant.

The reliance by the lower court on tile case of Red Line Transportation Co. v.
Bachrach41 and finding that the stipulation is illegal and void seems misplaced. In the
said Red Line case, the agreement therein sought to be enforced was virtually a division
of territory between two operators, each company imposing upon itself an obligation
not to operate in any territory covered by the routes of the other. Restraints of this type,
among common carriers have always been covered by the general rule invalidating
agreements in restraint of trade. 42

Neither are the other cases relied upon by the plaintiff-appellee applicable to the instant
case. In Pampanga Bus Co., Inc. v. Enriquez,43the undertaking of the applicant therein
not to apply for the lifting of restrictions imposed on his certificates of public
convenience was not an ancillary or incidental agreement. The restraint was the principal
objective. On the other hand, in Red Line Transportation Co., Inc. v. Gonzaga,44 the
restraint there in question not to ask for extension of the line, or trips, or increase of
equipment was not an agreement between the parties but a condition imposed in the
certificate of public convenience itself.

Upon the foregoing considerations, Our conclusion is that the stipulation prohibiting
Villarama for a period of 10 years to "apply" for TPU service along the lines covered by
the certificates of public convenience sold by him to Pantranco is valid and reasonable.
Having arrived at this conclusion, and considering that the preponderance of the
evidence have shown that Villa Rey Transit, Inc. is itself the alter ego of Villarama, We
hold, as prayed for in Pantranco's third party complaint, that the said Corporation
should, until the expiration of the 1-year period abovementioned, be enjoined from
operating the line subject of the prohibition.
To avoid any misunderstanding, it is here to be emphasized that the 10-year prohibition
upon Villarama is not against his application for, or purchase of, certificates of public
convenience, but merely the operation of TPU along the lines covered by the certificates
sold by him to Pantranco. Consequently, the sale between Fernando and the Corporation
is valid, such that the rightful ownership of the disputed certificates still belongs to the
plaintiff being the prior purchaser in good faith and for value thereof. In view of the
ancient rule of caveat emptor prevailing in this jurisdiction, what was acquired by Ferrer
in the sheriff's sale was only the right which Fernando, judgment debtor, had in the
certificates of public convenience on the day of the sale.45

Accordingly, by the "Notice of Levy Upon Personalty" the Commissioner of Public


Service was notified that "by virtue of an Order of Execution issued by the Court of
First Instance of Pangasinan, the rights, interests, or participation which the defendant,
VALENTIN A. FERNANDO in the above entitled case may have in the following
realty/personalty is attached or levied upon, to wit: The rights, interests and participation
on the Certificates of Public Convenience issued to Valentin A. Fernando, in Cases Nos.
59494, etc. ... Lines Manila to Lingayen, Dagupan, etc. vice versa." Such notice of
levy only shows that Ferrer, the vendee at auction of said certificates, merely stepped
into the shoes of the judgment debtor. Of the same principle is the provision of Article
1544 of the Civil Code, that "If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property."

There is no merit in Pantranco and Ferrer's theory that the sale of the certificates of
public convenience in question, between the Corporation and Fernando, was not
consummated, it being only a conditional sale subject to the suspensive condition of its
approval by the Public Service Commission. While section 20(g) of the Public Service
Act provides that "subject to established limitation and exceptions and saving provisions
to the contrary, it shall be unlawful for any public service or for the owner, lessee or
operator thereof, without the approval and authorization of the Commission previously
had ... to sell, alienate, mortgage, encumber or lease its property, franchise, certificates,
privileges, or rights or any part thereof, ...," the same section also provides:

... Provided, however, That nothing herein contained shall be construed to prevent the
transaction from being negotiated or completed before its approval or to prevent the
sale, alienation, or lease by any public service of any of its property in the ordinary
course of its business.

It is clear, therefore, that the requisite approval of the PSC is not a condition precedent
for the validity and consummation of the sale.

Anent the question of damages allegedly suffered by the parties, each of the appellants
has its or his own version to allege.
Villa Rey Transit, Inc. claims that by virtue of the "tortious acts" of defendants
(Pantranco and Ferrer) in acquiring the certificates of public convenience in question,
despite constructive and actual knowledge on their part of a prior sale executed by
Fernando in favor of the said corporation, which necessitated the latter to file the action
to annul the sheriff's sale to Ferrer and the subsequent transfer to Pantranco, it is entitled
to collect actual and compensatory damages, and attorney's fees in the amount of
P25,000.00. The evidence on record, however, does not clearly show that said
defendants acted in bad faith in their acquisition of the certificates in question. They
believed that because the bill of sale has yet to be approved by the Public Service
Commission, the transaction was not a consummated sale, and, therefore, the title to or
ownership of the certificates was still with the seller. The award by the lower court of
attorney's fees of P5,000.00 in favor of Villa Rey Transit, Inc. is, therefore, without basis
and should be set aside.

Eusebio Ferrer's charge that by reason of the filing of the action to annul the sheriff's
sale, he had suffered and should be awarded moral, exemplary damages and attorney's
fees, cannot be entertained, in view of the conclusion herein reached that the sale by
Fernando to the Corporation was valid.

Pantranco, on the other hand, justifies its claim for damages with the allegation that
when it purchased ViIlarama's business for P350,000.00, it intended to build up the
traffic along the lines covered by the certificates but it was rot afforded an opportunity
to do so since barely three months had elapsed when the contract was violated by
Villarama operating along the same lines in the name of Villa Rey Transit, Inc. It is
further claimed by Pantranco that the underhanded manner in which Villarama violated
the contract is pertinent in establishing punitive or moral damages. Its contention as to
the proper measure of damages is that it should be the purchase price of P350,000.00
that it paid to Villarama. While We are fully in accord with Pantranco's claim of
entitlement to damages it suffered as a result of Villarama's breach of his contract with
it, the record does not sufficiently supply the necessary evidentiary materials upon which
to base the award and there is need for further proceedings in the lower court to
ascertain the proper amount.

PREMISES CONSIDERED, the judgment appealed from is hereby modified as


follows:

1. The sale of the two certificates of public convenience in question by Valentin


Fernando to Villa Rey Transit, Inc. is declared preferred over that made by the Sheriff at
public auction of the aforesaid certificate of public convenience in favor of Eusebio
Ferrer;

2. Reversed, insofar as it dismisses the third-party complaint filed by Pangasinan


Transportation Co. against Jose M. Villarama, holding that Villa Rey Transit, Inc. is an
entity distinct and separate from the personality of Jose M. Villarama, and insofar as it
awards the sum of P5,000.00 as attorney's fees in favor of Villa Rey Transit, Inc.;
3. The case is remanded to the trial court for the reception of evidence in
consonance with the above findings as regards the amount of damages suffered by
Pantranco; and

4. On equitable considerations, without costs. So ordered.

Concepcion, C. J., Reyes, J.B.L., Dizon, Makalintal, Castro and Fernando, JJ., concur.
Sanchez and Capistrano, JJ., took no part.
Zaldivar, J., is on leave.

x--x

G.R. No. L-28999 May 24, 1977

COMPAIA MARITIMA, plaintiff-appellee,


vs.
ALLIED FREE WORKERS UNION, SALVADOR T. LLUCH, MARIANO LL.
BADELLES, individually and in their capacities as President and Vice-President,
respectively of the Allied Free Workers Union, NICANOR HALEBAS and
LAURENTINO LL. BADELLES, individually and officers of Allied Free Workers
Union, defendants-appellants.

Halibas, Badelles, Padilla & Sepulveda and Vicente A. Rafael & Associates for
defendants-appellants.

Rufino J. Abadies, Francisco Obach & Jesus Quijano for appellee.

AQUINO, J.:

Antecedents. - Since the onset in 1954 of litigation between the parties herein, this is the
fifth case between them that has been elevated to this Court. The incidents preceding
the instant appeal are as follows:

On August 11, 1952 the Compaia Maritima and the Allied Free Workers Union entered
into a written contract whereby the union agreed to perform arrastre and stevedoring
work for the consignees. vessels at Iligan City. The contract was to be effective for one
month counted from August 12, 1952.

It was stipulated that the company could revoke the contract before the expiration of
the term if the union failed to render proper service. The contract could be renewed by
agreement of the parties (Exh. J).
At the time the contract was entered into, the union had just been organized. Its
primordial desire was to find work for its members. The union agreed to the stipulation
that the company would not be liable for the payment of the services of the union "for
the loading, unloading and deliveries of cargoes" and that the compensation for such
services would be paid "by the owners and consigness of the cargoes" as "has been the
practice in the port of Iligan City" (Par. 2 of Exh. J).

The union found out later that that stipulation was oppressive and that the company was
unduly favored by that arrangement.

Under the contract, the work of the union consisted of arrastre and stevedoring service.
Arrastre, a Spanish word which refers to hauling of cargo, comprehends the handling of
cargo on the wharf or between the establishment of the consignee or shipper and the
ship's tackle. The service is usually performed by longshoremen.

On the other hand, stevedoring refers to the handling of the cargo in the holds of the
vessel or between the ship's tackle and the holds of the vessel.

The shippers and consignees paid the union oth for the arrastre work. They refused to
pay for the stevedoring service. They claimed that the shipowner was the one obligated
to pay for the stevedoring service because the bill of lading provided that the unloading
of the cargo was at the shipowner's expense (Exh. 1).

On the other hand, the company refused to pay for the stevedoring service because the
contract (Exh. J) explicitly provided that the compensation for both arrastre and
stevedoring work should be paid by the shippers and consignees, as was the alleged
practice in Iligan City, and that the shipowner would not be liable for the payment of
such services.

Thus, the issue of whether the company should pay for the stevedoring service became
a sore point of contention between the parties. The union members labored under the
impression that they were not being compensated for their stevedoring service as
distinguished from arrastre service.

Although the arrastre and stevedoring contract (Exh. J) was disadvantageous to the
union, it did not terminate the contract because its members were in dire need of work
and work, which was not adequately compensated, was preferable to having no work at
all (204, 214-5, 226-7 tsn May 20, 1960).

Upon the expiration of the one-month period, the said contract was verbally renewed.
The company allowed the union to continue performing arrastre and stevedoring work.

On July 23, 1954 the union sent a letter to the company requesting that it be recognized
as the exclusive bargaining unit to load and unload the cargo of its vessels at Iligan City.
The company ignored that demand. So, the union filed on August 6, 1954 in the Court
of Industrial Relations (CIR) a petition praying that it be certified as the sole collective
bargaining unit.

Despite that certification case, the company on August 24, 1954 served a written notice
on the union that, in accordance with payment of the 1952 contract, the same would be
terminated on August 31, 1954. Because of that notice, the union on August 26, 1954
filed in the CIR charges of unfair labor practice against the company.

On August 31, 1954 the company entered into a new stevedoring and arrastre contract
with the Iligan Stevedoring Association. On the following day, September 1, the union
members picketed the wharf and prevented the Iligan Stevedoring Association from
performing arrastre and stevedoring work. The picket lasted for nine days.

On September 8, 1954 the company sued the union and its officers in the Court of First
Instance of Lanao for the rescission of the aforementioned 1952 contract, to enjoin the
union from interfering with the loading and unloading of the cargo, and for the recovery
of damages.

On the following day, September 9, the lower court issued ex parte a writ of preliminary
injunction after the company had posted a bond in the sum of P20,000. A few hours
lateron that same day the union was allowed to file a counterbond. The injunction was
lifted. The union members resumed their arrastre and stevedoring work.

Later, the union assailed in a prohibition action in this Court the jurisdiction of the trial
court to entertain the action for damages, and injunction.

A majority of this Court held that the lower court had jurisdiction to issue the injunction
and to take cognizance of the damage suit filed by the company but that the injunction
was void because it was issued ex parte and the procedure laid down in section 9(d) of
Republic Act No. 875 was not followed by the trial court (Allied Free Workers Union vs.
Judge Apostol, 102 Phil. 292, 298).

After trial, the lower court rendered a decision dated December 5, 1960, amended on
January 11, 1961, (1) declaring the arrastre and stevedoring contract terminated on
August $1, 1954; (2) dismissing the union's counterclaim; (3) ordering the union and its
officers to pay solidarily to the company P520,000 as damages, with six percent interest
per annum from September 9, 1954, when the complaint. was filed; (4) permanently
enjoining the union from performing any arrastre and stevedoring work for the
company at Iligan City, and (5) requiring the union to post a supersedeas bond in the
sum of P520,000 to stay execution.

The union filed a motion for reconsideration. On the other hand, the company filed a
motion for the execution pending appeal of the money judgment. It filed another
motion for the immediate issuance of a writ of injunction. That second motion was
filed in the municipal court of Iligan City in view of the absence of the District Judge.

The municipal court issued the writ of injunction. However, this Court set it aside
because it was not an interlocutory order and no special reasons were adduced to justify
its issuance (Allied Free Workers Union vs. Judge Estipona, 113 Phil. 748).

The union on January 6, 1961 had perfected an appeal from the lower court's original
decision. It did not appeal from the amended decision. On March 24, 1962 the lower
court issued an order declaring its amended decision final and executory in view of the
union's failure to appeal therefrom. The court directed the clerk of court to issue a writ
of execution. That order was assailed by the union in a certiorari action filed in this
Court. A preliminary injunction was issued by this Court to restrain the execution of the
judgment.

On May 16, 1962 this Court dissolved the injunction at the instance of the company
which had filed a counterbond. Thereupon, the 225 members of the union yielded their
ten-year old jobs to the new set of workers contracted by the company.

The certiorari incident was decided on June 30, 1966. This Court noted that the lower
court amended its decision for the purpose of correcting certain errors and omissions
which were not substantial in character and that its amended decision was served upon
the parties after the union had perfected its appeal from the original decision.

Under those circumstances, this Court held that the union's appeal should be given due
coarse, subject to the amendment of its record on appeal. This Court reserved to the
members of the union the right to secure restitution under sections 2 and 5, Rule 39 of
the Rules of Court (Allied Free Workers Union vs. Estipona, L-19651, June 30, 1966,17
SCRA 513, 64 O.G. 2701).

Pursuant to that reservation, the union on December 16, 1966 filed a motion for
restitution, praying that its 225 members be restored to their jobs and that the company
be ordered to pay P 1,620,000 as damages, consisting of the lost earnings during the
four-years period from May 8, 1962 to May 8, 1966.

On the other hand, the company in its motion of January 18, 1967 reiterated its 1960
motion for the execution of the lower court's judgment as to the damages, of P520,000
and the permanent injunction.

Later, the company called the lower court's attention to this Court's decision dated
January 31, 1967. In that decision, this Court affirmed the CIR's decision holding that
the company did not commit any unfair labor practice and reversed the CIR's directive
that a certification election be held to determine whether the union should be the
exonemtod bargaining unit. This Court held that the union could not act as a collective
bargaining unit because the union was an independent contractor and its members were
not employees of the company (Allied Free Workers Union vs. Compaia Maritima,
L-22951-2 and L-22971, 19 SCRA 258).

The lower court in its order of April 25, 1967 (1) denied the union's motion for
restitution and to stay execution of its amended decision on January 11, 1961 and (2)
required the union to file a supersedeas bond in the sum of P100,000 within thirty days
from notice. The bond was reduced to P50,000 in the lower court's order of August 16,
1967. The union posted the bond on August 24,1967.

The lower court approved the union's amended record on appeal in its order of October
6, 1967.

The union appealed directly to this Court because the amount involved exceeds
P200,000. The appeal was perfected before Republic Act No. 5440 took effect on
September 9,1968.

Other proceedings. - The company in its original complaint prayed that the union and its
officials be ordered to pay actual damages, amounting to P15,000 for the union's failure
to load and unload cargo in and from the consignees. vessels from September 1 to 8,
1954; P50,000 as damages, due to the union's inefficiency in performing arrastre and
stevedoring work "during the latter part of the existence" of the contract; P50,000 as
moral and exemplary damages, (not supported by any allegation in the body of the
complaint) and P5,000 as attorney's Considering (10-12, Record on Appeal).

On September 15, 1954 the company added a fourth cause ofaction to its complaint. It
alleged that by reason of the acts of harassment and obstruction perpetrated by the
union in the loading and unloading ofcargo the company suffered additional damage in
the form of lost and unrealized freight and passenger charges in the amount of P10,000
for September 9 and 10, 1954 (66, Record on Appeal).

On November 2, 1954 the company attached to its motion for the revival of the
injunction against the union an auditor's report dated September 15, 1954 wherein it was
indicated that the company lost freight revenues amounting to P178,579.20 during the
period from January 1 to September 7, 1954 (121-143, Record on Appeal).

On November 27, 1954 the company filed another motion for the restoration of the
injunction. In support of that motion the company attached a trip operation report
showing the unloaded cargoes on the consignees. vessels, when they docked at Iligan
City on September 14, 19, 22 and 26 and October 3 and 5, 1954, as well as the delays in
their departure (157-162, Record on Appeal).

On March 5, 1955 the company added a fifth cause ofaction too its complaint. It alleged
that during the period from September 12 to December 28, 1954 it lost freight charges
on unloaded cargoes in the sum of P62,680.12, as shown in a detailed statement, and
that it incurred an estimated amount of P20,000 for overhead expenses. for the delay in
the dismissal of its vessels attributable to the union's unsatisfactory stevedoring and
arrastre work (225-229, 237-8, Record on Appeal).

Also on March 5, 1955 the union answered the original and supplemental complaints. It
denied that its members had rendered inefficient service. It averred that the termination
of the contract was prompted by the consignees. desire to give the work to the Iligan
Stevedoring Association which the company had allegedly organized and subsidized. The
union filed a counterclaim for P200,000 as compensation for its services to the company
and P500,000 as other damages, (239-252, Record on Appeal).

On March 9, 1960 the company filed a third supplemental complaint, It alleged that the
continuation of the stevedoring and arrastre work by the union for the company from
1955 to date had caused losses to the company at the rate of P25,000 annually in the
form of lost freight on shutout cargoes and the expenses. for the equipment used to
assist the union members in performing their work (320-3, Record on Appeal).

Plaintiff company's evidence. - Jose C. Teves, the consignees. branch manager at Iligan
City, testified that on August 24, 1954 he terminated the arrastre and stevedoring
contract with the union (Exh. J) upon instruction of the head office. The contract was
terminated in order to avoid further losses to the company caused by the union's
inefficient service (85-86 tsn March 11, 1960).

After the termination of the contract, the members of the union allegedly harassed the
company with the help of goons. The cargoes could not be unloaded in spite of the fact
that the company had sought the protection of the law-enforcing authorities (88). The
consignees. last recourse was to go to court. (89).

The company supposedly suffered losses as a result of the union's inefficient service
since September 1, 1954 (91). Teves hired auditors to ascertain the losses suffered by the
company during the period from January 1 to September 11, 1954.

The trial court awarded actual damages, amounting to P450,000 on the basis of the
auditor's reports, Exhibits A to I. It did not carefully examine the said exhibits. Contrary
to the trial court's impression, Exhibits B, C and D are not auditors' reports.

The trial court did not bother to make a breakdown of the alleged damages, totalling
P450,000. The reports of the two hired accountants, Demetrio S. Jayme and M. J. Siojo,
show the following alleged damages, in the aggregate amount of P349,245.37 (not
P412,663.17, as erroneously added by the consignees. counsel, 161,163-4 tsn March 11,
1960):

TABULATION OF ALLEGED

DAMAGES CLAIMED BY COMPAIA MARITIMA


(1) Freight for 74,751 bags of fertilizer

allegedly booked for shipment in the

company's vessels but loaded in other vessels

during the period from Jan. 1 to August 31,

1954, Statement A in Exh. A, CPA Jayme's

report.........................................................

P29,900.40

(2) Lost freight on other shutout cargoes

for January 1 to August 31, 1954, Statement A

in Exh. A, of CPA Jayme .........................

4,339.64

(3) Lost freight on shutout cargoes for

September 2 to 7, 1954 booked for shipment in

M. V. Mindoro, Panay and Masterhead Knot,


Statement B in Exh. A, CPA Jayme's report...

6,167.16

(4) Losses sustained in voyages of M.V.

Panay and Mindoro in four voyages from

September 4 to 11, 1954, with estimates,

Statement B, Exh. A...............................

3,764.50

(5) Other estimated losses for the said

voyages of M.V. Panay and Mindoro for the

same period, based on interviews of parties at

the wharf, Statement B, Exh. A...............

10,000.00

(6) Additional subsistence expenses. for the

M.V. Mindoro and Panay due to the delays in


their dismissal from January 1 to August 31,

1954 as certified by the pursers of the two

vessels, Statement C, Exh. A.....................

4,407.50

(7) Estimated loss in freight and passenger

revenue for the period from January 1 to

August 31, 1954, based on 1953 freight revenue

for the same period Statement D, Exh. A.....

100,000.00

(8) Estimated loss in passenger fares for

the period from September to December 31,

1954, Statement D, Exh. A.......................

20,000.00

(9) Lost freight charges from September


12 to December 28, 1954, as certified by the

chief clerk of the consignees. Iligan office. Exh.

B.............................................................

62,680.12

(10) Estimated overhead expenses for

delay of vessels in port, Exh. B.................

20,000.00

(11) Forklift operating expenses. for 1955,

consisting of salaries and maintenance

expenses, Exh. E- 1....................................

5,677.54

(12) Lost freight revenue for 1955, Exh. E-

2...............................................................

17,838.78

(13) Forklift operating expenses. for 1956,


Exh. F- 1...................................................

3,520.90

(14) Lost freight revenue for 1956, Exh. F-2

3,849.56

(15) Forklift operating expenses. for 1957,

Exh. G- 1...................................................

8,259.08

(16) Lost freight revenue for 1957, Exh. G-

2....................................................................

14,538.10

(17) Forklift operating expenses. for 1958,

Exh. H-1...................................................

7,503.45

(18) Lost freight revenue for 1958, Exh. H-

2.............................................................

10,193.46

(19) Forklift operating expenses. for 1959,

Exh. I-1....................................................
8,745.35

(20) Lost freight revenue for 1959, Exh. I-2

7,959.83

T OT A L -

P349,245.37

We tabulated the alleged damages, to show that the trial court's award to the company of
P450,000 as damages, is not supported by the evidence. On the other hand, the
statement of the consignees. counsel that the damages, totalled P412,663.17 (162- 164
tsn March 11, 1960) is wrong.

Teves, the consignees. branch manager, submitted a statement (Exh. K) showing the
alleged cost of three forklifts, 200 pieces of pallet boards, 530 pieces of wire rope slings
and two pieces of tarpaulins in the total sum of P27,215. In that statement, he claims
that the damages, to the company by reason of the depreciation of the said items of
equipment amounted to P38,835 or more than the cost thereof.

The company's counsel, in his summary of the damages, ignored the alleged damages,
of P38,835 indicated by Teves in Exhibit K. The consignees. counsel relied oth on the
auditors' reports, Exhibits A and E to I and on Exhibit B, the chief clerk's statement. As
already noted, those documents show that the total damages, claimed by the company
amounted to P349,245.37.

The best evidence on the cost of the said equipment would have been the sales invoices
instead of the oral testimony of Teves. He did not produce the sales invoices.

Teves further testified that Salvador T. Lluch was the president of the union; Nicanor
Halibas, the treasurer; Mariano Badelles, the general manager, and Luarentino Badelles, a
vice president.

Appellants' statement of facts. - To sustain their appeal, the appellants made the
following exceedingly short and deficient recital of the facts:

Sometime in the month of August, 1954, defendant, Allied Free Workers Union filed an
unfair labor practice case against defendant (should be plaintiff) and its branch manager,
Mr. Jose Teves, with the Court of Industrial Relations, Manila, and docketed as Case No.
426-UPL: defendant union also filed a petition for certification election docketed as Case
No, 175-MC against plaintiff; defendant union also filed a notice of strike dated August
27, 1954; the Secretary of Labor wired the public defender, Iligan City, on August 27,
1954 (see annexes 1-4, motion to dismiss, Record on Appeal, pp. 54-65).
To counteract these legitimate moves of labor, plaintiff filed the complaint docketed as
Civil Case No. 577 in the Court of First Instance of Lanao (now Lanao del Norte) for
damages, and/or resolution of contract with writ of preliminary injunction, On a
decision adverse to their interests, defendants take this appeal.

On the question of jurisdiction taken before this Honorable Tribunal in G.R. No.
L-8876, it was held:

... for the instant case merely refers to the recovery of damages, occasioned by the
picketing undertaken by the members of the union and the rescission of the arrastre and
stevedoring contract previously entered into between the parties.

The appellants did not discuss their oral and documentary evidence. *

First assignment of error. - The appellants contend that the trial court erred in awarding
to the company actual damages, amounting to P450,000, moral damages, of P50,000 and
attorney's Considering of P20,000, and in holding that the four officers of the union are
solidarily liable for the said damages.

Appellants' counsel assailed the award of actual damages, on the ground that the
auditors' reports, on which they were based, were hearsay.

After analyzing the nature of the damages, awarded, how the same were computed, and
the trustworthiness of the company's evidence, we find the first assignment of error
meritorious.

We have already stress that, on the basis of the reports of the two accountants, the
damages, claimed by the complaint as a matter of simple addition, does not reach the
sum of P 450,000 fixed by the trial court. The damages, shown in the accountants'
reports and in the statement made by the consignees. chief clerk (who did not testify)
amount to P349,245.37, or much less than P450,000.

The company argues that the accountants' reports are admissible in evidence because of
the rule that "when the original consists of numerous accounts or other documents
which cannot be examined in court without great loss-of time and the fact sought to be
established from them is oth the general result of the whole", the original writings need
not be produced (Sec. 2[e], Rule 130, Rules of Court).

That rule cannot be applied in this case because the voluminous character of the
records, on which the accountants' reports were based, was not duly established (U. S. vs.
Razon and Tayag, 37 Phil. 856, 861; 29 Am Jur 2nd 529).
It is also a requisite for the application of the rule that the records and accounts should
be made accessible to the adverse party so that the company, of the summary may be
tested on cross-examination (29 Am Jur 2nd 517-8; 32A C.J.S. 111).

What applies to this case is the general rule "that an audit made by, or the testimony of, a
private auditor, is inadmissible in evidence as proof of the original records, books of
accounts, reports or the like" (Anno 52 ALR 1266).

That general rule cannot be relaxed in this case because the company failed to make a
preliminary showing as to the difficulty or impossibility attending the production of the
records in court and their examination and analysis as evidence by the court (29 Am Jur
2nd 529).

A close scrutiny of the accountants' reports reveals their lack of probative value. The
propriety of allowing the different items of damages, is discussed below.

Unrealized freight and passenger revenue for 1954 ascertained by Accountant Demetrio
S. Jayme. - In his report (Exh. A, pp. 134 to 147, Record on Appeal), Jayme used the
pronouns "we" and "our" and made reference to the examination made by the
"auditors" and his accounting office.

He did not disclose the names of other "auditors" who assisted him in making the
examination of the consignees. records.

He gave the impression that he was an independent accountant hired by the company to
make a "special investigation" of the consignees. losses for the period from January 1 to
September 7, 1954.

The truth is that Jayme was a "personal friend" of Teves, the consignees. branch
manager at Iligan City. Teves was the consignees. principal witness in this case. He
verified the complaint. herein. He signed for the company the stevedoring and arrastre
contract which he later rescinded. In fact, Teves intervened in the drafting of the
contract. It was his Idea that the company should not pay the arrastre and stevedoring
Considering and that those charges should be borne by the shippers and consignees.

Jayme was not only the friend of Teves but was also his co-employee. Jayme was the
consignees. branch manager at Ozamis City and later at Cagayan de Oro City (217-8 tsn
May 20, 1960; Exh. 12). He suppressed that fact in his report of examination.
Apparently, the practice of accounting was his sideline or he practised accounting and, as
the saying goes, he moonlighted as the consignees. branch manager. Obviously, Jayme
would be biased for the company. He violated a rule of the accountants' code of ethics
by not disclosing in his report of examination that he was an employee of the company
(84 tsn June 2, 1960).
Accountant Jayme allegedly found from the consignees. records at Iligan City that its
freight and passenger revenue for the eight- month period from January 1 to August 31,
1953 amounted to P373,333.14 and that for the same period in 1954, that revenue
amounted to P470,716.29, or an increase of P97,383.12 (Statement D of Exh. A, 145,
Record on Appeal).

Jayme interpreted those figures as signifying that the company would have realized more
revenue if the union had rendered better service. He reasoned out that there was a big
volume of business in Iligan City due to the Maria Cristina Fertilizer Plant, Iligan Steel
Mill and NPC Hydroelectric Plant. He imagined that the consignees. freight revenue
during the first eight months of 1954 could have amounted to at least P600,000 and that
since it actually realized oth P 470,716.29, its loss of freight revenue for that period
could be "conservatively" estimated at least P100,000 (item 7 of the tabulation of
damages).

He stated that he attached to his report on the comparative statement of gross revenue a
certificate of the captain of the vessel Panay showing the delays in its dismissal in Iligan
City as indicated in its logbook. No such document was attached to Jayme's report.

And from the fact that the total fares received by the company during the eight-month
period were reduced in the sum of P3,951.58 (Jayme fixed the reduction at the round
figure of P4,000), he calculated that the company suffered a loss of at least P20,000 in
passenger revenue up to December 31, 1954 (Item 8 of the tabulation of damages).

Jayme also included in his report (a) damages, amounting to P10,000 as his estimate of
losses supposedly "based on interviews with disinterested parties at the wharf and city
proper customers"; (b) damages, amounting to P3,764.50 allegedly suffered in the
operation of the vessels Mindoro and Panay from September 4 to 11, 1954, consisting
of extra meals, expenses. for unloading cargo, estimated loss in passage revenue for four
voyages, and estimated loss from 14 re-routed freights to competing vessels" (consisting
of rice, corn and bananas), and (e) the sum of P4,407.50 as alleged additional
subsistence incurred for the crew of the Panay and Mindoro from January 1 to August
31, 1954 (items 4, 5 and 6 of the tabulation of damages). The records of the purser and
chief steward were allegedly examined in ascertaining those damages.

It would not be proper to allow Jayme's estimates as recoverable damages. They are not
supported by reliable evidence. They can hardly be sanctioned by the "generally accepted
auditing standards" alluded to in Jayme's report. The pertinent records of the company
should have been produced in court. The purser and steward did not testify.

The rule is that the auditor's summary should not include his conclusions or inferences
(29 Am Jur 2d 519). His opinion is not evidence.

The trial court unreservedly gave credence to the conjectures of Jayme. Obviously, his
inflated guesses are inherently speculative and devoid of probative value. Furthermore,
his estimate of the unrealized freight revenue for January 1 to August 31, 1954
overlapped with his computation of the lost freight for the unloaded 74,751 bags of
fertilizer and other cargoes covering the same period (Statement A of Exh. A).

The foregoing discussion shows Jayme's unreliable modus operandi in ascertaining the
1954 losses which the company claimed to have suffered in consequence of the union's
alleged inefficiency or poor service. It is noteworthy that those losses were not averred
with particularity and certitude in the consignees. complaint.

The same observations apply with equal cogency to the damages, amounting to
P40,407.20 as lost freight revenue also for the year 1954 (items 1 to 3 of the tabulation
of damages) which were computed by Accountant Jayme.

Those items refer to (1) the sum of P29,900.40 as lost freight revenue on 74,751 bags of
fertilizer, already mentioned, which were booked for shipment in the consignees. vessels
from January 1 to August 31, 1954 but which were allegedly loaded in other vessels; (2)
P4,339.64 as unrealized freight revenue for other cargoes booked in the consignees.
vessels but not loaded therein during the same eight-month period, and (3) P6,167,16 as
unrealized freight revenue on shutout cargoes not loaded in the consignees. vessels
during the six-day period from September 2 to 7, 1954.

Jayme allegedly based his computations on the records of the company which were not
produced in court. The union objected to Jayme's report as inadmissible under the
hearsay rule or as not being the best evidence.

Even if the presentation of the records themselves as exhibits should have been
dispensed with, yet the complaint to show good faith and fair dealing, could have
brought the records in court (manifests, bills of lading, receipts for the freights, if any,
etc.) and enabled the court and the union's counsel and its expert accountant to verify
the accuracy of Jayme's summaries.

Photostatic copies of some manifests and bills of lading proving that the company was
not able to collect the stipulated freight on the alleged shutout cargoes should have been
proforma. in evidence as supporting papers for Jayme's report. No such exhibits were
presented.

The flaw or error in relying merely on Jayme's summaries is that, as pointed out by
witness Mariano LL. Badelles, cargoes might be shutout due to causes other than the
supposed inefficiency of the union. He testified that cargoes were shutout deliberately
by the company because they could not be loaded in one vessel (for example, 50,000
bags of fertilizer), or a shipper had no allotment, or because the company did not want
to load cargoes like bananas (189-194 tsn May 20, 1960). Jayme's summaries did not take
into account the probability that a part of the cargo booked in the consignees. vessel for
a certain date might not have been loaded on that date but was loaded in another vessel
of the company which docked at the port a few days later, In that case, there would be
no loss of freight revenue. The mere shutting out of cargo in a particular voyage did not
ipso facto produce loss of freight revenue.

Our conclusion is that an injustice would be perpetrated if the damages, aggregating


P178,579 computed and estimated in the report of Jayme, a biased witness, should be
accepted at their face value.

Damages computed by Salvador M. Magante. - The company also claims as damages, for
the period from September 12 to December 28, 1954 lost freight charges on shutout
cargoes in the sum of P62,680.12, and the sum of P20,000 as "overhead expenses. for
delay of vessels in port", as set forth by Salvador M. Magante, the consignees. chief clerk
at Iligan City, in his statement, Exhibit B (items 9 and 10 of the tabulation of damages).

Magante did not testify on his statement. Instead, accountant Jayme, substituting for
Magante, testified on that statement. Jayme said that he verified the consignees. records
on which Magante based his statement. Jayme assured the court that the figures in
Magante's statement were supported by the consignees. records.

But as to the damages, of P20,000, Jayme said that he could not certify as to their
company, because he had not finished his investigation (33 tsn March 9, 1955). In spite
of that admission, the trial court allowed that item of damages.

The trial court erred in allowing the damages, totalling P82,680.12 because Magante's
statement, Exhibit B, is hearsay. Magante should have been proforma. as a witness.
Jayme was not competent to take his place since the statement was prepared by Magante,
not by Jayme. More appropriate still, the documents and records on which the statement
was based should have been proforma. as evidence or at least brought to the court for
examination by the union's counsel and its accountant. The trial court required the
production of the manifests supporting Magante's statement (85-86 tsn march 9, 1955).
Only one such manifest, Exhibit C, was produced. The nonproduction of the other
records was not explained.

Lost freight revenue and operating expenses for the forklifts. - The company claimed as
damages, the sum of P87,986.05 (P151,403.85 as erroneously computed by the
consignees. counsel, 163 tsn March 11, 1950) consisting of supposed unrealized freight
charges for shutout or unloaded cargoes for the year 1955 to 1959 (Exh. E to I, Items 11
to 20 of the tabulation of damages).

The claim is covered by the company's third supplemental complaint dated March 9,
1960 wherein it was alleged that due to the acts of the union and its officers the
company had suffered damages, of not less than P25,000 annually since 1955 (320-3,
Record on Appeal). That supplemental complaint was hurriedly filed during the trial as
directed by the trial court.
The said damages, were computed in the reports of Miguel J. Siojo, an accountant who,
for two days and nights, March 8 to 10, 1960, or shortly before and during the trial,
allegedly examined the consignees. record at Iligan City, such as its cash book, cash
vouchers, reports to the head office, shipping manifests, and liquidation reports. Those
records were not produced in court. Their nonproduction was not explained. If the
accountant was able to summarize the contents of those records in two days, they could
not have been very voluminous. They should have been offered in evidence.

The alleged expenses. in the operation of the forklifts consisted of (a) the wates of the
operators hired by the company and (b) the cost of gasoline and oil and expenses. for
repair.

The company's theory is that under the 1952 contract (Exh. J) the union was obligated
to provide for forklifts in the loading and unloading of cargo. Inasmuch as the union
allegedly did not have forklifts, the complaint to expedite the arrastre and stevedoring
work, purchase forklifts, hired laborers to operate the same, and paid for the
maintenance expenses. The company treated those expenses as losses or damages.

Those alleged damages, amounting to P87,986.05 are in the same category as the
depreciation allowances amounting to P38,835 which the company claimed for the
forklifts, pallet boards, tarpaulins and wire rope slings that it purchased for oth P27,215,
We have stated that the consignees. counsel ignored that depreciation in his
recapitulation of the damages, claimed by the plaintiff.

The union contends that Siojo's reports (Exh. E to I) were inadmissible evidence
because they were hearsay, meaning that the original documents, on which the reports
were based, were not presented in evidence and, therefore, appellants' counsel and the
court itself were not able to gauge the correctness of the figures or data contained in the
said reports. The person who had personal knowledge of the operating expenses. was
not examined in court.

We are of the opinion that, to avoid fraud or fabrication, the documents evidencing the
alleged expenses. should have been proforma. in evidence. Siojo's reports were not the
best evidence on the said operating expenses. The explanation of Badelles with respect
to shutout cargoes and our observations on Jayme's summaries are applicable to
accountant Siojo's reports.

A more substantial ground for rejecting Siojo's reports is that the said expenses, if really
incurred, cannot be properly treated as darn ages to the company.

The union's witness, Mariano LI. Badelles, testified that the consignees. forklifts were
not used exclusively on the wharf. They were used in the fertilizer and carbide plants.
Sometimes, the union supplied the driver and the gasoline for the operation of the
forklifts (174-177 tsn May 20, 1960).
Moreover, as stated earlier, the company was not paying the union a single centavo for
arrastre and stevedoring work. The shippers and consignees paid for the arrastre service
rendered by the union. The union did not receive any compensation for stevedoring
work.

The company complained that the union had been rendering unsatisfactory arrastre and
stevedoring services. That grievance was controverted by the union.

The use of the forklifts, tarpaulins pallet boards and wire rope slings immeasurably
benefitted the company. It is not proper nor just that the consignees. investment in those
pieces of equipment should be considered damages, just because it was able to bind the
union to a one-sided contract which exempted it from the payment of arrastre and
stevedoring Considering and which impliedly obligated the union to purchase the said
equipment.

If the service rendered by the union members was unsatisfactory, it must be because the
poor stevedores were underfed and underpaid. They were underfed and underpaid
because the company was astute enough to insure that it would obtain stevedoring
service without paying for it.

If to improve the arrastre and stevedoring service, the company had to incur expenses.
for the purchase of forklifts, pallet boards, tarpaulins and wire rope slings and for the
operation of the forklifts, the union should not be required to reimburse the company
for those expenses. The company should bear those expenses. because the same
redounded to its benefit.

The trial court erred in ordering the union and its officials to pay the amount of the said
expenses. as damages, to the company.

Moral damages and attorney's fees. - Considering that the consignees. claim for moral
damages, was based on the same facts on which it predicated its claim for actual
deduction which we have found to be groundless, it follows that the company, a juridical
person, is not entitled to moral damages.

Anyway, the company did not plead and prove moral damages. It merely claimed moral
damages, in the prayer of its complaint. That is not sufficient (Darang vs. Ty Belizar,
L-19487, January 31, 1967, 19 SCRA 214, 222).

Under the facts of this case, we do not find any justification for awarding attorney's
Considering to the company. Hence, the trial court's award of P20,000 as attorney's
Considering is set aside.

Appellants' first assignment of error, although not properly argued by their counsel,
should be sustained.
Other assignments of error. - The union and its officers contend that the lower court
erred in dismissing their counterclaims. Their counsel did not even bother to state in
their brief the amount of the counterclaims.

The union filed counterclaims for P200,000 as compensation for stevedoring services
from August, 1952 to March 4, 1955; P500,000 as deduction P10,000 as attorney's
Considering and P5,000 as premium on the counterbond (251-2, Record on Appeal). In
their supplemental counterclaim, they demanded P500,000 as stevedoring charges for
the period from March 4, 1955 to March 4, 1960 and additional damages, of P10,000
(308-10, Record on Appeal). The trial court dismissed the said counterclaims.

The appellants in their three-sentence argument in support of their counterclaims


alleged that the company's bill of lading provided that the unloading of the cargoes was
at the consignees. expense (Exh. 1); that the company had not paid the sum of P500,000
as compensation for the stevedoring services rendered by the laborers up to 1960, and
that the stipulation in the arrastre contract, "that the Compaia Maritima shall not be
liable for the payment of the services rendered by the Allied Free Workers Union for the
loading and deliveries of cargoes as same is payable by the owners and consignees of
cargoes, as it has been the practice in the port of Iligan City" (Exh. J, pp. 14, 334, 359,
500 Record on Appeal), was 'non- operative" and void, "being contrary to morals and
public policy".

That superficial argument is not well-taken. The printed stipulation in the bill of lading
was superseded by the contractual stipulation. The contract was prepared by the union
officials. As already noted, it was stipulated in the contract that the stevedoring and
arrastre charges should be paid by the shippers and consignees in consonance with the
practice in Iligan City. That stipulation was binding and enforceable.

The supposed illegality of that stipulation was not squarely raised by the union and its
officials in their answer. They merely averred that the contract did not express the true
agreement of the parties. They did not sue for reformation of the instrument evidencing
the contract. The lower court did not err in dismissing defendants' counterclaims.

The other two errors assigned by the appellants, namely, that the lower court erred in
issuing a permanent injunction against them and in executing its decision pending
appeal, are devoid of merit.

The appellants invoke section 9(d) of the Magna Carta of Labor regarding the issuance
of injunctions. That section has no application to this case because it was definitively
ruled by this Court in the certification and unfair labor practice cases that there is no
employer-employee relationship between the company and the stevedores. (They work
under the cabo system).

The lower court did not execute the money aspect of its judgment. It merely required
the defendants to file a supersedeas bond of P50,000.
As to the injunction, it should be recalled that it was this Court which, in its resolution
of May 16, 1962 in the execution and appeal incident (L-19651, 17 SCRA 513), allowed
the company to terminate the stevedoring and arrastre work of the union and to use
another union to perform that work.

The company had the contractual right to terminate the 1952 contract (Taylor vs. Uy
Teng Piao, 43 Phil. 873). The lower court did not err in sustaining the consignees.
rescission of the contract and in enjoining the union from performing arrastre and
stevedoring work.

WHEREFORE, that portion of the trial court's judgment declaring the arrastre and
stevedoring contract terminated, permanently enjoining the union and its officials from
performing arrastre and stevedoring work for the vessels of the Compaia Maritima,
and dismissing defendants' counterclaim is affirmed.

The lower court's award of damages, is reversed and set aside. No costs.

SO ORDERED.

Barredo, Antonio, and Martin, JJ., concur.

Concepcion Jr., J., took no part.

Martin, J., was designated to sit in the Second Division.