G.R. No.
170491 April 4, 2007 The Xerox or photocopies offered should, therefore, be stricken off
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 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 forCertiorari under
Rule 65 of the Rules of Civil Procedure before the Court of Appeals
maintaining that public respondent Judge acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in denying the
admission of its Exhibits "A", "C", "D", "E", "H" and its sub-markings,
"I", "J" and its sub-markings, "K", "L", "M" and its sub-markings, "N"
and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-
markings, "R", and "S" and its sub-markings.
On 9 November 2005, the appellate court issued a Decision
dismissing petitioner’s petition for certiorari, the pertinent portions
of which elucidate:
After a judicious scrutiny of the record of the case on hand, together
with the rules and jurisprudence which are applicable in the
premises, we have come up with a finding that the petition for
certiorari filed in this case is not meritorious.
It appears that there is no sufficient showing by the petitioner that
the respondent judge acted with grave abuse of discretion in issuing
the assailed orders in Civil Case No. CEB-18662. As what our
jurisprudence tells us, grave abuse of discretion is meant such
capricious and whimsical exercise of judgment as would be
equivalent to lack of jurisdiction x x x.
In the case at bench, what has been shown to the contrary by the
totality of the record on hand is that the respondent judge acted
correctly and within the pale of his sound discretion in issuing the
assailed order, dated November 16, 2004, in Civil Case No. CEB-
18662.
Indeed, it appears that the pieces of petitioner’s documentary
evidence which were denied admission by the respondent judge
were not properly identified by any competent witness. As pointed
out by the respondent Bangpai Shipping Company in its comment on
the petition filed in this case which reproduces some excerpts of the
testimonies in the court a quo of Atty. Marianito De Los Santos, Engr.
Nestor Enriquez, Jr. and Mr. Rodulfo I. Pagaling, the said witnesses
did not have personal knowledge of and participation in the
preparation and making of the pieces of documentary evidence
denied admission by respondent judge x x x. In other words, there
was lack of proper identification of said pieces of documentary
evidence. x x x.
Then another ground for denying admission of petitioner’s Exhibits
A, C, D, E, H, I, J, K, L, M, N, O, P, Q, R, and S by the respondent judge
is that said pieces of documentary evidence were merely
photocopies of purported documents or papers. There is no
gainsaying the fact that the respondent judge acted within the pale
of his discretion when he denied admission of said documentary
evidence. Section 3 of Rule 130 of the Rules of Court of the
Philippines is very explicit in providing that, when the subject of
inquiry are the contents of documents, no evidence shall be
admissible other than the original documents themselves, except in
certain cases specifically so enumerated therein, and the petitioner
has not shown that the non-presentation or non-production of its
original documentary pieces of evidence falls under such exceptions.
As aptly pointed out by the respondent judge in the order issued by
him on November 16, 2004:
"x x x The record shows that the plaintiff (petitioner herein) has been
given every opportunity to present the originals of the Xerox or
photocopies of the documents it offered. It never produced said
originals."
So, the petitioner has only itself to blame for the respondent judge’s
denial of admission of its aforementioned documentary evidence.
Of course, the petitioner tries to contend that the photocopies of
documents offered by it are equivalent to the original documents
that it sought to offer in evidence, based on the Rules on Electronic
Evidence which were in force and effect since August 1, 2001.
However, such a contention is devoid of merit. The pieces of
documentary evidence offered by the petitioner in Civil Case CEB-
18662 which were denied admission by the respondent judge do not
actually constitute as electronic evidence as defined in the Rules on
Electronic Evidence. The informations therein were not received,
retrieved or produced electronically. The petitioner has not
adequately established that its documentary evidence were
electronic evidence. it has not properly authenticated such evidence
as electronic documents, assuming arguendo that they are. Lastly,
the petitioner has not properly established by affidavit pursuant to
Rule 9 of the Rules on Electronic Evidence the admissibility and
evidentiary weight of said documentary evidence.
Thus, by any legal yardstick, it is manifest that the respondent judge
did not commit grave abuse of discretion in denying admission of the
aforementioned documentary evidence of petitioner.
But even if it be granted just for the sake of argument that the
respondent judge committed an error in denying the
aforementioned documentary evidence of the petitioner, still the
petition for certiorari filed in this case must fail. Such error would at
most be only an error of law and not an error of jurisdiction. In Lee
vs. People, 393 SCRA 397, the Supreme Court of the Philippines said
that certiorari will not lie in case of an error of law. x x x.
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us DISMISSING the petition filed in this case and
AFFIRMING the assailed orders issued by respondent judge in Civil
Case No. CEB-18662.4
Aggrieved by the aforequoted decision, petitioner filed the instant
petition.
The focal point of this entire controversy is petitioner’s obstinate
contention that the photocopies it offered as formal evidence before
the trial court are the functional equivalent of their original based on
its inimitable interpretation of the Rules on Electronic Evidence.
Petitioner insists that, contrary to the rulings of both the trial court
and the appellate court, the photocopies it presented as
documentary evidence actually constitute electronic evidence based
on its own premise that an "electronic document" as defined under
Section 1(h), Rule 2 of the Rules on Electronic Evidence is not limited
to information that is received, recorded, retrieved or produced
electronically. Rather, petitioner maintains that an "electronic
document" can also refer to other modes of written expression that
is produced electronically, such as photocopies, as included in the
section’s catch-all proviso: "any print-out or output, readable by
sight or other means".
We do not agree.
In order to shed light to the issue of whether or not the photocopies
are indeed electronic documents as contemplated in Republic Act
No. 8792 or the Implementing Rules and Regulations of the
Electronic Commerce Act, as well as the Rules on Electronic
Evidence, we shall enumerate the following documents offered as
evidence by the petitioner, to wit:
1. Exhibit "A" is a photocopy of a letter manually signed by a certain
Jose C. Troyo, with "RECEIVED" stamped thereon, together with a
handwritten date;
2. Exhibit "C" is a photocopy of a list of estimated cost of damages of
petitioner’s power barges 207 and 209 prepared by Hopewell Mobile
Power Systems Corporation and manually signed by Messrs. Rex
Malaluan and Virgilio Asprer;
3. Exhibit "D" is a photocopy of a letter manually signed by a certain
Nestor G. Enriquez, Jr., with "RECEIVED" stamped thereon, together
with a handwritten notation of the date it was received;
4. Exhibit "E" is a photocopy of a Standard Marine Protest Form
which was filled up and accomplished by Rex Joel C. Malaluan in his
own handwriting and signed by him. Portions of the Jurat were
handwritten, and manually signed by the Notary Public;
5. Exhibit "H" is a photocopy of a letter manually signed by Mr.
Nestor G. Enriquez, Jr. with "RECEIVED" stamped thereon, together
with a handwritten notation of the date it was received;
6. Exhibit "I" is a photocopy of a computation of the estimated
energy loss allegedly suffered by petitioner which was manually
signed by Mr. Nestor G. Enriquez, Jr.;
7. Exhibit "J" is a photocopy of a letter containing the breakdown of
the cost estimate, manually signed by Mr. Nestor G. Enriquez, Jr.,
with "RECEIVED" stamped thereon, together with a handwritten
notation of the date it was received, and other handwritten
notations;
8. Exhibit "K" is a photocopy of the Subpoena Duces Tecum Ad
Testificandum written using a manual typewriter, signed manually by
Atty. Ofelia Polo-De Los Reyes, with a handwritten notation when it
was received by the party;
9. Exhibit "L" is a photocopy of a portion of the electricity supply and
operation and maintenance agreement between petitioner and
Hopewell, containing handwritten notations and every page
containing three unidentified manually placed signatures;
10. Exhibit "M" is a photocopy of the Notice of Termination with
attachments addressed to Rex Joel C. Malaluan, manually signed by
Jaime S. Patinio, with a handwritten notation of the date it was
received. The sub-markings also contain manual signatures and/or
handwritten notations;
11. Exhibit "N" is a photocopy of a letter of termination with
attachments addressed to VIrgilio Asprer and manually signed by
Jaime S. Patino. The sub-markings contain manual signatures and/or
handwritten notations;
12. Exhibit "O" is the same photocopied document marked as Annex
C;
13. Exhibit "P" is a photocopy of an incident report manually signed
by Messrs. Malaluan and Bautista and by the Notary Public, with
other handwritten notations;
14. Exhibit "Q" is a photocopy of a letter manually signed by Virgilio
Asprer and by a Notary Public, together with other handwritten
notations.
On the other hand, an "electronic document" refers to information
or the representation of information, data, figures, symbols or other
models of written expression, described or however represented, by
which a right is established or an obligation extinguished, or by
which a fact may be proved and affirmed, which is received,
recorded, transmitted, stored, processed, retrieved or produced
electronically.5 It includes digitally signed documents and any
printout, readable by sight or other means which accurately reflects
the electronic data message or electronic document. 6
The rules use the word "information" to define an electronic
document received, recorded, transmitted, stored, processed,
retrieved or produced electronically. This would suggest that an
electronic document is relevant only in terms of the information
contained therein, similar to any other document which is presented
in evidence as proof of its contents. 7 However, what differentiates an
electronic document from a paper-based document is the manner by
which the information is processed; clearly, the information
contained in an electronic document is received, recorded,
transmitted, stored, processed, retrieved or produced electronically.
A perusal of the information contained in the photocopies submitted
by petitioner will reveal that not all of the contents therein, such as
the signatures of the persons who purportedly signed the
documents, may be recorded or produced electronically. By no
stretch of the imagination can a person’s signature affixed manually
be considered as information electronically received, recorded,
transmitted, stored, processed, retrieved or produced. Hence, the
argument of petitioner that since these paper printouts were
produced through an electronic process, then these photocopies are
electronic documents as defined in the Rules on Electronic Evidence
is obviously an erroneous, if not preposterous, interpretation of the
law. Having thus declared that the offered photocopies are not
tantamount to electronic documents, it is consequential that the
same may not be considered as the functional equivalent of their
original as decreed in the law.
Furthermore, no error can be ascribed to the court a quo in denying
admission and excluding from the records petitioner’s Exhibits "A",
"C", "D", "E", "H" and its sub-markings, "I", "J" and its sub-markings,
"K", "L", "M" and its sub-markings, "N" and its sub-markings, "O",
"P" and its sub-markings, "Q" and its sub-markings, and "R". The trial
court was correct in rejecting these photocopies as they violate the
best evidence rule and are therefore of no probative value being
incompetent pieces of evidence. Before the onset of liberal rules of
discovery, and modern technique of electronic copying, the best
evidence rule was designed to guard against incomplete or
fraudulent proof and the introduction of altered copies and the
withholding of the originals.8 But the modern justification for the
rule has expanded from the prevention of fraud to a recognition that
writings occupy a central position in the law. 9The importance of the
precise terms of writings in the world of legal relations, the fallibility
of the human memory as reliable evidence of the terms, and the
hazards of inaccurate or incomplete duplicate are the concerns
addressed by the best evidence rule.10
Moreover, as mandated under Section 2, Rule 130 of the Rules of
Court:
"SECTION 2. Original writing must be produced; exceptions. — There
can be no evidence of a writing the contents of which is the subject
of inquiry, other than the original writing itself, except in the
following cases:
(a) When the original has been lost, destroyed, or cannot be
produced in court;
(b) When the original is in the possession of the party against whom
the evidence is offered, and the latter fails to produce it after
reasonable notice;
(c) When the original is a record or other document in the custody of
a public officer;
(d) When the original has been recorded in an existing record a
certified copy of which is made evidence by law;
(e) When the original consists of numerous accounts or other
documents which cannot be examined in court without great loss of
time and the fact sought to be established from them is only the
general result of the whole."
When the original document has been lost or destroyed, or cannot
be produced in court, the offeror, upon proof of its execution or
existence and the cause of its unavailability without bad faith on his
part, may prove its contents by a copy, or by a recital of its contents
in some authentic document, or by the testimony of witnesses in the
order stated.11 The offeror of secondary evidence is burdened to
prove the predicates thereof: (a) the loss or destruction of the
original without bad faith on the part of the proponent/offeror
which can be shown by circumstantial evidence of routine practices
of destruction of documents; 12 (b) the proponent must prove by a
fair preponderance of evidence as to raise a reasonable inference of
the loss or destruction of the original copy; and (c) it must be shown
that a diligent and bona fide but unsuccessful search has been made
for the document in the proper place or places. 13 However, in the
case at bar, though petitioner insisted in offering the photocopies as
documentary evidence, it failed to establish that such offer was
made in accordance with the exceptions as enumerated under the
abovequoted rule. Accordingly, we find no error in the Order of the
court a quo denying admissibility of the photocopies offered by
petitioner as documentary evidence.
Finally, it perplexes this Court why petitioner continued to
obdurately disregard the opportunities given by the trial court for it
to present the originals of the photocopies it presented yet comes
before us now praying that it be allowed to present the originals of
the exhibits that were denied admission or in case the same are lost,
to lay the predicate for the admission of secondary evidence. Had
petitioner presented the originals of the documents to the court
instead of the photocopies it obstinately offered as evidence, or at
the very least laid the predicate for the admission of said
photocopies, this controversy would not have unnecessarily been
brought before the appellate court and finally to this Court for
adjudication. Had it not been for petitioner’s intransigence, the
merits of petitioner’s complaint for damages would have been
decided upon by the trial court long ago. As aptly articulated by the
Court of Appeals, petitioner has only itself to blame for the
respondent judge’s denial of admission of its aforementioned
documentary evidence and consequently, the denial of its prayer to
be given another opportunity to present the originals of the
documents that were denied admission nor to lay the predicate for
the admission of secondary evidence in case the same has been lost.
WHEREFORE, premises considered, the instant petition is hereby
DENIED. The Decision of the Court of Appeals in CA-G.R. CEB-SP No.
00848, dated 9 November 2005 is hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.
G.R. No. 170633 October 17, 2007
MCC INDUSTRIAL SALES CORPORATION, petitioner,
vs.
SSANGYONG CORPORATION, respondents.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari of the
Decision1 of the Court of Appeals in CA-G.R. CV No. 82983 and its
Resolution2 denying the motion for reconsideration thereof.
Petitioner MCC Industrial Sales (MCC), a domestic corporation with
office at Binondo, Manila, is engaged in the business of importing
and wholesaling stainless steel products.3 One of its suppliers is the
Ssangyong Corporation (Ssangyong),4 an international trading
company5 with head office in Seoul, South Korea and regional
headquarters in Makati City, Philippines.6 The two corporations
conducted business through telephone calls and facsimile or
telecopy transmissions.7 Ssangyong would send the pro
forma invoices containing the details of the steel product order to
MCC; if the latter conforms thereto, its representative affixes his
signature on the faxed copy and sends it back to Ssangyong, again by
fax.8
On April 13, 2000, Ssangyong Manila Office sent, by fax, a
letter9 addressed to Gregory Chan, MCC Manager [also the
President10 of Sanyo Seiki Stainless Steel Corporation], to confirm
MCC's and Sanyo Seiki's order of 220 metric tons (MT) of hot rolled
stainless steel under a preferential rate of US$1,860.00 per MT.
Chan, on behalf of the corporations, assented and affixed his
signature on the conforme portion of the letter.11
On April 17, 2000, Ssangyong forwarded to MCC Pro Forma Invoice
No. ST2-POSTSO40112 containing the terms and conditions of the
transaction. MCC sent back by fax to Ssangyong the invoice bearing
the conformity signature13 of Chan. As stated in the pro
forma invoice, payment for the ordered steel products would be
made through an irrevocable letter of credit (L/C) at sight in favor of
Ssangyong.14 Following their usual practice, delivery of the goods
was to be made after the L/C had been opened.
In the meantime, because of its confirmed transaction with MCC,
Ssangyong placed the order with its steel manufacturer, Pohang Iron
and Steel Corporation (POSCO), in South Korea 15 and paid the same
in full.
Because MCC could open only a partial letter of credit, the order for
220MT of steel was split into two, 16 one for110MT covered by Pro
Forma Invoice No. ST2-POSTS0401-117 and another for 110MT
covered by ST2-POSTS0401-2,18 both dated April 17, 2000.
On June 20, 2000, Ssangyong, through its Manila Office, informed
Sanyo Seiki and Chan, by way of a fax transmittal, that it was ready to
ship 193.597MT of stainless steel from Korea to the Philippines. It
requested that the opening of the L/C be facilitated. 19 Chan affixed
his signature on the fax transmittal and returned the same, by fax, to
Ssangyong.20
Two days later, on June 22, 2000, Ssangyong Manila Office informed
Sanyo Seiki, thru Chan, that it was able to secure a US$30/MT
price adjustment on the contracted price of US$1,860.00/MT for the
200MT stainless steel, and that the goods were to be shipped in
two tranches, the first 100MT on that day and the second 100MT not
later than June 27, 2000. Ssangyong reiterated its request for the
facilitation of the L/C's opening.21
Ssangyong later, through its Manila Office, sent a letter, on June 26,
2000, to the Treasury Group of Sanyo Seiki that it was looking
forward to receiving the L/C details and a cable copy thereof that
day.22 Ssangyong sent a separate letter of the same date to Sanyo
Seiki requesting for the opening of the L/C covering payment of the
first 100MT not later than June 28, 2000. 23 Similar letters were
transmitted by Ssangyong Manila Office on June 27, 2000. 24 On June
28, 2000, Ssangyong sent another facsimile letter to MCC stating that
its principal in Korea was already in a difficult situation 25 because of
the failure of Sanyo Seiki and MCC to open the L/C's.
The following day, June 29, 2000, Ssangyong received, by fax, a letter
signed by Chan, requesting an extension of time to open the L/C
because MCC's credit line with the bank had been fully availed of in
connection with another transaction, and MCC was waiting for an
additional credit line.26 On the same date, Ssangyong replied,
requesting that it be informed of the date when the L/C would be
opened, preferably at the earliest possible time, since its Steel Team
2 in Korea was having problems and Ssangyong was incurring
warehousing costs.27 To maintain their good business relationship
and to support MCC in its financial predicament, Ssangyong offered
to negotiate with its steel manufacturer, POSCO, another US$20/MT
discount on the price of the stainless steel ordered. This was
intimated in Ssangyong's June 30, 2000 letter to MCC. 28 On July 6,
2000, another follow-up letter29 for the opening of the L/C was sent
by Ssangyong to MCC.
However, despite Ssangyong's letters, MCC failed to open a letter of
credit.30 Consequently, on August 15, 2000, Ssangyong, through
counsel, wrote Sanyo Seiki that if the L/C's were not opened,
Ssangyong would be compelled to cancel the contract and hold MCC
liable for damages for breach thereof amounting to US$96,132.18,
inclusive of warehouse expenses, related interests and charges. 31
Later, Pro Forma Invoice Nos. ST2-POSTS080-132 and ST2-POSTS080-
233 dated August 16, 2000 were issued by Ssangyong and sent via fax
to MCC. The invoices slightly varied the terms of the earlier pro
forma invoices (ST2-POSTSO401, ST2-POSTS0401-1 and ST2-
POSTS0401-2), in that the quantity was now officially 100MT per
invoice and the price was reduced to US$1,700.00 per MT. As can be
gleaned from the photocopies of the said August 16, 2000 invoices
submitted to the court, they both bear the conformity signature of
MCC Manager Chan.
On August 17, 2000, MCC finally opened an L/C with PCIBank for
US$170,000.00 covering payment for 100MT of stainless steel coil
under Pro Forma Invoice No. ST2-POSTS080-2.34 The goods covered
by the said invoice were then shipped to and received by MCC. 35
MCC then faxed to Ssangyong a letter dated August 22, 2000 signed
by Chan, requesting for a price adjustment of the order stated in Pro
Forma Invoice No. ST2-POSTS080-1, considering that the prevailing
price of steel at that time was US$1,500.00/MT, and that MCC lost a
lot of money due to a recent strike.36
Ssangyong rejected the request, and, on August 23, 2000, sent a
demand letter37 to Chan for the opening of the second and last L/C of
US$170,000.00 with a warning that, if the said L/C was not opened
by MCC on August 26, 2000, Ssangyong would be constrained to
cancel the contract and hold MCC liable for US$64,066.99
(representing cost difference, warehousing expenses, interests and
charges as of August 15, 2000) and other damages for breach. Chan
failed to reply.
Exasperated, Ssangyong through counsel wrote a letter to MCC, on
September 11, 2000, canceling the sales contract under ST2-
POSTS0401-1 /ST2-POSTS0401-2, and demanding payment of
US$97,317.37 representing losses, warehousing expenses, interests
and charges.38
Ssangyong then filed, on November 16, 2001, a civil action for
damages due to breach of contract against defendants MCC, Sanyo
Seiki and Gregory Chan before the Regional Trial Court of Makati
City. In its complaint,39Ssangyong alleged that defendants breached
their contract when they refused to open the L/C in the amount of
US$170,000.00 for the remaining 100MT of steel under Pro
Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2.
After Ssangyong rested its case, defendants filed a Demurrer to
Evidence40 alleging that Ssangyong failed to present the original
copies of the pro forma invoices on which the civil action was based.
In an Order dated April 24, 2003, the court denied the demurrer,
ruling that the documentary evidence presented had already been
admitted in the December 16, 2002 Order 41 and their admissibility
finds support in Republic Act (R.A.) No. 8792, otherwise known as
the Electronic Commerce Act of 2000. Considering that both
testimonial and documentary evidence tended to substantiate the
material allegations in the complaint, Ssangyong's evidence sufficed
for purposes of a prima facie case.42
After trial on the merits, the RTC rendered its Decision 43 on March
24, 2004, in favor of Ssangyong. The trial court ruled that when
plaintiff agreed to sell and defendants agreed to buy the 220MT of
steel products for the price of US$1,860 per MT, the contract was
perfected. The subject transaction was evidenced by Pro
Forma Invoice Nos.ST2-POSTS0401-1 and ST2-POSTS0401-2, which
were later amended only in terms of reduction of volume as well as
the price per MT, following Pro Forma Invoice Nos. ST2-POSTS080-
1 and ST2-POSTS080-2. The RTC, however, excluded Sanyo Seiki from
liability for lack of competent evidence. The fallo of the decision
reads:
WHEREFORE, premises considered, Judgment is hereby rendered
ordering defendants MCC Industrial Sales Corporation and Gregory
Chan, to pay plaintiff, jointly and severally the following:
1) Actual damages of US$93,493.87 representing the outstanding
principal claim plus interest at the rate of 6% per annum from March
30, 2001.
2) Attorney's fees in the sum of P50,000.00 plus P2,000.00 per
counsel's appearance in court, the same being deemed just and
equitable considering that by reason of defendants' breach of their
obligation under the subject contract, plaintiff was constrained to
litigate to enforce its rights and recover for the damages it sustained,
and therefore had to engage the services of a lawyer.
3) Costs of suit.
No award of exemplary damages for lack of sufficient basis.
SO ORDERED.44
On April 22, 2004, MCC and Chan, through their counsel of record,
Atty. Eladio B. Samson, filed their Notice of Appeal. 45 On June 8,
2004, the law office of Castillo Zamora & Poblador entered its
appearance as their collaborating counsel.
In their Appeal Brief filed on March 9, 2005,46 MCC and Chan raised
before the CA the following errors of the RTC:
I. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT
APPELLANTS VIOLATED THEIR CONTRACT WITH APPELLEE
A. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT
APPELLANTS AGREED TO PURCHASE 200 METRIC TONS OF STEEL
PRODUCTS FROM APPELLEE, INSTEAD OF ONLY 100 METRIC TONS.
1. THE HONORABLE COURT A QUO PLAINLY ERRED IN ADMITTING IN
EVIDENCE THEPRO FORMA INVOICES WITH REFERENCE NOS. ST2-
POSTS0401-1 AND ST2-POSTS0401-2.
II. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING
ACTUAL DAMAGES TO APPELLEE.
III. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING
ATTORNEY'S FEES TO APPELLEE.
IV. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING
APPELLANT GREGORY CHAN JOINTLY AND SEVERALLY LIABLE WITH
APPELLANT MCC.47
On August 31, 2005, the CA rendered its Decision 48 affirming the
ruling of the trial court, but absolving Chan of any liability. The
appellate court ruled, among others, that Pro Forma Invoice
Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits "E", "E-1"
and "F") were admissible in evidence, although they were mere
facsimile printouts of MCC's steel orders. 49 The dispositive portion of
the appellate court's decision reads:
WHEREFORE, premises considered, the Court holds:
(1) The award of actual damages, with interest, attorney's fees and
costs ordered by the lower court is hereby AFFIRMED.
(2) Appellant Gregory Chan is hereby ABSOLVED from any liability.
SO ORDERED.50
A copy of the said Decision was received by MCC's and Chan's
principal counsel, Atty. Eladio B. Samson, on September 14,
2005.51 Their collaborating counsel, Castillo Zamora &
Poblador,52 likewise, received a copy of the CA decision on
September 19, 2005.53
On October 4, 2005, Castillo Zamora & Poblador, on behalf of MCC,
filed a motion for reconsideration of the said decision. 54 Ssangyong
opposed the motion contending that the decision of the CA had
become final and executory on account of the failure of MCC to file
the said motion within the reglementary period. The appellate court
resolved, on November 22, 2005, to deny the motion on its
merits,55 without, however, ruling on the procedural issue raised.
Aggrieved, MCC filed a petition for review on certiorari56 before this
Court, imputing the following errors to the Court of Appeals:
THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN
ACCORDANCE WITH JURISPRUDENCE AND SANCTIONED A
DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL
PROCEEDINGS BY REVERSING THE COURT A QUO'S DISMISSAL OF
THE COMPLAINT IN CIVIL CASE NO. 02-124 CONSIDERING THAT:
I. THE COURT OF APPEALS ERRED IN SUSTAINING THE ADMISSIBILITY
IN EVIDENCE OF THE PRO-FORMA INVOICES WITH REFERENCE NOS.
ST2-POSTSO401-1 AND ST2-POSTSO401-2, DESPITE THE FACT THAT
THE SAME WERE MERE PHOTOCOPIES OF FACSIMILE PRINTOUTS.
II. THE COURT OF APPEALS FAILED TO APPRECIATE THE OBVIOUS
FACT THAT, EVEN ASSUMING PETITIONER BREACHED THE SUPPOSED
CONTRACT, THE FACT IS THAT PETITIONER FAILED TO PROVE THAT IT
SUFFERED ANY DAMAGES AND THE AMOUNT THEREOF.
III. THE AWARD OF ACTUAL DAMAGES IN THE AMOUNT OF
US$93,493.87 IS SIMPLY UNCONSCIONABLE AND SHOULD HAVE
BEEN AT LEAST REDUCED, IF NOT DELETED BY THE COURT OF
APPEALS.57
In its Comment, Ssangyong sought the dismissal of the petition,
raising the following arguments: that the CA decision dated 15
August 2005 is already final and executory, because MCC's motion
for reconsideration was filed beyond the reglementary period of 15
days from receipt of a copy thereof, and that, in any case, it was
a pro formamotion; that MCC breached the contract for the
purchase of the steel products when it failed to open the required
letter of credit; that the printout copies and/or photocopies of
facsimile or telecopy transmissions were properly admitted by the
trial court because they are considered original documents under
R.A. No. 8792; and that MCC is liable for actual damages and
attorney's fees because of its breach, thus, compelling Ssangyong to
litigate.
The principal issues that this Court is called upon to resolve are the
following:
I – Whether the CA decision dated 15 August 2005 is already final
and executory;
II – Whether the print-out and/or photocopies of facsimile
transmissions are electronic evidence and admissible as such;
III – Whether there was a perfected contract of sale between MCC
and Ssangyong, and, if in the affirmative, whether MCC breached the
said contract; and
IV – Whether the award of actual damages and attorney's fees in
favor of Ssangyong is proper and justified.
-I-
It cannot be gainsaid that in Albano v. Court of Appeals,58 we held
that receipt of a copy of the decision by one of several counsels on
record is notice to all, and the period to appeal commences on such
date even if the other counsel has not yet received a copy of the
decision. In this case, when Atty. Samson received a copy of the CA
decision on September 14, 2005, MCC had only fifteen (15) days
within which to file a motion for reconsideration conformably with
Section 1, Rule 52 of the Rules of Court, or to file a petition for
review on certiorari in accordance with Section 2, Rule 45. The
period should not be reckoned from September 29, 2005 (when
Castillo Zamora & Poblador received their copy of the decision)
because notice to Atty. Samson is deemed notice to collaborating
counsel.
We note, however, from the records of the CA, that it was Castillo
Zamora & Poblador, not Atty. Samson, which filed both MCC's and
Chan's Brief and Reply Brief. Apparently, the arrangement between
the two counsels was for the collaborating, not the principal, counsel
to file the appeal brief and subsequent pleadings in the CA. This
explains why it was Castillo Zamora & Poblador which filed the
motion for the reconsideration of the CA decision, and they did so on
October 5, 2005, well within the 15-day period from September 29,
2005, when they received their copy of the CA decision. This could
also be the reason why the CA did not find it necessary to resolve
the question of the timeliness of petitioner's motion for
reconsideration, even as the CA denied the same.
Independent of this consideration though, this Court assiduously
reviewed the records and found that strong concerns of substantial
justice warrant the relaxation of this rule.
In Philippine Ports Authority v. Sargasso Construction and
Development Corporation,59 we ruled that:
In Orata v. Intermediate Appellate Court, we held that where strong
considerations of substantive justice are manifest in the petition, this
Court may relax the strict application of the rules of procedure in the
exercise of its legal jurisdiction. In addition to the basic merits of the
main case, such a petition usually embodies justifying circumstance
which warrants our heeding to the petitioner's cry for justice in spite
of the earlier negligence of counsel. As we held in Obut v. Court of
Appeals:
[W]e cannot look with favor on a course of action which would place
the administration of justice in a straight jacket for then the result
would be a poor kind of justice if there would be justice at all. Verily,
judicial orders, such as the one subject of this petition, are issued to
be obeyed, nonetheless a non-compliance is to be dealt with as the
circumstances attending the case may warrant. What should guide
judicial action is the principle that a party-litigant is to be given the
fullest opportunity to establish the merits of his complaint or
defense rather than for him to lose life, liberty, honor or property on
technicalities.
The rules of procedure are used only to secure and not override or
frustrate justice. A six-day delay in the perfection of the appeal, as in
this case, does not warrant the outright dismissal of the appeal.
InDevelopment Bank of the Philippines vs. Court of Appeals, we gave
due course to the petitioner's appeal despite the late filing of its
brief in the appellate court because such appeal involved public
interest. We stated in the said case that the Court may exempt a
particular case from a strict application of the rules of procedure
where the appellant failed to perfect its appeal within the
reglementary period, resulting in the appellate court's failure to
obtain jurisdiction over the case. In Republic vs. Imperial, Jr., we also
held that there is more leeway to exempt a case from the strictness
of procedural rules when the appellate court has already obtained
jurisdiction over the appealed case. We emphasize that:
[T]he rules of procedure are mere tools intended to facilitate the
attainment of justice, rather than frustrate it. A strict and rigid
application of the rules must always be eschewed when it would
subvert the rule's primary objective of enhancing fair trials and
expediting justice. Technicalities should never be used to defeat the
substantive rights of the other party. Every party-litigant must be
afforded the amplest opportunity for the proper and just
determination of his cause, free from the constraints of
technicalities.60
Moreover, it should be remembered that the Rules were
promulgated to set guidelines in the orderly administration of
justice, not to shackle the hand that dispenses it. Otherwise, the
courts would be consigned to being mere slaves to technical rules,
deprived of their judicial discretion. Technicalities must take a
backseat to substantive rights. After all, it is circumspect leniency in
this respect that will give the parties the fullest opportunity to
ventilate the merits of their respective causes, rather than have
them lose life, liberty, honor or property on sheer technicalities. 61
The other technical issue posed by respondent is the alleged pro
forma nature of MCC's motion for reconsideration, ostensibly
because it merely restated the arguments previously raised and
passed upon by the CA.
In this connection, suffice it to say that the mere restatement of
arguments in a motion for reconsideration does not per se result in
a pro forma motion. In Security Bank and Trust Company, Inc. v.
Cuenca,62 we held that a motion for reconsideration may not be
necessarily pro forma even if it reiterates the arguments earlier
passed upon and rejected by the appellate court. A movant may
raise the same arguments precisely to convince the court that its
ruling was erroneous. Furthermore, the pro forma rule will not apply
if the arguments were not sufficiently passed upon and answered in
the decision sought to be reconsidered.
- II -
The second issue poses a novel question that the Court welcomes. It
provides the occasion for this Court to pronounce a definitive
interpretation of the equally innovative provisions of the Electronic
Commerce Act of 2000 (R.A. No. 8792) vis-à-vis the Rules on
Electronic Evidence.
Although the parties did not raise the question whether the original
facsimile transmissions are "electronic data messages" or "electronic
documents" within the context of the Electronic Commerce Act (the
petitioner merely assails as inadmissible evidence the photocopies
of the said facsimile transmissions), we deem it appropriate to
determine first whether the said fax transmissions are indeed within
the coverage of R.A. No. 8792 before ruling on whether the
photocopies thereof are covered by the law. In any case, this Court
has ample authority to go beyond the pleadings when, in the
interest of justice or for the promotion of public policy, there is a
need to make its own findings in order to support its conclusions. 63
Petitioner contends that the photocopies of the pro forma invoices
presented by respondent Ssangyong to prove the perfection of their
supposed contract of sale are inadmissible in evidence and do not
fall within the ambit of R.A. No. 8792, because the law merely
admits as the best evidence the original fax transmittal. On the other
hand, respondent posits that, from a reading of the law and the
Rules on Electronic Evidence, the original facsimile transmittal of
the pro forma invoice is admissible in evidence since it is an
electronic document and, therefore, the best evidence under the law
and the Rules. Respondent further claims that the photocopies of
these fax transmittals (specifically ST2-POSTS0401-1 and ST2-
POSTS0401-2) are admissible under the Rules on Evidence because
the respondent sufficiently explained the non-production of the
original fax transmittals.
In resolving this issue, the appellate court ruled as follows:
Admissibility of Pro Forma
Invoices; Breach of Contract
by Appellants
Turning first to the appellants' argument against the admissibility of
the Pro Forma Invoices with Reference Nos. ST2-POSTS0401-1 and
ST2-POSTS0401-2 (Exhibits "E", "E-1" and "F", pp. 215-218, Records),
appellants argue that the said documents are inadmissible (sic) being
violative of the best evidence rule.
The argument is untenable.
The copies of the said pro-forma invoices submitted by the appellee
are admissible in evidence, although they are mere electronic
facsimile printouts of appellant's orders. Such facsimile printouts are
considered Electronic Documents under the New Rules on Electronic
Evidence, which came into effect on August 1, 2001. (Rule 2, Section
1 [h], A.M. No. 01-7-01-SC).
"(h) 'Electronic document' refers to information or the
representation of information, data, figures, symbols or other modes
of written expression, described or however represented, by which a
right is established or an obligation extinguished, or by which a fact
may be proved and affirmed, which is received, recorded,
transmitted, stored, processed, retrieved or produced electronically.
It includes digitally signed documents and any printout or output,
readable by sight or other means, which accurately reflects the
electronic data message or electronic document. For purposes of
these Rules, the term 'electronic document' may be used
interchangeably with 'electronic data message'.
An electronic document shall be regarded as the equivalent of an
original document under the Best Evidence Rule, as long as it is a
printout or output readable by sight or other means, showing to
reflect the data accurately. (Rule 4, Section 1, A.M. No. 01-7-01-SC)
The ruling of the Appellate Court is incorrect. R.A. No.
8792,64 otherwise known as the Electronic Commerce Act of 2000,
considers an electronic data message or an electronic document as
the functional equivalent of a written document for evidentiary
purposes.65 The Rules on Electronic Evidence 66 regards an electronic
document as admissible in evidence if it complies with the rules on
admissibility prescribed by the Rules of Court and related laws, and
is authenticated in the manner prescribed by the said Rules. 67 An
electronic document is also the equivalent of an original document
under the Best Evidence Rule, if it is a printout or output readable by
sight or other means, shown to reflect the data accurately.68
Thus, to be admissible in evidence as an electronic data message or
to be considered as the functional equivalent of an original
document under the Best Evidence Rule, the writing must foremost
be an "electronic data message" or an "electronic document."
The Electronic Commerce Act of 2000 defines electronic data
message and electronic document as follows:
Sec. 5. Definition of Terms. For the purposes of this Act, the
following terms are defined, as follows:
xxx
c. "Electronic Data Message" refers to information generated, sent,
received or stored by electronic, optical or similar means.
xxx
f. "Electronic Document" refers to information or the representation
of information, data, figures, symbols or other modes of written
expression, described or however represented, by which a right is
established or an obligation extinguished, or by which a fact may be
proved and affirmed, which is received, recorded, transmitted,
stored, processed, retrieved or produced electronically.
The Implementing Rules and Regulations (IRR) of R.A. No.
8792,69 which was signed on July 13, 2000 by the then Secretaries of
the Department of Trade and Industry, the Department of Budget
and Management, and then Governor of the Bangko Sentral ng
Pilipinas, defines the terms as:
Sec. 6. Definition of Terms. For the purposes of this Act and these
Rules, the following terms are defined, as follows:
xxx
(e) "Electronic Data Message" refers to information generated, sent,
received or stored by electronic, optical or similar means, but not
limited to, electronic data interchange (EDI), electronic mail,
telegram, telex or telecopy. Throughout these Rules, the term
"electronic data message" shall be equivalent to and be used
interchangeably with "electronic document."
xxxx
(h) "Electronic Document" refers to information or the
representation of information, data, figures, symbols or other modes
of written expression, described or however represented, by which a
right is established or an obligation extinguished, or by which a fact
may be proved and affirmed, which is received, recorded,
transmitted, stored, processed, retrieved or produced
electronically. Throughout these Rules, the term "electronic
document" shall be equivalent to and be used interchangeably with
"electronic data message."
The phrase "but not limited to, electronic data interchange (EDI),
electronic mail, telegram, telex or telecopy" in the IRR's definition of
"electronic data message" is copied from the Model Law on
Electronic Commerce adopted by the United Nations Commission on
International Trade Law (UNCITRAL),70 from which majority of the
provisions of R.A. No. 8792 were taken. 71 While Congress deleted
this phrase in the Electronic Commerce Act of 2000, the drafters of
the IRR reinstated it. The deletion by Congress of the said phrase is
significant and pivotal, as discussed hereunder.
The clause on the interchangeability of the terms "electronic data
message" and "electronic document" was the result of the Senate of
the Philippines' adoption, in Senate Bill 1902, of the phrase
"electronic data message" and the House of Representative's
employment, in House Bill 9971, of the term "electronic
document."72 In order to expedite the reconciliation of the two
versions, the technical working group of the Bicameral Conference
Committee adopted both terms and intended them to be the
equivalent of each one.73 Be that as it may, there is a slight difference
between the two terms. While "data message" has reference
to information electronically sent, stored or transmitted, it does not
necessarily mean that it will give rise to a right or extinguish an
obligation,74 unlike an electronic document. Evident from the law,
however, is the legislative intent to give the two terms the same
construction.
The Rules on Electronic Evidence promulgated by this Court defines
the said terms in the following manner:
SECTION 1. Definition of Terms. – For purposes of these Rules, the
following terms are defined, as follows:
xxxx
(g) "Electronic data message" refers to information generated, sent,
received or stored by electronic, optical or similar means.
(h) "Electronic document" refers to information or the
representation of information, data, figures, symbols or other modes
of written expression, described or however represented, by which a
right is established or an obligation extinguished, or by which a fact
may be proved and affirmed, which is received, recorded,
transmitted, stored, processed, retrieved or produced
electronically. It includes digitally signed documents and print-out or
output, readable by sight or other means, which accurately reflects
the electronic data message or electronic document. For purposes of
these Rules, the term "electronic document" may be used
interchangeably with "electronic data message."
Given these definitions, we go back to the original question: Is an
original printout of a facsimile transmission an electronic data
message or electronic document?
The definitions under the Electronic Commerce Act of 2000, its IRR
and the Rules on Electronic Evidence, at first glance, convey the
impression that facsimile transmissions are electronic data messages
or electronic documents because they are sent by electronic means.
The expanded definition of an "electronic data message" under the
IRR, consistent with the UNCITRAL Model Law, further supports this
theory considering that the enumeration "xxx [is] not limited to,
electronic data interchange (EDI), electronic mail, telegram, telex
or telecopy." And to telecopy is to send a document from one place
to another via a fax machine.75
As further guide for the Court in its task of statutory construction,
Section 37 of the Electronic Commerce Act of 2000 provides that
Unless otherwise expressly provided for, the interpretation of this
Act shall give due regard to its international origin and the need to
promote uniformity in its application and the observance of good
faith in international trade relations. The generally accepted
principles of international law and convention on electronic
commerce shall likewise be considered.
Obviously, the "international origin" mentioned in this section can
only refer to the UNCITRAL Model Law, and the UNCITRAL's
definition of "data message":
"Data message" means information generated, sent, received or
stored by electronic, optical or similar meansincluding, but not
limited to, electronic data interchange (EDI), electronic mail,
telegram, telex or telecopy.76
is substantially the same as the IRR's characterization of an
"electronic data message."
However, Congress deleted the phrase, "but not limited to, electronic
data interchange (EDI), electronic mail, telegram, telex or telecopy,"
and replaced the term "data message" (as found in the UNCITRAL
Model Law ) with "electronic data message." This legislative
divergence from what is assumed as the term's "international origin"
has bred uncertainty and now impels the Court to make an inquiry
into the true intent of the framers of the law. Indeed, in the
construction or interpretation of a legislative measure, the primary
rule is to search for and determine the intent and spirit of the
law.77 A construction should be rejected that gives to the language
used in a statute a meaning that does not accomplish the purpose
for which the statute was enacted, and that tends to defeat the ends
which are sought to be attained by the enactment.78
Interestingly, when Senator Ramon B. Magsaysay, Jr., the principal
author of Senate Bill 1902 (the predecessor of R.A. No. 8792),
sponsored the bill on second reading, he proposed to adopt the term
"data message" as formulated and defined in the UNCITRAL Model
Law.79 During the period of amendments, however, the term evolved
into "electronic data message," and the phrase "but not limited to,
electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy" in the UNCITRAL Model Law was deleted. Furthermore, the
term "electronic data message," though maintaining its description
under the UNCITRAL Model Law, except for the aforesaid deleted
phrase, conveyed a different meaning, as revealed in the following
proceedings:
xxxx
Senator Santiago. Yes, Mr. President. I will furnish a copy together
with the explanation of this proposed amendment.
And then finally, before I leave the Floor, may I please be allowed to
go back to Section 5; the Definition of Terms. In light of the
acceptance by the good Senator of my proposed amendments, it will
then become necessary to add certain terms in our list of terms to
be defined. I would like to add a definition on what is "data," what is
"electronic record" and what is an "electronic record system."
If the gentleman will give me permission, I will proceed with the
proposed amendment on Definition of Terms, Section 5.
Senator Magsaysay. Please go ahead, Senator Santiago.
Senator Santiago. We are in Part 1, short title on the Declaration of
Policy, Section 5, Definition of Terms.
At the appropriate places in the listing of these terms that have to be
defined since these are arranged alphabetically, Mr. President, I
would like to insert the term DATA and its definition. So, the
amendment will read: "DATA" MEANS REPRESENTATION, IN ANY
FORM, OF INFORMATION OR CONCEPTS.
The explanation is this: This definition of "data" or "data" as it is now
fashionably pronounced in America - -the definition of "data"
ensures that our bill applies to any form of information in an
electronic record, whether these are figures, facts or ideas.
So again, the proposed amendment is this: "DATA" MEANS
REPRESENTATIONS, IN ANY FORM, OF INFORMATION OR CONCEPTS.
Senator Magsaysay. May I know how will this affect the definition of
"Data Message" which encompasses electronic records, electronic
writings and electronic documents?
Senator Santiago. These are completely congruent with each other.
These are compatible. When we define "data," we are simply
reinforcing the definition of what is a data message.
Senator Magsaysay. It is accepted, Mr. President.
Senator Santiago. Thank you. The next term is "ELECTRONIC
RECORD." The proposed amendment is as follows:
"ELECTRONIC RECORD" MEANS DATA THAT IS RECORDED OR STORED
ON ANY MEDIUM IN OR BY A COMPUTER SYSTEM OR OTHER
SIMILAR DEVICE, THAT CAN BE READ OR PERCEIVED BY A PERSON OR
A COMPUTER SYSTEM OR OTHER SIMILAR DEVICE. IT INCLUDES A
DISPLAY, PRINTOUT OR OTHER OUTPUT OF THAT DATA.
The explanation for this term and its definition is as follows: The
term "ELECTRONIC RECORD" fixes the scope of our bill. The record is
the data. The record may be on any medium. It is electronic because
it is recorded or stored in or by a computer system or a similar
device.
The amendment is intended to apply, for example, to data on
magnetic strips on cards or in Smart cards. As drafted, it would not
apply to telexes or faxes, except computer-generated faxes, unlike
the United Nations model law on electronic commerce. It would
also not apply to regular digital telephone conversations since the
information is not recorded. It would apply to voice mail since the
information has been recorded in or by a device similar to a
computer. Likewise, video records are not covered. Though when the
video is transferred to a website, it would be covered because of the
involvement of the computer. Music recorded by a computer system
on a compact disc would be covered.
In short, not all data recorded or stored in digital form is covered. A
computer or a similar device has to be involved in its creation or
storage. The term "similar device" does not extend to all devices that
create or store data in digital form. Although things that are not
recorded or preserved by or in a computer system are omitted from
this bill, these may well be admissible under other rules of law. This
provision focuses on replacing the search for originality proving the
reliability of systems instead of that of individual records and using
standards to show systems reliability.
Paper records that are produced directly by a computer system such
as printouts are themselves electronic records being just the means
of intelligible display of the contents of the record. Photocopies of
the printout would be paper record subject to the usual rules about
copies, but the original printout would be subject to the rules of
admissibility of this bill.
However, printouts that are used only as paper records and whose
computer origin is never again called on are treated as paper
records. In that case, the reliability of the computer system that
produces the record is irrelevant to its reliability.
Senator Magsaysay. Mr. President, if my memory does not fail me,
earlier, the lady Senator accepted that we use the term "Data
Message" rather than "ELECTRONIC RECORD" in being consistent
with the UNCITRAL term of "Data Message." So with the new
amendment of defining "ELECTRONIC RECORD," will this affect her
accepting of the use of "Data Message" instead of "ELECTRONIC
RECORD"?
Senator Santiago. No, it will not. Thank you for reminding me. The
term I would like to insert is ELECTRONIC DATA MESSAGE in lieu of
"ELECTRONIC RECORD."
Senator Magsaysay. Then we are, in effect, amending the term of
the definition of "Data Message" on page 2A, line 31, to which we
have no objection.
Senator Santiago. Thank you, Mr. President.
xxxx
Senator Santiago. Mr. President, I have proposed all the
amendments that I desire to, including the amendment on the effect
of error or change. I will provide the language of the amendment
together with the explanation supporting that amendment to the
distinguished sponsor and then he can feel free to take it up in any
session without any further intervention.
Senator Magsaysay. Before we end, Mr. President, I understand from
the proponent of these amendments that these are based on
the Canadian E-commerce Law of 1998. Is that not right?
Senator Santiago. That is correct.80
Thus, when the Senate consequently voted to adopt the term
"electronic data message," it was consonant with the explanation of
Senator Miriam Defensor-Santiago that it would not apply "to telexes
or faxes, except computer-generated faxes, unlike the United Nations
model law on electronic commerce." In explaining the term
"electronic record" patterned after the E-Commerce Law of Canada,
Senator Defensor-Santiago had in mind the term "electronic data
message." This term then, while maintaining part of the UNCITRAL
Model Law's terminology of "data message," has assumed a different
context, this time, consonant with the term "electronic record" in
the law of Canada. It accounts for the addition of the word
"electronic" and the deletion of the phrase "but not limited to,
electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy." Noteworthy is that the Uniform Law Conference of
Canada, explains the term "electronic record," as drafted in the
Uniform Electronic Evidence Act, in a manner strikingly similar to
Sen. Santiago's explanation during the Senate deliberations:
"Electronic record" fixes the scope of the Act. The record is the data.
The record may be any medium. It is "electronic" because it is
recorded or stored in or by a computer system or similar device. The
Act is intended to apply, for example, to data on magnetic strips on
cards, or in smart cards. As drafted, it would not apply to telexes or
faxes (except computer-generated faxes), unlike the United Nations
Model Law on Electronic Commerce. It would also not apply to
regular digital telephone conversations, since the information is not
recorded. It would apply to voice mail, since the information has
been recorded in or by a device similar to a computer. Likewise video
records are not covered, though when the video is transferred to a
Web site it would be, because of the involvement of the computer.
Music recorded by a computer system on a compact disk would be
covered.
In short, not all data recorded or stored in "digital" form is covered.
A computer or similar device has to be involved in its creation or
storage. The term "similar device" does not extend to all devices that
create or store data in digital form. Although things that are not
recorded or preserved by or in a computer system are omitted from
this Act, they may well be admissible under other rules of law. This
Act focuses on replacing the search for originality, proving the
reliability of systems instead of that of individual records, and using
standards to show systems reliability.
Paper records that are produced directly by a computer system, such
as printouts, are themselves electronic records, being just the means
of intelligible display of the contents of the record. Photocopies of
the printout would be paper records subject to the usual rules about
copies, but the "original" printout would be subject to the rules of
admissibility of this Act.
However, printouts that are used only as paper records, and whose
computer origin is never again called on, are treated as paper
records. See subsection 4(2). In this case the reliability of the
computer system that produced the record is relevant to its
reliability.81
There is no question then that when Congress formulated the term
"electronic data message," it intended the same meaning as the
term "electronic record" in the Canada law. This construction of the
term "electronic data message," which excludes telexes or faxes,
except computer-generated faxes, is in harmony with the Electronic
Commerce Law's focus on "paperless" communications and the
"functional equivalent approach"82 that it espouses. In fact, the
deliberations of the Legislature are replete with discussions on
paperless and digital transactions.
Facsimile transmissions are not, in this sense, "paperless," but verily
are paper-based.
A facsimile machine, which was first patented in 1843 by Alexander
Bain,83 is a device that can send or receive pictures and text over a
telephone line. It works by digitizing an image—dividing it into a grid
of dots. Each dot is either on or off, depending on whether it is black
or white. Electronically, each dot is represented by a bit that has a
value of either 0 (off) or 1 (on). In this way, the fax machine
translates a picture into a series of zeros and ones (called a bit map)
that can be transmitted like normal computer data. On the receiving
side, a fax machine reads the incoming data, translates the zeros and
ones back into dots, and reprints the picture. 84 A fax machine is
essentially an image scanner, a modem and a computer printer
combined into a highly specialized package. The scanner converts
the content of a physical document into a digital image, the modem
sends the image data over a phone line, and the printer at the other
end makes a duplicate of the original document. 85 Thus, in Garvida v.
Sales, Jr.,86where we explained the unacceptability of filing pleadings
through fax machines, we ruled that:
A facsimile or fax transmission is a process involving the transmission
and reproduction of printed and graphic matter by scanning an
original copy, one elemental area at a time, and representing the
shade or tone of each area by a specified amount of electric current.
The current is transmitted as a signal over regular telephone lines or
via microwave relay and is used by the receiver to reproduce an
image of the elemental area in the proper position and the correct
shade. The receiver is equipped with a stylus or other device that
produces a printed record on paper referred to as a facsimile.
x x x A facsimile is not a genuine and authentic pleading. It is, at best,
an exact copy preserving all the marks of an original. Without the
original, there is no way of determining on its face whether the
facsimile pleading is genuine and authentic and was originally signed
by the party and his counsel. It may, in fact, be a sham pleading.87
Accordingly, in an ordinary facsimile transmission, there exists an
original paper-based information or data that is scanned, sent
through a phone line, and re-printed at the receiving end. Be it
noted that in enacting the Electronic Commerce Act of 2000,
Congress intended virtual or paperless writings to be
the functional equivalent and to have the same legal function as
paper-based documents.88 Further, in a virtual or paperless
environment, technically, there is no original copy to speak of, as all
direct printouts of the virtual reality are the same, in all respects,
and are considered as originals.89 Ineluctably, the law's definition of
"electronic data message," which, as aforesaid, is interchangeable
with "electronic document," could not have included facsimile
transmissions, which have an original paper-based copy as sent and
a paper-based facsimile copy as received. These two copies are
distinct from each other, and have different legal effects. While
Congress anticipated future developments in communications and
computer technology90 when it drafted the law, it excluded the early
forms of technology, like telegraph, telex and telecopy (except
computer-generated faxes, which is a newer development as
compared to the ordinary fax machine to fax machine transmission),
when it defined the term "electronic data message."
Clearly then, the IRR went beyond the parameters of the law when it
adopted verbatim the UNCITRAL Model Law's definition of "data
message," without considering the intention of Congress when the
latter deleted the phrase "but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy." The
inclusion of this phrase in the IRR offends a basic tenet in the
exercise of the rule-making power of administrative agencies. After
all, the power of administrative officials to promulgate rules in the
implementation of a statute is necessarily limited to what is found in
the legislative enactment itself. The implementing rules and
regulations of a law cannot extend the law or expand its coverage, as
the power to amend or repeal a statute is vested in the
Legislature.91 Thus, if a discrepancy occurs between the basic law
and an implementing rule or regulation, it is the former that prevails,
because the law cannot be broadened by a mere administrative
issuance—an administrative agency certainly cannot amend an act
of Congress.92 Had the Legislature really wanted ordinary fax
transmissions to be covered by the mantle of the Electronic
Commerce Act of 2000, it could have easily lifted without a bit of
tatter the entire wordings of the UNCITRAL Model Law.
Incidentally, the National Statistical Coordination Board Task Force
on the Measurement of E-Commerce,93 on November 22, 2006,
recommended a working definition of "electronic commerce," as
"[a]ny commercial transaction conducted through electronic, optical
and similar medium, mode, instrumentality and technology. The
transaction includes the sale or purchase of goods and services,
between individuals, households, businesses and governments
conducted over computer-mediated networks through the Internet,
mobile phones, electronic data interchange (EDI) and other channels
through open and closed networks." The Task Force's proposed
definition is similar to the Organization of Economic Cooperation and
Development's (OECD's) broad definition as it covers transactions
made over any network, and, in addition, it adopted the following
provisions of the OECD definition: (1) for transactions, it covers sale
or purchase of goods and services; (2) for channel/network, it
considers any computer-mediated network and NOT limited to
Internet alone; (3) it excludes transactions received/placed using fax,
telephone or non-interactive mail; (4) it considers payments done
online or offline; and (5) it considers delivery made online (like
downloading of purchased books, music or software programs) or
offline (deliveries of goods).94
We, therefore, conclude that the terms "electronic data message"
and "electronic document," as defined under the Electronic
Commerce Act of 2000, do not include a facsimile transmission.
Accordingly, a facsimile transmissioncannot be considered
as electronic evidence. It is not the functional equivalent of an
original under the Best Evidence Rule and is not admissible
as electronic evidence.
Since a facsimile transmission is not an "electronic data message" or
an "electronic document," and cannot be considered as electronic
evidence by the Court, with greater reason is a photocopy of such a
fax transmission not electronic evidence. In the present case,
therefore, Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-
POSTS0401-2 (Exhibits "E" and "F"), which are mere photocopies of
the original fax transmittals, are not electronic evidence, contrary to
the position of both the trial and the appellate courts.
- III -
Nevertheless, despite the pro forma invoices not being electronic
evidence, this Court finds that respondent has proven by
preponderance of evidence the existence of a perfected contract of
sale.
In an action for damages due to a breach of a contract, it is essential
that the claimant proves (1) the existence of a perfected contract, (2)
the breach thereof by the other contracting party and (3) the
damages which he/she sustained due to such breach. Actori
incumbit onus probandi. The burden of proof rests on the party who
advances a proposition affirmatively. 95 In other words, a plaintiff in a
civil action must establish his case by a preponderance of evidence,
that is, evidence that has greater weight, or is more convincing than
that which is offered in opposition to it.96
In general, contracts are perfected by mere consent, 97 which is
manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute.98 They are, moreover,
obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are
present.99 Sale, being a consensual contract, follows the general rule
that it is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the
price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form
of contracts.100
The essential elements of a contract of sale are (1) consent or
meeting of the minds, that is, to transfer ownership in exchange for
the price, (2) object certain which is the subject matter of the
contract, and (3) cause of the obligation which is established. 101
In this case, to establish the existence of a perfected contract of sale postp
between the parties, respondent Ssangyong formally offered in amou
evidence the testimonies of its witnesses and the following exhibits: and
Exhibit Description Purpose cance
E Pro forma Invoice dated 17 April 2000 To show that defendants
S contractedDemand
with plaintiff
letter to defendants dated 11 To sh
with Contract No. ST2-POSTS0401- for the delivery of 110 MT of stainless Septsteel
2000,from
original final
1, photocopy Korea payable by way of an irrevocable letter of as a c
credit in favor of plaintiff, among other conditions. defen
E-1 Pro forma Invoice dated 17 April 2000 To show that defendants
W sent their confirmation
Letter fromof plaintiff SSANGYONG to To p
with Contract No. ST2- the (i) delivery to it of the specified defendant
stainless steel
SANYO SEIKI dated 13 April purch
POSTS0401, contained in products, (ii) defendants' payment thereof
2000, with
by way fax back from defendants metri
facsimile/thermal paper faxed by of an irrevocable letter of credit in favor
SANYOof plaintiff,
SEIKI/MCC to plaintiff US$1
defendants to plaintiff showing the among other conditions. SSANGYONG,contained in
printed transmission details on the upper facsimile/thermal paper with back-up
portion of said paper as coming from photocopy
defendant MCC on 26 Apr 00 08:41AM W-1 Conforme signature of defendant To pr
E-2 Conforme signature of Mr. Gregory To show that defendants sent their confirmation
Gregory of Chan, contained in Chan
Chan, contained in facsimile/thermal the (i) delivery to it of the total of 220MT
facsimile/thermal
specified paper with back-up metri
paper faxed by defendants to plaintiff stainless steel products, (ii) defendants'
photocopy
payment US$1
showing the printed transmission details thereof by wayW-2 of an irrevocable letter of credit
Name in
of sender MCC Industrial Sales To pr
on the upper portion of said paper as favor of plaintiff, among other conditions.
Corporation the s
coming from defendant MCC on 26 Apr trans
00 08:41AM
X Pro forma Invoice dated 16 August To pr
F Pro forma Invoice dated 17 April 2000 To show that defendants contracted2000, with photocopy
plaintiff split
with Contract No. ST2-POSTSO401- for delivery of another 110 MT of stainless steel shipm
2, photocopy from Korea payable by way of an irrevocable letter disco
of credit in favor of plaintiff, among other
X-1 Notation "1/2", photocopy To pr
conditions.
the fi
G Letter to defendant SANYO SEIKE dated To prove that defendants were informed of the
X-2 Ref. No. ST2-POSTS080-1,photocopy To pr
20 June 2000,contained in date of L/C opening and
first o
facsimile/thermal paper defendant's
X-3 Conforme signature of defendant To p
G-1 Signature of defendant Gregory
Gregory Chan,photocopy Grego
Chan, contained in facsimile/thermal
the b
paper.
price
H Letter to defendants dated 22 June To prove that defendants were informed of the and
2000, original successful price adjustments secured by plaintiff in delive
favor of former and were advised of the schedules defen
of its L/C opening.
DD Letter from defendant MCC to plaintiff To p
I Letter to defendants dated 26 June To prove that plaintiff repeatedly requested dated
SSANGYONG 22 August purch
2000, original defendants for the agreed opening of2000, the Letters of
contained in facsimile/thermal and d
J Letter to defendants dated 26 June Credit, defendants' failure and refusal paper to with
comply
back-up photocopy tons,
2000, original with their obligations and the problems of plaintiff 100 m
is incurring by reason of defendants' failure and SSAN
K Letter to defendants dated 27 June
refusal to open the L/Cs.
2000, original DD-1 Ref. No. ST2-POSTS080-1,contained in To p
L Facsimile message to defendants dated facsimile/thermal paper with back-up purch
28 June 2000, photocopy photocopy and d
tons,
M Letter from defendants dated 29 June To prove that defendants admit of their liabilities to
100 m
2000, contained in facsimile/thermal plaintiff, that they requested for "more extension"
SSAN
paper faxed by defendants to plaintiff of time for the opening of the Letter of Credit, and
DD-2
showing the printed transmission details begging for favorable understanding and Signature of defendant Gregory Chan, To p
on the upper portion of said paper as consideration. contained in facsimile/thermal paper Grego
coming from defendant MCC on 29 June with back-up photocopy the b
00 11:12 AM other
was d
M-1 Signature of defendant Gregory
by de
Chan, contained in facsimile/thermal
Significantly, among these documentary evidence presented by
paper faxed by defendants to plaintiff
respondent, MCC, in its petition before this Court, assails the
showing the printed transmission details
admissibility only of Pro Forma Invoice Nos. ST2-POSTS0401-
on the upper portion of said paper as
1 and ST2-POSTS0401-2 (Exhibits "E" and "F"). After sifting through
coming from defendant MCC on June 00
the records, the Court found that these invoices are mere
11:12 AM
photocopies of their original fax transmittals. Ssangyong avers that
N Letter to defendants dated 29 June these documents were prepared after MCC asked for the splitting of
2000, original the original order into two, so that the latter can apply for an L/C
O Letter to defendants dated 30 June To prove that plaintiff
with greater facility. reiterated
It, however,itsfailed
request for why the originals of
to explain
2000, photocopy defendants to L/C opening
these documents wereafter the latter's request
not presented.
for extension
To determineof time
whetherwasthesegranted, defendants'
documents are admissible in evidence,
failure
weand refusal
apply to comply
the ordinary therewith
Rules extension
on Evidence, for as discussed above we
of time notwithstanding.
cannot apply the Electronic Commerce Act of 2000 and the Rules on
P Letter to defendants dated 06 July Electronic Evidence.
2000, original Because these documents are mere photocopies, they are simply
secondary evidence, admissible only upon compliance with Rule
Q Demand letter to defendants dated 15 To prove that plaintiff was constrained to engaged
130, Section 5, which states, "[w]hen the original document has
Aug 2000, original services of a lawyer for collection efforts.
been lost or destroyed, or cannot be produced in court, the offeror,
R Demand letter to defendants dated 23 To prove uponthat defendants
proof opened the
of its execution first L/C inand the cause of its
or existence
Aug 2000, original favorunavailability
of plaintiff,
without requested
bad faith on forhis further
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." Furthermore,
the offeror of secondary evidence must prove the predicates thereof,
namely: (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; (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. It has been held that
where the missing document is the foundation of the action, more
strictness in proof is required than where the document is only
collaterally involved.103
Given these norms, we find that respondent failed to prove the
existence of the original fax transmissions of Exhibits E and F, and
likewise did not sufficiently prove the loss or destruction of the
originals. Thus, Exhibits E and F cannot be admitted in evidence and
accorded probative weight.
It is observed, however, that respondent Ssangyong did not rely
merely on Exhibits E and F to prove the perfected contract. It also
introduced in evidence a variety of other documents, as enumerated
above, together with the testimonies of its witnesses. Notable
among them are Pro Forma Invoice Nos. ST2-POSTS080-1 and ST2-
POSTS080-2 which were issued by Ssangyong and sent via fax to
MCC. As already mentioned, these invoices slightly varied the terms
of the earlier invoices such that the quantity was now
officially 100MT per invoice and the price reduced
to US$1,700.00 per MT. The copies of the said August 16, 2000
invoices submitted to the court bear the conformity signature of
MCC Manager Chan.
Pro Forma Invoice No. ST2-POSTS080-1 (Exhibit "X"), however, is a
mere photocopy of its original. But then again, petitioner MCC does
not assail the admissibility of this document in the instant petition.
Verily, evidence not objected to is deemed admitted and may be
validly considered by the court in arriving at its judgment. 104 Issues
not raised on appeal are deemed abandoned.
As to Pro Forma Invoice No. ST2-POSTS080-2 (Exhibits "1-A" and "2-
C"), which was certified by PCIBank as a true copy of its original, 105 it
was, in fact, petitioner MCC which introduced this document in
evidence. Petitioner MCC paid for the order stated in this invoice. Its
admissibility, therefore, is not open to question.
These invoices (ST2-POSTS0401, ST2-POSTS080-1 and ST2-
POSTS080-2), along with the other unchallenged documentary
evidence of respondent Ssangyong, preponderate in favor of the
claim that a contract of sale was perfected by the parties.
This Court also finds merit in the following observations of the trial
court:
Defendants presented Letter of Credit (Exhibits "1", "1-A" to "1-R")
referring to Pro Forma Invoice for Contract No. ST2POSTS080-2, in
the amount of US$170,000.00, and which bears the signature of
Gregory Chan, General Manager of MCC. Plaintiff, on the other hand,
presented Pro Forma Invoice referring to Contract No. ST2-
POSTS080-1, in the amount of US$170,000.00, which likewise bears
the signature of Gregory Chan, MCC. Plaintiff accounted for the
notation "1/2" on the right upper portion of the Invoice, that is, that
it was the first of two (2) pro forma invoices covering the subject
contract between plaintiff and the defendants. Defendants, on the
other hand, failed to account for the notation "2/2" in its Pro Forma
Invoice (Exhibit "1-A"). Observably further, both Pro Forma Invoices
bear the same date and details, which logically mean that they both
apply to one and the same transaction.106
Indeed, why would petitioner open an L/C for the second half of the
transaction if there was no first half to speak of?
The logical chain of events, as gleaned from the evidence of both
parties, started with the petitioner and the respondent agreeing on
the sale and purchase of 220MT of stainless steel at US$1,860.00 per
MT. This initial contract was perfected. Later, as petitioner asked for
several extensions to pay, adjustments in the delivery dates, and
discounts in the price as originally agreed, the parties slightly varied
the terms of their contract, without necessarily novating it, to the
effect that the original order was reduced to 200MT, split into two
deliveries, and the price discounted to US$1,700 per MT. Petitioner,
however, paid only half of its obligation and failed to open an L/C for
the other 100MT. Notably, the conduct of both parties sufficiently
established the existence of a contract of sale, even if the writings of
the parties, because of their contested admissibility, were not as
explicit in establishing a contract. 107 Appropriate conduct by the
parties may be sufficient to establish an agreement, and while there
may be instances where the exchange of correspondence does not
disclose the exact point at which the deal was closed, the actions of
the parties may indicate that a binding obligation has been
undertaken.108
With our finding that there is a valid contract, it is crystal-clear that
when petitioner did not open the L/C for the first half of the
transaction (100MT), despite numerous demands from respondent
Ssangyong, petitioner breached its contractual obligation. It is a well-
entrenched rule that the failure of a buyer to furnish an agreed letter
of credit is a breach of the contract between buyer and seller.
Indeed, where the buyer fails to open a letter of credit as stipulated,
the seller or exporter is entitled to claim damages for such breach.
Damages for failure to open a commercial credit may, in appropriate
cases, include the loss of profit which the seller would reasonably
have made had the transaction been carried out. 109
- IV -
This Court, however, finds that the award of actual damages is not in
accord with the evidence on record. It is axiomatic that actual or
compensatory damages cannot be presumed, but must be proven
with a reasonable degree of certainty. 110 In Villafuerte v. Court of
Appeals,111 we explained that:
Actual or compensatory damages are those awarded in order to
compensate a party for an injury or loss he suffered. They arise out
of a sense of natural justice and are aimed at repairing the wrong
done. Except as provided by law or by stipulation, a party is entitled
to an adequate compensation only for such pecuniary loss as he has
duly proven. It is hornbook doctrine that to be able to recover actual
damages, the claimant bears the onus of presenting before the court
actual proof of the damages alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such pecuniary
loss actually suffered by him as he has duly proved. Such damages,
to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. We have
emphasized that these damages cannot be presumed and courts, in
making an award must point out specific facts which could afford a
basis for measuring whatever compensatory or actual damages are
borne.112
In the instant case, the trial court awarded to respondent Ssangyong
US$93,493.87 as actual damages. On appeal, the same was affirmed
by the appellate court. Noticeably, however, the trial and the
appellate courts, in making the said award, relied on the following
documents submitted in evidence by the respondent: (1) Exhibit "U,"
the Statement of Account dated March 30, 2001; (2) Exhibit "U-1,"
the details of the said Statement of Account); (3) Exhibit "V," the
contract of the alleged resale of the goods to a Korean corporation;
and (4) Exhibit "V-1," the authentication of the resale contract from
the Korean Embassy and certification from the Philippine Consular
Office.
The statement of account and the details of the losses sustained by
respondent due to the said breach are, at best, self-serving. It was
respondent Ssangyong itself which prepared the said documents.
The items therein are not even substantiated by official receipts. In
the absence of corroborative evidence, the said statement of
account is not sufficient basis to award actual damages. The court
cannot simply rely on speculation, conjecture or guesswork as to the
fact and amount of damages, but must depend on competent proof
that the claimant had suffered, and on evidence of, the actual
amount thereof.113
Furthermore, the sales contract and its authentication certificates,
Exhibits "V" and "V-1," allegedly evidencing the resale at a loss of the
stainless steel subject of the parties' breached contract, fail to
convince this Court of the veracity of its contents. The steel items
indicated in the sales contract114 with a Korean corporation are
different in all respects from the items ordered by petitioner MCC,
even in size and quantity. We observed the following discrepancies:
List of commodities as stated in Exhibit "V":
COMMODITY: Stainless Steel HR Sheet in
SPEC: SUS304 NO. 1
SIZE/Q'TY:
2.8MM X 1,219MM X C 8.193MT
3.0MM X 1,219MM X C 7.736MT
3.0MM X 1,219MM X C 7.885MT
3.0MM X 1,219MM X C 8.629MT
4.0MM X 1,219MM X C 7.307MT
4.0MM X 1,219MM X C 7.247MT
 4.5MM X 1,219MM X C 8.450MT Petitioner's liability resulted from the promissory note in the amount
of P50,000.00 which he signed with Rene C. Naybe and Gregorio D.
4.5MM X 1,219MM X C 8.870MT
Pantanosas on February 3, 1983, holding themselves jointly and
5.0MM X 1,219MM X C 8.391MT severally liable to private respondent Philippine Bank of
6.0MM X 1,219MM X C 6.589MT Communications, Cagayan de Oro City branch. The promissory note
6.0MM X 1,219MM X C 7.878MT was due on May 5, 1983.
Said due date expired without the promissors having paid their
6.0MM X 1,219MM X C 8.397MT
obligation. Consequently, on November 14, 1983 and on June 8,
TOTAL: 95.562MT115 1984, private respondent sent petitioner telegrams demanding
List of commodities as stated in Exhibit "X" (the invoice that was not payment thereof. 2 On December 11, 1984 private respondent also
paid): sent by registered mail a final letter of demand to Rene C. Naybe.
DESCRIPTION: Hot Rolled Stainless Steel Coil SUS 304 Since both obligors did not respond to the demands made, private
SIZE AND QUANTITY: respondent filed on January 24, 1986 a complaint for collection of
the sum of P50,000.00 against the three obligors.
2.6 MM X 4' X C 10.0MT On November 25, 1986, the complaint was dismissed for failure of
3.0 MM X 4' X C 25.0MT the plaintiff to prosecute the case. However, on January 9, 1987, the
4.0 MM X 4' X C 15.0MT lower court reconsidered the dismissal order and required the sheriff
to serve the summonses. On January 27, 1987, the lower court
4.5 MM X 4' X C 15.0MT
dismissed the case against defendant Pantanosas as prayed for by
5.0 MM X 4' X C 10.0MT the private respondent herein. Meanwhile, only the summons
6.0 MM X 4' X C 25.0MT addressed to petitioner was served as the sheriff learned that
TOTAL: 100MT defendant Naybe had gone to Saudi Arabia.
From the foregoing, we find merit in the contention of MCC that In his answer, petitioner alleged that sometime in January 1983, he
Ssangyong did not adequately prove that the items resold at a loss was approached by his friend, Rudy Campos, who told him that he
were the same items ordered by the petitioner. Therefore, as the was a partner of Pio Tio, the branch manager of private respondent
claim for actual damages was not proven, the Court cannot sanction in Cagayan de Oro City, in the falcata logs operation business.
the award. Campos also intimated to him that Rene C. Naybe was interested in
Nonetheless, the Court finds that petitioner knowingly breached its the business and would contribute a chainsaw to the venture. He
contractual obligation and obstinately refused to pay despite added that, although Naybe had no money to buy the equipment,
repeated demands from respondent. Petitioner even asked for Pio Tio had assured Naybe of the approval of a loan he would make
several extensions of time for it to make good its obligation. But in with private respondent. Campos then persuaded petitioner to act
spite of respondent's continuous accommodation, petitioner as a "co-maker" in the said loan. Petitioner allegedly acceded but
completely reneged on its contractual duty. For such inattention and with the understanding that he would only be a co-maker for the
insensitivity, MCC must be held liable for nominal damages. loan of P50,000.00.
"Nominal damages are 'recoverable where a legal right is technically Petitioner alleged further that five (5) copies of a blank promissory
violated and must be vindicated against an invasion that has note were brought to him by Campos at his office. He affixed his
produced no actual present loss of any kind or where there has been signature thereto but in one copy, he indicated that he bound
a breach of contract and no substantial injury or actual damages himself only for the amount of P5,000.00. Thus, it was by trickery,
whatsoever have been or can be shown.'" 117 Accordingly, the Court fraud and misrepresentation that he was made liable for the amount
awards nominal damages of P200,000.00 to respondent Ssangyong. of P50,000.00.
As to the award of attorney's fees, it is well settled that no premium In the aforementioned decision of the lower court, it noted that the
should be placed on the right to litigate and not every winning party typewritten figure "-- 50,000 --" clearly appears directly below the
is entitled to an automatic grant of attorney's fees. The party must admitted signature of the petitioner in the promissory note. 3 Hence,
show that he falls under one of the instances enumerated in Article the latter's uncorroborated testimony on his limited liability cannot
2208 of the Civil Code. 118 In the instant case, however, the Court prevail over the presumed regularity and fairness of the transaction,
finds the award of attorney's fees proper, considering that petitioner under Sec. 5 (q) of Rule 131. The lower court added that it was
MCC's unjustified refusal to pay has compelled respondent "rather odd" for petitioner to have indicated in a copy and not in the
Ssangyong to litigate and to incur expenses to protect its rights. original, of the promissory note, his supposed obligation in the
WHEREFORE, PREMISES CONSIDERED, the appeal is PARTIALLY amount of P5,000.00 only. Finally, the lower court held that, even
GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. granting that said limited amount had actually been agreed upon,
82983 is MODIFIED in that the award of actual damages is DELETED. the same would have been merely collateral between him and
However, petitioner is ORDERED to pay respondent NOMINAL Naybe and, therefore, not binding upon the private respondent as
DAMAGES in the amount of P200,000.00, and theATTORNEY'S creditor-bank.
FEES as awarded by the trial court. The lower court also noted that petitioner was a holder of a Bachelor
SO ORDERED. of Laws degree and a labor consultant who was supposed to take
due care of his concerns, and that, on the witness stand, Pio Tio
G.R. No. 96405 June 26, 1996 denied having participated in the alleged business venture although
BALDOMERO INCIONG, JR., petitioner, he knew for a fact that the falcata logs operation was encouraged by
vs. the bank for its export potential.
COURT OF APPEALS and PHILIPPINE BANK OF Petitioner appealed the said decision to the Court of Appeals which,
COMMUNICATIONS, respondents. in its decision of August 31, 1990, affirmed that of the lower court.
His motion for reconsideration of the said decision having been
ROMERO, J.:p denied, he filed the instant petition for review on certiorari.
This is a petition for review on certiorari of the decision of the Court On February 6, 1991, the Court denied the petition for failure of
of Appeals affirming that of the Regional Trial Court of Misamis petitioner to comply with the Rules of Court and paragraph 2 of
Oriental, Branch 18, 1 which disposed of Civil Case No. 10507 for Circular
collection of a sum of money and damages, as follows: No. 1-88, and to sufficiently show that respondent court had
WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged committed any reversible error in its questioned decision. 4 His
solidarily liable and ordered to pay to the plaintiff Philippine Bank of motion for the reconsideration of the denial of his petition was
Communications, Cagayan de Oro City, the amount of FIFTY likewise denied with finality in the Resolution of April 24,
THOUSAND PESOS (P50,000.00), with interest thereon from May 5, 1991. 5 Thereafter, petitioner filed a motion for leave to file a second
1983 at 16% per annum until fully paid; and 6% per annum on the motion for reconsideration which, in the Resolution of May 27, 1991,
total amount due, as liquidated damages or penalty from May 5, the Court denied. In the same Resolution, the Court ordered the
1983 until fully paid; plus 10% of the total amount due for expenses entry of judgment in this case. 6
of litigation and attorney's fees; and to pay the costs. Unfazed, petitioner filed a notion for leave to file a motion for
The counterclaim, as well as the cross claim, are dismissed for lack of clarification. In the latter motion, he asserted that he had attached
merit. Registry Receipt No. 3268 to page 14 of the petition in compliance
SO ORDERED. with Circular No. 1-88. Thus, on August 7, 1991, the Court granted
his prayer that his petition be given due course and reinstated the
same. 7
Nonetheless, we find the petition unmeritorious.
Annexed to the petition is a copy of an affidavit executed on May 3,
1988, or after the rendition of the decision of the lower court, by
Gregorio Pantanosas, Jr., an MTCC judge and petitioner's co-maker in
the promissory note. It supports petitioner's allegation that they
were induced to sign the promissory note on the belief that it was
only for P5,000.00, adding that it was Campos who caused the
amount of the loan to be increased to P50,000.00.
The affidavit is clearly intended to buttress petitioner's contention in
the instant petition that the Court of Appeals should have declared
the promissory note null and void on the following grounds: (a) the
promissory note was signed in the office of Judge Pantanosas,
outside the premises of the bank; (b) the loan was incurred for the
purpose of buying a second-hand chainsaw which cost only
P5,000.00; (c) even a new chainsaw would cost only P27,500.00; (d)
the loan was not approved by the board or credit committee which
was the practice, as it exceeded P5,000.00; (e) the loan had no
collateral; (f) petitioner and Judge Pantanosas were not present at
the time the loan was released in contravention of the bank practice,
and (g) notices of default are sent simultaneously and separately but
no notice was validly sent to him. 8 Finally, petitioner contends that in
signing the promissory note, his consent was vitiated by fraud as,
contrary to their agreement that the loan was only for the amount of
P5,000.00, the promissory note stated the amount of P50,000.00.
The above-stated points are clearly factual. Petitioner is to be
reminded of the basic rule that this Court is not a trier of facts.
Having lost the chance to fully ventilate his factual claims below,
petitioner may no longer be accorded the same opportunity in the
absence of grave abuse of discretion on the part of the court below.
Had he presented Judge Pantanosas affidavit before the lower court,
it would have strengthened his claim that the promissory note did
not reflect the correct amount of the loan.
Nor is there merit in petitioner's assertion that since the promissory
note "is not a public deed with the formalities prescribed by law
but . . . a mere commercial paper which does not bear the signature
of . . . attesting witnesses," parol evidence may "overcome" the
contents of the promissory note. 9 The first paragraph of the parol
evidence rule 10states:
When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement.
Clearly, the rule does not specify that the written agreement be a
public document.
What is required is that the agreement be in writing as the rule is in
fact founded on "long experience that written evidence is so much
more certain and accurate than that which rests in fleeting memory
only, that it would be unsafe, when parties have expressed the terms
of their contract in writing, to admit weaker evidence to control and
vary the stronger and to show that the
parties intended a different contract from that expressed in the
writing signed by them." 11 Thus, for the parol evidence rule to apply,
a written contract need not be in any particular form, or be signed by
both parties. 12 As a general rule, bills, notes and other instruments
of a similar nature are not subject to be varied or contradicted by
parol or extrinsic evidence. 13
By alleging fraud in his answer, 14 petitioner was actually in the right
direction towards proving that he and his co-makers agreed to a loan
of P5,000.00 only considering that, where a parol contemporaneous
agreement was the inducing and moving cause of the written
contract, it may be shown by parol evidence. 15 However, fraud must
be established by clear and convincing evidence, mere
preponderance of evidence, not even being adequate. 16 Petitioner's
attempt to prove fraud must, therefore, fail as it was evidenced only
by his own uncorroborated and, expectedly, self-serving testimony.
Petitioner also argues that the dismissal of the complaint against
Naybe, the principal debtor, and against Pantanosas, his co-maker,
constituted a release of his obligation, especially because the
dismissal of the case against Pantanosas was upon the motion of
private respondent itself. He cites as basis for his argument, Article
2080 of the Civil Code which provides that:
The guarantors, even though they be solidary, are released from
their obligation whenever by some act of the creditor, they cannot
be subrogated to the rights, mortgages, and preferences of the latter.
It is to be noted, however, that petitioner signed the promissory
note as a solidary co-maker and not as a guarantor. This is patent
even from the first sentence of the promissory note which states as
follows:
Ninety one (91) days after date, for value received, I/we, JOINTLY and
SEVERALLY promise to pay to the PHILIPPINE BANK OF
COMMUNICATIONS at its office in the City of Cagayan de Oro,
Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos,
Philippine Currency, together with interest . . . at the rate of SIXTEEN
(16) per cent per annum until fully paid.
A solidary or joint and several obligation is one in which each debtor
is liable for the entire obligation, and each creditor is entitled to
demand the whole obligation. 17 on the other hand, Article 2047 of
the Civil Code states:
By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the
provisions of Section 4, Chapter 3, Title I of this Book shall be
observed. In such a case the contract is called a suretyship.
(Emphasis supplied.)
While a guarantor may bind himself solidarily with the principal
debtor, the liability of a guarantor is different from that of a solidary
debtor. Thus, Tolentino explains:
A guarantor who binds himself in solidum with the principal debtor
under the provisions of the second paragraph does not become a
solidary co-debtor to all intents and purposes. There is a difference
between a solidary co-debtor and a fiador in solidum (surety). The
latter, outside of the liability he assumes to pay the debt before the
property of the principal debtor has been exhausted, retains all the
other rights, actions and benefits which pertain to him by reason of
the fiansa; while a solidary co-debtor has no other rights than those
bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the
Civil Code. 18
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law
on joint and several obligations. Under Art. 1207 thereof, when there
are two or more debtors in one and the same obligation, the
presumption is that the obligation is joint so that each of the debtors
is liable only for a proportionate part of the debt. There is a solidary
liability only when the obligation expressly so states, when the law
so provides or when the nature of the obligation so requires. 19
Because the promissory note involved in this case expressly states
that the three signatories therein are jointly and severally liable, any
one, some or all of them may be proceeded against for the entire
obligation. 20 The choice is left to the solidary creditor to determine
against whom he will enforce collection. 21 Consequently, the
dismissal of the case against Judge Pontanosas may not be deemed
as having discharged petitioner from liability as well. As regards
Naybe, suffice it to say that the court never acquired jurisdiction
over him. Petitioner, therefore, may only have recourse against his
co-makers, as provided by law.
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED and the questioned decision of the Court of Appeals is
AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. L-39972 & L-40300 August 6, 1986
VICTORIA LECHUGAS, petitioner,
vs.
HON. COURT OF APPEALS, MARINA LOZA, SALVADOR LOZA, ISIDRO
LOZA, CARMELITA LOZA, DAVID LOZA, AMPARO LOZA, ERLINDA
LOZA and ALEJANDRA LOZA, respondents.
A.R. Montemayor for petitioner.
Arturo L. Limoso for private respondents.
GUTIERREZ, JR., J:
This petition for review invokes the parol evidence rule as it imputes
grave abuse of discretion on the part of the appellate court for
admitting and giving credence to the testimony of the vendor
regarding the sale of the disputed lot. The testimony is contrary to
the contents of the deed of sale executed by the vendor in favor of
the petitioner.
The petitioner filed a complaint for forcible entry with damages
against the private respondents, alleging that the latter by means of
force, intimidation, strategy and stealth, unlawfully entered lots A
and B, corresponding to the middle and northern portion of the
property owned by the petitioner known as Lot No. 5456. She
alleged that they appropriated the produce thereof for themselves,
and refused to surrender the possession of the same despite
demands made by the petitioner. The complaint was dismissed.
Petitioner appealed to the then Court of First Instance (CFI) of Iloilo
where the case was docketed as Civil Case No. 5055.
While the above appeal was pending, the petitioner instituted
another action before the CFI of Iloilo for recovery and possession of
the same property against the private respondents.
This case was docketed as Civil Case No. 5303. The two cases were
tried jointly. After trial, the court rendered judgment. The dispositive
portion of the decision states:
Wherefore, premises considered, judgment is rendered, to wit:
a. dismissing the complaints in two cases;
b. declaring defendants except Salvador Anona and Jose Lozada as
owners and lawful possessors of the land in question together with
all the improvements thereon;
c. dismissing the claim for damages of all defendants except that of
Jose Lozada;
d. ordering plaintiff to pay defendant Jose Lozada the sum of
P500.00 as attorney's fees and the amount of P300.00 as litigation
expenses; and
e. ordering plaintiff to pay the costs of both proceedings.
The petitioner appealed to the Court of Appeals but the latter
sustained the dismissal of the cases. Hence, this petition with the
petitioner making the following assignments of errors:
I exhibit A, is different from the land now subject of this action, and
THAT THE RESPONDENT COURT ERRED IN CONSIDERING PAROL
EVIDENCE OVER THE OBJECTION OF THE PETITIONER IN ORDER TO
VARY THE SUBJECT MATTER OF THE DEED OF DEFINITE SALE (EXHIBIT
A) ALTHOUGH THE LAND THEREIN IS DESCRIBED AND DELIMITED BY
METES AND BOUNDS AND IdENTIFIED AS LOT NO. 5456 OF
LAMBUNAO CADASTRE.
II
THAT THE RESPONDENT COURT ERRED IN CONSIDERING THE
THEORY OF THE DEFENDANTS-APPELLEES FOR THE FIRST TIME ON
APPEAL THAT THE LAND DESCRIBED IN THE DEED OF SALE (EXHIBIT
A) IS LOT NO. 5522 INSTEAD OF LOT NO. 5456 OF THE LAMBUNAO
CADASTRE, THEIR ORIGINAL THEORY BEING THAT THE DEED OF SALE
(EXHIBIT A) IS NULL AND VOID AB INITIO BECAUSE LEONCIA
LASANGUE CAN NOT SELL THE LAND IN QUESTION IN 1950 SINCE IT
WAS ALLEGEDLY SOLD IN 1941 BY HER FATHER EMETERIO
LASANGUE.
III
THAT THE RESPONDENT COURT CANNOT REFORM THE DEED OF
DEFINITE SALE BY CHANGING ITS SUBJECT MATTER IN THE ABSENCE
OF STRONG, CLEAR AND CONVINCING EVIDENCE AND ON THE
STRENGTH OF LONG TESTIMONY OF THE VENDOR AND ALTHOUGH
NO DIRECT ACTION FOR REFORMATION WAS FILED IN THE COURT OF
ORIGIN.
A summary of the facts which brought about the controversy is
contained in the findings of the appellate court:
Plaintiff (petitioner) Victoria Lechugas testified that she bought the
land now subject of this litigation from Leoncia Lasangue as
evidenced by a public "Deed of Absolute Sale" which plaintiff had
caused to be registered in the Office of the Register of Deeds;
preparatory to the execution of the deed Exhibit "A", plaintiff had
the land segregated from the bigger portion of 12 hectares owned
by Leoncia Lasangue by contracting a private land surveyor, the
Sirilan Surveying Office, to survey the land on December 3, 1950 and
establish its boundaries, shape, form and area in accordance with
the said plan which was attached to exhibit A as Annex A thereof.
She also states that she caused the declaration of the said portion of
six hectares subject of Exhibit A in her name beginning the year 1951
under tax declaration No. 7912, paid taxes on the same land, and has
taken possession of the land through her tenants Jesus Leoncio,
Roberta Losarita and Simeon Guinta, who shared one-half of the
produce of the riceland with her, while she shouldered some of the
expenses in cultivation and seeds, and one-third share in other
crops, like coffee beans, bamboos, coconuts, corn and the like.
xxx xxx xxx
Plaintiff's declaration is corroborated by her tenant Simeon Guinta
who testifies that the land subject of the complaint was worked on
by him 1954 when its former tenant, Roberto Lazarita, now
deceased, left the land. As tenant thereof, he planted rice, corn
peanuts, coffee, and other minor products, sharing the same with
the owner, plaintiff Victoria Lechugas; that on June 14, 1958, while
witness was plowing Lot A preparatory to rice planting, defendants
entered the land and forced him to stop his work. Salvador Anona
and Carmelita Losa, particularly, told witness that if he (witness)
would sign an affidavit recognizing them as his landlords, they would
allow him to continue plowing the land. On that occasion, Salvador
Anona, David Loza and Jose Loza were carrying unsheathed bolos,
which made this witness very afraid, so much so that he left the land
and reported the matter to Victoria Lechugas who reportedly went
to the Chief of Police of Lambunao to ask the latter to intervene. The
advise however of the chief of police, who responded to the call of
plaintiff, was not heeded by the defendants who stayed adamantly
on Lot A and refused to surrender the possession thereof to plaintiff
appropriating the harvest to themselves. This witness further
declares that on June 24, 1958, defendants entered Lot B of the land
in question, situated on the northern portion, and cut the bamboo
poles growing thereof counted by plaintiff's brother and overseer in
the land, Bienvenido Laranja, to be 620 bamboo poles all in all.
Despite the warning of the overseer Laranja, defendants did not stop
cutting the bamboos, and they remained on the land, refusing to
leave the same. To top it all, in June of 1959, defendants, not
contended with just occupying the middle and northern portions of
the land (Lots A and B), grabbed the whole parcel containing six
hectares to the damage and prejudice of herein plaintiff, so that
plaintiff was left with no other recourse but to file Civil Case No.
5303 for ownership, recovery of possession and damages.
Defendants, on the other hand, maintain that the land which plaintiff
bought from Leoncia Lasangue in 1950 as evidenced by the deed
described in paragraph 2 of plaintiff's complaint. To prove this point,
defendants called as their first witness plaintiff herself (pp. 6167,
t.s.n., Tuble), to elicit from her the reason why it was that although
her vendor Leoncia Lasangue was also residing at the municipality of
Lambunao, Iloilo, plaintiff did not care to call her to the witness
stand to testify regarding the Identity of the land which she (plaintiff)
bought from said vendor Leoncia Lasangue; to which query witness
Lechugas countered that she had tried to call her vendor, but the
latter refused, saying that she (Lasangue) had already testified in
plaintiff's favor in the forcible entry case in the Justice of the Peace
Court. In connection with her testimony regarding the true Identity
of the land plaintiff, as witness of defendants, stated that before the
execution of Exhibit "A" on December 8, 1950 the lot in question was
surveyed (on December 3, 1950) by the Sirilan Surveyor Company
after due notice to the boundary owners including Leoncia Lasangue.
Defendant's evidence in chief, as testified to by Carmelita Lozada
(pp. 100-130, t.s.n., Trespeces; pp. 131-192, t.s.n., Tuble) shows that
on April 6, 1931 Hugo Loza father of Carmelita Loza and predecessor-
in-interest of the rest of the heirs of herein defendants, (with the
exception of Jose Loza and Salvador Anona) purchased a parcel of
land from one Victorina Limor as evidenced by the deed "Venta
Definitiva" (exhibit 3, pp. 49-50, folder of exhibits). This land,
containing 53,327 square meters is bounded on the north by Ramon
Lasangue, on the south by Emeterio Lasangue and covered by tax
declaration No. 7346 (exhibit 3-9, p. 67, Id.) in vendor's name; that
immediately after the sale, Hugo Loza took possession of the said
parcel of land and declared the same in his name (exhibit 3-10, p. 67,
folder of exhibits) starting the year 1935. On March 17, 1941, Hugo
Loza bought from Emeterio Lasangue a parcel of land with an area of
four hectares more or less, adjoining the land he (Loza) had earlier
bought from Victoria Limor, and which sale was duly evidenced by a
public instrument (exhibit 2, pp. 35-36, folder of exhibits). This
property had the following boundaries, to wit: on the north by Eladio
Luno, on the south, by Simeon Lasangue, on the west, by Gregorio
Militar and Emeterio Lasangue and on the east, by Maximo Lasangue
and Hipolito Lastica (exhibit 2, exhibit 2-B, p. 37, Id). After the
execution of the deed of sale, Exhibit 2, Hugo Loza cause the transfer
of the declaration in his own name (tax declaration No. 8832, exh. 2-
C, p. 38, Id.) beginning 1945, and started paying the taxes on the
land (exhibits 2-d to 2-i, pp. 39-44, Id.). These two parcels of land
(that purchased by Hugo Loza in 1941 from Emeterio Lasangue, and
a portion of that bought by him from Victoria Limor sometime in
1931) were consolidated and designated, during the cadastral survey
of Lambunao, Iloilo in 1959 as Lot No. 5456; while the remaining
portion of the lot bought from Victorina Limor, adjoining Lot 5456 on
the east, was designated as Lot No. 5515 in the name of the Heirs of
Hugo Loza. Defendants claim that the lot bought by plaintiff from
Leoncia Lasangue as evidenced by exhibit A, is situated south of the
land now subject of this action and designated during cadastral
survey of Lambunao as Lot No. 5522, in the name of Victoria
Lechugas.
xxx xxx xxx
Leoncia Lasangue, plaintiff's vendor in exhibit A, testifying for
defendants (pp. 182-115, t.s.n., Tambagan; pp. 69-88, t.s.n., Tuble)
declared that during his lifetime her father, Emeterio Lasangue,
owned a parcel of land in Lambunao, Iloilo, containing an area of 36
hectares; that said Emeterio Lasangue sold a slice of 4 hectares of
this property to Hugo Loza evidenced by a deed of sale (Exh. 2) dated
March 17, 1941; that other sales were made to other persons,
leaving only some twelve hectares out of the original 36; that these
12 hectares were transferred by her parents in her (witness) name,
being the only child and heir; that on December 8, 1950, she
(Leoncia Lasangue) sold six hectares of her inherited property to
Victoria Lechugas under a public instrument (exhibit A) which was
prepared at the instance of Victoria Lechugas and thumbmarked by
herself (the vendor).
Refuting plaintiff's contention that the land sold to her is the very
land under question, vendor Leoncia Lasangue testifies that:
Q. But Victoria Lechugas declared here that, by means of this
document, exhibit 'A', you sold to her this very land in litigation;
while you declared here now that this land in litigation was not
included in the sale you made of another parcel of land in her favor.
What do you say about that?
A. I only sold six (6) hectares to her.
Q. And that was included in this land in litigation?
A. No.
xxx xxx xxx
Q. Did you tell her where that land you were selling to her was
situated?
xxx xxx xxx
A. On the South.
Q. South side of what land, of the land in litigation?
A. The land I sold to her is south of the land in litigation.
xxx xxx xxx
Q. What portion of these thirty-six (36) hectares of land did you sell
actually, according to your agreement with Victoria Lechugas, and
was it inside the thirty-six (36) hectares of land or a portion on one
of the sides of thirty-six (36) hectares?
A. It is on the edge of the whole land.
Q. Where is that edge? on the north, east, west or south?
A . This edge. (witness indicating the lower edge of the piece of
paper shown into her)
Q. Do you know what is east, that is, the direction where the sun
rises?
A. I know what is east.
Q. Do you know where the sun sets ?
A. The sun sets on the west.
Q. If you are standing in the middle of your land containing thirty-six
(36) hectares and facing the east, that is, the direction where the sun
rises, where is that portion of land sold to Victoria Lechugas, on your
left, on your right, front of you or behind you?
A. On my right side. (Witness indicating south). (Testimony of
Leoncia Lasangue, pp. 209-211, rollo) (emphasis supplied).
On the basis of the above findings and the testimony of vendor
Leoncia Lasangue herself, who although illiterate was able to
specifically point out the land which she sold to the petitioner, the
appellate court upheld the trial court's decision except that the deed
of sale (Exhibit A) was declared as not null and void ab initio insofar
as Leoncia Lasangue was concerned because it could pass ownership
of the lot in the south known as Lot No. 5522 of the Lambunao
Cadastre which Leoncia Lasangue intended to sell and actually sold
to her vendee, petitioner Victoria Lechugas.
In her first assignment of error, the petitioner contends that the
respondent Court had no legal justification when it subjected the
true intent and agreement to parol evidence over the objection of
petitioner and that to impugn a written agreement, the evidence
must be conclusive. Petitioner maintains, moreover, that the
respondent Court relied so much on the testimony of the vendor
who did not even file a case for the reformation of Exhibit A.
The contentions are without merit.
The appellate court acted correctly in upholding the trial court's
action in admitting the testimony of Leoncia Lasangue. The
petitioner claims that Leoncia Lasangue was the vendor of the
disputed land. The petitioner denies that Leoncia Lasangue sold Lot
No. 5522 to her. She alleges that this lot was sold to her by one
Leonora Lasangue, who, however, was never presented as witness in
any of the proceedings below by herein petitioner.
As explained by a leading commentator on our Rules of Court, the
parol evidence rule does not apply, and may not properly be invoked
by either party to the litigation against the other, where at least one
of the parties to the suit is not party or a privy of a party to the
written instrument in question and does not base a claim on the
instrument or assert a right originating in the instrument or the
relation established thereby. (Francisco on Evidence, Vol. VII, part I of
the Rules of Court, p. 155 citing 32 C.J.S. 79.)
In Horn v. Hansen (57 N.W. 315), the court ruled:
...and the rule therefore applies, that as between parties to a written
agreement, or their privies, parol evidence cannot be received to
contradict or vary its terms. Strangers to a contract are, of course,
not bound by it, and the rule excluding extrinsic evidence in the
construction of writings is inapplicable in such cases; and it is relaxed
where either one of the parties between whom the question arises
is a stranger to the written agreement, and does not claim under or
through one who is party to it. In such case the rule is binding upon
neither. ...
In the case of Camacho v. Municipality of Baliuag, 28 Phil. 466, this
Court held that parol evidence which was introduced by the
municipality was competent to defeat the terms of the plaintiff's
deed which the latter executed with the Insular Government. In
his concurring opinion, Justice Moreland stated:
It should be noted in the first place, that there is no written
instrument between the plaintiff and the municipality, that is,
between the parties to the action; and there is, therefore, no
possibility of the question arising as to the admissibility of parol
evidence to vary or contradict the terms of an instrument. The
written instrument that is, the conveyance on which plaintiff bases
his action was between the Insular Government and the plaintiff,
and not between the municipality and the plaintiff; and therefore,
there can arise, as between the plaintiff and defendant no question
relative to the varying or contradicting the terms of a written
instrument between them ...
The petitioner's reliance on the parol evidence rule is misplaced. The
rule is not applicable where the controversy is between one of the
parties to the document and third persons. The deed of sale was
executed by Leoncia Lasangue in favor of Victoria Lechugas. The
dispute over what was actually sold is between petitioner and the
private respondents. In the case at bar, through the testimony of
Leoncia Lasangue, it was shown that what she really intended to sell
and to be the subject of Exhibit A was Lot No. 5522 but not being
able to read and write and fully relying on the good faith of her first
cousin, the petitioner, she just placed her thumbmark on a piece of
paper which petitioner told her was the document evidencing the
sale of land. The deed of sale described the disputed lot instead.
This fact was clearly shown in Lasangue's testimony:
Q. And how did you know that that was the description of the land
that you wanted to sell to Victoria Lechugas?
R. I know that because that land came from me.
S. But how were you able to read the description or do you know the
description?
A. Because, since I do not know how to read and write and after the
document was prepared, she made me sign it. So I just signed
because I do not know how to read.
xxx xxx xxx
Q. What explanation did she make to you?
A. She said to me, 'Manang, let us have a document prepared for you
to sign on the land you sold to me.' So, after the document was
prepared, I signed.
Q. Did you tell her where that land you were selling to her was
situated?
xxx xxx xxx
A. On the South.
Q. South side of what land, of the land in litigation?
A. The land I sold to her is south of the land in litigation.
Q. Did you tell her that before preparing the document you signed?
A. Yes, I told her so because I had confidence in her because she is
my first cousin. (pp. 198-207, rollo)
From the foregoing, there can be no other conclusion but that
Lasangue did not intend to sell as she could not have sold, a piece of
land already sold by her father to the predecessor-in-interest of the
respondents.
The fact that vendor Lasangue did not bring an action for the
reformation of Exhibit "A" is of no moment. The undisputed fact is
that the respondents have timely questioned the validity of the
instrument and have proven that, indeed Exhibit "A" does not reflect
the true intention of the vendor.
There is likewise no merit in the contention of the petitioner that the
respondents changed their theory on appeal.
Respondents, from the very start, had questioned and denied
Leoncia Lasangue's capacity to sell the disputed lot to petitioner. It
was their contention that the lot was sold by Leoncia's father
Emeterio Lasangue to their father, Hugo Loza wayback in 1941 while
the alleged sale by Leoncia to the petitioner took place only in 1950.
In essence, therefore, the respondents were already attacking the
validity of Exhibit "A". Moreover, although the prior sale of the lot to
their father may have been emphasized in their defenses in the civil
cases filed against them by the petitioner in the lower court,
nevertheless in their affirmative defense, the respondents already
raised doubt on the true intention of Leoncia Lasangue in signing
Exhibit "A" when they alleged that..." Leoncia Lasangue, publicly, and
in writing repudiated said allegation and pretension of the plaintiff,
to the effect that the parcel of land now in litigation in the present
case "WAS NOT INCLUDED in the sale she executed in favor of the
plaintiff ... .
Consequently, petitioner cannot impute grave abuse on the part of
the appellate court and state that it allowed a change of theory by
the respondents for the first time on appeal for in reality, there was
no such change.
The third issue raised by the petitioner has no merit. There is strong,
clear, and convincing evidence as to which lot was actually sold to
her. We see no reason to reverse the factual findings of both the
Court of First Instance and the Court of Appeals on this point. The
"reformation" which the petitioner questions was, in fact, intended
to favor her. Instead of declaring the deed of sale null and void for all
purposes, the Court upheld its having passed ownership of Lot No.
5522 to the petitioner.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby
DISMISSED for lack of merit with costs against the petitioner.
SO ORDERED.

G.R. No. 55691 May 21, 1992

ESPERANZA BORILLO, in her behalf and in behalf of her
children, petitioner,
vs.
HONORABLE COURT OF APPEALS and CATALINA
BORILLO, respondents.
Crisostomo F. Pariñas for petitioner.

DAVIDE, JR., J.:

In this petition for review on certiorari under Rule 45 of the Rules of
Court filed on 24 November 1980, petitioner urges this Court to
review and reverse the decision 1 of the Court of Appeals (Third
Division) in C.A.-G.R. No. 64536-R, promulgated on 3 September
1980, which reversed and set aside the 3 June 1978 decision of
Branch II of the then Court of First Instance (now Regional Trial
Court) of Abra in Civil Case No. 1043.
On 10 February 1977, petitioner, for herself and on behalf of her
children, filed before the abovementioned trial court a complaint
against private respondent and Marcos Borillo for the recovery of
several parcels of land located at Bugbuguis, Quillat, Langiden, Abra
particularly described in said complaint, under the first cause of
action, as follows:
(a) A parcel of land (Riceland unirr. and pastureland) . . . with an area
of 1231 sq. m.; with assessed value in the sum of P40.00; under Tax
Declaration No. 6319 in the name of Esperanza Borillo, et al.;
(b) A parcel of land (Riceland unirr.) . . . with an area of 980 sq. m.;
with an assessed value in the sum of P40.00; under Tax Declaration
No. 6320 in the name of Esperanza Borillo, et al.;
(c) A parcel of land (Riceland unirr.) . . . with an area of 698 sq. m.;
with assessed value in the sum of P20.00; under Tax Declaration No.
6321 in the name of Esperanza Borillo, et al.;
(d) A parcel of land (Cornland) . . . with an area of 570 sq. m.; with an
assessed value of P20.00; under Tax Declaration No. 6322 in the
name of Esperanza Borillo, et al. 2
and one-fifth (1/5) undivided portion of two (2) parcels of land, also
located in the same place as the above four (4) parcels, particularly
described under the second cause of action, thus:
(e) A parcel of land (Riceland unirr.) . . . with an area of 1440 sq. m.;
with an assessed value of P60.00; under Tax Declaration No. 1745 in
the name of Venancio Borillo;
(f) A parcel of land (Cornland) . . . with an area of 684 sq. m.; with an
assessed value of P20.00; under Tax Declaration No. 0746 in the
name of Venancio Borillo. 3
The complaint was docketed as Civil Case No. 1043.
In the complaint, petitioner alleges that the abovementioned parcels
(a), (b), (c) and (d) were originally owned by her late husband,
Elpidio Borillo, with whom she had four (4) children, namely:
Patricia, Melecio, Bonifacia and Quirino. Although said parcels of
land were unregistered, they were declared in 1948 in the name of
Elpidio under Tax Declaration Nos. 0731, 0732, 0733 and 0734,
respectively. 4 Elpidio had been in peaceful, public, continuous and
uninterrupted possession thereof in concept of owner even before
his marriage to petitioner and until his death in 1970. After his
death, petitioner continued to possess and cultivate said parcels of
land and enjoy the fruits thereof until sometime in 1971-1972 when
private respondent and Marcos Borillo, Elpidio's siblings, forcibly and
unlawfully dispossessed her of the property. Despite repeated
demands, Marcos and the private respondent refused to return the
property to the petitioner and her children. In 1974, new Tax
Declarations, namely Nos. 6319, 6320, 6321 and 6322 5 for parcels
(a), (b), (c) and (d), respectively, were issued in her name. Upon the
other hand, parcels (e) and (f), also unregistered, were inherited by
Elpidio, his brother Marcos and sisters Catalina, Aurelia and Rosita,
from their father, Venancio Borillo. Elpidio's 1/5 pro-indiviso share
therein was unlawfully taken by private respondent sometime in
1971; the latter refused to return it to petitioner and her children,
who are Elpidio's heirs, despite repeated demands.
Petitioner then prays that judgment be rendered declaring her and
her children owners of parcels (a), (b), (c) and (d), as well as the
1/5 pro-indiviso portion of parcels (e) and (f), and ordering the
private respondent and Marcos Borillo to pay actual and moral
damages plus costs.
In their Answer filed on 14 March 1977, private respondent claims
that parcels (a), (c) and (d) were sold to her by her late brother
Elpidio in 1935, while Marcos Borillo claims that parcel (b) was sold
to him by Elpidio sometime in 1937, long before Elpidio's marriage to
petitioner. Although they did not declare these parcels for taxation
purposes in their respective names, they immediately took
possession and occupied the same as owners thereof. Private
respondent had been paying the realty taxes on parcels (a), (c) and
(d) since 1948 6 and explains her failure to secure in her name tax
declarations for said parcels during Elpidio's lifetime by alleging that
she trusted him because he was her brother and he had assured her
that she could transfer in her favor the title thereto anytime. After
the Second World War, Elpidio and Rosita, another sibling, sold to
her their respective undivided shares in parcels (e) and (f).
On 15 March 1977, private respondent alone filed an Amended
Answer. On the other hand, on 5 April 1977, Patricia and Melencio
Borillo filed a motion to withdraw as co-plaintiffs on the ground that
they did not authorize their inclusion as such and that the private
respondent is the true and lawful owner of the land in question. 7
At the trial, private respondent relied heavily on Exhibit "3", a private
document purportedly showing that Elpidio sold to her all his
property for P40.00, and Exhibit "4", which she claims to be a deed
of sale of parcels (a), (c) and (d) allegedly executed by Elpidio Borillo
in 1935. Upon the other hand, Marcos Borillo claimed that the deed
of sale evidencing the sale to him of parcel (b) was lost during the
Second World War. Both parties claim actual possession of the
property. Private respondent and Marcos Borillo even claimed
possession for more than thirty (30) years.
After trial on the merits, the lower court rendered on 3 June 1978 a
decision in favor of herein petitioner, the dispositive portion of which
reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered
declaring the plaintiffs as the true owners of parcels A, B, C and D
described in par. 4 of the complaint and as co-owners of parcels E
and F described in par. 6 of the complaint with Rosita Borillo, Aurelia
Borillo and the defendants Catalina Borillo and Marcos Borillo. With
costs against the defendants. 8
The trial court arrived at this decision on the basis of the following
findings of fact:
The claim of ownership by the plaintiffs with respect to the four
parcels of land described in par. 4 of the complaint is preponderantly
established by Tax Declaration Nos. 731, 732, 733 and 734, Exhibits,
"A, A-1, A-2 and A-3" for the plaintiffs. These tax declarations
covering the four parcels of land in question are tax declarations
issued in 1948 and is (sic) in the name of Elpidio Borillo, husband of
plaintiff Esperanza Borillo. Defendants never declared it (sic) in their
name (sic) and no action or attempt whatsoever was made by the
defendants to declare it (sic) in their name (sic) during the lifetime of
Elpidio Borillo. It was only after the death of Elpidio Borillo and the
institution of this action by the plaintiffs that defendants took action
and strangely declared it (sic) in their names.
Obviously, the bulk of evidence for the plaintiffs are (sic) the tax
declarations in the name of Elpidio Borillo which do not absolutely
prove their ownership. But the circumstances obtaining in this case
renders (sic) the tax declarations — Exhibits "A, A-1, A-2 and A-3",
reliable and predominantly point that plaintiffs are owners of the
four parcels of land described in par. 4 of the complaint as against
the plaintiffs (sic). First, it will be noted that Exhibits A, A-1, A-2 and
A-3 were prepared and issued long before the death of Elpidio
Borillo. He was then a bachelor having married the plaintiff
Esperanza Borillo in 1950. Defendant Catalina Borillo married long
before the 2nd World War. Defendant Marcos Borillo likewise
married before World War II. Defendants have properties declared in
their names. Marcos Borillo accompanied the Assessors who
measured the four parcels of land according to him (sic). Despite the
status of the parties and the Assessors having been accompanied by
defendant Marcos Borillo, still the four parcels of land were declared
in the name of Elpidio Borillo. It is unconceivable (sic) why it was (sic)
declared in the name of Elpidio Borillo, if it does (sic) not belong to
him. True, that tax declarations are not conclusive proof of
ownership, but it cannot be gainsaid especially in rural areas like
Langiden, Abra where lands are not surveyed and titled, that tax
declarations are strong evidence of possession and ownership.
Secondly, the four parcels of land described in par. 4 of the
complaint were declared in the name of Elpidio Borillo for 29 years
and no action whatsoever was taken by the defendants to have the
tax declarations (Exhibits A, A-1, A-2 and A-3) be (sic) cancelled and
declared the lands (sic) in their names during the lifetime of the
declared owner Elpidio Borillo and immediately after his death. It
was only in 1977 after the filing of the complaint and after the
plaintiffs caused the cancellation of Exhibits A, A-1, A-2 and A-3 and
declared the lands in their names when defendants attempted to
declare it (sic) also in their names. The unfathomable tolerance of
the defendants of having the four (4) parcels of land be (sic) declared
in the name of their deceased brother, Elpidio Borillo in 1948 and
remained (sic) in his name after his marriage with (sic) the plaintiff
Esperanza Borillo in 1950 even (sic) after his death in 1971, is fatal
and strongly negate their (sic) defendants' claim of ownership. No
person like the defendants will ever allow his/her property be (sic)
declared in the name of another for twenty-nine (29) years. The fact
that the lands were declared in the name of Elpidio Borillo for
twenty-nine (29) years coupled by (sic) his actual possession during
his lifetime until his death in 1971 as testified to by Esperanza Borillo
and Clemente Llaneza who is an uninterested witness strongly
outweighed the evidence for the defendants and convincingly
indicate that the four parcels of land described in par. 4 of the
complaint really belong to Elpidio Borillo. The claim of defendants
that they are (sic) in actual possession before World War II up to the
present is persuasively belied by Exhibits A, A-1, A-2 and A-3 and the
testimony of Clemente Llaneza.
The claim of defendant Catalina Borillo that she purchased parcels A,
C and D described in par. 4 of the complaint from her deceased
brother Elpidio Borillo before World War II as evidence (sic) by
Exhibits "3" and "4" appears unreliable and incredible. Exhibit "3"
which is an acknowledgment receipt dated May 12, 1946 made no
mention of what property has been sold. There is no evidence of any
transfer of ownership. In fact, there is nothing clear from the
evidence as to what land of Elpidio Borillo is referred to in Exhibit
"3". From the terms of Exhibit "3" and the alleged consideration
thereof, it thus becomes obvious that it is only a receipt evidencing a
loan of P40.00.
Exhibit "4" (receipt) which is the main basis of the claim of
ownership by defendant Catalina Borillo with respect to parcels A, C
and D in par. 4 of the complaint, appears unreliable and cannot
prevail against the evidence for the plaintiffs. This Exhibit "4" for
defendant Catalina Borillo is undated and unsigned. Defendant
Catalina Borillo testified that she does not know the contends of
Exhibit "4". Elpidio Borillo as shown by Exhibit "3" for defendant
Catalina Borillo and Exhibits E and F for the plaintiffs knows how to
write his name. Yet, Exhibit "4" was not signed by him. Aside from
the patent defects of Exhibit "4" on its face which renders it
unreliable, it will be noted that during the pre-trial proceedings,
defendant Catalina Borillo presented Exhibit "4" to support her claim
as alleged in her answer of having purchased parcels A, C and D from
Elpidio Borillo in 1935. Clearly embodied, however, in Exhibit "4" are
tax declarations Nos. 0732, 0731 and 0734 which are indeed tax
declarations in 1948 in the name of Elpidio Borillo. Considering that
Exhibit "4" is a document executed in 1935 according to the
defendant Catalina Borillo, why are Tax Declarations Nos. 731, 732
and 734 which were issued only in 1948 incorporated? The inclusion
of non-existent document (sic) in Exhibit "4" at the time of its alleged
execution absolutely renders Exhibit "4" wholly unworthy and
undeserving of any credence. 9
Private respondent appealed from the adverse decision to the
respondent Court. Her co-defendant, Marcos Borillo, did not.
The appeal was docketed as C.A.-G.R. No. 64536-R. In her Appellant's
Brief, private respondent assigns the following errors:
I for he must not have been furnished a (sic) guide to be copied. No
THAT THE FACTS RELIED UPON IS (sic) NOT SUPPORTED BY
EVIDENCE.
II
THAT THE DECISION IS NOT IN ACCORDANCE WITH LAW.
On 3 September 1980, the respondent Court promulgated its
decision 10 reversing the decision of the trial court, thus:
WHEREFORE, the judgment appealed from is hereby set aside and
another judgment is hereby rendered declaring defendant Catalina
Borillo as the owner of parcels (a), (c) and (d) and of the one-fifth
portion of Elpidio Borillo in parcels (e) and (f); that defendant
Marcos Borillo is the owner of parcel (b); with costs against the
plaintiffs.
SO ORDERED.
The respondent Court made the following disquisitions to support its
decision:
We are convinced that the preponderance of the evidence tilt (sic)
heavily in favor of defendant. Defendant established she has been in
possession in the concept of owner of said three parcels of land (a),
(c) and (d) since her purchase of the same long before the war and
she cultivated the same in the concept of owner, paying the real
estate taxes and thereafter declaring it in her name while Marcos
Borillo acquired parcel (b) from Elpidio since 1938 of which he took
possession in the concept of owner, and declared the same in his
name paying the real estate taxes. No less than Melecio Borillo, son
of plaintiff Esperanza, not only withdrew as party plaintiff with his
sister Patricia but he even testified that he knew from the very
mouth of his father Elpidio while he was still alive that he sold the
property in question to defendant Catalina Borillo. It has also been
shown that Elpidio Borillo sold his 1/5 portion of parcels (e) and (f)
also before the war to defendant and she had been in continuous
possession since then in the concept of owner.
Under Article 1137 of the Civil Code, such uninterrupted, adverse,
open possession for thirty (30) years by defendants regardless of
their title or good faith upholds said defendants' right over the
property. (Parcotillo vs. Parcotillo, 12 SCRA 435, 440).
In finding for the plaintiffs the trial court relied on the tax
declarations in the name of Elpidio as proof that plaintiffs are the
owners of the questioned property since the property is untitled;
that for 29 years no action was taken by defendants to declare the
property in their name (sic) and it was only in 1977 after the filing of
the complaint that defendants so declared the properties in their
name (sic); that Exhibit 4 is unreliable being unsigned by Elpidio
when there is evidence that he could sign his name; that Exhibit 3
did not mention the property sold; that Exhibit 4 was made in 1935
as alleged in the answer but surprisingly it embodied Tax
Declarations 731, 732 and 734 which were issued only in 1948; and
that the alleged sale of the right of Elpidio over parcels (e) and (f) are
without receipts.
We disagree. Declaration of ownership for taxation purposes, or
assessment declaration and tax receipts do not constitute evidence
of ownership. They are only prima facie evidence of possession.
(Evangelista vs. Tabayuyong, 7 Phil. 607; Casimiro vs. Fernandez, 9
Phil. 562) However, if the holder of a (sic) land presents a deed of
conveyance in his favor from the former owner thereof to support
his claim of ownership, the declaration of ownership and tax receipts
relative to the property may be used to prove good faith on his part
in occupying and possessing the same. (Elumbaring vs. Elumbaring,
12 Phi. 384) And while it is true that tax receipts do not prove titled
(sic) to a land, nevertheless when considered with the actual
possession of the property by the applicant, they constitute
evidence of great weight in support of the claim of title of ownership
by prescription. (Viernes vs. Agpaoa, 41 Phil. 286; Land Registration
and Mortgages by Ventura, pp. 125-126)
Plaintiffs admitted that defendants are in possession of the lands in
question and the records show that even during the lifetime of
Elpidio, the defendant had been paying the real property taxes of the
property (Exhs. 1 to 1-I). The sale of parcels (a), (c) and (d) to
defendant is evidenced by Exhibits 3 and 4. Although Exhibit 3 does
not indicate the property subject of the sale, such deficiency can be
attributed to the fact that this was a document executed between
brother and sister without the assistance of a lawyer but testimonial
evidence has been adduced that cured this defect. True it is that
Exhibit 4 appears not to have been signed by Elpidio and he merely
imprinted a cross over his name when it appears that he knew how
to sign. However, defendants Catalina and Marcos Borillo
categorically testified that Elpidio signed his name only by copying a
sample. Hence, it is understandable if Elpidio did not sign Exhibit 4
evidence was adduced that Exhibit 4 was actually executed in 1935.
What was established is that Elpidio sold said three parcels to
defendant Catalina before the war. In confirmation of said sale,
Exhibit 4 must have been executed on or before 1948 that is why it
reflects the Tax Declarations of said property to be effective in the
same year.
On the other hand, outside of the fact that the property remained to
be declared in the name of Elpidio plaintiffs have not adduced any
other evidence to buttress their claim of ownership. Plaintiff
Esperanza paid for the real property taxes of the property only on
June 22, 1977 after the complaint was filed in court. (Exhibit C) It is
not improbable that the reason why the properties remained in the
name of Elpidio inspite of the fact that it has long been sold to
defendants is because this is a sale between brother and sister
where mutual trust and confidence is to be expected. Indeed, during
the lifetime of Elpidio he never questioned the acts of ownership
exercised by the defendants over the property and even after his
death in 1970, plaintiff Esperanza only remembered to assert their
alleged right in 1976 when she attempted to talk to defendant who
told her it was already sold to them and yet it was only in 1977 that
the complaint was filed.
Petitioner took this present recourse asking Us to review the
respondent Court's findings of facts and reverse its decision on the
ground that the same is based solely on "speculation, surmise and
conjecture," and that it committed a "misapprehension of facts."
After private respondent filed her Comment and the petitioner
submitted a Reply, this Court gave due course to the petition 11 and
required the petitioner to submit her Brief within thirty (30) days
from notice, 12 which she complied with. 13 Private respondent
subsequently filed her Brief. 14
The petition is meritorious.
To begin with, the respondent Court committed a grave error in
reversing the trial court's judgment insofar as it concerns defendant
Marcos Borillo. As earlier stated, the latter did not appeal from the
trial court's decision. As against him, and more particularly with
respect to parcel (b), the decision has long become final and the
respondent Court is without jurisdiction to review the
same. 15 Otherwise stated, beyond the period to appeal, a judgment
is no longer within the scope of the power of review of any
court. 16 The appeal interposed by private respondent did not benefit
Marcos Borillo because the former does not have anything to do
with parcel (b) and the defense in respect thereto is exclusive to the
latter.
The respondent Court likewise erred in reversing the trial court and
ruling that private respondent is the owner of parcels (a), (c) and (d)
and Elpidio Borillo's 1/5 pro-indiviso share in parcels (e) and (f).
It is of course settled that the appellate court's findings of fact are
binding and must be respected by this Court. 17 There are, however,
recognized exceptions thereto, 18 among which are when the factual
findings of the trial court and the appellate court are
conflicting, 19when they are totally devoid of support in the record or
are so glaringly erroneous as to constitute serious abuse of
discretion. 20
These exceptions obtain in the present case.
The fact that parcels (a), (c) and (d) were originally owned by Elpidio
Borillo is not disputed by private respondent. In fact, she claims to
have derived her title over the same from the former through a sale
in 1935. Thus, the question to be resolved is whether or not Elpidio
Borillo did in fact sell the said parcels of land to the private
respondent.
To substantiate her claim, private respondent presented two (2)
documents, Exhibits "3" and "4". The trial court in its judgment
described Exhibit "3", dated 12 May 1946, as a mere
acknowledgment receipt of a loan of P40.00 and not a sale for it
does not mention any property sold and is not acknowledged before
a notary public. It then concluded that said instrument is a mere
receipt evidencing a loan. On the other hand, Exhibit ''4'' is an
undated and unsigned document written in lead pencil on simple
grade paper. The instrument has no witnesses, is not acknowledged
before a notary public and has a mere cross over the written name
of Elpidio Borillo. It was duly proven that Elpidio knew how to write
and sign his name. Although Exhibit "4" was purportedly executed in
1935, the same mentions Tax Declaration Nos. 0731, 0732, 0733 and
0734 issued in 1948 in the name of Elpidio Borillo. Private
respondent herself testified that she had no knowledge of the
contents of said instrument. The trial court ruled Exhibit "4" as
"wholly unworthy and undeserving of any credence."
In reversing the foregoing findings, the respondent Court tried to
justify the deficiencies and discrepancies in Exhibit "3" by saying that
the absence of specifications as to what property was sold is
understandable because the transaction was between brother and
sister. It added that this defect was cured by testimonial evidence. It
made no attempt, however, to explain the variance in the date of the
alleged sale (1935) and the date of the instrument (1946).
As to Exhibit "4", the respondent Court accepted private
respondent's explanation for the absence of the signature of Elpidio
Borillo on the purported deed of sale saying that contrary to
petitioner's assertion, Elpidio did not really know how to write his
name. Private respondent and Marcos Borillo testified that Elpidio's
signature appeared on his voter's registration record and voter's ID
card 21 only because he was given a sample to copy. They declared
that unlike those occasions, at the time of the sale, Elpidio was not
given any sample to copy; this explains why he just printed a cross
over his name. As to why it mentions tax declarations issued in 1948,
although it is claimed to have been executed in 1935, the
respondent Court theorizes and speculates that:
. . . In confirmation of said sale, Exhibit 4 must have been executed
on or before 1948 that is why it reflects the Tax Declarations of said
property to be effective in the same year. 22
It is thus clear that what was originally submitted by private
respondent as the original deed of sale was later accepted by the
respondent Court as a deed of confirmation of sale.
Both Exhibits "3" and "4" are private documents. Hence, before they
may be received in evidence, their due execution and authenticity
must first be proven by the party presenting them. 23 At the hearing
of this case before the trial court, the controlling rule on this point
was Section 21, Rule 132 of the Rules of Court which provided:
Sec. 21. Private writing, its execution and authenticity, how
proved. — Before any private writing may be received in evidence,
its due execution and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker;
or
(c) By a subscribing witness. 24
Private respondent did not present anyone who actually saw the
execution of Exhibits "3" and "4", witnessed Elpidio affix his
signature on Exhibit "3" or make the cross over his written name in
Exhibit "4". There are no subscribing witnesses. The due execution
then of Exhibits "3" and "4", as the alleged deeds of sale transferring
title over said parcels of land to private respondent, was not
satisfactorily proven; thus, the same can not be received in evidence.
Even if We are to assume that Exhibits "3" and "4" are admissible in
evidence, they still do not satisfactorily prove the transfers of titles
over the subject parcels to the private respondent. As earlier pointed
out, Exhibit "3" makes no mention of any property sold. Hence, it
hardly qualifies as a deed of sale. It suffers from a patent and not just
an intrinsic ambiguity. The respondent Court then committed an
error by giving credence to the testimonies offered to cure such
ambiguity. It disregarded the parol evidence rule then applicable,
namely, Section 7, Rule 130 of the Rules of Court, which provided as
follows:
Sec. 7. Evidence of written agreement. — When the terms of an
agreement have been reduced to writing, it is to be considered as
containing all such terms, and, therefore, there can be, between the
parties and their successors in interest, no evidence of the terms of
the agreement other than the contents of the writing, except in the
following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or the validity
of the agreement is put in issue by the pleadings;
(b) When there is an intrinsic ambiguity in the writing.
The term "agreement" includes wills. 25
Before parol evidence may be admitted in order to identify, explain
or define the subject matter of a writing, it must first be shown that
the writing itself already contains a description sufficient to serve as
a foundation for the admission of such parol evidence; the evidence
should also be consistent with the writing. Otherwise stated, in order
to admit parol evidence to aid in the description of the subject
matter of a deed or other writing, there must be a description that
will serve as a foundation for such evidence; the writing must at
least give some data from which the description may be found and
made certain. Parol evidence is not admissible to identify the
property where the description thereof is so vague as to amount to
no description at all. In other words, parol evidence is not permitted
to supply a description, but only to apply it. 26
In his Commentary on the Rules of Court, 27 former Chief Justice
Manuel V. Moran explains the rule in the evident of patent
ambiguity, as is the case in Exhibit "3":
. . . The rule is that "if the words of a document are so defective or
ambiguous as to be unmeaning, no evidence can be given to show
what the author of the document intended to say." (Steph, Evidence,
Art. 91) The reason for the rule, in the language of Mr. Justice Story,
is that "if the language be too doubtful for any settled construction,
by the admission of parol evidence you create and do not merely
construe the contract. You attempt to do that for the party which he
has not chosen to do for himself; and the law very property denies
such an authority to courts of Justice." (Peisch v. Dickson, Fed. Cas.
No. 10, 911, 1 Mason, 9.) As Lord Bacon said, "Ambiguitas
patens cannot be holpen by averment." (Bacon, Max., 23) A case of
patent ambiguity is that of a deed wherein "a parcel of land" without
description is donated. The donation is void. The uncertainty cannot
be explained by parol evidence. (Wigmore on Evidence, 2d. ed., p.
414.) The following appears to be the most accurate and most
comprehensive statement of the rule regarding patent ambiguity: "In
other words and more generally, if the court, placing itself in the
situation in which the testator or contracting party stood at the time
of executing the instrument, and with a full understanding of the
force and import of the words, cannot ascertain his meaning and
intention from the language of the instrument, then it is a case of
incurable, hopeless uncertainty and the instrument is, therefore, so
far inoperative and void." (Palmer v. Albee, 50 Ia., 429, 432, quoting
1 Greenleaf on Evidence, par. 300.)
As to Exhibit "4", We agree with the trial court that it could not have
been prepared in 1935, as contended by private respondent,
because it makes reference to Tax Declarations issued in 1948,
thirteen (13) years later. Common sense and logic reject such
contention. Unfortunately, the respondent Court belabored the
explanation that Exhibit "4" must have been executed on or before
1948 to confirm the prior sale. This is unacceptable as it is purely
conjectural. Absent any evidence that it was signed by Elpidio Borillo,
it is not difficult to conclude that this document does not proceed
from any legitimate source. It is one which could easily be fabricated.
The trial court did not then err when it considered Exhibit "4" as
"wholly unworthy and undeserving of any credence."
It is not also true, as was held by the respondent Court, that the
conclusion of the trial court that Elpidio Borillo was in possession of
the property in concept of owner until his death, is based solely on
the tax declarations in his name. As shown earlier, the court
considered the testimonies of the petitioner and one Clemente
Llaneza whom the trial court described as "an uninterested witness."
Thus:
. . . The fact that the lands were declared in the name of Elpidio
Borillo for twenty-nine (29) years coupled by his actual possession
during his lifetime until his death in 1971 as testified to by Esperanza
Borillo and Clemente Llaneza who is an uninterested witness strongly
outweighed the evidence for the defendants and convincingly
indicate that the four parcels of land described in paragraph 4 of the
complaint really belong to Elpidio Borillo. . . .
It is thus clear that the authorities cited by the respondent Court on
the probative value of the tax declarations favor the herein
petitioner and not the private respondent. For indeed, while tax
declarations and tax receipts do not constitute evidence of
ownership, they are prima facie evidence of possession. Accordingly,
since Elpidio Borillo, during his lifetime, and then the petitioner, after
his death, secured and were issued tax declarations for the parcels of
land in question, and were in fact in possession thereof, the excuse
offered by private respondent as to her failure to obtain the tax
declarations deserves no consideration at all. The flimsiness or
implausibility of the excuse becomes more apparent when We
consider the findings of the trial court that private respondent has
other properties declared in her name for taxation purposes and
that neither she nor Marcos objected to the measurement by the
assessors of the four (4) parcels for Elpidio Borillo.
The conclusion then is inevitable that the late Elpidio Borillo did not
sell and alienate parcels (a), (c) and (d) to private respondent.
As to parcels (e) (f), private respondent presented no deed of sale in
her favor.
Private respondent can not likewise seek refuge under a claim of
ownership by virtue of acquisitive prescription.
Acquisitive prescription of dominion requires that there be public,
peaceful and uninterrupted possession in the concept of owner 28 for
a period of ten (10) years, in case of ordinary prescription, 29 and
thirty (30) years, in case of extraordinary prescription. 30
After reviewing the evidence presented before it, the trial court
concluded that Elpidio Borillo had actual, peaceful and continuous
possession of the subject parcels of land during his lifetime and until
his death in 1970. The respondent Court reversed this finding and
ruled that it was private respondent who had the possession since
her purchase thereof in 1935.
It is a matter of judicial policy to accord the trial court's findings of
facts with the highest respect and not to disturb the same on appeal
unless there are strong and impelling reasons to do so. 31 The reason
for this is that trial courts have more opportunity and facilities to
examine factual matters than appellate courts. 32 They are in a better
position to assess the credibility of witnesses, not only by the nature
of their testimonies, but also by their demeanor on the
stand. 33
In Shauf vs. Court of Appeals, 34 We ruled:
Elementary is the rule that the conclusions and findings of fact of the
trial court are entitled to great weight on appeal and should not be
disturbed unless for strong and cogent reasons. (Vda. de Alberto, et
al. vs. CA, et al., 173 SCRA 436 [1989]) Absent any substantial proof,
therefore, that the trial court's decision was grounded entirely on
speculations, surmises or conjectures, the same must be accorded G.R. No. 168387 August 25, 2010
full consideration and respect. This should be so because the trial SALUN-AT MARQUEZ and NESTOR DELA CRUZ, Petitioners,
court is, after all, in a much better position to observe and correctly vs.
appreciate the respective parties' evidence as they were presented. ELOISA ESPEJO, ELENITA ESPEJO, EMERITA ESPEJO, OPHIRRO
(Matabuena vs. CA, et al., 173 SCRA 170 [1989]) ESPEJO, OTHNIEL ESPEJO, ORLANDO ESPEJO, OSMUNDO ESPEJO,
We find no impelling, compelling or cogent reason to overturn the ODELEJO ESPEJO and NEMI FERNANDEZ, Respondents.
findings of fact of the trial court. DECISION
WHEREFORE, the instant petition is GRANTED. The challenged DEL CASTILLO, J.
decision of the Court of Appeals is hereby REVERSED and SET ASIDE When the parties admit the contents of written documents but put
and the judgment of the Regional Trial Court of Abra dated 3 June in issue whether these documents adequately and correctly express
1978 in Civil Case No. 1043 is hereby AFFIRMED and REINSTATED. the true intention of the parties, the deciding body is authorized to
SO ORDERED. look beyond these instruments and into the contemporaneous and
subsequent actions of the parties in order to determine such intent.
Well-settled is the rule that in case of doubt, it is the intention of the
contracting parties that prevails, for the intention is the soul of a
contract, not its wording which is prone to mistakes, inadequacies,
or ambiguities. To hold otherwise would give life, validity, and
precedence to mere typographical errors and defeat the very
purpose of agreements.
This Petition for Review on Certiorari1 assails the October 7, 2003
Decision,2 as well as the May 11, 2005 Resolution 3 of the Court of
Appeals (CA) in CA G.R. SP No. 69981. The dispositive portion of the
appellate court’s Decision reads:
WHEREFORE, finding reversible error committed by the Department
of Agrarian Reform Adjudication Board, the instant petition for
review is GRANTED. The assailed Decision, dated 17 January 2001,
rendered by the Department of Agrarian Reform Adjudication Board
is hereby ANNULLED and SET ASIDE. The Decision of the Department
of Agrarian Reform Adjudication Board of Bayombong[,] Nueva
Vizcaya, dated 17 March 1998, is REINSTATED. Costs against
respondents.
SO ORDERED.4
The reinstated Decision of the Department of Agrarian Reform
Adjudication Board (DARAB) of Bayombong, Nueva Vizcaya, in turn,
contained the following dispositive portion:
Accordingly, judgment is rendered:
1. Finding [respondents] to be the owner by re-purchase from RBBI
[of] the Murong property covered by TCT No. [T-]62096 (formerly
TCT No. 43258);
2. Ordering the cancellation of TCT with CLOA Nos. 395 and 396 in
the name[s] of Salun-at Marquez and Nestor de la Cruz respectively,
as they are disqualified to become tenants of the Lantap property;
3. Directing RBBI to sell through VOS the Lantap property to its
rightful beneficiary, herein tenant-farmer Nemi Fernandez under
reasonable terms and conditions;
4. Ordering RBBI to return the amount paid to it by Nestor and
Salun-at; and ordering the latter to pay 20 cavans of palay per
hectare at 46 kilos per cavan unto [respondents] plus such accrued
and unpaid rentals for the past years as may be duly accounted for
with the assistance of the Municipal Agrarian Reform Officer of
Bagabag, Nueva Vizcaya who is also hereby instructed to assist the
parties execute their leasehold contracts and;
5. The order to supervise harvest dated March 11, 1998 shall be
observed until otherwise modified or dissolved by the appellate
body.
SO ORDERED.5
Factual Antecedents
Respondents Espejos were the original registered owners of two
parcels of agricultural land, with an area of two hectares each. One is
located at Barangay Lantap, Bagabag, Nueva Vizcaya (the Lantap
property) while the other is located in Barangay Murong, Bagabag,
Nueva Vizcaya (the Murong property). There is no dispute among the
parties that the Lantap property is tenanted by respondent Nemi
Fernandez (Nemi)6 (who is the husband7 of respondent Elenita
Espejo (Elenita), while the Murong property is tenanted by
petitioners Salun-at Marquez (Marquez) and Nestor Dela Cruz (Dela
Cruz).8
The respondents mortgaged both parcels of land to Rural Bank of
Bayombong, Inc. (RBBI) to secure certain loans. Upon their failure to
pay the loans, the mortgaged properties were foreclosed and sold to
RBBI. RBBI eventually consolidated title to the properties and
transfer certificates of title (TCTs) were issued in the name of
RBBI. TCT No. T-62096 dated January 14, 1985 was issued for the
Murong property. It contained the following description:
Beginning at a point marked I on plan H-176292, S. 44034 W.
1656.31 m. more or less from B.L.L.M. No 1, Bagabag Townsite, K-27,
thence N. 28 deg. 20 ‘E., 200.00 m. to point 2;
thence S. 61 deg. 40 ‘E., 100.00 m. to point 3;
thence S. 28 deg. 20 ‘W., 200.00 m. to point 4;
thence N. 61 deg. 40 ‘W., 100.00 m. to point 1; point of beginning;
Containing an area of 2.000 hectares. Bounded on the northeast, by
Road; on the southeast, and southwest by public land; and on the
northwest by Public Land, properties claimed by Hilario Gaudia and
Santos Navarrete. Bearings true. Declination 0131 ‘E. Points referred
to are marked on plan H-176292. Surveyed under authority of
sections 12-22 Act No. 2874 and in accordance with existing
regulations of the Bureau of Lands by H.O. Bauman Public Land
Surveyor, [in] December 1912-March 1913. Note: All corners are
Conc. Mons. 15x15x60 cm. This is Lot No. 79-A=Lot No. 159
of Bagabag Townsite, K-27.9
Subsequently, TCT No. T-62836 dated June 4, 1985 was issued for the
Lantap property and contained the following description:
Beginning at a point marked "1" on plan H-105520, N. 80 deg. 32 ‘W.,
1150.21 m. from BLLM No. 122, Irrigation project,
thence N. 61 deg. 40’E., 200.00 m. to point 2;
thence N. 28 deg. 20’E, 100.00 m. to point 3;
thence S. 61 deg. 40’E, 200.00 m. to point 4;
thence S. 28 deg. 20’W, 100.00 m. to point 1; point of beginning;
containing an area of 2.0000 hectares. Bounded on the northeast,
southeast, and southwest by Public land; and on the northwest by
Road and public land. Bearings true. Declination 0 deg. 31’E., points
referred to are marked on plan H-105520. Surveyed under authority
of Section 12-22, Act No. 2874 and in accordance with existing
regulations of the Bureau of Lands, by H.O. Bauman Public Land
Surveyor, [in] Dec. 1912-Mar. 1913 and approved on January 6, 1932.
Note: This is Lot No. 119-A Lot No. 225 of Bagabag Townsite K-27. All
corners are B.I. Conc. Mons. 15x60 cm.10
Both TCTs describe their respective subjects as located in "Bagabag
Townsite, K-27," without any reference to either Barangay Lantap or
Barangay Murong.
On February 26, 1985, respondents Espejos bought back one of their
lots from RBBI. The Deed of Sale 11 described the property sold as
follows:
x x x do hereby SELL, TRANSFER, and CONVEY, absolutely and
unconditionally x x x that certain parcel of land, situated in the
Municipality of Bagabag, Province of Nueva Vizcaya, and more
particularly bounded and described as follows, to wit:
Beginning at a point marked "1" on plan x x x x Containing an area of
2.000 hectares. Bounded on the NE., by Road; on the SE., and SW by
Public Land; and on the NW., by Public Land, properties claimed by
Hilario Gaudia and Santos Navarrete. Bearing true. Declination 013
‘B. Points referred to are marked on plan H-176292.
of which the Rural Bank of Bayombong (NV) Inc., is the registered
owner in fee simple in accordance with the Land Registration Act, its
title thereto being evidenced by Transfer Certificate of Title No. T-
62096 issued by the Registry of Deeds of Nueva Vizcaya.
As may be seen from the foregoing, the Deed of Sale did not
mention the barangay where the property was located but
mentioned the title of the property (TCT No. T-62096), which title
corresponds to the Murong property. There is no evidence, however,
that respondents took possession of the Murong property, or
demanded lease rentals from the petitioners (who continued to be
the tenants of the Murong property), or otherwise exercised acts of
ownership over the Murong property. On the other hand,
respondent Nemi (husband of respondent Elenita and brother-in-law
of the other respondents), continued working on the other property
-- the Lantap property -- without any evidence that he ever paid
rentals to RBBI or to any landowner. The Deed of Sale was annotated
on TCT No. T-62096 almost a decade later, on July 1, 1994. 12
Meanwhile, on June 20, 1990, RBBI, pursuant to Sections 20 13 and
2114 of Republic Act (RA) No. 6657, 15 executed separate Deeds of
Voluntary Land Transfer (VLTs) in favor of petitioners Marquez and
Dela Cruz, the tenants of the Murong property. Both VLTs described
the subject thereof as an agricultural land located in Barangay
Murong andcovered by TCT No. T-62836 (which, however, is the title
corresponding to the Lantap property).16
After the petitioners completed the payment of the purchase price
of P90,000.00 to RBBI, the DAR issued the corresponding Certificates
of Land Ownership Award (CLOAs) to petitioners Marquez 17 and Dela
Cruz18 on September 5, 1991. Both CLOAs stated that their subjects
were parcels of agricultural land situated in Barangay Murong. 19 The
CLOAs were registered in the Registry of Deeds of Nueva Vizcaya on
September 5, 1991.
On February 10, 1997 (more than 10 years after the Deed of Sale in
favor of the respondents and almost seven years after the execution
of VLTs in favor of the petitioners), respondents filed a
Complaint20 before the Regional Agrarian Reform Adjudicator
(RARAD) of Bayombong, Nueva Vizcaya for the cancellation of
petitioners’ CLOAs, the deposit of leasehold rentals by petitioners in
favor of respondents, and the execution of a deed of voluntary land
transfer by RBBI in favor of respondent Nemi. The complaint was
based on respondents’ theory that the Murong property, occupied
by the petitioners, was owned by the respondents by virtue of the
1985 buy-back, as documented in the Deed of Sale. They based their
claim on the fact that their Deed of Sale refers to TCT No. 62096,
which pertains to the Murong property.
Petitioners filed their Answer21 and insisted that they bought the
Murong property as farmer-beneficiaries thereof. They maintained
that they have always displayed good faith, paid lease rentals to RBBI
when it became the owner of the Murong property, bought the
same from RBBI upon the honest belief that they were buying the
Murong property, and occupied and exercised acts of ownership
over the Murong property. Petitioners also argued that what
respondents Espejos repurchased from RBBI in 1985 was actually the
Lantap property, as evidenced by their continued occupation and
possession of the Lantap property through respondent Nemi.
RBBI answered22 that it was the Lantap property which was the
subject of the buy-back transaction with respondents Espejos. It
denied committing a grave mistake in the transaction and
maintained its good faith in the disposition of its acquired assets in
conformity with the rural banking rules and regulations.
OIC-RARAD Decision23
The OIC-RARAD gave precedence to the TCT numbers appearing on
the Deed of Sale and the VLTs. Since TCT No. T-62096 appeared on
respondents’ Deed of Sale and the said title refers to the Murong
property, the OIC-RARAD concluded that the subject of sale was
indeed the Murong property. On the other hand, since the
petitioners’ VLTs referred to TCT No. T-62836, which corresponds to
the Lantap property, the OIC-RARAD ruled that petitioners’ CLOAs
necessarily refer to the Lantap property. As for the particular
description contained in the VLTs that the subject thereof is the
Murong property, the OIC-RARAD ruled that it was a mere
typographical error.
Further, since the VLTs covered the Lantap property and petitioners
are not the actual tillers thereof, the OIC-RARAD declared that they
were disqualified to become tenants of the Lantap property and
ordered the cancellation of their CLOAs. It then ordered RBBI to
execute a leasehold contract with the real tenant of the Lantap
property, Nemi.
The OIC-RARAD recognized that petitioners’ only right as the actual
tillers of the Murong property is to remain as the tenants thereof
after the execution of leasehold contracts with and payment of
rentals in arrears to respondents.
DARAB Decision24
Upon appeal filed by petitioners, the DARAB reversed the OIC-
RARAD Decision. It ruled that in assailing the validity of the CLOAs
issued to petitioners as bona fide tenant-farmers, the burden of
proof rests on the respondents. There being no evidence that the
DAR field personnel were remiss in the performance of their official
duties when they issued the corresponding CLOAs in favor of
petitioners, the presumption of regular performance of duty
prevails. This conclusion is made more imperative by the
respondents’ admission that petitioners are the actual tillers of the
Murong property, hence qualified beneficiaries thereof.
As for respondents’ allegation that they bought back the Murong
property from RBBI, the DARAB ruled that they failed to support
their allegation with substantial evidence. It gave more credence to
RBBI’s claim that respondents repurchased the Lantap property, not
the Murong property. Respondents, as owners of the Lantap
property, were ordered to enter into an agricultural leasehold
contract with their brother-in-law Nemi, who is the actual tenant of
the Lantap property.
The DARAB ended its January 17, 2001 Decision in this wise:
We find no basis or justification to question the authenticity and
validity of the CLOAs issued to appellants as they are by operation of
law qualified beneficiaries over the landholdings; there is nothing to
quiet as these titles were awarded in conformity with the CARP
program implementation; and finally, the Board declares that all
controverted claims to or against the subject landholding must be
completely and finally laid to rest.
WHEREFORE, premises considered and finding reversible errors[,]
the assailed decision is ANNULLED and a new judgment is hereby
rendered, declaring:
1. Appellants Salun-at Marquez and Nestor Dela Cruz as the bona
fide tenant-tillers over the Murong property and therefore they are
the qualified beneficiaries thereof;
2. Declaring Transfer Certificate of Title (TCT) Nos. 395 and 396
issued in the name of [farmer-beneficiaries] Salun-at Marquez and
Nestor Dela Cruz respectively, covered formerly by TCT No. 62096
(TCT No. 43258) of the Murong property as valid and legal;
3. Ordering the co-[respondents] to firm-up an agricultural leasehold
contract with bona fide tenant-tiller Nemi Fernandez over the Lantap
property, [the latter] being the subject matter of the ‘buy back’
arrangement entered into between [respondents] and Rural Bank of
Bayombong, Incorporated, and other incidental matters are deemed
resolved.
SO ORDERED.25
Ruling of the Court of Appeals
In appealing to the CA, the respondents insisted that the DARAB
erred in ruling that they repurchased the Lantap property, while the
petitioners were awarded the Murong property. They were adamant
that the title numbers indicated in their respective deeds of
conveyance should control in determining the subjects thereof. Since
respondents’ Deed of Sale expressed that its subject is the property
with TCT No. T-62096, then what was sold to them was the Murong
property. On the other hand, petitioners’ VLTs and CLOAs say that
they cover the property with TCT No. T-62836; thus it should be
understood that they were awarded the Lantap property.
Respondents added that since petitioners are not the actual tillers of
the Lantap property, their CLOAs should be cancelled due to their
lack of qualification.
The CA agreed with the respondents. Using the Best Evidence Rule
embodied in Rule 130, Section 3, the CA held that the Deed of Sale is
the best evidence as to its contents, particularly the description of
the land which was the object of the sale. Since the Deed of Sale
expressed that its subject is the land covered by TCT No. T-62096 –
the Murong property – then that is the property that the
respondents repurchased.
The CA further ruled that as for petitioners’ VLTs, the same refer to
the property with TCT No. T-62836; thus, the subject of their CLOAs
is the Lantap property. The additional description in the VLTs that the
subject thereof is located in Barangay Murong was considered to be
a mere typographical error. The CA ruled that the technical
description contained in the TCT is more accurate in identifying the
subject property since the same particularly describes the
properties’ metes and bounds.
Both the RBBI26 and petitioners27 filed their respective motions for
reconsideration, which were separately denied.28
On June 22, 2004, RBBI filed a separate Petition for Review on
Certiorari, docketed as G.R. No. 163320, with this Court. 29 RBBI
raised the issue that the CA failed to appreciate that respondents did
not come to court with clean hands because they misled RBBI to
believe at the time of the sale that the two lots were not tenanted.
RBBI also asked that they be declared free from any liability to the
parties as it did not enrich itself at anyone’s expense. RBBI’s petition
was dismissed on July 26, 2004 for lack of merit. The said Resolution
reads:
Considering the allegations, issues[,] and arguments adduced in the
petition for review on certiorari, the Court Resolves to DENY the
petition for lack of sufficient showing that the Court of Appeals had
committed any reversible error in the questioned judgment to
warrant the exercise by this Court of its discretionary appellate
jurisdiction in this case.30
Their Motion for Reconsideration was likewise denied with
finality.31 Entry of judgment was made in that case on December 15,
2004.32
On July 27, 2005,33 petitioners filed the instant petition.
Issues
Rephrased and consolidated, the parties present the following issues
for the Court’s determination:
I
What is the effect of the final judgment dismissing RBBI’s Petition for
Review on Certiorari, which assailed the same CA Decision
II
Whether the CA erred in utilizing the Best Evidence Rule to
determine the subject of the contracts
III
What are the subject properties of the parties’ respective contracts
with RBBI
Our Ruling
Propriety of the Petition
Respondents maintain that the instant petition for review raises
factual issues which are beyond the province of Rule 45. 34
The issues involved herein are not entirely factual. Petitioners assail
the appellate court’s rejection of their evidence (as to the
contractual intent) as inadmissible under the Best Evidence Rule. The
question involving the admissibility of evidence is a legal question
that is within the Court’s authority to review.35
Besides, even if it were a factual question, the Court is not precluded
to review the same. The rule that a petition for review should raise
only questions of law admits of exceptions, among which are "(1)
when the findings are grounded entirely on speculations, surmises,
or conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on amisappreciation of facts; (5) when
the findings of fact are conflicting; (6) when, in making its findings,
the same are contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondent; and (10) when the
findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record."36
In the instant case, we find sufficient basis to apply the exceptions to
the general rule because the appellate court misappreciated the
facts of the case through its erroneous application of the Best
Evidence Rule, as will be discussed below. Moreover, the disparate
rulings of the three reviewing bodies below are sufficient for the
Court to exercise its jurisdiction under Rule 45.
First Issue
Dismissal of RBBI’s appeal
Respondents maintain that the Court’s earlier dismissal of RBBI’s
petition
for review of the same CA Decision is eloquent proof that there is no
reversible error in the appellate court’s decision in favor of the
respondents.37
We are not persuaded. This Court dismissed RBBI’s earlier petition in
G.R. No. 163320 because it failed to convincingly demonstrate the
alleged errors in the CA Decision. The bank did not point out the
inadequacies and errors in the appellate court’s decision but simply
placed the responsibility for the confusion on the respondents for
allegedly misleading the bank as to the identity of the properties and
for misrepresenting that the two lots were not tenanted. Thus, RBBI
argued that respondents did not come to court with clean hands.
These arguments were ineffectual in convincing the Court to review
the appellate court’s Decision. It is the appellant’s responsibility to
point out the perceived errors in the appealed decision. When a
party merely raises equitable considerations such as the "clean
hands" doctrine without a clear-cut legal basis and cogent
arguments to support his claim, there should be no surprise if the
Court is not swayed to exercise its appellate jurisdiction and the
appeal is dismissed outright. The dismissal of an appeal does not
always and necessarily mean that the appealed decision is correct,
for it could simply be the result of the appellant’s inadequate
discussion, ineffectual arguments, or even procedural lapses.
RBBI’s failure to convince the Court of the merits of its appeal should
not prejudice petitioners who were not parties to RBBI’s appeal,
especially because petitioners duly filed a separate appeal and were
able to articulately and effectively present their arguments. A party
cannot be deprived of his right to appeal an adverse decision just
because another party had already appealed ahead of him, 38 or just
because the other party’s separate appeal had already been
dismissed.39
There is another reason not to bind the petitioners to the final
judgment against RBBI. RBBI executed the transfer (VLTs) in favor of
petitioners prior to the commencement of the action. Thus, when
the action for cancellation of CLOA was filed, RBBI had already
divested itself of its title to the two properties involved. Under the
rule on res judicata, a judgment (in personam) is conclusive only
between the parties and their successors-in-interest by title
subsequent to the commencement of the action. 40 Thus, when the
vendor (in this case RBBI) has already transferred his title to third
persons (petitioners), the said transferees are not bound by any
judgment which may be rendered against the vendor. 41
Second Issue
Is it correct to apply the Best Evidence Rule?
Citing the Best Evidence Rule in Rule 130, Section 3, the CA held that
the Deed of Sale between respondents and RBBI is the best evidence
as to the property that was sold by RBBI to the respondents. Since
the Deed of Sale stated that its subject is the land covered by TCT
No. T-62096 – the title for the Murong property – then the property
repurchased by the respondents was the Murong property. Likewise,
the CA held that since the VLTs between petitioners and RBBI refer to
TCT No. T-62836 – the title for the Lantap property – then the
property transferred to petitioners was the Lantap property.
Petitioners argue that the appellate court erred in using the best
evidence rule to determine the subject of the Deed of Sale and the
Deeds of Voluntary Land Transfer. They maintain that the issue in the
case is not the contents of the contracts but the intention of the
parties that was not adequately expressed in their contracts.
Petitioners then argue that it is the Parol Evidence Rule that should
be applied in order to adequately resolve the dispute.
Indeed, the appellate court erred in its application of the Best
Evidence Rule. The Best Evidence Rule states that when the subject
of inquiry is the contents of a document, the best evidence is the
original document itself and no other evidence (such as a
reproduction, photocopy or oral evidence) is admissible as a general
rule. The original is preferred because it reduces the chance of
undetected tampering with the document.42
In the instant case, there is no room for the application of the Best
Evidence Rule because there is no dispute regarding the contents of
the documents. It is admitted by the parties that the respondents’
Deed of Sale referred to TCT No. T-62096 as its subject; while the
petitioners’ Deeds of Voluntary Land Transfer referred to TCT No. T-
62836 as its subject, which is further described as located in
Barangay Murong.
The real issue is whether the admitted contents of these documents
adequately and correctly express the true intention of the parties. As
to the Deed of Sale, petitioners (and RBBI) maintain that while it
refers to TCT No. T-62096, the parties actually intended the sale of
the Lantap property (covered by TCT No. T-62836).
As to the VLTs, respondents contend that the reference to TCT No. T-
62836 (corresponding to the Lantap property) reflects the true
intention of RBBI and the petitioners, and the reference to "Barangay
Murong" was a typographical error. On the other hand, petitioners
claim that the reference to "Barangay Murong" reflects their true
intention, while the reference to TCT No. T-62836 was a mere error.
This dispute reflects an intrinsic ambiguity in the contracts, arising
from an apparent failure of the instruments to adequately express
the true intention of the parties. To resolve the ambiguity, resort
must be had to evidence outside of the instruments.
The CA, however, refused to look beyond the literal wording of the
documents and rejected any other evidence that could shed light on
the actual intention of the contracting parties. Though the CA cited
the Best Evidence Rule, it appears that what it actually applied was
the Parol Evidence Rule instead, which provides:
When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement. 43
The Parol Evidence Rule excludes parol or extrinsic evidence by
which a party seeks to contradict, vary, add to or subtract from the
terms of a valid agreement or instrument. Thus, it appears that what
the CA actually applied in its assailed Decision when it refused to
look beyond the words of the contracts was the Parol Evidence Rule,
not the Best Evidence Rule. The appellate court gave primacy to the
literal terms of the two contracts and refused to admit any other
evidence that would contradict such terms.
However, even the application of the Parol Evidence Rule is improper
in the case at bar. In the first place, respondents are not parties to
the VLTs executed between RBBI and petitioners; they are strangers
to the written contracts. Rule 130, Section 9 specifically provides
that parol evidence rule is exclusive only as "between the parties and
their successors-in-interest." The parol evidence rule may not be
invoked where at least one of the parties to the suit is not a party or
a privy of a party to the written document in question, and does not
base his claim on the instrument or assert a right originating in the
instrument.44
Moreover, the instant case falls under the exceptions to the Parol
Evidence Rule, as provided in the second paragraph of Rule 130,
Section 9:
However, a party may present evidence to modify, explain or add to
the terms of the written agreement if he puts in issue in his pleading:
(1) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(2) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
x x x x (Emphasis supplied)
Here, the petitioners’ VLTs suffer from intrinsic ambiguity. The VLTs
described the subject property as covered by TCT No. T-62836
(Lantap property), but they also describe the subject property as
being located in "Barangay Murong." Even the respondents’ Deed of
Sale falls under the exception to the Parol Evidence Rule. It refers to
"TCT No. T-62096" (Murong property), but RBBI contended that the
true intent was to sell the Lantap property. In short, it was squarely
put in issue that the written agreement failed to express the true
intent of the parties.
Based on the foregoing, the resolution of the instant case
necessitates an examination of the parties’ respective parol
evidence, in order to determine the true intent of the parties. Well-
settled is the rule that in case of doubt, it is the intention of the
contracting parties that prevails, for the intention is the soul of a
contract,45 not its wording which is prone to mistakes, inadequacies,
or ambiguities. To hold otherwise would give life, validity, and
precedence to mere typographical errors and defeat the very
purpose of agreements.
In this regard, guidance is provided by the following articles of the
Civil Code involving the interpretation of contracts:
Article 1370. If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of
its stipulations shall control.
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
Article 1371. In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be
principally considered.
Rule 130, Section 13 which provides for the rules on the
interpretation of documents is likewise enlightening:
Section 13. Interpretation according to circumstances. – For the
proper construction of an instrument, the circumstances under
which it was made, including the situation of the subject thereof and
of the parties to it, may be shown, so that the judge may be placed
in the position of those whose language he is to interpret.1âwphi1
Applying the foregoing guiding rules, it is clear that the Deed of Sale
was intended to transfer the Lantap property to the respondents,
while the VLTs were intended to convey the Murong property to the
petitioners. This may be seen from the contemporaneous and
subsequent acts of the parties.
Third issue
Determining the intention of the parties
regarding the subjects of their contracts
We are convinced that the subject of the Deed of Sale between RBBI
and the respondents was the Lantap property, and not the Murong
property. After the execution in 1985 of the Deed of Sale, the
respondents did not exercise acts of ownership that could show that
they indeed knew and believed that they repurchased the Murong
property. They did not take possession of the Murong property. As
admitted by the parties, the Murong property was in the possession
of the petitioners, who occupied and tilled the same without any
objection from the respondents. Moreover, petitioners paid
leasehold rentals for using the Murong property to RBBI, not to the
respondents.
Aside from respondents’ neglect of their alleged ownership rights
over the Murong property, there is one other circumstance that
convinces us that what respondents really repurchased was the
Lantap property. Respondent Nemi (husband of respondent Elenita)
is the farmer actually tilling the Lantap property, without turning
over the supposed landowner’s share to RBBI. This strongly indicates
that the respondents considered themselves (and not RBBI) as the
owners of the Lantap property. For if respondents (particularly
spouses Elenita and Nemi) truly believed that RBBI retained
ownership of the Lantap property, how come they never complied
with their obligations as supposed tenants of RBBI’s land? The
factual circumstances of the case simply do not support the theory
propounded by the respondents.
We are likewise convinced that the subject of the Deeds of Voluntary
Land Transfer (VLTs) in favor of petitioners was the Murong property,
and not the Lantap property. When the VLTs were executed in 1990,
petitioners were already the tenant-farmers of the Murong property,
and had been paying rentals to RBBI accordingly. It is therefore
natural that the Murong property and no other was the one that
they had intended to acquire from RBBI with the execution of the
VLTs. Moreover, after the execution of the VLTs, petitioners remained
in possession of the Murong property, enjoying and tilling it without
any opposition from anybody. Subsequently, after the petitioners
completed their payment of the total purchase price of P90,000.00
to RBBI, the Department of Agrarian Reform (DAR) officials
conducted their investigation of the Murong property which, with
the presumption of regularity in the performance of official duty, did
not reveal any anomaly. Petitioners were found to be in actual
possession of the Murong property and were the qualified
beneficiaries thereof. Thus, the DAR officials issued CLOAs in
petitioners’ favor; and these CLOAs explicitly refer to the land in
Barangay Murong. All this time, petitioners were in possession of the
Murong property, undisturbed by anyone for several long years, until
respondents started the controversy in 1997.
All of these contemporaneous and subsequent actions of RBBI and
petitioners support their position that the subject of their contract
(VLTs) is the Murong property, not the Lantap property. Conversely,
there has been no contrary evidence of the parties’ actuations to
indicate that they intended the sale of the Lantap property. Thus, it
appears that the reference in their VLT to TCT No. T-62836 (Lantap
property) was due to their honest but mistaken belief that the said
title covers the Murong property. Such a mistake is not farfetched
considering that TCT No. T-62836 only refers to the Municipality of
Bayombong, Nueva Vizcaya, and does not indicate the particular
barangay where the property is located. Moreover, both properties
are bounded by a road and public land. Hence, were it not for the
detailed technical description, the titles for the two properties are
very similar.
The respondents attempt to discredit petitioners’ argument that
their VLTs were intrinsically ambiguous and failed to express their
true intention by asking why petitioners never filed an action for the
reformation of their contract.46 A cause of action for the reformation
of a contract only arises when one of the contracting parties
manifests an intention, by overt acts, not to abide by the true
agreement of the parties.47 It seems fairly obvious that petitioners
had no cause to reform their VLTs because the parties thereto (RBBI
and petitioners) never had any dispute as to the interpretation and
application thereof. They both understood the VLTs to cover the
Murong property (and not the Lantap property). It was only much
later, when strangers to the contracts argued for a different
interpretation, that the issue became relevant for the first time.
All told, we rule that the Deed of Sale dated February 26, 1985
between respondents and RBBI covers the Lantap property under
TCT No. T-62836, while the Deeds of Voluntary Land Transfer and TCT
Nos. CLOA-395 and CLOA-396 of the petitioners cover the Murong
property under TCT No. T-62096. In consequence, the CA’s ruling
against RBBI should not be executed as such execution would be
inconsistent with our ruling herein. Although the CA’s decision had
already become final and executory as against RBBI with the
dismissal of RBBI’s petition in G.R. No. 163320, our ruling herein in
favor of petitioners is a supervening cause which renders the
execution of the CA decision against RBBI unjust and inequitable.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The
assailed October 7, 2003 Decision, as well as the May 11, 2005
Resolution of the Court of Appeals in CA-G.R. SP No. 69981
are REVERSED and SETASIDE. The January 17, 2001 Decision of the
DARAB Central Office is REINSTATED. The Deed of Sale dated
February 26, 1985 between respondents and Rural Bank of
Bayombong, Inc. covers the Lantap property under TCT No. T-62836,
while the Deeds of Voluntary Land Transfer and TCT Nos. CLOA-395
and CLOA-396 of the petitioners cover the Murong property under
TCT No. T-62096. The Register of Deeds of Nueva Vizcaya is directed
to make the necessary corrections to the titles of the said properties
in accordance with this Decision. Costs against respondents.
SO ORDERED.
G.R. No. L-46892 September 30, 1981
HEIRS OF AMPARO DEL ROSARIO, plaintiffs-appellees,
vs.
AURORA O. SANTOS, JOVITA SANTOS GONZALES, ARNULFO O.
SANTOS, ARCHIMEDES O. SANTOS, ERMELINA SANTOS RAVIDA, and
ANDRES O. SANTOS, JR., defendants-appellants.
GUERRERO, J.:
The Court of Appeals, 1 in accordance with Section 31 of the
Judiciary Act of 1948, as amended, certified to Us the appeal
docketed as CA-G.R. No. 56674-R entitled "Amparo del Rosario,
plaintiff-appellee, vs. Spouses Andres Santos and Aurora Santos,
defendants-appellants," as only questions of law are involved.
On January 14, 1974, Amparo del Rosario filed a complaint against
the spouses Andres F. Santos and Aurora O. Santos, for specific
performance and damages allegedly for failure of the latter to
execute the Deed of Confirmation of Sale of an undivided 20,000
square meters of land, part of Lot 1, Psu-206650, located at Barrio
Sampaloc, Tanay, Rizal, in malicious breach of a Deed of Sale (Exhibit
A or 1) dated September 28, 1964.
Amparo del Rosario died on Sept. 21, 1980 so that she is now
substituted by the heirs named in her will still undergoing probate
proceedings. Andres F. Santos also died, on Sept. 5, 1980, and he is
substituted by the following heirs: Jovita Santos Gonzales, Arnulfo O.
Santos, Archimedes O. Santos, Germelina Santos Ravida, and Andres
O. Santos, Jr.
The Deed of Sale (Exh. A or 1) is herein reproduced below:
DEED OF SALE
KNOW ALL MEN BY THESE PRESENTS:
I, ANDRES F. SANTOS, of legal age, married to Aurora 0. Santos,
Filipino and resident cf San Dionisio, Paranaque, Rizal, Philippines,
for and in consideration of the sum of TWO THOUSAND (P 2,000.00)
PESOS, Philippine Currency, the receipt whereof is hereby
acknowledged, do hereby SELLS, CONVEYS, and TRANSFERS (sic)
unto Amparo del Rosario, of legal age, married to Fidel del Rosario
but with legal separation, Filipino and resident of San Dionisio,
Paranaque, Rizal, Philippines that certain 20,000 square meters to be
segregated from Lot 1 of plan Psu-206650 along the southeastern
portion of said lot, which property is more particularly described as
follows:
A parcel of land (Lot 1 as shown on plan Psu-206650, situated in the
Barrio of Sampaloc, Municipality of Tanay, Province of Rizal.
Bounded on the SW., along lines 1-2-3, by Lot 80 of Tanay Public
Land Subdivision, Pls-39; on the NW., along lines 3-4-5, by Lot 2; and
along lines 5-6-7-8-9-10-11, by Lot 6; on the NE., along lines 11-12-
13, by Lot 3: and along lines 13-1415, by Lot 4, all of plan Psu-
206650; and on the SE., along line 15-1, by Lot 5 of plan Psu-
206650 ... ; containing an area of ONE HUNDRED EIGHTY ONE
THOUSAND FOUR HUNDRED TWENTY (181,420) SQUARE METERS.
All points referred to are indicated on the plan and are marked on
the ground as follows: ...
of which above-described property, I own one-half (1/2) interest
thereof being my attorney's fee, and the said 20,000 square meters
will be transferred unto the VENDEE as soon as the title thereof has
been released by the proper authority or authorities concerned:
That the parties hereto hereby agree that the VENDOR shall execute
a Deed of Confirmation of Deed of Sale in favor of the herein
VENDEE as soon as the title has been released and the subdivision
plan of said Lot 1 has been approved by the Land Registration
Commissioner.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
September, 1964, in the City of Manila, Philippines.
s/ ANDRES F. SANTOS t/ ANDRES F. SANTOS
With My Marital Consent:
s/ Aurora O. Santos (Wife) t/ Aurora O. Santos (Wife)
SIGNED IN THE PRESENCE OF: s/ Felicitas C. Moro s/ Corona C. Venal
REPUBLIC OF THE PHILIPPINES) ) SS.
BEFORE ME, a Notary Public for and in Rizal, Philippines, personally
appeared Andres F. Santos, with Res. Cert. No. 4500027 issued at
Paranaque, Rizal, on Jan. 9, 1964, B-0935184 issued at Paranaque,
Rizal on April 15, 1964, and Aurora 0. Santos, with Res. Cert. No. A-
4500028 issued at Paranaque, Rizal, on Jan. 9, 1964, giving her
marital consent to this instrument, both of whom are known to me
and to me known to be the same persons who executed the
foregoing instruments and they acknowledged to me that the same
is their free act and voluntary deed.
IN WITNESS WHEREOF, I have hereunto signed this instrument and
affixed my notarial seal this lst day of October, 1964, in Pasig, Rizal,
Philippines.
Doc. No. 1792; Page No. 85; Book No. 19; Series of 1964.
s/ FLORENCIO LANDRITO t/ FLORENCIO LANDRITO
NOTARY PUBLIC Until December 31, 1965 2
Plaintiff claimed fulfillment of the conditions for the execution of the
Deed of Confirmation of Sale, namely: the release of the title of the
lot and the approval of the subdivision plan of said lot by the Land
Registration Commission. She even enumerated the titles with their
corresponding land areas derived by defendants from the aforesaid
lot, to wit:
(a) TCT 203580 — 30,205 sq. meters
(b) TCT 203581 — 19, 790 sq. meters
(c) TCT 167568 — 40,775 sq. meters
In a motion to dismiss, defendants pleaded, inter alia, the defenses
of lack of jurisdiction of the court a quo over the subject of the
action and lack of cause of action allegedly because there was no
allegation as to the date of the approval of the subdivision plan, no
specific statement that the titles therein mentioned were curved out
of Lot I and no clear showing when the demands were made on the
defendants. They likewise set up the defense of prescription
allegedly because the deed of sale was dated September 28, 1964
and supposedly ratified October 1, 1964 but the complaint was filed
only on January 14, 1974, a lapse of more than nine years when it
should have been filed within five years from 1964 in accordance
with Article 1149, New Civil Code.
Defendant also claimed that the demand set forth in the complaint
Lot 1
has been waived, abandoned or otherwise extinguished. It is alleged
that the deed of sale was "only an accommodation graciously
Lot 2
extended, out of close friendship between the defendants and the
plaintiff and her casual business partner in the buy and sell of real
estate, one Erlinda Cortez;" 3 that in order to allay the fears of
plaintiff over the non-collection of the debt of Erlinda Cortez to
plaintiff in various sums exceeding P 2,000.00, defendants, who were
in turn indebted to Erlinda Cortez in the amount of P 2,000.00,
voluntarily offered to transfer to plaintiff their inexistent but
expectant right over the lot in question, the same to be considered
as part payment of Erlinda Cortez' indebtedness; that as Erlinda
Cortez later on paid her creditor what was then due, the deed of sale
had in effect been extinguished. Defendants thereby characterized
the said deed of sale as a mere tentative agreement which was never
intended nor meant to be ratified by and acknowledged before a
notary public. In fact, they claimed that they never appeared before
Notary Public Florencio Landrito.
Finally, defendants alleged that the claim on which the action or suit
is founded is unenforceable under the statute of frauds and that the
cause or object of the contract did not exist at the time of the
transaction.
After an opposition and a reply were filed by the respective parties,
the Court a quo resolved to deny the motion to dismiss of
defendants. Defendants filed their answer with counterclaim
interposing more or less the same defenses but expounding on them
further. In addition, they claimed that the titles allegedly derived by
them from Lot 1 of Annex A or I were cancelled and/or different
from said Lot I and that the deed of sale was simulated and fictitious,
plaintiff having paid no amount to defendants; and that the deed
was entrusted to plaintiff's care and custody on the condition that
the latter; (a) would secure the written consent of Erlinda Cortez to
Annex A or I as part payment of what she owed to plaintiff; (b) would
render to defendants true accounting of collections made from
Erlinda showing in particular the consideration of 2,000.00 of Annex
A or I duly credited to Erlinda's account. 4
Plaintiff filed a reply and answer to counterclaim and thereafter a
motion for summary judgment and/or judgment on the pleadings on
the ground that the defenses of defendants fail to tender an issue or
the same do not present issues that are serious enough to deserve a
trial on the merits, 5 submitting on a later date the affidavit of merits.
Defendants filed their corresponding opposition to the motion for
summary judgment and/or judgment on the pleadings. Not content
with the pleadings already submitted to the Court, plaintiff filed a
reply while defendants filed a supplemental opposition.
With all these pleadings filed by the parties in support of their
respective positions, the Court a quo still held in abeyance plaintiff's
motion for summary judgment or judgment on the pleadings
pending the pre-trial of the case. At the pre-trial, defendants offered
by way of compromise to pay plaintiff the sum of P2,000.00, the
consideration stated in the deed of sale. But the latter rejected the
bid and insisted on the delivery of the land to her. Thus, the pre-trial
proceeded with the presentation by plaintiff of Exhibits A to Q which
defendants practically admitted, adopted as their own and marked
as Exhibits 1 to 17. In addition, the latter offered Exhibit 18, which
was their reply to plaintiff's letter of demand dated December 21,
1973.
From the various pleadings filed in this case by plaintiff, together
with the annexes and affidavits as well as the exhibits offered in
evidence at the pre-trial, the Court a quo found the following facts as
having been duly established since defendant failed to meet them
with countervailing evidence:
In February, 1964, Teofilo Custodia owner of a parcel of unregistered
land with an area of approximately 220,000 square meters in Barrio
Sampaloc, Tanay, Rizal, hired Attorney Andres F. Santos "to cause the
survey of the above-mentioned property, to file registration
proceedings in court, to appear and represent him in all government
office relative thereto, to advance all expenses for surveys, taxes to
the government, court fees, registration fees ... up to the issuance of
title in the name" of Custodia. They agreed that after the registration
of the title in Custodio's name, and "after deducting all expenses
from the total area of the property," Custodio would assign and
deliver to Santos "one-half (1/2) share of the whole property as
appearing in the certificate of title so issued." Exh. B or 2).
On March 22, 1964, Custodio's land was surveyed under plan Psu-
226650 (Exh. D or 4). It was divided into six (6) lots, one of which was
a road lot. The total area of the property as surveyed was 211,083
square meters. The respective areas of the lots were as follows:
181,420 square meters
7,238 square meters
 Out of Custodio's original Lot 1, Psu-206650, with an area of 181,420
Lot 3 7,305 square meters
square meters, Santos was given a total of 90,775 square meters,
registered in his name as of October 3, 1967 under three (3) titles,
Lot 4 5,655 square meters
namely:
Lot 5 5,235 square meters
TCT No. 167585 for
Road Lot 6 4,230 square meters
Lot 4 Pcs-5273 40,775 sq. m.
TOTAL 211,083 square meters
xxx xxx xxx (Exh. J or 10)
On December 27, 1965, a decree of registration No. N-108022 was
TCT No. 203580 for
issued in Land Registration Case No. N-5023, of the Court of First
Instance of Rizal, LRC Record No. N-27513, in favor of Teofilo
Lot 5-A Psd-78008 30,205 sq. m.
Custodia married to Miguela Perrando resident of Tanay, Rizal. On
March 23, 1966, Original Certificate of Title No. 5134 (Exh. Q or 17)
(Exh. K or 11)
was issued to Custodio for Lots 1, 2, 3, 4 and 5, Psu- 206650, with a
total area of 206,853 square meters. The areas of the five (5) lots
TCT No. 203581 for
were as follows:
Lot 1 181,420 square meters Lot 5-B Psd-78008 19,795 sq. m.

Lot 2 7,238 square meters (Exh. L or 12)

Lot 3 7,305 square meters 90,775 sq.m.

Lot 4 5,655 square meters
Lot 5 5,235 square meters
In April to May, 1966, a consolidation-subdivision survey (LRC) Pcs-
5273 (Exh. E or 5) was made on the above lots converting them into
six (6) new lots as follows:
xxx xxx xxx
Lot 1 20,000 square meters
Lot 2 40,775 square meters
Lot 3 50,000 square meters
Lot 4 40,775 square meters
Lot 5 50,000 square meters
Road Lot 6 5,303 square meters
TOTAL 206,853 square meters
On June 22, 1966, the consolidation-subdivision plan (LRC) Pcs-5273
(Exh. E or 5) was approved by the Land Registration Commission and
by the Court of First Instance of Rizal in an order dated July 2, 1966
(Entry No. 61037 T-167561, Exh. Q). Upon its registration, Custodio's
O.C.T. No. 5134 (Exh. Q) was cancelled and TCT Nos. 167561, 167562,
167563, 167564 (Exh. G), 167565 (Exh. H and 167566 were issued for
the six lots in the name of Custodio (Entry No. 61035, Exh. Q).
On June 23, 1966, Custodio conveyed to Santos Lots 4 and 5, Pcs-
5273 with a total area of 90,775 square meters (Exh. B or 2)
described in Custodio's TCT No. 167564 (Exh. G or 7) and TCT No.
167565 (Exh. H or 8), plus a one-half interest in the Road Lot No. 6,
as payment of Santos' attorney's fees and advances for the
registration of Custodio's land.
Upon registration of the deed of conveyance on July 5, 1966,
Custodio's TCT Nos. 167564 and 167565 (Exhs. G and H) were
cancelled. TCT No. 167568 (Exh. I or 9) for Lot 4 and TCT No. 167585
(Exh. J or 10) for Lot 5 were issued to Santos.
On September 2, 1967, Santos' Lot 5, with an area of 50,000 square
meters was subdivided into two (2) lots, designated as Lots 5-A and
5-B in the plan Psd-78008 (Exh. F or 6), with the following areas:
Lot 5-A 30,205 square meters
Lot 5-B 19,795square meters
TOTAL 50,000 square meters
Upon registration of Psd-78008 on October 3, 1967, Santos' TCT No.
167585 (Exh. J) was cancelled and TCT No. 203578 for Lot 5- A and
TCT No. 203579 for Lot 5-B were supposed to have been issued to
Santos (See Entry 6311 in Exh. J or 10). Actually, TCT No. 203580 was
issued for Lot 5-A (Exh. K or 1 1), and TCT No. 203581 for Lot 5-B
(Exh. L or 12), both in the name of Andres F. Santos.
plus one-half of the road lot, Lot 6, PCS-5273, with an area of 5,303
square meters, which is registered jointly in the name of Santos and
Custodio (Exh. B & E) 6
The court a quo thereupon concluded that there are no serious
factual issues involved so the motion for summary judgment may be
properly granted. Thereafter, it proceeded to dispose of the legal
issues raised by defendants and rendered judgment in favor of
plaintiff. The dispositive portion of the decision states as follows:
WHEREFORE, defendants Andres F. Santos and Aurora Santos are
ordered to execute and convey to plaintiff Amparo del Rosario,
within ten (10) days from the finality of this decision, 20,000 square
meters of land to be taken from the southeastern portion of either
Lot 4, Pcs-5273, which has an area of 40,775 square meters,
described in TCT No. 167568 (Exh. I or 9) of from their LOL 5-A. with
an area of 30,205 square meters, described in TCI No. 203; O (Exh. K
or 11). The expenses of segregating the 20,000 square meters
portion shall be borne fqually by the parties. rhe expenses for the
execution and registration of the sale shall be borne by the
defendants (Art. 1487, Civil Code). Since the defendants compelled
the plaintiff to litigate and they failed to heed plainliff's just demand,
they are further ordered to pay the plaintiff the sum of P2,000.00 as
attorney's fees and the costs of this action.
SO ORDERED. 7
Aggrieved by the aforesaid decision, the defendant's filed all appeal
to the Court of Appeals submitting for resolution seven assignments
of errors, to wit:
I. The lower court erred in depriving the appellants of their right to
the procedural due process.
II. The lower court erred in holding that the appellee's claim has not
been extinguished.
III. The lower court erred in sustaining appellee's contention that
there are no other unwritten conditions between the appellants and
the appellee except those express in Exh. "1" or "A", and that Erlinda
Cortez' conformity is not required to validate the appellants'
obligation.
IV. The lower court erred in holding that Exh. "l" or "A" is not
infirmed and expressed the true intent of the parties.
V. The lower court erred in declaring that the appellants are co-
owners of the lone registered owner Teofilo Custodia.
VI. The lower court erred in ordering the appellants to execute and
convey to the appellee 20,000 sq. m. of land to be taken from the
southeastern portion of either their lot 4, Pcs-5273, which has an
area of 40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or
from their lot No. 5-A, with an area of 30,205 sq.m. described in
T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be
borne equally by the appellants and the appellee and the expenses
of execution and registration to be borne by the appellants.
VII. Thelowercourterredinorderingtheappellantstopayto the appellee
the sum of P2,000. 00 as attorney's fee and costs. 8
The first four revolve on the issue of the propriety of the rendition of
summary judgment by the court a quo, which concededly is a
question of law. The last three assail the summary judgment itself.
Accordingly, the Court of Appeals, with whom the appeal was filed,
certified the records of the case to this Court for final determination.
For appellants herein, the rendition of summary judgment has
deprived them of their right to procedural due process. They claim
that a trial on the merits is indispensable in this case inasmuch as
they have denied under oath all the material allegations in appellee's
complaint which is based on a written instrument entitled "Deed of
Sale", thereby putting in issue the due execution of said deed.
Appellants in their opposition to the motion for summary judgment
and/or judgment on the pleadings, however, do not deny the
genuineness of their signatures on the deed of sale.
(Par. 3 of said Motion, p. 101, Record on Appeal). They do not
contest the words and figures in said deed except in the
acknowledgment portion thereof where certain words were
allegedly cancelled and changed without their knowledge and
consent and where, apparently, they appeared before Notary Public
Florencio Landrito when, in fact, they claimed that they did not. In
effect, there is an admission of the due execution and genuineness
of the document because by the admission of the due execution of a
document is meant that the party whose signature it bears admits
that voluntarily he signed it or that it was signed by another for him
and with his authority; and the admission of the genuineness of the
document is meant that the party whose signature it bears admits
that at the time it was signed it was in the words and figures exactly
as set out in the pleading of the party relying upon it; and that any
formal requisites required by law, such as swearing and
acknowledgment or revenue stamps which it requires, are waived by
him. 9
As correctly pointed out by the court a quo, the alleged false
notarization of the deed of sale is of no consequence. For a sale of
real property or of an interest therein to be enforceable under the
Statute of Frauds, it is enough that it be in writing. 10 It need not be
notarized. But the vendee may avail of the right under Article 1357
of the New Civil Code to compel the vendor to observe the form
required by law in order that the instrument may be registered in
the Registry of Deeds. 11 Hence, the due execution and genuineness
of the deed of sale are not really in issue in this case. Accordingly,
assigned error I is without merit.
What appellants really intended to prove through the alleged false
notarization of the deed of sale is the true import of the matter,
which according to them, is a mere tentative agreement with
appellee. As such, it was not intended to be notarized and was
merely entrusted to appellee's care and custody in order that: first,
the latter may secure the approval of one Erlinda Cortez to their
(appellants') offer to pay a debt owing to her in the amount of
P2,000.00 to appellee instead of paying directly to her as she was
indebted to appellee in various amounts exceeding P2,000.00; and
second once the approval is secured, appellee would render an
accounting of collections made from Erlinda showing in particular
the consideration of P2,000.00 of the deed of sale duly credited to
Erlinda's account.
According to appellants, they intended to prove at a full dress trial
the material facts: (1) that the aforesaid conditions were not
fulfilled; (2) that Erlinda Cortez paid her total indebtedness to
appellee in the amount of P14,160.00, the P2,000.00 intended to be
paid by appellant included; and (3) that said Erlinda decided to
forego, renounce and refrain from collecting the P2,000.00 the
appellants owed her as a countervance reciprocity of the countless
favors she also owes them.
Being conditions which alter and vary the terms of the deed of sale,
such conditions cannot, however, be proved by parol evidence in
view of the provision of Section 7, Rule 130 of the Rules of Court
which states as follows:
Sec. 7. Evidence of written agreements when the terms of an
agreement have been reduced to writing, it is to be considered as
containing all such terms, and, therefore, there can be, between the
parties and their successors in interest, no evidence of the terms of
the agreement other than the contents of the writing, except in the
following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or the validity
of the agreement is put in issue by the pleadings;
(b) When there is an intrinsic ambiguity in the writing. The term
"agreement" includes wills."
The parol evidence rule forbids any addition to or contradiction of
the terms of a written instrument by testimony purporting to show
that, at or before the signing of the document, other or different
terms were orally agreed upon by the parties. 12
While it is true, as appellants argue, that Article 1306 of the New
Civil Code provides that "the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided that they are not contrary to law, morals, good
customs, public order, or public policy" and that consequently,
appellants and appellee could freely enter into an agreement
imposing as conditions thereof the following: that appellee secure
the written conformity of Erlinda Cortez and that she render an
accounting of all collections from her, said conditions may not be
proved as they are not embodied in the deed of sale.
The only conditions imposed for the execution of the Deed of
Confirmation of Sale by appellants in favor of appellee are the
release of the title and the approval of the subdivision plan. Thus,
appellants may not now introduce other conditions allegedly agreed
upon by them because when they reduced their agreement to
writing, it is presumed that "they have made the writing the only
repository and memorial of truth, and whatever is not found in the
writing must be understood to have been waived and abandoned." 13
Neither can appellants invoke any of the exceptions to the parol
evidence rule, more particularly, the alleged failure of the writing to
express the true intent and agreement of the parties. Such an
exception obtains where the written contract is so ambiguous or
obscure in terms that the contractual intention of the parties cannot
be understood from a mere reading of the instrument. In such a
case, extrinsic evidence of the subject matter of the contract, of the
relations of the parties to each other, and of the facts and
circumstances surrounding them when they entered into the.
contract may be received to enable the court to make a proper
interpretation of the instrumental. 14 In the case at bar, the Deed of
Sale (Exh. A or 1) is clear, without any ambiguity, mistake or
imperfection, much less obscurity or doubt in the terms thereof. We,
therefore, hold and rule that assigned errors III and IV are untenable.
According to the court a quo, "(s)ince Santos, in his Opposition to the
Motion for Summary Judgment failed to meet the plaintiff's evidence
with countervailing evidence, a circumstance indicating that there
are no serious factual issues involved, the motion for summary
judgment may properly be granted." We affirm and sustain the
action of the trial court.
Indeed, where a motion for summary judgment and/or judgment on
the pleadings has been filed, as in this case, supporting and opposing
affidavits shall be made on personal knowledge, shall set forth such
facts as may be admissible in evidence, and shall show affirmatively
that the affiant is competent to testify as to the matters stated
therein. Sworn or certified copies of all papers or parts thereof
referred to in the
affidavitshalibeattachedtheretoorservedtherewith. 15
Examining the pleadings, affidavits and exhibits in the records, We
find that appellants have not submitted any categorical proof that
Erlinda Cortez had paid the P2,000.00 to appellee, hence, appellants
failed to substantiate the claim that the cause of action of appellee
has been extinguished. And while it is true that appellants submitted
a receipt for P14,160.00 signed by appellee, appellants, however,
have stated in their answer with counterclaim that the P2,000.00
value of the property covered by the Deed of Sale, instead of being
credited to Erlinda Cortez, was conspicuously excluded from the
accounting or receipt signed by appellee totalling P14,160.00. The
aforesaid receipt is no proof that Erlinda Cortez subsequently paid
her P2,000.00 debt to appellee. As correctly observed by the court a
quo, it is improbable that Cortez would still pay her debt to appellee
since Santos had already paid it.
Appellants' claim that their P2,000.00 debt to Erlinda Cortez had
been waived or abandoned is not also supported by any affidavit,
document or writing submitted to the court. As to their allegation
that the appellee's claim is barred by prescription, the ruling of the
trial court that only seven years and six months of the ten-year
prescription period provided under Arts. 1144 and 155 in cases of
actions for specific performance of the written contract of sale had
elapsed and that the action had not yet prescribed, is in accordance
with law and, therefore, We affirm the same.
The action of the court a quo in rendering a summary judgment has
been taken in faithful compliance and conformity with Rule 34,
Section 3, Rules of Court, which provides that "the judgment sought
shall be rendered forthwith if the pleadings, depositions, and
admissions on file together with the affidavits, show that, except as
to the amount of damages, there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law. "
Resolving assignments of errors, V, VI, and VII which directly assail
the summary judgment, not the propriety of the rendition thereof
which We have already resolved to be proper and correct, it is Our
considered opinion that the judgment of the court a quo is but a
logical consequence of the failure of appellants to present any bona
fidedefense to appellee's claim. Said judgment is simply the
application of the law to the undisputed facts of the case, one of
which is the finding of the court a quo, to which We agree, that
appellants are owners of one-half (1/2) interest of Lot I and,
therefore, the fifth assignment of error of appellants is without
merit.
By the terms of the Deed of Sale itself, which We find genuine and
not infirmed, appellants declared themselves to be owners of one-
half (1/2) interest thereof. But in order to avoid appellee's claim,
they now contend that Plan Psu-206650 where said Lot I appears is
in the exclusive name of Teofilo Custodio as the sole and exclusive
owner thereof and that the deed of assignment of one-half (1/2)
interest thereof executed by said Teofilo Custodio in their favor is
strictly personal between them. Notwithstanding the lack of any title
to the said lot by appellants at the time of the execution of the deed
of sale in favor of appellee, the said sale may be valid as there can be
a sale of an expected thing, in accordance with Art. 1461, New Civil
Code, which states:
Art. 1461. Things having a potential existence may be the object of
the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed

subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void.
In the case at bar, the expectant right came into existence or
materialized for the appellants actually derived titles from Lot I .
We further reject the contention of the appellants that the lower
court erred in ordering the appellants to execute and convey to the
appellee 20,000 sq.m. of land to be taken from the southeastern
portion of either their Lot 4, Pcs-5273, which has an area of 40,775
sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or from their Lot
No. 5-A, with an area of 30,205 sq.m. described in T.C.T. No. 203580
(Exh. 11 or K), the expenses of segregation to be borne equally by
the appellants and the appellee and the expenses of execution and
registration to be borne by the appellants. Their argument that the
southeastern portion of Lot 4 or Lot 5-A is no longer the
southeastern portion of the bigger Lot 1, the latter portion belonging
to the lone registered owner, Teofilo Custodia is not impressed with
merit. The subdivision of Lot I between the appellants and Teofilo
Custodio was made between themselves alone, without the
intervention, knowledge and consent of the appellee, and therefore,
not binding upon the latter. Appellants may not violate nor escape
their obligation under the Deed of Sale they have agreed and signed
with the appellee b3 simply subdividing Lot 1, bisecting the same
and segregating portions to change their sides in relation to the
original Lot 1.
Finally, considering the trial court's finding that the appellants
compelled the appellee to litigate and they failed to heed appellee's
just demand, the order of the court awarding the sum of P2,000.00
as attorney's fees is just and lawful, and We affirm the same.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed
from is hereby AFFIRMED in toto, with costs against the appellants.
SO ORDERED.
G.R. No. 74978 September 8, 1989
MARKET DEVELOPERS, INC. (MADE), petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and GAUDIOSO
UY, respondents.
Tanjuatco, Oreta, Tanjuatco & Factoran for petitioner.
Rodolfo M. Morelos for private respondent.
CRUZ, J.:
What one rnay notice at the outset about this case is that the private
respondent, although the plaintiff in the court a quo, seems to have
lost all interest after the decision in his favor was appealed to the
respondent court. He did not even submit a brief. 1 Later, when this
petition was filed and he was required to comment, he also failed to
do so. Required to show cause for his non-compliance, he explained
that his records of the case had been misplaced. Anyway, he said, he
could not add to the evidence presented at the trial; hence, he was
submitting the case for resolution by this Court without further
pleadings. 2
It is not as simple as that. The petitioner has raised substantial
arguments not touched in the decision under challenge. It was in the
private respondent's interest to refute these arguments if he was to
maintain his advantage. Notably, the issues raised by the petitioner
are mainly legal and could have been answered without much need
of referring to the records. If there was such a need, it would have
been easy for the private respondent to consult the records in this
Court, which were available to him. But it is now too late for him to
do so because of his waiver.
The private respondent's seeming indifference becomes an the more
costly to him in the light of the challenged decision of the
respondent court. 3 It was rather sketchy, to say the least. Hardly an
original idea or finding was volunteered. The appellate court made a
brief recital of the facts, summarized the allegations of the plaintiff
and the defendant, quoted at length the findings and conclusions of
the trial court 4 declared them well-taken and meritorious," and
concluded by aiming the appealed decision in toto. It was a mistake
for the private respondent to fully rely on that unsatisfactory
decision.
It appears that on June 20, 1978, petitioner Market Developers, Inc.
(MADE) entered into a written barging and to wage contract with
private respondent Gaudioso Uy for the shipment of the former's
cargo from Iligan City to Kalibo, Aklan, at the rate of P 1.45 per bag.
The petitioner was allowed 4 lay days and agreed to pay demurrage
at the rate of P5,000.00 for every day of delay, or in excess of the
stipulated allowance. 5 On June 26, 1978, Uy sent a barge and a
tugboat to Iligan City and loading of the petitioner's cargo began
immediately. It is not clear who made the request, but upon
completion of the loading on June 29, 1978, the parties agreed to
divert the barge to Culasi, Roxas City, with the cargo being consigned
per bill of lading to Modem Hardware in that City. 6 This new
agreement was not reduced to writing. The shipment arrived in
Roxas City on July 13, 1978, and the cargo was eventually unloaded
and duly received by the consignee. There is some dispute as to the
time consumed for such unloading. At any rate, about six months
later, Uy demanded payment of demurrage charges in the sum of
P40,855.40 for an alleged delay of eight days and 4/25
hours. 7 MADE ignored this demand, and Uy filed suit. He was
sustained by the trial court, which ordered the petitioner to pay him
the said amount with interest plus P4,000.00 attomey's fees and the
cost of the suit. 8 As earlier stated, this decision was fully affirmed on
appeal to the respondent court, which is the reason for this petition.
Agreeing with the trial court, the respondent court held that since
the diversion of tile cargo to Roxas City was not covered by a new
written agreement, the original agreement must prevail.
It is this conclusion that is now disputed by the petitioner, which
contends that the first written contract was replaced by a new verbal
agreement that did not contain any stipulation for demurrage. There
is the further insistence that the alleged delay in the unloading of
the cargo in Roxas City should not have been readily assumed as a
fact by the trial and respondent courts because it had not been
established by competent evidence and was based on mere hearsay.
The petitioner also argues that the claim for demurrage was barred
by laches, the private respondent having asserted it tardily and
obviously only as an afterthought. 9
After considering the issues and the arguments of the parties, we
find that it was erroneous for the respondent courts to affirm that
the original contract concluded on June 20, 1978, continued to
regulate the relations of the parties. What it should have held
instead was that the first written contract had been cancelled and
replaced by the second verbal contract because of the change in the
destination of the cargo.
In his testimony, the private respondent said he felt there was no
need to draft another agreement as anyway the rates remained
unchanged at P1.45 per sack of the petitioner's cargo. He did not
consider, however, that there was a substantial difference between
Roxas City and Kalibo, Aklan, as ports of destination, that affected
the continued existence of the first contract.
As correctly pointed out by the petitioner, Roxas City is a much
busier poet, than Kalibo, Aklan, where unloading of its cargo could
have been accomplished faster because of the lighter traffic. That is
why he agreed to pay demurrage charges under the original contract
but not under the revised verbal agreement. Testifying for the
petitioner, Julian Chua, its sales manager, declared that he had
expressed misgivings about paying demurrage charges in Roxas City
but was assured by Uy that there would be no such charges. 10 This
testimony was never denied by the private respondent.
Indeed, it would have been foolhardy for the petitioner to assume
demurrage charges in Roxas City, considering the crowded condition
of the port in that place. Such assumption should not have been
lightly inferred, especially since it is based on the resurrection of a
contract already voided because of the change in the port of
destination. To hold that the old agreement was still valid and
subsisting notwithstanding this substantial change was to impose
upon the petitioner a condition he had not, and would not have,
accepted under the new agreement.
In ruling that in the absence of a new written agreement the old
agreement must prevail, the courts a quo were saying that the first
agreement continued to be valid because the second was void. That
is hardly a logical conclusion. If the first contract was, indeed, still
valid, then it was clearly violated because of the diversion of the
cargo which, if we follow the reasoning of the courts a quo, could
not have been agreed upon verbally.
Was the second contract invalid because it was not in writing?
Article 1356 of the Civil Code provides:
Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity
are present. However, when the law requires that a contract be in
some form in order that it may be valid or enforceable, or that a
contract be proved in a certain way, that requirement is absolute and
indispensable. ...
We affirmed this rule only recently when we said in Tong v.
Intermediate Appellate Court 11 that "a contract may be entered into
in whatever form except where the law requires a document or
other special form as in the contracts enumerated in Article 1388 of
the Civil Code. The general rule, therefore, is that a contract may be
oral or written."
The contract executed by MADE and Uy was a contract of
affreightment. As defined, a contract of affreightment is a contract
with the shipowner to hire his ship or part of it, for the carriage of
goods, and generally takes the form either of a charter party or a bin
of lading. 12
Article 652 of the Code of Commerce provides that "a charter party
must be drawn in duplicate and signed by the contracting parties"
and enumerates the conditions and information to be embodied in
the contract, including "the lay days and extra lay days to be allowed
and the demurrage to be paid for each of them."
But while the rule clearly shows that this kind of contract must be in
writing, the succeeding Article 653 just as clearly provides:
If the cargo should be received without a charter party having been
signed, the contract shall be understood as executed in accordance
with what appears in the bill of lading, the sole evidence of title with
regard to the cargo for determining the rights and obligations of the
ship agent, of the captain and of the charterer.
We read this last provision as meaning that the charter party may be
oral, in which case the terms thereof, not having been reduced to
writing, shall be those embodied in the bin of lading.
Conformably, we recognized in Compania Maritima v. Insurance
Company of North America, 13 the existence of a contract of
affreightment entered into by telephone, where it was shown that
this oral agreement was later confirmed by a formal and written
booking issued by the shipper's branch office and later carried out by
the carrier.
We see no reason why the second agreement of the parties to
deliver the petitioner's cargo to Roxas City instead of Kalibo, Aklan,
should not be recognized simply because it was not in writing. Law
and jurisprudence support the validity of such a contract. And there
is no justification either to incorporate in such contract the
stipulation for demurrage in the original written contract which
provided for a different port of destination than that later agreed
upon by the parties. It was precisely this vital change in the second
contract that rendered that first contract ineffectual.
If the rate provided for in the old written contract was maintained in
the new oral contract, it was simply because, as the private
respondent himself declared, the rates for Kalibo, Aklan and Culasi,
Roxas City, where the same. But the demurrage charges cannot be
deemed stipulated also in the verbal contract because the conditions
in the ports of Aklan and Roxas City were, unlike the rates, not the
same. In fact, they were vastly different.
The parol evidence rule is clearly inapplicable because that involves
the verbal modification usually not allowed a written agreement
admittedly still valid and subsisting. In the case at bar, the first
written agreement had not merely been modified but
actually replaced by the second verbal agreement, which is perfectly
valid even if not in writing like the first. As has been correctly held:
No principle of law makes it necessary that a new contract upon the
same subject between the same persons shall be reduced to writing
because the old contract was written. 14
Regarding the bill of lading, an examination thereof will reveal that
there is no condition or requirement therein for the payment of
demurrage charges. Under the afore-quoted Article 653 of the Code
of Commerce, therefore, there was no reason to read any stipulation
for demurrage into the second contract.
At that, even assuming that the original agreement for demurrage
had been carried over in the second contract, there is no acceptable
evidence of the delay allegedly incurred by the petitioner in the
unloading of its cargo in Roxas City. Uy's testimony on this matter is
self-serving, let alone the fact that he admittedly was not present at
the unloading. His corroboration is hearsay. This consisted merely of
Exhibits B and C, 15 the so-called statement of facts regarding the
unloading of the cargo from the barge, prepared by the barge
patron, a certain Ding Julian. This person was not presented at the
trial to testify on his report and could therefore not be subjected to
cross examination.
A no less important consideration is the timeliness of the private
respondent's demand for the payment of demurrage charges as this
would indicate the real intention of the parties regarding this matter.
The petitioner points out that the original bill sent by the private
respondent charged it only for the freight but made no mention of
the demurrage charges. The trial court correctly noted, and the
respondent court agreed, that "this is so because at the time Exhibit
'2' was made which was on July 8, 1978, there was yet no
demurrage. As a matter of fact, unloading had not yet started. The
unloading started on July 13, 1978. (Exh. "D")
True. But accepting arguendo the facts stated in the mentioned
exhibits, we find that after sending the petitioner the billing dated
July 8, 1978, the private respondent did not make any additional
billing for demurrage following the completion of the unloading on
July 24, 1978, as alleged. It is also a matter of record that on
September 1, 1978, the petitioner remitted to Uy a check "in full
payment of our account," 16 which was accepted without protest and
eventually encashed by the private respondent. Furthermore, the
petitioner's sales manager testified that MADE and Uy entered into
at least one more voyage afterwards, and there was no demand
made then for the demurrage charges for the voyage to Roxas
City. 17 This has not been denied. Uy says he made such demand
verbally several times but offered no corroboration. It was only on
February 5, 1979, that he made his demand in writing. 18
Considering that Uy's original billing for freightage was made even
while the petitioner's cargo was still being unloaded in Roxas City,
one can only wonder why the billing for the demurrage charges was
not made with similar dispatch, that is, soon after the alleged delay.
Uncharacteristically, that billing was not at all prompt; indeed, it was
inexplicably deferred. It is not explained either why, when the
petitioner remitted what it expressly described as "fun payment" of
its account, Uy did not make haste to say that the demurrage
charges were still outstanding nor did he mention this claim when he
later entered into another freightage contract with the petitioner.
More curiously, it took all of six months before it occurred to Uy to
make a written demand for demurrage although he says his several
verbal demands had been consistently ignored.
The Court finds that while this delay, standing by itself, is not long
enough to constitute laches, it nevertheless clearly reflects on the
private respondent's credibility when assessed in relation to the G.R. No. L-4611 December 17, 1955
facts above narrated. QUA CHEE GAN, plaintiff-appellee,
The sum of it all is that while private respondent could have met all vs.
the arguments of the petitioner frontally, he elected to rely merely LAW UNION AND ROCK INSURANCE CO., LTD., represented by its
on the decisions of the trial court and the respondent court, perhaps agent, WARNER, BARNES AND CO., LTD., defendant-appellant.
feeling smuggly that he had already won. That was his error. He Delgado, Flores & Macapagal for appellant.
misjudged those judgments. It should never be assumed that when Andres Aguilar, Zacarias Gutierrez Lora, Gregorio Sabater and
this Court sits to review the decisions of the lower courts, it will Perkins, Ponce Enrile & Contreras for appellee.
merely and automatically affirm them without further inquiry on the
convenient assumption that they are correct. That may be a REYES, J. B. L., J.:
presumption, and it is often valid, but it is never conclusive upon us. Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in
Such decisions are always examined carefully and thoroughly by this the Court of First Instance of said province, seeking to recover the
Court, in the light of the issues and arguments raised by the parties proceeds of certain fire insurance policies totalling P370,000, issued
before it, and may be modified or even reversed whenever by the Law Union & Rock Insurance Co., Ltd., upon certain bodegas
warranted to give the deserving suitor the appropriate relief As in and merchandise of the insured that were burned on June 21, 1940.
this case. The records of the original case were destroyed during the liberation
WHEREFORE, the petition is GRANTED. The decision of the of the region, and were reconstituted in 1946. After a trial that
respondent court is REVERSED. Civil Case No. R 18095 in the lasted several years, the Court of First Instance rendered a decision
Regional Trial Court of Cebu is hereby dismissed, with costs against in favor of the plaintiff, the dispositive part whereof reads as follows:
the private respondent. Wherefore, judgment is rendered for the plaintiff and against the
SO ORDERED. defendant condemning the latter to pay the former —
(a) Under the first cause of action, the sum of P146,394.48;
(b) Under the second cause of action, the sum of P150,000;
(c) Under the third cause of action, the sum of P5,000;
(d) Under the fourth cause of action, the sum of P15,000; and
(e) Under the fifth cause of action, the sum of P40,000;
all of which shall bear interest at the rate of 8% per annum in
accordance with Section 91 (b) of the Insurance Act from September
26, 1940, until each is paid, with costs against the defendant.
The complaint in intervention of the Philippine National Bank is
dismissed without costs. (Record on Appeal, 166-167.)
From the decision, the defendant Insurance Company appealed
directly to this Court.
The record shows that before the last war, plaintiff-appellee owned
four warehouses or bodegas (designated as Bodegas Nos. 1 to 4) in
the municipality of Tabaco, Albay, used for the storage of stocks of
copra and of hemp, baled and loose, in which the appellee dealth
extensively. They had been, with their contents, insured with the
defendant Company since 1937, and the lose made payable to the
Philippine National Bank as mortgage of the hemp and crops, to the
extent of its interest. On June, 1940, the insurance stood as follows:
 Policy No. Property Insured
2637164 (Exhibit "LL") Bodega No. 1 (Building)
Bodega No. 2 (Building)
Bodega No. 3 (Building)
2637165 (Exhibit "JJ")
Bodega No. 4 (Building)
Hemp Press — moved by steam engine the insured that appellant's agents inspected the premises; and the
2637345 (Exhibit "X") Merchandise contents (copra and empty sacks of Bodega No. 1)
2637346 (Exhibit "Y") Merchandise contents (hemp) of Bodegarendered
2637067 (Exhibit "GG") Merchandise contents (loose hemp) of Bodega
Total
Fire of undetermined origin that broke out in the early morning of
July 21, 1940, and lasted almost one week, gutted and completely
destroyed Bodegas Nos. 1, 2 and 4, with the merchandise stored
theren. Plaintiff-appellee informed the insurer by telegram on the
same date; and on the next day, the fire adjusters engaged by
appellant insurance company arrived and proceeded to examine and
photograph the premises, pored over the books of the insured and
conducted an extensive investigation. The plaintiff having submitted
the corresponding fire claims, totalling P398,562.81 (but reduced to
the full amount of the insurance, P370,000), the Insurance Company
resisted payment, claiming violation of warranties and conditions,
filing of fraudulent claims, and that the fire had been deliberately
caused by the insured or by other persons in connivance with him.
With counsel for the insurance company acting as private
prosecutor, Que Chee Gan, with his brother, Qua Chee Pao, and
some employees of his, were indicted and tried in 1940 for the crime
of arson, it being claimed that they had set fire to the destroyed
warehouses to collect the insurance. They were, however, acquitted
by the trial court in a final decision dated July 9, 1941 (Exhibit WW).
Thereafter, the civil suit to collect the insurance money proceeded to
its trial and termination in the Court below, with the result noted at
the start of this opinion. The Philippine National Bank's complaint in
intervention was dismissed because the appellee had managed to
pay his indebtedness to the Bank during the pendecy of the suit, and
despite the fire losses.
In its first assignment of error, the insurance company alleges that
the trial Court should have held that the policies were avoided for
breach of warranty, specifically the one appearing on a rider pasted
(with other similar riders) on the face of the policies (Exhibits X, Y, JJ
and LL). These riders were attached for the first time in 1939, and
the pertinent portions read as follows:
Memo. of Warranty. — The undernoted Appliances for the
extinction of fire being kept on the premises insured hereby, and it
being declared and understood that there is an ample and constant
water supply with sufficient pressure available at all seasons for the
same, it is hereby warranted that the said appliances shall be
maintained in efficient working order during the currency of this
policy, by reason whereof a discount of 2 1/2 per cent is allowed on
the premium chargeable under this policy.
Hydrants in the compound, not less in number than one for each 150
feet of external wall measurement of building, protected, with not
less than 100 feet of hose piping and nozzles for every two hydrants
kept under cover in convenient places, the hydrants being supplied
with water pressure by a pumping engine, or from some other
source, capable of discharging at the rate of not less than 200 gallons
of water per minute into the upper story of the highest building
protected, and a trained brigade of not less than 20 men to work the
same.'
It is argued that since the bodegas insured had an external wall
perimeter of 500 meters or 1,640 feet, the appellee should have
eleven (11) fire hydrants in the compound, and that he actually had
only two (2), with a further pair nearby, belonging to the
municipality of Tabaco.
We are in agreement with the trial Court that the appellant is barred
by waiver (or rather estoppel) to claim violation of the so-called fire
hydrants warranty, for the reason that knowing fully all that the
number of hydrants demanded therein never existed from the very
beginning, the appellant neverthless issued the policies in question
subject to such warranty, and received the corresponding premiums.
It would be perilously close to conniving at fraud upon the insured to
allow appellant to claims now as void ab initio the policies that it had
issued to the plaintiff without warning of their fatal defect, of which
it was informed, and after it had misled the defendant into believing
that the policies were effective.
The insurance company was aware, even before the policies were
issued, that in the premises insured there were only two fire
hydrants installed by Qua Chee Gan and two others nearby, owned
by the municipality of TAbaco, contrary to the requirements of the
warranty in question. Such fact appears from positive testimony for
simple denials of appellant's representative (Jamiczon) can not
overcome that proof. That such inspection was made is moreover
No. 3 probable by its being a prerequisite for the fixing of the
discount on the premium to which the insured was entitled, since
No. 4 depended on the number of hydrants, and the fire
the discount
fighting equipment available (See "Scale of Allowances" to which the
policies were expressly made subject). The law, supported by a long
line of cases, is expressed by American Jurisprudence (Vol. 29, pp.
611-612) to be as follows:
It is usually held that where the insurer, at the time of the issuance
of a policy of insurance, has knowledge of existing facts which, if
insisted on, would invalidate the contract from its very inception,
such knowledge constitutes a waiver of conditions in the contract
inconsistent with the facts, and the insurer is stopped thereafter
from asserting the breach of such conditions. The law is charitable
enough to assume, in the absence of any showing to the contrary,
that an insurance company intends to executed a valid contract in
return for the premium received; and when the policy contains a
condition which renders it voidable at its inception, and this result is
known to the insurer, it will be presumed to have intended to waive
the conditions and to execute a binding contract, rather than to have
deceived the insured into thinking he is insured when in fact he is
not, and to have taken his money without consideration. (29 Am.
Jur., Insurance, section 807, at pp. 611-612.)
The reason for the rule is not difficult to find.
The plain, human justice of this doctrine is perfectly apparent. To
allow a company to accept one's money for a policy of insurance
which it then knows to be void and of no effect, though it knows as it
must, that the assured believes it to be valid and binding, is so
contrary to the dictates of honesty and fair dealing, and so closely
related to positive fraud, as to the abhorent to fairminded men. It
would be to allow the company to treat the policy as valid long
enough to get the preium on it, and leave it at liberty to repudiate it
the next moment. This cannot be deemed to be the real intention of
the parties. To hold that a literal construction of the policy expressed
the true intention of the company would be to indict it, for
fraudulent purposes and designs which we cannot believe it to be
guilty of (Wilson vs. Commercial Union Assurance Co., 96 Atl. 540,
543-544).
The inequitableness of the conduct observed by the insurance
company in this case is heightened by the fact that after the insured
had incurred the expense of installing the two hydrants, the
company collected the premiums and issued him a policy so worded
that it gave the insured a discount much smaller than that he was
normaly entitledto. According to the "Scale of Allowances," a policy
subject to a warranty of the existence of one fire hydrant for every
150 feet of external wall entitled the insured to a discount of 7 1/2
per cent of the premium; while the existence of "hydrants, in
compund" (regardless of number) reduced the allowance on the
premium to a mere 2 1/2 per cent. This schedule was logical, since a
greater number of hydrants and fire fighting appliances reduced the
risk of loss. But the appellant company, in the particular case now
before us, so worded the policies that while exacting the greater
number of fire hydrants and appliances, it kept the premium
discount at the minimum of 2 1/2 per cent, thereby giving the
insurance company a double benefit. No reason is shown why
appellant's premises, that had been insured with appellant for
several years past, suddenly should be regarded in 1939 as so
hazardous as to be accorded a treatment beyond the limits of
appellant's own scale of allowances. Such abnormal treatment of the
insured strongly points at an abuse of the insurance company's
selection of the words and terms of the contract, over which it had
absolute control.
These considerations lead us to regard the parol evidence rule,
invoked by the appellant as not applicable to the present case. It is
not a question here whether or not the parties may vary a written
contract by oral evidence; but whether testimony is receivable so
that a party may be, by reason of inequitable conduct shown,
estopped from enforcing forfeitures in its favor, in order to forestall
fraud or imposition on the insured.
Receipt of Premiums or Assessments afte Cause for Forfeiture Other
than Nonpayment. — It is a well settled rule of law that an insurer
which with knowledge of facts entitling it to treat a policy as no
longer in force, receives and accepts a preium on the policy,
estopped to take advantage of the forfeiture. It cannot treat the
policy as void for the purpose of defense to an action to recover for a
loss thereafter occurring and at the same time treat it as valid for the
purpose of earning and collecting further premiums." (29 Am. Jur.,
653, p. 657.)
It would be unconscionable to permit a company to issue a policy
under circumstances which it knew rendered the policy void and
then to accept and retain premiums under such a void policy.
Neither law nor good morals would justify such conduct and the
doctrine of equitable estoppel is peculiarly applicable to the
situation. (McGuire vs. Home Life Ins. Co. 94 Pa. Super Ct. 457.)
Moreover, taking into account the well known rule that ambiguities
or obscurities must be strictly interpreted aganst the prty that
caused them, 1the "memo of warranty" invoked by appellant bars the
latter from questioning the existence of the appliances called for in
the insured premises, since its initial expression, "the undernoted
appliances for the extinction of fire being kept on the premises
insured hereby, . . . it is hereby warranted . . .", admists of
interpretation as an admission of the existence of such appliances
which appellant cannot now contradict, should the parol evidence
rule apply.
The alleged violation of the warranty of 100 feet of fire hose for
every two hydrants, must be equally rejected, since the appellant's
argument thereon is based on the assumption that the insured was
bound to maintain no less than eleven hydrants (one per 150 feet of
wall), which requirement appellant is estopped from enforcing. The
supposed breach of the wter pressure condition is made to rest on
the testimony of witness Serra, that the water supply could fill a 5-
gallon can in 3 seconds; appellant thereupon inferring that the
maximum quantity obtainable from the hydrants was 100 gallons a
minute, when the warranty called for 200 gallons a minute. The
transcript shows, however, that Serra repeatedly refused and
professed inability to estimate the rate of discharge of the water, and
only gave the "5-gallon per 3-second" rate because the insistence of
appellant's counsel forced the witness to hazard a guess. Obviously,
the testimony is worthless and insufficient to establish the violation
claimed, specially since the burden of its proof lay on appellant.
As to maintenance of a trained fire brigade of 20 men, the record is
preponderant that the same was organized, and drilled, from time to
give, altho not maintained as a permanently separate unit, which the
warranty did not require. Anyway, it would be unreasonable to
expect the insured to maintain for his compound alone a fire fighting
force that many municipalities in the Islands do not even possess.
There is no merit in appellant's claim that subordinate membership
of the business manager (Co Cuan) in the fire brigade, while its
direction was entrusted to a minor employee unders the testimony
improbable. A business manager is not necessarily adept at fire
fighting, the qualities required being different for both activities.
Under the second assignment of error, appellant insurance company
avers, that the insured violated the "Hemp Warranty" provisions of
Policy No. 2637165 (Exhibit JJ), against the storage of gasoline, since
appellee admitted that there were 36 cans (latas) of gasoline in the
building designed as "Bodega No. 2" that was a separate structure
not affected by the fire. It is well to note that gasoline is not
specifically mentioned among the prohibited articles listed in the so-
called "hemp warranty." The cause relied upon by the insurer speaks
of "oils (animal and/or vegetable and/or mineral and/or their liquid
products having a flash point below 300o Fahrenheit", and is
decidedly ambiguous and uncertain; for in ordinary parlance, "Oils"
mean "lubricants" and not gasoline or kerosene. And how many
insured, it may well be wondered, are in a position to understand or
determine "flash point below 003o Fahrenheit. Here, again, by
reason of the exclusive control of the insurance company over the
terms and phraseology of the contract, the ambiguity must be held
strictly against the insurer and liberraly in favor of the insured,
specially to avoid a forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur.
180).
Insurance is, in its nature, complex and difficult for the layman to
understand. Policies are prepared by experts who know and can
anticipate the hearing and possible complications of every
contingency. So long as insurance companies insist upon the use of
ambiguous, intricate and technical provisions, which conceal rather
than frankly disclose, their own intentions, the courts must, in
fairness to those who purchase insurance, construe every ambiguity
in favor of the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash.
324, LRA 1917A, 1237.)
An insurer should not be allowed, by the use of obscure phrases and
exceptions, to defeat the very purpose for which the policy was
procured (Moore vs. Aetna Life Insurance Co., LRA 1915D, 264).
We see no reason why the prohibition of keeping gasoline in the
premises could not be expressed clearly and unmistakably, in the
language and terms that the general public can readily understand,
without resort to obscure esoteric expression (now derisively termed
"gobbledygook"). We reiterate the rule stated in Bachrach vs. British
American Assurance Co. (17 Phil. 555, 561):
If the company intended to rely upon a condition of that character, it
ought to have been plainly expressed in the policy.
This rigid application of the rule on ambiguities has become
necessary in view of current business practices. The courts cannot
ignore that nowadays monopolies, cartels and concentrations of
capital, endowed with overwhelming economic power, manage to
impose upon parties dealing with them cunningly prepared
"agreements" that the weaker party may not change one whit, his
participation in the "agreement" being reduced to the alternative to
take it or leave it" labelled since Raymond Baloilles" contracts by
adherence" (con tracts d'adhesion), in contrast to these entered into
by parties bargaining on an equal footing, such contracts (of which
policies of insurance and international bills of lading are prime
examples) obviously call for greater strictness and vigilance on the
part of courts of justice with a view to protecting the weaker party
from abuses and imposition, and prevent their becoming traps for
the unwarry (New Civil Coee, Article 24; Sent. of Supreme Court of
Spain, 13 Dec. 1934, 27 February 1942).
Si pudiera estimarse que la condicion 18 de la poliza de seguro
envolvia alguna oscuridad, habra de ser tenido en cuenta que al
seguro es, practicamente un contrato de los llamados de adhesion y
por consiguiente en caso de duda sobre la significacion de las
clausulas generales de una poliza — redactada por las compafijas sin
la intervencion alguna de sus clientes — se ha de adoptar de
acuerdo con el articulo 1268 del Codigo Civil, la interpretacion mas
favorable al asegurado, ya que la obscuridad es imputable a la
empresa aseguradora, que debia haberse explicado mas claramante.
(Dec. Trib. Sup. of Spain 13 Dec. 1934)
The contract of insurance is one of perfect good faith (uferrimal
fidei) not for the insured alone, but equally so for the insurer; in fact,
it is mere so for the latter, since its dominant bargaining position
carries with it stricter responsibility.
Another point that is in favor of the insured is that the gasoline kept
in Bodega No. 2 was only incidental to his business, being no more
than a customary 2 day's supply for the five or six motor vehicles
used for transporting of the stored merchandise (t. s. n., pp. 1447-
1448). "It is well settled that the keeping of inflammable oils on the
premises though prohibited by the policy does not void it if such
keeping is incidental to the business." Bachrach vs. British American
Ass. Co., 17 Phil. 555, 560); and "according to the weight of
authority, even though there are printed prohibitions against
keeping certain articles on the insured premises the policy will not
be avoided by a violation of these prohibitions, if the prohibited
articles are necessary or in customary use in carrying on the trade or
business conducted on the premises." (45 C. J. S., p. 311; also 4
Couch on Insurance, section 966b). It should also be noted that the
"Hemp Warranty" forbade storage only "in the building to which this
insurance applies and/or in any building communicating therewith",
and it is undisputed that no gasoline was stored in the burned
bodegas, and that "Bodega No. 2" which was not burned and where
the gasoline was found, stood isolated from the other insured
bodegas.
The charge that the insured failed or refused to submit to the
examiners of the insurer the books, vouchers, etc. demanded by
them was found unsubstantiated by the trial Court, and no reason
has been shown to alter this finding. The insured gave the insurance
examiner all the date he asked for (Exhibits AA, BB, CCC and Z), and
the examiner even kept and photographed some of the examined
books in his possession. What does appear to have been rejected by
the insured was the demand that he should submit
"a list of all books, vouchers, receipts and other records" (Age 4,
Exhibit 9-c); but the refusal of the insured in this instance was well
justified, since the demand for a list of all the vouchers (which were
not in use by the insured) and receipts was positively unreasonable,
considering that such listing was superfluous because the insurer
was not denied access to the records, that the volume of Qua Chee
Gan's business ran into millions, and that the demand was made just
after the fire when everything was in turmoil. That the
representatives of the insurance company were able to secure all the
date they needed is proved by the fact that the adjuster Alexander
Stewart was able to prepare his own balance sheet (Exhibit L of the
criminal case) that did not differ from that submitted by the insured
(Exhibit J) except for the valuation of the merchandise, as expressly
found by the Court in the criminal case for arson. (Decision, Exhibit
WW).
How valuations may differ honestly, without fraud being involved,
was strikingly illustrated in the decision of the arson case (Exhibit
WW) acquiting Qua Choc Gan, appellee in the present proceedings.
The decision states (Exhibit WW, p. 11):
Alexander D. Stewart declaro que ha examinado los libros de Qua
Choc Gan en Tabaco asi como su existencia de copra y abaca en las
bodega al tiempo del incendio durante el periodo comprendido
desde el 1.o de enero al 21 de junio de 1940 y ha encontrado que
Qua Choc Gan ha sufrico una perdida de P1,750.76 en su negocio en
Tabaco. Segun Steward al llegar a este conclusion el ha tenidoen
cuenta el balance de comprobacion Exhibit 'J' que le ha entregado el
mismo acusado Que Choc Gan en relacion con sus libros y lo ha
encontrado correcto a excepcion de los precios de abaca y copra que
alli aparecen que no estan de acuerdo con los precios en el mercado.
Esta comprobacion aparece en el balance mercado exhibit J que fue
preparado por el mismo testigo.
In view of the discrepancy in the valuations between the insured and
the adjuster Stewart for the insurer, the Court referred the
controversy to a government auditor, Apolonio Ramos; but the latter
reached a different result from the other two. Not only that, but
Ramos reported two different valuations that could be reached
according to the methods employed (Exhibit WW, p. 35):
La ciencia de la contabilidad es buena, pues ha tenido sus muchos
usos buenos para promovar el comercio y la finanza, pero en el caso
presente ha resultado un tanto cumplicada y acomodaticia, como lo
prueba el resultado del examen hecho por los contadores Stewart y
Ramos, pues el juzgado no alcanza a ver como habiendo examinado
las mismas partidas y los mismos libros dichos contadores hayan de
llegara dos conclusiones que difieron sustancialmente entre si. En
otras palabras, no solamente la comprobacion hecha por Stewart
difiere de la comprobacion hecha por Ramos sino que, segun este
ultimo, su comprobacion ha dado lugar a dos resultados diferentes
dependiendo del metodo que se emplea.
Clearly then, the charge of fraudulent overvaluation cannot be
seriously entertained. The insurer attempted to bolster its case with
alleged photographs of certain pages of the insurance book
(destroyed by the war) of insured Qua Chee Gan (Exhibits 26-A and
26-B) and allegedly showing abnormal purchases of hemp and copra
from June 11 to June 20, 1940. The Court below remained
unconvinced of the authenticity of those photographs, and rejected
them, because they were not mentioned not introduced in the
criminal case; and considering the evident importance of said
exhibits in establishing the motive of the insured in committing the
arson charged, and the absence of adequate explanation for their
omission in the criminal case, we cannot say that their rejection in
the civil case constituted reversible error.
The next two defenses pleaded by the insurer, — that the insured
connived at the loss and that the fraudulently inflated the quantity
of the insured stock in the burnt bodegas, — are closely related to
each other. Both defenses are predicted on the assumption that the
insured was in financial difficulties and set the fire to defraud the
insurance company, presumably in order to pay off the Philippine
National Bank, to which most of the insured hemp and copra was
pledged. Both defenses are fatally undermined by the established
fact that, notwithstanding the insurer's refusal to pay the value of
the policies the extensive resources of the insured (Exhibit WW)
enabled him to pay off the National Bank in a short time; and if he
was able to do so, no motive appears for attempt to defraud the
insurer. While the acquittal of the insured in the arson case is not res
judicata on the present civil action, the insurer's evidence, to judge
from the decision in the criminal case, is practically identical in both
cases and must lead to the same result, since the proof to establish
the defense of connivance at the fire in order to defraud the insurer
"cannot be materially less convincing than that required in order to
convict the insured of the crime of arson"(Bachrach vs. British
American Assurance Co., 17 Phil. 536).
As to the defense that the burned bodegas could not possibly have
contained the quantities of copra and hemp stated in the fire claims,
the insurer's case rests almost exclusively on the estimates,
inferences and conclusionsAs to the defense that the burned
bodegas could not possibly have contained the quantities of copra
and hemp stated in the fire claims, the insurer's case rests almost
exclusively on the estimates, inferences and conclusions of its
adjuster investigator, Alexander D. Stewart, who examined the
premises during and after the fire. His testimony, however, was
based on inferences from the photographs and traces found after
the fire, and must yield to the contradictory testimony of engineer
Andres Bolinas, and specially of the then Chief of the Loan
Department of the National Bank's Legaspi branch, Porfirio Barrios,
and of Bank Appraiser Loreto Samson, who actually saw the contents
of the bodegas shortly before the fire, while inspecting them for the
mortgagee Bank. The lower Court was satisfied of the veracity and
accuracy of these witnesses, and the appellant insurer has failed to
substantiate its charges aganst their character. In fact, the insurer's
repeated accusations that these witnesses were later "suspended for
fraudulent transactions" without giving any details, is a plain attempt
to create prejudice against them, without the least support in fact.
Stewart himself, in testifying that it is impossible to determine from
the remains the quantity of hemp burned (t. s. n., pp. 1468, 1470),
rebutted appellant's attacks on the refusal of the Court below to
accept its inferences from the remains shown in the photographs of
the burned premises. It appears, likewise, that the adjuster's
calculations of the maximum contents of the destroyed warehouses
rested on the assumption that all the copra and hemp were in sacks,
and on the result of his experiments to determine the space
occupied by definite amounts of sacked copra. The error in the
estimates thus arrived at proceeds from the fact that a large amount
of the insured's stock were in loose form, occupying less space than
when kept in sacks; and from Stewart's obvious failure to give due
allowance for the compression of the material at the bottom of the
piles (t. s. n., pp. 1964, 1967) due to the weight of the overlying
stock, as shown by engineer Bolinas. It is probable that the errors
were due to inexperience (Stewart himself admitted that this was
the first copra fire he had investigated); but it is clear that such
errors render valueles Stewart's computations. These were in fact
twice passed upon and twice rejected by different judges (in the
criminal and civil cases) and their concordant opinion is practically
conclusive.
The adjusters' reports, Exhibits 9-A and 9-B, were correctly
disregarded by the Court below, since the opinions stated therein
were based on ex parte investigations made at the back of the
insured; and the appellant did not present at the trial the original
testimony and documents from which the conclusions in the report
were drawn.lawphi1.net
Appellant insurance company also contends that the claims filed by
the insured contained false and fraudulent statements that avoided
the insurance policy. But the trial Court found that the discrepancies
were a result of the insured's erroneous interpretation of the
provisions of the insurance policies and claim forms, caused by his
imperfect knowledge of English, and that the misstatements were
innocently made and without intent to defraud. Our review of the
lengthy record fails to disclose reasons for rejecting these
conclusions of the Court below. For example, the occurrence of
previous fires in the premises insured in 1939, altho omitted in the
claims, Exhibits EE and FF, were nevertheless revealed by the insured
in his claims Exhibits Q (filed simultaneously with them), KK and WW.
Considering that all these claims were submitted to the smae agent,
and that this same agent had paid the loss caused by the 1939 fire,
we find no error in the trial Court's acceptance of the insured's
explanation that the omission in Exhibits EE and FF was due to
inadvertance, for the insured could hardly expect under such
circumstances, that the 1939 would pass unnoticed by the insurance
agents. Similarly, the 20 per cent overclaim on 70 per cent of the
hemo stock, was explained by the insured as caused by his belief
that he was entitled to include in the claim his expected profit on the
70 per cent of the hemp, because the same was already contracted
for and sold to other parties before the fire occurred. Compared with
other cases of over-valuation recorded in our judicial annals, the 20
per cent excess in the case of the insured is not by itself sufficient to
establish fraudulent intent. Thus, in Yu Cua vs. South British Ins. Co.,
41 Phil. 134, the claim was fourteen (14) times (1,400 per cent)
bigger than the actual loss; in Go Lu vs. Yorkshire Insurance Co., 43
Phil., 633, eight (8) times (800 per cent); in Tuason vs. North China
Ins. Co., 47 Phil. 14, six (6) times (600 per cent); in Tan It vs. Sun
Insurance, 51 Phil. 212, the claim totalled P31,860.85 while the
goods insured were inventoried at O13,113. Certainly, the insured's
overclaim of 20 per cent in the case at bar, duly explained by him to
the Court a quo, appears puny by comparison, and can not be
regarded as "more than misstatement, more than inadvertence of
mistake, more than a mere error in opinion, more than a slight
exaggeration" (Tan It vs. Sun Insurance Office, ante) that would
entitle the insurer to avoid the policy. It is well to note that the
overchange of 20 per cent was claimed only on a part (70 per cent)
of the hemp stock; had the insured acted with fraudulent intent,
nothing prevented him from increasing the value of all of his copra,
hemp and buildings in the same proportion. This also applies to the
alleged fraudulent claim for burned empty sacks, that was likewise
explained to our satisfaction and that of the trial Court. The rule is
that to avoid a policy, the false swearing must be wilful and with
intent to defraud (29 Am. Jur., pp. 849-851) which was not the cause.
Of course, the lack of fraudulent intent would not authorize the
collection of the expected profit under the terms of the polices, and
the trial Court correctly deducte the same from its award.
We find no reversible error in the judgment appealed from,
wherefore the smae is hereby affirmed. Costs against the appellant.
So ordered.