SECOND DIVISION

JUNIE MALLILLIN Y. LOPEZ, G.R. No. 172953

Petitioner,

Present:

QUISUMBING, J.,
- versus - Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
PEOPLE OF THE PHILIPPINES, BRION, JJ.
Respondent.
Promulgated:

April 30, 2008

x ---------------------------------------------------------------------------------x
DECISION

TINGA, J.:

The presumption of regularity in the performance of official functions cannot by its lonesome overcome the constitutional

presumption of innocence. Evidence of guilt beyond reasonable doubt and nothing else can eclipse the hypothesis of

guiltlessness. And this burden is met not by bestowing distrust on the innocence of the accused but by obliterating all

doubts as to his culpability.

In this Petition for Review[1] under Rule 45 of the Rules of Court, Junie Malillin y Lopez (petitioner) assails the

Decision[2] of the Court of Appeals dated 27 January 2006 as well as its Resolution [3] dated 30 May 2006 denying his

motion for reconsideration. The challenged decision has affirmed the Decision [4] of the Regional Trial Court (RTC)

of Sorsogon City, Branch 52[5]which found petitioner guilty beyond reasonable doubt of illegal possession of

methamphetamine hydrochloride, locally known as shabu, a prohibited drug.

The antecedent facts follow.

On the strength of a warrant[6] of search and seizure issued by the RTC of Sorsogon City, Branch 52, a team of five police
officers raided the residence of petitioner in Barangay Tugos, SorsogonCity on 4 February 2003. The team was headed by

P/Insp. Catalino Bolanos (Bolanos), with PO3 Roberto Esternon (Esternon), SPO1 Pedro Docot, SPO1 Danilo Lasala and

SPO2 Romeo Gallinera(Gallinera) as members. The searchconducted in the presence of barangay kagawad

Delfin Licup as well as petitioner himself, his wife Sheila and his mother, Normaallegedly yielded two (2) plastic sachets

of shabu and five (5) empty plastic sachets containing residual morsels of the said substance.

Accordingly, petitioner was charged with violation of Section 11, [7] Article II of Republic Act No. 9165, otherwise

known as The Comprehensive Dangerous Drugs Act of 2002, in a criminal information whose inculpatory portion reads:

That on or about the 4th day of February 2003, at about 8:45 in the morning in
Barangay Tugos, Sorsogon City, Philippines, the said accused did then and there willfully, unlawfully
and feloniously have in his possession, custody and control two (2) plastic sachets of
methamphetamine hydrochloride [or] shabu with an aggregate weight of 0.0743 gram, and four empty
 sachets containing shabu residue, without having been previously authorized by law to possess the
same.

CONTRARY TO LAW.[8]

Petitioner entered a negative plea.[9] At the ensuing trial, the prosecution presented Bolanos, Arroyo and Esternon

as witnesses.

Taking the witness stand, Bolanos, the leader of the raiding team, testified on the circumstances surrounding the

search as follows: that he and his men were allowed entry into the house by petitioner after the latter was shown the

search warrant; that upon entering the premises, he ordered Esternon and barangay kagawad Licup, whose assistance

had previously been requested in executing the warrant, to conduct the search; that the rest of the police team positioned

themselves outside the house to make sure that nobody flees; that he was observing the conduct of the search from about

a meter away; that the search conducted inside the bedroom of petitioner yielded five empty plastic sachets with

suspected shabu residue contained in a denim bag and kept in one of the cabinets, and two plastic sachets

containing shabu which fell off from one of the pillows searched by Esternona discovery that was made in the presence of

petitioner.[10] On cross examination, Bolanos admitted that during the search, he was explaining its progress to petitioners

mother, Norma, but that at the same time his eyes were fixed on the search being conducted by Esternon. [11]

Esternon testified that the denim bag containing the empty plastic sachets was found behind the door of the

bedroom and not inside the cabinet; that he then found the two filled sachets under a pillow on the bed and forthwith

called on Gallinera to have the items recorded and marked.[12] On cross, he admitted that it was he alone who conducted

the search because Bolanos was standing behind him in the living room portion of the house and that petitioner handed

to him the things to be searched, which included the pillow in which the two sachets of shabu were kept;[13] that he

brought the seized items to the Balogo Police Station for a true inventory, then to the trial court[14]and thereafter to the

laboratory.[15]

Supt. Lorlie Arroyo (Arroyo), the forensic chemist who administered the examination on the seized items, was

presented as an expert witness to identify the items submitted to the laboratory.She revealed that the two filled sachets

were positive of shabu and that of the five empty sachets, four were positive of containing residue of the same

substance.[16] She further admitted that all seven sachets were delivered to the laboratory by Esternon in the afternoon of

the same day that the warrant was executed except that it was not she but rather a certain Mrs. Ofelia Garcia who

received the items from Esternon at the laboratory.[17]

The evidence for the defense focused on the irregularity of the search and seizure conducted by the police

operatives. Petitioner testified that Esternon began the search of the bedroom with Licup and petitioner himself inside.

However, it was momentarily interrupted when one of the police officers declared to Bolanos that petitioners wife, Sheila,
was tucking something inside her underwear. Forthwith, a lady officer arrived to conduct the search of Sheilas body

inside the same bedroom. At that point, everyone except Esternon was asked to step out of the

room. So, it was in his presence that Sheila was searched by the lady officer. Petitioner was then asked by a police officer

to buy
cigarettes at a nearby store and when he returned from the errand, he was told that nothing was found on Sheilas

body.[18] Sheila was ordered to transfer to the other bedroom together with her children.[19]

Petitioner asserted that on his return from the errand, he was summoned by Esternon to the bedroom and

once inside, the officer closed the door and asked him to lift the mattress on the bed. And as he was doing as told,

Esternon stopped him and ordered him to lift the portion of the headboard. In that instant, Esternon showed him sachet

of shabu which according to him came from a pillow on the bed. [20] Petitioners account in its entirety was corroborated in

its material respects by Norma, barangay kagawad Licup and Sheila in their testimonies. Norma and Sheila positively

declared that petitioner was not in the house for the entire duration of the search because at one point he was sent by

Esternon to the store to buy cigarettes while Sheila was being searched by the lady officer. [21] Licup for his part testified on

the circumstances surrounding the discovery of the plastic sachets. He recounted that after the five empty sachets were

found, he went out of the bedroom and into the living room and after about three minutes, Esternon, who was left inside

the bedroom, exclaimed that he had just found two filled sachets.[22]

On 20 June 2004 the trial court rendered its Decision declaring petitioner guilty beyond reasonable doubt of the

offense charged. Petitioner was condemned to prison for twelve years (12) and one (1) day to twenty (20) years and to pay a

fine of P300,000.00.[23] The trial court reasoned that the fact that shabu was found in the house of petitioner was prima

facie evidence of petitioners animus possidendi sufficient to convict him of the charge inasmuch as things which a person

possesses or over which he exercises acts of ownership are presumptively owned by him. It also noted petitioners failure

to ascribe ill motives to the police officers to fabricate charges against him.[24]

Aggrieved, petitioner filed a Notice of Appeal.[25] In his Appeal Brief[26] filed with the Court of Appeals, petitioner

called the attention of the court to certain irregularities in the manner by which the search of his house was
conducted. For its part, the Office of the Solicitor General (OSG) advanced that on the contrary, the prosecution evidence

sufficed for petitioners conviction and that the defense never advanced any proof to show that the members of the raiding

team was improperly motivated to hurl false charges against him and hence the presumption that they had regularly

performed their duties should prevail.[27]

On 27 January 2006, the Court of Appeals rendered the assailed decision affirming the judgment of the trial court

but modifying the prison sentence to an indeterminate term of twelve (12) years as minimum to seventeen (17) years as

maximum.[28] Petitioner moved for reconsideration but the same was denied by the appellate court. [29] Hence, the instant

petition which raises substantially the same issues.

In its Comment,[30] the OSG bids to establish that the raiding team had regularly performed its duties in the

conduct of the search.[31] It points to petitioners incredulous claim that he was framed up by Esternon on the ground that

the discovery of the two filled sachets was made in his and Licups presence. It likewise notes that petitioners bare denial
cannot defeat the positive assertions of the prosecution and that the same does not suffice to overcome the prima

facie existence of animus possidendi.

This argument, however, hardly holds up to what is revealed by the records.

Prefatorily, although the trial courts findings of fact are entitled to great weight and will not be disturbed on

appeal, this rule does not apply where facts of weight and substance have been overlooked, misapprehended or

misapplied in a case under appeal.[32] In the case at bar, several circumstances obtain which, if properly appreciated,

would warrant a conclusion different from that arrived at by the trial court and the Court of Appeals.

Prosecutions for illegal possession of prohibited drugs necessitates that the elemental act of possession of a

prohibited substance be established with moral certainty, together with the fact that the same is not authorized by

law. The dangerous drug itself constitutes the very corpus delicti of the offense and the fact of its existence is vital to a

judgment of conviction.[33] Essential therefore in these cases is that the identity of the prohibited drug be established

beyond doubt.[34] Be that as it may, the mere fact of unauthorized possession will not suffice to create in a reasonable

mind the moral certainty required to sustain a finding of guilt. More than just the fact of possession, the fact that the

substance illegally possessed in the first place is the same substance offered in court as exhibit must also be

established with the same unwavering exactitude as that requisite to make a finding of guilt. The chain of custody

requirement performs this function in that it ensures that unnecessary doubts concerning the identity of the evidence are

removed.[35]

As a method of authenticating evidence, the chain of custody rule requires that the admission of an exhibit be

preceded by evidence sufficient to support a finding that the matter in question is what the proponent claims it to be. [36] It

would include testimony about every link in the chain, from the moment the item was picked up to the time it is offered

into evidence, in such a way that every person who touched the exhibit would describe how and from whom it was

received, where it was and what happened to it while in the witness possession, the condition in which it was received and

the condition in which it was delivered to the next link in the chain. These witnesses would then describe the precautions
taken to ensure that there had been no change in the condition of the item and no opportunity for someone not in the

chain to have possession of the same.[37]

While testimony about a perfect chain is not always the standard because it is almost always impossible to

obtain, an unbroken chain of custody becomes indispensable and essential when the item of real evidence is not

distinctive and is not readily identifiable, or when its condition at the time of testing or trial is critical, or when a witness

has failed to observe its uniqueness.[38] The same standard likewise obtains in case the evidence is susceptible to

alteration, tampering, contamination[39] and even substitution and exchange.[40] In other words, the exhibits level of

susceptibility to fungibility, alteration or tamperingwithout regard to whether the same is advertent or otherwise
notdictates the level of strictness in the application of the chain of custody rule.

Indeed, the likelihood of tampering, loss or mistake with respect to an exhibit is greatest when the exhibit is small

and is one that has physical characteristics fungible in nature and similar in form to substances familiar to people in their
daily lives.[41] Graham vs. State[42] positively acknowledged this danger. In that case where a substance later analyzed as

heroinwas handled by two police officers prior to examination who however did not testify in court on the condition and

whereabouts of the exhibit at the time it was in their possessionwas excluded from the prosecution evidence, the court

pointing out that the white powder seized could have been indeed heroin or it could have been sugar or baking powder. It

ruled that unless the state can show by records or testimony, the continuous whereabouts of the exhibit at least between

the time it came into the possession of police officers until it was tested in the laboratory to determine its composition,

testimony of the state as to the laboratorys findings is inadmissible.[43]

A unique characteristic of narcotic substances is that they are not readily identifiable as in fact they are subject to

scientific analysis to determine their composition and nature. The Court cannot reluctantly close its eyes to the likelihood,

or at least the possibility, that at any of the links in the chain of custody over the same there could have been tampering,

alteration or substitution of substances from other casesby accident or otherwisein which similar evidence was seized or

in which similar evidence was submitted for laboratory testing. Hence, in authenticating the same, a standard more

stringent than that applied to cases involving objects which are readily identifiable must be applied, a more exacting

standard that entails a chain of custody of the item with sufficient completeness if only to render it improbable that the

original item has either been exchanged with another or been contaminated or tampered with.

A mere fleeting glance at the records readily raises significant doubts as to the identity of the sachets

of shabu allegedly seized from petitioner. Of the people who came into direct contact with the seized objects, only Esternon

and Arroyo testified for the specific purpose of establishing the identity of the evidence. Gallinera, to whom Esternon

supposedly handed over the confiscated sachets for recording and marking, as well as Garcia, the person to whom

Esternon directly handed over the seized items for chemical analysis at the crime laboratory, were not presented in court

to establish the circumstances under which they handled the subject items. Any reasonable mind might then ask the

question: Are the sachets of shabu allegedly seized from petitioner the very same objects laboratory tested and offered in

court as evidence?

The prosecutions evidence is incomplete to provide an affirmative answer. Considering that it was Gallinera who
recorded and marked the seized items, his testimony in court is crucial to affirm whether the exhibits were the same items

handed over to him by Esternon at the place of seizure and acknowledge the initials marked thereon as his own. The same

is true of Garcia who could have, but nevertheless failed, to testify on the circumstances under which she received the

items from Esternon, what she did with them during the time they were in her possession until before she delivered the

same to Arroyo for analysis.

The prosecution was thus unsuccessful in discharging its burden of establishing the identity of the seized items

because it failed to offer not only the testimony of Gallinera and Garcia but also any sufficient explanation for such

failure. In effect, there is no reasonable guaranty as to the integrity of the exhibits inasmuch as it failed to rule out the
possibility of substitution of the exhibits, which cannot but inure to its own detriment. This holds true not only with

respect to the two filled sachets but also to the five sachets allegedly containing morsels of shabu.
 Also, contrary to what has been consistently claimed by the prosecution that the search and seizure was

conducted in a regular manner and must be presumed to be so, the records disclose a series of irregularities committed

by the police officers from the commencement of the search of petitioners house until the submission of the seized items

to the laboratory for analysis. The Court takes note of the unrebutted testimony of petitioner, corroborated by that of his

wife, that prior to the discovery of the two filled sachets petitioner was sent out of his house to buy cigarettes at a nearby

store. Equally telling is the testimony of Bolanos that he posted some of the members of the raiding team at the door of

petitioners house in order to forestall the likelihood of petitioner fleeing the scene. By no stretch of logic can it be

conclusively explained why petitioner was sent out of his house on an errand when in the first place the police officers

were in fact apprehensive that he would flee to evade arrest. This fact assumes prime importance because the two filled

sachets were allegedly discovered by Esternon immediately after petitioner returned to his house from the errand, such

that he was not able to witness the conduct of the search during the brief but crucial interlude that he was away.

It is also strange that, as claimed by Esternon, it was petitioner himself who handed to him the items to be

searched including the pillow from which the two filled sachets allegedly fell.Indeed, it is contrary to ordinary human

behavior that petitioner would hand over the said pillow to Esternon knowing fully well that illegal drugs are concealed

therein. In the same breath, the manner by which the search of Sheilas body was brought up by a member of the raiding

team also raises serious doubts as to the necessity thereof. The declaration of one of the police officers that he saw Sheila

tuck something in her underwear certainly diverted the attention of the members of petitioners household away from the

search being conducted by Esternon prior to the discovery of the two filled sachets. Lest it be omitted, the Court likewise

takes note of Esternons suspicious presence in the bedroom while Sheila was being searched by a lady officer. The

confluence of these circumstances by any objective standard of behavior contradicts the prosecutions claim of regularity

in the exercise of duty.

Moreover, Section 21[44] of the Implementing Rules and Regulations of R.A. No. 9165 clearly outlines the post-

seizure procedure in taking custody of seized drugs. In a language too plain to require a different construction, it

mandates that the officer acquiring initial custody of drugs under a search warrant must conduct the photographing and

the physical inventory of the item at the place where the warrant has been served. Esternon deviated from this procedure.
It was elicited from him that at the close of the search of petitioners house, he brought the seized items immediately to the

police station for the alleged purpose of making a true inventory thereof, but there appears to be no reason why a true

inventory could not be made in petitioners house when in fact the apprehending team was able to record and mark the

seized items and there and then prepare a seizure receipt therefor. Lest it be forgotten, the raiding team has had enough

opportunity to cause the issuance of the warrant which means that it has had as much time to prepare for its

implementation. While the final proviso in Section 21 of the rules would appear to excuse non-compliance therewith, the

same cannot benefit the prosecution as it failed to offer any acceptable justification for Esternons course of action.

Likewise, Esternons failure to deliver the seized items to the court demonstrates a departure from the directive in
the search warrant that the items seized be immediately delivered to the trial court with a true and verified inventory of

the same,[45] as required by Rule 126, Section 12[46] of the Rules of Court. People v. Go[47] characterized this requirement as

mandatory in order to preclude the substitution of or tampering with said items by interested parties. [48] Thus, as a

reasonable safeguard, People vs. Del Castillo[49] declared that the approval by the court which issued the search warrant is
necessary before police officers can retain the property seized and without it, they would have no authority to retain

possession thereof and more so to deliver the same to another agency. [50] Mere tolerance by the trial court of a contrary

practice does not make the practice right because it is violative of the mandatory requirements of the law and it thereby

defeats the very purpose for the enactment.[51]

Given the foregoing deviations of police officer Esternon from the standard and normal procedure in the

implementation of the warrant and in taking post-seizure custody of the evidence, the blind reliance by the trial court and

the Court of Appeals on the presumption of regularity in the conduct of police duty is manifestly misplaced. The

presumption of regularity is merely just thata mere presumption disputable by contrary proof and which when challenged

by the evidence cannot be regarded as binding truth.[52] Suffice it to say that this presumption cannot preponderate over

the presumption of innocence that prevails if not overthrown by proof beyond reasonable doubt.[53]In the present case the

lack of conclusive identification of the illegal drugs allegedly seized from petitioner, coupled with the irregularity in the

manner by which the same were placed under police custody before offered in court, strongly militates a finding of guilt.

In our constitutional system, basic and elementary is the presupposition that the burden of proving the guilt of an

accused lies on the prosecution which must rely on the strength of its own evidence and not on the weakness of the

defense. The rule is invariable whatever may

be the reputation of the accused, for the law presumes his innocence unless and until the contrary is

shown.[54] In dubio pro reo. When moral certainty as to culpability hangs in the balance, acquittal on reasonable doubt

inevitably becomes a matter of right.

WHEREFORE, the assailed Decision of the Court of Appeals dated 27 January 2006 affirming with modification

the judgment of conviction of the Regional Trial Court of SorsogonCity, Branch 52, and its Resolution dated 30 May 2006

denying reconsideration thereof, are REVERSED and SET ASIDE. Petitioner Junie Malillin y Lopez is ACQUITTED on
reasonable doubt and is accordingly ordered immediately released from custody unless he is being lawfully held for

another offense.

The Director of the Bureau of Corrections is directed to implement this Decision and to report to this Court the

action taken hereon within five (5) days from receipt.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

PEOPLE OF THE PHILIPPINES, G.R. No. 179029

Appellee,
Present:

- versus - CARPIO MORALES, J., Chairperson,

BRION,
BERSAMIN,
*ABAD, and

FELIMON PAGADUAN yTAMAYO, VILLARAMA, JR., JJ.

Appellant.
Promulgated:

August 12, 2010

x-----------------------------------------------------------------------------------------x
DECISION

BRION, J.:

We review the decision[1] of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 01597 which affirmed in toto the

decision[2] of the Regional Trial Court (RTC), Branch 27, Bayombong, Nueva Vizcaya, in Criminal Case No. 4600, finding

appellant Felimon Pagaduan y Tamayo (appellant) guilty beyond reasonable doubt of illegal sale of shabu, under Section

5, Article II of Republic Act (R.A.) No. 9165 or the Comprehensive Dangerous Drugs Act of 2002.

BACKGROUND FACTS

The prosecution charged the appellant before the RTC with violation of Section 5, Article II of R.A. No. 9165 under an

Information that states:

That on or about December 27, 2003 at about 4:30 oclock (sic) in the afternoon, in the
Municipality of Solano, Province of Nueva Vizcaya, Philippines and within the jurisdiction of this
Honorable Court, the above-named accused did then and there willfully, unlawfully and feloniously sell,
trade, dispense, deliver and give away 0.01 gram, more or less, of methamphetamine hydrochloride
(shabu), a dangerous drug, as contained in a heat-sealed transparent plastic sachet to PO3 Peter C.
Almarez, a member of the Philippine Drug Enforcement Agency (PDEA) who posed as a buyer of shabu in
the amount of P200.00, to the damage and prejudice of the Republic of the Philippines.

CONTRARY TO LAW.[3]

The appellant pleaded not guilty on arraignment. Trial on the merits, thereafter, followed.

The evidence for the prosecution reveals the following facts.

After having received information that the appellant was selling illegal drugs in Nueva Vizcaya, Captain Jaime de

Vera called, on his cellular phone, PO3 Peter Almarez and SPO1 Domingo Balido who were both in Santiago City and

informed them of a planned buy-bust operation. They agreed to meet at the SSS Building near LMN Hotel in Bayombong,

Nueva Vizcaya.[4] On their arrival there, Captain de Vera conducted a briefing and designated PO3 Almarez as

the poseur buyer. Thereafter, Captain de Vera introduced PO3 Almarez to the police informant (tipster),[5] and gave him
(PO3 Almarez) two P100 bills (Exhibits D and E) which the latter marked with his initials.[6]
 After this briefing, the buy-bust team went to Bintawan Road, Solano, Nueva Vizcaya to conduct the entrapment

operation.[7] PO3 Almarez and the informant rode a tricycle, while Captain de Vera and SPO1 Balido followed on board a

tinted van.[8] The buy-bust team arrived at the target area at around 4:30 p.m., and saw the appellant already waiting for

the informant. The informant approached the appellant and introduced PO3 Almarez to him as a buyer. PO3 Almarez told

the appellant that he needed shabu worth P200, and inquired from him (appellant) if he had a stock. The appellant replied

in the affirmative, and then handed one heat-sealed transparent plastic sachet containing white crystalline substance to

PO3 Almarez. PO3 Almarez, in turn, gave the two pre-marked P100 bills to the appellant.[9] Immediately after, PO3

Almarez made the pre-arranged signal to his companions, who then approached the appellant. Captain de Vera took the

marked money from the appellants right pocket, and then arrested him. [10] PO3 Almarez, for his part, marked the sachet

with his initials.[11] Thereafter, the buy-bust team brought the appellant to the Diadi Police Station for investigation.[12]

At the police station, Captain de Vera prepared a request for laboratory examination (Exh. C).[13] The appellant

was transferred to the Diadi Municipal Jail where he was detained. [14] Two days later, or on December 29, 2003, PO3

Almarez transmitted the letter-request, for laboratory examination, and the seized plastic sachet to the PNP Crime

Laboratory, where they were received by PO2 Fernando Dulnuan.[15] Police Senior Inspector (PSI) Alfredo Quintero, the

Forensic Chemist of the PNP Crime Laboratory, conducted an examination on the specimen submitted, and found it to be

positive for the presence of shabu (Exh. B).[16]

On the hearing of August 13, 2004, the prosecution offered the following as exhibits:

Exhibit A the shabu confiscated from the appellant

Exhibit B the report by the PNP Crime Laboratory

Exhibit C the request for laboratory examination

Exhibits D and E the buy-bust money

Exhibit F - the request for laboratory examination received by Forensic Chemist Quintero

The defense presented a different version of the events, summarized as follows:

At around 4:30 p.m. of December 27, 2003, Jojo Jose came to the appellants house and informed him that

Captain de Vera was inviting him to be an asset. The appellant and Jojo boarded a tricycle and proceeded to the SSS

Building where Captain de Vera was waiting for them.[17] As the tricycle approached the Methodist Church along Bintawan

Road, Jojo dropped his slippers and ordered the driver to stop. Immediately after, a van stopped in front of the tricycle;

Captain de Vera alighted from the van and handcuffed the appellant. Captain de Vera brought the appellant inside the

van, frisked him, and took P200 from his pocket.[18] Afterwards, Captain de Vera took the appellant to the SSS Building,

where he (Captain de Vera) and the building manager drank coffee. Captain de Vera then brought the appellant to the

Diadi Municipal Jail where he was detained for almost two days.[19]

On the morning of December 29, 2003, the appellant was transferred to the Provincial Jail. He signed a document

without the assistance of a lawyer after being told that it would result in his immediate release. [20]
 The RTC, in its decision[21] of August 16, 2005, convicted the appellant of the crime charged, and sentenced him

to suffer the penalty of life imprisonment. The RTC likewise ordered the appellant to pay a P500,000.00 fine.

The appellant appealed to the CA, docketed as CA-G.R. CR-H.C. No. 01597. The CA, in its decision[22] dated May 22, 2007,

affirmed the RTC decision.

The CA found unmeritorious the appellants defense of instigation, and held that the appellant was apprehended

as a result of a legitimate entrapment operation. It explained that in inducement or instigation, an innocent person is

lured by a public officer or private detective to commit a crime. In the case at bar, the buy-bust operation was planned

only after the police had received information that the appellant was selling shabu.

The CA also held that the failure of the police to conduct a prior surveillance on the appellant was not fatal to the

prosecutions case. It reasoned out that the police are given wide discretion to select effective means to apprehend drug

dealers. A prior surveillance is, therefore, not necessary, especially when the police are already accompanied by their

informant.

The CA further ruled that the prosecution was able to sufficiently prove an unbroken chain of custody of the shabu. It

explained that PO3 Almarez sealed the plastic sachet seized from the appellant, marked it with his initials, and

transmitted it to the PNP Crime Laboratory for examination. PSI Quintero conducted a qualitative examination and found

the specimen positive for the presence of shabu. According to the CA, the prosecution was able to prove that the

substance seized was the same specimen submitted to the laboratory and presented in court, notwithstanding that this

specimen was turned over to the crime laboratory only after two days.

In his brief,[23] the appellant claims that the lower courts erred in convicting him of the crime charged despite the

prosecutions failure to prove his guilt beyond reasonable doubt. He harps on the fact that the police did not conduct a

prior surveillance on him before conducting the buy-bust operation.

The appellant further contends that the prosecution failed to show an unbroken chain of custody in the handling
of the seized drug. He claims that there was no evidence to show when the markings were done. Moreover, a period of two

days had elapsed from the time the shabu was confiscated to the time it was forwarded to the crime laboratory for

examination.

The Office of the Solicitor General (OSG) counters with the argument that the chain of custody of the shabu was

sufficiently established. It explained that the shabu was turned over by the police officers to the PNP Crime Laboratory,

where it was found by the forensic chemist to be positive for the presence of shabu. The OSG likewise claimed that the

appellant failed to rebut the presumption of regularity in the performance of official duties by the police. The OSG further

added that a prior surveillance is not indispensable to a prosecution for illegal sale of drugs.[24]

THE COURTS RULING

After due consideration, we resolve to acquit the appellant for the prosecutions failure to prove his guilt beyond

reasonable doubt. Specifically, the prosecution failed to show that the police complied with paragraph 1, Section 21,

Article II of R.A. No. 9165, and with the chain of custody requirement of this Act.
The Comprehensive Dangerous Drugs
Act: A Brief Background

R.A. No. 9165 was enacted in 2002 to pursue the States policy to safeguard the integrity of its territory and the

well-being of its citizenry particularly the youth, from the harmful effects of dangerous drugs on their physical and mental

well-being, and to defend the same against acts or omissions detrimental to their development and preservation.

R.A. No. 9165 repealed and superseded R.A. No. 6425, known as the Dangerous Drugs Act of 1972. Realizing that

dangerous drugs are one of the most serious social ills of the society at present, Congress saw the need to further enhance

the efficacy of the law against dangerous drugs. The new law thus mandates the government to pursue an intensive and

unrelenting campaign against the trafficking and use of dangerous drugs and other similar substances through an

integrated system of planning, implementation and enforcement of anti-drug abuse policies, programs and projects.[25]

Illegal Sale of Drugs under Section 5

vis--vis the Inventory and Photograph
Requirement under Section 21

In a prosecution for illegal sale of a prohibited drug under Section 5 of R.A. No. 9165, the prosecution must prove

the following elements: (1) the identity of the buyer and the seller, the object, and the consideration; and (2) the delivery of

the thing sold and the payment therefor. All these require evidence that the sale transaction transpired, coupled with the

presentation in court of the corpus delicti, i.e., the body or substance of the crime that establishes that a crime has

actually been committed, as shown by presenting the object of the illegal transaction.[26] To remove any doubt or

uncertainty on the identity and integrity of the seized drug, evidence must definitely show that the illegal drug presented

in court is the same illegal drug actually recovered from the appellant; otherwise, the prosecution for possession or for

drug pushing under R.A. No. 9165 fails.[27]

The required procedure on the seizure and custody of drugs is embodied in Section 21, paragraph 1, Article II of

R.A. No. 9165, which states:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure
and confiscation, physically inventory and photograph the same in the presence of the accused or the
person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a
representative from the media and the Department of Justice (DOJ), and any elected public official who
shall be required to sign the copies of the inventory and be given a copy thereof[.]

This is implemented by Section 21(a), Article II of the Implementing Rules and Regulations of R.A. No. 9165, which reads:
(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after
seizure and confiscation, physically inventory and photograph the same in the presence of the accused
or the person/s from whom such items were confiscated and/or seized, or his/herrepresentative or
counsel, a representative from the media and the Department of Justice (DOJ), and any elected public
official who shall be required to sign the copies of the inventory and be given a copy thereof: Provided,
that the physical inventory and photograph shall be conducted at the place where the search warrant is
served; or at the nearest police station or at the nearest office of the apprehending officer/team,
whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with
these requirements under justifiable grounds, as long as the integrity and the evidentiary value of the
 seized items are properly preserved by the apprehending officer/team, shall not render void and invalid
such seizures of and custody over said items[.]

Strict compliance with the prescribed procedure is required because of the illegal drug's unique characteristic

rendering it indistinct, not readily identifiable, and easily open to tampering, alteration or substitution either by accident

or otherwise.[28] The records of the present case are bereft of evidence showing that the buy-bust team followed the

outlined procedure despite its mandatory terms. The deficiency is patent from the following exchanges at the trial:

PROSECUTOR [EMERSON TURINGAN]:

Q: After you handed this buy-bust money to the accused, what happened next?

[PO3 ALMAREZ:]

A: When the shabu was already with me and I gave him the money[,] I signaled the two, Captain
Jaime de Vera and SPO1 Balido, sir.

xxxx

Q: After you gave that signal, what happened?

A: Then they approached us and helped me in arresting Felimon Pagaduan, sir.

Q: After Pagaduan was arrested, what happened next?

A: After arresting Pagaduan[,] we brought him directly in Diadi Police Station, sir.

Q: What happened when you brought the accused to the Police Station in Diadi?

A: When we were already in Diadi Police Station, we first put him in jail in the Municipal Jail of
Diadi, Nueva Vizcaya, sir.

Q: What did you do with the shabu?

A: The request for laboratory examination was prepared and was brought to the Crime Lab.
of Solano, Nueva Vizcaya, sir.

xxxx

Q: After making the request, what did you do next[,] if any[,] Mr. Witness?

A: After submission of the request to the Crime Lab.[,] we prepared our joint affidavit for
submission of the case to the Court, sir.[29]

From the foregoing exchanges during trial, it is evident that the apprehending team, upon confiscation of the drug,

immediately brought the appellant and the seized items to the police station, and, once there, made the request for

laboratory examination. No physical inventory and photograph of the seized items were taken in the presence of the

accused or his counsel, a representative from the media and the Department of Justice, and an elective official. PO3

Almarez, on cross-examination, was unsure and could not give a categorical answer when asked whether he issued a

receipt for the shabu confiscated from the appellant.[30] At any rate, no such receipt or certificate of inventory appears in

the records.

In several cases, we have emphasized the importance of compliance with the prescribed procedure in the custody

and disposition of the seized drugs. We have repeatedly declared that the deviation from the standard procedure dismally

compromises the integrity of the evidence. In People v. Morales,[31] we acquitted the accused for failure of the buy-bust
team to photograph and inventory the seized items, without giving any justifiable ground for the non-observance of the

required procedures. People v. Garcia[32] likewise resulted in an acquittal because no physical inventory was ever made,

and no photograph of the seized items was taken under the circumstances required by R.A. No. 9165 and its

implementing rules. In Bondad, Jr. v. People,[33] we also acquitted the accused for the failure of the police to conduct an

inventory and to photograph the seized items, without justifiable grounds.

We had the same rulings in People v. Gutierrez,[34] People v. Denoman,[35] People v. Partoza,[36] People v.

Robles,[37] and People v. dela Cruz,[38] where we emphasized the importance of complying with the required mandatory

procedures under Section 21 of R.A. No. 9165.

We recognize that the strict compliance with the requirements of Section 21 of R.A. No. 9165 may not always be possible

under field conditions; the police operates under varied conditions, and cannot at all times attend to all the niceties of the

procedures in the handling of confiscated evidence. For this reason, the last sentence of the implementing rules provides

that non-compliance with these requirements under justifiable grounds, as long as the integrity and the evidentiary value

of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such

seizures of and custody over said items[.] Thus, noncompliance with the strict directive of Section 21 of R.A. No. 9165

is not necessarily fatal to the prosecutions case; police procedures in the handling of confiscated evidence may still have

some lapses, as in the present case. These lapses, however, must be recognized and explained in terms of

their justifiable grounds, and the integrity and evidentiary value of the evidence seized must be shown to have
been preserved.[39]

In the present case, the prosecution did not bother to offer any explanation to justify the failure of the police to

conduct the required physical inventory and photograph of the seized drugs. The apprehending team failed to show why

an inventory and photograph of the seized evidence had not been made either in the place of seizure and arrest or at the

nearest police station (as required by the Implementing Rules in case of warrantless arrests). We emphasize that for the

saving clause to apply, it is important that the prosecution explain the reasons behind the procedural lapses, and
that the integrity and value of the seized evidence had been preserved. [40] In other words, the justifiable ground

for noncompliance must be proven as a fact. The court cannot presume what these grounds are or that they even
exist.[41]

The Chain of Custody Requirement

Proof beyond reasonable doubt demands that unwavering exactitude be observed in establishing the corpus

delicti - the body of the crime whose core is the confiscated illicit drug.Thus, every fact necessary to constitute the crime

must be established. The chain of custody requirement performs this function in buy-bust operations as it ensures that

doubts concerning the identity of the evidence are removed.[42]

Blacks Law Dictionary explains chain of custody in this wise:

In evidence, the one who offers real evidence, such as the narcotics in a trial of drug case, must
account for the custody of the evidence from the moment in which it reaches his custody until the
 moment in which it is offered in evidence, and such evidence goes to weight not to admissibility of
evidence. Com. V. White, 353 Mass. 409, 232 N.E.2d 335.

Likewise, Section 1(b) of Dangerous Drugs Board Regulation No. 1, Series of 2002 which implements R.A. No. 9165

defines chain of custody as follows:

Chain of Custody means the duly recorded authorized movements and custody of seized drugs or
controlled chemicals or plant sources of dangerous drugs or laboratory equipment of each stage, from the
time of seizure/confiscation to receipt in the forensic laboratory to safekeeping to presentation in court for
destruction. Such record of movements and custody of seized item shall include the identity and
signature of the person who held temporary custody of the seized item, the date and time when such
transfer of custody were made in the course of safekeeping and use in court as evidence, and the final
disposition[.]

In Malillin v. People,[43] the Court explained that the chain of custody rule requires that there be testimony about

every link in the chain, from the moment the object seized was picked up to the time it is offered in evidence, in such a

way that every person who touched it would describe how and from whom it was received, where it was and what

happened to it while in the witness possession, the condition in which it was received and the condition in which it was

delivered to the next link in the chain.

In the present case, the prosecutions evidence failed to establish the chain that would have shown that

the shabu presented in court was the very same specimen seized from the appellant.

The first link in the chain of custody starts with the seizure of the heat-sealed plastic sachet from the appellant.

PO3 Almarez mentioned on cross-examination that he placed his initials on the confiscated sachet after apprehending the

appellant. Notably, this testimony constituted the totality of the prosecutions evidence on the marking of the seized

evidence. PO3 Almarezs testimony, however, lacked specifics on how he marked the sachet and who witnessed the

marking. In People v. Sanchez, we ruled that the marking of the seized items to truly ensure that they are the same items

that enter the chain and are eventually the ones offered in evidence should be done (1) in the presence of the

apprehended violator (2) immediately upon confiscation. In the present case, nothing in the records gives us an insight

on the manner and circumstances that attended the marking of the confiscated sachet. Whether the marking had been

done in the presence of the appellant is not at all clear from the evidence that merely mentioned that the evidence had

been marked after the appellants apprehension.

The second link in the chain of custody is its turnover from the apprehending team to the police station. PO3

Almarez testified that the appellant was brought to the Diadi Police Station after his arrest. However, he failed to

identify the person who had control and possession of the seized drug at the time of its transportation to the police station.

In the absence of clear evidence, we cannot presume that PO3 Almarez, as the poseur buyer, handled the seized sachet to

the exclusion of others - during its transfer from the place of arrest and confiscation to the police station. The prosecution

likewise failed to present evidence pertaining to the identity of the duty desk officer who received the plastic sachet
containing shabu from the buy-bust team. This is particularly significant since the seized specimen was turned over to the

PNP Crime Laboratory only after two days. It was not, therefore, clear who had temporary custody of the seized

items during this significant intervening period of time. Although the records show that the request for laboratory
examination of the seized plastic sachet was prepared by Captain de Vera, the evidence does not show that he was the

official who received the marked plastic sachet from the buy-bust team.

As for the subsequent links in the chain of custody, the records show that the seized specimen was forwarded by

PO3 Almarez to the PNP Crime Laboratory on December 29, 2003, where it was received by PO2 Dulnuan, and later

examined by PSI Quintero. However, the person from whom PO3 Almarez received the seized illegal drug for transfer to the

crime laboratory was not identified. As earlier discussed, the identity of the duty desk officer who received the shabu, as

well as the person who had temporary custody of the seized items for two days, had not been established.

The procedural lapses mentioned above show the glaring gaps in the chain of custody, creating a reasonable doubt

whether the drugs confiscated from the appellant were the same drugs that were brought to the crime laboratory

for chemical analysis, and eventually offered in court as evidence. In the absence of concrete evidence on the illegal

drugs bought and sold, the body of the crime the corpus delicti has not been adequately proven.[44] In effect, the

prosecution failed to fully prove the elements of the crime charged, creating reasonable doubt on the appellants criminal

liability.

Presumption of Regularity in the Performance of Official Duties

In sustaining the appellants conviction, the CA relied on the evidentiary presumption that official duties have

been regularly performed. This presumption, it must be emphasized, is not conclusive.[45] It cannot, by itself, overcome the

constitutional presumption of innocence. Any taint of irregularity affects the whole performance and should make the

presumption unavailable. In the present case, the failure of the apprehending team to comply with paragraph 1, Section

21, Article II of R.A. No. 9165, and with the chain of custody requirement of this Act effectively negates this presumption.

As we explained in Malillin v. People:[46]

The presumption of regularity is merely just that - a mere presumption disputable by contrary proof and
which when challenged by the evidence cannot be regarded as binding truth. Suffice it to say that this
presumption cannot preponderate over the presumption of innocence that prevails if not overthrown by
proof beyond reasonable doubt. In the present case the lack of conclusive identification of the illegal
drugs allegedly seized from petitioner, coupled with the irregularity in the manner by which the same
were placed under police custody before offered in court, strongly militates a finding of guilt.

We are not unmindful of the pernicious effects of drugs in our society; they are lingering maladies that destroy

families and relationships, and engender crimes. The Court is one with all the agencies concerned in pursuing an

intensive and unrelenting campaign against this social dilemma. Regardless of how much we want to curb this menace,

we cannot disregard the protection provided by the Constitution, most particularly the presumption of innocence

bestowed on the appellant. Proof beyond reasonable doubt, or that quantum of proof sufficient to produce moral certainty

that would convince and satisfy the conscience of those who act in judgment, is indispensable to overcome this

constitutional presumption. If the prosecution has not proved, in the first place, all the elements of the crime charged,
which in this case is the corpus delicti, then the appellant deserves no less than an acquittal.
 WHEREFORE, premises considered, we hereby REVERSE and SET ASIDE the May 22, 2007 Decision of the

Court of Appeals in CA-G.R. CR-H.C. No. 01597. Appellant Felimon Pagaduan y Tamayo is hereby ACQUITTED for failure

of the prosecution to prove his guilt beyond reasonable doubt. He is ordered immediately RELEASED from detention

unless he is confined for another lawful cause.

Let a copy of this Decision be furnished the Director, Bureau of Corrections, Muntinlupa Cityfor immediate

implementation. The Director of the Bureau of Corrections is directed to report the action he has taken to this Court

within five days from receipt of this Decision.

SO ORDERED.

G.R. No. 180284

FIRST DIVISION

September 11, 2013

G.R. No. 180284

NARCISO SALAS, Petitioner

vs.
ANNABELLE MATUSALEM, Respondent

VILLARAMA, JR., J.:

Before the Court is a petition for review on certiorari which seeks to reverse and set aside the Decision [1] dated July 18,
2006 and Resolution[2] dated October 19, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 64379.

The factual antecedents:

On May 26, 1995, Annabelle Matusalem (respondent) filed a complaint for Support/Damages against Narciso Salas
(petitioner) in the Regional Trial Court (RTC) ofCabanatuan City (Civil Case No. 2124-AF).

Respondent claimed that petitioner is. the father of her son Christian Paulo Salas who was born on December 28, 1994.
Petitioner, already 56 years old at the time, enticed her as she was then only 24 years old, making her believe that he is a
widower. Petitioner rented an apartment where respondent stayed and shouldered all expenses in the delivery of their
child, including the cost of caesarian operation and hospital confinement. However, when respondent refused the offer of
petitioner's family to take the child from her, petitioner abandoned respondent and her child and left them to the mercy of
relatives and friends. Respondent further alleged that she attempted suicide due to depression but still petitioner refused
to support her and their child.

Respondent thus prayed for support pendente lite and monthly support in the amount of P20,000.00, as well as actual,
moral and exemplary damages, and attorney's fees.

Petitioner filed his answer[4] with special and affirmative defenses and counterclaims. He described respondent as a
woman of loose morals, having borne her first child also out of wedlock when she went to work in Italy. Jobless upon her
return to the country, respondent spent time riding on petitioner's jeepney which was then being utilized by a female real
estate agent named Felicisima de Guzman. Respondent had seduced a senior police officer in San Isidro and her charge of
sexual abuse against said police officer was later withdrawn in exchange for the quashing of drug charges against
respondent's brother-in-law who was then detained at the municipal jail. It was at that time respondent introduced
herself to petitioner whom she pleaded for charity as she was pregnant with another child. Petitioner denied paternity of
the child Christian Paulo; he was motivated by no other reason except genuine altruism when he agreed to shoulder the
expenses for the delivery of said child, unaware of respondent's chicanery and deceit designed to "scandalize" him in
exchange for financial favor.
At the trial, respondent and her witness Grace Murillo testified. Petitioner was declared to have waived his right to present
evidence and the case was considered submitted for decision based on respondent's evidence.

Respondent testified that she first met petitioner at the house of his "kumadre" Felicisima de Guzman at Bgy. Malapit,
San Isidro, Nueva Ecija. During their subsequent meeting, petitioner told her he is already a widower and he has no more
companion in life because his children are all grown-up. She also learned that petitioner owns a rice mill, a construction
business and a housing subdivision (petitioner offered her a job at their family-owned Ma. Cristina Village). Petitioner at
the time already knows that she is a single mother as she had a child by her former boyfriend in Italy. He then brought
her to a motel, promising that he will take care of her and marry her. She believed him and yielded to his advances, with
the thought that she and her child will have a better life. Thereafter, they saw each other weekly and petitioner gave her
money for her child. When she became pregnant with petitioner's child, it was only then she learned that he is in fact not
a widower. She wanted to abort the baby but petitioner opposed it because he wanted to have another child. [5]

On the fourth month of her pregnancy, petitioner rented an apartment where she stayed with a housemaid; he also
provided for all their expenses. She gave birth to their child on December 28, 1994 at the Good Samaritan Hospital in
Cabanatuan City. Before delivery, petitioner even walked her at the hospital room and massaged her stomach, saying he
had not done this to his wife. She filled out the form for the child's birth certificate and wrote all the information supplied
by petitioner himself. It was also petitioner who paid the hospital bills and drove her baby home. He was excited and
happy to have a son at his advanced age who is his "look-alike," and this was witnessed by other boarders, visitors and
Grace Murillo, the owner of the apartment unit petitioner rented. However, on the 18 th day after the baby's birth,
petitioner went to Baguio City for a medical check-up. He confessed to her daughter and eventually his wife was also
informed about his having sired an illegitimate child. His family then decided to adopt the baby and just give respondent
money so she can go abroad. When she refused this offer, petitioner stopped seeing her and sending money to her. She
and her baby survived through the help of relatives and friends. Depressed, she tried to commit suicide by drug overdose
and was brought to the hospital by Murillo who paid the bill. Murillo sought the help of the Cabanatuan City Police
Station which set their meeting with petitioner. However, it was only petitioner's wife who showed up and she was very
mad, uttering unsavory words against respondent.[6]

Murillo corroborated respondent's testimony as to the payment by petitioner of apartment rental, his weekly visits to
respondent and financial support to her, his presence during and after delivery of respondent's baby, respondent's
attempted suicide through sleeping pills overdose and hospitalization for which she paid the bill, her complaint before the
police authorities and meeting with petitioner's wife at the headquarters.[7]

On April 5, 1999, the trial court rendered its decision[8] in favor of respondent, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant as
follows:

1. Ordering the defendant to give as monthly support of TWO THOUSAND (P2,000.00) PESOS for the child Christian
Paulo through the mother;

2. Directing the defendant to pay the plaintiff the sum of P20,000.00 by way of litigation expenses; and

3. To pay the costs of suit.

SO ORDERED.[9]

Petitioner appealed to the CA arguing that: (1) the trial court decided the case without affording him the right to introduce
evidence on his defense; and (2) the trial court erred in finding that petitioner is the putative father of Christian Paulo and
ordering him to give monthly support.

By Decision dated July 18, 2006, the CA dismissed petitioner's appeal. The appellate court found no reason to disturb the
trial court's exercise of discretion in denying petitioner's motion for postponement on April 17, 1998, the scheduled
hearing for the initial presentation of defendant's evidence, and the motion for reconsideration of the said order denying
the motion for postponement and submitting the case for decision.

On the paternity issue, the CA affirmed the trial court's ruling that respondent satisfactorily established the illegitimate
filiation of her son Christian Paulo, and consequently no error was committed by the trial court in granting respondent's
prayer for support. The appellate court thus held:

Christian Paulo, in instant case, does not enjoy the benefit of a record of birth in the civil registry which bears
acknowledgment signed by Narciso Salas. He cannot claim open and continuous possession of the status of an illegitimate
child.
It had been established by plaintiff's evidence, however, that during her pregnancy, Annabelle was provided by Narciso
Salas with an apartment at a rental of P1,500.00 which he paid for (TSN, October 6, 1995, p. 18). Narciso provided her
with a household help with a salary of P1,500.00 a month (TSN, October 6, 1995, ibid). He also provided her a monthly
food allowance of P1,500.00 (Ibid, p. 18). Narciso was with Annabelle at the hospital while the latter was in labor,
"walking" her around and massaging her belly (Ibid, p. 11). Narciso brought home Christian Paulo to the rented apartment
after Annabelle's discharge from the hospital. People living in the same apartment units were witnesses to Narciso's
delight to father a son at his age which was his "look alike". It was only after the 18 th day when Annabelle refused to give
him Christian Paulo that Narciso withdrew his support to him and his mother.

Said testimony of Annabelle aside from having been corroborated by Grace Murillo, the owner of the apartment which
Narciso rented, was never rebutted on record. Narciso did not present any evidence, verbal or documentary, to repudiate
plaintiff's evidence.

In the cases of Lim vs. CA (270 SCRA 1) and Rodriguez vs. CA (245 SCRA 150), the Supreme Court made it clear that
Article 172 of the Family Code is an adaptation of Article 283 of the Civil Code. Said legal provision provides that the
father is obliged to recognize the child as his natural child x x "3) when the child has in his favor any evidence or proof
that the defendant is his father".

In fact, in Ilano vs. CA (230 SCRA 242, 258-259), it was held that

"The last paragraph of Article 283 contains a blanket provision that practically covers all the other cases in the preceding
paragraphs. 'Any other evidence or proof' that the defendant is the father is broad enough to render unnecessary the other
paragraphs of this article. When the evidence submitted in the action for compulsory recognition is not sufficient to meet
[the] requirements of the first three paragraphs, it may still be enough under the last paragraph. This paragraph permits
hearsay and reputation evidence, as provided in the Rules of Court, with respect to illegitimate filiation."
As a necessary consequence of the finding that Christian Paulo is the son of defendant Narciso Salas, he is entitled to
support from the latter (Ilano vs. CA, supra).

It "shall be demandable from the time the person who has the right to recover the same needs it for maintenance x x." (Art.
203, Family Code of the Philippines).[10]

Petitioner filed a motion for reconsideration but it was denied by the CA.

Hence, this petition submitting the following arguments:

1. THE VENUE OF THE CASE WAS IMPROPERLY LAID BEFORE THE REGIONAL TRIAL COURT OF CABANATUAN CITY
CONSIDERING THAT BOTH PETITIONER AND RESPONDENT ARE ACTUAL RESIDENTS OF BRGY. MALAPIT, SAN
ISIDRO, NUEVA ECIJA.

2. THE HONORABLE COURT OF APPEALS ERRED IN PRONOUNCING THAT PETITIONER WAS AFFORDED THE FULL
MEASURE OF HIS RIGHT TO DUE PROCESS OF LAW AND IN UPHOLDING THAT THE TRIAL COURT DID NOT GRAVELY
ABUSE ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DECIDED THE INSTANT
CASE WITHOUT AFFORDING PETITIONER THE RIGHT TO INTRODUCE EVIDENCE IN HIS DEFENSE.

3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE FILIATION OF CHRISTIAN PAULO WAS DULY
ESTABLISHED PURSUANT TO ARTICLE 175 IN RELATION TO ARTICLE 172 OF THE FAMILY CODE AND EXISTING
JURISPRUDENCE AND THEREFORE ENTITLED TO SUPPORT FROM THE PETITIONER.[11]

We grant the petition.

It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the plaintiffs and their
witnesses. Equally settled, however, is the principle that choosing the venue of an action is not left to a plaintiff's caprice;
the matter is regulated by the Rules of Court.[12]

In personal actions such as the instant case, the Rules give the plaintiff the option of choosing where to file his complaint.
He can file it in the place (1) where he himself or any of them resides, or (2) where the defendant or any of the defendants
resides or may be found.[13] The plaintiff or the defendant must be residents of the place where the action has been
instituted at the time the action is commenced.[14]

However, petitioner raised the issue of improper venue for the first time in the Answer itself and no prior motion to
dismiss based on such ground was filed. Under the Rules of Court before the 1997 amendments, an objection to an
improper venue must be made before a responsive pleading is filed. Otherwise, it will be deemed waived. [15] Not having
been timely raised, petitioner's objection on venue is therefore deemed waived.

As to the denial of the motion for postponement filed by his counsel for the resetting of the initial presentation of defense
evidence on April 17, 1998, we find that it was not the first time petitioner's motion for postponement was denied by the
trial court.
Records disclosed that after the termination of the testimony of respondent's last witness on November 29, 1996, the trial
court as prayed for by the parties, set the continuation of hearing for the reception of evidence for the defendant
(petitioner) on January 27, February 3, and February 10, 1997. In the Order dated December 17, 1996, petitioner was
advised to be ready with his evidence at those hearing dates earlier scheduled. At the hearing on January 27, 1997,
petitioner's former counsel, Atty. Rolando S. Bala, requested for the cancellation of the February 3 and 10, 1997 hearings
in order to give him time to prepare for his defense, which request was granted by the trial court which thus reset the
hearing dates to March 3, 14 and 17, 1997. On March 3, 1997, upon oral manifestation by Atty. Bala and without
objection from respondent's counsel, Atty. Feliciano Wycoco, the trial court again reset the hearing to March 14 and 17,
1997. With the non-appearance of both petitioner and Atty. Bala on March 14, 1997, the trial court upon oral
manifestation by Atty. Wycoco declared their absence as a waiver of their right to present evidence and accordingly
deemed the case submitted for decision.[16]

On July 4, 1997, Atty. Bala withdrew as counsel for petitioner and Atty. Rafael E. Villarosa filed his appearance as his
new counsel on July 21, 1997. On the same date he filed entry of appearance, Atty. Villarosa filed a motion for
reconsideration of the March 14, 1997 Order pleading for liberality and magnanimity of the trial court, without offering
any explanation for Atty. Bala's failure to appear for the initial presentation of their evidence. The trial court thereupon
reconsidered its March 14, 1997 Order, finding it better to give petitioner a chance to present his evidence. On August 26,
1997, Atty. Villarosa received a notice of hearing for the presentation of their evidence scheduled on September 22, 1997.
On August 29, 1997, the trial court received his motion requesting that the said hearing be re-set to October 10, 1997 for
the reason that he had requested the postponement of a hearing in another case which was incidentally scheduled on
September 22, 23 and 24, 1997. As prayed for, the trial court reset the hearing to October 10, 1997. On said date,
however, the hearing was again moved to December 15, 1997. On February 16, 1998, the trial court itself reset the
hearing to April 17, 1998 since it was unclear whether Atty. Wycoco received a copy of the motion. [17]

On April 17, 1998, petitioner and his counsel failed to appear but the trial court received on April 16, 1998 an urgent
motion to cancel hearing filed by Atty. Villarosa. The reason given by the latter was the scheduled hearing on the issuance
of writ of preliminary injunction in another case under the April 8, 1998 Order issued by the RTC of Gapan, Nueva Ecija,
Branch 36 in Civil Case No. 1946. But as clearly stated in the said order, it was the plaintiffs therein who requested the
postponement of the hearing and it behoved Atty. Villarosa to inform the RTC of Gapan that he had a previous
commitment considering that the April 17, 1998 hearing was scheduled as early as February 16, 1998. Acting on the
motion for postponement, the trial court denied for the second time petitioner's motion for postponement. Even at the
hearing of their motion for reconsideration of the April 17, 1998 Order on September 21, 1998, Atty. Villarosa failed to
appear and instead filed another motion for postponement. The trial court thus ordered that the case be submitted for
decision stressing that the case had long been pending and that petitioner and his counsel have been given opportunities
to present their evidence. It likewise denied a second motion for reconsideration filed by Atty. Villarosa, who arrived late
during the hearing thereof on December 4, 1998.[18]

A motion for continuance or postponement is not a matter of right, but a request addressed to the sound discretion of the
court. Parties asking for postponement have absolutely no right to assume that their motions would be granted. Thus,
they must be prepared on the day of the hearing.[19] Indeed, an order declaring a party to have waived the right to present
evidence for performing dilatory actions upholds the trial court's duty to ensure that trial proceeds despite the deliberate
delay and refusal to proceed on the part of one party.[20]

Atty. Villarosa's plea for liberality was correctly rejected by the trial court in view of his own negligence in failing to ensure
there will be no conflict in his trial schedules. As we held in Tiomico v. Court of Appeals[21]:

Motions for postponement are generally frowned upon by Courts if there is evidence of bad faith, malice or inexcusable
negligence on the part of the movant. The inadvertence of the defense counsel in failing to take note of the trial dates and
in belatedly informing the trial court of any conflict in his schedules of trial or court appearances, constitutes inexcusable
negligence. It should be borne in mind that a client is bound by his counsel's conduct, negligence and mistakes in
handling the case.[22]

With our finding that there was no abuse of discretion in the trial court's denial of the motion for postponement filed by
petitioner's counsel, petitioner's contention that he was deprived of his day in court must likewise fail. The essence of due
process is that a party is given a reasonable opportunity to be heard and submit any evidence one may have in support of
one's defense. Where a party was afforded an opportunity to participate in the proceedings but failed to do so, he cannot
complain of deprivation of due process. If the opportunity is not availed of, it is deemed waived or forfeited without
violating the constitutional guarantee.[23]

We now proceed to the main issue of whether the trial and appellate courts erred in ruling that respondent's evidence
sufficiently proved that her son Christian Paulo is the illegitimate child of petitioner.

Under Article 175 of the Family Code of the Philippines, illegitimate filiation may be established in the same way and on
the same evidence as legitimate children.

Article 172 of the Family Code of the Philippines states:

The filiation of legitimate children is established by any of the following:

(1) The record of birth appearing in the civil register or a final judgment; or

(2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent
concerned.

In the absence of the foregoing evidence, the legitimate filiation shall be proved by:

(1) The open and continuous possession of the status of a legitimate child; or

(2) Any other means allowed by the Rules of Court and special laws. (Underscoring supplied.)

Respondent presented the Certificate of Live Birth[24] (Exhibit "A-1") of Christian Paulo Salas in which the name of
petitioner appears as his father but which is not signed by him. Admittedly, it was only respondent who filled up the
entries and signed the said document though she claims it was petitioner who supplied the information she wrote therein.

We have held that a certificate of live birth purportedly identifying the putative father is not competent evidence of
paternity when there is no showing that the putative father had a hand in the preparation of the certificate.[25] Thus, if the
father did not sign in the birth certificate, the placing of his name by the mother, doctor, registrar, or other person is
incompetent evidence of paternity.[26] Neither can such birth certificate be taken as a recognition in a public
instrument[27] and it has no probative value to establish filiation to the alleged father.[28]

As to the Baptismal Certificate[29] (Exhibit "B") of Christian Paulo Salas also indicating petitioner as the father, we have
ruled that while baptismal certificates may be considered public documents, they can only serve as evidence of the
administration of the sacraments on the dates so specified. They are not necessarily competent evidence of the veracity of
entries therein with respect to the child's paternity.[30]

The rest of respondent's documentary evidence consists of handwritten notes and letters, hospital bill and photographs
taken of petitioner and respondent inside their rented apartment unit.

Pictures taken of the mother and her child together with the alleged father are inconclusive evidence to prove
paternity.[31] Exhibits "E" and "F"[32] showing petitioner and respondent inside the rented apartment unit thus have scant
evidentiary value. The Statement of Account[33] (Exhibit "C") from the Good Samaritan General Hospital where respondent
herself was indicated as the payee is likewise incompetent to prove that petitioner is the father of her child
notwithstanding petitioner's admission in his answer that he shouldered the expenses in the delivery of respondent's child
as an act of charity.

As to the handwritten notes[34] (Exhibits "D" to "D-13") of petitioner and respondent showing their exchange of affectionate
words and romantic trysts, these, too, are not sufficient to establish Christian Paulo's filiation to petitioner as they were
not signed by petitioner and contained no statement of admission by petitioner that he is the father of said child. Thus,
even if these notes were authentic, they do not qualify under Article 172 (2) vis-à- vis Article 175 of the Family Code which
admits as competent evidence of illegitimate filiation an admission of filiation in a private handwritten instrument signed
by the parent concerned.[35]

Petitioner's reliance on our ruling in Lim v. Court of Appeals[36] is misplaced. In the said case, the handwritten letters of
petitioner contained a clear admission that he is the father of private respondent's daughter and were signed by him. The
Court therein considered the totality of evidence which established beyond reasonable doubt that petitioner was indeed
the father of private respondent's daughter. On the other hand, in Ilano v. Court of Appeals,[37] the Court sustained the
appellate court's finding that private respondent's evidence to establish her filiation with and paternity of petitioner was
overwhelming, particularly the latter's public acknowledgment of his amorous relationship with private respondent's
mother, and private respondent as his own child through acts and words, her testimonial evidence to that effect was fully
supported by documentary evidence. The Court thus ruled that respondent had adduced sufficient proof of continuous
possession of status of a spurious child.

Here, while the CA held that Christian Paulo Salas could not claim open and continuous possession of status of an
illegitimate child, it nevertheless considered the testimonial evidence sufficient proof to establish his filiation to petitioner.

An illegitimate child is now also allowed to establish his claimed filiation by "any other means allowed by the Rules of
Court and special laws," like his baptismal certificate, a judicial admission, a family Bible in which his name has been
entered, common reputation respecting his pedigree, admission by silence, the testimonies of witnesses, and other kinds
of proof admissible under Rule 130 of the Rules of Court.[38] Reviewing the records, we find the totality of respondent's
evidence insufficient to establish that petitioner is the father of Christian Paulo.

The testimonies of respondent and Murillo as to the circumstances of the birth of Christian Paulo, petitioner's financial
support while respondent lived in Murillo's apartment and his regular visits to her at the said apartment, though replete
with details, do not approximate the "overwhelming evidence, documentary and testimonial" presented in Ilano. In that
case, we sustained the appellate court's ruling anchored on the following factual findings by the appellate court which was
quoted at length in the ponencia:

It was Artemio who made arrangement for the delivery of Merceditas (sic) at the Manila Sanitarium and Hospital. Prior to
the delivery, Leoncia underwent prenatal examination accompanied by Artemio (TSN, p. 33, 5/17/74). After delivery, they
went home to their residence at EDSA in a car owned and driven by Artemio himself (id. p. 36).

Merceditas (sic) bore the surname of "Ilano" since birth without any objection on the part of Artemio, the fact that since
Merceditas (sic) had her discernment she had always known and called Artemio as her "Daddy" (TSN, pp. 28-29,
10/18/74); the fact that each time Artemio was at home, he would play with Merceditas (sic), take her for a ride or
restaurants to eat, and sometimes sleeping with Merceditas (sic) (id. p. 34) and does all what a father should do for his
child bringing home goodies, candies, toys and whatever he can bring her which a child enjoys which Artemio gives to
Merceditas (sic) (TSN, pp. 38-39, 5/17/74) are positive evidence that Merceditas (sic) is the child of Artemio and
recognized by Artemio as such. Special attention is called to Exh. "E-7" where Artemio was telling Leoncia the need for a
"frog test" to know the status of Leoncia.

Plaintiff pointed out that the support by Artemio for Leoncia and Merceditas (sic) was sometimes in the form of cash
personally delivered to her by Artemio, thru Melencio, thru Elynia (Exhs. "E-2" and "E-3", and "D-6"), or thru Merceditas
(sic) herself (TSN, p. 40, 5/17/74) and sometimes in the form of a check as the Manila Banking Corporation Check No.
81532 (Exh. "G") and the signature appearing therein which was identified by Leoncia as that of Artemio because Artemio
often gives her checks and Artemio would write the check at home and saw Artemio sign the check (TSN, p. 49, 7/18/73).
Both Artemio and Nilda admitted that the check and signature were those of Artemio (TSN, p. 53, 10/17/77; TSN, p. 19,
10/9/78).

During the time that Artemio and Leoncia were living as husband and wife, Artemio has shown concern as the father of
Merceditas (sic). When Merceditas (sic) was in Grade 1 at the St. Joseph Parochial School, Artemio signed the Report Card
of Merceditas (sic) (Exh. "H") for the fourth and fifth grading period(s) (Exh. "H-1" and "H-2") as the parent of Merceditas
(sic). Those signatures of Artemio [were] both identified by Leoncia and Merceditas (sic) because Artemio signed Exh. "H-1"
and "H-2" at their residence in the presence of Leoncia, Merceditas (sic) and of Elynia (TSN, p. 57, 7/18/73; TSN, p. 28,
10/1/73). x x x.

xxx xxx xxx

When Artemio run as a candidate in the Provincial Board of Cavite[,] Artemio gave Leoncia his picture with the following
dedication: "To Nene, with best regards, Temiong". (Exh. "I"). (pp. 19-20, Appellant's Brief)

The mere denial by defendant of his signature is not sufficient to offset the totality of the evidence indubitably showing
that the signature thereon belongs to him. The entry in the Certificate of Live Birth that Leoncia and Artemio was falsely
stated therein as married does not mean that Leoncia is not appellee's daughter. This particular entry was caused to be
made by Artemio himself in order to avoid embarrassment.[39]

In sum, we hold that the testimonies of respondent and Murillo, by themselves are not competent proof of paternity and
the totality of respondent's evidence failed to establish Christian Paulo's filiation to petitioner.

Time and again, this Court has ruled that a high standard of proof is required to establish paternity and filiation. An order
for recognition and support may create an unwholesome situation or may be an irritant to the family or the lives of the
parties so that it must be issued only if paternity or filiation is established by clear and convincing evidence. [40]

Finally, we note the Manifestation and Motion[41] filed by petitioner's counsel informing this Court that petitioner had died
on May 6, 2010.

The action for support having been filed in the trial court when petitioner was still alive, it is not barred under Article 175
(2)[42] of the Family Code. We have also held that the death of the putative father is not a bar to the action commenced
during his lifetime by one claiming to be his illegitimate child.[43] The rule on substitution of parties provided in Section
16, Rule 3 of the 1997 Rules of Civil Procedure, thus applies.

SEC. 16. Death of party; duty of counsel. Whenever a party to a pending action dies, and the claim is not thereby
extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact
thereof, and to give the name and address of his legal representative or representatives. Failure of counsel to comply with
his duty shall be a ground for disciplinary action.

The action must be brought within the same period specified in Article 173, except when the action is based on the second
paragraph of Article 172, in which case the action may be brought during the lifetime of the alleged parent.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an
executor or administrator and the court may appoint a guardian ad litem for the minor heirs.

The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of
thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within
the specified period, the court may order the opposing party, within a specified time to procure the appointment of an
executor or administrator for the estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party, may be recovered as costs.

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated July 18, 2006 and Resolution dated
October 19, 2007 of the Court of Appeals in CA-GR. CV No. 64379 are hereby REVERSED and SET ASIDE. Civil Case No.
2124-AF of the Regional Trial Court of Cabanatuan City, Branch 26 is DISMISSED.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 209588 February 18, 2015

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
ERIC ROSAURO y BONGCAWIL, Accused-Appellant.

DECISION

PEREZ, J.:

For the consideration of the Court is an appeal of the Decision1 dated 19 June 2013 of the Court of Appeals (CA) in CA-
G.R. CR-H.C. No. 00552- MIN, which affirmed the Judgment2 dated 24 November 2006 of the Regional Trial Court (RTC),
Cagayan de Oro City, Branch 25 in Criminal Case No. 2004-856, finding accused-appellant Eric Rosauro y Bongcawil
(accused-appellant) guilty beyond reasonable doubt of illegal sale of shabu under Sec. 5, Article II of Republic Act No.
9165 (R.A. No. 9165) or the Comprehensive Dangerous Drugs Act of 2002, sentencing him to suffer the penalty of life
imprisonment and ordering him to pay a fine of ₱500,000.00.

In an Amended Information dated 21 February 2005,3 accused-appellant was charged with violation of Sec. 5, Art. II of R.
A. No. 9165, to wit:

That on the 3rd day of July, 2004at about 5:30 o’clock in the afternoon, more or less, at Purok 3, Barangay Poblacion,
Municipality of Villanueva, Province of Misamis Oriental, Republic of the Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, not being authorized by law to possess and to sell any dangerous drugs,
knowingly, willfully and feloniously, did then and there, sell and convey to a third person, who acted as a decoy in a buy
bust operation, one (1) sachet of shabu, containing 0.04 grams (sic) of shabu, which when examined gave POSITIVE result
to test for the presence of Methamphetamine Hydrochloride (Shabu), a dangerous drug.4

Upon re-arraignment, accused-appellant pleaded not guilty to the crime charged.5 Thereafter, pre-trial and trial on the
merits ensued.

Based on the records, the prosecution’s version of the facts is as follows:

On October 13, 2002, on the basis of unconfirmed reports that accused-appellant Eric Rosauro (Rosauro for brevity) was
selling and distributing drugs, the Provincial Drug Enforcement Unit of Misamis Oriental conducted a test-buy operation
in the Municipality of Villanueva, Misamis Oriental using a confidential agent. The confidential agent bought shabu from
Rosauro at Purok 2, Barangay Katipunan, Villanueva, Misamis Oriental. The substance bought from Rosauro was
examined by the PNP crime laboratory and yielded a positive result for Methamphetamine Hydrochloride (commonly
known as shabu).

On July 3, 2004, the police authorities received information that again drugs were being distributed at Purok 3, Barangay
Poblacion, Villanueva, Misamis Oriental. Thus, at 5:30 o’clock in the afternoon, the Provincial Anti-Illegal Drugs Special
Operation Task Unit (PAID-SOTU) elements led by SPO4 Lorenzo Larot and PO3 Juancho Dizon positioned themselves in
the house of their confidential agent.

There, the PAID-SOTU elements saw Rosauro negotiate with the confidential agent. In exchange for the one (1) sachet of
shabu given by Rosauro to the confidential agent, the latter gave him a marked 100-peso bill with serial number YZ7
12579.

After the transaction, Larot and Dizon came out of their hiding place and arrested Rosauro. Thereafter, the confidential
agent handed the sachet to Larot, who taped it, mark edit with the marking "Exhibit A", and placed it inside his pocket.
He also took pictures of Rosauro and the drugs. In the police station, he prepared a Certificate of Inventory and a Request
for Laboratory Examination. Both the drugs and Rosauro were then turned over to the Crime laboratory.

On the basis of the request made by Larot, Police Chief Inspector Ma. Leocy Mag-abo, the Forensic Chemical Officer of
PNP Crime Laboratory conducted a laboratory examination on the contents of the sachet, on accused-appellant, and the
marked money. The examination of the seized item yielded positive result for methamphetamine hydrochloride (shabu);
while the accused-appellant and the marked money tested positive for the presence of ultra-violet fluorescent powder.6

For his part, accused-appellant claims that he was merely a victim of instigation:

Accused-appellant Rosauro, on the other hand, tells a different tale. He testified that on July 3, 2004, the police asset
went to his house four (4) times and convinced him to do an errand for him. Rosauro refused to buy shabu as he did not
know where to buy one. It was the confidential informant who told him to buy the prohibited drug from a certain "Kael"
and to deliver it to the former’s house.It was also the informant who gave the money to Rosauro to buy the shabu. But
Rosauro was not able to meet or buy directly from Kael because it was a young man who got and handed to him the
shabu on the road. When Rosauro went to the house of the confidential informant as instructed, he was arrested by SPO4
Larot and Dizon. The sachet of shabu was not even recovered from him but from the confidential informant.7

Finding the evidence of the prosecution sufficient to establish the guilt of accused-appellant, the RTC rendered a
judgment of conviction, viz.:

IN THE LIGHT OF THE FOREGOING, this Court hereby renders Judgment finding accused ERIC ROSAURO y
BONGCAWIL, "guilty" beyond reasonable doubt of the crime charged in the information for selling and delivering a sachet
of shabu to the poseur buyer a Violation of Section 5, Article II of R.A. 9165 and imposes a penalty of life imprisonment
and a fine of Five Hundred Thousand (PhP 500,000.00) Pesos and to pay the cost.

The accused ERIC B. ROSAURO who has undergone preventive imprisonment shall be credited in the service of his
sentence consisting of deprivation of liberty, with the full time during which he has undergone preventive imprisonment if
the detention prisoner agrees voluntarily in writing to abide by the same disciplinary rule imposed upon convicted
prisoners, except those disqualified by law.

The sachet of shabu, Exh. "A" is confiscated and forfeited in favor of the government to be destroyed in accordance with
law.8

Accused-appellant appealed before the CA, assigning a lone error:

THE COURT A QUO GRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT WHEN HIS GUILT WAS NOT
PROVEN BEYOND REASONABLE DOUBT.9

After a review of the records, the CA affirmed the RTC Judgment. The appellate court ruled that what transpired in the
case at bar was an entrapment and not an instigation;10 that all the elements of illegal sale of regulated or prohibited
drugs were duly proven;11 that the non-presentation of the confidential agent in court is not fatal;12 that the
inconsistencies in the testimony of the lone witness of the prosecution do not affect the result of the case;13 and that the
apprehending team was able to preserve the integrity of the subject drug and that the prosecution was able to present the
required unbroken chain in the custody of the subject drug.14 Thus, the CA held:
WHEREFORE, the Judgment dated November 24, 2006 of the Regional Trial Court, Branch 25, Cagayan de Oro City in
Criminal Case No. 2004-856 is hereby AFFIRMED.15

Accused-appellant is now before the Court seeking a review of his conviction.

After a thorough review of the records, however, we dismiss the appeal.

It is apropos to reiterate here that where there is no showing that the trial court overlooked or misinterpreted some
material facts or that it gravely abused its discretion, the Court will not disturb the trial court’s assessment of the facts
and the credibility of the witnesses since the RTC was in a better position to assess and weigh the evidence presented
during trial. Settled too is the rule that the factual findings of the appellate court sustaining those of the trial court are
binding on this Court, unless there is a clear showing that such findings are tainted with arbitrariness, capriciousness or
palpable error.16

The RTC and the CA both found the arrest of accused-appellant to be the result of a legitimate entrapment procedure, and
we find nothing in the records as to warrant a contrary finding. In People v. Bartolome,17 we had the occasion to discuss
the legitimacy of a "decoy solicitation," to wit:

It is no defense to the perpetrator of a crime that facilities for its commission were purposely placed in his way, or that the
criminal act was done at the "decoy solicitation" of persons seeking to expose the criminal, or that detectives feigning
complicity in the act were present and apparently assisting its commission. Especially is this true in that class of cases
where the office is one habitually committed, and the solicitation merely furnishes evidence of a course of conduct.

As here, the solicitation of drugs from appellant by the informant utilized by the police merely furnishes evidence of a
course of conduct. The police received an intelligence report that appellant has been habitually dealing in illegal drugs.
They duly acted on it by utilizing an informant to effect a drug transaction with appellant. There was no showing that the
informant induced the appellant to sell illegal drugs to him.1âwphi1

Similarly, the presentation of an informant as witness is not regarded as indispensable to the success of a prosecution of
a drug-dealing accused. As a rule, the informant is not presented in court for security reasons, in view of the need to
protect the informant from the retaliation of the culprit arrested through his efforts. Thereby, the confidentiality of the
informant’s identity is protected in deference to his invaluable services to law enforcement. Only when the testimony of
the informant is considered absolutely essential in obtaining the conviction of the culprit should the need to protect his
security be disregarded.18 In the present case, as the buy-bust operation was duly witnessed by the Provincial Anti-Illegal
Drugs Special Operation Task Unit (PAID-SOTU) elements led by SPO4 Lorenzo Larot (SPO4 Larot) and PO3 Juancho
Dizon, their testimonies can take the place of that of the confidential informant.

As to whether accused-appellant’s guilt was established beyond reasonable doubt, we rule in the affirmative.

In a catena of cases, this Court laid down the essential elements to be duly established for a successful prosecution of
offenses involving the illegal sale of dangerous or prohibited drugs, like shabu, under Section 5, Article II of R.A. No. 9165,
to wit: (1) the identity of the buyer and the seller, the object of the sale, and the consideration; and (2) the delivery of the
thing sold and payment therefor. Briefly, the delivery of the illicit drug to the poseur-buyer and the receipt of the marked
money by the seller successfully consummate the buy-bust transaction. What is material, therefore, is the proof that the
transaction or sale transpired, coupled with the presentation in court of the corpus delicti.19

Verily, all the elements for a conviction of illegal sale of dangerous or prohibited drugs were proven by the prosecution: the
identity of accused-appellant as the seller, and that of the confidential informant as poseur-buyer were established, as
well as the exchange of the sachet of shabu and the marked money. It was also ascertained that the seized item was
positive for shabu, a dangerous drug, and that the same item was properly identified in open court by SPO4 Larot.
Moreover, the ₱100.00 bill with serial number YZ712579, or the subject marked money, as well as the living body of the
accused-appellant revealed a positive result for ultraviolet fluorescent powder.

Accused-appellant avers that the prosecution was not able to prove the corpus delicti, and that the statutory safeguards
provided for in Sec. 21 of R.A. No. 9165 were not followed.

Indeed, as we held in People v. Torres,20 equally important in every prosecution for illegal sale of dangerous or prohibited
drugs is the presentation of evidence of the seized drug as the corpus delicti. The identity of the prohibited drug must be
proved with moral certainty. It must also be established with the same degree of certitude that the substance bought or
seized during the buy-bust operation is the same item offered in court as exhibit. In this regard, paragraph 1, Section 21,
Article II of R. A. No. 9165 (the chain of custody rule) provides for safeguards for the protection of the identity and
integrity of dangerous drugs seized, to wit:
SEC. 21. Custody and Disposition of Confiscated, Seized, and/or Surrendered Dangerous Drugs, Plant Sources of
Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory
Equipment. – The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs,
controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the following manner:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and
confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom
such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the
Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and
be given a copy thereof.

However, this Court has, in many cases, held that while the chain of custody should ideally be perfect, in reality it is
"almost always impossible to obtain an unbroken chain." The most important factor is the preservation of the integrity
and the evidentiary value of the seized items as they will be used to determine the guilt or innocence of the accused.
Hence, the prosecution’s failure to submit in evidence the physical inventory and photograph of the seized drugs as
required under Article 21 of R. A. No. 9165, will not render the accused’s arrest illegal or the items seized from him
inadmissible.21

The chain of custody is not established solely by compliance with the prescribed physical inventory and photographing of
the seized drugs in the presence of the enumerated persons. The Implementing Rules and Regulations of R. A. No. 9165
on the handling and disposition of seized dangerous drugs states:

x x x Provided, further, that non-compliance with these requirements under justifiable grounds, as long as the integrity
and evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void
and invalid such seizures of and custody over said items.22 (Italics, emphasis, undescoring omitted)

In the case at bar, after the sale was consummated, the confidential informant gave the seized item to SPO4 Larot who
placed tape on the sachet and marked it "Exhibit A." Upon reaching the police station, SPO4 Larot executed the Certificate
of Inventory, as well as the request for laboratory examination. The request, the specimen, as well as the marked money
and accused-appellant were then brought to the PNP Crime Laboratory for examination. They were received. by SPO2
Ricardo Maisog, the Receiving Clerk of the PNP Crime Laboratory Office, who then forwarded them to Police Inspector Ma.
Leocy Jabonillo Mag-abo, the Forensic Chemical Officer of the PNP Crime Laboratory.23 Moreover, the seized item was duly
identified by SPO4 Larot in open court as the same item seized from accused-appellant.

Accused-appellant's guilt having been established, we likewise affirm the penalty imposed by the RTC and the CA. Under
the law, the offense of illegal sale of shabu carries with it the penalty of life imprisonment to death and a fine ranging from
Five Hundred Thousand Pesos (₱500,000.00) to Ten Million Pesos (₱10,000,000.00), regardless of the quantity and purity
of the substance.24 Thus, the RTC and CA were within bounds when they imposed the penalty of life imprisonment and a
fine of Five Hundred Thousand Pesos (₱500,000.00).

WHEREFORE, premises considered, the present appeal is DISMISSED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 203984 June 18, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
MEDARIO CALANTIAO y DIMALANTA, Accused-Appellant.

DECISION

LEONARDO-DE CASTRO, J.:

This is an appeal from the January 1 7, 2012 Decision1 of the Court of Appeals in CA-G.R. CR.-H.C. No. 04069, affirming
in toto the July 23, 2009 Decision2 of the Regional Trial Court (RTC) of Caloocan City, Branch 127, finding accused-
appellant Medario Calantiao y Dimalanta (Calantiao) guilty beyond reasonable doubt of violating Section 11, Article II of
Republic Act No. 9165 or the Comprehensive Dangerous Drugs Act of 2002.

On November 13, 2003, Calantiao was charged before the RTC of violation of Section 11, Article II of Republic Act No.
9165 in an Information,3 the pertinent portion of which reads: That on or about the 11th day of November, 2003 in
Caloocan City, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused,
without any authority of law, did then and there willfully, unlawfully and feloniously have in his possession, custody and
control two (2) bricks of dried marijuana fruiting tops with a total weight of 997 .9 grams, knowing the same to be a
dangerous drug.

The facts, as synthesized by the RTC and adopted by the Court of Appeals, are as follows:

EVIDENCE OF THE PROSECUTION

On November 13, 2003[,] at around 5:30 x x x in the afternoon, while PO1 NELSON MARIANO and PO3 EDUARDO
RAMIREZ were on duty, a certain EDWIN LOJERA arrived at their office and asked for police assistance regarding a
shooting incident. Per report of the latter, it appears that while driving a towing truck and traversing along EDSA,
Balintawak, Quezon City, he had a traffic dispute (gitgitan) with a white taxi cab prompting him to follow said vehicle until
they reached along 8th Avenue Street corner C-3 Road, Caloocan City. Thereat, the passengers of said taxi cab, one of
them was accused Calantiao, alighted and fired their guns. Surprised, Lojera could not do anything but continued his
driving until he reached a police station nearby where he reported the incident.

The police officers on duty then were PO1 NELSON MARIANO and PO3 EDUARDO RAMIREZ. PO1 Mariano testified that
they immediately responded to said complaint by proceeding to 5th Avenue corner 8th Street, Caloocan City where they
found the white taxi. While approaching said vehicle, two armed men alighted therefrom, fired their guns towards them
(police officers) and ran away. PO1 Mariano and PO3 Ramirez chased them but they were subdued. PO1 Mariano
recovered from Calantiao a black bag containing two (2) bricks of dried marijuana fruiting tops and a magazine of super
38 stainless with ammos, while PO3 Ramirez recovered from Calantiao’s companion [a] .38 revolver.

The suspects and the confiscated items were then turned over to SPO3 PABLO TEMENA, police investigator at Bagong
Barrio Police Station for investigation. Thereat, PO1 Mariano marked the bricks of marijuana contained in a black bag
with his initials, "NM". Thereafter, said specimen were forwarded to the PNP Crime Laboratory for chemical analysis. The
result of the examination conducted by P/SINSP. JESSSE DELA ROSA revealed that the same was positive for marijuana,
a dangerous drug.

The foregoing testimony of PO1 MARIANO was corroborated by PO3 RAMIREZ who testified that he personally saw those
bricks of marijuana confiscated from the accused. He confirmed that he was with PO1 Mariano when they apprehended
said accused and his companion and testified that while PO1 Mariano recovered from the accused a black bag containing
marijuana, on his part, he confiscated from accused’s companion a .38 revolver.

MR. CRISENDO AMANSEC, the driver of the taxi where the suspects boarded was also presented in open court and
testified as to what he knows about the incident. He confirmed that on that date, two (2) persons boarded on his taxi and
upon reaching C-3 Road, they alighted and fired three (3) shots and ran away.

Aside from the oral testimonies of the witnesses, the prosecution also offered the following documentary evidence to boost
their charge against the accused:

Exh. "A" – Request for Laboratory Examination dated November 12, 2003

Exh. "B" – Physical Sciences Report No. D-1423-03 dated November 12, 2003

Exh. "C-1" – Picture of First brick of marijuana fruiting tops

Exh. "C-2" – Picture of Second brick of marijuana fruiting tops

Exh. "D" – Referral Slip dated November 12, 2003

Exh. "E" – Pinagsamang Sinumpaang Salaysay dated November 12, 2003 of PO3 Eduardo Ramirez and PO1
Nelson Mariano

Exh. "E-1" – Their respective signatures

 Exh. "F" – Sinumpaang Salaysay of Crisendo Amansec (Erroneously marked as Exh. "E")

EVIDENCE OF THE DEFENSE

The accused offered a different version of the story. According to his testimony, this instant case originated from a traffic
mishap where the taxi he and his companion Rommel Reyes were riding almost collided with another car. Reyes then
opened the window and made a "fuck you" sign against the persons on board of that car. That prompted the latter to
chase them and when they were caught in a traffic jam, PO1 Nelson Mariano, one of the persons on board of that other
car alighted and kicked their taxi. Calantiao and Reyes alighted and PO1 Mariano slapped the latter and uttered, "Putang
ina mo bakit mo ako pinakyu hindi mo ba ako kilala?" Said police officer poked his gun again[st] Reyes and when
Calantiao tried to grab it, the gun fired. Calantiao and Reyes were then handcuffed and were brought to the police station.
Thereat, they were subjected to body frisking and their wallets and money were taken. PO1 Mariano then prepared some
documents and informed them that they will be charged for drugs. A newspaper containing marijuana was shown to them
and said police officer told them that it would be sufficient evidence against them. They were detained and subjected to
medical examination before they were submitted for inquest at the prosecutor’s office.4

Ruling of the RTC

On July 23, 2009, the RTC rendered its Decision giving credence to the prosecution’s case. The dispositive portion of the
Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring accused MEDARIO CALANTIAO y
DIMALANTA, GUILTY BEYOND REASONABLE DOUBT of the offense of Violation of Section 11, Article II, R.A. 9165, for
illegally possessing997.9 grams of marijuana fruiting tops. Henceforth, this Court hereby sentences him to suffer the
penalty of life imprisonment and a fine of Five Hundred Thousand Pesos (Php500,000.00). 5

In convicting Calantiao, the RTC held that the illegal drug seized was admissible in evidence as it was discovered during a
body search after Calantiao was caught in flagrante delicto of possessing a gun and firing at the police officers. Moreover,
the RTC found all the elements of the offense to have been duly established by the prosecution. 6

Aggrieved, Calantiao appealed7 his conviction to the Court of Appeals, assigning the following errors:

THE COURT A QUOGRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY BEYOND REASONABLE
DOUBT FOR VIOLATION OF SECTION 11, ARTICLE II, REPUBLIC ACT NO. 9165, NOTWITHSTANDING THE
FACT THAT THE ALLEGEDLY SEIZED ITEMS ARE INADMISSIBLE IN EVIDENCE.

II

THE COURT A QUOGRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT DESPITE THE ARRESTING
OFFICERS’ PATENT NON-COMPLIANCE WITHTHE REQUIREMENTS FOR THE PROPER CUSTODY OF SEIZED
DANGEROUS DRUGS.

III

THE COURT A QUOGRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT DESPITE THE

PROSECUTION’S FAILURE TO PROVE THE PROPER CHAIN OF CUSTODY OF THE SEIZED DANGEROUS
DRUGS.8

Ruling of the Court of Appeals

The Court of Appeals found no reason to overturn Calantiao’s conviction. It found that there was sufficient reason to
justify a warrantless arrest, as the police officers were acting on a legitimate complaint and had a reasonable suspicion
that the persons identified at the scene were the perpetrators of the offense. Likewise, the Court of Appeals held that the
search and subsequent seizure of the marijuana in question was lawful and valid, being incidental to a lawful
arrest.9 Finding that all the elements of the charge of illegal possession of dangerous drugs to be present and duly
proven,10 the Court of Appeals, on January 17, 2012, promulgated its Decision, affirming in toto the RTC’s ruling.

Undaunted, Calantiao is now before this Court praying for an acquittal, adding the following arguments in support of his
position:
First, the plain view doctrine is not an exception to a search incident to a valid warrantless arrest.

xxxx

Second, Calantiao did not waive the inadmissibility of the seized items.

xxxx

Finally, the seized items’ custodial chain is broken.11

In essence, Calantiao is questioning the admissibility of the marijuana found in his possession, as evidence against him
on the grounds of either it was discovered via an illegal search, or because its custodial chain was broken.

Ruling of this Court

This Court finds no merit in Calantiao’s arguments.

Search and Seizure of

Marijuana valid

This Court cannot subscribe to Calantiao’s contention that the marijuana in his possession cannot be admitted as
evidence against him because it was illegally discovered and seized, not having been within the apprehending officers’
"plain view."12

Searches and seizure incident to a lawful arrest are governed by Section 13, Rule 126 of the Revised Rules of Criminal
Procedure, to wit:

Section 13.Search incident to lawful arrest.– A person lawfully arrested may be searched for dangerous weapons or
anything which may have been used or constitute proof in the commission of an offense without a search warrant.

The purpose of allowing a warrantless search and seizure incident to a lawful arrest is "to protect the arresting officer from
being harmed by the person arrested, who might be armed with a concealed weapon, and to prevent the latter from
destroying evidence within reach."13 It is therefore a reasonable exercise of the State’s police power to protect (1) law
enforcers from the injury that may be inflicted on them by a person they have lawfully arrested; and (2) evidence from
being destroyed by the arrestee. It seeks to ensure the safety of the arresting officers and the integrity of the evidence
under the control and within the reach of the arrestee.

In People v. Valeroso,14 this Court had the occasion to reiterate the permissible reach of a valid warrantless search and
seizure incident to a lawful arrest, viz:

When an arrest is made, it is reasonable for the arresting officer to search the person arrested in order to remove any
weapon that the latter might use in order to resist arrest or effect his escape. Otherwise, the officer’s safety might well be
endangered, and the arrest itself frustrated. In addition, it is entirely reasonable for the arresting officer to search for and
seize any evidence on the arrestee’s person in order to prevent its concealment or destruction.

Moreover, in lawful arrests, it becomes both the duty and the right of the apprehending officers to conduct a warrantless
search not only on the person of the suspect, but also in the permissible area within the latter’s reach. Otherwise stated, a
valid arrest allows the seizure of evidence or dangerous weapons either on the person of the one arrested or within the
area of his immediate control. The phrase "within the area of his immediate control" means the area from within which he
might gain possession of a weapon or destructible evidence. A gun on a table or in a drawer in front of one who is arrested
can be as dangerous to the arresting officer as one concealed in the clothing of the person arrested. (Citations omitted.)

In Valeroso, however, the Court held that the evidence searched and seized from him could not be used against him
because they were discovered in a room, different from where he was being detained, and was in a locked cabinet. Thus,
the area searched could not be considered as one within his immediate control that he could take any weapon or destroy
any evidence against him.15

In the case at bar, the marijuana was found in a black bag in Calantiao’s possession and within his immediate control. He
could have easily taken any weapon from the bag or dumped it to destroy the evidence inside it. As the black bag
containing the marijuana was in Calantiao’s possession, it was within the permissible area that the apprehending officers
could validly conduct a warrantless search.
Calantiao’s argument that the marijuana cannot be used as evidence against him because its discovery was in violation of
the Plain View Doctrine, is misplaced.

The Plain View Doctrine is actually the exception to the inadmissibility of evidence obtained in a warrantless search
incident to a lawful arrest outside the suspect’s person and premises under his immediate control. This is so because
"[o]bjects in the ‘plain view’ of an officer who has the right to be in the position to have that view are subject to seizure and
may be presented as evidence."16 "The doctrine is usually applied where a police officer is not searching for evidence
against the accused, but nonetheless inadvertently comes across an incriminating object x x x. [It] serves to supplement
the prior justification – whether it be a warrant for another object, hot pursuit, search incident to lawful arrest, or some
other legitimate reason for being present unconnected with a search directed against the accused – and permits the
warrantless seizure."17

The Plain View Doctrine thus finds no applicability in Calantiao’s situation because the police officers purposely searched
him upon his arrest. The police officers did not inadvertently come across the black bag, which was in Calantiao’s
possession; they deliberately opened it, as part of the search incident to Calantiao’s lawful arrest.

Inventory and Chain of

Custody of Evidence

Calantiao claims that even if the search and seizure were validly effected, the marijuana is still inadmissible as evidence
against him for failure of the apprehending officers to comply with the rules on chain of custody, as the item was marked
at the police station.18

The pertinent provisions of Republic Act No. 9165 provide as follows:

Section 21. Custody and Disposition of Confiscated, Seized, and/or Surrendered Dangerous Drugs, Plant Sources of
Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory
Equipment. – The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs,
controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the following manner:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and
confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from
whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the
media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the
copies of the inventory and be given a copy thereof[.]

Its Implementing Rules and Regulations state:

SECTION 21. Custody and Disposition of Confiscated, Seized and/or Surrendered Dangerous Drugs, Plant Sources of
Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory
Equipment. — The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs,
controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the following manner:

(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure
and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s
from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from
the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the
copies of the inventory and be given a copy thereof; Provided, that the physical inventory and photograph shall be
conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office
of the apprehending officer/team, whichever is practicable, in case of warrantless seizures; Provided, further, that
non-compliance with these requirements under justifiable grounds, as long as the integrity and the evidentiary
value of the seized items are properly preserved by the apprehending officer/team, shall not render void and
invalid such seizures of and custody over said items[.] (Emphasis supplied.)

This Court has held that the failure to strictly comply with Section 21, Article II of Republic Act No. 9165, such as
immediately marking seized drugs, will not automatically impair the integrity of chain of custody because what is of
utmost importance is the preservation of the integrity and the evidentiary value of the seized items, as these would be
utilized in the determination of the guilt or innocence of the accused.19

Section 21 and its IRR do not even mention "marking." What they require are (1) physical inventory, and (2) taking of
photographs. As this Court held in People v. Ocfemia20:
What Section 21 of R.A. No. 9165 and its implementing rule do not expressly specify is the matter of "marking" of the
seized items in warrantless seizures to ensure that the evidence seized upon apprehension is the same evidence subjected
to inventory and photography when these activities are undertaken at the police station rather than at the place of arrest.
Consistency with the "chain of custody" rule requires that the "marking" of the seized items – to truly ensure that they are
the same items that enter the chain and are eventually the ones offered in evidence – should be done (1) in the presence of
the apprehended violator (2) immediately upon confiscation.

The prosecution was able to establish the chain of custody of the seized marijuana from the time the police officers
confiscated it, to the time it was turned over to the investigating officer, up to the time it was brought to the forensic
chemist for laboratory examination.21 This Court has no reason to overrule the RTC and the Court of Appeals, which both
found the chain of custody of the seized drugs to have not been broken so as to render the marijuana seized from
Calantiao inadmissible in evidence.

Furthermore, unless it can be shown that there was bad faith, ill will, or tampering of the evidence, the presumption that
the integrity of the evidence has been preserved will remain. The burden of showing the foregoing to overcome the
presumption that the police officers handled the seized drugs with regularity, and that they properly discharged their
duties is on Calantiao. Unfortunately, Calantiao failed to discharge such burden.22

It is worthy to note that these arguments were only raised by Calantiao on his appeal. He himself admits this. 23 His
theory, from the very beginning, was that he did not do it, and that he was being framed for having offended the police
officers. Simply put, his defense tactic was one of denial and frame-up. However, those defenses have always been
frowned upon by the Court, to wit:

The defenses of denial and frame-up have been invariably viewed by this Court with disfavor for it can easily be concocted
and is a common and standard defense ploy in prosecutions for violation of Dangerous Drugs Act. In order to prosper, the
defenses of denial and frame-up must be proved with strong and convincing evidence. In the cases before us, appellant
failed to present sufficient evidence in support of his claims. Aside from his self-serving assertions, no plausible proof was
presented to bolster his allegations.24

Hence, as Calantiao failed to show clear and convincing evidence that the apprehending officers were stirred by illicit
motive or failed to properly perform their duties, their testimonies deserve full faith and credit.25

WHEREFORE, premises considered, the Court hereby AFFIRMS the January 17, 2012 Decision of the Court of Appeals in
CA-G.R. CR.-H.C. No. 04069.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 199689 March 12, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
HERMANOS CONSTANTINO, JR. y BINAYUG, a.k.a. "JOJIT," Accused-Appellant.

DECISION

LEONARDO-DE CASTRO, J.:

This appeal challenges the Decision1 dated July 29, 2011 of the Court of Appeals in CA-G.R. CR.-H.C. No. 03353,
affirming the Decision2 dated April 15, 2008 of the Regional Trial Court (R TC), Branch 5 of Tuguegarao City, Cagayan, in
Criminal Case No. 10516, which found accused-appellant Hermanos Constantino, Jr. y Binayug, a.k.a. "Jojit"
(Constantino), guilty of the crime of illegal sale of methamphetamine hydrochloride, more popularly known as shabu,
under Article II, Section 5 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act of
2002.

The Information3 filed before the R TC charged Constantino, as follows:

That on January 20, 2005, in the City of Tuguegarao, Province of Cagayan and within the jurisdiction of the Honorable
Court, the above-named accused, without authority of law and without permit to sell, transport, deliver and distribute
dangerous drugs, did then and there willfully, unlawfully and feloniously sell, transport, distribute and deliver two (2)
heat-sealed transparent plastic sachets containing 0.14 gram of Methamphetamine Hydrochloride commonly known as
"shabu", a dangerous drug to a member of the PNP, Tuguegarao City who acted as a poseur-buyer; that after receiving the
two (2) plastic sachets, the poseur-buyer simultaneously handed to the accused the marked money consisting of one (1)
piece of FIVE HUNDRED PESO BILL (₱500.00) with Serial No. Q₱278070 and five (5) pieces of ONE HUNDRED PESO
BILL with Serial Nos. SM989053, PS724429, XM484584, BB048002, and EK6900025 or a total of ₱1,000.00 and this led
to the apprehension of the accused and the confiscation of the dangerous drug together with the buy-bust money by the
said apprehending law enforcers of the Tuguegarao City Police Station who formed the buy bust team in coordination with
the PDEA.

When arraigned on July 8, 2005, Constantino pleaded not guilty to the crime charged. 4 Thereafter, pre-trial and trial on
the merits ensued.

Evidence for the prosecution presented the following version of events:

On January 20, 2005, at around 2:00 in the afternoon, Police Superintendent (P/Supt.) Mariano Rodriguez (Rodriquez),
the Chief of Police of Tuguegarao City, received a report from a confidential informant (CI) that a certain Jojit was selling
illegal drugs in the said city. P/Supt.

Rodriguez immediately formed a buy-bust group composed of Senior Police Officer (SPO) 2 Noel Taguiam (Taguiam), SPO2
Alexander Tamang (Tamang), SPO1 Arthur Blaquera (Blaquera), Police Officer (PO) 3 Edwin Hernandez (Hernandez), and
PO3 Rolando Domingo (Domingo). PO3 Domingo was designated as the poseur-buyer. The buy-bust money, consisting of
one ₱500.00 bill and five ₱100.00 bills, were dusted with fluorescent powder and their respective serial numbers were
recorded in the police blotter.5

Around 8:00 in the evening of the same day, the team proceeded to Reynovilla St., Caritan Centro, Tuguegarao City, the
place where, according to the CI, Jojit was selling shabu. PO3 Domingo positioned himself beside a street light while the
rest of the team hid behind a nearby concrete fence. After waiting for about 45 minutes, Constantino arrived on board a
tricycle. PO3 Domingo recognized Constantino as the Jojit described by the CI. PO3 Domingo approached Constantino
and asked him if he was Jojit. When Constantino replied in the affirmative, PO3 Domingo next asked, "Mayroon ka bang
stuff?" ("Do you have stuff?") In response, Constantino inquired of PO3 Domingo how much he wanted to buy. PO3
Domingo said he wanted to buy ₱1,000.00 worth of shabu, simultaneously handing over the buy-bust money to
Constantino, who, in turn, handed two plastic sachets to PO3 Domingo. Thereupon, PO3 Domingo turned his cap
backwards, the pre-arranged signal for the consummated sale. Upon seeing the signal, the other members of the buy-bust
team approached the scene at once and arrested Constantino, from whom SPO2 Taguiam recovered the buy-bust money.6

Thereafter, Constantino was brought to the police station where the recovered drugs and money were turned over to the
investigator, SPO2 Tamang.7 The recovered drugs were then marked with the initials "A-1" and "A-2." The incident was
recorded in the police blotter with an inventory of the recovered drugs and money.8

Later that evening, at around ten o’clock, P/Supt. Rodriguez and SPO2 Tamang submitted to the Philippine National
Police (PNP) Crime Laboratory Services, Camp Marcelo Adduru, Tuguegarao City, a request for laboratory examination of
two plastic sachets with white crystalline substance marked as "A-1" and "A-2" to determine the presence of dangerous
drugs;9 as well as both hands of Constantino, one piece ₱500.00 bill, and five pieces ₱100.00 bills, to determine the
presence of the ultra violet powder.10 Per Chemistry Report No. D-08-200511 and Physical Identification Report No. PI-04-
2005,12 prepared by Police Senior Inspector (P/SInsp.) Mayra Matote Madria,13 Forensic Chemist, the contents of the two
plastic sachets tested positive for Methamphetamine Hydrochloride; while the other specimens tested positive for the
presence of bright-yellow ultraviolet fluorescent powder.

Constantino denied the accusation against him and asserted that he was merely framed-up.

According to Constantino, at around 8:00 in the evening on January 20, 2005, he was enjoying a joyride with his friend,
Jeff Abarriao, on the latter’s motorcycle, within the vicinity of Caritan Centro. After 30 minutes, Constantino decided to go
home. While walking along Reyno or Reynovilla St., two vehicles suddenly stopped, one in front and the other behind him.
Five men, all in civilian clothes, alighted from the two vehicles. Two of the men held Constantino’s hands, while another
poked a gun at him, asking him where he came from and ordering him to bring out the shabu. Constantino answered that
he did not know what the men were talking about. The men then forced Constantino into one of the vehicles. Inside the
vehicle, one of the men frisked and searched Constantino, and told him that he was being arrested for selling shabu. The
men, who were now apparently police officers, brought Constantino to the Tuguegarao City Police Station. At the police
station, the police officers took Constantino’s cellphone and wallet. Also at the police station, one of the arresting police
officers brought out two pieces of plastic sachets and money and turned it over to one of his companions. At around 9:30
in the evening, the police officers brought Constantino to the PNP Crime Laboratory, but nothing happened because he
heard that the person who was supposed to conduct the examination was not around, so, Constantino was brought back
to the police station.14

The following day, January 21, 2005, the police officers again brought Constantino to the PNP Crime Laboratory. Along
the way, one of the police escorts forced Constantino to hold a certain amount of money. Constantino tried to resist but he
could not really do anything because he was handcuffed. After his examination, Constantino was detained and was told
that he was suspected of selling shabu.

The RTC promulgated its Decision on April 15, 2008, finding Constantino guilty as charged. The trial court rejected the
arguments of the defense, thus:

1. The Prosecution failed to give a detailed account of the arrangement with the accused for the purchase of the shabu.

The Court’s response: The testimony of PO3 Domingo was detailed enough, corroborated by other witnesses. It is the
defense that has failed to show in what crucial detail the prosecution’s account is wanting.

2. The police officers categorically admitted that they did not personally know the accused until they were at the alleged
place of transaction.

The Court’s response: Substantive law does not require this; the rules of evidence do not. Did they know he was Jojit?
Yes, from the description given the informant. Domingo asked whether he was Jojit. He answered "Yes".

3. The arresting officers failed to comply with the requirements of Article II, Section 21 of R.A. 9165 that requires that an
inventory be taken and that photographs be taken of the items seized.

The Court’s comment: The Police Blotter Entry No. 0270 enumerates the items seized. This, the Court holds to be
substantial compliance. Even assuming, without admitting, that not all the requirements may not have been complied
with, these omissions do not operate to exclude the evidence nor to cause suppression thereof. They are directory, not
mandatory provisions.

4. The chain of custody was not established with certainty.

The Court’s comment: The chain is not difficult to trace, and has been established by evidence, thus:

a. Exhibit "B": The police blotter recording that on 20 January 2005 at 2100 hours, mentioning the two sachets of
shabu which according to the blotter the accused admitted he handed over to Domingo; Domingo had testified
that the markings A-1 NBT and A-2 NBT were placed on the sachets by Investigator Alexander Tamang;

b. Exhibit "F": Dated January 20, 2005, a request to the PNP Crime Lab Services for the examination of "two
plastic sachet (sic) with white crystalline substance marked A1 and A2";

c. Exhibit "D": Chemistry Report No. D-08-2005 completed 21 January 2005 reporting a qualitative examination
of the contents of two heat-sealed sachets marked as A1 NBT and A2 NBT and identifying the substance as
"Methamphetamine Hydrochloride".

5. There was no prior coordination with PDEA.

The Court’s response: None was needed. Exhibit "H" clearly evidences that SPO1 Blaquera was authorized to conduct
anti-drug operations. Domingo also answered the question about coordination with PDEA when he testified: "During that
time 3 representatives of the Intelligence Operatives were deputized in the PDEA in the persons of Noel Taguiam, Arthur
Blaquera and the Chief of Police."

Hermanos testified in his behalf and his testimony can be reduced to the following story:

1 He went on a joy-ride that night with his friend aboard a motorcycle;

2 Tiring, he alighted and started to walk along Reyno Villa Street;

3 He was accosted by police officers who, at the time, he did not know to be police officers;

4 They took him to the police station and produced the sachets;
 5 Next day, while on the way to the Crime Lab, they forced him to hold marked bills, although he was cuffed.

All told, it is a story that is meant to endeavor to explain the circumstances around the accused’s arrest and
apprehension. For one thing, it is self-serving; for another, we are not told any reason why the police officers should have
wanted to apprehend him – a supposedly guiltless man; third, the Court never heard the testimony of his friend with
whom he was supposed to have had a joy-ride that night. In sum, his story does not convince this Court.15(Citations
omitted.)

The RTC imposed the following sentence upon Constantino:

WHEREFORE, the Court finds the accused guilty beyond reasonable doubt of Violation of Sec. 5, Art. II of R.A. 9165 and
sentences him to suffer the penalty of LIFE IMPRISONMENT and a fine of ₱500,000.00.16

Maintaining his innocence, Constantino appealed to the Court of Appeals, arguing that:

1. The trial court gravely erred in giving full credence to the testimonies of the prosecution witnesses despite the
patent irregularities in the conduct of the buy-bust operation.

2. The trial court gravely erred in convicting accused-appellant despite the prosecution’s failure to establish that
chain of custody of the drug specimens allegedly confiscated from the accused-appellant.

3. The trial court gravely erred in convicting the accused-appellant despite the prosecution’s failure to establish
the identity of the prohibited drugs constituting the corpus delicti of the offense.

In its Decision dated July 29, 2011, the Court of Appeals affirmed in toto the judgment of conviction of the RTC against
Constantino. The appellate court held that Constantino’s defense of frame-up was not worthy of credence as his version of
the incident was not at all corroborated.

Constantino was caught in flagrante delicto selling shabu to PO3 Domingo, who acted as the poseur-buyer, therefore, he
was legally arrested without a warrant. The appellate court also found that the chain of custody of the shabu had been
preserved from the time said drugs were confiscated from Constantino to the time the same drugs were delivered to the
crime laboratory and thereafter retrieved and presented as evidence before the trial court. Lastly, the appellate court
stressed that between the positive and categorical declarations of the prosecution witnesses, on one hand, and the
unsubstantial denial or negative statements of the appellant, on the other hand, the former generally prevails; and that
negative averments, unsubstantiated by clear and convincing evidence, deserve no weight in law, especially vis-a-vis the
time-tested presumption of regularity of performance of official duty on the part of the apprehending officers.

In the end, the Court of Appeals decreed:

WHEREFORE, the Decision of the Regional Trial Court of Tuguegarao City, Branch 5, dated 15 April 2008, in Criminal
Case No. 10516, is AFFIRMED.17

Consequently, Constantino comes before this Court seeking the reversal of his conviction by the trial court and the Court
of Appeals.

In his Supplemental Brief, Constantino contests his conviction, averring inconsistencies in the testimonies of the
prosecution witnesses, particularly, on the circumstances of the marking of the two plastic sachets containing shabu
allegedly confiscated from him. Different people claim to have made the marking "NBT" on the two plastic sachets and
gave various explanations as to what the initials "NBT" stand for. In short, Constantino argues that the prosecution failed
to establish a crucial link in the chain of custody of the shabu in this case.

The appeal is impressed with merit.

Admittedly, denial is an inherently weak defense, consistently viewed with disfavor by the courts, being a self-serving
negative evidence. In view, however, of the constitutional presumption that an accused is innocent until the contrary is
proven beyond reasonable doubt, the burden lies on the prosecution to overcome such presumption by presenting the
required quantum of evidence. In so doing, the prosecution must rest on its own merits and must not rely on the
weakness of the defense.18

In a prosecution for the sale of a dangerous drug, the following elements must be proven: (1) the identity of the buyer and
the seller, the object, and the consideration; and (2) the delivery of the thing sold and the payment therefor. Simply put,
"[in] prosecutions for illegal sale of shabu, what is material is the proof that the transaction or sale actually took place,
coupled with the presentation in court of the corpus delicti as evidence."19 And in the prosecution of these offenses, the
primary consideration is to ensure that the identity and integrity of the seized drugs and other related articles have been
preserved from the time they were confiscated from the accused until their presentation as evidence in court. 20

Article II, Section 21(1) of Republic Act No. 9165 lays down the procedure to be followed in the seizure and custody of
dangerous drugs:

Section 21. Custody and Disposition of Confiscated, Seized, and/or Surrendered Dangerous Drugs, Plant Sources of
Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory
Equipment. – The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs,
controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the following manner:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and
confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom
such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the
Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and
be given a copy thereof[.]

Article II, Section 21(a) of the Implementing Rules and Regulations (IRR) of Republic Act No. 9165 describes in more detail
how the foregoing procedure is to be applied:

SECTION 21. Custody and Disposition of Confiscated, Seized and/or Surrendered Dangerous Drugs, Plant Sources of
Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory
Equipment. — The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs,
controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the following manner:

(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and
confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom
such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the
Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and
be given a copy thereof; Provided, that the physical inventory and photograph shall be conducted at the place where the
search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team,
whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with these requirements
under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are properly preserved by
the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items[.]

While police officers are enjoined to strictly comply with the procedure prescribed by law, the IRR also explicitly excuses
non-compliance under justifiable grounds, but only if the integrity and evidentiary value of the seized items have been
properly preserved by the apprehending officers. The integrity and evidentiary value of seized items are properly preserved
for as long as the chain of custody of the same are duly established.

Section 1(b) of Dangerous Drugs Board Regulation No. 1, series of 2002,21 defines "chain of custody" as follows:

Chain of Custody means the duly recorded authorized movements and custody of seized drugs or controlled chemicals or
plant sources of dangerous drugs or laboratory equipment of each stage, from the time of seizure/confiscation to receipt
in the forensic laboratory to safekeeping to presentation in court for destruction. Such record of movements and custody
of seized item shall include the identity and signature of the person who held temporary custody of the seized item, the
date and time when such transfer of custody were made in the course of safekeeping and use in court as evidence, and
the final disposition.

In Mallillin v. People,22 the Court discussed how the chain of custody of seized items is established:

As a method of authenticating evidence, the chain of custody rule requires that the admission of an exhibit be preceded by
evidence sufficient to support a finding that the matter in question is what the proponent claims it to be. It would include
testimony about every link in the chain, from the moment the item was picked up to the time it is offered into evidence, in
such a way that every person who touched the exhibit would describe how and from whom it was received, where it was
and what happened to it while in the witness’ possession, the condition in which it was received and the condition in
which it was delivered to the next link in the chain. These witnesses would then describe the precautions taken to ensure
that there had been no change in the condition of the item and no opportunity for someone not in the chain to have
possession of the same. (Citations omitted.)
Thus, the following links must be established in the chain of custody in a buy-bust situation: first, the seizure and
marking, if practicable, of the illegal drug recovered from the accused by the apprehending officer; second, the turn over of
the illegal drug seized by the apprehending officer to the investigating officer; third, the turn over by the investigating
officer of the illegal drug to the forensic chemist for laboratory examination; and fourth, the turn over and submission of
the marked illegal drugs seized from the forensic chemist to the court.23

After a careful scrutiny of the testimonies of the prosecution witnesses, the Court finds glaring inconsistencies affecting
the integrity of the shabu purportedly confiscated from Constantino. The inconsistent testimonies of PO3 Domingo, PO3
Hernandez, and P/SInsp. Tulauan as to who, when, and where the two plastic sachets of shabu were marked lead the
Court to question whether the two plastic sachets of shabu identified in court were the very same ones confiscated from
Constantino. The doubtful markings already broke the chain of custody of the seized shabu at a very early stage.

To recall, the first crucial link in the chain of custody is seizure and marking of the illegal drug. In this case, PO3
Domingo, as poseur-buyer, received two plastic sachets of shabu from Constantino in exchange for ₱1,000. However, PO3
Domingo himself did not put any markings on the two plastic sachets of shabu. Instead, upon arrival of the buy-bust
team with Constantino at the police station, PO3 Domingo turned over the two plastic sachets of shabu to the
investigator, SPO2 Tamang, who was also a member of the buy-bust team. PO3 Domingo testified that it was SPO2
Tamang who put the marking "NBT" on the said sachets of shabu. Below are the excerpts from PO3 Domingo’s testimony:

Q If that plastic sachets which was sold to you by Hermanos Constantino is shown to you will you be able to identify the
same?

A Yes, ma’am.

Q How were you able to identify the plastic sachets?

A There is an initials (sic), ma’am.

Q What initials are you referring to?

A A-1 initial NBT and A-2 initial NBT.

Q Who placed those initials in the plastic sachets?

A The Investigator, ma’am.

Q And who is the investigator?

A Alexander Tamang, ma’am.

Q Where did he place those initials?

A In the police station after the apprehension, ma’am.24 (Emphasis supplied.)

However, PO3 Hernandez, another member of the buy-bust team, categorically pointed to SPO2 Taguiam, also a member
of the buy-bust team, as the one who put the marking "NBT" on the plastic sachets upon the team’s return to the police
station, thus:

PROS. NICOLAS:

Q During the buy bust operation you stated that the accused handed to the poseur buyer in the person of PO3 Rolando
Domingo two plastic sachets containing as you claimed methamphetamine hydrochloride, have you seen these plastic
sachets at that time when they handed to PO3 Rolando Domingo?

A Yes, sir.

Q If these two plastic sachets will be shown to you again today will you be able to tell that these two plastic sachets were
the same plastic sachets that were handed by the accused to PO3 Rolando Domingo?

A Yes, sir.
Q I am showing to you these two plastic sachets kindly tell us if these are the plastic sachets that were handed to PO3
Rolando Domingo?

A These are the ones, sir.

Q Why do you say that these are the two plastic sachets handed by the accused?

A Because I was there and I saw the accused handed the two plastic sachets to PO3 Rolando Domingo, sir.

Q Why do you know that these are the same plastic sachets?

A These are the ones, sir.

Q Mr. Witness, there are markings on these two plastic sachets, do you know whose markings are these?

xxxx

A It was Noel B. Taguiam, sir.

The witness is pointing to the marking NBT partly hidden.

COURT:

Q Who is Noel B. Taguiam?

A A member of the buy bust team also, sir.

PROS. NICOLAS:

Q You stated this NBT was placed by one Noel B. Taguiam, why do you know that he was the one who placed this?

A Because I was present during that time when he placed his initial, sir.

Q Do you know when this Noel B. Taguiam placed those initials on those two plastic sachets?

A After we conducted the buy bust operation, sir.

Q How soon Noel B. Taguiam placed those initials after the conduct of the buy bust operation?

A After a few hours, sir.

Q Where did he place those initials?

A In our office, sir.25 (Emphasis supplied.)

To complicate things even further, P/SInsp Tulauan,26 the Forensic Chemist, also declared before the trial court that the
marking "NBT" on the two plastic sachets of shabu were made by SPO3 Nelson B. Tamaray (Tamaray), the duty officer
who received the specimens at the crime laboratory. P/SInsp. Tulauan testified:

PROS. ISRAEL:

Q When you received these two specimens Madam Witness, will you please tell us the physical appearance of these items
when you received the same?

A They were heat-sealed and with markings "A-1" and "A-2," your Honor.

B And will you please point to us these markings "A-1" and "A-2" when you received these items Madam Witness?

A This is the markings "A-1" and "A-2," Ma’am.

INTERPRETER:

The witness is pointing to the markings "A-1" and "A-2" with the use of a black pentel pen.

PROS. ISRAEL:

Q There is another marking in this plastic sachet Madam Witness marked as NBT, what is this marking all about?

A That is the marking of SPO3 Nelson B. Tamaray, Ma’am.

Q Is he authorized to make the necessary marking which was requested to be examined Madam Witness?

A Yes, Ma’am because he is the one who received the specimen from the one who deliver it, Ma’am.

Q In this second plastic sachet Madam Witness which you identified earlier, that there is a marking "A-1," there is another
marking NBT, what is this marking all about Madam Witness?

A That is the marking of SPO3 Nelson B. Tamaray, Ma’am.27 (Emphases supplied.)

On cross-examination, P/SInsp. Tulauan confirmed her previous declaration that SPO3 Tamaray had claimed making the
marking on the sachets of shabu:

Atty. Aquino

Madam Witness, with respect to that marking made which are "A1" and "A-2", they are not your markings, is it not?

A Yes, sir.

Q And with respect also to that NBT marked and placed in that exhibit which you have earlier identified, you did not see
this duty officer placed his markings thereon, is it not?

A Yes sir but I asked him who placed that marking and he said that he was the one who placed the initial NBT, sir. 28

The Court already emphasized in People v. Zakaria29 the importance of marking the seized item right after seizure:

Crucial in proving the chain of custody is the marking of the seized dangerous drugs or other related items immediately
after they are seized from the accused, for the marking upon seizure is the starting point in the custodial link that
succeeding handlers of the evidence will use as reference point. Moreover, the value of marking of the evidence is to
separate the marked evidence from the corpus of all other similar or related evidence from the time of seizure from the
accused until disposition at the end of criminal proceedings, obviating switching, "planting" or contamination of evidence.
A failure to mark at the time of taking of initial custody imperils the integrity of the chain of custody that the law
requires.1âwphi1 (Citation omitted.)

Herein, the prosecution is completely silent as to why PO3 Domingo, the poseur-buyer, despite having immediate custody
of the two plastic sachets of shabu purchased from Constantino, failed to immediately mark the seized drugs before
turning over the custody of the same to another police officer. This lapse in procedure opened the door for confusion and
doubt as to the identity of the drugs actually seized from Constantino during the buy-bust and the ones presented before
the trial court, especially considering that three different people, during the interval, supposedly received and marked the
same. To clarify the matter, the prosecution could have presented as witness either SPO2 Tamang or SPO2 Taguiam to
directly validate the marking in court, but unfortunately, the prosecution chose to dispense with the testimonies of both
officers. This omission diminished the importance of the markings as the reference point for the subsequent handling of
the evidence. As a consequence, an objective person could now justifiably suspect the shabu ultimately presented as
evidence in court to be planted or contaminated.30

The failure of the prosecution to establish the evidence’s chain of custody is fatal to its case as the Court can no longer
consider or even safely assume that the integrity and evidentiary value of the confiscated dangerous drug were properly
preserved.31

In light of the foregoing, Constantino is acquitted of the crime charged, not because the Court accords credence to his
defense of frame-up, but because the prosecution failed to discharge its burden of proving his guilt beyond reasonable
doubt.
WHEREFORE, the appeal is GRANTED. The Decision dated July 29, 2011 of the Court of Appeals in CA-G.R. CR.-H.C. No.
03353, affirming the Decision dated April 15, 2008 of the Regional Trial Court, Branch 5 of Tuguegarao City, Cagayan, in
Criminal Case No. 10516, is REVERSED and SET ASIDE. Appellant Hermanos Constantino, Jr. y Binayug, a.k.a. "Jojit,"
is ACQUITTED for failure of the prosecution to prove his guilt beyond reasonable doubt and is ORDERED to be
immediately released from detention unless he is confined for another lawful cause.

SO ORDERED.

[ GR No. 212171, Sep 07, 2016 ]

PEOPLE v. MERCURY DELA CRUZ ALIAS 'DEDAY +

DECISION

PEREZ, J.:

We resolve the appeal, filed by accused-appellant Mercury Dela Cruz alias "Deday," from the 27 September 2013
Decision[1] of the Court of Appeals (CA) in CA-G.R. CR.-H.C. No. 01103.
In a Decision[2] dated 27 November 2008, the Regional Trial Court (RTC), Branch 58, Cebu City, found the accused-
appellant guilty of illegal sale of shabu under Sections 5, Article II of Republic Act (R.A.) No. 9165[3] and sentenced him to
suffer the penalty life imprisonment and to pay a fine of P500,000.00.

The RTC gave full credence to the testimonies of Senior Police Officer (SPO) 2 Alejandro Batobalanos, Police Officer (PO) 1
Angsgar Babyboy A. Reales, and PO1 Leopoldo Bullido who conducted the buy-bust operation against the accused-
appellant, and rejected the self-serving defenses of denial and alibi of accused-appellant and her live-in partner. The RTC
noted that the categorical affirmation of accused-appellant and her live-in partner that the arresting officers did not
demand anything from them in exchange for the accused-appellant's liberty created the presumption that the arresting
officers were performing their official functions regularly.[4]

On intermediate appellate review, the CA affirmed in toto the RTC's ruling. The CA agreed with the RTC in giving weight to
the testimonies of the prosecution witnesses, and held that the arresting officers complied with the proper procedure in
the custody and disposition of the seized drugs.

Our Ruling

We dismiss the appeal and affirm the accused-appellant's guilt.

We find no reason to reverse the RTC's findings, as affirmed by the CA. In the same manner as the lower courts, we give
full credit to the positive, spontaneous and straightforward testimonies of the police officers pointing to accused-appellant
as the seller and possessor of the confiscated shabu.

We have consistently held that in order to secure a conviction for illegal sale of dangerous drugs, it is necessary that the
prosecution is able to establish the following essential elements: (1) the identity of the buyer and the seller, the object of
the sale and its consideration; and (2) the delivery of the thing sold and its payment. What is material is the proof that the
transaction or sale actually took place, coupled with the presentation in court of the corpus delicti as evidence. The
delivery of the illicit drug to the poseur-buyer and the receipt by the seller of the marked money successfully consummate
the buy-bust transaction.[5] Here, all the aforesaid elements necessary for accused-appellant's prosecution have been
sufficiently complied with, indubitably establishing that she has indeed committed the crime. PO1 Reales testified in detail
how he was introduced by the confidential informant to accused-appellant. The confidential informant, thereafter,
manifested to the accused-appellant their intention to buy worth P200.00. Upon giving the accused-appellant the 2
marked P100.00 bills, she, in return, handed to PO1 Reales a small plastic containing white crystalline substance. The
plastic sachet later on tested positive for the presence of Methamphetamine Hydrochloride. The testimony given by PO1
Reales was corroborated by SPO1 Batobalonos and PO1 Bullido in all material details. It is therefore clear beyond any
shadow of doubt that the buy-bust operation had been substantially completed and consummated. The fact that accused-
appellant was able to evade the arrest immediately after the sale and that she was arrested only after, by virtue of a
warrant of arrest, did not change the fact that the crime she committed earlier had been consummated.

We agree with the lower courts that in the absence of any intent or ill-motive on the part of the police officers to falsely
impute commission of a crime against the accused-appellant, the presumption of regularity in the performance of official
duty is entitled to great respect and deserves to prevail over the bare, uncorroborated denial and self-serving claim of the
accused of frame-up.[6]

Also, we reject the appellant's contention that the police officers failed to comply with the provisions of Section 21,
paragraph 1 of R.A. No. 9165,[7] which provides for the procedure in the custody and disposition of seized drugs.
After a careful perusal of the records, we agree with the CA that the prosecution had established the unbroken chain of
custody over the seized drugs. This was established through the testimonies of the prosecution witnesses, to wit: "At
around 7:15 o'clock in the evening of November 10, 2006, PO3 Batobalonos, PO1 Reales, PO1 Bullido and their civilian asset
proceeded to Sitio Cogon, A. Lopez St., Barangay Labangon. When the team went inside the interior portion of Sitio Cogon,
PO1 Reales together with the civilian asset approached the house of Dela Cruz, while PO3 Batobalonos and PO1 Bullido
were strategically hidden more or less ten (10) meters away. The civilian asset called Dela Cruz and told her that they will
buy shabu worth P200.00. Thereafter, Dela Cruz handed PO1 Reales a small plastic containing white crystalline substance
and in exchange he handed to the former the P200.00 bills. Upon getting hold of the money, PO3 Batobalonos and PO1
Bullido, who saw the consummation of the transaction rushed to the scene. When PO3 Batobalonos got hold of Dela Cruz,
the latter shouted for help and resisted arrest. Dela Cruz was able to run and so the team chased her, however, her neighbor
Arthur Tabasa Ortega ("Ortega") blocked their way. The team introduced themselves as policemen but Ortega did not listen,
so PO3 Batobalonos fired a warning shot as the people likewise started to gather around them. Meanwhile, Dela Cruz was
able to evade arrest. The team then arrested Ortega for obstruction of justice.

On their way to the police station aboard their patrol car, PO1 Reales handed to PO3 Batobalonos the small plastic
containing white crystalline substance which he purchased from Dela Cruz. Thereafter, upon arrival at the police station,
PO3 Batobalonos marked the seized item with "DDM 11/10/06."

Afterwards, a Request for Laboratory Examination of the seized item was prepared by PO3 Batobalonos. The Request and
the seized item were delivered to the Regional Crime Laboratory Office-7, Camp Sotero Cabahug, Gorordo Avenue, Cebu City
by PO1 Reales at around 1:10 o'clock in the morning of November 11, 2006.

Thereafter Forensic Chemist PCI Salinas issued Chemistry Report No. D-1771-2006,"[8] with the finding that the specimen
gave positive result for the presence of Methamphetamine hydrochloride.[9]

The confiscated dangerous drug which also constitutes the corpus delicti of the crime was validly considered by the courts
in arriving at the decision despite the fact that the forensic chemist who examined it did not testify in court. The relevant
portion of the RTC decision reads:

The presentation of the testimony of Forensic chemist PSI MUTCHIT G. SALINAS was dispensed with, the defense
having ADMITTED: the existence of the Letter Request dated November 10, 2006 from the PNP Station 10; the existence
of one (1) small plastic pack containing white crystalline substance which is the subject for examination, however DENIED
as to the ownership of said evidence; the existence and due execution of the Chemistry Report No. D-1771-2006 executed
by witness Mutchit G. Salinas; that the intended witness is and expert witness who examined the specimen found to
contain the presence of Methylamphetamine hydrochloride locally known as shabu, a dangerous drug.[10]

Anent accused-appellant's contention that the drugs were marked not at the place where she was apprehended but at the
police station and that there was no physical inventory made on the seized item nor was it photographed, we find the
same untenable. The alleged non-compliance with Section 21 of R.A. No. 9165 was not fatal to the prosecution's case
because the apprehending team properly preserved the integrity and evidentiary value of the seized drugs.[11]

Relevant to the instant case is the procedure to be followed in the custody and handling of the seized dangerous drugs as
outlined in Section 21(a), Article II of the Implementing Rules and Regulations of R.A. No. 9165, which states:

(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and
confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom
such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the
Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and
be given a copy thereof: Provided, that the physical inventory and photograph shall be conducted at the place where the
search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team,
whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with these requirements
under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are properly preserved by
the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items[.]

The last part of the aforequoted issuance provided the exception to the strict compliance with the requirements of Section
21 of R.A. No. 9165. Although ideally the prosecution should offer a perfect chain of custody in the handling of evidence,
"substantial compliance with the legal requirements on the handling of the seized item" is sufficient. [12] This Court has
consistently ruled that even if the arresting officers failed to strictly comply with the requirements under Section 21 of
R.A. No. 9165, such procedural lapse is not fatal and will not render the items seized inadmissible in evidence. [13] What is
of utmost importance is the preservation of the integrity and evidentiary value of the seized items, as the same would be
utilized in the determination of the guilt or innocence of the accused.[14] In other words, to be admissible in evidence, the
prosecution must be able to present through records or testimony, the whereabouts of the dangerous drugs from the time
these were seized from the accused by the arresting officers; turned-over to the investigating officer; forwarded to the
laboratory for determination of their composition; and up to the time these are offered in evidence. For as long as the
chain of custody remains unbroken, as in this case, even though the procedural requirements provided for in Sec. 21 of
R.A. No. 9165 were not faithfully observed, the guilt of the accused will not be affected.[15]

In the instant case, the failure to strictly comply with the requirements of Sec. 21 of R.A. No. 9165 was satisfactorily
explained by the apprehending officers. They testified that a commotion erupted when accused-appellant resisted and
shouted for help while she was being arrested. The commotion eventually gave accused-appellant the opportunity to run
and elude arrest. The arresting officers further alleged that the people who gathered around them were already aggressive
prompting them to decide to immediately proceed to the police station for their safety.[16] In fact, the arresting officers even
had to fire a warning shot and arrest Arthur Tabasa Ortega, the person who intervened in the arrest of accused-appellant,
in order for them to pacify the people around them.

The integrity of the evidence is presumed to have been preserved unless there is a showing of bad faith, ill will, or proof
that the evidence has been tampered with. Accused-appellant bears the burden of showing that the evidence was
tampered or meddled with in order to overcome the presumption of regularity in the handling of exhibits by public officers
and the presumption that public officers properly discharged their duties.[17] Accused-appellant in this case failed to
present any plausible reason to impute ill motive on the part of the arresting officers. Thus, the testimonies of the
apprehending officers deserve full faith and credit.[18] In fact, accused-appellant did not even question the credibility of the
prosecution witnesses. She simply anchored her defense on denial and alibi.

We affirm the penalties imposed as they are well within the ranges provided by law. Section 5, Article II of R.A. No. 9165
prescribes a penalty of life imprisonment to death[19] and a fine ranging from P500,000.00 to P10,000,000.00 for the sale
of any dangerous drug, regardless of the quantity or purity involved.

WHEREFORE, the decision dated 27 September 2013 of the Court of Appeals in CA-G.R. CR.-H.C. No. 01103 is
hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION

[ G.R. No. 181045, July 02, 2014 ]

SPOUSES EDUARDO AND LYDIA SILOS, PETITIONERS, VS. PHILIPPINE NATIONAL BANK, RESPONDENT.

DECISION

DEL CASTILLO, J.:

In loan agreements, it cannot be denied that the rate of interest is a principal condition, if not the most important
component. Thus, any modification thereof must be mutually agreed upon; otherwise, it has no binding effect. Moreover,
the Court cannot consider a stipulation granting a party the option to prepay the loan if said party is not agreeable to the
arbitrary interest rates imposed. Premium may not be placed upon a stipulation in a contract which grants one party the
right to choose whether to continue with or withdraw from the agreement if it discovers that what the other party has
been doing all along is improper or illegal.

This Petition for Review on Certiorari[1] questions the May 8, 2007 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV
No. 79650, which affirmed with modifications the February 28, 2003 Decision [3] and the June 4, 2003 Order[4] of the
Regional Trial Court (RTC), Branch 6 of Kalibo, Aklan in Civil Case No. 5975.

Factual Antecedents

Spouses Eduardo and Lydia Silos (petitioners) have been in business for about two decades of operating a department
store and buying and selling of ready-to-wear apparel. Respondent Philippine National Bank (PNB) is a banking
corporation organized and existing under Philippine laws.

To secure a one-year revolving credit line of P150,000.00 obtained from PNB, petitioners constituted in August 1987
a Real Estate Mortgage[5] over a 370-square meter lot in Kalibo, Aklan covered by Transfer Certificate of Title No. (TCT) T-
14250. In July 1988, the credit line was increased to P1.8 million and the mortgage was correspondingly increased to P1.8
million.[6] And in July 1989, a Supplement to the Existing Real Estate Mortgage[7] was executed to cover the same credit
line, which was increased to P2.5 million, and additional security was given in the form of a 134-square meter lot covered
by TCT T-16208. In addition, petitioners issued eight Promissory Notes[8] and signed a Credit Agreement.[9] This July
1989 Credit Agreement contained a stipulation on interest which provides as follows:

1.03. Interest. (a) The Loan shall be subject to interest at the rate of 19.5% per annum. Interest shall be payable in
advance every one hundred twenty days at the rate prevailing at the time of the renewal.

(b) The Borrower agrees that the Bank may modify the interest rate in the Loan depending on whatever policy the
Bank may adopt in the future, including without limitation, the shifting from the floating interest rate system to the
fixed interest rate system, or vice versa. Where the Bank has imposed on the Loan interest at a rate per annum, which is
equal to the Bank's spread over the current floating interest rate, the Borrower hereby agrees that the Bank may,
without need of notice to the Borrower, increase or decrease its spread over the floating interest rate at any time
depending on whatever policy it may adopt in the future.[10] (Emphases supplied)

The eight Promissory Notes, on the other hand, contained a stipulation granting PNB the right to increase or reduce
interest rates "within the limits allowed by law or by the Monetary Board."[11] The Real Estate Mortgage agreement provided
the same right to increase or reduce interest rates "at any time depending on whatever policy PNB may adopt in the
future."[12]

Petitioners religiously paid interest on the notes at the following rates:

1. 1st Promissory Note dated July 24, 1989 19.5%;

2. 2nd Promissory Note dated November 22, 1989 23%;

3. 3rd Promissory Note dated March 21, 1990 22%;

4. 4th Promissory Note dated July 19, 1990 24%;

5. 5th Promissory Note dated December 17, 1990 28%;

6. 6th Promissory Note dated February 14, 1991 32%;

7. 7th Promissory Note dated March 1, 1991 30%; and

8. 8th Promissory Note dated July 11, 1991 24%.[13]

In August 1991, an Amendment to Credit Agreement[14] was executed by the parties, with the following stipulation
regarding interest:

1.03. Interest on Line Availments. (a) The Borrowers agree to pay interest on each Availment from date of each
Availment up to but not including the date of full payment thereof at the rate per annum which is determined by the
Bank to be prime rate plus applicable spread in effect as of the date of each Availment.[15] (Emphases supplied)

Under this Amendment to Credit Agreement, petitioners issued in favor of

PNB the following 18 Promissory Notes, which petitioners settled except the last (the note covering the principal) at the
following interest rates:

1. 9th Promissory Note dated November 8, 1991 26%;

2. 10th Promissory Note dated March 19, 1992 25%;

3. 11th Promissory Note dated July 11, 1992 23%;

4. 12th Promissory Note dated November 10, 1992 21%;

5. 13th Promissory Note dated March 15, 1993 21%;

6. 14th Promissory Note dated July 12, 1993 17.5%;

7. 15th Promissory Note dated November 17, 1993 21%;

8. 16th Promissory Note dated March 28, 1994 21%;

9. 17th Promissory Note dated July 13, 1994 21%;

10. 18th Promissory Note dated November 16, 1994 16%;

 11. 19th Promissory Note dated April 10, 1995 21%;

12. 20th Promissory Note dated July 19, 1995 18.5%;

13. 21st Promissory Note dated December 18, 1995 18.75%;

14. 22nd Promissory Note dated April 22, 1996 18.5%;

15. 23rd Promissory Note dated July 22, 1996 18.5%;

16. 24th Promissory Note dated November 25, 1996 18%;

17. 25th Promissory Note dated May 30, 1997 17.5%; and

18. 26th Promissory Note (PN 9707237) dated July 30, 1997 25%.[16]

The 9th up to the 17th promissory notes provide for the payment of interest at the "rate the Bank may at any time without
notice, raise within the limits allowed by law x x x."[17] On the other hand, the 18th up to the 26th promissory notes
including PN 9707237, which is the 26th promissory note carried the following provision:

x x x For this purpose, I/We agree that the rate of interest herein stipulated may be increased or decreased for the
subsequent Interest Periods, with prior notice to the Borrower in the event of changes in interest rate prescribed
by law or the Monetary Board of the Central Bank of the Philippines, or in the Bank's overall cost of funds. I/We
hereby agree that in the event I/we are not agreeable to the interest rate fixed for any Interest Period, I/we shall
have the option to prepay the loan or credit facility without penalty within ten (10) calendar days from the
Interest Setting Date.[18] (Emphasis supplied)

Respondent regularly renewed the line from 1990 up to 1997, and petitioners made good on the promissory notes,
religiously paying the interests without objection or fail. But in 1997, petitioners faltered when the interest rates soared
due to the Asian financial crisis. Petitioners' sole outstanding promissory note for P2.5 million PN 9707237 executed in
July 1997 and due 120 days later or on October 28, 1997 became past due, and despite repeated demands, petitioners
failed to make good on the note.

Incidentally, PN 9707237 provided for the penalty equivalent to 24% per annum in case of default, as follows:

Without need for notice or demand, failure to pay this note or any installment thereon, when due, shall constitute default
and in such cases or in case of garnishment, receivership or bankruptcy or suit of any kind filed against me/us by the
Bank, the outstanding principal of this note, at the option of the Bank and without prior notice of demand, shall
immediately become due and payable and shall be subject to a penalty charge of twenty four percent (24%) per
annum based on the defaulted principal amount. x x x[19] (Emphasis supplied)

PNB prepared a Statement of Account[20] as of October 12, 1998, detailing the amount due and demandable from
petitioners in the total amount of P3,620,541.60, broken down as follows:

Principal P 2,500,000.00

Interest 538,874.94

Penalties 581,666.66

Total P 3,620,541.60

Despite demand, petitioners failed to pay the foregoing amount. Thus, PNB foreclosed on the mortgage, and on January
14, 1999, TCTs T-14250 and T-16208 were sold to it at auction for the amount of P4,324,172.96.[21] The sheriff's
certificate of sale was registered on March 11, 1999.

More than a year later, or on March 24, 2000, petitioners filed Civil Case No. 5975, seeking annulment of the foreclosure
sale and an accounting of the PNB credit. Petitioners theorized that after the first promissory note where they agreed to
pay 19.5% interest, the succeeding stipulations for the payment of interest in their loan agreements with PNB which
allegedly left to the latter the sole will to determine the interest rate became null and void. Petitioners added that because
the interest rates were fixed by respondent without their prior consent or agreement, these rates are void, and as a result,
petitioners should only be made liable for interest at the legal rate of 12%. They claimed further that they overpaid
interests on the credit, and concluded that due to this overpayment of steep interest charges, their debt should now be
deemed paid, and the foreclosure and sale of TCTs T-14250 and T-16208 became unnecessary and wrongful. As for the
imposed penalty of P581,666.66, petitioners alleged that since the Real Estate Mortgage and the Supplement thereto did
not include penalties as part of the secured amount, the same should be excluded from the foreclosure amount or bid
price, even if such penalties are provided for in the final Promissory Note, or PN 9707237.[22]

In addition, petitioners sought to be reimbursed an alleged overpayment of P848,285.00 made during the period August
21, 1991 to March 5, 1998, resulting from respondent's imposition of the alleged illegal and steep interest rates. They also
prayed to be awarded P200,000.00 by way of attorney's fees.[23]

In its Answer,[24] PNB denied that it unilaterally imposed or fixed interest rates; that petitioners agreed that without prior
notice, PNB may modify interest rates depending on future policy adopted by it; and that the imposition of penalties was
agreed upon in the Credit Agreement. It added that the imposition of penalties is supported by the all-inclusive clause in
the Real Estate Mortgage agreement which provides that the mortgage shall stand as security for any and all other
obligations of whatever kind and nature owing to respondent, which thus includes penalties imposed upon default or non-
payment of the principal and interest on due date.

On pre-trial, the parties mutually agreed to the following material facts, among others:

a) That since 1991 up to 1998, petitioners had paid PNB the total amount of P3,484,287.00; [25] and

b) That PNB sent, and petitioners received, a March 10, 2000 demand letter.[26]

During trial, petitioner Lydia Silos (Lydia) testified that the Credit Agreement, the Amendment to Credit Agreement, Real
Estate Mortgage and the Supplement thereto were all prepared by respondent PNB and were presented to her and her
husband Eduardo only for signature; that she was told by PNB that the latter alone would determine the interest rate;
that as to the Amendment to Credit Agreement, she was told that PNB would fill up the interest rate portion thereof; that
at the time the parties executed the said Credit Agreement, she was not informed about the applicable spread that PNB
would impose on her account; that the interest rate portion of all Promissory Notes she and Eduardo issued were always
left in blank when they executed them, with respondent's mere assurance that it would be the one to enter or indicate
thereon the prevailing interest rate at the time of availment; and that they agreed to such arrangement. She further
testified that the two Real Estate Mortgage agreements she signed did not stipulate the payment of penalties; that she and
Eduardo consulted with a lawyer, and were told that PNB's actions were improper, and so on March 20, 2000, they wrote
to the latter seeking a recomputation of their outstanding obligation; and when PNB did not oblige, they instituted Civil
Case No. 5975.[27]

On cross-examination, Lydia testified that she has been in business for 20 years; that she also borrowed from other
individuals and another bank; that it was only with banks that she was asked to sign loan documents with no indicated
interest rate; that she did not bother to read the terms of the loan documents which she signed; and that she received
several PNB statements of account detailing their outstanding obligations, but she did not complain; that she assumed
instead that what was written therein is correct.[28]

For his part, PNB Kalibo Branch Manager Diosdado Aspa, Jr. (Aspa), the sole witness for respondent, stated on cross-
examination that as a practice, the determination of the prime rates of interest was the responsibility solely of PNB's
Treasury Department which is based in Manila; that these prime rates were simply communicated to all PNB branches for
implementation; that there are a multitude of considerations which determine the interest rate, such as the cost of money,
foreign currency values, PNB's spread, bank administrative costs, profitability, and the practice in the banking industry;
that in every repricing of each loan availment, the borrower has the right to question the rates, but that this was not done
by the petitioners; and that anything that is not found in the Promissory Note may be supplemented by the Credit
Agreement.[29]

Ruling of the Regional Trial Court

On February 28, 2003, the trial court rendered judgment dismissing Civil Case No. 5975.[30] It ruled that:

1. While the Credit Agreement allows PNB to unilaterally increase its spread over the floating interest rate at any
time depending on whatever policy it may adopt in the future, it likewise allows for the decrease at any time of the
same. Thus, such stipulation authorizing both the increase and decrease of interest rates as may be applicable is
 valid,[31] as was held in Consolidated Bank and Trust Corporation (SOLIDBANK) v. Court of Appeals;[32]

2. Banks are allowed to stipulate that interest rates on loans need not be fixed and instead be made dependent on
prevailing rates upon which to peg such variable interest rates;[33]

3. The Promissory Note, as the principal contract evidencing petitioners' loan, prevails over the Credit Agreement
and the Real Estate Mortgage. As such, the rate of interest, penalties and attorney's fees stipulated in the
Promissory Note prevail over those mentioned in the Credit Agreement and the Real Estate Mortgage
agreements;[34]

4. Roughly, PNB's computation of the total amount of petitioners' obligation is correct;[35]

5. Because the loan was admittedly due and demandable, the foreclosure was regularly made; [36]

6. By the admission of petitioners during pre-trial, all payments made to PNB were properly applied to the principal,
interest and penalties.[37]

The dispositive portion of the trial court's Decision reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the respondent and against the petitioners by
DISMISSING the latter's petition.

Costs against the petitioners.

SO ORDERED.[38]

Petitioners moved for reconsideration. In an Order[39] dated June 4, 2003, the trial court granted only a modification in the
award of attorney's fees, reducing the same from 10% to 1%. Thus, PNB was ordered to refund to petitioner the excess in
attorney's fees in the amount of P356,589.90, viz:

WHEREFORE, judgment is hereby rendered upholding the validity of the interest rate charged by the respondent as well
as the extra-judicial foreclosure proceedings and the Certificate of Sale. However, respondent is directed to refund to the
petitioner the amount of P356,589.90 representing the excess interest charged against the latter.

No pronouncement as to costs.

SO ORDERED.[40]

Ruling of the Court of Appeals

Petitioners appealed to the CA, which issued the questioned Decision with the following decretal portion:

WHEREFORE, in view of the foregoing, the instant appeal is PARTLY GRANTED. The modified Decision of the Regional
Trial Court per Order dated June 4, 2003 is hereby AFFIRMED with MODIFICATIONS, to wit:

1. [T]hat the interest rate to be applied after the expiration of the first 30-day interest period for PN. No. 9707237 should
be 12% per annum;

2. [T]hat the attorney's fees of 10% is valid and binding; and

3. [T]hat [PNB] is hereby ordered to reimburse [petitioners] the excess in the bid price of P377,505.99 which is the
difference between the total amount due [PNB] and the amount of its bid price.

SO ORDERED.[41]

On the other hand, respondent did not appeal the June 4, 2003 Order of the trial court which reduced its award of
attorney's fees. It simply raised the issue in its appellee's brief in the CA, and included a prayer for the reversal of said
Order.
In effect, the CA limited petitioners' appeal to the following issues:

Whether x x x the interest rates on petitioners' outstanding obligation were unilaterally and arbitrarily imposed by
1)
PNB;

2) Whether x x x the penalty charges were secured by the real estate mortgage; and

3) Whether x x x the extrajudicial foreclosure and sale are valid.[42]

The CA noted that, based on receipts presented by petitioners during trial, the latter dutifully paid a total of
P3,027,324.60 in interest for the period August 7, 1991 to August 6, 1997, over and above the P2.5 million principal
obligation. And this is exclusive of payments for insurance premiums, documentary stamp taxes, and penalty. All the
while, petitioners did not complain nor object to the imposition of interest; they in fact paid the same religiously and
without fail for seven years. The appellate court ruled that petitioners are thus estopped from questioning the same.

The CA nevertheless noted that for the period July 30, 1997 to August 14, 1997, PNB wrongly applied an interest rate of
25.72% instead of the agreed 25%; thus it overcharged petitioners, and the latter paid, an excess of P736.56 in interest.

On the issue of penalties, the CA ruled that the express tenor of the Real Estate Mortgage agreements contemplated the
inclusion of the PN 9707237-stipulated 24% penalty in the amount to be secured by the mortgaged property, thus

For and in consideration of certain loans, overdrafts and other credit accommodations obtained from the MORTGAGEE
and to secure the payment of the same and those others that the MORTGAGEE may extend to the MORTGAGOR,
including interest and expenses, and other obligations owing by the MORTGAGOR to the MORTGAGEE, whether
direct or indirect, principal or secondary, as appearing in the accounts, books and records of the MORTGAGEE, the
MORTGAGOR does hereby transfer and convey by way of mortgage unto the MORTGAGEE x x x[43] (Emphasis supplied)

The CA believes that the 24% penalty is covered by the phrase "and other obligations owing by the mortgagor to the
mortgagee" and should thus be added to the amount secured by the mortgages.[44]

The CA then proceeded to declare valid the foreclosure and sale of properties covered by TCTs T-14250 and T-16208,
which came as a necessary result of petitioners' failure to pay the outstanding obligation upon demand.[45] The CA saw fit
to increase the trial court's award of 1% to 10%, finding the latter rate to be reasonable and citing the Real Estate
Mortgage agreement which authorized the collection of the higher rate.[46]

Finally, the CA ruled that petitioners are entitled to P377,505.09 surplus, which is the difference between PNB's bid price
of P4,324,172.96 and petitioners' total computed obligation as of January 14, 1999, or the date of the auction sale, in the
amount of P3,946,667.87.[47]

Hence, the present Petition.

Issues

The following issues are raised in this Petition:

A. THE COURT OF APPEALS AS WELL AS THE LOWER COURT ERRED IN NOT NULLIFYING THE INTEREST RATE
PROVISION IN THE CREDIT AGREEMENT DATED JULY 24, 1989 X X X AND IN THE AMENDMENT TO CREDIT
AGREEMENT DATED AUGUST 21, 1991 X X X WHICH LEFT TO THE SOLE UNILATERAL DETERMINATION OF
THE RESPONDENT PNB THE ORIGINAL FIXING OF INTEREST RATE AND ITS INCREASE, WHICH AGREEMENT
IS CONTRARY TO LAW, ART. 1308 OF THE [NEW CIVIL CODE], AS ENUNCIATED IN PONCIANO ALMEIDA V.
COURT OF APPEALS, G.R. [NO.] 113412, APRIL 17, 1996, AND CONTRARY TO PUBLIC POLICY AND PUBLIC
INTEREST, AND IN APPLYING THE PRINCIPLE OF ESTOPPEL ARISING FROM THE ALLEGED DELAYED
 COMPLAINT OF PETITIONER[S], AND [THEIR] PAYMENT OF THE INTEREST CHARGED.

B. CONSEQUENTLY, THE COURT OF APPEALS AND THE LOWER COURT ERRED IN NOT DECLARING THAT PNB
IS NOT AT ALL ENTITLED TO ANY INTEREST EXCEPT THE LEGAL RATE FROM DATE OF DEMAND, AND IN
NOT APPLYING THE EXCESS OVER THE LEGAL RATE OF THE ADMITTED PAYMENTS MADE BY PETITIONER[S]
FROM 1991-1998 IN THE ADMITTED TOTAL AMOUNT OF P3,484,287.00, TO PAYMENT OF THE PRINCIPAL OF
P2,500,000.00 LEAVING AN OVERPAYMENT OF P984,287.00 REFUNDABLE BY RESPONDENT TO
PETITIONER[S] WITH INTEREST OF 12% PER ANNUM.

II

THE COURT OF APPEALS AND THE LOWER COURT ERRED IN HOLDING THAT PENALTIES ARE INCLUDED IN THE
SECURED AMOUNT, SUBJECT TO FORECLOSURE, WHEN NO PENALTIES ARE MENTIONED [NOR] PROVIDED FOR IN
THE REAL ESTATE MORTGAGE AS A SECURED AMOUNT AND THEREFORE THE AMOUNT OF PENALTIES SHOULD
HAVE BEEN EXCLUDED FROM [THE] FORECLOSURE AMOUNT.

III

THE COURT OF APPEALS ERRED IN REVERSING THE RULING OF THE LOWER COURT, WHICH REDUCED THE
ATTORNEY'S FEES OF 10% OF THE TOTAL INDEBTEDNESS CHARGED IN THE X X X EXTRAJUDICIAL FORECLOSURE
TO ONLY 1%, AND [AWARDING] 10% ATTORNEY'S FEES.[48]

Petitioners' Arguments

Petitioners insist that the interest rate provision in the Credit Agreement and the Amendment to Credit Agreement should
be declared null and void, for they relegated to PNB the sole power to fix interest rates based on arbitrary criteria or
factors such as bank policy, profitability, cost of money, foreign currency values, and bank administrative costs; spaces
for interest rates in the two Credit Agreements and the promissory notes were left blank for PNB to unilaterally fill, and
their consent or agreement to the interest rates imposed thereafter was not obtained; the interest rate, which consists of
the prime rate plus the bank spread, is determined not by agreement of the parties but by PNB's Treasury Department in
Manila. Petitioners conclude that by this method of fixing the interest rates, the principle of mutuality of contracts is
violated, and public policy as well as Circular 905[49] of the then Central Bank had been breached.

Petitioners question the CA's application of the principle of estoppel, saying that no estoppel can proceed from an illegal
act. Though they failed to timely question the imposition of the alleged illegal interest rates and continued to pay the loan
on the basis of these rates, they cannot be deemed to have acquiesced, and hence could recover what they erroneously
paid.[50]

Petitioners argue that if the interest rates were nullified, then their obligation to PNB is deemed extinguished as of July
1997; moreover, it would appear that they even made an overpayment to the bank in the amount of P984,287.00.

Next, petitioners suggest that since the Real Estate Mortgage agreements did not include nor specify, as part of the
secured amount, the penalty of 24% authorized in PN 9707237, such amount of P581,666.66 could not be made
answerable by or collected from the mortgages covering TCTs T-14250 and T-16208. Claiming support from Philippine
Bank of Communications [PBCom] v. Court of Appeals,[51] petitioners insist that the phrase "and other obligations owing by
the mortgagor to the mortgagee"[52] in the mortgage agreements cannot embrace the P581,666.66 penalty, because, as held
in the PBCom case, "[a] penalty charge does not belong to the species of obligations enumerated in the mortgage, hence,
the said contract cannot be understood to secure the penalty";[53] while the mortgages are the accessory contracts, what
items are secured may only be determined from the provisions of the mortgage contracts, and not from the Credit
Agreement or the promissory notes.

Finally, petitioners submit that the trial court's award of 1% attorney's fees should be maintained, given that in
foreclosures, a lawyer's work consists merely in the preparation and filing of the petition, and involves minimal
study.[54] To allow the imposition of a staggering P396,211.00 for such work would be contrary to equity. Petitioners state
that the purpose of attorney's fees in cases of this nature "is not to give respondent a larger compensation for the loan
than the law already allows, but to protect it against any future loss or damage by being compelled to retain counsel x x x
to institute judicial proceedings for the collection of its credit."[55] And because the instant case involves a simple
extrajudicial foreclosure, attorney's fees may be equitably tempered.

Respondent's Arguments

For its part, respondent disputes petitioners' claim that interest rates were unilaterally fixed by it, taking relief in the CA
pronouncement that petitioners are deemed estopped by their failure to question the imposed rates and their continued
payment thereof without opposition. It adds that because the Credit Agreement and promissory notes contained both an
escalation clause and a de-escalation clause, it may not be said that the bank violated the principle of mutuality. Besides,
the increase or decrease in interest rates have been mutually agreed upon by the parties, as shown by petitioners'
continuous payment without protest. Respondent adds that the alleged unilateral imposition of interest rates is not a
proper subject for review by the Court because the issue was never raised in the lower court.

As for petitioners' claim that interest rates imposed by it are null and void for the reasons that 1) the Credit Agreements
and the promissory notes were signed in blank; 2) interest rates were at short periods; 3) no interest rates could be
charged where no agreement on interest rates was made in writing; 4) PNB fixed interest rates on the basis of arbitrary
policies and standards left to its choosing; and 5) interest rates based on prime rate plus applicable spread are
indeterminate and arbitrary PNB counters:

a. That Credit Agreements and promissory notes were signed by petitioner[s] in blank Respondent claims that this
issue was never raised in the lower court. Besides, documentary evidence prevails over testimonial evidence; Lydia
Silos' testimony in this regard is self-serving, unsupported and uncorroborated, and for being the lone evidence
on this issue. The fact remains that these documents are in proper form, presumed regular, and endure, against
arbitrary claims by Silos who is an experienced business person that she signed questionable loan documents
whose provisions for interest rates were left blank, and yet she continued to pay the interests without protest for a
number of years.[56]

b. That interest rates were at short periods Respondent argues that the law which governs and prohibits changes in
interest rates made more than once every twelve months has been removed[57] with the issuance of Presidential
Decree No. 858.[58]

c. That no interest rates could be charged where no agreement on interest rates was made in writing in violation of
Article 1956 of the Civil Code, which provides that no interest shall be due unless it has been expressly stipulated
in writing Respondent insists that the stipulated 25% per annum as embodied in PN 9707237 should be imposed
during the interim, or the period after the loan became due and while it remains unpaid, and not the legal interest
of 12% as claimed by petitioners.[59]

d. That PNB fixed interest rates on the basis of arbitrary policies and standards left to its choosing According to
respondent, interest rates were fixed taking into consideration increases or decreases as provided by law or by the
Monetary Board, the bank's overall costs of funds, and upon agreement of the parties.[60]

e. That interest rates based on prime rate plus applicable spread are indeterminate and arbitrary On this score,
respondent submits there are various factors that influence interest rates, from political events to economic
developments, etc.; the cost of money, profitability and foreign currency transactions may not be discounted. [61]

On the issue of penalties, respondent reiterates the trial court's finding that during pre-trial, petitioners admitted that the
Statement of Account as of October 12, 1998 which detailed and included penalty charges as part of the total outstanding
obligation owing to the bank was correct. Respondent justifies the imposition and collection of a penalty as a normal
banking practice, and the standard rate per annum for all commercial banks, at the time, was 24%. Respondent adds that
the purpose of the penalty or a penal clause for that matter is to ensure the performance of the obligation and substitute
for damages and the payment of interest in the event of non-compliance.[62]And the promissory note being the principal
agreement as opposed to the mortgage, which is a mere accessory should prevail. This being the case, its inclusion as part
of the secured amount in the mortgage agreements is valid and necessary.

Regarding the foreclosure of the mortgages, respondent accuses petitioners of pre-empting consolidation of its ownership
over TCTs T-14250 and T-16208; that petitioners filed Civil Case No. 5975 ostensibly to question the foreclosure and sale
of properties covered by TCTs T-14250 and T-16208 in a desperate move to retain ownership over these properties,
because they failed to timely redeem them.

Respondent directs the attention of the Court to its petition in G.R. No. 181046,[63]where the propriety of the CA's ruling
on the following issues is squarely raised:
 1. That the interest rate to be applied after the expiration of the first 30-day interest period for PN 9707237 should
be 12% per annum; and

2. That PNB should reimburse petitioners the excess in the bid price of P377,505.99 which is the difference between
the total amount due to PNB and the amount of its bid price.

Our Ruling

The Court grants the Petition.

Before anything else, it must be said that it is not the function of the Court to re-examine or re-evaluate evidence adduced
by the parties in the proceedings below. The rule admits of certain well-recognized exceptions, though, as when the lower
courts' findings are not supported by the evidence on record or are based on a misapprehension of facts, or when certain
relevant and undisputed facts were manifestly overlooked that, if properly considered, would justify a different conclusion.
This case falls within such exceptions.

The Court notes that on March 5, 2008, a Resolution was issued by the Court's First Division denying respondent's
petition in G.R. No. 181046, due to late filing, failure to attach the required affidavit of service of the petition on the trial
court and the petitioners, and submission of a defective verification and certification of non-forum shopping. On June 25,
2008, the Court issued another Resolution denying with finality respondent's motion for reconsideration of the March 5,
2008 Resolution. And on August 15, 2008, entry of judgment was made. This thus settles the issues, as above-stated,
covering a) the interest rate or 12% per annum that applies upon expiration of the first 30 days interest period provided
under PN 9707237, and b) the CA's decree that PNB should reimburse petitioner the excess in the bid price of
P377,505.09.

It appears that respondent's practice, more than once proscribed by the Court, has been carried over once more to the
petitioners. In a number of decided cases, the Court struck down provisions in credit documents issued by PNB to, or
required of, its borrowers which allow the bank to increase or decrease interest rates "within the limits allowed by law at
any time depending on whatever policy it may adopt in the future." Thus, in Philippine National Bank v. Court of
Appeals,[64] such stipulation and similar ones were declared in violation of Article 1308 [65] of the Civil Code. In a second
case, Philippine National Bank v. Court of Appeals,[66] the very same stipulations found in the credit agreement and the
promissory notes prepared and issued by the respondent were again invalidated. The Court therein said:

The Credit Agreement provided inter alia, that

(a) The BANK reserves the right to increase the interest rate within the limits allowed by law at any time
depending on whatever policy it may adopt in the future; Provided, that the interest rate on this accommodation shall
be correspondingly decreased in the event that the applicable maximum interest is reduced by law or by the Monetary
Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the
increase or decrease in the maximum interest rate.

The Promissory Note, in turn, authorized the PNB to raise the rate of interest, at any time without notice, beyond
the stipulated rate of 12% but only "within the limits allowed by law."

The Real Estate Mortgage contract likewise provided that

(k) INCREASE OF INTEREST RATE: The rate of interest charged on the obligation secured by this mortgage as well as
the interest on the amount which may have been advanced by the MORTGAGEE, in accordance with the provision
hereof, shall be subject during the life of this contract to such an increase within the rate allowed by law, as the
Board of Directors of the MORTGAGEE may prescribe for its debtors.

xxxx

In making the unilateral increases in interest rates, petitioner bank relied on the escalation clause contained in their
credit agreement which provides, as follows:
The Bank reserves the right to increase the interest rate within the limits allowed by law at any time depending
on whatever policy it may adopt in the future and provided, that, the interest rate on this accommodation shall be
correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary
Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the
increase or decrease in maximum interest rate.

This clause is authorized by Section 2 of Presidential Decree (P.D.) No. 1684 which further amended Act No. 2655 ("The
Usury Law"), as amended, thus:

Section 2. The same Act is hereby amended by adding a new section after Section 7, to read as follows:

Sec. 7-a. Parties to an agreement pertaining to a loan or forbearance of money, goods or credits may stipulate that the
rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by
law or by the Monetary Board; Provided, That such stipulation shall be valid only if there is also a stipulation in the
agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest
is reduced by law or by the Monetary Board; Provided further, That the adjustment in the rate of interest agreed upon
shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest.

Section 1 of P.D. No. 1684 also empowered the Central Bank's Monetary Board to prescribe the maximum rates of interest
for loans and certain forbearances. Pursuant to such authority, the Monetary Board issued Central Bank (C.B.) Circular
No. 905, series of 1982, Section 5 of which provides:

Sec. 5. Section 1303 of the Manual of Regulations (for Banks and Other Financial Intermediaries) is hereby amended to
read as follows:

Sec. 1303. Interest and Other Charges. The rate of interest, including commissions, premiums, fees and other charges, on
any loan, or forbearance of any money, goods or credits, regardless of maturity and whether secured or unsecured, shall
not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended.

P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any
subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits. In fine,
they can agree to adjust, upward or downward, the interest previously stipulated. However, contrary to the stubborn
insistence of petitioner bank, the said law and circular did not authorize either party to unilaterally raise the
interest rate without the other's consent.

It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of
mutual assent of the parties. If this assent is wanting on the part of the one who contracts, his act has no more
efficacy than if it had been done under duress or by a person of unsound mind.

Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties
must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In
the case of loan contracts, it cannot be gainsaid that the rate of interest is always a vital component, for it can
make or break a capital venture. Thus, any change must be mutually agreed upon, otherwise, it is bereft of any binding
effect.

We cannot countenance petitioner bank's posturing that the escalation clause at bench gives it unbridled right to
unilaterally upwardly adjust the interest on private respondents' loan. That would completely take away from
private respondents the right to assent to an important modification in their agreement, and would negate the
element of mutuality in contracts. In Philippine National Bank v. Court of Appeals, et al., 196 SCRA 536, 544-545
(1991) we held

x x x The unilateral action of the PNB in increasing the interest rate on the private respondent's loan violated the
mutuality of contracts ordained in Article 1308 of the Civil Code:
Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of
them.

In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality
between the parties based on their essential equality. A contract containing a condition which makes its fulfillment
dependent exclusively upon the uncontrolled will of one of the contracting parties, is void . . . . Hence, even assuming that
the . . . loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was
none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being
violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character
of a contract of adhesion, where the parties do not bargain on equal footing, the weaker party's (the debtor) participation
being reduced to the alternative "to take it or leave it" . . . . Such a contract is a veritable trap for the weaker party whom
the courts of justice must protect against abuse and imposition.[67](Emphases supplied)

Then again, in a third case, Spouses Almeda v. Court of Appeals,[68] the Court invalidated the very same provisions in the
respondent's prepared Credit Agreement, declaring thus:

The binding effect of any agreement between parties to a contract is premised on two settled principles: (1) that any
obligation arising from contract has the force of law between the parties; and (2) that there must be mutuality between the
parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so
as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is
left solely to the will of one of the parties, is likewise, invalid.

It is plainly obvious, therefore, from the undisputed facts of the case that respondent bank unilaterally altered the
terms of its contract with petitioners by increasing the interest rates on the loan without the prior assent of the
latter. In fact, the manner of agreement is itself explicitly stipulated by the Civil Code when it provides, in Article 1956
that "No interest shall be due unless it has been expressly stipulated in writing." What has been "stipulated in writing"
from a perusal of interest rate provision of the credit agreement signed between the parties is that petitioners
were bound merely to pay 21% interest, subject to a possible escalation or de-escalation, when 1) the
circumstances warrant such escalation or de-escalation; 2) within the limits allowed by law; and 3) upon
agreement.

Indeed, the interest rate which appears to have been agreed upon by the parties to the contract in this case was
the 21% rate stipulated in the interest provision. Any doubt about this is in fact readily resolved by a careful
reading of the credit agreement because the same plainly uses the phrase "interest rate agreed upon," in reference
to the original 21% interest rate. x x x

xxxx

Petitioners never agreed in writing to pay the increased interest rates demanded by respondent bank in contravention to
the tenor of their credit agreement. That an increase in interest rates from 18% to as much as 68% is excessive and
unconscionable is indisputable. Between 1981 and 1984, petitioners had paid an amount equivalent to virtually half
of the entire principal (P7,735,004.66) which was applied to interest alone. By the time the spouses tendered the
amount of P40,142,518.00 in settlement of their obligations; respondent bank was demanding P58,377,487.00
over and above those amounts already previously paid by the spouses.

Escalation clauses are not basically wrong or legally objectionable so long as they are not solely potestative but based on
reasonable and valid grounds. Here, as clearly demonstrated above, not only [are] the increases of the interest rates on the
basis of the escalation clause patently unreasonable and unconscionable, but also there are no valid and reasonable
standards upon which the increases are anchored.

xxxx

In the face of the unequivocal interest rate provisions in the credit agreement and in the law requiring the parties to agree
to changes in the interest rate in writing, we hold that the unilateral and progressive increases imposed by respondent
PNB were null and void. Their effect was to increase the total obligation on an eighteen million peso loan to an amount
way over three times that which was originally granted to the borrowers. That these increases, occasioned by crafty
manipulations in the interest rates is unconscionable and neutralizes the salutary policies of extending loans to spur
business cannot be disputed.[69] (Emphases supplied)
Still, in a fourth case, Philippine National Bank v. Court of Appeals,[70] the above doctrine was reiterated:

The promissory note contained the following stipulation:

For value received, I/we, [private respondents] jointly and severally promise to pay to the ORDER of the PHILIPPINE
NATIONAL BANK, at its office in San Jose City, Philippines, the sum of FIFTEEN THOUSAND ONLY (P15,000.00),
Philippine Currency, together with interest thereon at the rate of 12% per annum until paid, which interest rate the
Bank may at any time without notice, raise within the limits allowed by law, and I/we also agree to pay jointly and
severally ____% per annum penalty charge, by way of liquidated damages should this note be unpaid or is not renewed on
due dated.

Payment of this note shall be as follows:

*THREE HUNDRED SIXTY FIVE DAYS* AFTER DATE

On the reverse side of the note the following condition was stamped:

All short-term loans to be granted starting January 1, 1978 shall be made subject to the condition that any and/or all
extensions hereof that will leave any portion of the amount still unpaid after 730 days shall automatically convert the
outstanding balance into a medium or long-term obligation as the case may be and give the Bank the right to charge
the interest rates prescribed under its policiesfrom the date the account was originally granted.

To secure payment of the loan the parties executed a real estate mortgage contract which provided:

(k) INCREASE OF INTEREST RATE:

The rate of interest charged on the obligation secured by this mortgage as well as the interest on the amount which may
have been advanced by the MORTGAGEE, in accordance with the provision hereof, shall be subject during the life of
this contract to such an increase within the rate allowed by law, as the Board of Directors of the MORTGAGEE
may prescribe for its debtors.

xxxx

To begin with, PNB's argument rests on a misapprehension of the import of the appellate court's ruling. The Court of
Appeals nullified the interest rate increases not because the promissory note did not comply with P.D. No. 1684 by
providing for a de-escalation, but because the absence of such provision made the clause so one-sided as to make it
unreasonable.

That ruling is correct. It is in line with our decision in Banco Filipino Savings & Mortgage Bank v. Navarro that although
P.D. No. 1684 is not to be retroactively applied to loans granted before its effectivity, there must nevertheless be a de-
escalation clause to mitigate the one-sidedness of the escalation clause. Indeed because of concern for the unequal status
of borrowers vis-a-vis the banks, our cases after Banco Filipino have fashioned the rule that any increase in the rate of
interest made pursuant to an escalation clause must be the result of agreement between the parties.

Thus in Philippine National Bank v. Court of Appeals, two promissory notes authorized PNB to increase the
stipulated interest per annum"within the limits allowed by law at any time depending on whatever policy [PNB]
may adopt in the future; Provided, that the interest rate on this note shall be correspondingly decreased in the
event that the applicable maximum interest rate is reduced by law or by the Monetary Board." The real estate
mortgage likewise provided:

The rate of interest charged on the obligation secured by this mortgage as well as the interest on the amount which may
have been advanced by the MORTGAGEE, in accordance with the provisions hereof, shall be subject during the life of this
contract to such an increase within the rate allowed by law, as the Board of Directors of the MORTGAGEE may prescribe
for its debtors.

Pursuant to these clauses, PNB successively increased the interest from 18% to 32%, then to 41% and then to 48%. This
Court declared the increases unilaterally imposed by [PNB] to be in violation of the principle of mutuality as
embodied in Art. 1308 of the Civil Code, which provides that "[t]he contract must bind both contracting parties; its validity
or compliance cannot be left to the will of one of them." As the Court explained:

In order that obligations arising from contracts may have the force of law between the parties, there must be
mutuality between the parties based on their essential equality. A contract containing a condition which makes its
fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita
Legarda, Inc., 21 SCRA 555). Hence, even assuming that the P1.8 million loan agreement between the PNB and the private
respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of
the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts.
It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain
on equal footing, the weaker party's (the debtor) participation being reduced to the alternative "to take it or leave it" (Qua
vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the weaker party whom the
courts of justice must protect against abuse and imposition.

A similar ruling was made in Philippine National Bank v. Court of Appeals. The credit agreement in that case
provided:

The BANK reserves the right to increase the interest rate within the limits allowed by law at any time depending
on whatever policy it may adopt in the future: Provided, that the interest rate on this accommodation shall be
correspondingly decreased in the event that the applicable maximum interest is reduced by law or by the Monetary Board.
...

As in the first case, PNB successively increased the stipulated interest so that what was originally 12% per
annum became, after only two years, 42%. In declaring the increases invalid, we held:

We cannot countenance petitioner bank's posturing that the escalation clause at bench gives it unbridled right to
unilaterally upwardly adjust the interest on private respondents' loan. That would completely take away from private
respondents the right to assent to an important modification in their agreement, and would negate the element of
mutuality in contracts.

Only recently we invalidated another round of interest increases decreed by PNB pursuant to a similar agreement
it had with other borrowers:

[W]hile the Usury Law ceiling on interest rates was lifted by C.B. Circular 905, nothing in the said circular could
possibly be read as granting respondent bank carte blanche authority to raise interest rates to levels which would
either enslave its borrowers or lead to a hemorrhaging of their assets.

In this case no attempt was made by PNB to secure the conformity of private respondents to the successive
increases in the interest rate. Private respondents' assent to the increases can not be implied from their lack of
response to the letters sent by PNB, informing them of the increases. For as stated in one case, no one receiving a
proposal to change a contract is obliged to answer the proposal.[71] (Emphasis supplied)

We made the same pronouncement in a fifth case, New Sampaguita Builders Construction, Inc. v. Philippine National
Bank,[72] thus

Courts have the authority to strike down or to modify provisions in promissory notes that grant the lenders unrestrained
power to increase interest rates, penalties and other charges at the latter's sole discretion and without giving prior notice
to and securing the consent of the borrowers. This unilateral authority is anathema to the mutuality of contracts and
enable lenders to take undue advantage of borrowers. Although the Usury Law has been effectively repealed, courts may
still reduce iniquitous or unconscionable rates charged for the use of money. Furthermore, excessive interests,
penalties and other charges not revealed in disclosure statements issued by banks, even if stipulated in the
promissory notes, cannot be given effect under the Truth in Lending Act.[73] (Emphasis supplied)

Yet again, in a sixth disposition, Philippine National Bank v. Spouses Rocamora,[74]the above pronouncements were
reiterated to debunk PNB's repeated reliance on its invalidated contract stipulations:

We repeated this rule in the 1994 case of PNB v. CA and Jayme-Fernandez and the 1996 case of PNB v. CA and Spouses
Basco. Taking no heed of these rulings, the escalation clause PNB used in the present case to justify the increased interest
rates is no different from the escalation clause assailed in the 1996 PNB case; in both, the interest rates were increased
from the agreed 12% per annum rate to 42%. x x x

xxxx

On the strength of this ruling, PNB's argument that the spouses Rocamora's failure to contest the increased
interest rates that were purportedly reflected in the statements of account and the demand letters sent by the
bank amounted to their implied acceptance of the increase should likewise fail.

Evidently, PNB's failure to secure the spouses Rocamora's consent to the increased interest rates prompted the lower
courts to declare excessive and illegal the interest rates imposed. To go around this lower court finding, PNB alleges that
the P206,297.47 deficiency claim was computed using only the original 12% per annum interest rate. We find this
unlikely. Our examination of PNB's own ledgers, included in the records of the case, clearly indicates that PNB imposed
interest rates higher than the agreed 12% per annum rate. This confirmatory finding, albeit based solely on ledgers found
in the records, reinforces the application in this case of the rule that findings of the RTC, when affirmed by the CA, are
binding upon this Court.[75] (Emphases supplied)

Verily, all these cases, including the present one, involve identical or similar provisions found in respondent's credit
agreements and promissory notes. Thus, the July 1989 Credit Agreement executed by petitioners and respondent
contained the following stipulation on interest:

1.03. Interest. (a) The Loan shall be subject to interest at the rate of 19.5% [per annum]. Interest shall be payable in
advance every one hundred twenty days at the rate prevailing at the time of the renewal.

(b) The Borrower agrees that the Bank may modify the interest rate in the Loan depending on whatever policy the
Bank may adopt in the future, including without limitation, the shifting from the floating interest rate system to the
fixed interest rate system, or vice versa. Where the Bank has imposed on the Loan interest at a rate per annum which is
equal to the Bank's spread over the current floating interest rate, the Borrower hereby agrees that the Bank may,
without need of notice to the Borrower, increase or decrease its spread over the floating interest rate at any time
depending on whatever policy it may adopt in the future.[76] (Emphases supplied)

while the eight promissory notes issued pursuant thereto granted PNB the right to increase or reduce interest rates
"within the limits allowed by law or the Monetary Board"[77] and the Real Estate Mortgage agreement included the same
right to increase or reduce interest rates "at any time depending on whatever policy PNB may adopt in the future."[78]

On the basis of the Credit Agreement, petitioners issued promissory notes which they signed in blank, and respondent
later on entered their corresponding interest rates, as follows:

1st Promissory Note dated July 24, 1989 19.5%;

2nd Promissory Note dated November 22, 1989 23%;

3rd Promissory Note dated March 21, 1990 22%;

4th Promissory Note dated July 19, 1990 24%;

5th Promissory Note dated December 17, 1990 28%;

6th Promissory Note dated February 14, 1991 32%;

7th Promissory Note dated March 1, 1991 30%; and

8th Promissory Note dated July 11, 1991 24%.[79]

On the other hand, the August 1991 Amendment to Credit Agreement contains the following stipulation regarding
interest:
1.03. Interest on Line Availments. (a) The Borrowers agree to pay interest on each Availment from date of each
Availment up to but not including the date of full payment thereof at the rate per annum which is determined by the
Bank to be prime rate plus applicable spread in effect as of the date of each Availment.[80] (Emphases supplied)

and under this Amendment to Credit Agreement, petitioners again executed and signed the following promissory notes in
blank, for the respondent to later on enter the corresponding interest rates, which it did, as follows:

9th Promissory Note dated November 8, 1991 26%;

10th Promissory Note dated March 19, 1992 25%;

11th Promissory Note dated July 11, 1992 23%;

12th Promissory Note dated November 10, 1992 21%;

13th Promissory Note dated March 15, 1993 21%;

14th Promissory Note dated July 12, 1993 17.5%;

15th Promissory Note dated November 17, 1993 21%;

16th Promissory Note dated March 28, 1994 21%;

17th Promissory Note dated July 13, 1994 21%;

18th Promissory Note dated November 16, 1994 16%;

19th Promissory Note dated April 10, 1995 21%;

20th Promissory Note dated July 19, 1995 18.5%;

21st Promissory Note dated December 18, 1995 18.75%;

22nd Promissory Note dated April 22, 1996 18.5%;

23rd Promissory Note dated July 22, 1996 18.5%;

24th Promissory Note dated November 25, 1996 18%;

25th Promissory Note dated May 30, 1997 17.5%; and

26th Promissory Note (PN 9707237) dated July 30, 1997 25%.[81]

The 9th up to the 17th promissory notes provide for the payment of interest at the "rate the Bank may at any time without
notice, raise within the limits allowed by law x x x."[82] On the other hand, the 18th up to the 26th promissory notes which
includes PN 9707237 carried the following provision:

x x x For this purpose, I/We agree that the rate of interest herein stipulated may be increased or decreased for the
subsequent Interest Periods, with prior notice to the Borrower in the event of changes in interest rate prescribed
by law or the Monetary Board of the Central Bank of the Philippines, or in the Bank's overall cost of funds. I/We
hereby agree that in the event I/we are not agreeable to the interest rate fixed for any Interest Period, I/we shall
have the option to prepay the loan or credit facility without penalty within ten (10) calendar days from the
Interest Setting Date.[83] (Emphasis supplied)

These stipulations must be once more invalidated, as was done in previous cases. The common denominator in these
cases is the lack of agreement of the parties to the imposed interest rates. For this case, this lack of consent by the
petitioners has been made obvious by the fact that they signed the promissory notes in blank for the respondent to fill. We
find credible the testimony of Lydia in this respect. Respondent failed to discredit her; in fact, its witness PNB Kalibo
Branch Manager Aspa admitted that interest rates were fixed solely by its Treasury Department in Manila, which were
then simply communicated to all PNB branches for implementation. If this were the case, then this would explain why
petitioners had to sign the promissory notes in blank, since the imposable interest rates have yet to be determined and
fixed by respondent's Treasury Department in Manila.

Moreover, in Aspa's enumeration of the factors that determine the interest rates PNB fixes such as cost of money, foreign
currency values, bank administrative costs, profitability, and considerations which affect the banking industry it can be
seen that considerations which affect PNB's borrowers are ignored. A borrower's current financial state, his feedback or
opinions, the nature and purpose of his borrowings, the effect of foreign currency values or fluctuations on his business
or borrowing, etc. these are not factors which influence the fixing of interest rates to be imposed on him. Clearly,
respondent's method of fixing interest rates based on one-sided, indeterminate, and subjective criteria such as
profitability, cost of money, bank costs, etc. is arbitrary for there is no fixed standard or margin above or below these
considerations.

The stipulation in the promissory notes subjecting the interest rate to review does not render the imposition by UCPB of
interest rates on the obligations of the spouses Beluso valid. According to said stipulation:

The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among
others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or
financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to
the LENDER after due consideration of all dealings with the BORROWER.

It should be pointed out that the authority to review the interest rate was given [to] UCPB alone as the
lender. Moreover, UCPB may apply the considerations enumerated in this provision as it wishes. As worded in the above
provision, UCPB may give as much weight as it desires to each of the following considerations: (1) the prevailing financial
and monetary condition; (2) the rate of interest and charges which other banks or financial institutions charge or offer to
charge for similar accommodations; and/or (3) the resulting profitability to the LENDER (UCPB) after due consideration of
all dealings with the BORROWER (the spouses Beluso). Again, as in the case of the interest rate provision, there is no
fixed margin above or below these considerations.

In view of the foregoing, the Separability Clause cannot save either of the two options of UCPB as to the interest to be
imposed, as both options violate the principle of mutuality of contracts.[84] (Emphases supplied)

To repeat what has been said in the above-cited cases, any modification in the contract, such as the interest rates, must
be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed
modification, especially when it affects an important aspect of the agreement. In the case of loan agreements, the rate of
interest is a principal condition, if not the most important component. Thus, any modification thereof must be mutually
agreed upon; otherwise, it has no binding effect.

What is even more glaring in the present case is that, the stipulations in question no longer provide that the parties shall
agree upon the interest rate to be fixed; -instead, they are worded in such a way that the borrower shall agree
to whatever interest rate respondent fixes. In credit agreements covered by the above-cited cases, it is provided that:

The Bank reserves the right to increase the interest rate within the limits allowed by law at any time depending on
whatever policy it may adopt in the future: Provided, that, the interest rate on this accommodation shall be
correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary
Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the
increase or decrease in maximum interest rate.[85] (Emphasis supplied)

Whereas, in the present credit agreements under scrutiny, it is stated that:

IN THE JULY 1989 CREDIT AGREEMENT

(b) The Borrower agrees that the Bank may modify the interest rate on the Loan depending on whatever policy the Bank
may adopt in the future, including without limitation, the shifting from the floating interest rate system to the fixed
interest rate system, or vice versa. Where the Bank has imposed on the Loan interest at a rate per annum, which is equal
to the Bank's spread over the current floating interest rate, the Borrower hereby agrees that the Bank may, without
need of notice to the Borrower, increase or decrease its spread over the floating interest rate at any time depending on
whatever policy it may adopt in the future.[86] (Emphases supplied)

IN THE AUGUST 1991 AMENDMENT TO CREDIT AGREEMENT

1.03. Interest on Line Availments. (a) The Borrowers agree to pay interest on each Availment from date of each
Availment up to but not including the date of full payment thereof at the rate per annum which is determined by the Bank
to be prime rate plus applicable spread in effect as of the date of each Availment.[87](Emphasis supplied)

Plainly, with the present credit agreement, the element of consent or agreement by the borrower is now completely lacking,
which makes respondent's unlawful act all the more reprehensible.

Accordingly, petitioners are correct in arguing that estoppel should not apply to them, for "[e]stoppel cannot be predicated
on an illegal act. As between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or
is against public policy."[88] It appears that by its acts, respondent violated the Truth in Lending Act, or Republic Act No.
3765, which was enacted "to protect x x x citizens from a lack of awareness of the true cost of credit to the user by using a
full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national
economy."[89] The law "gives a detailed enumeration of the specific information required to be disclosed, among which are
the interest and other charges incident to the extension of credit."[90] Section 4 thereof provides that a disclosure
statement must be furnished prior to the consummation of the transaction, thus:

SEC. 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the
transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and
regulations prescribed by the Board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but
which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the
outstanding unpaid balance of the obligation.

Under Section 4(6), "finance charge" represents the amount to be paid by the debtor incident to the extension of credit
such as interest or discounts, collection fees, credit investigation fees, attorney's fees, and other service charges. The total
finance charge represents the difference between (1) the aggregate consideration (down payment plus installments) on the
part of the debtor, and (2) the sum of the cash price and non-finance charges.[91]

By requiring the petitioners to sign the credit documents and the promissory notes in blank, and then unilaterally filling
them up later on, respondent violated the Truth in Lending Act, and was remiss in its disclosure obligations. In one case,
which the Court finds applicable here, it was held:

UCPB further argues that since the spouses Beluso were duly given copies of the subject promissory notes after
their execution, then they were duly notified of the terms thereof, in substantial compliance with the Truth in
Lending Act.

Once more, we disagree. Section 4 of the Truth in Lending Act clearly provides that the disclosure statement must be
furnished prior to the consummation of the transaction:
SEC. 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the
transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and
regulations prescribed by the Board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but
which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the
outstanding unpaid balance of the obligation.

The rationale of this provision is to protect users of credit from a lack of awareness of the true cost thereof,
proceeding from the experience that banks are able to conceal such true cost by hidden charges, uncertainty of
interest rates, deduction of interests from the loaned amount, and the like. The law thereby seeks to protect
debtors by permitting them to fully appreciate the true cost of their loan, to enable them to give full consent to
the contract, and to properly evaluate their options in arriving at business decisions. Upholding UCPB's claim of
substantial compliance would defeat these purposes of the Truth in Lending Act. The belated discovery of the true cost
of credit will too often not be able to reverse the ill effects of an already consummated business decision.

In addition, the promissory notes, the copies of which were presented to the spouses Beluso after execution, are
not sufficient notification from UCPB. As earlier discussed, the interest rate provision therein does not
sufficiently indicate with particularity the interest rate to be applied to the loan covered by said promissory
notes.[92] (Emphases supplied)

However, the one-year period within which an action for violation of the Truth in Lending Act may be filed evidently
prescribed long ago, or sometime in 2001, one year after petitioners received the March 2000 demand letter which
contained the illegal charges.

The fact that petitioners later received several statements of account detailing its outstanding obligations does not cure
respondent's breach. To repeat, the belated discovery of the true cost of credit does not reverse the ill effects of an already
consummated business decision.[93] Neither may the statements be considered proposals sent to secure the petitioners'
conformity; they were sent after the imposition and application of the interest rate, and not before. And even if it were to
be presumed that these are proposals or offers, there was no acceptance by petitioners. "No one receiving a proposal to
modify a loan contract, especially regarding interest, is obliged to answer the proposal."[94]

Loan and credit arrangements may be made enticing by, or "sweetened" with, offers of low initial interest rates, but
actually accompanied by provisions written in fine print that allow lenders to later on increase or decrease interest rates
unilaterally, without the consent of the borrower, and depending on complex and subjective factors. Because they have
been lured into these contracts by initially low interest rates, borrowers get caught and stuck in the web of subsequent
steep rates and penalties, surcharges and the like. Being ordinary individuals or entities, they naturally dread legal
complications and cannot afford court litigation; they succumb to whatever charges the lenders impose. At the very least,
borrowers should be charged rightly; but then again this is not possible in a one-sided credit system where the temptation
to abuse is strong and the willingness to rectify is made weak by the eternal desire for profit.

Given the above supposition, the Court cannot subscribe to respondent's argument that in every repricing of petitioners'
loan availment, they are given the right to question the interest rates imposed. The import of respondent's line of
reasoning cannot be other than that if one out of every hundred borrowers questions respondent's practice of unilaterally
fixing interest rates, then only the loan arrangement with that lone complaining borrower will enjoy the benefit of review
or re-negotiation; as to the 99 others, the questionable practice will continue unchecked, and respondent will continue to
reap the profits from such unscrupulous practice. The Court can no more condone a view so perverse. This is exactly
what the Court meant in the immediately preceding cited case when it said that "the belated discovery of the true cost of
credit does not reverse the ill effects of an already consummated business decision;"[95] as to the 99 borrowers who did not
or could not complain, the illegal act shall have become a fait accompli to their detriment, they have already suffered the
oppressive rates.

Besides, that petitioners are given the right to question the interest rates imposed is, under the circumstances, irrelevant;
we have a situation where the petitioners do not stand on equal footing with the respondent. It is doubtful that any
borrower who finds himself in petitioners' position would dare question respondent's power to arbitrarily modify interest
rates at any time. In the second place, on what basis could any borrower question such power, when the criteria or
standards which are really one-sided, arbitrary and subjective for the exercise of such power are precisely lost on him?

For the same reasons, the Court cannot validly consider that, as stipulated in the 18 thup to the 26th promissory notes,
petitioners are granted the option to prepay the loan or credit facility without penalty within 10 calendar days from the
Interest Setting Date if they are not agreeable to the interest rate fixed. It has been shown that the promissory notes are
executed and signed in blank, meaning that by the time petitioners learn of the interest rate, they are already bound to
pay it because they have already pre-signed the note where the rate is subsequently entered. Besides, premium may not
be placed upon a stipulation in a contract which grants one party the right to choose whether to continue with or
withdraw from the agreement if it discovers that what the other party has been doing all along is improper or illegal.

Thus said, respondent's arguments relative to the credit documents that documentary evidence prevails over testimonial
evidence; that the credit documents are in proper form, presumed regular, and endure, against arbitrary claims by
petitioners, experienced business persons that they are, they signed questionable loan documents whose provisions for
interest rates were left blank, and yet they continued to pay the interests without protest for a number of years deserve no
consideration.

With regard to interest, the Court finds that since the escalation clause is annulled, the principal amount of the loan is
subject to the original or stipulated rate of interest, and upon maturity, the amount due shall be subject to legal interest
at the rate of 12% per annum. This is the uniform ruling adopted in previous cases, including those cited here.[96] The
interests paid by petitioners should be applied first to the payment of the stipulated or legal and unpaid interest, as the
case may be, and later, to the capital or principal.[97] Respondent should then refund the excess amount of interest that it
has illegally imposed upon petitioners; "[t]he amount to be refunded refers to that paid by petitioners when they had no
obligation to do so."[98] Thus, the parties' original agreement stipulated the payment of 19.5% interest; however, this rate
was intended to apply only to the first promissory note which expired on November 21, 1989 and was paid by petitioners;
it was not intended to apply to the whole duration of the loan. Subsequent higher interest rates have been declared illegal;
but because only the rates are found to be improper, the obligation to pay interest subsists, the same to be fixed at the
legal rate of 12% per annum. However, the 12% interest shall apply only until June 30, 2013. Starting July 1, 2013, the
prevailing rate of interest shall be 6% per annumpursuant to our ruling in Nacar v. Gallery Frames[99] and Bangko Sentral
ng Pilipinas-Monetary Board Circular No. 799.

Now to the issue of penalty. PN 9707237 provides that failure to pay it or any installment thereon, when due, shall
constitute default, and a penalty charge of 24% per annum based on the defaulted principal amount shall be imposed.
Petitioners claim that this penalty should be excluded from the foreclosure amount or bid price because the Real Estate
Mortgage and the Supplement thereto did not specifically include it as part of the secured amount. Respondent justifies
its inclusion in the secured amount, saying that the purpose of the penalty or a penal clause is to ensure the performance
of the obligation and substitute for damages and the payment of interest in the event of non-compliance.[100] Respondent
adds that the imposition and collection of a penalty is a normal banking practice, and the standard rate per annumfor all
commercial banks, at the time, was 24%. Its inclusion as part of the secured amount in the mortgage agreements is thus
valid and necessary.

The Court sustains petitioners' view that the penalty may not be included as part of the secured amount. Having found
the credit agreements and promissory notes to be tainted, we must accord the same treatment to the mortgages. After all,
"[a] mortgage and a note secured by it are deemed parts of one transaction and are construed together."[101] Being so
tainted and having the attributes of a contract of adhesion as the principal credit documents, we must construe the
mortgage contracts strictly, and against the party who drafted it. An examination of the mortgage agreements reveals that
nowhere is it stated that penalties are to be included in the secured amount. Construing this silence strictly against the
respondent, the Court can only conclude that the parties did not intend to include the penalty allowed under PN 9707237
as part of the secured amount. Given its resources, respondent could have if it truly wanted to conveniently prepared and
executed an amended mortgage agreement with the petitioners, thereby including penalties in the amount to be secured
by the encumbered properties. Yet it did not.
With regard to attorney's fees, it was plain error for the CA to have passed upon the issue since it was not raised by the
petitioners in their appeal; it was the respondent that improperly brought it up in its appellee's brief, when it should have
interposed an appeal, since the trial court's Decision on this issue is adverse to it. It is an elementary principle in the
subject of appeals that an appellee who does not himself appeal cannot obtain from the appellate court any affirmative
relief other than those granted in the decision of the court below.

x x x [A]n appellee, who is at the same time not an appellant, may on appeal be permitted to make counter assignments of
error in ordinary actions, when the purpose is merely to defend himself against an appeal in which errors are alleged to
have been committed by the trial court both in the appreciation of facts and in the interpretation of the law, in order to
sustain the judgment in his favor but not when his purpose is to seek modification or reversal of the judgment, in which
case it is necessary for him to have excepted to and appealed from the judgment.[102]

Since petitioners did not raise the issue of reduction of attorney's fees, the CA possessed no authority to pass upon it at
the instance of respondent. The ruling of the trial court in this respect should remain undisturbed.

For the fixing of the proper amounts due and owing to the parties to the respondent as creditor and to the petitioners who
are entitled to a refund as a consequence of overpayment considering that they paid more by way of interest charges than
the 12% per annum[103] herein allowed the case should be remanded to the lower court for proper accounting and
computation, applying the following procedure:

1. The 1st Promissory Note with the 19.5% interest rate is deemed proper and paid;

2. All subsequent promissory notes (from the 2nd to the 26th promissory notes) shall carry an interest rate of only
12% per annum.[104] Thus, interest payment made in excess of 12% on the 2nd promissory note shall immediately
be applied to the principal, and the principal shall be accordingly reduced. The reduced principal shall then be
subjected to the 12%[105] interest on the 3rd promissory note, and the excess over 12% interest payment on the
3rd promissory note shall again be applied to the principal, which shall again be reduced accordingly. The
reduced principal shall then be subjected to the 12% interest on the 4th promissory note, and the excess over
12% interest payment on the 4th promissory note shall again be applied to the principal, which shall again be
reduced accordingly. And so on and so forth;

3. After the above procedure is carried out, the trial court shall be able to conclude if petitioners a) still have
an OUTSTANDING BALANCE/OBLIGATION or b) MADE PAYMENTS OVER AND ABOVE THEIR TOTAL
OBLIGATION (principal and interest);

4. Such outstanding balance/obligation, if there be any, shall then be subjected to a 12% per
annum interest from October 28, 1997 until January 14, 1999, which is the date of the auction sale;

5. Such outstanding balance/obligation shall also be charged a 24% per annumpenalty from August 14, 1997
until January 14, 1999. But from this total penalty, the petitioners' previous payment of penalties in the amount
of P202,000.00 made on January 27, 1998[106] shall be DEDUCTED;

6. To this outstanding balance (3.), the interest (4.), penalties (5.), and the final and executory award of 1%
attorney's fees shall be ADDED;

7. The sum total of the outstanding balance (3.), interest (4.) and 1% attorney's fees (6.) shall be DEDUCTED from
the bid price of P4,324,172.96. The penalties (5.) are not included because they are not included in the secured
amount;

8. The difference in (7.) [P4,324,172.96 LESS sum total of the outstanding balance (3.), interest (4.), and 1%
attorney's fees (6.)] shall be DELIVERED TO THE PETITIONERS;

9. Respondent may then proceed to consolidate its title to TCTs T-14250 and T-16208;

10. ON THE OTHER HAND, if after performing the procedure in (2.), it turns out that petitioners made
an OVERPAYMENT, the interest (4.), penalties (5.), and the award of 1% attorney's fees (6.) shall be DEDUCTED
from the overpayment. There is no outstanding balance/obligation precisely because petitioners have paid beyond
the amount of the principal and interest;
 11. If the overpayment exceeds the sum total of the interest (4.), penalties (5.), and award of 1% attorney's fees (6.),
the excess shall be RETURNED to the petitioners, with legal interest, under the principle of solutio indebiti;[107]

12. Likewise, if the overpayment exceeds the total amount of interest (4.) and award of 1% attorney's fees (6.), the trial
court shall INVALIDATE THE EXTRAJUDICIAL FORECLOSURE AND SALE;

13. HOWEVER, if the total amount of interest (4.) and award of 1% attorney's fees (6.) exceed petitioners'
overpayment, then the excess shall be DEDUCTED from the bid price of P4,324,172.96;

14. The difference in (13.) [P4,324,172.96 LESS sum total of the interest (4.) and 1% attorney's fees (6.)] shall be
DELIVERED TO THE PETITIONERS;

15. Respondent may then proceed to consolidate its title to TCTs T-14250 and T-16208. The outstanding penalties, if
any, shall be collected by other means.

From the above, it will be seen that if, after proper accounting, it turns out that the petitioners made payments exceeding
what they actually owe by way of principal, interest, and attorney's fees, then the mortgaged properties need not answer
for any outstanding secured amount, because there is not any; quite the contrary, respondent must refund the excess to
petitioners. In such case, the extrajudicial foreclosure and sale of the properties shall be declared null and void for
obvious lack of basis, the case being one of solutio indebiti instead. If, on the other hand, it turns out that petitioners'
overpayments in interests do not exceed their total obligation, then the respondent may consolidate its ownership over the
properties, since the period for redemption has expired. Its only obligation will be to return the difference between its bid
price (P4,324,172.96) and petitioners' total obligation outstanding except penalties after applying the latter's
overpayments.

WHEREFORE, premises considered, the Petition is GRANTED. The May 8, 2007 Decision of the Court of Appeals in CA-
G.R. CV No. 79650 is ANNULLED and SET ASIDE. Judgment is hereby rendered as follows:

1. The interest rates imposed and indicated in the 2nd up to the 26th Promissory Notes are DECLARED NULL AND
VOID, and such notes shall instead be subject to interest at the rate of twelve percent (12%) per annum up to
June 30, 2013, and starting July 1, 2013, six percent (6%) per annum until full satisfaction;

2. The penalty charge imposed in Promissory Note No. 9707237 shall be EXCLUDED from the amounts secured by
the real estate mortgages;

3. The trial court's award of one per cent (1%) attorney's fees is REINSTATED;

4. The case is ordered REMANDED to the Regional Trial Court, Branch 6 of Kalibo, Aklan for the computation of
overpayments made by petitioners spouses Eduardo and Lydia Silos to respondent Philippine National Bank,
taking into consideration the foregoing dispositions, and applying the procedure hereinabove set forth;

5. Thereafter, the trial court is ORDERED to make a determination as to the validity of the extrajudicial foreclosure
and sale, declaring the same null and void in case of overpayment and ordering the release and return of Transfer
Certificates of Title Nos. T-14250 and TCT T-16208 to petitioners, or ordering the delivery to the petitioners of the
difference between the bid price and the total remaining obligation of petitioners, if any;

6. In the meantime, the respondent Philippine National Bank is ENJOINED from consolidating title to Transfer
Certificates of Title Nos. T-14250 and T-16208 until all the steps in the procedure above set forth have been taken
and applied;

7. The reimbursement of the excess in the bid price of P377,505.99, which respondent Philippine National Bank is
ordered to reimburse petitioners, should be HELD IN ABEYANCE until the true amount owing to or owed by the
parties as against each other is determined;

8. Considering that this case has been pending for such a long time and that further proceedings, albeit
uncomplicated, are required, the trial court is ORDERED to proceed with dispatch.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
 THIRD DIVISION

G.R. No. 201001 November 10, 2014

MCMP CONSTRUCTION CORP., Petitioner,

vs.
MONARK EQUIPMENT CORP., Respondent.

RESOLUTION

VELASCO, JR., J.:

For consideration of the Court is a Petition for Review on Certiorari dated April 20, 20li filed by MCMP Construction Corp.
under Rule 45 of the Rules of Court. The petition seeks the reversal of the Decision dated October 14, 20112and
Resolution dated March 9, 20123 issued by the Court of Appeals (CA) in CA G.R. CV No. 91860 entitled Monark
Equipment Corporation v. MCMP Construction Corporation. The CA Decision affirmed the Decision dated November 20,
20074 and Order dated April 28, 20085 issued by the Regional Trial Court, Branch 96 in Quezon City (RTC) in Civil Case
No. Q-02-4 7092 entitled Monark Equipment Corporation v. MCMP Construction Corporation.

The facts of the case are as follows:

MCMP Construction Corporation (MCMP) leased heavy equipment from Monark Equipment Corporation (Monark) for
various periods in 2000, the lease covered by a Rental Equipment Contract (Contract). Thus, Monark delivered five (5)
pieces of heavy equipment to the project site of MCMP in Tanay, Rizal and Llavac, Quezon, the delivery evidenced by
invoices as well as Documents Acknowledgment Receipt Nos. 04667 and 5706, received and signed by representatives of
MCMP, namely, Jorge Samonte on December 5, 2000 and Rose Takahashi on January 29, 2001, respectively. Notably, the
invoices state:

"Credit sales are payable within 30 days from the date of invoice. Customer agrees to pay interest at 24% p.a. on all
amounts. In addition, customer agrees to pay a collection fee of 1% compounded monthly and 2% per month penalty
charge for late payment on amounts overdue. Customer agrees to pay a sum equal to 25% of any amount due as
attorney’s fees in case of suit, and expressly submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or
Manila, Metro Manila, for any legal action arising from, this transactions."

Despite the lapse of the thirty (30)-day period indicated in the invoices, MCMP failed to pay the rental fees. Upon demands
made upon MCMP to pay the amount due, partial payments were made in the amount of Ph₱100,000.00 on April 15,
2001 and Ph₱100,000.00 on August 15, 2001. Further demands went unheeded. As of April 30, 2002, MCMP owed
Monark the amount of Ph₱1,282,481.83, broken down as follows:

Principal Accumulated PhP 765,380.33

Interest (2%) 253,226.17
2% Monthly Penalty Charge 253,226.17
Collection Fee (1%) 10,649.16
===============
Ph₱1,282,481.836

Thus, on June 18, 2002, Monark filed a suit for a Sum of Money with the RTC docketed as Civil Case No. Q-02-47092.7 In
its Answer filed on July 5, 2002,8 MCMP alleged in defense thatthe complaint was premature as Monark has refused to
give a detailed breakdown of its claims. MCMP further averred that it had an agreement with Monark that it would not be
charged for the whole time that the leased equipment was in its possession but rather only for the actual time that the
equipment was used although still on the project site. MCMP, however, admitted that this agreement was not contained in
the Contract.

During trial, Monark presented asone of its witnesses, Reynaldo Peregrino (Peregrino), its Senior Account Manager.
Peregrino testified that there were two (2) original copies ofthe Contract, one retained by Monark, while the other was
given to MCMP. He further testified that Monark’s copy had been lost and that diligent efforts to recover the copy proved
futile. Instead, Peregrino presented a photocopy of the Contract which he personally had on file. MCMP objected to the
presentation of secondary evidence to prove the contents of the Contract arguing that there were no diligent efforts to
search for the original copy. Notably, MCMP did not present its copy of the Contract notwithstanding the directive of the
trial court to produce the same.9

On November 20, 2007, the RTC issued its Decision finding for Monark as plaintiff, the dispositive portion of which reads:
"WHEREFORE, in view of the foregoing findings and legal premises, judgment is hereby rendered in favor of the plaintiff,
and ordering the defendant to pay the former:

1. PhP 1,282,481.83 as balance for the rental fees of the subject heavy equipments (sic) as of April 30, 2002,
inclusive of the interests thereof;

2. Twenty-Five percent (25%) of the total amount to be recovered as payment for the attorney’s fees; and,

3. The costs of suit.

SO ORDERED."

From this Decision of the RTC, MCMP filed a Motion for Reconsideration dated January 31, 2008 while Monark interposed
a Motion for Clarification and/or Partial Reconsideration.10 On April 28, 2008, the RTC issued an Order, disposing as
follows:

"WHEREFORE, in light of the foregoing, the Court finds no reversible error in the assailed decision henceforth, the Motion
for Reconsideration of defendant is hereby DENIED for lack of merit. On the other hand, the plaintiff’s Motion for
Clarification and/or Partial Reconsideration is hereby GRANTED for being meritorious. Therefore, in the dispositive
portion of the assailed decision dated 20 November 2007, the following should be included:

‘The payment of interests, charges and fees due after April 30, 2002 and up to the time when all the obligations of the
defendant to the plaintiff shall have been fully paid, computed in accordance with the stipulations entered into between
the parties under Exhibits "A" to "G", and uniformly stated in the following wise:

Credit sales are payable within 30 days from the date of invoice. Customer agreesto pay interest at 24% p.a. on all
amounts. In addition, customer agrees to pay a collection fee of 1% compounded monthly and 2% per month penalty
charge for late payment on amounts overdue. Customer agrees to pay a sum equal to 25% of any amount due as
attorney’s fees in case of suit, and expressly submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or
Manila, Metro Manila, for any legal action arising from, this transactions.’

SO ORDERED."

Unsatisfied, MCMP appealed the RTC’s Decision and Order to the Court of Appeals (CA). Eventually, the appellate court,
by a Decision dated October 14, 2011, affirmed in totothe Decision and Order of the RTC. MCMP’s motion for
reconsideration of the CA Decision was denied by the CA in its Resolution dated March 9, 2012.

Hence, the instant petition.

MCMP challenges the ruling of the CA arguing that the appellate court should have disallowed the presentation of
secondary evidence to prove the existence of the Contract, following the Best Evidence Rule. MCMP specifically argues
that based on the testimony of Peregrino, Monark did not diligently search for the original copy of the Contract as
evidenced by the fact that: 1) the actual custodian of the document was not presented; 2) the alleged loss was not even
reported to management or the police; and 3) Monark only searched for the original copy of the document for the purposes
of the instant case.

Petitioner’s contention is erroneous.

The Best Evidence Rule, a basic postulate requiring the production of the original document whenever its contents are the
subject of inquiry, is contained in Section 3 of Rule 130 ofthe Rules of Court which provides:

"Section 3. Original document must be produced; exceptions. — When the subject of inquiry is the contents of a
document, no evidence shall be admissible other than the original document itself, except in the following cases:

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

(b) When the original is in the custody or under the control of the party against whom the evidence is offered, and
the latter fails to produce it after reasonable notice;
 (c) When the original consists of numerous accounts or other documents which cannot be examined in court
without great loss of time and the fact sought to be established from them is only the general result of the whole;
and

(d) When the original is a public record in the custody of a public officer or is recorded in a public office.
(Emphasis supplied)"

Relative thereto, Sections 5 and 6 of Rule 130 provide the relevant rules on the presentation of secondary evidence to
prove the contents of a lost document:

"Section 5. When original document is unavailable. — When the original document has been lost ordestroyed, 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. (4a)

Section 6. When original document is in adverse party's custody or control. — If the document is inthe custody or under
the control of adverse party, he must have reasonable notice to produce it. If after such notice and after satisfactory proof
of its existence, he fails to produce the document, secondary evidence may be presented as in the case of its loss."

In Country Bankers Insurance Corporation v. Lagman,11 the Court set down the requirements before a party may present
secondary evidence to prove the contents of the original document whenever the original copy has been lost:

Before a party is allowed to adduce secondary evidence to prove the contents of the original, the offeror must prove the
following: (1) the existence or due execution of the original; (2) the loss and destruction of the original or the reason for its
non-production in court; and (3) on the part of the offeror, the absence of bad faith to which the unavailability of the
original can be attributed. The correct order of proof is as follows: existence, execution, loss, and contents.

In the instant case, the CA correctlyruled that the above requisites are present. Both the CA and the RTC gave credence to
the testimony of Peregrino that the original Contract in the possession of Monark has been lost and that diligent efforts
were exerted to find the same but to no avail. Such testimony has remained uncontroverted. As has been repeatedly held
by this Court, "findings offacts and assessment ofcredibility of witnesses are matters best left to the trial court." 12 Hence,
the Court will respect the evaluation of the trial court on the credibility of Peregrino.

MCMP, to note, contends that the Contract presented by Monark is not the contract that they entered into. Yet, it has
failed to present a copy of the Contract even despite the request ofthe trial court for it to produce its copy of the
Contract.13 Normal business practice dictates that MCMP should have asked for and retained a copy of their agreement.
Thus, MCMP’s failure to present the same and even explain its failure, not only justifies the presentation by Monark of
secondary evidence in accordance with Section 6 of Rule 130 of the Rules of Court, butit also gives rise to the disputable
presumption adverse to MCMP under Section 3 (e) of Rule 131 of the Rules of Court that "evidence willfully suppressed
would be adverse if produced."

Next, MCMP claims that the piecesof equipment were not actually delivered to it by Monark. It bears pointing out,
however, that the witnesses of MCMP itself, Jorge Samonte, a Budget Supervisor of MCMP, and Engr. Horacio A. Martinez,
Sr., General Manager of MCMP, both acknowledged the delivery of the equipment to the project sites.14Clearly, the
contention of MCMP is false.

Evidently, the instant petition must be dismissed.

Nevertheless, the Court takes notice that the trial court imposed upon MCMP a 24% per annum interest on the rental fees
as well as a collection fee of 1% per month compounded monthly and a 2% per month penalty charge. In all then, the
effective interest rate foisted upon MCMP is 60% per annum. On top of this, MCMP was assessedfor attorney’s fees at the
rate of 25% of the total amount due. These are exorbitant and unconscionable rates and, following jurisprudence, must be
equitably reduced.

In Macalinao v. Bank of the Philippine Islands,15 the Court reduced the interest imposed by the bank of 36% for being
excessive and unconscionable:

"x x x Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of 36%
per annum as excessive and unconscionable. We held in Chua vs. Timan:

The stipulated interest rates of 7% and 5% per month imposed on respondents’ loans mustbe equitably reduced to 1% per
month or 12% per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated
interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are
void for being contrary to morals, if not against the law. While C.B. Circular No. 905-82, which took effect on January 1,
1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity,
nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to
levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. (Emphasis supplied.)

Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may
reduce the interest rate as reason and equity demand.

The same is true with respect tothe penalty charge. Notably, under the Terms and Conditions Governing the Issuance and
Use of the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3%
per month. Pertinently, Article 1229 of the Civil Code states:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is
iniquitous or unconscionable. In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances of each case since what may be iniquitous and unconscionable in one may be totally just and
equitable in another."

In the more recent case of Pentacapital Investment Corporation v. Mahinay,16 the Court reduced the interest and penalties
imposed in a contract as follows:

"Aside from the payment of the principal obligation of ₱1,936,800.00, the parties agreed that respondent pay interest at
the rate of 25% from February 17, 1997 until fully paid. Such rate, however, is excessive and thus, void. Since the
stipulation on the interest rate is void, it is as if there was no express contract thereon. To be sure, courts may reduce the
interest rate as reason and equity demand. In this case, 12% interest is reasonable.

The promissory notes likewise required the payment of a penalty charge of 3% per month or 36% per annum. We find
such rates unconscionable. This Court has recognized a penalty clause as an accessory obligation which the parties
attach to a principal obligation for the purpose of ensuring the performance thereof by imposing on the debtor a special
prestation (generallyconsisting of the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or
inadequately fulfilled. However, a penalty charge of 3% per month is unconscionable; hence, we reduce it to1% per month
or 12% per annum, pursuant to Article 1229 of the Civil Code which states:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is
iniquitous or unconscionable.

Lastly, respondent promised to pay 25% of his outstanding obligations as attorney’s fees in case of non-payment thereof.
Attorney’s fees here are in the nature of liquidated damages. As long as said stipulation does not contravene law, morals,
or public order, it is strictly binding upon respondent. Nonetheless, courts are empowered to reduce such rate if the same
is iniquitous or unconscionable pursuant to the above-quoted provision. This sentiment is echoed inArticle 2227 of the
Civil Code, to wit:

Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are
iniquitous or unconscionable.

Hence, we reduce the stipulated attorney's fees from 25% to 10%."

Following the above principles previously laid down by the Court, the interest and penalty charges imposed upon MCMP
must also be considered as iniquitous, unconscionable and, therefore, void. As such, the rates may validly be reduced.
Thus, the interest rate of 24% per annum is hereby reduced to 12% per annum. Moreover, the interest shall start to
accrue thirty (30) days after receipt of the second set of invoices on January 21, 2001, or March 1, 2001 in accordance
with the provisions in the invoices themselves.

Additionally, the penalty and collection charge of 3% per month, or 36% per annum, is also reduced to 6% per
annum.1âwphi1 And the amount of attorney's fees is reduced from 25% of the total amount due to 5%.

WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of merit with the MODIFICATION that
the dispositive portion of the RTC's Decision dated November 20, 2007, as amended in an Order dated April 28, 2008,
should read:

WHEREFORE, in view of the foregoing findings and legal premises, judgment is hereby rendered in favor of the plaintiff,
and ordering the defendant to pay the former:
 1. PhP 765,380.33 representing the unpaid rental fees;

2. Interest of 12% per annum on the unpaid rental fees to be computed from March 1, 2001 17 until payment;

3. Penalty and collection charge of 6% per annum on the unpaid rental fees to be computed from March 1, 2001;

4. Attorney's Fees of five percent (5%) of the total amount to be recovered; and,

5. The costs of suit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 189404 December 11, 2013

WILGEN LOON, JERRY ARCILLA, ALBERTPEREYE, ARNOLD PEREYE, EDGARDO OBOSE, ARNEL MALARAS,
PATROCINO TOETIN, EVELYN LEONARDO, ELMER GLOCENDA, RUFO CUNAMAY, ROLANDOSAJOL, ROLANDO
ABUCAYON, JENNIFER NATIVIDAD, MARITESS TORION, ARMANDO LONZAGA, RIZAL GELLIDO, EVIRDE
HAQUE,1 MYRNA VINAS, RODELITO AYALA, WINELITO OJEL, RENATO RODREGO, NENA ABINA, EMALYN
OLIVEROS, LOUIE ILAGAN, JOEL ENTIG, ARNEL ARANETA, BENJAMIN COSE, WELITO LOON and WILLIAM
ALIPAO, Petitioners,
vs.
POWER MASTER, INC., TRI-C GENERAL SERVICES, and SPOUSES HOMER and CARINA ALUMISIN,Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari,2 filed by petitioners Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold
Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando
Sajol, Rolando Abucayon, Jennifer Natividad, Maritess Torion, Armando Lonzaga, Rizal Gellido, Evirde Haque, Myrna
Vinas, Rodelito Ayala, Winelito Ojel, Renato Rodrego, Nena Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Arnel
Araneta, Benjamin Cose, Welito Loon, William Alipao (collectively, the petitioners), to challenge the June 5, 2009
decision3 and the August 28, 2009 resolution4 of the Court of Appeals (CA) in CA-G.R. SP No. 95182.

The Factual Antecedents

Respondents Power Master, Inc. and Tri-C General Services employed and assigned the petitioners as janitors and
leadsmen in various Philippine Long Distance Telephone Company (PLDT) offices in Metro Manila area. Subsequently, the
petitioners filed a complaint for money claims against Power Master, Inc., Tri-C General Services and their officers, the
spouses Homer and Carina Alumisin (collectively, the respondents). The petitioners alleged in their complaint that they
were not paid minimum wages, overtime, holiday, premium, service incentive leave, and thirteenth month pays. They
further averred that the respondents made them sign blank payroll sheets. On June 11, 2001, the petitioners amended
their complaint and included illegal dismissal as their cause of action. They claimed that the respondents relieved them
from service in retaliation for the filing of their original complaint.

Notably, the respondents did not participate in the proceedings before the Labor Arbiter except on April 19, 2001 and
May 21, 2001 when Mr. Romulo Pacia, Jr. appeared on the respondents’ behalf.5 The respondents’ counsel also
appeared in a preliminary mandatory conference on July 5, 2001.6 However, the respondents neither filed any position
paper nor proffered pieces of evidence in their defense despite their knowledge of the pendency of the case.

The Labor Arbiter’s Ruling

In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H. Salinas partially ruled in favor of the petitioners. The LA
awarded the petitioners salary differential, service incentive leave, and thirteenth month pays. In awarding these
claims, the LA stated that the burden of proving the payment of these money claims rests with the employer. The LA also
awarded attorney’s fees in favor of the petitioners, pursuant to Article 111 of the Labor Code.8
However, the LA denied the petitioners’ claims for backwages, overtime, holiday, and premium pays. The LA observed
that the petitioners failed to show that they rendered overtime work and worked on holidays and rest days without
compensation. The LA further concluded that the petitioners cannot be declared to have been dismissed from employment
because they did not show any notice of termination of employment. They were also not barred from entering the
respondents’ premises.

The Proceedings before the NLRC

Both parties appealed the LA’s ruling with the National Labor Relations Commission. The petitioners disputed the LA’s
denial of their claim for backwages, overtime, holiday and premium pays. Meanwhile, the respondents questioned the LA’s
ruling on the ground that the LA did not acquire jurisdiction over their persons.

The respondents insisted that they were not personally served with summons and other processes. They also claimed that
they paid the petitioners minimum wages, service incentive leave and thirteenth month pays. As proofs, they attached
photocopied and computerized copies of payroll sheets to their memorandum on appeal. 9 They further maintained
that the petitioners were validly dismissed. They argued that the petitioners’ repeated defiance to their transfer to different
workplaces and their violations of the company rules and regulations constituted serious misconduct and willful
disobedience.10

On January 3, 2003, the respondents filed an unverified supplemental appeal. They attached photocopied and
computerized copies of list of employees with automated teller machine (ATM) cards to the supplemental
appeal. This list also showed the amounts allegedly deposited in the employees’ ATM cards.11 They also attached
documentary evidence showing that the petitioners were dismissed for cause and had been accorded due process.

On January 22, 2003, the petitioners filed an Urgent Manifestation and Motion12 where they asked for the deletion of
the supplemental appeal from the records because it allegedly suffered from infirmities. First, the supplemental appeal
was not verified. Second, it was belatedly filed six months from the filing of the respondents’ notice of appeal with
memorandum on appeal. The petitioners pointed out that they only agreed to the respondents’ filing of a responsive
pleading until December 18, 2002.13 Third¸ the attached documentary evidence on the supplemental appeal bore the
petitioners’ forged signatures.

They reiterated these allegations in an Urgent Motion to Resolve Manifestation and Motion (To Expunge from the
Records Respondents’ Supplemental Appeal, Reply and/or Rejoinder) dated January 31, 2003.14Subsequently, the
petitioners filed an Urgent Manifestation with Reiterating Motion to Strike-Off the Record Supplemental
Appeal/Reply, Quitclaims and Spurious Documents Attached to Respondents’ Appeal dated August 7, 2003.15 The
petitioners argued in this last motion that the payrolls should not be given probative value because they were the
respondents’ fabrications. They reiterated that the genuine payrolls bore their signatures, unlike the respondents’
photocopies of the payrolls. They also maintained that their signatures in the respondents’ documents (which showed
their receipt of thirteenth month pay) had been forged.

The NLRC Ruling

In a resolution dated November 27, 2003, the NLRC partially ruled in favor of the respondents. 16 The NLRC affirmed the
LA’s awards of holiday pay and attorney’s fees. It also maintained that the LA acquired jurisdiction over the persons of
the respondents through their voluntary appearance.

However, it allowed the respondents to submit pieces of evidence for the first time on appeal on the ground that
they had been deprived of due process. It found that the respondents did not actually receive the LA’s processes. It also
admitted the respondents’ unverified supplemental appeal on the ground that technicalities may be disregarded to serve
the greater interest of substantial due process. Furthermore, the Rules of Court do not require the verification of a
supplemental pleading.

The NLRC also vacated the LA’s awards of salary differential, thirteenth month and service incentive leave pays. In
so ruling, it gave weight to the pieces of evidence attached to the memorandum on appeal and the supplemental appeal. It
maintained that the absence of the petitioners’ signatures in the payrolls was not an indispensable factor for their
authenticity. It pointed out that the payment of money claims was further evidenced by the list of employees with ATM
cards. It also found that the petitioners’ signatures were not forged. It took judicial notice that many people use at least
two or more different signatures.

The NLRC further ruled that the petitioners were lawfully dismissed on grounds of serious misconduct and willful
disobedience. It found that the petitioners failed to comply with various memoranda directing them to transfer to other
workplaces and to attend training seminars for the intended reorganization and reshuffling.
The NLRC denied the petitioners’ motion for reconsideration in a resolution dated April 28, 2006. 17 Aggrieved, the
petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.18

The CA Ruling

The CA affirmed the NLRC’s ruling. The CA held that the petitioners were afforded substantive and procedural due
process. Accordingly, the petitioners deliberately did not explain their side. Instead, they continuously resisted their
transfer to other PLDT offices and violated company rules and regulations. It also upheld the NLRC’s findings on the
petitioners’ monetary claims.

The CA denied the petitioners’ motion for reconsideration in a resolution dated August 28, 2009, prompting the
petitioners to file the present petition.19

The Petition

In the petition before this Court, the petitioners argue that the CA committed a reversible error when it did not find that
the NLRC committed grave abuse of discretion. They reiterate their arguments before the lower tribunals and the CA in
support of this conclusion. They also point out that the respondents posted a bond from a surety that was not accredited
by this Court and by the NLRC. In effect, the respondents failed to perfect their appeal before the NLRC. They further
insist that the NLRC should not have admitted the respondents’ unverified supplemental appeal. 20

The Respondents’ Position

In their Comments, the respondents stress that the petitioners only raised the issue of the validity of the appeal bond for
the first time on appeal. They also reiterate their arguments before the NLRC and the CA. They additionally submit that
the petitioners’ arguments have been fully passed upon and found unmeritorious by the NLRC and the CA. 21

The Issues

This case presents to us the following issues:

1) Whether the CA erred when it did not find that the NLRC committed grave abuse of discretion in giving due
course to the respondents’ appeal;

a) Whether the respondents perfected their appeal before the NLRC; and

b) Whether the NLRC properly allowed the respondents’ supplemental appeal

2) Whether the respondents were estopped from submitting pieces of evidence for the first time on appeal;

3) Whether the petitioners were illegally dismissed and are thus entitled to backwages;

4) Whether the petitioners are entitled to salary differential, overtime, holiday, premium, service incentive leave,
and thirteenth month pays; and

5) Whether the petitioners are entitled to attorney’s fees.

The Court’s Ruling

The respondents perfected their

appeal with the NLRC because the
revocation of the bonding company's
authority has a prospective
application

Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of a judgment involving a monetary award, an appeal
by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment
appealed from."
Contrary to the respondents’ claim, the issue of the appeal bond’s validity may be raised for the first time on appeal since
its proper filing is a jurisdictional requirement.22 The requirement that the appeal bond should be issued by an accredited
bonding company is mandatory and jurisdictional. The rationale of requiring an appeal bond is to discourage the
employers from using an appeal to delay or evade the employees' just and lawful claims. It is intended to assure the
workers that they will receive the money judgment in their favor upon the dismissal of the employer’s appeal.23

In the present case, the respondents filed a surety bond issued by Security Pacific Assurance Corporation (Security
Pacific) on June 28, 2002. At that time, Security Pacific was still an accredited bonding company. However, the NLRC
revoked its accreditation on February 16, 2003.24 Nonetheless, this subsequent revocation should not prejudice the
respondents who relied on its then subsisting accreditation in good faith. In Del Rosario v. Philippine Journalists, Inc.,25 we
ruled that a bonding company’s revocation of authority is prospective in application.

However, the respondents should post a new bond issued by an accredited bonding company in compliance with
paragraph 4, Section 6, Rule 6 of the NLRC Rules of Procedure. This provision states that "[a] cash or surety bond shall be
valid and effective from the date of deposit or posting, until the case is finally decided, resolved or terminated or the
award satisfied."

The CA correctly ruled that the

NLRC properly gave due course to
the respondents’ supplemental
appeal

The CA also correctly ruled that the NLRC properly gave due course to the respondents’ supplemental appeal. Neither the
laws nor the rules require the verification of the supplemental appeal.26 Furthermore, verification is a formal, not a
jurisdictional, requirement. It is mainly intended for the assurance that the matters alleged in the pleading are true and
correct and not of mere speculation.27 Also, a supplemental appeal is merely an addendum to the verified memorandum
on appeal that was earlier filed in the present case; hence, the requirement for verification has substantially been
complied with.

The respondents also timely filed their supplemental appeal on January 3, 2003. The records of the case show that the
petitioners themselves agreed that the pleading shall be filed until December 18, 2002. The NLRC further extended the
filing of the supplemental pleading until January 3, 2003 upon the respondents’ motion for extension.

A party may only adduce evidence

for the first time on appeal if he
adequately explains his delay in the
submission of evidence and he
sufficiently proves the allegations
sought to be proven

In labor cases, strict adherence to the technical rules of procedure is not required. Time and again, we have allowed
evidence to be submitted for the first time on appeal with the NLRC in the interest of substantial justice. 28 Thus, we have
consistently supported the rule that labor officials should use all reasonable means to ascertain the facts in each case
speedily and objectively, without regard to technicalities of law or procedure, in the interest of due process.29

However, this liberal policy should still be subject to rules of reason and fairplay. The liberality of procedural rules is
qualified by two requirements: (1) a party should adequately explain any delay in the submission of evidence; and
(2) a party should sufficiently prove the allegations sought to be proven.30 The reason for these requirements is that
the liberal application of the rules before quasi-judicial agencies cannot be used to perpetuate injustice and hamper the
just resolution of the case. Neither is the rule on liberal construction a license to disregard the rules of procedure.31

Guided by these principles, the CA grossly erred in ruling that the NLRC did not commit grave abuse of discretion in
arbitrarily admitting and giving weight to the respondents’ pieces of evidence for the first time on appeal.

A. The respondents failed to

adequately explain their delay
in the submission of evidence

We cannot accept the respondents’ cavalier attitude in blatantly disregarding the NLRC Rules of Procedure. The CA
gravely erred when it overlooked that the NLRC blindly admitted and arbitrarily gave probative value to the respondents’
evidence despite their failure to adequately explain their delay in the submission of evidence. Notably, the respondents’
delay was anchored on their assertion that they were oblivious of the proceedings before the LA. However, the respondents
did not dispute the LA’s finding that Mr. Romulo Pacia, Jr. appeared on their behalf on April 19, 2001 and May 21,
2001.32 The respondents also failed to contest the petitioners’ assertion that the respondents’ counsel appeared in a
preliminary mandatory conference on July 5, 2001.33

Indeed, the NLRC capriciously and whimsically admitted and gave weight to the respondents’ evidence despite its finding
that they voluntarily appeared in the compulsory arbitration proceedings. The NLRC blatantly disregarded the fact that
the respondents voluntarily opted not to participate, to adduce evidence in their defense and to file a position paper
despite their knowledge of the pendency of the proceedings before the LA. The respondents were also grossly negligent in
not informing the LA of the specific building unit where the respondents were conducting their business and their
counsel’s address despite their knowledge of their non-receipt of the processes.34

B. The respondents failed to

sufficiently prove the
allegations sought to be
proven

Furthermore, the respondents failed to sufficiently prove the allegations sought to be proven. Why the respondents’
photocopied and computerized copies of documentary evidence were not presented at the earliest opportunity is a serious
question that lends credence to the petitioners’ claim that the respondents fabricated the evidence for purposes of
appeal. While we generally admit in evidence and give probative value to photocopied documents in
administrative proceedings, allegations of forgery and fabrication should prompt the adverse party to present
the original documents for inspection.35 It was incumbent upon the respondents to present the originals, especially in
this case where the petitioners had submitted their specimen signatures. Instead, the respondents effectively deprived the
petitioners of the opportunity to examine and controvert the alleged spurious evidence by not adducing the originals. This
Court is thus left with no option but to rule that the respondents’ failure to present the originals raises the presumption
that evidence willfully suppressed would be adverse if produced.36

It was also gross error for the CA to affirm the NLRC’s proposition that "[i]t is of common knowledge that there are many
people who use at least two or more different signatures."37 The NLRC cannot take judicial notice that many people use at
least two signatures, especially in this case where the petitioners themselves disown the signatures in the respondents’
assailed documentary evidence.38 The NLRC’s position is unwarranted and is patently unsupported by the law and
jurisprudence.

Viewed in these lights, the scales of justice must tilt in favor of the employees. This conclusion is consistent with the rule
that the employer’s cause can only succeed on the strength of its own evidence and not on the weakness of the employee’s
evidence.39

The petitioners are entitled to

backwages

Based on the above considerations, we reverse the NLRC and the CA’s finding that the petitioners were terminated for just
cause and were afforded procedural due process. In termination cases, the burden of proving just and valid cause for
dismissing an employee from his employment rests upon the employer. The employer’s failure to discharge this burden
results in the finding that the dismissal is unjustified.40 This is exactly what happened in the present case.

The petitioners are entitled to salary

differential, service incentive,
holiday, and thirteenth month pays

We also reverse the NLRC and the CA’s finding that the petitioners are not entitled to salary differential, service incentive,
holiday, and thirteenth month pays. As in illegal dismissal cases, the general rule is that the burden rests on the
defendant to prove payment rather than on the plaintiff to prove non-payment of these money claims.41 The rationale for
this rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents – which will
show that differentials, service incentive leave and other claims of workers have been paid – are not in the possession of
the worker but are in the custody and control of the employer.42

The petitioners are not entitled to

overtime and premium pays

However, the CA was correct in its finding that the petitioners failed to provide sufficient factual basis for the award of
overtime, and premium pays for holidays and rest days. The burden of proving entitlement to overtime pay and premium
pay for holidays and rest days rests on the employee because these are not incurred in the normal course of
business.43 In the present case, the petitioners failed to adduce any evidence that would show that they actually rendered
service in excess of the regular eight working hours a day, and that they in fact worked on holidays and rest days.
The petitioners are entitled to
attorney’s fees

The award of attorney’s fees is also warranted under the circumstances of this case.1âwphi1 An employee is entitled to an
award of attorney’s fees equivalent to ten percent (10%) of the amount of the wages in actions for unlawful withholding of
wages.44

As a final note, we observe that Rodelito Ayala, Winelito Ojel, Renato Rodrego and Welito Loon are also named as
petitioners in this case. However, we deny their petition for the reason that they were not part of the proceedings before
the CA. Their failure to timely seek redress before the CA precludes this Court from awarding them monetary claims.

All told, we find that the NLRC committed grave abuse of discretion in admitting and giving probative value to the
respondents' evidence on appeal, which errors the CA replicated when it upheld the NLRC rulings.

WHEREFORE, based on these premises, we REVERSE and SET ASIDE the decision dated June 5, 2009, and the
resolution dated August 28, 2009 of the Court of Appeals in CA-G.R. SP No. 95182. This case is REMANDED to the Labor
Arbiter for the sole purpose of computing petitioners' (Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold Pereye, Edgardo
Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol, Rolando
Abucayon, Jennifer Natividad, Maritess Torion, Ammndo Lonzaga, Rizal Gellido, Evirdly Haque, Myrna Vinas, Nena Abina,
Emalyn Oliveros, Louie Ilagan, Joel Entig, Amel Araneta, Benjamin Cose and William Alipao) full backwages (computed
from the date of their respective dismissals up to the finality of this decision) and their salary differential, service incentive
leave, holiday, thirteenth month pays, and attorney's fees equivalent to ten percent (10%) of the withheld wages. The
respondents are further directed to immediately post a satisfactory bond conditioned on the satisfaction of the awards
affirmed in this Decision.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 201011 January 27, 2014

THERESITA, JUAN, ASUNCION, PATROCINIA, RICARDO, and GLORIA, all surnamed DIMAGUILA, Petitioners,
vs.
JOSE and SONIA A. MONTEIRO, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the August 15, 2011Decision 1and
the March 5, 2012 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV No. 92707, which affirmed the August 23,
2007 Decision3 of the Regional Trial Court, Branch 27, Santa Cruz, Laguna (RTC), in Civil Case No. SC-3108.

The Facts

On July 5, 1993, the respondent spouses, Jose and Sonia Monteiro (Spouses Monteiro), along with Jose, Gerasmo, Elisa,
and Clarita Nobleza, filed their Complaint for Partition and Damages before the RTC, against the pet1t10ners, Theresita,
Juan, Asuncion, Patrocinia, Ricardo, and Gloria Dimaguila (The Dimaguilas), together with Rosalina, Jonathan, Eve, Sol,
Venus, Enrique, Nina, Princess Arieta, and Evangelina Borlaza. The complaint alleged that all the pmiies were co-owners
and prayed for the pmiition of a residential house and lot located at Gat. Tayaw St., Liliw, Laguna, with an area of 489
square meters, and covered by Tax Declaration No. 1453. Spouses Monteiro anchored their claim on a deed of sale
executed in their favor by the heirs of Pedro Dimaguila (Pedro).

In their Answer, the Dimaguilas and the other defendants countered that there was no co-ownership to speak of in the
first place. They alleged that the subject property, then owned by Maria Ignacio Buenaseda, had long been partitioned
equally between her two sons, Perfecto and Vitaliano Dimaguila, through a Deed of Extrajudicial Partition, with its
southern-half portion assigned to Perfecto and the northern-half portion to Vitaliano. They claimed that they were the
heirs of Vitaliano and that Spouses Monteiro had nothing to do with the property as they were not heirs of either Perfecto
or Vitaliano.

During the course of the proceedings, several incidents were initiated, namely: (a) Motion to Dismiss for lack of legal
capacity to sue of Spouses Monteiro and for lack of cause of action; (b) Motion for Reconsideration of the Order of denial
thereof, which was denied; (c) Motion for Production and Inspection of Documents; (d) Motion for Reconsideration of the
Order granting the same, which was denied; (e) Motion to Defer Pre-trial; (f) Notice of Consignation by the petitioners in
the exercise of their alleged right of redemption of the share being claimed by the Spouses Monteiro in light of the deed of
sale they produced and claimed to have been executed by the heirs of Pedro in their favor; (g) Motion to Remove Sonia
Monteiro (Sonia) as plaintiff, which was denied; (h) Motion for Reconsideration thereof, which was also denied; (i) Motion
for Clarification and/or Extended Resolution; and (j) Motion to Suspend Proceedings due to a pending Petition for
Certiorari before the CA assailing several of the RTC orders. The proceedings resumed after the promulgation by the CA of
its April 5, 2000 Resolution in CA-G.R. No. SP 52833, which upheld the assailed RTC orders.

On January 2, 2001, upon resumption of the proceedings, Spouses Monteiro filed their Motion for Leave to Amend and/or
Admit Amended Complaint.4 The RTC granted their motion. The amended complaint abandoned the original claim for
partition and instead sought the recovery of possession of a portion of the subject property occupied by the Dimagui as
and other defendants, specifically, the potiion sold to the couple by the heirs of Pedro. Furthermore, only Spouses
Monteiro were retained as plaintiffs and the Dimaguilas as defendants.

In amending their complaint, Spouses Montiero adopted the Dimaguilas' admission in their original answer that the
subject propetiy had already been partitioned between Perfecto and Vitaliano, through a Deed of Extrajudicial Partition,
dated October 5, 1945, and that during their lifetime, the brothers agreed that Perfecto would become the owner of the
southern-hal f portion and Vitaliano of the northern-half portion, which division was observed and respected by them as
well as their heirs and successors-in-interest.

Spouses Monteiro further averred that Perfecto was survived by Esperanza, Leandro and Pedro, who had divided the
southern-half portion equally amongst themselves, with their respective 1 /3 shares measuring 81.13 square meters each;
that Pedro's share pertains to the 1 /3 of the southern-half immediately adjacent to the northern-half adjudicated to the

Dimaguilas as heirs of Vitaliano; that on September 29, 1992, Pedro's share was sold by his heirs to them through a
Bilihan ng Lahat Naming Karapatan (Bilihan) with the acquiescence of the heirs of Esperanza and Leandro appearing in
an Affidavit of Conformity and Waiver; and that when they attempted to take possession of the share of Pedro, they
discovered that the subject portion was being occupied by the Dimaguilas.

In their Answer5 to the amended complaint, the Dimaguilas admitted that the subject property was inherited by, and
divided equally between Perfecto and Vitaliano, but denied the admission in their original answer that it had been actually
divided into southern and nmihern portions. Instead, they argued that the Extrajudicial Partition mentioned only the
division of the subject property "into two and share and share alike." In effect, they argued the existence of a co-
owenrship, contrary to their original position. The Dimaguilas further argued that the Bilihan did not specify the metes
and bounds of the property sold, in violation of Article 1458 of the Civil Code. Even assuming that such had been
specified, they averred that the sale of a definite portion of a property owned in common was void since a co-owner could
only sell his undivided share in the property.

During the trial, Spouses Monteiro presented Pedrito Adrieta, brother of Sonia Monteiro (Sonia), who testified that Perfecto
was his grandfather and that at the time of Perfecto's death, he had two properties, one of which was the subject property
in Liliw, Laguna, which went to his children, Esperanza, Leonardo and Pedro. Pedro was survived by his children Pedrito,
Theresita, Francisco, and Luis, who, in turn, sold their rights over the subject property to Sonia.

Sonia testified that she was approached by Pedro's son, Francisco, and was asked if she was interested in purchasing
Pedro's 1/3 share of the southern portion of the Bahay na Sato, and that he showed her a deed of extrajudicial partition
executed by and between Perfecto and Vitaliano, as well as the tax declaration of the property to prove that the property
had already been partitioned between the two brothers.

Engineer Baltazar F. Mesina testified that he was the geodetic engineer hired by Spouses Monteiro to survey the property
in Liliw, and recounted that he checked the boundary of the subject property, subdivided the lot into two and came up
with a survey plan.

Crisostomo Arves, an employee from the Office of the Municipal Assessor, presented a certified true copy of the cadastral
map of Liliw and a list of claimants/owners.

Dominga Tolentino, a record officer of the Department of Environment and Natural Resources (DENR), testified that as
part of her duties, she certifies and safekeeps the records of surveyed land, including cadastral maps from the region.
One of the Dimaguilas, Asuncion, was the sole witness for the defendants. She testified that their first counsel made a
mistake when he alleged in their original answer that the property had already been partitioned into n01ihern and
southern portions between the two brothers, as the original answer had been rushed and they were never given a copy of
it. She claimed that the mistake was only pointed out to her by their new counsel after their former counsel withdrew due
to cancer. She further testified that there was no intention to partition the "bahay na bato" which stood on the subject
property, in order to preserve its historical and sentimental value.

Ruling of the RTC

In its August 23, 2007 Decision, the RTC ruled in favor of Spouses Monteiro and ordered the Dimaguilas to turn over the
possession of the subject 1 /3 portion of the southern-half of the property, to wit:

WHEREOF, judgment is hereby rendered in favor of the plaintiffs and against the defendants:

a. Ordering the defendants and all persons claiming rights under them to peacefully vacate and turn-over
possession of 1/ 3 of the southern portion of the property covered by Tax Declaration No. 1453, specifically
described as "A" of Lot 877 in the sketch plan marked as Exhibit "I", within 60 days from the finality of this
Decision, failing which let a writ of possession issue;

b. Ordering the defendants to pay the plaintiffs, jointly and solidarily, the amount of ?500 per month in the form
of rent for the use of the property from July 1993 until the property is vacated;

c. Ordering the defendants to pay the plaintiffs, jointly and solidarily, attorney's fees of ₱30,000 and litigation
expense of ₱20,000.

SO ORDERED.6

The RTC found that although the extrajudicial partition merely divided the property into two share and share alike,
evidence aliunde was appreciated to show that there was an actual division of the property into south and north between
Perfecto and Vitaliano, and that such partition was observed and honored by their heirs. These pieces of evidence were the
cadastral map of Liliw7 and a corresponding list of claimants, which showed that the subject property had long been
registered as Lot 876 (northern-half), claimed by Buenaventura Dimaguila (Buenaventura), an heir of Vitaliano, and Lot
877 (southern-half), claimed by Perfecto.

The RTC held that the manner of partition was admitted by the Dimaguilas themselves in their original answer. It gave no
credence to the claim of Asuncion that such admission was an error of their fonner counsel and that she was unaware of
the contents of their original answer. It noted that the Dimaguilas had strongly maintained their theory of partition from
1992 when the complaint was first filed, and only changed their defense in 2001 when Spouses Monteiro filed their
amended complaint. It keenly observed that it was precisely their admission which propelled Spouses Monteiro to amend
their complaint from one of partition to recovery of possession. Thus, the RTC concluded that there was indeed a partition
of the subject property into southern-half and northern-half portions between Perfecto and Vitaliano and that the
Dimaguilas were estopped from denying the same.

As to the authenticity of the Bilihan, where the 1 /3 share of Pedro was sold to Spouses Monteiro, the RTC found the
document to be regular and authentic absent any piece of evidence to the contrary. It stated that the proper persons to
contest the sale were not the Dimaguilas, who were the heirs of Vitaliano, but the heirs of Perfecto. It noted that the
records showed that the heirs of Esperanza and Leandro (Pedro's siblings), had signified their conformity to the pa1iition
and to the sale of Pedro's 1 /3 portion.

Ruling of the CA

In its assailed August 15, 2011 Decision, the CA affirmed the ruling of the RTC.

The CA found that Spouses Monteiro had established their case by a preponderance of evidence thru their presentation of
the Deed of Extrajudicial Partition,8 the cadastral map and the municipal assessor's records.9 It noted, more importantly,
that the Dimaguilas themselves corroborated the claim of partition in their original answer. It likewise ruled that the
petitioners were estopped from denying their admission of partition after the respondent spouses had relied on their
judicial admission.

The Dimaguilas also insisted on their argument, which was raised before the RTC, but not addressed, that the Bilihan
should not have been admitted as evidence for lack of a documentary stamp tax, in accordance with Section 201 of the
National Internal Revenue Code (N!RC). Citing Gabucan v. Manta10 and Del Rosario v. Hamoy,11 the CA, however, ruled
that if a document which did not bear the required documentary stamp was presented in evidence, the court should
require the proponent to affix the requisite stamp. The CA noted that the RTC had failed to direct Spouses Monteiro to
affix the stamp and merely reminded the presiding judge to be more vigilant on similar situations in the future.
Nonetheless, it held that the petitioners did not possess the necessary personality to assail the sale between Spouses
Monteiro and the heirs of Pedro because it pe1iained to the southern-half of the property to which they had no claim.

The CA likewise found sufficient basis for the award of rentals as compensatory damages since Spouses Monteiro were
wrongfully deprived of possession of the 1/3 portion of the southern-half of the subject property. It also upheld the award
of attorney's fees and litigation expenses by the RTC, considering that Spouses Monteiro were compelled to litigate and
incur expenses to protect their rights and interest.

In its assailed March 5, 2012 Resolution, the CA denied the petitioners' motion for reconsideration for lack of merit.

Hence, this petition.

ASSIGNMENT OF ERRORS

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THERE WAS AN ACTUAL PARTITION OF THE PROPERTY
COVERED BY TAX DECLARATION NO. 1453.

II

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE 1/3 PORTION OF THE SOUTHERN HALF OF THE
PROPERTY WAS SOLD TO THE RESPONDENTS.

III

THE COURT OF APPEALS GRAVELY ERRED IN ADMITTING IN EVIDENCE EXHIBIT C, THE BIL/HAN NG LAHA T
NAMING KARAPATAN.

IV

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE RESPONDENTS ARE ENTITLED TO RECOVER
POSSESSION OF THE 1/3 PORTION OF THE SOUTHERN HALF OF THE PROPERTY.

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THE PETITIONERS LIABLE FOR RENTALS FOR THE USE OF
THE PROPERTY FROM JULY 1993 UNTIL VACATED.

VI

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THE PETITIONERS LIABLE FOR ATTORNEY'S FEES AND
LITIGATION EXPENSES.

VII

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO CONSIDER THE PETITIONERS' SUPPLEMENTAL
ANSWER TO AMENDED COMPLAINT AND TO GRANT THE COUNTERCLAIMS INTERPOSED THEREIN.12

The Dimaguilas argue that their original allegation regarding the partition of the subject property into northern and
southern portions was a mistake of their former counsel, and it was not their intention to partition the property because
to do so would damage the house thereon. Even assuming an admission was made, the petitioners aver that such was
made only by some, but not all, of the co-owners; and that partition can only be made by all co-owners, and allowing the
admission is tantamount to effecting partition by only some co-owners. Spouses Monteiro themselves, in their original
complaint, made an admission that they were co-owners of the property and asserted that there was no partition. The
evidence aliunde considered by the RTC, consisting of the cadastral map and the list of claimants, were timely objected to
during the trial as hearsay and a violation of the best evidence rule.
The petitioners reiterate that the Bilihan should not have been admitted into evidence because it lacked the documentary
stamp tax required by Section 201 of the NIRC, providing that no document shall be admitted in evidence until the
requisite stamps have been affixed thereto. They argue that the ruling of petitioners' lack of personality to assail the deed
of sale is different from the issue of the deed of sale's admissibility as evidence. They conclude that considering that no
documentary stamp was ever affixed on the deed of sale, such should never have been admitted into evidence and
consequently, should not have been relied upon by the lower courts to prove the sale of 1/3 of the southern portion; and
that considering that the Bilihan is inadmissible as evidence, the respondent spouses have no basis for their claim to the
subject 1/3 portion of the southern-half of the property. Thus, they insist that the lower courts erred in awarding to
Spouses Monteiro the possession of the subject prope1iy, the rentals, attorney's fees and litigation expenses, and in failing
to rule on their counterclaim for demolition of improvements and payment of damages.

The assignment of errors boils down to two main issues:

I. Whether there was a pa1iition of the subject property; and

2. Whether the 1/3 portion of the southern-half of the subject property was sold to the respondent spouses.

Ruling of the Court

At the outset, it must be pointed out that the petitioners' assignment of errors calls for the Court to again evaluate the
evidence to determine whether there was a partition of the property and whether the 1/3 portion of the southern half was
sold to the respondent spouses. These clearly entail questions of fact which are beyond the Court's ambit of review under
Rule 45 of the Rules of Court, especially considering that the findings of fact of the RTC were affirmed by the CA. 13 On this
ground alone, the present petition must be denied. Nonetheless, the Court shall delve into these factual issues to finally
put this case to rest.

Partition of the Subject Property

Spouses Monteiro, as plaintiffs in the original case, had the burden of proof to establish their case by a preponderance of
evidence, which is the weight, credit, and value of the aggregate evidence on either side, synonymous with the term
"greater weight of the evidence." Preponderance of evidence is evidence which is more convincing to the court as worthy of
belief than that which is offered in opposition thereto.14

To prove their claim of partition, the respondent spouses presented the following: (1) the Deed of Extrajudicial Partition,
dated October 5, 1945, executed by and between the brothers Perfecto and Vitaliano; (2) the cadastral map of Liliw Cadm-
484,15 dated August 6, 1976, showing that the subject property had been divided into southern and northern portions,
registered as Lot Nos. 876 and 877; and (3) the Municipal Assessor's records16 showing that the said lots were respectively
claimed by Buenaventura and Perfecto.

It is undisputed that the Deed of Extrajudicial Partition stated that Perfecto and Vitaliano agreed "to divide between them
into two and share and share alike" the subject property, including the house situated thereon. It appears, however, that
the property was actually partitioned into definite portions, namely, southern and northern halves, as reflected in the
cadastral map of Liliw, which were respectively claimed by an heir of Vitaliano and Perfecto himself. It, thus, appears that
the subject property had already been partitioned into definite portions more than 20 years prior to the original complaint
for partition filed in 1993, and that such division had been observed by the brothers' heirs. As earlier pointed out, the
petitioners themselves admitted to this very fact in their original answer, to wit:

(b) On September 5, 1945 the brothers PERFECTO and VITALIANO DIMAGUILA executed a deed of EXTRA JUDICIAL
PARTITION of the aforedescribed property dividing the same into two (2) equal parts as indicated in the aforesaid deed as
follows, to wit:

xxx

(c) As a result of the foregoing partition and as known by all the parties in this case from the beginning or as soon as they
reached the age of discernment PERFECTO DIMAGUILA became the sole and exclusive owner of the southern half of the
aforedescribed property and VITALIANO DIMAGUILA became the sole owner of the northern half of the same property; the
house that was built thereon and still existing up to this time was likewise equally divided between the two (2)
DIMAGUILA brothers in accordance with the extrajudicial partition of half equal shares;

xxx

2. In other words, the share of VITALIANO DIMAGUILA in the above described property has already been long segregated
and had passed on to his heirs as is very well known by all the parties in this case;17
 xxx

(Emphases in the Original)

Section 418 of Rule 129 of the Rules of Court provides that an admission made by a pa1iy in the course of the proceedings
in the same case does not require proof, and may be contradicted only by showing that it was made through palpable
mistake. The petitioners argue that such admission was the palpable mistake of their former counsel in his rush to file the
answer, a copy of which was not provided to them. Petitioner Asuncion testified:

Q So, why was that allegations (sic) made in the Answer?

A May be, (sic) in his rush to file the Answer, Atty. Paredes filed the same without giving us a copy ...19

This contention is unacceptable. It is a purely self-serving claim unsupported by any iota of evidence. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof.20 Furthermore, the Court notes that this position was adopted
by the petitioners only almost eight (8) years after their original answer was filed, in response to the amended complaint of
the respondent spouses. In their original answer to the complaint for partition, their claim that there was already a
partition into northern-half and southern-half portions, was the very essence of their defense. It was precisely this
admission which moved the respondent spouses to amend their complaint. The petitioners cannot now insist that the very
foundation of their original defense was a palpable mistake.

Article 143121 of the Civil Code provides that through estoppel, an admission is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon. The respondent spouses had clearly
relied on the petitioners' admission and so amended their original complaint for partition to one for recovery of possession
of a portion of the subject property. Thus, the petitioners are now estopped from denying or attempting to prove that there
was no partition of the property.

Considering that an admission does not require proof, the admission of the petitioners would actually be sufficient to
prove the partition even without the documents presented by the respondent spouses. If anything, the additional evidence
they presented only served to corroborate the petitioners' admission.

The petitioners argue that they timely objected to the cadastral map and the list of claimants presented by the respondent
spouses, on the ground that they violated the rule on hearsay and the best evidence rule.

Anent the best evidence rule, Section 3( d) of Rule 130 of the Rules of Court provides that when the subject of inquiry is
the contents of a document, no evidence shall be admissible other than the original document itself, except when the
original is a public record in the custody of a public officer or is recorded in a public office.22 Section 7 of the same Rule
provides that when the original of a document is in the custody of a public officer or is recorded in a public office, its
contents may be proved by a certified copy issued by the public officer in custody thereof.23 Section 24 of Rule 132
provides that the record of public documents may be evidenced by a copy attested by the officer having the legal custody
or the record.24

Certified true copies of the cadastral map of Liliw and the corresponding list of claimants of the area covered by the map
were presented by two public officers. The first was Crisostomo Arves, Clerk III of the Municipal Assessor's Office, a
repository of such documents. The second was Dominga Tolentino, a DENR employee, who, as a record officer, certifies
and safekeeps records of surveyed land involving cadastral maps. The cadastral maps and the list of claimants, as
ce1iified true copies of original public records, fall under the exception to the best evidence rule.

As to the hearsay rule, Section 44 of Rule 130 of the Rules of Court similarly provides that entries in official records are
an exception to the rule.25 The rule provides that entries in official records made in the performance of the duty of a public
officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of
the facts therein stated. The necessity of this rule consists in the inconvenience and difficulty of requiring the official's
attendance as a witness to testify to the innumerable transactions in the course of his duty. The document's
trustworthiness consists in the presumption of regularity of performance of official duty.26

Cadastral maps are the output of cadastral surveys. The DENR is the department tasked to execute, supervise and
manage the conduct of cadastral surveys.27 It is, therefore, clear that the cadastral map and the corresponding list of
claimants qualify as entries in official records as they were prepared by the DENR, as mandated by law. As such, they are
exceptions to the hearsay rule and are primafacie evidence of the facts stated therein.

Even granting that the petitioners had not admitted the partition, they presented no evidence to contradict the evidence of
the respondent spouses. Thus, even without the admission of the petitioners, the respondent spouses proved by a
preponderance of evidence that there had indeed been a partition of the subject property.
Sale of 1/3 Portion of the Southern-half

To prove that 1/3 of the southern-half portion of the subject property was sold to them, Spouses Monteiro presented a
deed of sale entitled Bilihan ng Lahat Naming Karapatan,28 dated September 29, 1992, wherein Pedro's share was sold by
his heirs to them, with the acquiescence of the heirs of Esperanza and Leandro in an Affidavit of Conformity and
Waiver.29 The petitioners argue that the Bilihan should not have been admitted into evidence because it lacked the
documentary stamp tax required by Section 201 of the NIRC.

On August 29, 1994, the petitioners filed a motion for the production and/or inspection of documents,30 praying that
Spouses Monteiro be ordered to produce the deed of sale, which they cited as the source of their rights as co-owners. On
November 20, 1995, Spouses Monteiro submitted their compliance,31 furnishing the RTC and the petitioners with a
copy32 of the Bilihan. On January 3, 1996, the petitioners filed a notice of consignation,33manifesting that they had
attempted to exercise their right of redemption as co-owners of the 1/3 portion of the southern half of the property under
Article 162334 of the Civil Code by sending and tendering payment of redemption to Spouses Monteiro, which was,
however, returned.

By filing the notice of consignation and tendering their payment for the redemption of the 1/3 portion of the southern-half
of the property, the petitioners, in effect, admitted the existence, due execution and validity of the Bilihan. Consequently,
they are now estopped from questioning its admissiblity in evidence for relying on such for their right of redemption.
Additionally, the Court notes that the copy35 of the Bilihan which was originally submitted by Spouses Monteiro with its
compliance filed on November 20, 1995, does in fact bear a documentary stamp tax. It could only mean that the
documentary stamp tax on the sale was properly paid. The Bilihan was, therefore, properly admitted into evidence and
considered by the RTC.

In any case, as correctly held by the lower cou1is, the petitioners, as heirs of Vitaliano, who inherited the northern-half
po1iion of the subject property, do not possess the necessary personality to assail the sale of the southern-half portion
between Spouses Monteiro and the heirs of Pedro.1âwphi1 They are not real parties-in-interest who stand to be benefited
or injured by the sale of the 1/3 portion of the southern-half over which they have absolutely no right. As correctly ruled
by the courts below, only fellow co-owners have the personality to assail the sale, namely, the heirs of Pedro's siblings,
Esperanza and Leandro. They have, however, expressly aquiesced to the sale and waived their right to the property in the
affidavit presented by Spouses Monteiro.36 As such, the petitioners have no right to their counterclaims of demolition of
improvements and payment of damages.

With Spouses Monteiro having sufficiently proved their claim over the subject I /3 portion of the southern-half of the
prope1iy through the Bilihan, the lower courts did not err in awarding possession, rentals, attorney's fees, and litigation
expenses to them.

The Court, however, finds that the award of rentals should be reckoned from January 2, 2001, the date the Spouses
Monteiro filed their Amended Complaint seeking recovery of the subject portion. Interest at the rate of 6% per annum
shall also be imposed on the total amount of rent due from finality of this Decision until fully paid.37

WHEREFORE, the petition is DENIED. The August 15, 2011 Decision and the March 15, 2012 Resolution of the Court of
Appeals, in CA-G .R. CV No. 92707 are AFFIRMED with MODIFICATION, in that:

a. The award of rent at the rate of ₱500.00 per month shall be reckoned from January 2, 2001 until the property
is vacated; and

b. Interest at the rate of 6% per annum shall be imposed on the total amount of rent due from finality of this
Decision until fully paid.

SO ORDERED.

EN BANC

[ GR No. 181892, Apr 19, 2016 ]

REPUBLIC v. JESUS M. MUPAS +

RESOLUTION
BRION, J.:

Before the Court are the motion for reconsideration filed by the Republic of the Philippines (Department of Transportation
and Communications) and the Manila International Airport Authority (Republic for brevity), and the respective partial
motions for reconsideration of Philippine International Airport Terminals Co., Inc. (PIATCO) and of Takenaka Corporation
(Takenaka) and Asahikosan Corporation (Asahikosan). In these motions, the parties assail the Court's Decision dated
September 8, 2015 (Decision)[1]

I. The Factual Antecedents

A. The concession agreement between the

Republic and PIATCO; PIATCO's subcontract
agreements with Takenaka and Asahikosan

On July 12, 1997, the Republic executed a concession agreement with PIATCO for the construction, development, and
operation of the Ninoy Aquino International Airport Passenger Terminal III (NAIA-IPT III) under a build-operate-transfer
scheme. The parties subsequently amended their concession agreement and entered into several supplemental
agreements (collectively referred to as the PIATCO contracts).[2]

In the PIATCO contracts, the Republic authorized PIATCO to build, operate, and maintain the NAIA-IPT III during the
concession period of twenty-five (25) years.[3]

On March 31, 2000, PIATCO engaged the services of Takenaka for the construction of the NAIA-IPT III under
an Onshore Construction Contract.On the same date, PIATCO also entered into an Offshore Procurement
Contractwith Asahikosan for the design, manufacture, purchase, test and delivery of the Plant in the NAIA-IPT III. Both
contracts were supplemented by succeeding agreements.[4]

In May 2002, PIATCO failed to pay for the services rendered by Takenaka and Asahikosan.[5]

B. The Agan v. PIATCO[6] case: the

nullification of the PIATCO contracts

On May 5, 2003, the Court nullified the PIATCO contracts in Agan v. PIATCO[7] on the grounds that: (a) the Paircargo
Consortium (that later incorporated into PIATCO) was not a duly pre-qualified bidder; and (b) the PIATCO contracts
contained provisions that substantially departed from the draft Concession Agreement.[8]

On January 21, 2004, the Court issued a resolution (2004 Agan Resolution), denying PIATCO, et al.'s motion for
reconsideration.[9] Significantly, we stated in the resolution that the Republic should first pay PIATCO before it could
take over the NAIA-IPTHI. We further ruled that "the compensation must be just and in accordance with law and equity
for the Republic cannot unjustly enrich itself at the expense of PIATCO and its investors."[10]

C. The expropriation case before the RTC

On December 21, 2004, the Republic filed a complaint for the expropriation of the NAIA-IPT III before the Regional
Trial Court (RTC) of Pasay, Branch 117, docketed as Civil Case No. 04-0876. Notably, the property to be expropriated only
involves the NAIA-IPT III structure and did not include the land which the Republic already owns. [11]

On the same day, the RTC issued a writ of possession in favor of the Republic pursuant to Rule 67 of the Rules of
Court (Rule 67). The writ was issued based on the Republic's manifestation that it had deposited with the Land Bank of
the Philippines (Land Bank) the amount of P3,002,125,000.00, representing the NAIA-IPT Ill's assessed value.[12]

On January 4, 2005, the RTC supplemented its December 21, 2004 order. The RTC applied Republic Act (RA) No.
8974 instead of Rule 67 as basis for the effectivity of the writ of possession. The RTC ruled, among others, that the Land
Bank should immediately release to PIATCO the amount of US$62,343,175.77,[13] to be deducted eventually from the just
compensation.[14]

In the course of the RTC expropriation proceedings, the RTC allowed Takenaka and Asahikosan to intervene in the case.
Takenaka and Asahikosan based their intervention on the foreign judgments issued in their favor in the two collection
cases that they filed against PIATCO {London awards). Takenaka and Asahikosan asked the RTC to: (a) hold in abeyance
the release of just compensation to PIATCO until the London awards are recognized and enforced in the Philippines; and
(b) order that the just compensation be deposited with the RTC for the benefit of PIATCO's creditors. [15]

The Republic questioned the January 4, 2005 RTC order and two other RTC orders[16] before this Court in the case
entitled Republic v. Gingoyon.[17]

On January 14, 2005, we issued a temporary restraining order and preliminary injunction against the implementation of
the assailed RTC orders, including the January 4, 2005 RTC order.[18]

D. Developments pending the expropriation

case: the Republic v. Gingoyon case

In Gingoyon, the Court partly granted the Republic's petition on December 19, 2005.

We adopted the 2004 Agan Resolution in ruling that the Republic is barred from taking over the NAIA-IPT III until just
compensation is paid to PIATCO as the builder and owner of the structure.

We also ruled that RA No. 8974 applies insofar as it: (a) provides valuation standards in determining the amount of just
compensation; and (b) requires the Republic to immediately pay PIATCO at least the proffered value of the NAIA-IPT III
for purposes of determining the effectivity of the writ of possession.

We also held that Rule 67 shall apply to the procedural matters of the expropriation proceedings insofar as it is
consistent with RA 8974 and its implementing rules and regulations (IRR), and Agan.

Applying RA No. 8974, we held in abeyance the implementation of the writ of possession until the
Republic directly pays PIATCO the proffered value of P3 billion. We also authorized the Republic to perform acts
essential to the operation of the NAIA-IPT III once the writ of possession becomes effective.

For purposes of computing just compensation, we held that PIATCO should only be paid the value of the improvements
and/or structures using the replacement cost method under Section 10 of RA 8974 IRR.[19] We added, however, that
the replacement cost method is only one of the factors to be considered in determining just compensation; equity should
also be considered.

On February 1, 2006, we denied the Republic, et al.'s motion for partial reconsideration. Citing procedural errors, we also
denied the motions for intervention of Asahikosan, Takenaka, and Rep. Salacnib F. Baterina. [20]

E. The continuation of the expropriation

proceedings after the finality of the
Gingoyon case; the present cases before
the Court

Pursuant to our mandate in Gingoyon, the RTC proceeded to determine the amount of just compensation.

In compliance with the RTC's order, the Republic tendered to PIATCO the P3 billion proffered value on September 11,
2006. On the same day, the RTC reinstated the writ of possession in favor of the Republic.[21]

In compliance with the RTC order dated August 5, 2010, the parties and the BOC submitted their appraisal reports on
NAIA-IPT III, as follows: (1) the Republic's appraisal was US$149,448,037.00; (2) PIATCO's appraisal was
US$905,867,549.47; (3) Takenaka and Asahikosan's appraisal was US$360,969,790.82; and (4) the BOC's appraisal was
US$376,149,742.56, plus interest and commissioner's fees.[22]

In the RTC's decision dated May 23, 2011, the RTC computed just compensation at US$116,348,641.10. The RTC further
directed the Republic and the team of Takenaka and Asahikosan to pay their respective shares in the BOC expenses. [23]

On appeal with the CA, docketed as CA-G.R. CV No. 98029, the CA issued its amended decision, computing the just
compensation at US$371,426,688.24 as of July 31, 2013 plus 6% per annum on the amount due from finality of judgment
until fully paid. The CA further held that Takenaka and Asahikosan are both liable to share in the BOC expenses.[24]

The RTC rulings and CA decision in the expropriation cases led to the present consolidated cases before us, specifically:

G.R. No. 181892 was filed by the Republic to question the RTC's orders: (1) appointing DG Jones and Partners as
independent appraiser; (2) directing the Republic to submit a Certificate of Availability of Funds to cover DG Jones and
Partners' US$1.9 Million appraisal fee; and (3) sustaining the appointment of DG Jones and Partners as an independent
appraiser.[25]

G.R. Nos. 209917, 209731, and 209696 were filed by the Republic, PIATCO, and Takenaka and Asahikosan,
respectively questioning the CA's decision.[26]

II. Our ruling dated September 8, 2015

in G.R. Nos. 181892, 209917, 209696, 209731

In our Decision dated September 8, 2015, we applied the standards laid down under Section 7, RA 8974 and Section 10
of RA 8974 IRR. We likewise applied equity pursuant to Gingoyon.
We ruled that PIATCO, as the owner of the NAIA-IPT III, is the sole recipient of the just compensation even though
Takenaka and Asahikosan actually built the NAIA-IPT III.

We did not grant Takenaka and Asahikosan's prayer to set aside a portion of just compensation to secure their claims, as
we would be preempting the Court's ruling in the enforcement case, specifically, G.R. No. 202166, which is still pending
before the Court.

We ruled that the Republic shall only have ownership of the NAIA-IPT III after it fully pays PIATCO the just compensation
due. However, the determination of whether the NAIA-IPT III shall be burdened by liens and mortgages even after the full
payment of just compensation is still premature.

In computing the just compensation, we applied the depreciated replacement cost method consistent with Section 10
of RA 8974 IRR and the principle that the property owner of the expropriated property shall be compensated for
his actual loss. We therefore agreed with the Gleeds' deduction of depreciation and deterioration from the construction
cost.

We adopted Gleeds' construction cost at US$300,206,693.00 as the base value at December 2002. We also rejected the
Republic's argument that the amounts pertaining to the unnecessary areas, structural defect, and costs for rectification for
contract compliance should be excluded from the base value. We likewise did not add attendant costs as it already formed
part of the Gleeds' computation of construction cost.

Applying equity, we adjusted the replacement cost computed at December 2002 to December 2004 values using the
Consumer Price Index.

We likewise imposed interest on the unpaid amount of just compensation, reckoned from September 11, 2006 when the
writ of possession was reinstated in favor of the Republic.

In summary, we computed the just compensation as of December 21, 2004 at US$326,932,221.26. We deducted from this
sum the proffered value of US$59,438,604.00. We ruled that the resulting difference of US$267,493,617.26 shall earn a
straight interest of 12% per annum from September 11, 2006 until June 30, 2013, and a straight interest of 6% per
annum from July 1, 2013, until full payment.[27]

Finally, we reversed the CA's ruling that Takenaka and Asahikosan were liable to share in the BOC expenses. We ruled
that the Republic shall solely bear these expenses as part of the costs of expropriation. We however ruled that PIATCO,
which voluntarily paid a portion of the BOC expenses and did not question the rulings ordering it to pay, is deemed to
have waived its right not to share in these expenses.

III. The parties' motion for reconsideration and

motions for partial reconsideration of our September 8, 2015 Decision

The parties assail our Decision. The Republic filed its motion for reconsideration while PIATCO and Takenaka and
Asahikosan filed their respective partial motions for reconsideration.

A. The Republic's motion for reconsideration

The Republic argues as follows:

First, the Court should declare that, upon payment of just compensation, full ownership shall be vested in the
Republic, free from liens and encumbrances.[28]

Second, the just compensation should not earn interest. The Republic prays for the deletion of US$242,810,918.54
awarded to PIATCO by way of interest.

According to the Republic, the present case is sui generis as the expropriation resulted from the nullification of the
concession agreement; hence, the traditional notion of "just compensation" is inapplicable. [29]

The Republic cites our rulings in Agan and Gingoyon that the principle of unjust enrichment or solutio indebiti is the
standard in fixing just compensation in the present case. According to the Republic, this principle results in the
application of the doctrine of restitution which arose as a consequence of Agon's nullification of the concession
agreements.[30] The Republic referred to Justice Panganiban's concurring opinion in Agan that the quantum
meruit principle should be applied.[31]

The Republic further argues that the award of interest is unjustifiable because: (a) PIATCO has no "income-generating
capacity" from the expropriated structures due to the nullification of the concession agreements; and (b) the Republic
should not be made liable to pay interest as the delay in the prompt payment of just compensation was due to the
deliberate refusal of PIATCO, Takenaka and Asahikosan to submit the valuation of the NAIA-IPT III.[32]

The Republic concludes that the Court's award of interest in the present case is contrary to Agan and Gingoyon and would
result in PIATCO "profiting" from its own misdeed that caused the nullification of the concession agreements.[33]

Third, the Court erred in not deducting from the computed just compensation the amounts pertaining to structural
defects, unnecessary areas, and rectification for contract compliance.[34]

The Republic asserts that the amounts pertaining to NAIA-IPT Ill's structural defects should be excluded from the
computation of just compensation. According to the Republic, the equiponderance of evidence rule is inapplicable because
it had proven by overwhelming evidence that the NAIA-IPT III suffered from massive structural defects. PIATCO allegedly
admitted this fact in the Scott Wilson Report.[35]

The Republic also points to the structural remediation programs that MIAA conducted prior to the NAIA-IPT Ill's operation,
showing that it was structurally defective. PIATCO also failed to refute the findings of TGCI, one of the Republic's
engineering experts, that the NAIA-IPT III would not have been damaged by the 2008 Pangasinan earthquake if it had
been structurally sound.

The Republic posits that it was forced to expropriate a structure that does not conform with the design intended to serve
its purpose; worse, the design contains facilities that are not essential for an airport (such as the retail mall and excess
retail concession space). PIATCO should not be compensated for these structures as the Republic had to spend for the
rectification expenses.

B. PIATCO's partial motion for reconsideration

PIATCO seeks the partial reconsideration of our decision under the following arguments:

First, the Court erred in applying the depreciated replacement cost method in computing just compensation.[36]

RA 8974 and its IRR never used the terms "depreciated replacement cost," "deterioration," or any other type of adjustment
to the replacement cost.[37]

Second, the financial concept of depreciation is inapplicable in the determination of just compensation in expropriation
cases. An asset may still be valuable and yet appear as fully depreciated in financial statements. [38]

Third, assuming the accounting concept of "depreciation" is relevant, depreciation of an asset begins when it is available
for use. The Republic should therefore bear the cost of depreciation since the NAIA-IPT III was available for use only in
December 21, 2004 when the Republic operated it.[39]

PIATCO further argues that Gleeds, which first visited NAIA-IPT III only on May 2006, could not have possibly evaluated
deterioration in the structure that supposedly occurred between 2002 and 2004.[40]

Fourth, PIATCO argues that the Court erred in excluding PIATCO's computation of attendant costs.

According to PIATCO, the photocopied documents evidencing its attendant costs are admissible and have probative value.
These documents were accompanied by the affidavit dated December 14, 2010 of PIATCO's VP for Legal and Corporate
Affairs, Atty. Moises S. Tolentino, Jr. (Atty. Tolentino). In his affidavit, he identified the documents and affirmed that these
photocopies were certified true copies and/or faithful reproductions of the originals in his possession.[41]

PIATCO further argues that these documents were submitted in a summary and informal proceeding before the BOC. The
parties' failure to object to the offered evidence rendered the photocopy documents admissible.[42]

Furthermore, PIATCO points out that the construction cost in the Gleeds report, which the Court had adopted in the
present case, excluded attendant costs, financing costs, and other associated costs as confirmed by the Scott Wilson
Report. Even Gleeds admitted that the attendant costs reflected in its report excluded the financing cost in the amount of
US$26,602,890.00.[43] As such, at the very least, PIATCO should be awarded financing costs on top of the construction
cost as supported by documents submitted to the lower court.

PIATCO further avers that the Court has misquoted item 3.1.17 of the Scott Wilson Report in page 99 of our Decision. The
quote in our Decision states that PIATCO has paid US$7.9 million to the QA Inspectors (JAC) and US$4.2 million to PCI,
SOM, PACICON and JGC, and this appears "not reasonable." PIATCO alleged that the correct provision of clause 3.1.17
in the Scott Wilson Report states that these PIATCO payments appear "not unreasonable."[44]

The Court should award PIATCO's attendant costs in view of Scott Wilson's findings that the paid fees under clause 3.1.17
are reasonable. [45]

Fifth, PIATCO argues that the Court erred in reckoning the period for the interest payment only on September 11, 2006.
PIATCO avers that the Court is mistaken in its impression that the Republic took possession of NAIA-IPT III only on
September 11, 2006.[46]

PIATCO insists that the interest should be computed from the date of the actual taking or on December 21, 2004 when
the Republic filed the expropriation complaint and actually took physical possession of NAIA-IPT III. According to PIATCO,
the RTC order dated January 7, 2005 confirms this fact.[47]

PIATCO also argues that the Republic stubbornly refused to pay the proffered value, thus resulting in the delay of the
reinstatement of the writ of possession.[48]

In the computation of interest, PIATCO further argues that the Court should consider the leap years, specifically years
2008 and 2012, with 366 days instead of just 365 days as stated in our Decision.[49]

PIATCO likewise brings to the Court's attention the discrepancy on the dates mentioned in the Decision. PIATCO notes the
Court's statement on page 41 of the Decision that the CA reckoned the period for the computation of interest on
September 11, 2006. However, page 42 of our Decision shows in tabular form that the CA computed the interest from
December 21, 2004.[50]

According to PIATCO, the abovementioned date of "September 11, 2006" in page 41 of the Decision might have been a
typographical error since the other statements in the Decision were consistent that the CA computed interest from
December 21, 2004. In any case, PIATCO reiterates its position that the interest rate of 12% per annum should be
computed from December 21, 2004.[51]

Sixth, PIATCO argues that it should not be held liable to share the BOC expenses in view of the Court's Decision that the
Republic should solely bear the cost of expropriation. PIATCO disagrees with the Court's statement that PIATCO's
voluntary payment served as a waiver of its right not to share in the BOC expenses.

According to PIATCO, its payment was out of faithful compliance with the RTC's order dated March 11, 2011, directing the
Republic, PIATCO and Takenaka and Asahikosan to proportionately share in the BOC's mobilization
fund.[52] Consequently, PIATCO invokes the principle of solutio indebiti and equity in arguing that it should be refunded
the P2.550 million that it had mistakenly paid as its share in the BOC expenses. [53]

Seventh, PIATCO argues that the Bureau of Internal Revenue's (BIR) present and future tax assessments against PIATCO
in relation to the supply for and construction of the NAIA-IPT III should be added to the just compensation. This approach
is consistent with the definition of "replacement cost" under Section 10 of RA 8974 1RR. PIATCO manifested that the BIR
had intensified its harassment on PIATCO since the promulgation of our Decision.[54]

C. Asahikosan and Takenaka's motion for partial reconsideration

Takenaka and Asahikosan argue that the Court misconstrued their prayers in the petition. They clarified that they are not
asking the Court to order that any part of the just compensation be paid directly to them. They are also not asserting any
form of title to the NAIA-IPT III or enforcing any liens that they may have thereto.[55]

They are only asking the Court to partially reconsider its decision insofar as it ordered the direct payment to PIATCO of
the computed just compensation. Takenaka and Asahikosan, as the unpaid builders and largest contractors, pray that
the Court also apply equity in their favor by ordering that a portion of the just compensation in the amount of at least
US$85.7 million be set aside in escrow to cover for their claims in the enforcement case.[56]

IV. Comments

The Republic's Consolidated Comment

The Republic maintains that the Court correctly applied the depreciated replacement cost method in determining just
compensation; that RA 8974 is not the sole basis for such determination as Agan held that compensation must be in
accordance with law and equity.[57]

The Republic insists that the award of interest is unwarranted and reiterates its arguments that PIATCO is not an
innocent property owner; that the award of interest detracts from Agan and Gingoyon, which predicated compensation on
"unjust enrichment."[58] The award of interest would allow PIATCO to profit from its own wrong.[59]

The Republic likewise argues that PIATCO is not entitled to be compensated for loss of its income-generating potential
because the concession agreements were nullified.[60]

The Republic further resists the payment of interests, by stressing that the delay is not attributable to it. [61] Rather, the
delay was caused by: (a) the private parties' deliberate refusal to provide valuation and (b) the protracted court
proceedings (i.e., numerous interventions, the appointment and replacements of commissioners, the appointment of
appraisers, the death of Judge Gingoyon, and the appeals).[62] To place the entire weight of delay solely on the Republic by
imposing interest of $242,810,918.54 (more than half of the awarded just compensation) is neither just nor equitable. [63]

The Republic maintains that the depreciation and deterioration were properly excluded from the total amount of just
compensation. NAIA-IPT III did not have the full economic and functional utility of a brand new airport. [64]

The Republic agrees that the Court correctly denied PIATCO's claim for attendant costs.[65] The Republic echoes the
Court's discussion on PIATCO's secondary evidence[66] and contends that Atty. Tolentino's affidavit and the photocopied
documents are hearsay evidence even if no one objected to their admissibility.[67]Moreover, the computation of the
construction cost valuation already included the attendant costs.[68]

The Republic refutes PIATCO's claim for the refund of the amount it paid for the BOC expenses. [69] First, solutio
indebiti does not apply because PIATCO voluntarily paid.[70] It cannot claim that it paid the BOC's expenses "through a
misapprehension of fact."[71] Second, even assuming that solutio indebiti applies, PIATCO's claim for refund has prescribed.
A quasi-contract claim must be made within six (6) years from the date of payment. In the present case, PIATCO first paid
the BOC expenses in 2006; thus, the claim has prescribed.[72]

Anent PIATCO's deficiency tax liability, the Republic argues that it cannot form part of just compensation. [73] PIATCO's
liability arose from its filing of false returns.[74]Moreover, PIATCO failed to present proof that its deficiency tax liability is
part of the replacement cost of NAIA-IPT III facilities.[75]

Finally, the Republic submits that Takenaka and Asahikosan's plea that the Court set aside a portion of the just
compensation in the amount of at least US$85.7 million to cover the London Awards lacks legal basis. Besides, their
claims as unpaid credits are still premature given the pendency of the enforcement case in G.R. No. 202166.[76]

PIATCO 's Comment to the Republic's

Motion for Reconsideration

PIATCO asserts that the Republic is not the victim in this case; that the Republic was not forced to award the NAIA-IPT III
project to PIATCO; and that the Republic acted deliberately and voluntarily.[77] PIATCO insists that there is no finding
in Agan that supports the notion that PIATCO is the "guilty party," while the Republic is the "innocent party." [78] PIATCO
also stresses that the Republic voluntarily expropriated NAIA-IPT III.[79]

PIATCO refutes the Republic's reliance on the concept of solutio indebiti, unjust enrichment, and quantum meruit as
standards in the computation of just compensation. Rather, and as held by the Court in Gingoyon, the substantive law
applicable is RA 8974 and its IRR.[80]

PIATCO underscores that the principle of unjust enrichment does not apply because PIATCO has not received anything
from the Republic that the latter believes is not owed. Instead, it is the Republic that has taken and benefited from NAIA-
IPT III, and that has withheld the just compensation due to PIATCO.[81] Thus, just compensation determined as of the time
of taking correctly earns interest from the time of taking until fully paid to the property owner. [82]

Finally, PIATCO maintains that the Republic failed to establish that NAIA-IPT III was structurally defective.[83] And since
the Republic is expropriating the entire terminal, then it shall also pay for the value of the "unnecessary areas." [84]

PIATCO's Comment to Takenaka and

Asahikosan 's Partial Motion for
Recons ideration

PIATCO argues that Takenaka and Asahikosan's prayer for the Court to set aside a certain portion of the just
compensation to cover the London awards lacks legal basis. Section 4(a) of RA 8974 (i.e., direct payment to the property
owner) applies when the issue of ownership of the expropriated property is not disputed as in the present case.[85]

On this point, PIATCO invokes the Court's Decision where it held that "in Philippine jurisdiction, the person who is solely
entitled to just compensation is the owner of the property at the time of taking. The test of who shall receive just
compensation is not who built the terminal but rather who its true owner is."[86] The Court has consistently recognized
that PIATCO is the owner of NAIA-IPT III. Takenaka and Asahikosan have not shown that they possess legal title to the
NAIA-IPT III.[87]

PIATCO further claims that, contrary to Takenaka and Asahikosan's claim, there is no "secured valid money judgments"
against it, considering that the enforcement of the London awards is still pending with the Court in G.R.No. 202166.[88]

Takenaka and Asahikosan's Comment

to the Republic's Motion for
Reconsideration

Takenaka and Asahikosan urge the Court to set aside, in an escrow account, a portion of the just compensation. They
argue that this method would relieve the NAIA-IPT III of the biggest possible lien that could be asserted against it.[89]
While Takenaka and Asahikosan admit that the enforcement of the London awards is still awaiting decision, they propose
that the Court opt for either of two actions: (1) set aside the amount of US$87.5Million; or (2) await the decision of the
Second Division in the enforcement case (G.R. No. 202166).[90]

Takenaka and Asahikosan maintain that the design of the NAIA-IPT III is, and always has been, structurally sound. They
insist that the Republic failed to prove its claim that the NAIA-IPT III was structurally defective.[91]

We note Takenaka and Asahikosan's Reply[92] reiterating their position that they are not asking to be directly paid a
portion of the just compensation, but merely for the Court to set aside the amount corresponding to the London awards.
They posit that if the Court does not set aside the said amount and they eventually prevail in the enforcement case, there
is a danger that they would not be paid if PIATCO chooses to ignore their claim and absconds with the money.

V. Our Ruling

We partly grant the Republic's motion for reconsideration and deny the partial motions for reconsideration of PIATCO
and Takenaka and Asahikosan.

A. On the application of the depreciated

replacement cost method in computing just
compensation in the present case

We disagree with PIATCO's arguments that the application of the depreciated replacement cost method is not allowed
under RA 8974.

The payment for property in expropriation cases is enshrined in Section 9, Article III of the 1987 Constitution, which
mandates that no private property shall be taken for public use without payment of just compensation. [93] The measure of
just compensation is not the taker's gain, but the owner's loss.[94] We have ruled that just compensation must not
extend beyond the property owner's loss or injury. This is the only way for the compensation paid to be truly just, not
only to the individual whose property is taken, but also to the public who shoulders the cost of expropriation. Even as
undervaluation would deprive the owner of his property without due process, so too would its overvaluation unduly favor
him to the prejudice of the public.[95]

To this end, statutes such as RA 8974 have been enacted, laying down guiding principles to facilitate the expropriation of
private property and payment of just compensation.[96]

However, we must bear in mind that the determination of just compensation is primarily a judicial function that may not
be usurped by any other branch or official of the Republic. In National Power Corporation v. Bagui,[97] this Court ruled that
any valuation for just compensation laid down in the statutes may serve only as a guiding principle or one of the factors
in determining just compensation but it may not substitute the court's own judgment as to what amount should be
awarded and how to arrive at such amount. In fact, in National Power Corporation v. Purefoods Corporation,[98] we held that
just compensation standards derived from statutes such as RA 8974, are not binding on this Court.

The nature of the provisions in RA 8974 as mere guidelines to this Court, as opposed to being mandatory rules, cannot be
denied. First, while Section 10, RA 8974 IRR uses the word "shall" in referring to the use of the replacement cost method
in determining valuation of the improvements and/or structures on the land to be expropriated, connoting that such use
is mandatory, the directive/mandate is addressed, not to this Court, but to the Implementing Agency[99] or the department,
bureau, office, commission, authority, or agency of the national government, including any government-owned and -
controlled corporation or state college or university, concerned and authorized by law or its respective charter to
undertake national government projects.[100] Second, Section 13, RA 8974 IRR explicitly states that the
court shall determine the just compensation to be paid to the owner of the property, considering the standards set out in
Sections 8, 9, and 10 thereof.[101] Clearly, the Court may consider the guidelines set, but it cannot be bound by these
guidelines.

At best, any finding on just compensation using the methods set forth in the statute is merely a preliminary determination
by the Implementing Agency, subject to the final review and determination by the Court. While we may be guided by the
replacement cost of the property, just compensation will be ultimately based on the payment due to the private property
owner for his actual loss - the fundamental measure of just compensation compliant with the Constitution. [102]

Further, when acting within the parameters set by the law itself, courts are not strictly bound to apply the formula to its
minutest detail, particularly when faced with situations that do not warrant the formula's strict application. The courts may,
in the exercise of their discretion, relax the formula's application to fit the factual situations before them. [103]

In the present case, we adopted the depreciated replacement cost method as a guideline in the computation of just
compensation; at the same time, we reconciled this method with our duty to award just compensation as a constitutional
mandate to compensate the owner with his actual loss.[104]
In our Decision, we compared the different replacement cost methods,[105] such as the replacement cost new
method and the depreciated replacement cost method. Notably, these are recognized methods in appraising properties.

As we clearly explained, we did not adopt the new replacement cost method because in doing so, PIATCO would be
compensated for more than it actually lost.[106] We emphasize our ruling that "[i]njustice would result if we award PIATCO
just compensation based on the new replacement cost of the NAIA-IPT III, and disregard the fact that the Republic
expropriated a terminal that is not brand new; the NAIA-IPT III simply does not have the full economic and functional utility of
a brand new airport."[107]

We therefore ruled that PIATCO would be compensated for its actual loss if we adopt the depreciated replacement cost
approach.[108] It is defined as a "method of valuation which provides the current cost of replacing an asset with its
modern equivalent asset less deductions for all physical deterioration and all relevant forms of obsolescence and
optima[z]ation."[109]

Adjustments for depreciation should be made to reflect the differences between the modern equivalent asset and the actual
asset or the NAIA-IPT III. The reason is that depreciation involves the loss of value caused by the property's reduced utility
as a result of damage, advancement of technology, current trends and tastes, or environmental changes. [110]

PIATCO, however, argues that depreciation begins when the asset is available for use and continues until the asset is
derecognized and, as such, NAIA -IPT III could be subject to depreciation only in the hand of the Republic after the
Republic operated it, which took place after the taking on December 21, 2004.[111]

In our Decision, we clarified the difference between "depreciation" in the contexts of valuation and financial accounting. In
financial accounting, depreciation is a process of allocating[112] the cost of a plant asset over its useful (service) life.[113] The
need exists to determine when an asset is available for use in order to identify the periods within which cost must be
allocated.

Depreciation in valuation/appraisal, on the other hand, is the "reduction or writing down of the cost of a modern
equivalent asset to reflect the obsolescence and relative disabilities affecting the actual asset" or "loss in any value from
any cause."[114] Hence, for purposes of appraisal, an asset may not yet be available for use within the context of financial
accounting, but its value has nevertheless depreciated due to factors affecting its intended use and function.

In sum, even assuming PIATCO's claim that an asset only begins to depreciate when it is available for use (that is, the
NAIA-IPT IIII only began to depreciate when the Republic filed the expropriation complaint on December 21, 2004, not on
December 2002 when construction was suspended), is accurate, we are not precluded from adopting a method that is
more in line with the settled jurisprudence that the measure of the award of just compensation is the owner's actual loss
and not the taker's gain.

In these lights, we maintain our ruling that the depreciated replacement cost applies in computing just compensation
in the present case. In applying this method, the owner is compensated for his actual loss at the date of taking of the
expropriated property. Consequently, the deduction from the construction cost of the deterioration and depreciation items
is permissible under RA 8974.

B. PIATCO's arguments against the

deeds' computation of the deterioration
items

We also disagree with PIATCO's argument that Gleeds could not have correctly computed the deterioration items of the
NAIA-1PT III structure from December 2002 to December 2004 because Gleeds first visited NAIA-IPT III only in May 2006.
PIATCO adds that Gleeds failed to show how the sums for deterioration were derived, and Scott Wilson stated that Gleeds'
computation did not seem fair and reasonable.

We find that the Gleeds Report contains sufficient explanation on the methodology that Gleeds followed in arriving at its
conclusion on deterioration since the suspension of the NAIA-IPT Ill's construction in December 2002.

At pages 2 and 28 of Gleeds Report dated November 15, 2010, Tim Lunt stated that:[115]

1.1 Instructions

xxxx

1.1.2
  With the help of the Republic's airport architectural and engineering experts, determine the cost to remedy the
deterioration in the Terminal 3 facility stemming from the suspension of work in early 2002 xxx.

Deterioration

xxxx

3.2.7 The Arup Site Observation Report identifies a number of items which have deteriorated since suspension of the
construction of Terminal 3 in December 2002.

3.2.8 A provisional value has been assessed against the items identified in the Arup report at $1,738,318. The
deterioration items have been costed with a base date of 2009. Calculation of this amount is contained in Appendix 'E.'
Further examination and costing of each of the identified items are required and, therefore, the costs of these items will
require adjustment based on the actual date when the rectification works are carried out.

At pages 26-27 of the Scott Wilson Report dated December 1, 2010,116 Scott Wilson replied to the above Gleeds findings.
Scott Wilson commented that the sum arrived at had no documentary support. Thus:

3.6.1 Gleeds have deducted from the Base Value CCV deterioration items made up as follows xxx.

3.6.2 The major deduction is for the baggage system but the Gleeds document does not show how any of these sums are
derived.

3.6.3 It is noted the baggage system requirements was to handle 8000 bags per hour. According to section 8.3 of the Arup
March 2007 report that following 9/11 that significant changes were made to the Employers Requirements to incorporates
(sic) alternative screening technology, requiring a reduced capacity of 6500 bags per hour (Section 8.3.3.4 Arup March
2007 Report) and testing showed it handling between 6250 to 6500 bags per hour.

3.6.4 Of the 80 items listed against the baggage system in Volume 2, Section K of the Arup March 2007 none are noted as
Non Code Compliant, 10 fall under the "Not Best Practice" headings. There are none in the "Does Not Confirm to Technical
Requirements."

3.6.5 We therefore do not understand how the above reduction of US$1.13 million has been derived and it does
not seem fair and reasonable. (emphasis supplied)

PIATCO relies on the above statement of Scott Wilson that Gleeds' computation of deterioration "does not seem fair and
reasonable."

PIATCO's reliance on the Scott Wilson's findings was misplaced. Scott Wilson's statement on the unreasonableness of
Gleeds' computation only pertains to the baggage handling item out of the seven (7) deterioration items.

At any rate, Gleeds sufficiently showed how it arrived at the amount of deterioration. We quote Gleeds' answer in page 16
of its Reply dated December 22, 2010[117] to the Scott Wilson Report, as follows:

54. The cost associated with deterioration are (sic) set out in Appendix E, Part 1 of the CCV. The detailed calculation of the
amounts for deterioration was included in the Appendices to the CCVs. Scott Wilson does not appear to have been
provided with the relevant appendices to my CCV. The cost of deterioration to the baggage handling system is shown
in the detailed calculation. The total deduction from the CCV associated with deterioration is US$1,738,318.

We therefore maintain our ruling applying the depreciated replacement cost method to serve the purpose of just
compensation, which is to compensate the owner for his actual loss.

C. The arguments of the Republic and

PIATCO on the imposition of interest

Before we separately address the Republic and PIATCO's arguments, we first expound on the reason for the imposition of
interest in case of delay in the payment of just compensation. While we have exhaustively discussed in our Decision the
legal and jurisprudential bases for the imposition of interest,[118] we find it helpful to review the basic facts of the case and
highlight key legal concepts that can illuminate our ruling.

We stress that the Republic chose to expropriate the NAIA-IPT III, and was fully cognizant of the legal and practical effects
of filing an expropriation complaint. After choosing this legal remedy, the Republic cannot now disclaim knowledge or
feign ignorance of the implications of this choice in an attempt to evade paying interest.
The Republic owes PIATCO a specific sum of money.

We remind the Republic that PIATCO, through its subcontractors, built the NAIA-IPT III.

The Republic later took over the NAIA-IPT III in the exercise of its power of eminent domain. By so doing, the Republic
became legally obliged to pay PIATCO the value of the property taken. This obligation arises from the constitutional
mandate that private property shall not be taken for public use without just compensation.[119]

Subsequently, the Court determined the monetary value of the NAIA-IPT III, which sum the Republic now owes PIATCO as
payment for the NAIA-IPT III. In short, it is currently indebted to PIATCO for the monetary value of the NAIA-IPT III less
the proffered value.

The Republic has not yet fully paid its debt.

The Republic took over the NAIA-IPT III on September 11, 2006 upon payment of the proffered value. The Republic's
possession of the NAIA-IPT III had twin effects: (1) PIATCO was effectively deprived of the possession of the property; and
(2) PIATCO's right to the payment of the just compensation accrued as a matter of right.

Applying Section 10 of Rule 67, we held in our Decision that the condemnor incurs delay if it does not pay the property
owner the full amount of just compensation on the date of taking.[120] This rule requires the Republic to perform two
essential acts in order not to incur delay: (1) pay the full amount of just compensation and (2) pay the full amount of just
compensation on time, i.e., on the date of taking.

Upon its failure to pay, the Republic has been in continuing delay, which delay carries legal consequences.

As a consequence of the Republic's continuing delay in paying the full amount of just compensation, it is legally
obliged to pay interest.

As explained in our Decision, "the interest in eminent domain cases runs as a matter of law and follows as a matter of
course from the right of the [owner] to be placed in as good a position as money can accomplish, as of the date of
taking."[121]

We also recognized that the just compensation due to the property owner is effectively a forbearance of
money.[122] Forbearance of money refers to "arrangements other than loan agreements, where a person acquiesces to the
temporary use of his money, goods or credits pending happening of certain events or fulfillment of certain conditions." [123]

In such arrangements, "the [creditors] are entitled not only to the return of the principal amount paid, but also to
compensation for the use of their money. And the compensation for the use of their money, absent any stipulation, should
be the same rate of legal interest applicable to a loan since the use or deprivation of funds is similar to a loan"[124]

Applying these concepts in the present case,- it can readily be seen that PIATCO "acquiesced" to the temporary use of its
money (the monetary value of NAIA-IPT III) by the Republic while the expropriation case was pending. We note that during
the pendency of the expropriation case, PIATCO had already been dispossessed of NAIA-IPT III but had not yet received
the monetary equivalent of the property taken from it.

Plainly, PIATCO is entitled to the award of interest as compensation for the use of its money, computed from the time of
taking of the NAIA-IPT III until full payment of the just compensation.

As we also noted in the Decision, Central Bank Circular No. 905, later amended by BSP Circular No. 799, provides for the
rate of legal interest for forbearance of money (i.e., from 12% per annum to 6% per annum, effective July 1, 2013).

In sum, the Republic owes PIATCO the unpaid portion of the just compensation and the interest on that unpaid
portion, which interest runs from the date of taking (September 11, 2006) until full payment of the just
compensation. Thus, any argument that wholly or partly assails this legal conclusion must fail.

C.I. On the Republic's argument

that PIATCO is not entitled to the
interest award on the unpaid portion
of the just compensation because the
traditional notion of expropriation
is inapplicable.

The Republic alleges that the traditional notion of expropriation is inapplicable in the present case and that the principles
of restitution and unjust enrichment should apply, supposedly pursuant to Agan and Gingoyon.

The Republic's contention lacks merit.

In our 2004 Agan Resolution, we held that "[f]or the Republic to take over the said facility, it has to compensate respondent
PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the
Republic cannot unjustly enrich itself at the expense of PIATCO and its investors."[125]

The statement in our 2004 Agan Resolution that the "Republic cannot unjustly enrich itself at the expense of PIATCO and
its investors" should be understood in a way consistent with its preceding statement that "[f]or the Republic to take over the
said facility, it has to compensate respondent PIATCO as builder of the said structures." We would read too much in the
above Agan pronouncement if we adopt the Republic's view that the Court had already envisioned the applicability of the
principles of restitution and unjust enrichment on the yet unfiled expropriation case.

We should remember that the core of Agan was merely the nullification of the concession agreements. The Republic had
not yet taken any legal step at that point to acquire the NAIA-IPT III; hence, the Court could not have validly and finally
ruled in Agan on the applicable laws in relation to the Republic's acquisition of the NAIA-IPT III. The statement
in Agan merely instructs that the Republic cannot take over the NAIA-IPT III without paying PIATCO compensation for the
structure to avoid the Republic's unjust enrichment at the expense of PIATCO and its investors.

It is undisputed that the Republic subsequently chose to acquire the NAIA-IPT III by exercising its power of
eminent domain when it filed its expropriation complaint on December 21, 2004. The RTC's several early rulings in this
expropriation case led to Gingoyon.

We ruled in Gingoyon that "[i]n addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment
of just compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount of just
compensation, the duty of the trial court is to ensure that such amount conforms not only to the law, such as Rep. Act No.
8974, but to principles of equity as well."[126]

In our Decision now on reconsideration, we simply pursued the above directive in Gingoyon. Specifically, we applied the
law, RA 8974, and equity in: (1) adopting the depreciated replacement cost method in computing just compensation; and
(2) adjusting the computed 2002 replacement cost of NAIA-IPT III to its 2004 value.

By adopting the depreciated replacement cost method, we took into consideration that the Republic did not expropriate a
brand new airport at the time of taking on December 21, 2004.[127] Similarly, we considered that PIATCO should be
compensated for the 2004 value of the airport by adjusting the 2002 computed construction cost to its 2004 value by
using the consumer price index.[128]

In applying RA 8974 and equity in our computation of just compensation, we thus complied with the mandate of Agan that
the Republic cannot unjustly enrich itself at the expense of PIATCO and its investors. We did this by ordering the Republic
to pay just compensation, in the context of expropriation, which the Republic itself filed to acquire the NAIA-IPT III.

In applying Agan and Gingoyon, we also fulfilled our duty to award compensation that is fair and just both to the Republic
and PIATCO.

Consequently, we cannot adopt Justice Panganiban's concurring opinion in Agan prescribing the application of the
principle of quantum meruit; his opinion - it should be noted - had never been made a part of the majority decision.

In these lights, we deny the Republic's argument that we should not impose interest on the just compensation award to
PIATCO.

C.2. On the Republic's argument

that PIATCO is not entitled to the
interest award in view of PIATCO's
bad faith, leading to the nullification
of the concession agreement.

We remind the Republic that what it filed before the RTC was an action for expropriation. Hence, there is no reason to
doubt that the Republic was fully aware of the legal realities (i.e., the law, rules and prevailing jurisprudence governing
expropriation cases) attendant to such filing. We thus reject any opposition to the imposition of interest that has no
relation to the settled rules on expropriation, such as PIATCO's alleged bad faith.

In expropriation cases, our jurisprudence has established that interest should be paid on the computed just
compensation due when delay in payment takes place, i.e, regardless of PIATCO's alleged bad faith in contracting with the
Republic.

We have consistently ruled that just compensation does not only refer to the full and fair equivalent of the property taken;
it also means, equally if not more than anything else, payment in full without delay.[129] The basis for the imposition of
interest in cases of delay is none other than our Constitution which commands the condemnor to pay the property owner
the full and fair equivalent of the property from the date of taking. This provision likewise presupposes that the condemnor
incurs delay if it does not pay the property owner the full amount of just compensation on the date of taking.[130]
In other words, interest on the unpaid compensation becomes due as compliance with the constitutional mandate on
eminent domain and as a basic measure of fairness.[131]The owners' loss is not only his property but also its income-
generating potential.[132]

We disagree with the Republic's position that PIATCO's bad faith in the nullified concession agreements should negate any
award of interest in its favor. We disagree, too, with the Republic's argument that PIATCO has no income-generating
capacity as it no longer has the right to operate the NAIA-IPT III under the nullified concession agreements.

In advancing these arguments, the Republic confuses its right of action arising from the nullification of the concession
agreement and its right of action arising from the exercise of its power of eminent domain. These two rights of action are
totally distinct from each other, giving rise to distinct rights and obligations among the parties to the case, and prescribing
distinct proceedings before the courts.

At the risk of repetition, we stress that the Republic availed of the remedy of expropriation rather than a case arising from
the nullification of contract. Thus, issues such as PIATCO's bad faith resulting in the nullification of the concession
agreements may not be properly considered in the present case.

Since the Republic chose to file the present expropriation case to acquire NAIA-ITP III, we are bound to follow the
appropriate expropriation proceeding, the settled jurisprudence in expropriation case, and use the applicable
expropriation laws and rules as guiding principles.

For these reasons, we maintain our ruling imposing interest on the computed just compensation (less the proffered value).

C.3. On the Republic's argument

that PIATCO is not entitled to the
interest award as it caused the delay
in the computation of just compensation.

We now resolve the Republic's argument that PIATCO is not entitled to interest, as it is guilty of delay in the expropriation
proceedings for the computation of just compensation.

In pursuing this argument, the Republic forgets that the delay in the payment of just compensation, and not the delay in
the proceedings for its computation, is the legal basis for the imposition of interest on the unpaid just compensation.

m our Decision, we imposed the interest on the unpaid just compensation starting September 11, 2006 when the writ of
possession granted in favor of the Republic became effective. We ruled that, in view of the effectivity of the writ of
possession on September 11, 2006, the Republic effectively deprived PIATCO of the ordinary use of the NAIA-IPT III as of
this date[133] and PIATCO could no longer exercise all the attributes of ownership over NAIA-IPT III, particularly the right of
possession.

In expropriation cases, the State must pay for the shortfall in the earning potential immediately lost due to the taking, and
the absence of a replacement property from which income can be derived. We established this rule in order to comply with
the constitutional mandate that the owner of the expropriated property must be compensated for his actual loss; the
income-generating potential is part of this loss and should therefore be fully taken into account. [134]

Clearly, the concept of delay for purposes of the imposition of interest on the unpaid just compensation is based on
the effect on the owner's rights of the Republic's non-payment of the full amount of just compensation at the date the
possession and effective taking of the expropriated property took place.

While the delay in the computation of just compensation (because of the protracted proceeding) may also delay the
payment of just compensation, we note that, in this case, the delay was not entirely attributable to any particular
party, i.e., to PIATCO and/or Takenaka and Asahikosan, as the Republic contends. The "delay" arose because all the
parties to the case had taken procedurally permissible steps in order to protect their respective interests; the complexity,
too, of appraising a specialized property like the NAIA-IPT III cannot likewise be discounted.

We remind the Republic that the computation of just compensation is not always a simple affair and may take time,
particularly in the case of a specialized property like the NAIA-IPT III. Delay should not be imputed on the owner alone
unless it delayed the proceedings purposely and unreasonably. The facts of the present case do not show that neither
PIATCO nor Takenaka and Asahikosan purposely and unreasonably acted to cause delay. The more tenable view is that
all the parties took remedial measures, within legitimate and reasonable limits, to protect their respective claims, thus,
the belated determination of the just compensation.

For all these reasons, the Republic would have to pay the amount of just compensation computed as of the date of the
effective taking (December 21, 2004) plus the interest which runs from the date it took possession and actually took over
the property (September 11, 2006), regardless of the perceived delay in the determination of just compensation.

C.4 PIATCO's arguments on the

reckoning period of the interest
award from September 11, 2006

We now address PIATCO's arguments on the imposition of interest on the unpaid just compensation awarded to it.

PIATCO first questions the reckoning period of the interest.that we imposed on the unpaid just compensation. PIATCO
argues that since the Republic actually took possession of NAIA-IPT III on December 21, 2004 (the date of filing of the
complaint for expropriation), then it should be the reckoning period of the interest payment and not on September 11,
2006 when the writ of possession was reinstated. Furthermore, the delay in the payment of the proffered value on
September 11, 2006 was due to the Republic's fault, which should not prejudice PIATCO.

We do not find PIATCO's arguments persuasive.

PIATCO's unsupported claim that the Republic actually took possession of the NAIA-IPT III on December 21, 2004 cannot
be a valid basis for us to reckon the accrual of the interest on that date.

We cannot also accord merit to PIATCO's reliance on the RTC's order dated January 7, 2005 where it stated that the
Republic actually took possession of NAIA-IPT III on December 21, 2004.

We note that the RTC issued its January 7, 2005 order without motion and hearing[135] from which it could properly infer
its factual statement on the Republic's actual possession of the NAIA-IPT III on December 21, 2004.

Significantly, Gingoyon noted that this January 7, 2005 order was issued without prior consultation with either the
Republic or PIATCO.[136] Furthermore, we note that the Republic's alleged possession was not the issue resolved in the
RTC order; the crux of the order was the RTC's appointment of commissioners.

Gingoyon is the case that settled the basis and standards for the effectivity of the writ of possession in favor of the
Republic. In ruling, therefore, that the interest should be reckoned from September 11, 2006, our basis was our final and
executory ruling in Gingoyon, which is undisputably applicable in the present case.

To recall, the writ of possession was the subject of two (2) conflicting RTC orders - the first was the December 21, 2004
order based on Rule 67; the second was the January 4, 2005 order based on RA 8974 instead of Rule 67.

The January 4, 2005 order supplemented the December 21, 2004 order and effectively imposed more stringent
requirements as conditions for the effectivity of the December 21 writ of possession. Notably, the Republic,
pending Gingoyon, did not have to comply with the conditions in the January 4, 2005 order as we had issued in its favor a
temporary restraining order and preliminary injunction against its implementation. The effectivity of the writ of possession
was therefore still then at issue in Gingoyon.

In Gingoyon, we reconciled Agan, RA 8974 and Rule 67 in: (1) resolving the effectivity of the writ of possession issued in
favor of the Republic; and (2) determining the standards in computing just compensation. We pointed out that the RTC
erroneously relied on Rule 67 in issuing the December 21, 2004 writ of possession; we also ruled on the RTC's
misapplication of RA 8974 in issuing the January 4, 2005 order.

On the pre-requisites for the effectivity of the writ of possession, we ruled that FLA 8974 guarantees compliance with the
Agan requirement that just compensation be first paid to PIATCO before the Republic could takeover the NAIA-IPT III.
Specifically, RA 8974 assures the private property owner the payment of, at the very least, the proffered value of the
property to be seized. We also ruled that the payment of the proffered value to the owner, followed by the issuance of the
writ of possession in favor of the Republic, is precisely the scheme under RA 8974, one that facially complied with the
prescription laid down in the 2004 Agan Resolution.

Consequently, in Gingoyon, we held in abeyance the writ of possession dated December 21, 2004 pending proof of the
Republic's actual payment to PIATCO of the proffered value of the NAIA-IPT III of F3,002,125,000.00. We expressly ruled
that the Republic would be entitled to the writ of possession only once it pays PIATCO the amount of the proffered value.

On the effects of an effective writ of possession, we also held in Gingoyon that upon the effectivity of the writ of possession,
the Republic is authorized to perform the acts that are essential to the operation of the NAIA-IPT III as an international airport
terminal. These acts include the repair, reconditioning, and improvement of the complex, maintenance of the existing
facilities and equipment, installation of new facilities and equipment, provision for services and facilities pertaining to the
facilitation of air traffic and transport, and other services that are integral to a modern-day international airport.[137]

It is undisputed that the Republic tendered to PIATCO the proffered value on September 11, 2006, leading to the
reinstatement of the writ of possession in favor of the Republic on the same day.[138]

Thus, applying Gingoyon, we ruled in our Decision now under challenge, that the reinstatement of the writ of possession on
September 11, 2006 empowered the Republic to take the property for public use, and to effectively deprive PIATCO of the
ordinary use of the NAIA-IPT III.[139]

Based on these considerations, we maintain our ruling that the interest on the just compensation (less proffered value)
should accrue only from September 11, 2006 when the Republic effectively deprived PIATCO of the ordinary use of the
NAIA-IPT III.

C.5 On PIATCO's arguments that

it should not be prejudiced by the
Republic's delay in paying the
proffered value

We disagree with PIATCO that the Republic deliberately refused to pay the proffered value, resulting in the delay of its
payment.

We find that the Republic's filing of the Gingoyon case was a reasonable legal move in view of the two (2) RTC orders
relative to the effectivity of the writ of possession. These two orders contained different bases, amounts, and modes for
payment for purposes of the effectivity of the writ of possession. Furthermore, we note that in Gingoyon, we issued a
temporary restraining order and preliminary injunction against the RTC order dated January 4, 2005 and only lifted the
TRO in our decision dated December 19,2005.

We further note that we resolved the motion for reconsideration in Gingoyon on February 1, 2006. Thereafter, supervening
events occurred that delayed the payment of the P3 billion proffered value. Thus:

 On April 11, 2006, the RTC ordered the BOC to resume its duties.

 On April 26, 2006, the Republic asked the RTC to stop the payment of P3 billion proffered value in view of an
alleged supervening event - the collapse of the ceiling of the arrival lobby section of the north side of the NAIA-IPT
III on March 27, 2006. The Republic informed the Court that the MIAA requested the Association of Structural
Engineers of the Philippines (ASEP) to investigate the cause of the collapse.[140]

 On June 20, 2006, the RTC ordered Land Bank to immediately release the amount of P3 billion to PIATCO. The
RTC ruled that the collapse of a portion of the NAIA-IPT III was not a supervening event that would hinder the
payment of the proffered value to PIATCO. In compliance with this order, the Republic tendered to PIATCO a P3
billion check on September 11, 2006. On the same day, the RTC reinstated the writ of possession in favor of the
Republic.[141]

In view of these RTC proceedings prior to the payment of the P3 billion proffered value on September 11, 2006, we cannot
agree with PIATCO that the Republic deliberately refused to pay this amount. The supervening events leading to the
Republic's filing of cases and motions before the RTC and the lapse of less than three (3) months from the RTC's order to
release the P3 billion proffered value until its payment are reasonable developments in the case that could not be taken
against the Republic.

C.6 On PIATCO's arguments that

the computation of interest should
consider leap years 2008 and 2012

We now resolve PIATCO's argument that the interest awarded to it should include leap years. According to PIATCO, the
Court may have failed to consider the leap years, specifically years 2008 and 2012, where there were supposed to be 366
days instead of just 365 days as stated in the Decision.

We disagree with PIATCO's contention.

We compute interest rates of 12% or 6% per annum on a yearly basis, as the term suggests, without distinguishing
whether it is a leap year or not. While our computation on pages 123-124 of our Decision indicated that 2008 and 2012
had 365 days, we computed the 12% per annum interest equivalent to one whole year of interest for these years.

Notably, Article 13 of the New Civil Code states that "when the laws speak of years, it shall be understood that years are of
three hundred sixty-five days each. " Since our interest rate is applied on a per annum basis or per year basis, we apply
the general rule that the imposition of interest rate per annum means the imposition of the whole interest rate for one
whole year, regardless if it is composed of 365 or 366 days.

Nevertheless, we correct pages 123-124 of the Decision to reflect the proper number of days in years 2008 and 2012,
which is 366 days.

C.7 On PIATCO's reference to the

typographical errors in our Decision
on the CA 's ruling on interest
We agree with PIATCO's observation that the correct CA's ruling was its computation of interest starting December 21,
2004 as reflected at page 42 of our decision. Hence, we correct page 41 of our decision to read as follows:

Interest. The CA further held that interest shall be added to just compensation as of December 21, 2004. xxx

Nevertheless, for reasons already explained above, we maintain our ruling that the reckoning period for the computation
of interest on the just compensation is September 11, 2006.

D. PIATCO's arguments on the attendant costs

We disagree with PIATCO's argument that the Court should have considered the photocopies of PIATCO's documents
supporting attendant costs.

PIATCO cannot rely on the affidavit of Atty. Tolentino who allegedly identified the photocopied documents supporting
attendant costs. The Court observed that the alleged affidavit of Atty. Tolentino does not have any signal are above his
name as the affiant.[142] Hence, his affidavit cannot be said to have at least substantially complied with the requirements
laid down in Sections 3(a), (b), and/or (d) of Rule 130 of the Rules of Court for the admissibility of photocopies as
secondary evidence.

We therefore maintain our ruling that PIATCO's documents allegedly supporting the attendant costs are hearsay
evidence.[143]

With respect to the effect of the alleged non-objection of the parties to the presentation of these photocopy documents, we
have ruled in PNOC Shipping and Transport Corporation v. CA et al.[144] that a hearsay evidence has no probative value and
should be disregarded whether objected to or not.

The courts differ as to the weight to be given to hearsay evidence admitted without objection. Some hold that when
hearsay has been admitted without objection, the same may be considered as any other properly admitted
testimony. Others maintain that it is entitled to no more consideration than if it had been excluded.

The rule prevailing in this jurisdiction is the latter one. Our Supreme Court held that although the question of
admissibility of evidence cannot be raised for the first time on appeal, yet if the evidence is hearsay it has no probative
value and should be disregarded whether objected to or not."If no objection is made" — quoting Jones on Evidence —
"it (hearsay) becomes evidence by reason of the want of such objection even though its admission does not confer upon it
any new attribute in point of weight. Its nature and quality remain the same, so far as its intrinsic weakness and
incompetency to satisfy the mind are concerned, and as opposed to direct primary evidence, the latter always
prevails.

The failure of the defense counsel to object to the presentation of incompetent evidence, like hearsay evidence or evidence
that violates the rules of res inter alios acta, or his failure to ask for the striking out of the same does not give such
evidence any probative value. But admissibility of evidence should not be equated with weight of evidence. Hearsay
evidence whether objected to or not has no probative value. (Emphasis supplied)

Notably, the BOC, the RTC, and the CA unanimously disregarded PIATCO's documents in considering the attendant costs
in their respective computations of the just compensation. The BOC and the RTC awarded the attendant costs based only
on industry practice because PIATCO failed to substantiate its claimed attendant costs.

More importantly, we reiterate that we cannot give weight to the summary prepared by Reyes, Tacandong & Co. for being
double hearsay. Aside from failing to state that it examined the original documents allegedly proving attendant costs, it
also stated that it did not "express any assurance on the attendant costs."[145] Thus, our ruling on attendant costs
remains.

D.I On PIATCO's statement that the

Court misquoted item 3.1.17 of the
Scott Wilson Report on
attendant costs

We now address PIATCO's averment that the Court should revisit its ruling on the attendant costs as we misquoted item
3.1.17 of the Scott Wilson Report at page 99 of our Decision.

The quote in our Decision states that PIATCO paid US$7.9 million to the QA Inspectors (JAC) and US$4.2 million to PCI,
SOM, PACICON and JGC, and these payments appear "not reasonable." PIATCO pointed out that the correct phrase is
"not unreasonable." Hence, we should award the attendant costs on the basis of the Scott Wilson's finding that these
are reasonable.
We disagree with PIATCO's reasoning.

While it is true that there had been a misquote of item 3.1.17 of the Scott Wilson Report, our findings in disregarding the
attendant cost did not rise and fall on this quoted item of the report. The relevance of this quote, as is obvious in the
Decision, was merely to compare the Scott Wilson Report and the Gleeds report on attendant cost. We did not grant
PIATCO's claimed attendant costs, as it failed to substantiate its claim.

Nevertheless, we correct page 99 of the Decision to reflect the correct quote of item 3.1.17 of the Scott Wilson Report, as
follows:

3.1.17 On the basis of a construction cost valuation of the order of US$322 million we would expect the cost of
construction supervision to be a minimum of US$9.5 million. It is understood that PIATCO have paid US$7.9 million to
the QA Inspectors (JAC) and US$4.2 million to PCI, SOM, PACICON and JGC and this therefore appears not
unreasonable.

E. On the Republic's arguments on

structural defect, unnecessary areas,
and rectification for contract
compliance

We deny the Republic's argument that the amount pertaining to structural defects should be deducted from the
construction cost.

The Republic's arguments on the structural defects of the NAIA IPT-III were sufficiently discussed in our Decision.
Although the Scott Wilson Report admitted that retrofit works needed to be done, the Republic failed to submit documents
before the lower courts supporting the retrofit project. Furthermore, we noted that the retrofit bid took place in 2012, or
after the promulgation of the RTC's ruling.[146]

In view of the equally persuasive arguments of the Republic on the one hand, and PIATCO, Takenaka and Asahikosan, on
the other, the equiponderance rule applies against the Republic.

Similarly, we sufficiently explained in our Decision our ruling on the Republic's arguments pertaining to the unnecessary
areas and the rectification for contract compliance.

In computing the just compensation in the present case, we have included the amount allegedly pertaining to
the unnecessary areas, such as the excess concession space and the four-level retail complex. We ruled that since the
Republic would expropriate the entire NAIA-IPT III, the Republic should pay for these structures.

We reiterate that the present case stemmed from an expropriation case. Hence, the standards and parameters for
computing just compensation should be in line with the nature of the action before us.[147]

Notably, just compensation in expropriation cases is defined "as the full and fair equivalent of the property taken from its
owner by the expropriator. The Court repeatedly stressed that the true measure is not the taker's gain but the owner's
loss. The word 'just' is used to modify the meaning of the word 'compensation' to convey the idea that the equivalent to be
given for the property to be taken shall be real, substantial, full and ample.[148]

We therefore consider the NAIA-IPT III structure as a whole for purposes of computing just compensation.

On the issue of rectification for contract compliance, we maintain our ruling that this should not be excluded from the
computation of just compensation. We ruled that there could not be rectification works to comply with a void contract. [149]

We have succinctly ruled that "the [Republic] cannot complain of contract noncompliance in an eminent domain case, whose
cause of action is not based on a breach of contract, but on the peremptory power of the State to take private property for
public use."[150]

Additionally, we referred to Scott Wilson's observation that the non-compliant items, except for the moving walkway, are
"functional."[151] It is therefore proper that these form part of the just compensation in order to serve its purpose to fully
compensate the owner for its actual loss.

We noted in our Decision that should the Republic decide to construct the moving walkway, the amount spent therefore
cannot be determined in the present expropriation case as we are merely tasked to determine the value of NA[A-IPT III at
the time of taking.[152]

We therefore deny the Republic's arguments in its motion for reconsideration with respect to the structural defects,
unnecessary areas, and rectification for contract compliance.

F. On PIATCO's arguments that it should

be refunded of the amount it paid for the
BOC expense

We disagree with PIATCO's argument that the Court erred in ruling that PIATCO had waived its right not to share in the
BOC expenses.

In resolving this issue, it is necessary to trace the proceedings relating to the parties' sharing of the BOC expenses.

On June 15, 2006, the BOC filed a request for the release of a mobilization fund of P1,600,000.00.[153] The RTC approved
the request and directed the Republic and PIATCO to equally share the BOC's expenses.[154] The Republic
and PIATCOcomplied with this order and tendered the sum of P1,600,000.00 to the BOC.[155]

On December 7, 2010, the RTC directed PIATCO and the Republic to pay the amount of P5,250,000.00 on a fifty-fifty
basis or for P2,625,000.00 each to defray the BOC expenses. Aside from paying the amount ordered by the RTC, PIATCO
did not question the RTC orders dated June 15, 2006 and December 7, 2010. The Republic, on the other hand, filed a
motion for partial reconsideration, on the grounds that the amount was excessive and arbitrary and that the Intervenors
(Takenaka and Asahikosan) should likewise shoulder part of the BOC expenses.

The RTC issued an order on March 11, 2011, granting the Republic's prayer that the Intervenors Takenaka and
Asahikosan should share in the BOC expenses but denied the Republic's argument that the expenses were excessive. The
RTC thus ordered each party to pay P1,750,000.00. PIATCO did not question the March 11, 2011 order; instead, PIATCO
complied with this order and paid the amount of PI, 750,000.00 to the BOC.[156]

Takenaka and Asahikosan filed a partial motion for reconsideration of the March 11, 2011 order on the ground that it has
no legal basis.

The RTC rendered its decision on May 23, 2011 on the computation of just compensation and directed both the Republic
and Takenaka and Asahikosan to pay their proportionate shares of the BOC expenses with dispatch.

The Republic, PIATCO, and Takenaka and Asahikosan filed their respective appeals with the CA, which are subject of the
present case. Takenaka and Asahikosan questioned the RTC's ruling directing them to pay their proportionate shares in the
BOC expenses; PIATCO again did not question the RTC's decision on the BOC expenses.

The CA denied Takenaka and Asahikosan's prayer to be exempt from paying the BOC expenses. Consequently, Takenaka
and Asahikosan raised this issue in its appeal before the Court.

In the cases before the Court, PIATCO never lifted a finger to question the rulings of the RTC and the CA; it likewise did not
raise this issue in the pleadings before the Court except in the present partial motion for reconsideration.

In view of PIATCO's failure to promptly and vigorously question the imposition of the BOC expenses, we confirm our ruling
that PIATCO is deemed to have waived its right to question the rulings directing it to share in the BOC expenses. PIATCO's
payment pursuant to the RTC rulings, which it did not assail, served as its conformity with these rulings, whose finality
against PIATCO we cannot modify in the present case.

PIATCO should have questioned the rulings that are adverse to it; that it did not and even willingly complied means that it
had accepted the ruling. It is well-settled, too, that the negligence and mistakes of counsel bind the client. Hence, the
principle of unjust enrichment cannot be applied in the present case in favor of PIATCO.[157]

G. On the Republic's prayer for

the Court to declare that, upon payment
of just compensation, full ownership
shall be vested in the Republic,
free from any liens and encumbrances.

We grant the Republic's prayer that upon payment of just compensation, full ownership shall fully vest with the
Republic; however, we deny its prayer that this ownership shall be free from any Hens and encumbrances.

We ruled in Agan that "[f]or the Republic to take over the said facility, it has to compensate respondent PIATCO as builder of
the said structures."

We however clarified in Gingoyon that, "[t]he recognized rule is that title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. "

In Association of Small Landowners in the Philippines, Inc. et al., v. Secretary of Agrarian Reform, [158] we ruled that "ftjitle to
property which is the subject of condemnation proceedings does not vest [with] the condemnor until the judgment fixing just
compensation is entered and paid xxx title to the property taken remains in the owner until payment is actually made. "
In view of these jurisprudential precedents, we grant the Republic's prayer that upon full payment of the just
compensation finally adjudged in this decision, the title to the property shall be fully vested in the Republic.

However, we cannot categorically rule in the present case that the Republic's ownership of NAIA-IPT III - after full
payment of just compensation - shall be free from all liens and encumbrances.

Before us are the narrow issues of an expropriation case. We cannot make an all-encompassing ruling that would cover
cases and issues that had not been raised and resolved in the present case. To do so would not only be purely speculative
but may also be reckless and highly improper.

H. On Takenaka andAsahikosan's claims

We cannot grant Takenaka and Asahikosan's argument that a portion of the just compensation be set aside to cover for
their claims against PIATCO. Takenaka and Asahikosan's arguments are contrary to the constitutional and
jurisprudential mandates on just compensation and our final and executory rulings in Agan and Gingoyon.

To reiterate, just compensation should be paid to the owner and it should be real, substantial, full and
ample.[159] Therefore, the Republic must pay PIATCO the full amount of the just compensation computed in the present
case.

Furthermore, if we set aside a portion of the just compensation to cover Takenaka and Asahikosan's claims, we would also
be running against our final and executory rulings in Agan and Gingoyon mandating that just compensation should
be fully paid to PIATCO as the owner of the NAIA-IPT III.

Stated differently, the mere setting aside of a definite portion of the just compensation to cover the claim of a non-
owner (especially if the non-owner's claim is not yet fixed or confirmed by a final ruling) would defeat the constitutional
mandate that full payment be made to the property owner. We thus cannot grant Takenaka and Asahikosan's plea even if
we can later release to PIATCO the portion that is set aside (in the event that Takenaka and Asahikosan's claims turn out
to be excessive or totally unjustified).

Takenaka and Asahikosan also conveniently ignore the adverse consequences of their request. They do not seem to realize
that the Court would deprive PIATCO of the uses of its money during the entire period a portion of the just compensation
is put in escrow.

Worse, if Takenaka and Asahikosan's claims are later partially or wholly denied, there is the matter of interest: who will
pay the interest on the amount set aside? Will it be the Republic or will it be Takenaka and Asahikosan? Will they equally
share the burden? These are the complications that Takenaka and Asahikosan avoided in their insistence to have a
portion of the just compensation set aside to cover claims that have not even been judicially confirmed with finality in the
Philippines.

Finally, we clarify our holding that if we grant Takenaka and Asahikosan's prayer to merely set aside a portion of the just
compensation to secure their claims, we would thereby pre-empt the Court's ruling in the pending enforcement case (G.R.
No. 202166).

In truth, we would not pre-empt the Court's ruling in the enforcement case ifwe set aside a portion of the just
compensation in favor Takenaka and Asahikosan. The Court would still have to apply the law to the unique facts of that
case regardless of our holding in the present case.

Nevertheless, there is simply no basis to set aside a portion of the just compensation in favor of a non-owner. As
explained, setting aside Takenaka and Asahikosan's claim purportedly in the interest of "equity and justice" would defeat
the essence of just compensation. We remind Takenaka and Asahikosan that the invocation of the Court's equity
jurisdiction can never be used to violate the law and the Constitution.[160]

In light of the discussion above, we deny Takenaka and Asahikosan's arguments in its partial motion for reconsideration.

I. On PlATCO's argument that the tax

assessments against it should be included
as part of the just compensation

We deny PIATCO's argument that the tax assessments against it should be added to the just compensation in the present
case.

The tax assessments should first go through the appropriate tax proceedings prescribed by law. The present case is
neither the proper venue nor the forum to determine the validity of these alleged pending tax assessments or to declare its
inclusion in the computation of just compensation inasmuch as these were not presented before the lower courts.

WHEREFORE, premises considered, we:

(1) SUSTAIN our September 8, 2015 Decision, thus:

a. The principal amount of just compensation is fixed at $326,932,221.26 as of December 21, 2004. Thereafter, the
amount of $267,493,617.26, which is the difference between $326,932,221.26 and the proffered value of
$59,438,604.00, shall earn a straight interest of 12% per annum from September 11, 2006 until June 30, 2013,
and a straight interest of 6% per annum from July 1, 2013 until full payment;

b. The Republic is hereby ordered to make direct payment of the just compensation due to PIATCO; and

c. The Republic is hereby ordered to defray the expenses of the BOC in the sum of P3,500,000.00.

(2) PARTLY GRANT the Republic's motion for reconsideration by declaring that full ownership over the NAIA-IPT III shall
be vested in the Republic upon full payment of the just compensation as computed in the immediately preceding
paragraph;

(3) DENY PIATCO's motion for partial reconsideration;

(4) DENY Takenaka and Asahikosan's motion for partial reconsideration; and

(5) RECTIFY THE FOLLOWING TYPOGRAPHICAL ERRORS in our Decision dated September 8, 2015:

(a) The last paragraph of page 41 of our Decision should read as follows:

Interest. The CA further held that interest shall be added to just compensation as of December 21, 2004. xxx
(b) Page 99 of the Decision should reflect the proper quote of item 3.1.17 of the Scott Wilson Report, as follows:

3.1.17 On the basis of a construction cost valuation of the order of US$322 million we would expect the cost of
construction supervision to be a minimum of US$9.5 million. It is understood that PIATCO has paid US$7.9 million to the
QA Inspectors (JAC) and US$4.2 million to PCI, SOM, PACICON and JGC and this therefore appears not unreasonable.

(c) Pages 123-124 of the Decision should reflect the proper number of days in years 2008 and 2012, which is 366 days,
and hence should be corrected as follows:

Number of Interest Principal

Period Formula Straight Interest
Days Rate Amount
September 11, 2006 to principal*rate *
113 days 12% $267,493,617.26 $9,937,571.10
December 31, 2006 (113/365)
January 1, 2007 to
principal *rate 365 days 12% $267,493,617.26 $32,099,234.07
December 31, 2007
January 1, 2008 to
principal*rate 366 days 12% $267,493,617.26 $32,099,234.07
December 31, 2008
January 1,2009 to
principal *rate 365 days 12% $267,493,617.26 $32,099,234.07
December 31, 2009
January 1,2010 to
principal*rate 365 days 12% $267,493,617.26 $32,099,234.07
December 31, 2010
January 1, 2011 to
principal*rate 365 days 12% $267,493,617.26 $32,099,234.07
December 31, 2011
January 1, 2012 to
principal *rate 366 days 12% $267,493,617.26 $32,099,234.07
December 31, 2012
January 1, 2013 to principal *rate*
181 days 12% $267,493,617.26 $15,917,702.38
June 30, 2013 (181/365)
July 1, 2013 to principal *rate *
189 days 6% $267,493,617.26 $8,310,623.62
December 31, 2013 (189/365)
January 1, 2014 to
principal*rate 365 days 6% $267,493,617.26$16,049,617.04
December 31, 2014
Total $242,810,918.54

This Resolution is final and no further pleadings shall be entertained. Let judgment be entered in due course.

SO ORDERED.
 [G.R. No. 107372. January 23, 1997]

RAFAEL S. ORTAEZ, petitioner, vs. THE COURT OF APPEALS, OSCAR INOCENTES, AND ASUNCION LLANES
INOCENTES, respondents.

RESOLUTION
FRANCISCO, J.:

On September 30, 1982, private respondents sold to petitioner two (2) parcels of registered land in Quezon City for a
consideration of P35,000.00 and P20,000.00, respectively. The first deed of absolute sale covering Transfer Certificate of
Title (TCT) No. 258628 provides in part:

"That for and in consideration of the sum of THIRTY FIVE THOUSAND (P35,000.00) PESOS, receipt of which in full is
hereby acknowledged, we have sold, transferred and conveyed, as we hereby sell, transfer and convey, that subdivided
portion of the property covered by TCT No. 258628 known as Lot No. 684-G-1-B-2 in favor of RAFAEL S. ORTANEZ, of
legal age, Filipino. whose marriage is under a regime of complete separation of property, and a resident of 942 Aurora
Blvd., Quezon City, his heirs or assigns."[1]

while the second deed of absolute sale covering TCT No. 243273 provides:

"That for and in consideration of the sum of TWENTY THOUSAND (P20,000.00) PESOS receipt of which in full is hereby
acknowledged, we have sold, transferred and conveyed, as we hereby sell, transfer and convey, that consolidated-
subdivided portion of the property covered by TCT No. 243273 known as Lot No. 5 in favor of RAFAEL S. ORTANEZ, of
legal age, Filipino, whose marriage is under a regime of complete separation of property, and a resident of 942 Aurora
Blvd., Cubao, Quezon City his heirs or assigns.[2]

Private respondents received the payments for the above-mentioned lots, but failed to deliver the titles to petitioner.
On April 9, 1990 the latter demanded from the former the delivery of said titles. [3] Private respondents, however, refused
on the ground that the title of the first lot is in the possession of another person, [4] and petitioner's acquisition of the title
of the other lot is subject to certain conditions.
Offshoot, petitioner sued private respondents for specific performance before the RTC. In their answer with
counterclaim private respondents merely alleged the existence of the following oral conditions [5]which were never reflected
in the deeds of sale:[6]

"3.3.2 Title to the other property (TCT No. 243273) remains with the defendants (private respondents) until plaintiff
(petitioner) shows proof that all the following requirements have been met:

(i) Plaintiff will cause the segregation of his right of way amounting to 398 sq. m.;

(ii) Plaintiff will submit to the defendants the approved plan for the segregation;

(iii) Plaintiff will put up a strong wall between his property and that of defendants' lot to segregate his right of way;

(iv) Plaintiff will pay the capital gains tax and all other expenses that may be incurred by reason of sale. x x x."

During trial, private respondent Oscar Inocentes, a former judge, orally testified that the sale was subject to the
above conditions,[7] although such conditions were not incorporated in the deeds of sale. Despite petitioner's timely
objections on the ground that the introduction of said oral conditions was barred by the parol evidence rule, the lower
court nonetheless, admitted them and eventually dismissed the complaint as well as the counterclaim. On appeal, the
Court of Appeals (CA) affirmed the court a quo. Hence, this petition.
We are tasked to resolve the issue on the admissibility of parol evidence to establish the alleged oral conditions-
precedent to a contract of sale, when the deeds of sale are silent on such conditions.
The parol evidence herein introduced is inadmissible. First, private respondents' oral testimony on the alleged
conditions, coming from a party who has an interest in the outcome of the case, depending exclusively on human
memory, is not as reliable as written or documentary evidence. [8] Spoken words could be notoriously unreliable unlike a
written contract which speaks of a uniform language.[9] Thus, under the general rule in Section 9 of Rule 130 [10] of the
Rules of Court, when the terms of an agreement were reduced to writing, as in this case, it is deemed to contain all the
terms agreed upon and no evidence of such terms can be admitted other than the contents thereof. [11] Considering that
the written deeds of sale were the only repository of the truth, whatever is not found in said instruments must have been
waived and abandoned by the parties.[12] Examining the deeds of sale, we cannot even make an inference that the sale was
subject to any condition. As a contract, it is the law between the parties.[13]
Secondly, to buttress their argument, private respondents rely on the case of Land Settlement Development, Co. vs.
Garcia Plantation[14] where the Court ruled that a condition precedent to a contract may be established by parol evidence.
However, the material facts of that case are different from this case. In the former, the contract sought to be
enforced[15] expressly stated that it is subject to an agreement containing the conditions-precedent which were proven
through parol evidence. Whereas, the deeds of sale in this case, made no reference to any pre- conditions or other
agreement. In fact, the sale is denominated as absolute in its own terms.
Third, the parol evidence herein sought to be introduced would vary, contradict or defeat the operation of a valid
instrument,[16] hence, contrary to the rule that:

The parol evidence rule forbids any addition to x x x 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. [17]

Although parol evidence is admissible to explain the meaning of a contract, "it cannot serve the purpose
of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing
unless there has been fraud or mistake." [18] No such fraud or mistake exists in this case.
Fourth, we disagree with private respondents' argument that their parol evidence is admissible under the exceptions
provided by the Rules, specifically, the alleged failure of the agreement to express the true intent of the parties. Such
exception obtains only in the following instance:

"[W]here the written contract is so ambiguous or obscure in terms that the contractual intention of the parties cannot be
understood from a mere reading of the instrument. In such a case, extrinsic evidence of the subject matter of the contract,
of the relations of the parties to each other, and of the facts and circumstances surrounding them when they entered into
the contract may be received to enable the court to make a proper interpretation of the instrument." [19]

In this case, the deeds of sale are clear, without any ambiguity, mistake or imperfection, much less obscurity or doubt in
the terms thereof.
Fifth, we are not persuaded by private respondents contention that they "put in issue by the pleadings" the failure of
the written agreement to express the true intent of the parties. Record shows[20]that private respondents did
not expressly plead that the deeds of sale were incomplete or that it did not reflect the intention[21] of the buyer (petitioner)
and the seller (private respondents). Such issue must be "squarely presented."[22] Private respondents merely alleged that
the sale was subject to four (4) conditions which they tried to prove during trial by parol evidence. [23] Obviously, this
cannot be done, because they did not plead any of the exceptions mentioned in the parol evidence rule. [24] Their case is
covered by the general rule that the contents of the writing are the only repository of the terms of the agreement.
Considering that private respondent Oscar Inocentes is a lawyer (and former judge) he was "supposed to be steeped in
legal knowledge and practices" and was "expected to know the consequences"[25] of his signing a deed of absolute sale. Had
he given an iota's attention to scrutinize the deeds, he would have incorporated important stipulations that the transfer of
title to said lots were conditional.[26]
One last thing, assuming arguendo that the parol evidence is admissible, it should nonetheless be disbelieved as no
other evidence appears from the record to sustain the existence of the alleged conditions. Not even the other seller,
Asuncion Inocentes, was presented to testify on such conditions.
ACCORDINGLY, the appealed decision is REVERSED and the records of this case REMANDED to the trial court for
proper disposition in accordance with this ruling.
SO ORDERED.

[G.R. No. 126006. January 29, 2004]

LAPULAPU FOUNDATION, INC. and ELIAS Q. TAN, petitioners, vs. COURT OF APPEALS (Seventeenth Division) and
ALLIED BANKING CORP., respondents

DECISION
CALLEJO, SR., J.:
 Before the Court is the petition for review on certiorari filed by the Lapulapu Foundation, Inc. and Elias Q. Tan
seeking to reverse and set aside the Decision[1] dated June 26, 1996 of the Court of Appeals (CA) in CA-G.R. CV No. 37162
ordering the petitioners, jointly and solidarily, to pay the respondent Allied Banking Corporation the amount
of P493,566.61 plus interests and other charges. Likewise, sought to be reversed and set aside is the appellate courts
Resolution dated August 19, 1996 denying the petitioners motion for reconsideration.
The case stemmed from the following facts:
Sometime in 1977, petitioner Elias Q. Tan, then President of the co-petitioner Lapulapu Foundation, Inc., obtained
four loans from the respondent Allied Banking Corporation covered by four promissory notes in the amounts of P100,000
each. The details of the promissory notes are as follows:

P/N No. Date of P/N Maturity Date Amount as of 1/23/79

BD No. 504 Nov. 7, 1977 Feb. 5, 1978 P123,377.76

BD No. 621 Nov. 28, 1977 Mar. 28, 1978 P123,411.10

BD No. 716 Dec. 12, 1977 Apr. 11, 1978 P122,322.21

BD No. 839 Jan. 5, 1978 May 5, 1978 P120,455.54[2]

As of January 23, 1979, the entire obligation amounted to P493,566.61 and despite demands made on them by the
respondent Bank, the petitioners failed to pay the same. The respondent Bank was constrained to file with the Regional
Trial Court of Cebu City, Branch 15, a complaint seeking payment by the petitioners, jointly and solidarily, of the sum
of P493,566.61 representing their loan obligation, exclusive of interests, penalty charges, attorneys fees and costs.
In its answer to the complaint, the petitioner Foundation denied incurring indebtedness from the respondent Bank
alleging that the loans were obtained by petitioner Tan in his personal capacity, for his own use and benefit and on the
strength of the personal information he furnished the respondent Bank. The petitioner Foundation maintained that it
never authorized petitioner Tan to co-sign in his capacity as its President any promissory note and that the respondent
Bank fully knew that the loans contracted were made in petitioner Tans personal capacity and for his own use and that
the petitioner Foundation never benefited, directly or indirectly, therefrom. The petitioner Foundation then interposed a
cross-claim against petitioner Tan alleging that he, having exceeded his authority, should be solely liable for said loans,
and a counterclaim against the respondent Bank for damages and attorneys fees.
For his part, petitioner Tan admitted that he contracted the loans from the respondent Bank in his personal capacity.
The parties, however, agreed that the loans were to be paid from the proceeds of petitioner Tans shares of common stocks
in the Lapulapu Industries Corporation, a real estate firm. The loans were covered by promissory notes which were
automatically renewable (rolled-over) every year at an amount including unpaid interests, until such time as petitioner
Tan was able to pay the same from the proceeds of his aforesaid shares.
According to petitioner Tan, the respondent Banks employee required him to affix two signatures on every promissory
note, assuring him that the loan documents would be filled out in accordance with their agreement. However, after he
signed and delivered the loan documents to the respondent Bank, these were filled out in a manner not in accord with
their agreement, such that the petitioner Foundation was included as party thereto. Further, prior to its filing of the
complaint, the respondent Bank made no demand on him.
After due trial, the court a quo rendered judgment the dispositive portion of which reads:

WHEREFORE, in view of the foregoing evidences [sic], arguments and considerations, this court hereby finds the
preponderance of evidence in favor of the plaintiff and hereby renders judgment as follows:

1. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc. [the petitioners herein] to pay jointly and
solidarily to the plaintiff Allied Banking Corporation [the respondent herein] the amount of P493,566.61 as principal
obligation for the four promissory notes, including all other charges included in the same, with interest at 14% per
annum, computed from January 24, 1979, until the same are fully paid, plus 2% service charges and 1% monthly penalty
charges.

2. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly and solidarily, attorneys fees in
the equivalent amount of 25% of the total amount due from the defendants on the promissory notes, including all
charges;

3. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly and solidarily litigation expenses
of P1,000.00 plus costs of the suit.[3]
 On appeal, the CA affirmed with modification the judgment of the court a quo by deleting the award of attorneys fees
in favor of the respondent Bank for being without basis.
The appellate court disbelieved petitioner Tans claim that the loans were his personal loans as the promissory notes
evidencing them showed upon their faces that these were obligations of the petitioner Foundation, as contracted by
petitioner Tan himself in his official and personal character. Applying the parol evidence rule, the CA likewise rejected
petitioner Tans assertion that there was an unwritten agreement between him and the respondent Bank that he would
pay the loans from the proceeds of his shares of stocks in the Lapulapu Industries Corp.
Further, the CA found that demand had been made by the respondent Bank on the petitioners prior to the filing of
the complaint a quo. It noted that the two letters of demand dated January 3, 1979 [4] and January 30, 1979[5] asking
settlement of the obligation were sent by the respondent Bank. These were received by the petitioners as shown by the
registry return cards[6] presented during trial in the court a quo.
Finally, like the court a quo, the CA applied the doctrine of piercing the veil of corporate entity in holding the
petitioners jointly and solidarily liable. The evidence showed that petitioner Tan had represented himself as the President
of the petitioner Foundation, opened savings and current accounts in its behalf, and signed the loan documents for and in
behalf of the latter. The CA, likewise, found that the petitioner Foundation had allowed petitioner Tan to act as though he
had the authority to contract the loans in its behalf. On the other hand, petitioner Tan could not escape liability as he had
used the petitioner Foundation for his benefit.
Aggrieved, the petitioners now come to the Court alleging that:
I. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE LOANS SUBJECT MATTER OF THE
INSTANT PETITION ARE ALREADY DUE AND DEMANDABLE DESPITE ABSENCE OF PRIOR DEMAND.
II. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE PAROL EVIDENCE RULE AND THE
DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY AS BASIS FOR ADJUDGING JOINT AND
SOLIDARY LIABILITY ON THE PART OF PETITIONERS ELIAS Q. TAN AND LAPULAPU FOUNDATION, INC.[7]
The petitioners assail the appellate courts finding that the loans had become due and demandable in view of the two
demand letters sent to them by the respondent Bank. The petitioners insist that there was no prior demand as they
vigorously deny receiving those letters. According to petitioner Tan, the signatures on the registry return cards were not
his.
The petitioners denial of receipt of the demand letters was rightfully given scant consideration by the CA as it held:

Exhibits R and S are two letters of demand, respectively dated January 3, 1979 and January 30, 1979, asking settlement
of the obligations covered by the promissory notes. The first letter was written by Ben Tio Peng Seng, Vice-President of the
bank, and addressed to Lapulapu Foundation, Inc., attention of Mr. Elias Q. Tan, President, while the second was a final
demand written by the appellees counsel, addressed to both defendants-appellants, and giving them five (5) days from
receipt within which to settle or judicial action would be instituted against them. Both letters were duly received by the
defendants, as shown by the registry return cards, marked as Exhibits R-2 and S-1, respectively. The allegation of Tan
that he does not know who signed the said registry return receipts merits scant consideration, for there is no showing that
the addresses thereon were wrong. Hence, the disputable presumption that a letter duly directed and mailed was received
in the regular course of mail (per par. V, Section 3, Rule 131 of the Revised Rules on Evidence) still holds.[8]

There is no dispute that the promissory notes had already matured. However, the petitioners insist that the loans
had not become due and demandable as they deny receipt of the respondent Banks demand letters. When presented the
registry return cards during the trial, petitioner Tan claimed that he did not recognize the signatures thereon. The
petitioners allegation and denial are self-serving. They cannot prevail over the registry return cards which constitute
documentary evidence and which enjoy the presumption that, absent clear and convincing evidence to the contrary, these
were regularly issued by the postal officials in the performance of their official duty and that they acted in good
faith.[9] Further, as the CA correctly opined, mails are presumed to have been properly delivered and received by the
addressee in the regular course of the mail.[10] As the CA noted, there is no showing that the addresses on the registry
return cards were wrong. It is the petitioners burden to overcome the presumptions by sufficient evidence, and other than
their barefaced denial, the petitioners failed to support their claim that they did not receive the demand letters; therefore,
no prior demand was made on them by the respondent Bank.
Having established that the loans had become due and demandable, the Court shall now resolve the issue of whether
the CA correctly held the petitioners jointly and solidarily liable therefor.
In disclaiming any liability for the loans, the petitioner Foundation maintains that these were contracted by petitioner
Tan in his personal capacity and that it did not benefit therefrom. On the other hand, while admitting that the loans were
his personal obligation, petitioner Tan avers that he had an unwritten agreement with the respondent Bank that these
loans would be renewed on a year-to-year basis and paid from the proceeds of his shares of stock in the Lapulapu
Industries Corp.
These contentions are untenable.
 The Court particularly finds as incredulous petitioner Tans allegation that he was made to sign blank loan
documents and that the phrase IN MY OFFICIAL/PERSONAL CAPACITY was superimposed by the respondent Banks
employee despite petitioner Tans protestation. The Court is hard pressed to believe that a businessman of petitioner Tans
stature could have been so careless as to sign blank loan documents.
In contrast, as found by the CA, the promissory notes[11] clearly showed upon their faces that they are the obligation
of the petitioner Foundation, as contracted by petitioner Tan in his official and personal capacity. [12] Moreover, the
application for credit accommodation,[13] the signature cards of the two accounts in the name of petitioner
Foundation,[14] as well as New Current Account Record,[15] all accompanying the promissory notes, were signed by
petitioner Tan for and in the name of the petitioner Foundation. [16] These documentary evidence unequivocally and
categorically establish that the loans were solidarily contracted by the petitioner Foundation and petitioner Tan.
As a corollary, the parol evidence rule likewise constrains this Court to reject petitioner Tans claim regarding the
purported unwritten agreement between him and the respondent Bank on the payment of the obligation. Section 9, Rule
130 of the of the Revised Rules of Court provides that [w]hen the terms of an agreement have been reduced to writing, it is
to be 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.[17]
In this case, the promissory notes are the law between the petitioners and the respondent Bank. These promissory
notes contained maturity dates as follows: February 5, 1978, March 28, 1978, April 11, 1978 and May 5, 1978,
respectively. That these notes were to be paid on these dates is clear and explicit. Nowhere was it stated therein that they
would be renewed on a year-to-year basis or rolled-over annually until paid from the proceeds of petitioner Tans shares in
the Lapulapu Industries Corp. Accordingly, this purported unwritten agreement could not be made to vary or contradict
the terms and conditions in the promissory notes.
Evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the
operation of a valid contract.[18] While parol evidence is admissible to explain the meaning of written contracts, it cannot
serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at
all in writing, unless there has been fraud or mistake.[19] No such allegation had been made by the petitioners in this case.
Finally, the appellate court did not err in holding the petitioners jointly and solidarily liable as it applied the doctrine
of piercing the veil of corporate entity. The petitioner Foundation asserts that it has a personality separate and distinct
from that of its President, petitioner Tan, and that it cannot be held solidarily liable for the loans of the latter.
The Court agrees with the CA that the petitioners cannot hide behind the corporate veil under the following
circumstances:

The evidence shows that Tan has been representing himself as the President of Lapulapu Foundation, Inc. He opened a
savings account and a current account in the names of the corporation, and signed the application form as well as the
necessary specimen signature cards (Exhibits A, B and C) twice, for himself and for the foundation. He submitted a
notarized Secretarys Certificate (Exhibit G) from the corporation, attesting that he has been authorized, inter alia, to sign
for and in behalf of the Lapulapu Foundation any and all checks, drafts or other orders with respect to the bank; to
transact business with the Bank, negotiate loans, agreements, obligations, promissory notes and other commercial
documents; and to initially obtain a loan for P100,000.00 from any bank (Exhibits G-1 and G-2). Under these
circumstances, the defendant corporation is liable for the transactions entered into by Tan on its behalf. [20]

Per its Secretarys Certificate, the petitioner Foundation had given its President, petitioner Tan, ostensible and
apparent authority to inter alia deal with the respondent Bank. Accordingly, the petitioner Foundation is estopped from
questioning petitioner Tans authority to obtain the subject loans from the respondent Bank. It is a familiar doctrine that if
a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it
holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone
who has in good faith dealt with it through such agent, be estopped from denying the agents authority. [21]
In fine, there is no cogent reason to deviate from the CAs ruling that the petitioners are jointly and solidarily liable for
the loans contracted with the respondent Bank.
WHEREFORE, premises considered, the petition is DENIED and the Decision dated June 26, 1996 and Resolution
dated August 19, 1996 of the Court of Appeals in CA-G.R. CV No. 37162 are AFFIRMED in toto.
SO ORDERED.

THIRD DIVISION

MODESTO LEOVERAS, G.R. No. 169985

Petitioner,
Present:
CARPIO MORALES, J., Chairperson,
BRION,
 BERSAMIN,
- versus - VILLARAMA, JR., and
SERENO, JJ.
Promulgated:

June 15, 2011

CASIMERO VALDEZ,
Respondent.
x-------------------------------------------------------------------------------------- x

DECISION

BRION, J.:

Before the Court is a petition for review on certiorari[1] assailing the March 31, 2005decision[2] and the October 6,

2005 resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 68549. The CA decision reversed the June 23,

2000 decision[4] of the Regional Trial Court (RTC), Branch 46, Urdaneta City, Pangasinan, dismissing respondent Casimero

Valdezs complaint for annulment of title, reconveyance and damages against petitioner Modesto Leoveras.

FACTUAL ANTECEDENTS

Maria Sta. Maria and Dominga Manangan were the registered owners - three-fourths () and one-fourth () pro-

indiviso, respectively - of a parcel of land located in Poblacion, Manaoag, Pangasinan, covered by Original Certificate of

Title (OCT) No. 24695, with an area of 28,171 square meters.[5]

In September 1932, Sta. Maria sold her three-fourths () share to Benigna Llamas.[6] The sale was duly annotated

at the back of OCT No. 24695. When Benigna died in 1944, [7] she willed her three-fourths () share equally to her sisters

Alejandra Llamas and Josefa Llamas.[8] Thus, Alejandra and Josefa each owned one-half () of Benignas three-fourths ()

share.

On June 14, 1969, Alejandras heirs sold their predecessors one-half () share (roughly equivalent to 10,564 square

meters) to the respondent, as evidenced by a Deed of Absolute Sale.[9]

Also on June 14, 1969, Josefa sold her own one-half () share (subject property) to the respondent and the

petitioner, as evidenced by another Deed of Absolute Sale.[10] On even date, the respondent and the petitioner executed

an Agreement,[11] allotting their portions of the subject property.

WITNESSETH

That we [petitioner and respondent] are the absolute owners of [the subject property] which is
particularly described as follows:

xxx

That our ownership over the said portion mentioned above is evidenced by a Deed of Absolute
Sale xxx
 That in said deed of sale mentioned in the immediate preceding paragraph, our respective share
consist of 5, 282.13 [one-half of 10,564 square meters] square meter each.

That we hereby agreed and covenanted that our respective share shall be as follows:

Modesto Leoveras 3,020 square meters residential portion on the northern part near the
Municipal road of Poblacion Pugaro, Manaoag, Pangasinan;
Casimero Valdez 7,544.27[12] square meters of the parcel of land described above.[13]

On June 8, 1977, the petitioner and the respondent executed an Affidavit of Adverse Claim over the subject

property.[14] The parties took possession of their respective portions of the subject property and declared it in their name

for taxation purposes.[15]

In 1996, the respondent asked the Register of Deeds of Lingayen, Pangasinan on the requirements for the transfer

of title over the portion allotted to him on the subject property. To his surprise, the respondent learned that the petitioner

had already obtained in his name two transfer certificates of title (TCTs): one, TCT No. 195812 - covering an area of 3,020

square meters; and two, TCT No. 195813 - covering an area of 1,004 square meters (or a total of 4,024 square meters).

The Register of Deeds informed the respondent that they could not find the record of OCT No. 24695; instead, the

Register of Deeds furnished the respondent with the following[16](collectively, petitioners documents):
1. Two (2) deeds of absolute sale dated June 14, 1969, both executed by Sta. Maria, purportedly
conveying an unspecified portion of OCT No. 24695 as follows:

a. 11, 568 square meters to the respondent and petitioner[17]

b. 8, 689 square meters to one Virgilia Li Meneses[18]

2. Deed of Absolute Sale (Benigna Deed) also dated June 14, 1969 executed by Benigna[19] which reads:

I, Benigna Llamas, Fernandez xxx do sell xxx by way of ABSOLUTE SALE unto the said
Casimero Valdez, Modesto Leoveras and Virgilia Meneses their heirs and assigns, 7,544
sq.m.; 4,024 sq. m. and 8,689 sq. m. more or less respectively of a parcel of land which is
particularly described as follows:

A parcel of land xxx covered by [OCT No.] 24695. (Emphases added)

3. Subdivision Plan of PSU 21864 of OCT No. 24695[20]

4. Affidavit of Confirmation of Subdivision[21] dated May 3, 1994 (Affidavit), which reads:

That we, Virgilia Li Meneses, xxx Dominga Manangan; Modesto Leoveras; and Casimero
Valdez xxx

xxx are co-owners of a certain parcel of land with an area of 28, 171 sq. m. more or less in
subdivision plan Psu 21864 xxx covered by [OCT No.] 24695 situated at Poblacion (now Pugaro),
Manaoag, Pangasinan;

xxx we agree xxx to subdivide and hereby confirmed the subdivision in the following manner
xxx:

Lot 2 with an area of 3, 020 sq. m. xxx to Modesto Leoveras xxx;

Lot 3 with an area of 1,004 sq. m. xxx to Modesto Leoveras xxx;

Lot 4 with an area of 7,544 sq. m. xxx to Casimero Valdez xxx;

 Lot 5 with an area of 8, 689 sq. m. xxx to Virgilia Meneses;

Lot 6 with an area of 7,043 sq. m. xxx to Dominga Manangan (Emphasis supplied.)

On June 21, 1996, the respondent filed a complaint for Annulment of Title, Reconveyance and Damages against

the petitioner, seeking the reconveyance of the 1,004-square meter portion (disputed property) covered by TCT No.

195813, on the ground that the petitioner is entitled only to the 3,020 square meters identified in the parties Agreement.

The respondent sought the nullification of the petitioners titles by contesting the authenticity of the petitioners

documents. Particularly, the respondent assailed the Benigna Deed by presenting Benignas death certificate. The

respondent argued that Benigna could not have executed a deed, which purports to convey 4,024 square meters to the

petitioner, in 1969 because Benigna already died in 1944. The respondent added that neither could Sta. Maria have sold

to the parties her three-fourths () share in 1969 because she had already sold her share to Benigna in 1932. [22] The

respondent denied his purported signature appearing in the Affidavit,[23] and prayed for:

a) xxx the cancellation of the [petitioners documents];

b) the cancellation of TCT No. 195813 in the name of Modesto Leoveras and that it be reconveyedto the
[respondent];

c) the cancellation and nullification of [TCT No. 195812] covering an area of 3,020 square meters xxx;

d) [the issuance of] title xxx in the name of [respondent] over an area of 17, 104 square meters of OCT
24695; [24] (Underscoring supplied)

In his defense, the petitioner claimed that the parties already had (i) delineated their respective portions of the

subject property even before they acquired it in 1969 and (ii) agreed that upon acquisition, each would own the portion as

delineated; that the area he actually possessed and subsequently acquired has a total area of 4,024 square meters, which

he subdivided into two portions and caused to be covered by the two TCTs in question. The petitioner claimed that in

signing the Agreement, he was led to believe, based on the parties rough estimation, that the area he actually possessed is

only 3,020 square meters contrary to the parties real intention - i.e., the extent of their ownership would be based on their

actual possession.[25]

The petitioner further claimed that the respondent voluntarily participated in executing the Affidavit, which

corrected the mistake in the previously executed Agreement[26] and confirmed the petitioners ownership over the disputed

property. The petitioner asked for the dismissal of the complaint and for a declaration that he is the lawful owner of the

parcels of land covered by his titles.

RTC RULING
 The RTC dismissed the complaint. The court ruled that the respondent failed to preponderantly prove that the

Benigna Deed and the Affidavit are fabricated and, consequently, no ground exists to nullify the petitioners titles. The

court observed that the respondent did not even compare his genuine signature with the signatures appearing in these

documents.

CA RULING

On appeal, the CA reversed the RTC by ruling against the authenticity of the Benigna Deed and the Affidavit. The

CA gave weight to Benignas death certificate which shows the impossibility of Benignas execution of the deed in 1969. The

CA also noted the discrepancy between the respondents signatures as appearing in the Affidavit, on one hand, and the

documents on record, on the other.[27] The CA added that the respondents failure to compare his genuine signature from

his purported signatures appearing in the petitioners documents is not fatal, since Section 22, Rule 132 of the Rules of

Court allows the court to make its own comparison. In light of its observations, the CA ruled:

As the totality of the evidence presented sufficiently sustains [the respondents] claim that the titles issued
to [the petitioner] were based on forged and spurious documents, it behooves this Court to annul these
certificates of title.

WHEREFORE, the assailed Decision dated June 23, 2000 is SET ASIDE. Declaring TCT No.
195812 and TCT No. 195813 as NULL and VOID, [the petitioner] is hereby directed to reconvey the
subject parcels of land to [the respondent].[28] (Emphasis added.)

Unwilling to accept the CAs reversal of the RTC ruling, the petitioner filed the present appeal by certiorari,

claiming that the CA committed gross misappreciation of the facts[29] by going beyond what the respondent sought in his

complaint.

THE PETITION

The petitioner claims that the CA should not have ordered the reconveyance of both parcels of land covered by the

TCTs in question since the respondent only seeks the reconveyance of the disputed property i.e., the parcel of land

covered by TCT No. 195813.

The petitioner asserts that after the subject sale, the parties physically partitioned the subject property and

possessed their respective portions, thereby setting the limits of their ownership.
 The petitioner admits that the Benigna Deed is fabricated but hastens to add that it was only designed (i) to affirm

the true intent and agreement of the parties on the extent of their ownership, as shown by their actual physical

possession, and (ii) as a convenient tool to facilitate the transfer of title to his name.

THE RESPONDENTS COMMENT

The respondent claims that since the petitioner himself admitted using a spurious document in obtaining his

titles (as alleged in the complaint and as found by the CA), then the CA correctly cancelled the latters titles. [30]

The petitioner forged the respondents signature in the Affidavit to make it appear that he agreed to the division

indicated in the document. The respondent defended the CAs reconveyance of both parcels of land, covered by the

petitioners titles, to the respondent by arguing that if the distribution in the Affidavit is followed, the original

intendment of the parties on their shares of the subject property would be grievously impaired [31]

THE ISSUES

The two basic issues[32] for our resolution are:

1. Whether the CA erred in nullifying the petitioners titles.

2. Whether the CA erred in ordering the reconveyance of the parcel of land covered by the petitioners titles.

THE RULING

We partially grant the petition.

An action for reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was

wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the

land to him.[33] The plaintiff in this action must allege and prove his ownership of the land in dispute and the defendants

erroneous, fraudulent or wrongful registration of the property.

We rule that the respondent adequately proved his ownership of the disputed property by virtue of the (i) Deed of

Absolute Sale executed by Josefa in favor of the parties; (ii) the parties Affidavit of Adverse Claim; and (iii) the parties

Agreement, which cover the subject property.

 The petitioner does not dispute the due execution and the authenticity

of these documents,[34] particularly the Agreement. However, he claims that since the Agreement does not reflect the true

intention of the parties, the Affidavit was subsequently executed in order to reflect the parties true intention.

The petitioners argument calls to fore the application of the parol evidence rule, [35] i.e., when the terms of an

agreement are reduced to writing, the written agreement is deemed to contain all the terms agreed upon and no evidence

of these terms can be admitted other than what is contained in the written agreement. [36] Whatever is not found in the

writing is understood to have been waived and abandoned.[37]

To avoid the operation of the parol evidence rule, the Rules of Court allows a party to present evidence modifying,

explaining or adding to the terms of the written agreement if he puts in issue in his pleading, as in this case, the failure of

the written agreement to express the true intent and agreement of the parties. The failure of the written agreement to

express the true intention of the parties is either by reason of mistake, fraud, inequitable conduct or accident, which

nevertheless did not prevent a meeting of the minds of the parties.[38]

At the trial, the petitioner attempted to prove, by parol evidence, the alleged true intention of the parties by

presenting the Affidavit, which allegedly corrected the mistake in the previously executed Agreement and confirmed his

ownership of the parcels of land covered by his titles. It was the petitioners staunch assertion that the respondent co-

executed this Affidavit supposedly to reflect the parties true intention.

In the present petition, however, the petitioner made a damaging admission that the Benigna Deed is fabricated,

thereby completely bolstering the respondents cause of action for reconveyance of the disputed property on the ground of

fraudulent registration of title. Since the Affidavit merely reflects what is embodied in the Benigna Deed, the petitioners

admission, coupled with the respondents denial of his purported signature in the Affidavit, placed in serious doubt the

reliability of this document, supposedly the bedrock of the petitioners defense.

Curiously, if the parties truly intended to include in the petitioners share the disputed property, the petitioner

obviously need not go at length of fabricating a deed of sale to support his application for the transfer of title of his rightful

portion of the subject property. Notably, there is nothing in the Affidavit (that supposedly corrected the mistake in the

earlier Agreement) that supports the petitioners claim that the partition of the subject property is based on the parties

actual possession.

Note that the RTC dismissed the complaint based on the respondents alleged failure to prove the spuriousness of

the documents submitted by the petitioner to the Register of Deeds. However, by admitting the presentation of a false

deed in securing his title, the petitioner rendered moot the issue of authenticity of the Benigna Deed and relieved the

respondent of the burden of proving its falsity as a ground to nullify the petitioners titles.
 By fraudulently causing the transfer of the registration of title over the disputed property in his name, the

petitioner holds the title to this disputed property in trust for the benefit of the respondent as the true

owner;[39] registration does not vest title but merely confirms or records title already existing and vested.

The Torrens system of registration cannot be used to protect a usurper from the true owner, nor can it be used as a shield

for the commission of fraud, or to permit one to enrich oneself at the expense of others.[40] Hence, the CA correctly ordered

the reconveyance ofthe disputed property, covered by TCT No. 195813, to the respondent.

The parties Agreement effectively partitioned the subject property

The petitioner also relies on his alleged actual possession of the disputed property to support his claim of

ownership. Notably, both parties make conflicting assertions of possession of the disputed property. [41] The petitioner

testified on his possession as follows:

Q: How many square meters did you get from the land and how many square meters was the share of
[respondent]?
A: 4[0]20 square meters and my brother-in-law 6,000 plus square meters.

xxx

Q: Was there a boundary between the 4,020 square meters and the rest of the property which (sic)
designated by your brother-in-law?

A: There is sir, and the boundary is the fence.

Q: When did you put up that fence which is the boundary?

A: After the deed of sale was made.

Q: And that boundary fence which you put according to you since the execution of the Deed of Absolute
Sale in 1969 up to the present does it still exist?

A: Yes, sir.

Q: Since the time you purchased the property according to you you already divided the property, is that
correct?

A: Yes, sir.

Q: And that as of today who is in possession of that 4,020 square meters?

A: I, sir.[42]

The petitioner and the respondent were originally co-owners of the subject property when they jointly bought it

from the same vendor in 1969. However, the parties immediately terminated this state of indivision by executing

an Agreement, which is in the nature of a partition agreement.

The Civil Code of the Philippines defines partition as the separation, division and assignment of a thing held in

common among those to whom it may belong.[43] Partition is the division between two or more persons of real or personal
property, owned in common, by setting apart their respective interests so that they may enjoy and possess these in

severalty,[44] resulting in

the partial or total extinguishment of co-ownership.[45]

In the present case, the parties agreed to divide the subject property by giving the petitioner the 3,020 square

meters residential portion on the northern part near the Municipal road.[46] There is no dispute that this 3,020- square

meter portion is the same parcel of land identified as Lot No. 2 (which is not the subject of the respondents action for

reconveyance) in the Affidavit and the Subdivision Plan presented by the petitioner before the Register of Deeds. The fact

that the Agreement lacks technical description of the parties respective portions or that the subject property was then still

embraced by a single certificate of title could not legally prevent a partition, where the different portions allotted to

each were determined and became separately identifiable, as in this case.[47]

What is strikingly significant is that even the petitioners own testimony merely attempted to confirm his actual

possession of the disputed property, without, however, supporting his claim contrary to the written Agreement that the

parties ownership of the subject property would be co-extensive with their possession. This is the core of the petitioners

defense. At any rate, just as non-possession does not negate ownership, neither does possession automatically prove

ownership,[48]especially in the face of an unambiguous document executed by the parties themselves.

Contrary to the petitioners claim that his actual possession determines the extent of his ownership, it is the

parties Agreement that defines the extent of their ownership in the subject property. One of the legal effects of partition,

whether by agreement among the co-owners or by judicial proceeding, is to terminate the co-ownership and,

consequently, to make the previous co-owners the absolute and exclusive owner of the share allotted to him.[49]

Parenthetically, the respondent declared for taxation purposes the portion he claims in December 1987. [50] The

total area (7,544 square meters) of the properties declared is equivalent to the area allotted to the respondent under the

Agreement. On the other hand, the petitioner declared the 1,004-square meter portion only in September 1994, under Tax

Declaration No. 9393,[51]despite his claim of exclusive and adverse possession since 1969.

Nullification of the petitioners title over the 3,020 square meter portion

While the petitioner admitted using a spurious document in securing his titles, nonetheless, he questions the CAs
nullification of TCT No. 195812 on the ground that, per the respondents own admission and the parties Agreement, he is
the rightful owner of the land covered by this title.

We disagree.

The petitioners argument confuses registration of title with ownership.[52] While the petitioners ownership over the
land covered by TCT No. 195812 is undisputed, his ownership only gave him the right to apply for the proper transfer of
title to the property in his name. Obviously, the petitioner, even as a rightful owner, must comply with the statutory
provisions on the transfer of registered title to lands.[53] Section 53 of Presidential Decree No. 1529 provides that the
subsequent registration of title procured by the presentation of a forged deed or other instrument is null and void. Thus,
the subsequent issuance of TCT No. 195812 gave the petitioner no better right than the tainted registration which was the
basis for the issuance of the same title. The Court simply cannot allow the petitioners attempt to get around the proper
procedure for registering the transfer of title in his name by using spurious documents.

Reconveyance is the remedy of the rightful owner only

While the CA correctly nullified the petitioners certificates of title, the CA erred in ordering the reconveyance of
the entire subject property in the respondents favor. The respondent himself admitted that the 3,020- square meter
portion covered by TCT No. 195812 is the petitioners just share in the subject property. [54] Thus, although the petitioner
obtained TCT No. 195812 using the same spurious documents, the land covered by this title should not be reconveyed in
favor of the respondent since he is not the rightful owner of the property covered by this title.[55]

WHEREFORE, the petition is partially GRANTED. The assailed decision and resolution of the Court of Appeals
are MODIFIED. Accordingly, the petitioner is directed to RECONVEY to the respondent the parcel of land covered by TCT
No. 195813. Costs against petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 171601 April 8, 2015

SPOUSES BONIFACIO AND LUCIA PARAS, Petitioners,

vs.
KIMWA CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent.

DECISION

LEONEN, J.:

This resolves the Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure praying that the
assailed Decision2 dated July 4, 2005 and Resolution3 dated February 9, 2006 of the Court of Appeals Special 20th
Division in CA-G.R. CV No. 74682 be reversed and set aside, and that the Decision4 of Branch 55 of the Regional Trial
Court, Mandaue City dated May 16, 2001 in Civil Case No. MAN-2412 be reinstated.5

The trial court's May 16, 2001 Decision ruled in favor of petitioners Spouses Bonifacio and Lucia Paras (plaintiffs before
the Regional Trial Court) in their action for breach of contract with damages against respondent Kimwa Construction and
Development Corporation (Kimwa).6 The assailed Decision of the Court of Appeals reversed and set aside the trial court’s
May 16, 2001 Decision and dismissed Spouses Paras’ Complaint.7 The Court of Appeals’ assailed Resolution denied
Spouses Paras’ Motion for Reconsideration.8

Lucia Paras (Lucia) was a "concessionaire of a sand and gravel permit at Kabulihan, Toledo City[.]" 9 Kimwa is a
"construction firm that sells concrete aggregates to contractors and haulers in . . . Cebu."10

On December 6, 1994, Lucia and Kimwa entered into a contract denominated "Agreement for Supply of Aggregates"
(Agreement) where 40,000 cubic meters of aggregates were "allotted"11 by Lucia as supplier to Kimwa.12 Kimwa was to pick
up the allotted aggregates at Lucia’s permitted area in Toledo City 13 at ₱240.00 per truckload.14

The entirety of this Agreement reads:

AGREEMENT FOR SUPPLY OF AGGREGATES

KNOW ALL MEN BY THESE PRESENTS:

This Agreement made and entered into by and between:

LUCIA PARAS, of legal age, Filipino, married and resident of Poblacion, Toledo City, Province of Cebu, hereinafter referred
to as the SUPPLIER:

-and-

KIMWA CONSTRUCTION AND DEVELOPMENT CORP., a corporation duly organized and existing under the laws of the
Philippines with office address at Subangdaku, Mandaue City, hereinafter represented by its President MRS. CORAZON Y.
LUA, of legal age, Filipino and a resident of Subangdaku, Mandaue City[,] hereinafter referred to as the CONTRACTOR;

W I T N E S S E T H:

That the SUPPLIER is [sic] Special Permittee of (Rechanelling Block # VI of Sapang Daco River along Barangay Ilihan)
located at Toledo City under the terms and conditions:

1. That the aggregates is [sic] to be picked-up by the CONTRACTOR at the SUPPLIER [sic] permitted area
at the rate of TWO HUNDRED FORTY (P 240.00) PESOS per truck load;

2. That the volume allotted by the SUPPLIER to the CONTRACTOR is limited to 40,000 cu.m.; 3. That the
said Aggregates is [sic] for the exclusive use of the Contractor;

4. That the terms of payment is Fifteen (15) days after the receipt of billing;

5. That there is [sic] no modification, amendment, assignment or transfer of this Agreement after
acceptance shall be binding upon the SUPPLIER unless agreed to in writing by and between the
CONTRACTOR and SUPPLIER.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this 6th day of December, 1994 at Mandaue City, Cebu,
Philippines.

LUCIA PARAS(sgd.) CORAZON Y. LUA(sgd.)

Supplier Contractor

(Emphasis supplied)

Pursuant to the Agreement, Kimwa hauled 10,000 cubic meters of aggregates. Sometime after this, however, Kimwa
stopped hauling aggregates.16

Claiming that in so doing, Kimwa violated the Agreement, Lucia, joined by her husband, Bonifacio, filed the
Complaint17 for breach of contract with damages that is now subject of this Petition.

In their Complaint, Spouses Paras alleged that sometime in December 1994, Lucia was approached by Kimwa expressing
its interest to purchase gravel and sand from her.18 Kimwa allegedly asked that it be "assured"19 of 40,000 cubic meters
worth of aggregates.20 Lucia countered that her concession area was due to be rechanneled on May 15,1995, when her
Special Permit expires.21 Thus, she emphasized that she would be willing to enter into a contract with Kimwa "provided
the forty thousand cubic meter[s] w[ould] be withdrawn or completely extracted and hauled before 15 May
1995[.]"22 Kimwa then assured Lucia that it would take only two to three months for it to completely haul the 40,000
cubic meters of aggregates.23 Convinced of Kimwa’s assurances, Lucia and Kimwa entered into the Agreement.24

Spouses Paras added that within a few days, Kimwa was able to extract and haul 10,000 cubic meters of aggregates.
However, after extracting and hauling this quantity, Kimwa allegedly transferred to the concession area of a certain Mrs.
Remedios dela Torre in violation of their Agreement. They then addressed demand letters to Kimwa. As these went
unheeded, Spouses Paras filed their Complaint.25

In its Answer,26 Kimwa alleged that it never committed to obtain 40,000 cubic meters of aggregates from Lucia. It argued
that the controversial quantity of 40,000 cubic meters represented only an upper limit or the maximum quantity that it
could haul.27 It likewise claimed that it neither made any commitment to haul 40,000 cubic meters of aggregates before
May 15, 1995 nor represented that the hauling of this quantity could be completed in two to three months. 28 It denied
that the hauling of 10,000 cubic meters of aggregates was completed in a matter of days and countered that it took weeks
to do so. It also denied transferring to the concession area of a certain Mrs. Remedios dela Torre.29
Kimwa asserted that the Agreement articulated the parties’ true intent that 40,000 cubic meters was a maximum limit
and that May 15, 1995 was never set as a deadline. Invoking the Parol Evidence Rule, it insisted that Spouses Paras were
barred from introducing evidence which would show that the parties had agreed differently. 30

On May 16, 2001, the Regional Trial Court rendered the Decision in favor of Spouses Paras. The trial court noted that the
Agreement stipulated that the allotted aggregates were set aside exclusively for Kimwa. It reasoned that it was contrary to
human experience for Kimwa to have entered into an Agreement with Lucia without verifying the latter’s authority as a
concessionaire.31 Considering that the Special Permit32 granted to Lucia (petitioners’ Exhibit "A" before the trial court)
clearly indicated that her authority was good for only six (6) months from November 14, 1994, the trial court noted that
Kimwa must have been aware that the 40,000 cubic meters of aggregates allotted to it must necessarily be hauled by May
15, 1995. As it failed to do so, it was liable to Spouses Paras for the total sum of ₱720,000.00, the value of the 30,000
cubic meters of aggregates that Kimwa did not haul, in addition to attorney’s fees and costs of suit. 33

On appeal, the Court of Appeals reversed the Regional Trial Court’s Decision. It faulted the trial court for basing its
findings on evidence presented which were supposedly in violation of the Parol Evidence Rule. It noted that the Agreement
was clear that Kimwa was under no obligation to haul 40,000 cubic meters of aggregates by May 15, 1995. 34

In a subsequent Resolution, the Court of Appeals denied reconsideration to Spouses Paras.35

Hence, this Petition was filed.

The issue for resolution is whether respondent Kimwa Construction and Development Corporation is liable to petitioners
Spouses Paras for (admittedly) failing to haul 30,000 cubic meters of aggregates from petitioner Lucia Paras’ permitted
area by May 15, 1995.

To resolve this, it is necessary to determine whether petitioners Spouses Paras were able to establish that respondent
Kimwa was obliged to haul a total of 40,000 cubic meters of aggregates on or before May 15, 1995.

We reverse the Decision of the Court of Appeals and reinstate that of the Regional Trial Court. Respondent Kimwa is liable
for failing to haul the remainder of the quantity which it was obliged to acquire from petitioner Lucia Paras.

Rule 130, Section 9 of the Revised Rules on Evidence provides for the Parol Evidence Rule, the rule on admissibility of
documentary evidence when the terms of an agreement have been reduced into writing:

Section 9. Evidence of written agreements. — When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest,
no evidence of such terms other than the contents of the written agreement.

However, a party may present evidence to modify, explain or add to the terms of written agreement if he puts in issue in
his pleading:

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the
written agreement.

The term "agreement" includes wills.

Per this rule, reduction to written form, regardless of the formalities observed,36 "forbids any addition to, or contradiction
of, the terms of a written agreement by testimony or other evidence purporting to show that different terms were agreed
upon by the parties, varying the purport of the written contract."37

This rule is animated by a perceived wisdom in deferring to the contracting parties’ articulated intent. In choosing to
reduce their agreement into writing, they are deemed to have done so meticulously and carefully, employing specific —
frequently, even technical — language as are appropriate to their context. From an evidentiary standpoint, this is also
because "oral testimony . . . coming from a party who has an interest in the outcome of the case, depending exclusively on
human memory, is not as reliable as written or documentary evidence. Spoken words could be notoriously unreliable
unlike a written contract which speaks of a uniform language."38 As illustrated in Abella v. Court of Appeals:39

Without any doubt, oral testimony as to a certain fact, depending as it does exclusively on human memory, is not as
reliable as written or documentary evidence.1âwphi1 "I would sooner trust the smallest slip of paper for truth," said Judge
Limpkin of Georgia, "than the strongest and most retentive memory ever bestowed on mortal man." This is especially true
in this case where such oral testimony is given by . . . a party to the case who has an interest in its outcome, and by . . . a
witness who claimed to have received a commission from the petitioner.40

This, however, is merely a general rule. Provided that a party puts in issue in its pleading any of the four(4) items
enumerated in the second paragraph of Rule 130, Section 9, "a party may present evidence to modify, explain or add to
the terms of the agreement[.]"41 Raising any of these items as an issue in a pleading such that it falls under the exception
is not limited to the party initiating an action. In Philippine National Railways v. Court of First Instance of Albay,42 this
court noted that "if the defendant set up the affirmative defense that the contract mentioned in the complaint does not
express the true agreement of the parties, then parol evidence is admissible to prove the true agreement of the
parties[.]"43 Moreover, as with all possible objections to the admission of evidence, a party’s failure to timely object is
deemed a waiver, and parol evidence may then be entertained.

Apart from pleading these exceptions, it is equally imperative that the parol evidence sought to be introduced points to the
conclusion proposed by the party presenting it. That is, it must be relevant, tending to "induce belief in [the]
existence"44 of the flaw, true intent, or subsequent extraneous terms averred by the party seeking to introduce parol
evidence.

In sum, two (2) things must be established for parol evidence to be admitted: first, that the existence of any of the four (4)
exceptions has been put in issue in a party’s pleading or has not been objected to by the adverse party; and second, that
the parol evidence sought to be presented serves to form the basis of the conclusion proposed by the presenting party.

II

Here, the Court of Appeals found fault in the Regional Trial Court for basing its findings "on the basis of evidence
presented in violation of the parol evidence rule."45 It proceeded to fault petitioners Spouses Paras for showing "no proof . .
. of [respondent Kimwa’s] obligation."46 Then, it stated that "[t]he stipulations in the agreement between the parties leave
no room for interpretation."47

The Court of Appeals is in serious error.

At the onset, two (2) flaws in the Court of Appeals’ reasoning must be emphasized. First, it is inconsistent to say, on one
hand, that the trial court erred on the basis of "evidence presented"48 (albeit supposedly in violation of the Parol Evidence
Rule),and, on the other, that petitioners Spouses Paras showed "no proof."49 Second, without even accounting for the
exceptions provided by Rule 130, Section 9, the Court of Appeals immediately concluded that whatever evidence
petitioners Spouses Paras presented was in violation of the Parol Evidence Rule.

Contrary to the Court of Appeal’s conclusion, petitioners Spouses Paras pleaded in the Complaint they filed before the
trial court a mistake or imperfection in the Agreement, as well as the Agreement’s failure to express the true intent of the
parties. Further, respondent Kimwa, through its Answer, also responded to petitioners Spouses Paras’ pleading of these
issues. This is, thus, an exceptional case allowing admission of parol evidence.

Paragraphs 6 to 10 of petitioners’ Complaint read:

6. Sensing that the buyers-contractors and haulers alike could easily consumed [sic] the deposits defendant
proposed to the plaintiff-wife that it be assured of a forty thousand (40,000) cubic meter [sic];

7. Plaintiff countered that the area is scheduled to be rechanneled on 15 May 1995 and by that time she will be
prohibited to sell the aggregates;

8. She further told the defendant that she would be willing to enter into a contract provided the forty thousand
cubic meter [sic] will be withdrawn or completely extracted and hauled before 15 May 1995, the scheduled
rechanneling;

9. Defendant assured her that it will take them only two to three months to haul completely the desired volume as
defendant has all the trucks needed;
 10. Convinced of the assurances, plaintiff-wife and the defendant entered into a contract for the supply of the
aggregates sometime on 6 December 1994 or thereabouts, at a cost of Two Hundred Forty (₱240.00) Pesos per
truckload[.]50

It is true that petitioners Spouses Paras’ Complaint does not specifically state words and phrases such as "mistake,"
"imperfection," or "failure to express the true intent of the parties." Nevertheless, it is evident that the crux of petitioners
Spouses Paras’ Complaint is their assertion that the Agreement "entered into . . . on 6 December 1994 or
thereabouts"51 was founded on the parties’ supposed understanding that the quantity of aggregates allotted in favor of
respondent Kimwa must be hauled by May 15, 1995, lest such hauling be rendered impossible by the rechanneling of
petitioner Lucia Paras’ permitted area. This assertion is the very foundation of petitioners’ having come to court for relief.

Proof of how petitioners Spouses Paras successfully pleaded and put this in issue in their Complaint is how respondent
Kimwa felt it necessary to respond to it or address it in its Answer. Paragraphs 2 to 5 of respondent Kimwa’s Answer read:

2. The allegation in paragraph six of the complaint is admitted subject to the qualification that when defendant
offered to buy aggregates from the concession of the plaintiffs, it simply asked the plaintiff concessionaire if she
could sell a sufficient supply of aggregates to be used in defendant’s construction business and plaintiff
concessionaire agreed to sell to the defendant aggregates from her concession up to a limit of 40,000 cubic meters
at the price of ₱240.00 per cubic meter.

3. The allegations in paragraph seven and eight of the complaint are vehemently denied by the defendant. The
contract which was entered into by the plaintiffs and the defendant provides only that the former supply the latter
the volume of 40,000.00 cubic meters of aggregates. There is no truth to the allegation that the plaintiff wife
entered into the contract under the condition that the aggregates must be quarried and hauled by defendant
completely before May 15, 1995, otherwise this would have been unequivocally stipulated in the contract.

4. The allegation in paragraph nine of the complaint is hereby denied. The defendant never made any assurance
to the plaintiff wife that it will take only two to three months to haul the aforesaid volume of aggregates. Likewise,
the contract is silent on this aspect for in fact there is no definite time frame agreed upon by the parties within
which defendant is to quarry and haul aggregates from the concession of the plaintiffs.

5. The allegation in paragraph ten of the complaint is admitted insofar as the execution of the contract is
concerned. However, the contract was executed, not by reason of the alleged assurances of the defendant to the
plaintiffs, as claimed by the latter, but because of the intent and willingness of the plaintiffs to supply and sell
aggregates to it. It was upon the instance of the plaintiff that the defendant sign the subject contract to express in
writing their agreement that the latter would haul aggregates from plaintiffs’ concession up to such point in time
that the maximum limit of 40,000 cubic meters would be quarried and hauled without a definite deadline being
set. Moreover, the contract does not obligate the defendant to consume the allotted volume of 40,000 cubic
meters.52

Considering how the Agreement’s mistake, imperfection, or supposed failure to express the parties’ true intent was
successfully put in issue in petitioners Spouses Paras’ Complaint (and even responded to by respondent Kimwa in its
Answer), this case falls under the exceptions provided by Rule 130, Section 9 of the Revised Rules on Evidence.
Accordingly, the testimonial and documentary parol evidence sought to be introduced by petitioners Spouses Paras, which
attest to these supposed flaws and what they aver to have been the parties’ true intent, may be admitted and considered.

III

Of course, this admission and availability for consideration is no guarantee of how exactly the parol evidence adduced
shall be appreciated by a court. That is, they do not guarantee the probative value, if any, that shall be attached to them.
In any case, we find that petitioners have established that respondent Kimwa was obliged to haul 40,000 cubic meters of
aggregates on or before May 15, 1995. Considering its admission that it did not haul 30,000 cubic meters of aggregates,
respondent Kimwa is liable to petitioners.

The Pre-Trial Order issued by the Regional Trial Court in Civil Case No. MAN-2412 attests to respondent Kimwa’s
admission that:

6) Prior to or during the execution of the contract[,] the Plaintiffs furnished the Defendant all the documents and requisite
papers in connection with the contract, one of which was a copy of the Plaintiff’s [sic] special permit indicating that the
Plaintiff’s [sic] authority was only good for (6) months from November 14, 1994.53

This Special Permit was, in turn, introduced by petitioners in evidence as their Exhibit "A,"54 with its date of issuance and
effectivity being specifically identified as their Exhibit "A-1."55 Relevant portions of this Special Permit read:
To All Whom It May Concern:

PERMISSION is hereby granted to:

Name Address

LUCIA PARAS Poblacion, Toledo City

to undertake the rechannelling of Block No. VI of Sapang Daco River along Barangay Ilihan, Toledo City, subject to
following terms and conditions:

1. That the volume to be extracted from the area is approximately 40,000 cubic meters;

....

This permit which is valid for six (6) months from the date hereof is revocable anytime upon violation of any of the
foregoing conditions or in the interest of public peace and order.

Cebu Capitol, Cebu City, November 14, 1994.56

Having been admittedly furnished a copy of this Special Permit, respondent Kimwa was well aware that a total of only
about 40,000 cubic meters of aggregates may be extracted by petitioner Lucia from the permitted area, and that petitioner
Lucia Paras’ operations cannot extend beyond May 15, 1995, when the Special Permit expires.

The Special Permit’s condition that a total of only about 40,000 cubic meters of aggregates may be extracted by petitioner
Lucia Paras from the permitted area lends credence to the position that the aggregates "allotted" to respondent Kimwa was
in consideration of its corresponding commitment to haul all 40,000 cubic meters. This is so, especially in light of the
Agreement’s own statement that "the said Aggregates is for the exclusive use of [respondent Kimwa.]"57 By allotting the
entire 40,000 cubic meters, petitioner Lucia Paras bound her entire business to respondent Kimwa. Rational human
behavior dictates that she must have done so with the corresponding assurances from it. It would have been irrational, if
not ridiculous, of her to oblige herself to make this allotment without respondent Kimwa’s concomitant undertaking that it
would obtain the entire amount allotted.

Likewise, the condition that the Special Permit shall be valid for only six (6) months from November 14,1994 lends
credence to petitioners Spouses Paras’ assertion that, in entering into the Agreement with respondent Kimwa, petitioner
Lucia Paras did so because of respondent Kimwa's promise that hauling can be completed by May 15, 1995. Bound as she
was by the Special Permit, petitioner Lucia Paras needed to make it eminently clear to any party she was transacting with
that she could supply aggregates only up to May 15, 1995 and that the other party's hauling must be completed by May
15, 1995. She was merely acting with due diligence, for otherwise, any contract she would enter into would be negated;
any commitment she would make beyond May 15, 1995 would make her guilty of misrepresentation, and any prospective
income for her would be rendered illusory.

Our evidentiary rules impel us to proceed from the position (unless convincingly shown otherwise) that individuals act as
rational human beings, i.e, "[t]hat a person takes ordinary care of his concerns[.]"58 This basic evidentiary stance, taken
with the. supporting evidence petitioners Spouses Paras adduced, respondent Kimwa's awareness of the conditions under
which petitioner Lucia Paras was bound, and the Agreement's own text specifying exclusive allotment for respondent
Kimwa, supports petitioners Spouses Paras' position that respondent Kimwa was obliged to haul 40,000 cubic meters of
aggregates on or before May 15, 1995. As it admittedly hauled only 10,000 cubic meters, respondent Kimwa is liable for
breach of contract in respect of the remaining 30,000 cubic meters.

WHEREFORE, the Petition is GRANTED. The assailed Decision dated July 4, 2005 and Resolution dated February 9, 2006
of the Court of Appeals Special 20th Division in CA-G.R. CV No. 74682 are REVERSED and SET ASIDE. The Decision of
Branch 55 of the Regional Trial Court, Mandaue City dated May 16, 2001 in Civil Case No. MAN-2412 is REINSTATED.

A legal interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of this Decision
until full satisfaction.

SO ORDERED.
 THIRD DIVISION

[ G.R. No. 205590, September 02, 2015 ]

PHILIPPINE NATIONAL BANK, PETITIONER, VS. GAYAM. PAS IMIO, RESPONDENT.

DECISION

VELASCO JR., J.:

In this petition for review under Rule 45, the Philippine National Bank (PNB) assails and seeks to set aside the January
23, 2013 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 94079 dismissing petitioner's appeal from the decision
of the Regional Trial Court (RTC) of Parañaque City, Branch 196, which ruled for respondent Ligaya Pasimio (Pasimio) in
an action for a sum of money she commenced thereat against the bank.

The Facts

From the petition, the comment thereon, their respective annexes, and other pleadings filed by the parties, the Court
gathers the following relevant facts:

On May 19, 2005, Pasimio filed suit against PNB for the recovery of a sum of money and damages before the RTC of
Parañaque City. In her complaint,[2] docketed as Civil Case No. CV-05-0195 and eventually raffled to Branch 196 of the
court, she alleged having a peso and dollar time deposit accounts with PNB in the total amount of P4,322,057.57 and
US$5,170.80, respectively; that both investment placements have matured; and when she sought to withdraw her deposit
money with accrued interests, PNB refused to oblige.

In its Answer with Counterclaim,[3] with annexes, PNB admitted the fact of deposit placement for the amount aforestated.
But it claimed that Pasimio is without right to insist on their withdrawal, the deposited amount having already been used
in payment of her outstanding loan obligations to the bank. PNB narrated how the set off of sort came about: Pasimio and
her husband took out three "loans against deposit hold-out"[4] from the PNB Sucat branch, as follows: a Three Million One
Hundred Thousand Peso (P3,100,000) loan on March 21, 2001; a One Million Seven Hundred Thousand Peso
(P1,700,000) loan on April 2, 2001; and a Thirty-One Thousand One Hundred US Dollar (US$31,1 00) loan on December
7, 2001.

PNB further alleged the following: (1) each loan accommodation was secured by a deposit account of Pasimio; (2) the
proceeds of the first and second loans were released to and received by the Pasimio spouses in the form of PNB Manager's
Checks (MCs) while the proceeds of the third loan were released and received in cash; (3) the loan proceeds were
acknowledged by Pasimio in corresponding notarized promissory notes (PNs) and Disclosure Statements of Loan/Credit
Transaction; (4) Pasimio then re-lent the proceeds of the third loan to a certain Paolo Sun; (5) contrary to Pasimio's
allegations on maturing deposit instruments, she in fact renewed/rolled over her placements several times; and (6)
Pasimio had failed to pay her outstanding loan obligations forcing the bank to apply her deposits to the unpaid loans
pursuant to the legal compensation arrangement embodied in the "hold-out" proviso under Clause 5 of the PN.[5]

To this answer, Pasimio filed her reply and answer to counterclaim alleging facts she would also later venture to prove.

During the trial following the joinder of issues, Pasimio denied obtaining any loan from PNB, let alone receiving the
corresponding loan proceeds. While conceding signing certain documents which turned out to be the Peso Loans Against
Peso/FX Deposit Loan Applications, the Promissory Notes and Hold-out on Savings Deposit/Peso/FX Time Deposit and
Assignment of Deposit Substitute and the Disclosure Statements of Loan/Credit Transaction (Loan Documents), she
professed not understanding what they really meant. She agreed to affix her signature on these loan documents in blank
or in an incomplete state, she added, only because the PNB Sucat branch manager, Teresita Gregorio (Gregorio), and
Customer Relations Officer, Gloria Miranda (Miranda), led her to believe that what she was signing were related to new
high-yielding PNB products.

Pasimio would also deny re-lending the loan proceeds to Paolo Sun. She asserted in this regard that Gregorio repaired to
her residence with a duly accomplished affidavit detailing the re-lending event and urged her to sign the same if she
wished to recover her placements.

In all, Pasimio depicted herself as victim of a nefarious lending scam, orchestrated by Gregorio and Miranda who PNB had
ordered dismissed following the exposure of their involvement in anomalous loan transactions with unsuspecting PNB
depositors.

Pasimio submitted the following as evidence:

1. Passbook for PNB Mint Placement No. 61281001164164 (same as PNB Mint Placement No. 6128100115590) - to
prove that she invested P3,100,000 with PNB-Sucat under PNB Mint Placement No. 6128100115590;

2. Passbook for PNB Mint Placement No. 61281001164688 (same as PNB Mint Placement No. 6128100115632) - to
prove that she invested P1,700,000 with PNB-Sucat under PNB Mint Placement No. 6128100115632;

3. Certificate of Time Deposit for $CTD No. 6628100116575 - to prove that she invested US$5,160.84 with PNB-
Sucat under Certificate of Time Deposit $CTD No. 66281001 16575;

4. Letter dated April 22, 2004 addressed to the PNB Sucat branch manager to prove that she made a demand for the
release of her investments;

5. Letters dated July 21, 2004 from PNB's Internal Auditor to Pasimio -to prove that PNB confirmed her deposits and
investment with PNB-Sucat but that she corrected entries pertaining to their amounts and denied having a
deposit hold-out on any of her investments;

6. Engagement letter dated February 2, 2005 from the law firm Rondain & Mendiola;

7. An unsigned affidavit - to prove that Gregorio had prepared an affidavit to make it appear that Pasimio and other
depositors entered into loan agreements with a certain Paolo Sun, to cover her (Gregorio's) illegal schemes and
that Gregorio went to the homes of these depositors begging them to sign the affidavit as she was already being
audited by PNB's main office;[6] and

8. A Memorandum on Irregular Lending Operation on Loans vs. Deposit Hold-Out (Sucat Branch) dated February
18, 2003 detailing the alleged modus operandi of Gregorio and Miranda and stating that the latter were dismissed
for their involvement in shady loan practices.[7]

On the other hand, PNB offered the following for purposes as stated:

1. Peso Loans Against Peso/FX Deposit Loan Application Form dated March 21, 2001 - to prove that Pasimio applied
for a PNB loan and voluntarily executed a loan application form dated March 21, 2001 for the amount: of
P3,100,000 secured by her own PNB Mint Account No. 612810011393 as loan collateral;

2. PN and Hold-out on Peso/FX Savings Deposit/Peso/FX Time Deposit and Assignment of Deposit Substitute dated
March 21, 2001 - to prove that Pasimio's P 3,100,000 loan was supported with a PN which she and her husband
voluntarily signed and executed on March 21, 2001 and that she renewed the said loan on different dates;

3. Disclosure Statement of Loan/Credit Transaction dated March 21, 2001 - to prove that Pasimio's loan for
P3,100,000 was also supported with a Disclosure Statement, a copy of which she acknowledged to have received
prior to the consummation of the credit transaction, where she voluntarily agreed to the terms and conditions of
her loan by signing the said statement;

4. MC No. 0000166650 dated March 21, 2001 for P3,049,188.94 - to prove that Pasimio encashed this check and
received the proceeds of her P3,100,000 loan, net of bank charges;

5. Peso Loans Against Peso/FX Deposit Loan Application/Approval Form dated April 2, 2001 - to prove that Pasimio
applied for another loan on April 2, 2001 in the amount of PI,700,000 and that the same was secured by
Pasimio's own PNB Mint Account No. 6128100113429. As in the first loan, Pasimio also voluntarily affixed her
signature on the document;

6. PN and Hold-out on Peso/FX Savings Deposit/Peso/FX Time Deposit and Assignment of Deposit Substitute dated
April 2, 2001 - to prove that Pasimio's second loan of LP1,700,000 is supported by a PN which she voluntarily
 signed and executed on April 2, 2001 together with her husband and that she renewed the said loan on different
dates;

7. Disclosure Statement of Loan/Credit Transaction dated April 2, 2001 - to prove that Pasimio's loan for
P1,700,000 was also supported with a Disclosure Statement, a copy of which she acknowledged to have received
prior to the consummation of the credit transaction, where she voluntarily agreed to the terms and conditions of
her loan by signing the said statement;

8. MC No. 0000166682 dated April 2, 2001 in the amount of P1,672,797.50 - to prove that Pasimio encashed this
check and received the proceeds of her P1,700,000 loan, net of bank charges;

9. Peso Loans Against Peso/FX Deposit Loan Application/Approval Form dated December 7, 200 - to prove that
Pasimio applied for a US$31,100 loan which her own PNB FX CTD No. 6628100115637 (US$20,393.78) and CTD
No. 6628100115716 (US$10,766.25) secured as collateral. As in the first two loans, Pasimio also voluntarily
affixed her signature on the document;

10. PN and Hold-Out on Peso/FX Savings Deposit/Peso/FX Time Deposit and Assignment of Deposit Substitute dated
December 7, 2001 - to prove that Pasimio's US$3 1,100 loan is supported by a PN note which she and her
husband voluntarily signed and executed on December 7, 2001 and that she renewed the said loan on different
dates;

11. Disclosure Statement of Loan/Credit Transaction dated December 7, 2001 - to prove that Pasimio's loan for US
$31,100 was also supported with a Disclosure Statement, a copy of which she acknowledged to have received
prior to the consummation of the credit transaction, where she voluntarily agreed to the terms and conditions of
her loan by signing the said statement;

12. Miscellaneous Ticket dated December 7, 2001 in the amount of US$30,981.28 - to prove that Pasimio received the
proceeds of her US$31,100 loan, net of bank charges;

13. Bills Payment Form dated July 26, 2004 - to prove that her failure to settle her peso/dollar loan obligations was
subsequently settled by offsetting the available balance of her deposit accounts that were used as collaterals
against these loans, in accordance with the PNs she executed;

14. Demand letter addressed to Pasimio dated July 5, 2004 signed by Noel R. Millares on behalf of the bank -- to
prove that PNB demanded payment of her loans in the aggregate amount of P4,623,458.03 and US$5,277.34
which had already become due and payable;

15. Pasimio's Affidavit dated April 10, 2003 - to prove Pasimio's execution of an affidavit lending US$3 1,100 to Paolo
Sun;

16. Pasimio's letter dated February 25, 2003 - to prove that the Pasimios effected a change in their PNB Mint Account
Nos. deposited at PNB Sucat from the old account number 6128100113393 to the new account number
6128100116464 (pertaining to the deposit of F3,100,000); and from the old account number 6128100113429 to
the new account number 61281001.16488 (pertaining to the deposit of P1,700,000);

17. PNB Mint Savings Account Passbook with Serial No. 046783 - to prove that the deposit covered by this passbook
in the amount of P3,100,000 was used as collateral for Pasimio's f3,100,000 loan. As proof of this fact, the
passbook is stamped with the notation "HOLDOUT" to indicate a withdrawal restriction on this account;

18. PNB Mint Savings Account Passbook with Serial Number 046781 - to prove that the deposit covered by this,
passbook in the amount of P1,700,000 was used as collateral for Pasimio's P1,700,000 loan. As proof of this fact,
the passbook is stamped with the notation "HOLDOUT" to indicate a withdrawal restriction on this account;

19. Portion of PNB Mint Passbook stamped "Hold Out" - to prove that the savings account covered by this passbook is
under a hold-out restriction;

20. Pasimio's Certificate of Time Deposit Ledger for PNBig Savings Account No. 222-5476838-7 - to prove that Pasimio
opened an account with PNB-Sucat on March 21, 2001 under Account No. 222- 5476838-7 which was
constituted as collateral of the P3,100,000 loan;

21. PNBig Savings Account from October 29, 2003 up to May 3, 2004 - to prove that Pasimio opened an account with
PNB-Sucat under Account No. 281-5254913 which constituted as collateral for the P1,700,000 loan;

22. The Certificate of Deposit Ledger from June 4, 2001 to July 25, 2004 - to prove that the amounts covered by this
deposit document were used as collateral for Pasimio's dollar loan of US$31,100;
 23. CTD dated June 4, 2001 in the amount of US$34,030.18 - to prove that Pasimio was issued a Certificate of Time
Deposit for the amount of US$34,030.18 with an annual interest rate of 4.5%;

24. CTD dated July 27, 2001 in the amount of US$20,187.10 - to prove that Pasimio was issued a Certificate of Time
Deposit for the amount of US$20,187.10 with an annual interest rate of 4.125%;

25. CTD dated December 23, 2003 in the amount of US$5,136.03 - to prove that Pasimio had an existing dollar time
deposit with PNB which she used as collateral for the dollar hold-out loan that she took out. The dollar certificate
is stamped with a notation that reads "HOLD-OUT";

26. Statement of Account (SOA) - to prove that PNB-Sucat issued a SOA for Pasimio's Dollar Hold-Out Loan, which
showed an outstanding balance of US$5,100. This SOA was used as basis for the offsetting of Pasimio's past due
loan obligation with her PNB Mint Account as collateral; and

27. Statement of Account (SOA) - to prove that PNB-Sucat issued a SOA for Pasimio's Dollar Hold-Out Loan, which
showed an outstanding balance of P4,321,781.06. This SOA was used as basis for the offsetting of Pasimio's past
due loan obligation with her PNB Mint Account as collateral.[8]

RTC Decision

On October 30, 2009, the RTC' rendered judgment[9] in favor of Pasimio, as plaintiff, disposing:

WHEREFORE, premises considered, this court finds the Complaint dated May 16, 2005 with merit, and Defendant,
Philippine National Bank is ordered to pay plaintiff, LIGAYA M. P[A]SIMIO[,] the amount of x x x (P3,100,000.00), x x x
(P1,222,000.00) and x x x (US$5,170), respectively, representing her peso/dollar time deposit placements with said bank,
with legal interest on said amounts, and, the amount of x x x (P180,000.00) representing attorney's fees, and costs.

SO ORDERED.[10]

The disposition is predicated on the postulate that Pasimio had proven by convincing evidence that she did not obtain any
loan accommodation from PNB. As a corollary, the trial court held that there was no evidence snowing the release by PNB
of the loan proceeds to Pasimio. Pushing the point, the RTC stated that the transaction documents were highly
questionable for the reasons stated in some detail in its decision to be reproduced by the CA in its assailed decision.

Therefrom, PNB appealed to the CA, the recourse docketed as CA-GR. CV No. 94079.

CA Decision

In its assailed Decision dated January 23, 2013, the CA affirmed that the RTC, to wit:

WHEREFORE, the instant appeal is DENIED. The Decision dated 30 October 2009 rendered by the [RTC], Branch 196,
Parañaque City in Civil Case No. 05-0195 is hereby AFFIRMED.[11]

Even as it found and declared PNB's bank personnel grossly negligent and their transactions with Pasimio highly
unacceptable,[12] the appellate court held that no loan proceeds were ever released to Pasimio, thus sustaining the RTC
appreciation of the evidence thus presented on the matter by Pasimio.[13] The CA wrote:

Hence, We are one with the RTC when it ruled that there was no release of proceeds of bank loans to plaintiff-appellee
[Pasimio], viz:
No release of proceeds of purported bank loans to plaintiff. The evidence at hand does not show that any amount of the
loans, if there were any, were ever released by [PNB] to plaintiff.

The [PNB] presented a miscellaneous ticket dated December 7, 2001 for the discounted amount of x x x (US$ 30,981.28)
attending the release of such funds over the purported third loan in the amount of x x x (US$ 31.100.00) extended to
plaintiff and as affecting her FX dollar time deposits. This document remains to be a simple ticket advice and | would] not
amount to fact of payment of loan proceeds in the absence of any cogent and better evidence which is available to (he
bank. There is no statement of account or a corresponding check document presented to compliment such ticket advice to
clearly show an amount was debited from the account of the bank to ably pay off the amount of the loan proceeds. The
miscellaneous ticket standing by itself is no[t] an adequate proof of fact of payment of a loan x x x.

The [PNB] presented a document for Manager Check No. 166650 dated March 21, 2001 at a discounted amount of x x x
(P3,049,188.94) to prove the possible release of proceeds of a first loan allegedly secured by plaintiff for the amount of x x
x (P3,100,000.00). Looking over the dorsal portion of the check, it is highly unnatural and irregular that the very check in
question does not have a machine printed validation of the transaction to reflect the debit entry of the account from which
the release "of funds might have been secured. With exception to the stamp marking and a few signatures at the back of
the check, it becomes highly inconceivable for a bank teller to forget a machine validation of a check, not unless the
checks was not properly cleared but was only received by the teller. The check standing out as evidence docs not proffer
(that the amount indicated therein was properly released for the purpose, to only draw a farce conclusion that it was
properly transacted and funds was indeed released to plaintiff.

The [PNB] presented a document for Manager Check No. 166682 dated April 2, 2001 in the discounted amount of x x x
(P1,679,797.50) to prove the alleged release of proceeds of a second loan allegedly secured by plaintiff for the amount x x x
(P1,700,000.00). Looking over the dorsal portion of the check, the machine validation entry by the teller reads of
entry '005 502 281 02AP01 PCOUT 1,672,797.50 A N 14021226' in comparison with the front portion of the very check
does not tally with the check no. '166682' neither the checking account from which the amount is drawn at reference
number '00-281-022222-2' which makes it an invalid validation entry and will not prove the fact that debited amounts
were made from the bank account number '00-281-022222-2' [to cover the release to plaintiff of proceeds] of the second
loan. There being no explanation by the very bank employees presented by the bank on the discrepancy of the teller
validation entries with the checking account used to possible pay off the release of loan proceeds, there can be no
indication that the loan was properly paid for to plaintiff.

Simply stated, there is really no loan ever released by defendant bank in favor of plaintiff to engage the operative right to
hold-out on the deposits of the latter.[14]

On a related matter, the CA found, as highly irregular, the PNB personnel's act of securing Pasimio's signature and
consent to have the proceeds of the US$3 1,100 loan re-lent to Paolo Sun. ft expounded:

Second, it can be gleaned from the facts of the case that [PNB] was able to obtain the signature and assent of plaintiff-
appellee in re-lending the loan proceeds to a certain Paolo Sun, in a manner not in accordance with the ordinary course of
business of banks. According to plaintiff-appellee, Bank Manager Gregorio went to her house for her to sign a document,
telling her that it was the only way for plaintiff-appellee to get her money back by re-lending her money deposits with
[PNB] to a certain Paolo Sun whom she does not know. Plaintiff-appellee also contends that she was not aware that the
document she signed was notarized.

For that alone, the action performed by the bank manager in the transactions is definitely exposed to a high incident of
negligence. It bears stressing that banks must exercise the highest degree of diligence and by doing the transactions
outside the bank without any proper explanation of the consequences of the document to be signed by plaintiff-appellee
as client of the bank is reprehensible x x x. The bank personnel misrepresented the true nature of the transaction which
deprived plaintiff-appellee to evaluate the consequences of the transaction offered to her by the bank personnel of
[PNB].[15]

And agreeing with the RTC on what it viewed as the questionable nature of the transactions PNB entered into with
Pasimio, as purportedly evidenced by a combination of related circumstances reflecting documentary tampering, the CA
quoted with approval the ensuing excerpts from the RTC's decision:
The transaction documents are highly questionable. The loan application form dated March 21, 2001 over the purported
first peso loan in the amount of x x x (P3,100,000.00) which was verified with a notary public on April 30, 2001 did not
utilize any residence certificate of plaintiff x x x which also missed out for a residence certificate number in the
promissory note dated March 21, 2001, the same former document carried bolder typewritten entries for the names
of depositors but faint entries for the amount and the security deposit account which only shows that such entries
were made on different dates using different typesets compounded by the column side for the verified balance of deposit
and the recommendation of interest were left unfilled. Which circumstances bring in a question on the validity and
veracity of the loan documents when in fact the entries and the missing items thereto [do] not speak well of a fully
accomplished and perfected loan document between the parties. Sad to say, this court cannot even believe [PNB's]
witness, Edna Palomares in stating that she checked the entries [in] the loan approval form be lore she placed her
signature considering there are valuable and important entries that are left unfulfilled by a bank officer as herself to even
downgrade her line of credibility on the true circumstances to the execution of such document.

The same circumstances attend the loan documents that allegedly covered the second loan in the amount of x x x
(P1,700,000.00) and the third loan in the amount of x x x (US$31,100.00), and, this court need not discuss further to
emphasize the line of anomalous circumstances attending the execution and existence of such documents. [16] (emphasis
added)

The CA explained that even if both parties may have been negligent in the conduct of their respective affairs, PNB cannot
evade liability for its shortcomings. As stressed by the appellate court, the banking industry is impressed with public
interest. Accordingly, all banks and their personnel are burdened with a high level of responsibility and expected to be
more careful than ordinary persons. The CA held that since PNB was grossly negligent, it should bear the consequences:

Third, although it may be argued that both parties seemed to have been negligent in their own affairs, [PNB] cannot put
all the blame to cover its negligence on plaintiff-appellee. The degree of care is more paramount and expected with that of
banks than that of an ordinary person.

As the banking industry is impressed with public interest, all bank personnel are burdened with a high level of
responsibility insofar as care and diligence in the custody and management of funds are concerned. Banks handle
transactions involving millions of pesos and properties x x x. Indeed, by the very nature of their work, the degree of
responsibility, care and trustworthiness expected of officials and employees of the bank is tar greater than those of
ordinary officers and employees in the other business firms.

Unquestionably, [PNB] x x x had the direct obligation to supervise very closely the employees handling its depositors'
accounts, and should always be mindful of the fiduciary nature of its relationship with the depositors. Such relationship
required it and its employees to record accurately every single transaction, and as promptly as possible, considering that
the depositors' accounts should always reflect the amounts of money the depositors could dispose of as they saw fit x x x.
If it fell short of that obligation, it should bear the responsibility for the consequences to the depositor x x x.

In this case. [PNB's] personnel were in violation of their duties and responsibilities as its employees. They have committed
gross negligence in dealing with their bank transactions which connotes "want of care in the performance of one's duties."
[PNB's] failure to observe basic procedure constituted serial negligence. The repealed failure to carefully observe the duties
of its personnel clearly showed utter want of care. As gathered from the records of the case, it was shown that this is not
an isolated transaction as other clients of the bank have been likewise victimized. Witness Virginia Pollard has stated in
her testimony before the RTC that at one point, she too, was a victim of irregular bank transactions of the same branch of
[PNB] as offered by its bank personnel. Thus, it was [PNB's] action that defies the ordinary banking transactions and
between an ordinary person like plaintiff-appellee and a bank like [PNB], [PNB] carries more burden, which unfortunately,
it failed to overcome.

Verily, from the foregoing instances, (PNB] was indeed grossly negligent in its transactions with plaintiff-appellee. Even
assuming that plaintiff-appellee was concocting her version of the facts, We still find irregularities and inconsistencies
that have attributed to the unjustified refusal to return the investment placement and to the commission of negligence. [17]
Finally, the CA would state the observation, citing City trust Banking Corporation v. Cruz[18] and Typoco v. Commission on
Elections,[19] that the errors PNB sought reviewed relate to the RTC's factual findings when the appellate court is not a trier
of facts, necessarily implying that it is improper for the CA under the premises to do what PNB seeks. The CA explained
that 'the stated doctrine regarding the factual findings of the RTC applies within force in the instant case." [20]

Issue

Whether or not the CA erred in affirming the RTC Decision granting Pasimio's complaint for a sum of money.

The Court's Ruling

The findings of Fact of the CA are subject to well-defined exceptions,[21] among which are when such findings are not
supported by substantial evidence, grounded on surmises or conjectures or are patently arbitrary, binding and conclusive
and this Court will not review them on appeal. This case squarely falls under the exceptions of the general rule.

The petition is impressed with merit.

The CA has the power to

resolve factual issues

Before proceeding to the main issue of this case, there is a need to clarify the assailed decision's perplexing but flawed
pronouncement that the CA, not being a trier of facts, is without competence to review the factual determination of the
RTC. Section 9 of Bates Pambansa Blg. (BP) 129, otherwise known as the Judiciary Reorganization Act of 1980,
categorically states that the CA has, inter alia, the power to try cases, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, thus:

Sec. 9. Jurisdiction. - The Court of Appeals shall exercise:

xxxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all
acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. Trials or hearings in the Court of Appeals must be
continuous and must be completed within three (3) months unless extended by the Chief Justice.

To be sure, the cases[22] the CA cited to support its adverted pronouncement are inapposite. In context, the issue involved
in Citytrust and Typoco relates to the nature and extent of this Court's, and not the CA's, power to review factual findings
of lower courts and administrative agencies in petitions for review and in original certiorari and prohibition cases.
Clearly, Citytrust and Typoco have been misread and consequently misapplied.

It is also worthy to note that the appellate court's reliance on the factual findings of the trial court is hinged on the latter's
firsthand opportunity to hear the witnesses and to observe their demeanor during the trial. However, when such findings
are not anchored on their credibility and their testimonies, but on the assessment of documents that are available to
appellate magistrates and subject to their scrutiny, reliance on the trial courts factual findings finds no application. [23]

The CA's regrettable cavalier treatment of PNB's appeal is inconsistent with Rule 41 of the Rules of Court and with the
usual course of judicial proceedings. Be reminded that the parties in Rule 41 appeal proceedings may raise questions of
fact or mixed questions of fact and law.[24] Thus, in insisting that it is not a trier of facts and implying that it had no
choice but to adopt the RTC's factual findings, the CA shirked from its function as an appellate court to independently
evaluate the merits of this case. To accept the CA's aberrant stance is to trivialize its review function, but, perhaps worse,
render useless one of the reasons for its institution.

Pasimio failed to prove her claim

by preponderance of evidence

It is settled that the burden of proof lies with the party who asserts a right and the quantum of evidence required by law
in civil cases is preponderance of evidence. "Preponderance of evidence" is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the term "greater weight of evidence" or "greater
weight of credible evidence."[25] Section 1, Rule 133 of the Rules of Court provides:

Section 1. Preponderance of evidence, how determined. - In civil cases, the party having the burden of proof must establish
his case by a preponderance of evidence. In determining where the preponderance of evidence or superior weight of
evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses'
manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the
nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of
interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also
consider the number of witnesses, though the preponderance is not necessarily with the greater number.

Just as settled is the rule that the plaintiff in civil cases must rely on strength of his or her own evidence and not upon
the weakness of that of the defendant. In the case at bench, this means that on Pasimio rests the burden of proof and the
onus to produce the required quantum of evidence to support her cause/s of action.[26]

With the view we take of the case, Pasimio has failed to discharge this burden.

There can be no quibbling that Pasimio had, during the time material, opened and maintained deposit accounts with PNB.
For this purpose, she submitted two passbooks and one certificate of time deposit to establish her peso and dollar
placements with the bank. However, PNB also succeeded in substantiating its defense for refusing to release Pasimio's
funds by presenting documents showing that her accounts were, pursuant to hold-out arrangement, made collaterals for
the loans she obtained from the bank and were eventually used to pay her outstanding loan obligations. Unfortunately,
Pasimio failed to trump PNB's defense after the burden of evidence shifted back to her.

To recall, PNB, to bolster its case, presented these documents: loan application forms, PNs and disclosure statements to
prove that Pasimio obtained the disputed bank loans; manager's checks and a miscellaneous ticket to establish the
release of the loan proceeds to Pasimio; passbooks and a certificate of time deposit with the stamp "HOLD-OUT" to
indicate restrictions on the withthrawal of Pasimio's deposit; a bills payment form to prove that Pasimio's deposits were
made to pay for her outstanding obligations in accordance with the provisions of Pasimio's promissory notes; and a signed
and notarized affidavit recounting that she lent the proceeds of her dollar loan to Paolo Sun.

On the witness stand, PNB's witness Edna Palomares, the bank's Per Pro Officer, categorically testified having prepared
and processed all. of Pasimio's loan documents, and witnessed Pasimio and her husband signing the same. [27] Palomares
also testified about Pasimio's receipt of the proceeds of the subject loans and identified the signatures appearing on the
dorsal portion of the PNB manager's checks and miscellaneous ticket covering the loan processed as genuine signatures of
Pasimio.[28]

Pasimio, on the other hand, denied applying for any loan with PNB and receiving any loan proceeds or authorizing the
bank to use her deposit as collateral. While admitting to signing certain papers, she professed unawareness that what she
signed were in fact loan documents as nobody came forward to explain what they were, adding that she was convinced to
sign them only because she was made to believe by bank officers that the documents were related to a new PNB high-
yielding investment product.

Unfortunately, the courts a quo chose to disregard all of PNB's documentary evidence and ruled in favor of Pasimio. This
to us is a blatant mistake on the part of the RTC and the CA because all that Pasimio put forward against PNB's evidence,
for the most part documentary, were unsubstantiated denials and bare, self-serving assertions. To borrow from Pecson v.
Commission on Elections,[29] citing Almeida v. Court of Appeals,[30] the use of wrong or irrelevant considerations, reliance on
clearly erroneous factual findings or giving too much weight to one factor in deciding an issue is sufficient to taint a
decision-maker's action with grave abuse of discretion.

As between Pasimio's barefaced denials and Palomares' positive assertions, the trial court ought to have accorded greater
weight to Palomares' testimony, especially considering that Pasimio never put in issue the due execution and authenticity
of the loan documents. As between a positive and categorical testimony which has a truth, on one hand, and a bare
denial, on the other, the former is generally held to prevail.[31]

ft cannot be stressed enough that Pasimio unequivocally admitted that the signatures appearing in the Loan
Application/Approval Forms dated March 21, 2001, April 2, 2001 and December 7, 2001, [32] in all three Promissory
Notes,[33] and the Disclosure Statement dated December 7, 2001 were hers and her husband's. She also was aware of the
consequences of her act of signing. Her testimonies on the matter are quoted hereunder:

Atty. Banzuela:

Thank you. Madam Witness, you testified that you signed these documents which are blank in its details,
Q:
what do yon mean by blank in details.

A: Nothing. Blank as in it's a pro-forma form but blank.

Q: Madam Witness, but you read what these documents were?

A: No, I did not read.

You entrusted to PNB that huge amount of US$31,100, P1,700,000 and US$3,100 without going through the
Q:
documents that you were signing with PNB?

A: That's right.

Q: Why is this so. Madam Witness?

Because I trusted the bank, I trusted the employees of the bank having been a depositor for the past two (2)
A:
decades.

Q: But you know. Madam Witness, the consequences of your acts in signing pro-forma documents?

A: Well, I trusted those people. So...

Q: But you know the consequences of signing blank documents?

A: Yes.[34]

Pasimio had tagged as forgeries her signatures appearing in the Disclosure Statements of March 21, 2001 and April 2,
2001. She, however, never presented any competent proof to successfully support her contention. While testimonies of
handwriting experts are not a must to prove forgeries, Pasimio did not submit any evidence for the RTC to consider and
readily conclude that the signatures in these Disclosure Statements were forged.

Likewise, Pasimio also denied, having appeared before a notary public to subscribe and swear to the loan documents, but
never substantiated this allegation. It is settled that a notarial document, guaranteed by public attestation in accordance
with the law, must be sustained in full force and effect, absent strong, complete, and conclusive proof of its falsity or
nullity on account of some flaw or defect provided by law.[35]

The RTC and the CA, for unexplained reason, ignored Pasimio's admissions in her April 10, 2003 Affidavit in which she
stated that she relent the proceeds of the US$31,10 loan to Paolo Sun. A portion of this affidavit reads:

2. I agreed to lend (lie amount of Dollars: Thirty One Thousand One Hundred Only ($31,100.00) to PAOLO SUN, payable
on an agreed maturity date and at an agreed interest rate out of a Loan Against Deposit Holdout that I will secure from
PNB using my time deposits as collateral.

3. PAOLO SUN and I agreed that should ( lend him the proceeds of my Loan Against Deposit Holdout from PNB, he would
pay all the bank charges and interest on such PNB loan, which he agreed to do so by authorizing PNB to debit his deposit
account for such amount equivalent to the charges/interest due on my loan.

4. PNB approved my loan application, and so, after I have lent the loan proceeds to PAOLO SUN, the latter has dutifully
and promptly paid all bank charges and interest under the aforesaid arrangement;[36]

Again, Pasimio did not deny the due execution of this affidavit. Rather, she lamely insisted she was only forced to sign this
affidavit upon Gregorio's representations that this was the only way that she would recover her investments. Pasimio
denied knowing Paolo Sun and having loan arrangements with him. She would stick to her story that she signed the
document under duress, needing, as she did at that time, money to support a dying spouse. Gregorio also allegedly
divulged that she needed Pasimio to sign the Affidavit as she (Gregorio) was already being audited and investigated by the
PNB Main office.

As between Pasimio's empty assertions about the above affidavit and its contents and the categorical statements in the
notarized affidavit detailing her arrangement with PNB and Paolo Sun, the choice as to which is more credible should be
clear and simple. In fact, Pasimio ought to have been estopped from denying the contents of that affidavit.

Verily, Pasimio's version of the case taxes credulity. By her own testimonial account, she is a holder of a BS Commerce
degree and used to work as a personnel director of an advertising agency.[37] It is, therefore, not believable that a person of
her educational attainment and stature, who appeared to be of good physical and mental health, would simply hand over
millions of pesos, no mean amount by ordinary standards, to a bank and then blindly sign documents involving her
money without exercising a modicum of care by verifying, or at least taking a cursory look at what these documents mean.
And yet, the courts a quo chose to close their eyes to these absurdities.

Lest it be overlooked, Pasimio's husband Rene also affixed his signature on the subject promissory notes and loan
application forms to signify his consent to his wife's financial dealings. There is no allegation, let alone proof; that Rene
did not likewise understand what he was signing and giving his consent to. These loan documents have, on their face, the
words "Peso Loans Against Peso/FX Deposit Loan Application/Approval Form," "Promissory Note and Hold-out on
Peso/FX Savings Deposit/ Peso/FX Time Deposit and Assignment of Deposit Substitute," and "Disclosure Statements of
Loan/Credit Transaction" printed in big letters. Thus, it is reasonable to assume that, at first glance, Pasimio and
husband Rene would have been put on notice of what these documents were. What they signed were pro-forma bank
documents, printed in full but with blanks to be filled up with specific terms thereof such as loan amount, interest rate,
and security, among others. They were not, in fine, empty white sheets of paper. It may be that Pasimio was indeed made
to sign the blank spaces of the loan documents. Be that as it may, it is well-nigh impossible that she had absolutely no
idea what they actually were, she having testified being a PNB depositor for some twenty years. Indeed, the Court is hard-
pressed to believe that she has not encountered these documents before, just as it is also hard to imagine that her
husband did not notice the titles of these documents and had no clue what they were.

Pasimio would parlay the idea that she signed certain loan documents and the April 10, 2003 affidavit under duress or
undue influence. Like her other unsubstantiated assertions, her allegations of improper influence, duress or fraud
practised on her by bank officers deserve scant consideration. Undue influence is described under the Civil Code, thus:

Art. 1337. There is undue influence when a person takes improper advantage of his power over the will of another,
depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential,
family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly
influenced was suffering from menial weakness, or was ignorant or in financial distress.

As regards fraud, the Civil Code says:

Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is
induced to enter into a contract which without them, he would not have agreed to.
Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by
both contracting parties.

The employment of fraud, duress, or undue influence is a serious charge, and to be sustained it must be supported by
clear and convincing proof; it cannot be presumed.[38] There is no allegation or evidence that Gregorio and Miranda
influenced Pasimio by employing means she could not well resist, and which controlled her volition and induced her to
sign the loan documents and the April 10, 2003 Affidavit, which otherwise she would not have executed. Also, there was
no evidence showing that Gregorio and Miranda's influence interfered with Pasimio's exercise of independent discretion
necessary to determine the advantage or disadvantage of signing these documents.

Then, too, Pasimio failed to prove that Gregorio and Miranda defrauded her. Taking into consideration the personal
conditions of Pasimio, there is no clear and convincing evidence establishing serious fraud or deceit, insidious words or
machinations on the part of PNB or its officers, sufficient to impress or lead her into error;[39]

It is germane to observe at this juncture that PNB has, in its favor, certain presumptions which Pasimio failed to overturn.
Rule 131, Sec. 3 of the Rules of Court specifies that a disputable presumption is satisfactory if uncontradicted and not
overcome by other evidence. Corollary thereto, paragraphs (r) and (s) thereof read:

SBC. 3. Disputable presumptions.— The following presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:

xxxx

(r) That there was sufficient consideration for a contract;

(s) That a negotiable instrument was given or indorsed for a sufficient consideration;

and Sec. 24 of the Negotiable Instruments Law reads:

SEC. 24. Presumption of consideration.— Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.

Pasimio also failed to overcome the presumptions that a person takes ordinary care of his concerns,[40] that private
transactions have been fair and regular,[41] and that the ordinary course of business has been followed.[42]

Certainly, the trial court erred in saying that Pasimio "had proved by convincing evidence that she had not secured any
loan accommodations from the defendant bank x x x and, thus, is entitled for the return of said deposit x x x" and that
"[t]he factum probans to sustain parties cause has been successfully hurdled and undertaken by plaintiff, in
contradistinction to defendant's mere denial of a transport obligation, the latter failing to overcome the quantum of
evidence presented by plaintiff to tilt the scale of justice in favor of plaintiff herein."[43] In truth, other than her self-serving
statements, Pasimio had nothing else to show against PNB's evidence. The greater weight of credible evidence as to
whether Pasimio secured from PNB loans covered by promissory notes with hold-out provisions is decidedly in favor of
petitioner bank.

To be sure, the RTC did not explain its reasons for coming up with these conclusions and did not even bother to discuss
its evaluation of the merits of Pasimio's evidence. The Court also notes that the trial court never even declared that,
indeed, Pasimio and her husband were fooled into signing the loan documents and made to believe that the loan
documents were related to a high-yielding PNB product.

Hence, it may be said that the trial court violated in a sense the constitutional caveat enjoining courts from rendering a
decision "without expressing therein clearly and distinctly the facts and the law on which it is based." The RTC had 1 ailed
to discharge its duty to inform parties to litigation on how the case was decided, with an explanation of the factual and
legal reasons that led to the conclusions of the court.
The dismissal of PNB's petition is
based on mere speculations and
surmises

In denying Pasimio's appeal, the CA adopted verbatim the trial court's findings that there was no evidence proving
Pasimio's receipt of the loan proceeds and that the loan documents were highly questionable. The appellate court also
reasoned that since PNB was grossly negligent in transacting with Pasimio, the bank should suffer the consequences.

In upholding the RTC's finding respecting Pasimio's never having received any loan proceeds, the CA doubtless
disregarded the rule holding that a promissory note is the best evidence of the transaction embodied therein; also, to
prove the existence of the loan, there is no need to submit a separate receipt to prove that the borrower received the loan
proceeds.[44] Indeed, a promissory note represents a solemn acknowledgment of a debt and a formal commitment to repay
it on the date and under the conditions agreed upon by the borrower and the lender. As has been held, a person who
signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he
affixes thereto as a token of his good faith. If he reneges on his promise without cause, he forfeits the sympathy and
assistance of this Court and deserves instead its sharp repudiation.[45]

The Court has also declared that a mere denial of the receipt of the loan, which is stated in a clear and unequivocal
manner in a public instrument, is not sufficient to assail its validity. To overthrow the recitals of such instrument,
convincing and more than merely preponderant evidence is necessary. A contrary rule would throw wide open doors to
fraud.[46] Following this doctrine, Pasimio's notarized promissory notes bearing her signature and that of her husband
must be upheld, absent, as here, strong, complete, and conclusive proof of their nullity.

The promissory notes, bearing Pasimio's signature, speak for themselves. To repeat, Pasimio has not questioned the
genuineness and due execution of the notes. By signing the promissory notes, she is deemed to acknowledge receipt of the
corresponding loan proceeds. Withal, she cannot plausibly set up the defense that she did not apply for any loan, and
receive the value of the notes or any consideration therefor in order to escape her liabilities under these promissory
notes.[47]

But the foregoing is not all. PNB presented evidence that strengthened its allegation on the existence of the loan. Here,
each promissory note was supported by a corresponding loan application form and disclosure statement, all of which
carried Pasimio's signatures. Isolated from each other, these documents might not prove the existence of the loan, but
when taken together, collectively, they show that Pasimio took the necessary steps to contract loans from PNB and was
aware of their terms and conditions.

Further, this Court does not agree that the loan documents were "highly questionable." The trial court arrived at this
conclusion upon observing that the March 21, 2001, April 2, 2001, and December 7, 2001 loan application forms and
promissory notes did not bear Pasimio's community tax certificate number and because it appeared that the blanks for
the specific terms of these loan documents were filled up on different dates considering that some typewritten entries
appeared to be bolder or darker than the others.

These reasons are specious as they are flimsy.

First, the authenticity of these loan documents should not be affected merely because their blank spaces appeared to have
been filled up, if that be the case, on different dates, using different typewriters. As PNB aptly puts it, there is nothing
suspicious or inherently wrong about bank forms being filled up on different dates since these are usually pre-typed, with
the blanks thereon to be filled up subsequently, depending on the specific terms of the transaction with a client, and
thereafter presented to the latter for signing.

Second, the absence of Pasimio's community tax certificate number in : said loan documents neither vitiates the
transaction nor invalidates the document. If at all, such absence renders the notarization of the loan documents defective.
Under the notarial rules at that time, i.e., Sec. 163 (a) of Republic Act No. 7160, otherwise known as the Local Government
Code of 1991, where an individual subject to the community tax acknowledges any document before a notary public, it
shall be the duty of the administering officer to require such individual to exhibit the community tax certificate. The
defective notarization of the loan documents only means that these documents would not be carrying the evidentiary
weight conferred upon it with respect to its due execution; that they should be treated as a private document to be
examined in appropriate cases under the parameters of Sec. 20, Rule 132 of the Rules of Court which provides that
"before any private document offered as authentic is received in evidence, its due execution and authenticity must be
proved either: (a) by anyone who saw the document executed or written; or (b) by evidence of the genuineness of the
signature or handwriting of the maker x x x." Settled is the rule that a defective notarization will strip the document of its
public character and reduce it to a private instrument, and the evidentiary standard of its validity shall be based on
preponderance of evidence.[48]

It must be stressed that the adverted defective notarization should not have been made an issue at all in the first place,
for Pasimio already admitted executing the documents in question, or to put it in another way, she did not deny that the
signatures appearing thereon were hers and her husband's. Thus, the requirements of Sec. 20, Rule 132 of the Rules of
Court have been sufficiently met and all doubts as to their authenticity and due execution should have been put to rest.

More importantly, the records do not show that Pasimio alleged the regoing defects and presented any proof for the trial
court to consider and rule on.

Furthermore, the Court does not find sufficient evidence to support the CA's finding that PNB is guilty of gross negligence
and, thus, must suffer the consequences of its transactions with Pasimio. In this regard, the CA explained that PNB foiled
to exercise the highest degree of diligence required of banks because allegedly, Gregorio was able to obtain Pasimio's
signature and assent to re-lend the dollar loan proceeds to Paolo Sun in a manner not in accordance with the ordinary
course of business of hanks.Also, the appellate court found PNB reprehensible for doing transactions outside the bank
without any proper explanation of the consequences of the document to be signed by [Pasimio] and because the bank
personnel misrepresented the true nature of the transaction.[49]

There is no sufficient evidence to support the foregoing. It must be stressed that these were solely drawn from Pasimio's
testimony that Gregorio went to her house for her to sign the April 10, 2003 Affidavit and that the latter told her that the
only way she could get her money back was to re-lend her money deposits to Paolo Sun. Other than Pasimio's story, the
CA had no other evidence to bolster these findings.

Further, the CA's conclusions that PNB's personnel were in violation of their duties and responsibilities as its employees;
that they committed gross negligence in dealing with their bank transactions; and that the bank repeatedly failed to observe
basic procedures thus, was guilty of serial negligence, are not supported by sufficient evidence.

It was wrong for the CA to make the foregoing conclusions merely because another bank client, Virginia Pollard (Pollard),
testified to being a victim of irregular bank transactions of PNB Sucat. Even if Pollard were telling the truth, her testimony
should not have been considered proof that what she underwent is what actually transpired between Pasimio and
PNB. Res inter alios acta. Acts and declarations of persons strangers to a suit should, as a rule, be irrelevant as evidence.
Pollard's transaction with PNB is entirely different and totally unrelated to Pasimio's dealings with the bank.

What may be true in the case of Pollard may not hold true for Pasimio. It was quite erroneous for the appellate court to
declare PNB grossly negligent in its transactions with Pasimio when the only evidence it had discussed on the matter was
Pollard's testimony. It may be true that the PNB was grossly negligent in dealing with Pollard, but this does not
automatically mean that PNB was grossly negligent toward Pasimio as well. Hence, the CA had no basis in saying that
"[e]ven assuming that [Pasimio] was concocting her version of the facts, fit] still find[s] irregularities and inconsistencies
that have attributed to the unjustified refusal to return the investment placement and to the commission of negligence."

Much is attempted to be made by the Memorandum on Irregular Lending Operation on Loans v. Deposit Hold-Out (Sucat
Branch) dated February 18, 2003. The memorandum does not pertain to Pasimio or her accounts and transactions with
the bank, albeit it discusses Garcia and Miranda's sham dealings with other bank clients. Hence, the memorandum is
really not determinative of the critical question of whether or not Pasimio sought and eventually secured loan
accommodations from PNB.

Here, the RTC and the CA focused on finding trivial Haws and weaknesses in PNB's evidence and totally disregarded the
bank's most telling proof, foremost of which are the notarized notes Had the courts a quo looked at and considered the
totality of the bank's evidence, then it would have realized how preposterous the story that Pasimio spun was, a story
featuring, at bottom, a well-educated, accomplished woman signing several pieces of bank documents involving millions of
pesos, without knowing, nay even reading, what she is signing.

Finally, it is well to consider this rule: that 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.[50]
Under this rule, parol evidence or oral evidence cannot be given to contradict, change or vary a written document, except
if a party presents evidence to modify, explain, or add to the terms of a written agreement and puts in issue in his
pleadings: (a) an intrinsic ambiguity, mistake, or imperfection in the written agreement; (b) the failure of the written
agreement to express the true intent and agreement of the parties; (c) the validity of the written agreement; and (d) the
existence of other terms agreed to by the parties or their successors-in-interest after the execution of the written
agreement.[51]

Such evidence, however, must be clear and convincing and of such sufficient credibility as to overturn the written
agreement.[52] Since no evidence of such nature is before the Court, the documents embodying the loan agreement of the
parties should be upheld.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the Court of Appeals dated
January 23, 2013 in CA-G.R. CV No. 94079 is REVERSED and SET ASIDE. Respondent Ligaya M. Pasimio's complaint in
Civil Case No. CV-05-0195 before the egional Trial Court of Paranaque City, Branch 196 is DISMISSED for lack of merit.

No costs.

SO ORDERED.

[G.R. No. 152807. August 12, 2003]

HEIRS OF LOURDES SAEZ SABANPAN: BERNARDO S. SABANPAN, RENE S. SABANPAN, DANILO S. SABANPAN and
THELMA S. CHU; HEIRS OF ADOLFO SAEZ: MA. LUISA SAEZ TAPIZ, MA. VICTORIA SAEZ LAPITAN, MA.
BELEN SAEZ and EMMANUEL SAEZ; and HEIRS OF CRISTINA SAEZ GUTIERREZ:ROY SAEZ GUTIERREZ
and LUIS SAEZ JR., petitioners, vs. ALBERTO C. COMORPOSA, HERDIN C. COMORPOSA, OFELIA C.
ARIEGO,[1] REMEDIOS COMORPOSA, VIRGILIO A. LARIEGO,1-a BELINDA M. COMORPOSA and ISABELITA H.
COMORPOSA, respondents.

DECISION
PANGANIBAN, J.:

The admissibility of evidence should be distinguished from its probative value. Just because a piece of evidence is
admitted does not ipso facto mean that it conclusively proves the fact in dispute.

The Case

Before us is a Petition for Review[2] under Rule 45 of the Rules of Court, seeking to set aside the August 7, 2001
Decision and the February 27, 2002 Resolution of the Court of Appeals [3](CA) in CA-GR SP No. 60645. The dispositive
portion of the assailed Decision reads as follows:

WHEREFORE, in view of all the foregoing, the Court hereby AFFIRMS the Decision dated 22 June 2000 rendered by
Branch 18 of the Regional Trial Court of Digos, Davao del Sur, REVERSING and SETTING ASIDEthe Decision of the
Municipal Trial Court of Sta. Cruz, Davao del Su[r].[4]

The assailed Resolution[5] denied petitioners Motion for Reconsideration.

The Facts

The CA summarized the factual antecedents of the case as follows:

A [C]omplaint for unlawful detainer with damages was filed by [petitioners] against [respondents] before the Santa Cruz,
Davao del Sur Municipal Trial Court.
The [C]omplaint alleged that Marcos Saez was the lawful and actual possessor of Lot No. 845, Land 275 located at Darong,
Sta. Cruz, Davao del Sur with an area of 1.2 hectares. In 1960, he died leaving all his heirs, his children and
grandchildren.

In 1965, Francisco Comorposa who was working in the land of Oboza was terminated from his job. The termination of his
employment caused a problem in relocating his house. Being a close family friend of [Marcos] Saez, Francisco Comorposa
approached the late Marcos Saezs son, [Adolfo] Saez, the husband of Gloria Leano Saez, about his problem. Out of pity
and for humanitarian consideration, Adolfo allowed Francisco Comorposa to occupy the land of Marcos Saez. Hence, his
nipa hut was carried by his neighbors and transferred to a portion of the land subject matter of this case. Such transfer
was witnessed by several people, among them, Gloria Leano and Noel Oboza. Francisco Comorposa occupied a portion of
Marcos Saez property without paying any rental.

Francisco Comorposa left for Hawaii, U.S.A. He was succeeded in his possession by the respondents who likewise did not
pay any rental and are occupying the premises through petitioners tolerance.

On 7 May 1998, a formal demand was made upon the respondents to vacate the premises but the latter refused to vacate
the same and claimed that they [were] the legitimate claimants and the actual and lawful possessor[s] of the premises. A
[C]omplaint was filed with the barangay office of Sta. Cruz[,] Davao del Sur, but the parties failed to arrive at an amicable
settlement. Thus, the corresponding Certificate to File Action was issued by the said barangay and an action for unlawful
detainer was filed by petitioners against respondents.

Respondents, in their Answer, denied the material allegations of the [C]omplaint and alleged that they entered and
occupied the premises in their own right as true, valid and lawful claimants, possessors and owners of the said lot way
back in 1960 and up to the present time; that they have acquired just and valid ownership and possession of the premises
by ordinary or extraordinary prescription, and that the Regional Director of the DENR, Region XI has already upheld their
possession over the land in question when it ruled that they [were] the rightful claimants and possessors and [were],
therefore, entitled to the issuance of a title.

The Municipal Trial Court of Sta. Cruz, Davao del Sur rendered judgment in favor of petitioners but the Regional Trial
Court of Digos, Davao del Sur, on appeal, reversed and set aside the said decision. x x x[6]

Ruling of the Court of Appeals

Affirming the Regional Trial Court (RTC), the CA upheld the right of respondents as claimants and possessors. The
appellate court held that -- although not yet final -- the Order issued by the regional executive director of the Department
of Environment and Natural Resources (DENR) remained in full force and effect, unless declared null and void. The CA
added that the Certification issued by the DENRs community environment and natural resources (CENR) officer was proof
that when the cadastral survey was conducted, the land was still alienable and was not yet allocated to any person.
According to the CA, respondents had the better right to possess alienable and disposable land of the public domain,
because they have suffiently proven their actual, physical, open, notorious, exclusive, continuous and uninterrupted
possession thereof since 1960. The appellate court deemed as self-serving, and therefore incredible, the Affidavits
executed by Gloria Leano Saez, Noel Oboza and Paulina Paran.
Hence, this Petition.[7]

The Issue

In their Memorandum, petitioners raise the following issues for the Courts consideration:
I

Did the Court of Appeals gravely abuse its discretion and [err] in sustaining the ruling of the Regional Trial Court giving
credence to the Order dated 2 April 1998 issued by the regional executive director?

II

Did the Court of Appeals gravely abuse its discretion and err in sustaining the Regional Trial Courts ruling giving weight
to the CENR Officers Certification, which only bears the facsimile of the alleged signature of a certain Jose F. Tagorda and,
[worse], it is a new matter raised for the first time on appeal?
 III

Did the Court of Appeals gravely abuse its discretion and err in holding that the land subject matter of this case has been
acquired by means of adverse possession and prescription?

IV

Did the Court of Appeals gravely abuse its discretion, and err in declaring that, neither is there error on the part of the
Regional Trial Court, when it did not give importance to the affidavits by Gloria Leano Saez, Noel [Oboza], and Paulina
Paran for allegedly being self serving?[8]

To facilitate the discussion, the fourth and the third issues shall be discussed in reverse sequence.

The Courts Ruling

The Petition has no merit.

First Issue:
The DENR Order of April 2, 1998

Petitioners claim that the reliance of the CA upon the April 2, 1998 Order issued by the regional director of the DENR
was erroneous. The reason was that the Order, which had upheld the claim of respondents, was supposedly not yet final
and executory. Another Order dated August 23, 1999,[9] issued later by the DENR regional director, allegedly held in
abeyance the effectivity of the earlier one.
Under the Public Land Act,[10] the management and the disposition of public land is under the primary control of the
director of lands[11] (now the director of the Lands Management Bureau or LMB),[12] subject to review by the DENR
secretary.[13] As a rule, then, courts have no jurisdiction to intrude upon matters properly falling within the powers of the
LMB.
The powers given to the LMB and the DENR to alienate and dispose of public land does not, however, divest regular
courts of jurisdiction over possessory actions instituted by occupants or applicants to protect their respective possessions
and occupations.[14] The power to determine who has actual physical possession or occupation of public land and who has
the better right of possession over it remains with the courts.[15] But once the DENR has decided, particularly through the
grant of a homestead patent and the issuance of a certificate of title, its decision on these points will normally prevail.[16]
Therefore, while the issue as to who among the parties are entitled to a piece of public land remains pending with the
DENR, the question of recovery of possession of the disputed property is a matter that may be addressed to the courts.

Second Issue:
CENR Officers Certification

Petitioners contend that the CENR Certification dated July 22, 1997 is a sham document, because the signature of
the CENR officer is a mere facsimile. In support of their argument, they cite Garvida v. Sales Jr.[17] and argue that the
Certification is a new matter being raised by respondents for the first time on appeal.
We are not persuaded.
In Garvida, the Court held:

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. x x x[18]

Pleadings filed via fax machines are not considered originals and are at best exact copies. As such, they are not
admissible in evidence, as there is no way of determining whether they are genuine or authentic. [19]
The Certification, on the other hand, is being contested for bearing a facsimile of the signature of CENR Officer Jose
F. Tagorda. The facsimile referred to is not the same as that which is alluded to in Garvida. The one mentioned here refers
to a facsimile signature, which is defined as a signature produced by mechanical means but recognized as valid in
banking, financial, and business transactions.[20]
Note that the CENR officer has not disclaimed the Certification. In fact, the DENR regional director has acknowledged
and used it as reference in his Order dated April 2, 1998:

x x x. CENR Officer Jose F. Tagorda, in a CERTIFICATION dated 22 July 1997, certified among others, that: x x x per records
available in his Office, x x x the controverted lot x x x was not allocated to any person x x x.[21]

If the Certification were a sham as petitioner claims, then the regional director would not have used it as reference in
his Order. Instead, he would have either verified it or directed the CENR officer to take the appropriate action, as the latter
was under the formers direct control and supervision.

Petitioners claim that the Certification was raised for the first time on appeal is incorrect. As early as the pretrial
conference at the Municipal Trial Court (MTC), the CENR Certification had already been marked as evidence for
respondents as stated in the Pre-trial Order.[22] The Certification was not formally offered, however, because respondents
had not been able to file their position paper.
Neither the rules of procedure[23] nor jurisprudence[24] would sanction the admission of evidence that has not been
formally offered during the trial. But this evidentiary rule is applicable only to ordinary trials, not to cases covered by the
rule on summary procedure -- cases in which no full-blown trial is held.[25]

Third Issue:
Affidavit of Petitioners Witnesses

Petitioners assert that the CA erred in disregarding the Affidavits of their witnesses, insisting that the Rule on
Summary Procedure authorizes the use of affidavits. They also claim that the failure of respondents to file their position
paper and counter-affidavits before the MTC amounts to an admission by silence.
The admissibility of evidence should not be confused with its probative value. Admissibility refers to the question of
whether certain pieces of evidence are to be considered at all, while probative value refers to the question of whether the
admitted evidence proves an issue.[26] Thus, a particular item of evidence may be admissible, but its evidentiary weight
depends on judicial evaluation within the guidelines provided by the rules of evidence.[27]
While in summary proceedings affidavits are admissible as the witnesses respective testimonies, the failure of the
adverse party to reply does not ipso facto render the facts, set forth therein, duly proven.Petitioners still bear the burden of
proving their cause of action, because they are the ones asserting an affirmative relief.[28]

Fourth Issue:
Defense of Prescription

Petitioners claim that the court a quo erred in upholding the defense of prescription proffered by respondents. It is
the formers contention that since the latters possession of the land was merely being tolerated, there was no basis for the
claim of prescription. We disagree.
For the Court to uphold the contention of petitioners, they have first to prove that the possession of respondents was
by mere tolerance. The only pieces of evidence submitted by the former to support their claim were a technical description
and a vicinity map drawn in accordance with the survey dated May 22, 1936. [29] Both of these were discredited by the
CENR Certification, which indicated that the contested lot had not yet been allocated to any person when the survey was
conducted.[30] The testimony of petitioners witnesses alone cannot prevail over respondents continued and uninterrupted
possession of the subject lot for a considerable length of time.
Furthermore, this is an issue of fact that cannot, as a rule, be raised in a petition for review under Rule 45.[31]
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

EN BANC
ELLERY MARCH G. TORRES, G.R. No. 193531
Petitioner,
Present:

CORONA, C.J.,
CARPIO,
VELASCO, JR.,*
LEONARDO-DE CASTRO,
BRION,
PERALTA,
-versus- BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.
PHILIPPINE AMUSEMENT and GAMING
CORPORATION, represented by ATTY. Promulgated:
CARLOS R. BAUTISTA, JR.,
Respondent. December 14, 2011
x-----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Petitioner Ellery March G. Torres seeks to annul and set aside the Decision [1] dated April 22, 2010 of the Court of Appeals

(CA) in CA-G.R. SP No. 110302, which dismissed his petition seeking reversal of the Resolutions dated June 23,

2008[2] and July 28, 2009[3] of the Civil Service Commission (CSC). Also assailed is the CA Resolution[4] dated July 30,

2010 denying petitioner's motion for reconsideration.

Petitioner was a Slot Machine Operations Supervisor (SMOS) of respondent Philippine Amusement and Gaming

Corporation (PAGCOR). On the basis of an alleged intelligence report of padding of the Credit Meter Readings (CMR) of the

slot machines at PAGCOR-Hyatt Manila, then Casino Filipino-Hyatt (CF Hyatt), which involved the slot machine and

internal security personnel of respondent PAGCOR, and in connivance with slot machine customers, respondent

PAGCOR's Corporate Investigation Unit (CIU) allegedly conducted an investigation to verify the veracity ofsuch report. The

CIU discovered the scheme of CMR padding which was committed by adding zero after the first digit of the actual CMR of

a slot machine or adding a digit before the first digit of the actual CMR, e.g., a slot machine with an actual CMR

of P5,000.00 will be issued a CMR receipt with the amount of either P50,000.00 or P35,000.00.[5] Based on the CIU's

investigation of all the CMR receipts and slot machine jackpot slips issued by CF Hyatt for the months of February and

March 2007, the CIU identified the members of the syndicate who were responsible for such CMR padding, which

included herein petitioner.[6]

On May 4, 2007, the CIU served petitioner with a Memorandum of Charges [7] for dishonesty, serious misconduct, fraud
and violation of office rules and regulations which were considered grave offenses where the penalty imposable is

dismissal. The summary description of the charges stated:

Sometime between November 2006 and March 2007, you facilitated and actively participated in the
fraudulent scheme with respect to irregular manipulation of Credit Meter Reading (CMR) which, in turn,
led to the misappropriation of money earmarked for the slot machine jackpot at CF Hyatt Manila. These
 anomalous transactions were consummated through your direct participation and active cooperation of
your co-employees and customers. With malice afterthought, you embezzled and stole monies from
PAGCOR, thereby resulting in substantial losses to the proprietary interest of PAGCOR.[8]

On the same day, another Memorandum of Charges[9] signed by Rogelio Y. Bangsil, Jr., Senior Branch Manager, CF Hyatt

Manila, was issued to petitioner informing him of the charge of dishonesty (padding of anomalous SM jackpot

receipts). Petitioner was then required to explain in writing within seventy-two (72) hours from receipt thereof why he

should not be sanctioned or dismissed. Petitioner was placed under preventive suspension effective immediately until

further orders.

On May 7, 2007, petitioner wrote Manager Bangsil a letter explanation/refutation [10] of the charges against him. He denied

any involvement or participation in any fraudulent manipulation of the CMR or padding of the slot machine receipts, and

he asked for a formal investigation of the accusations against him.

On August 4, 2007, petitioner received a letter[11] dated August 2, 2007 from Atty. Lizette F. Mortel, Managing Head of

PAGCOR's Human Resource and Development Department, dismissing him from the service. The letter reads in part, to

wit:

Please be informed that the Board of Directors, in its meeting on July 31, 2007, approved the
recommendation of the Adjudication Committee to dismiss you from the service effective upon approval
due to the following offense:

Dishonesty, gross misconduct, serious violations of office rules and regulations, conduct prejudicial to
the best interests of the company and loss of trust and confidence, committed as follows: For actively and
directly participating in a scheme to defraud the company in conspiracy with co-employees and SM
customers by padding slot machine Credit Meter Reading (CMR) receipts in favor of co-conspirator
customers who had said (sic) CMR receipts paid at the teller's booth on numerous occasions which
caused substantial losses to the proprietary interests of PAGCOR.[12]

On September 14, 2007, petitioner filed with the CSC a Complaint[13] against PAGCOR and its Chairman Efraim Genuino

for illegal dismissal, non-payment of backwages and other benefits. The complaint alleged among others: (1) that he

denied all the charges against him; (2) that he did ask for a formal investigation of the accusations against him and for

PAGCOR to produce evidence and proofs to substantiate the charges, but respondent PAGCOR did not call for any formal

administrative hearing; (3) that he tried to persuade respondent PAGCOR to review and reverse its decision in a letter of

reconsideration dated August 13, 2007 addressed to the Chairman, the members of the Board of Directors and the Merit

Systems Protection Board; and (4) that no resolution was issued on his letter reconsideration, thus, the filing of the

complaint. Petitioner claimed that as a result of his unlawful, unjustified and illegal termination/dismissal, he was

compelled to hire the services of a counsel in order to protect his rights.

Respondent PAGCOR filed its Comment wherein it alleged, among others, that petitioner failed to perfect an appeal within
the period and manner provided by the Uniform Rules on Administrative Cases in the Civil Service Law.
On June 23, 2008, the CSC, treating petitioner's complaint as an appeal from the PAGCOR's decision dismissing

petitioner from the service, issued Resolution No. 081204 denying petitioner's appeal. The dispositive portion of which

reads as follows:
WHEREFORE, the instant appeal of Ellery March G. Torres is hereby DENIED. Accordingly, the decision
contained in a letter dated August 2, 2007 of Lizette F. Mortel, Managing Head, Human Resource and
Development Department (HRDD), PAGCOR, finding him guilty of Dishonesty, Gross Misconduct, Serious
Violation of Office Rules and Regulations, Conduct Prejudicial to the Best Interest of the Service and Loss
of Trust and Confidence and imposing upon him the penalty of dismissal from the service, is hereby
AFFIRMED. The penalty of dismissal carries with it the accessory penalties of forfeiture of retirement
benefits, cancellation of eligibility, perpetual disqualification from reemployment in the government
service, and bar from taking future Civil Service Examination.[14]

In so ruling, the CSC found that the issue for resolution was whether petitioner's appeal had already prescribed which the

former answered in the positive. The CSC did not give credit to petitioner's claim that he sent a facsimile transmission of

his letter reconsideration within the period prescribed by the Uniform Rules on Administrative Cases in the Civil

Service. It found PAGCOR's denial of having received petitioner's letter more credible as it was supported by certifications

issued by its employees. It found that a verification of one of the telephone numbers where petitioner allegedly sent his

letter reconsideration disclosed that such number did not belong to the PAGCOR's Office of the Board of Directors; and

that petitioner should have mentioned about the alleged facsimile transmission at the first instance when he filed his

complaint and not only when respondent PAGCOR raised the issue of prescription in its Comment.

Petitioner's motion for a reconsideration was denied in CSC Resolution No. 09-1105 dated July 28, 2009.

Petitioner filed with the CA a petition for review under Rule 43 of the Rules of Court seeking to set aside the twin

resolutions issued by the CSC.

On April 22, 2010, the CA issued its assailed decision dismissing the petition for lack of merit.

In dismissing the petition, the CA found that petitioner failed to adduce clear and convincing evidence that he had filed a

motion for reconsideration. It found insufficient to merit consideration petitioner's claim that he had sent through a

facsimile transmission a letter/reconsideration dated August 13, 2007 addressed to PAGCOR's Chairman, members of the

Board of Directors and the Merit Systems Protection Board; that assuming arguendo that a letter reconsideration was

indeed sent through a facsimile transmission, such facsimile transmission is inadmissible as electronic evidence

under the Electronic Commerce Act of 2000; and that a review of the CSC assailed resolution revealed that the telephone

numbers where petitioner claimed to be the recipient of the faxed document sent was not that of PAGCOR's Office of

Board of Directors. The CA found baseless and conjectural petitioner's claim that PAGCOR can easily deny having

received the letter by giving orders to their employees to execute an affidavit of denial under pain and threat of

administrative sanction or termination from service.

The CA then concluded that PAGCOR's decision which was contained in a letter dated August 4, 2007 dismissing
petitioner from the service had already attained finality since there was no motion for reconsideration filed by petitioner in

the manner and within the period provided for under the Revised Uniform Rules on the Administrative Cases in the Civil

Service.
Petitioner's motion for reconsideration was denied in a Resolution dated July 30, 2010.

Hence, this petition where petitioner states the errors committed by the CA in this wise:
The first issue that should be resolved is:

1. Whether or not the Court of Appeals erred when it affirmed the dismissal of petitioner based merely on
technicality without considering the allegations on summary and arbitrary dismissal based on fabricated
and unfounded accusations.

Next to be raised were the issues propounded in petitioner's Memorandum dated 29 January 2010 but
were not tackled upon by the Court of Appeals, thus:
A. Whether or not the Civil Service Commission erred in ruling that there was no valid letter/motion for
reconsideration submitted to reconsider petitioner's dismissal from the service;
B. Whether or not the Civil Service Commission erred in giving more weight to PAGCOR's denial ofhaving
received petitioner's letter of reconsideration;

C. Whether or not the Civil Service Commission erred in not acting/resolving the Ex-Parte Motion to
Issue Subpoena Duces Tecum;

D. Whether or not the Civil Service Commission erred in ruling that petitioner's failure to send his letter
reconsideration through mail or by personal service as set forth in the Rules of Court, he forfeited his
right to appeal; and

E. Whether or not the Civil Service Commission erred in favoring PAGCORs dismissal of petitioner from
employment based on hearsay, imaginary and non-existent evidence.[15]

The threshold issue for resolution is whether the CA erred when it affirmed the CSC's dismissal of the appeal for being

filed beyond the reglementary period.

Petitioner contends that he filed his letter reconsideration of his dismissal[16] on August 13, 2007, which was

within the 15-day period for filing the same; and that he did so by means of a facsimile transmission sent to the

PAGCOR's Office of the Board of Directors. He claims that the sending of documents thru electronic data message, which

includes facsimile, is sanctioned under Republic Act No. 8792, the Electronic Commerce Act of 2000. Petitioner further

contends that since his letter reconsideration was not acted upon by PAGCOR, he then filed his complaint before the CSC.

We are not persuaded.

Sections 37, 38, 39, and 43 of the Revised Uniform Rules on Administrative Cases in the Civil Service, which are

applicable to this case, respectively provide, to wit:

Section 37. Finality of Decisions - A decision rendered by heads of agencies whereby a penalty of
suspension for not more than thirty days or a fine in an amount not exceeding thirty (30) days' salary is
imposed, shall be final and executory. However, if the penalty imposed is suspension exceeding thirty
days, or fine in an amount exceeding thirty days salary, the same shall be final and executory after the
lapse of the reglementary period for filing a motion for reconsideration or an appeal and no such pleading
has been filed.

Section 38. Filing of motion for reconsideration. - The party adversely affected by the decision may file a
motion for reconsideration with the disciplining authority who rendered the same within fifteen days from
receipt thereof.

Section 39. When deemed filed. - A motion for reconsideration sent by mail shall be deemed filed on the
date shown by the postmark on the envelope which shall be attached to the records of the case and in
case of personal delivery, the date stamped thereon by the proper office.
Section 43. Filing of Appeals. - Decisions of heads of departments, agencies, provinces, cities,
municipalities and other instrumentalities imposing a penalty exceeding thirty (30) days suspension or
fine in an amount exceeding thirty (30) days salary, maybe appealed to the Commission Proper within a
period of fifteen (15) days from receipt thereof.
Clearly, a motion for reconsideration may either be filed by mail or personal delivery. When a motion for reconsideration

was sent by mail, the same shall be deemed filed on the date shown by the postmark on the envelope which shall be

attached to the records of the case. On the other hand, in case of personal delivery, the motion is deemed filed on the date

stamped thereon by the proper office. And the movant has 15 days from receipt of the decision within which to file a

motion for reconsideration or an appeal therefrom.

Petitioner received a copy of the letter/notice of dismissal on August 4, 2007; thus, the motion for reconsideration should

have been submitted either by mail or by personal delivery on or before August 19, 2007. However, records do not show

that petitioner had filed his motion for reconsideration. In fact, the CSC found that the non-receipt of petitioner's letter

reconsideration was duly supported by certifications issued by PAGCOR employees.

Even assuming arguendo that petitioner indeed submitted a letter reconsideration which he claims was sent through a

facsimile transmission, such letter reconsideration did not toll the period to appeal. The mode used by petitioner in filing

his reconsideration is not sanctioned by the Uniform Rules on Administrative Cases in the Civil Service. As we stated

earlier, the motion for reconsideration may be filed only in two ways, either by mail or personal delivery.

In Garvida v. Sales, Jr.,[17] we found inadmissible in evidence the filing of pleadings through fax machines and 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. x x x[18]

Moreover, a facsimile transmission is not considered as an electronic evidence under the Electronic Commerce

Act. In MCC Industrial Sales Corporation v. Ssangyong Corporation,[19] We determined the question of whether the original

facsimile transmissions are "electronic data messages" or "electronic documents" within the context of the Electronic

Commerce Act, and We said:

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 transmission cannot 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. (Italics ours.)[20]

We, therefore, found no reversible error committed by the CA when it affirmed the CSC in dismissing petitioner's

appeal. Petitioner filed with the CSC a complaint against PAGCOR and its Chairman for illegal dismissal, non-payment
of backwages and other benefits on September 14, 2007. The CSC treated the complaint as an appeal from the PAGCOR's

dismissal of petitioner. Under Section 43 which we earlier quoted, petitioner had 15 days from receipt of the letter of

dismissal to file his appeal. However, at the time petitioner filed his complaint with the CSC, which was considered as

petitioner's appeal, 41 days had already elapsed from the time he received his letter of dismissal on August 4, 2007;
hence, the CSC correctly found that it has no jurisdiction to entertain the appeal since petitioner's dismissal had already

attained finality. Petitioner's dismissal from the service became final and executory after he failed to file his motion for

reconsideration or appeal in the manner and within the period provided for under the Revised Uniform Rules on

Administrative Cases in the Civil Service.

In Pea v. Government Service and Insurance System,[21] We said:

Noteworthy is that the right to appeal is neither a natural right nor a part of due process, except where it
is granted by statute in which case it should be exercised in the manner and in accordance with the
provisions of law. In other words, appeal is a right of statutory and not of constitutional origin. The
perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but
also jurisdictional and the failure of a party to conform to the rules regarding appeal will render the
judgment final and executory and, hence, unappealable, for it is more important that a case be settled
than it be settled right. Furthermore, it is axiomatic that final and executory judgments can no longer be
attacked by any of the parties or be modified, directly or indirectly, even by the highest court of the land.
Just as the losing party has the right to file an appeal within the prescribed period, so also the winning
party has the correlative right to enjoy the finality of the resolution of the case.[22]

WHEREFORE, the petition is DENIED. The Decision dated April 22, 2010 and the Resolution dated July 30, 2010 of the

Court of Appeals are hereby AFFIRMED.

SO ORDERED.

DIVISION

[ GR No. 204894, Mar 10, 2014 ]

PEOPLE v. NOEL ENOJAS Y HINGPIT +

DECISION

ABAD, J.:

On September 4, 2006 the City Prosecutor of Las Piñas charged appellants Noel Enojas y Hingpit (Enojas), Arnold
Gomez y Fabregas (Gomez), Fernando Santos y Delantar (Santos), and Roger Jalandoni y Ari (Jalandoni) with murder
before the Las Piñas Regional Trial Court (RTC) in Criminal Case 06-0854.[1]

PO2 Eduardo Gregorio, Jr. (PO2 Gregorio) testified that at around 10:30 in the evening of August 29, 2006, he and PO2
Francisco Pangilinan (PO2 Pangilinan) were patrolling the vicinity of Toyota Alabang and SM Southmall when they spotted
a taxi that was suspiciously parked in front of the Aguila Auto Glass shop near the intersection of BF Almanza and
Alabang-Zapote Roads. The officers approached the taxi and asked the driver, later identified as accused Enojas, for his
documents. The latter complied but, having entertained doubts regarding the veracity of documents shown them, they
asked him to come with them to the police station in their mobile car for further questioning. [2]

Accused Enojas voluntarily went with the police officers and left his taxi behind. On reaching the 7-11 convenience store
on the Zapote-Alabang Road, however, they stopped and PO2 Pangilinan went down to relieve himself there. As he
approached the store's door, however, he came upon two suspected robbers and shot it out with them. PO2 Pangilinan
shot one suspect dead and hit the other who still managed to escape. But someone fired at PO2 Pangilinan causing his
death.

On hearing the shots, PO2 Gregorio came around and fired at an armed man whom he saw running towards Pilar Village.
He saw another man, who came from the Jollibbee outlet, run towards Alabang-Zapote Road while firing his gun at PO2
Gregorio. The latter returned fire but the men were able to take a taxi and escape. PO2 Gregorio radioed for help and for
an ambulance. On returning to his mobile car, he realized that accused Enojas, the taxi driver they had with them had
fled.

P/Insp. Ferjen Torred (Torred), the Chief of Investigation Division of the Las Piñas Police, testified that he and PO2 Teoson
Rosarito (PO2 Rosarito) immediately responded to PO2 Gregorio's urgent call. Suspecting that accused Enojas, the taxi
driver who fled, was involved in the attempted robbery, they searched the abandoned taxi and found a mobile phone that
Enojas apparently left behind. P/Ins. Torred instructed PO3 Joel Cambi (PO3 Cambi) to monitor its incoming messages.[3]

The police later ascertained that the suspect whom PO2 Pangilinan had killed was someone named Reynaldo Mendoza
who was armed with a .38 caliber revolver. The police found spent 9 mm and M-16 rifle shells at the crime scene. Follow-
up operations at nearby provinces resulted in finding the dead body of one of the suspects, Alex Angeles, at the Metro
South Medical Center along Molino, Bacoor, Cavite.[4]

PO3 Cambi and PO2 Rosarito testified that they monitored the messages in accused Enojas' mobile phone and, posing as
Enojas, communicated with the other accused. The police then conducted an entrapment operation that resulted in the
arrest of accused Santos and Jalandoni. Subsequently, the police were also able to capture accused Enojas and Gomez.
The prosecution presented the transcripts of the mobile phone text messages between Enojas and some of his co-
accused.[5]

The victim's father, Ricardo Pangilinan, testified that his son was at the time of his death 28 years old, unmarried, and
was receiving police pay of P8,000.00 to P10,000.00 per month. Ricardo spent P99,999 for burial expense, P16,000.00 for
the interment services, and P50,000.00 for purchase of the cemetery lot.[6]

Manifesting in open court that they did not want to adduce any evidence or testify in the case,[7] the accused opted to
instead file a trial memorandum on March 10, 2008 for their defense. They pointed out that they were entitled to an
acquittal since they were all illegally arrested and since the evidence of the text messages were inadmissible, not having
been properly identified.

On June 2, 2008 the RTC rendered judgment,[8] finding all the accused guilty of murder qualified by evident premeditation
and use of armed men with the special aggravating circumstance of use of unlicensed firearms. It thus sentenced them to
suffer the penalty of reclusion perpetua, without the possibility of parole and to indemnify the heirs of PO2 Pangilinan with
P165,999.00 as actual damages, P50,000.00 as moral damages, P25,000.00 as exemplary damages, and P2,080,000.00
as compensation for loss of earning capacity.

Upon review in CA-G.R. CR-H.C. 03377, on June 14, 2012 the Court of Appeals (CA) dismissed the appeal and affirmed in
toto the conviction of the accused.[9] The CA, however, found the absence of evident premeditation since the prosecution
failed to prove that the several accused planned the crime before committing it. The accused appealed from the CA to this
Court.[10]

The defense points out that the prosecution failed to present direct evidence that the accused Enojas, Gomez, Santos, or
Jalandoni took part in shooting PO2 Pangilinan dead.[11] This may be true but the prosecution could prove their liability
by circumstantial evidence that meets the evidentiary standard of proof beyond reasonable doubt. It has been held that
circumstantial evidence is sufficient for conviction if: 1) there is more than one circumstance; 2) the facts from which the
inferences are derived are proven; and 3) the combination of all the circumstances is such as to produce a conviction
beyond reasonable doubt. [12]

Here the totality of the circumstantial evidence the prosecution presented sufficiently provides basis for the conviction of
all the accused. Thus:

1. PO2 Gregorio positively identified accused Enojas as the driver of the taxicab suspiciously parked in front of the Aguila
Auto Glass shop. The officers were bringing him with them to the police station because of the questionable documents he
showed upon query. Subsequent inspection of the taxicab yielded Enojas' mobile phone that contained messages which
led to the entrapment and capture of the other accused who were also taxicab drivers.

2. Enojas fled during the commotion rather than remain in the cab to go to the police station where he was about to be
taken for questioning, tending to show that he had something to hide. He certainly did not go to the police afterwards to
clear up the matter and claim his taxi.

3. PO2 Gregorio positively identified accused Gomez as one of the men he saw running away from the scene of the
shooting.

4. The text messages identified "Kua Justin" as one of those who engaged PO2 Pangilinan in the shootout; the messages
also referred to "Kua Justin" as the one who was hit in such shootout and later died in a hospital in Bacoor, Cavite. These
messages linked the other accused.

5. During the follow-up operations, the police investigators succeeded in entrapping accused Santos, Jalandoni, Enojas,
and Gomez, who were all named in the text messages.
6. The text messages sent to the phone recovered from the taxi driven by Enojas clearly made references to the 7-11
shootout and to the wounding of "Kua Justin," one of the gunmen, and his subsequent death.

7. The context of the messages showed that the accused were members of an organized group of taxicab drivers engaged
in illegal activities.

8. Upon the arrest of the accused, they were found in possession of mobile phones with call numbers that corresponded to
the senders of the messages received on the mobile phone that accused Enojas left in his taxicab.[13]

The Court must, however, disagree with the CA's ruling that the aggravating circumstances of a) aid of armed men and b)
use of unlicensed firearms qualified the killing of PO2 Pangilinan to murder. In "aid of armed men," the men act as
accomplices only. They must not be acting in the commission of the crime under the same purpose as the principal
accused, otherwise they are to be regarded as co-principals or co-conspirators. The use of unlicensed firearm, on the other
hand, is a special aggravating circumstance that is not among the circumstances mentioned in Article 248 of the Revised
Penal Code as qualifying a homicide to murder.[14] Consequently, the accused in this case may be held liable only for
homicide, aggravated by the use of unlicensed firearms, a circumstance alleged in the information.

As to the admissibility of the text messages, the RTC admitted them in conformity with the Court's earlier Resolution
applying the Rules on Electronic Evidence to criminal actions.[15] Text messages are to be proved by the testimony of a
person who was a party to the same or has personal knowledge of them.[16] Here, PO3 Cambi, posing as the accused
Enojas, exchanged text messages with the other accused in order to identify and entrap them. As the recipient of those
messages sent from and to the mobile phone in his possession, PO3 Cambi had personal knowledge of such messages and
was competent to testify on them.

The accused lament that they were arrested without a valid warrant of arrest. But, assuming that this was so, it cannot be
a ground for acquitting them of the crime charged but for rejecting any evidence that may have been taken from them
after an unauthorized search as an incident of an unlawful arrest, a point that is not in issue here. At any rate, a crime
had been committed the killing of PO2 Pangilinan and the investigating police officers had personal knowledge of facts
indicating that the persons they were to arrest had committed it.[17] The text messages to and from the mobile phone left
at the scene by accused Enojas provided strong leads on the participation and identities of the accused. Indeed, the police
caught them in an entrapment using this knowledge.

The award of damages by the courts below has to be modified to conform to current jurisprudence.[18]

WHEREFORE, the Court MODIFIES the Court of Appeals Decision of June 14, 2012 in CA-G.R. CR-HC 03377. The Court
instead FINDS accused-appellants Noel Enojas yHingpit, Arnold Gomez y Fabregas, Fernando Santos y Delantar, and
Roger Jalandoniy Ari GUILTY of the lesser crime of HOMICIDE with the special aggravating circumstance of use of
unlicensed firearms. Applying the Indeterminate Sentence Law, the Court SENTENCES each of them to 12 years of prision
mayor, as minimum, to 20 years of reclusion temporal, as maximum. The Court also MODIFIES the award of exemplary
damages by increasing it to P30,000.00, with an additional P50,000.00 for civil indemnity.

SO ORDERED.

G.R. No. 200148 June 4, 2014

RAMON A. SYHUNLIONG, Petitioner,

vs.
TERESITA D. RIVERA, Respondent.

RESOLUTION

REYES, J.:

For review is the instant Petition1 filed by Ramon A. Syhunliong (Syhunliong) seeking the reversal of the
Decision2rendered on July 11, 2011 and Resolution3 issued on January 6, 2012 by the Court of Appeals (CA) in CA-G.R.
SP No. 110335. The CA set aside the Orders dated December 4, 20084 and June 18, 20095 of the Regional Trial Court
(RTC) of Quezon City, Branch 84, which denied the Motion to Dismiss/Quash on Jurisdictional Challenge 6 (Motion to
Quash) filed by the herein respondent, Teresita D. Rivera (Rivera), in Criminal Case No. Q-07-147802, an action for libel.

Antecedents

Syhunliong and Rivera are respectively the private complainant and defendant in Criminal Case No. Q-07-147802.
Syhunliong is the President of BANFF Realty and Development Corporation (BANFF) and likewise owns interests in
construction, restaurant and hospital businesses. On the other hand, Rivera used to be the Accounting Manager of
BANFF. She was hired in September of 2002 with a monthly salary of Php 30,000.00.
About three years after, Rivera, citing personal and family matters, tendered her resignation to be effective on February 3,
2006. However, Rivera actually continued working for BANFF until March of the same year to complete the turn over of
papers under her custody to Jennifer Lumapas (Lumapas), who succeeded her.

Sometime in April of 2006, Rivera called Lumapas to request for the payment of her remaining salaries, benefits and
incentives. Lumapas informed Rivera that her benefits would be paid, but the check representing her salaries was still
unsigned, and her incentives were put on hold by Syhunliong.7

On April 6, 2006, at around 11:55 a.m., Rivera sent the following text message to one of BANFF’s official cellular phones
held by Lumapas:

I am expecting that[.] [G]rabe talagasufferings ko dyan hanggang pagkuha nglast pay ko. I don’t deserve this [because] I
did my job when I [was] still there. God bless ras[.]8 [S]ana yung pagsimba niya, alam niya real meaning.9 (Italics ours)

Minutes later, Rivera once again texted another message, which reads:

Kailangan release niya lahat [nang] makukuha ko diyanincluding incentive up to the last datena nandyan ako para di na
kami abot sa labor.10 (Italics ours)

Subsequently, on December of 2006, Rivera filed before the National Labor Relations Commission a complaint against
Syhunliong for underpaid salaries, 13th to 16th month and incentive pay, gratuities and tax refund in the total sum of
Php 698,150.48.11

On April 16, 2007,12 pending the resolution of the aforecited labor case, Syhunliong instituted against Rivera a complaint
for libel, the origin of the instant petition. The information, dated June 21, 2007, charged Rivera with the following:

That on or about the 6th day of April, 2006, in Quezon City, Philippines, the said accused, with malicious intent of
impeaching the honor, virtue, character and reputation of one RAMON A. SYHUNGLIONG [sic] and with evident intent of
exposing the complainant to public dishonor, discredit, contempt and ridicule, did then and there willfully, unlawfully,
feloniously and maliciously publish in the form of text messages and/or caused to be publish[ed] the following defamatory
statements through the company’s cellular phone, to wit:

xxxx

that with the said text message, the said accused meant and intended to convey as in fact she did mean and convey,
malicious and offensive insinuations and imputations that tends [sic] to destroy the good name and reputation of Ramon
Syhunliong, with no good or justifiable motive but solely for the purpose of maligning and besmirching the good name,
honor, character and reputation of the said complainant and to expose it, as in fact [he] was exposed to public hatred,
contempt and ridicule, to the damage and prejudice of said offended party.

CONTRARY TO LAW.13

Rivera filed a Motion to Quash14 the aforequoted information. She argued that the text message, which was the subject of
the libel complaint, merely reflected the undue stress she had suffered due to the delay in the release of her unpaid
salaries, benefits and incentives. Further, the facts charged in the information did not constitute the crime of libel as the
elements of malice and the making of defamatory imputation for public consumption were wanting. Her text message was
not prompted by ill will or spite, but was merely sent as part of her duty to defend her own interests.

During the arraignment on October 11, 2007, Rivera entered a plea of not guilty.15

The Orders of the RTC

On December 4, 2008, the RTC issued an Order16 denying Rivera’s Motion to Quash on these grounds:

[T]he grounds raised by [Rivera] in the motion to quash [are] evidentiary in nature[,] which can only be threshed out in a
full blown hearing to determine if said [t]ext message falls squarely within the parameters of "Privileged Communication"
or the elements of Article 353 of the Revised Penal Code [are] not fully established by the Prosecution’s evidence.

The Rule on Criminal Procedure in the prosecution of any felony or offense requires only the existence of probable cause
in order to indict an accused of the crime charged. x x x [P]robable cause was established seasonably during the
preliminary investigation. [Rivera] should have participated during the preliminary investigation or filed a Motion for re-
investigation [if] she was not accorded such right and raised these grounds, before she enter[ed] her plea during
arraignment.

The Supreme Court ruled that "[i]t should be noted that the libelous material [or text] must be viewed as a whole. In order
to ascertain the meaning of [the] published article [or text message], the whole of the article must be considered, each
phrase must be construed in the light of the entire publication."

The Supreme Court held that "writing [or texting] to a person other than the person defamed is sufficient to constitute
publication, for the person to whom the letter [text message] is addressed is a third person in relation to its writer and the
person defamed therein. In this case, the wife of the complainant[,] who received the unsealed letter[,] is held a third
person to whom the publication is made.[ ]17 (Citations omitted)

The RTC thereafter issued an Order18 on June 18, 2009 denying Rivera’s motion for reconsideration to the foregoing.
Citing Lu Chu Sing and Lu Tian Chiong v. Lu Tiong Gui,19 the RTC explained that the privileged character of a
communication merely does away with the presumption of malice. However, the plaintiff is not precluded from proving the
existence of such malice. The RTC once again concurred with the Public Prosecutor’s finding that there was probable
cause to indict Rivera for having ascribed to Syhunliong the possession of a vice or defect, or for having committed an act,
tending to cause dishonor or discredit to the latter’s name.

Rivera challenged the orders issued by the RTC through a Petition for Certiorari20 filed before the CA. Quoting Article 354
of the Revised Penal Code (RPC), she emphasized that "every defamatory imputation is presumed to be malicious, even if it
be true, if no good intention and justifiable motive for making it is shown," except in "a private communication made by
any person to another in the performance of any legal, moral or social duty."21 Citing Brillante v. Court of
Appeals,22 Rivera enumerated the requisites, compliance with which would make a statement fall within the purview of a
qualified privileged communication, viz: (1) the person who made the communication had a legal, moral, or social duty to
make the communication, or at least, had an interest to protect, which interest may either be his own or of the one [for]
whom it is made; (2) the communication is addressed to an officer or a board, or superior, having some interest or duty in
the matter, and who has the power to furnish the protection sought; and (3) the statements in the communication are
made in good faith and without malice.23 Rivera likewise stressed that under Sections 3(a)24 and 9,25 Rule 11726 of the
Rules of Court, an accused may move to quash the information even after arraignment if the facts charged therein do not
constitute an offense. She thus concluded that the text message she sent to Lumapas was in the nature of a qualified
privileged communication, it being merely an expression of her legitimate grievances over the delay in the release of her
unpaid salaries and other entitlements. Rivera texted Lumapas because the latter was in the best position to help expedite
the release of the checks. Rivera had no intent to injure anyone’s reputation. Lastly, Rivera labeled as erroneous the RTC’s
declaration regarding the necessity of a full blown trial since facts sufficient for the resolution of the case were allegedly
already extant in the records. The CA Ruling

On July 11, 2011, the CA rendered the herein assailed Decision27 directing the dismissal of the information for libel filed
against Rivera. The CA favorably considered her argument that when the facts in an information fail to charge an offense,
the said ground can be invoked by the accused in a motion to quash filed even after arraignment. The CA likewise
explained that:

The focal issue to the parties in the present case is whether the facts charged in the information[,]as well as the
undeniable facts appearing on the record[,] show that an offense of libel has been committed. Our criminal law
convincingly provide us with a definition of libel – It is a public and malicious imputation of a crime, or of a vice or defect
... or any act, omission, condition, status or circumstance tending to cause the dishonor, discredit or contempt of ... a
person. x x x.

The first procedural requisite in the determination of the existence of libel is whether there is a defamatory imputation.
The history of the law on libel abounds in examples of utterances or statements that are not necessarily considered
libelous because they are a [sic] mere expression[s] of an [sic] opinion[s] of a [sic] person[s] in connection with a [sic]
plea[s] or grievance[s]. Libel is inherently a limitation on the liberty of speech and press freedom, and must be construed
in a manner that does not trench upon constitutionally protected freedoms.

x x x There can be libel only if the words used are calculated to induce the hearer or reader to suppose and understand
them as impeaching the honesty, virtue or reputation of another. The question is not what the writer or speaker meant by
his words but what they convey to those who heard or read them.

xxxx

We can break up the text message of [Rivera] to [Lumapas] into three parts. The utterance is mercifully short so that it
could not be difficult to infer the whole sense and understanding of the message from the standpoint of Lumapas to whom
the message was conveyed. In context, [Rivera] was seeking payment of her wage claims consequent to her resignation
and receiving [BANFF’s] response through Lumapas. [Rivera] retorted with three things in her message to Lumapas – (1)
that she suffered a lot in collecting her last pay from [BANFF] Grabe talaga sufferings ko dyan hanggang pagkuha ng
lastpay ko.[;] (2) that she does not deserve to suffer this way [because she] did [her] job when [she was] still there[;] and (3)
turning to [Syhunliong] himself [she] said – God bless ras[.] [S]ana yung pagsimba niya, alam niya real meaning.

If libel is to be understood as an imputation of a crime, vice or defect to another, there can be no libel in the first two of
the three statements which announced only the sufferings, albeit undeserved[,] of [Rivera]. The proposition gets to be
dicey in the third statement because now she makes a distinct reference to [Syhunliong][,] [b]ut is the imputation
defamatory? We hesitate to reach this conclusion, and all doubts in criminal law, we are basically taught, must be
resolved in favor of the accused. To articulate the legal wisdom, [Rivera] has the right to express an opinion in a matter in
which she has an undeniable interest.

[Rivera said] in the last part of the text that [Syhunliong] should understand the real meaning of the masswhen he goes to
attend it. It is in this tail end of the message that [Syhunliong] is mentioned. But what is conveyed by the words ["]sana
alam niya real meaning?[ ] Does it impute a crime, vice or defect in [Syhunliong], either directly or by way of innuendo?
But the innuendo can only be explanatory of a libelous imputation and cannot alter the sense of the words claimed to be
libelous. If the publication is not actionable per se, an innuendo cannot make it so, and if the publication is actionable per
se, the innuendo would not even be necessary.

We hold that the text message is not actionable libel. It does not serve to cast a shadow on [Syhunliong’s]character and
integrity[,] there being no direct and personal imputation of a venality to him. At best, the statement that [Syhunliong]
should understand the meaning of the mass suggests that [Syhunliong] should be more compassionate and caring to the
employee. But is being the converse of compassionate and caring suggestive of a vice or defect in the person alluded to?
We do not think so. Otherwise, even courts should be exposed to contempt and ridicule for reaching at times decisions in
favor of capital and against labor. x x x To follow the intent of the message as ordinarily conveyed by the words and the
context in which they are said, it can only suggest the intention of [Rivera] to describe [Syhunliong] as strict and selfish.
But[,] there are legitimate reasons why a person who acts in the interest of the employer may appear strict and selfish to
the other side. One may have to be so to protect the interest of his company and, indeed, the outcome of the labor case
vindicates the stand of [Syhunliong] against giving [Rivera] the claims she sought after.

A responsible officer whose decisions may affect the fortunes of others and who is faced with criticism such as in this case
should not be so onion-skinned as to react through the criminal law. Instead, he should use methods of discussion and
persuasion to dispel the misgivings over his decisions. He should, in particular, explain through the same source that told
him of the comment why [BANFF]cannot satisfy all [of Rivera’s] claims.

x x x The matter contained in the text message is privileged communication under Article 354 of the Revised Penal Code
which [negates] the existence of malice in – a private communication made by any person to another in the performance of
any legal, [moral] or social duty. x x x It was Lumapas who told her of the stand of [Syhunliong] on the matter of her wage
claims, and her reaction through the text message may be deemed a part of her duty to seek redress of her grievances
through the same source. She was speaking in response to duty and not out of an intent to injure the reputation of the
person who claims to be defamed. There was no unnecessary publicity of the message beyond the necessity of conveying it
to the party concerned.28 (Citations omitted and italics supplied)

The CA denied Syhunliong’s motion for reconsideration to the above through the herein assailed Resolution29 dated
January 6, 2012.

Issues and Arguments of the Parties

Undaunted, Syhunliong now presents to this Court the issues of whether or not: (a) the trial court’s denial of a motion to
quash information may be validly assailed through a special civil action for certiorari; (b) Rivera may validly question the
denial of her motion to quash before the CA after voluntarily allowing herself to be arraigned even during the pendency of
such motion to quash; (c) the CA may validly review on certiorari what was, at best, an error of judgment made by the
RTC; (d) the CA correctly ruled that the facts charged in the information do not constitute the offense of libel; and (e) the
CA committed reversible error in ordering the outright dismissal of Criminal Case No. Q-07-147802 on the putative
ground that the allegedly libelous text messages were privileged communication.30

In support of the petition, Syhunliong cites Soriano, et al. v. People, et al.31 where the Court declared that in assailing the
denial of a motion to quash an information, the accused should not file a special civil action for certiorari. Instead, the
accused should enter a plea, go to trial sans prejudice to present the special defenses he or she had invoked in the motion
to quash, and if an adverse decision is rendered, file an appeal therefrom.

Syhunliong further avers that Rivera was arraigned on October 11, 2007. Section 1, Rule 117 of the Rules of Court clearly
provides that the accused may only be allowed to file a motion to quash at any time before entering a plea. In Rivera’s
case, she had already voluntarily entered a plea;
hence, it was tantamount to an effective abandonment of her motion to quash.

It is also Syhunliong’s argument that the CA improperly arrogated unto itself the power to review the Public Prosecutor
and RTC’s uniform finding of the existence of probable cause. Even if it were to be assumed that the RTC erred in its
disposition, it was a mistake of judgment and not of jurisdiction.

Syhunliong also refutes the CA’s finding that the facts charged in the information did not constitute the crime of libel. The
text message was apparently an indictment of his personality and character since it portrayed him as a hypocrite.

Lastly, Syhunliong invokes People v. Judge Gomez32 which enunciated the doctrine that in a libel case, the privileged
nature of a communication is not a ground for a motion to quash, but is merely a matter of defense to be proven during
the trial.

In Rivera’s Comment,33 she reiterates the arguments in the Motion to Quash filed with the RTC. Additionally, she
contends that the RTC no longer had jurisdiction to take cognizance of Syhunliong’s complaint. The text message was sent
on April 6, 2006.Per Syhunliong’s narration in the instant petition, his complaint was filed on August 18, 2007, 34 beyond
the one year prescriptive period for instituting actions for libel provided for in Articles 90 35 and 9136 of the RPC.

Further, the ground that the facts charged in the information did not constitute an offense can be raised even after
arraignment and is broad enough to cover within its ambit lack of probable cause. This, the court can re-assess in the
exercise of its inherent power of judicial review.

Rivera also laments that she was deprived of due process and of the opportunity to submit countervailing evidence during
preliminary investigation.

Our Ruling

There is no merit in the instant petition.

Prescription had set in.

Syhunliong raised five issues before this Court, but the Court’s resolution of the same would be a superfluity in the light
of Rivera’s unrefuted averment that prescription had set in before the complaint for libel was instituted.

In Romualdez v. Hon. Marcelo,37 the Court, partially quoting People v. Moran,38 stressed the reason behind and the
character of prescription of penal offenses, to wit:

"Here the State is the grantor, surrendering by act of grace its rights to prosecute, and declaring the offense to be no
longer the subject of prosecution. The statute is not a statute of process, to be scantily and grudgingly applied, but an
amnesty, declaring that after a certain time oblivion shall be cast over the offence; x x x that from henceforth[,] he may
cease to preserve the proofs of his innocence, for the proofs of his guilt are blotted out. Hence[,] it is that statutes of
limitation are to be liberally construed in favor of the defendant, not only because such liberality of construction belongs
to all acts of amnesty and grace, but because the very existence of the statute, is a recognition and notification by the
legislature of the fact that time, while it gradually wears out proofs of innocence, has assigned to it fixed and positive
periods in which it destroys proofs of guilt. Independently of these views, it must be remembered that delay in instituting
prosecutions is not only productive of expense to the State, but of peril to public justice in the attenuation and distortion,
even by mere natural lapse of memory, of testimony. It is the policy of the law that prosecutions should be prompt, and
that statutes, enforcing such promptitude should be vigorously maintained. They are not merely acts of grace, but checks
imposed by the State upon itself, to exact vigilant activity from its subalterns, and to secure for criminal trials the best
evidence that can be obtained."

Indeed, there is no reason why we should deny petitioner the benefits accruing from the liberal construction of
prescriptive laws on criminal statutes. Prescription emanates from the liberality of the State. x x x Any doubt on this
matter must be resolved in favor of the grantee thereof, the accused.39 (Italics supplied)

In the case at bar, it is extant in the records that Syhunliong filed his complaint against Rivera more than one year after
the allegedly libelous message was sent to Lumapas. Whether the date of the filing of the complaint is April 16, 2007 or
August 18, 2007,40 it would not alter the fact that its institution was made beyond the prescriptive period provided for in
Article 90 of the RPC. The Court finds no persuasive reason why Rivera should be deprived of the benefits accruing from
the prescription of the crime ascribed to her.

People v. Castro,41 on the other hand, is instructive anent the effect in criminal proceedings of the failure of an accused to
raise prescription as a ground in a motion to quash an information, viz:
Does the failure of the accused to move to quash before pleading constitute a waiver to raise the question of prescription
at a later stage of the case?

A case in point is People vs. Moran, 44 Phil., 387. x x x [T]he court ruled that the crime had already prescribed holding
that this defense can not [b]e deemed waived even if the case had been decided by the lower court and was pending appeal
in the Supreme Court. The philosophy behind this ruling was aptly stated as follows: "Although the general rule is that
the defense of prescription is not available unless expressly set up in the lower court, as in that case it is presumed to
have been waived and cannot be taken advantage of thereafter, yet this rule is not always of absolute application in
criminal cases, such as that in which prescription of the crime is expressly provided by law, for the State not having then
the right to prosecute, or continue prosecuting, nor to punish, or continue punishing, the offense, or to continue holding
the defendant subject to its action through the imposition of the penalty, the court must so declare."

And elaborating on this proposition, the Court went on to state as follows:

"As prescription of the crime is the loss by the State of the right to prosecute and punish the same, it is absolutely
indisputable that from the moment the State has lost or waived such right, the defendant may, at any stage of the
proceeding, demand and ask that the same be finally dismissed and he be acquitted from the complaint, and such
petition is proper and effective even if the court taking cognizance of the case has already rendered judgment and said
judgment is merely in suspense, pending the resolution of a motion for a reconsideration and new trial, and this is the
more so since in such a case there is not yet any final and irrevocable judgment."

The ruling above adverted to squarely applies to the present case. Here, the rule provides that the plea of prescription
should be set up before arraignment, or before the accused pleads to the charge, as otherwise the defense would be
deemed waived; but, as was well said in the Moran case, this rule is not of absolute application, especially when it
conflicts with a substantive provisions of the law, such as that which refers to prescription of crimes. Since, under the
Constitution, the Supreme Court has only the power to promulgate rules concerning pleadings, practice and procedure,
and the admission to the practice of law, and cannot cover substantive rights (section 13, article VIII, of the Constitution),
the rule we are considering cannot be interpreted or given such scope or extent that would come into conflict or defeat an
express provision of our substantive law. One of such provisions is article 89of the Revised Penal Code which provides
that the prescription of crime has the effect of totally extinguishing the criminal liability. And so we hold that the ruling
laid down in the Moran case still holds good even if it were laid down before the adoption of the present Rules of
Court.42 (Italics supplied)

While Castro is an old jurisprudence, it still finds application in the case at bench in view of Section 9, Rule 117 of the
Rules of Court, which in essence partially provides that the defense of extinction of criminal action or liability, e.g.,
prescription, is not deemed waived even if the accused had not raised the same in a motion to quash. In Rivera’s case, the
issue of prescription is raised in her comment to the instant petition before this Court. Syhunliong does not specifically
refute Rivera’s averment, thus, it is deemed admitted.

In sum, even if the Court were to sustain Syhunliong’s stance that Rivera availed of the wrong remedy when she resorted
to filing a petition for certiorari before the CA to assail the RTC orders denying the motion to quash, the result would only
prove circuitous. Even if the trial proceeds and an adverse decision is rendered against Rivera, she can appeal the same,
but the CA and this Court would still be compelled to order the dismissal of the information on account of prescription of
the crime.1âwphi1

Prescription of the crime is already a compelling reason for this Court to order the dismissal of the libel information, but
the Court still stresses that the text message which Rivera sent to Lumapas falls within the purview of a qualified
privileged communication.

"The rule on privileged communication means that a communication made in good faith on any subject matter in which
the communicator has an interest, or concerning which he has a duty, is privileged if made to a person having a
corresponding duty."43

In order to prove that a statement falls within the purview of a qualified privileged communication under Article 354, No.
1, the following requisites must concur: (1) the person who made the communication had a legal, moral, or social duty to
make the communication, or at least, had an interest to protect, which interest may either be his own or of the one to
whom it is made; (2) the communication is addressed to an officer or a board, or superior, having some interest or duty in
the matter, and who has the power to furnish the protection sought; and (3) the statements in the communication are
made in good faith and without malice.44

In the case at bar, it was Lumapas who informed Rivera of either the delay or denial of the latter's claims for payment of
salaries, benefits and incentives by Syhunliong. Rivera expressed through the subject text message her grievances to
Lumapas. At that time, Lumapas was the best person, who could help expedite the release of Rivera's claims.
Prescinding from the above, the Court thus finds no error in the CA' s declaration that Rivera's text message falls within
the ambit of a qualified privileged communication since she "was speaking in response to duty [to protect her own
interest] and not out of an intent to injure the reputation"45 of Syhunliong. Besides, "[t]here was no unnecessary publicity
of the message beyond [that] of conveying it to the party concerned."46

IN VIEW OF THE FOREGOING, the petition is DENIED. The Decision rendered on July 11, 2011 and Resolution issued on
January 6, 2012 by the Court of Appeals in CA-G.R. SP No. 110335 ordering the Regional Trial Court of Quezon City,
Branch 84, to dismiss the information for libel filed by Ramon A. Syhunliong against Teresita D. Rivera are AFFIRMED.

SO ORDERED.

EN BANC

[ AM No. P-11-2979, Nov 18, 2014 ]

ELLA M. BARTOLOME v. ROSALIE B. MARANAN +

DECISION

PER CURIAM:

This administrative matter started through the sworn affidavit-complaint[1] in the vernacular, dated December 16, 2009,
that Ella M. Bartolome (complainant) filed against Rosalie B. Maranan [respondent, Court Stenographer III, Regional Trial
Court (RTC), Branch 20, Imus, Cavite], charging her with extortion, graft and corruption, gross misconduct and conduct
unbecoming of a court employee.

The complainant alleged that the respondent asked money from her in the amount of P200,000.00, which was later
reduced to P160,000.00, to facilitate the filing of her case for annulment of marriage. She further alleged that the
respondent undertook to have the case decided in her favor without the need of court appearances during the proceedings
of the case.

For a clear and complete picture of the accusations against the respondent, we quote verbatim the pertinent portions of
the complainant's narration of the incidents that gave rise to the filing of the present administrative complaint

xxxx

2. Na noong October 21, 2009 nakilala ko si ROSALIE MARANAN na isang stenographer sa Regional Trial Court ng Imus,
Cavite. Nasabihan ko siya ng aking kagustuhan na magsampa ng annulment of marriage case. Agad niya akong inalok at
pinangakuan na kaya niyang ipasok ang aking annulment case sa RTC, Br. 20, Imus, Cavite kung saan siya nagtratrabaho.
Noong una ang hinihingi niya sa akin ay halagang TWO HUNDRED THOUSAND PESOS (P200,000.00) pero humingi ako sa
kanya ng discount at pumayag siya sa ONE HUNDRED SIXTY THOUSAND PESOS (P160,000.00). Ako po ay naengganyo na
magtiwala sa kanya dahil nangako siya na siya na ang bahala sa lahat. May kausap na daw siyang abogado na pipirma
sa petisyon ko at di ko na daw kailangan pang umappear sa korte. Sinabi niya na malakas daw siya sa judge at sa fiscal
at siya lang daw ang pinapayagan na magpasok ng mga aaregluhin na kaso sa kanilang korte. Sinabi niya din na kasama
na sa P160,000.00 ang para sa judge at sa fiscal kaya siguradong maaaprubahan ang aking annulment case sa mabilis na
panahon. Kasama po ng Affidavit-Complaint na ito angtranscript at ang SIM Card ay aking ipadadala kapag ako ay
makasigurado na ang Korte Suprema ay poprotektahan ang mga ebidensya laban kay MARANAN sapagkat rito lahat
nakatagon (sic) ang mga text messages at nakarecord lahat ng calls nitong si ROSALIE MARANAN sa akin na nagpapatunay
ng panghihingi niya sa akin ng pera at pangako na aaregluhin niya ang aking annulment of marriage case. Ang cellphone
number po na nag-aappear dito sa SIM ay kay ROSALINA MARANAN, ang numero niya ay 09175775982. Maaaring nagpalit
na ng numero ang inirereklamo ko kung kaya't maganda rin na ipag-utos ang pag-alam ng detalye mula sa Globe Telecoms
kung saan post-paid subscriber ang may-ari ng numero na iyan. [Emphasis supplied]
To put an end to the respondent's extortion activities, the complainant decided to report the matter to the police
authorities. During the entrapment operation conducted by police officers of Imus Police Station, the respondent was
apprehended inside the premises of the RTC, Branch 20, Imus, Cavite, in the act of receiving the money from the
complainant.

In support of her allegations, the complainant attached to her affidavit-complaint the transcribed electronic
communications (text messages) between her and the respondent;[2] a copy of an Electronic Psychiatric History form given
to her by the respondent for her to accomplish in filing the petition for annulment of marriage;[3] a copy of the Imus Police
Station Blotter showing that the respondent was apprehended during the entrapment operation conducted by police
officers of Imus Police Station on November 11, 2009 at 2:40 p.m.;[4] and a versatile compact disc (VCD) containing the
video taken during the entrapment operation conducted against the respondent.[5]

The Court, in a 1st Indorsement[6] dated March 19, 2010, required the respondent to comment on the complaint against
her.

In her Comment dated May 27, 2010,[7] the respondent denied the accusations against her. She alleged her belief that
Bartolome is a fictitious name as the affidavit-complaint does not indicate the complainant's exact address. She asserted
that her detention at Imus Police Station does not prove her culpability since no actual criminal charges were filed against
her. She claimed that the lapse of six (6) months from the time of the alleged incident indicates that the complaint is pure
and simple harassment orchestrated by a lawyer or litigant who has a grudge against her and who wants to publicly
besmirch her reputation. In support of her defense, the respondent mentioned that even Judge Fernando L. Felicen
(Judge Felicen), Presiding Judge of RTC, Branch 20, Imus, Cavite interceded for her release from detention.

On July 29, 2010, the complainant sent a letter to the Office of the Court Administrator (OCA),[8] without indicating her
address, alleging that she has to constantly change residence because unidentified persons had been seen in their
neighborhood asking questions about her. She has also been receiving text messages from the respondent telling her that
her complaint would only be dismissed because she knows people in the Supreme Court. The respondent also threatened
retaliation against her after the case is terminated. The complainant further claimed that the pieces of evidence she
submitted are sufficient to prove the respondent's anomalous activities, and prayed for the immediate resolution of her
complaint.

Based on the complainant's pleadings and evidence, the OCA, (through then Deputy Court Administrator Nimfa C. Vilches
and OCA Chief of Legal Office Wilhelmina D. Geronga) submitted its Report to the Court dated May 9, 2011, [9] finding
enough evidence to prove the respondent's involvement in anomalous activities and recommending that

1) OCA IPI No. 10-3352-P be RE-DOCKETED as a regular administrative matter;

respondent Rosalie B. Maranan, Court Stenographer III, Regional Trial Court, Branch 20, Imus, Cavite, be found
2)
GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service; and
respondent Maranan be immediately DISMISSED from the service with forfeiture of retirement benefits except her
3) accrued leave credits, and with perpetual disqualification from employment in any government agencies or
instrumentalities, including government owned and controlled corporations.

In a Resolution dated September 5, 2011,[10] the Court required the parties to manifest whether they were willing to
submit their case for resolution on the basis of the pleadings filed. The respondent filed her Manifestation dated November
17, 2011[11]submitting the case for resolution by the Court. She reiterated her complete innocence and "vigorous" and
"vehement" denial of the allegations against her. She insisted that the present complaint against her is plain and simple
harassment and a vexatious suit by the complainant who either has a grudge against her or must have been used by
another person with a grudge against her. All she did was to secure the services of a lawyer at the complainant's request;
this act, she claimed, does not constitute graft and corruption, gross misconduct, conduct unbecoming of a court
employee and extortion.

The complainant did not respond to our September 5, 2011 Resolution as it was returned unserved on her. We
nevertheless considered the case submitted for resolution considering her letter of July 16, 2010 praying for the
immediate resolution of her complaint.

In our Internal Resolution dated December 7, 2011,[12] we resolved to refer the complaint to the OCA for evaluation, report
and recommendation.

The OCA responded through its Memorandum of July 16, 2012,[13] finding that the pieces of evidence on record establish
the guilt of the respondent on the charges of Gross Misconduct and Conduct Prejudicial to the Best Interest of the Service
filed against her. It recommended that the respondent be found guilty of the offenses charged and be dismissed from the
service, with forfeiture of retirement benefits except her accrued leave credits and with perpetual disqualification from
employment in any government agency.

The Court fully agrees with the OCA's recommendation.

The respondent's bare denial cannot overcome the evidence supporting the complainant's accusation that she demanded
money on the promise that she would facilitate the annulment of her (complainant's) marriage. The respondent's actions
from the time the complainant started communicating with her on October 21, 2009 and thereafter through a series of
messages they exchanged via SMS,[14] until the entrapment operation on November 11, 2009, showed that the complaint
is indeed meritorious. The respondent's text messages sent to the complainant corroborate that she promised to expedite
in exchange for a monetary consideration of P160,000.00 and that she would provide the lawyer who would file the
annulment case the complainant's annulment case once it is filed:[15]

21/19/09 8:40pm

Sino po to
21/10/09 8:53pm

Sino nagrefer sayo sakin ano pangalan?

21/10/09 8:54pm

San mo nakuha # ko

21/10/09 9:05pm

Ako rin magbibigay lawyer sayo

21/10/09 9:13pm

D kaba tlaga makakatawag ngayon

21/10/09 9:18pm

Ako n lang tatawag sayo kc mahirap ang txt lang

21/10/09 9:24pm

Tawag n lng ako ha

21/10/09 9:49pm

Natitiwala ako sayo ha dahil hindi lahat pinagbibigyan namin. Sally n lang tawag mo sakin nagtataka lng kc ako kanina
kc buong buong buo yung txt ng name ko e.

21/10/09 9:51pm

Ay sorry mali pala sabi ko sayo 160k pala singil namin

22/10/09 10:05am

Gud am. Ano pwede k bukas

22/10/09 10:25am

ls txt bak naghihintay po kme

22/10/09 10:51am

Bukas lng available si atty

22/10/09 10:56am

Sana kung makakagawa ka daw paraan bukas kahit 40k n lng muna down tapos 3pm bukas

22/10/09 11:04am

Ok pero d kita pilipilit ha nasayo pa din and decision yan ang sakin lng kc nagmamadali k at tsaka yun ang free time ng
lawyer ha

22/10/09 11:11am

Ella pakihusto mo n daw pala 50k at ibabayad daw mua sa psychiatrist at osg kahit sa susunod n lng daw yung sa kanya

22/10/09 1:09pm
The complainant described the respondent as an influence peddler in the courts of Imus, Cavite who acts as a conduit to
judges, prosecutors and private law practitioners.

In her comment to the complaint, the respondent admitted that "she suggested to the complainant the name of a lawyer
friend, Atty. Renante C. Bihasa (Atty. Bihasa), and forwarded to her the cell phone number of this lawyer so that they
could discuss the case." While she was in detention at Imus Police Station, she called Atty. Bihasa, who told her that he
was on his way and assured her that he had already asked his lawyer friends to assist her. Atty. Bihasa arrived at about
five o'clock in the afternoon. As it was already beyond office hours, she was told by Atty. Bihasa of the possibility that she
would be detained pending investigation. Atty. Bihasa returned the following day and was joined by Judge Felicen and her
officemates. Judge Felicen interceded in her behalf that she be given permission by the police officers to leave her
detention in order to take a bath and change clothes. She was granted permission, with the full guaranty of Judge Felicen
that she would return.[16]

In an affidavit[17] dated May 28, 2010, Atty. Bihasa corroborated the respondent's allegations. In his affidavit, he narrated
that upon receiving a call from the respondent that she was being detained, he immediately called up two (2) of his lawyer
friends based at Imus, Atty. Wilfredo P. Saquilayan and Atty. Jose Emmanuel Montoya, to assist the respondent. As he
arrived at Imus Police Station at around past four o'clock in the afternoon, he told the respondent of the probability of her
detention until formal charges were filed against her. According to him, "[he] took it upon [himself] to assist [the
respondent] on that date and accompanied her while the police officers of Imus PNP were doing their routine work on
suspects."

Atty. Bihasa further narrated that on the next day at about five o'clock in the afternoon, he went back to Imus Police
Station to wait for the complainant. After a few hours, the respondent's co-workers, including Judge Felicen arrived. They
waited for the complainant until seven o'clock in the evening but she failed to come. Only the complainant's lawyer arrived
who informed the police investigator that the complainant cannot come out of fear because of the death threats she
received.[18]

The concern that Atty. Bihasa and Judge Felicen showed to the respondent while under detention at Imus PNP Station
gives rise to the suspicion that they have knowledge and tolerate the respondent's anomalous activities. The respondent's
text messages to the complainant support this suspicion:[19]

At tsaka alam mo naman nakailang appointment n tayo sa abogado hiyang hiya nga ako kahapon e

7/11/09 3:13pm

Tawagan ko muna si judge kung pwede pa kami tumanggap hanggang wed

7/11/09 3:15pm

Try ko lng

7/11/09 3:25pm

Hanggang Tuesday na lg tayo after nun nxt year na. Yan ang sabi

7/11/09 3:28pm

Sayang kc ang haba n ng time mo dp natuloy sabi ko naman sayo e kapag inabot ng naghigpit dn pwede none
appearance. Yun nagan nagpatulong sakin kahapon lng tumawag yun d sana nagka sabay n kayo

7/11/09 3:59pm

Ok po mit po tayo bukas 10 am sinabi ko napo kay atty. Tnx po. See you po
Ephemeral electronic communications are now admissible evidence, subject to certain conditions. "Ephemeral electronic
communication" refers to telephone conversations, text messages, chatroom sessions, streaming audio, streaming video,
and other electronic forms of communication the evidence of which is not recorded or retained. [20] It may be proven by the
testimony of a person who was a party to the communications or has personal knowledge thereof. [21] In the present case,
we have no doubt regarding the probative value of the text messages as evidence in considering the present case. The
complainant, who was the recipient of the text messages and who therefore has personal knowledge of these text
messages, identified the respondent as the sender through cellphone number 09175775982. The respondent herself
admitted that her conversations with the complainant had been thru SMS messaging and that the cellphone number
reflected in the complainant's cellphone from which the text messages originated was hers. She confirmed that it was her
cellphone number during the entrapment operation the Imus Cavite Police conducted [22] -

Sally:

Halika dito sa office, sa clerk of court. Pupunta ka ngayon? O sige, sige, pupunta ka ngaun? Ah sige OK, salamat! Ang
number ko …

Lalaki:

Ibigay ko sa kanya?

Sally:

Oo, ang number ko ay 09175775982, ok thank you.

The complainant submitted two (2) copies of the VCD[23] containing pictures taken during the entrapment conducted by
the Imus Cavite Police on November 11, 2009.[24]

Under Section 1, Rule 11 of A.M. No. 01-7-01-SC, audio, photographic and video evidence of events, acts or transactions
shall be admissible provided it shall be shown, presented or displayed to the court and shall be identified, explained or
authenticated by the person who made the recording or by some other person competent to testify on the accuracy
thereof.

We viewed the VCD and the video showed the actual entrapment operation. The complainant herself certified that the
video and text messages are evidence of her complaint against the respondent, "Sapat at malinaw ang lahat ng ebidensya
na kasama ng aking reklamo na nagpapatunay na totoo lahat ang nakasaad sa aking reklamo. Kitang kita sa video at sa
mga text messages niya ang kanyang modus operandi at paggamit niya ng pwesto sa gobyerno upang makapanghingi ng
malaking pera sa mga inosenteng tao." It is also well to remember that in administrative cases, technical rules of
procedure and evidence are not strictly applied.[25] A.M. No. 01-7-01-SC specifically provides that these rules shall be
liberally construed to assist the parties in obtaining a just, expeditious and inexpensive determination of cases.

The Court totally agrees with the OCA's finding that the respondent is guilty of grave misconduct and conduct prejudicial
to the best interest of the service. The respondent's assertion that Bartolome is a fictitious name because the complainant
has not stated in her complaint her exact address is preposterous in light of the evidence of direct personal and text
message contacts between them. In the absence of supporting evidence, the claim that the complaint against her is pure
and simple harassment orchestrated by persons with grudge against her, is mere conjectural allegation.

As a public servant, nothing less than the highest sense of honesty and integrity is expected of the respondent at all
times.[26] She should be the personification of the principle that public office is a public trust.[27] The respondent
unfortunately fell extremely short of the standards that should have governed her life as a public servant. By soliciting
money from the complainant, she committed a crime and an act of serious impropriety that tarnished the honor and
dignity of the judiciary and deeply affected the people's confidence in it. She committed an ultimate betrayal of the duty to
uphold the dignity and authority of the judiciary by peddling influence to litigants, thereby creating the impression that
decision can be bought and sold.[28]

The Court has never wavered in its vigilance in eradicating the so-called "bad-eggs" in the judiciary.[29] We have been
resolute in our drive to discipline and, if warranted, to remove from the service errant magistrates, employees and even
Justices of higher collegiate appellate courts for any infraction that gives the Judiciary a bad name. To stress our
earnestness in this pursuit, we have, in fact, been unflinching in imposing discipline on errant personnel or in purging the
ranks of those undeserving to remain in the service.[30]

WHEREFORE, the Court finds respondent Rosalie B. Maranan, Court Stenographer III, Regional Trial Court, Branch 20,
Imus, Cavite, GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service and is
accordingly DISMISSEDfrom the service, with prejudice to re-employment in any government agency including
government-owned or controlled corporations. Her retirement benefits, except accrued leave credits are ordered
forfeited. This decision shall be immediately executory.

The Court further Resolves to REQUIRE Judge Fernando L. Felicen, Regional Trial Court, Branch 20, Imus, Cavite
and Atty. Renante C. Bihasa, to file their Comments on their alleged participation in the anomalous activities of the
respondent, within fifteen (15) days from notice. This directive is without prejudice to the investigation of all or selected
employees and officials of the Branch, who may have participated in anomalous transactions relating to annulment of
marriage.

The Office of the Court Administrator is hereby directed to submit to this Court, within thirty (30) days, a list of the
annulment of marriage decisions of Judge Fernando L. Felicen for the past ten (10) years, indicating therein the
judgments made and the names of participating lawyers and prosecutors.

The Office of the Chief Attorney shall analyze the submitted data, including the records of and the proceedings in the
listed cases, and recommend to the Court the actions it should take in the event a pattern of corruption involving
annulment of marriage cases emerges. The Office of the Chief Attorney is given ninety (90) days from receipt of the Office
of the Court Administrator's list, within which to submit its recommendations to the Court.

The Office of the Court Administrator shall likewise refer this administrative case and its records to the Ombudsman for
whatever action it may take within its jurisdiction.

SO ORDERED.
DIVISION

[ GR No. 193225, Feb 09, 2015 ]

BBB v. AAA +

RESOLUTION

REYES, J.:

Petitioner BBB is now before this Court with a Petition for Review on Certiorari[1]under Rule 45 of the Rules of Civil
Procedure to assail the Decision[2] dated November 6, 2009 and Resolution[3] dated August 3, 2010 of the Court of Appeals
(CA) in CA-G.R. CV No. 89581, which affirmed with modification the issuance against him on August 14, 2007 of a
Permanent Protection Order (PPO)[4] by the Regional Trial Court (RTC) of Pasig City, Branch 162, in favor of his wife,
herein respondent AAA.

Antecedent Facts

The CA aptly summarized as follows the facts of the case until the RTC's issuance of the PPO against BBB:

Both [BBB] and [AAA] allege that they first met in 1991 but started to date seriously only in 1996. [AAA] was then a
medical student and was raising her first child borne from a previous relationship, a boy named [CCC], with the help of
her parents.

During the relationship with [BBB], [AAA] bore two more children namely, [DDD] (born on December 11, 1997) and [EEE]
(born on October 19, 2000).

To legalize their relationship, [BBB] and [AAA] married in civil rights on October 10, 2002 and thereafter, the birth
certificates of the children, including [CCC's], was amended to change their civil status to legitimated by virtue of the said
marriage.

The relationship, both admit, was far from ideal and has had its share of happy moments and heated arguments. The two
however have contradicting statements as to the cause of their present situation.

[BBB] alleges that [AAA's] irrational jealousy has caused their frequent arguments. According to [BBB], [AAA] has been
suspicious of [BBB] and his relationship with his female co-workers, which [BBB] alleges, contrary to [AAA's] suspicion,
are purely professional. According to [BBB], because of their repeated fights, he was forced to leave the family home to
prevent the brewing animosity between him and his wife. Soon after [BBB] left, [AAA] herself decided to leave the family
home and brought the children with her, which made it difficult for [BBB] to see their kids regularly. This has also caused
the family expense to double, making it even more difficult for [BBB] to fulfill his financial obligations.

[AAA], on the other hand, alleges that their heated arguments were often due to [BBB's] incessant womanizing. When
confronted about it, [BBB], instead of denying the same, would even curse [AAA].

The breaking point for [AAA] came when, [BBB's] alleged mistress, a woman by the name of [FFF], insulted and humiliated
[AAA] in public, in the presence of [BBB] himself, who, according to [AAA], did nothing to stop the same. Extremely hurt,
[AAA] decided to leave the conjugal home with the children and lived temporarily at a friend's house. She however went
back to the conjugal home with [DDD] and [EEE] after some time, leaving her son [CCC] at her friend's house.

What made matters worse, according to [AAA], was the apparent biases of [BBB] in favor of [DDD] and [EEE]. That despite
his promise to treat [CCC] as his own, [BBB] would still treat the latter differently from the two kids, putting [CCC] at a
disadvantage. [AAA], cites as example the instances when, [BBB] would buy food and toys for [DDD] and [EEE] only,
buying nothing for [CCC].

While living separately from [BBB], [AAA] discovered that [BBB] was not paying the rentals due on the condominium unit
they were occupying, forcing [AAA] to move out. [AAA] was likewise compelled to find work to support the family, after
[BBB] has started to be remiss in his financial obligations to the family. According to [AAA], the amounts given by [BBB]
were not sufficient to cover the family expenses, forcing her to request for loans from friends.

[AAA] likewise feels threatened after discovering [that BBB] was stalking her and/or their children. [AAA] alleges that she
found out that [BBB] has sought the help of one [GGG], a friend of [BBB] who lives within the same compound where
[AAA] lives, to go through the guard's logbook to monitor their every move, i.e., who visits them, what time [AAA] leaves
and returns back home, etc.

Citing the foregoing as constituting economic and psychological abuse, [AAA] filed an application for the issuance of a
Temporary Protection Order with a request to make the same permanent after due hearing, before the Regional Trial Court
of Pasig City.

Finding good ground in [AAA's] application, the court a quo issued a Temporary Protection Order (TPO). The TPO was
thereafter, made permanent by virtue of a Decision of the RTC dated August [14, 2007], the dispositive portion of which
orders:

"x x x x

a. Prohibiting [BBB], directly and indirectly, from stalking, harassing, annoying, or otherwise verbally abusing [AAA],
directly or indirectly, to refrain from insulting her, cursing her and shouting invectives at her;

b. Prohibiting [BBB] from committing or threatening to commit any act that may cause mental and emotional anguish to
[AAA], i.e. publicly displaying her extramarital relations with his mistress [FFF] and anyone else for that matter;

c. Prohibiting [BBB] from exposing the minor children to immoral and illicit environment, specifically prohibiting him to
allow her (sic) mistress [FFF] and anyone else to be with them in instances where he would be allowed by this Court
to see their children;

d. Allowing [BBB] ALONE to see and visit his children once a month (for a total of 12 visits per year) at the latter's
residence for a maximum period of 2 years [sic] each visit, subject to further orders from this Court. For this purpose,
[BBB's every visit] shall be accompanied by the Court Sheriff, who shall coordinate with [AAA] as to the availability
of time and date of children for such visit, at the expense of [BBB]. For every visit, the Court Sheriff is directed to
submit his report within 5 days from the date [BBB] visited the children;

e. Directing [BBB] to allow [AAA] to continue to have lawful use and possession of the motor vehicle more particularly
described as follows:

One (1) Hyundai Starex Van

1997 Model
Plate Number: WJP 902
Chassis Number:
Serial Number KMJWH7HPXU158443

f. Granting [AAA] permanent sole custody over their common children until further orders from this Court;

g. Ordering [BBB] to provide support in the amount of Php 62,918.97 per month (not Php 81,650.00 being prayed by
[AAA]) to [AAA] as monthly support, inclusive of educational expenses, groceries, medicines, medical bills, and
insurance premiums, starting from the month of January 2007 to be given within the first five (5) days of the month
through the Court Sheriff, who shall coordinate with [AAA] in receiving such support;

h. Requiring [BBB] to stay away from the offended party and any designated family or household member at a
distance of 100 meters;

i. Requiring [BBB] to stay away from the residence, school, place of employment or any specified place frequented
regularly by the offended party and children and any designated family or household member;

j. Ordering [BBB] to post bond of Php 300,000.00 to keep peace pursuant to Section 23 of RA 9262 with the
undertaking that [BBB] will not commit the violence sought to be prevented and that in case such violence is
committed[,] he will pay the amount determined by the Court in its judgment;

k. Ordering [BBB] to pay the sum of Php 100,000.00 (not Php 200,000.00 being prayed by [AAA]) representing both
reasonable attorney's fees and cost of litigation, including cost of suit.

x x x x."[5]

Ruling of the CA

BBB filed before the CA an appeal[6] to challenge the RTC Decision dated August 14, 2007. BBB alleged that the RTC's (a)
issuance of the PPO against him, (b) award to AAA of the sole custody over their children, (c) directives for him to pay
attorney's fees and costs of litigation and to post an excessive amount of bond, and (d) declaration that he had an abusive
character lack factual bases.

On November 6, 2009, the CA rendered the assailed decision affirming the factual findings and dispositions of the RTC,
but ordering the remand of the case for the latter to determine in the proper proceedings who shall be awarded custody of
the children. Like the RTC, the CA found that under the provisions of Republic Act (R.A.) No. 9262, [7] BBB had subjected
AAA and their children to psychological, emotional and economic abuses. BBB displayed acts of marital infidelity which
exposed AAA to public ridicule causing her emotional and psychological distress. While BBB alleged that FFF was only a
professional colleague, he continued to have public appearances with her which did not help to dispel AAA's accusation
that the two had an extra-marital relation. Further, BBB verbally abused AAA either in person or through text messages.
The CA likewise did not favorably consider BBB's claim that he cannot provide financial support to AAA and the children
in the amount required by the RTC as his income merely depended on contractual hosting and events management
assignments. The CA emphasized that AAA was in the position to know the sources of BBB's income. Citing Section
28[8] of R.A. No. 9262 and Article 213[9] of the Family Code, the CA, however, ordered the RTC to determine who shall be
entitled to exercise custody over the children, who at that time were already older than seven years of age.

The CA denied BBB's Motion for Partial Reconsideration[10] by way of the Resolution[11] dated August 3, 2010 which is
likewise assailed in the instant petition.

Issues

Undaunted, BBB now comes before this Court raising the following issues:

WHETHER OR NOT THE [CA] COMMITTED ERROR IN AFFIRMING THE RTC'S DECISION TO MAKE THE [TEMPORARY
RESTRAINING ORDER (TPO)] PERMANENT.

II

WHETHER OR NOT THE [CA] COMMITTED ERROR IN AFFIRMING THE RTC'S AWARD OF ATTORNEY'S FEES AND COST
OF LITIGATION IN FAVOR OF [AAA].

III

WHETHER OR NOT THE [CA] COMMITTED ERROR IN AFFIRMING THE RTC'S ORDER REQUIRING [BBB] TO POST AN
EXCESSIVE AMOUNT OF BOND TO KEEP THE PEACE.[12]

IV

WHETHER OR NOT THE CA AND THE RTC CORRECTLY ADMITTED INTO EVIDENCE THE UNAUTHENTICATED TEXT
MESSAGES ADDUCED BY AAA.[13]

WHETHER OR NOT THE AWARD OF SUPPORT SHOULD BE DELETED AS THE SPOUSES' COMMON BIOLOGICAL
CHILDREN, DDD AND EEE, ARE ALREADY UNDER BBB'S ACTUAL CARE AND CUSTODY SINCE AUGUST 2010 WHEN
AAA LEFT TO WORK AS A NURSE IN THE UNITED STATES.[14]

In support of the instant petition, BBB merely reiterates his factual claims in the proceedings below relative to his
financial position and AAA's supposedly baseless accusations and demands from him. In addition, he posits that the text
messages offered by AAA as evidence were unauthenticated; hence, doubt exists as to their admissibility. Further, he
points out that due to the current whereabouts and circumstances of the parties, the PPO issued against him is rendered
moot. He now has actual care and custody of DDD and EEE, while CCC, who is not his biological son, resides in a college
dormitory. BBB and AAA barely get in touch with each other except when the latter initiates the same.

In her Comment[15] to the petition, AAA counters that BBB erroneously raises factual issues which are subjects beyond
the contemplation of a petition filed under Rule 45 of the Rules of Civil Procedure. Further, BBB continuously violates the
PPO, which under the provisions of R.A. No. 9262, is supposed to be immediately executory upon its issuance by the RTC.
AAA claims that BBB still verbally abuses her. BBB has not posted the P300,000.00 bond required from him. He likewise
has not paid the attorney's fees and costs of litigation awarded to AAA. He does not provide support for CCC, who, in the
eyes of the law, is also among his legitimated children. AAA further alleges that in 2010, she left DDD and EEE under the
care of BBB only because the circumstances then obtaining forced her to do so. Three years had then lapsed from the
time she filed an application for a protection order and still, no execution of the PPO ensued. She could not depend for
financial support from BBB. She was thus left with no choice but to yield custody over DDD and EEE even if the set-up
exposed the children to BBB's illicit affairs. AAA points out that since their children are all older than seven years of age,
they are already capable of choosing for themselves whom they want to exercise custody over them.

Pending the Court's deliberation of the instant case, BBB filed a Manifestation and Motion to Render Judgment Based on
a Memorandum of Agreement (MOA).[16] BBB alleges that on July 29, 2013, he and AAA had entered into a compromise
anent the custody, exercise of parental authority over, and support of DDD and EEE.[17]

AAA's counsel, Atty. Shielah Elbinias-Uyboco (Atty. Uyboco), filed a Comment to the MOA[18] pointing out that AAA signed
the MOA while emotionally distressed and sans the former's advice and guidance. Atty. Uyboco likewise emphasizes that
BBB's illicit relationship with FFF continues in violation of the PPO issued by the RTC.

In BBB's Reply,[19] he counters that AAA should be presumed to have acted with due care and full knowledge of the
contents of the MOA which she signed. Further, BBB's alleged involvement with FFF is an issue which need not be
resolved in a judgment based on compromise.

Disquisition of the Court

The instant petition is not a proper

subject of a compromise agreement.

The Court cannot take the simplest course of finally writing finis to the instant petition by rendering a judgment merely
based on compromise as prayed for by BBB due to reasons discussed below.

Alleging psychological violence and economic abuse, AAA anchored her application for the issuance of a TPO and a PPO
on the basis of the provisions of R.A. No. 9262. In the instant petition, what is essentially being assailed is the PPO issued
by the RTC and which was affirmed by the CA. The rules, however, intend that cases filed under the provisions of R.A. No.
9262 be not subjects of compromise agreements.

It bears stressing that Section 23(d) of A.M. No. 04-10-11-SC[20] explicitly prohibits compromise on any act constituting
the crime of violence against women. Thus, in Garcia v. Drilon,[21] the Court declared that:

Violence, however, is not a subject for compromise. A process which involves parties mediating the issue of violence
implies that the victim is somehow at fault. x x x.[22] (Emphasis deleted)

AM No. 10-4-16-SC,[23] on the other hand, directs the referral to mediation of all issues under the Family Code and other
laws in relation to support, custody, visitation, property relations and guardianship of minor children, excepting therefrom
those covered by R.A. No. 9262.

While AAA filed her application for a TPO and a PPO as an independent action and not as an incidental relief prayed for in
a criminal suit, the instant petition cannot be taken outside the ambit of cases falling under the provisions of R.A. No.
9262. Perforce, the prohibition against subjecting the instant petition to compromise applies.

The courts a quo committed no

error in issuing a PPO against BBB.

Anent the main issues raised in the instant petition, the Court finds no error in the CA's ruling that the RTC properly
issued a PPO against BBB and that a remanding of the case to the trial court is necessary to determine who shall exercise
custody over CCC, DDD and EEE. However, the choices of the children as with whom they would prefer to stay would
alter the effects of the PPO. Hence, this Court affirms the herein assailed PPO except items (d), (f), (g), (h) and (i)[24] thereof
relative to who shall be granted custody over the three children, how the spouses shall exercise visitation rights, and the
amount and manner of providing financial support, which are matters the RTC is now directed to determine with
dispatch.

The Court notes BBB's manifestation that he and AAA had arrived at an amicable settlement as regards the issues of
custody, exercise of parental authority over, and support of DDD and EEE. While these matters can be lawful subjects of
compromise, AAA's vacillation, as expressed by her counsel, compels the Court to exercise prudence by directing the RTC
to resolve with finality the aforesaid issues. The parties are, however, not precluded from entering into a compromise as
regards the aforesaid issues, but the Court now requires the RTC's direct supervision lest the parties muddle the issues
anew and fail to put an end to their bickering.

No grounds exist which compel this

Court to resolve the first three issues
raised by BBB since they are merely
factual in character.
In Padalhin v. Laviña,[25] the Court declared that:

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition filed shall raise only questions of
law, which must be distinctly set forth. A question of law arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a
question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact.

x x x [T]he substantive issue of whether or not the petitioners are entitled to moral and exemplary damages as well as
attorney's fees is a factual issue which is beyond the province of a petition for review on certiorari. x x x

In the case at bar, the petitioner spouses present to us issues with an intent to subject to review the uniform
factual findings of the RTC and the CA. Specifically, the instant petition challenges the existence of clear and
substantial evidence warranting the award of damages and attorney's fees in Laviña's favor. Further, the instant petition
prays for the grant of the Spouses Padalhin's counterclaims on the supposed showing that the complaint filed by Laviña
before the RTC was groundless. It bears stressing that we are not a trier of facts. Undoubtedly, the questions now
raised before us are factual and not legal in character, hence, beyond the contemplation of a petition filed under Rule 45
of the Rules of Civil Procedure.[26] (Italics in the original and emphasis ours)

In BBB's case, he avers that the RTC and the CA's (a) issuance of the PPO, (b) award of attorney's fees and costs of
litigation in AAA's favor, and (c) directive for him to post a bond in the amount of P300,000.00 all lack factual bases. The
first three issues presented unmistakably call for a re-calibration of evidence. While the general rule that only legal issues
can be resolved in a petition filed under Rule 45 recognizes exceptions,[27] BBB's case does not fall in the latter category.
The RTC and the CA are in accord with each other as to their factual findings, which are supported by substantial
evidence, thus, binding upon this Court.

The doubt raised by BBB anent the

admissibility of the text messages as
evidence is not genuinely a legal issue.

In the case of Justice Vidallon-Magtolis v. Salud,[28] it is stated that any question as to the admissibility of text messages as
evidence is rendered moot and academic if the party raising such issue admits authorship of the subject messages.[29]

BBB argues that the RTC and the CA erred in admitting as evidence the text messages which were sent by him and FFF to
AAA since they were unauthenticated. However, BBB himself effectively admitted in the pleadings filed with this Court
and the CA that he indeed sent the text messages attributed to him by AAA. The Appellant's Brief [30]filed before the CA
stated in part that:

[AAA] conveniently chose to leave out the initiatory messages to which [BBB] replied to. It is totally obvious that the
alleged messages from [BBB] are only messages that are in response to an ongoing verbal or virtual tussle and the adamant
refusal of [AAA] to bring the children home despite the entreaties of [BBB]. Be it noted that [BBB], for the past several months
leading up to their separation, and up to the time that the instant case has been filed, continuously endured the extreme
mood swings, malicious accusations, haranguing, curses, insults, and even violence from [AAA]. [31] (Emphasis and
underscoring in the original and italics ours)

Further, in the instant petition, BBB repleads that:

[I]t is utterly apparent that the alleged messages from [BBB] are only messages that are in response to an ongoing verbal
or virtual tussle between the parties.[32]

In the above-quoted portions of the pleadings, BBB attempted to justify why he sent the messages to AAA. However, in
doing so, he, in effect, admitted authorship of the messages which AAA adduced as evidence. It is likewise noted that BBB
did not deny ownership of the cellphone number from which the text messages were sent.

Hence, while at first glance, it would seem that the issue of admissibility of the text messages requires an interpretation of
the rules of evidence, this Court does not find the same to be necessary. While BBB had admitted authorship of the text
messages, he pleads for this Court to consider those messages as inadmissible for allegedly being unauthenticated. BBB's
arguments are unbearably self-contradictory and he cannot be allowed to take refuge under technical rules of procedure
to assail what is already apparent.

The deletion from the PPO of the

directive of the RTC and the CA relative
to the award of support is not warranted.
While CCC is not BBB's biological son,
he was legitimated under the latter's name.
Like DDD and EEE, CCC is entitled to
receive support from BBB.

BBB claims that DDD and EEE are now under his sole care and custody, which allegedly renders moot the provision in
the PPO relative to support. BBB points out that CCC is not his biological son. Impliedly then, BBB justifies why CCC is
not entitled to receive support from him.

This Court is not persuaded.

Article 177 of the Family Code provides that "[o]nly children conceived and born outside of wedlock of parents who, at the
time of the conception of the former, were not disqualified by any impediment to marry each other may be legitimated."
Article 178 states that "[l]egitimation shall take place by a subsequent valid marriage between parents."

In the case at bar, the parties do not dispute the fact that BBB is not CCC's biological father. Such being the case, it was
improper to have CCC legitimated after the celebration of BBB and AAA's marriage. Clearly then, the legal process of
legitimation was trifled with. BBB voluntarily but falsely acknowledged CCC as his son. Article 1431 of the New Civil Code
pertinently provides:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.

At least for the purpose of resolving the instant petition, the principle of estoppel finds application and it now bars BBB
from making an assertion contrary to his previous representations. He should not be allowed to evade a responsibility
arising from his own misrepresentations. He is bound by the effects of the legitimation process. CCC remains to be BBB's
son, and pursuant to Article 179 of the Family Code, the former is entitled to the same rights as those of a legitimate
child, including the receipt of his father's support.

Notwithstanding the above, there is no absolute preclusion for BBB from raising before the proper court the issue of
CCC's status and filiation. However, BBB cannot do the same in the instant petition before this Court now. In Tison v.
CA,[33] the Court held that "the civil status [of a child] cannot be attacked collaterally." The child's legitimacy "cannot be
contested by way of defense or as a collateral issue in another action for a different purpose."[34] The instant petition
sprang out of AAA's application for a PPO before the RTC. Hence, BBB's claim that CCC is not his biological son is a
collateral issue, which this Court has no authority to resolve now.

All told, the Court finds no merit in BBB's petition, but there exists a necessity to remand the case for the RTC to resolve
matters relative to who shall be granted custody over the three children, how the spouses shall exercise visitation rights, and
the amount and manner of providing financial support.

The RTC and the CA found substantial evidence and did not commit reversible errors when they issued the PPO against
BBB. Events, which took place after the issuance of the PPO, do not erase the fact that psychological, emotional and
economic abuses were committed by BBB against AAA. Hence, BBB's claim that he now has actual sole care of DDD and
EEE does not necessarily call for this Court's revocation of the PPO and the award to him of custody over the children.

This Court, thus, affirms the CA's order to remand the case for the RTC to resolve the question of custody. Since the
children are now all older than seven years of age, they can choose for themselves whom they want to stay with. If all the
three children would manifest to the RTC their choice to stay with AAA, then the PPO issued by RTC shall continue to be
executed in its entirety. However, if any of the three children would choose to be under BBB's care, necessarily, the PPO
issued against BBB relative to them is to be modified. The PPO, in its entirety, would remain effective only as to AAA and
any of the children who opt to stay with her. Consequently, the RTC may accordingly alter the manner and amount of
financial support BBB should give depending on who shall finally be awarded custody over the children. Pursuant to
Articles 201 and 202 of the Family Code, BBB's resources and means and the necessities of AAA and the children are the
essential factors in determining the amount of support, and the same can be reduced or increased proportionately. The
RTC is reminded to be circumspect in resolving the matter of support, which is a mutual responsibility of the spouses.
The parties do not dispute that AAA is now employed as well, thus, the RTC should consider the same with the end in
mind of promoting the best interests of the children.

A final note on the effectivity and

violation of a PPO

The Court reminds the parties that the application for the issuance of a PPO is not a process to be trifled with. It is only
granted after notice and hearing. Once issued, violation of its provisions shall be punishable with a fine ranging from Five
Thousand Pesos (P5,000.00) to Fifty Thousand Pesos (P50,000.00) and/or imprisonment of six (6) months. [35]

Section 16 of R.A. No. 9262, on the other hand, provides that "[a] PPO shall be effective until revoked by a court upon
application of the person in whose favor the order was issued."
Pending the resolution of the instant petition, BBB claims that he and AAA had executed a MOA, upon which basis a
judgment by compromise is sought to be rendered. Atty. Uyboco, on her part, pointed out AAA's vacillation anent the
MOA's execution. With the foregoing circumstances, the parties, wittingly or unwittingly, have imposed upon this Court
the undue burden of speculating whether or not AAA's half-hearted acquiescence to the MOA is tantamount to an
application for the revocation of the PPO. The Court, however, refuses to indulge the whims of either parties. The
questions raised in the instant petition for the Court to dispose of revolve around the propriety of the PPO's issuance. The
Court resolves that principal query in the affirmative. The PPO thus stands unless AAA, categorically and without any
equivocation, files an application for its revocation.

IN VIEW OF THE FOREGOING, the petition is DENIED. The Decision dated November 6, 2009 and Resolution dated
August 3, 2010 of the Court of Appeals in CA-G.R. CV No. 89581 are AFFIRMED. The Permanent Protection Order,
dated August 14, 2007, issued against BBB by the Regional Trial Court of Pasig City, Branch 162 STANDS except items
(d), (f), (g), (h) and (i)[36] thereof. The case is hereby remanded to the trial court for it to accordingly modify the aforecited
items after determining with dispatch the following:

(1) who between BBB and AAA shall exercise custody over the three children;
(2) how the parties shall exercise their respective visitation rights; and
(3) the amount and manner of providing financial support.

The Reply and Manifestation dated November 10, 2014 and December 4, 2014, respectively, are NOTED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-23475 April 30, 1974

HERMINIO A. ASTORGA, in his capacity as Vice-Mayor of Manila, petitioner,

vs.
ANTONIO J. VILLEGAS, in his capacity as Mayor of Manila, THE HON., THE EXECUTIVE SECRETARY, ABELARDO
SUBIDO, in his capacity as Commissioner of Civil Service, EDUARDO QUINTOS, in his capacity as Chief of Police
of Manila, MANUEL CUDIAMAT, in his capacity as City Treasurer of Manila, CITY OF MANILA, JOSE SEMBRANO,
FRANCISCO GATMAITAN, MARTIN ISIDRO, CESAR LUCERO, PADERES TINOCO, LEONARDO FUGOSO, FRANCIS
YUSECO, APOLONIO GENER, AMBROCIO LORENZO, JR., ALFONSO MENDOZA, JR., SERGIO LOYOLA, GERINO
TOLENTINO, MARIANO MAGSALIN, EDUARDO QUINTOS, JR., AVELINO VILLACORTA, PABLO OCAMPO,
FELICISIMO CABIGAO, JOSE BRILLANTES, JOSE VILLANUEVA and MARINA FRANCISCO, in their capacities as
members of the Municipal Board, respondents.

Artemio V. Panganiban and Renito V. Saguisag and Crispin D. Baizas and Associates for petitioner.

Paredes Poblador, Cruz and Nazareno and Antonio Barredo for respondent Mayor of Manila.

Romeo L. Kahayon for respondents City Treasurer of Manila, etc., et al.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Pacifico P. de Castro, Solicitor Jorge R. Coquia and
Solicitor Ricardo L. Pronove, Jr. for respondents The Executive Secretary and Commissioner of Civil Service.

Fortunato de Leon and Antonio V. Raquiza as amici curiae.

MAKALINTAL, C.J.:p

The present controversy revolves around the passage of House Bill No. 9266, which became Republic Act 4065, "An Act
Defining the Powers, Rights and Duties of the Vice-Mayor of the City of Manila, Further Amending for the Purpose
Sections Ten and Eleven of Republic Act Numbered Four Hundred Nine, as Amended, Otherwise Known as the Revised
Charter of the City of Manila."

The facts as set forth in the pleadings appear undisputed:

On March 30, 1964 House Bill No. 9266, a bill of local application, was filed in the House of Representatives. It was there
passed on third reading without amendments on April 21, 1964. Forthwith the bill was sent to the Senate for its
concurrence. It was referred to the Senate Committee on Provinces and Municipal Governments and Cities headed by
Senator Gerardo M. Roxas. The committee favorably recommended approval with a minor amendment, suggested by
Senator Roxas, that instead of the City Engineer it be the President Protempore of the Municipal Board who should
succeed the Vice-Mayor in case of the latter's incapacity to act as Mayor.

When the bill was discussed on the floor of the Senate on second reading on May 20, 1964, substantial amendments to
Section 11 were introduced by Senator Arturo Tolentino. Those amendments were approved in toto by the Senate. The
amendment recommended by Senator Roxas does not appear in the journal of the Senate proceedings as having been
acted upon.

On May 21, 1964 the Secretary of the Senate sent a letter to the House of Representatives that House Bill No. 9266 had
been passed by the Senate on May 20, 1964 "with amendments." Attached to the letter was a certification of the
amendment, which was the one recommended by Senator Roxas and not the Tolentino amendments which were the ones
actually approved by the Senate. The House of Representatives thereafter signified its approval of House Bill No. 9266 as
sent back to it, and copies thereof were caused to be printed. The printed copies were then certified and attested by the
Secretary of the House of Representatives, the Speaker of the House of Representatives, the Secretary of the Senate and
the Senate President. On June 16, 1964 the Secretary of the House transmitted four printed copies of the bill to the
President of the Philippines, who affixed his signatures thereto by way of approval on June 18, 1964. The bill thereupon
became Republic Act No. 4065.

The furor over the Act which ensued as a result of the public denunciation mounted by respondent City Mayor drew
immediate reaction from Senator Tolentino, who on July 5, 1964 issued a press statement that the enrolled copy of House
Bill No. 9266 signed into law by the President of the Philippines was a wrong version of the bill actually passed by the
Senate because it did not embody the amendments introduced by him and approved on the Senate floor. As a
consequence the Senate President, through the Secretary of the Senate, addressed a letter dated July 11, 1964 to the
President of the Philippines, explaining that the enrolled copy of House Bill No. 9266 signed by the secretaries of both
Houses as well as by the presiding officers thereof was not the bill duly approved by Congress and that he considered his
signature on the enrolled bill as invalid and of no effect. A subsequent letter dated July 21, 1964 made the further
clarification that the invalidation by the Senate President of his signature meant that the bill on which his signature
appeared had never been approved by the Senate and therefore the fact that he and the Senate Secretary had signed it did
not make the bill a valid enactment.

On July 31, 1964 the President of the Philippines sent a message to the presiding officers of both Houses of Congress
informing them that in view of the circumstances he was officially withdrawing his signature on House Bill No. 9266
(which had been returned to the Senate the previous July 3), adding that "it would be untenable and against public policy
to convert into law what was not actually approved by the two Houses of Congress."

Upon the foregoing facts the Mayor of Manila, Antonio Villegas, issued circulars to the department heads and chiefs of
offices of the city government as well as to the owners, operators and/or managers of business establishments in Manila
to disregard the provisions of Republic Act 4065. He likewise issued an order to the Chief of Police to recall five members
of the city police force who had been assigned to the Vice-Mayor presumably under authority of Republic Act 4065.

Reacting to these steps taken by Mayor Villegas, the then Vice-Mayor, Herminio A. Astorga, filed a petition with this Court
on September 7, 1964 for "Mandamus, Injunction and/or Prohibition with Preliminary Mandatory and Prohibitory
Injunction" to compel respondents Mayor of Manila, the Executive Secretary, the Commissioner of Civil Service, the
Manila Chief of Police, the Manila City Treasurer and the members of the municipal board to comply with the provisions of
Republic Act 4065.

Respondents' position is that the so-called Republic Act 4065 never became law since it was not the bill actually passed
by the Senate, and that the entries in the journal of that body and not the enrolled bill itself should be decisive in the
resolution of the issue.

On April 28, 1965, upon motion of respondent Mayor, who was then going abroad on an official trip, this Court issued a
restraining order, without bond, "enjoining the petitioner Vice-Mayor Herminio Astorga from exercising any of the powers
of an Acting Mayor purportedly conferred upon the Vice-Mayor of Manila under the so-called Republic Act 4065 and not
otherwise conferred upon said Vice-Mayor under any other law until further orders from this Court."
The original petitioner, Herminio A. Astorga, has since been succeeded by others as Vice-Mayor of Manila. Attorneys
Fortunato de Leon and Antonio Raquiza, with previous leave of this Court, appeared as amici curiae, and have filed
extensive and highly enlightening memoranda on the issues raised by the parties.

Lengthy arguments, supported by copious citations of authorities, principally decisions of United States Federal and State
Courts, have been submitted on the question of whether the "enrolled bill" doctrine or the "journal entry" rule should be
adhered to in this jurisdiction. A similar question came up before this Court and elicited differing opinions in the case of
Mabanag, et al. vs. Lopez Vito, et al. (March 5, 1947), 78 Phil. Reports 1. While the majority of the Court in that case
applied the "enrolled bill" doctrine, it cannot be truly said that the question has been laid to rest and that the decision
therein constitutes a binding precedent.

The issue in that case was whether or not a resolution of both Houses of Congress proposing an amendment to the (1935)
Constitution to be appended as an ordinance thereto (the so-called parity rights provision) had been passed by "a vote of
three-fourths of all the members of the Senate and of the House of Representatives" pursuant to Article XV of the
Constitution.

The main opinion, delivered by Justice Pedro Tuason and concurred in by Justices Manuel V. Moran, Guillermo F. Pablo
and Jose M. Hontiveros, held that the case involved a political question which was not within the province of the judiciary
in view of the principle of separation of powers in our government. The "enrolled bill" theory was relied upon merely to
bolster the ruling on the jurisdictional question, the reasoning being that "if a political question conclusively binds the
judges out of respect to the political departments, a duly certified law or resolution also binds the judges under the
"enrolled bill rule" born of that respect."

Justice Cesar Bengzon wrote a separate opinion, concurred in by Justice Sabino Padilla, holding that the Court had
jurisdiction to resolve the question presented, and affirming categorically that "the enrolled copy of the resolution and the
legislative journals are conclusive upon us," specifically in view of Section 313 of Act 190, as amended by Act No. 2210.
This provision in the Rules of Evidence in the old Code of Civil Procedure appears indeed to be the only statutory basis on
which the "enrolled bill" theory rests. It reads:

The proceedings of the Philippine Commission, or of any legislative body that may be provided for in the
Philippine Islands, or of Congress (may be proved) by the journals of those bodies or of either house
thereof, or by published statutes or resolutions, or by copies certified by the clerk or secretary, printed by
their order; provided, that in the case of acts of the Philippine Commission or the Philippine Legislature,
when there is in existence a copy signed by the presiding officers and secretaries of said bodies, it shall
be conclusive proof of the provisions of such acts and of the due enactment thereof.

Congress devised its own system of authenticating bills duly approved by both Houses, namely, by the signatures of their
respective presiding officers and secretaries on the printed copy of the approved bill.2 It has been held that this procedure
is merely a mode of authentication,3 to signify to the Chief Executive that the bill being presented to him has been duly
approved by Congress and is ready for his approval or rejection.4 The function of an attestation is therefore not of
approval, because a bill is considered approved after it has passed both Houses. Even where such attestation is provided
for in the Constitution authorities are divided as to whether or not the signatures are mandatory such that their absence
would render the statute invalid.5 The affirmative view, it is pointed out, would be in effect giving the presiding officers the
power of veto, which in itself is a strong argument to the contrary6 There is less reason to make the attestation a requisite
for the validity of a bill where the Constitution does not even provide that the presiding officers should sign the bill before
it is submitted to the President.

In one case in the United States, where the (State)Constitution required the presiding officers to sign a bill and this
provision was deemed mandatory, the duly authenticated enrolled bill was considered as conclusive proof of its due
enactment.7 Another case however, under the same circumstances, held that the enrolled bill was not conclusive
evidence.8 But in the case of Field vs. Clark,9 the U.S. Supreme Court held that the signatures of the presiding officers on
a bill, although not required by the Constitution, is conclusive evidence of its passage. The authorities in the United
States are thus not unanimous on this point.

The rationale of the enrolled bill theory is set forth in the said case of Field vs. Clark as follows:

The signing by the Speaker of the House of Representatives, and, by the President of the Senate, in open
session, of an enrolled bill, is an official attestation by the two houses of such bill as one that has passed
Congress. It is a declaration by the two houses, through their presiding officers, to the President, that a
bill, thus attested, has received, in due form, the sanction of the legislative branch of the government, and
that it is delivered to him in obedience to the constitutional requirement that all bills which pass
Congress shall be presented to him. And when a bill, thus attested, receives his approval, and is
deposited in the public archives, its authentication as a bill that has passed Congress should be deemed
complete and unimpeachable. As the President has no authority to approve a bill not passed by Congress,
an enrolled Act in the custody of the Secretary of State, and having the official attestations of the Speaker
 of the House of Representatives, of the President of the Senate, and of the President of the United States,
carries, on its face, a solemn assurance by the legislative and executive departments of the government,
charged, respectively, with the duty of enacting and executing the laws, that it was passed by Congress.
The respect due to coequal and independent departments requires the judicial department to act upon
that assurance, and to accept, as having passed Congress, all bills authenticated in the manner stated;
leaving the courts to determine, when the question properly arises, whether the Act, so authenticated, is
in conformity with the Constitution.

It may be noted that the enrolled bill theory is based mainly on "the respect due to coequal and independent
departments," which requires the judicial department "to accept, as having passed Congress, all bills authenticated in the
manner stated." Thus it has also been stated in other cases that if the attestation is absent and the same is not required for
the validity of a statute, the courts may resort to the journals and other records of Congress for proof of its due enactment.
This was the logical conclusion reached in a number of decisions, 10 although they are silent as to whether the journals
may still be resorted to if the attestation of the presiding officers is present.

The (1935) Constitution is silent as to what shall constitute proof of due enactment of a bill. It does not require the
presiding officers to certify to the same. But the said Constitution does contain the following provisions:

Sec. 10 (4). "Each House shall keep a Journal of its proceedings, and from time to time publish the same,
excepting such parts as may in its judgment require secrecy; and the yeas and nays on any question
shall, at the request of one-fifth of the Members present, be entered in the Journal."

Sec. 21 (2). "No bill shall be passed by either House unless it shall have been printed and copies thereof in
its final form furnished its Members at least three calendar days prior to its passage, except when the
President shall have certified to the necessity of its immediate enactment. Upon the last reading of a bill
no amendment thereof shall be allowed, and the question upon its passage shall be taken immediately
thereafter, and the yeas and nays entered on the Journal."

Petitioner's argument that the attestation of the presiding officers of Congress is conclusive proof of a bill's due enactment,
required, it is said, by the respect due to a co-equal department of the government, 11 is neutralized in this case by the
fact that the Senate President declared his signature on the bill to be invalid and issued a subsequent clarification that
the invalidation of his signature meant that the bill he had signed had never been approved by the Senate. Obviously this
declaration should be accorded even greater respect than the attestation it invalidated, which it did for a reason that is
undisputed in fact and indisputable in logic.

As far as Congress itself is concerned, there is nothing sacrosanct in the certification made by the presiding officers. It is
merely a mode of authentication. The lawmaking process in Congress ends when the bill is approved by both Houses, and
the certification does not add to the validity of the bill or cure any defect already present upon its passage. In other words
it is the approval by Congress and not the signatures of the presiding officers that is essential. Thus the (1935)
Constitution says that "[e] very bill passed by the Congress shall, before it becomes law, be presented to the
President. 12 In Brown vs. Morris, supra, the Supreme Court of Missouri, interpreting a similar provision in the State
Constitution, said that the same "makes it clear that the indispensable step is the final passage and it follows that if a bill,
otherwise fully enacted as a law, is not attested by the presiding officer, of the proof that it has "passed both houses" will
satisfy the constitutional requirement."

Petitioner agrees that the attestation in the bill is not mandatory but argues that the disclaimer thereof by the Senate
President, granting it to have been validly made, would only mean that there was no attestation at all, but would not affect
the validity of the statute. Hence, it is pointed out, Republic Act No. 4065 would remain valid and binding. This argument
begs the issue. It would limit the court's inquiry to the presence or absence of the attestation and to the effect of its
absence upon the validity of the statute. The inquiry, however, goes farther. Absent such attestation as a result of the
disclaimer, and consequently there being no enrolled bill to speak of, what evidence is there to determine whether or not
the bill had been duly enacted? In such a case the entries in the journal should be consulted.

The journal of the proceedings of each House of Congress is no ordinary record. The Constitution requires it. While it is
true that the journal is not authenticated and is subject to the risks of misprinting and other errors, the point is irrelevant
in this case. This Court is merely asked to inquire whether the text of House Bill No. 9266 signed by the Chief Executive
was the same text passed by both Houses of Congress. Under the specific facts and circumstances of this case, this Court
can do this and resort to the Senate journal for the purpose. The journal discloses that substantial and lengthy
amendments were introduced on the floor and approved by the Senate but were not incorporated in the printed text sent
to the President and signed by him. This Court is not asked to incorporate such amendments into the alleged law, which
admittedly is a risky undertaking, 13 but to declare that the bill was not duly enacted and therefore did not become law.
This We do, as indeed both the President of the Senate and the Chief Executive did, when they withdrew their signatures
therein. In the face of the manifest error committed and subsequently rectified by the President of the Senate and by the
Chief Executive, for this Court to perpetuate that error by disregarding such rectification and holding that the erroneous
bill has become law would be to sacrifice truth to fiction and bring about mischievous consequences not intended by the
law-making body.

In view of the foregoing considerations, the petition is denied and the so-called Republic Act No. 4065 entitled "AN ACT
DEFINING THE POWERS, RIGHTS AND DUTIES OF THE VICE-MAYOR OF THE CITY OF MANILA, FURTHER AMENDING
FOR THE PURPOSE SECTIONS TEN AND ELEVEN OF REPUBLIC ACT NUMBERED FOUR HUNDRED NINE, AS
AMENDED, OTHERWISE KNOWN AS THE REVISED CHARTER OF THE CITY OF MANILA" is declared not to have been
duly enacted and therefore did not become law. The temporary restraining order dated April 28, 1965 is hereby made
permanent. No pronouncement as to costs.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 198240 July 3, 2013

LUISA NAVARRO MARCOS*, Petitioner,

vs.
THE HEIRS OFTHE LATE DR. ANDRES NAVARRO, JR., namely NONITA NAVARRO, FRANCISCA NAVARRO
MALAPITAN, SOLEDAD NAVARRO BROCHLER, NONITA BARRUN NAVARRO, JR., IMELDA NAVARRO, ANDRES
NAVARRO III, MILAGROS NAVARRO YAP, PILAR NAVARRO, TERESA NAVARRO-TABITA, and LOURDES BARRUN-
REJUSO, Respondents.

DECISION

VILLARAMA, JR., J.:

Petitioner Luisa Navarro Marcos appeals the Decision1 dated February 28, 2011 and Resolution2 dated July 29, 2011 of
the Court of Appeals (CA) in CA-G.R. SP No. 92460.

The antecedent facts follow:

Spouses Andres Navarro, Sr. and Concepcion Medina-Navarro died in 1958 and 1993, respectively. They left behind
several parcels of land including a 108.3997-hectare lot (subject lot) located in Cayabon, Milagros, Masbate.3

The spouses were survived by their daughters Luisa Navarro Marcos, herein petitioner, and Lydia Navarro Grageda, and
the heirs of their only son Andres Navarro, Jr. The heirs of Andres, Jr. are the respondents herein.4

Petitioner and her sister Lydia discovered that respondents are claiming exclusive ownership of the subject lot.
Respondents based their claim on the Affidavit of Transfer of Real Property dated May 19, 1954 where Andres, Sr. donated
the subject lot to Andres, Jr.5

Believing that the affidavit is a forgery, the sisters, through Assistant Fiscal Andres Marcos, requested a handwriting
examination of the affidavit. The PNP handwriting expert PO2 Mary Grace Alvarez found that Andres, Sr.’s signature on
the affidavit and the submitted standard signatures of Andres, Sr. were not written by one and the same person. 6

Thus, the sisters sued the respondents for annulment of the deed of donation before the Regional Trial Court (RTC) of
Masbate, where the case was docketed as Civil Case No. 5215.7

After the pre-trial, respondents moved to disqualify PO2 Alvarez as a witness. They argued that the RTC did not authorize
the handwriting examination of the affidavit. They added that presenting PO2 Alvarez as a witness will violate their
constitutional right to due process since no notice was given to them before the examination was conducted. 8 Thus, PO2
Alvarez’s report is a worthless piece of paper and her testimony would be useless and irrelevant. 9

In its Order10 dated August 19, 2004, the RTC granted respondents’ motion and disqualified PO2 Alvarez as a witness.
The RTC ruled that PO2 Alvarez’s supposed testimony would be hearsay as she has no personal knowledge of the alleged
handwriting of Andres, Sr. Also, there is no need for PO2 Alvarez to be presented, if she is to be presented as an expert
witness, because her testimony is not yet needed.

The sisters sought reconsideration of the order but the RTC denied their motion in an Order11 dated October 11, 2005.
Aggrieved, the sisters filed a petition for certiorari before the CA, which however, dismissed their petition in the assailed
Decision dated February 28, 2011 on the ground that the dismissal of Civil Case No. 5215 has mooted the issue of PO2
Alvarez’s disqualification as a witness.

Later, the CA likewise denied their motion for reconsideration in its Resolution dated July 29, 2011. The CA refused to
take judicial notice of the decision of another CA Division which reinstated Civil Case No. 5215. The CA held that a CA
Justice cannot take judicial notice of decisions or matters pending before another Division of the appellate court where he
or she is not a member. The CA also held that the sisters were negligent for belatedly informing it that Civil Case No. 5215
was reinstated.

Hence, this appeal.

Petitioner argues that the CA erred in refusing to reconsider the assailed decision in light of the reinstatement of Civil
Case No. 5215. Petitioner adds that the CA erred in not ruling that the RTC committed grave abuse of discretion in
disqualifying PO2 Alvarez as a witness.12 They stress that PO2 Alvarez will be presented as an expert witness to render an
opinion on whether the disputed handwriting was indeed made by Andres, Sr. or whether it is a forgery. 13

In their comment,14 respondents counter that the CA properly disqualified PO2 Alvarez. They also agreed with the CA that
her disqualification was mooted by the dismissal of Civil Case No. 5215.

We find in favor of petitioner.

The CA ruling that the dismissal of Civil Case No. 5215 has mooted the issue of PO2 Alvarez’s disqualification as a witness
can no longer be justified. Hence, we reverse the CA ruling. While we agree with the CA in considering the RTC’s
Orders15 which dismissed Civil Case No. 5215, we are unable to agree with its refusal to take judicial notice of the
Decision16 of another CA Division which reinstated Civil Case No. 5215. Subsequent proceedings were even held in the
reinstated Civil Case No. 5215 per Orders17 issued by the RTC which were already submitted to the CA. That Civil Case
No. 5215 was reinstated is a fact that cannot be ignored.

We also agree with petitioner that the RTC committed grave abuse of discretion in disqualifying PO2 Alvarez as a witness.
Grave abuse of discretion defies exact definition, but it generally refers to capricious or whimsical exercise of judgment as
is equivalent to lack of jurisdiction. The abuse of discretion must be patent and gross as to amount to an evasion of a
positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the
power is exercised in an arbitrary and despotic manner by reason of passion and hostility.18Grave abuse of discretion
arises when a lower court or tribunal violates the Constitution or grossly disregards the law or existing jurisprudence. 19

In Armed Forces of the Philippines Retirement and Separation Benefits System v. Republic of the Philippines, 20 we said
that a witness must only possess all the qualifications and none of the disqualifications provided in the Rules of Court.
Section 20, Rule 130 of the Rules on Evidence provides:

SEC. 20. Witnesses; their qualifications.–Except as provided in the next succeeding section, all persons who can perceive,
and perceiving, can make known their perception to others, may be witnesses.

Religious or political belief, interest in the outcome of the case, or conviction of a crime unless otherwise provided by law,
shall not be a ground for disqualification.

Specific rules of witness disqualification are provided under Sections 21 to 24, Rule 130 of the Rules on Evidence. Section
21 disqualifies a witness by reason of mental incapacity or immaturity. Section 22 disqualifies a witness by reason of
marriage. Section 23 disqualifies a witness by reason of death or insanity of the adverse party. Section 24 disqualifies a
witness by reason of privileged communication.

In Cavili v. Judge Florendo,21 we have held that the specific enumeration of disqualified witnesses excludes the operation
of causes of disability other than those mentioned in the Rules. The Rules should not be interpreted to include an
exception not embodied therein. We said:

The generosity with which the Rule allows people to testify is apparent. Interest in the outcome of a case, conviction of a
crime unless otherwise provided by law, and religious belief are not grounds for disqualification.

Sections 19 and 20 of Rule 130 provide for specific disqualifications. Section 19 disqualifies those who are mentally
incapacitated and children whose tender age or immaturity renders them incapable of being witnesses. Section 20
provides for disqualification based on conflicts of interest or on relationship. Section 21 provides for disqualification based
on privileged communications. Section 15 of Rule 132 may not be a rule on disqualification of witnesses but it states the
grounds when a witness may be impeached by the party against whom he was called.
There is no provision of the Rules disqualifying parties declared in default from taking the witness stand for non-
disqualified parties. The law does not provide default as an exception. The specific enumeration of disqualified witnesses
excludes the operation of causes of disability other than those mentioned in the Rules. It is a maxim of recognized utility
and merit in the construction of statutes that an express exception, exemption, or saving clause excludes other
exceptions. x x x As a general rule, where there are express exceptions these comprise the only limitations on the
operation of a statute and no other exception will be implied. x x x The Rules should not be interpreted to include an
exception not embodied therein. (Emphasis supplied; citations omitted.)

As a handwriting expert of the PNP, PO2 Alvarez can surely perceive and make known her perception to
others.1âwphi1We have no doubt that she is qualified as a witness. She cannot be disqualified as a witness since she
possesses none of the disqualifications specified under the Rules. Respondents’ motion to disqualify her should have been
denied by the RTC for it was not based on any of these grounds for disqualification. The RTC rather confused the
qualification of the witness with the credibility and weight of her testimony.

Moreover, Section 49, Rule 130 of the Rules of Evidence is clear that the opinion of an expert witness may be received in
evidence, to wit:

SEC. 49. Opinion of expert witness.–The opinion of a witness on a matter requiring special knowledge, skill, experience or
training which he is shown to possess, may be received in evidence.

For instance, in Tamani v. Salvador,22 we were inclined to believe that Tamani’s signature was forged after considering the
testimony of the PNP document examiner that the case involved simulated or copied forgery, such that the similarities will
be superficial. We said that the value of the opinion of a handwriting expert depends not upon his mere statements of
whether a writing is genuine or false, but upon the assistance he may afford in pointing out distinguishing marks,
characteristics and discrepancies in and between genuine and false specimens of writing which would ordinarily escape
notice or detection from an unpracticed observer.

Thus, we disagree with the RTC that PO2 Alvarez’s testimony would be hearsay. Under Section 49, Rule 130 of the Rules
on Evidence, PO2 Alvarez is allowed to render an expert opinion, as the PNP document examiner was allowed in Tamani.
But the RTC already ruled at the outset that PO2 Alvarez’s testimony is hearsay even before her testimony is offered and
she is called to the witness stand. Under the circumstances, the CA should have issued a corrective writ of certiorari and
annulled the RTC ruling.

True, the use of the word "may" in Section 49, Rule 130 of the Rules on Evidence signifies that the use of opinion of an
expert witness is permissive and not mandatory on the part of the courts.23 Jurisprudence is also replete with instances
wherein this Court dispensed with the testimony of expert witnesses to prove forgeries.24 However, we have also
recognized that handwriting experts are often offered as expert witnesses considering the technical nature of the
procedure in examining forged documents.25 More important, analysis of the questioned signature in the deed of donation
executed by the late Andres Navarro, Sr. in crucial to the resolution of the case.

In sum, the RTC should not have disqualified P02 Alvarez as a witness. She has the qualifications of witness and possess
none of the disqualifications under the Rules. The Rules allow the opinion of an expert witness to be received as evidence.
In Tamani, we used the opinion of an expert witness. The value of P02 Alvarez's expert opinion cannot be determined if
P02 Alvarez is not even allowed to testify on the handwriting examination she conducted.

WHEREFORE, we GRANT the petition. We SET ASIDE the (1) Decision dated February 28, 2011 and Resolution dated
July 29, 2011 of the Court of Appeals in CA-G.R. SP No. 92460, and (2) Orders dated August 19, 2004 and October II,
2005 of the Regional Trial Court in Civil Case No. 5215. We DENY respondents' motion to disqualify P02 Mary Grace
Alvarez as a witness.

No pronouncement as to costs.

SO ORDERED.